Q4 2024 CarMax Inc Earnings Call

Operator: is about to begin. If you need assistance during your conference call today, please press star zero. Ladies and gentlemen, thank you for standing by. Welcome to the Carmax Q4 fiscal year 2024 earnings release conference call. At this time, all participants are in a listen-only mode.

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Speaker Change: Well, ladies and gentlemen, thank.

Speaker Change: Thank you for standing by.

Speaker Change: Welcome to the Q4 fiscal year 'twenty 'twenty for Carmax earnings release Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Operator: After the speaker's presentation, there will be a question and answer session. 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.

Speaker Change: Be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, David Loewenstein VP Investor Relations. Please go ahead.

David L. Lowenstein: Thank you, Shelby. Good morning, everyone. Thank you for joining our fiscal 2024 fourth quarter earnings conference call. I'm here today with Bill Nash, our President and CEO, Enrique Mayor Moore, our Executive Vice President and CFO, and John Daniels, our Senior Vice President, Carmax Auto Finance Operations. Let me remind you, our statements today that are not statements of historical fact, including statements regarding the company's future business plans, prospects, and financial performance, are forward-looking statements we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our current knowledge, expectations, and assumptions and are subject to substantial risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, we disclaim any intent or obligation to update them.

David L. Lowenstein: Thank you Shelby good morning, everyone. Thank you for joining our fiscal 'twenty 'twenty four fourth quarter earnings conference call.

David L. Lowenstein: I'm here today with Bill Nash, our President and CEO Enrique Mayor Moore, our executive Vice President and CFO and John Daniels, Our senior Vice President Carmax Auto finance operations.

David L. Lowenstein: Let me remind you our statements today that are not statements of historical fact, including statements regarding the company's future business plans prospects and financial performance.

David L. Lowenstein: Our forward looking statements, we make pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

David L. Lowenstein: These statements are based on our current knowledge expectations and assumptions and are subject to substantial risks and uncertainties that could cause actual results to differ materially from our expectations.

David L. Lowenstein: In providing projections and other forward looking statements, we disclaim any intent or obligation to update them.

David L. Lowenstein: For additional information on important factors that could affect these expectations, please see our Form 8K filed with the SEC this morning and our annual report on Form 10K for the fiscal year ended February 28, 2023, previously filed with the SEC. Should you have any follow-up questions after the call, please feel free to contact our Investor Relations Department at 804-747-0422, extension 7865. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-ups. Bill?

David L. Lowenstein: For additional information on important factors that could affect these expectations. Please see our form 8-K filed with the SEC. This morning, and our interim report on Form 10-K for the fiscal year ended February 28, 2023 previously filed with the SEC.

David L. Lowenstein: Should you have any follow up questions. After the call. Please feel free to contact our Investor Relations Department at 8047, and 470422 extension 7865 Lastly, let me. Thank you in advance for asking only one question and getting back in the queue for more follow.

William D. Nash: Great. Thank you, David. We're encouraged by the performance of our business during the fourth quarter. We're continuing to leverage our strongest assets, our associates, capabilities, experience, and culture to build momentum as we manage through the cycle. While the affordability of used cars remains a challenge for consumers, pricing improved during the quarter.

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

Speaker Change: We're encouraged by the performance of our business during the fourth quarter, we're continuing to leverage our strongest assets, our associates capabilities experience and culture to build momentum as we manage through the cycle, while affordability of used cars remains a challenge for consumers pricing improved during the quarter.

William D. Nash: We continue to achieve efficiency improvements in our core operations and believe we are well positioned to drive growth as the market turns. In the fourth quarter, we posted our fifth consecutive quarter of sequential year-over-year retail used unit improvement and reported growth in total used unit sales and comps. We delivered strong retail and wholesale GPUs. We increased used saleable inventory units by more than 10% while holding used total inventory units flat year over year.

We continue to achieve efficiency improvements in our core operations and believe we are well positioned to drive growth as the market turns.

Speaker Change: In the fourth quarter, we posted our fifth consecutive quarter of sequential year over year retail used unit improvement in reported growth in total used unit sales and comps we delivered strong retail and wholesale Gpus, we increased use saleable inventory units more than 10%, while holding us total inventory units flat year over year, we continue.

William D. Nash: We continued to actively manage our SG&A, and we grew CAF income significantly as we delivered a substantial reduction in the provision for loan losses year over year while maintaining stable net interest margin sequentially. For the fourth quarter of FY24, our diversified business model delivered total sales of $5.6 billion, down 2% compared to last year. This was driven by lower retail and wholesale prices and lower wholesale volume, partially offset by higher retail volume. In our retail business, total unit sales increased 1.3%, and used unit comps were up 0.1%. The average selling price declined approximately $600 per unit, or 2% year over year.

Speaker Change: To actively manage our SG&A.

Speaker Change: And we grew Caf income significantly as we delivered a substantial reduction in the provision for loan losses year over year, while maintaining stable net interest margin sequentially.

For the fourth quarter of FY 'twenty for our diversified business model delivered total sales of $5 $6 billion down 2% compared to last year.

Speaker Change: This was driven by lower retail and wholesale prices and lower wholesale volume, partially offset by higher retail volume.

Speaker Change: In our retail business total unit sales increased one 3% in used unit comps were up <unk>, 1% average selling price declined approximately $600 per unit or 2% year over year.

William D. Nash: Our market share data indicates that our nationwide share of zero to 10 year-old used vehicles declined from 4% in calendar 22 to 3.7% in 2023, as we prioritize profitability over near-term market share growth. As always, we continue to test price elasticity to validate our decision. External title data shows that our market share initially accelerated relative to our performance across the second half of 2022 but then came under pressure during multiple periods of steep depreciation. We remain confident in our ability to accelerate market share growth as used vehicle affordability continues to improve and as the volatility of vehicle value stabilizes. Fourth quarter retail gross profit per used unit was $2,251, relatively consistent with last year's fourth quarter record of $2,277. However, wholesale unit sales were down 4% versus the fourth quarter last year.

Speaker Change: Our market share data indicates that our nationwide share of zero to 10 year old used vehicles declined from 4% in calendar 'twenty two to three 7% in 2023, as we prioritize profitability over near term market share growth.

Speaker Change: As always we continue to test price elasticity to validate our decisions.

Speaker Change: External title that data shows that our market share initially accelerate accelerated relative to our performance across the second half of 2022. It didn't came under pressure during multiple periods of steep depreciation.

Speaker Change: We remain confident in our ability to accelerate market share growth as used vehicle affordability continues to improve and as the volatility of vehicle value stabilizes.

Speaker Change: Fourth quarter retail gross profit per used unit was $2251 relatively consistent with last year's fourth quarter record 2277.

Speaker Change: Wholesale unit sales were down 4% versus the fourth quarter last year average selling prices declined approximately $250 per unit or 3% year over year.

William D. Nash: Average selling prices declined approximately $250 per unit, or 3% year-over-year. Fourth quarter wholesale gross profit per unit was $11.20, slightly down from $1,187 a year ago. As a reminder, last year's fourth quarter wholesale GPU was within $4 of our all-time record and benefited from appreciation and strong dealer demand, particularly at the end of last year's quarter. This prior year appreciation dynamic impacted our year-over-year performance in buys as well. We bought approximately 234,000 vehicles during the quarter, down 11% from last year.

Speaker Change: Fourth quarter wholesale gross profit per unit was 11 20 slightly down from $1187 a year ago.

Speaker Change: As a reminder, last year's fourth quarter wholesale GPU was within $4 of our all time record and benefited from appreciation and strong dealer demand, particularly at the end of last year's quarter.

Speaker Change: This prior year prior year appreciation dynamic impacted our year over year performance in buys as well we bought approximately 234000 vehicles during the quarter down 11% from last year.

William D. Nash: Of these vehicles, we purchased approximately 213,000 from consumers, with slightly more than half of those buys coming through our online instant appraisal experience. With the support of our Edmunds sales team, we sourced the remaining approximately 21,000 vehicles through dealers, up 45% from last year. For our fourth quarter online metrics, approximately 14% of retail unit sales were online, consistent with last year. Additionally, approximately 55% of retail unit sales were omni-sales this quarter, up from 52% in the prior year. All of our fourth quarter wholesale auctions and sales were virtual and are considered online transactions.

Speaker Change: Of these vehicles, we purchased approximately 213000 from consumers with slightly more than half of those bonds coming through our online instant appraisal experience.

Speaker Change: With the support of our admin and sales team we source the remaining approximately 21000 vehicles through dealers up 45% from last year.

Speaker Change: For our fourth quarter online metrics approximately 14% of retail unit sales were online consistent with last year.

Speaker Change: Approximately 55% of retail unit sales for omni sales this quarter up from 52% in the prior year.

Speaker Change: All of our fourth quarter wholesale auctions and sales were virtual and are considered online transactions. This represents 17% of total revenue total revenue from online transactions was approximately 30% in line with last year.

William D. Nash: This represents 17% of total revenue. Total revenue from online transactions was approximately 30%, in line with last year. Carmax Auto Finance, or CAF, delivered income of $147 million, up 19% from $124 million during the same period last year. John will provide more detail on consumer financing, the loan loss provision, and cap contribution in a few minutes, but at this point, I'd like to turn the call over to Enrique, who will provide more information on our fourth quarter financial performance. Enrique?

Speaker Change: Carmax auto finance or Caf delivered income up $147 million up 19% from 124 million during the same period last year.

Speaker Change: John will provide more detail on consumer financing for loan loss provision and cash contribution of a few minutes, but at this point I'd like to turn the call over to Enrique who will provide more information on our fourth quarter financial performance Enrique Thanks, Bill and good morning, everyone. As Bill noted we drove another quarter of sequential improvement in our used unit sales.

Enrique N. Mayor: Thanks Bill and good morning everyone. As Bill noted, we drove another quarter of sequential improvement in our used unit sales with strong per unit margins for both used and wholesale and strong cap contribution growth while staying focused on managing SG&A. With the quarter net earnings per diluted share was $0.32 versus $0.44 a year ago. Last year's quarter benefited from an $0.08 tailwind due to the receipt of Extended Protection Plan, or EPP, profit sharing revenues, as well as $0.04 from a lower tax rate compared to a more normalized tax rate this quarter. Total gross profit was $586 million, down 4% from last year's fourth quarter. Used retail margin of $387 million was flat, with higher volume partially offset by a slightly lower per unit margin. We'll see a vehicle margin decrease by 9% to $129 million, a decrease in volume and per unit margin compared to last year. Other gross profit was $69 million, down 15% from a year ago.

Enrique: With strong per unit margins for both used and wholesale and strong cash contribution growth, while staying focused on managing SG&A.

Enrique: Fourth quarter net earnings per diluted share was 32 cents versus 44 cents a year ago last year's quarter benefited from an eight cent tailwind due to the receipt of extended protection plan or E. P. P profit sharing revenues as well as for <unk> from a lower tax rate compared to a more normalized tax rate this quarter.

Enrique: Total gross profit was $586 million down 4% from last year's fourth quarter.

Enrique: Used retail margin of $387 million was flat with higher volume, partially offset by a slightly lower per unit margins.

Enrique: Wholesale vehicle margin decreased by 9% to $129 million with a decrease in volume and per unit margin compared to last year.

Enrique: Other gross profit was $69 million down 15% from a year ago.

Enrique N. Mayor: This decrease was driven primarily by last year's receipt of $16 million in profit-sharing revenues from our EPP partners. As noted on our third-quarter call, we did not expect to receive profit-sharing revenues this year, as our partners experienced inflationary pressures and consumers returned to more normalized driving patterns. Partially offsetting this dynamic was the positive impact from price elasticity testing on our extended service product. During the quarter, we tested raising MaxCare margins per contract sold, which resulted in a slight decrease in product penetration while driving overall profitability. We are encouraged by these results, and we have ruled out the margin increase nationally. Our expectation is that this action will drive approximately $20 per retail unit of incremental EPP margin in FY25. Services revenue decreased by $4 million as compared to last year's fourth quarter.

Enrique: This decrease was driven primarily by last year's receipt of $16 million in profit sharing revenues from our <unk> partners.

Enrique: As noted on our third quarter call. We did not expect to receive profit sharing revenues. This year as our partners experienced inflationary pressures and consumers return to more normalized driving patterns.

Enrique: Partially offsetting this dynamic was the positive impact from price elasticity testing on our extended service product during the quarter, we tested raising maxicare margins per contract sold which resulted in a slight decrease in product penetration, while driving overall profitability.

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

Enrique: Our expectation is that this action will drive approximately $20 per retail unit of incremental E. P. P margin in FY 'twenty five.

Enrique: Service decreased by $4 million as compared to last year's fourth quarter.

Enrique N. Mayor: This decrease was primarily driven by wage pressures and planned lower production in the quarter as we pre-built inventory in the third quarter due to holiday timing. For the full year, service improved by $75 million year over year. Our expectation is that we will continue to see significant year-over-year favorability in FY25. However, the extent of this improvement will be governed by sales performance given the leveraged, deleveraged nature of service. Third-party finance fees were down $3 million from a year ago, driven by higher volume in Tier 3, for which we pay a fee, and lower volume in Tier 2, for which we receive a fee. On the SG&A front, expenses for the fourth quarter were $581 million, up 1% from the prior year's quarter.

Enrique: This decrease was primarily driven by wage pressures and planned lower production in the quarter as we pre built inventory in the third quarter due to holiday timing.

Enrique: For the full year service improved by $75 million year over year.

Enrique: Our expectation is that we will continue to see significant year over year favorability in FY 'twenty five.

Enrique: The extent of this improvement will be governed by sales performance given the leverage deleverage nature of service.

Third party finance fees were down $3 million from a year ago, driven by higher volume in tier three for which we pay a fee and lower volume in tier two for which we receive a fee.

Enrique: On the SG&A front expenses for the fourth quarter with $581 million up 1% from the prior year's quarter.

Enrique N. Mayor: Our continued discipline in spend and investment levels allowed us to come in flat year over year when excluding share-based compensation. As a reminder, in the fourth quarter, we passed the year mark since initiating our significant cost management effort. SG&A dollars for the fourth quarter versus last year were mainly impacted by three factors. First, other overhead decreased by $16 million. This decrease was driven primarily from reductions in spend for our technology platforms and from the continued favorableability in non-CAF uncollectible receivables. Second, total compensation and benefits increased by $7 million, excluding an $8 million increase in share-based compensation.

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

As a reminder, in the fourth quarter, we passed the year Mark since initiating our significant cost management efforts.

Enrique: SG&A dollars for the fourth quarter versus last year were mainly impacted by three factors first other overhead decreased by $16 million. This decrease was driven primarily from reductions in spend for technology platforms and from the continued favorability in noncash uncollectable receivables.

Enrique: Second total compensation and benefits increased by $7 million, excluding an $8 million increase in share based compensation.

Enrique N. Mayor: This increase was mostly driven by a higher corporate bonus accrual in the quarter. Third, advertising increased by $5 million. This reflects an increase, as communicated last quarter, due primarily to the timing of per-unit spend. For full year FY24, we strongly outperformed the target we set out at the beginning of the year of requiring low single-digit gross profit growth to lever SG&A, even when excluding the benefits from this year's legal settlement. Our ability to materially drive SG&A costs down year over year was led by favorability and non-calf uncollectible receivables that reflected improved execution at our stores, at our corporate offices, and by external partners. Additionally, our focus on driving efficiency gains in our stores and CECs. The Planned Reduction of Technology Spend and by Aligning Staffing Levels and Marketing Spend to Sales.

Enrique: The increase was mostly driven by a higher corporate bonus accrual in the quarter.

Enrique: Third advertising increased by $5 million. This reflects an increase as communicated last quarter due primarily to the timing of per unit spend.

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

Enrique: Our ability to materially drive SG&A costs down year over year was led by favorability in noncash uncollectable receivables that reflects improved execution at our stores and our corporate offices and by external partners.

Enrique: Our focus on driving efficiency gains in our stores and see he sees.

Enrique: The planned reduction of technology spend and by aligning staffing levels and marketing spend to sales.

Enrique N. Mayor: In FY25, we expect to require low single-digit gross profit growth to lever SG&A, when excluding FY24's favorable legal settlement. This reinforces our pathway back to a lower SG&A leverage ratio with our initial goal of returning to the mid-70% range over time once we see healthier consumer demand. We anticipate that SG&A will be pressured in the first quarter. As a reminder, we received $59 million in a legal settlement during the first quarter of FY24. Additionally...

Enrique: In FY 'twenty five we expect to require low single digit gross profit growth to lever SG&A when excluding FY 'twenty four is favorable legal settlements.

Enrique: This reinforces our pathway back to a lower SG&A leverage ratio with our initial goal of returning to the mid 70% range over time once we see healthier consumer demand.

Enrique: We anticipate that SG&A will be pressured in the first quarter.

Enrique: As a reminder, we received $59 million and a legal settlement during the first quarter of FY 'twenty four.

Additionally.

Enrique N. Mayor: In this year's first quarter, we expect an approximately $25 million impact due to share-based compensation for certain... retirement-eligible executives and a lapping of favorable reserve adjustments related to non-CAF uncollectible receivables during last year's first quarter. With regard to marketing, going forward, we plan to speak to our spend on a per total unit basis, inclusive of total retail and wholesale units. We believe this more holistically reflects the impact of our marketing initiatives, which support both vehicle sales and buys. In FY25, we expect full-year marketing spend on a total unit basis to be similar to FY24 at approximately $200. Regarding capital structure, during the quarter, we repurchased approximately 686,000 shares for a total spend of $49 million.

Enrique: In this year's first quarter, we expect an approximately $25 million impact due to share based compensation for certain retirement eligible executives and the lapping of favorable reserve adjustments related to noncash uncollectible receivables during last year's first quarter.

Enrique: With regard to marketing going forward, we plan to speak to I spend on a per total unit basis inclusive of total retail and wholesale units.

Enrique: We believe this more holistically reflects the impact of our marketing initiatives, which support both vehicles sales and buys.

Enrique: In FY 'twenty five we expect full year marketing spend on a total unit basis to be similar to FY 'twenty four at approximately $200.

Enrique: Regarding capital structure during the quarter, we repurchased approximately 686000 shares for a total spend of $49 million.

Enrique N. Mayor: Starting in the first quarter, we intend to modestly accelerate the pace of our share repurchases above the pace that we implemented in our third quarter of fiscal year 2015. As of the end of the quarter, we had $2.36 billion of repurchase authorization remaining. For capital expenditures, we anticipate an investment level between $500 million and $550 million, up from $465 million in FY24. The year-over-year increase in plant spending is primarily related to the timing of spending for new stores. Like in FY24, the largest portion of our CapEx investment remains related to the land and the build-out of facilities for long-term growth capacity in off-site reconditioning and auction. In FY25, we plan to open five new store locations. Consistent with our strategy, these new locations will be smaller, cross-functional stores that complement our omni-channel strategy and leverage our scale. We also plan to open our second stand-alone reconditioning facility, which will be located in Richland, Mississippi, as well as one off-site auction location in the Los Angeles Metro Market.

Enrique: Starting in the first quarter, we intend to modestly accelerate the pace of our share repurchases above the pace that we implemented in the third quarter of fiscal year 'twenty four.

Enrique: As of the end of the quarter, we had $2 $3 $6 billion of repurchase authorization remaining.

Enrique: For capital expenditures, we anticipate an investment level between $500 million to $550 million up from the $465 million in FY 'twenty for the.

Enrique: The year over year increase in planned spending is primarily related to the timing of spend for new stores.

Enrique: Like in FY 'twenty for the largest portion of our Capex investment remains related to the land and the buildout of facilities for long term growth capacity and I'll say, it reconditioning and options.

Enrique: In FY 'twenty five we plan to open five new store locations consistent with our strategy. These new locations will be smaller cross functional stores and complement our omni channel strategy and leverage our scale.

We also plan to open our second Standalone reconditioning facility, which will be located in Richland, Mississippi.

Enrique: As well as one offsite auction location in the Los Angeles Metro market.

Enrique N. Mayor: We currently expect to open multiple offsite reconditioning and auction locations in FY21. Our extensive nationwide footprint and logistics network continue to be a competitive advantage for Carmax. Now, I'd like to turn the call over to John. Thanks, Enrique, and good morning, everyone.

We currently expect to open multiple I'll say reconditioning and auction locations in FY 'twenty six.

Enrique: Our extensive nash nationwide footprint and logistics network continues to be a competitive advantage for carmax.

Enrique: Now I'd like to turn the call over to John Thanks, Enrique and good morning, everyone.

Jon G. Daniels: During the fourth quarter, Carmax's auto finance originated approximately $1.8 billion, resulting in sales penetration of 42.3% net of three-day payoffs, which was down 240 basis points from the same period last year. The weighted average contract rate charged to new customers grew to 11.5%, an increase of 60 basis points from the previous year's fourth quarter and 20 basis points sequentially. Tier 2 penetration in the quarter was 18.6%, down from 19.4% observed during last year's fourth quarter.

Jon G. Daniels: The fourth quarter Carmax auto finance originated approximately $1 8 billion, resulting in sales penetration of 42, 3% net of three day payoffs, which was down 240 basis points from the same period last year.

Jon G. Daniels: The weighted average contract rate charged to new customers grew to 11, 5% an increase of 60 basis points from the last year's fourth quarter and 20 basis points sequentially.

Jon G. Daniels: Tier two penetration in the quarter was $18 eight 2% down from 19, 4% observed during last year's fourth quarter.

Jon G. Daniels: Tier 3 accounted for 8.2% of sales, up 130 basis points from last year, as a partner began to ease previously-implemented tightness. Also impacting each of these year-over-year results is CAF's continued decreased percentage in Tier 3 as well as the increased test volume in Tier 2. Cap income for the quarter was $147 million, up $23 million from the same period last year.

Jon G. Daniels: Tier three accounted for eight 2% of sales up 130 basis points from last year as our partner began to ease previously implemented tightening.

Also impacting each of these year over year results as caps continued decreased percentage in tier three as well as the increased test volume in tier two.

Jon G. Daniels: GAAP income for the quarter was $147 million up $23 million from the same period last year.

Jon G. Daniels: This improvement was primarily driven by a $26 million year-over-year reduction in the provision for loan losses, slightly offset by a $3 million reduction in total interest margin. Note fair market value adjustments from our hedging strategy accounted for $4 million in expense this quarter versus $1 million of income in last year's fourth quarter. The $72 million provision within the quarter resulted in a reserve balance of $483 million, or 2.78% of receivables, compared to 2.92% at the end of the third quarter.

Jon G. Daniels: This improvement was primarily driven by a $26 million year over year reduction in the provision for loan losses.

Jon G. Daniels: Lately offset by a $3 million reduction in total interest margin.

Jon G. Daniels: No fair market value adjustments from our hedging strategy accounted for $4 million in expense this quarter versus $1 million of income in last year's fourth quarter.

The $72 million provision within the quarter resulted in a reserve balance of $483 million or 2.78% of receivables compared to $2, 92% at the end of the third quarter.

Jon G. Daniels: This highlights the significant impact that Originations under our tightened credit policy are having on the reserve as they continue to become a larger percentage of the full portfolio. In addition, observed performance within the portfolio aligned closely to our reserve expectations at the end of the third quarter and contributed to the reduction in the reserve. The margin-to-receivable rate of the portfolio remained steady at 5.9% for the quarter.

Jon G. Daniels: This highlights the significant impact that originations under our tightened credit policy are having on their reserve as they continue to become a larger percentage of the full portfolio.

Jon G. Daniels: In addition observed performance within the portfolio align closely to our reserve expectations at the end of the third quarter and contributed to the reduction in the reserve.

Jon G. Daniels: The margin to receivable ratio rate of the portfolio remained steady at five 9% for the quarter. We remain pleased with our ability to maintain a stable interest margin despite keeping our credit tightening in place.

Jon G. Daniels: We remain pleased with our ability to maintain a stable interest margin despite keeping our credit tightening in place. As I noted earlier, CAP continues to test across varying parts of the credit spectrum. Ultimately, CAP is building the capability to scale its participation across all credit tiers, which will help to capture finance economics, drive sales, and fully complement our valued lending partnerships that are a key foundation of Carmax's best-in-class credit platform. Now, I'll turn the call back over to Bill. Thank you, John and Enrique.

Jon G. Daniels: As I noted earlier cap continues to test across a bearing parts of the credit spectrum. Ultimately cap is building the capability to scale its participation across all credit tiers, which will help to capture finance economics drive sales and fully complement our valued lending partnerships that are a key foundation of Carmax is best in class.

Jon G. Daniels: The platform now I'll turn the call back over to Bill. Thank you Jon Enrique <unk>.

William D. Nash: Fiscal 2024 was a challenging year across the used car industry. As vehicle affordability and widespread macro factors continue to pressure sales, in response, we focused on what we could control and took deliberate steps to support our business both in the near term and long run. In addition to achieving the efficiency across our entire organization that Enrique talked about, I am proud of the progress we've made in further enhancing our omni-channel capabilities as we prioritize projects designed to optimize experiences for our associates and customers and drive operating efficiency. Some examples include: for retail, we leverage data science, automation, and AI to make it even easier for customers to complete key transaction steps like vehicle transfers on their own.

Jon G. Daniels: Fiscal 2024 was a challenging year across the used car industry is vehicle affordability widespread macro factors continue to pressure sales. In response, we are focused on what we can control and took deliberate steps to support our business, both the near term and long run.

William D. Nash: In addition to achieving efficiencies across our entire organization that Enrique talked about I am proud of the progress we've made in further enhancing our omnichannel.

William D. Nash: Omnichannel capabilities as we prioritize projects designed to optimize experiences for our associates and customers and drive operating efficiencies.

William D. Nash: Examples include for retail, we leverage data science automation and AI to make it even easier for customers to complete key transaction steps like vehicle transfers on their own. We also enhanced digital checkout functionality for appraisal customers, enabling them to submit their documents remotely and unlocking the ability to participate in our 30 minute express drop off experience.

William D. Nash: We also enhanced digital checkout functionality for appraisal customers, enabling them to submit their documents remotely and unlocking their ability to participate in our 30-minute express drop-off experience. Additionally, we expanded capabilities for Sky, our 24-7 virtual assistant, to include managing finance applications, vehicle transfers, appointment reservations, and the appraisal office. Customer adoption of Sky has been strong, and this has not only created efficiencies but also widened bandwidth for our associates. For wholesale and vehicle acquisition, we modernized our auction platform to offer new services, including single sign-on across all of our systems. AI Enhanced Condition Reports, Early Bidding Capabilities, and Automated Bills of Sale.

William D. Nash: Additionally, we expanded capabilities for sky or 24, seven virtual assistant to include managing finance applications vehicle transfers appointment reservations and appraisal offers customer adoption of Sky has been strong and this has not only created efficiencies, but also widened bandwidth for our associates.

William D. Nash: For wholesale vehicle acquisition, we modernize our auction platform to offer new services, including single sign on across all of our systems AI enhanced condition reports early bidding capabilities and automated builds a sale. Additionally, we streamlined Max offer by rolling out our instant offer experience to all participating dealers.

William D. Nash: Additionally, we streamline Mac's offer by rolling out our instant offer experience to all participating dealers. In the credit space, we have now incorporated all of our lenders into our finance-based shopping platform, expanding the breadth and depth of offers available to our customers. We continue to see great adoption with more than 80% of consumers utilizing this best-in-class pre-qualification product as they begin the credit process. Finally, Edmonds launched a number of research and buy tools in support of its goal to be the leader in easy research.

William D. Nash: In the credit space, we've now incorporated all of our lenders into our finance based shopping platform expanding the breadth and depth of offerings available to our customers. We continue to see great adoption with more than 80% of the consumers utilizing this best in class Prequalification product as they begin the credit process.

William D. Nash: Finally, edmunds launched a number of research and bi tools in support of this goal to be the leader needs to research. These include range test charging efficiencies Vin level battery health assessments, and EV tax credit incentive gods.

William D. Nash: These include range tests, charging efficiencies, VIN-level battery health assessments, and EV tax credit incentive guides. Looking ahead to fiscal 2025, we will build on our progress from last year to further expand our competitive mode. We are confident that the actions we are taking will enable us to grow sales, profitable market share, and profits while also driving additional operational efficiencies at the market turn. Some examples include, for retail, we plan to launch an evolved hub within our customers' online shopping accounts that will make it even easier to seamlessly go back and forth between assisted help and self-progression. Customers will be able to see the steps they have taken on their shopping journey, whether on their own or with help from a CEC or store associate.

William D. Nash: Looking ahead to fiscal 2025, we will build on our progress from last year to further extend our competitive mode. We're confident that the actions. We are taking will enable us to grow sales profitable market share and barge while also driving additional operational efficiencies as the market turns. Some examples include for retail we plan to launch an evolved hub.

William D. Nash: Within our customers' online shopping accounts that will make it even easier to seamlessly go back and forth between assisted help can self progression customers will be able to see the steps. They have taken on their shopping journey, whether on their own with help from our CEC. Your store associate the hub will also guide next steps and promote Maxicare our extended service plan offering.

William D. Nash: The Hub will also guide next steps and promote MaxCare, our extended service plan offer. Additionally, we will continue to digitize work in support of our focus on building a leaner and high-value assistance model for our CECs. This will enable existing resources to support higher transaction volume as we grow traffic and drive stronger conversion. As part of this effort, we will further integrate Sky into key communication channels and improve its ability to serve as the initial point of contact across many points in the customer shopping journey. Sky will manage the next steps on its own or seamlessly transition customers to a CEC associate via the customer's channel of choice.

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

William D. Nash: Part of this effort, we will further integrate sky into key communication channels improve its ability to serve as the initial point of contact across many points in the customer shopping journey.

William D. Nash: Scott will manage next steps on its own or seamlessly transition customers to our CEC associates via the customer channel of choice.

William D. Nash: For vehicle acquisition, we'll focus on bringing even more vehicles into our ecosystem. A key component of this will be our continued partnership with Edmunds to acquire vehicles from dealers. In the credit space, we plan to further optimize our prequalification product by integrating the customer's instant offer into the application process.

William D. Nash: For vehicle acquisition will focus to bring even more vehicles into our ecosystem. A key component of this will be our continued partnership with edmunds to acquire vehicles from dealers.

William D. Nash: The credit space, we plan to further optimize our prequalification product by integrating the customers' instant offer into the application process as John mentioned, we will also continue to test cast participation across various parts of the credit spectrum as always we will continue to pursue opportunities that enable us to provide outstanding offers for consumers, while driving sales and economics for the <unk>.

William D. Nash: As John mentioned, we will also continue to test CAF's participation across varying parts of the credit spectrum. And, as always, we will continue to pursue opportunities that enable us to provide outstanding offers for consumers while driving sales and profits for the business. In regard to our long-term financial targets, we're maintaining our goal to sell more than 2 million combined retail and wholesale units annually. However, we are extending the timeframe for this goal between fiscal 2026 and fiscal 2030 due to the uncertainty in the timing of the market recovery and as we continue to focus on profitable market share growth. We will adjust the timeframe as we gain greater visibility into the industry's pace of recovery. Given higher average selling prices, we expect to achieve the $33 billion annual revenue target sooner than usual.

William D. Nash: Isn't it.

William D. Nash: In regard to our long term financial targets, we're maintaining our goal to sell more than 2 million combined retail and wholesale units annually. However, we are extending the timeframe for this goal between fiscal 2026 in fiscal 'twenty 30, due to the uncertainty in the timing of the market recovery and as we continue to focus on profitable market share growth, we will adjust the.

William D. Nash: Timeframe as we gain greater visibility into the industry's pace of recovery.

William D. Nash: Given higher average selling prices, we expect to achieve the 33 billion annual revenue target sooner than units and similarly, we also expect to achieve more than 5% nationwide market share of zero to 10 year old used vehicle sooner than units given the recent volatility in vehicle values. We will provide an updated timeframe for our expected achievement at the end of fiscal year 2000.

William D. Nash: And similarly, we also expect to achieve more than 5% of the nationwide market share of 0-10 year-old used vehicles sooner than units. Given the recent volatility in vehicle values, we will provide an updated time frame for our expected achievement at the end of fiscal year 2025. Before turning to Q&A, I want to recognize two significant milestones. First, Carmax celebrated its 30th anniversary during fiscal 2024.

William D. Nash: 25.

Speaker Change: Before turning to Q&A I want to recognize two significant milestones first carmax celebrated its 30th anniversary during fiscal 2024, I want to thank and congratulate all of our associates for the work that they do they are the differentiator key to our success.

William D. Nash: I want to thank and congratulate all of our associates for the work that they do. They are the differentiator and the key to our success. Second, Fortune Magazine recently named Carmax one of the 100 best companies to work for for the 20th year in a row.

Second Fortune magazine recently named Carmax is one of the 100 best companies to work for for the 20th year in a row I'm incredibly proud of this recognition, particularly as we faced a challenging year is due to our associates' commitment to supporting each other our customers and our communities every day.

William D. Nash: I'm incredibly proud of this recognition, particularly as we face a challenging year. It's due to our associates' commitment to supporting each other, our customers, and our communities every day. In closing, I'm proud of the progress we've made on our journey to deliver the most customer-centric experience in the industry. I'm encouraged by the sequential quarterly improvements we're driving across our business, and I'm excited about our focus for fiscal 2025. Our core operations are strong, and we are well positioned to drive growth as macro conditions improve. With that said, we'll be happy to take your questions. So Shelby, at this time, if you would like to ask a question, please press the star and 1 on your touch-tone phone. You may remove yourself from the queue at any time by pressing star 2.

Speaker Change: In closing I'm proud of the progress we've made on our journey to deliver the most customer centric experience in the industry.

Speaker Change: <unk> by the sequentially quarterly improvements, we're driving across our business and I'm excited about our focuses for fiscal 2025, our cooperations are strong and we're well positioned to drive growth as macro conditions improve with that we'll be happy to take your questions. So Shelby.

Speaker Change: At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone.

Speaker Change: You may remove yourself from the queue at any time by pressing star to once again that is star one to ask a question.

Operator: Once again, that is Star and 1 to ask a question. We will pause for a moment to allow questions to queue. And your first question comes from the line of Seth Basham with Wedbush Curities. Your line is open. You may now ask your question. Thanks a lot.

Speaker Change: We will pause for a moment to allow questions to queue.

Speaker Change: And your first question comes from the line is set the Shah with Wedbush Securities. Your line is open and you May now ask your question.

Speaker Change: Thanks, a lot I have one quarterly specific question and then one big picture question on the quarter. It seems like service gross profit was weaker than we anticipated can you help us understand how much of that pressure was transitory and how much improvement we should see in the service line in 2025.

Seth Mckain Basham: I have one quarterly specific question and then one big picture question. For the quarter, it seems like service gross profit was weaker than we anticipated. Can you help us understand how much of that pressure was transitory and how much of an improvement we should see in the service line in 2025? Yeah, thanks.

Speaker Change: Yes.

Speaker Change: Yeah. Thanks, Thanks, Matt Great question, we do believe it is transitory we did have a couple of things from a year over year standpoint, the planned lower production that we had communicated so we did expect some headwinds there in the fourth quarter and we also had some wage pressures now that being said we have undertaken in the fourth quarter, which will carry forward into <unk>.

Enrique N. Mayor: Thanks for the great question. You know, we do believe it is transitory. We did have a couple things from a year over year standpoint, the planned lower production that we had communicated. So we did expect some headwinds there.

William D. Nash: We also had some wage pressures. Now that being said, what we have undertaken in the fourth quarter, which we'll carry forward into next year, more efficiency initiatives, things for labor specifically. We've invested in RFID tracking of inventory, we're going to leverage our tech and engineering investments to enhance reporting in our stores, we're focused on driving more max care work to our shops, and at the same time, we've also taken labor and parts rates up to help offset inflationary pressures. So we do expect to see improvement, significant improvement year over year, just like we delivered this year, a significant improvement for the year as a whole, and we expect that same next year. Now it is also certainly related to sales performance as well, given the leveraged nature of RFID. You indicated on your last call that you started to see an improvement in market share towards the end of the fiscal third quarter. It seems like things slipped a little bit in the fourth quarter. Can you help us understand why and when we should expect to see market share increases going forward as the cycle turns? Yeah, a great question, Seth.

Speaker Change: Next year is even more efficiency.

Speaker Change: Initiatives things and for labor, specifically, we've invested in the RFID tracking of inventory.

Speaker Change: Our leverage checking and engineering investments to enhance reporting in our stores, we're focused on driving more Max care work to our shops and at the same time, we've also taken labor in powertrain.

Speaker Change: To help offset inflationary pressures. So we do expect to see improvement a significant improvement year over year, just like we delivered this year is a significant improvement for the year as a whole and we expect that same next year now. It is also certainly related to sales performance as well given the leverage deleverage nature of service.

Yeah.

Speaker Change: Understood. Thank you for that color and then secondly, bill with regards to market share.

William D. Nash: You indicated on your last call that you're starting to see an improvement in market share towards the end of the fiscal third quarter. It seems like things slipped a little bit in the fourth quarter coupon help us understand why and when should we expect to see market share increases going forward as the cycle times, Yeah, Great question, Seth and you're right last quarter I talked about October.

William D. Nash: And you're right. Last quarter, I talked about October from a year-over-year standpoint actually inflecting positively, but also during the quarter, the third quarter, I talked about the steep depreciation. It would be interesting to see how competitors reacted. When I step back and think about market share kind of at the highest level, the two things that have been impacting us this year, and really some of it was last year as well, are affordability, and then, more relevant to this year, the steep depreciation periods that we've seen. So from the affordability standpoint, we've talked about that throughout the year. As far as consumers, maybe trading down, trading into older vehicles, into zero- to ten-year-old cars that maybe we don't sell, or just basically standing on the sidelines, because we see that there's demand out there, yet people aren't actually pulling the trigger.

William D. Nash: From a year over year standpoint, actually in selecting a positive but also during the quarter third quarter I talked about the steep depreciation it was gonna be interesting to see how competitors reacted when I step back and think about market share kind of at the highest level.

William D. Nash: The two things that have been impacting us this year and really some of it was last year as well our affordability and then more relevant to this year is the steep depreciation periods that we've seen so from the affordability standpoint, we've talked about that throughout the year as far as consumers may be trading down trading into older vehicles into zero to 10 year old car.

William D. Nash: Or is that maybe we don't sell or just basically standing on the sidelines because we see that there is demand out there yet people arent actually pulling the trigger.

William D. Nash: The other thing that we saw during the year was two very steep depreciation cycles. If I look at last year's calendar year, and I talked about it in my prepared remarks, we were growing market share coming out of, and improving our market share coming out of last year. And then we ran into a period of, let's call it, four or five months of steep depreciation starting in about April, and it was about $3,000. Then it stabilized for a little bit, and then we finished out the year with, again, another steep depreciation. Probably the steepest we've seen in the shortest period of time, by about another $3,000.

William D. Nash: The other thing that we saw during the year, we saw two very steep depreciation cycles. If I look at last year's calendar year and I talked about in my prepared remarks, we were growing market share coming out of we are improving our market share coming out of last year.

William D. Nash: And then we ran into a period, let's call it four or five months of steep depreciation starting in about April.

William D. Nash: It was about $3000.

William D. Nash: And then it stabilized to a little bit and then we finished out the year with again another steep depreciation probably the steepest we've seen in the shortest period of time of about another $3000 and as we've talked about before when we see the steep depreciation that's really when we're testing our pricing elasticity, because we know the competitors for their own reasons and for their business models may end up taking down prices.

William D. Nash: And as we've talked about before, when we see the steep depreciation, that's really when we're testing our pricing elasticity because we know that competitors, for their own reasons and for their business models, may end up taking down prices to move inventory, that kind of thing. And what we've said is we're going to continue to move forward on profitable market share growth. I think what we saw in the fourth quarter; dealers were trying to figure that out in October because a year ago, if you remember, we saw steep depreciation. There was a big influx where we saw dealers letting inventory go. And then what happened at the beginning of the first quarter; they ended up buying a bunch of cards because they had sold through too many, and that drove up appreciation.

William D. Nash: To move inventory that kind of thing and what we've said is we're going to continue to move forward on profitable market share growth. So I think what we saw in the fourth quarter dealers were trying to figure that out in October because a year ago. If you remember we saw steep depreciation there was a big influx of where we saw dealers letting inventory go in.

William D. Nash: And then what happened in the beginning of the first quarter. They ended up buying a bunch of cars because they had it sold through too much net drove up appreciation. So I think this year dealers were a little bit delayed which is why you saw a little bit of an inflection in October.

William D. Nash: So I think this year, dealers were a little bit late, which is why you saw a little bit of an inflection in October. But then we saw a sell-off in November and December. Now, the good news is that with the January data we have, we can actually see where we're improving our market share in January. February, we don't have the actual data yet, but we feel good about February.

William D. Nash: But then we saw a sell off in November and December now the good news is the January data. We have we can actually see where were improving our market share in in January February we don't have the actual data yet, but we feel good about about February so I think from a market share standpoint, there's this.

William D. Nash: So I think from a market share standpoint, this volatility in value can be challenging, and we'll continue to work. And that's one of the reasons why we want to see how this kind of pans out over this. And we'll take our next question from Sharon Zackfia with William Blair. Your line is open. Please ask your question. Hi, good morning.

William D. Nash: <unk> volatility.

William D. Nash: It can be challenging and we will continue to work it and that's one of the reasons why we want to see how this kind of pans out over this year before we update that target. So hopefully that color is helpful.

William D. Nash: And we'll take our next question from Sharon Zackfia with William Blair. Your line is open. Please ask your question.

Sharon Zackfia: Hi, Good morning, I guess two.

Sharon Zackfia: I guess two questions, and hopefully you guys will forgive me, but on the improved affordability, can you give us some metrics around that? I mean, it's clear that used car prices are coming down, and hopefully rates are top-ish. So, what was kind of an average loan payment that you originated this quarter versus maybe the third quarter or, you know, some historical benchmark just to give us an idea of how that's improving for the customer? And then, secondarily, just on that market share dynamic, is there any region or any, you know, particular cohort of demographics that you've been more susceptible to this market share loss? Some competitors may have been less rational. Thanks. Sure, Sharon. It's Jon here.

Questions and hopefully you guys will forgive me, but on the improved affordability can you give us some metrics around that I mean, it's clear that used car prices are coming down and hopefully rates or topic. So what was kind of an average loan payment that you originated.

Sharon Zackfia: This quarter versus maybe the third quarter or you know some historical benchmark just to give us some idea.

Sharon Zackfia: Thats improving for the customer and then secondarily just on that market share dynamics is there any region or any.

Sharon Zackfia: Particular cohort of demographics that you've been more susceptible to this market share losses. Some competitors may have been less rational. Thanks.

Jon G. Daniels: I'll take the first one on the loan payment. So historically, you know, our average used car was $20,000 for life. So yeah, that translated typically, depending on the interest rate, you know, $400 monthly payment. I think that's a good round number to think about. With the appreciation, you saw really a peak probably hit in kind of later calendar 22 of about 570-580. That was, I think we've, cited that was primarily driven by that financed amount. I mean, rates were on their way up. But that financed amount really was driving that.

Sharon Zackfia: Sure Sharon it's John here I'll take the first one on the loan payment.

So historically you know.

Jon G. Daniels: Our average used car was $20000 forever. So yeah that translated typically depending on the interest rate $400 monthly payment I think that's a good round number to think about.

Jon G. Daniels: With the appreciation you saw really a peak probably hit them in kind of later in calendar 'twenty two of about $5 75 to 80 that was I think we cited that was primarily driven by that financed amount I mean rates were on their way up but that financed amount really whats driving that so that increase we kind of attributed to maybe an 80 515 split.

Jon G. Daniels: So that increase, we kind of attributed to maybe an 85-15 split on the financed amount versus the interest rate going up. Now, as we've cited, you know, clearly, the vehicle prices are coming down, the financed amount is coming down to some degree, and rates are going in the other direction. So we probably say this quarter we probably saw roughly a 520-530, $530 payment. Still, you know, two thirds of that are driven by that vehicle price which is still higher.

Jon G. Daniels: On the financing amount versus the interest rate going up now as we've cited clearly.

Jon G. Daniels: The vehicle prices are coming down the financed amount is coming down to some degree and rates are going in the other direction. So we'd probably say this quarter, we probably saw roughly a $5 25 3500 $30 payments.

Jon G. Daniels: Still two thirds of that driven by that vehicle price still higher now the rates are a bigger contributor, but hopefully that gives you. Some perspective on how affordability has improved to some degree still a bit of a shock to a consumer that used to have 400, Ela monthly payment coming in at $530 monthly payments are going to have to figure out how they worked out into their their budget going for.

William D. Nash: Now the rates, a bigger contributor, but hopefully that gives you some perspective on how affordability has improved to some degree. Still a bit of a shock to a consumer that's used to a $400 monthly payment coming in at a $530 monthly payment; they're gonna have to figure out how they work that into their budget going forward. But yeah, that hopefully gives you some context. And Sharon, on the second part of your question, not necessarily a difference geographically.

Jon G. Daniels: A word but that hopefully gives you some context.

Jon G. Daniels: Sure on the second part of your question not necessarily a difference geographically we've talked about before you.

William D. Nash: We talked about before, you know, your Tier 3 customer. Obviously, we have a lot fewer Tier 3 sales than we did in the past. Our consumers that make less than $3,000 per month in a household, they're, they've basically been cut in half. So certainly that, that lower finance customer, the lower income coming in customer, has been impacted. But we also see, and I talked about this in the third quarter, just from working with one of the credit bureaus of the folks that don't end up buying that apply for a loan at Carmax. It's not like we're seeing this big degradation where they're going to somebody else; they're just sitting on the sidelines.

Jon G. Daniels: Your tier three customer, obviously, where we have a lot less tier three sales than we've had in the past our consumers that make less than $3000 per month and a half a household they're they basically been cut in half so certainly that that lower.

Jon G. Daniels: Finance customer lower income.

Jon G. Daniels: Income income coming in customer has been impacted but we also see and I talked about this on the third quarter just from working with one of the credit Bureau is that the folks that don't end up buying that apply for loans.

Jon G. Daniels: At Carmax.

Jon G. Daniels: Not like we're seeing this big degradation, where they're going somewhere else. They're just they're just sitting on the on the sidelines and I think part of that speaks to what to what John just spoke about the only thing I would just remind everybody on the market share as you know historically, we have always grown market share. It's just when theres been unusual events. You know if you go back to the great financial crisis. If you go to Covid and I would say you know now in this.

William D. Nash: And I think part of that speaks to what John just spoke about. The other thing I would just remind everybody about market share is, you know, historically, we have always grown market share. It's just when there's been unusual events, you know, if you go back to the great financial crisis, if you go to COVID, and I would say, you know, now in this period, we've got these very, very steep depreciations. I mean, we saw two this year, we saw one last year; we've just never seen such things before.

Jon G. Daniels: We've got these very very steep depreciations I mean, we saw two this year. We saw one last year. We've just never seen these before and so I think working through these will get through them and then like always we will continue to grow our market share.

William D. Nash: And so I think working through these, we'll get through them. And then, like always, we'll continue to grow market share. And we'll take our next question from Rajat Gupta with J.P. Morgan. Your line is open. You may ask your question.

Jon G. Daniels: And we'll take our next question from Rajat Gupta with JP Morgan. Your line is open you may ask your question.

Rajat Gupta: Great. Thanks for taking the questions. I wanted to just quickly ask you how the first quarter was trending, given you exited or had positive comps in the fourth quarter. Should we expect that trend to continue here? You know, because seasonality would imply, like, comps should move lower or negative again in the first quarter, but curious, like, what you're seeing in the updates you can give us there. And then just a broader question on the long-term targets, you know, it's a four, it's almost like a four-year range, you know, 2026 to 2030. Can you explain the thought process behind such a wide range?

Rajat Gupta: Got it great. Thanks for taking the question I wanted to just quickly.

Rajat Gupta: Ask on you know how the first quarter was trending.

Rajat Gupta: Giving you exited or you had positive comps in the fourth quarter.

Rajat Gupta: Should we expect that trend to continue here you know because he's a lot of people would imply like bomb should move lower or negative again in the first quarter, but curious like what are you seeing any update you can give us there.

Rajat Gupta: And then just a broader question on the long term targets no. It's a floor, it's almost like a four year old range without doing 26 spring Gordon.

Rajat Gupta: Could you explain the pop buses behind such a wide range.

William D. Nash: And where is the uncertainty really coming from? Is it on the demand side, or is it on the supply side? Any more color there would be helpful.

Rajat Gupta: With young children really coming from is it on the demand side or is it on the supply side any more color that would be helpful.

William D. Nash: Yeah, so thanks for the questions, Rajat. On the first question, kind of the comp cadence for the quarter, December, January, negative comps; February was a positive comp, resulting in a positive for the quarter. Since the quarter ended, it's been a little choppy. We've seen some weakness, and right now, the quarter's date, albeit early, and again, choppy. We're seeing about a mid-single-digit negative comp right now, but again, it's early on, and it's been choppy the last month and a half. On the second question, the long-range targets, well, keep in mind, on market share, we'll come back at the end of this year and update that. On the units one, yeah, you're right; it is a wide range.

Gordon: Yeah. So thanks for the question is on on the on the first question kind of comp cadence for the quarter.

Gordon: December January negative comps February was it was a positive comp resulting in a positive for the quarter.

Gordon: Since the quarter ended its been its been a little choppy we've seen some we've seen some weakness in right now quarter to date, albeit early and again choppy.

Gordon: We're seeing about a mid single digit negative comp right now, but again, it's early on and it's been it's been been choppy the last month and a half on the second question.

Gordon: The market.

Gordon: The long range targets well keep in mind on the market share will come back at the end of this year and update that on the units one yeah, you're right. It is a wide range, we're going to come back and provide more visibility into that once we just get a better idea of of the market recovery keep in mind I think Cox's latest numbers had this year, finishing.

William D. Nash: We're going to come back and provide more visibility into that once we just get a better idea of the market recovery. Keep in mind, I think Cox's latest numbers had, this year, finishing up about 35.5 million units, where traditionally, we're at 40 million, and so I think their expectations are it's going to be fairly flat, maybe up a little bit in total used units, and the zero to 10, it might be flat to even up a little bit less, so I think they're expecting, when it comes to total used units, there's probably going to be more growth in the over-10-year-old vehicles than the zero to 10, and so that's something of, we want to get some visibility into that, especially when it comes to the units.

Gordon: About 35, and a half million units were traditionally were at 40 million and so I think there you know.

Gordon: The expectation of ours can be fairly flat, maybe up a little bit and total used units in the zero to 10, it might be flat to even up a little bit less. So I think they are expecting when it comes to total used units is probably going to be more growth in the over 10 year old vehicles into zero to 10, and so that's something we want to get some visibility into that especially when it comes to the units. The volatility also plays into it though because it also.

William D. Nash: The volatility also plays into it, though, because it also impacts vehicle volatility plays into it because it impacts your buy rate, which ultimately can impact your wholesale, so as we get more visibility into this market recovery, we'll come back and narrow that time frame for you. Yeah, but the expectation is not for it to hit the wide end of that range.

Gordon: Impacts vehicle about volatility plays into it because it impacts.

Gordon: Your buy rate, which ultimately can impact your wholesale so as we get more visibility into this market recovery will come back and narrow that that timeframe for you.

Gordon: The expectation is not for you to hit the wide end of that range really is we're going to provide visibility. Once it is just a bit more stability in the market like building.

William D. Nash: It really is; we're going to provide visibility once there's just a bit more stability in the market. Scott, just to clarify, you know, on the zero to 10-year-old comment, I mean, if you look at what's happened with new car sales the last few years and, you know, just the leases originated on them, is there a chance that the zero to 10-year-old market takes another step down in calendar 25 before turning positive? Because that should be fairly obvious, right, given what we know about what has happened over the last three, four years?

Speaker Change: Sorry, just to clarify.

Speaker Change: There was a general comment I mean, if you look at.

Speaker Change: So what's happened with like new car sales last year.

Speaker Change: Easily originated on them.

Speaker Change: Is there a chance that the year to general market takes another step down in calendar 'twenty five before.

Before turning positive.

Speaker Change: Because that should be fairly visible I'd give them. Let me know what that's happened over the last three or four years I think that again I think the zero to 10, what the estimates are out there is it's going to be flat to up a little bit. So, we'll see where that actually pans out I mean keep in mind there.

William D. Nash: Again, I think the zero to 10, what the estimates are out there is it's going to be flat to up a little bit. So we'll see where that actually pans out. I mean, keep in mind, you know, there is a new car dynamic here where fewer cars were sold a couple years ago. But, again, I would also look back to when we saw bigger declines back in the great financial crisis. So we'll see. Estimates are that it's going to be flat to up a little bit. Great. Thanks for all the coverage. Thank you. And we'll take our next question from Brian Nagel with Oppenheimer. Your line is open.

Speaker Change: There is a new car dynamic here, where less cars were sold.

Speaker Change: You know a couple of years ago, but but again I would I would also look back to what we saw in the bigger declines back in the great financial crisis. So we will see estimates are that it's going to be flat to up a little bit.

Speaker Change: Oh, great. Thanks for all the color.

Speaker Change: [noise].

Speaker Change: Yeah.

Speaker Change: And we'll take our next question from Brian Nagel with Oppenheimer. Your line is open you may ask your question.

Brian William Nagel: You may ask your question. Hey, guys. Good morning. Morning, Brian.

Brian William Nagel: Hey, guys. Good morning, good morning, Brian.

Operator: Morning. Okay, so my first question, you know, with regard to use sales, and maybe maybe a bit bigger picture, but, you know, I guess as we're watching the business, you look, you got the positive comp, albeit slightly positive, use car unit comp here and in q4. And then in response to the prior questions, I talked about, you know, maybe some incremental weakness here at early, you know, q1. But the question I have is, As you're looking at this business, recognizing that you don't give guidance, there's a lot of moving parts out there, what has to happen?

Brian William Nagel: This is my first question.

Brian William Nagel: With regard to swift required to use sales and maybe maybe a bit bigger picture.

Speaker Change: I guess as we're watching the business you've.

Brian William Nagel: Got you got the positive comp, albeit slightly you got to be positive used car unit copyright.

Brian William Nagel: In Q4, and then your response to the prior question you talked about your.

Incremental weakness here in early Q1, but the question I have is.

Brian William Nagel: As Youre looking at this business and are recognizing that you know you don't give guidance just wanted moving parts out there what has to happen because it seems like a lot to be the key factors are starting to turn more favorable for clawbacks, whether it be used car pricing moderating rate stabilization you received the data.

William D. Nash: Because it seems like a lot of the key factors are starting to turn more favorable for Carmax. Whether it be used car pricing moderating, rate stabilization, we're seeing the data, and a better tax refund season. So I guess as you're looking, what's the equation, if you will, to get back to that normalized used car unit comp? Yeah, I think we've hit on a couple of the major issues. You know, the affordability has to continue to move down. I was encouraged.

Brian William Nagel: Better tax refund season, so I guess as you like what what's the kind of equation, if you're willing to get back about normalized used car unit comp.

Speaker Change: Yeah, and I think we've hit on a couple of the major issues.

Speaker Change: The affordability has to continue to move down I was I was encouraged I mean this quarter was the first time, we've been under a $26000 average selling price in like two years. So you know that's a that's a step in the right direction I think theres a lot of pauses out that you referred to it like interest hopefully interest rates are at least stable and once they start coming down.

William D. Nash: I mean, this quarter was the first time we've been under a $26,000 average selling price for like two years. So, you know, that's a step in the right direction. I think there are a lot of positives out there you referred to, like interest rates. Hopefully, interest rates are at least stable. And, you know, once they start coming down, I think that's certainly a good thing as well.

Speaker Change: And I think that that's certainly a good guy as well I think.

William D. Nash: I think, you know, building on some of the stuff that we've been working on, the efficiencies that we're working on, that we've talked about, this fact that we've got sequential improvement. John talked about CAF, you know, becoming more of a full credit spectrum lender. There's opportunity there. I think there's opportunity in Omni, I mean, we've got a lot of good things that are positive, but, you know, we do need a little help with affordability.

Building on some of the stuff that we've been working on the efficiencies that we're working on that we've talked about the fact that we've got sequential improvement, yes, John talked about Caf.

It's becoming more of a full credit spectrum lender theres opportunity. There I think there is opportunity in the army I mean, we've got a lot of good things that are positive, but we do need a little help on the affordability and I think we also just that that volatility don't underestimate I mean, when you have a year, where you see depreciation of $6000 keep them.

William D. Nash: And I think we also underestimate just that volatility. I mean, when you have a year where you see depreciation of $6,000, keep in mind, we saw some appreciation at the beginning, so it offsets some of that, but $6,000 really in two different time periods, we just haven't seen that. And, you know, we had another one of those last year. I would call them price corrections.

Speaker Change: And we saw some appreciation at the beginning so it offset some of that but $6000 really in two different time periods. We just haven't seen that and we had another one of those last year, you know I I would call them, they're there they're price corrections in I think.

William D. Nash: And I think, you know, having some visibility into that and stabilizing that, if you get in, we've shown continued market share growth over the years, whether it's been appreciation, whether it's been normal depreciation. Keep in mind, normally, in any year, there is depreciation. It's probably $1,500, $1,600 a year, and we've been able to take market share in all those environments So, I think those are the two big factors for us. I think a couple of other just demand signals that we've seen; web traffic was up again this quarter, year over year; and our finance applications were up again this quarter. So, there are demand signals that we're seeing out there; it just boils down to that. I've been talking about really affordability. That's very helpful.

Speaker Change: Having some visibility in to that and stabilizing that if you get and we've shown you.

Speaker Change: Continued market share growth over the years, whether it's been appreciation, whether it's been normal depreciation and keep them on normally in any year. There is depreciation should probably $15600 a year and we've been able to take market share in all of those environments. So I think those are the two big factors for US I think a couple of other just demand signals that we've seen.

Speaker Change: Web traffic was up again this quarter year over year finance applications were up again this quarter. So there's demand signals that we're seeing out there just boils down to like.

Speaker Change: We've been talking about really to the affordability question.

Speaker Change: Yeah.

Jon G. Daniels: If I could ask just one follow-up question. You've talked for a bit about the Tydeen Lending Standards. We're clearly seeing the benefits of that in the CAF data, particularly, I guess, the loan loss provision. But I guess the question I have is, you know, to what extent is, or your, or what potential extent is, your, your Tyder lending now impacting? demand for used cars at Carmax. Yeah, I appreciate the question. I mean, certainly, I think that's the benefit of our platform, right? CAF is able to tighten, and it's able to flow down to partners that are willing to maybe ask for a little more money down, it's going to be a little bit higher rate, but they are going to have the option to buy, and we see people get picked up down the line. We're very careful when we test rates, and we or we do any underwriting adjustments. We watch it very carefully, we test it, we know what's going to get picked up.

That's very helpful. If I could ask just one follow up.

Speaker Change: Talk now forget about tight.

Speaker Change: Tightening lending standards receivable clearly see the benefits of that in the Caf data, particularly the I guess the loan loss provision I guess the question I have as you know to what extent is your are your what would you what potential extent or your what your your tighter lending now impacting demand.

Speaker Change: Demand for used cars at Carmax.

Speaker Change: Yeah I appreciate the question.

Speaker Change: I mean, certainly I think that's the benefit of our platform right calf is able to tighten and it's able to flow down to partners that are willing to maybe they're going to ask for a little more money down it's going to be a little bit higher rate, but they are going to have the option to buy and we see people get picked up down the line. We're very careful when we when we test rates and we we do any.

Speaker Change: Adjustments, we watch it very carefully we test it we know what's going to get picked up and we're very thoughtful about the sales impact and any decision, we make whether it be pricing or underwriting. So yes, certainly there's going to be a few people that might not choose that higher rates at more down payment from our lenders down the line, but but we believe generally they they are very excited tier two partners are one cap passes.

Jon G. Daniels: And we're very thoughtful about the sales impact of any decision we make, whether it be pricing or underwriting. So, certainly, there are going to be a few people that might not choose that higher rate, that more down payment from our lenders down the line. But, but we believe, generally, they are very excited about tier two partners when CAF passes on stuff, and they can go pick it up. Yeah, but Brian, it's definitely a headwind.

Speaker Change: On stuff and they can go pick it up but Brian it's definitely a headwind I mean, we you know we're tightening we've got great partners in picking up some of that but they don't pick up pick it all up and you know then it goes down into tier three and you've seen by our tier three volume just as in general So there's no doubt that the tightening in general the industry is having an impact.

William D. Nash: I mean, we, you know, we're tightening, we've got great partners picking up some of that, but they don't pick it all up. And you know, then it goes down into tier three. And you've seen where our tier three volume just is, in general. So there's no doubt that the tightening, in general, of the industry is having an impact. I appreciate it.

Speaker Change: Got it I appreciate it. Thank you. Thank you Brian.

Craig R. Kennison: Thank you. And we'll take our next question from Craig Kennison with Baird. Your line is open. You may ask your question. Hey, good morning.

Speaker Change: And we'll take our next question from Craig Kennison with Baird. Your line is open you may ask your question.

Craig R. Kennison: Hey, good morning, Thanks for taking my question I wanted to ask about sourcing Bill you bought 11% fewer cars.

William D. Nash: Thanks for taking my question. I wanted to ask about sourcing. Bill, you bought 11% fewer cars. I know depreciation is a headwind, but you also have these innovative new tools like Instant Offer and Max Offer that I thought might provide a secular... lift.

Craig R. Kennison: I know depreciation is a headwind, but you also have these innovative new tools like instant offer and Max offer that I might provide thought might provide like a secular <unk>.

William D. Nash: So I'm wondering, on instant offer, can you shed any light on just overall appraisal activity and buy rates to give us a feel for the kind of traction you have with that tool? And then on max offer, how much of that 45% growth, albeit from a small base, is attributable to adding new dealers versus momentum with existing dealers? Yeah, thanks for the question, Craig. On the from consumers, again, I think it's more when you're talking about the decline, it's more of a year over year dynamic. The buy rate this year was down a little bit versus last year. But keep in mind, last year, I think in the fourth quarter, we saw about $2,000 of appreciation; we didn't see that this quarter was much, much less than that.

Craig R. Kennison: The lift so I'm wondering on instant offer can you shed any light on just overall appraisal activity.

Craig R. Kennison: And by rates to give us a feel for the kind of traction you have with that tool and then on Max offer how much of that 45% growth, albeit from a small base is attributable to adding new dealers versus momentum with our existing dealers. Yeah. Thanks for the question Craig on the on the AR from.

Craig R. Kennison: Tumors again, I think it's more when you're talking about the decline it's more of a year over year dynamic by rate. This year was down a little bit versus last year, but keep in mind, you know last year I think in the fourth quarter. We saw about $2000 of appreciation. We didn't see that this quarter was much much less than than that by the end of the quarter that has.

William D. Nash: By the end of the quarter, that has an impact, you know, because consumers always think their cars are worth more money, and when you can put more on them, that helps that helps buy. On the max offer, the increase there is really, while we've increased the overall number of dealers, the way we think about it, how many active dealers do you have, and of the dealers we have, we saw about a 50% increase in active dealers actually using the tool. So we're encouraged by that we haven't expanded to other areas; we think, you know, there's a lot of opportunity to continue to move this along, which is what I said earlier; my prepared remarks are gonna be a focus for us. Thank you. Thank you. And we'll take our next question from Michael Montani with Evercore ISI. Your line is open. You may ask your own question. Hey guys, good morning.

Craig R. Kennison: Impact you know because consumers always think their cars are worth more money. When you can put more on it that helps that helps buy.

Craig R. Kennison: On the the Max offer the increase there is really a wow.

Craig R. Kennison: While we have increased the overall number of deals the way, we think about it as how many active dealers do you have in and of the deals we have we saw about a.

Craig R. Kennison: A 50% increase in active dealers actually using the tool. So we're encouraged by that we havent expanded it to other areas. We think are you know theres a lot of opportunity to continue to move this along which is what I said earlier in my prepared remarks as it can be a focus for us.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: And we'll take our next question from Michael Mann Teeny with Evercore ISI. Your line is open you may ask your question.

Speaker Change: Hey, guys. Good morning, Thanks for taking the question I just wanted to ask <unk> to start off if you think about this year.

Michael David Montani: Thanks for taking the question. I just wanted to ask, to start off, if you think about this year, is there any reason that this wouldn't be another year for Carmax to take market share? And then, you know, is there a need at all to either sacrifice gross profit per unit or, you know, potentially loosen credit standards to take share? Yeah, I mean, look. If you lowered your prices, you could absolutely sell some more cars, but I'll go back to what I said earlier. I mean, we're focused on profitable market share, and look, you can see it with the publicly traded auto retailers. They're swapping it off, you know, sometimes units for GPU, and when you look at total comp GPU, it just hasn't been a good decision.

Is there any reason that this wouldn't be another year for carmax to take market share and then you know is there a need at all to either sacrifice gross profit per unit.

Speaker Change: Or potentially loosen credit standards to take share.

Speaker Change: Yeah, I mean look you could see if you're larger prices you could absolutely sell some more cars, but I'll go back what I said earlier I mean, we're focused on profitable market share and look you can see it with the publicly traded auto retailers are swapping it off.

Speaker Change: Sometimes units for GPU and when you look at total comp GPU. It just it hasn't been necessarily a good decision. So you will continue to test the elasticity. Our goal. Obviously every year is to gain market share.

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

Speaker Change: I am hopeful you know just looking at kind of depreciation trends I'm, hoping that this year will be a more normal depreciation and depreciation cycles, but we will see and I think that's going to be a factor and again I always couch it with will always test the elasticity to see.

Speaker Change: If it makes sense to to lower margins in order to get more units and more more total gross profit.

Speaker Change: And as far as the.

Speaker Change: Cap lending standards I mean, I think that's one of the things that we're optimistic about we've tightened we've taken for a very purposeful reason, obviously, we have partners down the line, but as Bill mentioned, yes, you do lose sales when cap Titans.

Jon G. Daniels: We've tightened for a very purposeful reason. Obviously, we have partners down the line. But as Bill mentioned, yes, you do lose sales when CAF tightens. But, you know, we believe that this cycle will turn.

Speaker Change: But we believe that the cycle will turn the consumer will get healthier and we're excited to go after more market share up and down the credit spectrum. So I think it absolutely is an opportunity on the other side of this yeah I'm optimistic with Caf.

William D. Nash: The consumer will get healthier, and we're excited to go after more market share up and down the credit spectrum. So I think it absolutely is an opportunity on the other side of this. Yeah, I'm optimistic about CAF. You know, I know the Fed, there's a decision on when they're going to cut rates. I mean, at least it's stabilized. It doesn't sound like it's going to go up. I'm going to knock on wood right now.

Speaker Change: The fed is there's a decision on when they're going to cut rates I mean at least it's stabilized and doesn't sound like it's going to go up I'm going to knock on wood right now, but you know as that comes down that's a that's a that's a tailwind for us for sure on a couple of different fronts from a cap standpoint margin standpoint, but also from a sales standpoint.

Enrique N. Mayor: But, you know, as that comes down, that's a tailwind for us for sure on a couple different fronts, from a CAF standpoint, a margin standpoint, but also from a sales standpoint. How should we think about the mid-70s SG&A ratio target as well? Is that feasible for this year, or how should we think about that?

Speaker Change: Just trying to think about the mid Seventy's SG&A ratio target as well is that feasible for this year, how should we think about that.

Enrique N. Mayor: Yeah, I think for the mid-70s, as we've talked about, that is absolutely our next step in our progress. I think in terms of this coming year, we're going to need strong consumer demand to also return. There are obviously two variables in that equation, right?

Speaker Change: Yes, I think for the mid <unk> as we've talked about that is absolutely. Our next step in our progress I think in terms of this coming year.

Speaker Change: We're going to need strong consumer demand to also return. There's obviously two are two variables in that equation rate of SG&A, which I'd say, we've made a lot of strides. This past year will continue to focus on but we really need that gross profit number two to accelerate in order to hit that mid 70% I think you hit it in FY 'twenty five would really be a tough, but just given the level.

Enrique N. Mayor: You have SG&A, which I feel we've made a lot of strides this past year and we'll continue to focus on. But we really need that gross profit number to accelerate in order to hit that mid-70%. I think to hit it in FY25 would really be a tough put, Well, and I think also just given that they think that the market is overall going to be fairly flat. Thank you. And we'll take our next question from John Healy with North Coast Research. Your line is open.

Speaker Change: The volumes of our unit sales over the past couple of years here and I think also just given that they're they think that the market is overall can be fairly flat.

Speaker Change: Excellent.

Speaker Change: Got it. Thank you. Thank you.

Speaker Change: And we'll take our next question from John Healy with Northcoast Research. Your line is open and you May now ask your question.

John Michael Healy: You may now ask your question. I think you just wanted to ask a bit about the wholesale business. It's a nice position where we kind of ended the year in terms of GPUs on wholesale. I was kind of curious about how you see that business from a GPU performing in 25 just given the expected kind of, you know, descending of the used car market in terms of values with improving supply. Do you think we can hold at this kind of $1,000 level for a while? And can you talk a little bit about what you're doing with the auction side of the business?

John Michael Healy: Thank you just wanted to ask a bit about the wholesale business.

John Michael Healy: It's a nice position, where we kind of ended the year in terms of Gpus on wholesale it was kind of curious kind of how you see that business from a GPU performing in 25, just given the mix.

Speaker Change: <unk> kind of you know.

Speaker Change: Defending of the used car market in terms of values with improving supply.

Speaker Change: Do you think we can hold at this kind of a thousand dollar level for a while and can you talk a little bit about what youre doing with the auction side of the business I think in your prepared remarks, you mentioned that youre going to build a standalone auction facility, which I believe would be the first one for the company.

William D. Nash: I think in your prepared remarks you mentioned that you're going to build a standalone auction facility, which I believe would be the first one for the company. Maybe where you're going with that business and does that decoupling of auctions from the retail location potentially mark a new business line that you're getting into not only from a, you know, a self-sufficiency standpoint, but maybe from a revenue standpoint. Yeah, good morning,

Speaker Change: And maybe where youre going with that business and does that decoupling of auctions from the retail location potentially mark a new business line that youre getting into not only for me.

Speaker Change: Ah self sufficiency standpoint, but maybe from a revenue standpoint.

Speaker Change: Yeah. Good morning, John Thank you for the questions on the wholesale margin Yeah, I was especially pleased with the wholesale margin.

William D. Nash: Thank you for the questions on the wholesale margin. Yeah, I was especially pleased with the wholesale margin. Just given some of the year over year dynamics, the team did a phenomenal job.

Speaker Change: Just given some of the year over year dynamics. The team did a phenomenal job and I also think it speaks to just some of the improvements we've made in our overall auction process with technology that kind of thing I think you're thinking about it the right way. If you look at it on a yearly basis I think a good target give or take a little bit is it's similar to what we ran for the year. This year.

William D. Nash: And I think it speaks to just some of the improvements we've made in our overall auction process with technology, that kind of thing. I think you're thinking about it the right way. If you look at it on a yearly basis, I think a good target, give or take a little bit, is similar to what we ran for the year this year on wholesale margin. So I think you're thinking about that the right way. And I think it speaks to a lot of the improvements that we've made in the business. As far as the standalone auction facility, it is, it's interesting because we actually have a couple standalone auction facilities that we built over time just that are generally located right close to one of the stores for extra capacity, but this, you're right, this would be the first time that we've gone out and and really kind of built a facility with the intention of it having to be an auction facility.

Speaker Change: On on wholesale margins, so I think youre thinking about that the right way and I think it speaks to a lot of the improvements that we've made in the business as.

Speaker Change: As far as the Standalone auction facility.

Speaker Change: It is.

Speaker Change: It's interesting because we actually have a couple of standalone auction facilities, we that we that we built over time just that are generally located right close to one of the stores from our extra capacity, but you're right. This will be the first time that we've gone out and.

Speaker Change: And really kind of built the facility with the intention of it having it be an office facility I think going forward youre going to see some of the Standalone auction slashed production. The one that we're talking about for next year is just an auction facility we may run some.

William D. Nash: I think going forward, you're going to see some of the standalone auction slash production. The one that we're talking about for next year is just an auction facility. We may run some logistics hub out of there, but right now, it's just an auction facility and, and it's really. It's really going to help us in a couple different ways. The facility will be close to existing stores, and we'll be able to take wholesale vehicles out of existing stores and allow them to leverage the lots more from a service standpoint and more from a sales standpoint. We're ending up moving a lot of cars anyway from satellites and XF stores, so now taking them to this location will just help us continue to make benefits or improvements at, you know, these standalone facilities, and I think they'll pan out well for us going forward.

Speaker Change: Logistics hub out of there, but right now it's a it's an auction facility in and it's really.

Speaker Change: It's really going to help us in a couple of different ways that the facility will be close to existing stores and we will be able to take wholesale vehicles out of existing stores allow them to leverage a lot more.

Speaker Change: More from a service standpoint, more from a sales standpoint.

Speaker Change: We ended up moving a lot of cars anyway from satellites and excess stores. So now taking them to this location will well just help us continue to make benefits or improvements at kind of the standalone facilities and I think.

Speaker Change: They'll pan out well for us going going forward. So our intention as we go forward is to build more of these things get more of some of the wholesale sales out of the stores to free up space free up capacity that we think will have other benefits to the business, whether it's hey, you can now do a little bit more maxicare retail service Theres a lot of there's a lot of benefits to that plus just the standardization of <unk>.

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

Speaker Change: These bigger locations in close proximity to stores will also help us to innovate even quicker than what we've been able to do.

Okay. Thank you guys. Thanks.

Scot Ciccarelli: Thanks, John. And we'll take our next question from Scot Ciccarelli with Truist Securities. Your line is open.

Speaker Change: Thanks, John.

Speaker Change: And we'll take our next question from Scot Ciccarelli with Trust Securities. Your line is open you may ask your question.

William D. Nash: You may ask your question. Good morning, guys. Another market share follow-up, I guess. Bill, why do you think you lose share in disrupted periods? I mean, historically, industry leaders in various retail verticals actually accelerate share gains during disrupted periods. What is different about the Carmax model that may not follow a similar pattern?

Scot Ciccarelli: Good morning, guys.

Scot Ciccarelli: And then another market share follow up I guess Bill why why do you think you'll lose share in disrupted periods I mean historically <unk>.

Three leaders in various retail verticals actually accelerate share gains during disruptive periods.

Scot Ciccarelli: What is different about the carmax model like that that may not follow a similar pattern.

William D. Nash: Well, when you say disruptive periods, I mean, the three periods. If I think of the great recession, if I think about COVID, I think what we're doing, what's going on now, they're all a little bit different. I mean, here more recently, it's this vehicle volatility that I talked about earlier. And when there's shocks to the system of large depreciations over a short amount of time, you know how we run the model. We're like, okay, should we lower our prices? And is it overall better from a profitability standpoint?

William D. Nash: Well when you say disruptive periods I mean, the three periods, but I think it'd be a great recession, if I think about Covid I think what we're doing what's going on now they're all a little bit a little bit different I mean here more recently, it's this vehicle volatility that I talked about earlier and when they're shocks to the system of large depreciations over a short amount of time you know how we run the model we're like okay.

William D. Nash: Should we lower our prices and is an overall better from a profitability standpoint, and what we've seen is.

William D. Nash: And what we've seen is that it just doesn't pan out that way, which is why we hold the margins steady. Now, lots of competitors don't do that. And they do it what's right for their business. They've got different demands, they've got, you know, credit lines, things like that. So they have to do what's right for their business.

William D. Nash: It just doesn't pan out that way, which is why we hold the margins steady now.

William D. Nash: Lots of competitors don't do that and they do it whats right for their business they've got different demands they've got credit lines things like that so they have to do what's right for their business and we have to do what's right for our business. So you will see we have seen this year when we hold the prices and others are are liquidating inventory for various reasons, we we tend to give up market share.

William D. Nash: And we have to do what's right for our business. So you will see, we have seen this year, when we hold prices and others are liquidating inventory for various reasons, we tend to give up market share. So, just philosophically, like, is that the right decision over time? Like, I understand, like, you know, you can capture more profit, but, you know, if you want to be a growth vehicle, and you have been for 20 plus years, I think you said 30 today, is that the right decision to kind of hold the line on price and protect profit, or should you be seeking market share? I'm just wondering philosophically how you guys are thinking about that. Thanks. Yeah, no, I mean, it's a good question.

William D. Nash: Yeah.

Speaker Change: So just philosophically like is that the right decision over time like I understand like I mean, you can capture more profit, but you know if you want to be a growth vehicle and you had been for 20 plus years. I think you said 38 I is that the right decision to kind of hold the line on price and protect profit or should you be.

Speaker Change: <unk> market share I'm, just wondering philosophically how you guys are thinking about that thanks, yeah. Yeah, no. It's a good question and obviously, we think philosophically you know look the buying cycles every five years and you know who I if you'd asked me at the beginning of this year do you think there might be a price correction I would have said, maybe yeah, probably another price correction coming out of last year I didn't expect there to be too price correct.

William D. Nash: I mean, obviously, we think philosophically that it's, you know, look, the buying cycle is every five years. And, you know, who would have said, maybe, yeah, probably another price correction coming out of last year. I didn't expect there to be two price corrections, and I don't see this type of environment being able to replicate itself year after year. I think these are very unusual circumstances.

Speaker Change: <unk>.

Speaker Change: I don't see this type of environment being able to replicate itself year. After year. I think these are very unusual circumstances. So I do think that you know here.

Speaker Change: Here in the short term it has the right. It is the right thing to do it's not like this is gonna be continuing to repeat if it was then we would look at the business model, but I just think we believe that this is the right move.

William D. Nash: So I do think that, you know, here in the short term, it is the right thing to do. Got it. Thank you very much.

Christopher James Bottiglieri: Thanks, Scott. And we'll take our next question from Christopher Bottiglieri from BNP Paribas-Xane. Your line is open. You may ask your question. Hey everyone, this is Ian Davis on behalf of Chris.

Speaker Change: Thank you very much thanks Scott.

Speaker Change: And we'll take our next question from Christopher <unk> from BNP Paribas Exane. Your line is open you may ask your question.

Speaker Change: Hey, everyone. This is Ian Davis on for Chris Thanks for the question.

Jon G. Daniels: Thanks for the question. It seems you've been a bit more reliant on warehouse facilities than ABS in recent years, ex the tier two and tier three pilot. So wondering if you could elaborate a little bit on how average FICO and expected losses of loans in these warehouse facilities compare to maybe what you see in the similarly aged loans in ABS facilities. Sure. Yeah, I can take that one, Ian.

Speaker Change: It seems you've been a bit more reliant on warehouse facilities and a b S. In recent years ex the tier two and tier three pilot. So wondering if you could elaborate a little bit on how average FICO and expected losses of loads in these warehouse facilities compares to maybe what you see in the similarly, H loans ABS facilities.

Speaker Change: Sure I can take that one.

Jon G. Daniels: Yeah, I mean, and I think you said excluding Tier 2 and Tier 3, so we're talking about the Tier 1 business. Yeah, I mean, our focus is generally to bring all the volume from Tier 1 into our warehouse facilities, and our goal would be to get it all into the ABS market. Now, fundamentally, there are things that you need to pare back. There are certain criteria they need to meet. You need to have a title. They need to have made the first payment, etc. So you're going to have some higher-risk stuff fall out. It's always going to happen. But our goal is to move all that volume from originations through the warehouse into ABS. Inherently, because of those exclusions, you're going to have probably a little bit higher FICO in the ABS deals.

Speaker Change: Yes, I mean.

Speaker Change: You said, excluding tier two and tier three so for tuck in focusing on the tier one business. Yeah. I mean, our focus is generally to bring in.

Speaker Change: All the volume from tier one into our warehouse facilities and our goal would be to get it all into the ABS market now fundamentally there are things that you need to pair back are certain criteria. They need to meet you need to have a title and need to have made the first payment etcetera. So youre going to have some higher risk stuff fallout, it's always going to happen, but our goal is to move all of that volume from.

Speaker Change: Nations through the warehouse into ABS inherently because of those exclusions youre going to have probably a little bit.

Speaker Change: If I go in the ABS deals if you look at deal over Delever deal that change in FICO is coming from us changing what we're originating and that ultimately flowing through remember it's going to take six seven months to get into an ABS deal from when we originated but that movement over time and ABS is really what we're underwriting probably less what we're holding out into in a warehouse line.

Jon G. Daniels: If you look deal over deal over deal, that change in FICO is coming from us changing what we're originating and that ultimately flowing through. Remember, it's going to take six, seven months to get into an ABS deal from when we originate it. But that movement over time in ABS is really what we're underwriting, probably less so what we're holding out for in a warehouse line. And from a total capacity standpoint, we certainly leverage the ABS market. It's the most efficient way to fund a business.

Speaker Change: Total capacity standpoint, where we certainly leverage the ABS market is the most efficient way to fund the business. We also have as you've noted we've also grown our kind of non ABS funding with our banking partners. We have tremendous banking partners and we felt that some facilities additional facilities, there and we talked about that several years ago about just bridging out.

William D. Nash: We also, as you've noted, have grown our non-ABS funding with our banking partners. We have tremendous banking partners, and we've built out some facilities, additional facilities there. We talked about that several years ago, about just bridging out and having alternative finance options as we continue to grow the business. That's helpful. And if I could just slip another question in, We had read that Carmax may be removing the 30 day return policy. Is there any truth to this? And if there is, could you contextualize maybe how material abandoning the policy would be to earnings and perhaps any other context in terms of customers valuing it or maybe abusing it? Any context there would be helpful.

Speaker Change: Having alternative finance options as we continue to grow the business and that's what we've done.

Speaker Change: Got it that's helpful and if I could just slip in another question and we had read that Carmax, maybe removing the 30 day return policy is there any truth to this and if there is could you contextualize, maybe how material a banding abandoning the policy would be the earnings and perhaps any other context in terms of customers valuing it or may be abusing it any any comp.

Speaker Change: <unk> there would be helpful.

William D. Nash: Yeah, so what you're referring to is the 30 day money back guarantee, and we're modifying it to 10 days money back, which is still industry leading, and that's really due to some experiential headwinds, both for customers and associates, which also add increased expenses when you're talking about, you know, most of our customers, a lot of our customers take advantage of it well before the 30 days. You get past the 10, some people are just playing the system. Others, what we run into is some headwinds with DMVs and municipalities getting title work squared away, checks back, taxes back, that kind of thing. So I think that's what you're referring to. Yeah, that's right.

Speaker Change: Yes, so on the what.

Speaker Change: You're referring to is the 30 day money back guarantee and we're modifying it to 10 days money back which is still industry, leading and that's really due to really some experiential headwinds both for customers and our associates.

Speaker Change: Associates, which also add increased expenses when you were talking about most of our customers a lot of our customers take advantage of a well before the 30 days you get past. The 10. Some people are just working the system others.

Speaker Change: <unk> run into some headwinds with DMV and municipalities getting title work squared away checks back taxes back that kind of thing so I think thats, what youre referring to.

Ian Davis: Yeah, that's helpful. Thank you. Yeah. And we'll take our next question from Chris Pierce with MEDEM. Your line is open. You may ask your question. Hey, good morning.

Speaker Change: Yeah, that's right Yeah. That's helpful. Thank you Jeff.

Okay.

And we'll take our next question from Chris <unk> with Needham. Your line is open you may ask your question.

Chris: Hey, good morning, I just wanted to ask are we set up for another period of excess of depreciation in the wholesale market because that is.

William D. Nash: I just wanted to ask, are we set up for another period of excessive depreciation in the wholesale market? Because as we get the tax refund season, which we're sort of already through in the wholesale market, there's going to be normal depreciation, but, like, are we set for further excessive depreciation? And what and what would limit excessive depreciation?

Chris: We get the tax refund season, which were sort of already through in the wholesale market theres going to be normal depreciation but.

Chris: Like are we set up for further access the depreciation will end what would limit excesses depreciation because as far as I can tell if dealers are already carrying lower inventories versus normal. So how is there anything that the industry can do to combat that or is it just we need to see that excessive depreciation because we need to get back to a $22000 used car.

Christopher Alan Pierce: Because, as far as I can tell, dealers are already carrying lower inventories versus normal. So how is there anything that the industry can do to combat that? Or is it just that we need to see that excessive depreciation because we need to get back to a $22,000 juice car? Yeah, Chris, I'm not necessarily seeing what you're calling excessive depreciation. I'm really seeing more depreciation that's more in line with kind of what you would see between 2015 and 2019. It's actually, if you look at it, it actually appreciated a little bit more.

Speaker Change: Yeah, Chris I'm, not necessarily saying, which you are calling excessive depreciation I'm really saying more depreciation that's more in line with kind of what you would see between 2015 and 2019. It. It's actually if you look at it appreciated a little bit more but again your average sales prices up is up higher.

William D. Nash: But again, your average sales price is higher is higher. And you know, just recently have we started to see some depreciation. So I haven't seen what you're referring to as far as excessive depreciation.

Speaker Change: And just recently have we started to see some some depreciation so I I havent seen what you are referring to as far as excessive depreciation and.

I think we may see more of a historical type type of appreciation depreciation throughout the year, but we'll see.

William D. Nash: And you know, I think we may see more of a historical type of appreciation depreciation throughout the year, but we'll see. And is that because of lower dealer volumes or inventories, or is that what gives you confidence that you think you'll see that you won't see abnormal depreciation this year like you saw last year? Well, I'm just going off of what I've seen so far, kind of calendar year to date, and comparing it to historical averages. You know, the last two or three years have kind of been all over the board from an appreciation standpoint and a depreciation standpoint. If you kind of take those years out and look more historically at, say, 2015 to 2019, what does the depreciation curve look like? What does the NAAA data look like?

Speaker Change: And is that because of lower dealer volumes or inventories or is that what gives you confidence that you think you'll see that you won't see abnormal depreciation. This year like you saw last year, well I'm just going off of what I've seen so far kind of calendar year to date and comparing it to historical averages you know it's the last the last two or three years has kind of been all over the board.

Speaker Change: From an appreciation standpoint, and a depreciation standpoint, if you kind of take those years out and look more historical like 2015 to 2019, what does the depreciation curve look like what does the end AAA data look like.

Speaker Change: I would say this year calendar year to date is falling more in line with kind of what those cycles look like so that's what I'm referring to.

William D. Nash: I would say this year's calendar year to date is falling more in line with kind of what those cycles look like. So that's what I'm referring to. Okay, appreciate it. Thank you. Thank you, Chris. And we'll take our next question from John Murphy with Bank of America. Your line is open. You may ask your question. Good morning, guys.

Speaker Change: Okay I appreciate it. Thank you thank you Chris.

Speaker Change: And we'll take our next question from John Murphy with Bank of America. Your line is open you may ask your question.

John Joseph Murphy: Good morning, guys.

John Joseph Murphy: Well, I just wanted to see if you could talk about sort of the split of the zero to six and the seven to ten year old vehicles sold in the quarter and maybe on a year-to-year basis. You know, as we think about this, unless there's some massive economic boom that is not really expected, it seems like through 24 and 25, the zero to six-year-old car population will continue to shrink, which is a supply issue for you guys unless you shift a little bit more to the seven to ten-year-old bucket, but it also would help you out a lot on affordability. So it just seems like it could be a small strategy shift here that could alleviate some of the issues that we're facing. Just curious if you could comment on that as well. So mix them together and then potentially push them a little bit more to seven to ten. Yeah, so I think looking at the quarter, if I look at 0-4 versus, let's call it 5+, we were similar to last year. We were a little bit older than the third quarter.

John Joseph Murphy: Well I just wanted to see if you could talk.

John Joseph Murphy: Talk about sort of the split up zero to six in the seven to 10 year old vehicles sold in the quarter and maybe on a year over year basis.

John Joseph Murphy: And as we think about this unless there's some massive economic boom.

John Joseph Murphy: Boom that is not really expected.

Like through 'twenty four 'twenty five is euro six real car population will continue to.

Shrink, which is a supply issue for your for your guys unless you shipped a little bit more to the seven to 10 year old bucket could also would help you out a lot on affordability. So it just seems like it could be a small strategy shift here. They they could alleviate some of the issues that we're facing.

John Joseph Murphy: I'm just curious if you could comment on that as well so mix and then potentially pushing a little bit more to seven tenths.

John Joseph Murphy: Yeah. So I think looking at the quarter, if I look at zero to four versus let's call. It five plus we were similar to last year, we were a little bit older than the third quarter. So I think our mix it's call. It. It's interesting. It's almost 50 50, when you look at <unk> to four and the five plus when I.

William D. Nash: So I think our mix, let's call it, is interesting. It's almost 50-50 when you look at 0-4 and the 5-6. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com. For last year, it's very similar. You know, let's call it a 70-30 split.

John Joseph Murphy: Look at zero to six.

John Joseph Murphy: Maybe versus the seven plus.

John Joseph Murphy:

John Joseph Murphy: It's it's for last year, it's very similar you know, let's call. It a 70 30 split zero to six year olds, 70% seven plus 30% for US last quarter was a little bit and I made the remark last quarter that we had a little bit shifting some newer car. So last quarter was a little bit more in the zero to six then than this quarter.

William D. Nash: You know, zero to six-year-old, 70%, seven-plus, 30% for us. Last quarter was a little bit, and I made the remark last quarter that we had a little bit of a shift in some newer cars. So last quarter was a little bit more in the zero to six than this quarter. And, you know, I think, look, as we move forward, and I mentioned this earlier, you're right. As far as new cars go, a year or two ago, there weren't as many new cars sold, but again, I would just point out that you're still in the ballpark of 15 plus million SAR run rate, which is, you know, much higher than what we saw coming out of the great financial crisis. And the other thing I would point to is that, you know, our self-sufficiency now, for a couple of years, on a yearly basis, continues to be over 70%, which we didn't have prior, and we think that's a great tailwind.

John Joseph Murphy: Order.

And I think look as we as we move forward and I mentioned this earlier youre right as far as new cars a.

John Joseph Murphy: A year or two year goes werent as many new cars sold but again I would just point to if you are still in the ballpark of 15 plus million Saar run rate, which is.

John Joseph Murphy: Much higher than what we saw coming out of the great financial crisis and the other thing I would point to is that you know.

John Joseph Murphy: Our self sufficiency now for a couple of years on a yearly basis continues to be over over 70%, which we didn't have prior and we think that's a great tailwind for us to supply Hasnt really been the issue. It's the price now you could say well supply of just overall vehicles out there, it's causing price to go up but our ability to acquire.

William D. Nash: So for us, the supply hasn't really been the issue; it's the price. Now you could say, well, the supply of just overall vehicles out there is causing prices to go up, but our ability to acquire inventory has not been the issue; it's more the price. And then just one follow-up on the sourcing side that you just talked about. You said dealer sourcing was up 21,000 units, about 45% on a year-over-year basis in the quarter. Is that something you think could increase?

John Joseph Murphy: Inventory has not been the issue it's more of the price.

John Joseph Murphy: Okay, and then just one follow up on the sourcing side that you just talked about you said dealer sourcing was up 21000 units about 45% on a on a year over year basis in the quarter.

John Joseph Murphy: Is that something you think could increase I mean, I think there's some concern in the vehicles.

John Joseph Murphy: Late model vehicles get caught further up funnel is openly manheim ACB all kind of helped.

With their virtual auctions keep vehicles further up the funnel, but it sounds like you actually kind of reviewed that with the increase in dealer sourcing how much of an opportunity do you think you are sourcing could be over time or maybe a risk as they hold on to more vehicles.

William D. Nash: I mean, I think there's some concern that vehicles, you know, late-model vehicles get caught further up the funnel as Open Lane, Mannheim, and ACB all kind of help, you know, with their virtual auctions, keep vehicles further up the funnel. But it sounds like you actually kind of refute that with the increase in dealer sourcing. You know, how much of an opportunity do you think, you know, dealer sourcing could be over time or maybe a risk as they hold on to more vehicles? Yeah, look, I'm, I'm pleased with the max offer.

Speaker Change: Yeah look I'm I'm pleased with the Max offer I mean, we're continuing to buy more vehicles through that we think it's a great product, that's really resonating with dealers and when you look at the mix of vehicles, we're buying it's actually skewed more retail than wholesale which is a which is a huge benefit I think it's a very competitive product and like I said, we've got a lot of dealers that are actively using it and we plan.

William D. Nash: I mean, we're continuing to buy more vehicles through that because we think it's a great product that's really resonating with dealers. And when you look at the mix of vehicles we're buying, it's actually skewed more towards retail than wholesale, which is which is a huge benefit. I think it's a very competitive product, and, like I said, we've got a lot of dealers that are actively using it. And we plan to continue to push that. And, you know, when we've historically talked about self-sufficiency, we've always talked about it from a standpoint of just the consumers.

Speaker Change: And to continue.

Speaker Change: Continue to push that and you know when we talked about we've historically talked about self sufficiency, we've always talked about it from a standpoint of just the consumers while it really should start adding in this bucket as well, which again just helps keep our self sufficiency very high.

Okay, great. Thank you very much.

Speaker Change: John.

Speaker Change: We'll take our next question from David Bellinger with Mizuho. Your line is open you may ask your question.

David Bellinger: Hey, thanks for the questions maybe.

William D. Nash: Well, really, you should start adding to this bucket as well, which again just helps keep our self-sufficiency very high. Great. Thank you very much.

David Bellinger: Maybe just to follow up on that last one in acquiring cars directly from consumers can you talk through just the quality of those vehicles are there any material differences versus those at the auction and just overall or is there enough inventory out there from consumers in that 20 to $25000 range right now or is that more of a limited opportunity.

William D. Nash: Thank you, John. We'll take our next question from David Bellinger with Mizzouho. Your line is open.

David Bellinger: You may ask your question. Hey, thanks for the questions. Maybe just to follow up on that last one and acquiring cars directly from consumers, can you talk through just the quality of those vehicles? Are there any material differences versus those at the auction? And just overall, is there enough inventory out there from consumers in that $20,000 to $25,000 range right now? Or is that more of a limited opportunity?

Yeah actually from a I was encouraged because this quarter. If you look at our our sales are less than 20% or less than $20000 vehicles.

David Bellinger: While year over year. It was similar it actually was better than the third quarter. So we had more or less than $20000 cars I think as far as what are the vehicles look like from consumers.

Buying vehicles from consumers is just a huge benefit I mean, you're buying vehicles that people in that area generally like and the reason why it's important is to self sufficiency is because those are more profitable than having to go off site and if you were having to go and secure all your vehicles off site, that's an expensive channel.

William D. Nash: Yeah, actually, I was encouraged because this quarter, if you look at our, our sales are less than 20% of less than $20,000 vehicles. You know, while year over year, it was similar, it actually was better than the third quarter. So we had more less than $20,000 cars. I think, as far as what the vehicles look like from consumers, buying vehicles from consumers is just a huge benefit. I mean, you're buying vehicles that people in that area generally like. And the reason why it's important to be self-sufficient is because those are more profitable than having to go off-site. And, you know, if you're having to go and secure all your vehicles off-site, that's an expensive channel to go through. And, you know, we have the luxury of having such a high self-sufficiency that we have to really kind of go out and obtain vehicles off-site on a limited basis.

David Bellinger: To go through.

David Bellinger: We had the luxury of having such a high self sufficiency that we have to really kind of go out and obtain.

David Bellinger: Vehicles off site.

David Bellinger: Limited basis.

Speaker Change: Got it and then if I could just follow up one more on your quarter to date comment of down mid single digit is there anything that's really changed to explain that shift from positive comps in February and maybe some of the tax refund flows that might that might have impacted but also is there potentially just some pause on the part of the consumer with steeper.

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

Speaker Change: Price depreciation lately and if that's the case, how long can that last.

Speaker Change: Yeah, I think it just it's probably more just speaks to the consumer.

Speaker Change: I think the consumer is still in a tough spot the tax season, I think overall the tax season. This year, it's been a little softer although refunds are higher.

Speaker Change: Actual the refund dollar amounts are higher the actual number of refunds is behind where it was a it was last year and while prices have gone down obviously interest rates are higher than a year ago. I think you still have the pressure of the consumers on everything else that they're basically buying food and housing got inflationary pressures. There. So I think it speaks more to the the consumer mindset.

William D. Nash: Yeah, I think it just, it probably more just speaks to the consumer. You know, I think the consumer is still in a tough spot. You know, the tax season, I think overall, the tax season this year has been a little softer. Although refunds are higher, the actual refund dollar amounts are higher, the actual number of refunds is behind where it was last year. And while prices have gone down, obviously interest rates are higher than a year ago. I think you still have the pressure of consumers on everything else because they're basically buying food and housing, you know, inflationary pressure there. So I think it speaks more to the consumer mindset at this point. And, like I said, it's been choppy.

Speaker Change: At this point and like I said, it's it's been choppy I mean theres been a you've got we've had some weather things going on its just theres been a lot a lot going on so we.

Speaker Change: We will continue to monitor it and make adjustments as we can as we go through.

Speaker Change: Got it thanks Bill.

William D. Nash: Thank you David.

William D. Nash: And we'll take our last question from David Whiston with Morningstar. Your line is open you may ask your question.

David Whiston: Thanks, Good morning, So a two part question on affordability you mentioned Asps are continuing to fall, which is which is good but our consumers even noticing Lori S&P at this point or are they entirely focused on the unfavorable monthly payment due to interest rates and also on that trading trade offs scenario for affordability as the consumer moving.

William D. Nash: I mean, there's been a lot going on. We've had some weather things going on. It's just, there's been a lot going on. So we'll continue to monitor it, make adjustments as we can as we go through it.

William D. Nash: Thanks, Bill. Thank you, David. And we'll take our last question from David Whiston with Morningstar. Your line is open, so you may ask your question. Thanks. Good morning.

David Whiston: It's a two-part question on affordability. You mentioned ASPs are continuing to fall, which is good, but are consumers even noticing the lower ASCP at this point? Are they entirely focused on an unfavorable monthly payment due to interest rates and also on that trade-off scenario for affordability? Is the consumer moving into cars away from trucks, or is it more just shifting into older than five-year-old vehicles? Yeah, well, I think it's always been about the monthly payment for consumers, and prices are coming down. And, as John said, the actual monthly payment is coming down, but it's still over $100 more than what it used to be. And so when a consumer is thinking about buying a car, let's say they're in a car right now, well, they're making a certain monthly payment, and all of a sudden, they look and say, okay, well, I'm ready to swap out. They're like, oh my gosh, I'd have to pay another $100.

David Whiston: And into cars away from light trucks are and the more just shifting into older than five year old vehicles.

David Whiston: Well I think it's always been about the monthly payment for the consumers and the prices are coming down as John said, the actual monthly payments coming down, but it's still over $100 more than what it used to be and so when a consumer is thinking about buying a car, let's say, they're in a car right now well, they're making a certain monthly payment and all of a sudden they look and say, okay, well I'm ready to swap out they were like Oh My gosh.

David Whiston: I'd have to pay another $100, that's where we're seeing and you know again, there's lots of data points to say consumers are just waiting on the sidelines right now.

David Whiston: And either for them.

David Whiston: The monthly payments to come down or to figure out a way to work it into their into their budget with all the other expenses. So I think thats, what youre, saying.

Speaker Change: Was there another part in Armenia.

Yeah or are they are they also moving away from light trucks or cars or are they just focused on an older vehicle to try I know it's interesting. It's interesting. If you look at the numbers for the quarter from a class standpoint, we actually sold more like from a mix standpoint, more larger suvs more expensive type of cars now.

William D. Nash: That's what we're seeing. And, you know, again, there are lots of data points that say consumers are just waiting for the monthly payments to come down, or to figure out a way to work it into their budget with all the other expenses. So, I think that's what you're seeing.

Speaker Change: The average age both of our wholesale and retail.

Speaker Change: It's up what you've sold but it's not like they're choosing to go compact versus larger SUV types at least not for the quarter.

William D. Nash: Yeah, are they also moving away from trucks into cars, or are they just focused on an older vehicle to try and help with that monthly payment? It's interesting. If you look at the numbers for the quarter, from a class standpoint, we actually sold more, from a mixed standpoint, more larger SUVs, more expensive types of cars. Now, the average age, both of our wholesale and retail sales, is up, you know, on what you've sold, but it's not like they're choosing to go compact versus, you know, larger SUV types, at least not for the quarter. Okay, are you worried about the off-lease shortage ramping up with the anniversary of the start of the chip shortage? Yeah, look, leased vehicles have never been a big piece of our inventory strategy.

Speaker Change: Okay are you worried about the off lease shortage ramping up with the anniversary of the that started the chip shortage.

Speaker Change: Yeah look lease vehicles I've never been a big piece of our inventory strategy.

Speaker Change: And we've been through cycles, before where theres been leased cars and we've been through cycles, where there haven't been leased cars I think we've been in a cycle, where there really haven't been leased cars because a lot of the manufacturers are requiring lease customers to take it back to the the franchise dealer.

Speaker Change: Have customers wanting to sell its release vehicle and we can't we can't buy because of those restrictions and quite honestly. It's I think it's been a nice benefit for the franchise dealers because they're able to get these things at a good rate based off of leases.

William D. Nash: I mean, we've been through cycles before where there have been leased cars, and we've been through cycles where there haven't been leased cars. I think we're in a cycle where there really haven't been leased cars because a lot of the manufacturers are requiring leased customers to take them back to the franchise dealer. We have customers wanting to sell us leased vehicles, but we can't buy them because of those restrictions.

Speaker Change: Basically done a while ago that will play out and not become such a benefit us as we as we go into the future, but it just hasn't been a big source of inventory for us historically.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Thank you we don't have any further questions at this time I'll hand, the call back to bill for any closing remarks, great well listen I want to thank every body for joining the call. Today, obviously, we've got lots going on and we appreciate your questions and your support before closing again I just want to congratulate all of our associates for being.

William D. Nash: And, you know, quite honestly, I think it's been a nice benefit for the franchise dealers because they're able to get these things at a good rate based off of leases that were, you know, basically done a while ago. That will play out and not become such a benefit as we go into the future. But it just hasn't been a big source of inventory for us historically.

William D. Nash: Named as a great place to work for the 20th year in a row, where all we're all very proud of that and it really speaks to our folks and the culture that they they really are enhanced here and implemented here at Carmax. So.

William D. Nash: OK, thank you. Thank you. Thank you. We don't have any further questions at this time. I'll hand the call back to Bill for any closing remarks. All right. Well, listen, I want to thank everybody for joining the call today. Obviously, we've got lots going on, and we appreciate your questions and your support. Before I close, I, again, just want to congratulate all of our associates for being named a great place to work for the 20th year in a row. We're all very proud of that, and it really speaks to our people and the culture that they've really enhanced here and implemented here at Carmax. So thanks for your time today, and we'll talk again next quarter. Thank you. Ladies and gentlemen, that concludes the Q4 Fiscal Year 2024 Carmax Earnings Release Conference Call. You may now disconnect. BF-WATCH TV 2021

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

Speaker Change: Thank you, ladies and gentlemen that concludes the Q4 fiscal year 'twenty 'twenty four Carmax earnings release Conference call you may now disconnect.

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