CarMax (KMX) 11 Apr 242024 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Q4 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, VP, Investor Relations. Please go ahead.

Shelby. you, Thank everyone. Good morning, for conference joining fourth 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

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

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

the Great. Thank our of performance business by joining you, during encouraged David. Good fourth We're morning, for everyone, and us. the quarter. thanks

associates, strongest our manage our to capabilities, and cycle. are We as leverage build assets, we culture experience continuing through the to momentum

during challenge consumers, improved quarter. remains the a cars used of for affordability While pricing

than retail reported and used inventory while sales delivered growth inventory units flat as We we used our We of year-over-year used well salable we core comps. our the strong wholesale improvement GPUs. year-over-year. fifth increased in consecutive units operations fourth positioned used quarter, improvements believe posted continue We XX% unit efficiency turns. In to retail to and holding more growth drive unit market and achieve are quarter sequential the in total total and

we substantial margin actively year-over-year We in delivered provision a continue the sequentially. our grew to interest we SG&A, stable losses and as reduction net loan significantly manage while maintaining income CAF for

retail For X% X.X%, $X.X last wholesale comps increased and 'XX, was volume, retail by were FY to business price retail unit year. sales down driven of and partially billion, fourth our year-over-year. and X% model delivered X.X%. compared selling sales per offset Average our of by total higher used lower This business, unit total prices unit the approximately quarter up $XXX or declined volume. In wholesale lower diversified

to we near-term nationwide data Our that our profitability from X.X% in XX-year-old to market share of prioritized declined XXXX share X% market share indicates over as calendar X- used in vehicles 'XX growth.

the last declined test to quarter quarter unit relative to down year. consistent year-over-year. Fourth share our our growth the affordability second fourth versus quarter under vehicle stabilizes. Fourth used during unit price continues year market slightly across continue accelerate and from X% sales Wholesale our wholesale retail multiple a pressure value periods accelerated gross vehicle last $X,XXX, per was down per selling we $X,XXX, were to of relatively X% $XXX of gross unit the half year's shows our performance volatility with ago. title profit initially elasticity decisions. External Average $X,XXX quarter steep as unit data $X,XXX. improve market or remain that was share confident per to ability as prices but depreciation. always, We used As of in validate record fourth approximately XXXX to profit came of then

appreciation dealer vehicles XXX,XXX appreciation quarter. dynamic more last our all-time down buyers year. approximately end prior bought from half through XX% performance than these from was slightly particularly coming This XXX,XXX we GPU of of well. We record benefited during as year's year's online consumers As Of purchased our and with strong buyers last last a the approximately year-over-year appraisal experience. the those within reminder, fourth demand, vehicles, quarter, year of from wholesale at impacted quarter our $X in instant

support our Edmond team, of remaining XX,XXX year. the last XX% dealers, sourced approximately up through the With sales we from vehicles

retail metrics, For in sales XX% with were of our from XX% year. quarter, approximately were fourth last quarter omni the retail year. online unit Approximately this sales XX% online, up consistent sales of prior unit

of considered line sales from were with All revenue transactions. fourth total wholesale approximately quarter XX% Auto period loan XX%, same on the loss transactions year. $XXX CAF contribution CAF CarMax of our XX% $XXX income in delivered few last and up from last will are represents year. provide Finance Jon consumer This online virtual financing, a provisions the and million, revenue. Total auctions or detail in and million minutes. online during of was more

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

morning, Thanks, good and Bill, everyone.

contribution more quarter Protection per $X.XX XX% a versus a by Other X% fourth was revenues staying unit as a for a profit rate drove while margin $XXX year's vehicle our tax was volume slightly $XX partners. $XX a and share $X.XX $XXX diluted managing volume was sharing to margin. Wholesale million quarter. Total noted, to down in was and higher from quarter. per from with As last net was Plan to million this our retail as normalized million, X% with on margins from Used or receipt in another per due used driven earnings sales benefited EPP gross unit $X.XX strong lower last quarter profit sequential decrease down from million, we lower focused wholesale decreased the tax per million decrease ago. compared last and $X.XX of year. of year an quarter CAF growth ago. receipt year offset well EPP This year's unit of strong flat year's revenues profit with primarily of Last margin by from unit in $XXX gross rate to Bill tailwind used compared a improvement both Extended profit-sharing SG&A. Fourth margin partially by

call, we As impact our return profit-sharing did this year experienced was as consumers price elasticity more Partially and on extended positive this third our noted dynamic to partners normalized expect on offsetting revenues receive product. to service driving inflationary not pressures from quarter patterns. testing our

resulted overall quarter, tested per penetration driving raising we the During product MaxCare which contract sold, margins decrease while a in slight profitability. in

have are these the we rolled increase margin nationally. results, encouraged We out by and

FY This Our driven decrease expectation due pre-built by compared quarter wage we holiday as as primarily drive retail fourth per by decreased that approximately margin last in will quarter to and year's was action lower pressures quarter. production million in the unit third is EPP incremental $XX in timing. 'XX. Service $X planned this inventory of the to

full $XX million year, improved the Service year-over-year. For by

Our extent 'XX. nature that will the of sales by to significant expectation is of improvement leverage/deleverage we The will governed be performance, favorability in service. continue see this FY year-over-year given

ago finance Third-party from Tier a we in fees were down fee we which higher X X for driven fee. million and which by for receive pay year $X Tier lower a a volume volume in

quarter. X% were for the SG&A from front, prior million, up $XXX quarter expenses the the year's fourth On

come in compensation. Our and in us flat year-over-year allowed spend discipline excluding when levels continued to investment share-based

by fourth the we for were mark the quarter fourth mainly since last impacted factors. significant reminder, management X year efforts. SG&A our initiating year versus cost passed quarter, a in the As dollars

primarily non-CAF was This our by First, platforms the other in continued in spend overhead million. decreased reductions decrease $XX receivables. driven and technology for from from favorability uncollectible

mostly increase increase Second, was share-based $X increased an driven by accrual by corporate quarter. bonus and million total compensation compensation. in in benefits $X This higher excluding a million, the

This an last the million. increased increase due quarter per communicated reflects advertising spend. by $X timing primarily of as to Third, unit

beginning year growth at requiring lever benefits single-digit of FY For set we the gross to year target 'XX, we even of outperformed SG&A full from excluding this the profit legal strongly year's when low the out settlements. the

costs partners. SG&A uncollectible drive in external our year-over-year by down improved stores, that corporate materially our to favorability receivables offices ability non-CAF by and at was led execution reflects at Our

technology to driving 'XX, and to settlements. sales. In reduction stores our and gains range SG&A healthier first single-digit our goal consumer low when lever expect by FY to focus time the aligning excluding pressured we of and in profit to in mid-XX% efficiency demand. We to over see planned leverage CECs, levels growth legal Our spend marketing gross on staffing will of acquire anticipate spend that with the SG&A This quarter. the pathway our back returning reinforces we initial favorable once ratio be lower a 'XX's FY SG&A

of As million we reminder, FY 'XX. settlement the a $XX quarter first legal a during in received

wholesale of which to spend related we a during for initiatives, more a approximately quarter. With retirement-eligible certain Additionally, and we speak reflects to buys. In expect reserve units. share-based last to at unit marketing, year's FY We believe the year and favorable uncollectible regard marketing of million support first sales total full expect vehicle total total quarter, 'XX our be 'XX, to compensation to lapping and per first in we spend going forward, basis both marketing unit inclusive basis, due plan impact to non-CAF similar an impact our on this $XX this executives receivables on to holistically FY of retail year's adjustments the approximately $XXX.

structure. capital Regarding

third repurchased pace that we in repurchases Starting million. the fiscal we the pace spend of During to the year in share XXX,XXX a the of modestly our quarter approximately implemented quarter, 'XX. for $XX accelerate of shares quarter, our first intend above total we

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

and investment new million plan capital CapEx from largest the complement reconditioning remains expenditures, facilities land $XXX omnichannel locations. scale. spending our an new and in 'XX. will $XXX anticipate be offsite Consistent for of our strategy, FY we these long-term related our for strategy in level auctions. In and investment stores. Like is year-over-year million, FY and between smaller, planned 'XX, X primarily that cross-functional open in For stores million with of of growth 'XX, leverage spend the to to we FY the the related up build-out locations timing portion increase to our store capacity $XXX to new The the

open as reconditioning Mississippi the metro market. We reconditioning our Los expect located in auction open will and in We Richland, Angeles one auction off-site 'XX. to locations multiple well facility, standalone in which second currently location be off-site also plan FY to as

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

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

everyone. and Enrique, Thanks, good morning,

quarter for reserve tightening. Also XX.X% fourth loan losses, or having a implemented a slightly X.XX% in our a XX.X%, the credit year-over-year during down in points contract third was the $X the from net sales $XX of which our of these charged of million penetration that in year. last X-day This grew of fourth $X.X quarter. larger decreased last hedging in value During to The up highlights driven income million our rate quarter in basis the from originated sales, in fair margin. Note, ease impact The improvement up $XXX X. X.X% $XX new for basis of last payoffs, the basis XX average continue percentage million on to the resulting of XX the quarter, reduction from impacting same for this accounted year. increased was and X as expense to strategy CAF's the points within year's $XXX portfolio. customers reduction as offset points results reserve partner was they last become X period from volume fourth of Auto XXX the compared year's increase quarter. points a versus XX.X%, X of adjustments weighted percentage year each down in million quarter by began in well to was accounted are continued year's the XX.X% tightened last sequentially. Tier million to of CarMax an same from policy $XX for period income fourth significant million, approximately in the Tier at was balance $X previously the Finance penetration billion, $X by resulted X.XX% CAF as XXX end the last total observed full million the quarter. test million interest as market under This Tier primarily provision receivables quarter from originations Tier provision year basis quarter

a rate end In the the ability X.X% of observed margin the within despite for margin to quarter at receivable portfolio third maintain aligned the remained to performance the closely quarter. We reserve. at and remain contributed The pleased place. our steady interest addition, tightening credit to our in with the the reduction of keeping portfolio to our in reserve expectations stable

tiers, credit key to credit economics, and continues across the valued As capability drive lending complement varying noted test parts scale I that will Ultimately, all partnerships CarMax's is foundation building credit CAF of CAF earlier, capture are of to a finance which across our participation fully its platform. sales to the spectrum. help best-in-class

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

XXXX across and pressure deliberate was factors on In widespread challenging we run. what took you, industry Thank and support Enrique. focused Jon and affordability car year long the a vehicle Fiscal and can business, sales. the continue term as response, macro our used to near to steps we both control

our In efficiencies. addition am we to for our to customers efficiencies organization capabilities I and in progress proud experiences operating Enrique enhancing associates the about that drive entire omnichannel of optimize further across made achieving the designed as our talked we've prioritize projects , and

transfers vehicle it their we easier science, include: for examples even complete customers leverage for retail, own. Some transaction to AI and like make to key data on steps automation

customers, remotely experience. in XX-minute submit for unlocking express to ability their enabling also appraisal them and to digital We participate checkout documents drop-off enhanced their functionality our

we expanded virtual capabilities managing Customer of but appraisal finance Skye, offers. created our not for only has widened also this our vehicle XX/X associates. for Skye adoption strong. reservations efficiencies, include And has to bandwidth appointment transfers, assistant Additionally, and applications, been

new we vehicle bidding modernized to bills of condition AI-enhanced across platform of our all single and acquisition, sign-on sale. wholesale including systems, auction early automated services, For reports, our and capabilities offer

all streamlined of we by experience our participating the available our customers. offers shopping offer to breadth incorporated rolling platform, finance-based of into the to expanding our Additionally, space, MaxOffer credit we depth have our lenders instant and out now all dealers. In

than more continue they to product with this the as adoption the process. of utilizing consumers credit great prequalification XX% best-in-class see We begin

range Edmunds a in guides. health VIN-level of of charging leader support number and tests, tools tax battery incentive Finally, in launched research and include efficiencies, be EV assessments, to research. goal buyer the its These EV credit

last fiscal to competitive year from further build we XXXX, expand our will ahead moat. progress our Looking to on

efficiencies grow are turns. will us market additional we We also enable are actions confident as profitable while that driving taking share operational buyers the market to sales, and the

examples plan include: go will between will be and offering. even on with make for customers' our shopping promote guide that assisted to able self-progression. health journey, associate. The the or have within extended service on see online launch retail, and our Some accounts we back steps or their they a to will from taken seamlessly next also to evolved hub store MaxCare, an whether shopping help it their hub forth Customers CEC own and plan steps easier

digitize CECs. Additionally, and volume in will assistance stronger work traffic we continue to of drive support higher conversion. build grow support focus to as our to This existing will a high-value leaner model transaction we our resources for and enable

of contact manage channels, serve associate will we across the journey. its customer's seamlessly CEC to of a points will into effort, key Skye customer channel the transition or shopping many communication further via on of this as integrate ability part As in sorts. next -- to the improve steps customers initial point Skye

our of vehicles this be A into even vehicles dealers. will acquire more key ecosystem. acquisition Edmunds continued from partnership will with our bring to to vehicle Our focus component

we product further In into plan prequalification by to the customers' space, the offer the application instant our optimize integrating process. credit

mentioned, test we As CAF's participation spectrum. varying continue the also across will parts to credit of Jon

goal and As to always, for while pursue than that we're sell to wholesale for financial combined regard annually. sales targets, to us our outstanding maintaining X we continue enable to business. In will and million the opportunities our driving long-term offers economics provide more retail consumers units

market timing on fiscal XXXX as we time market and share the However, continue to of are uncertainty to due and the focus for fiscal we profitable growth. goal this extending frame the between recovery the and XXXX

frame greater industry's the as pace time the into visibility we recovery. adjust will gain We

vehicle to sooner share revenue prices, billion selling X% more target average units. X- we expect than annual we And $XX expect market units. Given achieve used similarly, to the than to of achieve also higher than nationwide sooner XX-year-old

fiscal recent updated year the values, of frame volatility Given will the XXXX. achievement in we expected an end provide at our vehicle time for

X recognize to want I milestones. Q&A, to turning Before significant

key XXth First, the celebrated for to success. work and our want all congratulate to thank of they its associates and XXXX. are fiscal do. the anniversary I CarMax differentiator our They during the

quarterly CarMax are recognition, supporting associates' the strong, experience row. our Work challenging take Magazine I'm made Fortune in questions. other, we've XXXX. And by Second, deliver XXX Companies our year I'm driving year. drive in focuses XXth encouraged I'm proud we on the our the of of across and particularly It's for we the as due the journey the are customers to a we're named recently each macro to be for conditions our we'll this a our commitment faced For, communities business, one about your well improve. With Best happy incredibly closing, of proud as our to progress growth as day. In most that, and I'm sequentially customer-centric to core and fiscal operations to excited improvements our positioned industry. to every

Shelby? So

line And from Instructions] first Seth Basham [Operator with Wedbush your Securities. comes question of the

have then question. big picture quarterly one specific I one question,

the it of weaker us and On line pressure in service in than service gross transitory Can the much was was like how XXXX? improvement understand anticipated. that an we you seems profit help quarter, of should we much how see

a We Yes. had Thanks, question. believe communicated. from lower the we did planned transitory. things is Seth. We a production Great couple that have standpoint, year-over-year of it do

quarter. did So headwinds expect we some in there fourth the

had some wage also We pressures.

into quarter, even being labor. that is Now undertaken have more in year, which for what will efficiency we said, the forward things carry next fourth initiatives,

labor Specifically, pressures. reporting stores. We're inflationary offset engineering shops. And to up parts and driving RFID on leverage the to MaxCare We're work our enhance our to tracking taken investments time, we've more our at focused going tech we've in inventory. in and help invested of also same rates to

the like for improvement the year-over-year, we significant whole. a improvement -- just And expect significant that year, year delivered year. this we improvement So as next same see we expect do to

the is it also well, nature Now service. to related certainly as performance sales leverage/deleverage given of

market little your secondly, Bill, as to you the going seems share And see last turns? to Understood. us to bit towards share cycle fourth in the indicated call why? And quarter. regards you on an end It things fiscal should see then slipped share, expect like you a of forward Can when increases third the started in market improvement in that we help quarter. the understand market

and from think quarter, October inflecting to that how year talked steep the of step really are Great affordability, year -- Last actually interesting more and was the about have Seth. year-over-year about highest talked I periods been share X kind as some it I right. then market But was third quarter, steep depreciation. question, at this Yes. It see back quarter impacting to this you're level, also And standpoint about of I during a to the be positive. we've competitors and is going the that depreciation year us last relevant the well things seen. react. When

talked standpoint, just the don't there's the far out maybe that down, trigger. vehicles, as into older demand basically So trading the we that from because into XX-year we affordability people we've throughout X- there, sell consumers as aren't standing cars or old pulling actually the trading may about to that be yet sidelines year see on

we're cycles. I out we was a saw market we prepared And look X last depreciation, year, finished another X/X steep The And of it the forward may thing. and again, it depreciation of that because time taking about at steep up as year. our we seen saw we -- share about April, elasticity down share about the shortest kind during in continue said pricing in months their reasons it call starting share remarks, other for with, were move end of ran of coming market what out to we and period in then little coming into the we business and models we've year $X,XXX. Then my is steepest our know we're thing when period, we market that growing talked move to let's steep another of calendar bit. I see improving when stabilized profitable we've about a that year, then If prices really we've steep depreciation, about talked competitors last out $X,XXX. And of year's the it, probably on we're very before, for to And that's going the own growth. their inventory, testing depreciation

letting was were think dealers in of So a beginning too inventory in what year first ended saw quarter, to of you a drove they buying saw much, they influx in that we because sold had what cars figure through I the October quarter, a because ago, then up we remember, of dealers steep appreciation. saw fourth the out we go. And There bunch happened and if that up where the big trying depreciation.

which bit and why this little were a we an think in But bit then October. in I inflection saw So December. little year, delayed, dealers a saw November a sell-off of is you

news February, good is we're good can have January. feel the we share in the Now February. where January market actual have, data actually data but we yet, we the about we improving see don't

from that market to of we this kind we'll challenging, standpoint, update year I to that's we this becomes the why want reasons it. And target. one out before continue So value over of work this think share a pans how see and volatility

that hopefully, helpful. color is So

next our take Blair. with Sharon Zackfia William from question we'll And

are X questions, some give I around metrics can that improved But toppish. that? mean me. and coming prices hopefully, on down. will And guess it's media affordability, hopefully, you you I car rates used guys clear are us forgive

demographics you've loan for how rational? as more loss to of historical then of market have region quarter share kind idea of any originated susceptible was this particular is that that's been maybe market to benchmark less third some competitors that on secondarily, dynamic, just you what So just may that improving there any versus some or the share cohort us been this give an the average customer? And payment quarter or an

Jon loan It's here. Sure, Sharon. the take the payment. I'll on first one

$XX,XXX was car forever. used average our basically, So

typically interest $XXX So the rate, payment. that translated monthly depending on

think good a that's think round about. number to I

$XXX peak later we a of I about amount. probably think hit was ], $XXX -- that. [ really really are was I in calendar primarily their saw financed [ ], but cited 'XX was on way you by up, kind that rates finance driven that amount that of appreciation driving that the With mean

the up. attribute maybe XX-XX split So of that to interest finance it versus increase, amount an we the going kind rate on

cited, amount down. vehicle degree, we've coming other to The are as prices the the financed and is going coming clearly, Now in down some are direction. rates

So we that a say that X/X saw $XXX vehicle driven payment, we probably quarter, this roughly probably still $XXX, higher. of price by still

into the gives Now $XXX budget a rate monthly degree. Still out context. have a improved some a They're some payment that's But coming is a into you to perspective of hopefully a yes, to shock used to they that monthly payment. on bigger that contributor, some forward. bit figure how work that but gives a going hopefully, consumer affordability $XXX has going how to to their you

on were we've we question, talked than customer, X Sharon, We less the the about And second in lot sales obviously a your Tier part not -- before, past. of had have difference your Tier geographically. X necessarily

Our per month consumers household, that they've $X,XXX make basically cut in a in half. less been than

customer, income has coming customer lower impacted. in that certainly So finance lower been

see But loan from I the speaks working what that folks the to about. degradation else. big up this just on the where sidelines. spoke we're -- at Jon like of just not this buying that one And seeing They're sitting bureaus, of the going to just quarter, someone think I it's they're part credit CarMax, in with for talked apply end they'd don't we also and third about

been these share thing now share. mean, I great one financial the market we seen is, We've I saw COVID, we have we've we everybody the steep got go The you events, last year, grown X depreciations. go these there's crisis, very I would before. other just this would remind on just say unusual when market It's to saw this and if just you in to period, very, back never always historically, if year.

And working share. think we'll market through then we'll I grow get And continue through like them. to always, so these,

with question next take our we'll Gupta Rajat JPMorgan. And from

like the because to how wanted you what Could such I quarter Great. that first on comps ask be us you're imply more just a can long-term continue would there. And was comps Any XXXX. it negative Is quarter. Any we then a it. positive it would But side? X-year first you like like curious move you fourth Should It's again here range, coming almost color trending, in give Got quickly on -- targets. should Or seeing. thought exhibited demand really the you to on expect quarter. a a in the had explain behind supply the the the update the trend And side? or given lower is or the to range? is from? just it's wide uncertainty XXXX there X process broader on question helpful. where seasonality

Yes.

thanks Rajat. So for question, the

the right and early a weakness comp on, We're it's early the albeit quarter. Since mid-single-digit been choppy We've negative quarter a it's resulting in a now. On the for positive the quarter, first right question, February in was end, months. it's choppy. again, choppy. kind of comp and But cadence, last X.X seen for positive a the quarter-to-date, about December, January, again, some little comps. now, seeing negative comp been

keep year back come on question, at On mind, long-range end oh, market the share, we'll in Well, and the the market -- the targets. second update of the this that.

the it idea going we once back units We're market and just a to get into yes, a wide that more visibility On range. is the provide one, of recovery. you're come right, better

XX where in units, finishing at traditionally, about Keep year numbers I this we're latest million. million Cox's up mind, had XX.X think

might flat, ours less. expectation to little XX, bit to going think up fairly to I X bit flat even total be be in up used a so And a to maybe the it units little in

comes probably over XX-year-old it to you're vehicles the to when XX. expecting think I more So growth the used there's in in X total units,

plays to of can buy your into comes some though, ultimately also volatility so also volatility get to units. it that, because impact into -- that's it it it, impacts rate, we And because -- impacts something your the especially which wholesale. when it want into visibility vehicle The plays

back and come visibility for narrow you. we as this into we'll get that recovery, So time frame more market

hit visibility Really market to the is a Yes, end once we're stability going bit building. the is not wide like that range. expectation there's in the provide just of to more

on positive? that takes over step another chance the 'XX to and the comment. the given with mean XX-year-old car them, there years X, look I a turning should to X- you X clarify calendar years? down market fairly last visible, on leases what that's we if that in X- know just to the last XX-year-old right, originated happened like the is sales be Just what's new few at before happened Because

Yes.

X the think to bit. be what little it's there again, X out are up a going estimates -- I flat to is the think to XX, the I

So out. we'll mean would dynamic -- couple new the crisis. actually here where pans a is in declines car financial back were cars that of also we saw sold I mind, years I bigger keep again, see But ago. to there the a great in where less look -- back

we'll estimates are little to be see a bit. So that going to it's flat up

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

a albeit in used regard I But question positive Look, guess business. the you slightly. first the much sales, and with bit picture. bigger to comp, maybe My it's got

we're of there. incremental you this have in key some the like here you QX. don't in positive favorable I prior the What moving at a that question Because you're data, unit guidance, the got But talked it factors whether moderating, in early then car are car weakness turn seeing maybe happen? more for comp as used give be starting question, here response You to the of QX. And CarMax recognizing to it a refund rate used stabilization, there's looking is business, about tax out pricing parts better has season. lot to seems lot a

guess I as car used equation, to kind back that to unit look, the So if get the you you normalized will, comp? of what's

Yes.

we've we've a The major think this I of quarter first X affordability hit I years. encouraged. I continue a couple mean on down. the average was in move been issues. the $XX,XXX was under has price like selling to to time

direction. a that's So step right the in

a good think guide down, lot And rates to I that's hopefully well. think at interest positives like they start stable. coming -- of referred a as certainly you out I are there once interest least there's

on that of we've the opportunity Jon the been about I that about of working more There's that full we're think working the there. sequential talked building CAF on, efficiencies lender. got credit talked fact that some we've on a is stuff becoming we've spectrum improvement.

But a I there's good that have depreciation just -- on where mean a opportunity underestimate. I that. think you we positive, the so those that. we year got things saw volatility, mind, also in omni. their we've I I And another appreciation corrections. And stabilizing $X,XXX X a haven't some some some having I that of but price visibility do that. different the lot periods. we of mean And in just last would and seen offset really them, when at think we think are into time had I see beginning call We need you it year, of $X,XXX, keep don't in little that of help affordability.

been it's market normal appreciation, you been is $X,XXX -- we've the been of take in probably able whether a years, in to growth the all normally it's whether We've share year. mind, get a environments. those If depreciation. depreciation, in end $X,XXX, It's there keep continued like share year, over shown market

are So those for us. I think big the factors X

I Web think we've seen. this demand up applications of other that this just quarter. couple quarter, were again traffic Finance signals up year-over-year. again a was

So to question. to really about there's boils down like talking just we're we've seeing demand there the been that signals affordability out

very follow-up. That's I ask just And one helpful. if could

in particularly, that, You've -- impacting your demand what that provision. CarMax? the is seeing loan CAF tighter question standards. cars talked extent I now We're is is I the have -- used forget now data the lending -- loss what to we're potential for lending your seeing -- at the of guess and are about clearly tightening benefits I guess,

underwriting option to I question. to the and money right? be Yes, have willing I appreciate the the to little partners to more it We We what's pricing about very thoughtful the careful platform, know tighten, whether to the benefit underwriting. it's watch we are do up they're it be we any carefully. decision get picked going ] buy, for certainly, mean a test CAF we down very is to down, [ higher down to -- But to bit rates. able people that going and we're to picked and it. cast make, when maybe going are little impact think it's very going ask sales rate. any a they adjustments. or see And We that's slow get line. We're up, able our of we and

believe, from So line. CAF on lenders the very pick But that that down people rate when we X go generally, higher stuff, not down they it excited, are, our certainly, they there's choose and are going a few can that Tier passes up. to be partners payment might more

Brian, headwind. up to and is We've down you've X Tier in great it pick Yes. I a And and but tightening. our just where X, got don't it up. definitely seen all we're they some mean it's But Tier then goes of general. partners volume that, picking

that impact. the tightening of is So in there's an doubt the general industry no having

question take we'll Baird. with next And Craig Kennison from our

I wanted to ask about sourcing, Bill.

MaxOffer is have cars. headwind, fewer like depreciation You instant like offer lift. innovative bought secular thought I new and a might a these XX% also know that but provide I tools you

tool? instant new I'm dealers? from light the then for have versus us MaxOffer, overall feel momentum appraisal adding on with base, and shed growth, kind on that traction a wondering that So any of you you a much with on to And small existing rates to is buy can just how albeit the give XX% of dealers offer, activity attributable

the question, Craig. for Yes. Thanks

this see quarter. money. put that the you are on When much about the more saw because keep has a think year, think that last about can mind, last rate year. of again, of consumers, But That little of year talking when impact from that I year-over-year dynamic. Buy we It -- in less more was an appreciation. cars think more the it's helps -- in I bit was it, decline, end it's think On $X,XXX quarter. the than buy. much, down didn't their quarter, the I more by you're fourth We consumers always versus worth this a

increased the MaxOffer, about using the active XX% actually saw overall of the we the On have. And about a active we increase dealers we've there the tools. is in increase way number of deals. think how we have, really deals -- do dealers The many it, you well,

by encouraged we're that. So

this haven't opportunity expanded of going earlier in to I a We continue It's areas. my remarks. there's us. other along, to which think prepared for lot move said to be is We what to a focus

from take Evercore our Michael Montani question we'll with next And ISI.

to off. to wanted ask Just start

another If then need you share? market gross unit or year, a to loosen be for about reason take wouldn't there all take CarMax at either sacrifice credit profit And any is to potentially there this think that this share? to year is per standards

Yes.

you look, more you think, focused absolutely you the publicly traded retailers, GPU. sometimes sell at profitable I I said share. And go swapping can off, cars. necessarily what earlier. we're to units mean comp back just could hasn't lower And could auto some for with But on it prices, it you -- it market decision. see look, GPU, I -- I'll if total when you good been they're it a look your

So we'll test the elasticity. continue to

I gross elasticity to the going get that's and And units cycles, in I'm a to appreciation looking I to is always order more year And market at lower more factor. we'll just see with margins it we'll depreciation sense see. more this be share. but kind every think will profit. test couch it a obviously, always gain and hoping am to makes hopeful be to I depreciation again, of normal goal, if trends, Our year that total

the think tightened. line. tightens. CAF of when sales as as I the Bill optimistic that down about. a standards, the we're We've But CAF We've you Obviously, as very purposeful mentioned, for far tightened yes, reason. for And do that's partners one mean, things very lending have we I lose

get we're credit healthier. more But market up excited we and believe after go that share the the to cycle spectrum. will And down turn. The consumer will

it an is I absolutely So of opportunity side on the other think this.

of optimistic they're And going Fed standpoint, standpoint. rates. on it's mean to fronts up. sound on when I that wood a margin and knock a doesn't with sales tailwind right for from to -- down, from a But us standpoint there's comes the that's now. sure a CAF. also I I'm cut it but know for a to different as go couple CAF is going like decision Yes. I'm going stabilizes on

to how about the that feasible ratio how for year? Just that? mid-XXs think SG&A as should well. about this we Or target think Is

Yes.

is I think XXs absolutely progress. next about, the as talked mid step our we've our for that in

we'll X demand made a gross feel we've variables of year, this profit mid-XX%. year, You to really of that But need terms focus think strong I in on. we continue order equation, coming accelerate in going that that to we're which I in this to to have consumer strides return. There's, hit right? obviously, also and need lot past number SG&A,

really here. past -- hit I think unit of the FY our a volumes tough in you 'XX it be the put, level given years sales would the couple just of over

to fairly I also -- market think that going think Well and just flat. is overall they that be given the

Yes. Exactly.

next our Research. Northcoast We'll Healy with from John question take

into, of can ended that you curious bit and new to potentially that of the self-sufficiency wanted where I business a talk with believe auction I first that a but was nice maybe see for of decoupling what location It's from of level kind we wholesale given $X,XXX of would a business from business? about does kind 'XX, kind revenue performing only expected not going I Do which we you're line Just the one think little to prepared you how a a can market a supply. side while? And of in bit of that business the auction on business. the you're of kind sending car doing position where the values you're year about wholesale. a facility, ask in hold remarks, GPUs maybe just with that the for market used the terms company, build getting going from be think in your kind the auctions terms standpoint with mentioned this from of improving in you're the GPU the you retail standalone of standpoint? you a at

Thank you questions. the Yes. for

wholesale On was the especially margin. with I margin, yes, wholesale pleased the

of in some to job. improvements the with just the process year-over-year I of we overall Just did phenomenal think And of thing. a speaks technology, auction the our given kind it that some team dynamics, made

right the I you're way. it think thinking about

at ran we target, to the bit, little a year think look margins. I for it wholesale good take this you a or a If year basis, what yearly on is similar give on

So way. And lot speaks that made right in that we've to the think of I it I thinking think the about improvements business. you're a the

you're located As close auction far standalone interesting time, right just built facilities -- because auction standalone that a and it's be of from built is with time facility the the -- are auction to to this right, kind that be of the that stores facility, a we've as generally have we of an intention having the it capacity. But out really the first facility. we've couple gone it extra actually of over one will this

them auction see think you're of may there. year we're next going of forward, allow facility. And But auction one an more to from The will standpoint. sales the to stores. more out close right existing service from it's leverage a I couple we'll is a in talking take the out facility. really standpoint, us for lots facility some to of an now, help We existing ways. standalone a going it's vehicles logistics auction/production. The about stores, be going to hub to just different run wholesale be that able some And

help they'll make and forward. satellite improvements cars taking We're ending them from continue and for think benefits to will up And us or facilities, moving us at now standalone location I well this XF anyway going pan a just lot stores. of to out

intention to go of help innovate than sales whether that been we more the even also capacity stores to forward of out bit get hey, a free up benefits can more build to having of just little other of things, more stores lot the these retail space, business, in as will it's, closed quicker standardization So us of have to benefits MaxCare some to our what you a plus free There's that, do. to of we locations is think bigger able the do service. will we've proximity to the up these wholesale

next our Ciccarelli Truist Scot take We'll Securities. question with from

disruptive What model actually share that different do pattern? market guess. lose follow-up, various periods? the verticals why leaders retail gains I follow why I in you share about not a is during in may accelerate share you periods. Bill, mean similar CarMax disruptive Another think historically, industry

you I mean, bit a I think think what volatility it's I disruptive Recession, we're X talked recently, about mean and little different. periods, I if Great I this COVID, about think on what's here that Well, vehicle the when -- doing say I going periods, more earlier.

how And is overall it And shocks what we when large is why better short a there that depreciation lower seen we've know our model. from amount profitability a of are over is And system run hold okay, to time, doesn't it of should steady. prices? out you pan the We're the just like, which we way, standpoint? the we margins

They've for do credit They've like do what's business. lines, demands. there's got And they lots things that. that. of right competitors Now different don't their got

business. for their what's to and to right do have they what's business, we So our for right do have

this the So seen we prices -- various share. others see you up to -- market hold are reasons. inventory when liquidating will year for trying We and we've give

share? philosophically I'm that want right line you is you kind you should [ be been said market of philosophically, on to for to thinking how you are that you decision time? ], the But just and can hold vehicle like years, XX about profit. if a growth more price understand you capture right is Like the be have XX-plus that. I wondering think decision profit? So like over guys the Or seeking protect I just and

we Yes. be you buying a able expect replicate every another And me cycle didn't the mean, asked price itself type last at think you say X And I out good price the correction maybe, this correction? being year. I yes, there it's obviously, if -- might is coming see year, do after year think years. don't year. I to would of to corrections. look, philosophically, of environment probably had beginning there be X question. No, who I of this a price

unusual these think circumstances. I are very

If is believe right to model. the It's that move. at I like going that short this is would I the then the to this here is the it But business think it think term, look be So not repeat. we in right do continuing thing do. we to just was,

We'll next question take BNP our from Bottiglieri from Paribas Christopher Exane.

It ex a ABS facilities Tier warehouse been Ian more for pilot. Davis recent years and than is This X in Chris. X you've Tier seems on the on reliant bit

So average wondering loans these in what -- warehouse bit maybe in ABS if facilities on expected facilities? of the and see you to could losses elaborate similarly FICO little loans compares how a you

would you Ian. can our be I so business. X Yes, mean, from generally get our I Tier it market. all focused and into think that into to X X Tier to facilities, the take Yes, the the mean, is X, excluding Tier talking focus ABS one, volume our goal Yes, bring all Sure. said on and Tier we're I in I warehouse

fundamentally, Now meet. need are there are to they to back. things There pare you certain that criteria need

title, have a have to they et need to made You need the first payment, cetera.

to stuff higher little volume that It's exclusions, our So bit fall going those the ABS have out. the warehouse you're into have of ABS. goal from risk originations deals. in probably FICO to through going some to a all happen. But because is higher to Inherently going you're always move

ABS going is probably line. Remember, to in If originate X so months from into time you an ABS deal originating coming deal to over over we're it. what FICO we're into movement changing when us really in take in ultimately underwriting, a we deal get what deal, holding is warehouse change that less it's that But look that through. we're and X, out for at over flowing what

the we business. total to fund the leverage a most where capacity the certainly efficient way standpoint, from ABS And market is

non-ABS We our also -- banking our partners. of as grown you've noted, kind also we've with funding

we've partners, done. some that to continue the as ago just have out additional out about what business. and facilities bridging alternative tremendous built And several options years finance about and we've there. And banking having we We talked that's we facilities, grow

other helpful. That's And that policy. had if just there slip could I it. this? CarMax We And may another any return any any customers earnings? abandoning Got be be read terms helpful. valuing material there XX-day if context would how maybe the it, policy context to it be of to question perhaps maybe is, there contextualize in. would or you in And Is using the could removing truth

Yes.

So modifying money And some that's advantage And associates, you're both really lot back customers it about of the for referring experiential it back, is add money expenses which well days. what before due to industry-leading. a guarantee. to the still to is really XX-day -- customers we're headwind, talking XX days you're customers of increased our of when and our also most take XX which

You municipalities getting of just back, is with away, people get checks the title run past the squared DMVs back, and XX, thing. some some what taxes are working kind that system. Others, headwinds into work we

think I to. what referring that's So you're

Yes, that's right.

And from Needham. Chris with we'll next our question Pierce take

as refund I market we depreciation which excessive are tax Because depreciation? up in limit far the But be are we excessive excessive in wholesale just set we to carrying the to going already for would as can depreciation. wanted as tell, for another further get and there's sort are normal lower set ask, wholesale through depreciation like period because of inventories I of normal. what market, versus already season, dealers we're the

that? we Or excessive to -- average depreciation back anything that is combat the how we to get is that industry a there used to car? need see do it because to can need $XX,XXX just So

more price a more. higher. I'm appreciate little depreciation. not calling your kind average you would of and it, XXXX. seeing that's line actually again, with in is excessive depreciation at really necessarily bit up look more what between see XXXX you're But Chris, Yes. seeing what sales I'm It's

Just recently have we started to see some depreciation.

to but seen see the depreciation of we as think excessive depreciation. may appreciation, a type of more year, you're referring historical So throughout I as what far we'll haven't And see. I

gives that -- of inventories? you year or Or volumes won't you'll is that confidence is like year? lower think that that depreciation see you this because you last And you dealer saw what abnormal see

what and off years, it's seen kind calendar kind standpoint. last going been and depreciation Well, far averages. X, all of I'm standpoint the comparing appreciation a of from over historical an year-to-date of to board I've so X The it just

take say like? historical the of interpolate look those like? this I kind more would XXXX line cycles year-to-date in does the calendar and look data depreciation those XXXX, kind out what curve with what of like look to you If is does year, years What falling like. more look

So that's to. referring I'm what

from And America. take we'll Murphy next with question John our Bank of

massive will like 'XX 'XX, could through XX-year-old a talk X- and split of you X on for there's the see not And and which the expected, supply to bit the we the more to XX-year-old help economic you if vehicle X- to think wanted boom you also population continue shift out of about X a shrink, the really to seems would maybe just the about unless guys, sold and a to car to issue but is X that year-over-year is to I plus a this, in affordability. unless some basis. X lot you bucket on sort quarter as little

could seems So alleviate it small of here facing. that issues we're be some a shift it the just could like that strategy

on as that if curious comment you could Just well.

little more X potentially So to XXs. bit mix to pushing then and a

Yes.

older at last we a bit the at to it think third I similar X quarter. little plus, let's So X I were than We call to year. were the looking if look quarter, X versus,

is you -- almost XX-XX at So X the X think to look when our I X It's mix it's plus. and interesting.

X I for -- plus, very versus last at look the X it's When to X it's similar. year, maybe

remark for X-year-old bit split, XX% we quarter X- Let's call little a the Last was shift X-plus little bit had made in that cars. XX%, and -- newer to quarter a XX-XX some it last a us. I

little last this So quarter more the bit X than a to quarter. X in was

as which I coming of what think far still continues financial X didn't and of right, year in now basis as great couple would new that move a look, yearly to point higher for you're we But self-sufficiency just we XX%, of I you're over crisis. And And years is as to much forward, new I weren't saw great many to the year SAAR that's sold. rate, out I million ago, a a than other the cars, point is run again, earlier, as and the which a ballpark we be prior, thing cars we tailwind. our think, on this would or XX-plus mentioned have

So for the it's really the been the us, supply issue, hasn't price.

just up, of Now ability has overall more the been vehicles well, It's to inventory you the supply say, there is causing issue. but price to out acquire could our go not price.

Got it. talked the one about. And you that side then just on just follow-up sourcing

a quarter. increase? I Manheim could kind think a think in basis ATB with about funnel the that up openly, dealer there's on vehicles as XX,XXX their of year-over-year vehicles, XX% sourcing said Is You something get help some further and that all was I mean But vehicles opportunity an sounds late-model could the up in think on do increase refute risk as of over that they up you units, concern vehicles? much auctions caught to hold time like with to virtual keep dealer you be it dealer How more you funnel. sourcing. sourcing or further actually kind maybe of

dealers. really look vehicles to And it's is than huge that's a retail at with of you the great mix actually think continuing skewed we're it's that. vehicles a product with when I buying, pleased more benefit. mean resonating We more Yes. MaxOffer. buy wholesale, I'm to the which we're Look,

it's just of dealers about talked the about standpoint lot are think of talked product. I that. it using talked to We've we've it, from competitive to push got a that very actively self-sufficiency. a -- we've we And And like always I said, when and plan we consumers. continue a historically about

really well, which, should self-sufficiency this keep high. just our in bucket adding it helps again, start as very Well,

Bellinger next with question our from take We'll Mizuho. David

of to range just there from acquiring the vehicles? consumers. those material there versus that through $XX,XXX any directly a last just right now? the in from And auction? Maybe cars is those one out of talk is just quality that follow-up enough consumers a and Or $XX,XXX Are you inventory at limited there Can overall, that opportunity? differences on more

It a than less was you was sales actually less Actually, if year-over-year, because third vehicles, from the Yes. better quarter. this look quarter, than than -- are it encouraged I was at similar. XX% while -- our or $XX,XXX

cars. So more $XX,XXX had we less than

to do from consumers huge benefit. I just that reason what you're to self-sufficiency a the for is I vehicles those consumers, important vehicles are like. off-site. because think vehicles go the that is why is having it's generally buying like than people look as area far as mean buying profitable And in more

an go secure have all And And high if your expensive a kind go vehicles of and and on through. luxury the really vehicles channel to off-site, having to go a self-sufficiency obtain you're that's basis. have to off-site limited out we that such of we having

comps the digit. in just of some comment February, it. Is maybe changed Got if I follow explain flows just that tax positive if that the part up your that pause And on is shift steeper the on really could potentially one And more could case, there refund down there lately? also, with anything long to of how might price that's quarter-to-date last? but consumer that's have depreciation from mid-single some the impacted,

Yes.

I think it just -- consumer. to it's probably more speaks just

last amounts -- The tax year a actual the are refunds is softer, a tax although tough is this year. higher, think the consumer still -- refund been has season the the dollar number season actual it overall, of refunds I I where the higher, little was think are behind spot. in

obviously, higher down, ago. are while year have prices And than a interest rates gone

still everything basically consumers buying there. inflationary pressure housing, they're on you that the pressure else think get food I the of have and

the mindset had been been there's at it's we've like I mean think on. a It's going things I choppy. going it just -- consumer point. And I been weather speaks some to more So -- on. said, this lot a there's

we'll through. So as as we continue monitor we make to adjustments and can go

David we'll from last question Morningstar. our And take Whiston with

question X-part a on affordability. Just

rates? unfavorable due continuing the You ASPs payment focused monthly are they noticing which consumers this mentioned good. at fall, interest point? to even But ASPs are lower entirely to on Are is

vehicles? Or cars also from that scenario trading light away is X-year-old for And than older just trade-offs affordability, the on is consumer into moving trucks? shifting it more into

actual down. Yes. $XXX it monthly consumers. for are but payment Well, coming And it's it's to still been always be. used is the what I the think the coming monthly than Jon as prices over said, And the about down, more payment

sidelines another That's it with for on a thinking And waiting to the pay budget payments let's and Well, about and a there's a now. seeing or right They're certain car a into to have gosh, look like, out." out buying we're my lots work of all they're the a are come "Okay, ready payment. $XXX. in sudden, all to to expenses. I'm data points well, again, And either is monthly making other to car, when say the they figure now they're swap say consumer a down so consumers of to way it. And oh monthly their where just right say, I'd

part question? you're think I another there So seeing. Was what of that's your

from Yes. on Or are just older vehicle trucks Are try to they away light into to... also moving an cars? focused they

It's interesting.

you quarter, more like actually sold If of expensive numbers larger standpoint, SUVs, a at standpoint, the look type class more from cars. for the from a more we mix

at Now the to up average the sold. larger like choosing of least age, is they're not you've what not both and compact it's go quarter. on our types, versus retail SUV wholesale But for

off-lease with the the shortage of about worried shortage? you start ramping anniversary chip the Are up Okay. of the

and Yes. vehicles -- cycles where have there's been through we've been inventory before Look, our of cycles leased big where mean cars, strategy. never through been haven't there been leased cars. and leased we've been a piece I

I cycle customers manufacturers in the because requiring the haven't to franchise leased think lot it a dealer. back really we've of a been where there take been to cars lease are

play will historically. a ago. hasn't become We have just at nice quite vehicle, we benefit inventory base basically think and we been while customers for into sell they're as benefit good it's a wanting that to were such dealers these of things lease it -- But rate because to of the the franchise of go them restrictions. And off I and source it a it's future. get to a done us buy can't not for been out able because That leases a those big honestly,

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

everybody want the on. got today. joining questions Great. listen, to Well, Obviously, lots support. going And thank we your your we've appreciate for I call and

being year all at our We're the and the really to enhanced want of our for Place congratulate in Before that here for and I of row. to to a really Great XXth I culture here all named a associates and close, that as very folks they've proud Work speaks just again, implemented CarMax.

today, next So thanks for quarter. talk your and we'll again time

that Earnings Ladies Conference concludes XXXX Call. QX you. CarMax Year gentlemen, the Release Fiscal Thank and

disconnect. now may You