CarMax (KMX) 11 Apr 232023 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Fourth 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 for Senior CarMax joining President and earnings morning. Vice CEO; Enrique Thank President, XXXX President and Executive Nash, Good here quarter Vice our Bill I'm conference you, fourth Operations. call. Jon and Auto with our CFO; Finance Mayor-Mora, our Corless. fiscal today you Daniels, our

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

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

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

auto pressured are challenges thanks inflation, lending for interest by in rates, and consumer well everyone, documented. Great. Thank the us. joining and confidence. affordability low you, The prolonged David. broad standards tightening climbing With morning, current industry used Good

strongest manage our our culture build our to this leverage experience to through momentum associates, assets, and our in continuing cycle. are We

both our steps the the taken are many cannot control, have we support we there to long While run. that business deliberate near-term macro factors and

used reconditioning reduced management wholesale retail We while We to quarter, aligned acquisition, continuing unit GPU, delivered raised margin and down inventory while help consumer strong than offset rates SG&A XX% total finally, more vehicle dollars to market with And elasticity. driving increasing our units conditions, year-over-year. saleable while This growing CAF's funds still strategies, of quarter-over-quarter. strong rising sales deliver We offers penetration. CAF’s price we inventory we to while further. adjusted cost GPU through test

wholesale out improve our us are ‘XX, and We enable number of prioritizing and each enabled also area to We rollout experience; cycle our Reflecting growth. steps leaner the positioning a and our effective, achieved nationwide customers. we retail more self-progression of will shopping efficiency milestones customers; to drive model. our enhanced of come associates all completed based experiences fiscal diversified for for for and our of online product. finance believe in on prequalification this these of initiatives We key business future us shopping while

these business All most experience later the talk in growth in I'll the these position about centric call. customer further industry. our more accomplishments of the for as

And now ‘XX. quarter the results fourth FY into for of our

Average unit retail diversified sales and total X% per approximately selling to compared unit $X,XXX business, retail lower used year-over-year. and unit down prices. Our business were declined year, driven declined comps last down wholesale model of or prices sales $X.X In delivered billion, and XX.X% by XX%, volume our total XX.X%.

the competitive responses mentioned In impacted to by our macro current addition to previously, continued I factors performance to environment. transitory we believed be the

the share gains the calendar first-half losses year market were data XXXX. offset of the indicated vehicles that we of the share. year Our our X% prioritize market share market to achieved data year title profitability shows second-half over during nationwide share near-term as remained we at share by of old that zero XX-year during External the for

the market and that we those improved. the have down share up We tests. profitable cycles. and recovered share we on cases, context, to In be economic heights achieving market lost the remain then prior share running focused can to sustained continued extensive price gains conditions continue new market for during as plan For to grow long-term elasticity

quarter was The quarter results right $XX Despite price, $X,XXX, the XX.X% the vehicles to recent holding ability quarter down year, boughts’ unit value retail year-over-year, decline manage unit demonstrating our dealers per from test used the margins as was but this effectively fourth our last improved most gross and sequentially. selling and from decrease third total during during our profit in the from average fourth versus quarter XX.X% the margin sales play. improved were appropriately that consumers in inventory. Wholesale per confirmed profitability year's unit up

consistent selling at average XX% the beginning from $XX.XX, unit per appreciation with quarter. Margin particularly fourth appreciation recent year's some saw end Wholesale approximately demand, in profit the benefited Wholesale that we price mentioned of $X,XXX is unit was per declined dealer last the or price I from and just year-over-year, quarter. strong gross which January.

dealers XXX,XXX last XX% down record, bought third year's from from improvement the We approximately this year's XX% vehicles from during during consumers but quarter. a decline the and quarter, sequential

buyers from appraisal in XXX,XXX little online the coming X% consumers XX% approximately more those above remained up our We than through self-sufficiency during XX,XXX last experience. vehicles half cars year. of quarter sourced quarter. dealers, the instant through a from Our We with purchased approximately

online sales our fourth sales to virtual down revenue were and to quarter the up to resuming from resulting simulcast in-person Nearly all options during dealer unit in small sales which test ‘XX. was this and Total attendance for online a unit of remain quarter interest prior in slightly We approximately regard XX% last began transactions approximately will test prior total XX% online gauge of XX%, considered attendance XX% online, retail are down metrics, XX% year. represents year. quarter from auction In from transactions. XX% during of fourth the the from in wholesale auctions FY sales approximately our revenue quarter, retail year, live wholesale were in continue omni of

million $XXX last year. of provision down a income during provide delivered from detail contribution period $XXX CAF or more on few and million, loss moments. loan same Finance CAF Auto the Jon will in the financing, customer CarMax

the I'd At call to who Enrique, performance. to like this Enrique? more fourth point, financial turn over quarter our will on provide information

Thanks, Bill morning, and good everyone.

EPS, what quarter and continued on is third our sequential profit metrics, a SG&A. improvement gross the managing Our key focus control drove in across including financial from

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

were profit wholesale in Used unit per EPP Other quarter by down was driven a fourth protection or unit plan $XX last flat margins decrease year-over-year. year's gross and margins extended XX% This decline primarily increased million, from last was from revenues. year's fourth quarter.

return by $XX In last adjustment. addition $XX sales, stronger to million unit quarter. our year-over-year This partially a offset the decreased quarter impact was fourth from year's of lower in partners in reserve and margins this favorable million to revenues profit year's retail from sharing

approximately at year-over-year flat XX%. was Penetration

generating flat year-over-year for a was Tier offset flat sequential which X and Third-party fourth were Tier Service fourth by year's X over finance also fee. volume quarter improvement relatively last with we pay year's last quarter, fees over in lower fee reflecting relatively lower volume performance.

This the our the and compared have of teams. in deleverage ‘XX be key coverage to year. place maintained this our technician efficiency will have FY levels cost given goals nature leverage, full governed and service. We of expectation The staffing supports ‘XX, to for performance improvement sales improved extent performance put in our also by FY

dollars, third percent SG&A sequentially quarter. the year's profit higher factors: gross quarter. over reduced and front, were expenses SG&A first, $XXX $XX the the X% to last mainly last year, total down quarter fourth change by to million, we this from quarter from SG&A was as due profit a the fourth to was advertising in On The XX% due X% compared primarily year's for of following quarter in than the gross year down the last prior dollars million. year's decrease

million benefits $XX Second, in total decreased compensation an share increase compensation. million, based $XX included which and

$XX quarter. latter, down was million benefits Excluding and the to $XX due which was a in compensation million of the bonus accrual corporate lower

comparison $X by to favorability increased year. was cost primarily year's This partially overhead in year-over-year quarters. of investments last associated incurred technology with due platforms decisions The was other year-over-year prior our costs a in offset staffing a and growth strategic ramp million. significant of made in Third, this increase in smaller other the in variety favorable initiatives a fourth in and by result quarter

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

remains dollar spend and advertising a quarter our full-year for unit on on our on While unit last per and with expense lower full-year investment the basis was year's aligned the the quarter, per level. year-over-year basis

to investments For omnichannel fiscal expect our with and digital the below spend growth ‘XX, we will the lever in point, our needs. SG&A. our to that and we that well other largely at per ‘XX, to unit SG&A, FY meet require spend In curve varying of Accordingly, levels have quarter-to-quarter. maintaining phases near-term heavy transformation. our resources unit to overall a on similar place from single-digit the we've to guided this in ‘XX during at believe expense is expectation investment omni per low our we We total, FY level we anticipate omnichannel investment gross profit bend growth the

growth flow to we through a gross As profit deliver profitability. result, expect of stronger to

the from the that benefit we benefit in QX than in cost I we fourth may of half over for from the that to X% of decrease rolling in the particularly advertising we the stems relative accrual year the more be bonus actions corporate dynamic While expect FY half QX. will magnitude quarter management the a ‘XX, took of back period a comparable in earlier. front year-over-year muted, declines QX and the noted experienced This

providing ratio returning initial FY a will range our this expect this also over over pathway ‘XX, bending back healthier support leverage to year. that will to not demand. of SG&A will range While mid-XX% carry goal require guidance This this time. beyond Hitting SG&A specific we beyond the with consumer the lower the growth curve of

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

continue recent Given we and to ongoing structure. performance to take uncertainty, the conservative approach a market capital our

below our we a markets capital the net that for are adjusted XX% XX% managing our was allows as CarMax the slightly net efficiently CAF maintain to both leverage our debt access capital While flexibility to ratio targeted to to range, us whole. and

pause to share continue In keeping buybacks. we our the of with school maintaining flexibility,

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

anticipate capital spend For FY long-term the level. and expenditures, in production similar is FY growth in related investments being we approximately options. by ‘XX, primarily This to land $XXX to and for out driven facilities of capacity build ‘XX our million

store a more at metro as pace the is contributing as metro lower of City first in two location Atlanta albeit slowed open development FY have New as our in production market, new ‘XX. we CapEx, the the off-site to FY to well market. level plan openings including New stores ‘XX, in York also five we locations In

to advantage network Our logistics CarMax. be footprint and continues for nationwide a competitive extensive

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

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

and everyone. Enrique, good Thanks, morning,

in CarMax the XX.X% quarter QX. resulting net XX% with billion, in fourth line Auto of the last from the Finance originated up seen in of same penetration quarter, and $X.X payoffs, three-day year During

with finance to contract charged last finance share points average the XXX at were was contracts weighted increase rates year-over-year maintaining of pleased from sequentially and QX of We up basis a XXX the ability basis. new The year. same within consumer rate share substantially to and contracts quarter, XX.X% while from on our points consistent customers basis a period our growing

adjustments. year year-over-year penetration was Tier each led typical observe in X credit X continued to lower last levels. rising was offers these our at to lending providing to quarter strong as long-term flat did and partners to the X.X%, likely seasonal delinquencies in while our interest than XX.X% both tightening penetration other rates customers, Tier complement we

X Of adjusted note, environment, to the its standards XX% of of to reaction current the CAF Tier targeted towards reducing end including underwriting in QX also its from has percentage volume X%.

as million quarter a for interest by from loss $XX million well in was interest decrease million, down as last growth increase increase fee $XXX $XX period and driven by partially CAF income in million The $XXX income. is the a primarily the in loan million in provision, same year-over-year expense, offset year. $XX

down from in receivables this X.X% decreased year-over-year the the interest year. $XXX the jumps driven XXX last approximately past seen from interest same $XX the million, Within absorbed mostly total quarter rate basis to corresponding points to margin the basis down of year's points quarter, XXX during near quarter, peak first significant margin and by rate The year. million XX-year is

last of receivables. receivables. ending have which In this The QX level in This loan the the over results pricing and in response, should X.XX% compared reserve off year $XXX X.XX% provision a million reduction XXXX. reserve in was million fourth an to balance is last margin of of rate portfolio to numerous months, loss million ending fiscal made quarter in slow of $XX quarter, in moves $XXX the or of we that to XX cause allow including

basis in receivable well ratio the with as adjustment environment unfavorable reserved X the and Tier continued Tier within sequential to the performance in the This volume. cash point X uncertain X along macro portfolio, as reflects increase

to portfolio loss credit we we Tier future for net are range within core reserved target and X to for and believe appropriately continue the losses. We X.X% cumulative X% operate our

or in advancements and our nationally available finance-based best-in-class to product, we Regarding improve FBS. further our credit shopping continue technology, pre-qualification stabilize upon

an decisions vehicle co-applicant, During another within are applicant five full yet the we our the a total inventory the well-established bringing platform, of and fourth FBS now fully the for pull. soft quarter, large of partners credit leveraging lenders providing to that lending on deployed

we're are leveraging store, auto truly makes customers the in million used own X credit distinct what our offers each distinct in to their calculate every Note over lot. decisions and credit is product minute from ability they industry the this finance at digitally walking to available to models make unique wherever multiple home, then these shopping sources,

already quarter, platform as the first upcoming work to well additional add this During hope is we to partners finance underway.

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

Thank Jon Enrique. and you,

of mentioned key simpler of on I challenges making the in customers. the to omnichannel made associates even proud start our that during and achieved for the more As fiscal the as experience most and synthetic journey the experience at focusing by the I'm progress deliver our seamless ‘XX, our customer year call, on faster, the we've industry. of number we of milestones we navigated a

diversified online have lasting self-progression Some highlights a from this year are of our model that for will all capabilities enabled retail our impact for we across business customers.

models our evolve we drive stores. in we're experience, As omnichannel also updating efficiency operating to our our gains

year, appraisal and better the launched for During functionality self-checking we enhanced customers e-sign enable self-progression. also capabilities to

Our competitive nationwide fiscal unparalleled e-commerce is our footprint with advantage. combined a engine

available deliver key experience to we the is and in digital provide across us. to transactions ability total a both Our in physical addressable market integration the differentiator

similar that to how most to out for a details shopping preview need from vehicle we mobile displays relevant that rolled our wholesale, our retail is experience inventory, dealers dealers inventory. they a shop creating For modernized friendly the page wholesale information consumers

approximately dealers markets, to cars. product which buyer us expanded position our also for of appraisal We a XX leading our to build digital enable on as MaxOffer,

service, We for utilize new sales profitable our wholesale provides team up admin dealers which volume. sign to incremental the

For credit nationwide prequalification rollout CAFs, our we in of shopping, product. completed finance-based the multi-lender

they of As used our from Jon process. the XX% entire majority Over customers gives flexibility decisions customers our as a of digitally vehicle this begin inventory. receive tool credit quick this to mentioned, lenders online across the credit have the

this the on a more In upcoming deployed new system years. leveraging savings leaner ago to little on out with opportunities many the equally that and team loan coming receivable we more addition a expected year deliver effective. The is over is CAF in focused of cycle already

that create Looking last to customers. build we ‘XX, operating efficiencies prioritize year's and will initiatives associates experiences on projects and fiscal unlock our ahead and better for

position that are We the take market us to confident the capture will improves. actions the upside better when we

customers even to between include: and are steps Some we and easier to assisted own examples transaction automation data their go for back science, make for it to AI self-progression. and retail, health and complete on forth key leveraging

transaction their We customers and better digital and that insight building remaining tools give steps. key journey are their support into across steps will also them

These express as to at pickup. their and as customers win-win stores our complete it drive opt of make ability transaction delivery easier XX online minutes sales to to little tools This option offers customers will for in one the and a represents in opportunity.

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

vehicle services. modernized our leverage will new we offer to wholesale, For page detail

AI enhanced and reports, bidding proxy include capabilities. Some examples conditional

We will us we scale all tools experience. offer our operational These as providing incremental a volume, drive continue all better dealers. by to enable while also improve our rolling wholesale efficiencies instant will participating MaxOffer to experience to out

we're stores consumers can For working enjoy into product to more and that full experience. integrate shopping so the CAF, customer experience our finance-based seamlessly, all our centers

As to the add we which available platform, to continue expand breadth to will and additional also Jon offers the our mentioned, of will customers. depth pursue opportunities lenders to

Logistics a experiences. these Edmonds improving examples, is focused While and good organization few our to entire on are efficiencies from

confident in business. are our of We diversified the future

continue will relative financial our annually. targets to performance to We our evaluate long-term

As fiscal of selling $XX combined we X% in by retail in zero million start ‘XX, ‘XX affirming and billion and through X.X by our between to ’XX, revenue that fiscal of updated and million between nationwide generating more we vehicles wholesale April ‘XX, we growing are the to our fiscal billion XX-year ‘XX. market $XX old by calendar targets share end than channels X and vehicles the

recognition, its of do. work is our all are week, of CarMax in It's to and XXX to associates' incredibly Best Last Fortune to a we year differentiator our I Magazine want XXth row. our our commitments thank a the customers every challenging and communities the our to each other, strongest success. key the supporting faced day. congratulate named I one due They for Companies particularly proud as for, this for associates they our am in and of Work year.

XX-year many I'm us we've each time. challenging This the to we that drive navigated environment no is will and are the actions improves. nearly our history, growth enable environments confident and Over different emerged stronger have as market taking robust

to be that, Corless? With your we'll happy questions. take

At questions. line first open from Healy And question John floor of Northcoast Research. with [Operator the we Instructions] this for the comes time, Absolutely. will your

you bit hoping some talk so? we of of start where say is to to might that's late, could going kind kind what your wanted dynamics ‘XX? well thoughts rate and up next metrics to off. just Enrique on as the a there well can fiscal moving us, maybe business think kind on your also about to losses of a where coupon just funds of little that's about But cost Just lag? out as a as maybe how of there or those hit kind of some of consumer? the for as moving catch crosscurrents -- key kind the the and maybe Guys, look start maybe CAF of maybe there? quarter the just Maybe Is recoveries on as period? And maybe of the we

I'll Then turn the talk Thanks and Jon for about of kind the about question, I'll that. Yes. it over of think to business. the to cost John. funds address how to

the relative down of, come that and we spreads that what open, so and you forward. signed kind believe cost the to of is a is funds dependent we expect that to down, we've would market be in deal to I'd in tell is you the healthy what that deal to, XXXX, the securitization continue constructive, market, benchmarks right? currently funds that, our continue carry on, where ended of which perspective, first seen, we're came from So largely cost the do And

the us ago market couple better from I we many, again, to in be, was the relative we deals would we'd like market in seen you expect what but expect of had there. able to the to cost they than deal. of be be where timing, Per in higher a a trended obviously our years. to execute here But was really down would near-term. the to compressed And Still the think and of couple deals ago. one of certainly had It's highest come many, funds them than where many

metrics. jump I'll on the other And Sure. in

cost the just originations time, the on Just there we obviously a to kind we other that in done funds, cited of the on great through our year. the deal APR, were is piggyback we've job in Last raising XX.X% of as rates we of this were that's at well. component quarter, the X.XX%,

can imagine drive well. you through into deals So to as that future

us. So if settles in higher, that benefit our are APRs spread should and

With losses in that that mention remarks, of mentioned we've to prepared macro by and delinquencies, again, in taken our reserve regard portfolio million, of up driven as and unfavorability Did $XXX to that's is some the X.XX% receivables. the environment. the

is higher feeling a of think consumer I of the business. in the industry us existing for sense delinquency entire book the in

challenging some got consumers. You've higher making for inflation definitely got more you've -- it

are purchasing payment. originations therefore, at newer Our higher a selling higher there's price, average a

So work higher having through payment used people be to. auto are might than a to having normally they

well. watching of to and very definitely be a we've consumer things into the we're or but job delinquencies So and hasn't we these all carefully. with to a that in trended done continue rise think reserved to way its accordingly serve losses able fully going nice we're for it, We've factors

in basis, did it something thing the have and on we've I'll done we've -- tightened at recession, that between. did mention -- of well as did is tightened many prepared our other pandemic. that regular we have outside we done in the add The we it times tightened and of the start their as We've great But many platform, to the as in it we lenders a remarks on a in well. industry

little it that make But to done. again, watch will our more to have this a as to carefully. volume pick partners tightening, we've we our So with up happy consumer conservative just tightened be

and We to to we say looking think be, that consumer to watch we'll reserved X% are and delinquencies in where well range hard going So X.X% losses have. we but carefully. always the we're we're out as think

Thank you. Great.

Michael Montani with next ISI. question And Evercore comes from the

line is Your open.

for the question. taking Thanks Great.

wholesale stronger were on ask retail Those both, we were Just to I wanted and than anticipating. GPUs. think,

could unprecedented, I on update the in If in GPU well how some think at for market, those competitively wholesale. at provide what kind this, I And as guess seeing volatility discipline two is just we're seeing as of, that sustainable you then pretty segments? the retail you're strong both pricing

Good morning, in and on the did Sure. come Michael. Yes, GPU, wholesale retail obviously, stronger. they

the I think usually bit trail appreciation saw or benefited in generally down. which wholesale we we latter the part little a happens, quarter, that comes some when of the whether it goes up

think So of there. I that added little favorability bit a

I forward would you about historically the wholesale, Difficulty] more of [Technical $X,XXX. go in think to we've as line probably thinking where I $XXX been

we side money. made On and price less retail elasticity few but we more could would testing have we that have expansive again, cars, the determined actually a sold did

They a held older which of mix a So third pretty that of similar we higher that's bit have to of GPUs, to and the were up continue vehicles, more retail quarter. margin. the carry we little they're year-over-year the a function more fact

environment the at of appreciation in retail we the did of saw quarter, the the part. latter bit in little I a totality, just at think we depreciation pricing beginning some see

a see about some back recent I little as come go we've bit I they would a forward. calendar seen more back though the depreciation end before, ago, appreciation, just year, prices to zero and cars year, start the go of year had we this about in $X,XXX would the to that's they expect appreciated the not to even By old year. five-year expect, you If probably $X,XXX, year completed this

little that relief the sales to bit So price. should overall a on continue retail give of

you. Thank

Sure.

of And the from next question the with Craig Kennison line comes Baird.

line is open. Your

some Hey, good question. [Technical morning and thank We're my that you hearing Difficulty] taking for banks

lost we think Craig. I have Corless, may

line is your Craig, open.

hear me? Yes, morning. Can you good

Go Yes, Craig. we can hear ahead. you,

we've you so an wondering for Yes, inventory, banks this floor heard you. sourcing since you inventory competitors. your some that credit advantage in plan expect back on self-fund pulling environment? of would Thank your are some I'm

Yes.

on environment. as hard you mean, an it's I our to. had sourcing out going say, so to I because I high, It's as self-sufficiency would haven't auction not we we like in lanes issue just and really is think used competing is tell the much we're

seeing and seen. to guess financing are I to But lot. not on to go to be that inventory is get theoretically remains the to impact source cause funding. it think prices they down their I keep it competitors be remains they able what where on if the could

Thank you.

Yes.

The JPMorgan. Gupta next comes of from with line question the Rajat

is open. line Your

Thanks question. for taking Great. the

would Just just we to the make have occupancy but SG&A one new despite XX%, there within missing stores question it one-timers opening, sequentially we're quarter-over-quarter and a on want given sure, car, just store the was there? We had opened. that. be like Maybe new to it I Is up a follow-up. And not are roughly five missing have expected on lower by any quick I there? then something

of spend vary. quarter-to-quarter here. that there was I Yes, timing One from anything, thanks, Great. of points things will Rajat. Yes, don't think missing some we’re I thing couple a is

So previous some the we quarter favorability over this had quarter. timing

they're pullback lot volumes of we the did as a capacity And accommodate where given are will volumes we move volumes volumes. to where and in bit have off off-site terms given addition, of short-term we a flex, in our a our at, at, rent in pullback In had up capacity. our

occupancy a lower see through you'll reflected that rent. So in

tell So those the items within are two bigger you the I'd quarter.

assuming Understood. purposes Do kind old used the of year. That's the And car space this to you are helpful. plan? level what Just ad that you curious in budgeting spend with that within grow grow kind your you're expect market to budgeting zero especially terms in the the on for -- for SG&A year taking are expect you do just you XX-year industry, of like to view the of and share guiding recovery of What to? this of year? shape

a the down for COGS thanks has think but we're and question. bit I Rajat, being the market economists, I used there's overall for think some little Yes, publications year. example certainly this not like Look,

it in also part you half. the I front mean, in the a softer the softer better have back I bit part, in think front little

market think way that the I the our share, relates And as profitable market it we'd spoke we to as a on gaining and to be market market. and to whether get a share. well, We as the into want but would that market share it quarter to of gain think about to see or transitory market good in bad I we seen. is turn this kind market share. pressures is remains always the goal expect that to given just then back previous continue experiences, that's we But

you. Thank Understood.

Sure.

question next the Nagel Brian Our of from comes Oppenheimer. with line

line Your is open.

Hi, morning. good

Good morning.

to want ask. I question a So

leverage mean, you I like So are kind it growth. lower expenses at of sounds you're a comments, for going now rates to point. telegraphing lower of leverage this year

So have again, going make order I'm I what assessment. pull it cyclical in able guess that to what for And what to levers happen? trough eventually you we is question leverage that kind been should to you clarification, them And assume the to back were allow -- to that this mean, the had your point as sure comments in of than will then business more I remain strengthens changed? correct of skewed then, out were I previously?

longer brick We quite of it's some year years, the what every I companies we other to rate this if running pure few five you gone we of are -- this that But to I'll be back hasn't more have at of take require to forward. with everyone. a many of I'm Thanks past between while giving year, expect hadn't companies going there's message lever example my we going mortar the forth question. the as you and considered for have is from that in guidance, of and omnichannel, we an physical said, we're knew in that, thoughts about investments really Yes, where will we doing update been and going making we there hey, send exactly Enrique were more okay, prior a because properties. that to sure you're give and past any carryover it's a call digital term because purchase lower the plus and first honestly, day think right, And the and what well. say, thoughts investments. than lot some this year been

house, which old experienced an renovating unfortunately to with this haven't too. equate almost I that so And

down And know what our rocks And there. this, to We've You into don't there. rock other get point the the of would know feel two is surprise we've we've what to time the until resources the I underneath were there's turnover related that in there house old every with built got out some a time We think about pull capabilities. we it. new as the good experience, wall of gotten it. you it every base really you a Well, organization. omnichannel product you don't

enhance and it's shift and to then Now some things, we about people different on finish as we'll things. work enhancing,

resources we feel So the that have point. we about good at this

And I'll let add Enrique any other…

transformation. in and Yes, phase a omni for prepared speaking we a (ph), for for heavy experiences efficiencies, just resources point. said We and of that we we're have remarks, our really build in are our around associates, on little passed believe on our as really I enhancing customers executing strengthening But that appropriately my now enhancing plans bit, the and [Steve] it's to we staffed right? we matter to largely the past believe, investment in that place, focus

do gross lever. we to is now going given, need that what think and growth for to low-single-digit So we're we've that guidance the profit

of think I would would guidance, about And beyond as that while kind in time. carrying of giving and about ‘XX That kind company think of into, I it period our is not that's for are well FY as where maturity we the about as think and a curve I specific that. next how

you. the Thank Alright, guys. I appreciate color.

next comes William Blair. of Zackfia question with Sharon line Our from the

Your line is open.

SG&A. A morning. few things around good Hi,

Just the context want make around I leverage. to sure understand

leverage in the to that's, you make clarify well, the on to you're want cadence or want just using. level think also quarter, I profit? what set metric referring in So to SG&A moderation? well? to of, I gross as referring sales first quantify sure, are to percent of SG&A the a So as or important year-over-year decline kind are moderation you sequential to

a ad per year-over-year. out period. behind the it’s I thought that people sounds as spend, are and would the if to surprised ad priced And a which car little we're just then so a I think of sorry wondered multipronged it's remain I'm just And heard on given cars' in, environment just lot consistent It's it of process the correctly that I and spend hear lastly question.

the retracting wonder of, I that spend, level keeping maybe you kind towards about had So same $XXX level more that ad at the historically? versus

if you, the here Sharon, And Yes. Thank see for questions. multiple I can…

I'm Speaker] clarifications of Couple the [Multiple using clarifications,

others, and guess the on leverage profit. the to to first I So you being SG&A as gross asked here, we different right? one, absolutely, defined moved

it's as know, as per better better just also wholesale There's also business. because and transformed business, solely about ourselves retail a a So not we've units, retail sales unit. migrated CAF you not

specifically our take leverage look we on gross and profit. point So holistic a is

think I that So first of point your clarification. was

my first I it important that the in spoke for is notes here I and second The point quarter, had it an to. yes,

fourth year-over-year, SG&A. were the right, down in we in X% -- we So quarter,

So, communicating versus to quarter decrease which what compared because first comes that year's here of year corporate the as ‘XX muted, we'll last may muted notes. be X%. in materially that call that would the upcoming my accrual, compared pretty when the be And first fourth comparables we're first just that's quarter quarter be quarter in -- FY I decrease year-over-year bonus in down more have it in was the that to will is

than what was fourth our was relief much last which it spend quarter, well, this in quarter. our quarter fourth year, this some marketing fourth in As provided higher

challenge a compared presents FY bit compared as ‘XX. that So first of of quarter more as FY to little of a for ’XX, the year-over-year,

very on here. our and have believe per what with We it. we a we investments and spend, intend ago per take journey to we we and up sight properties into ROI made a where unit marketing on few lastly, keeping here marketing a our transformation then our and accretive strong of And currently spend line decision years that's along

Our track is a ROI able generating. What job is and marketing team accretive. being ROI what what does to fantastic not is and generating

understanding per are. is So of we to when it we for and XXX our investments where pretty that currently, of we comes portfolio unit spend appropriate have roughly marketing a think good

is, would thing comments, that the it I only add other Sharon, to And vary and Enrique his said quarter-to-quarter. can in this

quarters, may seeing. there, long-term. of always because I You quarters may be we're and spend that out We're think some some that ROI other the in by brand be dictated have up going to really will you it's in down some important some be

that other -- when we I it's think also about So thing the we acquisition, of here about not advertising, about it’s also think customer just is note vehicle acquisition.

bit So a trying from cars there may consumer. sometimes we little up be more buy to in spend

monitor So again, we'll continue to this.

Thank Okay. you.

Thank you.

comes line Scot with next Your Securities. Truist of from the Ciccarelli question

line is Your open.

driven the factors one of to are at first get? more really than at? the they're bit. when having other or more prices by then Ciccarelli. that afford of you up so Average also kind it close quite other comps, at impact is they causing get Or retail plate decide up in your but decline, on the people look more it Obviously, what it about conversion that is -- specifically still of monthly and it's the reduction payments is are rates a rate? In looking it are decline sales Scot what line words, guys. finish in swing traffic I guys kind being I or is we and can't the a they like meaningfully? Hey, same? those just up Like know double-digit kind guess

to call. Yes, great the back welcome question, Scot, and

you. Thank

you It's working happens not make of the is one find sudden fall of and point funnel. they car top been all payment it's sense at degradation see conversion vehicle biggest a as you really The like, through factors realize, wow, impact the then sales. and a our -- see afford the so of we traffic I top and can is that can funnel, you start which is out, you that the which about talking more affordability where reason of than why you monthly that we've

funnel. top about not it's all conversion, of So necessarily

Yes. just Scot. on And that, to add I'll

what one ahead store so about payment not that, of things one we're monthly FBS many and the out platform shopping right? online mentioned people in we of gate, So excited are Just thing, the that the necessarily. for the

if it quickly. with they able being we're payments multiple so pivot on to providing the a them for payment can X see and relatively lenders And ends them, up all so they being to the higher -- capability vehicles vehicle pick

higher once again the having out think to as down benefit we thing. of will that of really when tool the ASPs price that And payment this shock us. there springboard time we'll in So that over needed come out adjust just

Okay.

is still really It's total close the challenge to just there. So you is the affordability main demand ability or if the will?

what web of people maybe finance just the a shopping car, Maybe what trying afford? they're some because to strength to out of definitely continued also just looking see is to is talk interest to Jon the the can in web the Yes, traffic there. I I And think buy ready they're afford? that I can product just figure traffic not but based

Great. Thank you very much.

Scot. Thanks,

Daniel from Inc. comes question with next Stephens Your Imbro

Your open. line is

morning, Good Yes. Thanks everybody. questions. for my taking

morning. Good

morning. Good

want I on maybe bit a different little way. Enrique, ask to SG&A

You mid-XXs should or headcount Is progress your go you the down thought year Where where more in talked line? before to remarks improves? think hand, you're as lower? about Bill levels that and you forward, CECs seems versus going for like XX% and toward are making attrition at on said for staffing SG&A stay a SG&A lower? that good And goes Because XX% staffing driving I now could ratio about or trying So time? talk that these one compensation just ago the a mentioned where you then Are put the kind today -- few working over stores lean gross quarters we it just means but what prepared should attrition? pieces together, growth in we're I those and long-term of margins? where to it if

that's staffed. where There's healthy largely we largely we've were believe And about down really, we're for SG&A, comes we're working right? to Yes. you approach taken service we're attrition. last to we I'm Compared just about going XX%. that's tell service CECs which through year-over-year, through and you'll what because appropriately that's we but we're the SG&A, speaking, by speaking And, a that there's flows that the our our still in little COGS. that we kind where pockets in past as as way, see through we've overstaffing But department our rightsized we're XX% staffing, in think it a staffed, here. to rightsized probably offset board. bit do corporate to some kind like some staffing right? when overhead flows is of, have as it across stores appropriately down net-net associates and down period And our But large do We right? it just year, a we've is well the through, of,

kind that's of So are. where we

striving get actually to When the it we're mid-XX%. there. comes Yes, to XX% like

that reflective to goal a Our model is to get and flow through stronger to. a to leverage of more striving business get that's we're back a rate

to right, to over need And we we're sales, Now in support expect there help some as that well going to that. get get to also number, time. to

is are in and And we've it's we transformation. done matter resources a now curve our the I of, effective in But think business control omni just would where we down of are pretty our kind and where to reallocating FY maturity it would and the taking environment that tell with internally kind a where get of, and given to of at. the on really job we what work thinking accretive stretch about in. kind be you I in ‘XX, most we terms model ended our of, have. we're a And here SG&A projects I strong think ‘XX of just, volumes there FY operating our that controlling are

as would the has focused Yes. Daniel, we're even on model store to returns, that business with finding -- I within other the changed only is The add thing we And efficiencies. as business really omni. heavily

reduced on CEC, really force, associates. as progress, more more CECs, focused because coming consultants progress at the because can grow we're on is looking our handle floor to sales taken customers have volume can already -- efficiencies so which are why self-progression, don't we're of the reason the the in, this in own, their more So We've more customers comes CECs another sales we've as fast. more

we think field future side, not we've efficient in also become the model, the about the So as get but at we good feel there, operations. got corporate efficiencies which the just trying to only pretty about teams we're more

XX% better it or like if have mid-XXs. admins there be been I margin? reduced guess something I wouldn't to than incremental guess could used raised mid SG&A And I efficient. rather in guys just that working be I you CEC squeeze a to not that the have guess high-XXs, the why sounds than more you making Enrique towards is and the question. another clarifier, that that headcount target from expenses you're have omni the long-term the

fully where to we here, term roughly our first so our our is don't part we'll back as in medium what mid-XXs. said I first we goal where aspirations if know we right, of then longer were initial get to that And the have do Yes. and were. step, to is the step but our to term, to I to get certainly mid-XXs is get back the

is gone that Daniel think also I a part in And keep omni we've didn't systems all software-as-a-service. combination that, we that an cost transformation the to us in-house, built anything organization but systems of of from really that Yes. legacy with mind worked on

not we software-as-a-service And to is expense an that have. used

channel organization omni the digital. and experience software-as-a-service, that built having like teams the things really enable to this have So got that product both we've the out, XX we product store

expense away. that have that We to So isn't going didn't expense. use

be Theoretically, the sale. CECs will with offset the

had you your things digital watch, should to of a like there. the now there we up but are that that because cybersecurity So so much have spend presence step

point, to didn't So let's and back there. to it our use is, XXs we there hey, get to we've got below some work taking to that the headwinds we'll because first then on have Enrique’s why on some continue we goal know things which are things is

and of Great. color the all Appreciate best luck.

Thank you.

Seth with Securities. Wedbush next Your from question comes Basham

is line open. Your

think elasticity other be good or way good whether a performance Thanks a or on the based question you other we year-over-year should XXXX the should then movement one factors? flat the retail Curious lot My about And and is to quarter. that for on forward, GPU, you on price helped know morning. expectations and dynamics be this there or metric? that pretty not market looking fiscal thinking

I cars, again, think morning, Yes, profitability but we I earlier, could some would Good were Yes. have down. overall market been have elasticity because tests as and pricing help, the did doing more sold said we dynamics Seth.

I think So help. that, that did

far range the as Now get going in more probably historically. where I think, we as I'd of forward,

what it you X,XXX think in probably about know, to of, depend to it's going XX,XXX for market be would we'll part the what upcoming from again, we I range X,XXX, good dependent target macro continue roughly think But about in that kind think we've factors. because X,XXX the But think, somewhere see that I factors, test -- you to will the a range. on elasticity. the been, year. of on is if to in

important And unit meet thinking your sales point share there trade-off long-term market a goal aggressive to of a as be GPU between time yours. on you'll just the targets. is about an follow-up price to Is where clearly in Okay. regain market and more share

be? it You truly believe this is transitory? there any Is reason why may not

a question. hasn't that No, always idea it's of we've market changed. Yes. this again, proper and great said And share

You share look the market I if at for flat. know, XXXX relatively

but we call You up, can was it flat. argue it slightly relatively

market of For share year, the good we saw gains. first-half the

start then continue any COVID, started we expect we several back a we flattens double-digit to then ’XX, before, were where we go were share saw period from market they're from December. if lost We we've be to would back most to was to although go of gains. seen for seen the month-over-month, start and fact, I not increase. before I would through this really We out. we've if it where then back. fairly and different circumstances, August, grow to it of flat, gains get declining hit August, In back we've a very We September months to different. I ’XX, call we And time, I this

I December, market data really it the look at decreasing that if so we or through encouraged September have at shares through was far, look August I'm as you month-over-month.

that, still we've below from be my out, kind out. bottomed market I year-over-year, but okay, will share start we but February have hope the data hoping should probably there. back we climb bottomed month-over-month of I'm is think December, to January, don't should yet, that out which means We

you. Thank

Sure.

with comes BNP from Bottiglieri Chris Your next Paribas. question

Your line is open.

omnichannel Hey, guys. there. on Bottiglieri. The wanted Chris a only I bit more to slowing just can you bit stores. It's five a ask you're little and CapEx, is elaborate opening

get up? on a FY -- stepping there? you the reaccelerate this And capital you like upfront a a to some growth to the costs Are store CapEx sense there's long ’XX, to for said then lot you Just is planning sorry, in mentioned why trying question, incurring way call.

understand You what you're auction strategies trying mentioned opening that Are centers to really you that intensive just will And and be recognition in up can these accomplish? more helpful? elaborate investments what and off-site your these help capital stores centers. these to

build auction levels, to really going making to off-site we're to the question. capabilities targets, little out future same sales, auction our about to Chris, at be good to longer is FY that up contributor to spend same hit production, ability what's long right? our to we in thanks roughly over the of off-site be changing ensure meet expect our it that's our feel but to the far, what the bit, our our term year-over-year kind starting over right? also for so was, we a so by ‘XX, able Yes, ‘XX and our the Yes, in as for CapEx it our time, need that largest time. near-term plan the FY And CapEx but We is our

will of first sorry auction the which there. and and land -- It out year of market be country. across So Atlanta in off-site consists buying our production that also metro consists building this the opening production site

think will roughly that we be way is is size right? that past the them. on, And about locations the to spend. our is in is. plus to this some think the in was largest will actually our grow kind stores those. the spent of continue think FY our that from a way CapEx they'll of the to spend, will production roughly kind going our environment it Large locations market, our locations in right? them well about just moving of, we see had how piece largest driving off-site so anticipation forward And size how There be in XX have how production CapEx Still, about acres it acreage, of be production stores perform, ’XX, the for and CapEx as the is But to currently, that of macro to similar how to we the that

early in for We there five that, the ’XX FY we're have on and stores FY goes it bit that year, for even a lowered amount know, some we'll open. that does ‘XX, is planning to quite take get see store this because you at in new a ahead as of but time

Yes. going bunch And no for stores than the leveraging just the what Chris, I a new up opened production would to that production. been the add we're it's production what into we've used build different been the here past. lately, we've because as We doing Well, spend planned stores, we we've of done haven't in capacity, markets. to existing

capacity. to had add we So planned

start difference to do the different only time them advantage. happens the we is in to attached no what close because still It be to really a it's done but not additional in competitive stores, So some that than builds. we've now that's just really will big is proximity And to some of production past. stores, okay be that

up really elaborate wholesale thoughts effective understand on you helpful. maybe get volumes And and to like really there revenue and simulcast to I related, GPUs opening think That's you're means cost? then something the any in It be Just just what there? that strong Yes. for you wholesale. would getting Can just motivation mentioned helpful. seems

just make our cars good want we're the for maximizing We question. sell to well for. maximizing that as Yes. experience the a our it's sure dealers, as price ultimate that No, both

doing it, that do having you just just new both broadcasting bid. physical we're might dealers small a tests to And are up? also show hey, virtually Or sale, get extra there see, but so a --

efforts possible, any make So to to we leave sure unturned. efficient -- being want don't as in [Indiscernible] we're our we

what a as of post think SG&A really about of don't spend, that sale. is like I So more it -- card lot big I would testing we're call a because the a doing

actually you of you cars thing. but auction for the running that bid open have the in So kind folks have to lane through,

to continue your what feel can to But we cars. on learn. again, see going we great looking So always can margins again, what But small point, to little tests, better. the get about we we're to we a put are

for the Appreciate time. you Thank okay. That’s it.

you. Thank

Murphy with line of comes question Bank of from America. next John Your the

open. is line Your

guys. morning, Good

maybe quite release what about compress? margin collateral or pools four, you about running to ‘XX, launch the off I'm that if are bit. a XXXX. spreads spreads quick curious understand X% in ‘XX how where think open spreads. forward this we the press last that, Is of and seems or the going and It just hard you you're sort there years two In said you three something off in in -- those spreads to at up could -- follow-ups not level market Just to think very would as total we about X% in you the and did interest level clarifications. did the just last collateral in look

of these just to kind on in think vehicles a time? Is share might -- sorry, where about you grosses if market, older is segment? in the that there XX-year significant higher old one in to XX-year And over in X% the gains. then the -- room mean, zero I you there have six Bill, gain question, franchise room I'm the market second old to on

take Sure. question. the one. John for the Yes, NIM thanks I'll

first of So peak of out you're previous is I to a -- this QX important most coming in probably XX-year year. off think point

capture funding You Lenders margin able really were lot there. a low benefited costs. to from of

very some I margin. mean, at you those referenced, You of very, strong look deals

come there, up to stay probably us to quarter-over-quarter. been have was to you've love seen we'd and happen while So down never going sequentially it

-- at have we we'll for costs look do you long-term our the to obviously, consumers do able raise out if kind market how been We're ABS funding Enrique our think is with improving. probably we how to there. rates matched I think that and earlier, better of already what rates mentioned

that never door. when that to rates we've walk well consumers do we But sell down can matched you this go, provide consumers. to we level we the our the competitive Ultimately, are that come what look competitive costs remain when look think we sure we know for we're out, versus and our where going what rates stuff need We cars we off peak. off never know fund are in can think out, of going this to through in and and for with we're so future think you And we funding ‘XX. make to able

things X% the collateral the does get match are going future? you're you've normal. to think you somewhat sorry, but That's what mean I'm seen, in back to X% that more spreads to near

what soon? I’m So get that's to going curious you if to just think you're

Sure. Yes.

quarter, APR at absolutely think so X.XX%, funding quarter better ‘XX you're one referenced If that's we're for at ended look going to what you to. we're are I'm be funding that's there, matched where not higher XX.X% I if and again, costs out you the costs see exactly referring just previous we deals, this the look going reasonable, that in to an deal, of rate you subsequent could more I deals at we tell is just those APR

Thank you.

points zero is we miles. prices if XX and back see, them. we're I look vehicles? at remember, look year-over-year, where John, If XX model recondition we're of that probably we a as were like six question position. mean, six, opportunity. always sales is I to higher, newer six So market down. an at think be over sale. even XX,XXX And share the to over vehicles We can start high go those probably I shown think XXs come I you percent great XX. recent obviously to we're the in vehicle acquire have is consumers years we'll Do measure do market quarter, this share to The a XX, we real on our will

go we it's a great lever as So forward.

still I'm you I Wouldn't just your, have I cheaper opportunity, a to that consumers structural go think When like you of, curious, can just younger, mean, long-term sort XX-year right? augment seems structural growth? back mean, Okay. of I just if old as just a opportunity. vehicles, those it huge sell. you mean, the that vehicles that those

think so. it manage whatever the that coming just of our But on more is going certainly on model are to be some put mileage, looking stores again, we're those I for to are into the lower for. so looking our folks we'll later of will Yes, lot, demand. consumer consumer If vehicles,

Okay. Thank you.

Yes. you. Thank

comes Your with Pierce from next question Chris Needham.

open. is line Your

halfway Hey, QX, retail here, sequentially inflated. through could bit came artificially used little comment ASPs you seeing? I QX a what just if curious QX down good They but was morning. you're About know ASPs, was in I on X% and

as wholesale given increases if not much, retail the wholesale for the retail strong through price Just retail you're that's ASPs? of seeing because been flowing quarter-to-date or about and Just what talked a trace, curious that's kind of as spread? wholesale demand

Yes, I we're little now, right selling because in think, quarter. vehicles Chris, it's we the a early, the last sourced

retail So to I are. point ASPs don't your really to up think this impact it's going what

And to those days. quickly appreciation right about the through again, what the ASPs think turning that we cars, of that this our would a I probably we similar now, retail the on seven So much every because wholesale there. -- quarter. depreciation had little inventory they you're saw bit quarter are that in were flows mind for Keep

Okay. Thank you. Perfect.

Yes.

with And comes the Whiston question David next from Morningstar.

line open. Your is

morning. Good Thanks.

you've I noteworthy partners, or to Tier sorry up Jon, lending think I'm because the if talking that, to you for curious CAF from Tier said your gross or seen also partners? you a goal earlier, was partners And ABS you CAF lending related just pullback new XXX to your penetration wanted from lenders. your lending -- Just bps. X Were X is add about and

speaks because from our customers picked down those in typically Tier of space from that X pull Tier other or picks certainly did in benefit your certainly. tier our back X that back, X if just CAF sums Tier is But certainly and the to first just Tier may platform, tends partners to yes, would Tier did partners the to us X Tier pullback can but in I CAF's up up, benefit Tier think and But pull up If competitive X Yes, be we CAF pulls Yes, back the by winning move outright. right? that. Tier penetration X, that, volume see pie who again I pulls to remaining XXX, X see when quality a the back, David. But we Tier get question, Sure. X space picks really X. so partners think

about And and the regard probably a to lender, we to with FBS subsequent was were second my question prepared adding platform. your referring remarks

possible. lender just inventory added to you all add, the as to rich can QX, add in set one minutes long-term means their that consumer with and we again, to which of can offer lenders five, hope further the to on one all using see they pull and models a another in back it getting we in across have the us We provide vehicles helps convert. provide so an operating that the the strengthens there, Every that as we they customer are decisioning them QX soft are and offers

to. what I that's So was referring

are And those [Multiples David, have lenders -- that are we Speakers] that already pulling long-term those we're in

Absolutely, we that into into our space. typical to not very in But a this is add environment. love to of this lenders our I'm rich would that again going plenty come adding have FBS in-store although brand existing we're it’s lender, environments sure new

happen you expect later repossessions that And you. in this or seeing are year? Thank Okay. any do to increase you

question So go Obviously, added then as up, certainly losses lead if to to repossession. in repossessions. industry, seeing will is, as see delinquencies going increased your you're the losses it you're

the is think industry entire I So that. seeing

seeing that to some if are question. We degree, that's your

very Yes. Thank much. you

Yes.

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

questions positioned I forward for thank in care. again named everyone on emerge row. And and do Great. I this look we're and congratulate want place call and to talking your to the everybody for being We you. to navigate a said we joining a to stronger. great Thank with to support. XX-years environment even I earlier, quarter. believe associates Take well all want next the like work

quarter CarMax year conference fiscal Thank earnings you, the ladies XXXX release gentlemen. and That call. concludes fourth

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