AMERICAS CARMART INC (CRMT)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this report.

Forward-Looking Information

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address the Company’s future events, objectives, plans and goals, as well as the Company’s intent, beliefs and current expectations regarding future operating performance and can generally be identified by words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” and other similar words or phrases. Specific events addressed by these forward-looking statements may include, but are not limited to:

•the Company’s ability to continue as a going concern;

•the Company’s review of strategic and financing alternatives and the potential outcomes of that review and its ability to execute and consummate any potential transaction;

•the covenant relief and waivers under, and the Company’s ability to satisfy the milestones and other conditions of, the June 19, 2026 amendment to the Company’s Credit and Guaranty Agreement;

•the Company’s liquidity and its efforts to preserve liquidity, including the curtailment of inventory purchases and finance receivable originations;

•the availability of capital, including through income from operations and securing additional financing to sustain and supplement operating cash flows through additional securitization transactions, warehouse credit facilities, or other sources, and the Company’s ability to consummate such financing transactions;

•maintenance of the Company’s operational infrastructure, including the continued transition to a centralized collections model and ongoing technology initiatives;

•gross profit margin percentages;

•gross profit per retail unit sold;

•future revenues and operating results;

•future credit losses;

•the Company’s collection results;

•the effects of the dealership optimization initiatives and the closing of existing dealerships;

•the Company’s ability to execute its business plan;

•future supply, demand, and affordability of used vehicles;

•seasonality; and

•the Company’s business and operating strategies and expectations.

These forward-looking statements are based on the Company’s current estimates and assumptions and involve various risks and uncertainties. As a result, you are cautioned that these forward-looking statements are not guarantees of future performance, and that actual results and events could differ materially from those projected in these forward-looking statements. Factors that may cause actual results and events to differ materially from the Company’s projections include those risks described elsewhere in this report and in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2026, as well as:

•the existence of substantial doubt about the Company’s ability to continue as a going concern, and the effects of that disclosure on the Company’s relationships with customers, associates, suppliers, lenders and other stakeholders;

•the Company’s ability to satisfy the milestones and other conditions of the June 19, 2026 amendment to its Credit and Guaranty Agreement, to further extend the related covenant relief and waiver period beyond September 11, 2026, if needed, and to obtain further waivers, covenant relief, forbearance or financing from its lenders on acceptable terms, or at all;

•the outcome of the Company’s review of strategic and financing alternatives, including the risk that the review does not result in any transaction, results in a transaction on unfavorable terms, or is not completed in a timely manner, and the costs, timing and uncertainties associated with the review and related advisory engagements;

•the Company’s substantial level of indebtedness and its ability to service that indebtedness, and the risk that its indebtedness could be accelerated (including under cross-default or cross-acceleration provisions) and that the Company would not have sufficient liquidity to repay it;

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•the Company’s ability to fund finance receivable originations, vehicle inventory purchases, debt service and operating expenses, including its ability to establish a warehouse credit facility and to continue to complete asset-backed securitization transactions;

•the curtailment of the Company’s vehicle inventory purchases and finance receivable originations and the effect of that curtailment on the Company’s sales, revenues and collections;

•the Company’s changes to customer collection practices, including the transition to a centralized collections model and the transfer of customer accounts to dealerships located farther from customers’ prior collection locations and the effect of the change on collections, revenues, and customer relationships;

•the potential need for the Company to seek protection under applicable bankruptcy or insolvency laws;

•the possibility that holders of the Company’s common stock could experience a significant or complete loss of their investment, including as a result of any restructuring, recapitalization, or dilutive issuance of equity or equity-linked securities;

•the Company’s ability to maintain compliance with the continued listing requirements of, and the continued listing of its common stock on, the Nasdaq Stock Market;

•the diversion of management’s attention from ordinary-course operations as a result of the strategic review and the Company’s liquidity and capital-structure matters;

•general economic conditions in the markets in which the Company operates, including but not limited to fluctuations in gas prices, grocery prices and employment levels, inflationary pressure on operating costs and customers’ ability to make vehicle payments;

•the availability of quality used vehicles at prices that will be affordable to the Company’s customers, including the impacts of changes in new vehicle production and sales, tariffs and trade restrictions on the automotive industry, and elevated wholesale vehicle costs;

•the availability of and access to capital through warehouse credit facilities, securitization financings or other debt or equity financing sources on terms acceptable to the Company, and any increase in the cost of capital, to support the Company’s business;

•the Company’s ability to consummate debt or equity financing transactions on terms acceptable to the Company;

•the Company’s compliance with financial covenants and other terms of its senior secured term loan, non-recourse notes payable, and any future debt facilities;

•the Company’s ability to underwrite and collect its contracts effectively, including whether anticipated benefits from the Company’s recently implemented loan origination system are achieved as expected or at all;

•competition;

•dependence on existing management;

•ability to attract, develop, and retain qualified general managers;

•changes in consumer finance laws or regulations, including but not limited to rules and regulations that have recently been enacted or could be enacted by federal and state governments;

•future shutdowns of the federal government or changes to federal or state government assistance programs impacting the Company’s customers;

•the ability to keep pace with technological advances and changes in consumer behavior affecting our business;

•security breaches, cyber-attacks, or fraudulent activity;

•the occurrence and impact of any adverse weather events or other natural disasters affecting the Company’s dealerships or customers;

•the Company’s ability to maintain effective internal control over financial reporting following the remediation of its previously identified material weakness, and to design, implement, and maintain effective disclosure controls and procedures;

•the potential dilutive impact of outstanding warrants to purchase the Company’s common stock, if exercised, and of any other future issuances of the Company’s equity securities; and

•potential business and economic disruptions and uncertainty that may result from any future public health crises and any efforts to mitigate the financial impact and health risks associated with such developments.

The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers and investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.

Overview

America’s Car-Mart, Inc., a Texas corporation initially formed in 1981 (the “Company”), is one of the largest publicly held automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance”

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segment of the used car market. The Company’s operations are principally conducted through its two operating subsidiaries, America’s Car Mart, Inc., an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an Arkansas corporation (“Colonial”). References to the Company include the Company’s consolidated subsidiaries. The Company primarily sells older model used vehicles and provides financing for substantially all of its customers. Many of the Company’s customers have limited financial resources and would not qualify for conventional financing as a result of limited credit histories or past credit difficulties. As of July 31, 2026, the Company operated 94 dealerships located primarily in small cities throughout the South-Central United States.

The conditions affecting the Company’s liquidity and capital structure that were described in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2026 continued throughout the first quarter of fiscal 2027 without material improvement. The Company continued to have no revolving credit facility or warehouse facility available to it, completed no asset-backed term funding transactions during the quarter, and obtained no new financing. The review by the special committee of the Company’s Board of Directors (the “Special Committee”) of strategic and financing alternatives, which was underway when the Form 10-K was filed, remained in progress at July 31, 2026 and has not resulted in a transaction as of the date of this report. The matters reported as subsequent events in the notes to the consolidated financial statements included in the Form 10-K developed during the quarter: the Company failed to comply with the minimum liquidity and minimum collateral coverage ratio covenants under its Credit and Guaranty Agreement as then in effect, obtained a series of short-term forbearance agreements with its lenders, and on June 19, 2026 entered into an amendment to the Credit and Guaranty Agreement (the “Amendment”) providing covenant relief for a limited period (which on September 4, 2026, the lenders agreed to extend through September 11, 2026), subject to the Company’s compliance with certain milestones and other conditions. In connection with the Amendment, the Company incurred approximately $3.9 million of fees and costs. Of that amount, a $3.0 million closing payment was added to the outstanding principal balance of the term loan and approximately $0.7 million of professional fees directly attributable to the Amendment were capitalized as debt issuance costs (see Note B). The remaining approximately $0.3 million of legal, financial advisory and other professional fees did not qualify for deferral and were expensed as incurred and included in net loss for the three months ended July 31, 2026. As described in Note B to the Condensed Consolidated Financial Statements, these conditions continue to raise substantial doubt abo

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto appearing in Item 8 of this Annual Report on Form 10-K.

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Overview

America’s Car-Mart, Inc., a Texas corporation (the “Company”), is one of the largest publicly held automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance” segment of the used car market. References to the Company include the Company’s consolidated subsidiaries. The Company’s operations are principally conducted through its two operating subsidiaries, America’s Car Mart, Inc., an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an Arkansas corporation (“Colonial”). Collectively, Car-Mart of Arkansas and Colonial are referred to herein as “Car-Mart.” The Company primarily sells older model used vehicles and provides financing for substantially all of its customers. Many of the Company’s customers have limited financial resources and would not qualify for conventional financing as a result of limited credit histories or past credit problems. As of April 30, 2026, the Company operated 94 dealerships located primarily in small cities throughout the South-Central United States.

Fiscal 2026 was a transitional year defined principally by the Company’s efforts to address its liquidity position and capital structure. Constraints on available origination capital led the Company to reduce finance receivable originations, lower inventory levels, and tighten underwriting standards. Beginning in the third quarter of fiscal 2026, the Company also undertook a footprint optimization initiative through which it consolidated 60 dealership locations into nearby, higher-performing dealerships, reducing its active dealership count from 154 at April 30, 2025 to 94 at April 30, 2026. On October 30, 2025, the Company closed a five-year, $300.0 million senior secured term loan facility with funds managed by Silver Point Capital, L.P., and used a portion of the proceeds to repay and retire its revolving line of credit, with the remainder used for general operating and corporate purposes. As further described under “Liquidity and Capital Resources” and in Note B to the Consolidated Financial Statements, the conditions affecting the Company’s liquidity and capital structure raise substantial doubt about its ability to continue as a going concern.

Total revenue for fiscal 2026 decreased 7.9% to $1,281.5 million, compared to a decline of 0.2% in fiscal 2025. The decrease was primarily attributable to a decline in retail units sold—reflecting the reduction in active dealership locations and the pause in inventory purchases resulting from the Company’s liquidity constraints—partially offset by a 3.4% increase in the average retail sales price and a 3.7% increase in interest and other income. The Company reported a net loss attributable to common stockholders of $139.2 million, or $16.79 per diluted share, for fiscal 2026, compared to net income of $17.9 million, or $2.33 per diluted share, for fiscal 2025. Notwithstanding the decline in revenue in each of the past two years, over the last ten fiscal years, the Company’s annual revenue growth has averaged 9.1%.

From fiscal 2024 to fiscal 2026, sales performance was shaped primarily by the Company's liquidity position and the resulting moderation of finance receivable originations. With limited origination capital available — and no revolving warehouse facility in place to bridge the period between origination and securitization following the Company's repayment and termination of its prior asset-backed revolving line of credit on October 30, 2025 — the Company deliberately reduced originations and lowered inventory levels, which in turn constrained retail unit volume. Finance receivable originations decreased to $952.5 million in fiscal 2026 from $1,075.1 million in fiscal 2025, and inventory declined to $54.1 million at April 30, 2026 from $112.2 million a year earlier. As a result, used vehicle sales revenue declined, driven principally by lower retail unit sales rather than by a change in underlying customer demand. Wholesale revenue also decreased, reflecting a lower volume of repossessed vehicles available for resale.

The Company generates revenue primarily through the sale of used vehicles—typically accompanied by a related service contract and accident protection plan—together with interest income and late fees from financing. Its cost structure is relatively fixed and is therefore sensitive to changes in sales volume. Revenue is influenced by competition, the availability of funding in the subprime automobile industry and for the Company specifically, broader macroeconomic conditions, and fluctuations in the cost of acquiring vehicles for resale. Because the Company's selling price is largely a function of its vehicle acquisition cost, increases in purchase costs generally result in higher selling prices, which can pressure gross margin percentages and contract terms as the Company seeks to preserve affordable payment options for a customer base with limited financial flexibility. Declines in new vehicle sales, particularly of domestic brands, reduce the future supply of used vehicles and tend to raise wholesale prices, and changes in consumer credit availability, broader economic conditions, and the imposition of (or threats to impose) tariffs or other trade restrictions could similarly affect both the demand for and the acquisition cost of vehicles.

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The Company has been focused on strengthening its underwriting and improving vehicle quality by procuring lower-mileage vehicles, while balancing affordability for customers. The Company believes this will aid in driving down our customers’ vehicle repair costs, reduce our service contract repair expenses, and lead to better recovery values in the event of repossession. When combined with inventory procurement efficiencies, these changes are expected to drive improved customer experience and contribute to better gross margins.

The Company places significant emphasis on building strong, long-term customer relationships, which it believes generate the repeat business that is integral to its success. It pairs a "local," face-to-face approach to customer service with continued investment in digital and online capabilities intended to deliver a more integrated, seamless sales and service experience, and, subject to recent inventory funding constraints, it offers a diverse mix of vehicles at a variety of price points to address affordability across a broad range of customer needs.

The Company closely monitors key underwriting variables—including down payments, contract terms, and customer credit scores—to support customers' ability to meet their payment obligations. After the sale, collections, delinquencies, and charge-offs are central to assessing the Company's financial condition and results of operations, and management monitors these measures on an ongoing basis to enable timely intervention and adjustments to strategy.

The Company maintains a consistent focus on collections. For most of fiscal 2026, collections were conducted at the dealership level under the oversight of the corporate office, and in the fourth quarter of fiscal 2026 the Company began rolling out a centralized collections model intended to improve the consistency and efficiency of its collection activities across its footprint. Total collections of principal, interest, and late fees increased by $15.9 million, or 2.2%, to $730.0 million in fiscal 2026, compared to $714.1 million in fiscal 2025. The average total collected per active customer per month increased to $590.56, compared to $575.48 for fiscal 2025. These results underscore the positive impact of our enhanced payments platform, which has streamlined processes and improved overall collection efficiency.

The credit performance of the Company's portfolio is reflected in the provision for credit losses, which increased to 40.8% of sales in fiscal 2026, from 32.7% in fiscal 2025 and 36.5% in fiscal 2024—the high end of a five-year range that has run from approximately 22.9% in fiscal 2022 to 40.8% in fiscal 2026. The increase as a percentage of sales reflected the reduction in finance receivable originations during the year—which lowered the sales base, along with changes in macroeconomic conditions affecting the Company's customer base. The provision also increased in absolute terms, to $419.2 million in fiscal 2026 from $374.6 million in fiscal 2025.

As of April 30, 2026, the Company's allowance for credit losses increased to 25.15% of finance receivables, net of deferred revenue and pending accident protection plan claims, from 23.25% at April 30, 2025. The increase was driven primarily by changes in macroeconomic conditions affecting the Company's customer base—including persistent inflation in essential goods and services and, in the fourth quarter, elevated fuel prices—which reduced customers' disposable income and contributed to an increase in the frequency of losses. The reduction in finance receivable originations undertaken to preserve liquidity also contributed to the higher allowance percentage by reducing the receivables base against which the allowance is measured. These factors were partially offset by shifts in portfolio mix, including the growing share of receivables originated through the Company's loan origination system ("LOS") and receivables from recently acquired locations. The LOS centralizes customer information—including internal credit scores, down-payment percentages, and credit reports—in a single location, which supports more informed credit decisions and stronger credit management.

The Company continuously seeks ways to improve operational efficiency, including refining its underwriting and collections processes. The Company’s proprietary credit scoring system allows for constant monitoring of contract quality. Corporate personnel regularly review credit scores and work with dealerships when scores fall outside acceptable thresholds. Additionally, the Company uses credit reporting and GPS technology to support its collections efforts, while its training department ensures ongoing improvement in collections practices. Effective execution of these business practices is considered the primary driver of the Company’s long-term credit loss performance.

Over the past five fiscal years, the Company’s gross margin as a percentage of sales has fluctuated, reaching a high of approximately 36.7% in fiscal 2025 and a low of 33.5% in fiscal 2023, with an average of 35.4%. Gross margin was 35.4% of sales in fiscal 2026, compared to 36.7% in fiscal 2025. The prior year included a 0.7% benefit resulting from a change in accounting estimate related to revenue recognition for service contracts implemented in the second quarter of fiscal 2025. The remaining year-over-year change reflects a higher average retail sales price, which increased $666 to $20,064 (and increased $303 to $17,618 excluding ancillary products), partially offset by the Company's initiatives around pricing discipline, lower frequency and severity of vehicle repair costs, and improved retention of wholesale buyers for

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vehicles repossessed by the Company. Because higher-priced vehicles typically carry higher gross margin dollars but lower gross margin percentages, the increase in average selling price contributed to higher gross profit dollars per unit even as the gross margin percentage declined; total gross profit per retail unit sold increased $74 over the prior fiscal year to $7,442. Gross margin is also affected by the percentage of wholesale sales to retail sales, which relates, for the most part, to repossessed vehicles sold at or near cost. The

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