CarMax (KMX) 29 Sep 222023 Q2 Earnings call transcript

Good day, and welcome to the CarMax Second Quarter Fiscal Year 2023 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to David Lowenstein. Please go ahead.

Thank you, [Samira] [Ph]. you conference joining call. thank second fiscal and earnings quarter morning, everyone our for XXXX Good and Daniels, I'm President Auto Mayor-Mora, President and today Finance CEO; and here with Enrique our Bill Operations. Executive President, Senior Vice our Nash, our CFO; CarMax Jon Vice

provisions expectations, historical business statements Let remind statements risks assumptions, any intent Harbor plans, of are Litigation the forward-looking based financial cause differ on are our forward-looking of prospects make to Securities that In statements statements pursuant regarding obligation uncertainties Safe or are not our today and are current the the me substantial other including them. knowledge, providing that to from we results the we Reform and to and to materially These our XXXX. statements, statements you, Private fact, subject disclaim could of company's update future actual and performance and expectations. Act projections

important affect the ended contact Form XX-K please SEC, fiscal year factors XXXX, our on with after filed this SEC. report feel you For extension the additional annual that morning, with please information these see for Form filed could on and X-K, XX, have department questions our follow-up expectations, free previously Should to at Relations our any Investor the XXX-XXX-XXXX February call, the XXXX.

asking follow-ups. question and one the more advance getting only for Bill? Lastly, for let in thank me in queue you back

David. you, everyone, Great, thank us. thanks Good morning, joining and for

Hurricane to communities are with associates, and our I that Before are I by their impacted get share that want thoughts my started, being families, Ian.

monitor of We've associates as situation stores our and actions needed. to in our taken provide is and associates continue always, significant to take our number the storm's the have to as priority. will of path. we a communities, assistance support the and steps top And our safety We

stems to market-wide from results, rates, consumer Macro including climbing auto inflation, persistent car used used that interest our all in vehicle industry and wide-spread and reflects a this led factors, decline to is facing. affordability broad Now quarter sales. low pressure the confidence,

values market in the In were grow factors impact we to share. wholesale addition, by quarter. steep on the our of continued Despite affected results, these depreciation

to competitive make further over initiatives time. We key that also will on strengthen progress the differentiation continue our

We on and time, strategy cycles have have of have weathered a difficult and operating our to in our track And, number our learnings achieve further key through to managed long-term We history. goals. strengthen remain them, leveraged model. each successfully we

last delivered sales volume. For dollars, the our by quarter retail versus offset second model retail down total the total quarter the prices, partially In billion comps last second second unit of year's up quarter average business X% declined $X.X by compared growth of diversified with driven FY'XX, our in sales X.X%, selling and lower wholesale in X.X% and business, were used unit second year. quarter,

the consumer mix impacted the improving second Comps then comp decline. items. shift Our June, the ending discretionary with was data. call. to We continued continuation sharply a August earnings in beginning Last we and decline in the to that the purchases last July, demand, a reported current sales, the began share I consumer were our reflected softer, factors during macro vehicles. of low mid-teen of in on with that previously. spending from we by sales, we smaller of response offer impacted by industry We large have lower-priced to quarter the In discussed performance quarter, prioritization sales although environment higher also mentioned fell market single-digit at believe which

period retail relative and continue to our data, Based to share latest quarter our July, data profit provides performance the as margin second highlights which [Ph], available. gross context quarter we to through this gain any period, ability title on to reflection $XX prior-year in used again manage unit reported that unit do per industry. a the will up the environment. We additional of versus external [XX.XX] of data used per is We for

gross would [Ph] as less $X,XXX focus and increases, and XX%. than along managing reaction cost was about intentionally by unit the of XX.X% rapidly-changing have We sales striking and right conditions. consumers second balance Wholesale as on to support well unit down shift, last between reflected lower-priced used to to conditions retail efficiencies mix demand Wholesale units of were our retail affordability. older the result vehicles. continue year, versus down covering to $XXX, without been to wholesale passing vehicle market down to from of wholesale [slowed-bys] was profit quarter in a as decision We and $X,XXX older consumer some we depreciation softening vehicles. from -- to higher ago, as Performance also per decision partially estimate a deliberate for their market meet as our a year to reallocate that impacted vehicles this margin,

margins. offers to out reconditioning our them the But able XXX,XXX on the our [Ph] they source to more for market consumer quarter. to happens, conditions approximately standards vehicles sales. consumers we In as for at vehicles. at current consumers often from younger fall during is of we dealers more aligning process vehicles, bought ability and one focused during competencies. quarter, vehicles a advantage. vehicles Our inventory vehicles, second core meet [Fine] to prices wholesale the from those conditions to appropriate third and competitive When We these not older efficiently that have relative are is incorporate lower-than-normal been adjusted our of

While XX% cars tool FY'XX, approximately both was online nation-wide record reflects results. last XX% customers' of down year's our from up and this and instant the year's responsiveness quarter versus quarter, versus approximately We offers. in offer second to from purchased period, consumers down the our last X% XXX,XXX

period, approximately for compared and through year's year's up vehicles last We to was XX,XXX XX% sourced up appraisal versus our product this MaxOffer, This also digital first quarter. dealers. XXX%

quarter cars remain experience. XX% customer-centric We most our best-in-class quarter. and integrates with our above regard a efficiency metrics, of prior focused to the quarter. online, In this leading sales XX% during that sales quarter. the XX% down, sales the providing from year's retail XX% from platform in on store were sales were selling second Approximately e-commerce omni slightly, unit experience industry, online the unit year's quarter, retail with in the buying X% Our remained of approximately prior in up

total delivered Financer of $XXX so, income remain down in same during quarter. second from revenue, transactions last auctions XXX% sales, was represents XX% Total Our considered million is approximately last wholesale million, resulting are year. which from up from XX% revenue This year's $XXX wholesale transactions. online XX%. of virtual, Cap the CarMax Auto online period

pandemic. the As quarter reminder, last provision year's a from coming out a reduced benefited of

provide information I'd as the our second as loss contributions like financing, financial We to turn we well in few the will the At taking provision, our sales customers with cap the offers performance strong provide call as are to minutes. steps will over on Enrique? move to continue to point, and rates to expenses customer our environment. we will align the loan market. to in Enrique, current credit more quarter more who detail provide this Jon a further

everyone. morning, Thanks, Bill, good and

vehicle This quarter million, was million, XX%. by Total year was from both by margin net was margin profit from $X.XX wholesale of earnings ago. down share which gross $X.XX, decrease lower second a $XXX driven X.X% driven volume unit. last Second was was primarily year-over-year The per quarter. $XXX down down diluted year's and decrease per

to sales at position higher and been down Bill the Other ourselves or million, quarter. a was per accordingly combined negative XX%, second lower approximately by and from slightly, quarter, decrease $XX primarily on profit from faced manage used through EPP as by used driven sharp volume, million, decline in lower Total million, decrease of was X% deleverage service. and, last by environment. results unit. margin stronger at $X $XXX million stable a year's X.X%, have gross reflecting depreciation noted, penetration to sales of adjusting impacts of effect vehicle declined As margins, fell a retail was inflationary pressures Total unit we effects in offset results. unit down $XXX Service unit better throughout This sales. X%. XX% drove secondarily, the the retail current largely the of was margin

as volume, for X fees over year's in finance flat were Tier offset fee. we a last quarter volume fee-generating lower pay Tier second Third-party which lower X by were

during was SG&A the three year the change reflecting first expenses this front, to quarter increase the Approximately last Up during to was from year's due quarter prior a decrease profit in estimate $XXX quarter. in factors. million. as deleveraged compared On for year's a a margin The to increased A year. the second the quarter. dollars last the the XX% deleverage quarter. an year gross year-over-year XX.X% reflects the in key total two accounting quarter dollars prior a in increase contributor SG&A the to of points over percent SG&A slowdown from second of quarter of XX.X% from X.X% increase mainly last gross

from in increase strategic uncollectible include technology a a change The variety overhead. cost impact receivables, year platforms, an advance of in million $XX $XX investments non-CAF a other a of prior onetime to headwinds. other drivers First, smaller to estimate increase primary related million accounting this and our initiatives, and growth

the compensation. in this Primarily strong annualization compensation staffing growth excluding offsetting Partially the million million Second, experienced increase $X share-based in a last pressures. in in the well as back was share-based half compensation. year of as $XX a we increase and benefits driven of by wage decrease

have staffing discussed our we customer in actively CECs to our first During better stores the experience time. at earnings expenses steps experiencing we levels our sales quarter the we or to centers were how align call, taken and

expectations, to the to declined noted, second additional our Accordingly, sales align quarter second as versus July. further However, our sharply levels. we in pulled Bill levers sales quarter the during our in starting expenses

maintain better sales. a investment that to full-year offices our 'XX in per will unit on continue quarters. and fully to reducing savings materialize In these in FY stores portion expect basis marketing, more as attrition regard our our a This well CECs, strong and staffing on in further aligning the with level hiring at We included spend contractor through coming as the to least corporate pausing is marketing is utilization intent consistent to of the a levels.

per second unit investment quarter, a robust but basis. the total For a year-over-year on dollars flat were reflected marketing

of part reduced our structure. our channel we operating have As variable cost component the journey, of omni

ended that the in ratio XX% enhance middle will a perspective, long-term to and support of From we our our the adjusted quarter resources of structure that will capital macro-environment, same initiatives invest will and effectiveness the will continue be customer the initiatives priority fixed time, At cost. our facing our selectively those efficiency across drive in on Given near-term range to allocating debt-to-capital an experience omni growth. further towards our channel we XX%. with targeted

approximately During the repurchased $XXX from second quarter, million. we million X.X shares

Now, to to the turn over I like would call Jon.

good and Enrique, the results again, lending Thanks, delivered seen cost. that levels environment auto transitioning low funding morning, CarMax finance loss everyone. extremely has of and credit historically from business favorable Once a while solid

billion. X.X% quarter customers than net higher funding which the offers. second XX% was pass X% penetration and to During CAF's second penetration of the loans compared year average providing in was a three cost second rate to the originated rate of the QX. ability new XX.X% the in last last This competitive weighted over CAF's consumers with quarter quarter, the with while The to QX. highly strategically seen was year's XX.X% affects was still added quarter-over-quarter net payoffs X.X%, in in contract increase $X.X charged day CAF's portion along in increase combined and

Our credit other each continue in offers. attractive providing complement lending to partners also

year, X of last with used sales rate consistent And ago. Tier compared penetration X% XX.X%. X Our for Tier with accounted X.X% unit year was

year. and purchase. continuous the the a continue to quarter Although a credit performance they to period remained CAF for as from overall able with remarkably of decrease Last the provision was shopping be significant credit, actively challenged and demand million consumer of lower our the same income million affordability to million, the applying was by $XXX being for consumer show complete strong. of or year, loss the X.X% $XX tailwind $XX last loan

to basis consumer, provision quarterly compared targeted of million to balance is reserve seven $XX X.X%. billion X challenge the as and attributed credit originations The in to our we resulted our posed X% loan adjustment proportionately quarter's Tier $XX from predominantly note, of confident X.XX% point last of our managed experience leverage to Of ability ensure the This higher X macroeconomic remain receivables, within conditions again in the our X range operating the of Tier portfolio. vast credit a losses robust $XXX million pre-existing ending volume to once to up or comfortably X.XX% credit and platform Tier remain quarter.

offset total from of our up provision second interest by last $XX was As and grew points benefit supported margin, by significantly our quarter, which X.XX% last margin year-over-year, year's headwind was it basis was hedging was seen from a million strategy. our quarter, million our $X.X XX

experience, Regarding in expanded finance our pre-qualification online product significantly during we the industry-leading launched March. our quarter,

results multi-lender our time customized full score, real As in no your decisions a and reminder, unique generates on credit product inventory. this credit impact

As of and nationwide the is product of quarter. this of XX% our to the quarter, during third available end the was consumers, go expected second to over

I'll turn Now back over call to the Bill.

Enrique. Thank you, you, Jon. Thank

time, car long-term the operational will our continuing our experience efficiencies the business we our environment, model. omni Given further At as well the including both driving the pressures customers associates, additional will remain used same on navigate facing macro as of we and focused to the on achieve realities continue work improving sharpen industry. further focus growing as to for our we our goals, our channel diversified near-term

Some effectiveness our within of automation customer include experience leveraging and science, data initiatives we're our efficiency AI improve first, to and centers. key

streams value the our customer enable second assistant. chat provide from Guided work us as time, associate tools ability software, Associate the Action for anticipate reduce to we at phone we and we develop to to interactions digital quarter, these will our During per facing time calls, Over our expanded enhance spent moments. highest live consumer Facing additional

quickly finance to to for the our monthly payments base options APRs multi-lender financing mentioned, different just customers to in within generates simple minutes. all secure understand on This With experience. have credit vehicles as leading Second, continue this ultimately and our cards scale pre-qualification inventory information a industry compare need tool, across and terms, streamlined, and best-in-class the shopping we leverages product contract they application Jon terms them. right retail effortlessly

vehicles position Third, we're of on build cars. expanding Max leading and our market buyer acquire a offer to as

As buying profitable provides from a additional enhances live over and acquisition and incremental year. volume. XX our wholesale anticipate and consumers directly markets markets costs, launching selections, later reminder, lowers this dealers currently inventory We're in our

preview vehicle more to even testing user our online upgrading most to testing reporting. page detail customers wholesale our be efficiently experience information we're vehicle similar retail to inventory. how capabilities mobile Finally, to We're need auction our be to inventory, shop and display modernized AI the friendly. friendly relevant also a enhance condition dealers our We're

continue checkout In providing wholesale have even experience incremental to as addition, wholesale we drive nationwide. rolled out while us volume, we to dealers. our self-service better capabilities These scale our tools will efficiencies all enable to operational an

and diversified Samira? navigate this during challenging our environment questions. As happy remain remains these as to behaviors while we conditions times pressures past that take challenging, I of transitory consumer in future close, that are about to and well-positioned reiterate have business. that, the we'll be the that With We're remain foundation your to I our market the we strong. believe and excited want

Baird. take And question go Kennison from our Thank you. with Craig ahead. Please first Instructions] [Operator we'll

for Okay, about to Thanks several sure good will there see XX% your surprised consumers. a little in taking tool. I'd macro be sourced I'm questions, I'm question. morning. like to sourcing but an ask drop vehicles from my

buy seeing the momentum you is to appraisal you've a the with instant or of on slower it secular you're and the instant little can decision selectively? tool, traction online a more slower appraisal the tool, is had light more traffic shed your Given function a online with online whether that pace

goes morning, good I question. couple And, things. back Craig, a thank the it to for look, Yes, you think

I we're and the our talked tool excited earlier. all, online about offer really about First that both MaxOffer of

of less environment, While was our one, some long pockets -- than selectivity them decline we the retail, some in dynamics in or offers. thing, kind depreciating see smaller from think of mean decline, retail decline, into if certain in certain those which would cars, other biggest any that of the actually -- we was would the factors in you than market, end out fact moving we're quickly-changing lowering you've say on us points And and I that which in I over of enough, geographic already buys price then slowed consumers. I putting know, a we're buying it either highlighted, ultimately but is to Depreciation, get followed two, time wholesale has didn't our an the XX%. because up take third we the what which you cars certain did the impact because areas, you we of the take the that change we just our That the environment.

So, are led the to I factors that really the three think those decline.

you. Thank

Sure.

take question go Brian from our Oppenheimer. next Please We'll ahead. Nagel with

Thanks good taking for question. Hi, morning. my

So, in wanted unit slowdown with comments in the in to the sales, so, car that began used quarter Bill, market prepared talked trend the focus on you just July. the your about

question anything your into there [leaks] [Ph] out on very slowdown? a then the see business of question, my tracking in and product is, that that there or you is is variable how cost QX, are well some September, in pressures are particular quick the spectrum? is follow-up macro but any So, explain you anything -- geographically, you there, documented know, Did particular? in And within here there's comments there that noticed could

Yes, question. a Brian, it's great

that for better as saw If you were remember lots I then June ended it there. I doing that thing drop-off why I a into is think, we up than we Obviously, And where are about "Oh, single we can to first July. continued this saw And happened can softness the say, I ever. I mean, last pressures out groceries August, the higher the a that June one about and how talked a pressures. because call, bit said, we of, about July we drop-off." are not make inflationary broad there's mid-teen because having decisions; I there's feeling consumers good quarter. talked And in to the big decline in little was than in comps. point

confidence, I the increases, consumer think lower during height we've recent more as rates' quarter, I then low even history, certainly interest pandemic. seen as of the mean the far all-time

the it's consumers like, consumer. overall their the of thing one to, point of decline." differently. a spend -- happened, think deterioration little kind I saw there's why just think I that's single So, not are that continuation can we I and this But the "Oh, just the prioritizing

Moving September, same softness August. tell the just the as you additional we you, seeing imagine, contributing into I to would given we're that recently, that's in saw softness even well. And hurricane, more as can

with hurricanes you that will later absolutely thing or But it weather put the far generally Now, as goes, any -- will events, on. as get flow pressure. back September

XX -- currently We have amounts stores about see, varying and closed, of let's closed been for are time. have

side just that and seen depreciation quarter environment we've And a as in depreciating a from we also well. just continuation that wholesale the saw of on first standpoint, the

that So, September. into has continued

ask apologize? should mean the a business a depreciation for significant talking in I make wholesale. quick, just what I'll lead I so follow-up, in Right. that undermine But and it attractive car the prices -- been has Could used you're the about challenge to potentially you consumers? more then

about new bit probably six thinking got I used and you're is in, I you in or Brain. Yeah, fact, And, probably wider the a first right little gap quarter seven know. this between quarters, think gosh, the where way, believe it

the correcting keep in was and depreciation the rivals we over think I seen dollars, peak what this to time. the rivals height I Great But at we time. I back used the But depreciation; on what got the $X,XXX saw challenging. some that used perspective absolutely mean, take saw benefit in it'll quarter in will prices think So, we at Recession, of market that that rivals we haven't omni. -- of absolute used

better that proven, very much navigate been do a that unusual over we'll it we've we've it's But challenges. pretty brings and than it So, thing anyone. able those think I that to and time,

I appreciate Thank you. it.

Sure.

William Zackfia And with Please ahead. from Sharon our next question comes Blair. go

morning. good Hi,

Good morning.

-- I'm different of small share, that solace to continuing comp navigate you although So, of that I'm a here seven And company quarter. talked it's gain lot market I think, all. this SG&A kind erased, because time. sounds of spend the the terms followed scenarios I been congratulations retraction in layoffs profit years slowing spend, I've has we sure the year, with can cycles. certainly haven't back-half if SG&A think you're or trends initiatives, guess, -- you in long on enough see where seeing. those to that I gross materially, do you slower I hires. the like, open profit about the that there's you've into to we in and historically, company exceeds of go it Obviously, done at in But mean, to staffing the curious, just and profitability of how as about a acquisitions get of Enrique, seasonally kind swallowed, given that and really

just So, SG&A us now, dollar help of percent in how think profit are, SG&A barometers that's idea much spend money where an you in? that about whether be is coming gross of where growth, kind it'd right SG&A out of kind take of as whether have sales we mark-to-market, can kind or any of a

Sharon. investments remain focused the ourselves that thanks requires the right in we that our on making our is the from Yes, really to long-term. on for objective to differentiate And question, And winning competitors. continue

accretive tilting be well. because sheet resources about an remarks so, with able prepared been mentioned in in efficiencies initiatives omni-related we better remarks, have that and my current active and being large that strong we've levers, but drive Bill that, said, of our about, balance talked our towards and to the our to current certainly pull that I we've structure initiatives align also environment, of investing to macro that going been cost -- our prepared we And the do have to in part as environment. we're our that performance, So, portfolio more started the in I to talked

but certainly not the of investments, growth-related So, down pulling on our velocity be back. slowing some

we're in of doing terms the costs. moment right think the better our at managing things current I So,

active experienced to through we the to eye But the strong have We we're really strong back when managing and on position that cycles. the capture consumer, and up, we upside. stand in that sure picks in these make a very industry also a want

at of think we fully the balance of I that the second So, manifest the pulled do and start levers SG&A, we themselves look during the in next expect quarters. over year terms to quarter how to more will few the

the think be moving fourth just I kind of certainly, very not into an component, control, next is and certainly profit, the is can right, But other gross year, purely the leverage, another and in to factor. the where that in we that's strongly stands SG&A. quarter

So, appropriate good being. the -- that we for levers the pulled time levers feel the we

there's the of Sharon, for then, can ourselves Enrique's a initiatives, from ever we of absolutely on, a for strength. expense there's lots of there's not cash position host prepare thing future, preserve to there's other entering whole just side, add from advertising, pull these right we're And a to just other to all And levers there's I lot needed. lever. variable that the still that, growth -- now we're I would mean continuing mention spend; Yes. that of those if that's this to to expense only point, the there's

let's initiatives the the the are will levers, know look, and that us, at strength. I coming that position a think point in -- know So, long-term; we've is, near-term There's a get we're challenging them is we where of at both, time, pulled we this it's done. we help this from

it And to when turns, already these an absolutely, environment. able eye so, will market outside off But take will to when we'll and it keep, this done we've be the things. because turns, turn; we

mid-teens that gross trends as more? would back pull let just kind as okay, can decline over to mark is XXX, you see of in, I have now where you given for of profit? I Okay. is mean, that terms a I Can SG&A kind say, a we what follow-up, guess, of mark-to-market go mean, percent it in we or comp I the have you ask in just [indiscernible] of us

No, can are like we we control levers the now. with we we pull environment. current think Yes. on I have We back aligned think better right said, that

of We themselves You are savings manifest going see moving forward. pulled quarter. kind the half second through stronger levers kind to those way of did

fully but see more it P&L, moving see we start you quarter's this of the forward, So, to don't in savings. should

to first We in dollars an And the think way Yes. to I we absolute think, Enrique about SG&A would improvement second about. from manifest dollars as these is, look, expect more. it in talked Sharon, had to

You will there. see reduction a

The in gross equation Enrique that as was the be macro to just going and about. the other talked that's wildcard by driven factors dollars, profit

that. you for Okay, thank

Sure.

from We with go will take question Montani our next Michael Please Evercore. ahead.

Hello, taking thanks for my questions.

macro? and So, the the trends of volume pressure and we terms side. the challenging was in GPU wholesale kind I first If to have just the of question around should assume similar start quarter third given wholesale

Yes, Michael, good morning.

asked I to good depreciating retail talked said in gotten margin. pressure. if about have pretty would environment, margin I about wholesale And like enter under going be calls we I to the -- talked coming that's about about is all quarters going Wholesale us I keeping strong retail and previous margins. we feel because before. questions And So, pressure into have what are have previous cause being a

corresponding I mentioned could because older reason kicks. cars other that just is the The under selectivity, are what we And then, to some it come call cars moving over that we pressure retail. and retail because

to We perform You And Or, it. to we back standards. car, get that generally move say we wholesale. go you realize, okay, the okay, on build this you start to normal this is those than and worse can't then build retailer's wholesale.

some So, we knew be there pressure. going was to

was GPU let's last we quarter look recent another year over quarter had look then you on the -- call last certainly was $XXXX. think you at I think year, think performance, before, I $XXXX. if for that year over every And I at standpoint wholesale

saw at prior massive or last And in last year. then than that, to years of X $XXXX. over we to we were look more years that's there year compare that in X probably equal because appreciation and the the you If the had it that quarters the last

probably average see year So, X, think it I make normally what wholesale period. you given in line in X going is think the about X, would with forward that quarter over to we the way more any

I think that's about to vehicles just or affordability an from of the some older standpoint. this over more continue push more and push especially in to to way these think especially try depreciating as environment we

next Stanley. take And Adam from ahead. will Morgan we go question with our Jonas Please

now Hey, pricing sure stuff to proposed the transparency collecting Bill. increase following add-on. trade FTC like downstream advertising regulation your that and And aimed and some motor on from I the is rule that rule dealer's vehicle aftermarket am team making comments. it's

So, approved, there CarMax going if guys Thanks. lot have on this this in and or work might cost SG&A on any any I impacts? making a know impact expense, of revenue of or potential done terms preliminary compliance you rule is be puts have takes, to what is

there discussion that's it's Adam, great Yes, the the decided, we so a expenses sure lot prepared many at and look just comment ultimately make really a we little point, the whatever at follow, are because much or about this started again anything, that is period to will in cases up talk it's we because folks requirements it. question. but we air, gets haven't did and much Obviously, put unknown. as a There -- point we during do we some to in obviously debate commented is onerous, aren't so your about really to additional

point, mean though, et around products transparency the One add-on Adam, verbiages, thing clarity I is your I to cetera. pricing and will that add

pricing are our up business model perfectly I very that. there. EPP We sets show transparent, think for our honest online, already We products the can online. us

required. a So, I position will to whatever great obviously, think And is in do that. do we are we

bear motor of on Everybody signing I signatures, operating of kind as the to think and complication of paperwork, for world really need And thing. some the in I be is requirements us, a physical online. that managers looked think is

So, be out. to see interesting will how pans again, it it

from We America. will take Bank with ahead. of Please go Murphy a question John

more always a X%. down to on are relevant, quarter-over-quarter vehicles down was I Year-over-year guys. than side. here, morning, you might pricing. in mean, I you that, but sequentially, sequentially more be and at question and about retail changing Good wanted are look was doing just the X% ask in talked retail they yours about things relevant the when older wholesale typically of as sort price, comparisons

absorbing So, vehicles. I lower priced that is X% mean even

but what of So, Bill, two. better you wholesale a retail actually sort weakness is some seeing market, pricing than this more mean, in amount I even between the kind pricing? the we're larger than think the hearing retail seems a from is, anticipating they lot do side. that gap looking or a up wholesale fair on those the And anticipating things may to it the are of where are holding on is growth, folks be are lot dealers maintain there's, like market softening or other of you

it overall when think think some John, you Yes, although offset the mean, we about retail I older although both those an it, wasn't comparing and have your to quarter, like but there bring if has vehicle to I of pointed prices, out, down was timing. a it do in with enough to year-ago. as depreciation of you mix,

if depreciation. with We've experienced think appreciation ended about an about only about in year $X,XXX last So, it, $X,XXX. you we

So, will offset see into wasn't you're overall just that why the you dynamic is above still enough year. still get become But we appreciation that to which and as us there less last less later year.

about at a bought lot they're quarter in sold were thing of other got of that to bought even a prior them starting, were you the the the majority quarter think so is higher I a price. the cars that actually; to second think were

some, there's there's there. definitely timing think I So, some

more the wholesale obviously to a side, if stuff little you're impact expensive of On nicer more. your going bit that's some into retail the wholesale moving

going And have think there. that you dynamic the on so, I that's

from our Bottiglieri BNP Paribas. ahead. with will go question Chris Please We next take

on the this forward? thanks spreads, a in and bit, trying taking of impact given of originations we going like, impact refresh fluctuations guys, then better can tightening in the Hi couple margins you just so securitization still used question. kind these loan lost profitability, given variables this quantified cadence take the and to we how bigger maybe And the just cash of picture model the can how to I'm of a up defaults market volumes, us like net the picking kind hedges little the for on like quarter. decline kind affect in years next of question, these

quarter, saw I'll Very maybe the in in hedge. first jump And to right. what the first on similar dynamic we

majority ABS vast of the we those. funded are our have receivables through know, on market, the we So, edge as accounting

to And with alternative our hedge we flow our vehicles not an have really However, have financing do maintain our of banking partners but funding flexibility to due a and accounting receivables in desire our banking that's profile. longstanding partners; hedge. a those cash portion

sharp get quarter or what And So, did material exactly this when hit that's really they again change to potential you rates. decreases happened or last a quarter. benefit, or every they're see are those quarter. And mark-to-market where is receivables interest rises in going like and

only saw would that's movements to rates. changes. expect the be the for And sharp same happened. this we it's capturing changes again $X interest And the and the quarter. periods in quarter. first very to We million of material material what similar And it So, was from first amount

to that me other we're not Great that But a peak we've be over Obviously, been maybe with correct would obviously, rising our hit there, we way accounting of in to question, margin, increases environment. longer. and overall obviously, continues I again, that's last to it's have But a to And net could us. time, hedge margin cover come margins could downturn it obviously if your do receivable everything the we quarter. going have for that I'll hang this funds a Chris. just And see margin, you I don't is the touch asked. begin said, where down. interest you margin accounting regard interest in our cost a tighter in quarter, think and change our tightened, on our seen And had probably the as we around benefits higher signaled

continue through see pricing. side come down. manage that margins continuing our So, obviously we on carefully to very our to We're maybe

do competitive for we'll still our what So, customer. but can, remaining we

on be think that going net margin as there will our I pressure interest again, as So, forward. manage we But can. well we'll again,

very Thank you you. Got much.

question next go from our JPMorgan. take Please with ahead. Gupta We'll Rajat

Great. still maintain follow-up. the I you for the I current want heard hear current couple correctly, the to you there's taking I correctly, in a Did that if Thanks. on clarify GPU in a quick mentioned quarters. first, believe level the next just GPU, pricing few could retail Thanks Maybe Bill, have environment you question. that retail you ones, and that

Rajat. sure. Yes,

things, a we older we and us there. self-sufficiency, So, we've the will then lack good a strong caveat margins, about vehicles, like nice this selling so it. from quarter, benefits to depending of competitors on some our some that in of but able when levels, I inventory -- margin, sales elasticity, I But earlier, that offsetting doing, of a take to more. maintain the feel realizing what the although levels, lot well that talking it really was lot we as able although this, are different I own to bit fact there's there's But the a into a form inventory bit as pass consumers being we inflationary about little always with, retail do goes speaking were along still bit are gives still more feel little little these are of some pressures,

we'll forward. they other watch feel continue as go retail So, just again, external And and today. where of factors or margins good we to our we about them are some

is managing now, around it, the to But maybe continue more want advertising more rates gain in or you maybe right market spend you company around are able just to sure maybe like like like maintain focus terms it. of us of interest higher it lack to pricing of it share make with to or profitability the overall is And to discounts. healthy looks advertising, follow-up Got got just on per curious Enrique's unit. a comments

really or you could one the as profitability? strategy and time the in you near-term? at what's Is for the other, volume to the the think both the to like, Just get curious same

challenging we Yes, level. you look going I'll think do I'll know and far to excited we where now, some this per right other going. you so then goes, industry about let Enrique and things, as thoughts but to we've we're I'll on answer invest want it, advertising industry, the Enrique really got as to are, as we're -- and we still kind just is advertising, give said, it in of but some still continue about Granted, unit a as

feel we business, quarter, measure ultimately awareness vehicles. obviously but advertising standpoint come advertising buying sales where a customers you ROI. that an it of if was continuing we invest down spend it's not this continue the as But do versus the like will to to the are we may everything we So, from from majority an also monitor, can down, whole standpoint, to more in change you one and it, acquisition as

to something panning have And so, back certainly that that pull to we'll if targets we we're certain have to we aren't things is. or going out, else see that pivot

any have that? thoughts you on Enrique, So,

in what a of Yes, really profitability a dollars, compared tremendous we're how a has done investing ROI. of an sight, giving to few marketing ago, job us the I overall would to team the and say years line that is, into translates then

about been of the making past really feel we've couple we years. good investments the So, over

to And ability we've because our years by really get good dollars unit increased about the ourselves visibility. per think ago, that's right. compare over you two we If feel I XX%, to

continue we that think drive So, awareness and can same I the to time, at drive profitability.

I think Rajat, can we So, the best both get of worlds.

thing important give that remember a Yes, you example. about, I'll marketed even is going lot we I The and that we yet. -- Rajat too that's great to even things both talked have haven't Jon pre-qualification we think other an I the of haven't on,

area And so, for opportunity. that's an

highlight as of lots highlight we have we it able to what things. do of us being want we highlight we online advertising, there's to about to going pre-qualification, we're highlight offers, kind really want to again, to to think buy okay, experience, to the we omni want allows online, So, highlight,

So, we're it constantly moving around.

thinking how of again, that's we're about it. kind So,

it. competitive continue consumer? increases got comfortable feel the on on cash is do to based interest just still to Maybe lenders it, the out able you able Got rate to to be you being to pass on more going Or that also there? thoughtful piece, just are more

great here make and stay of that increases pleased manage margin, our our to could did I and capture offers again, yet extremely manage I we the some then our as think I the of we're we was my said still capture in remarks, that can able but to done we'll it delicate things elasticity, we question. three job consumers to Yes, the continue show amount pass think I appreciate trying is prepared that. do customers, penetration with along sure to a that had, a it's on manage that competitive right balance, highly we've the Yes, and Rajat, we standpoint, the for volume from sales I the were

from take Please we'll Basham our ahead. question next go Seth Securities. Wedbush with And

loan is on Thanks reserves, what My Tier-X loss question and at is what reserving, for your thinking your for your you're right about cash securitized what core first a you're that just and allowance managed receivables? lot. imply where now, does rate

volume. Tier-X in predominantly in Yes, Seth that from comfortably percentage now a you so to range. we The increase portfolio. originations is right the coming as within are that new the X% the larger I than mentioned Tier-X X.X% saw, and is it That's

reserve. in And about feel reflected range. we real targeted that's So, in that staying the good

it. Got

for haven't despite in the environment potential for receivables? taken sharply the rate think those allowance seen core those we've collateral deteriorate? here should dynamics we for up higher receivables and values loan that come How macro you really the and fact losses the about So,

assuming we extensively. that absolute on five And our it Yes, three people like ago, of isn't bought we years the just an that plummeting are values, you've pretty vehicles felt there ago. that got modelled books again, years buying

but it's a in down, modeling ramp-up. $XXX a was it immaterial slow million slow a ramp And So, reserve. there's hopefully, obviously, that, been relatively really it's

So, that absolutely absorb we what today. are we we have reserved, can well in we feel

today. we've sits think considered we it it, as reserve we've the got but So, right

Thank it. you. Got

Enderlin We Please will question Joe go with next take Stephens. our from ahead.

guys, Hey our taking for thanks question.

see than vehicle remain vehicles question moving could are for normalizes, So, you forward? older that as mix these older buy the you support levels? of about to a the GPUs mix historical part how higher thinking the Or vehicle

can about great put that thing have out so it's available, we we wants. whatever a of Yes, more great we inventory that no, now The much question. is that the customer

now are we that it this, out there. can forward, for a looking get we put period, and to go to as more area, maybe normalized have sure if a we So, consumers make we source or

I us. this think benefit So, also will

right fact be as being do think If many sold, aren't gap. this have something to fills will a about there now cars you that that new the I tool a great that great to is This they'll think be -- that.

we'll So, again, whatever the consumers put out there, want.

guys. Thank you, it. Got

Thank you.

with Whiston we'll our And question Please David pick Morningstar. Instructions] ahead. [Operator from next go

do But more there's Thanks. Good first but versus balance. least be delicate now, be morning, cheaper anticipate lot buyback even spending second cash, aggressive? being a or at buybacks half you of Stocks, pressures, macroeconomic flat half? it's to you on to able from want in to was back Are course, going conserve flat pull that which QX. roughly can obviously make one

pace as question. were first you the second out thanks And the David. in for quarter. Hey, we're pointed in as same we quarter, the on Yes, the

continue the to goes remains but our our capital philosophy our back foremost, growing you into So, I the cash that shares, tell first buy core allocation business. and

are a continue return to to also back those From we we grow. So, sure businesses, wholesale cash look make, business position growth that's to in our businesses, retail there, shareholders. capital our and that in making we then our for investments opportunities,

has So, our philosophy remained the same.

I voluntarily? you replacement if earlier does sure control, understand just Okay, someone make staffing. you SG&A on leave made and comment doing just your I any to on want Are hiring the

we Yes, we absolutely a We're strategic. on don't very this pause point. hiring have -- so, at

of prioritization a hiring. have We

the replace hiring. a the make same have to positions, while we'll prioritized, we that but vacancy, time, supporting our of sure near-term something initiatives, them, and overall not have we but you leave that's want this kind you thing, critical folks is at we've as absolutely, if positions So, okay, paused

how Yes, through been and just also it's to managing that. has we've be clear done headcount well, attrition that as right, managing

benefits will you future those progress So, sharply we quarters. more as again the into see

you. thank Okay,

Thank you.

time. closing I'd or for conference are there to appears it additional Bill And like at turn any questions further Nash back to this the no remarks.

Thank you.

and our As stay with are quarter. the being for thoughts do, take you Hurricane. my next always, care they each customers the other again we'll everything those definitely Please, communities. by I the safe. Again, want the all Thank please for they And to talk how of and associates impacted thank call. joining

your This participation. concludes Thank call. you today's for

disconnect. now may You