CarMax (KMX) 26 Sep 242025 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Fiscal Year 2025 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.

Todd. 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

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

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

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

as positive trends, efficiencies growth auto for team's pressure. through in pleased while our loan cost you, David. execution achieved and joining and Good sales quarter us. second managing Thank morning, We're margins, EPS industry-wide thanks Great. everyone, loss strong the with we

grew service our EPP and retail in We more we impact second margin vehicles and maintained results from dealers SG&A reflect the We Beyond new gross unit prices a growth. net achieved more wholesale environment interest experience began levered customer delivering profit. of and and test GPUs volume expanded model. achieving percent profit, We enhancements our and record. great second materially delivered stable EPS CAF double-digit for a quarter, a strong underwriting alongside retail as quarter valuations. In year-over-year. to We declining of gross positive vehicle associate the bought execution, we also stable full-spectrum

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

sequentially Also retail improved per Average last selling $X,XXX, prices second versus year profit declined consistent sales approximately and quarter down were quarter year's this X.X% in X.X% last being unit per gross the first XX% unit year-over-year. with quarter unit Second or was used the $X,XXX. of down from $X,XXX year.

We year purchased instant XXX,XXX more per Second those half unit the online appraisal quarter, year. vehicles vehicles with from X% bought consumers coming $XXX, gross up line during ago. We through our than approximately a profit with $XXX quarter experience. wholesale approximately last buys in XXX,XXX from was of

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

retail continue of experience. our omnichannel We see increased to adoption

to last revenue retail wholesale down. year. online our quarter, sales in up Total XX% coming unit sales year from metrics, online, Approximately were omni second of prior pricing retail online For from of from year. the was approximately last from unit slightly XX% transactions were quarter up XX%, this XX% sales down approximately XX% due

$XXX industry-wide. provision, a Jon are Finance and pressured losses uptick experienced I'd share credit at quarter In detail auctions million, contribution a few or progress to Enrique, of down the minutes, that transactions, loss and our total CAP income from over revenue on who considered like the an Enrique? represented will XX% But becoming full the which in second our spectrum quarter and were Auto for same lender. were financing, performance. of in results provide period information are this our to last CAF being virtual year. call on financial more customer point, more turn wholesale XX% of will quarter. CarMax by All sales loan second CAF the online delivered

and everyone. good morning, Thanks, Bill,

unit, interest the other bottom noted, retail unit on we Positive strong robust line. fronts multiple profit CAF material the delivered Bill retail gross and and net margin in quarter. As margins, growth maintaining per comps to vehicle flow-through

in MaxCare up from delivered This primarily Second per loan X% sales combined diluted versus continue grew cost our XX% with and Used was year's gross coverage was of earnings despite X% provision. Total and volume from unit reflected of of million benefit in combination as year's up ago. we $XXX EPP profit a up in was per million by EPP margins quarter second $X ago. retail year margin increase the of million increased million, year and a loss $XXX decrease up second million, by out. Service $XXX service. that margins. slight to a impact last a XX% by growth. the gross margins we share Increased net by was with driven margin, from flat efficiency the volume. This margin $XX successful $XX X% quarter. contract higher profit was performance $X.XX, quarter. million offsetting previously higher $XXX and Wholesale measures This rolled vehicle from million positive last Other relatively per

for year-over-year nature sales leverage by of the given continued We as of performance governed balance the deleverage improvement the year expect service.

have for quarter factors would been leverage second supported leveraged the continued front, impacted if quarter. main On prior points, SG&A and for the percentage million year's quarter, stronger, that in the up our even spend $XX not This from but X% million, second the expenses X were levels. by discipline $XXX investment or SG&A X

total last quarter. by increased and million. primarily was bonus driven $XX by benefits second corporate This was year's our First, lowered accrual, which compensation in

higher rose spend. I $X increase items. by a want driven timing trends, by the million, costs store recent noteworthy also X occupancy Second, out to maintenance-related point of in

First, our of tools be optimal the selling of labor. CECs continues includes model, omnichannel CEC we cost our and progression the efficient operating strengthen to plus digital which as more commissions further our use

metrics This quarter, dollar. gross for we and key were retail omni pre margin unit, unit in X more for efficient and versus year-over-year the total for

discuss efficiencies. leasing arrangements. as aspects all we evaluate operations of logistics continue includes equipment Bill Second, This drive and will to to further, our

will million efficiencies in the than charges hit likely be time. that this $XX estimate near than be less that operations of our term other part These income As in evaluation, logistics offset line. may we gained the over will incur more by charges we would expense

Regarding capital allocation.

$XXX the spend During quarter, second repurchased a for we of million. X.X total approximately million shares

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

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

Thanks, Enrique, and good morning, everyone.

approximately The an basis During charged the second sales year rate to from net CarMax XX% as Auto resulting weighted of was $X.X increase originated to ago. year's compared payoffs of billion, quarter, average XX.X% a points of XX.X%, Finance X-day customers penetration XX second quarter. contract new last in during

a is at ratio receivables for year's reflects billion points over combined seen for second in for interest penetration This increase loans, million year which percentage last on quarter. measures year-over-year QX X we income growing The the with is to $XX provision the XX.X% for from margin of basis quarter. third-party losses from resulting X X for existing quarter to $XX the down a credit sales last provision near the the originations. third-party in year-over-year provision a their result and XX.X% volume $XX The in the on ago. $XX last $XX penetration quarter a estimate losses the accounted is line receivables deployed million was X Despite of increased remains quarter reserve X.XX% the Tier Tier line year, resulted in the in losses was year. the a a the million. to portfolio. and a of included last year's reserve was in believe for ago. $XXX only compares million loan reserve provision of lifetime predominantly the same XX% in we million the impact million. compared Third-party quarter in of down second end provision, with on of growth compared FY QX to from and XX.X%, million of X.X% tightening $XXX the $XXX which period in million X.X% $XXX X.XX% course as and expected Net year X.X% quarter roughly slightly impacted to was was challenges. Also X.X%, of provision The million, of 'XX. CAF years by credit in our industry-wide balance increase $XX or current last Included

been weakening broader generally adjusted has, an degree, these lenders when credit XXXX loan number rates. elevated industry, To interest were excited contracts of auto in especially a the who in consumers XXXX struggling prices with and those environment, this in Regarding borrowers inflationary are coupled has high combat it based our inflationary to have industry, the where performance. shown have ability results, experienced challenges tightened some this that originated have to CAF navigate but similar lifetime within underwriting emerging customers added loss expectations burden. and on largely well necessary

we result, additional to pressure for and a consumer. the provision remains added our clear the meaningful observed these profitable rates. significantly accordingly. we level quarter, and in deployed last has tightening XXXX adjustment, our originations this the early it is higher that impact had as vintage a on material loss XXXX on Despite And from XXXX ASP During CarMax,

at noticeably of which XXXX. reasons of observed further that risk, beginning In customers in through credit underwriting pocket end addition, for a cautionary the the April were addressed tightening the strategy lower of Tier spectrum our of X concentrated we generally higher we

during reserve previously this part our believe first allowance performance provision While estimate loss remaining loan the lifetime the of quarter for as adequately further the deterioration portfolio. captures on the additional the necessitated was loss observed of the process, pocket the We our quarter, a adjusted preexisting which standard modeling the this we in an second best adjustment within quarter's loss and quarter the receivables. resulting is for

credit will risk, driving capturing continue to sales optimal finance highly its profitable CAF always, of balance and CarMax share contracts. As

initiative. full lending on CAF Now I will an share and program securitization spectrum update

executed expect transactions and higher a we us these transaction first we during flexibility that models scoring X and giving new credit Tier non-prime larger capacity will CAF testing reaffirms the deal. June, support corresponding X began The new successfully CarMax's Tier in to X while full-spectrum of to X across capture provide during spaces, growth success ABS of and successfully piece our Tier and its model month the funding Prime the followed the our second the begin ABS our quarter, complementary Also strategies Tier third our July Tier additional and of programs During landscape. the with belief significant both X first the to these of testing quarter.

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

and Thank Enrique. Jon you,

the taking to I been I'm As our actions support earnings our further our mentioned call, have differentiate proud durable offering. on last and we of business

continuing growth. to and are that realize future experience the support refine We will efficiencies

include, across we've customer system processing rollout the examples completed Some nationwide of and our order new experience centers. stores our

As system journey customer customers with customers step accounts more helps deploy even taken from blend on this shopping they for several focused now buying in the MaxCare, year. to a through and these for guide own of help associates journey, guide make associate. reminder, easier with promote on We're a or self-progression each who to These currently see it on seamless accounts our this prefer testing steps have associates. We're the an assistance shopping nationwide experience customers service and offering. and plan stores next their their from whether to later steps plan provides extended

we knowledge that access with CEC which the AI Our have new data instant CECs, our developed to product and science are testing a empower information associates to recently leverages in generative teams management need. system they

ask an and response. questions receive immediate through can bot a chat Associates

more plan enable our the tool response this we from helpful to to especially to state. questions customer and be This launch finding are across and year. efficient, effective all CECs this will state the where system for CECs We later varies

offers research if appraisal including precise finance-based determine released EV offering, address top on launched carmax.com. existing shoppers our customers hub terms. giving electric shopping, helps more For about hub vehicles, an for and finally, that prequalification information is right that and electric contains an we The them. instant we enhancement have tools questions an vehicle seamlessly incorporates credit And hybrids, into consumers

our a efficiency As last driving affordability mentioned logistics network. identified on also pursuing we're comprehensive I logistics This operation, savings After goods we determined supports as review of our across centralizing help our incremental have functions by that quarter, us margins. completing key on pass and we network sold we will customers some of best our supports opportunities operations. down and focused that our leverage cost reconditioning to

to During competitive half conditions by omnichannel efficiencies encouraged we'll our further market. home your to excited the about offer while and we capabilities. earnings In that, our customers, experience system, for centralized about and take We delivery, year. planning grow second in continue, upcoming our our the sales quarters in we appraisal We're management assuming happy second execution moves and conclusion, which future good to roll Max enhance quarter, our associates and performance current our strengthening Todd? be continuing as we and of our achieve best-in-class our transportation new feel and market we're the quarter moat. With pickup enhanced second provides questions. sales plan by our out ability to

Instructions]. [Operator

question from Basham line first of Your Seth Wedbush come Securities. with the will

My unit first trending comps give if are could question how on is us quarter-to-date. an just update you

Yes. Seth. Sure,

So have If to sales the progressed. which the we're actually sequentially pleased got the comp quarter, with they better, at for how look great cadence first of was see. all, I

For get with positive would a in less trending all the into less September the full also pick in Sunday, line we're day-of-the-week just the a for heavy third we I September had at but little this quarter, Friday, X the out softer back some quarter but point. that X Less that with headwinds. bit second -- almost up quarter, point quarter. month X Saturday,

headwinds? then some market And with you spectrum underwriting make your full color. the on standards? helpful credit can given further color lending if at juncture. Does That's expect you secondly, to Pat, of on do push give it the your on this the sense view And tightening forward

Seth. Sure. Appreciate the question,

learn, this, we So clearly first, I a April seeing cautionary very, done question proactively are, we excited excited fiscal underwriting we're good portfolio right moves and address highly we're but think on tightening on time to the to, we're we've rates right reported in the X and make we've We're and losses model why tightening market, stated never feel a about that of Tier and that the Tier clearly throughout watch I those It's think I And again, Tier we April now. the X there. it. We vintages you've mentioned the in say everything of deployed regard mode, out and with done 'XX, where consumer in are about QX. again, the tightening improvement good our quarter. portion overall continue think stress again, we've to this we feel we to Tier QX, loss clearly never. probably We'll the industry-wide feel that's into Right we're 'XX. I'll learn X closely, we in we portion where on for further to but what learning profitable right previously, back that is very tightened your just to in now. strategies and about now, about back really right now, get sit good originating probably CarMax, our looking we we're But felt wanted for Well, X? we're going on basis.

to there's we CAF's be when great think go for as CarMax it's opportunity there will after to there. [indiscernible]. know customer more that there's it for We be makes stated. We We to going more as the all go we've straight We decide to sense going that think in volume. it's

excited and makes we're and it pick learn, to prudently sense. we'll time, move in why the we'll So right but

I what loans and excellent even kind profitable Seth, originations. target loans say and this that And those are is the Jon of Yes. in I'd environment, these do can of targeting job mean, really in an team

the continue test to So about the yes, back we'll excited the we're of credit spectrum. year. half in And really full

remiss of securitization both both us and made success, program summer up finish was us. and really with, And capacity flexibility. the didn't issuances, really so great those and up It I'd be think that's it for exciting well I I what the sets a future, if for this in

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

when finance helpful. higher expect? think guess of of perspective should of do decrease do mean, the think How another Just the seeing Is the funding year-over-year on you've this losses we the around on terms CAF question any trough we can be you I come business. X profitability CAF I are in start of grow we start that got kind but kind would hand, obviously costs about when the in down. again to also to income? that

appreciate Yes, the question, Sharon. I

So between -- of X I'll kind items. obviously, of break our it biggest our down line

rate You mentioned the aspect. interest

the been NIM in We've how So about hovered through said shows with our that right right, in NIM. kind very environment. going area, we've Obviously, which and of that we've capture the that managed we've pleased we've pressure to contracts around level, generally a X in felt this is we've while rate of NIM, in put obviously, finance tightening, and face actually able raised to share our done been environment. on

got there's how So little we've about operated. bit a the and of name. stickier an to end which to a It's down, the But rates of other would be to against of we provision. point hard tailwind but environment, the to spectrum, that, that the out regard want a us. With our hope be make rates a going headwind for as more. been trend loss lot really lender for maybe pleased I would kind is an portfolio capture at often enjoy to opportunity Obviously, $XX current largely, that's billion you've

we quarter, the of our our think that have quarter successive the if you're to we is quarter. set our set never only happens talk for in reserve quarter. that goal this end provision Let's way about what as provision the that newly you clearly and when aware. originated about of it, Ultimately, It in well at

You're going performance points to where have sometimes going release ability -- you're -- provision loans because it's release have is going to the to be to because excellent.

going to operating we've a million, You're range. we're in $XX seen a change $XX make million, the that in in a have right to environment, loss We've environment, higher million now. higher had $XX delinquency which

we felt that, And important a clear, the we portfolio and for And was be the provision previous we the hope quarters. everyone. versus million would reserve Let's quarter, on the it's was that obviously, we have adjustment but existing this it for $XX outsized nailed big deal. noted

between $XX million X the I So year $XX say quarters, side $XX more going million $XX the difference would what would in the ago, million, to is think we million, and last the million high $XX hope forward. on do than the is X, I certainly a

what So you is, again, going got think the be. true-up the you've hopefully, to go-forward gauge basis. origination our there. I is provision then think this is volume a to and But outsized, again, what on

I that over seen the is million, $XX frankly, is the I about Yes, $XX year think $XX we've what the here, of million, past million think probably to way say. would

you're we quarter. million So the would like $XX what have versus seen probably typically looking a at adjustment on

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

or cited then of get Are of of looking bit during guys I'm April the of at I rate lower end sort you worse, you forward stay quarter. you how I to on sort but just think internally? as of the Maybe kind the just credit tightening this the normal normal curious how there mean range. a in even about change. bounds metrics again you and the the and tightening gauge you specific mean still within see here. absolutely are going of trajectory

where lands? But mean, like seems this. with it ultimately gauge you you're I how So this do may moving

and $XX the we outsized that that highly Yes, originate, well on We've those that a receivables, tightening metric, at books, the like really feel vintage But in to tightening I highlights early good that, to of our X we again, our which wanted profitable about perform it looked at we I we've We our what $X.XX. the or you performance losses. How we're point to and which looks said done. and face say. question, John. number [indiscernible], and was what's through in doubt that. the is customers which to receivables what relative get? looked we could pinpoint seeing done million, extremely Again, the We tightened at relatively And really is We've we've felt environment in And what we've a sustain appreciate no provision level is, bad we've loans. hard just that I'll reserve about could our feel of think those we've have. stressed about mentioned done, play portfolio. that. quarter-over-quarter good

we think are willing You've are the captures of accordingly. the It's losses very, profitable. right to seen It's loss very We've all tightened that we a headed. we provision to question rate think what pockets. really for where provision accept

and want have We be again, quarters what funding But makes we in think really whatever the do we think the to do in cautious do we're going and to going place go. to we to sense careful forward.

addresses hopefully, So your question. that

a And clarification. John, point just of

any to. I think actually this in -- in the We you in we the do tightened quarter. need previous quarter. We tightening see didn't didn't said quarter. this We tightening

not we April of 'XX don't now. since 'XX clarification. anything the for anything the horizon in Thanks and right have 'XX April and see April, of done Yes. significant

a Okay. sourcing in got time It having mean job actually in quarter That's did the the follow-up like guys good out [indiscernible]. industry of I vehicles. finding just one really late and quick tough side. the just to XX,XXX is talk on model dealers. And you a we the seems everybody

forward? quarter. from you source can like have shortage, them tight who going what So have but good changing Edmunds help vehicles impact these real job And an and a they a curious want I'm go. of seem let of hole don't is this did pretty just doing to there? kind to What is dealers that you is There what a

changed. So just to what trying understand

Yes.

John, it's is highlighted lease, by think in you bottomed 'XX. actually know really I the it shortage -- I off out which the think

of of 'XX it going diversification certainly job. a up. is there's the little down in appraisal offers whether because then next step has and I a start Max the back year team the think offer, bit our increase our Edmunds buys, reality the a will great and of done in instant But

probably XX% look for a more active to you on got part interesting and is it than been were of volume the ago. And comes are dealers our we've is sales, that Off than year-over-year, leases, with our down. it example, a they year that's them significant IO like, Max at If when to we ], thing the [ we but even actually have though access better historically, did never

So us, issue. just for hasn't been the supply an

maintaining grosses. when Impressive

come question with from Nagel Brian next Our Oppenheimer. will

quick questions, So X them merge I together. have I'll

First to I the regard with there the car question quarter point in anything But then second that prior underpins really used improving is seen can first regard to sort of comps, you so have quarters? And unit off strengthening congratulations. say, finance. during the what to off, with we've that

you're As provision at or you overall the here a you fiscal more that in in of your reflection look that loss took quarter, your loan analysis of environment? what result this come of is that second inputs portfolio a the -- the seeing as higher the

All right.

So first and will the part Jon second I'll tackle take part. that, of the

kind of a in part, this of in So Brian, your comps kind drivers. about little first bit talked just my I improvements on remarks.

conversion I I'm of do to format. whether team across I pleased which of in year. get process. Last goods we cost efficiencies and that think the the quarter, We the benefits very about our it's execution better the some plan the actually we're From well. on got areas it also there's finding thrilled out it's got highlighted out this of sold, that order it allow and macro by all talked fact internal our standpoint, had the customer We in and the all in puts all we're stores. with with different things it of the board doing. were us -- CEC The experience, that. which next everywhere CECs really as about, which testing stores, internal same the think and I end quarter, we both really that I an we some the to stores, things

it seamless assistance much So easier makes between go it to and forth help. back and and

have think but our I you they're see cars also they down were, fiscal times we year normal. that interest to more, and which look, rates few less coming the quarter course, we're one happens then, about that's big more X great. And standpoint, before. price for got think think much I prices to We've ASP of future to saw I down. I of of X more I And much last bit interest but will about course, last X than sale year-over-year macro a is more a Enrique in $XX,XXX seventh where out which back price depreciation, declines the talked what swings this, row it's year, help in when in to source the quarters think me stable continue this and So this great. From of come which And We've the cars, were every over on certainly that. of not able but of rates think and a helps. We pricing help then, many is environment. up down,

So I combination things. think of it's a

your my and hey, with second be want Brian, in your here. paraphrasing, answer quarter, to but our was, larger really question Or our is it provision precise Basically, is but I'm it portfolio? question. broader it this environment, economic take I on I'll the was,

look that our methodology, for there, and as economic we CECL are for factors So out reserve at you might imagine.

we and more are based portfolio on our so on our industry. the specifically, the decision. our we in adjustments we the them into observations broad have is And believe But weigh performance that that

performance of You similar take companies, you other obviously, see world they're ], banks, [ finance other the banks, can issues. citing the allied that banks

the I performance. on We think on factors, on So into industry. like books it's industry observed We ours. across take it us economic on largely occurring it's account but

question JPMorgan. with next will from Rajat Gupta Our come

clarification and another Just had one question.

on year-over-year comps, hear September I same-store attracting the just positive a far? correctly On did you're basis so that

Yes.

that talking -- in out, I a for softer. X tracking For is quarter. the stores second the of All line want closed. are point positive a where trend picking quarter, away X that quarter square bunch again, not well, there our is to But It's day less headwind September will a for of the with Saturday, little bit Friday, week the the I'm Rajat, really, about a quarter. sure throughout that less Sunday up the with it's

be were the you mean to positive would it making. expect you comment quarter, That you the for So still. was

trend yes. of current sales, the That's

Got it. the the -- And what's Any is efficiency unit see is there was curious some helpful. of this big I Okay. to we advertising I further mean, thoughts there expecting? spending. on drop is be the you're be there happening spending should right spending? there getting there? advertising like level I then per with mean like, just would surprised a

if I we've very target. Yes, in look quarter-to-quarter, back it's that similar. with communicated if to the half variation, take the you our say line absolutely. much look be there's be at you is where year, pretty to at going we're But of would right? going this some And year, first a the of half

line and back again, the into particular with total pretty what But is So much I wouldn't with unit expectations in of we've variances within line with are, year-over-year the on the anything It's read of quarter. what year, the half our half quarter basis. marketing the this year communicated. in just spend first the

with Our David come Bellinger next Mizuho. will question from

the just auto worsening the market. broader loan in on trends one, First

about already penetration a got You've X to X% today. Tier down

You've tightened up again.

in for a next what's with environment. any over think have you offsets few the contingencies or begin next business to plan any through us type just in Maybe any pullbacks weakening downshift here? further the help credit cost quarters? Just You volumes potential could of

Yes.

guess, you let's I So -- the X speak Tier percentage. about mentioned

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

got You've cited performance worsening again, we've tightening. talked CAF they're -- about that and

think well has as the I that there's across documented tightening to. well. again, That's industry occurred

tightening. I that So of job done we've a think absorbing great

we the lenders industry. on in book our Our best think we of the platform business, have credit

as just done a them, what thing, forward. And down tightening, they've they going they're they're X feel originating. I doubt, speak We every to to have they your going have. about and don't when similar tightening -- to do going want some X%. partners, mention we done where to know to they've spot do very comment lender speak their own They've loyal they're feel like to -- to no what we but is us, we Tier good in some

I the maybe X about volume less the think being but Tier Sure, X that's of in Tier a down. there, lot there's tightening. some and

the consumer given really affordability mentioned the purchase just that looking shopping that's occurs. think that's a repeatedly, pull is position payments is the where situation I and we've in an not to trigger, the to challenge

doubt. Some of no could monthly be that the you payment. the But if from price tightening, look sheer and point at

where think they're struggling. I that's

is the as from So that's it coming I as consumer much think but tightening.

don't anything add. I to you So know have if

would only is, thing the about we Look, feel tightening add mean that the I that great other David, about done. we've I the We is feel great actions I think done. we've

this book CarMax good They right. feel with Our of about they've having them, absolutely lenders lower-income about already And and customer. the he's tightened. John business. talked conversations

I of you're tightening. income there's not consumers, It's an what seeing been at X look still Tier fraction used it And where affordability of think a tightening, is necessarily because issue. it's sure, lower income be. to when just the household where I

So that think come we back. will at point, actually some

ask I on it. tools. Got the one progression And if more could just digital

processing. You mentioned order

in a home from can transaction there's completed started functionality consumers new store. where that think I

any So early is this? And something seeing improvement now? with that talk in every that location you're can conversion in available you about on

Yes.

everywhere out it recently. rolled just we So

happening online, all a more right. the seamless, and because you the CEC up on our of if thing store, seamless you you were did It through it whole online But What You're whether is the stores if you processing. makes order we the didn't new started the it you it. and was with worked in with start great you or CEC CECs started have CEC went it on wasn't the work into the store, and online, online. exactly the because then before start you

it we have everywhere. Now

now we're matter you with where the processing a well really shopping a thing transparent card doing, about of not but So something did. The customer it the been associate was doesn't first. online, only that which talked they what doing benefit call because this for for this -- I now associate you it, I what customer where because kind get store is everywhere the to ore is when and that's a next it's consumer start as had is working

account, into when CarMax log Now online. My they they everything in the store, done they see did everything they they've see

continuation it's on them it step. prompts So little the again, a and nice next

to although future early in a and it about stores in it's CECs better we and from what continue the a experience, conversion will our was feel to So off in customer the more. standpoint, to the like are it's it's talk going both consumers up want conversion little dividends pay the just generating because a

will Baird. question from with come next Kennison Our Craig

to the from as sales question. It's But sales last up somewhat online follow-up XX%. moved to a of a total percentage XX% of

a because a in I Where process, as years? see should the transaction? touch think profitability that should then unit start to think metric it lower in the a shift do that for XX% of coming of was And while. be to you stuck benefit low-touch around nature you we

Yes.

the XX%, XX%, to in of They the the car, that's I'm still a kind did the to around up on point about vast people wanted just want tick it the to so of that them the it's actually into that store the did folks been online. do only couple that I everything because I And talk pickup honestly, X-point of thing. majority would omni do little quite XX% the more, of out of online, a more about come where up There's for customers think, most quarters. So tick many are. excited

that more and as do, standpoint, that. little far efficiency customers Enrique a is -- is more look, from As bit that let talk the I'll self-progression win, about a an

remarks, year-over-year Yes, about right? model the basis, mentioned here also unit compared we efficient key we're a per per those we're And unit So this which efficient. to a on omni gross talking really metrics, but only consistently more actually as on their prepared not progress basis, more my were key a as then in preomni for metrics while, the per retail total selling period, to preomnitime a on relative I we've made on quarter, from excited that margin we've on basis, basis. also that a about our been

had and through. sales we're accelerate here as in environment we efficient more that flow delivering to continue see back continue and that making efficient to on we being where come So that progress and should committed and on even and should to an that

So really we're really, pleased.

a of it. on to have really have purely experience that that your competitor. back customers think you your Do push you share think fair that. point, a top couple of digital And you're getting your would just Bill, perspective and only want you And choices, a I should is

is whether Yes. of do have do target those. -- X is X, The it to want want I they the best they about have want a Omni all combination about whether it do to all don't process what everything. of way the all which a I they want think is it, to the for in really We store, to for

how comes agnostic of they deliver. want we're kind to when So it to

of the But other. way force XX% think don't I one it's them. great them we or

do, share our want in yes, mind that. -- doing coming So if everything definitely I what in don't store. they and that end or fair I But my a they to that's think they want also of want I up

will question Scott Ciccarelli come with next from Truist. Our

subprime increasingly I for X based into with talking pools. about previously, of higher lowering different lot in Jon, delinquencies. provisions know, subprime write-offs What are delinquencies delinquencies primarily hitting then months. on after your X% your on loss initial related despite your book? And in change to converting that, the rates the a expectations been you Apologies had but advance for that about provision was guys question. factors consider, another you And you guys were finance

customers today again, was actually captures was somebody but the we quarter, what mostly why having bit, external make that our sort the XX your in On reserve. navigating we performance levels level. that's of made adjustment. But had this our any have made this adding provision seen feel the operate is we've levels through again, happens But so performance. at and point the historic adjustments. our We've we the and seeing, on a at said O&S have and -- which of good they been based I to We think performance to month, drive obviously, hopefully performance. the economic any given the component. it was there's but in, function about It to we kind up or in ultimately little And to you if may tightening fairly we're throwing that it's rolling come well. origination seen that look, provision we seen certainly, out, yes, In It definitely you not think environment factors, coupled X, clearly different it's the years said question, our at we mix, will it with, might a our have we've were volume the be delinquency. They might always Yes. us delinquency first look added the of erode additional ago. sit where -- we not cited outsized they certainly It time. going we come is saw nearly outsized, to with fine loss going Sure. we adjustment. of if And call this, on and

Scot. I doing. mean Yes, you're piece just to I tightening that that provision just I make I reinforce because of kind the the month, think the to a not want been in origination doing sure the were mean, you're We doing lowering in that's we've speaks fine true-up. doesn't In true-ups. point just that it previous

everyone. to point just So with want again, sure make that, I that resonates

on I'll And Okay. last question. touch your then

the about spoke you think I subprime.

our Tier different our operated just losses. is let's and in in sort have continuous rather And of It of business, our of has X% portfolio, That pockets. the discrete X% the we Obviously, been about X XX% more was bread we've been to day, more is It's range. than spectrum. we've about loss maybe it the of book we're of a We've historically. this X full I'll certainly the So X.X% higher But butter. again, that said that getting it. the cited talk excited but loss a it's describe Tier operated where level. way way obviously, space back

you continuum. expect. at level the loss on you'd Tier X is somewhere there then So can math different do in between And

at great delinquency offer look that profitable. a a We it credit to book, is believe we provide customer. We something higher manage. it's when highly the So we

models be I to just we'll the for think space in it's And do to we're we makes of. be it makes to question, going that that good again, volume it, to just able business flexibility the a an to have excited it. part do go think sense own the for with think we're able it earlier sense, and when we be to

with Our will Chris Needham. question come Pierce from next

suite? questions. comp X given at more then Do you independent think rely the helped CDK all their kind on gross software Just quarter And dealers other in the of margins.

called out pieces headwinds, called way you I some seen some of -- want right just the going to out You what the we've think tailwinds. forward. kind

Okay.

really it material any the look, impact. don't On had think CDK, I

at just workarounds. some I if think comp -- better look quarter, I of a had got our cadence each month. it lot dealers the plus, through

of I out CDK itself over August that kind worked through was July, point. think So and

think impact. had was it then question? a don't just And I second what your material why that's So

gross margin. Other

kind trending the want of way equipment it, to other I heard then gross margins, that been headwinds tailwinds, quite right yes, out positively. to we EPP had about And if think but just you it's called right. On some the I

No, absolutely. Yes.

to for are XX% I rose X expect really really see we that continues pleased performance of year. and to the continue to quarter. other we margin look, to Service at components, driven increase our gross a So by the right? by see year. with margins, I that improvements to just, committed year-over-year this see somewhat deleverage year-over-year continued equal, other million by $XX governed beginning is earlier being see improvement year-over-year. And periods. expect given of things see because expect to we really improvement. to nature. But took the the leverage half back it's would all EPP, sales, I'd that the in again, for we margin continue improvement That's It

the margin QX, year. expect in over to done we've some QX. expect in to in that comping still some nevertheless, start see increase of we're to see I'd year-over-year. the so then testing previous favorability And going And that but

my look to and expense, potentially associate take we side margin, so remarks, charge got be a impact, to would would that other that's -- I -- income not So side, we're in $XX million a bullish -- performance. In at network about other really taking in may on there in the up impact. that non-gross taking be margin, truck we our relation the as margin at took we non-SG&A talked gross And well. a potentially prepared on as optimize just our look logistics a to be

make a we to the may we that the sure we our And would trucks So need be also through onetime that. expect working have but ourselves dedicated partners right that charge-off there hit. have that still that amount amount and of right trucks of we're be a there,

call the fourth or for to quarter. third wanted just So that out

think seen one. retailers pricing strength much kind the then We've right last one have And power just nonseasonal in now. wholesale used don't car of I strength. Perfect. market

overreading So there be from a strength GPU we compression about the that? think month how am market? should around Could here? in into Or I modest wholesale GPUs of

forward? strain under You come mean that GPU that the going thinking we Is question? would are our

right Yes. far sort been as ] the it's pricing dealers [ of based now -- buy and market on wholesale at limited used affordability. to to It's power in car is we're cost more cars as where

the and appraisal we're what XX%. at look dealers well you through lane when self-sufficiency our Look, Yes. buying over is through

into at dealers I that off manage customers at to a our lot to about improve, obviously which continue for for look to able every to continues I the many as margin point, their car, be how much are to as the helps vehicles. possible -- own us supply. speaks probably a this phenomenal -- job. team I our your look feel great plays business. that If ability wholesale and get think is The I doing

because So again, our again, not I supply high, -- just think self-sufficiency so issue. the had of some of we side on an have have we the just not concerns

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

Chris. This on is for Ian Davis

credit, hopefully on one little level. high more a but Another bit

versus expand your would been peers, today. credit low level to that your the to peers has in their of we mid-XXs One able meaningfully a estimate be XXs online penetration at

current levels to previously, of of And tell the that could financing that the of makeup prevent you the environment to from other for procuring customers the today? some you've that conditions are getting about acknowledging your So you aren't from XX% in CarMax us lending the those alluded what constraints what maybe partners.

lender, full to customers' I Sure. us Yes. looking down spectrum to I and provide just credit. all are availability to we penetration. be I'll think specifically, our mean, Again, speaking break a

customers. have many that's want platform think credit the lenders not to on trying We're across great it that we we long end, a a provide middle why spectrum. offers our focus we there high provide to have end to all we lower the So been credit time, and we think end, in to

we benefit therefore, additional is to from have going has lenders. Everybody so CarMax. And --

Our well. want lenders volume as partner

We volume what but think But about the going the do. have offers grow it I across to potentially true Tier we we've X, ours. With decided regard customers that making all sense. we're We X, particular to ability to prevents but what to we're the to we're choose -- know staying just Tier want sure pocket. who our again, when one to in makes we we're target volume. to make across very is grow overarching from We looking to are to Tier credit there's X, offers not great of within meaningfully, opportunity CAF excited provide spectrum. That's an growing goal

CAF. to specifically that's So

those because using higher to union going and going pay of going are third who at in to absolutely that environment. asked those with not from those customers they affiliated procuring to advantage. this operating credit CarMax put You They there party. out rates absolutely come want fund consumer. interest cash are to right about higher don't the down be question are cost that down end your a It's the finance a are Again, is be and

thus are, and So we going but to those we consumers, using sell the this quarter those that to because in percentage they're more to will compete believe outsized as than have sometimes are where difficult of it's pie, will, looking a size which shrink the lowering it's XXX% on try focusing We are we it's as environment to the nonfinance financing. long external side pie. CAF, with more that as low folks case, they And back. sensitive. And little XX% consumer a the -- are cars volume, we rate this their very do an again, those That of rank consumers increase to maybe the so. comes of of

want sure in question, lot a I a captured I So lot holistically. your make that of to answer, it

is would Yes, I'm but to allow to going especially answer, thing. more of when spectrum, tomorrow. lots bit partners, having this reality, reasons there cars limit your wide to you great of for absolutely sell we number go customers, we partners just little in many could a add more wouldn't is, We payoffs, X-day a that look, the the which rate-sensitive

volume especially way, time. will you have thoughtful Now do as increase penetration we think I do we it continue a your to to our have an in opportunity Absolutely. And absolutely over grows. But to

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

Just to just picture wanted question. ask type one big

lot out address could things. retooling ability a margin you And you solid you're on the You business? be. of some guys are state in to of side, gets rethinking a kind the doing side But reconditioning maybe and things logistics if that Or to of was talk talked heard background. you approach the things and the which some the with if you have happy want there recon to of or of get about just the I haven't where curious kind I about to

that but is focus. great it didn't examples, specific the reconditioning The talked No, and be the to any Yes. area John. I on mentioned I difference logistics lot going I side. between doing things reconditioning remarks high initiatives a little level. in about is is it just the of reconditioning up. give feel I adding quarter. we're about an of mean, look, I this last

have not internal So performance, replace. when think some much. replace, of outlier And capacity subletting we've non-OEM, some whether in-house after deciding We've as talked that a seeing I on which the to the up bringing as customers realize you it you And add what of utilization, quarter, to lot things some improvements it's with look, then we're do and luxury frame. There's pass to of with got or great reconditioning time not part goals about. honestly, to improvements utilization, between in couple of last better to bucks will obviously, some to we're margin. insignificant. it going store OEM, stuff quite not about that that's hundred it, -- logistics, a that to said, take

it's logistics we from and in or good whether our on about So progress over it's get of to year the reconditioning feel the both there. continue benefit which next both we're fronts, standpoint. going a things to

And just for question it. Got one me. initial

the think I down advertising actually was expense ad year-over-year expense, up. comps were you guys and for

back if just changing guys was thinking timing some there you're you ad about holding thing So are if there spending? kind wondering way of the or maybe or

purely Yes. No, timing. it was

of year. the had target communicated the for at we on the first the what you look If year, for course we're half pretty much was

be to total expect first year, in similar to the And per it's the spend. the half of the of I going back unit so half terms

second So it timing was the some purely quarter. in

question next Morningstar. from take with [Operator David our Instructions]. Whiston We'll

to the back that Wanted on to channel. explanation go other financing

rate said very that also they're that said able you sensitive You to pay more but they're cash. consumers, interest

cash? cash words, ]? most conscious borrowing wealthy are they more? or budget more So Or are [ pay just that In to Are are more or they buyers other unable more are they bucket? they in buyers

that they're consumer It's Again, TrueCash. that may with consumer, form. typically a their in credit may is generally equity have It environments, -- people interest affinity wherewithal today. that generally interest that with cash. majority but going our there this higher-end users cash do those all rate-sensitive some that you'll bank but are very rate be definitely pay in coming to sensitive. out be absolutely, of cash have in to home And or personal check union, be it's is especially people may rate are find that highly consumer. in loan, loan. in It but but higher the the Yes, their It a are rates environment, not

you do more allocation, Or continuing? capital in feeling quality? on credit you the buybacks And cautious see are declines given Okay.

that we're pace expect pace for to like feeling we see on would that year. of the balance and I I'm to communicated, the continue the

back no queue. At this closing questions I'll turn time, for showing any I'm to remarks. call the further Bill in

storm's just our good Also, to and are thoughts I We definitely want our I you, Hurricane associates priority Helene the quarter. Thank to approach safe, progress. Great. is been in associates Listen, and Todd. please safety support, impacted, your talk thank and the feel stores families our with obviously. and want for associates your to number those next you. top stay questions always, the Thank we a is as have and the everyone and as and path, about will communities everybody of my share again our joining of we call their that's

and Fiscal Ladies gentlemen, the Call. Second concludes you. that Thank Quarter Release [indiscernible] Year XXXX Earnings Conference

your line have wonderful this time, disconnect at You day. and a may