CarMax (KMX) 22 Dec 222023 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter Fiscal year 2023 CarMax Earnings Release Conference Call. At this time, all participants are a in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. to Lowenstein, conference AVP like speaker to now David today, Investor would hand over the your I Relations. Please go ahead.

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

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

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

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

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

confidence. stemming across macro continuation car the reflect remain Vehicle broad rates, low climbing used results the interest factors inflation, challenging consumer continued industry. due and quarter of widespread affordability third pressures to from Our

run. steep and been business we impacted long to wholesale the for In for both short-term In deliberate and addition, taking throughout our the have quarter. the persistent values steps depreciation response, support

our and of to inventory rising during us Raising locations consumer leveraging slowing five higher assets, cycle. experience capital initiatives mix steep of our more our to give help reducing In our total culture rates next unlock operational share than priced we are used took store market while quarter We SG&A, for to a the dollars XX% conditions and locations to further down this efficiencies experiences slowing offset growth light our through that for strongest funds, our of in and manage buys maintaining flexibility near include cost associates and that associates, buyback market our ability Actions create saleable older more the change. inventory driving year-over-year. depreciation, year planned fiscal are the lower pausing we caps if units customers. better maintaining prioritizing vehicles, to selling open term, while our

for While come this these more the pace new to us growth. continue cycle enable while capabilities, in to selectively believe will we the us steps We activate we to potential effective future slowed those investments. out invest initiatives of and that positioning leaner of have have

And more today's We provide now during will these details our later actions to call. results. on on

quarter For total used and delivered billion with XX.X% and quarter a model achieved in $X.X year, our when down FY the XX.X% sales unit total last business, the unit the quarter comp. of retail versus unit down comps retail third of year's were last volume. In third our declined XX% XX.X% diversified third wholesale used we quarter sales XX, third compared by business driven lower

share. transitory seen data competitive current responses year-to-date October, through share addition our we've gained loss on environment. the impacted macro we In factors believe title that the a I of External that though performance was mentioned market to basis previously, indicates we to some by recent

margins have we Through focused we that quarter expansive that before, profitable elasticity price profitability can the holding play. the for said the testing, are long-term. determined share on be market we during sustained gains was As right

retail to is during with down quarter. second year, depreciation sales quarter record year approximately meet we per unit the third XX.X% priced of year's Also, also profit conditions, performance vehicles for approximately reallocate changing to which This was lower which Wholesale a last was wholesale the market $XXX, of to included ago. continued as year last a impacted versus about older tailwind. consistent was $X,XXX quarter appreciated $X,XXX down incremental used which a by vehicles. unit Also prices $X,XXX, Recall, units third gross last consumer was during quarter. quarter gross quarter, from Third the third profit depreciation. were per rapidly $X,XXX some to of demand driven retail is margin from experienced $X,XXX

dealers on as focus to doing from Just and were retail, profitability. period. we total will during We year's versus XX% quarter third in vehicles the maximizing continue down consumers bought last margin approximately XXX,XXX we wholesale

XXX,XXX half Our by decision and coming our online through We buys consumers steep buys the of to in volume those purchased impacted was from depreciation. in slow cars experience. approximately to quarter the our reaction depreciation deliberate instant with appraisal about

up sourced also third quarter. XX,XXX through our digital XX% Max appraisal from vehicles last We product offer dealers about for year's

from retail during third were in prior sales online year's XX% Approximately quarter. of the Omni sales quarter, above quarter unit Our retail down were the in regard quarter. XX% quarter. our XX% In online unit metrics prior the to this up X% XX% from sales approximately year's of self-sufficiency remained

will resulting John last year's same third taken during performance to to Financer transactions. provide are align the will more more Our Cap income loss delivered in At down financial wholesale call auctions sales cash provide total who to which like million XXX% steps from year. Total consumer the on quarter. on the from loan third few our we've the XX% Enrique down represent XXX considered virtual moments. our period I'd further wholesale detail approximately of this sales, online and transactions during million remained turn last XX% so revenue was revenue online and contribution CarMax Enrique? Auto a provision, XXX from of XX% business financing information current the point, to over environment. quarter

Thanks, morning, Bill. everyone. Good

XX% net down across diluted $XXX $XXX per earnings per wholesale margin gross profit wholesale from by volume share was last year's lower of of and and vehicle from unit. XX% XX% driven million Total a $X.XX quarter. and was retail ago. million $X.XX down million quarter year and Third margin $XXX third margin declined decreases lower The wholesale were year-over-year used respectively. Used

adjustment. levels most strongly staffing are inventory among quickly some when deleveraging. we exit EPP their the grow a the to to down have was and the stronger continue XX% environment. depreciation technician we adjusting better reflecting manage year's maintain margins, cycle. Service approximately lower will accordingly gross third was effect XX%. profit has primarily fell quarter. declined million on current sales offset This current returned by from Other and in year-over-year position the in-demand drove Technicians last us associates and noted, and that EPP. at by to or driven the retention industry, through sales of Bill $XX and been partially lower was to secondarily, stable Penetration decrease XX% million decision $XX reserve sales $XX face service results decline favorable position million, As ourselves unit to our was by the retail in

quarter lower by fees and we Tier-X generating year's Third-party lower flat for last were fee. finance which pay Tier-X relatively with volume fee a third over volumes offset

SG&A the the lawsuit quarter change the mainly year-over-year this factors. class percent X% On SG&A actually margin from year's of materially XX% to would the SG&A increases last year, decrease third in prior to year-over-year for to over front total quarter, a adjusting slowdown during gross following first the quarter million primarily action the was second were year. as XX% settlement, expenses last that year's third the SG&A from settlement this The received $XXX was reflecting dollars a quarter. million quarter last quarter due as have quarter. in the dollars In a quarter, third due compared XX% we prior for of during year a gross $XX pressured the up compared to year's profit and X% declined from the of

million year's legal primarily $XX overhead a First, other over settlement. in last cycling driven by increase

a continue our in also platforms initiatives. growth to and although strategic reduced pace and technology We invest, at

an share-based compensation, Second, in in advertising. reduction $XX third, and decrease million in benefits, including $XX compensation million $XX a a reduction million and

and our contractor CECs reducing align During limiting align offices included the stores and quarter, to attrition and we continue sales. to to expenses take to steps This hiring to sales. our our marketing in continuing our spend staffing corporate in utilization through better our further

anticipate year's remain continued remains third year-over-year, our investment on focused advertising reducing per in expenses on and expense with lower fourth our consistent the unit We quarter. last quarter. While was progress basis a

to structure, fund priority our first capital business. Regarding is the

market continued a uncertainties, and are conservative structure. approach performance quarter we to taking third our Given capital

XX% ratio below targeted debt-to-capital range. adjusted was to our While XX%

We the are quarter both that leverage steps keeping access I as this goal with spoke managing us markets to and net maintain the maintaining whole. following for SG&A of we our to CAF a allows in actions In to. capital the efficiently the CarMax flexibility, flexibility took addition this to

our paused share buybacks. we First,

as authorization Our back does over to time. to in return shareholders billion place, our remains $X.XX commitment capital

previous CapEx slowed our at we $XXX year expect fiscal our approximately spend, CapEx $XXX versus Second, the estimate. the end of we will velocity million million

fiscal year planned conservatively we XXXX. store growth mentioned, in of five Bill As locations also new have

very on $XXX and Our draw liquidity quarter over on ended no strong. $X We the billion million our in remains balance with the sheet cash revolver.

turn Jon. to to like over call I'd the Now

in quarter, three-day in Thanks, shopping X.X% the XX.X% of platform Enrique, new applied originated XX.X% realized approvals CarMax to in QX. was charged to their our last credit billion net quarter a the and and in In third X.X%, the resulting weighted XX.X% average everyone. the the credit strength higher than contract last stability seen same morning, third within of quarter penetration for in good year's year which Auto Finance quarter, up customers was $X.X and who consumers the and during over provided X.X% rate payoffs QX. journey. The of a XX% from

year infrastructure and scalable portion underwriting We continue ago. line along the down last still consumers of from to testing to share financed nimble X.X% increasing year's the Tier-X levels, the in compared while was but funding sales a contracts. historical unit leverage pass increased our Tier-X a to XX.X%. XX.X% strategically used finance to X.X% of penetration costs with quarter of environments have in

this same from environment, and decrease period lenders to for quarter $XXX last our the they with X.X% offers was customers. make decisions own their a million, provide or to lending pleased million $XX remain income able competitive the are collectively Our the challenging continued of CAF independent year. we in to

year's reserved for range future to QX. $XXX position All in to provision overall resulting ending quarters. our is and our to million strong balance continued with were Our Tier-X unique portfolio reserve compared current loss ratio, our million, portfolio within up reserves this a Further, Tier-X seen $XX within an in sequential receivables targeted appropriately last reserve primarily The $XX a losses. of receivables the of is credit to previous from believe in X.XX% all, adjustment was at loan of loss This slightly operate of quarter's in in managed we performance are credit provision $XXX platforms be Tier-X of our business we end to as continue the X.XX% three comes we during addition quarter, quarter. from to basis receivables the the up This leverage million second in the X% we of X.X%. to million. year pleased point

receivables recent total hedging moves. quarter, our are by from $XXX margin historically flat was million year the strategy. a as The supported X.X% low to last costs down dollars funding receivables to offset XX the million impacted rate more by $X at corresponding were the basis by year-over-year points interest receivables margin benefit Within modestly with Fed

product, experience. level our in nationwide we see with technology, the of quarter, successfully engagement credit completed we a broader shopping, advancements this rollout our third during multilinear high of finance-based and the Regarding pre-qualification to continue

journey. application inventory be secure reminder, customers on the rest gives credit also Like across driving to simple quick online the the our financing decisions and shopping with scores. allows digitally credit our This a is at no of focused entire to efficiencies. also point in business, impact to any As quickly ability receive CAF consumers this their easily

our And benefits modern, seeing the a highly our that to changes. product the California's Consumer old finance and more we cancellation the disclosure receivable GAP space. a and us the onerous, would related temporarily we while product. these system necessary suspended is launched waiver to A upcoming have we regulatory implementation already system regulated are allows the ago. lengthy change more and have system, that recent in is the made refund adapt to example requires year servicing been of everchanging requirements likely easily added state and With nimble the changes. We new would from

we However, sight and from without agile our more new of to example clear these the have near one and requirements early are with our able incorporate many just our technology, interrupting. wins of system, is midterm. new to in line we resulting more This a

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

you, Thank thank Jon, and Enrique. you,

and I mentioned As by omni-channel customers. our better with call, efficiencies today's the and operating It start prioritizing we're simpler making support starts unlock create to business seamless. more experiences steps faster, projects of at that associates taking for our experience and our

for offers make transaction it in express completing forth one our opportunity. to through and it transaction Some pickup option to assisted between a examples online ability and and features in represents XX customers making opt back and self-progression. on delivery enhancing to We're own help stores help also to little easier confident include, more go of self-progression. win-win their consumers key as steps feel minutes at complete we're the customers into This simple their as

customers to shows and this time. that utilized when our over it us enable costs Our experience love research will lower

to available product adding working base is example seamlessly customer our to who shopping time, same platform not stores lenders final depth centers shop breadth we additional experience, just all the enjoy into this we are those so offers and to expand the to consumers finance Our that At can of are the that online. our and our customers. experience integrate

stores. experience, to evolve our we our our operating updating drive omni-channel As we also are gains models efficiency in

have our for business e-sign we self-check-in appraisal example, launched functionality self-progression. and capabilities enable enhanced For better in to have customers offices, also

enable software customer digital customer time to improve per customer as new are transaction Additionally, better shorten and We improved speed manage these will and us testing an to title reduce well anticipate associate appointments, to we queue as visibility. tools times. spent

focused Our an are customer exceptional skills associates are on to key value-added leveraging we most the their providing and manner. experience in

include deliver and does us vehicle also our will key in is in costs. which our version, invest markets. offer to the still projects continue potential We instant updating dealers, provide to Many requires and dealers them Examples approximately available first, initial lowering product not capabilities XX our appraisal have take new while of which that selectively are we're to on for send offers the pictures. Max

offer are will dealer to We volume this offers rolling product all higher support experience new believe out dealer, which grow more over to a and We position us a fully efficiently digital our well instant dealers. time. buys

reduce advantage about are We speed, Enhancements Second, year. cost estimate and technology our moves. and approximately providers as X even out full our control the our more capability. keep our logistics that a will This XX% our and million enhance loads support stores. system of management logistics ability to volume move low and to enable to our our we costs to of moves vehicles improves each of operation truck consolidate drives We over our transportation internal we increase complete loads, will and us efficiently. third-party leveraging faster mix in predictability

we're Third, to auction upgrade our experience. continuing

improved springboard search the dealers, data condition friendly and functionality. to and AI During our that XX% including This bidding. also proxy modernized will enhance wholesale relevant page capabilities to believe our of more It quarter, further and use will page to third detail mobile is reports enhanced provides business, we is our scaled dealers. filter we launch the vehicle we

grow years In a have building over spent of ups downs focus the can long-term. diversified and the that initiatives car the We closing, profitably navigate drive XX efficiencies are business our will almost industry. business our used we and confident that

We to have a capital. access strong balance sheet and

in we be management experience strength continue manage thoughtful expenses inventory levers and and Our as pulling our margin is a to will and necessary.

other, to that, excited our be pressures challenged, customers happy believe we an business and able While them through future not each positioned doing industry remains questions. manage our are thank we'll and to take your the long to everything business, our the that I and our diversified will company. to our of support foundation With want and stronger we're to for that remain we even about transitory are strong, associates the emerge we're they're predict well model. how

Ashley?

[Operator Instructions] And your first question the of comes line Oppenheimer. with from Brian Nagel

Your open. is line

if trend could here. So I business sales have better, if how Bill, bit to later the saw guess this you sales. on And actions sounds more you you the performing then aggressive guess discuss just the just will, question I more is we quarters, period. maybe market declines, with was you And others through regard of that like a a It understand your in of share that result comments also, the taking mentioned in price. I

look can a You at inventories. the you've that? and see doing very, should dynamic percolating take margin. And been at your further has to inventory? action doing business of you issues -- within how Could you're managing historically Who's follow starting very And up expect guess your wider to I there that cohort and there. persist? to is then, price, would elaborate how what as good be But now held more CarMax that, on you aggressive it long what, others long your competition

right. All in Brian. there, lot There's a

we the little the about So we actually in during me of The being it end of spoke, last was And let September. it down continued. September, latter of the sales September, a talked time it softer by middle mid-teens, quarter. start with part sales got

I'm get December to back panning is is, where continue save softness third your quarter into from and the -- December in the more quarter see about average. running even out? October ran the I'll question on how's having actually because queue next to sure you We well, November.

So also better from in little doing bit easier the it's fourth that I But than of we're performance, just were a third comping we're a over you going that be to would the will quarter. November. little we bit we -- be than remind obviously, quarter

see very prices -- pricing much that recession. and elasticity we're reason lowered we though those expansive if on did share, is some We sometimes after far made margins detail always title and the still my I in Year-to-date, share share through we've that in recently play data move we've as in giving 'XX, prices October, would a you market this and similar got also have As I and profitable most a because says less think we the have confident a sold speaks we still even share record had on which 'XX and which market would actually on basis did the we're And is tests, latest cars more said, gains long-term share. are -- the gains, we But we declines. I'll -- saw market back track you market got said going to It's we that competitors about September like we pressures. opening have. what testing we some it's made more as have And surprising. on hesitate lowering saw be short-term in what always I to always, I talking inventory, great money. not temporary honest, we're remarks, I've mean, that. there declines we

business was move it. of lots trying who's to and is think of I there. of widespread rid know players other to I look. just them. pressures lots get their dispersed out just that that a can't inventory getting highly point and question folks any of I your This

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

very thing well retail again, first managed, on just quarter. this obviously, Maybe, GPU,

competitors. older seems point, discounting much the the it's about getting not lot. the you're talked you some aging your of like it's fact as it as have You -- you But some move inventory that to at that have, and on

gives next to not this move to mean, some do if the think consider pricing next about quarter discounting the So the at like And manage transition? door, Thanks. point a retail quarter? I maybe quarter, have should what position? two what that And you implications do that GPU you how how have through we out inventory I maybe ultimately, So to in or that follow-up. the

waiting saleable units. really This had, up total a question. talked on job, we worked great because comes did think titles, missing Rajat to gone maintain shine lot. clean really hard I'm has to a phenomenal that's inventory when we management, And I to were up where is I really when about So, it team were that pleased able stuff cleaning But if the inventory our we notice, down. really how you parts, we we much

didn't the So aging of see to the your point, reasons why movement our in more ASPs. it's one you inventory,

the price this a that selling it average no getting Our price just sophisticated is with And our and there. the through look out away. job did realized, we depreciation, then there's testing, given sense given team phenomenal working

we going come feel you've And again, good up your this see to like going what what point. you'll lot so And a forward. we think average in put position selling to seen than are really prices ourselves more retail down forward I going is,

feel robust, as we good continue go retail to But GPU, see continue if you'll the have holds, forward. robust will GPUs. we elasticity retail we elasticity I about test think So to obviously us

the now maybe was similar the XX like, three financing years I that line, slightly better. the gross to have at profit look million if ago, today. you million, that and did XX And And Got that is volumes third-party lower it. today, actually really gross other despite you very your profit fee volume other

almost there And taking a going we thanks And volume? recouple similar question. so know, the opportunity rate for any you in the it you there. down you had see reduce are can mentioned the what cost long how is this to kind to but run before to that on why is of XX% mean, that technicians, And I level want I of the retain to past? like

a quarter things. important a that to really competitors. we they the you retain, through the just flows leverage service one. given sales for the have it's technicians equal year-over-year that a being investment position two, this being service roughly current out we and and line. Number right quarter, pressure to because with That's of the term. and pressure very to medium up that to within Yes, technicians. correct on recruit need our million for actually quickly, XX% again, the that cycle, when in Rajat. were that want decision is It's levels, volumes we where the almost margin, difficult the do was the specifically about this biggest decision term It quarter year-over-year, ramp decision, an that And can business, position other was where down couple one our of hold was look most to inventory places this sales the the That what is staff. fair this service we with $XX $XX we longer bit number be de was come a But million quarter this is absolutely number business. our it But faster definitely but on said, than importance is

would add more now, technicians, ago, comparing we a lot have obviously, because more more have to over it Rajat Yes. you're going production capacity we is, few we a have years space. I

it feeding that's as into well. So

that are the you I like year of more of of Sorry, next what mean, What's so some We’d just to these your just take things some might like, a hear to have mean, recovery? conviction aggressively? rebound point at that actions, the follow on on have thought kind cycle you some of you like, anticipating process kind there. or do like view up. I

good Yes. Rajat, happen Look to guess as next far as mine. what's your year as as going

that is happens trying we upcoming will pull regardless if ourselves what or I in put need up will in pull additional the we're additional levers. what quarters, flex do a think of position to levers to

trying So at we're to flexibility point. this ourselves just give

Yes. what laser we we're I on actions what focused And can taking are mean, that's we on. control.

And at take bent our so look there. how the you can SG&A curve a we've and

know service, in we going there's really And it's that be cycle. to reduce But that, investing cars because look emerge again, get a from take want is, through our yes, to we're a to -- up. at we're quickly. reason it's when this we can in the You technicians, position strong we up that

Thanks taking Got the it. question. Great. for

take with our next Healy Northcoast Please ahead. John We Research. from will question go

ask Just was bit just that. we us you wanted you really, understand kind might color if took in I could And wondering don't help rates kind the a for actions cadence, think cadence. on know more appreciate about little I if SG&A but or I lot comp there's maybe just you can of quarters, SG&A. like run think the SG&A QX. to now couple us of, and reasonable it help the about sounds to gross calibrating growth next of level been the a be of just what for for an guys, the you're because And

helpful? could would you anything be provide So there

prepared you, was million half back significantly whole, our Thank go up bent my a I Yes, SG&A John. the as said, the to that in curve we growth like of settlement decrease out remarks, you're But XX% year XX% year bend first in that in last SG&A. really it the a received great. this on looking $XX down back quarter. you Yes, when We've the again, have to overall quarter, the year-over-year. at X%, we slight third to year-over-year

variable the been quarter we've actions. We forward actions headcount, Number about, an right. is our fourth staffing, of kind why really two lowering groups our more change lowering our been on that's one material talking of pretty attrition into into we've perspective, stores. in year. would that? the from And it's the It's basis in next carry So is because expect that to and the And curve.

time, more takes been the that attrition, second through year. fourth talking believe it's since bit do a we right, expect into the when from about down little we has started really, culture but a forward quarter it actually and you're thing that'll we the that next standpoint. And So because it, to right bleeding carry quarter, managing to

actively fixed second at look taking a as The there really costs is our and managing piece well.

uses of right. our -- our And So paused the home our in we've of corporate corporate essentially there, office, about the looking pulled contractors at also I've talked back hiring in office. we've usage

positions well, as by hiring kind We of we corporate key materially, strategic still well, backfills hiring are positions as of have paused overhead well. and that as our we've so kind

they're quarter operating strong take marketplace need So as out we're quarter in. year. you believe back believe we that we're right but if about would answer we to fourth actions, that the actions, we've last I your further actions question would settlement required, taken positioned third to appropriate from cadence, well, the for strongly to the And the If expect we once now. do look like the to we similar

And say relatively would be to in that the gross? or terms dollars, that of be to in of when SG&A you terms would QX, similar

Yes.

it's believe with and more moving, profit the grow? to a effectively. SG&A I we been challenge, can to number. how And gross of challenge John profit gross we've not SG&A So is think ratio, the that's So it's that the is year-over-year I control SG&A. leverage the The doing

depending that profit movements, it really and difficult ratio. leverage up manage ends number sharp that So make gross on quarter-to-quarter where to

line. we're we'll focused terms can And in of, So what control we on on. as that's We're focused I that earlier, SG&A what mentioned control.

SG&A would I growth about the specifically -- So and are my quarter. year-over-year comments

about wanted Perfect, couple ASPs more the to so fall Hypothetically, over mix? to it market or the quarters given changing way. already achievable? the you in just Are ask I X% And guys answered conditions And one in $XXXX still feel another just XX% but scenario, question just of maybe of even thank like that just that either profit confident to a per that unit I ask up GPU directly. is kind level follow if next of want you. this, just different you've levels. gross

think we look, use. Yes. running continue very But industry the comfortable think the gap We'll GPUs. we're to to good where monitor Look, continue new I overall feel the to help fall, for and is model some thing between which expect drop I retail test. a ASPs to I late

with feel So and continue are to GPUs we test. comfortable where will our

guys. Appreciate you, it. Thank

our take from Daniel with Please We Stephens question go will Imbro next Inc. ahead.

just season, pulled you really in some the some color the I $XX that provide on end other million up drivers you question follow of year-over-year. around you fine? expenses. to I John's labor overhead on the what still more want can are think it's and costs said back, biggest of inflationary Enrique, up, on

that of step then think on one just even reasons quarter, the now XX expecting about, we last that months. backdrop And headcount one-time a to any I a back. we're hire need year. like too next is talked is want So gets that softer to it for plus don't taking quickly, the harder reduce expenses, you increase? But back sounds the next of And

why parts So expenses more other of I headcount guess or quickly the reduce not across enterprise? Thanks.

the I'd what so quarter, deeper the there the did, is we went And got Yes. as we and levels in in more third field. challenged say sales that, staffing into

through still And so, it's attrition.

at the in what the to managing regards does the longer. your it last well, those expenses. compare you prior from and look same standpoint. other right? investment I over a the quarters, But what What is in settlement that So looking in as to if $XX in it to that less I you, And And an did a first is you, increase. that that's of if And investments really release, primarily attributed there attributed that's back out, will if comping you environments, year-over-year half right. just reflect sales asking lower a That year, what that think I about increase, as to question, go of it the bit and a at expense product, was because is take is had little that reduction did tell there, line, at our targets time, to. because technology into our XX% current you're you deeper we though, we're the million goes you're we pace staffing we tell than

been there we've well. so pulling as And back

terms some some addition volume, of initiatives have a the there CapEx those in also chunk slowing projects, that in guidance that comes XXX from capacity just of some this of with out lower manifested We've just that capacity XXX, to taken see You those growing that we're slowing decrease, year. our down to for down from down investments. in of really slowing of the our we largest down

mindset, would allow is, chosen for thing the look, are reason to people only to we people our add one the our there us that's culture need reason a And attrition is first we to that's to success. Daniel And the get I be. where our

situation, very to We we're monitor to continue attrition obviously but get us the will be. to comfortable with allowing we to where need

up. question. I'll in back I'll for Thanks. hop stick it. the Got one And follow with queue

Please Murphy next question Bank our ahead. go John America. with from of take We'll

six-year-old in for fleet you sort wanted when continue probably to side just the to the is the next [indiscernible], on for the mentioned dealer. I focused second. here I more going mean, think shrink you Competition about of to one- years. a car on couple as supply to that's just of the focus,

So you've But folks going to But drive it of is lower and in car of fairly -- certainly available volume. kind mentioned agent the is secondary in what's to one- the like an available to going to And market. to you shown it's other shrink. fleet manage ability price spectrum, that well. seems to why six-year-old you've continue kind the

the So fast points, grosses, capital returns, how here, better price you just curious, lower potentially on move I'm that can and back volume drive employed. maybe higher on up just but to

high. John. kind way there were a Yes. to because you, Thanks what it in that we we of position tell newer today its a and has interesting, the cars, less self-sufficiency similar of high. back better because kind than through. have I you so where after we're is 'XX work just for out living very the slow to so you our so were just come did there's In 'XX, we're remember question, you of life recession, was decision of also buys. the get lever, XX way is made some to we my And be sell XX, far, consumers to looking going obviously, our biggest we'll able than but better we in able what could opening self-sufficiency because down to for. buyers depreciation to really, one we're that the are be a after comments, reasons And down It's our

not the of there cars market. so we highly in that did of retail type purposely depreciating buy were those risk And a of cars because

that are And I think XX better XX, So, again, job period. we're and in did XX. and XX I were we we positioned with than in navigating think comfortable where a I'm very we phenomenal

when But fast going I traditionally positive? after headwinds in you sort just what of move you how to follow-up, it. obvious, I of you the admirable particularly but just which penetration materially fixed core. is know comps drive maybe it. mean, can mean, was increase, volumes that, analysis, higher? very was I your costs Bill, Enrique mean, the we these a GPUs, on kind vehicles that the these I have it Because, I you're on to variable mean, push maybe older do mean, thing the this understand variable, kind do of mean, is it's I that the about GPU of that and or a as focus these is talking cost technicians. drive the you are one high,

and stating mean, to So but you are I at something when point you you're you it? cover do got can some I to doing mean not, not these this? do costs

driven the higher you is consumer about everybody of by less that's demand, talk how the type vehicle penetration wants older, when but an not older we expensive. much Well, put of out there mileage and and penetration vehicles,

everybody's that. that's everyone's demand. looking to demand will that consumers see put So we continue again, out. But not all continue that to driven And as for -- by again, not

Okay.

the supply, mean, to push I of product I the than more So supply mean, core a being older. really getting it's able it's to

at just it's the And CAF rates. as example. have Tier-X affordability. it's just on also payment, go just vehicle keeping If interest people not an But more It's that's back think affordability, I sidelines -- it's have just right the a payments, of rising issue. to just It's only -- to share. now. bigger a lion's you a lot I look you Well, vehicle

think we've got the inflationary I trying just inventory the pressures. there what monthly with And think to a by overall the do sidelines, right inventory, is on it's And of mix to that make right to sure we're a XXX of out that the majority amount the to is the mindset consumer buy how the with by the the payment, someone's vehicle costs our to going factor being be not which driven is driven business. the to up that and on we in that in taking you've the got margins on very first which price, I not, way about, order people bucks obviously piece we're interest keeping meet smaller cover mention rates. biggest or approach the whether being of decide So car year-over-year demand thoughtful people the

Thank much. right. All Okay. very you

Wedbush question comes Securities. Basham with our And ahead. next go Seth from Please

you the clarify trend to Just SG&A to still forward? sales for this to quarter in to be XX%, fourth comps flat and continuing up down environment where expect year-over-year going

in you need the third million No, I back mentioned out $XX year got quarter. that to we last the

Seth quarter. like expect the so that happen. down can a And expectation quarter. down It year-over-year tricky But fourth year-over-year would our be quarter-to-quarter little to bit things be we fourth we in is in would is the gets

again, you get on when And more persisting XX% think decide Okay. SG&A? much the how down to and when aggressive decline you about

going SG&A. be quarter-to-quarter, will is guidance what you if expectation the been down again, you is to I fourth And we've to the the of trend because the our in levers year-over-year. pulling so kind quarter much Well, on we've it down but that we've look -- variability not right there's we're provide been think I Yes. far. been And on tell how that some at managing focused

Now, to and continue do. we the we'll being, pulled the always doesn't up the business have manage prudently pick we right. if for believe levers, levers right and time we we deteriorates, other But pull, as business can we

just the the normal? you my follow terms up sold, of on sharply in And this is XX% quarter, business, the declined new wholesale question consider it. to would to ratio retail wholesale Got this units

prices market. When disconnect you sell There's year like what down ever consumers are been. this a this could time consider a been that depreciating told than they in best last have there. And car, is going get the I to more No, highly for their a the they can lot would have see before. gotten they

drives buy come always down. as down, so rate our it And prices

appraisal is just that to of add just volatility stepped the would I back, we given thing market. that other The the advertising our

no, consider this the new So norm. I don't

guys. you, Thank

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

year-to-date question. run that the a in fourth assuming on how because into of quarter contextualize SG&A. SG&A much initiatives way the that quarter. now And taken I'm in is the quarter rate guess and up continued what those you've I to third Following out there is the fourth

Yes.

always that I that just better is year-over-year seasonality that we've and or the the it grew half it year, to QX, in year-over-year had, SG&A. go think Sharon, our you about was it occurs first first because cadence, in think way In the there's XX% business, best up to quarter. if the to about year-over-year. impacts if SG&A the the second the up we you think the of way quarter, again, But also back quarter-to-quarter cadence right XX%

we This quarter, settlement that we're out legal the last down X%. got back you if year,

So in decrease pace that's a significant SG&A. the of

think And we're doing so managing so to we are appropriately. we environment. And we are it, focused on current the

challenged, we material be do. our the there's Now, time for being, steps business if But SG&A. can to taken the manage things continues some to pretty we've other

Yes.

heads to it down part our sounds sounds be year-over-year the if I quarter in year-over-year, than quarter, that third it more is, a of you're see as makes the down. manage X% the saw SG&A if in continuing as And if like that us SG&A what think of Similarly, to are as a also but wouldn't lot you're down bit you why to we in confusion fourth reconcile sense. to proactively think I fiscal SG&A. expecting trying

We SG&A down. go of expect to continue to to kind see

our we challenging manage things year-over-year many it what basis. is and too, think quarter. number But that to on I managing down you from continue happen a to we're I you practically bit into to gets thematically expect coming individual tell a a SG&A little give quarter, can a

basis you've lot of your a you're got about same intact rebound. very Okay. year? the climate. have time, Maybe next separately? macro I potential at parts, with of a you should full keep But we difficult for year muscle So a moving on to mean, how think a for dealing SG&A kind

I mean are particularly as the growth? about think in So year, next how opening, you with we curtailment the dollar SG&A viewing

we is, go kind right? Yes. say. this In we're past, gross SG&A way kind is of guidance X% kind macro environment, in think like, of important to less that hey, lever, X% than guidance looking to profit I'm this at we've need backdrop, The I in what the to given about of

managing, to we our actually X% right, improving and to SG&A. So that is get goal gross are on our mid to to the is our SG&A X%, kind way profit, step of the first

we more there, how operating right. time. you and But get at going transformations we're to expect what over than more time, back be. to But to that need a we Now profit model. to and to going take get our step. operating can used model to expect that still it about many where an better that take it's to be we efficient takes having growth And a that's it be, talked that's look gross through to we to is efficient it, first Over have just time, though, other time used retailers gone going have

did we third support kind exactly profit to mid that's to X% SG&A to of the Our And to need we're But gross the again, first going And to you in market. we there. gross what In going the step is we're that's X%, do. get for SG&A see profit, to get our appropriately right. the quarter. meantime, what to continue can manage

We next the and expect that year. to into forward fourth quarter carry into

how more after and to Sharon, now tell business lot the depending then. does have you on really And visibility also between a the quarter we I fourth will be more to think able

you. Thank

will with Please We next go to Instructions] Kennison ahead. Craig go Baird. [Operator

topic in there's winning could if low aggressively market to not a might a sprint may anymore, in try SG&A hit change a favor. how in I way. change the competitive I'll be been make aggressive And truly with marathon you you just wondering more that, digit than to in And cuts. you think -- it's allow SG&A percentage landscape. been but to single the But different throttle I'm a your a be respect And back are to and given this philosophically,

Yes, Craig.

differently. bit little a about it think I

I think back now given similar have financial are, strength where the that to be time think don't we obviously struggling. should competitors is whole we I pulling on where, a you, our SG&A. bunch but

things remarks, quarter-to-quarter that We give want spending same absolutely the for basis, decision we over us long-term. think to right everybody at business Absolutely. my the will business I on as considerably future. opening make sure build And now? Absolutely. also operate a long-term? right talked it EPS we're we the company this us to is some Does is, for headwind that longer help back. to the I have needs for there continuing for the time, we're don't term. we pulled success that what in the But the on operate remember it a But And are

build think, view. business I term muscle. the really, questions, again, long-term are which find walk And fine a with thoughts line. We on We your this view to So to want continue efficiencies, quarter-to-quarter continue continue we do. will we're continue out going just my manage to the a we'll to near to to to want versus

messaging, your amount it provided maybe improve with board maybe I pressure, obviously, term not which with the you And the met? to are there under and it, can or to do guidance just results surprise on significant the philosophy, something enough long mean, stocks reduce the have shareholders feels the but you follow to of is like up, are

you really, control. surprise are macro point factors from can't to that the is things I those think coming Enrique's that we

look got you and share, is little look it for Even look what market ever. years, intact more I XX, some is we a you historically XX, last online in back, market shares. short-term. rolling in in you if at we've focus plus back. little more. capabilities, than near-term, mean, And share messaging at we've step then you we've really share, in the pain need our what but up few short-term. going, look Yes, which back seen still long-term gains. here control We've year, at at we is when the FY time out you XX, if And like following we you market when guess think gave I into we a if gained started to success before we on some a our can how is the but COVID, the obviously, more. even think so seen, But what proxy pain we then back we've for in I market the we quickly are we got market a got that the Unfortunately, lost in share example, saw bit went

a in we're Now period. recessionary

going again, So of long-term noisy, a intact. to a I long but everybody little the can what we're after keep yes, of the is think And just short-term be needs perspective message still term. kind

Great. much. so Thanks

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

incremental for for more you you Just some bit wanted give credit X.X X to on us ask a if is the mentioned side to little John, of could color Tier-X. had kind normal

be, of follow rates, up would by the incremental of for be expectations tier around Tier-X? at possible, loss all, and ratio you way were very give what So kind equivalent delinquency And then trends can by be roll if Tier-X and color would some helpful?

range. on. the The X% our question. to again, Yes. for X.X% Sure. targeted Right is, Thanks

substantially we've business I put initially, Tier-X within higher X% been done since And was of loss our you it of great think in we've know, the I X%. staying we've it's We've XX% there. I rates, quoted, think losses a it's often job for think obviously, XXXX, it's historically when receivables our now X%. basically,

seeing loss to choose somewhere in there, So on a is you're XXx, XX-fold the play in depends difference spectrum. there's obviously a between rate there maybe Tier-X. Tier-X where we wide

factors the gives color that delinquencies overall on portfolio. us to buckets, provisioning, different how macro losses, some whatever, our and losses, around impacting hopefully, So expect and

can the the think in no deals, in that the rise it’s clear very ABS historically, on certainly industry, delinquencies consumer. that I pressure mentioned doubt, you there's there's we've see are within our think

a I done strong days job past due, find while go solutions, status. think them charge that really, that go a really consumer. with might XX helping at such into it working off doesn't they we've And XX,

fight to our that continue So we with consumers. and fight work good

Bill consumers helping job mentioned, a expecting up, think are our obviously, and And accordingly of payments I responsible them to we've in monthly nice through As lending of ultimately, our all being done we this. reserve it.

that And a answers in and watch a good So environment we're we'll position standpoint, the questions. I think the hopefully your consumer from carefully. reserve credit very

what delinquency can you in a contrast the you're seeing and happening experience, current vis-à-vis, just was XX And maybe bit little XX?

spectrum historically I an is, Sure. XX what the and credit across you're entire think Yes, absolutely you would substantially. say, I saw impact seeing XX,

into pressure is, the think I seeing the consumer, even lower what maybe more a Tier-X lower on we've of identified we're maybe side little a our Tier-X credit Tier-X, space. the

I definitely see that consumer, that it credit XX, is again, carefully. going So not that that, XX. loss. And labor all saw pressure now watch seeing and Again, And impact back see can different. for think pressure manifesting environment. We the absolutely delinquency think an really but we're for the of that what is agree across a you of the into we're side hint we'll income into with that's But versus spectrum then I more worker. loss challenge very I the And itself a it to happens. again, the different in

So But seen. those fundamental see I think the translates. it are where we'll differences we've

you. Thank

Please our We'll from Bottiglieri go next question go with BNP. take Chris ahead.

is open. line Your

of I gross profit that use levels It gross like want profit level, target path to are service on gross. control. but and dependent sounds some about volumes out your it's some your the to your of like SG&A talk

the I down pretty say significant step to think took improvement big quarter. it's fair you've wholesalers probably there. this driven But a

could that like, on from? guess profit think Is the I any point there my gross wholesale coming you where evidently. I read see do is So reason

back. I We're expense is two-piece we're the going gross to equation. a side, business going to point to it We're Enrique's the come to think it to the need profit, come back. earlier, need controlling

both retail. good So, wholesale think wholesale Actually, I profit. some GPUs and strong. Obviously, think retail made I improvements we gross are there

about the back. volume it's some getting Now of

we that carry probably Like a things that It'd grow I can did think, But some that it's that's quarter bit wholesale, little that's we going said, -- going some I weight. be. to more. slowed I'm think this where down a dependent be that'll hopeful I to little bit.

Got you.

more And question ton, Financing And on jumped imagine raise to quicker well. as the quickly, in Then, And penetration rate Okay, and bit, like a a large despite too, of hike. jumped Bring you've Own Your been a CAF Tier-X Tier-X like terms declined. pretty rates.

You're onto also adding heard correctly. new if I Tier-X, that Tier-X network, partners the

tightening or sounds at the the X. drive there like new added? your credit talk an instant Will that penetration So you're it and appraisal Tier-X tool about margin. Tier-X help Does Tier-X, you includes aggregate the of can seeing you've partners that It more.

Just there any helpful? thoughts would be

Yes.

sequentially them take me here. Let

we -- with penetration. raising points we're competing and basis credit unions something that the at actually end. done that just to prepared So captured really lag the higher about. market. year-over-year, a XXX job remarks, still But penetration, in Again, you're overall the we've sequentially, I we're think fantastic basis at think remark going rates XX points CAF one us with pleased We in generally, tandem penetration I mentioned raising up know yes, rates, is that's

that. with So we're pleased

the down. Tier-X last see, You And that's your penetration penetration from year. down three

of I think two that's things. a combination

challenge the absolutely see Bill there, You consumer as mentioned.

see still But there. affordability issue an yes, absolutely. You

lenders but mentioned, very a got collectively figure credit for being they we them, to do a back in of the out run. need they're the work -- need what's independently think benefit and best operate they good to to long what number of And pull our are together where As platform, to. I offer you've provides there's to lenders, going

-- I instant mentioned think pullback part there. pre-quarter definitely our see your I last Chris, think So but tool. not of that's you tool, appraisal you question,

there? best-in-class board. consumer that's we into know process. so I quality questions? better tool, think credit lenders Yes. our that seeing missed? there. of add to I But does that lenders, your that on penetration Again, the nimbleness albeit on all from driving a have necessarily that mentioned the does a else they're to continuing clarify requires don't Just a ton tool What We engagement tool. that it's to bring story, Are answer application we're we it lot coming a to

Nothing.

my correcting misspoken. my for insert. Yes, And why that's was laundry the list. thanks that got You

said began you. financing the Sorry, penetration Thank I tool.

We'll Needham. take Chris our with Pierce go next question from Please ahead.

kind just to wanted I color around. of get some

negative means it do industry you or back where to is about units normal, talked preference aggressively guys’ competitors acting is kind but price versus opposite. the You because lower of in to it positive short-term of moving fresher Is of to think a going inventory to that the want kind kind your about that's know because have the they're that just and to to past. that's going trended how unit how numbers and

You've talked this about before? seeing

Chris. Yes,

that you're I think been moving any there's and steep. is, there what depreciation aren't has competitors saying out -- just very weren't inventory

trying you're the why wanted moved. did but to, see we reason expensive up That's some that the the of to units down. move seen a again, making it's need trying they're what lot is you inventory. this and doing to we they're what the did because past, It's in the over get both so price. prices you're And to we sustainable long-term, not of that cases, elasticity. not money And in We've just the

So just better did price tests that it, kind up profitability decision us standpoint. which we to did we confidence of prices made down, the a from again, also understand gives right just we

Okay. Thank you.

Please question from Whiston final go ahead. David our with We'll Morningstar. take

had you off you then, how some to rather And can health, the flow sheet cash have inventory cash sell? with adequate And generation off yet Do have cash free great to want balance to would I still some from revolver of reduce benefit like you more loan also really curious, get that get inventory to that I'm pay June an much reduction. paid that term on that you flow? inventory hand? just longer XX you looks flow your free It quarter you, free guess, a cash wanting vehicle

Yes.

effective our overall having actually this used I a isn't increased environment, cash the hand decreased inventory. absolutely kind about. We some we like I year-over-year, think on think bad management of we in And inventory thing. really sellable Bill of inventory talked but

teams the some by that's through our work to impressive work So WIP.

our take news. We the that to good just you that no not so think, cash, thing time, to sit be of environment, really quarter it to, in some revolver, same to And I bad cash David would on was as basically well. of revolver. down this mentioned, the pay kind down that have used it's And at as zero, cash tap a this on some

of I ultimately environment. flexibility strong to proud we in And a the the of it. others think So we that industry. position have strength. us that a balance And, puts in of it We're us gives have through And kind sheet. have this don't manage flexibility really

be And three mid-term less short months the to the But we ago? maybe somewhat mean you I about were to you related, to buyback are interpret do optimistic this guys understand than wanting pause. prudent. should

carefully this run prepared balance to remarks, of comes as to consideration just manage we funds a having key organization. we that kind in flexibility that's goes terms make environment. CAF. at large ratios important net my And to something have it it's we that mentioned, to a Well, have into when and sure ultimate We do cap in a very in finance do our conservative I to of And leverage look managing it. sheet

committed until repurchase think That will kind program, business just I we as outlook buyback. time improves, when of I improves, the share the we'll macro and into being and said, fully the the appropriate back to that So at backdrop get remain we improve, and improves. share it pause things importantly, the expect the

get uncertainty. our are David, Yes, have changed about about It's on, views to more the worse. that's going things just

hear you. pause. Hopefully, I of Yes, too long it's not a

I here. think attractive your stock is very

call Thank you. time. any back to this We for I'll further don't any over closing at questions Bill hand have remarks. the

and questions. Thank Ashley. listen, you, everyone for thanks, joining for today your call the Well,

Thank again, environment this As everything thank you. the next associates think, commitment the stronger wish today, season our their and each to I I want talking to even I holiday positioned an well and to doing want we customer believe communities for to look times we emerge again you a I will forward navigate we're do company. and quarter. happy all said to the and in environment. multiple they're other And and we

gentlemen, you. quarter CarMax and concludes Ladies fiscal call. conference that XXXX year release third Thank earnings

now may disconnect. You