[Management View]
Key metrics: Gross margin expanded to 36.6%, interest income increased by 7.5%, and total collections rose by 6.2%. Retail unit sales decreased by 5.7% to 13,568 units.
Strategic priorities: Focus on digital collections adoption, enhanced underwriting standards, and managing procurement costs amid tariffs.

[Outlook]
Performance guidance: Management expects to unwind approximately half of total SG&A growth in the back half of the year.
Future plans: Continue to scale digital adoption, improve capital structure, and expand inventory capacity to meet demand.

[Financial Performance]
YoY/QoQ trends: Total revenue declined by 1.9% to $341.3 million due to lower retail unit sales. Gross margin improved by 160 basis points. Interest expense decreased by 6.9%.

[Q&A Highlights]
Question 1: Just on the unit volume decline, I know you guys talked about applications being really strong particularly in July. But Doug, I think you highlighted some increased procurement costs in the quarter. Just wondering what you've seen kind of subsequent to the quarter end in terms of procurement costs. And I recognize that you guys are doing what you can in terms of financing solutions in order to manage working capital as well.
Answer: Yes. Thanks for the question. Good morning. How are you doing? So I think subsequent to the quarter, we've seen the pricing smooth out. It's been sort of in that same exact range. In fact, it's come down a couple of bucks, but that's nominal. And on a positive note, we've seen the same sort of demand we saw in July sort of flow through August. And as Jamie mentioned, September is off to a great start. I think this sort of goes towards we speak about our business where when things tighten and other people tighten, consumers come to us from the top. And we've certainly seen that based on the overall volume of applications and the quality applications coming to us.

Question 2: Got it. And then shifting to credit, appreciate that the new loans under the new LOS are over 70% of the portfolio. But as that back book wanes, you kind of expect some credit tailwinds, but we've seen increases in DQs and NCOs. So appreciate the color you gave on charge-offs in terms of frequency and severity and portfolio size. But just given DQs are up, give us your sense for how quickly you would expect that to stabilize with the new LOS systems?
Answer: Yes. The portfolio is weighted with mostly this new underwriting in place. And so I would expect like now we sort of have like our normal cadence and normal seasonality as it relates to NCOs. And we would typically see a couple of basis points change as we sort of go in and through the year. So to me, this is just sort of more normal. Over the last several quarters, we've obviously experienced the benefit of LOS sort of building the portfolio up. Now it represents a majority of the portfolio. And I think we should expect sort of the normal seasonal fluctuations within MCOs. And certainly, where we're at today is well within our operating range.

Question 3: Got it. Last question probably Jonathan. But just on the G and A was up in the quarter. It sounds like there's a pull forward of investments, but just kind of expectations for the cadence of G and A. It sounds like should the second quarter be kind of in line with the first quarter and then we really start to see some of the benefits of the investments you've been making? Is that kind of the right cadence of expenses?
Answer: Yes. Hi, Kyle. Good morning. Yes, that's right. I think in the second half, we'll see roughly half of the increase from this quarter unwind, as we start to kind of finish the implementation of some of the technologies that we've pulled forward. I think there's also a broader story around some of the technologies that we're rolling out, we'll modernize, for example, Pay Your Way, that'll modernize our collections infrastructure. That'll generate an additional tailwind. And we put that about 5% of SG&A cost. And as we continue to roll out the system and test the system, we should start seeing that benefit in the next fiscal year. And then finally, all of those pieces combined will help us get towards our ultimate goal, which is about mid-sixteen percent SG&A as a percentage of sales.

Question 4: Hey, guys. Thanks very much for taking my questions. Some of it's related to what Kyle was just asking. But the temporary impacts from tariffs, do we look at this as just sort of a onetime step function change in inventory pricing? Or will this just be a spike up and then the costs will go down? I guess the just question is what are your are you guys anticipating in terms of used car pricing? I mean, and like the call it the duration of how long that will affect the system?
Answer: Sure. Good morning. How are you? I would say that the wholesale pricing, obviously, post-tax season, we should have had some sort of normal seasonality fall in pricing. We didn't experience that. I think the industry is contending with what is today represents a 5% or 6% increase relative to the prior year. I would expect that through the balance of the year, now that the effects of tariffs are sort of known, that we get some seasonality and pricing decline in the back half, all other things being equal, if we procure the same asset, etcetera. So this is really just a period of sort of managing through what that is today. But it does sort of lend itself to this other question around our capital structure with, which we highlighted there. And really, I'll let Jonathan sort of unpack a little bit about how we think about that and how we can leverage and create opportunity there.

Question 5: Okay. And then follow-up question, it's very helpful by the way. Thank you very much. Follow-up question is the excuse me, the sorry, my phone was cutting out. You guys there's still very high demand from the consumer, but I guess it's tough to complete the transactions given supply constraints and macro factors and so forth. I guess you guys are positioning yourself to be very like resourced and strong during a recovery period. So what factors should we look for in terms of like seeing green shoots maybe for the dissipation of some of these headwinds?
Answer: Sure. I think with the release of LOS V2, which went live on May 8, that's like our second iteration for the LOS. So if you go back in time, you remember when we first launched LOS, it was around deal structures on our customer ranks one through four and tightening the credit box. The second iteration is more about identifying and properly identifying risk, more accurately identifying risk and with more granularity than we've had in the past. LOS V2 has a new scorecard embedded. And so I would expect us to continue to sort of continue to get favorability. My hope would be that similar to what we had in terms of a step change in the credit quality that we've had over the last year and a half, that it's another step in that right direction. As an example, if you look year over year from Q1 2025 to Q1 2026, the average FICO score change was about 20 points in origination quarter over quarter. And you can see that distribution, There was a new chart we included in the presentation in our supplemental slide pack that shows us more heavily weighting these five to seven rank customers. And typically, we talked about the volume of applications that Jamie mentioned earlier. We're really pleased with what we're seeing there. It's really important given that we're seeing more growth at the top of the funnel and equal growth at the bottom, but more growth with these better qualified customers that we maintain the asset quality. Not going to be able to capitalize on that opportunity unless we have the right asset to match what the consumers' needs are.

[Sentiment Analysis]
Tone of analysts/management: Analysts were focused on understanding the impact of procurement costs and credit performance. Management remained optimistic about demand and the benefits of new technologies and underwriting standards.

[Quarterly Comparison]
| Metric | Q1 2025 | Q1 2024 |
|-------------------------------|---------------|---------------|
| Total Revenue | $341.3 million| $348.0 million|
| Gross Margin | 36.6% | 35.0% |
| Retail Unit Sales | 13,568 units | 14,391 units |
| Interest Income | +7.5% | N/A |
| SG&A Expenses | $51.4 million | $46.7 million |
| Interest Expense | $17 million | $18.3 million |
| Allowance for Credit Losses | 23.35% | 25% |
| Debt to Finance Receivables | 51.1% | N/A |
| Debt Net of Cash to Receivables| 43.1% | N/A |

[Risks and Concerns]
- Low advance rate of 30% and a cap of $30 million on inventory advances under the revolving credit facility.
- Increased procurement costs due to tariffs.
- Slight increase in net charge-offs and delinquencies.

[Final Takeaway]
America's Car-Mart demonstrated resilience in Q1 2025 by expanding gross margins and increasing interest income despite a decline in retail unit sales. The company’s strategic focus on digital collections and enhanced underwriting standards has started to yield positive results, with a higher quality customer mix and improved portfolio performance. However, ongoing challenges such as procurement cost pressures and inventory financing constraints remain. Management is optimistic about future performance, driven by continued digital adoption and capital efficiency improvements.