Americas Carmart Inc: Form 10-K for the period ended Apr 30, 2025

Business and Organization

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” 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, 2025, the Company operated 154 dealerships located primarily in small cities throughout the South-Central United States.

Business Strategy

In general, it is the Company’s objective to continue to expand its business using the same business model that has been developed and used by Car-Mart for over 40 years with enhancements to our technology and core products to better serve our customers. This business strategy focuses on:

Collecting Customer Accounts. Collecting customer accounts is perhaps the single most important aspect of operating an Integrated Auto Sales and Finance used car business and is a focal point for dealership level and corporate office personnel on a daily basis. The Company measures and monitors the collection results of its dealerships using internally developed delinquency and account loss standards. A large part of dealership management and account representatives’ incentive compensation is tied directly or indirectly to collection results. The Company utilizes numerous collections strategies to mitigate loss and provide ongoing support to its customers who often experience financial challenges. The Company has a collections department and support staff at the corporate level to work with field operators to improve collection results. This team monitors efficiencies and the effectiveness of account representatives as they work to improve customer success rates. The Company also utilizes several collection efforts centrally at the corporate office through texting, phone calls and other methods to supplement the field efforts. As part of our collections efforts we offer contract modifications, primarily involving term extensions. Over the last five fiscal years, the Company’s annual provision for credit losses as a percentage of sales has ranged from a low of 19.31% in fiscal 2021 to a high of 36.48% in fiscal 2024, with an average of 28.14% over the period. During fiscal 2025, credit losses improved to 32.68% due to the continued favorable performance in contracts originated under the Company's enhanced underwriting system.

Standardized Operations with Local Empowerment and Customer Engagement. The Company’s dealerships operate within a consistent framework of standardized processes that ensure quality, compliance, and operational efficiency across all locations. These processes guide key functions such as vehicle quality assurance, sales lead generation, credit decision-making through our loan origination system, and contract collections. While these standards provide a cohesive operational foundation, dealership managers are empowered to make decisions that best serve their customers. This localized leadership fosters responsiveness to customer needs and strengthens community ties. Approximately 46% of customers make their payments in person at a dealership, enabling regular face-to-face interactions that build trust, encourage timely payments, and provide immediate support for service or payment concerns. This blend of structured operations and community-level empowerment supports a customer-centric culture that drives engagement and satisfaction.

Expansion Through Disciplined Organic Growth and Strategic Acquisitions. The Company pursues growth through both increased revenue generation at existing dealership locations and the selective addition of new dealerships, either through openings or acquisitions. Historically, organic growth from existing operations has represented the primary driver of the Company’s expansion. To support this strategy, the Company continues to invest in infrastructure improvements designed to enhance dealership performance and facilitate the growth of its customer base.

In fiscal year 2025, the Company completed the acquisition of a dealership group comprising two locations. The Company intends to continue expanding its footprint primarily through the pursuit of strategic acquisition opportunities that are expected to strengthen its brand and optimize long-term shareholder returns. The Company has successfully completed acquisitions in each of the past five fiscal years and anticipates that future acquisitions will continue to contribute meaningfully to its overall growth trajectory. These strategic initiatives are subject to ongoing evaluation and may be adjusted in response to internal assessments or changing market conditions.

Selling Basic Transportation. The Company focuses on selling basic and affordable transportation to its customers. The Company’s average retail sales price was $19,398 per unit in fiscal 2025, compared to $19,113 in fiscal 2024. Used vehicle pricing continued to increase due to the high demand and tight supply of used vehicles. In general, the demand for quality, used vehicles has increased due to a shortage of new vehicles leading to inventory constraints in both the new and used vehicle markets. Management expects continued pressure on the supply and price of used vehicles for the near term. The Company focuses on providing a quality vehicle with affordable payment terms while maintaining relatively shorter-term lengths compared to others in the industry on its installment sales contracts (overall portfolio weighted average of 48.3 months).

Operating in Smaller Communities. As of April 30, 2025, approximately 69% of the Company’s dealerships were located in communities with populations of 50,000 or fewer. The Company believes that focusing on these smaller markets fosters stronger personal relationships with customers, which supports improved collection performance. Additionally, operating costs—including salaries, rent, and advertising—tend to be lower in these areas compared to major metropolitan markets. As the Company continues to build out its infrastructure and centralize certain operational functions, it may selectively expand into larger urban markets where strategically appropriate.

Enhanced Management Talent and Experience. The Company seeks to hire honest and hardworking individuals to fill entry-level positions, nurture and develop these associates, and promote them to managerial positions from within the Company. By promoting from within, the Company believes it is able to train its associates in the Car-Mart way of doing business, maintain the Company’s unique culture and develop the loyalty of its associates by providing opportunities for advancement. Our associates are core to our ability to serve the needs of our customers in a manner that is consistent with our mission and values. Due to growth, the Company has, to a larger extent, also had to look outside of the Company for associates possessing requisite skills and core competencies and who share the values and appreciate the unique culture the Company has developed over the years. Management expects to continue recruiting outside talent to support future growth. While the Company’s operating success and its Recruiting Team have aided Management's recruiting efforts, the Company expects the hiring environment to continue to be challenging as a result of increasing wages, competition for qualified workers, and the impact of inflation on our business and operations.

Cultivating Customer Relationships. The Company believes that maintaining and nurturing a strong relationship with its customers is critical to the success of the Company. A large percentage of sales at mature dealerships are made to repeat customers, and additional sales result from customer referrals. By developing a personal relationship with its customers, the Company believes it is in a better position to assist a customer, and the customer is more likely to cooperate with the Company should the customer experience financial difficulty during the term of their installment contract. The Company is able to cultivate these relationships through traditional communication channels and direct face-to-face interactions, as a high percentage of customers visit Company dealerships in person to make payments and for account and vehicle servicing needs. In addition, the Company uses digital communication channels such as email and SMS, as well as emerging technologies such as our customer relationship management software.

Business Strengths

The Company believes it possesses a number of strengths or advantages that distinguish it from most of its competitors. These business strengths include:

Experienced Management Team. The Company is led by a senior management team with significant experience in the automotive industry and specific expertise in serving subprime customers. Management has demonstrated the ability to adapt to changes in market conditions, implement operational improvements, and evaluate growth opportunities, including the integration of new technologies and business processes. The team’s industry knowledge and customer focus support the Company’s efforts to enhance operational efficiency, align its offerings with customer needs, and pursue long-term growth initiatives. Management’s experience and leadership are key contributors to the Company’s strategic execution and competitive positioning within the used vehicle market.

Proven Business Practices. The Company’s operations are highly structured. While dealerships operate on a decentralized basis, the Company has established policies, procedures, and business practices for virtually every aspect of a dealership’s operations. Detailed online operating manuals are available to assist the dealership manager and office, sales and collections personnel in performing their daily tasks. As a result, each dealership is operated in a uniform manner. Further, corporate office personnel monitor the dealerships’ operations through weekly visits and a number of daily, weekly and monthly communications and reports.

Cost-Efficient Operating Model. The Company has designed its dealership and corporate operations to maintain a disciplined focus on minimizing operating costs. Staffing levels at each dealership are aligned with the number of active customer accounts serviced, ensuring operational scalability. Associate compensation is standardized by position and adjusted to reflect regional market conditions. Other operating expenses are rigorously monitored and controlled to maintain cost efficiency. The Company leverages technology to enhance operational productivity; recent investments in a new loan origination system and an enterprise resource planning (ERP) system have been instrumental in driving efficiencies and providing greater operational flexibility to support growth. The Company regularly tracks operating costs as a percentage of revenues and on a per-customer basis, striving to deliver high-quality service while maintaining a cost-efficient structure.

Well-Capitalized. The Company believes it can fund its planned growth from net income generated from operations supplemented by its external capital resources. To the extent external capital is needed to fund growth, the Company plans to draw on its existing credit facilities, or renewals or replacements of those facilities, and to participate in the securitization market from time to time, when appropriate. The Company may also choose to access other debt or equity markets if needed or if market conditions are favorable to pursue its growth and acquisition strategies. Management will continue to scrutinize capital deployment to manage appropriate liquidity and access to capital to support growth. As of April 30, 2025, the Company’s ratio of debt to finance receivables (revolving credit facilities and non-recourse notes payable divided by principal balance of finance receivables) was 51.5%. Excluding the amount of total cash, the Company’s adjusted ratio of debt to finance receivables (a non-GAAP measure) as of April 30, 2025 was 43.2%, which the Company believes is lower than many of its competitors. For a reconciliation of the adjusted debt to finance receivables ratio to the most directly comparable GAAP financial measure, see “Non-GAAP Financial Measure” included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Significant Expansion Opportunities. The Company historically targets smaller communities in which to locate its dealerships (i.e., populations from 20,000 to 50,000), but has operations in larger cities such as Austin, Texas; Tulsa, Oklahoma; Lexington, Kentucky; Springfield, Missouri; Chattanooga and Knoxville, Tennessee; and Little Rock, Arkansas. The Company believes there are numerous suitable communities to expand our physical footprint within the twelve states in which the Company currently operates and other contiguous states to satisfy anticipated dealership growth for the next several years. In addition, the Company is leveraging its growing online presence, including an intuitive website, online inventory browsing, and seamless online application process, to improve the buying experience while also reaching beyond physical dealership locations.

Business Segment Information

The Company operates in a single reportable segment which represents our core business of offering integrated automotive sales and financing solutions for customers with limited financial resources regardless of credit history. For more information regarding our one reportable segment, see Note O to the Consolidated Financial Statements in Item 8 of this Annual Report Form 10-K, which is incorporated herein by reference.

Operations

Operating Segment. The Company operates with its consolidated results regularly reviewed by the Company’s Chief Operating Decision Maker in an effort to make decisions about resources to be allocated and to assess performance. The Company operates in the Integrated Auto Sales and Finance segment of the used car market. In this industry, the nature of the sale and the financing of the transaction, financing processes, the type of customer and the methods used to distribute the Company’s products and services, including the actual servicing of the contracts as well as the regulatory environment in which the Company operates, all have similar characteristics. Given the Company's single segment structure, there is no need for segment aggregation.

Dealership Organization. The Company’s dealerships operate with significant operational autonomy. Each dealership is responsible for vehicle sales, credit decision-making (subject to parameters established within the Company’s loan origination system), and the servicing and collection of installment contracts originated at the location, with support from the corporate office. Monthly financial statements for each dealership are prepared by the corporate office and reviewed by multiple levels of management to ensure oversight and accountability. The size of the workforce at each dealership varies based on the number of active customer accounts, ranging from as few as three to as many as forty-eight full-time associates. Larger dealerships typically employ personnel in roles such as general manager, assistant manager(s), office manager, office clerks, service manager, collections staff, sales staff, inventory associates (detailers), and on-call drivers. Dealerships generally operate Monday through Saturday, from 9:00 a.m. to 6:00 p.m.

Dealership Locations and Facilities. Below is a summary of dealerships operating during the fiscal years ended April 30, 2025, 2024, and 2023:

Below is a summary of dealership locations by state as of April 30, 2025, 2024, and 2023:

Dealerships are located on leased or owned property between one and four acres in size. When opening a new dealership, the Company will either remodel an existing structure on the property to conduct business or construct a new facility. Dealership facilities typically range in size from 1,500 to 5,000 square feet.

Vehicle Procurement. The Company acquires vehicles primarily from wholesalers, new car dealers, rental and fleet companies, auctions, and the general public. Vehicle purchasing is primarily conducted by corporate buyers, with additional support from purchasing agents located in the Company’s local markets. Additionally, dealership managers are authorized to procure vehicles as needed to meet local demand. The Company establishes centralized purchasing guidelines and actively monitors the quantity and quality of vehicles acquired, holding responsible parties accountable for adherence to these standards. In evaluating inventory purchases, the Company focuses on three primary criteria:

• Compliance with Company standards, including an internal condition report;
• Costs and physical characteristics of the vehicle, based on market values; and
• Vehicle reliability and historical performance, based on market conditions.

Generally, the Company acquires vehicles that are between five and twelve years old, with mileage ranging from approximately 70,000 to 140,000 miles, and pays between $7,000 and $15,000 per vehicle, with an average purchase price of approximately $9,500. The Company’s primary focus is providing reliable, basic transportation to its customers. The vehicle inventory primarily consists of sport utility vehicles, trucks, and sedans, while the Company typically does not acquire sports cars or luxury vehicles. Prior to sale, a member of dealership management inspects and test-drives each vehicle to ensure quality standards are met. Given the Company’s limited capacity for vehicle repair and reconditioning, it strives to purchase vehicles requiring minimal repairs. To support this strategy and maintain access to quality, affordable inventory, the Company has established relationships with third-party reconditioning firms. These partnerships leverage volume to negotiate favorable labor rates and consistent condition reporting, particularly for repossessed and traded vehicles, thereby expanding the Company’s access to a broader selection of lower-cost vehicles.

Selling, Marketing, and Advertising. Dealerships typically maintain an inventory ranging from 20 to 90 vehicles, depending on the size, maturity, and seasonal factors affecting the location. Inventory turnover occurs approximately seven times annually. Vehicle sales are primarily conducted by dealership managers, assistant managers, manager trainees, or sales associates. Sales associates receive a commission in addition to an hourly wage.

Sales are completed on an “as is” basis; however, customers have the option to purchase a service contract covering certain vehicle components and assemblies. For covered repairs, the Company coordinates service through third-party service centers with which it has negotiated favorable labor rates. A substantial majority of customers elect to purchase such service contracts at the time of sale.

Additionally, the Company offers an Accident Protection Plan (“APP”) to customers who finance their purchases. This product contractually obligates the Company to cancel the outstanding balance on the financing contract if the vehicle is declared a total loss or is stolen, as defined under the terms of the APP agreement. The APP product is available in most states where the Company operates, and the vast majority of financed customers elect to purchase it.

The Company maintains a seven-day vehicle exchange policy. Customers dissatisfied with their purchase may exchange the vehicle for one of comparable value within seven days of purchase or before the vehicle accrues 500 miles, whichever occurs first.

The Company’s objective is to provide customers with reliable basic transportation at a fair price while fostering positive customer experiences to encourage repeat business. The Company seeks to establish and maintain a strong reputation within each community it serves, generating new business through customer referrals. For mature dealerships, repeat customers represent a significant portion of total sales.

The Company employs a comprehensive marketing strategy, leveraging both traditional and digital channels across owned, paid, and earned media platforms. The Company employs promotional sales campaigns to drive demand and boost application volumes. To support and refine its brand strategy, the Company engages an external marketing firm that provides specialized expertise and scalability.

Underwriting and Finance. The Company provides financing to substantially all customers who purchase vehicles at its dealerships. Financing is offered exclusively for the purchase of the Company’s vehicles and selected ancillary products; the Company does not extend financing to non-customers. As of April 30, 2025, the Company’s installment sales contracts typically include down payments ranging from 0% to 20%, with an average down payment of 5.5%). Contract terms range from 18 months to 79 months, averaging 48.3 months, with a fixed annual interest rate ranging from 12.99% to 23.0% based primarily on the customer's credit score and applicable state usury limits. The portfolio weighted average interest rate is 17.6%.

Payment schedules are designed to align with customers’ pay periods and may be weekly, bi-weekly, semi-monthly, or monthly, with approximately 78% of payments due on a weekly or bi-weekly basis. Once preliminary financing terms are agreed upon, the Company obtains a credit application from the customer, which includes information on employment, residence, credit history, and personal references. This information is entered into the Company’s loan origination system and subject to verification by Company personnel. Following verification, the dealership manager reviews and either accepts, rejects, or modifies the proposed transaction, potentially requiring a higher down payment or recommending a lower-priced vehicle.

Recent refinements to underwriting guidelines within the origination system have enhanced dealership managers’ ability to evaluate applicants’ stability and creditworthiness. The dealership manager who approves the credit decision is ultimately responsible for contract collections, with compensation directly tied to the collection performance of the dealership. Centralized support is provided to dealership managers through underwriting assistance, training, and regular reporting to monitor customer accounts on a daily, weekly, and monthly basis.

Collections. The Company services all retail installment contracts through personnel located at the dealership level. Approximately 46% of customers make payments in person at the dealership where they purchased their vehicle. To facilitate convenience, the Company offers multiple payment options, including mail payments, in-person debit or cash payments, debit or ACH auto drafts, mobile and online payments, phone system payments, and payments at select retailers using personalized barcodes.

Each dealership closely monitors customer accounts using the Company’s proprietary receivables and collections software, which stratifies past due accounts by days delinquent. Senior operations personnel, including vice presidents and area operations managers, regularly review collection performance to ensure compliance with established policies and procedures. The Company believes timely engagement with past due accounts is critical to successful collections.

The Company has established delinquency standards for accounts one and two weeks past due, 15 or more days past due, and 30 or more days past due, as well as loss standards related to repossessions and charge-offs. The Company actively works to maintain low delinquency rates and minimize repossessions. Customers who are one to three days late on payments receive telephone or text message reminders, with all contact notes recorded electronically. The Company also utilizes centralized text messaging notifications, allowing customers to opt in for payment reminders and late notices via text.

During the collections process, the Company regularly offers contract modifications to customers experiencing financial difficulty. Approximately half of the Company’s installment sale contracts on average require one or more minor modifications to accommodate changes in the customer’s financial circumstances over the life of the contract. Modifications typically involve minor adjustments to payment terms, such as modest extensions to the overall contract term to lower the installment payment amount, provided that such modifications are expected to increase recoveries and the likelihood of repayment. The Company expects to collect all amounts due, including accrued interest at the contractual rate, during any modification period. When a customer’s contract is modified, the outstanding balance generally remains unchanged. Extension periods are limited to twelve months beyond the initial payment term and can be used in one or more modifications over the life of the contract. The Company’s use of contract term extensions and other modifications helps the Company mitigate credit loss and potential repossession of the underlying vehicle.

In addition to routine contract modifications, a limited subset of the Company’s installment sale contracts—representing approximately 1.1%, 1.1%, and 1.0% of total finance receivables as of April 30, 2025, 2024 and 2023, respectively—require modification due to customers entering bankruptcy protection. These modifications typically include a reduction in the contractual interest rate and/or an extension of the contract term as part of the customer’s court-approved bankruptcy plan. Under these circumstances, the bankruptcy trustee assumes responsibility for distributing payments to creditors on behalf of the bankruptcy court, including the Company, as allocated under the bankruptcy plan. If the customer’s bankruptcy proceeding is dismissed, the Company's collection process reverts back to the existing terms of the installment sales contract.

The Company prioritizes amicable resolution of payment delinquencies prior to vehicle repossession. In cases of severe delinquency where management determines that future timely payments are unlikely, the Company initiates repossession proceedings. For repossessed vehicles, a significant portion are voluntarily returned or surrendered by customers. Remaining repossessions are conducted by Company personnel or third-party agents. Depending on condition, repossessed vehicles are either retailed through Company dealerships or sold wholesale, primarily via physical or online auctions.

New Dealership Openings. In addition to its strategic acquisition initiatives, the Company continues to evaluate opportunities to open new dealership locations. Site selection decisions are made by senior management in coordination with corporate office personnel, taking into consideration demographic, economic, and competitive factors relevant to each prospective market. New dealerships are generally established in proximity to existing locations to facilitate operational oversight and support from the corporate office. This geographic clustering also enhances logistical efficiency and ensures alignment with the Company’s operational standards and policies.

Dealership Acquisitions. Since 2020, the Company has pursued a deliberate strategy of acquiring established dealerships to expand its geographic footprint, enhance operational scale, and strengthen its position within the used vehicle market. Most recently, the Company completed the acquisition of two used car dealerships in the Austin, Texas area, further expanding its market presence and enabling the Company to serve a broader customer base.

The acquisition of established dealerships provides the Company with the ability to accelerate growth by leveraging the existing infrastructure, personnel, and customer relationships of the acquired entities. These acquisitions have enhanced the Company’s operational efficiency and enabled greater brand reach while providing immediate access to experienced management teams and established local market knowledge.

The Company continues to actively seek additional acquisition opportunities, including in markets beyond its current geographic footprint. Management believes that ongoing changes in the competitive landscape may create favorable conditions to acquire well-performing dealerships operated by experienced ownership groups. Such acquisitions are expected to support long-term growth, improve scale-driven efficiencies, and deliver enhanced value to shareholders and customers alike.

Corporate Office Oversight and Management. The Company’s corporate headquarters, located in Rogers, Arkansas, provides centralized oversight of dealership operations. It includes senior management and personnel supporting functions such as regional operations, inventory, sales, collections, compliance, human resources, accounting, and information systems.

The corporate office monitors dealership performance through daily, weekly, monthly, and annual reviews of financial and operational data, including cash receipts, inventory levels, receivables aging, and sales performance. This information is used to prepare company-wide reports and manage field operations.

Senior management, area operations managers, compliance auditors, and loss prevention staff periodically visit dealerships to assess operations and ensure adherence to policies. The corporate office also develops and coordinates training programs, with a focus on managerial development and staff training.

Dealership performance is evaluated based on sales, delinquency and account loss performance and other key performance indicators. The corporate office manages written-off accounts, allowing dealerships to focus on current collections. Monthly meetings with dealership managers provide a platform for training, performance recognition, and goal setting.

The corporate office is responsible for policy development, compliance audits, new dealership openings, and the Company’s strategic direction.

Industry

Used Car Sales. The market for used car sales in the United States is significant. Used car retail sales typically occur through franchised new car dealerships that sell used cars or independent used car dealerships. The Company operates in the Integrated Auto Sales and Finance segment of the independent used car sales and finance market. Integrated Auto Sales and Finance dealers sell and finance used cars to individuals that often have limited credit histories or past credit problems. Integrated Auto Sales and Finance dealers typically offer their customers certain advantages over more traditional financing sources, such as less restrictive underwriting guidelines, flexible payment terms (including scheduling payments on a weekly or bi-weekly basis to coincide with a customer’s payday), and the ability to make payments in person, an important feature to individuals who may not have a checking account.

Used Car Financing. The used automobile financing industry is served by traditional lending sources such as banks, savings and loans, and captive finance subsidiaries of automobile manufacturers, as well as by independent finance companies and Integrated Auto Sales and Finance dealers. Many loans that flow through the more traditional sources have historically ended up packaged in the securitization markets. Despite significant opportunities, many of the traditional lending sources have not historically been consistent in providing financing to individuals with limited credit histories or past credit problems. Management believes traditional lenders have historically avoided this market because of its high credit risk and the associated collections efforts. In addition, as a result of the recent inflationary environment, increased funding costs, and increased insurance costs, credit availability for used vehicle financing across the market has tightened from the financing availability levels experienced during the past decade. Management expects the current conditions to continue for the foreseeable future and believes the reduced availability of used vehicle financing elsewhere will provide the Company an opportunity to gain market share and better serve an increasing customer base.

Competition

The used automotive retail industry is fragmented and highly competitive. The Company competes principally with other independent Integrated Auto Sales and Finance dealers, as well as with (i) the used vehicle retail operations of franchised automobile dealerships, (ii) independent used vehicle dealers, and (iii) individuals who sell used vehicles in private transactions. The Company competes for both the purchase and resale of used vehicles. The tight supply of used vehicles in our market has led to higher purchase and retail prices which have been the primary contributors to the Company’s decision in recent periods to allow longer term lengths and slightly lower down payments in connection with our customer financing contracts.

Management believes the principal competitive factors in the sale of its used vehicles include (i) the availability of financing to consumers with limited credit histories or past credit problems, (ii) the breadth and quality of vehicle selection, (iii) pricing, (iv) the convenience of a dealership’s location, (v) the option to purchase a service contract and an accident protection plan, and (vi) customer service. Management believes that its dealerships are not only competitive in each of these areas, but have some distinct advantages, specifically related to the provision of strong customer service for a credit challenged consumer. The Company’s local face-to-face presence combined with some centralized support through digital and phone allows it to serve customers at a higher level by forming strong personal relationships.

Seasonality

Historically, the Company’s third fiscal quarter (November through January) has been the slowest period for vehicle sales. Conversely, the Company’s first and fourth fiscal quarters (May through July and February through April) have historically been the busiest times for vehicle sales. Therefore, the Company generally realizes a higher proportion of its revenue and operating profit during the first and fourth fiscal quarters. The Company expects this pattern to continue in future years.

If conditions arise that impair vehicle sales during the first or fourth fiscal quarters, the adverse effect on the Company’s revenues and operating results for the year could be disproportionately large.

Regulation and Licensing

The Company is committed to a culture of compliance by promoting and supporting efforts to design, implement, manage, and maintain compliance initiatives. The Company’s operations are subject to various federal, state and local laws, ordinances and regulations pertaining to the sale and financing of vehicles. Under various state laws, the Company’s dealerships must obtain a license in order to operate or relocate. These laws also regulate advertising and sales practices. The Company’s financing activities are subject to federal laws such as truth-in-lending and equal credit opportunity laws and regulations as well as state and local motor vehicle finance laws, installment finance laws, usury laws and other installment sales laws. Among other things, these laws require that the Company limit or prescribe terms of the contracts it originates, require specified disclosures to customers, restrict collections practices, limit the Company’s right to repossess and sell collateral, and prohibit discrimination against customers on the basis of certain characteristics including age, race, gender and marital status.

The Company’s consumer financing and collection activities are also subject to oversight by the federal Consumer Financial Protection Bureau (“CFPB”), which has broad regulatory powers over consumer credit products and services such as those offered by the Company. Under applicable CFPB rules, the Company’s finance subsidiary, Colonial, is deemed a “larger participant” in the automobile financing market and is therefore subject to examination and supervision by the CFPB.

The states in which the Company operates impose limits on interest rates the Company can charge on its installment contracts. These limits have generally been based on either (i) a specified margin above the federal primary credit rate, (ii) the age of the vehicle, or (iii) a fixed rate.

The Company is also subject to a variety of federal, state and local laws and regulations that pertain to the environment, including compliance with regulations concerning the use, handling and disposal of hazardous substances and waste.

Management believes the Company is in compliance in all material respects with all applicable federal, state and local laws, ordinances and regulations; however, the adoption of additional laws, changes in the interpretation of existing laws, or the Company’s entrance into jurisdictions with more stringent regulatory requirements could have a material adverse effect on the Company’s used vehicle sales and finance business.

Human Capital Resources

At America’s Car-Mart, Inc., our associates are the heart of our business. Our associates are committed to making a difference for customers, their communities and each other. As of April 30, 2025, the Company, including its consolidated subsidiaries, employed a diverse associate base of approximately 2,300 full-time associates. None of the Company’s employees are covered by a collective bargaining agreement, and the Company is committed to an environment where associates feel respected, valued, and empowered to reach their full potential.

Equity and Inclusion

The Company’s culture is one that values equity and inclusion and fosters engagement. We view inclusion as an important factor in reflecting the values and cultures of all our associates. Each of our dealerships is a locally operated business, and our associates must represent the communities in which we serve.

Fostering an open-door culture based on compassion, respect, and open communications is essential for driving long-term success of the Company’s culture. Car-mart conducts engagement surveys and exit surveys which allow the Company to gain insight to associate sentiment and address workforce priorities.

Employee Safety and Well-being

Ensuring the safety of all associates is a critical priority for the Company. Associates are expected to stay informed about safety initiatives and to report unsafe conditions immediately. All vendors must comply with all applicable laws and regulations while also satisfying the Company’s due diligence processes and related vendor requirements. The Company’s annual and continuing safety goals are to eliminate all preventable work-related injuries, illnesses and property damage and achieve 100% compliance with all established safety procedures. Internally, we track workplace injuries among associates, as well as injuries among customers and other third parties that occur at our facilities. With our comprehensive safety and education program and attention to proper procedures at our dealerships, the number of incidents is below industry standards for all retail locations.

Our Legal and Compliance departments are responsible for safety education, training, OSHA compliance and reporting, and regular reviews of indicators and areas where risks and injuries can occur, helping to eliminate hazards. General Managers at each dealership are responsible for safety at their location on a daily basis, and members of the safety committee at our corporate office are trained on CPR and other emergency procedures and regularly conduct drills for events such as a fire or tornado.

From a health perspective, the Company believes it is important to support the physical, mental, social, environmental and financial well-being of our Car-Mart associates at work and at home. To support this commitment, we provide a comprehensive Employee Assistance Program at no additional cost to our associates and their immediate family members. We seek to empower associates to improve and maintain their overall health and wellness through this program which provides associates access to financial planning, legal consultants, and professional resources that promote associates’ mental health and general well-being. Further, we offer resources for preventive care, such as flu shots, vaccinations and other preventative health screenings.

Talent Management, Compensation, and Development

Talent Management and Associate Development. The Company is dedicated to fostering a work environment and organizational culture that attracts, develops, and retains highly motivated associates. We aim to provide our associates with challenging opportunities, an environment conducive to entrepreneurial thinking, and the resources necessary for career development. As we continue to grow our operations, our success relies on our ability to consistently attract, hire, and retain top-tier talent at all levels of the organization.

The Company’s talent management strategy encompasses targeted recruitment efforts through prominent online job platforms, complemented by internal career advancement opportunities to support the ongoing development of our associate pipeline. We offer a competitive compensation and benefits program designed to promote both personal and professional growth, while ensuring our associates acquire the skills and experience necessary to secure a financially stable retirement.

The Company provides a comprehensive compensation package tailored to the specific role each associate holds. Our compensation philosophy emphasizes performance, both on an individual and company-wide basis. Many associates have the opportunity to earn additional compensation through commissions, performance-based salary adjustments, and bonuses. All associates are compensated at levels exceeding both state and federal minimum wage requirements. Additionally, a broad selection of benefit options is made available to our associates to accommodate their unique needs.

The Company is committed to the continuous development of its associates through various training, mentoring, and career advancement programs. All associates are required to complete orientation courses on Company culture, safety, sexual harassment and discrimination awareness, and other compliance-related topics. Associates also have access to online training resources focused on enhancing job-specific skills, leadership competencies, and advanced subjects such as data literacy.

The Company’s Future Manager Training Program provides associates with comprehensive training in all aspects of dealership operations, including vehicle inventory management, facility operations, effective collection strategies, and leadership development. Furthermore, the Car-Mart U program builds upon the foundational knowledge gained through the Future Manager Training Program, offering a blended learning curriculum that prepares assistant managers for roles such as general manager or other senior management positions. This program incorporates advanced leadership training, business concepts, and customer experience strategies.

We believe that these initiatives underscore the Company’s commitment to the long-term growth, motivation, and success of our associates.

Available Information

The Company’s website is located at www.car-mart.com (http://www.car-mart.com). The Company makes available on this website, free of charge, access to its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, as well as proxy statements and other information the Company files with, or furnishes to, the Securities and Exchange Commission (“SEC”) as soon as reasonably practicable after the Company electronically submits this material to the SEC. The information contained on the website or available by hyperlink from the website is not incorporated into this Annual Report on Form 10-K or other documents the Company files with, or furnishes to, the SEC.

Executive Officers of the Registrant

The following table provides information regarding the executive officers of the Company as of July 31, 2025:

Douglas Campbell became Chief Executive Officer, President and a director of the Company in October 2023, after serving as President of the Company for the prior year. Before joining the Company, Mr. Campbell was Senior Vice President, Head of Fleet Services for the Americas, at Avis Budget Group (“Avis”) since June 2022, previously serving in roles as Head of Fleet Services for the Americas since June 2021 and Vice President, Remarketing for the Americas, at Avis from March 2018 to June 2021. Prior to joining Avis, Mr. Campbell held management positions at AutoNation from September 2014 to March 2018 serving as Used Vehicle Director, Eastern Region, in AutoNation’s corporate office and later as General Manager of its Honda Dulles dealership. Preceding AutoNation, Mr. Campbell served fifteen years with Coral Springs Auto Mall, most recently serving as Executive General Manager.

Jonathan M. Collins became Chief Financial Officer of the Company on May 12, 2025. Before joining the Company, Mr. Collins served as the Chief Financial Officer for Walmart Africa since 2023. Prior to his role with Walmart Africa, Mr. Collins served as the Chief Accounting Officer for Flipkart Group, an e-commerce platform based in India, from 2020 to 2023. He also previously served as Controller for Walmart Canada from 2019 to 2020 and worked for 12 years in CFO advisory services for KPMG. Mr. Collins started his career as a software developer and eventually chief architect of the enterprise resource planning system for Alltel Information Systems.

Vickie D. Judy currently serves as Chief Accounting Officer and served as Chief Financial Officer of the Company from January 2018 to May 2025. Before becoming Chief Financial Officer in January 2018, Ms. Judy served as Principal Accounting Officer since March 2016 and Vice President of Accounting since August 2015. Since joining the Company in May 2010, Ms. Judy has also served as Controller and Director of Financial Reporting. Ms. Judy is a Certified Public Accountant and prior to joining the Company her experience included approximately five years in public accounting with Arthur Andersen & Co. and approximately 17 years at National Home Centers, Inc., a home improvement product and building materials retailer, most recently as Vice President of Financial Reporting.

Jamie Fischer has served as Chief Operating Officer of the Company since September 2024. Before becoming Chief Operating Officer, Ms. Fischer served as Head of Operations at DriveTime Automotive Group, Inc. (“DriveTime”) since 2021. She previously served as Senior Managing Director of Retail and Inventory Operations for DriveTime from 2018 until 2021 and held various leadership positions in operations and human resources management for DriveTime and its affiliated automotive warranty company, SilverRock, Inc., from 2012 to 2018. Prior to joining DriveTime, Ms. Fischer gained nearly a decade of experience in the auto retail industry, where she focused on operations and leadership development.

The Company is subject to various risks. The following is a discussion of risks that could materially and adversely affect the Company’s business, operating results, and financial condition.

Risks Related to the Company’s Business, Industry, and Markets

Recent and future disruptions in domestic and global economic and market conditions could have adverse consequences for the used automotive retail industry in the future and may have greater consequences for the non-prime segment of the industry.

In the normal course of business, the used automotive retail industry is subject to changes in national and regional U.S. economic conditions, including, but not limited to, interest rates, gasoline and grocery prices, inflation, personal discretionary spending levels, and consumer sentiment about the economy in general. A downturn in economic conditions, disruptions in the equity or debt markets, high unemployment or underemployment, depressed vehicle or housing prices, unsustainable debt levels, high inflation, high interest rates, unfavorable changes in interest rates, the introduction of trade tariffs or other policies that negatively impact the automotive industry, declines in household incomes or savings, deteriorating consumer or business sentiment, consumer or commercial bankruptcy filings, or declines in the strength of national or local economies could decrease demand for our products and services, increase the amount and rate of delinquencies and losses, raise our operating and other expenses, and negatively impact the returns on and the value of our portfolio.

Recent and future disruptions in domestic and global economic and market conditions, including as a result of the recent and potential future implementation of increased tariffs and other changes in trade policies, or significant changes in the political environment and/or public policy, could adversely affect consumer demand or increase the Company’s costs, resulting in lower profitability for the Company. Due to the Company’s focus on non-prime customers, its actual rate of delinquencies, repossessions and credit losses on contracts could be higher under adverse economic conditions than those experienced in the automotive retail finance industry in general.

The outlook for the U.S. economy and the impacts to the automotive industry and individual consumers of the recently imposed tariffs, any future tariffs and any retaliatory actions by other countries remains uncertain, which may adversely affect the Company’s financial condition, results of operations and liquidity. Periods of economic slowdown or recession are often characterized by high unemployment and diminished availability of credit, generally resulting in increases in delinquencies, defaults, repossessions and credit losses. Further, periods of economic slowdown may also be accompanied by temporary or prolonged decreased consumer demand for motor vehicles and declining used vehicle prices.

Significant increases in the inventory of used vehicles during periods of economic slowdown or recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales. The prices of used vehicles are variable and a rise or decline in the used vehicle prices may have an adverse effect on the Company’s business. The Company is unable to predict with certainty the future impact of the most recent global and domestic economic conditions on consumer demand in our markets or on the Company’s costs.

A reduction in the availability or access to sources of inventory could adversely affect the Company’s business by increasing the costs of vehicles purchased.

The Company primarily acquires vehicles through wholesalers, new car dealers, rental and fleet companies, auctions, and the general public. However, there is no assurance that sufficient inventory will continue to be available to the Company, nor that vehicles will be available at comparable prices. Any reduction in inventory availability or increase in vehicle acquisition costs could negatively impact the Company’s gross margin, particularly as it strives to maintain affordable payments for its customer base. In such instances, the Company may need to absorb a portion of these cost increases, which could adversely affect profitability.

The availability and pricing of vehicles is heavily influenced by overall new car sales volumes. New car sales have historically been vulnerable to economic downturns and disruptions to supply chains and could be impacted by tariffs or the imposition of new tariffs, trade wars, barriers or restrictions, or threats of such actions. Any future decline in new car sales as a result of the recent and potential future U.S. trade policy changes or other factors could further exacerbate challenges related to sourcing inventory or increase the cost of vehicles.

Additionally, the Company’s ability to procure vehicles may be adversely affected by disruptions in the wholesale and auction markets, including closures or reduced operations due to future public health crises, continued economic volatility, or other unforeseen factors. Such disruptions could restrict access to vehicles or drive up acquisition costs, further impacting the Company’s operational performance and margins.

The used automotive retail industry is fragmented and highly competitive, which could result in increased costs to the Company for vehicles and adverse price competition. Increased competition on the financing side of the business could result in increased credit losses.

The Company competes principally with other independent Integrated Auto Sales and Finance dealers, and with (i) the used vehicle retail operations of franchised automobile dealerships, (ii) independent used vehicle dealers, and (iii) individuals who sell used vehicles in private transactions. The Company competes for both the purchase and resale, which includes, in most cases, financing for the customer, of used vehicles. The Company’s competitors may sell the same or similar makes of vehicles that Car-Mart offers in the same or similar markets at competitive prices. Increased competition in the market, including new entrants to the market, could result in increased wholesale costs for used vehicles and lower-than-expected vehicle sales and margins. Further, if any of the Company’s competitors seek to gain or retain market share by reducing prices for used vehicles, the Company would likely reduce its prices in order to remain competitive, which may result in a decrease in its sales and profitability and require a change in its operating strategies. Increased competition on the financing side puts pressure on contract structures and increases the risk for higher credit losses. More qualified applicants have more financing options on the front-end, and if events adversely affecting the borrower occur after the sale, the increased competition may tempt the borrower to default on their contract with the Company in favor of other financing options, which in turn increases the likelihood of the Company not being able to save that account.

The used automotive retail industry operates in a highly regulated environment with significant attendant compliance costs and penalties for non-compliance.

The used automotive retail industry is subject to a wide range of federal, state, and local laws and regulations, such as local licensing requirements and laws regarding advertising, vehicle sales, financing, and employment practices. Facilities and operations are also subject to federal, state, and local laws and regulations relating to environmental protection and human health and safety. The violation of these laws and regulations could result in administrative, civil, or criminal penalties against the Company or in a cease-and-desist order. As a result, the Company has incurred, and will continue to incur, capital and operating expenditures, and other costs of complying with these laws and regulations. Further, over the past several years, private plaintiffs and federal, state, and local regulatory and law enforcement authorities have increased their scrutiny of advertising, sales and finance activities in the sale of motor vehicles. Additionally, the Company’s finance subsidiary, Colonial, is deemed a “larger participant” in the automobile finance market and currently remains subject to examination and supervision by the CFPB, which has broad regulatory powers over consumer credit products and services such as those offered by the Company.

The Company’s business is geographically concentrated; therefore, the Company’s results of operations may be adversely affected by unfavorable conditions in its local markets.

The Company’s performance is subject to local economic, competitive, and other conditions prevailing in the twelve states where the Company operates. The Company provides financing in connection with the sale of substantially all of its vehicles. These sales are made primarily to customers residing in Alabama, Arkansas, Georgia, Illinois, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee and Texas with approximately 28% of revenues resulting from sales to Arkansas customers. The Company’s current results of operations depend substantially on general economic conditions and consumer spending habits in these local markets. Any decline in the general economic conditions or decreased consumer spending in these markets may have a negative effect on the Company’s results of operations.

The Company’s growth strategy is dependent upon the following factors:

• Favorable operating performance. Our ability to increase revenues at existing dealerships or expand our business through additional dealership openings or strategic acquisitions is dependent on a sufficiently favorable level of operating performance to support the management, personnel and capital resources necessary to successfully grow existing locations, open and operate new locations, or complete acquisitions.
• Ability to successfully identify, complete and integrate new acquisitions. Part of our current growth strategy includes strategic acquisitions of dealerships. We could have difficulty identifying attractive target dealerships, completing the acquisition or integrating the acquired business’ assets, personnel and operations with our own. Acquisitions are accompanied by a number of inherent risks, including, without limitation, the difficulty of integrating acquired companies and operations; potential disruption of our ongoing business and distraction of our management or the management of the target company; difficulties in maintaining controls, procedures and policies; potential impairment of relationships with associates and partners as a result of any integration of new personnel; potential inability to manage an increased number of locations and associates; failure to realize expected efficiencies, synergies and cost savings; reaction to the transaction among the companies’ customers and potential customers; and the effect of any government regulations which relate to the businesses acquired.
• Availability of suitable dealership sites. Our ability to open new dealerships is subject to the availability of suitable dealership sites in locations and on terms favorable to the Company. If and when the Company decides to open new dealerships, the inability to acquire suitable real estate, either through lease or purchase, at favorable terms could limit the expansion of the Company’s dealership base. In addition, if a new dealership is unsuccessful and we are forced to close the dealership, we could incur additional costs if we are unable to dispose of the property in a timely manner or on terms favorable to the Company. Any of these circumstances could have a material adverse effect on the Company’s expansion strategy and future operating results.
• Ability to attract and retain management for new and existing dealerships. The success of new dealerships is dependent upon the Company being able to hire and retain additional competent personnel. The market for qualified employees in the industry and in the regions in which the Company operates is highly competitive. If we are unable to hire and retain qualified and competent personnel to operate our dealerships, these dealerships may not be profitable, which could have a material adverse effect on our future financial condition and operating results.
• Availability and cost of vehicles. The cost and availability of sources of inventory could affect the Company’s ability to open new dealerships or increase revenue at existing dealerships. While new car sales volumes and the operations of auctions and wholesalers have generally stabilized since the pandemic, long-term changes in supply chain dynamics and vehicle turnover continue to create uncertainty and could be impacted by tariffs or the imposition of new tariffs, trade wars, barriers or restriction, or threats of such actions. Any of these factors could potentially have a significant negative effect on the supply of vehicles at appropriate prices available to the Company in future periods. This could also make it difficult for the Company to supply appropriate levels of inventory for an increasing number of dealerships without significant additional costs, which could limit our future sales or reduce future profit margins if we are required to incur substantially higher costs to maintain appropriate inventory levels.
• Acceptable levels of credit losses at new dealerships. Credit losses tend to be higher at new dealerships due to fewer repeat customers and less experienced associates; therefore, the opening of new dealerships, excluding acquired dealerships, tends to increase the Company’s overall credit losses. This may require the Company to incur additional costs to reduce future credit losses or to close the underperforming locations altogether. Any of these circumstances could have a material adverse effect on the Company’s future financial condition and operating results.

The Company’s business is subject to seasonal fluctuations.

Historically, the Company’s third fiscal quarter (November through January) has been the slowest period for vehicle sales. Conversely, the Company’s first and fourth fiscal quarters (May through July and February through April) have historically been the busiest times for vehicle sales. Therefore, the Company generally realizes a higher proportion of its revenue and operating profit during the first and fourth fiscal quarters. The Company expects this pattern to continue in future years.

If conditions arise that impair vehicle sales during the first or fourth fiscal quarters, the adverse effect on the Company’s revenues and operating results for the year could be disproportionately large.

The effects of any future public health crisis could have a significant impact on our business, sales, results of operations and financial condition.

The global outbreak of COVID-19 led to severe disruptions in general economic activities, particularly retail operations and global supply chains, and affected consumer demand and the overall health of the U.S. economy for an extended period following the height of the pandemic. The effects of any future pandemic or similar public health crises could negatively impact all aspects of our business, including consumer demand, used vehicle sales and financing, finance receivable collections, repossession activity and inventory acquisition. The continued health and productivity of our associates, including management teams, is critical to our business, and any disruption could adversely affect our operations, The consequences of any future adverse public health developments could have a material adverse effect on our business, sales, results of operations and financial condition.

Additionally, our liquidity could be negatively impacted if economic conditions were to once again deteriorate due to a future public health crisis, which could require us to pursue additional sources of financing to obtain working capital, maintain appropriate inventory levels, support the origination of vehicle financing, and meet our financial obligations. Capital and credit markets may also be disrupted by such events, and our ability to obtain any new or additional financing is not guaranteed and largely dependent upon evolving market conditions and other factors.

Risks Related to the Company’s Operations

The Company identified a material weakness in its internal control over financial reporting, and if it is unable to achieve and maintain effective internal control over financial reporting, its ability to produce accurate financial statements on a timely basis could be impaired and its public reporting may be unreliable.

Effective internal control over financial reporting is necessary for the Company to detect and prevent material misstatements in a timely manner in order to provide reasonable assurance regarding the reliability of our financial reporting and the presentation of its financial statements in accordance with GAAP. Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed by the Company in the reports we file or submit to the SEC is accumulated and communicated to management to allow timely decisions regarding required disclosure. A material weakness, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. Based on the Company’s evaluation of the effectiveness of its internal control over financial reporting as of April 30, 2025, the Company determined that it had a material weakness as of April 30, 2025 because of inadequate controls to appropriately analyze all relevant information required for complete and accurate presentation and disclosure under GAAP. This principally resulted from (1) incorrect assessment during the initial adoption of ASU 2022-02, (2) ineffective disclosure controls and procedures that did not identify missing required disclosures under ASC 310-10-50-42 through 50-44, and (3) turnover in technical accounting resources leading to a reduction of requisite expertise. Accordingly, the Company’s disclosure controls and procedures and internal control over financial reporting as of April 30, 2025 were not effective due to the material weakness discussed above.

The Company is implementing significant organizational and process improvements to address the material weakness, including hiring experienced financial reporting personnel and enhancing its disclosure controls and procedures. The remediation actions are being monitored by the Audit Committee of the Board of Directors. However, the Company cannot assure you that these efforts will remediate this material weakness in a timely manner, or at all, or that the Company will be able to maintain effective controls and procedures even if it remediates this material weakness. If the Company is unable to successfully remediate this material weakness, design or operate effective controls and procedures, or identify any future material weaknesses, the accuracy and timing of its financial reporting may be adversely affected, it may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports and it may experience a loss of public confidence, which could have an adverse effect on the Company’s business, financial condition and the market price of the Company’s common stock.

The Company is required to disclose changes made in its internal control procedures on a quarterly basis, and management is required to assess the effectiveness of these controls annually. As an “accelerated filer,” the Company’s independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. An independent assessment of the effectiveness of the Company’s internal controls could detect problems that management’s assessment might not. Any additional undetected material weaknesses in the Company’s internal controls could lead to further financial statement restatements and require the Company to incur additional expenses of remediation. In addition, if the Company is unable to remediate this material weakness, or if the Company is otherwise unable to conclude that its internal control over financial reporting is effective, the Company could lose investor confidence in the accuracy and completeness of its financial reports, the market price of its securities could decline, and the Company could be subject to sanctions or investigations by regulatory authorities. Failure to remedy any material weakness in the Company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict the Company’s future access to the capital markets.

The Company may have a higher risk of delinquency and default than traditional lenders because it finances its sales of used vehicles to credit-impaired borrowers.

Substantially all of the Company’s automobile contracts involve financing to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Financing made to borrowers who are restricted in their ability to obtain financing from traditional lenders generally entails a higher risk of delinquency, default and repossession, and higher losses than financing made to borrowers with better credit. Delinquency interrupts the flow of projected interest income and repayment of principal from a contract, and a default can ultimately lead to a loss if the net realizable value of the automobile securing the contract is insufficient to cover the principal and interest due on the contract or if the vehicle cannot be recovered. The Company’s profitability depends, in part, upon its ability to properly evaluate the creditworthiness of non-prime borrowers and efficiently service such contracts. Although the Company believes that its underwriting criteria and collection methods enable it to manage the higher risks inherent in financing made to non-prime borrowers, no assurance can be given that such criteria or methods will afford adequate protection against such risks. Additionally, changes in regulatory or bankruptcy laws could have an impact on the Company’s losses. If the Company experiences higher losses than anticipated, its financial condition, results of operations and business prospects could be materially and adversely affected.

The Company’s allowance for credit losses may not be sufficient to cover actual credit losses, which could adversely affect its financial condition and operating results.

When applicable, the Company has to recognize losses resulting from the inability of certain borrowers to pay contracts and the insufficient realizable value of the collateral securing contracts. The Company maintains an allowance for credit losses in an attempt to cover net credit losses expected over the remaining life of the contracts in the portfolio at the measurement date. Additional credit losses will likely occur in the future and may occur at a rate greater than the Company has experienced to date. The allowance for credit losses represents management’s best estimate of lifetime expected losses based on reasonable and supportable forecasts, historical credit loss experience, changes in contractual characteristics (i.e., average amount financed, term, and interest rates), and other qualitative considerations, such as credit quality trends, collateral values, current and forecasted economic conditions, underwriting and collections practices, concentration risk, credit review, and other external factors. This evaluation is inherently subjective as it requires estimates of material factors that may be susceptible to significant change. If the Company’s assumptions and judgments prove to be incorrect, its current allowance for credit losses may not be sufficient and adjustments may be necessary to allow for different economic conditions or adverse developments in its contract portfolio which could adversely affect the Company’s financial condition and results of operations. In addition, any future deterioration in economic conditions or consumer financial health may result in additional future credit losses that may require us to increase the allowance for credit losses.

The Company’s success depends upon the continued contributions of its management teams and the ability to attract and retain qualified employees.

The Company is dependent upon the continued contributions of its management teams. Because the Company maintains a decentralized operation in which each dealership is responsible for inspecting and selling its own vehicles, making credit decisions and collecting contracts it originates, the key employees at each dealership are important factors in the Company’s ability to implement its business strategy. Consequently, the loss of the services of key employees could have a material adverse effect on the Company’s results of operations. In addition, when the Company decides to open new dealerships, the Company will need to hire additional personnel. The market for qualified employees in the industry and in the regions in which the Company operates is highly competitive and may subject the Company to increased labor costs during periods of low unemployment or times of increased competition for labor.

The Company’s business is dependent upon the efficient operation of its information systems.

The Company relies on its information systems in managing its sales, inventory, consumer financing, and customer information effectively. The failure of the Company’s information systems to perform as designed, or the failure to maintain and continually enhance or protect the integrity of these systems, could disrupt the Company’s business, impact sales and profitability, or expose the Company to customer or third-party claims.

Security breaches, cyber-attacks or fraudulent activity could result in damage to the Company’s operations or lead to reputational damage.

Our information and technology systems are vulnerable to damage or interruption from computer viruses, network failures, computer and telecommunications failures, infiltration by unauthorized persons and security breaches, usage errors by our employees, power outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes. A security breach of the Company’s computer systems could also interrupt or damage its operations or harm its reputation. In addition, the Company could be subject to liability if confidential customer information is misappropriated from its computer systems. Any compromise of security, including security breaches perpetrated on persons with whom the Company has commercial relationships, that result in the unauthorized release of its users’ personal information, could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to the Company’s reputation, and a loss of confidence in the Company’s security measures, which could harm its business. Any compromise of security could deter people from entering into transactions that involve transmitting confidential information to the Company’s systems and could harm relationships with the Company’s suppliers, which could have a material adverse effect on the Company’s business. Actual or anticipated attacks may cause the Company to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. Despite the implementation of security measures, these systems may still be vulnerable to physical break-ins, computer viruses, programming errors, attacks by third parties or similar disruptive problems. The Company may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.

Most of the Company’s customers provide personal information when applying for financing. The Company relies on encryption and authentication technology to provide security to effectively store and securely transmit confidential information. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in the technology used by the Company to protect transaction data being breached or compromised.

In addition, many of the third parties who provide products, services, or support to the Company could also experience any of the above cyber risks or security breaches, which could impact the Company’s customers and its business and could result in a loss of customers, suppliers, or revenue.

The Company may be unable to keep pace with technological advances and changes in consumer behavior, which could adversely affect its business, financial condition and results of operations.

The Company relies on its information technology systems to facilitate digital sales leads. The Company’s ability to optimize its digital sales platform is affected by online search engines and classified sites that are not direct competitors but that may direct online traffic to the websites of competing automotive retailers. These third-party sites could make it more difficult for the Company to market its vehicles online and attract customers to its online offerings. Further, to address changes in consumer buying preferences and to improve customer experience, inventory procurement and recruiting and training, the Company makes corresponding technology and systems upgrades. The Company may not be able to establish sufficient technological upgrades to support evolving consumer buying preferences and to keep pace with its competitors. If these systems fail to perform as designed or if the Company fails to respond effectively to consumer buying preferences or keep pace with technological advances by its competitors, it could have a material adverse effect on the Company’s business, financial condition and results of operations.

Changes in the availability or cost of capital and working capital financing could adversely affect the Company’s growth and business strategies, and volatility and disruption of the capital and credit markets and adverse changes in the global economy could have a negative impact on the Company’s ability to access the credit markets in the future and/or obtain credit on favorable terms.

The Company generates cash from income from continuing operations. The cash is primarily used to fund finance receivables growth. In addition to income from continuing operations, the Company generally funds its finance receivables growth and operations through borrowings under its revolving credit facilities and periodic issuances of non-recourse notes through asset-back securitization transactions. On a long-term basis, the Company expects its principal sources of liquidity to consist of income from continuing operations and borrowings under revolving credit facilities and/or term securitizations. Any adverse changes in the Company’s ability to borrow under revolving credit facilities or by accessing the securitization market, or any increase in the cost of such borrowings, would likely have a negative impact on the Company’s ability to finance receivables growth which would adversely affect the Company’s growth and business strategies. Further, the Company’s current credit facilities and non-recourse notes payable contain various reporting and/or financial performance covenants. Any failure of the Company to comply with these covenants could have a material adverse effect on the Company’s operating results, financial condition, cash flow and ability to implement its business strategy.

If the capital and credit markets experience disruptions and/or the availability of funds becomes restricted, it is possible that the Company’s ability to access the capital and credit markets may be limited or available on less favorable terms which could have an impact on the Company’s ability to refinance maturing debt or react to changing economic and business conditions. In addition, if negative domestic or global economic conditions persist for an extended period of time or worsen substantially, the Company’s business may suffer in a manner which could cause the Company to fail to satisfy the financial and other restrictive covenants under its credit facilities.

The impact of climate-change related events, including efforts to reduce or mitigate the effects of climate change and inclement weather can adversely impact the Company’s operating results.

The effects of climate change such as natural disasters or the occurrence of weather events, such as rain, snow, wind, storms, hurricanes, or other natural disasters, which can adversely affect consumer traffic and operations at the Company’s automotive dealerships as well as customers’ ability to make their car payments, could negatively impact the Company’s operating results. Further, the pricing of used vehicles is affected by, among other factors, consumer preferences, which may be impacted by consumer perceptions of climate change and consumer efforts to mitigate or reduce climate change-related events by purchasing vehicles that are viewed as more fuel efficient (including vehicles powered primarily or solely through electricity). An increase in the supply or a decrease in the demand for used vehicles may impact the resale value of the vehicles the Company sells. Moreover, the implementation of new or revised laws or regulations designed to address or mitigate the potential impacts of climate change (including laws which may adversely impact the auto industry in particular as a result of efforts to mitigate the factors contributing to climate change) could have a significant impact on the Company. Consequently, the impact of climate change-related events, including efforts to reduce or mitigate the effects of climate change, may adversely impact the Company’s operating results.

Risks Related to the Company’s Common Stock

The Company’s stock trading volume may result in greater volatility in the market price of the Company’s common stock and may not provide adequate liquidity for investors.

Although shares of the Company’s common stock are traded on the NASDAQ Global Select Market, the average daily trading volume in the Company’s common stock is less than that of other larger automotive retail companies. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of a sufficient number of willing buyers and sellers of the common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which the Company has no control. Given the average daily trading volume of the Company’s common stock, the market price of the Company’s common stock may be subject to greater volatility than companies with larger trading volumes as smaller transactions can more significantly impact the Company’s stock price. Significant sales of the Company’s common stock in a brief period of time, or the expectation of these sales, could cause a decline in the price of the Company’s common stock. The price of the Company’s common stock may also be subject to wide fluctuations based upon the Company’s operating results, general economic and market conditions, general trends and prospects for our industry, announcements by competitors, the Company’s ability to achieve any long-term targets or performance metrics and other factors. Any such fluctuations could increase the Company’s risk of being subject to securities class action litigation, which could result in substantial costs, divert management’s attention and resources and have other material adverse impacts on the Company’s business. Additionally, low trading volumes may limit a stockholder’s ability to sell shares of the Company’s common stock.

The Company currently does not intend to pay future dividends on its common stock.

The Company historically has not paid cash dividends on its common stock and currently does not anticipate paying future cash dividends on its common stock. Any determination to pay future dividends and other distributions in cash, stock, or property by the Company in the future will be at the discretion of the Company’s Board of Directors and will be dependent on then-existing conditions, including the Company’s financial condition and results of operations and contractual restrictions. The Company is also restricted from paying dividends or making other distributions to its shareholders without the consent of its lender. Therefore, stockholders should not rely on future dividend income from shares of the Company’s common stock.

Material Effects of Cybersecurity Incidents

Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected us, including our business strategy, results of operations, or financial condition. Further information regarding cybersecurity risks can be found in Item 1A. Risk Factors, of this Annual Report on Form 10-K.

Cybersecurity Risk Management and Strategy

We consider the protection of our customers’ and corporate data to be a priority within our business. We continually monitor and assess the cybersecurity landscape and invest in enhancing our cybersecurity capabilities and strengthening our partnerships with appropriate business partners, service partners, and government and law enforcement agencies to understand the range of cybersecurity risks in the operating environment, enhance defenses, and improve resiliency against cybersecurity threats. Through these partnerships, we incorporate threat intelligence, security operations, continuous training, and penetration testing. We strive to reduce the threat landscape for both the Company and our customers, through vigilantly monitoring systems and general technology controls.

Our efforts focus on protecting and enhancing the security of our information systems, software, networks, and other assets, whether commercial products or custom solutions. Our cybersecurity program focuses on protecting and enhancing the security of our information systems, software, networks, and other assets, whether commercial products or custom solutions. These efforts are under continuous review for improvement within the changing threat landscape and are designed to protect against, and mitigate the effects of, cybersecurity incidents that could result in unauthorized access to confidential, sensitive, or personal information of associates or customers or proprietary company information and potentially disrupt or impede our operations or otherwise cause harm to the Company, our customers, suppliers, dealers, or other key stakeholders.

Our cybersecurity program leverages both internal and external techniques and expertise across the cybersecurity spectrum. We maintain and utilize industry best practice capabilities, processes, and other security-related measures, based upon National Institute of Standards and Technology (NIST) and Control Objectives for Information Technologies (CoBIT) frameworks. Our capabilities, processes, and other security measures include, among others:

• Threat detection through the use of security information and event management software;
• Incident management processes for any security-related activity, requiring senior management signoff;
• Corporate endpoint detection and response software, which monitors for malicious activities on external-facing endpoints;
• Cloud monitoring tools, running on primary public and private cloud environments;
• Data encryption at rest and during transit and immutable data backups; and
• Business continuity, disaster recovery and incident response plans.

We also expect our suppliers and third party service providers to follow the same industry-standard security practices that we follow. Despite having thorough due diligence, onboarding, and cybersecurity assessment processes in place for our suppliers, the responsibility ultimately rests with our suppliers to establish and uphold their respective cybersecurity programs. The ability and availability of information to monitor the cybersecurity practices and controls of our suppliers and third party service providers is limited, and there can be no assurance that we can prevent or mitigate the risk of any compromise or failure in information systems, software, networks, and other assets owned or controlled by our suppliers and third party service providers. Although the Company attempts to manage its exposure to such events through the purchase of cyber liability insurance, such events are inherently unpredictable, and insurance may not be sufficient to protect the Company against all losses. There is no assurance that the Company’s security systems or processes will prevent or mitigate future break-ins, tampering, security breaches or other cyber-related attacks.

Cybersecurity Governance

Our Board of Directors oversees the management of risks inherent in the operation of our business, with a focus on the most significant risks that we face, including those related to cybersecurity. Our Board of Directors has delegated oversight of cybersecurity, including privacy and information security, as well as enterprise risk management to the Audit and Compliance Committee (the “Audit Committee”). In connection with that oversight responsibility, our Chief Technology Officer and Chief Legal Officer meet with the Audit Committee on a quarterly basis to provide information and updates on a range of cybersecurity topics which may include our cybersecurity program and governance processes; cyber risk monitoring and management; the status of projects to strengthen our cybersecurity and privacy capabilities; recent significant incidents or threats impacting our operations, industry, or third-party suppliers; and the emerging threat landscape.

Our information security team works closely with key stakeholders, including regulators, government agencies, peer institutions, industry groups, and develops and invests in talent and innovative technology to manage cybersecurity risk.

In the event that a cybersecurity threat or incident is identified, the Chief Technology Officer and the security team would work closely with cross functional committees, leveraging subject matter expertise across the organization, as part of our incident response plans and promptly provide information to senior management, with the goal of timely assessing such incidents, determining applicable disclosure requirements and communicating with the Chair of the Audit Committee regarding any significant cybersecurity incidents, including those experienced by third party service providers, which may pose significant risk to our business, customers, clients, associates and stakeholders, and continues to provide regular reports until such incidents are concluded. The above framework is designed to track and allow team members to monitor each incident throughout its lifecycle to ensure the Company is informed about and following cybersecurity incidents as they are mitigated and remediated. Post-incident reviews would also be performed to determine if there are any additional controls that may feasibly be implemented to prevent recurrence.

As of April 30, 2025, the Company leased approximately 87% of its facilities, including dealerships and the Company’s corporate offices. These facilities are located principally in the states of Alabama, Arkansas, Georgia, Illinois, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee and Texas. The Company’s corporate offices are located in approximately 50,000 square feet of leased space in Rogers, Arkansas. For additional information regarding the Company’s properties, see “Operations-Dealership Locations and Facilities” under Item 1 above.

In the ordinary course of business, the Company has become a defendant in various types of legal proceedings. While the outcome of these proceedings cannot be predicted with certainty, the Company does not expect the final outcome of any of these proceedings, individually or in the aggregate, to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

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.

Restated Disclosure Information for Contract Modifications for Interim Periods

Pursuant to a Current Report on Form 8-K filed by the Company on July 30, 2025, the Company is including the previously omitted footnote disclosure that should have been included in the Company’s interim unaudited Condensed Consolidated Financial Statements for each of the quarterly periods included in the Company’s Quarterly Reports on Form 10-Q filed with the SEC during fiscal years 2025 and 2024 regarding contract modifications made to borrowers experiencing financial difficulty. These disclosures relate to the Company’s systematic modification program that assists borrowers experiencing financial difficulty.

The required disclosures that the Company is now including relate to contract modifications affecting $436.1 million, or 28.9%, of the Company’s gross finance receivables as of April 30, 2025. These modifications primarily consist of:

• Term extensions and
• Combination of modifications, which include both term extensions and interest rate reductions as determined by the bankruptcy court when a borrower declares Chapter 13 bankruptcy.

This inclusion of these omitted disclosures has no impact on our previously reported interim unaudited Condensed Consolidated Statements of Operations, unaudited Condensed Consolidated Statements of Comprehensive Income, unaudited Condensed Consolidated Balance Sheets, or unaudited Condensed Consolidated Statements of Cash Flows.

Contract Modifications

The Company identifies and discloses contract modifications made for customers experiencing financial difficulty after the origination date. Due to the subprime nature and limited financial resources of the majority of the Company’s customers, all modifications that result in a term extension are identified by the Company as modifications made for customers experiencing financial difficulty and therefore included in the related disclosures. See Note B to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information on these contract modifications. These modifications are made with the intent to support customers while preserving asset value and minimizing credit losses.

The following tables present the aggregate outstanding principal balance of contracts that have been modified during the fiscal periods, categorized by type of modification. These modifications represent management’s efforts to work with customers experiencing financial difficulty to help them maintain their vehicle ownership while preserving asset value for the Company. The percentages shown represent the portion of the total gross finance receivables portfolio as of the end of the fiscal period that has been modified at least once during the fiscal period.

The following table presents contract modifications by type of modification for the following periods during fiscal year 2025:

(Dollars in thousands)

(1) These modifications result from customer bankruptcy filings and have been made in accordance with bankruptcy court requirements. They generally consist of a reduction in the contractual interest rate and/or an extension of the contract term as part of the customer’s court-approved payment restructuring plan.

The following table presents contract modifications by type of modification for the following periods during fiscal year 2024:

(Dollars in thousands)

(1) These modifications result from customer bankruptcy filings and have been made in accordance with bankruptcy court requirements. They generally consist of a reduction in the contractual interest rate and/or an extension of the contract term as part of the customer’s court-approved payment restructuring plan.

The following table describes the financial effect of the modifications for the following periods during fiscal year 2025:

30

The following table describes the financial effect of the modifications for the following periods during fiscal year 2024:

The Company closely monitors the performance of the contracts that are modified to understand the effectiveness of its modification efforts. The following table depicts the status of contracts that have term modifications for the periods presented:

(In thousands)

31

The following table depicts the status of contracts that have term modifications due to the combination of modifications due to bankruptcies for the periods presented:

(In thousands)

The following table depicts the aggregate principal amounts of customer contracts that were charged off during the periods presented following contract modifications:

(In thousands)

32

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, 2025, the Company operated 154 dealerships located primarily in small cities throughout the South-Central United States.

Over the last ten fiscal years, the Company’s revenue growth averaged 10.6%. However, revenue for fiscal year 2025 declined 0.2% compared to fiscal year 2024. This follows a similar decline of 0.5% in fiscal year 2024 compared to fiscal year 2023. The slight decrease in revenue for fiscal year 2025 is primarily due to a 1.7% decrease in retail units sold, partially offset by a 1.5% increase in the average retail sales price and a 5.0% increase in interest income.

The Company has focused on improving vehicle quality by procuring lower-mileage vehicles, while balancing affordability for customers. The Company’s recent strategic partnership with a leading automotive services and technology provider initiated in fiscal year 2024 has begun to increase efficiencies within the Company’s inventory supply chain and is enabling the Company to utilize reconditioning and auction facilities, enhancing the quality of the Company’s vehicle offerings. Management expects this strategic partnership to help the Company optimize its inventory supply chain and further improve vehicle quality over the long term. The Company believes these efforts will reduce customers’ vehicle repair costs, lower service contract repair expenses, and increase recovery values in the event of repossession. When combined with enhanced inventory procurement efficiencies, these initiatives are expected to improve the customer experience and contribute to better gross margins.

The Company generates revenue primarily through the sale of used vehicles, typically accompanied by a related service contract and accident protection plan, as well as interest income and late fees from financing. The Company’s cost structure is relatively fixed and is sensitive to changes in volume. Revenue is influenced by factors such as competition, the availability of funding in the subprime automobile industry, and fluctuations in the purchase costs of vehicles for resale. Additionally, the macroeconomic environment plays a significant role in revenue performance.

The Company closely monitors key variables such as down payments, contract terms, and customer credit scores at the point of sale to help ensure customers’ success in meeting their payment obligations. After the sale, collections, delinquencies, and charge-offs are critical components in assessing the Company’s financial condition and results of operations. These factors are continuously monitored by management to ensure timely intervention and appropriate strategy adjustments.

The Company places significant emphasis on building strong, long-term relationships with customers, believing that fostering repeat business is integral to the Company’s success and growth. The Company also prioritizes excellent customer service, leveraging its “local” face-to-face approach, while continuing to expand and enhance digital and online services to meet the growing demand for an integrated, seamless sales and service experience.

In recent years, the Company has focused on offering a diverse mix of vehicles at various price points to improve affordability for customers. This approach is aimed at meeting a broad spectrum of customer needs while maintaining a competitive edge in the market.

The purchase price of vehicles has a direct impact on the Company’s revenues, liquidity, and capital resources. Since the Company’s selling price is largely based on the cost of acquiring its vehicles, increases in purchase costs often result in higher selling prices. This, in turn, can place pressure on gross margin percentages and contract terms, as the Company seeks to maintain affordable payment options for its customer base, which typically has limited financial flexibility.

Furthermore, declines in the volume of new car sales, particularly within domestic brands, lead to decreased vehicle supply and generally result in higher prices in the wholesale used car market. Changes in consumer credit availability, coupled with broader economic conditions, can also affect the demand for vehicles and the resulting purchase prices in the used car market. Tariffs or the imposition of new tariffs, trade wars, barriers or restrictions, or threats of such actions could also affect the demand and resulting purchase price of vehicles.

The Company maintains a consistent focus on collections, with each dealership responsible for its own collection efforts under the oversight of the corporate office. Over the past five fiscal years, the Company’s provision for credit losses as a percentage of sales has ranged from a low of approximately 19.3% in fiscal 2021 to a high of 36.5% in fiscal 2024, with an average of 28.1%. In fiscal 2025, the provision for credit losses as a percentage of sales decreased to 32.7%. In fiscal 2022, credit losses began to return to pre-pandemic levels, though they remained below historical averages, despite an increase in average retail sales prices, and in fiscal 2023, credit losses exceeded pre-pandemic levels, due in part to the expiration of federal stimulus programs and prevailing macroeconomic conditions. The high credit loss percentage for fiscal 2024 was primarily driven by the Company’s implementation in October 2023 of third-party software to provide more accurate credit loss calculations, which resulted in an increase in the allowance for credit losses, as percentage of finance receivables, net of deferred revenue and pending APP claims, from 23.91% at April 30, 2023 to 25.32% at April 30, 2024 (26.04% at October 31, 2023), and a corresponding increase in the provision for credit losses.

As of April 30, 2025, the Company’s allowance for credit losses decreased to 23.25% of finance receivables, net of deferred revenue and pending APP claims. This improvement was mainly due to improved credit performance on contracts underwritten in the new loan origination system and tighter underwriting standards, with a noticeable reduction in charge-offs and loss rates compared to loans originated using the legacy system. The new underwriting system centralizes loan information, providing dealerships with easy access to internal scores, down-payment percentages, credit reports, and other relevant customer data, all in one location. This improvement enables more informed decision-making and supports better credit management.

Credit losses, on a percentage basis, tend to be higher at new and developing dealerships due to less experienced management and a less seasoned customer base. More mature dealerships typically have a higher rate of repeat customers, who are generally lower credit risks. Credit losses can also be influenced by market and economic factors, such as competition in the used vehicle financing space and macroeconomic pressures, including inflation in essential goods and services. However, as the Company provides affordable transportation, these economic conditions do not always lead to higher credit losses.

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 40.2% in fiscal 2021 and a low of 33.5% in fiscal 2023, with an average of 36.3%. The gross margin percentage improved to 34.7% in fiscal 2024 and 36.7% in fiscal 2025, including 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 Company’s initiatives in vehicle pricing discipline, reduced transportation costs, lower repair expenses, and more effective disposal strategies have collectively contributed to the increase in gross profit. The total gross profit per retail unit sold increased by $431 compared to the prior fiscal year.

The Company’s gross margin is primarily influenced by the cost of vehicles purchased, with lower-priced vehicles generally yielding higher gross margin percentages but lower gross profit dollars. Additionally, the margin is impacted by the proportion of wholesale sales relative to retail sales, which is primarily associated with the sale of repossessed vehicles, typically sold at or near cost. Going forward, the Company intends to maintain a focus on increasing gross margin dollars, as evidenced by the growth observed in fiscal 2025, This will be achieved through continued efforts to improve wholesale results, enforce cost controls, and enhance operational efficiency related to vehicle acquisition and disposal.

The recruitment, training, and retention of qualified personnel are also pivotal to the Company’s continued success. The Company’s capacity to expand its dealership network and implement operational initiatives is constrained by the availability of adequately trained managers and support staff. High turnover rates, particularly among dealership managers, could impede the Company’s ability to scale its operations and execute strategic initiatives. Given the highly competitive hiring environment, the Company has consistently allocated resources towards enhancing its recruitment, training, and development processes, with a particular emphasis on filling dealership manager roles. The Company anticipates ongoing investment in its workforce development programs to ensure the availability of skilled personnel to support its growth trajectory.

Consolidated Operations

(Operating Statement Dollars in Thousands)

35

Fiscal 2025 Compared to Fiscal 2024

Total revenues decreased $3.0 million, or 0.2%, in fiscal year 2025 compared to fiscal year 2024, primarily as a result of declines in revenue from (i) dealerships that operated a full twelve months in both fiscal years ($68.2 million), and (ii) dealerships that were closed during or after the year ended April 30, 2024 ($18.3 million), which were mostly offset by revenue generated from (iii) dealerships opened or acquired after April 30, 2024 ($83.5 million). The overall decline in revenue for fiscal 2025 was primarily due to a 1.7% decrease in retail units sold, partially offset by a 5.0% increase in interest and other income and a 1.5% increase in the average retail sales price. Interest income increased approximately $11.6 million compared to fiscal 2024, due to the $36.9 million increase in average finance receivables.

The cost of sales as a percentage of total sales decreased to 63.3% in fiscal 2025, compared to 65.3% in fiscal 2024, resulting in a gross margin of 36.7% in fiscal 2025, which includes a 0.7% benefit from the change in accounting estimate for revenue recognition related to service contracts. This represents an improvement in gross margin from 34.7% in fiscal 2024. On a dollar basis, the gross margin per retail unit sold increased by $431 in fiscal 2025, relative to fiscal 2024. The primary driver of this decrease in the cost of sales was the Company’s sustained efforts in vehicle pricing discipline, reductions in transportation and repair costs, and improvements in vehicle disposal strategies.

The average retail sales price in fiscal 2025, including ancillary products, was $19,398, reflecting an increase of $285 over the prior fiscal year. This increase was largely attributable to a $13.2 million benefit recognized in the second quarter of fiscal 2025 due to the aforementioned change in accounting estimate for service contract revenue recognition. The average retail sales price of the vehicles themselves, excluding ancillary products, rose modestly to $17,315, an increase of $20 from the previous fiscal year, primarily driven by the Company’s focus on maintaining consumer affordability and strategically procuring vehicles through preferred partners.

Selling, general and administrative (SG&A) expenses as a percentage of sales increased to 16.5% in fiscal 2025, compared to 15.5% for fiscal 2024. SG&A expenses are, by nature, relatively fixed. In absolute terms, SG&A expenses rose by $9.5 million from fiscal 2024. This increase is primarily attributable to the Company’s continued investments across several key areas, including senior management, technology, inventory procurement and management, customer experience, and digital initiatives. Additionally, the growth of the Company’s dealership network through acquisitions in the past year contributed to the rise in SG&A expenses. These acquisitions are integral to the Company’s long-term growth strategy and, while they may temporarily impact SG&A expense leverage, they play a critical role in expanding customer portfolios and enhancing future revenue potential. The Company remains committed to cost control while ensuring continued investment in strategic areas to drive future growth.

Provision for credit losses as a percentage of sales decreased to 32.7% for fiscal 2025 compared to 36.5% for fiscal 2024. Net charge-offs as a percentage of average finance receivables decreased to 25.9% for fiscal 2025 compared to 27.2% for the prior year. The Company experienced an improvement in both the frequency and severity of losses. The allowance for credit losses as a percentage of finance receivables, net of deferred revenue and pending accident protection plan claims was 23.25% at April 30, 2025 compared to 25.32% at April 30, 2024. The primary drivers of this change were continued favorable performance in contracts originated under the Company’s enhanced underwriting standards as well as an increase in the outstanding portfolio balance (excluding acquisitions) originated under the Company’s LOS to approximately 65.7% at April 30, 2025.

Interest expense for fiscal 2025 as a percentage of sales increased to 6.2% in fiscal 2025 from 5.6% in fiscal 2024. The increase in interest expense is primarily due to higher average borrowings in fiscal 2025 ($769.7 million in fiscal 2025 compared to $730.3 million for fiscal 2024) as well as the higher interest rates in 2025. Approximately two-thirds of the increase in interest expense is attributable to the increase in borrowings, and one-third is attributable to the higher interest rates in 2025.

Fiscal 2024 Compared to Fiscal 2023

Total revenues decreased $6.5 million or 0.5%, in fiscal 2024, as compared to revenue growth of 17.6% in fiscal 2023, principally as a result of declines in revenue from (i) dealerships that operated a full twelve months in both fiscal years ($13.8 million), and (ii) dealerships that were closed during or after the year ended April 30, 2023 ($14.9 million), partially offset by revenue generated from (iii) dealerships opened or acquired after the year ended April 30, 2023 ($22.2 million). The decline in revenue for fiscal 2024 is attributable to an 8.8% decrease in retail units sold, largely reflecting the challenging macroeconomic environment for our customers, partially offset by an 18.8% increase in interest and other income and a 5.7% increase in the average retail sales price. Interest income increased approximately $36.9 million compared to fiscal 2023, due to the $187.9 million increase in average finance receivables.

Cost of sales, as a percentage of sales, decreased to 65.3% compared to 66.5% in fiscal 2023, resulting in an increase in the gross margin percentage to 34.7% of sales in fiscal 2024 from 33.5% of sales in fiscal 2023. On a dollar basis, our gross margin per retail unit sold increased by $593 in fiscal 2024 compared to fiscal 2023. The average retail sales price for fiscal 2024 was $19,113, a $1,033 increase over the prior fiscal year, with over half of the increase attributable to vehicle price and the remainder related to ancillary products. As purchase costs increase, the margin between the purchase cost and the sales price of the vehicles we sell generally narrows on a percentage basis because the Company must offer affordable prices to our customers. The Company initiated a strategic partnership with an industry leader in October 2023 and implemented initiatives around vehicle reconditioning efforts, transportation and scaling that aided the Company’s cost improvement efforts during the second half of fiscal 2024 and in fiscal 2025 and are expected to continue to provide a better volume of affordable units going forward.

Selling, general and administrative expenses, as a percentage of sales increased to 15.5% in fiscal 2024 from 14.7% for fiscal 2023. Selling, general and administrative expenses are, for the most part, more fixed in nature. In dollar terms, selling, general and administrative expenses increased $2.8 million from fiscal 2023. The increase resulted from increased collections costs due primarily to a higher frequency of repossessions and increased spending in professional services around improvements in technology, as well as operating in a higher inflationary environment, partially offset by operational improvements and cost-cutting measures implemented in fiscal 2024. These efforts resulted in the lowest percentage change in annual selling, general and administrative expenses in over five years at just a 1.5% increase.

Provision for credit losses as a percentage of sales increased to 36.5% for fiscal 2024 compared to 29.3% for fiscal 2023. The provision for credit losses as a percentage of sales was higher during fiscal 2024 due to the growth in the balance of finance receivables, net of deferred revenue, coupled with a decrease in sales of $43.4 million. An increase in net charge-offs also contributed to the higher provision. Net charge-offs as a percentage of average finance receivables increased to 27.2% for fiscal 2024 compared to 23.3% for the prior year. The Company experienced continued increases in both the frequency and severity of losses, with the frequency increase accounting for over 80% of the increase as the Company’s customers continue to face pressures on higher average costs of everyday items. Severity was also higher due to the longer terms and lower recovery values. The increased frequency and severity of losses was partially mitigated by improved collection results from loans originated using our new underwriting system compared to our outstanding loans originated under our legacy system. Approximately 20% of the portfolio balance at April 30, 2024 originated under the new underwriting system.

Interest expense for fiscal 2024 as a percentage of sales increased to 5.6% from 3.2% in fiscal 2023. The increase in interest expense is primarily due to the higher interest rates in 2024 as well as the higher average borrowings in fiscal 2024 ($730.3 million in fiscal 2024 compared to $568.3 million for fiscal 2023). 60% of the increase in interest expense is attributable to the higher interest rates in 2024, and 40% is attributable to the increase in borrowings.

Financial Condition

The following table sets forth the major balance sheet accounts of the Company at April 30, 2025, 2024 and 2023 (in thousands):

The following table shows receivables growth compared to revenue growth during each of the past three fiscal years. For fiscal year 2025, growth in finance receivables, net of deferred revenue was 6.2%, while revenue decline of 0.2%, due primarily to the increases in term lengths of our installment sales contracts as the Company strives to keep payments affordable for our customers. The Company currently anticipates that the growth in finance receivables will continue to modestly exceed the overall change in revenue on an annual basis due to overall term length increases in our installment sales contracts, partially offset by improvements in underwriting and collection procedures in an effort to reduce credit losses. The weighted average contract term for the portfolio of installment sales contracts at April 30, 2025 was 48.3 months, compared to 47.9. months for April 30, 2024.

At fiscal year-end 2025, inventory increased 4.4%, or $4.8 million, compared to fiscal year-end 2024. The increase is primarily due to the most recent acquisition completed in the first quarter of 2025. Annualized inventory turns for fiscal year-end 2025 were 6.6, a slight decrease from 7.0 for the prior year. The Company strives to improve the quality of the inventory and maintain adequate turns while maintaining inventory levels to ensure an adequate supply of vehicles, in volume and mix, and to meet sales demand.

Property and equipment, net, decreased by approximately $3.5 million as of April 30, 2025 as compared to fiscal 2024. The Company incurred approximately $3.9 million in expenditures during fiscal year 2025, primarily related to remodeling of existing locations. These expenditures were offset by $7.6 million in depreciation expense during fiscal 2025.

Accounts payable and accrued liabilities increased by approximately $21.7 million at April 30, 2025 as compared to April 30, 2024 which reflects the impact of higher inventory and SG&A expenses and a strategic shift in payment scheduling, allowing us to optimize cash flow while maintaining strong supplier relationships.

Deferred revenue decreased by $7.5 million as of April 30, 2025, compared to April 30, 2024. This decrease was primarily due to the $13.2 million benefit recognized in the second quarter of fiscal 2025, resulting from the Company’s adjustment to its estimate for the applicable recognition period under the Company’s service contract accounting change.

Deferred income tax liabilities, net, decreased approximately $10.7 million on April 30, 2025, compared to April 30, 2024, primarily due to a net operating loss carryforward for the related finance company.

The Company had $572.0 million and $553.6 million of notes payable outstanding related to asset-backed term funding transactions as of April 30, 2025 and 2024, respectively. These non-recourse notes issued by the Company accrue interest at fixed rates with a weighted average rate of 8.2% as of April 30, 2025. During fiscal 2025, the Company completed two issuances of asset-backed term funding on January 31, 2025 and October 9, 2024, respectively, and used the proceeds of the issuances to pay down existing debt. In July 2024, the Company borrowed $150 million in funds under a warehouse loan facility that accrued interest at a rate equal to the term SOFR plus 350 basis points. The Company repaid the funds borrowed under the warehouse facility in October 2024 using the proceeds from its asset-backed term funding. See Note F to the Consolidated Financial Statements for further details on the non-recourse notes payable and warehouse loan facility.

On September 20, 2024, the Company completed an underwritten public offering of 1,700,000 shares of common stock at a price per share of $43.00. The net proceeds of the public offering were approximately $73.8 million after deducting the underwriting discount, commissions and offering costs of approximately $4.9 million. Under the terms of the Underwriting Agreement entered into in connection with the offering, on October 22, 2024, the Company completed the sale of an additional 138,272 shares of common stock at the price of $43.00 per share, in connection with the partial exercise by the underwriter of an option (the “Over-Allotment Option”) granted in the Underwriting Agreement for the underwriters to purchase up to 255,000 additional shares at the public offering price to cover over-allotments. The net proceeds to the Company of the underwriter’s partial exercise of the Over-Allotment Option were approximately $5.6 million after deducting the underwriting discount, commissions and offering costs of approximately $346,000, resulting in aggregate net proceeds to the Company from the offering of approximately $73.8 million. The Company used the net proceeds from this offering to pay down a portion of the Company’s revolving line of credit.

The Company maintains a revolving line of credit with a group of lenders with available borrowings based on and secured by eligible finance receivables and inventory. The credit facilities provide for four pricing tiers for determining the applicable interest rate, based on the Company’s consolidated leverage ratio for the preceding fiscal quarter. The current applicable interest rate under the credit facilities is SOFR plus 3.50% or, for non-SOFR amounts, the base rate of 7.50% plus 1% at April 30, 2025 and 8.25% plus 1% at April 30, 2024. At April 30, 2025 and 2024 the Company had $204.8 million and $200.8 million, respectively, in outstanding borrowings under the revolving credit facilities. See Note F for further details on the revolving line of credit.

Borrowings on the Company’s revolving credit facilities fluctuate based upon a number of factors including (i) net income, (ii) finance receivables changes, (iii) funds available from asset-backed securitization offerings, warehouse facilities and/or other capital financing sources, (iv) income taxes, and (v) capital expenditures. Historically, income from operations, as well as borrowings on the revolving credit facilities and securitized debt, have funded the Company’s finance receivables growth and capital asset purchases and, as applicable, common stock repurchases. The overall increase in total borrowings during fiscal 2025 was made to support an increase in finance receivables, with longer terms, and a growing customer base. During fiscal 2025, the Company funded finance receivables growth of $73.8 million, increased inventory by $4.8 million, invested in an acquisition and fixed assets of $11.4 million and increased total cash by $30.1 million with income from operations, a $22.3 million increase in total debt and $73.8 million in net proceeds from the sale of common stock.

The proceeds from the Company’s common stock offering during the second quarter substantially offset the increase in finance receivables for fiscal year 2025.

Liquidity and Capital Resources

The following table sets forth certain historical information with respect to the Company’s Statements of Cash Flows (in thousands):

40

The primary drivers of operating profits and cash flows include (i) top line sales (ii) interest income on finance receivables, (iii) gross margin percentages on vehicle sales, and (iv) credit losses, a significant portion of which relates to the collection of principal on finance receivables. Historically, most or all of the cash generated from operations has been used to fund finance receivables growth, capital expenditures, and as applicable, common stock repurchases. To the extent finance receivables growth, capital expenditures and common stock repurchases have exceeded income from operations, the Company has increased borrowings under its revolving credit facilities and secured additional funding through the issuance of asset-backed non-recourse notes.

Cash flows used in operating activities for fiscal 2025 compared to fiscal 2024 decreased primarily as a result of (i) an increase in net income and (ii) a decrease in deferred income taxes, (iii) an increase in finance receivable collections and (iv) a decrease in finance receivable originations. Finance receivables, net, increased by $82.1 million from April 30, 2024 to April 30, 2025.

Cash flows used in operating activities for fiscal 2024 compared to fiscal 2023 decreased primarily as a result of (i) an increase in the provision for credit losses and (ii) a decrease in finance receivable originations, partially offset by (iii) an increase in cash used for accounts payable and accrued liabilities and (iv) a net loss.

The purchase price the Company pays for a vehicle has a significant effect on liquidity and capital resources. Because the Company bases its selling price on the purchase cost for the vehicle, increases in purchase costs result in higher selling prices. As the selling price increases, it generally becomes more difficult to keep the gross margin percentage and contract term in line with historical results because the Company’s customers have limited incomes, and their car payments must remain affordable within their individual budgets. Several external factors can negatively affect the purchase cost of vehicles. Decreases in the overall volume of new car sales, particularly domestic brands, lead to decreased supply in the used car market. The long-term impacts of any economic downturn on new car sales volumes and the ability of auctions and wholesalers to continue to operate could be impacted by tariffs or the imposition of new tariffs, trade wars, barriers or restrictions, or threats of such actions, and any future decline in new car sales could exacerbate challenges related to sourcing inventory or increase the cost of vehicles.

Sustained macro-economic pressures affecting our customers have helped keep demand high in recent years for the types of vehicles we purchase. This strong demand for used vehicles, coupled with modest levels of new vehicle sales in recent years, have led to a generally ongoing tight supply of used vehicles available to the Company in both quality and quantity. Wholesale prices continued to soften in calendar year 2024 and into 2025 but began to improve late in fiscal year 2025. The Company expects that the tight supply of used vehicles, strong demand for the types of vehicles we purchase, and market reactions to ongoing tariff uncertainty will continue to keep purchase costs and resulting sales prices elevated in the short term, However, an increase in marketplace wages for our customers could enhance affordability.

The Company has made substantial efforts to enhance its purchasing processes in order to secure an adequate supply of vehicles at competitive prices. This includes a strategic partnership with an industry leader, the expansion of its purchasing territories into larger cities near its dealerships, and the establishment of relationships with reconditioning partners to reduce procurement costs. Additionally, the Company has heightened accountability for its purchasing agents through updates to sourcing and pricing guidelines. Ongoing efforts also include the cultivation of relationships with national vendors capable of supplying large volumes of high-quality vehicles.

The Company’s liquidity is also influenced by its credit losses. Macro-economic factors, such as unemployment rates and general inflation affecting both core and discretionary items, can significantly impact collection results and, consequently, credit losses. At present, as customers face rising costs for non-discretionary items like childcare, insurance, groceries, and gasoline, their ability to meet vehicle payment obligations may be strained. To mitigate these risks, the Company has implemented several process improvements, including the introduction of a loan origination system over the past two years, which strengthens controls and provides a more robust infrastructure to support collections. Management remains focused on enhancing execution at the dealership level, particularly in terms of individualized customer engagement related to collection matters.

The Company’s business model relies on leasing the majority of the properties where its dealerships are located. As of April 30, 2025, the Company leased approximately 87% of its dealership properties. The $86.6 million of operating lease commitments includes $21.3 million of non-cancelable lease commitments under the lease terms and $65.3 million of lease commitments for renewal periods at the Company’s option that are reasonably assured. The Company expects to continue to lease the majority of the properties where its dealerships are located.

The Company’s principal sources of liquidity include income from operations, proceeds from non-recourse notes payable issued under asset-back securitization transactions, warehouse facilities, borrowings under its revolving credit facilities, and other potential debt or equity financing sources. At April 30, 2025, the Company had approximately $9.8 million of cash on hand and approximately an additional $27.3 million of availability under its revolving credit facilities (see Note F to the Consolidated Financial Statements). The revolving credit facility has a scheduled maturity date of March 31, 2027, with total permitted borrowings of $350 million at April 30, 2025.

In July 2024, the Company entered into Amendment No. 7 to its revolving credit agreement to allow for, among other things, the entry into an amortizing warehouse agreement and to amend the fixed charge coverage ratio under the credit agreement. On September 16, 2024, the Company entered into Amendment No. 8 to its revolving credit agreement that, among other things, reduced the total permitted borrowings under the revolving line of credit by $20 million to $320 million. Amendment No. 8 required the Company to maintain a minimum amount available to be drawn under the credit facilities, based on eligible finance receivables and inventory, of $20 million, or $50.0 million if the outstanding principal balance under the line of credit equaled or exceeded $300 million. The amendment also required the Company to use the net proceeds of any junior capital raise of $50 million or more to pay down the then outstanding principal balance of the line of credit. The Company used the $73.8 million in aggregate net proceeds from its underwritten public common stock offering completed during the second quarter of fiscal year 2025 to pay down a portion of the outstanding balance of the line of credit. The amendment also made certain modifications to the fixed charge coverage ratio covenant under the credit agreement and restricts the Company from making future repurchases of its common stock, along with the agreement’s existing restrictions on other distributions to the Company’s shareholders. Thus, the Company is restricted from paying dividends or making other distributions to its shareholders without the consent of the Company’s lenders.

On February 28, 2025, the Company entered into Amendment No. 9 to its revolving credit agreement that, among other things, extended the maturity date of the credit facility to March 31, 2027 and increased the total permitted borrowings by $30 million to $350 million. Under the amendment, the Company is required to maintain a minimum amount available to be drawn under the credit facilities, based on eligible finance receivables and inventory, of $20 million when the outstanding principal balance under the line of credit is less than or equal to $325 million. If the outstanding principal balance under the line of credit is greater than $325 million, the Company will be required to maintain a minimum availability of $50 million. The amendment made further adjustments to the required fixed charge coverage ratio, including incremental increases in the required ratio through July 31, 2026. The amendment also decreased the Company’s permissible capital expenditure limit from $35.0 million to $25.0 million in the aggregate during any fiscal year

In July 2024, the Company entered into a $150 million amortizing warehouse agreement backed by a portion of its finance receivables. The warehouse facility accrues interest at a rate of SOFR plus 350 basis points, with payments of principal and interest due monthly and a scheduled maturity date of July 12, 2026. The Company primarily used the funds from the warehouse facility to pay down outstanding amounts borrowed under the revolving line of credit to fund finance receivables. On September 16, 2024, the Company entered into an amendment to the warehouse agreement that amended the fixed charge coverage ratio covenant consistent with Amendment No. 8 to the revolving credit agreement and modified certain other financial covenants under the warehouse agreement. In October 2024, the Company used the proceeds from its October 2024 asset-back term securitization funding to pay down the outstanding balance under the warehouse loan facility. No debt was outstanding under the warehouse loan facility as of April 30, 2025

The Company expects to use cash from operations and other financing sources to (i) periodically pay down the outstanding principal balance of the revolving line of credit, (ii) grow its finance receivables portfolio, (iii) purchase fixed assets of approximately $9 million in the next 12 months as we complete facility updates and general fixed asset requirements, (iv) fund dealership acquisitions as opportunities arise on terms acceptable to the Company, and (v) reduce the Company’s remaining debt to the extent excess cash is available.

The Company believes it will have adequate liquidity to continue to grow its revenues and to satisfy its capital needs for the foreseeable future through expected financing sources such as additional securitized borrowings or public registered offerings.

Off-Balance Sheet Arrangements

The Company has two standby letters of credit relating to insurance policies totaling $4.4 million at April 30, 2025.

Other than its letters of credit, the Company is not a party to any off-balance sheet arrangement that management believes is reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Related Finance Company Contingency

Car-Mart of Arkansas and Colonial do not meet the affiliation standard for filing consolidated income tax returns, and as such they file separate federal and state income tax returns. Car-Mart of Arkansas routinely sells its finance receivables to Colonial at what the Company believes to be fair market value and is able to take a tax deduction at the time of sale for the difference between the tax basis of the receivables sold and the sales price. These types of transactions, based upon facts and circumstances, have been permissible under the provisions of the Internal Revenue Code as described in the Treasury Regulations. For financial accounting purposes, these transactions are eliminated in consolidation and a deferred income tax liability has been recorded for this timing difference. The sale of finance receivables from Car-Mart of Arkansas to Colonial provides certain legal protection for the Company’s finance receivables and, principally because of certain state apportionment characteristics of Colonial, also has the effect of reducing the Company’s overall effective state income tax rate. The actual interpretation of the Regulations is in part a facts and circumstances matter. The Company believes it satisfies the material provisions of the Regulations. Failure to satisfy those provisions could result in the loss of a tax deduction at the time the receivables are sold and have the effect of increasing the Company’s overall effective income tax rate as well as the timing of required tax payments.

The Company’s policy is to recognize accrued interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company had no accrued penalties or interest as of April 30, 2025.

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires the Company to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the Company’s estimates. The Company believes the most significant estimate made in the preparation of the Consolidated Financial Statements in Item 8 relates to the determination of its allowance for credit losses, which is discussed below. The Company’s accounting policies are discussed in Note B to the Consolidated Financial Statements in Item 8.

The Company maintains an allowance for credit losses on an aggregate basis at a level it considers sufficient to cover estimated losses expected to be incurred on the portfolio at the measurement date in the collection of its finance receivables currently outstanding. At April 30, 2025, the weighted average contract term was 48.3 months with 35.9 months remaining. At April 30, 2024, the weighted average total contract term was 47.9 months with 36.1 months remaining. The allowance for credit losses at April 30, 2025, $323.1 million, was 23.25% of the principal balance in finance receivables of $1.5 billion, less unearned accident protection plan revenue of $51.5 million, unearned service contract revenue of $61.8 million, and pending APP claims of $6.2 million. The allowance for credit losses at April 30, 2024, $331.3 million, was 25.32% of the principal balance in finance receivables of $1.4 billion, less deferred APP revenue of $51.8 million, deferred service contract revenue of $68.9 million, and pending APP claims of $6.4 million. The Company decreased the allowance for credit losses as a percentage of finance receivables from 25.32% at April 30, 2024 to 23.25% at April 30, 2025.

The allowance for credit losses represents the Company’s expectation of future net charge-offs at the measurement date. The allowance takes into account quantitative and qualitative factors such as historical credit loss experience, with consideration given to changes in contract characteristics (i.e., customer interest rates, credit deterioration and delinquency rates), current and forecasted inflationary economic conditions, amongst others. The allowance for credit losses is reviewed at least quarterly by management with any changes reflected in current operations.

The allowance for credit losses is a critical accounting estimate for the following reasons:

• estimates relating to the allowance for credit losses require management to project future loan performance, including cash flows, prepayments, and charge-offs;
• the allowance for credit losses is influenced by factors outside of management’s control such as industry and business trends, geopolitical events and the effects of laws and regulations as well as economic conditions including, but not limited to, inflation; and
• judgment is required to evaluate whether the model used to generate the allowance for credit losses, which is then adjusted for changes in customer interest rates, credit deterioration and delinquency rates, as well as the expected effects from current and forecasted inflation, produces an allowance that appropriately reflects a current estimate of lifetime expected credit losses.

Because management’s estimate of the allowance for credit losses involves a high degree of qualitative judgment, such as the subjectivity of the assumptions used, there is uncertainty inherent in such estimates. Changes in these estimates could significantly impact the allowance and provision for credit losses.

Recent Accounting Pronouncements

Occasionally, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies which the Company will adopt as of the specified effective date. Unless otherwise discussed, the Company believes the implementation of recently issued standards which are not yet effective will not have a material impact on its consolidated financial statements upon adoption.

In October 2023, the FASB issued an accounting pronouncement (ASU 2023-06) related to disclosure or presentation requirements for various subtopics in the FASB’s Accounting Standards Codification (“Codification”). The amendments in the update are intended to align the requirements in the Codification with the U.S. Securities and Exchange Commission’s (“SEC”) regulations and facilitate the application of GAAP for all entities. The effective date for each amendment is the date on which the SEC removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or if the SEC has not removed the requirements by June 30, 2027, this amendment will be removed from the Codification and will not become effective for any entity. Early adoption is prohibited. We do not expect this update to have a material impact on our consolidated financial statements.

In November 30, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which sets forth improvements to the current segment disclosure requirements in accordance with Topic 280 “Segment Reporting,” including clarifying that entities with a single reportable segment are subject to both new and existing segment reporting requirements. The Company adopted this standard for the year ended April 30, 2025. Adoption of this ASU expanded our business segment disclosures, but did not impact the Company’s consolidated financial position, results of operations or cash flows.

In December 2023, the FASB issued an accounting pronouncement (ASU 2023-09) related to income tax disclosures. The amendments in this update are intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We plan to adopt this pronouncement for our fiscal year beginning May 1, 2025, and we do not expect it to have a material effect on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard requires public business entities to provide enhanced disclosures of certain natural expense categories within relevant income statement captions. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of this standard on its financial statement disclosures.

Non-GAAP Financial Measure

This Annual Report on Form 10-K contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP). We present debt, net of cash, and an adjusted debt to finance receivables ratio, each a non-GAAP financial measure, as supplemental measures of our financial condition. Debt, net of cash, is defined as total debt minus total cash, cash equivalents, and restricted cash on the balance sheet. The adjusted debt to finance receivables ratio is defined as the ratio of total debt, net of total cash, cash equivalents, and restricted cash divided by the outstanding principal balance of our finance receivables. We believe debt, net of cash, and the adjusted debt to finance receivables ratio are useful measures to monitor leverage and evaluate balance sheet risk. These measures should not be considered in isolation or as substitutes for reported GAAP results because they exclude certain items as compared to similar GAAP-based measures, and such measures may not be comparable to similarly-titled measures reported by other companies. We strongly encourage investors to review our consolidated financial statements included in this Annual Report on Form 10-K in their entirety and not rely solely on any one, single financial measure. The reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures as of April 30, 2025 and 2024, are provided in the table below.

The Company is exposed to market risk on its financial instruments from changes in interest rates. In particular, the Company has historically had exposure to changes in the federal primary credit rate and changes in the prime interest rate of its lender. The Company does not use financial instruments for trading purposes but has in the past utilized an interest rate swap agreement to manage interest rate risk.

Interest rate risk. The Company’s exposure to changes in interest rates relates primarily to its debt obligations. The Company is exposed to changes in interest rates as a result of its revolving credit facilities, and the interest rates charged to the Company under its credit facilities fluctuate based on its primary lender’s base rate of interest. The Company had an outstanding balance on its revolving line of credit of $204.8 million at April 30, 2025 and $200.8 million at April 30, 2024. The impact of a 1% increase in interest rates would result in increased annual interest expense of approximately $2.0 million based on the amounts outstanding at April 30, 2025 and 2024, and a corresponding decrease in net income before income tax.

The Company’s earnings are impacted by its net interest income, which is the difference between the income earned on interest-bearing assets and the interest paid on interest-bearing notes payable. The Company’s finance receivables carry a fixed annual interest rate based on the Company’s contract interest rate as of the origination date of the installment sale contract, while its revolving credit facilities contain variable interest rates that fluctuate with market interest rates. The Company’s finance receivables carry annual interest rates ranging from 12.99% to 23.0%. The interest rate on the Company’s revolving credit facilities is generally SOFR plus 3.50%, or for non-SOFR amounts the base rate of 7.50% plus 1% at April 30, 2025.

Disclosure Controls and Procedures

Management, with the participation of the Company’s President and Chief Executive Officer, and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of April 30, 2025. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including the Company’s President and Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, the Company’s President and Chief Executive Officer and Chief Financial Officer have concluded that as of April 30, 2025, the Company’s disclosure controls and procedures were not effective as a result of the material weakness in internal control over financial reporting described below.

Management’s Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of April 30, 2025. In making this assessment, management used the criteria set forth in The 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, the Company’s President and Chief Executive Officer and Chief Financial Officer have concluded that as of April 30, 2025, the Company’s internal control over financial reporting were not effective as a result of the material weakness in internal control over financial reporting described below.

A material weakness, as defined in Rule 12b-2 under the Exchange Act, is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. During the year ended April 30, 2025, in connection with the preparation of the Company’s annual financial statements as of and for the year ended April 30, 2025, the Company identified a material weakness in its internal control over financial reporting. The material weakness in internal control over financial reporting relates to having inadequate controls to appropriately analyze all relevant information required for complete and accurate presentation and disclosure under GAAP. This principally resulted from (1) incorrect assessment during the initial adoption of ASU 2022-02, (2) ineffective disclosure controls and procedures that did not identify missing required disclosures under ASC 310-10-50-42 through 50-44, and (3) turnover in technical accounting resources leading to a reduction of requisite expertise. This material weakness existed as of April 30, 2024 and each interim reporting period during fiscal years 2025 and 2024 and resulted in the restatement of previously issued financial statements to include the required disclosures regarding contract modifications made to borrowers experiencing financial difficulty.

Further, the Company completed the acquisition of Texas Auto Center on June 3, 2024. The scope of management’s assessment of the effectiveness of the Company’s internal control over financial reporting did not include the internal controls over financial reporting of Texas Auto Center. Texas Auto Center represented approximately 4.9% of the Company’s total revenues for the year ended April 30, 2025. Total assets of the acquired business represented approximately 3.3% of the Company’s total consolidated assets as of April 30, 2025.

The Company’s independent registered public accounting firm has audited the effectiveness of the Company’s internal control over financial reporting at April 30, 2025, as stated in their report included herein.

Remediation Plan for the Material Weakness in Internal Control Over Financial Reporting

Management is implementing significant organizational and process improvements to address the material weakness, including (1) leadership changes and enhanced expertise related to technical accounting and financial reporting and (2) process and control improvements related to the following:

• Enhanced new accounting standards implementation process with formalized assessment procedures;
• Secondary review process for complex disclosure requirements;
• Formalized disclosure committee to provide additional oversight;
• Systematic data compilation processes for required disclosures; and
• Enhanced training programs for control operators.

However, no assurance can be given that these changes will remediate the material weakness until such time that the controls have operated for a sufficient period of time and their operating effectiveness has been tested.

Inherent Limitations on Effectiveness of Controls

The Company’s disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their desired objectives. Management recognizes that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect all errors or misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of America’s Car-Mart, Inc. (a Texas corporation) and subsidiaries (the “Company”) as of April 30, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, because of the effect of the material weakness described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of April 30, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment.

The material weakness in internal control over financial reporting relates to having inadequate controls to appropriately analyze all relevant information required for complete and accurate presentation and disclosure under generally accepted accounting principles. This principally resulted from (1) incorrect assessment during the initial adoption of ASU 2022-02 - Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, (2) ineffective disclosure controls and procedures that did not identify missing required disclosures under ASC 310-10-50-42 through 50-44, and (3) turnover in technical accounting resources leading to a reduction of requisite expertise.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended April 30, 2025. The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 consolidated financial statements, and this report does not affect our report dated August 7, 2025 which expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Texas Auto Center, a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 3.3 and 4.9 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended April 30, 2025. As indicated in Management’s Report, Texas Auto Center was acquired during fiscal year 2025. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Texas Auto Center.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Tulsa, Oklahoma

August 7, 2025

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.