Q1 2025 Carmax Inc Earnings Call

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Operator: Typhon Hold, we appreciate your patience and ask that this be continued. Goodbye. We appreciate your patience and ask that this be continued. Please stand by; your program is about to begin. If you need any assistance during your conference today, please press star zero. Ladies and gentlemen, thank you for standing by. Welcome to the Q1 quarter fiscal year 2025 Carmax earnings release conference call. At this time, all participants are in a listen-only mode.

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Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Q-1 Quarter Fiscal Year 2025. CarMax earnings release conference call.

Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the Q1 quarter of fiscal year 2025, Carmax earnings release Conference call.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded.

Speaker Change: At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. Please be advised that today's conference is being recorded and I would now like to hand, the conference over to your speaker today, David Loewenstein VP Investor Relations. Please go ahead.

Operator: And I would now like to hand the conference over to your speaker today.

Operator: After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded, and I would now like to hand the conference over to your speaker today, David Lowenstein, VP of Investor Relations. Please go ahead.

David Lowenstein: David Lowenstein, BP investor relations. Please go ahead.

David Lowenstein: Thank you, Savannah.

David L. Lowenstein: Thank you, Savannah. Good morning, everyone. Thank you for joining our fiscal 2025 first quarter earnings conference call. I'm here today with Bill Nash, our President and CEO, Enrique Mayor Amor, 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.

David L. Lowenstein: Thank you Savannah and good morning, everyone. Thank you for joining our fiscal 2025 first quarter earnings conference call I'm here today with Bill Nash, our president and CEO, Enrique Mayor or more our executive Vice President and CFO and John Daniels, Our senior Vice President Carmax Auto finance.

David Lowenstein: Good morning, everyone. Thank you for joining. Thank you for joining our Fiscal 2025 first quarter earnings conference call.

David Lowenstein: I'm here today with Bill Nash, our President and CEO, Enrique Mayor Moore, our Executive Vice President and CFO, and Jon 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. Our 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 in our subject to substantial risks and uncertainties that could cause actual results to differ materially from our expectations.

David Loewenstein: S operations.

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

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

David Loewenstein: 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 Lowenstein: In providing projections and other forward-looking statements, we display any intent or obligation to update them for additional information on important factors that could affect these expectations.

David Loewenstein: Abiding projections and other forward looking statements, we disclaim any intent or obligation to update them for additional information on important factors that could affect these expectations. Please see our form 8-K filed with the SEC. This morning.

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 10-K for the fiscal year ended February 29, 2024, 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 Lowenstein: Please see our Form 8-K followed with the SEC this morning and our annual report on Form 10-K for the fiscal year ended February 29, 2024, previously filed with the SEC.

David Loewenstein: And our annual report on Form 10-K for the fiscal year ended February 29, 2024 previously filed with the SEC.

David Lowenstein: 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.

Speaker Change: 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 ups.

Bill Nash: Bill? Thank you, David.

David L. Lowenstein: Yep, great. Thank you David Good morning, everyone and thanks for joining us.

William D. Nash: Great. Thank you, David. During the quarter, we saw continued positive trends, including year-over-year price declines, improvement in vehicle value stability, and ongoing growth in upper funnel demand. We're encouraged by what we are seeing and are continuing to strengthen our business by delivering associate and customer wins that are differentiated and durable. In the first quarter, we delivered strong retail and wholesale GPUs and grew EPP margins. We've sourced approximately 35,000 vehicles from dealers at an all-time record pace.

Bill Nash: Good morning, everyone. Thanks for joining us. During the quarter, we saw continued positive trends, including year-of-year price declines, improvement in vehicle value stability, and ongoing growth and upper funnel demand. We are encouraged by what we are seeing and are continuing to strengthen our business by delivering associate and customer wins that are differentiated and durable. In the first quarter, we delivered strong retail and wholesale GPUs and grew EPP margins. We sourced approximately 35,000 vehicles from dealers and an all-time record. We increased use saleable inventory units 5% year-by-year, while decreasing use total inventory units 4%. We grew caffeine comes 7% year-by-year under tight lending standards, and post-quarter end we launched our first non-pronged securitization deal.

Speaker Change: During the quarter, we saw continued positive trends, including year over year price declines improvement in vehicle values stability and ongoing growth in upper funnel demand.

Speaker Change: Encouraged by what we're seeing and are continuing to strengthen our business by delivering associate and customer wins that are differentiated and durable.

Speaker Change: In the first quarter, we delivered strong retail and wholesale Gpus and grew E. P. P margins.

Speaker Change: We sourced approximately 35000 vehicles from dealers and all time record.

William D. Nash: We increased used saleable inventory units 5% year over year while decreasing used total inventory units 4%. We grew CAF income 7% year-over-year under Titan Lending Standards, and post-quarter-end, we launched our first non-prime securitization deal. We continue to actively manage our SG&A, and we repurchased over $100 million in shares. For the first quarter of FY25, our diversified business model delivered total sales of $7.1 billion, down 7% compared to last year, reflecting lower retail and wholesale volume and prices. In our retail business, total unit sales declined 3.1%, and the average selling price declined approximately $700 per unit, or 3% year over year.

Speaker Change: We increased use saleable inventory units, 5% year over year, while decreasing use total inventory inventory units 4%.

Speaker Change: We grew cap income, 7% year over year under tightened lending standards.

Speaker Change: Post quarter end, we launched our first non non prime securitization deal.

Bill Nash: We continued to actively manage our SGNA, and we repurchased over $100 million in shares.

Speaker Change: We continue to actively manage our SG&A and we repurchased over $100 million in shares.

Bill Nash: For the first quarter of FY25, our diversified business model delivered total sales of $7.1 billion, down 7% compared to last year, reflecting lower retail and wholesale volume and prices. In our retail business, total unit sales declined 3.1%, and average selling price declined approximately $700 per unit, or 3% year-by-year. Carter, Hughes unit comps were down 3.8 percent, and we saw comp performance strengthened in the back half of the first quarter. First quarter retail growth profit per Hughes unit was $2,347, in line with last year's 2,361. Also, unit sales were down 8.3 percent versus the first quarter last year at the industry experience lower seasonal appreciation year-over-year, average selling price to find approximately $900 per unit or 10 percent.

Speaker Change: For the first quarter of FY 'twenty five our diversified business model delivered total sales of $7 $1 billion down, 7% compared to last year, reflecting lower retail and wholesale volume and prices.

Speaker Change: In our retail business total unit sales declined three 1% and average selling price declined approximately $700 per unit or 3% year over year.

William D. Nash: Unit comps, we're down 3.8, and we saw comp performance strengthen in the back half of the first quarter. First quarter retail gross profit per used unit was $2,347, in line with last year's $2,361. Also, unit sales are down 8.3% versus the first quarter last year as the industry experienced lower seasonal appreciation year over year. Average selling price declined approximately $900 per unit or 10%.

Speaker Change: Used unit comps were down three 8% and we saw comp performance strengthened in the back half of the first quarter.

Speaker Change: First quarter retail gross profit per used unit was $2347 in line with last year's $23 61.

Speaker Change: Wholesale unit sales were down eight 3% versus the first quarter last year as the industry experienced lower seasonal appreciation year over year.

Speaker Change: Average selling price declined approximately $900 per unit or 10%.

Bill Nash: Also, growth profit per unit was a first quarter record of 1,064, up from 1,042 a year ago. We bought approximately 314,000 vehicles during the quarter, down 9 percent from last year. The appreciation dynamics that I just mentioned impacted our overall buys as well. We purchased approximately 279,000 vehicles from consumers, with slightly more than half of those buys coming through our online incident appraisal experience. With the support of our Edmund sales team, we sourced the remaining approximately 35,000 vehicles through dealers, up 70 percent from last year. For our first quarter online metrics, approximately 14 percent of retail unit sales were online, consistent with last year.

William D. Nash: Wholesale gross profit per unit was a first quarter record of $10.64, up from $10.42 a year ago. We bought approximately 314,000 vehicles during the quarter, down 9% from last year. The appreciation dynamic that I just mentioned impacted our overall buys as well. We purchased approximately 279,000 vehicles from consumers, with slightly more than half of those buyers coming through our online incident appraisal experience. With the support of our Edmunds sales team, we sourced the remaining approximately 35,000 vehicles through dealers, up 70% from last year.

Speaker Change: Wholesale gross profit per unit was a first quarter record of $10 64 up from $10 42, a year ago.

Speaker Change: We bought approximately 314000 vehicles during the quarter down 9% from last year, the appreciation dynamics that I, just mentioned impacted our overall buys as well.

Purchased approximately 279000 vehicles from consumers with slightly more than half of those buys coming through our online instant appraisal experience.

Speaker Change: With the support of our Edmond sales team we source the remaining approximately 30 for 35000 vehicles through dealers up 70% from last year.

William D. Nash: For our first quarter online metrics, approximately 14% of retail unit sales were online, consistent with last year. We continue to see ongoing adoption of our omni-channel retail experience. Approximately 57% of retail unit sales were omni-cells this quarter, up from 54% in the prior year.

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

Bill Nash: We continue to see ongoing adoption of our on the channel retail experience. Approximately 57 percent of retail unit sales were on these sales this quarter, up from 54 percent in the prior year. Total revenue from online transactions was approximately 30 percent in line with last year. All of our first quarter wholesale auctions and sales were virtual and are considered online transactions, which represent 18 percent of total revenue for the quarter.

We continue to see ongoing adoption of our omni channel retail experience approximately 57% of retail unit sales were omni sales this quarter up from 54% in the prior year.

William D. Nash: Total revenue from online transactions was approximately 30%, in line with last year. All of our first quarter wholesale auctions and sales were virtual and are considered online transactions, which represent 18% of total revenue for the quarter. Carmax Auto Finance, or CAF, delivered income of $147 million, up 7% from the same period last year. In a few minutes, Jon will provide more detail on customer financing, the loan loss provision, CAF contribution, and our progress in becoming a full-credit spectrum lender, which enables incremental growth in finding a new customers. At this point, I'd like to turn the call over to Enrique, who will provide more information on our first Enrique?

Speaker Change: Total revenue from online transactions was approximately 30% in line with last year all of our first quarter wholesale auctions and sales where virtual and are considered online transactions, which represent 18% of total revenues for the quarter.

Bill Nash: CarMax Auto Finance or CAF delivered income of $147 million, up 7 percent from the same period last year. In a few minutes, John will provide more detail in customer financing, the loan loss provisions, CAF contribution, and our progress in becoming a full spectrum, full credit spectrum lender, which enables incremental growth in finding the income.

Speaker Change: Carmax auto finance for cap delivered income up $147 million up 7% from the same period last year in a few minutes John will provide more detail on customer financing the loan loss provision caf contribution and our progress in becoming a full spectrum full credit spectrum lender, which enables incremental growth in finance income.

Enrique Mayor: At this point, I'd like to turn the call over to Enrique, who will provide more information on our first quarter financial performance. Enrique? Thanks, Bill, and good morning, everyone. As Bill noted, we drove strong per unit margins this quarter for both use and wholesale. We also delivered growth in other gross profit margins and CAF contributions while staying focused on managing SGA. First quarter net earnings per diluted share was $0.97 versus $1.44 a year ago. As a reminder, last year's quarter had a benefit of $59 million, which translates to a $0.28 per share from a legal settlement.

Speaker Change: At this point I'd like to turn the call over to Enrique who will provide more information on our first quarter financial performance Enrique.

Enrique N. Mayor: Thanks, Bill, and good morning, everyone. As Bill noted, we drove strong per-unit margins this quarter for both used and wholesale. We also delivered growth and other gross profit margins and cash contributions while staying focused on managing SG&A. First quarter net earnings per diluted share were $0.97 versus $1.44 a year ago. As a reminder, last year's quarter had a benefit of $59 million, which translates to $0.28 per share from a legal settlement. Total gross profit was $792 million, down 3% from last year's first quarter.

Enrique N. Mayor: Thanks, Bill and good morning, everyone. As Bill noted we drove strong per unit margins. This quarter, what you used in wholesale.

Enrique N. Mayor: We also delivered growth in other gross profit margins and cash contribution while staying focused on managing SG&A.

Enrique N. Mayor: First quarter net earnings per diluted share was <unk> 97.

Enrique N. Mayor: Versus $1 44, a year ago as a reminder, last year's quarter had a benefit of $59 million.

Enrique N. Mayor: Which translates to a 28 per share from a legal settlement.

Enrique N. Mayor: Yeah.

Enrique Mayor: Total gross profit was $792 million, down 3 percent from last year's for his quarter. Use retail margin of $495 million declined by 4 percent with lower volume and relatively flat per unit margins. Wholesale vehicle margin of $157 million declined by 6 percent, with lower volumes partially offset by higher per unit margins. Other gross profit was $139 million, up 3 percent from a year ago. This was driven by an $8 million increase in EPP. As a reminder, in the fourth quarter of FY24, we tested raising max care margins per contract, which drove overall product profitability despite a lower product penetration rate.

Enrique N. Mayor: Total gross profit was $792 million down 3% from last year's first quarter used.

Enrique N. Mayor: Used retail margin of $495 million declined by 4% with lower volume and relatively flat per unit margin. Wholesale vehicle margin of $157 million declined by 6% with lower volumes partially offset by higher per unit margin. Other gross profit was $139 million, up 3% from a year ago. This was driven by an $8 million increase in EPP. As a reminder, in the fourth quarter of FY24, we tested raising MaxCare margins per contract, which drove overall product profitability despite a lower product penetration rate. With that, we rolled out the margin increases in late Q4 FY24. Service delivered $3 million in margin, flat with last year's first quarter.

Enrique N. Mayor: Used retail margin at $495 million declined by 4% with lower volume and relatively flat per unit margins.

Enrique N. Mayor: Vehicle margin of $157 million declined by 6% with lower volumes, partially offset by higher per unit margins.

Enrique N. Mayor: Gross profit was $139 million up 3% from a year ago.

Enrique N. Mayor: This was driven by an $8 million increase in E. P. P.

Enrique N. Mayor: As a reminder, in the fourth quarter of FY 'twenty, four we tested raising Max care margins per contract, which drove overall product profitability. Despite a lower product penetration rate with that we rolled out the margin increases in late Q4, FY 'twenty four.

Enrique Mayor: With that, we rolled out the margin increases in late Q4 FY20. for. Service delivered $3 million in margin, flat with last year's first quarter. Performance was primarily supported by efficiency and cost coverage measures, offset by deliverage due to lower year-over-year sales in the quarter, as well as by timing. We expect year-over-year improvement for the balance of the year, as governed by sales performance, given the leverage-deliverage nature of service. On the SG&A front, expenses for the first quarter were $639 million, up 3% or $19 million. From the prior year's quarter, when excluding the benefit from the $59 million legal settlement received during the first quarter of FY24.

Enrique N. Mayor: Service delivery, it's $3 million and margins flat with last year's first quarter.

Enrique N. Mayor: Performance was primarily supported by efficiency and cost coverage measures, offset by de-leverage due to lower year-over-year sales in the quarter, as well as by timing. We expect year-over-year improvement for the balance of the year, as governed by sales performance, given the leverage-deleverage nature of service. On the SG&A front, expenses for the first quarter were $639 million, up 3%, or $19 million, from the prior year's quarter when excluding the benefit from the $59 million legal settlement received during the first quarter of FY25.

Performance was primarily supported by efficiency and cost coverage measures.

Enrique N. Mayor: Set by deleverage due to lower year over year sales in the quarter as well as by timing.

Enrique N. Mayor: We expect year over year improvement for the balance of the year as governed by sales performance given the leverage deleverage nature of service.

Enrique N. Mayor: On the SG&A front expenses for the first quarter were $639 million up 3% or $19 million.

In the prior year's quarter, when excluding the benefit from the $59 million legal settlement received during the first quarter of FY 'twenty four.

Enrique N. Mayor: Also pressuring SG&A this quarter was approximately $22 million of expense from 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. Excluding these items, which we noted in our FY24 year-end call, SG&A total dollars were down year-over-year in the first quarter due to our continued SG&A dollars for the first quarter were mainly impacted by two additional factors.

Enrique Mayor: Also pressuring SGNA this quarter was approximately $22 million of expense from share-based compensation for certain retirement eligible executives, and the laughing of favorable reserve adjustments related to non-calf-uncollectible receivables during last year's first quarter. Excluding these items, which we noted in our FY24 year-end call, SGNA total dollars were down year-over-year in the first quarter due to our continued discipline in spend levels. SGNA dollars for the first quarter were mainly impacted by two additional factors. First, other overhead increased by $6 million when excluding last year's favorable legal settlement. Continued year-over-year favorability in non-calf-uncollectible receivables was more than offset by lapping over last year's first quarter favorable reserve adjustment.

Enrique N. Mayor: Also pressuring SG&A this quarter was approximately $22 million of expense from 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.

Excluding these items, which we noted in our FY 'twenty for yearend call SG&A total dollars were down year over year in the first quarter due to our continued discipline and spend levels.

Enrique N. Mayor: SG&A dollars for the first quarter were mainly impacted by two additional factors.

Enrique N. Mayor: First, overhead increased by $6 million when excluding last year's favorable legal settlement? Continued year-over-year favorability in non-CAF uncollectible receivables was more than offset by lapping over last year's first quarter favorable reserve adjustment. Second, total compensation and benefits, excluding share-based compensation expense, decreased by $3 million, mostly driven by our ongoing focus on efficiency in stores and CEC.

Enrique N. Mayor: First other overhead increased by $6 million when excluding last year's favorable legal settlement Kantar.

Enrique N. Mayor: Continued year over year favorability in noncash uncollectible receivables was more than offset by lapping over last year's first quarter favorable received reserve adjustment.

Enrique Mayor: Second, total compensation and benefits, excluding share-based compensation expense, decreased by $3 million, mostly driven by our ongoing focus on efficiency in stores and CECs. Regarding capital allocation, during the quarter we repurchased approximately $1.4 million shares for a total spend of $104 million, which was an acceleration in the pace from the repurchased levels in the second half of FY24. As of the end of the quarter, we had approximately $2.3 billion of repurchased authorization remaining.

Enrique N. Mayor: Second total compensation and benefits excluding share based compensation expense decreased by $3 million, mostly driven by our ongoing focus on efficiency and stores and see he sees.

Jon Daniels: Regarding capital allocation, during the quarter, we repurchased approximately 1.4 million shares for a total spend of $104 million, which was an acceleration in the pace from the repurchase levels in the second half of fiscal year 2014. As of the end of the quarter, we had approximately $2.3 billion of repurchase authorization remaining. In the first quarter, we also paid off our $300 million floating rate term loan, which was scheduled to mature in early July. Now, I'd like to turn the call over to John. Thanks, Enrique, and good morning everyone.

Enrique N. Mayor: Regarding capital allocation during the quarter, we repurchased approximately one 4 million shares for a total spend of $104 million, which was an acceleration in the pace from the repurchase levels in the second half of fiscal year 'twenty four.

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

Enrique Mayor: In the first quarter, we also paid off our $300 million floating rate term loan, which was scheduled to mature in early June.

Enrique N. Mayor: In the first quarter, we also paid off our $300 million floating rate term loan, which was scheduled to mature in early June.

Jon Daniels: Now I'd like to turn the call over to John. Thanks, Enrique, and good morning, everyone. During the first quarter, Carmex auto-finance originated approximately $2.3 billion, resulting in sales penetration of 43.3% net-up-three-day pay-offs, which was up 60 basis points from last year's first quarter. The weighted average contract rate charged to new customers was 11.4%, an increase of 30 basis points from a year ago. Partner tier 2 penetration in the quarter was 18.7%, down from 20.4% observed last year. Partner tier 3 volume accounted for 7.5% of sales, up from 6.7% compared to last year, as our partners' improved offers were in place for the entirety of the first quarter.

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

Jon Daniels: During the first quarter, Carmax's auto finance originated approximately $2.3 billion, resulting in sales penetration of 43.3% net of three-day payoffs, which was up 60 basis points from last year's first quarter. The weighted average contract rate charged to new customers was 11.4%, an increase of 30 basis points from a year ago. Partner Tier 2 penetration in the quarter was 18.7%, down from 20.4% observed last year. Partner Tier 3 volume accounted for 7.5% of sales, up from 6.7% compared to last year, as our partners' improved offers were in place for the entirety of the first quarter. Both tiers saw less application volume year over year as lower credit customers remained challenged with affordability.

Jeff: During the first quarter Carmax auto finance originated approximately $2 $3 billion, resulting in sales penetration of 43, 3% net of three day payoffs, which was up 60 basis points from last year's first quarter.

Jeff: The weighted average contract rate charged to new customers was 11, 4% an increase of 30 basis points from a year ago.

Jeff: Partner tier two penetration in the quarter was 18, 7% down from 24% observed last year partner tier three volume accounted for seven 5% of sales up from six 7% compared to last year as our partners improved offers were in place for the entirety of the first quarter.

Jon Daniels: Both tiers saw less application volume year-by-year as lower credit customers remained challenged with affordability. Also impacting each of these year-by-year results, but to a lesser degree, this cap's continued decreased volume in tier 3, as well as the increased test volume in tier 2. Cap income for the quarter was $147 million, up 10 million from the same period last year, primarily driven by an increase in total interest margin. Note: fair market value adjustments from our hedging strategy accounted for $3 million in expense this quarter versus $9 million in expense during last year's first quarter. The net interest margin percentage for the quarter was 6.2%, up from last quarter but in line with our expected level of near 6%.

Jeff: Both tiers saw less application volume year over year as lower credit customers remained challenged with affordability.

Jon Daniels: Also impacting each of these year-over-year results, but to a lesser degree, is CAF's continued decreased volume in Tier 3, as well as the increased test volume in Tier 2. CAF income for the quarter was $147 million, up $10 million from the same period last year, primarily driven by an increase in total interest margin. Note fair market value adjustments from our hedging strategy accounted for $3 million in expense this quarter versus $9 million in expense during last year's first quarter.

Jeff: Also impacting each of these year over year results, but to a lesser degree is caps continued decreased volume in tier three as well as the increased test volume in tier two.

Jeff: Caf income for the quarter was $147 million up $10 million from the same period last year, primarily driven by an increase in total interest margin.

The fair market value adjustments from our hedging strategy accounted for $3 million in expense this quarter versus $9 million in expense during last year's first quarter.

Jon Daniels: The net interest margin percentage for the quarter was 6.2%, up from last quarter but in line with our expected level of near 6%. The provision for loan losses was flat last year at $81 million and resulted in a reserve balance of $493 million, or 2.79% of receivables, compared to 2.78% at the end of last quarter.

Jeff: The net interest margin percentage for the quarter was six 2% up from last quarter, but in line with our expected level of near 6%.

Jon Daniels: The provision for loan losses was flat to last year at $81 million and resulted in a reserve balance of $493 million or 2.79% of receivables compared to 2.78% at the end of last quarter. Cap's continued investment in the tier 2 space, all set by the previously implemented tightening into tier 1, contributed to a consistent reserve to receivable ratio.

Jeff: The provision for loan losses was flat to last year at $81 million and resulted in a reserve balance of $493 million or $2, 79% of receivables compared to 2.78% at the end of last quarter.

Jon Daniels: CAP's continued investment in the Tier 2 space, offset by the previously implemented tightening in Tier 1, contributed to a consistent reserved receivable ratio. As was highlighted last quarter, CAF has been building the capability and infrastructure to scale its participation across all credit tiers. First, CAF has leveraged its learning in Tier 2, along with its experience operating in both Tiers 1 and 3, to develop a new, full-spectrum underwriting model, which we will begin to test in the second quarter.

Jeff: Costs continued investment in the tier two space offset by the previously implemented tightening in tier one contributed to a consistent reserved receivable ratio.

Jon Daniels: As was highlighted last quarter, CAS has been building the capability and infrastructure to scale its participation across all credit tiers. First, CAS has leveraged its learning in tier 2, along with its experience operating in both tiers 1 and 3, to develop a new full spectrum underwriting model, which we will begin to test in the second quarter. From a funding perspective, we plan to expand our current asset back securitization program from a single platform to one that more broadly incorporates CAS receivables across distinct prime and non-prime segments. We believe this will allow us to better align our offering with each investor base and ultimately generate added funding capacity.

Jeff: As was highlighted last quarter cap, that's been building the capability and infrastructure to scale its participation across all credit tiers.

Jeff: First cash has leveraged its learning and tier two along with its experienced operating in both tiers, one and three to develop a new full spectrum underwriting model, which we will begin to test in the second quarter.

Jon Daniels: From a funding perspective, we plan to expand our current asset-backed securitization program from a single platform to one that more broadly incorporates cash receivables across distinct prime and Non-prime segments. We believe this will allow us to better align our offering with each investor base and ultimately generate added funding capacity. To that end, our first non-prime ABS transaction is currently in the market with $625 million of offered notes. Having the ability to both successfully originate and efficiently fund the entirety of the credit spectrum at scale puts CAF in a strategic position to further complement our full roster of lending partners while also driving additional finance income for the business. Now, I'll turn the call back over to Bill.

From a funding perspective, we plan to expand our current asset backed securitization program from a single platform to one that more broadly incorporates cash receivables across distinct prime and non prime segments.

Jeff: We believe this will allow us to better align our offering with each investor base and ultimately generate added funding capacity.

Jon Daniels: To that end, our first non-prime ABS transaction is currently in the market with $625 million of offered notes. Having the ability to both successfully decision and efficiently fund the entirety of the credit spectrum at scale puts CAS in a strategic position to further compliment our full roster of lending partners while also driving additional finance income for the business.

Jeff: To that end our first non prime ABS transaction is currently in the market with $625 million of offered notes.

Beth: Having the ability to both successfully decision and efficiently fund the entirety of the credit spectrum at scale puts caf in a strategic position to further complement our full roster of lending partners. While also driving additional finance income for the business now I'll turn the call back over to Beth great. Thank you as I mentioned earlier, we are encouraged by the positive.

Bill Nash: Now let's turn the call back over to Bill. Great, thank you. As I mentioned earlier, we are encouraged by the positive trends we're seeing in pricing and vehicle value stability.

William D. Nash: Great, thank you. As I mentioned earlier, we're encouraged by the positive trends we're seeing in pricing and vehicle value stability. I am proud of the durable actions we have been taking to support our business and further differentiate our offering, which are setting us up for continued improvements in our performance and future growth. Some examples include: we've expanded our vehicle sourcing capabilities by attracting more dealers to our Max Offer through product enhancements that make it even easier to use.

Beth: <unk>, we're seeing in pricing in vehicle values stability I'm proud of the durable actions, we've been taking to support our business to further differentiate our offerings, which are setting us up for continued improvements in our performance and future growth.

Bill Nash: I am proud of the durable actions we've been taking to support our business and further differentiate our offering, which are setting us up for continued improvements in our performance and future growth. Some examples include we've expanded our vehicle sourcing capabilities by attracting more dealers to Max Offer through product enhancements that make it even easier to use. We achieve record sourcing volume each month with a quarter and are excited about launching this capability in New York during the second quarter. We've increased use cell women tour units while lowering total used inventory units through with reductions from new title management capabilities and focus inventory management and non-production stores.

Speaker Change: Some examples include we've expanded our vehicle sourcing capabilities by attracting more dealers to Max offer through product enhancements to make it even easier to use we achieved record sourcing volume each month of the quarter and are excited about launching this capability in New York during the second quarter.

William D. Nash: We achieve record sourcing volume each month of the quarter and are excited about launching this capability in New York during the second quarter. We've increased used saleable inventory units while lowering total used inventory units through WIP reductions from new title management capabilities and focused inventory management non-production stores.

Speaker Change: We've increased use sell women tour units, while lowering total used inventory units through with reductions from new title management capabilities and focused inventory management non production stores.

Bill Nash: We've enhanced capability to become a full spectrum lender, which positions us to further grow cap income over time. We've raised our EPP margins and improved service growth profit. We have achieved efficiency gains in our stores and CECs that will scale very well as we buy and sell more cars.

William D. Nash: We've enhanced CAP's ability to become a full-spectrum lender, which positions us to further grow CAP income over time. We've raised our EPP margins and improved service gross profit. We have achieved efficiency gains in our stores and CECs that will scale very well as we buy and sell more cars. We have launched a number of EV research tools through Edmunds that help educate and build trust with consumers.

Speaker Change: We have enhanced cat's ability to become a full spectrum lender, which positions us to further grow caf income overtime.

Speaker Change: We've raised our E. P P margins and improved service gross profit we have achieved efficiency gains in our stores and see he sees it will scale very well as we buy and sell more cars.

Bill Nash: We have launched a number of EV research tools through Edmunds that help educate and build trust with consumers. We've also established test stores in California to evaluate new capabilities that support our operational readiness for increased EV sales and also enhance the customer experience. Finally, we've continued to further enhance our omnichannel capabilities. We are rolling out our new order processing system to our stores and plan forward to be available nationwide later this year. The system helps associates guide customers through each step of the buying journey and provides a more seamless experience for consumers who prefer to blend self-progression with assistance from associates.

Speaker Change: We have launched a number of E. D research tools through Edmunds to help educate and build trust with consumers. We've also established test stores in California to evaluate new capabilities that support our operational readiness for increased <unk> sales and also enhance the customer experience.

William D. Nash: We have also established test stores in California to evaluate new capabilities that support our operational readiness for increased EV sales and also enhance the customer experience. Finally, we have continued to further enhance our omni-channel capabilities. We are rolling out our new order processing system to our stores and plan for it to be available nationwide later this year. The system helps associates guide customers through each step of the buying journey and provides a more seamless experience for consumers who prefer to blend self-progression with assistance from associates.

Speaker Change: Finally, we have continued to further enhance our comedy Omnichannel capabilities, we are rolling out a new order processing system to our stores and plan for it to be available nationwide later this year the.

Speaker Change: The system helps associates guide customers through each step in the buying journey and it provides a more seamless experience for consumers who prefer to blend self progression with assistance from associates.

Bill Nash: In addition to these actions, we are focused on driving down cost of goods sold by pursuing incremental efficiency opportunities that we've identified across our logistics network and reconditioning operations. For logistics, we're testing a transportation management system that dispatches moves through a centralized team. The system automates communication between drivers and stores and provides new planning and execution capabilities. For reconditioning, we've identified opportunities to reduce costs such as parts acquisition, bringing elements of sublet work in house, and optimizing production workflow. In addition, we believe that balancing production capacity across our stores and standalone reconditioning centers will drive further efficiencies and potentially enable us to take on more Max Care work over time.

William D. Nash: In addition to these actions, we are focused on driving down the cost of goods sold by pursuing incremental efficiency opportunities that we've identified across our logistics network and reconditioning operations. For logistics, we're testing a transportation management system that dispatches moves through a centralized...

Speaker Change: In addition to these actions we are focused on driving down cost of goods sold by pursuing incremental efficiency opportunities that we've identified across our logistics network and reconditioning operations for logistics, we're testing a transportation management system. The dispatches move moves through a centralized team.

Operator: The system automates communication between drivers and stores and provides new planning and execution capabilities. For reconditioning, we've identified opportunities to reduce costs, such as parts acquisition, bringing elements of sublet work in-house, and optimizing production workflow. In addition, we believe that balancing production capacity across our stores and standalone reconditioning... will drive further efficiencies and potentially enable us to take on more MaxCare work over time. If all of these actions continue to make us a stronger, better position to support consumers and fuel our excitement about our future growth in sales and profitability.

Speaker Change: The system automates communication between drivers in stores and it provides new planning and execution capabilities.

Speaker Change: For reconditioning, we've identified opportunities to reduce costs, such as parts acquisition, bringing elements of sublet work in house and optimizing production workflow. In addition, we believe that balancing production capacity across our stores and Standalone reconditioning centers will drive further efficiencies and potentially enable us to take on more maxicare work overtime.

Bill Nash: All of these actions continue to make a stronger, better position to support consumers and fuel our excitement about our future growth and sales and profitability.

Speaker Change: All of these actions continue to make a stronger better positioned to support consumers and fuel our excitement about our future growth in sales and profitability.

Operator: With that, we'll be happy to take your questions. Savannah? Thank you, and at this time, if you would like to ask a question, please press star one on your telephone keypad. Let me remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question.

Operator: With that, we'll be happy to take your questions. Thank you, and at this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.

Speaker Change: With that we'll be happy to take your questions Savannah.

Savannah: Thank you and at this time, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: They remove yourself from the queue at any time by pressing star Q.

Operator: Once again, that is Star 1 to ask a question. And our first question will come from John Healy with North Coast Research. Please go ahead.

Speaker Change: Once again that is star one to ask a question.

John Healy: And our first question will come from John Healy with North Coast Research. Please go ahead. I think, Bill, I'd love to just kind of start with the top of the funnel for you guys just on the store sales. I think you mentioned that Comtrends improved as we move through queue one, and we'll just love to get your thoughts on maybe how those improved and maybe what you're seeing now. And just as a follow-up to that, how do you answer the share questions? I think that's the biggest one investors bring up is we see these numbers for Karnax.

Speaker Change: And our first question will come from John Healy with Northcoast Research. Please go ahead.

William D. Nash: Thank you. Bill, I'd love to just kind of start with the top of the funnel for you guys on same-store sales. I think you mentioned that Comtrend's improved as we move through Q1, and we'd just love to get your thoughts on maybe how they've improved and maybe what you're seeing now. And just as a follow-up to that, how do you answer the share question? Because I think that's the biggest one investors bring up is, you know, we see these numbers for Carmax, but, you know, how do you feel you guys are performing in the market versus peers? And if there is a delta, you know, how do you explain that delta?

Speaker Change: Thank you.

John Michael Healy: I'd love to just kind of start with this.

John Michael Healy: Top of the funnel for you guys. Just on same store sales I think you mentioned that comp trends improved as we moved through Q1 and would just love to get your thoughts on maybe how those improved and maybe what youre seeing now and just as a follow up to that.

How do you answer the share question, because I think that's the biggest one investors bring up as you know we see these numbers for Carmax, but how do you feel you guys are performing in the market versus peers and if there is a delta you know.

John Healy: But how do you feel you guys are performing in the market versus peers? And if there is a delta, how do you explain that delta?

John: How do you explain that adult day. Thanks, Yeah. Thank you John.

Bill Nash: Thank you, John. On your first question, I think what you're asking is basically kind of comp cadence. So again, if you go back to the fourth quarter, the last call we did halfway through the quarter, we were running mid single-digit, negative comps. Obviously, the back half of the quarter was better than the first half of the quarter, which we were encouraged by. And then if you look at June month to date for the new quarter, we're also continued, we continue to see some improved performance, and we're actually running slightly positive comp June month to date.

William D. Nash: Thanks. Thank you, John. All right. On your first question, I think what you're asking is basically kind of a comp cadence. So, again, if you go back to the fourth quarter, the last call we did, halfway through the quarter, we were running mid-single-digit negative comps. Obviously, the back half of the quarter was better than the first half of the quarter, which we were encouraged by. And then if you look at, you know, June month-to-date for the new quarter, we're also continuing to see some improved performance, and we're actually running slightly positive comp June month-to-date.

Speaker Change: On your first question.

Speaker Change: I think what you're asking is basically kind of comp cadence. So again, if you go back to the fourth quarter. We the last call. We did halfway through the quarter. We were running mid single digit negative comps obviously the back half of the quarter was better than the first half the quarter, which are where we were encouraged by it and then if you look at our June.

Speaker Change: June month to date for the new quarter. We also continued our we continue to see some improved performance and we're actually running slightly positive comp Jim June month to date. So we're we're encouraged to see this continued improvement there.

Bill Nash: So we're encouraged to see this continued improvement there. As far as market share data, if we look at the first three calendar months of the year, which we have the title data for, we're higher in the first calendar quarter of 24. We were in the fourth quarter of calendar 2023. We're also similar to where we were last year in the first calendar quarter, and just remind you, the last two fourth quarters, we've seen big price corrections. And so that's this one was similar. We kind of bottomed out December. We're coming back up. It looks like we're coming up about the same rate as we did last year.

Speaker Change: As far as market share data if.

Speaker Change: If we look at the first three calendar months of the year, which we had the title data four were higher than the first.

William D. Nash: So we're encouraged to see this continued improvement there, calendar quarter 24, than we were in the fourth quarter of calendar 2023. We're also similar to where we were last year in the first quarter of calendar 2024, and just to remind you, the last two fourth quarters, we've seen big price corrections, and so that's, This one was similar, we kind of bottomed out December, and we're coming back up. It looks like we're coming up at about the same rate as we did last year, so year over year, market shares are fairly similar.

Speaker Change: Calendar quarter of 'twenty four than we were in fourth quarter of calendar 2023 were also similar to where we were last year in the first quarter calendar quarter and just to remind you.

Speaker Change: The last two fourth quarters, we've seen big price corrections and so that's.

Speaker Change: This one was similar if we kind of bottomed out in December we're coming back up it looks like we're coming up about the same rate as we did last year. So year over year market shares are is fairly similar.

Bill Nash: So year-over-year market shares is fairly similar.

Bill Nash: On the market share, look, there's a lot of volatility there on short periods. and you know, barring any other big price correction, my plan is not necessarily to talk about the market share again until the end of the year, because already we're seeing, we've got some markets that are up, some markets that are down. I think looking over the longer period of time is the way to really look at it. So again, I'll update this again at the end of the year unless we see some big macro factor that's having an outsized impact on it, but we feel good about the trends.

Speaker Change: Similar on the market share look theres a lot of volatility there on on short periods and.

William D. Nash: On market share, look, there's a lot of volatility there for short periods. You know, barring any other big price correction, my plan is not necessarily to talk about market share again until the end of the year because, already, we're seeing, we've got some markets that are up, some markets that are down. I think looking over a longer period of time is the way to really look at it. So again, I'll update this again at the end of the year unless we see some big macro factor that's having an outsized impact on it, but we feel good about the trend. Thank you, guys. Thanks, John. Our next question will come from Seth Basham with Wedbush Securities. Please go ahead. Thanks a lot, and good morning.

Speaker Change: Barring any other big price correction my plan is not necessarily to talk about the market share gain until the end of of the.

Speaker Change: The year cause already we're seeing we've got some markets are up some markets that are down I think looking over the longer period of time is the way to really look at it. So again I'll update this again at the end of the year unless we see some big macro factor, that's having an outsized impact on it but we feel good about our about the trends.

John Healy: Thank you, good. Thanks, Jon.

Speaker Change: Thank you guys. Thanks.

Speaker Change: Thanks, John.

Speaker Change: Okay.

Seth Moshen: Our next question will come from Seth Moshen with Wedbler Securities. Please go ahead. Thanks a lot, and good morning.

Speaker Change: Our next question will come from Seth Basham with Wedbush Securities. Please go ahead.

Jon Daniels: My multi-part question is on CAF. First, looking at the loss trends in your reserves, we continue to see losses increase in your securitized portfolio. Your reserves look a little bit light. Do you think that you're going to have to reserve more aggressively if the loss trends continue? And secondly, how quickly can you ramp up Tier 2 and Tier 3 lending as you now have a non-prime securitization program? Yeah, I appreciate the question, Seth. So with regard to losses and delinquencies, you know, within the quarter, I'd say largely, we were very much in line with what we expected for the quarter.

Seth Mckain Basham: Thanks, a lot and good morning, my like.

Seth Moshen: My multi-part question is on CAP. First, looking at the loss trends in your reserves, the continuously losses increase in your standardized portfolio; your reserves look a little bit light. Do you think that you're going to have to reserve more aggressively if the loss trends continue?

Seth Mckain Basham: My multi part questions on Caf first looking at the loss trends are.

Speaker Change: And your reserves continuing to see losses increase in year securitized portfolio.

Speaker Change: Your reserves.

Speaker Change: What's a little bit like do you think that you're going to have to reserve more aggressively if the losses continue and then secondly, how quickly can you ramp here.

Jon Daniels: And then secondly, how quickly can you ramp Tier 2 and Tier 3 lending as you now have a non-prime scarization program? Yeah, appreciate the question, Seth. So, with regard to losses and delinquencies, you know, within the core, I'd say largely we were very much in line with what we expected for the quarter. And I think that's reflected in the provision year. Every year is basically flat. If you look at our reserve receivable ratio, flat sequentially, you know, certainly we publish data on a quarterly basis. You know, remember, that's roughly 60% of our portfolio, but again, the trends there are as expected. You know, and bear in mind, in the quarter, this quarter is typically a high volume quarter.

Speaker Change: Tier two and tier three lending as you know have a nonprofit sterilization program.

Jon Daniels: And I think that's reflected in the provision year-over-year, which is basically flat. If you look at our reserved receivable ratio, flat sequentially, you know, certainly we publish data on a quarterly basis. Remember, that's roughly 60% of our portfolio. But again, the trends there are as expected, you know, and bear in mind in the quarter; this quarter is typically a high volume quarter. So your actual provision will typically be higher because you've originated more. And it's typically a lower credit quality quarter because of tax time as well. So I'll add that.

Seth Mckain Basham: I appreciate the question Seth is that Seth so with regard to losses and delinquencies yeah within the quarter I'd say largely we were very much in line with what we expected for the quarter and I think that's reflected in the provision year over year is basically flat. If you look at our reserved receivable ratio flat sequentially. You know certainly we published data on a on a.

Seth Mckain Basham: At a quarterly basis remember, that's roughly 60% of our portfolio, but but again the trends there as expected.

Jon Daniels: But for the most part, a non-event for us from a delinquency and losses perspective as it was right in line with our expectations. To your second question, how quickly can we ramp up the Tier 2 and Tier 3 volume? You know, I think the easier way to answer that is kind of to anchor to what we do today. So 43 percent of sales, you know, give or take at any given point is largely what we're doing today. The vast majority clearly is in Tier 1.

Seth Mckain Basham: And bear in mind in the in the quarter. This quarter is typically a high volume quarter. So your actual provision will typically be higher because you've originated more and it's typically a lower credit quality quarter because of tax time as well, so I have that but.

Jon Daniels: So your actual provision will typically be higher because you've originated more. And it's typically a lower credit quality quarter because of tax time as well. So I'll add that. But for the most part, a non-event for us from a delinquency in losses, as it was right in line with our expectations.

Seth Mckain Basham: For the most part a non event for us from a delinquency and losses as it was right in line with our expectations to your second question how quickly can we ramp the tier two and tier three volume.

Jon Daniels: To your second question, how quickly can we ramp the Tier 2 and Tier 3 volume? You know, I think the easier way to answer that is kind of let's anchor to what we originate today. So 43% of sales, you know, give or take, in any given point, is largely what we're doing today. The vast majority clearly is in Tier 1. In tier 3, we've been historically larger, but we're at a small piece because we're really investing in tier 2 and trying to understand that. It's in the higher portion of Tier 2. We are really excited about our, you know, our non-prime sterilization program.

Seth Mckain Basham: I think the easier way to answer that is kind of what's the anchor to what we originate today. So 43% of sales you know give or take in any given point is largely what we're doing today. The vast majority clearly is in tier one.

Jon Daniels: In Tier 3, we've been historically larger, but we're at a small piece because we're really investing in Tier 2 and trying to understand that. It's in the higher portion of Tier 2. We are really excited about our, you know, our non-prime securitization program. We think that's truly going to enable growth both in the lower end of the credit spectrum for us to take a larger percentage of sales but also to expand what we do in the higher end in what we call our higher prime segment.

Speaker Change: Yeah in tier three we've been historically larger but we're at a small piece because we're really investing in tier two and trying to understand that it's in the higher portion of tier two we are really excited about our you know our non prime securitization program, we think that's truly going to enable our growth.

Jon Daniels: We think that's truly going to enable growth both in the lower end of the credit spectrum for us. To take a larger percentage of sales, but also to expand what we do in the higher end in what we call our higher prime segment. So we're looking forward to that.

Growth both in the lower end of the credit spectrum for us to take a larger percentage of sales, but also to expand what we do in the higher end in what we'll call a higher prime segment. So we're looking forward to that now as far as ramping and the timing of the ramp I would take it in the near term maybe for the balance of the year, we're going to continue to just learn about the tier two space, we're going to roll out our new models.

Jon Daniels: So we're looking forward to that. Now, as far as ramping up and the timing of the ramp, I would say in the near term, maybe for the balance of the year, we're going to continue to just learn about the Tier 2 space. We're going to roll out our new models, or sorry, test our new models in the quarter. We're going to begin to learn about the entirety of the Tier 2 spectrum, and that will take some time.

Jon Daniels: Now, as far as ramping and the timing of the ramp, I would say in the near term, maybe for the balance of the year, we're going to continue to just learn about the tier 2 space. We're going to roll out our new models; sorry, test our new models in the quarter. We're going to begin to learn about the entirety of the Tier 2 spectrum. And that will take some time. And as we grow that, we will certainly let folks know. But beyond that, we do think there's room for us to grow beyond 43%. You know, it will be 45, 47, 50. Remains to be seen the timing of how much and when.

Speaker Change: Sorry, a test our new models in the <unk> in the quarter, we're going to begin to learn about the entirety of the tier two spectrum and that will take some time and as we grow that we will certainly let folks know, but beyond that we do think there's room for us to grow beyond 43%.

Jon Daniels: And as we grow that, we will certainly let folks know. But beyond that, we do think there's room for us to grow beyond 43 percent. You know, will it be 45, 47, or 50?

Speaker Change: Will it be 45 to $47 50 remains to be seen the timing of how much and when but we do believe it's substantial but you know probably not doing much more than what we're doing today for the balance of the year.

Jon Daniels: It remains to be seen the timing of how much and when, but we do believe it's substantial, but, you know, probably not doing much more than what we're doing today for the balance of the year. I do think longer term as well, when you think about funding capacity. I do think us entering this market, which we're really excited about, is probably another two to three billion dollars worth of funding capacity that we're going to give ourselves when you think about how deep we can eventually go over time. So this is a really exciting program, and we expect to drive our finance, incrementally, Absolutely. Thank you.

Jon Daniels: But we do believe it's substantial.

Jon Daniels: But, you know, probably not doing much more than what we're doing today for the balance of the year.

Jon Daniels: I do think long back here as well when you, when you've just, when you think about funding capacity, do you think of entering into this market, which we're really excited about? It's probably another two to three billion dollars' worth of funding capacity that we're going to give ourselves. When you think about how deep we can eventually go over time. So this is a really exciting program. And we expect to drive our financing income incrementally.

Speaker Change: I do think longer term as well when you. When he was asked why do you think about funding capacity do you think that's entering into this market, which we're really excited about it's probably another $2 billion to $3 billion worth of funding capacity that we're gonna give ourselves when you think about how deep we can eventually go overtime. So this this is a really exciting program and we expect to drive our financing income.

Jon Daniels: Thanks for moving forward.

Speaker Change: Incrementally moving forward.

Jon Daniels: Absolutely. Thank you.

Speaker Change: Absolutely. Thank you.

David Bellinger: Our next question comes from the line of David Bellinger with Mizzouhaal. Hey, great. Thanks for taking a question. It's on the expense side. So if you look at the ad spend per total union, I think that was about 5% year-over-year, compares to your guidance for flatish. Maybe just walk us through any changes you're seeing there on the ad spend line. And just overall, how we should think about SG&A dollars in Q2 and over the balance of the year. Thanks for the question. I would tell you that’s pretty benign. I think quarter to quarter is going to be a plus here, a little bit negative here on the total unit basis, which is again how we manage our total advertising spend.

Operator: Our next question comes from the line of David Bellinger with Mizzou Health. Hey, great, thanks for taking the question. It's on the expense side. So if you look at the ad spend per total unit, I think that was about 5% year over year compared to your guidance for Flatish. Maybe just walk us through any changes you're seeing there on the ad spend line and just overall how we should think about SG&A dollars in Q2 and over the balance of the year. You know, thanks for the question. I would tell you that it's pretty benign, right?

Speaker Change: Our next question comes from the line of David Bellinger with Mizuho.

Speaker Change: Okay, great. Thanks for taking my question. It's on the expense side. So do you still get the AD spend per total Union I think that was about 5% year over year compares to your guidance for for flattish, maybe just walk us through any changes you're seeing there on the AD spend line and just overall, how we should think about SG&A dollars in Q2.

Speaker Change: Over the balance of the year.

Thanks for the question I would tell you that's a pretty benign right I think quarter to quarter, it's going to be a plus here a little bit negative here on the total unit basis, which is again, how we manage our total advertising spend so I wouldn't look at that as anything other than just kind of quarter to quarter fluctuations, but we are committed to managing to that roughly $200.

Operator: I think, quarter to quarter, it's going to be a plus here, a little bit negative here on a total unit basis, which is again how we manage our total advertising spend. So I wouldn't look at that as anything other than just kind of quarterly fluctuations. But you know, we are committed to managing to that roughly $200 per total unit for the balance for the entire year. For the rest of the year, sorry, can you repeat the question again?

Enrique Mayor: So I wouldn't look at that as anything other than just quarter-to-quarter fluctuations.

Enrique Mayor: But we are committed to managing to that roughly $200 per total unit for the balance of the year, the entire year. For the rest of the year, can you repeat the question again? Yeah, and just the second part is overall SG&A expense dollars. How should we think about that level through the balance of the year? Yeah, I think for the entire year, we're really focused in the first quarter. We're really proud of the fact that once you back out some of the noise that I spoke to, we were actually down SG&A year over year. I would expect that for the balance of the year, that's going to be a little bit more challenging.

Speaker Change: For total unit favorite for the balance of the year for the entire year I should say.

Speaker Change: On the rest of the year.

For the rest of the year, sorry can you repeat the question again.

Operator: Yeah, and just the second part is overall SG&A expense dollars. Just how should we think about that level through the balance of the year? Yeah, I think for the entire year, you know, we're really focused. In the first quarter, we're really proud of the fact that once you back out some of the noise that I spoke to, we were actually down SG&A year over year.

Speaker Change: Yeah, and just the second part just overall SG&A expense dollars, just how should we think about that level through the balance of the year.

Operator: You know, I would expect that for the balance of the year, it's going to be a little bit more challenging from a total dollar standpoint. But what I'll reemphasize here is what we're focused on. And what we're focused on is putting ourselves in a position, through active cost management, to be able to lever low single-digit gross profit growth. And that's really what we're focused on. So when you look at what we've been doing for the past several years in our heavy investment phase, that's a different story.

Speaker Change: Yes, I think for the entire year you know, we're really focused in the first quarter. We're really proud of the fact that once you back out some of the noise that I spoke to you we were actually down SG&A year over year, you know I would expect that for the balance of the year that that's going to be a little bit more challenging from a total dollar standpoint, but what I'll reemphasize here is what we're focused on and what we're focused on is putting ourself.

Enrique Mayor: I think for the entire year, we're really focused in the first quarter. We're really proud of the fact that once you back out some of the noise that I spoke to, we were actually down SG&A year over year. I would expect that for the balance of the year. That's going to be a little bit more challenging. From a total dollar standpoint, but what I'll re-emphasize here is what we're focused on. What we're focused on is putting ourselves in a position through active cost management to be able to lever on low single digit or as profit growth.

Speaker Change: And our position through active cost management to be able to lever on low single digit gross profit growth and that's really what we're focused on and so when you look at where we've been for the past several years in a heavy investment phase that's a different story right and it really speaks to is migrating more to it a little bit more of a fixed cost structure and.

Enrique Mayor: That's really what we're focused on. When you look at what we've been for the past several years and our heavy investment phase, that's a different story. It really speaks to us migrating more to a little bit more of a fixed cost structure and an ability to lever when sales roll around, which they were focused on.

Operator: And it really speaks to us migrating more to a little bit more of a fixed cost structure and an ability to leverage when sales roll around, which they will. And so that's how we think about our ability to leverage.

Speaker Change: And the ability to lever when sales were all around at which they will and so that's how we think about our ability to leverage moving forward.

Enrique Mayor: That's how we think about our ability to leverage moving forward.

Brian Nagel: Thank you. Our next question comes from Brian Nagel with Oppenheimer.

Got it thank you.

Speaker Change: Okay.

Speaker Change: Yes.

Operator: Thank you. Our next question comes from Brian Nagel with Oppenheimer. Good morning.

Speaker Change: Our next question comes from Brian Nagel with Oppenheimer.

Brian Nagel: Good morning. A couple of questions. I'll lump them together.

Brian William Nagel: Hi, good morning.

Brian William Nagel: Yeah.

Operator: A couple of questions. I'll lump them together. I mean, the first is just with regard to this first non-prime securitization, I think it's a follow-up to Seth's question before, but as we think about this development, how, what are the ramifications, longer term, for Carmax? Is this gonna be a potential vehicle to drive better share or better profitability both? I mean, again, how should we think about the model flexing now with this capability?

Speaker Change: Couple of questions all lumped them together.

Brian Nagel: I mean, the first, just with regard to this first non-prime securitization, I think it's a follow-up to sub-question before, but here's my question. What do we think about this development? Where are the ramifications, longer-term formats? Is this going to be a potential vehicle to drive better share, or better profitability, both? How should we think about the model question now with this capability?

Speaker Change: Just with regard to the this first non prime securitization I think it's a follow up the sub question before but.

Speaker Change: Think about this development.

What are the ramifications you longer term for Carmax is there is this going to be a potential vehicle to you too.

Speaker Change: To drive better share or better profitability. Both from here how should we think about the bottle question now with this capability and then my second question unrelated.

Bill Nash: My second question, I'm related. Can you keep going out the sourcing vehicles from dealers? I guess the question is the sustainability of that, and this also the potential positives for margins or other sources.

Operator: And then my second question, unrelated. You keep calling out sourcing vehicles from dealers. I guess the question is the sustainability of that and just also the potential positives for margins or other sourcing. Thank you.

Speaker Change: You're calling out the business.

Speaker Change: The sourcing vehicles from from dealers I guess the question is the sustainability of that and just also the potential positive support for margins or are there other sourcing.

Bill Nash: Thank you.

Speaker Change: Thank you.

Jon Daniels: Yeah, Brian, I appreciate the question. I'll take the first one with regard to non-prime securitization. Yeah, I'm going to continue to anchor us to this kind of 43% of sales. As mentioned, we think there is some substantive volume that we can take above that. And the best way to kind of give orders of magnitude of the value, the long-term value here is that under the current financial situation, the current economics, for every one point of sales that we can grab, we think that can drive $10 to $12 million worth of value to Carmax. Now, bear in mind, that doesn't start day one when you begin to add that volume. Initially, you originate additional volume. You need the provision for loan losses, but eventually, it becomes accretive.

Brian William Nagel: Yeah, Brian I appreciate the question I'll take the first one with regard to the non prime securitization, yeah, I'm going to continue to anchor us to this kind of 43% of sales as mentioned, we think there is some substantive volume that we can take up of that and the best way to kind of give orders of magnitude of the value. The long term value here is.

Bill Nash: I'll take the first one with regard to the non-prime securitization. I'm going to continue to anchor this 43% of sales. As mentioned, we think there is some substantive volume that we can take above that. The best way to kind of give orders of magnitude of the value, the long-term value here is, we see it under the current financial situation, the current economics. For every one point of sales that we can grab, we think that can drive $10 to $12 million for the value to CarMax. Bear in mind that doesn't start day one when you begin to add that volume.

Brian William Nagel: We see it under the current financial situation the current economics.

Brian William Nagel: For every one point of sales that we can grab them, we think that can drive $10 million to $12 million worth of value to Carmax now bear in mind that doesn't start day, one when you begin to add that volume.

Bill Nash: Initially, you originate additional volume; you need provision for loan losses, but eventually becomes a creative, and when you get to steady state, that's where I'm referring to the kind of $12 million. As you can imagine, as you tack on additional points, you tack on additional value for CarMax, and in the long run, we think it's very substantial and something we're looking forward to going after.

Brian William Nagel: Actually you originate additional volume you need to provision for loan losses, but eventually becomes accretive and once you get to steady state that's what I'm, referring to the to the $10 million to $12 million. So as you can imagine as you tack on additional points you tack on additional value for Carmax and in the long run we think its very substantial and something we're looking forward to going after.

William D. Nash: And once you get to steady state, that's where I'm referring to the $10 to $12 million. So, as you can imagine, as you tack on additional points, you tack on additional value for Carmax. And in the long run, we think it's very substantial and something we're looking forward to going after. Yeah, and as far as the second part of your question, Brian, on dealer sourcing, look, we're all about sourcing vehicles wherever we can find them.

Bill Nash: Yeah, and as far as the second part of your question, Brian, on dealer sourcing, look, we're all about sourcing vehicles wherever we can find them. You know, traditionally for us, we've been sourcing them through consumers, and then what we don't get from consumers, we've been buying it at all site auctions. This is just another step to diversify, you know. We buy from consumers; we can buy directly from dealers, and the ones that we're buying for dealers, the bulk, it's a little different than we buy from consumers. The majority of those are, there's a higher percentage of retail cars that we're buying from dealers, so while they're not as profitable as the ones we buy from consumers, there's certainly more profitable than when we have to go off site for.

Speaker Change: Yeah, and as far as the second part of your question, Brian on dealer sourcing look we're all about sourcing vehicles wherever we can find them and you know traditionally for us we've been sourcing through consumers and then what we don't get from consumers we've been buying it off site auctions. This is just another step to diversify.

William D. Nash: And traditionally, for us, we've been sourcing them through consumers. And then what we don't get from consumers, we've been buying at off-site auctions. This is just another step to diversify. We buy from consumers. We can buy directly from dealers.

Speaker Change: As consumers, we can buy directly from our dealers and the ones that were buying for deal is the bulk of it is a little different that we bought the consumers. The majority of those are our there's a higher percentage of retail cars that we're buying from from dealer so while they're not as profitable as the ones. We bought from consumers are there are certainly more profitable than when we have to go on.

William D. Nash: And the ones that we're buying for dealers, the bulk of it, it's a little different than we buy from consumers. The majority of those are, there's a higher percentage of retail cars that we're buying from dealers. So while they're not as profitable as the ones we buy from consumers, they're certainly more profitable than when we have to go off-site for. So we're encouraged by it.

Bill Nash: So we're encouraged by it; we think it's, you know, this is an area that we can continue to grow. We're getting great responses from the dealers; we've made some improvements to the platform, which I think is part of why you're seeing this continued demand. And, you know, if I look at a year ago versus now, we've, the dealers that are actively using it have bumped up, let's call it roughly 50% in the last year, and we really haven't added them. We added a few more markets, but really haven't added that many more markets, so we're encouraged by it.

Speaker Change: Offsite for us so we're encouraged by it we think it's a you know this is an area that we can continue to grow and we're getting great responses from the dealers. We've made some improvements to the platform, which I think is part of why you're seeing this continued demand and.

William D. Nash: We think this is an area that we can continue to grow. We're getting great responses from the dealers. We've made some improvements to the platform, which I think is part of why you're seeing this continued demand. And if I look at a year ago versus now, the dealers that are actively using it have bumped up, let's call it roughly 50% in the last year. And we really haven't added anything.

Speaker Change: If I look at a year ago versus now.

Speaker Change: We've with the dealers that are actively using it have bumped up our let's call. It roughly 50% in the last year and we really haven't added and we've added a few more markets, but really havent added that many more markets. So we're encouraged by.

William D. Nash: I mean, we added a few more markets, but we really haven't added that many more markets. So we're encouraged by it. Thanks, guys. I appreciate all the color.

Brian Nagel: Thanks, guys. I appreciate all the color.

Speaker Change: Thanks, guys I appreciate the color.

Sharon Zackfia: Sure. Next question comes from Sharon Zachvia: what is William Blair? Hey, good morning. Thanks for taking the question. I guess, you know, it's kind of on the improvement sales you've been seeing. I mean, do you think that's broader industry dynamics? Do you think there's something operationally you're doing? I mean, you know, I know obviously at the top of the funnel is increasing conversions than down a little bit, is that starting to improve for you and if so, kind of where and why. Thanks.

Speaker Change: Sure.

Operator: Our next question comes from Sharon Zackfia with William Blair. Hey, good morning. Thanks for taking the question. I guess, you know, it's kind of on the improvement in sales you've been seeing. I mean, do you think that's broader industry dynamics? Do you think there's something operationally wrong you're doing? You know, I know, obviously, if the top of the funnel is increasing, conversion has been down a little bit. Is that starting to improve for you? And if so, where and why?

Speaker Change: Our next question comes from Sharon Zackfia with William Blair.

Speaker Change: Hey, good morning, Thanks for taking the question.

Sharon Zackfia: Yes, you know it is kind of on the improvement in sales you've been seeing I mean do you think.

Speaker Change: It's broader industry dynamics, do you think theres something operationally or Julien.

Speaker Change: I know obviously at the top of the funnel is increasing conversions and then down a little bit is that starting to improve for you and if so kind of where and why thanks.

Operator: Thanks. Yeah, thank you for the question, Sharon. Look, I think it's a combination of things.

Bill Nash: Yeah, thank you for the questions, Sharon. Look, I think it's a combination of things. I think it's, it reflects on just some of the continued work that we're doing internally, but it's also a vehicle prices, you know, even though they were up quarter of a quarter, they're always up from the fourth to the first. You know, they were down 700 bucks a year over a year, so we're seeing vehicle values be a little bit more stable. If you look at depreciation trends, for example, if you look at the last two years, they're all over the board from appreciation to depreciation, and they're steep both ways.

Sharon Zackfia: Yeah. Thank you for the question Sharon look I think it's a combination of things I think it's it reflects on just some of the continued work that we're doing internally, but it's also a vehicle prices you know, even though they were up quarter over quarter, they're always up from the FERC fourth to the first you know they were down 700 bucks year over year, So where we're seeing vehicle values be a little bit more <unk>.

Sharon Zackfia: Table, if you look at depreciation trends for example, if you look at the last two years, they're all over the board from appreciation due to depreciation in their steep both both ways. This year is a little bit more what I would call normal. Although there is a there is a difference in the in the first quarter last year.

Bill Nash: This year's a little bit more what I would call normal, although there's a difference in the in the first quarter last year, just to expand on some of my comments earlier. Last year we saw appreciation kind of in this first time period of the year of about 2500 bucks, and then we saw about a, you know, $1100 depreciation this year. We only went up about $1,000, and then it's kind of flat by the end of the quarter. So you have a little bit of year-over-year dynamics, but again, just the value stability. That's nice. I mean, we've always worked in an environment where there's been appreciation, depreciation.

William D. Nash: I think it's, it reflects on just some of the continued work that we're doing internally. But it's also, look, vehicle prices, you know, even though they were up a quarter of a quarter, they're always up from the fourth to the first, you know, they were down 700 bucks year over year. So we're seeing vehicle values be a little bit more stable. If you look at depreciation trends, for example, if you look at the last two years, they're all over the board from appreciation to depreciation, and they're steep both ways.

Sharon Zackfia: Just to expand on some of my comments earlier last year, we saw appreciation kind of in this first time period of the year of about 2500 box and then we saw about $1100 depreciation this year.

Sharon Zackfia: We only went up about $1000 and then it's kind of flat body by the end of the quarter. So you had a little bit of year over year dynamics, but again, just the values stability. That's nice I mean, we've always worked in AR and AR and AR.

William D. Nash: This year is a little bit more what I would call normal, although there is a difference in the first quarter last year. Just to expand on some of my comments earlier last year, we saw appreciation kind of in this first time period of the year of about 2500 bucks, and then we saw about $1,100 depreciation this year; we only went up about $1,000. And then it's kind of flat by the end of the quarter.

Sharon Zackfia: In an environment, where theres been appreciation depreciation what's more impact as to last year and a half two years as these big price correction. So I think it's a combination of factors.

Bill Nash: What's more impact is the last year and a half, two years is these big price corrections. So I think it's a combination of factors.

Rajat Gupta: And we will take our next question from Rajat, Rajat Gupta with JP Morgan. Please go ahead. Great. Thanks for taking the question.

William D. Nash: So you have a little bit of year over year dynamics. But again, just the value stability, that's nice. I mean, we've always worked in an environment where there's been appreciation and depreciation. What's more impacted us the last year and a half, two years, the big price correction. So I think it's a combination of factors. And we will take our next question from Rajat Gupta with J.P. Morgan. Go ahead.

Speaker Change: And we will take our next question from Russia, Vishal Gupta with J P. Morgan.

Speaker Change: Please go ahead.

Speaker Change: Great. Thanks for taking the question Oh, Bill I just had a question.

Operator: Great. Thanks for taking the question. Bill, I just had a question on strategy and operations. I think, like, we can all see the factual data on the unit comps, you know, the market share. It's not where Carmax used to be historically.

Rajat Gupta: Bill, I just had just had a question on strategy and operations. I think like we can all see like the factual data on the unit columns in the market share. It's not where CarMax needs to be historically. And if you look at your margins and like you build up a unit, I'm using the one time items, the squatter, they have not changed right through some curious, you know, if you think, you know, the current strategy that you have around sourcing, you know, the impact on the channel has had on your in store culture. It's all about still the right approach, or do you think something needs to change, or we're just waiting for the industry backdrop to improve for climate to do better on all these metrics, especially when some of the public peers are doing better.

Speaker Change: Question on the strategy and operations.

Speaker Change: I think you can always be like the factual data on the unit comps.

Speaker Change: The market share.

Speaker Change: It's not very carmax used to be historically.

Operator: And you can look at your margins and, like, the EBITDA per unit. I mean, we used to exclude the one-time items this quarter. They have not changed or improved.

Speaker Change: And you can look at your margins and EBITDA, but if.

Speaker Change: If you exclude the one time items this quarter, we have not changed.

Operator: So, I'm curious, you know, if you think, you know, the current strategy that you have around sourcing, you know, the impact Omnichannel has had on your in-store culture, is all of that still the right approach, or do you think something needs to change, or are we just waiting for the industry backdrop to improve for Carmax to do better on all these metrics, especially when some of its public peers are doing better? Thanks. Yeah, Rajat, look, I feel great about the strategy.

So I'm curious if you think.

Speaker Change: The current strategy that you have around sourcing.

The impact Omnichannel has had on the on your <unk>.

Speaker Change: In store culture.

All of that still the right approach or do you think something needs to change or are we just waiting for the industry backdrop would improve our Brooklyn match you better on all these metrics.

Especially when some of the public peers are doing better. Thanks, Yeah, Rajat look I feel great about the strategy I feel great about all the things that you are that you talked about I think what's really been the story for US, particularly is really what you've seen over the last year and a half and it's been more about these big price corrections and what's going on.

Bill Nash: Thanks. Yeah, Rajat. Look, I feel great about the strategy. I feel great about all the things that you talked about. I think what's really been the story for us particularly is really what you've seen over the last year and a half. And it's been more about these big price corrections and what's going on in the market. The fact that we sell a late model high quality car from an affordability standpoint. So, you know, if you look at the data, you're seeing more 10-plus year old cars being sold here, you know, in the last, you know, two years.

William D. Nash: I feel great about all the things that you, you know, that you talked about. I think what's really been the story for us, particularly is what you've seen over the last year and a half. And it's been more about these big price corrections and what's going on in the market, the fact that we sell a late model, high quality car from an affordability standpoint. So, you know, if you look at the data, you're seeing more 10 plus year old cars being sold here in the last, you know, two years. I think that's even the case for the first calendar quarter.

Speaker Change: The market. The fact that we sell a late model high quality car from an affordability standpoint. So you know if you look at the data you're seeing more 10, plus year old cars being sold here you know in the last two years I think that's even the same case for the first the first calendar quarter. So I think the the impact on the business had been more macro related but.

Bill Nash: I think that's even the same case for the first, the first calendar quarter. So, I think the impacts on the business have been more macro related, but we certainly have not been sitting here waiting for them to get better. We've been making ourselves stronger. And I think those dividends will continue to come back. They'll pay dividends as we go forward as sales come back. I mean, keep in mind, you know, last year, I think the total used cars exchange was 35 and a half million. It's typically north of 40 million. And the most impacted share of that group is the less than six year old.

William D. Nash: So I think the impact on the business has been more macro-related, but we certainly have not been sitting here waiting for things to get better. We've been making ourselves stronger, and I think those dividends will continue to come back. They'll pay dividends as we go forward as sales come back. I mean, keep in mind, you know, last year I think the total used car exchange was $35.5 million. It's typically north of $40 million, and the most impacted share of that group is the less than six-year-old.

Speaker Change: We certainly have not been sitting here waiting for them to get to get better we've been making ourselves stronger and I think those dividends will continue to to come back they'll pay dividends as we go forward as sales come back I mean keep in mind.

Speaker Change: Last year I think the total used cars exchange was 35 and a half million, it's typically north of $40 million in the most impacted share of that group is is the less than six year old and it again it goes back to the affordability. So we feel great about our strategy, we feel great about the durable actions I told you that we've taken which will continue to give us benefits as we go forward.

William D. Nash: And again, it goes back to affordability. So we feel great about our strategy. We feel great about the durable actions I told you that we've taken, which will continue to give us benefits as we go forward. Yeah, and I do think it's important to point out, and Bill talked about it in his prepared remarks, aggressively going after reconditioning costs, going after logistics costs, and bringing those down.

Enrique Mayor: And again, it goes back to the affordability. So, we feel great about our strategy. We feel great about the durable actions. I told you that we've, we've taken which will continue to give us benefits as we go forward. Yeah, I do think it's important to point out as well. Bill talked about it in his prepared remarks. Going after aggressively going after reconditioning costs, going after logistics costs and bringing those down. Those are, those are material items moving forward that we anticipate. They can support sales. They can support margin. Both of those items, so we're excited about those.

I do think it's important to point out as well and bill talked about it in his prepared remarks.

Speaker Change: Going after aggressively going after reconditioning costs going after logistics costs and bringing those down isn't it doesn't material items. Moving forward. Then we anticipate that can support sales that can support margin are both of those items. So we're excited about those so it's a matter of aggressive also going after you know what we can't control and we can do.

William D. Nash: Those are material items moving forward that we anticipate can support sales, that can support margin, both of those items. So we're excited about those. The only other thing I would add to that, Rajat, is that when you go through experiences like this, you want to be a better, stronger company. So if this was to happen again in the future, you know, what might you do different?

Enrique Mayor: So, you know, Brigade, it's a matter of aggressive also going after, you know, what we can control, and we can control that.

Bill Nash: The only other thing I would ask, the only other thing I would add to that, is, you know, when you go through experiences like this, you want to be a better, stronger company. So, if this was to happen again in the future, you know, what might you do different? And some of the things we've already talked about, the expanding our sourcing, you know, Enrique just talked about really focusing on the cost of goods sold. John's talked about the financing. I actually think the financing, you know, they're going to allow us to grow cap income. I think there's an opportunity to actually grow units, because I think there's little pockets that maybe our partners aren't picking up that we think are actually good little pockets that we can, that we can now do.

Speaker Change: All of that.

The only other thing I would ask that the only other thing I would add to that regard as you know when you go through experiences like this you want to be a better stronger company. So if this was to happen again in the future you know what might you do different in some of the things we've already talked about the expanding our sourcing.

William D. Nash: And some of the things we've already talked about, expanding our sourcing, you know, Enrique just talked about really focusing on the cost of goods sold, and John talked about financing. I actually think the financing, not only is it going to allow us to grow cap income, but I think there's an opportunity to actually grow units because I think there are little pockets that maybe our partners aren't picking up that we think are actually good little pockets that we can now do.

Speaker Change: You just talked about really focusing on the cost of goods sold John's talked about the financing I actually think the financing now they're going to allow us to grow Caf income I think theres, an opportunity to actually grow units, because I think theres little pockets that maybe our partners aren't picking up that we that we think are actually good little pockets that we can that we can now do I think the work that we've done on the variable cost.

William D. Nash: I think the work that we've done on the variable cost, for example, a lot of those factors, the EPP, the increase in that, all those factors also enter into the equation on elasticity when it comes to measuring things like, should we lower prices? Should we keep prices the same?

Bill Nash: I think the work that we've done on the variable costs, for example. A lot of those factors, the EPP, the increase in that, all those factors also enter into the equation on elasticity when it comes to measuring like, should we lower prices? Should we keep the prices the same? So, again, I think we've, we've learned a lot. We've made a lot of improvements. So, if the situation is to happen together, we have more, more tools in our tool chest.

Speaker Change: For example, a lot of those factors the E. P. P. The increase in that all of those factors also enter into the equation on elasticity when it comes to measuring like should we lower prices should we keep the prices. The same. So again I think we've we've learned a lot. We've made a lot of improvements or if the situations happen together, we have more more tools in our tool chest.

William D. Nash: So again, I think we've learned a lot. We've made a lot of improvements. So if the situation is to happen again, we have more tools in our tool chest. Maybe just like in the June commentary, I mean, is it fair to expect that the positive trends you're seeing should only get better through the course of the quarter, or is there some monthly seasonality or comps to keep in mind there? Yeah, no, look, we're encouraged by the trend since the second half of the first quarter. As I said, it's even continued into June.

Bill Nash: Maybe just like on the June, on the June commentary. I mean, is it, is it fair to expect that the positive trends you're seeing should only get better through to the course of the quarter, or is there some monthly seasonality or cons to keep in mind there? Yeah, look, I look, we're encouraged by the, really, the trend since the second half of the first quarter. Like I said, it's even, you know, continued into, into June. So, we're encouraged by that. And, you know, we're going to, we're going to, we're going to keep getting after it.

Speaker Change: Maybe just take them in June on the juice commentary I mean is it is it fair to expect that the positive trends youre seeing them should only get better through the course of the quarter or is there some monthly seasonality or comps to keep in mind that I don't look I look we're encouraged by the really the trend since the second half of the.

Speaker Change: The first quarter like I said it too is even you know continued into may into June. So we're we're encouraged by that and we're going to we're going to keep getting after it. So I don't have a crystal ball to tell you exactly what's going to happen this year, but we feel good about the trajectory.

William D. Nash: So we're encouraged by that, and we're going to keep going after it. So I don't have a crystal ball to tell you exactly what's going to happen this year, but we feel good about the trajectory. Great, thank you.

Bill Nash: So, I don't have a crystal ball to tell you exactly what's going to happen this year, but we feel good about the trajectory. Great. Thank you.

Speaker Change: Great. Thank you. Thank you.

Craig Kennison: Our next question will come from Craig, Kenneth, and with Baird. Please go ahead. Hey, good morning. Thanks for taking my question. Bill, you mentioned some cost of goods sold initiatives related to logistics and reconditioning. Do you expect those savings to flow through to the bottom? In the bottom line, or to drive lower prices, and then is there any way for you to quantify the per unit impact of those initiatives?

Operator: Thank you. Our next question will come from Craig Kennison with Baird. Please go ahead. Hey, good morning. Thanks for taking my question. Bill, you mentioned some cost of goods sold initiatives related to logistics and reconditioning. Do you expect those savings to flow through to the bottom line or to drive lower prices? And then, is there any way for you to quantify the per unit impact of those initiatives? Yeah, great questions, Craig, and yeah, we're. From a quantification standpoint, look, I think we have a couple hundred bucks per unit per retail unit that we're going after over the next year or two between reconditioning and logistics. So, as you know, that's not insignificant at all.

Speaker Change: Our next question will come from Craig Kennison with Baird. Please go ahead.

William D. Nash: And we're excited about it. It's not going to hit day one tomorrow, but across the two, we feel like there is kind of that amount of opportunity there. And then the other part of your question. Do you expect that to hit the bottom line, or is that? Oh, yeah, yeah.

Craig R. Kennison: Hey, good morning, Thanks for taking my question Bill you mentioned some cost of goods sold initiatives related to logistics and reconditioning.

Do you expect those savings to flow through to the bottom line or to drive lower prices and then is there any way for you to quantify the per unit impact of those initiatives.

Bill Nash: Chris. Yeah, great question, Craig. And yeah, we're from a quantification standpoint. Look, I think we have a couple hundred, a couple hundred bucks per unit, per retail unit that we're going after over the next year or two, between reconditioning and logistics. So, as you know, that's not insignificant at all. And you know, we're excited about it. It's not going to hit day one tomorrow, but you know, across the two, we feel like there is kind of that amount of opportunity there. And then the other part of your question. Do you expect that to hit the bottom line?

William D. Nash: Yeah, great questions Craig.

William D. Nash: Where.

William D. Nash: At least from a quantification standpoint look I think we have a couple of hundred couple hundred Bucks per unit per retail unit that we're going after over the next year or two between reconditioning and logistics. So as you know that's not insignificant at all and I'm. We're excited about its not going to hit day one tomorrow.

William D. Nash: But across the two we feel like there is kind of that amount of opportunity there.

William D. Nash: And then the other part of your question.

Speaker Change: Do you expect that to hit the bottom line or is that Oh, yes, yes.

Bill Nash: Or is that? Yeah, yeah. So what I would tell you is, I mean, obviously you have a decision to make when you start to pull that in. And as I sit here right now, it's a look. We'll probably flow that through in the form of pricing, but certainly you have decisions to make as you realize some of those efficiencies.

William D. Nash: So, what I would tell you is, obviously, you have a decision to make when you start to pull that in. As I sit here right now, I'd say, look, we'll probably flow that through in the form of pricing, but certainly you have decisions to make as you realize some of those efficiencies. Why not, I guess just to follow up, why not take? If your prices are competitive today, why not take those efficiencies to the bottom line?

Speaker Change: So what I would tell you is I mean, obviously you have a decision to make when you start to pull that in and as I sit here right now I'd say look we'd probably flow that through in the form of pricing, but certainly you have decisions to make as you realize some of those efficiencies.

Bill Nash: I guess just to follow up, why not take, you know, if your prices are competitive today, why not take those efficiencies to the bottom line? Well, again, you have decisions to make. And again, we'll be looking at the affordability. We'll be looking at last. There's lots of; it's hard for me to say what the situation is going to look like once we get there, because there's a lot of factors that play into that. We may take some of it. We may take, you know, in the past, I mean, you've followed us long enough; you know, at one point, we picked up some reconditioning savings.

Speaker Change: Why why not I guess, just a follow up why not take.

Speaker Change: If your prices are competitive today, why not take those efficiencies to the bottom line well. It again, you'll have decisions to make and again, we'll be looking at the affordability will be looking at elasticity. There's lots of it is hard for me to say what the situation is going to look like once we get that because there's a lot of factors that play into that we may take some of it we may take you know in the past.

William D. Nash: Again, you have decisions to make, and again, we'll be looking at affordability, and we'll be looking at elasticity. It's hard for me to say what the situation's going to look like once we get there, because there are a lot of factors that play into that. We may take some of it, we may take...

Operator: In the past, you've followed us long enough, at one point, we picked up some reconditioning savings, and we took them to the bottom line. A lot of years since then, we've been passing along, and it helps us just manage overall margins, it helps manage price, so I just think there's a lot that goes into the equation that we'll have to look at at that point in time. Yeah. Yeah, it makes sense, Bill. Thank you. The next question comes from Chris Bottiglieri with BNP Paribas. Please go ahead.

Speaker Change: I mean, you followed us long enough you know at one point, we picked up some reconditioning savings we took them to the bottom line, but a lot of the year. Since then we've been passing along and it helps us just manage overall margins that helps manage the price.

Bill Nash: We took them to the bottom line. But a lot of the years since then, we've been passing along, and it helps us just manage overall margins and helps manage the price. So I just think there's a lot that goes into the equation that we'll have to look at at that point in time.

William D. Nash: So I just think there's a lot that goes into the equation that will have to look at at that point in time, yeah. Yeah. It makes sense bill. Thank you yep.

Bill Nash: Yeah, yeah, it makes sense, Bill. Thank you.

Christopher Bottiglieri: Yep. Our next question comes from Chris Botagliari with BNP Paribas. Please go ahead. Hey, thanks for taking the question. So first, I just wanted to follow up that last question, actually. Can you elaborate more on the parts acquisition? That sounds pretty material. Are you going direct to vendor and just sourcing yourself? Are you asking your retail partners to use pricing? I don't have a question on credit. I know I'm breaking David's reply. I apologize. I hope that I'm doing intentional. I'm sorry. But the perspective on new, you know, new non-prime scarization, which suggests there's five billion of this type of, you know, receivable.

Speaker Change: Our next question comes from Chris <unk> with BNP Paribas.

Speaker Change: Please go ahead.

Operator: Hey, thanks for taking the question. So first, I just wanted to follow up that last question. Actually, can you elaborate more on the parts acquisition? That sounds pretty material.

Chris: Hey, Thanks for taking the question.

Chris: So first just wanted to follow up that last question actually can you elaborate more on the parts acquisition that sounds pretty material are you going direct to vendor sourcing yourself are you asking your retail partners to reduce pricing.

Operator: Are you going direct to the vendor and sourcing yourself? Are you asking your retail partners to reduce the price? I don't have a question about credit.

Speaker Change: The question on credit I know I'm, breaking David's role I apologize.

Operator: I know I'm breaking David's rule, and I apologize, but I'm doing it intentionally, so sorry. But the prospectus on the new, you know, new non-prime securitization would suggest there are five billion of this type of, you know, receivable. How does that five billion legacy portfolio that's behind that securitization differ from tier two? Like, is tier two just like a higher CNL than the legacy five? Can you just elaborate, like, how this is different, where you see this, you know, the key? Sure, Chris. Well, first of all, breaking David's rule, you're the only one that apologized, and everybody else has broken it up to this point, so we forgive you.

Speaker Change: But I'm doing potentially so sorry.

Speaker Change: But the prospectus on new you know new non prime securitization would suggest there's 5 billion of this type of receivable how does that 5 billion legacy portfolio that yeah, that's behind that securitization, how does that differ between tier two like as tier two just like a higher <unk> than the legacy five can you just elaborate like how this is different than what he says.

John Daniels: How does that five billion legacy portfolio that, you know, that's behind that scarization? How does that differ between Tier two? Like is tier two just like a higher CNL than the legacy five? Can you elaborate like how this is different?

John Daniels: Sure, Chris. Well, first of all, breaking David's rule, you're the only one that apologized, and everybody's broken it up to this point. So we forgive you.

Speaker Change: Sure, Chris well first of all break in David's role, you're the only one I apologize and everybody's broken it up to this point so we forgive you.

William D. Nash: The first part of the question I'll answer, and I'll toss it over to John on the non-prof. So, look, we've got unbelievable partners. Parts partners have been around for a long time, so we have national relationships with them. So that's been great. We just see that there's some parts optimization internally that we can do better on, and which parts we're getting from which source, and which parts are being applied and not being applied.

Bill Nash: The first part of question I'll talk it over to John on the non-prime. So look, we've got unbelievable part partners. Parts partners have been around for a long time. So we have national relationships with, so that's been great. We just see that there's some parts optimization internally that we can do better on and which parts we're getting from which source and which parts are being applied and not being applied. So, you know, that's just one of many things that we're working on. But I don't want you to come away. I think we have this. We don't have good part partners or whatever because we do.

The first part of the question I answered and I'll toss it over to John on the the the nonprofit so look we've got unbelievable Park partners parts partners they've been around for a long time, so where we have a national relationships with so that's been that's been great. We just see that there's some parts optimization internally that we can do better on and which parts were getting from which source in which.

William D. Nash: So, you know, that's just one of many things that we're working on. But I don't want you to come away thinking we have this – we don't have good parts partners or whatever, because we do. We have great national relationships, and we're pleased with those partners. We just think we can do a better job optimizing the parts. John?

Parts are being applied and not being applied so.

Speaker Change: Just one of many things that we're working on but but I don't want you to come away I think we have this we don't have good parts partners or whatever because we do we have great national relationships and we're pleased with this partnership we just think we can do a better job optimizing the parts.

Bill Nash: We have great national relationships, and we're pleased with those partners. We just think we can do a better job optimizing the parts.

John Daniels: So, John. Yeah. Appreciate the question, Chris. So if we think about, you know, the legacy five billion you referred to. If I look at kind of our overall portfolio or what we originate across, so 43 percent, you know, again, we've historically operate our current program. The vast majority of that has been tier one that we're putting into the current ABS program. If we think about that, those receivables, we're going to basically split that and we're going to create a higher prime program which is going to, you know, target again. We think a different investor base really gives us scale across what we consider the higher portion of those historically securitized receivables.

John: John Yeah I appreciate the question, Chris So if you think about.

Jon Daniels: Yeah. I appreciate the question, Chris. So, if we think about, you know, the legacy $5 billion you referred to, or what we originate across our 43%, you know, again, we've historically operated our current program. The vast majority of that has been Tier 1 that we're putting into the current ABS program. If we think about that, those receivables, we're going to basically split that, and we're going to create a higher prime program, which is going to, you know, target, again, we think a different investor base, really give us scale across what we would consider a higher portion of those historically securitized receivables.

Speaker Change: The legacy 5 billion you referred to if I look at kind of our overall portfolio are what we originate a cross sell 43% you know again, we've historically operated our current program.

Speaker Change: The vast majority of that has been tier one that we're putting into the current ABS program Ah. If we think about that those receivables are we're going to basically split that and we're going to create a higher prime program, which is going to target again, we think a different investor base really give us scale across what we would consider the higher portion.

Speaker Change: All of those historically securitized receivables and then we dropped down the residual they are including and then add to that the tier two and the tier three volume that we have not historically securitize, we'll be able to be lumped together into this non prime program. So that's how you think about what we originate today. If you think about what we might go after in the future there.

John Daniels: And then we drop down the residual there, including, and then add to that the tier two and the tier three volume that we have not historically securitized, will be able to be lumped together into this non prime program. So that's how you think about what we originate today. If you think about what we might go after in the future, there are small pockets of tier one that we've, you know, tightened on today that we would be able to capture back, and we're always looking to do that. But then, if you look at the entirety of tier two and tier three, call that today, it's 27 percent of sales.

Jon Daniels: And then we drop down the residual there, including and then add to that the Tier 2 and the Tier 3 volume that we have not historically securitized, we'll be able to be lumped together into this non-prime program. So, that's how you think about what we originate today.

Jon Daniels: If you think about what we might go after in the future, there are small pockets of Tier 1 that we've, you know, tightened on today that we would be able to capture back, and we're always looking to do that. But then, if you look at the entirety of Tier 2 and Tier 3, call that today, it's 27% of sales. You know, that's a wide spectrum, in all honesty, across that 27%.

Speaker Change: A small pockets of tier one that we've we've tightened to one today that we would be able to capture back and we're always looking to do that but then if you look at the entirety of the tier two and tier three call that today, it's 27% of sales yeah. That's a wide spectrum in all honesty across that 27% and so we think that there's volume being captured across all of that and we will.

John Daniels: You know, that's a wide spectrum, and all honesty across that 25 percent. And so we think that there's volume to be captured across all of that, and we will figure out what the right spot to be is. So, but again, this will enable us to grow down there. Now, the last thing I'd want to make a point on is our partners have enjoyed that volume, and we love that they enjoy that volume. We anticipate selling a lot of cars in the future, and we want our partners right there with us along for the ride. So we will go after some of that volume in the 20 in that tier two and that tier three space.

Jon Daniels: And so, we think that there's volume to be captured across all of that, and we will figure out what the right spot to be in is. But again, this will enable us to grow down there. Now, the last thing I'd want to make a point about is that our partners have enjoyed that volume, and we love that they enjoy that volume. We anticipate selling a lot of cars in the future, and we want our partners right there with us along for the ride.

Speaker Change: Out what the right spot to be in is so but again this will enable us to grow down there now last thing I'd want to make a point on is our partners have enjoyed that volume and we loved it they enjoy that volume, we anticipate selling a lot of cars in the future and we want our partners right there with us along for the ride so.

Jon Daniels: So, we will go after some of that volume in that Tier 2 and that Tier 3 space. We don't want it all, but we do think there's an opportunity to grow there. So, hopefully, that broad answer answers your question. I would just add one thing. I said one thing, Chris. I think a general way to think about that split in the program between high prime and non-prime from a FICO perspective is to think of the non-prime as less than 650, and then the high prime is greater than 650. Just a general way to think about the... Thank you for all the help.

Speaker Change: We will go after some of that volume in that 'twenty in that tier two in that tier three space. We don't want it all but we do think there is opportunity to grow there. So hopefully that broad answer answers. Your question I would just add one thing.

John Daniels: We don't want it all, but we do think there's opportunity to grow there. So hopefully that broad answer answers your question.

John Daniels: I would just add one thing, Chris. I think a general way to think about that split in the program between high prime and non prime from a psycho perspective is think of the non prime less than 650 and then the high prime is greater than 650. Just a general way to think about that. and two pools. Okay, thank you for all the help.

Chris: I said, one thing Chris I think in a general way to think about that split in the program between high Prime and non prime from a FICO perspective is think of the non prime is less than $6 650, and then the high prime is greater than 650, or just a general way to think about the two pools.

Speaker Change: Okay. Thank you for all the help I appreciate it.

Scott Ciccarelli: Thank you. Our next question comes from Scott Chiccarelli with Truist. Please go ahead. Good morning, guys. Good morning.

Speaker Change: Yeah.

Operator: Our next question comes from Scot Ciccarelli with Truist. Please go ahead. Good morning, guys. Good morning. Bill, I know you've had a couple of different questions on market share, but I'm going to try to swing at it a little bit differently here. From the outside, I guess we can see the growth rates of Carvana and the public dealers. Given your commentary earlier on mix, do you think it's your mix of late-model products that's kind of the key driver to the relative growth rates that we're seeing? Or could there be other factors at play, whether it's credit approvals or something else? No, Scott.

Speaker Change: Our next question comes from Scot Ciccarelli with Jewish.

Speaker Change: Please go ahead.

Scot Ciccarelli: Good morning, guys good morning.

Bill Nash: Bill, I know you've had a couple of different questions on market share, but I'm going to try to swing a swing out a little bit differently here. From the outside, I guess we can see growth rates of carbon and the public dealers. Given your commentary earlier on next, do you think it's your mix of late model products? That's kind of the key driver to the relative growth rates that we're seeing, or could there be other factors at play, whether it's credit approvals or something else? No, Scott, I think the biggest factor is really coming off that big price correction at the end of the calendar year last year.

Speaker Change: But like I I know you've had a couple of different questions on market share, but I'm going to try and try to swing up putting out a little bit differently here.

Speaker Change: From the outside I guess, we can see growth rates of carbon in the public dealers.

Speaker Change: Given your commentary earlier on mix do you think it's your mix of late model product. That's the key driver to the relative relative growth rates that we're seeing where could there be other factors that play, whether it's credit approvals or something else.

William D. Nash: I think the biggest factor is really coming off that big price correction at the end of the calendar year last year. Remember, we hold our margins. Obviously, it's a highly fragmented market. There are lots of folks that don't hold their margins; they're getting rid of the inventory. So I think that's been a big factor most recently in the drop in the fourth quarter. And now that we're starting to climb back out, but certainly, I think beyond that, look, as I said earlier, I think, you know, there are more cars that are being sold that are, for example, that are 10 years and older. And that's just not a space that we really do anything in.

Scott: No Scott I mean, I think the biggest factor is really coming off that big price correction at the end of the calendar year last year I remember, we hold our margins.

Bill Nash: Remember, we hold our margins. Obviously, it's a highly fragmented market. There's lots of folks that don't hold their margins or getting rid of the inventory. I think that's been a big factor most recently in the drop in the fourth quarter, and now as we're starting to climb back out. But certainly, I think beyond that, look, I said earlier, I think there's more cars that are being sold that, for example, that are 10 years and older, and that's just not a space that we really do anything. I think the other thing is our bread and butter has always been zero to four.

Scott: Obviously, it's a highly fragmented market, there's lots of folks that don't hold their margins are getting rid of inventory. So I think that's been a that's been a big factor most recently and the drop in the fourth quarter and now as we're starting to climb back out, but certainly I think beyond that look I said earlier I think there's more cars that are being sold that for example that are 10 years and older.

Scott: And that's just not a space that we really do anything and I think the other thing is you know our bread and butter has always been kind of zero to four that's probably 70% of historically, what our sales are and that's been a it's been an expensive ticket for for folks inside of there.

William D. Nash: And I think the other thing is, you know, our bread and butter has always been kind of zero to four; that's probably 70% of what our sales are historically, and that's been an expensive ticket for folks. And so, you know, we've seen people migrate down. We've seen, you know, throughout the last couple years, when you look at credit apps, people are looking for a little bit cheaper car. And that's across all the credit spectrum.

Bill Nash: That's probably 70% of historically what our sales are, and that's been an expensive ticket for folks, and so we've seen people migrate down. We've seen throughout the last couple of years, when you look at credit apps, people are looking for a little bit cheaper car, and that's across all the credit spectrum. I think there's a combination of things that are going on, and the other thing is we're just not going to. We've spent 30 years making sure that we have a high-quality product, and we want to maintain that high-quality product. We understand that there's going to be some consumers that have traded down, so I think it's a combination of things.

Scott: We've seen people migrate down we've seen like you know throughout the last couple of years. When you look at credit apps people are looking for a little bit cheaper car and that's across all of the credit spectrum. So I think there's a combination of things that are going on and you know the other thing is we're just not going to work.

William D. Nash: So I think there's a combination of things that are going on. And, you know, the other thing is that we're just not going to. We've spent 30 years making sure that we have a high quality product, and we want to maintain that high quality product. And so we understand that there are going to be some consumers that have traded down.

Scott: Spent 30 years, making sure that we have a high quality product and we want to maintain that high quality product and so we understand that theres going be some consumers that have to have traded down. So I think it's a combination of things.

Bill Nash: Can I ask a follow-up? When you look across your markets, I know, historically, the older Imagine Pean used to refer to 10% market share in certain markets. What is your highest market share in a specific market, just so we can compare the 4% average to it? Yeah, so our highest markets are over 10% still, and when we, and I've talked about this in the past, when we rolled out on the originally in 20, we looked at those 15 oldest markets, and we actually saw a nice little acceleration in our share. Obviously, they grow a lot slower than the younger stores, but I don't know where the top end of that is. But it is the older ones; they're over double digits, over 10%.

William D. Nash: You know, where is it, you know, when you look across your markets, I know historically, the older management team used to refer to kind of 10% market share in certain markets, like, what is your highest market share in a specific market, just so we can kind of compare the 4% average to it? Yeah, so our highest markets are still over 10%. And, you know, when we talked about this in the past, when we rolled out Omni originally in 20, we looked at those 15 oldest markets, and we actually saw a nice little acceleration in market share. Obviously, they grow a lot slower than the younger stores. But, you know, I don't know where the top end of that is.

Speaker Change: Okay can I ask a follow up.

Speaker Change: Where is you know when you look across your markets I know historically you know.

Speaker Change: The older management team use preferred to kind of 10% market share in certain markets like what is your highest market share in a specific market. Just so we can kind of compare that the 4% average to it yeah. So were our highest markets are over 10% still and you know when we have talked about this in the past when we rolled out omni.

Operator: But it is the older ones; they're over, over, you know, double digits over 10%. Got it. Thanks, guys. Thank you, Scott. Our next question will come from Chris Pierce with Needham. Please go ahead. Hey, good morning.

Speaker Change: He originally in 'twenty, we looked at those 15 oldest markets can we actually saw a nice little acceleration in March obviously, they could grow a lot slower than the younger stores, but you know.

Speaker Change: I don't know where the top end of that is but.

Speaker Change: It is the older ones there over over double digit over 10%.

Scott Ciccarelli: Thanks, guys.

Speaker Change: Got it thanks, guys. Thank you Scott.

Chris Pierce: Thank you, Scott. Our next question will come from Chris Pierce with Needham. Please go ahead. Hey, good morning. Can you talk about supply? I know we're seeing commercial vehicles at auction kind of grow year-over-year, with more growth ahead, but is that the supply of cars that you need to come back that will help the overall share of newer cars in the market gain share versus older cars, and that helps you sort of gain share? Like, what do you see from a supply perspective? Yeah, and a lot of the written folks in that we have a supply problem, and the reality is we're not having a problem sourcing the cars.

Speaker Change: Our next question will come from Chris Pierce with Needham. Please go ahead.

Operator: Can you talk about supply? I know we're seeing commercial vehicles at auction kind of grow year over year with more growth ahead. But is that the supply of cars that you need to come back that will help the overall share of newer cars in the market gain share versus older share of older cars, and that helps you sort of gain share? Like what are you seeing from a supply perspective? Yeah, you know, I know a lot has been written and folks saying that we have a supply problem, but the reality is, we're not having a problem sourcing the cars. If there's any impact on supply or from supply, it's just that it goes into the overall affordability question. But we can get the supply.

Christopher Alan Pierce: Hey, Good morning can you talk about supply I know, we're seeing commercial vehicles at auction kind of grow year over year with more growth ahead, but is that this could play of cars that you need to come back that will help the overall share of newer cars in the market gain share versus the older older cars and that helps you sort of gains.

Speaker Change: Like what are you seeing from a supply perspective.

Speaker Change: Yeah.

Speaker Change: And there are lots of written and focus and we have a supply problem and the reality is we're not having a problem sourcing the cars if theres any impact on supply or from supply. It's just that it goes into the overall affordability question, but we can get the supply now having said that I think it's great that the Saar continues to go up I think the most recent number I saw was like 15 seven.

Bill Nash: If there's any impact on supply, or from supply, it's just that it goes into the overall affordability question, but we can get to supply. Now, having said that, I think it's great that this car continues to go up. I think the most recent number I saw was like 15, 7. You know, eventually, and we've already started to see it, to your point. Now, more cars that come into the market, again, help bring the price down of the used cars, and... and, you know, more specifically, zero to four. So I think it's more, more inventory inners.

William D. Nash: Now, having said that, I think it's great that the SAR continues to go up. I think the most recent number I saw was 15.7. Eventually, and we've already started to see it to your point, more cars that come into the market, again, more specifically, zero to four. So I think it's more inventory inners, and I think that's good for the industry, and I think it's good for us.

Speaker Change: Eventually and we've already started to see it to your point more cars that come into the market again help help bring the price down of the used cars.

Speaker Change: More specifically zero to four so I think it's more more inventory enters and I think that's good for the industry I think it's good for us.

Bill Nash: And I think that's, that's good for the industry. And I think it's good for us.

Bill Nash: Okay. So, just to, you're not having problems getting supply, but you, you're choosing not to source older vehicles. And that's what's sort of hurting the share. But, oh, I just want to make sure I'm kind of understanding where supply is going and the supply. This isn't your making. Yeah. So, no, I so appreciate the clarification, because, you know, when you ask the question, you're talking about the supply of about later model cars. If there's any supply issue, it's just, if you're looking for an older vehicle, you know, for us, we buy lots of older vehicles, but there's only so many of them that you can bring up to the quality standards.

William D. Nash: Okay, so you're not having problems getting supply, but you're choosing not to source older vehicles, and that's what's sort of hurting the share, but I just want to make sure I'm kind of understanding where supply is going and the supply decisions you're making. Yeah, so I appreciate the clarification because, you know, when you asked the question, you were talking more about the supply of, I thought, later-model cars. If there's any supply issue, it's just if you're looking for an older vehicle, you know, for us.

Speaker Change: Okay. So youre.

Speaker Change: You're not having a problem getting supply, but you you you're choosing not to source all their vehicles and that's what's sort of hurting this year, but I just want to make sure I'm kind of understanding where to place going into supply this isn't going to make it yes. So no. So I appreciate the clarification because you know when you ask the question Youre talking to more about the supply I thought later model cars, if theres any.

Speaker Change: Why issue, it's just if youre looking for an older vehicle.

Speaker Change: You know for us we.

William D. Nash: We buy lots of older vehicles, but there's only so many of them that you can bring up to the quality standards. So if we have any supply issue at all, it would be more in the older vehicles that meet the Carmax standards. But again, roughly a third of our cars are, let's call it, more than six years old.

Speaker Change: We bought a lots of older vehicles, but there's only so many of them that you can bring up to the to the quality standards. So if we have any supply issue at all it would be more in the older vehicles that meet the carmax standards, but but again I mean, we've had roughly a third of our cars are let's call it more than six years old.

Bill Nash: So if we have any supply issue at all, it would be more in the older vehicles that meet the CarMax standards. But, but again, I mean, we've had roughly a third of our cars are, let's call it, more than six years old. That's, you know, quite up. It's up a lot from where it was before. But, you know, if there's any supply issue, it would be more in the older vehicles that meet the CarMax standards. But, but again, I mean, we've had roughly a third of our cars are, let's call it, more than six years old.

William D. Nash: It's up a lot from where it was before, but if there's any supply, there should probably be more in that bucket versus the late model bucket. So, just, is the supply of vehicles that meet the Carmax standard growing, or has it been flat and not changing? You know, what's the right way to think about the supply of vehicles that you're going to retail?

Speaker Change: You know quite up that's up a lot from where it was before but if theres any supply issue would probably be more in that bucket versus the late model bucket.

Bill Nash: That's, you know, quite up. It's up a lot from where it was before. But, you know, if there's a supply issue, it would probably be more in that bucket versus the late model bucket. So, just, is the supply of vehicles that meet the CarMax standard growing, or has it been flat and not changing yet? You know, what's the right way to think about what the supply of vehicles that you're going to retail? Yeah, I think as we look forward to look holistically, whether it's an older CarMax vehicle that meets our parameters, or a younger one, I think the supply is improving just because of what the dynamic that you talked about earlier, because the SARS continuing to go up eventually those cars come in.

Speaker Change: So just as the supply of vehicles that meet the Carmax standard growing or has it been flat and not changing it.

Speaker Change: By way of think about the supply of vehicles that you're willing to retail yeah. I think as we look forward and you look holistically, whether it's an older car Max vehicle that meets our parameters are younger one I think the supply is improving just because of the dynamic that you talked about earlier because the Saar is continuing to go up eventually those cars come in so and the impact it has on us as well.

William D. Nash: Yeah, I think as we look forward and you look holistically, whether it's an older Carmax vehicle that meets our parameters or a younger one, I think the supply is improving. Just because of the dynamic that you talked about earlier, because the SAR is continuing to go up, eventually those cars come in, and the impact it has on us is, well, prices just start to come down. And I think that's good for the industry, and it's good for us.

Bill Nash: And so, and the impact as on us is, well, prices just start to come down. And I think that's, that's good for the industry, and it's good for us.

Speaker Change: Rice is just start to come down and I think that's good for the industry and it's good for us.

David Ballinger: Okay. Thank you for that. Appreciate it.

William D. Nash: Okay, thank you for that. I appreciate it. Thank you, Chris. And as a reminder, that is star number one if you would like to ask a question, and we will take our next question from David Ballinger with Mizzou Health. Please go ahead.

Okay. Thank you for that I appreciate it thank you Chris.

Bill Nash: Thank you, Chris.

Bill Nash: And, as a reminder, that is star one. If you would like to ask a question, we will take our next question from David Ballinger with Ms. Ewell. Please go ahead. Hey, thanks, guys. Just another one. Regarding the CDK and the dealer software issues that are pretty widespread right now. Does CarMax have any exposure there? And do you see any changes in volumes or consumer activity? Does any clarity you can provide on just some of the near-term implications from this widespread issue? Yeah, you know, it's unfortunate for those dealers because I know there are a lot of them.

Speaker Change: And as a reminder, that is star one if you would like to ask a question. We will take our next question from David Bellinger with Mizuho.

Please go ahead.

Operator: Hey, thanks, guys. Just another one. Regarding the CDK and the dealer software issues that are pretty widespread right now, does Carmax have any exposure there, and are you seeing any changes in volumes or consumer activity? Is there any clarity you can provide on just some of the near-term implications from this widespread issue? Yeah, it's unfortunate for those dealers, because I know there are a lot of them.

Hey, Thanks, guys just another one.

David Bellinger: The CDK, you're getting the dealer software issues that are pretty widespread right now yeah.

Speaker Change #100: Carmike have any exposure there are you seeing any changes in volumes or consumer activity. Just any clarity you can provide on just some of the near term implications from this this widespread issue yeah yeah.

William D. Nash: We do not use CDK as our DMS, so it has a small impact on us. The way it has an impact on us is we obviously work with a lot of other dealers from a parts standpoint, and if their systems are down, it can slow down parts. There's little impact on title work as well, but I would say it's just minor in the scheme of things as far as the impact on us is concerned.

Speaker Change #101: It's unfortunate for those dealers because I know there are a lot of them, we do not use CDK as our Dms.

Bill Nash: We do not use CDK as our, our DMS. It has a small impact on us, and the way it has an impact on us is we obviously work with a lot of other dealers from a part standpoint. And if their systems are down, it can slow down parts as low impact on, on title work as well. But I would say it's just minor in the scheme of things as far as the impact on us. Got it.

It has a small impact on us in the way it has an impact on us as we obviously work with a lot of other dealers from a part standpoint, and if their systems are down it can slow down parts.

Speaker Change #101: Low impact on on title work as well, but I would say its just minor in the scheme of things as far as the impact on us.

Operator: Got it. Thank you. I'm calling the call back to Bill for any closing remarks. Okay. Great. Well, I want to thank, as I always do, all of our associates for everything they do. recently published the 2024 Responsibility Report, and I would encourage all of you to read it. It provides great updates on several of our key initiatives, from climate-related to the tangible impact we're making on our local communities. I think we're proud. I think it demonstrates our values and how we live, and it also positions us well to drive long-term sustainable value for all of our shareholders.

Bill Nash: Thank you.

Speaker Change #102: Got it thank you sure.

Speaker Change #102: Okay.

Bill Nash: I'm all in the call back to Bill for any closing remarks. Okay. Great. Well, I want to thank, as always, I want to thank all of our associates for everything they do.

William D. Nash: And I'll turn the call back to Bill for any closing remarks, okay, great well I want to thank you as always do want to thank all of our associates for everything they do I also want to thank you all for joining the call today and just let you know we just recently published the 'twenty 'twenty four responsibility reporting out.

Bill Nash: I also want to thank you all for joining the call today and just let you know, we just recently published the 2024 Responsibility Report, and I would encourage all of you to read it. It provides great updates on several of our key initiatives, from climate related to the tangible impact we're making on our local communities. I think we're proud. I think it demonstrates our values and how we live, and it also positions us well to drive long-term sustainable value for all of our shareholders.

William D. Nash: Encourage all of you to to read it provides great updates on several of our key initiatives from climate related to the tangible impact we're making on our local communities I think where we're proud I think it demonstrates our our values and how we live and it also positions us well to drive long term sustainable value for all of our shareholders. So again, we appreciate.

Operator: So again, we appreciate your time today, and we'll talk again next quarter.

William D. Nash: So again, we appreciate your time today, and we'll talk again next quarter. And this will conclude today's conference. Thank you for your participation, and you may now disconnect. Thanks for watching!

William D. Nash: Appreciate your time today, and we'll talk again next quarter.

Operator: And this will conclude today's conference. Thank you for your participation, and you may now disconnect.

Speaker Change #103: And this will conclude today's conference. Thank you for your participation and you may now disconnect.

Speaker Change #103: Yeah.

Speaker Change #103: [music].

Speaker Change #103: Okay.

Speaker Change #103: Hum.

Speaker Change #103: [music].

Speaker Change #103: Mhm.

Speaker Change #103: Hum.

Speaker Change #103: Mhm mhm.

Speaker Change #103: Hum.

Speaker Change #103: [music].

Speaker Change #103: Mhm.

Speaker Change #103: [music].

Speaker Change #103: Hum.

Speaker Change #103: [music].

Speaker Change #103: Hum.