CarMax (KMX) 28 Sep 232024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Fiscal Year 2024 CarMax Earnings Release Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Lowenstein, AVP Investor Relations. Please go ahead.

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

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

other and statements, forward-looking update any we to obligation intent projections providing In or them. disclaim

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

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

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

taking same also we well we the our widespread second believe across while the see positioning that we business. over improvement the what our can business past future. largely for steps continued pressures our reflect deliberate control supporting year, to quarterly us Although now are sequential quarter results are the cited we to We

by a costs. units strong evenly retail decreased level SG&A We total similar year-over-year, inventory reduced This to at units year-over-year. acquisition split We and quarter, inventory between reduced first dollars the lower maintained XX% while approximately used sellable quarter, we further delivered GPU.

GPU experiencing maintained we stabilized wholesale net while despite strong interest steep and CAF's We drove we margin depreciation penetration.

our 'XX driven business and XX% sales lower unit total compared continue to $X.X For our of the last prices. achieve year, X.X% retail billion, comps and delivered sales were and total unit diversified business, while model declined by retail of used down X%, second FY down wholesale volume quarterly In quarter sequential to improvement. we

of comp quarter. Average price second declined Further, similar across year's or second $X,XXX used year-over-year. $X,XXX, high last was by approximately per per sequentially sales improved gross Retail to the $XXXX. month X% profit unit unit record quarter selling

full last will We per to expect similar margin year's year be unit to this continue year.

As always, we to will landscape. price monitor test and competitive continue elasticity the

$X,XXX per concentrated XX% year declined this Wholesale from first second price year's sales year. last unit were Average down achieved was up in this used July. reflect approximately of the gross unit that per despite sequential last improvement half $XXX XX.X% a year-over-year. year sales, ago; steep depreciation unit and year-over-year Wholesale profit from or quarter this second the experiencing versus and $XXX, unit June Like selling primarily was we continued quarter.

vehicles approximately as a of the in XXX,XXX with are consumers last Of down from appraisal in coming our offers during little XX% vehicles, instant we marketplace. and buyers the from through year half these we seeing from quarter, the more approximately bought reflect dealers experience. we We online that depreciation to the those consumers purchased steep adjusted quarter, XXX,XXX than

prior XX,XXX the remaining XX% remained team, approximately we Supported our year. vehicles up As Edmunds last sales during retail were XX% Approximately our down a result, by X% self-sufficiency from our dealers, through regard sourced the to year. quarter. Sales this In up above the XX% of XX% quarter retail last sales of second from omni quarter, unit in online, unit from XX% online metrics, were approximately sales year.

last all of Auto total during from Finance the from transactions online in delivered million second CarMax loan point, Total like on income our on of Jon virtual quarter year. will Enrique, provision financial more or information remain will minutes. the the are CAF quarter to was performance. XX% considered Enrique? online last CAF At represents down $XXX provide revenue to over same in of loss period Nearly a transactions. auctions few sales, financing, which customer million, $XXX detail slightly revenue, more our and and resulting approximately XX% provide wholesale year. contributions who I'd turn second up this call from XX%,

good Bill, Thanks, everyone. and morning,

year-over-year another drove improvement we sales, unit profit, in gross margin, key of financial sequential noted, EPS. across SG&A Bill As performance quarter wholesale metrics, including and

net $X.XX gross versus quarter share lower decrease Total in by retail from at $XXX driven earnings last $XXX year second declined by margin profit by was quarter. million, similar X% per $X.XX vehicle with million a down Used ago. per unit year's Second a to margin volume X% per was stronger offset partially performance. $XXX volume, Wholesale million, by X% to margin unit margins. declined diluted

from which million was second last year, over improvement increase a up was quarter. this with delivered $XX a million loss. This last year's Other -- reporting driven $XX X% profit million, gross quarter quarter $XXX year's this by service

measures of communicated will expectation cost for the last we service improved result our is we've and in 'XX in performance deliver as a FY that X efficiency place. that coverage our put As year-over-year calls, earnings

revenues and the degree, partially experienced rates fees. the improvement items reduction increases of penetration in offset to The $X adjustments. to due to in performance given extent taken impacted third-party lower partially a plan by primarily partially cost in depend for were due leverage-deleverage recent protection a by offset extended year-over-year lower lesser revenues providers. sales third-party favorability pressures down service. improvement of on slightly The EPP pricing also offset nature These were, was by finance service EPP million, will reserve by to our sales were and

receive year's last Tier million a second from $X lower fee. quarter, down we were driven for fees volume in which by finance Third-party X

the benefits including management cost expenses SG&A $XXX had were percent in points from efforts. decrease for initiatives, reductions to of timing leverage timing was over in lesser as and our To included as down due front, which quarter. last associated year second decrease million. second X.X in a prior our quarter. SG&A by also quarter the a quarter XX% XX%, a First, The in spend year's continued favorability as staffing $XX gross with of of following: a some and in million, quarter. for several benefit the see degree, favorability this the costs favorability compared profit dollars was other last the levels we decreased we continue was lower non-CAF This to strategic uncollectible from by On overhead SG&A the platforms to receivables, driven factors, year's technology mainly

We of These in X items spoke additional losses action class the that by events. also had the dollars multiple quarter, to smaller hailstorm self-insured consisted from same the lawsuit offset each first in related quarter to settlement other. largely we unfavorable offset

staffing and driving Second, $XX primarily million, CECs a and and $X to total benefits in on driven stores was compensation. continued compensation million excluding focus decreased share-based our levels gains increase This by aligning efficiency sales. in decrease

million. in compared timing. spend This $XX per per reduced spend, year's peak was lower volume last as a to decrease unit we unit advertising Third, due by to reduction and

the FY quarter largely back half our cost benefits over as efforts. 'XX, we the our we on fourth As call, have will anniversaried we of from year-over-year management communicated enter

we that said, spend. disciplined With remain our with

spend 'XX front from full also spend still year expect will to Accordingly, regard technology and spend half. our unit expect to the back FY we our 'XX of timing half level. We per and spend of the back FY marketing spend basis be per on the half to marketing, the impact in to In similar exceed FY unit 'XX. a

spend, technology experienced favorability back will of year-over-year of 'XX. million overhead approximately $XX Regarding half other FY in hit year-to-date the the

our committed remain to effectively We managing structure. cost

of even benefits half on settlement. first to year, profit year full excluding the low this growth when the goal SG&A the lever from in track year's our for performance deliver on the gross has us single-digit of to legal Our

third Regarding we of repurchase while in repurchase during capital intend we the share restart XXXX, fiscal to the quarter program quarter. this common of our our paused structure, stock

that We below modest our to expect quarterly prior pace paces will initial pause. be average a the

appropriately as to to both markets flexibility maintain for and financial efficiently capital to and manage a leverage net whole, CarMax while is shareholders. objective back Our to also CAF access our capital returning

the we $X.XX of quarter, repurchase billion had end the remaining. of of authorization As

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

everyone. Thanks, morning, Enrique, and good

was the second CarMax X-day last penetration second During and year. quarter, up QX resulting during originated with of billion, consistent net the $X.X in from observed XX.X% which XX.X% payoffs, quarter Auto of Finance

modest Within only tightened amount the quarter, retaining Tier is further time. of X and within a volume at this CAF

additional and provide the in an slightly believe our We in Tier credit we learning continue X have, investment future effort space pockets however, to will increased opportunity. that our

tiers last lenders consumer to Tier new last year reduction as versus penetration combination basis majority customers of XX.X% year Tier contract from period and was to was an compared and the line benefited last of the credit quarter with the X% CAF's points year. average weighted sales X.X% slightly lower and QX. penetration The for in lender drove in X's of in hesitation as XX.X% previous accounted increase specially XX.X%, observed rate a same the tightening from X charged X the of XXX Tier tightening. as

driven year. impacted adjustment a in strategy in same from $XXX CAF income $XX provision. a million positive growth by $X.X fee million, income interest last loss by was million in a down expense, market last negative for expense period our a is from the as same quarter and fair well seen as adjustment million million This interest million the was partially interest Note, $X.X increase $XX of hedging value decrease year. million $XXX $XX million offset the in $XX year-over-year in versus increase period our by

total period expected X.X%, year. Within as from to CAF million The to ability to full $XXX $XXX is with or results quarter, in loan reserve of million an million, a the margin manage of was million effectively finance margin to receivables compared ending of QX the I $XX receivables. $XX million which of provision rate decreased benefit continued has margin, am of balance $XXX leveled loss team's and same as of corresponding penetration interest sales of conversion is off CarMax ending whole. the the and last QX. The X.XX% down however, in quarter, receivables. reserve to a portfolio line on proud in last This X.XX%

the of rate positive long-term profitability a tightening, function The believe X% on to by capture loss to in Tier within also existing business will while in partially reserve, offset portfolio rate X future adjustments a expectations on of a the the slight net tightening reserve have required the reduction the is for continue to and the modest X additional investment receivables for portfolio. We impact but opportunities targeted X.X%. look we credit will CarMax the cumulative to loss maintaining Tier

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

Thank you, Jon and Enrique.

believe mentioned the of to long I environment our response the run. are As well business start while term, the also us in we the the taking we are positioning steps call, in supporting the at for current near

focus will Channel the experience experience more we on simpler faster, believe operational and We for that the initiatives as make prioritize drive continue to delivering industry associates customer-centric seamless Omni is efficiencies and in customers. and we our most what our

Customer to enhance system. the order connect a from assistance our journey or Some In launched tool the automatically generated and rolling for we're capabilities tracker. to new car-buying we more blend accounts processing CECs, customers self-progression provides customers number that system with our experience. the Centers, experience for examples Sales guides digital through and step who second online, shopping seamless our to orders of out quarter from include customers' a new associates. prefer new a of progression each Experience online through This

start testing stores, our unlock the customers journey. all system they of their which where for begun our in this functionality will regardless buying We've of

also our expanding assistant. XX/X for Skye, capabilities virtual are We

As Skye work to while us you customers functionality might automated efficiently via out system. recall, taking enables of chat assist CEC our

Skye offer. reservations, complete applications, associates identify the appointment Skye provide have have their now these addition appraisal the who to to further related supporting to transfers Previously, finance able and to trade-in, vehicle In to helps an is for customers next reach support. steps out would customers instant workflows

as they their We've been pleased shopping Skye in with journey. adoption our of progress customers'

to For and to transaction we're improve accuracy. our automation stores, continuing speed data and costs reduce leverage

cars payoff integrated our in payoff to lenders business XX% from over which consumers. the associates this faster titles also receive we obtain automated instances, many an deployed holding for have service of the amounts for bought allows by office, enables to expediting us We payoffs. service titles In

which enables by platform continue information we provide to bids. our to submit For our auctions, informed them we test upgrading enhancements to dealers, the more

and detailed a including enhancements UVeye positive, Dealer that of our more other brand, For in out information to tire example, been feedback using with plan offering depth we from partnership speed, quarters. provides test size upcoming this in we launched on technology has tire. in conditions, the investment each roll tread and

milestones Before turning recognize X to in to Q&A, the company's significant I want history.

the the created far this team. anniversary have to value First, the associates welcoming customer and vehicle with programs. to celebrated X-year our talented June, continue so we all our out excited build together as We're very we Edmunds we that of acquisition

of to our we position For enabled to us offer for as sign mentioned, utilized team example, buyer up and dealers I has our cars. Edmunds support a previously Max extend product, the sales as which market-leading

on based are launched also CarMax's that for an redeemable websites that offer. Max algorithm offers instant recently appraisal tool We via dealer makes

positive and received with results. the feedback that initial pleased from dealers this are are utilizing service have We

of Additionally, of like to goal EV tools used the to buy our a speak these. support in and to of Edmunds leader has sales. number be research in X launched I'd

First, intelligence used in EV health in with conducted a range first vehicle Edmunds EV online on to XX we charge Beginning consumption. car will leader late single VIN level. energy the testing provide resource allowed Recurrent, to has partnered its far which enables to to batteries Edmunds the and of us in go EVs, This offer health battery insights of shopping more a range the how about at consumers XXXX, into hands-on analytics. a than become

Edmunds.com customers to route. to on enable can on drive single their ZIP how on maps range based that determine charge customized they launched we've far code Second, a specific

the These And and Federal incentive potential local we from month, EV help all are this EVs. across third, XXth and come. anniversary. utilities we customers CarMax's tax incentives to to have more built plus available guide with thousands evaluate State municipalities cover for credits programs celebrating offers and country Also of

our the do. opportunity I the reshaped work revolutionize differentiator by the key for transparency want have in have proud and used associates success. to industry and they to many thank and the integrity, are congratulate twice. Not driving car they the all are that our honesty every of to companies to We're industry They an interaction.

little want. our of reshape model to we the buying uniquely and online to the or the confident by in-stores are again will in taking drive car the We offering are believe excited industry today do steps customers that experience they a enables personalized and We're as business growth much future deliberate in as ahead. diversified years

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

question with will And first Instructions] Kennison [Operator come from Baird. our Craig

rates question My that elongated trade-in lower reluctant locked they from seeing cycles up to to the give in that you goes during your rates customers pandemic? are have cycles trade-in are with moving higher, might

cycle staying are question, a Yes, there's I little is think say Yes, is absolutely is the payment, Craig, would trade-in of because sidelines. I we're goes really the cycle trade-in some longer? the that customers a answer either monthly customers what issue, affordability longer. which the would the are on seeing Which into the little

in how the monthly you the interest as to of see their when actually can't a and quantify fall number, far but in absolutely true is traffic I lower point flow continue this people we at funnel, to especially give conversion the customers. As payments. off see the to specific And at top credit there's where coming again, start that,

Oppenheimer. next will Brian from Our with question come Nagel

a So couple them I together. have merge I'll of questions.

further expect regard modest little comment explain the start modestly? how buyback, maybe a First about decision and bit just your the to to start, to restart here then you off, with the talk about maybe

question, demand. with just And respect then second to the

in at better lower-priced some the certain improvement better been while anything negative, a unit vehicles? of as sequential actually look that you're and improve? highlighted as seeing, you seeing to are still been. car seeing Comparison's older, in Or you've data, So you maybe merchandise your real easier. you they've that demand pockets, used comps what benefits is your suggest than done comments, as in there's we're getting But

the jump I'll on first question. Yes, in

capital So allocation been an capital of important to component back our returning shareholders. has strategy

to that to a we in position us performances sequential of business, where investing our strategy really balance improvement want in in a where is and capital returning have be capital the shareholders. past really The that ensuring Our it at pace. the back is modest our quarters few we to to structure then we're able in albeit places goal restart,

was quarter. Modest really about $XXX means an from initial average amount a pace, quarterly below which the pre-pause million our

with offset roughly begin we're million $XX quarter, when amount It's a would dilution. annualized going plus initially, quarterly to annual So or roughly that minus. a

to it what be that's be could light little targeting. goal, heavy, a little could it So but initially that we're a

Brian, back monthly we shopping. told, of what comes part of It's second a where And funnel when of to see just payments, meeting folks We're I little falloff. Craig. actually seeing go the on top I'll your Yes. it question, the good that's the bit

to I about for our your bit are think question, if for the increased certainly sales vehicles. demand pocket XX,XXX an sequentially cars up older seeing think the sales year-over-year. not but quarter-over-quarter, for old, miles, only that years little quarter, specific a own In X still we over ticked I

that So is there still demand.

than you years a sector would look old, I is of are the actually XX you, vehicle at than this market XX that data at vehicles the tell think also point. older X little if that bit to better performing

with question Our will Wedbush Seth come Securities. Basham next from

on demand well the the older outlook ripple months potential is How over effects the My as are so those question about X or of vehicles competitive next UAW thinking the a in based to as environment. here on the you strikes? shift

think know downstream identify situation goes monitoring going worked strengths, strikes early this first are and this difference to cycles and like be. and And them, through gone time it's I on lot precise been I impact to through a we've there. First don't to to depend having Seth. we're try on. to the the past an of I Well, going expect strike what isn't the on pricing any think how to impacts all, that's the those the of long strike, Obviously, vehicle Obviously, like supply, it's one closely this. exactly in our a of parts the navigate and issue little UAW of of able the too

to bit now right X just are there's I parameters think I as that again, XX-year-old subset mind, are in Keep our older. think as little vehicles the a continue large environment, that so a far competitive and pressured we'll and provide consumers cars to monitor much. don't of meet

technicians they great. them, much And as are a we the they Our how no how just are car. money matter good can't make into put and cut CarMax

not quality, that our but they're their match And to out vehicles that so looking put sacrifice we're for. on to continue quality going we'll

than terms $XX,XXX. well, of priced inventory In we of affordability have X/X less still over as our

So affordability, of is terms hitting us. certainly in focus that it a for

still Are more forward? expect of in seeing challenges? ability of going a Do as any to you Just follow-up that what majority late-model your you're source to you change terms the selling. vehicles, just

aren't seeing more. any we No,

think that sales think quarter, retail And XX%, as cars consideration X selection of above offer little again, Max to our fact actually and In fact, to up I doesn't Max I through the well. the our go. anything as compared the in offer, there is a we're take nice this there's getting that self-sufficiency a X into which previous far quarter, as went in category bit we

than to much change extreme late-model we've through this cars seen there. cycles degree of really a haven't And we've right a where shortage again, we're of now. So more seeing seen a like been

Healy Research. come Our from with will next Northcoast question John

come you private with Are afford Do sales the conversion that follow-up seeing to know persistent. later? they're sitting they cycle. of that market? are back can't a comment, I about Are disappointment I you weeks folks just the they them just think sidelines? happening couple to going consumer on your a question vehicle? the, Bill, the wanted the your initial to What's after the ask

happening they would after So get love that roadblock? of of just surprise affordability to what's kind meet perspective

even to by million and we X up the are great quarter It's of there probably X a hits, over of me, and a I million out use were that million that hits, web window a for substantially tells interested the X up kind Yes. year-over-year about which at million and which as lot traffic, they're proxy. look, shopping. in averaging about got look -- folks We're, we've If just is quarter, their question, John. probably XX

And some offenders. of those are repeat Those aren't unique absolutely visits.

there's a unless where car a of I as purchase, that for purchase. they're folks reliable to they payments running some car, they're the folks the just are they transportation. lot of them sure make just, do far that think I the delay think As and isn't level going, afford their absolutely anymore, look, think of to some delaying that cannot the different down that just to of have going can monthly I

And to I'll on that, John. tack

the real finance our I think, and values product. that's of of one

You can on back easily apply online and all then providing the vehicles. the answers

and something You in can sort, pivot range, your filter very find easily accordingly.

able to So think about really of being I excited that the our customer. to things that one provide we're that's

so Well, is having component of platform lenders the also them rate, fact for the which that customers, payment. basically the on and the gives the competing interest monthly key a best many

Scot Our will from come Truist. with next question Ciccarelli

month, if you on improved but that I by Bill, I challenges So eased, call, I'm comparison think comps mistaken. think commented, the not

look So And any to you just cadence stack turn I current monthly a But back reason or based in guys kind very then shouldn't to what for on know don't on X-year X- long comparisons? like time. the basis? believe the of related trends comps that, would a haven't positive and guide, half

starting we're each We're the specifically, the see did we we call, to a And last quarter you comps because call not how if the do of year's of But the said so a month September of average. think the ended similar performance, I the about of going quarter Yes, said, easier. the where on the did, on bit I the very get August comps as look as at I rest last mean, talked the to I quarter. out guidance far that do little of improvement beginning we last is And quarter, year. Scot, bit little was. in the improvement give to

Okay.

So there I X-year at it at I a to there was looking XQ, like break on is XQ, way on a basis? to on and just down stacks, kind or stack help us if look X- were understand that commenting obviously. not If is of whether improvement

stack, try Though X-year was comes than think but like second said. a not when month-to-month, I we quarter. talk than to would too On the quarter Bill that a of X-year to especially intra-quarter, quarter, better year, first when it the I basis much tell over about second you the the details as quarter looking first better

will Blair. with next Our question Zackfia Sharon from come William

I you year, the apologize I open you're door my this, this thoughts program. you resuming and the for repurchase even at store But answered obviously, if year. share the to to cell know this I point cut the had and reiterated accelerating out in. I on redial maybe of kind are plan don't What if left you know openings. next

more store than on at locations thoughts the meaningfully? harvesting or just So sales of idea existing perhaps in terms changed rather has base growing that the

Sharon. said changed. hasn't point, Yes, at already we've outlook what this our

a more stores going this that few year, up. So we're to have we open

that one plus production get market. stand-alone of to So about X facility a us Atlanta that year, talked the the down in will this we've total

in and year, building be come know. QX talk year We'll not later that next and have let you on that probably stores about the We number yet. out the exactly we'll said of

annual regular the for basis, with our that's We routine. guidance that And on Yes. provide update an year. CapEx along

with Our Evercore next ISI. from question Michael comes Montani

provide also the credit favorable. was Any to just of given the on the How the right provisioning is be the I we And number should about less wanted for update $XX color availability. some now? million ask background then great. can extent you of credit credit would on give can to if think there behavior an front, you kind current

order. Sure. Yes, them I'll take in

of So we of again, We access really multitude have. I credit to availability provide with great is values having customers for of credit. the think to continue CarMax, that our the one lenders this

tightened We've industry portfolios, a of surprise that from to. if of last seen they've are most tightened year. the our I you shore Now and year. And tightening half I will, the back think needed probably think their up it's over the to calendar lenders looking not in course think they've you're always apply. obviously, partners, to CAF the has that's provide of going where in think give probably I But are to XX% Certainly from approval to ultimately, access access practices again, now. we right to vehicles the see just rate to to we fantastic XX% that find them they over standard when I credit. lending And high and range them. available customers that mid- other our

that business. performance on I'm we how quarter everything basis, monthly performing. the report We for portfolio. overall that's we Regarding to Tier look in at overall look in particular, on going at our a X the to CAF continue this from securitized lens of our

obviously, access older the loss X.X% cash, compare look that XXXX they're stimulus, that low that. all deals If we've reasons for exceptionally the and deals 'XX, trending below the towards to, X% to rates, at to before, cited the the range really might deals, you right XXXX, even newer now 'XX, all the you the the government well

So really outperformed. they

really What we're seeing perspective. that vintages expected. in industry normalized reversion of has back currently the lending newer levels highly It's a to seen from sort is a the the just

'XX pull the anticipating we to Tier to And back sure last range. X, that we've in portion we're a X.X% range, were of at to we to higher that make X.X% where done job to nice we're you, operate degree some higher Tier We've to X% and of monthly the in think payments, done X% probably why seeing the deals with 'XX tightening course So done. these the it we've over would X done also year, that's range. I within tell that go We the to opportunity we've I well back. pockets want there. and we see to that

portfolio, ultimately, the several about have again, which, the a it's provision the cited we handle combination prepared existing of I think going forward, on. So in good you a think things remarks, I as

we've there. I going to in that job range, X% nice X.X% think done and operate to a it's

You've got to in X, the the opportunity. We've that new business. lower, the about and we're our space, portion going given originations, some which back on And to pulled degree the tightening. of certainly come are see Tier It's excited great X. we a small Tier

put for that think together, I come you speaks We've X.XX% to all reserve So from X.XX%. our itself.

it's in see well But reserved, think we're performs. stable. we'll a and consumer relatively the think think I We good now. I right we're how spot

Murphy come Bank Our America. from John of with next will question

as used market through now just just which they're old then and seen to of periods higher. the as in for of you're I'm same-store to maybe I like and a far seeing increases, X-year what which the over on target flow sales maybe is which go as in in availability the market old, car we've the wanted you're vehicles depreciation to target time? drive Typically, X- X- supply you right curious XX-year by and pricing. talking about bucket, ask, the is you growing in accompanied would steep Bill,

in June I and was look I steep said, there the in at May. a honestly, depreciation July back like and quite depreciation for it started when Yes, the quarter,

it's June going thinking because July, there has So are on consumers more steep. May, really that about we're biggest their it if worth the and probably always you of accordingly was absolutely, is adjust is on more. are to the obviously, depreciation, $X,XXX which look And vehicles and buys at us, impact

the rest the impacts until on the shift. of market early it buys So

in from term. the buy standpoint, a So a short headwind it's

margins, about But this even team but think which in again, up steep they year-over-year, we not were phenomenal job only margins, environment. I maintaining the wholesale talked a did retail haven't because the the

As for the supply. availability, having been there's over and to just, a rely sources, while. available through on there's if look, CarMax, third-party less there's my that think at to a if far back limit least here way outside as you're just And at I auctions, vehicles it's tenure

can look wholesale, we're the to retail those greatly so term, is So, outside avenues don't and and of continuing thrilled to which have to we really or foresee high, near I why changing source inventory that sources. in we're self-sufficiency to continue for however our also

self-sufficiency increase get And could you start you maybe follow-up. other meaningfully? good with. think ways or a mean, pretty just at could avenues that which maybe now, are you right damn above But through is Edmunds meaningfully XX% other I you're ever to mean, I that there that that do

what could Yes. to vehicles. tomorrow. it the depends on we Look, on It all XXX% take you put

is I XXX% drive self-sufficiency think because much little pockets to you're But going to want or inventory we probably would is get say to we our that going again, you're want have as of to probably whatever. never as to always supplement goal to wholesale -- I'd this, high not also in feel key drive we'll every buy here the It's thing steady XX-ish I on it's but that it well. pretty about. as car been in range, possible. again, as think, the only as that good retail And which we car

So we're on absolutely that. focused

question next from BNP with Our will come Paribas. Chris Bottiglieri

have cuts like could you that compensation hoping expense. more said cost know but each Just I quarter. cuts, compensation lapping it cost on elaborate sequentially ramped you seems you're

is, that X-year head count still better if question if So would to versus -- better compensation? like seasonality? that at units, you than normal? look trends would Or Will be Are that's actively QX. from CAGR would you normal maintain behave also reducing unit or to relative QX particularly particularly seasonality happen gotten normal What worse that the here? my

in benefits our question, levers stronger I as point place. compensation, much the with have in we the Thanks this put Chris. some prepared remarks, at mentioned of Yes, pretty anniversaried over of we for the

lines, think compensation, would been relative half of will, here of So more we've when thinking you that year, where past the quarters. for the pressure back the of couple to of of I if one for

staffing through associate this levers. go time, year of Depending to the well. over decision process time up tax will the there as what for we same the comped right? we've the at ramp level time, those about tax At for is start So expectation on we our time,

more would So pressured of few where I little we've bit to be That do past here. compensation will one quarters been moving the expect forward. be relative line for a the items

with that's at down well. year staffing-wise so associates, you some look with and it And about was total numbers, first to as the a pretty what quarter company, X,XXX bring Chris. consistent Yes, just down ago, if or we're

Enrique's as you we're just -- to the staffing be as keeping be, like we point, it of, kind sales we've much need So year half won't we to will see of pickup where back will long as feel there. the

staffed. believe which appropriately we we're Yes,

At those So successfully we largely cost undertook point, successfully. we're management appropriately staffed. this efforts staffed and

from The of progresses, we seasonality other year about that's his next half keep the would and is when that. standpoint, generally mind, back thing everyone tax only to think building to the Yes. start earlier in time remarks, for be touched that Enrique a in as on year's for

a that count. head so little requires bit generally larger And

back be we'll monitoring So we through go as the that half.

Got makes sense. quickly just you. then buying. That on And car

It out. worst, called pricing Or from was maintain kind cars Have August? Has is of frequently seen, stabilized more the its when sorry, kind often September extent, or and a to or pricing July was I and you lesser bit pace? like think in higher July. buying it you conversion customers? of trying more are June seemed you August that and that

Yes.

the actually up to were And bit data up July bit. appreciation flattish AAA a and little then June worst. standpoint. So an in or standpoint a September August, was little depreciation probably is from a

especially the So, I new start when event. that, to year, probably a And probably barring strike. factors. steep a you see think is rest outside macro But of I of fairly similar, depreciation continue reversal would lot the other look no out any there, would there's September depreciation. obviously, think about I we'll we of things other the to would normal think more thinking seasonal August the was And we it as but what call I assuming and now this forward see of

that you to is or from that think And the expect your hit you pick here? level? car back do helps it's Or up like that, buying,

that what feeds is onto couple obviously, that front I does think it things. that prices. line your depreciation does One, as a of continues,

So that the issue. I on some helps think affordability

business. phenomenal But makes, and quarter. run a stable that's to the team did the phenomenal usual just job kind you're us. business more saw depreciation. when that a as steep the depreciation do to We also normal think I it's of It just see for we easier depreciation, job that's starting even in that with

will Our next come from with JPMorgan. Gupta question Rajat

one had than first been in decline it GPU, retail On a the was move quarter. average lower. Last clarification. than years, versus plus just question, little seasonal has was one quarter I quarter $XXX. larger $XX more the this XX sequential Great. second I mean,

if there would out items and tests? any one curious Just that you onetime there impacted that? Anything pricing any clarification. call Or were were

quarter, out, was as Yes, question, -- I'm with actually, pleased. about where $XX remember, into Rajat. think with high we the record mean, the year, year for last a I it coming because noise we I'm more us. And for when line within for you Thanks were us. last I pleased is this point about Yes. talked quarter in which last

So the there. that's I feel environment good about out that, considering especially

the first obviously, high. a think I quarter was record

were I then purchased And in kind we in there appreciation that do which the thing. markdowns, and vehicles, that think some you quarter quarter, to from dynamics you some having saw where that keeps of

-- in $XXX. whole still the we we've And of be run quarter, quarter we up anomaly, think year the line first quarter more reiterate -- from a said $XX we'll year of why the whole did step second we more of with what year, at is historically year. with be in for So as second we which the quarter line which is last we the we in where look last I would more thought last to

the too, And benefit time. be a first strongest Rajat, the tends GPU our quarter there's right? reminder, quarter, a as seasonality So first standpoint from to just just within some tax

So well. that it as happening is

you reconditioning and the cars the the mentioned year-old may fact supply there Great. are Right. that your around X-XX That's needs. helpful. situation that I And, earlier several guess, in not meet

it this into quality on the of couple your old grow look constraints some next years, X-year-old the business. later it recondition Because to worse will gets going year for X-year-old cars, into dependency of get constraints, likely be cars? is like around there than better. you to looks How do before more X- to the greater we the get As those supply

order in to in the So return you how growth years? to through do couple that in next business manage the of

back go the a if you, the on had back the big is what million between Rajat, late-model in cars, Well, over remind and you crisis, we go rate it 'XX, 'XX, $XX.X in 'XX, 'XX, little around would bounced million. when car sales bubble I last financial anywhere new through $XX

about from like to the 'XX, over this the at million look estimate $XX period talking XXXX, and you for you're $XX 'XX If even year, million.

and bubble through X-year in situations been to we're we be of to better point worse X- a we're cars sources. is out as old high, because then my were going X- getting to facing. what far we're than other in seeing a we've So as that position now our is from And we're self-sufficiency far and those again, so X- pointing cars that back than directly consumers or

So X- buy X-year whether little wanting we or navigate feel to it's something it's consumers the very good consumers older. old wanting to ability cars future, bit about our to whether a

Stephens. Daniel question next from with comes Imbro Our

ask the rates rising passing rate flat, through a price. But at your here sequentially XX.X% discussion. the think, it despite to weighted benchmark wanted I of I into recent on average and follow-up CAF and maybe was affordability maybe ties trend

that seeing ability rate of reached sign Should a back take So rates? push have we APR And flatline to rising guys CAF on curious limit are Just as why I on your more sequentially kind pass despite their from at guess, are affordability? that's you we end maybe of customers maybe environment? through customers at the here? the

of to there Great are Yes. question, Sure. out. Daniel. A things settled that couple in point

realized quarter-over-quarter we some also there. tightening flat the did in First,

then purchase adjust pockets we and carefully very key sequential the optimize I testing that's mind, we Tier test think that X growth is test quarter. to they the I things back us we our smaller did do someone rates taking to the space, finance for But the we can offset and gain Are the with in able not pick are pass end income? So any you the tell wouldn't When bear value. within going finance account, X to maximize margin. we're APR. to we along pull this up to in rates overall customer, CarMax any into pockets of raise car? and in space, you in the Tier the those looking to different paying to they one APRs off continue If going else in we're where

think we to that's mentioned, you're Bill the so payment I continue pressures, that very that. with tightening why it. It's certainly, there careful But why sequential is seeing obviously, quarter-over-quarter flat. be So you're that's the piece. offsetting sequential as But are seeing

that Did your to strategy on So more at hear not to question, we CAF. be sold, margin that up would units maximize follow maximize right?

also No, we sold. look pay can look margin CAF units in finance and we I they remember, X that at decision at captures off would contemplate amount We days. contemplate, say of in the that

credit So could sell lose the financing to the bank we street go choose CAF car, or but the their could if union. they to down their

put all one just we CarMax in the total, not maximize optimize that other. So dimension to together for or

That how that's total is it. profitability CarMax's we right, think about

Our next with Morningstar. Whiston David question from will come

Other with is Enrique. mentioned just buy consumers Tier lenders other Or at sticking is a Just curious with taking market the there a more Are other now? the cash-only financing this I'm channels opportunity to Tier in from you X just just you? just expense or willing lot those the of buyers year, problem there why gaining X?

David. Sure. Yes,

I think couple there's of things there. going a on

in mid-tier to the challenge ultimately, payment, First, see through higher-end with space. the a the definitely the kind that the see I is We see of spectrum, guys think is what purchase. are follow great demand that to when but you really it's credit the across credit the spectrum portion do of the subprime bottom able affordability they monthly

and CAF population. outside that's to kind both So benefit the of going financing

half mentioned, see the back I in X Tier did space. year some the pullbacks, last as You of

predominantly, hurting higher-end customers that buy, space. in also high to slow the from tightening sales see to can there, benefit end. down to Those just did customers right? you why skewed percentage think X it's Those Tier X, penetration it out the there's little and tightening, the Tier they more affordability. round of some But that's So a I the that's

it. but driving everywhere, demand there's think what's really I that's

receivables Okay. could of non-CAF examples are? And uncollectible briefly me just what some give you

Yes.

right? up or the down SG&A a be buy up So those underwrite our so processing in back. receivables finance going are that a that end this having having title to challenge going we bucket, payment hits that to originate to And end issue partners and be, these are

the got talked made turning the So turning for previous improvements, execution that's stores DMVs material an quarters, of in home better over as year. in We've I've of about those banks our area as well have our of terms also around as past in us in and focus on The terms both the office. around processing. titles

So we saw another quarter. benefit quarter this of

We we of probably in strong expect of to to that focus not as year more as over year last making start we half year, back half the the the had those. managing some as accentuated see the lap benefit the sure on first we're

stuff? third-party terms do servicing for in collection of of And that do I'm the you sorry, the XXX% lenders

they it do No, the we we do That's underwrite third-party partner, then underwrite service it. and it. not not. That's,

We do from Montani Michael with ISI. have Evercore another question

filter to X% ask the then the around does the quarter, And think color for that spend about dollars improvement into how income income any incremental level. and wanted comp into you the give you seeing trends upper about the when sequentially could sales consumers? throughout desire half income year? you to what versus down by if then your to ad Just And lower are for the back of

Okay. Yes.

consumer. the of not household the, monthly for on dramatically. has of, $X,XXX. a So as shrunk lower it on say, That seeing -- And we're let's about sales I the probably it us biggest income the think segment said $X,XXX from mean, to earlier, are seeing we I pinch on probably

and in the than income is $X,XXX XX% of it's years, the and it's less in probably what about XX% used probably last down probably, couple it's -- about less So it be. to household down

absolutely that's again to the speaks a affordability. So which headwind,

big when an advertising Jim to sales, advertising, and but we've looking in goes, advertising that's think they everybody this for are also, Sarah it's as needs also it's because buy. far mind we where talk thing got constantly As that an engine And is at area it. team, keep interesting buying I about and advertising for

on do may back sales, So on you pull buy. more may while you

do. we that And job So walk it's great ROI. a that does the measuring a team

certainly earlier, Enrique's back to It's "Hey, the need we're to do shift we and on much. side, little that. continue see is to to then "Hey, half, want But the spend it, fruitful" as the that may don't we're about a expecting Enrique could you gave flip bit way monitoring that in more." And constantly spend guidance we'll what think something So the that marketplace or monitor to if so not comments the it. in says, to think I you really

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

our continued XXth questions Well, and for I today joining congratulate call Great. more just that every customers anniversary, you to, all the and everything they them quarter. and time, want do thank our your team again take want I thank on to achieving care one for talk CarMax and your support. of the other day for the will do each we Thank communities, to and next you. and

gentlemen. ladies Earnings Second Conference and Call. Release you, Thank Year XXXX concludes the Fiscal CarMax That Quarter

now may disconnect. You