NYSE:KMX CarMax Q4 2025 Earnings Report $66.63 +1.11 (+1.70%) Closing price 05/2/2025 03:59 PM EasternExtended Trading$65.98 -0.65 (-0.97%) As of 04:23 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast CarMax EPS ResultsActual EPSN/AConsensus EPS $0.66Beat/MissN/AOne Year Ago EPS$0.32CarMax Revenue ResultsActual RevenueN/AExpected Revenue$5.93 billionBeat/MissN/AYoY Revenue GrowthN/ACarMax Announcement DetailsQuarterQ4 2025Date4/10/2025TimeBefore Market OpensConference Call DateThursday, April 10, 2025Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)SEC FilingEarnings HistoryCompany ProfilePowered by CarMax Q4 2025 Earnings Call TranscriptProvided by QuartrApril 10, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter Fiscal Year twenty twenty five CarMax Earnings Release Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. Operator00:00:18I would now like to hand the conference over to your speaker today, David Lowenstein, VP of Investor Relations. Please go ahead. David LowensteinVice President - Investor Relations at CarMax00:00:27Thank you, Madison. Good morning, everyone, and thank you for joining our fiscal twenty twenty five fourth quarter earnings conference call. I'm here today with Bill Nash, our President and CEO Enrique Mayer Mora, our Executive Vice President and CFO and John Daniels, our Executive Vice President, CarMax Auto Finance Operations. Let me remind you our statements today that are not statements of historical fact, including, but not limited to, statements regarding the company's future business plans, prospects and financial performance are forward looking statements we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our current knowledge, expectations and assumptions and are subject to substantial risks and uncertainties that could cause actual results to differ materially from our expectations. David LowensteinVice President - Investor Relations at CarMax00:01:24In providing projections and other forward looking statements, we disclaim any intent or obligation to update them. For additional information on important factors and risks that could affect these expectations, please see our Form eight ks filed with the SEC this morning, our annual report on Form 10 ks for fiscal year twenty twenty four and our quarterly reports on Form 10 Q 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 700865. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow David LowensteinVice President - Investor Relations at CarMax00:02:12ups. Bill? Bill NashPresident & CEO at CarMax00:02:13Great. Thank you, David. Good morning, everyone, and thanks for joining us. We're very pleased with the continuing momentum across our diversified business during the fourth quarter. Our results reflect solid execution and the strength of our business model. Bill NashPresident & CEO at CarMax00:02:25We delivered robust year over year EPS growth as we drove unit volume increases in sales and buys, materially increased gross profit, grew CAF income and realized additional cost efficiencies. Our associates, stores, technology and digital capabilities all seamlessly tied together enable us to provide the most customer centric car buying and selling experience. This is a key differentiator that gives us the right to win and access to the largest total addressable market in the used car space. This also positions us to drive sales, gain market share and deliver significant year over year earnings growth for years to come. In the fourth quarter, on a year over year basis, we grew retail and wholesale unit volume. Bill NashPresident & CEO at CarMax00:03:04We delivered strong retail, wholesale and EPP GPUs and materially improved service gross profit. We bought more vehicles from both consumers and dealers achieving an all time record with dealers. We grew CAF's net interest margin and continued to advance our full credit spectrum underwriting model. We materially leveraged SG and A as a percent of gross profit and we also achieved double digit EPS growth for the third consecutive quarter. For the fourth quarter of FY twenty twenty five, we delivered total sales of $6,000,000,000 up 7% compared to last year, primarily driven by higher volume. Bill NashPresident & CEO at CarMax00:03:39In our retail business, total unit sales increased 6.2% and used unit comps were up 5.1% despite having one less selling day, inclement weather and a delayed start to this year's tax season. Average selling price was in line with last year's fourth quarter. For the full year, total retail unit sales increased 3.1% and used unit comps were up 2.2%, with a decline in the first quarter more than offset by gains across the second, third and fourth quarters. Our market share data indicates that our nationwide share of age zero to 10 year old used vehicles was 3.7% in calendar twenty twenty four consistent with 2023. External title data shows year over year, while our share came under pressure during the first half of twenty twenty four, it then recovered as we achieved accelerating gains through the second half with particular strength in age zero to four vehicles, which grew for the entire year. Bill NashPresident & CEO at CarMax00:04:35The data indicates that our market share continued to grow year over year during January 2025, the latest period for which information is available. While I do not intend to provide another update until this time next year, we remain confident in our ability to achieve further market share gains and across 2025 and beyond. Fourth quarter retail gross profit per used unit was $2,322 a fourth quarter record up from last year's 2,251 Wholesale unit sales were up 3.1% versus the fourth quarter last year. Average selling price was flat year over year. Fourth quarter wholesale gross profit per unit was $10.45 dollars which is historically strong, though down from the $11.20 dollars a year ago. Bill NashPresident & CEO at CarMax00:05:20We bought approximately 269,000 vehicles during the quarter, up 15% from last year. We purchased approximately 223,000 vehicles from consumers with more than half of those buys coming through our online instant appraisal experience. With the support of our Edmond sales team, we sourced the remaining approximately 46,000 vehicles through dealers, is up 114% from last year. For the fourth quarter, approximately 15% of retail unit sales were online, up from 14% last year. Total revenue from online transactions was approximately 29% compared with 30% last year. Bill NashPresident & CEO at CarMax00:05:55All of our wholesale auctions in sales were virtual and are considered online transactions, which represented 17% of the total revenue for the quarter. Approximately 58% of retail unit sales were omni sales for this quarter, up from 55% in the prior year. As a reminder, our omni channel sales definition incorporates customers who complete some, but not all of the following transactional activities online: reserving the vehicle, financing the vehicle if needed, trading in or opting out of a trade in and creating a sales order. To better reflect the ways customers are utilizing our digital capabilities to buy a car, Going forward, we are updating our definition of an omni channel sale to also include customers who complete any of the following steps online: prequalifying for financing, setting appointments and signing up for notification on cars coming soon. Based on this updated definition, approximately 67% of our retail unit sales were omni this quarter, up from 64% last year. Bill NashPresident & CEO at CarMax00:06:54Of note, this does not impact how we calculate online sales since the steps to complete an online retail transaction remain the same. Across omni and online, our digital capabilities supported over 80% of our sales during the fourth quarter. We expect that our mix of digitally supported sales will continue to grow over time we add further enhancements to our online tools, customers become more accustomed to leveraging them and as we improve our ability to track their use. Turning to finance, CarMax Auto Finance or CAF delivered income of $159,000,000 up 8% from the same quarter last year. In a few moments, John will provide more detail on customer financing, the loan loss provision and CAF contribution as well as our progress on full credit spectrum lending and increasing CAF's penetration. Bill NashPresident & CEO at CarMax00:07:41At this point, I'd like to turn the call over to Enrique, who will share more information on our fourth quarter financial performance. Enrique? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:07:48Thanks, Bill, and good morning, everyone. The momentum we built over the last few quarters continued into the fourth quarter. We achieved positive growth in retail and wholesale units, increased per unit and total dollar margin, grew CAF income and had strong flow through to our bottom line. Fourth quarter net earnings per diluted share was $0.58 up 81% versus a year ago. Adjusted for a $12,000,000 noncash impairment within other expense related to an Edmunds lease, EPS was $0.64 which is doubled from a year ago. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:08:23Total gross profit was $668,000,000 up 14% from last year's fourth quarter. Used retail margin of $424,000,000 increased by 9% with higher volume and per unit margins. Wholesale vehicle margin of $125,000,000 declined by 4% with an increase in volume offset by a reduction in per unit margins. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:08:48Other gross profit was $119,000,000 Enrique Mayor-MoraExecutive VP & CFO at CarMax00:08:51up 72% from a year ago. This was driven primarily by a combination of EPP and service. EPP increased by $8,000,000 or $10 per retail unit as we lapped over the initial rollout of margin increases that took place in last year's fourth quarter. Service recorded a $1,000,000 loss, which was a $44,000,000 improvement over last year's fourth quarter. We achieved this performance improvement through successful cost coverage, efficiency measures and growth in sales. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:09:23On the SG and A front, expenses for the fourth quarter were $611,000,000 up 5% or $30,000,000 from the prior year. SG and A leveraged by seven seventy basis points, driven by growth in gross profit and our ongoing actions to improve expense efficiency. SG and A dollars for the fourth quarter versus last year were mainly impacted by two factors. First, total compensation and benefits increased by $22,000,000 Over half of this increase was due to our corporate bonus accrual with the majority of the balance driven by unit volume growth. Second, advertising was up by $9,000,000 due to timing. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:10:06This was in line with the guidance we provided last quarter. In respect to capital allocation, during the fourth quarter, we repurchased approximately 1,200,000.0 shares for a total spend of $99,000,000 As of the end of the quarter, we had approximately 1,940,000,000 of repurchase authorization remaining. As we look ahead, I'll highlight a few key areas which support our earnings model that Bill will speak to shortly. We are testing EPP product enhancements that will focus on increasing penetration and per unit margins. These enhancements are expected to drive a small year over year increase in per unit EPP margin in FY 2026 with the potential for more expansion in fiscal twenty twenty seven. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:10:53We expect service margin in FY 2026 to grow year over year, predominantly in the first half of the year and to deliver a slight positive profit contribution for the full year as governed by sales performance given the leverage deleverage nature of service. Additionally, we expect service to continue to serve as a slight profit lever beyond FY 2026. In respect to SG and A, in the near term, we expect to require low single digit gross profit growth to lever on an annual basis, including in FY 2026. This will be supported by our goal of hitting full year omni cost neutrality in FY 2026 for the first time with continued improvement thereafter. We expect all three metrics per used unit, per total unit and as a percent of gross profit to be more efficient than pre omni for the full year. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:11:46This reinforces our pathway back to a lower SG and A leverage ratio with the initial goal of returning to the mid-seventy percent range over time as we see healthier consumer demand. In FY 2026, we expect that marketing spend will be approximately the same as in FY 2025 on a total unit basis. With regard to capital expenditures, we anticipate approximately $575,000,000 in FY 2026. The increase is primarily driven by the timing of land purchases as we experienced favorability to our FY 2025 outlook due to the timing of certain deal closures. Similar to FY 2024 and FY 2025, the largest portion of our CapEx investment is related to the land and build out of facilities for long term growth capacity in off-site reconditioning and auctions. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:12:38In FY twenty twenty six, we plan to open six new store locations, up from five in FY 2025 and four stand alone reconditioning and auction centers, up from two in FY 2025. Our extensive nationwide footprint and logistics network continue to be a competitive advantage for CarMax. Now I'd like to turn the call over to John. Jon DanielsEVP, CarMax Auto Finance at CarMax00:12:58Thanks, Enrique, and good morning, everyone. During the fourth quarter, CarMax Auto Finance originated approximately $1,900,000,000 resulting in sales penetration of 42.3% net of three day payoffs, which was in line with last year's fourth quarter. Jon DanielsEVP, CarMax Auto Finance at CarMax00:13:13The weighted average contract rate charged to new customers was 11.1%, a decrease of 40 basis points from a year ago, which was reflective of credit tightening and APR reductions executed prior to Q4. Third party Tier two penetration in the quarter was 17.6% of sales, down 110 basis points from last year, while third party Tier three volume accounted for 7.9% of sales, down 30 basis points from last year. GAAP income for the quarter was $159,000,000 which was up $12,000,000 from FY 2024. This increase was driven by net interest margin, which remained steady from the third quarter at 6.2%, but is up 30 basis points from last year's fourth quarter. Provision for loan losses was $68,000,000 and results in a total reserve balance of $459,000,000 or 2.61% of managed receivables. Jon DanielsEVP, CarMax Auto Finance at CarMax00:14:08This sequential improvement in the reserve to receivable ratio reflects an additional quarter with a more normalized provision along with the continuation of previous credit tightening. Regarding our full spectrum lending initiative, we remain excited about CAF's continued efforts in this space as well as the tremendous growth potential unlocked by the broadening of our securitization program. During the month of March, CAF began measured expansion by recapturing profitable portions of Tier one originations that we had shifted to our Tier two lenders as we tightened lending standards. This adjustment is targeted to grow our penetration by 100 to 150 basis points in the near term and is enabled by our non prime securitization program, which allows us to efficiently fund these non prime receivables while retaining the full economic value of the contracts. We were also pleased to successfully execute our second non prime ABS transaction, which closed in late March and was well received in the market. Jon DanielsEVP, CarMax Auto Finance at CarMax00:15:09We continue to learn from our new underwriting models and corresponding tests currently in place and anticipate capturing additional volume across Tier two and Tier three during the back half of the fiscal year. But as always, we will carefully monitor the consumer and the broader economy and will adjust our origination strategy as needed. It is worth noting that in the first quarter, we are forecasted to have a larger provision sequentially and year over year driven by new origination volume. This stems from seasonally higher sales and a lower credit quality period plus the need for additional reserve given the profitable but higher loss nature of the recaptured receivables that I mentioned a few moments ago. As a reminder, we expect this initial impact from building the loss reserve as we grow cap penetration to be materially offset by future income over time. Jon DanielsEVP, CarMax Auto Finance at CarMax00:16:00Now I'll turn the call back over to Bill. Bill NashPresident & CEO at CarMax00:16:02Thank you, John and Enrique. As I mentioned at the start of the call, I'm pleased with the momentum we are seeing across our business. The associate and customer facing tools we launched during fiscal twenty twenty five are contributing to our results and to providing the most customer centric car buying and selling experience. I'm proud of the steps we took during the year to further differentiate our offering and drive incremental operational efficiencies. Some examples include: for retail, we rolled out a number of new systems that enhance consumer shopping experiences, support conversion and enable our associates to be more efficient. Bill NashPresident & CEO at CarMax00:16:33These include order processing in our stores, customer accounts online, AI driven knowledge management in our CECs and EV research and shopping tools on the Edmunds and CarMax websites. Our digital tools enhancements have made it easier for consumers to self progress in their shopping journey. Sky, our AI powered virtual assistant is now able to independently answer over half of the questions our customers ask it, reflecting more than a 20% year over year improvement. Additionally, the rate of fully self progressed online sales grew by 25% across fiscal twenty twenty five. For Supply, we enhanced both our consumer and dealer facing appraisal experiences. Bill NashPresident & CEO at CarMax00:17:14We are now able to give digital offers to approximately 99% of the customers who come to CarMax.com for an appraisal and we made Max offer even easier to use. This has attracted more dealers to the offering and has driven strong record sourcing volume each quarter. For finance, we began testing new credit scoring models and corresponding strategies across the full credit spectrum, which positions us to further grow cap income modestly in the near term and more materially over time. We also released an update to our finance based shopping experience that seamlessly incorporates existing instant appraisal offers into our prequalification offering giving customers more precise credit terms. And finally, we continue to focus on driving down cost of goods sold by pursuing incremental efficiency opportunities across our logistics network and reconditioning operations. Bill NashPresident & CEO at CarMax00:18:02We achieved savings of approximately $125 per unit this year and anticipate that we will achieve at least another $125 per unit in fiscal twenty twenty six. This exceeds the initial $200 target we set at the beginning of fiscal twenty twenty five. These efficiencies support affordability as we pass savings on to our customers and also support our margins. In fiscal twenty twenty six, we will leverage and enhance our capabilities to drive growth through better execution, innovative offers, innovative efforts and up leveled experiences. Some examples include, for retail, we will continue leveraging data science and AI to offer even better digital experiences for our associates and consumers driving conversion and efficiency. Bill NashPresident & CEO at CarMax00:18:44We plan to improve our online vehicle transfer experience and to expand Sky's functionality with additional data and new architecture. In recognition of the breadth and seamlessness of our best in class offering, we will also launch a new marketing campaign over the summer that will bring our omni channel experience and our digital capabilities to the forefront for a broad set of consumers. For supply, we plan to streamline the online appraisal checkout process and expand appraisal pickup availability to new markets. We will also further enhance Mac's offer to attract new dealers expanding our access to directly sourced vehicles. For credit, as John mentioned, we plan to continue expanding CAF's participation across the credit spectrum to grow penetration and capture profitable returns. Bill NashPresident & CEO at CarMax00:19:31Additionally, we plan to modernize the ownership experience on CAF's digital platform, which will enhance customer experience and drive operating efficiencies. Looking ahead, we've positioned the company to achieve ongoing growth in retail and wholesale unit sales and market share with double digit EPS growth for years to come. We're excited about the power of the earning model we have built. Our model is designed to deliver an earnings per share growth CAGR in the high teens when retail unit growth is in the mid single digits. In addition to retail and wholesale unit growth, other key inputs driving our model are strength in other gross profit, CAF's credit spectrum expansion, continued operating efficiencies, SG and A leverage and our share repurchase program. Bill NashPresident & CEO at CarMax00:20:14Regarding our long term goals, we are focused on growing the business and we continue to make progress towards those goals. However, at this point, we are moving the timeframes associated with them given the potential impact of broader macro factors. Before turning to Q and A, I want to recognize two significant milestones. First, Fortune Magazine recently named CarMax as one of its 100 Best Companies to Work For for the twenty first year in a row. I'm incredibly proud of this recognition. Bill NashPresident & CEO at CarMax00:20:42It's due to our associates' commitment to supporting each other, our customers and our communities every day. Second, we opened up our 200 store during the fourth quarter. Reaching two fifty stores across the country is a fantastic accomplishment. I want to thank and congratulate all of our associates for the work that they do. They are a differentiator and the key to our success. Bill NashPresident & CEO at CarMax00:21:04In closing, we're excited about the strength of the business model and the opportunities that lie ahead to grow sales and earnings. We are proud to offer customers the ability to progress seamlessly through and across online and in store channels delivering what our research affirms is the most customer centric buying and selling experience. This competitive advantage gives us access to the largest total addressable market in the used car space and provides a strong runway for future growth. With that, we'll be happy to take your questions. Madison? Operator00:21:34Thank And your first question comes from the line of Sharon Zackfia with William Blair. Your line is open. You may now ask your question. Sharon ZackfiaPartner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C00:22:01Hi, good morning. Bill NashPresident & CEO at CarMax00:22:02Good morning. Sharon ZackfiaPartner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C00:22:04As we As we think about fiscal, '25 and kind of that tale of two halves where there were some share losses in the first half followed by the accelerating gains in the second half, As you kind of diagnose that, can you give us some insight into kind of what you think the drivers were between the first half and the second half and why you kind of saw that inflection? And I guess, secondarily, as as we're kind of staring down this idea of of maybe used car prices going up again with tariffs, I mean, what lessons did you learn over the past several years that could maybe help the business more if affordability becomes more challenged again in the industry? Sharon ZackfiaPartner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C00:22:47Thank you. Bill NashPresident & CEO at CarMax00:22:48Okay, Sharon. On the first question about kind of first half versus second half, look, main driving factor that we talked about that being in the years. We were coming off of, if you remember last calendar year that last quarter there was a big price correction. Remember it was the third last and third one that we saw. And when you have those big price corrections I think if I remember correctly it was probably around $3,000 in a very short period of time of depreciation. Bill NashPresident & CEO at CarMax00:23:14That impacts us a little bit differently. So I think you had that to kind of really worked into the fourth quarter that masked a lot of the things that were providing benefit for the rest of the year. If you think about the improvements and I cited a lot of them on the call today, but I think there's just a lot of factors. You take we're continuing to make the experience better for the consumers and our associates. We've got better execution. Bill NashPresident & CEO at CarMax00:23:35You've got the benefit of efficiency gains and kind of flexibility that gives you both in your pricing and your margin making sure that you're competitively priced. Our inventory acquisition expansion, we continue to set new records with our MAX offer. It just gives you a wider variety of inventory. And then I think the other thing is this year we've also just seen a more normal pricing environment. So I think there's a lot of things going on there. Bill NashPresident & CEO at CarMax00:23:56But I do think that the actions that we've taken are really what's driving the momentum. And I think they were masked a little bit in the first quarter because we were coming off of a big macro factor. As far as your second question goes, think it was just kind of if I remember correctly, it's what have we kind of learned? How are we better positioned now versus previous? And again, I think there's a lot of things that we learned in the last two or three years. Bill NashPresident & CEO at CarMax00:24:27One of them obviously is we've sharpened our skills. When we came out of COVID, our six to ten year old cars just wasn't a big focus for us, as big a focus and that's not really what customers were looking for. So we had to build that muscle up. So we have more six to 10 year old cars that over time, I think other things we've expanded the sourcing, which I just talked about. I think John spoke about the ABS bifurcation. Bill NashPresident & CEO at CarMax00:24:51If you remember, coming out of COVID, there's a lot of profitable loans out there, but we couldn't we had to pass them on to lenders because we had one ABS that required a certain return and certain loss ratios. So now having a second ABS think absolutely helps us preserve some of those sales. You like to think all of them get picked up, but some of them won't get picked up. So I think that's another one. You got the cost improvements that we've been focused on over the last couple of years. Bill NashPresident & CEO at CarMax00:25:16The work that John and his team have done on the FBS and making sure that we make it very easy for customers to understand their monthly payment and look for options that fit that monthly payment. So I think there's just a lot of great things as well as just the overall omni experience. We didn't slow down during the last few years. We kept plugging along at it because we knew this is where we wanted to get. So I think there's a lot that goes into that. Operator00:25:45Thank Operator00:25:47your next question comes from the line of Seth Basham with Wedbush Securities. Your line is open. Seth BashamMD - Equity Research at Wedbush Securities00:25:54Thanks a lot and good morning. Bill, if you wouldn't mind commenting on quarter to date use comp trends, that would be great. And then as you think about this macro environment and the potential for new car tariffs driving double digit increases in new car prices, what does that mean for you guys from a share gain perspective and from a used car industry growth perspective? Thank you. Bill NashPresident & CEO at CarMax00:26:16Yes. Good morning, Seth. On the comp trends, look, if I look at the fourth quarter, December and January were very strong. February was a little softer, which we expected given that we had leap day last year. We also think February is slightly impacted by the delay of refunds. Bill NashPresident & CEO at CarMax00:26:32And what I mean by there is, if you remember probably halfway through February refunds were off significantly year over year. Now they caught up pretty much by the February, but I think it pushed a little bit into March as well as we had some weather impacts. Then we get into March and we saw a step up that was a little stronger than the fourth quarter comp. And it continued the whole month until the March where we saw some strength some additional strength, which continued and then accelerated into the first few days April, which obviously we're early into April right now. From a comp standpoint, first quarter to date, we're running high single digits. Bill NashPresident & CEO at CarMax00:27:16Your second question, I Bill NashPresident & CEO at CarMax00:27:19think it Bill NashPresident & CEO at CarMax00:27:19was on tariffs. Is that correct? Seth BashamMD - Equity Research at Wedbush Securities00:27:22Yes. New car tariffs, if they drive double digit increases in new car prices, what does that mean for the used car industry and your ability to gain market share in that environment? Bill NashPresident & CEO at CarMax00:27:31Yes. You know, think it's it you know there's a lot of moving pieces here, and I'm sure it's probably changed even while we've been on this call. But there's a lot to watch. You wanna look at the new car pricing, the supply, parts costs, used vehicle supply, just market volatility in general with consumer sentiment. Obviously, as you pointed out, new car prices are definitely going to go up. Bill NashPresident & CEO at CarMax00:27:51I think certainly as new car prices go up that will put a bigger spread between late model used and new cars. So obviously just the speculation of the tariffs and now the tariffs actually being out there, it's driven demand. I mean you're seeing it in the franchise dealers. We're seeing it just based off of the step up that I just spoke to. I think it will push some folks into looking at used cars, late model used cars, which is interesting because that's what we're seeing a lot of interest in right now. Bill NashPresident & CEO at CarMax00:28:24Now I think over time what could happen is that the used car prices will also go up. Now the question is how much will they go up over what period of time. I think the other thing to think about on the tariffs that impacts our business as well as anybody that sells used cars is just the parts piece. When it comes to reconditioning, the parts will be going up. And it just makes our work that much more important on the efficiencies that we're going after on cost of goods sold to offset those increases. Seth BashamMD - Equity Research at Wedbush Securities00:28:54Thank you very much. Bill NashPresident & CEO at CarMax00:28:56Yes. Operator00:28:57Thank you. And your next question comes from the line of John Murphy with Bank of America. Please go ahead. John MurphyManaging Director at Bank of America Merrill Lynch00:29:04Good morning, guys. I mean, I love hearing about the investment in the recon centers and the auctions because it gives you more throughput and production capacity. I'm just curious, Bill, as you think about that, does that give you the ability to stay and maintain this presence in the six to ten year old sort of segment of the cart population? And could that actually be increased over time? And sort of kind of along that same you talk about the 200,000,000 in COGS savings going it sounds like now $250,000,000 How much of that do you think you're going to be able to maintain as you kind of go through this reconditioning and other efficiencies? John MurphyManaging Director at Bank of America Merrill Lynch00:29:45And is 2,300 to 400,002,000 the new 2,200 Bill NashPresident & CEO at CarMax00:29:49Okay. Good morning, John. So on the reconditioning and the auctions, yes, look, we're thrilled. I mean that's going to give us additional capacity, is why you're seeing that we open up more. Certainly, we want to have the cars out on the lot. Bill NashPresident & CEO at CarMax00:30:04We sell zero to 10 year old cars. We want to have what the consumers are looking for. And if they're looking for six to 10, we're certainly going to continue to try to move that mix without sacrificing the quality. I mean, that's something that you and I we've talked about in the past is we don't want to push cars out there to meet an age parameter that don't meet our quality standards. Because quite honestly, we're fine with taking those cars and wholesaling them. Bill NashPresident & CEO at CarMax00:30:24And we just we don't get the retail market share from them, we you know, it's a great business when you're turning $8,000 car making $1,000 every every seven days. So interestingly, if I look at the sales mix this last quarter, we actually sold a little bit more zero to four cars than we did older cars. That's not to say we're not pushing on the older cars and putting out those at the consumers. It's just an interesting anecdote that actually the consumers are looking a little bit more for the younger cars this quarter. I think on the $250 efficiency that we're going after, look, I think the big wildcard there is just how much tariffs end up impacting parts. Bill NashPresident & CEO at CarMax00:31:03I feel great about the fact that we're getting these efficiencies across the system in old stores, in old production centers, in new stores. So I feel good about getting those. Then the question becomes how much will tariffs kind of offset that, which again we're going to continue to focus and go after that. The other thing I would tell you on these reconditioning centers, these offset reconditioning centers, the additional benefit that you get from that is that you now have the cars closer to the stores in the markets. And we put them in we're putting them in markets where we have capacity challenges. Bill NashPresident & CEO at CarMax00:31:39And so we're having to pull cars from further distance for retail. Now with these auction these production centers being closer, you cut down on your logistics, which is a savings that we're going to continue to get whether there's tariffs or not. John MurphyManaging Director at Bank of America Merrill Lynch00:31:55It's good to hear. Thank you very much. Bill NashPresident & CEO at CarMax00:31:57Thank you, John. Operator00:31:59Thank you. And your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open. Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:32:06Hi, good morning. Nice quarter. Congratulations. Bill NashPresident & CEO at CarMax00:32:09Thank you, Brian. Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:32:11So I wanna I I don't know. I think Seth asked the question about the quarterly trend business. And you you said, you know, Bill, you're running high high single digits would would be a step up from what we what you did in q four and then particularly as you talked about February. So I guess and I know you're not I know you don't give guidance, but what I wanna ask is, I mean, as you're looking at the business, how should we think particularly against what is a very, fluid macro backdrop, I mean, how should you think about how should we think about the sustainability of that fully fiscal Q1 performance? I mean, do you Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:32:39think it is it a Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:32:41catch up from maybe February? Does it reflect potentially people buying cars ahead of time because of tariffs? Or is this overall sustainability from your standpoint? Bill NashPresident & CEO at CarMax00:32:50Yes. First of all, I don't think it's a catch up for February. I think we probably got a little bit of benefit there because, again, you're not going get the catch up on the leap day miss. What you will get a little catch up on is the tax refunds, little bit of weather. But that's very small in the scheme of things. Bill NashPresident & CEO at CarMax00:33:06So I wouldn't look at it nearly as nearly like a catch up. As you said, we don't give guidance for the full year. But I will tell you, Brian, mean, we expect that momentum that we've been seeing for the last three quarters. We're we're coming into the year very strong, and we've got some good momentum, and we would expect to continue that momentum. Obviously, you alluded to it. Bill NashPresident & CEO at CarMax00:33:25I mean, there's a lot that's going on in the macro right now, and it's changing. It's a very fluid situation. We're constantly monitoring it. We're looking at mitigation plans from a part standpoint, all kinds of things. So it's a little hard to speak on the whole year, but I will tell you that we feel good about the momentum coming into this year. Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:33:43That's helpful. I appreciate it. Thank you. Bill NashPresident & CEO at CarMax00:33:45Sure. Operator00:33:47Thank you. And your next question comes from the line of Scott Ciccarelli with Truist. Your line is open. Josh YoungEquity Research Senior Associate at Truist Securities00:33:54Hi, good morning guys. Josh Young on for Scott. You talked a bit about the improving market share here in the back half of the year. But with it sitting just under 4% today, curious what do you think you have Josh YoungEquity Research Senior Associate at Truist Securities00:34:06to do from here? Josh YoungEquity Research Senior Associate at Truist Securities00:34:07And what has to happen to get closer to that 5% target over time? Bill NashPresident & CEO at CarMax00:34:11Yeah. I think everything that they're working on that I've highlighted earlier on this call, this continue look, our big focus right now is growing sales and robust EPS. And if you do those things, all the other stuff is going to work out great including market share. If I look at the market share for this last year, we're gaining market share. We're taking it from other dealers. Bill NashPresident & CEO at CarMax00:34:31The interesting thing is you also see where P2P is growing market share when you look at that zero to 10 space. And the P2P strength is really in kind of the older vehicles, which you would expect. So I think we're we've got all the steps in place to continue. As I said, January, which is the latest title data that we have at this point, we're continuing that share gain. And like I said, with Brian, we like the momentum that we're on and we would expect to continue to gain market share. Josh YoungEquity Research Senior Associate at Truist Securities00:35:02Got it. That's helpful. Thanks. Bill NashPresident & CEO at CarMax00:35:03Thank you. Operator00:35:05Thank you. And your next question comes from the line of Jeff Licht with Stephens Inc. Your line is open. Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:35:12Good morning, guys. Congrats on a nice quarter. I was wondering if we could talk about sourcing. In this quarter, you bought 46,000 units from dealers, which is the most you've ever done on a percent basis in terms of improvement or even unit basis. And also your overall purchase of $2.69 was 89% of the combined units. Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:35:37I think a big thing going forward, especially in this tariff scenario, is going be your ability to source. Could you talk about both on the dealer front and the consumer front and any evolutions or changes and what drove the kind of pickup there and improvement in Q4? Bill NashPresident & CEO at CarMax00:35:53Yes. It's a great question. And you're right. I think sourcing is critical. We're very pleased with the Max Offer product. Bill NashPresident & CEO at CarMax00:36:00I think it's a solution that works well dealers obviously with the expansion. When I think about the performance there over the last year, it's being driven by first and foremost just dealer expansion. This quarter we were up from active dealer standpoint 40% year over year. As I said in my prepared remarks, we also made it very easier for them to use. If you look at the last year, we've got a great instant offer program for them. Bill NashPresident & CEO at CarMax00:36:26We also have one that allows them to take pictures if they'd like us to see some of the pictures that might be unique to that vehicle. We consolidated the vehicle condition information making it faster and easier. We've made improvements so because you realize a dealer may start this MAX offer on the desktop, but they need a mobile device to go see the car or whatever. So we've made a very seamless transition to go from device to device. So this past year was really about trying to make that experience better. Bill NashPresident & CEO at CarMax00:36:52Other thing that I would add is that we've also started to embed it in their inventory management system in the dealership, which just makes it more convenient. And as I look forward to the upcoming year, I think we can still we've got some improvements. We're working on some landing page improvements and I think some more integrations into dealers, which will continue to attract dealers. We feel good about it. Feel good about the momentum. Bill NashPresident & CEO at CarMax00:37:19Thought I'd Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:37:20you about Congrats. Bill NashPresident & CEO at CarMax00:37:21Yeah. I think you also asked about the consumers. And again, the consumers, as I said in my prepared remarks, we pretty much can give you an offer online now. There's very few cars that we can't. There's a small subset that we really need to see the car. Bill NashPresident & CEO at CarMax00:37:34But essentially 99% you can get those offers. We've made it easier. I think there's progress. We've got some things queued up there again with appraisal express drop off, appraisal pickup. There are some other things that we're working on there again just to enhance that experience and continue to drive incremental buys. Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:37:54And then the last two weeks have been kind of crazy. There's been a pickup in conversion at the auction lanes in general. Any comments in terms of just looking at what we just talked about with Q4, any changes with the last two weeks? Bill NashPresident & CEO at CarMax00:38:07Yeah. Well, I think you hit the nail on the head. If you look at the wholesale the last couple of weeks, it's there's a lot of folks out there trying to bid, which again, I think it just makes me feel really good about all of our initiatives on supply and sourcing directly versus having to go that route. Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:38:26Awesome. Well, congrats and good luck in the next quarter. Bill NashPresident & CEO at CarMax00:38:29Thank you, Jeff. Operator00:38:32Thank you. And your next question comes from the line of Rajat Gupta with JPMorgan. Your line is open. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:38:39Great. Thanks for taking the question. I just had a follow-up to Jeff's question earlier. Bill, I'm trying to understand how are you as an organization trying to manage inventory acquisition over the next few weeks, couple months given, firstly, there's already a lot of uncertainty around the tariffs. It may happen. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:39:01It may go away. You know you know, you're hearing a lot about the auction win activity. I mean, I'm curious, like, how are you managing your inventory acquisition in that backdrop? I mean, you think you need to be aggressive or you're just being cautious, you know, just in case, you know, like, tariffs actually don't stick ultimately. I'm just curious, like, how is the company strategizing around that? Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:39:24And I have a very quick follow-up on service gross profit. Bill NashPresident & CEO at CarMax00:39:27Yeah. Well, look, I think we manage inventory better than anybody in the business. We've been doing it for over thirty years. We are very familiar with operating and changing a fluid type of environment. Keep in mind, we have the benefit of professional buyers who are on the ground. Bill NashPresident & CEO at CarMax00:39:44They're seeing things coupled with data that we're getting coupled with our own auctions. So I feel really good about where we are both from an inventory on the ground and our inventory going forward. And I have no doubt that the team will continue to execute at a very high level. And then you said you had a question on service as well? Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:40:04Yes. Curious what drove the significant mean, typically, seasonally, you know, we see, a big drop in, service gross profit. I'm curious what drove, you know, the improvement. It it was it just, you know, just better productivity, you know, you know, just maybe some, like, cost takeout? Just trying to understand, you know, the cadence there. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:40:25I know I I think and we could talk about, like, flattish gross profit or a little more than flattish for the full year. So does it mean that this is going to be less seasonal from here on on just that cadence? Just curious if you could add any more color on the service gross profit. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:40:43I'll start maybe with your second point. Seasonality will still be in place. So from quarter to quarter, there's definitely still seasonal aspects to it, which is why we expect the first quarter of the year, as I had in my prepared remarks, to be probably the strongest in the year because volume is higher. We'll also be comping over some cost coverage metrics we did last year. But I'd tell you in terms of why it's getting better, there's really three things that are driving the improvement. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:41:08That we've seen over the past two years now, we've consistently improved our performance in service. Number one is efficiency opportunities that we've driven. We've made investments in technologies like RFID trackers, investments in technologies we can better have have better reporting in the stores to manage our our costs. That's number one. Number two is we have taken cost coverage as well. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:41:29So to match cost inflation that we've seen, we've had an ability to increase our our fees there. And part of that is also driven by what Bill has talked about, the efficiency improvements in COGS and logistics gives us an ability to take some fees there without increasing the price of our cars. And then lastly, certainly, sales being positive helps because service does have a large component of fixed cost. Certainly, when you think of all the technicians that we're trying to retain, there is an aspect of fixed cost, especially in the shorter term. So you have positive sales, stronger ability to leverage. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:42:03And we would expect going into this year to have a year of profitability in service, which we haven't had in several years. And thereafter, too, feeding the earnings model that Bill talked about and our ability to deliver double digit EPS growth over several years is also because of that as well. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:42:24Got it. Great. Thanks for all the color and good Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:42:26luck. Bill NashPresident & CEO at CarMax00:42:28Thank you. Operator00:42:29Thank you. Your next question comes from the line of Michael Montani with Evercore ISI. Your line is open. Michael MontaniManaging Director at Evercore00:42:38Yes. Hey, good morning. Thanks for taking the question. Bill NashPresident & CEO at CarMax00:42:41Good morning. Michael MontaniManaging Director at Evercore00:42:43Just wanted to ask, I guess, a two part thing. One was, if you look at historically periods of appreciating prices, what does that typically do for your market share and then also your margins? How would you typically respond there? Because historically, you've called out it can be challenging if we have abnormal depreciation. So if you get a appreciation in price, does that help you from a share and margin perspective? Michael MontaniManaging Director at Evercore00:43:11And the follow-up question was, you guys had mentioned an EPS outlook that includes, if mid single digit unit growth is there, could have high teen EPS growth. So I'm wondering if there's anything we need to keep in mind as it relates to that for this current year? And then also anything we should know about from a timing perspective as we think through quarterly cadence? Bill NashPresident & CEO at CarMax00:43:36Okay. So Michael, good morning. On appreciating price environment, I think for every group that sells used cars, when you're in an appreciating environment, it makes it easier. And I think generally in an appreciating environment, your margins are easier to manage because you're not having to do as many markdowns. Again, you're going to sell the car and if it's appreciating the next car is going be a little bit more expensive. Bill NashPresident & CEO at CarMax00:43:58So I think it helps your margin. Think from a market share standpoint too, it would also help that. So I think that's good. And then your second question was on the model. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:44:10Yes. So from a model, we've spent the past several years, as we all know, investing in our omnichannel model, investing in capabilities, investing in efficiencies. And we feel very confident about our ability at this point to deliver robust EPS CAGR growth for several years at least, talking to high teens, like we mentioned in our prepared remarks, on just mid single digit retail sales. And what that's enabled on are strong margins, strong growth in other GPU as well, exceeding retail units. I talked about service. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:44:45We talked about EPP opportunities. You're also talking about SG and A. We're done with the heavy investment period. We're pivoting from building capabilities to leveraging and enhancing them to grow efficiencies and to grow the bottom line. So we think we are really well positioned to grow. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:45:03And then you throw in the share repurchase program that we're committed to, that's also going to to juice our EPS. And then you take a look at CAF, we're making those investments there in terms of the full spectrum credit that John talked about. Those are also kind of in the in the shorter term and the medium term and definitely in the longer term accelerators to our EPS growth. So we think we've built a model here that is in this really strong position to deliver outsized returns. Michael MontaniManaging Director at Evercore00:45:28Anything cadence wise to think about as we progress through the year? Because I think you called out there could be some CAF related things to keep in mind in the first quarter. But then on the flip side, you also have potentially some benefits from the work you've done in service and EPP. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:45:44Yes. Before jumping into CAF, I'll turn it over to John. Certainly, service, we do expect the first half of the year to perform probably better, holding everything constant than the back half purely due to seasonality when you think of higher volume and comping over some some cost coverage metrics we did last year. So for Service, I would expect outsized performance in the front half. And then for CAF, I'll Enrique Mayor-MoraExecutive VP & CFO at CarMax00:46:07just turn it over to John. Jon DanielsEVP, CarMax Auto Finance at CarMax00:46:08Sure. Yes, I'd definitely like to take the opportunity to speak to cadence on provision coming up. I mentioned in the prepared remarks that anticipate a sequentially higher year over year increase in provision. And just to give some orders of magnitude around that. So I'll jump off Q4. Jon DanielsEVP, CarMax Auto Finance at CarMax00:46:26So we had a $68,000,000 more normalized provision in Q4. You're going to have a sequentially higher provision in Q1 because it's a higher from a seasonality standpoint, it's a higher volume quarter. It is a lower credit quality quarter. So you can anticipate a 30% to 35% increase off of that Q4 number simply from that aspect. Couple that with the fact that we said we are going to we have taken some volume back that we were giving to flowing to Tier two partners, kind of undo a portion of our tightening. Jon DanielsEVP, CarMax Auto Finance at CarMax00:47:00So you can add probably another 10% to 15% increase off of the Q4 number there. So you absolutely could see a 45% to 50% increase in provision in Q2 and that can sorry, in Q1 and that tightening will continue sorry, that increase will continue because again, this is volume that we anticipate keeping. You're going to have to continue to provision for that added volume you're taking on. And then again, we will watch that economy very, very carefully. But the back half of the year, we're taking in more volume, from our Tier two and Tier three testing. Jon DanielsEVP, CarMax Auto Finance at CarMax00:47:33So again, that would stack on there. All in the long run, a very, very good thing for CAF, but an impact in the near term to our provision. And that's relative to Q4 is the key, yes. Michael MontaniManaging Director at Evercore00:47:45All right. Michael MontaniManaging Director at Evercore00:47:46Thank you. Operator00:47:48Thank you. And your next question comes from the line of Chris Bottiglieri with BNP Paribas. Your line is open. Chris BottiglieriAnalyst at BNP Paribas00:47:58Hey guys, thanks for taking the question. So you've done a really nice job taking costs out of business for the last few years, fairly consistently my own expectations. The question is though, if the economy slows from here and sales turn negative to mid single or high single digits again, does EPS decline high teens very much at the upside? Or do you have levers left at your disposal to continue to cut costs and mitigate the operating leverage? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:48:25Yeah. We feel good. Look, a couple of things. I mean, one is we still have room for efficiency improvements. Those are part of our plan irrespective of kind of the macro economy. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:48:35We're we're going after those efficiency improvements. That's number one. Number two is if if there is a downturn in in the economy, you know, we have pulled levers in the past. You know, we're positioned to to pull those levers if we had to. Again, you know, you're looking at a management team here that's been through quite a few things here over the past few years. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:48:54So we know kind of how to manage through these kind of environments, whether they're upswing or downswing. Chris BottiglieriAnalyst at BNP Paribas00:49:00Yes. Good. Thank you. Operator00:49:04Thank you. And your next question comes from the line of John Healy with Northcoast Research. Your line is open. John HealyMD & Research Analyst at Northcoast Research00:49:12Thanks for taking my question. Just kind of wanted to ask a big picture question, Bill. In the last couple of weeks, obviously, outside of the macro, probably the biggest item on used retail has just been some of the Amazon news. And, you know, obviously, it doesn't appear like they're becoming a retailer per se in the auto space, but would love to get your thoughts about them entering in the fray. And, you know, do you view them as a, you know, adversary competitor, you know, maybe elevating your peers? John HealyMD & Research Analyst at Northcoast Research00:49:39Or do you view them potentially as a partner? You know, would you be surprised if you maybe work collaboratively with them going forward? Thanks. Bill NashPresident & CEO at CarMax00:49:47Yeah. Good morning, John. Yeah. I don't think anybody was surprised to see them actually get into this space. They've been kind of talking about it. Bill NashPresident & CEO at CarMax00:49:57And to your point, they recently clarified either more interested in kind of the listings, the lead generation, the advertising. So the way I see it is at this point it's more like a facilitator that we facilitate with I mean we work with a lot of different facilitators. I would see us as more of a collaboration. We obviously a lot of traffic just through carmax.com, but we also we work with facilitators to help complement the CarMax.com traffic. And I think that that's the way we kind of view it at this point. Bill NashPresident & CEO at CarMax00:50:24But certainly, it's something that we you continue to monitor. I would also just tell you, it just makes me really glad that gone through this pivot to really become an omni channel retailer because I think customers are really looking for this combination of physical and digital assets when it comes to buying a car. And it's just it's a big competitive moat that we built and it's very hard to replicate. So if you're going to get into the used car business, there's a lot that has to be considered. Operator00:50:58Thank you. And your next question comes from the line of Chris Pearce with Needham. Your line is open. Chris PierceSenior Analyst at Needham & Company00:51:05Hey, good morning, everyone. Bill NashPresident & CEO at CarMax00:51:06Good morning. Chris PierceSenior Analyst at Needham & Company00:51:08Just was curious, as you move kind of more into six to 10 less late model because of the opening of the credit spectrum, is that an opportunity for are you competing against dealers you haven't traditionally competed against at a larger rate and there's potential for a new set of share gains? Or is, like, the six to eight year old car now the what used to be the two to four year old car because of what's happened with new car production? Like, is this a new competitive set, or is it just kind of continuation of the dealers you've been competing against for years now? Bill NashPresident & CEO at CarMax00:51:41Yes. I think look we've always sold one to 10 year old cars. And I think the and I talked a little bit about this earlier. The biggest thing that we want to make sure that we do is that whatever we put the CarMax label on, it meets our quality standards. And when you start getting into the six to 10 population, there's a lot of vehicles that just don't meet the CarMax standards and we're just not going flinch on that standard. Bill NashPresident & CEO at CarMax00:52:06That being said though, we've obviously built the muscle to continue to produce that type of car and get it up to the CarMax standard. So what I would say is it's continuing to compete in the space that we've been in. But quite honestly, it's a space where there's a lot of transactions that happen. I talked about the P2P, consumer to consumer selling each other, especially in the seven, eight, nine year old, 10 year old cars. There's a lot of vehicles in there that just while it's in the denominator, it's not going to necessarily be in our numerator set. Bill NashPresident & CEO at CarMax00:52:35It's just not going be able to be brought up to the quality standard. So I think that's the thing to think about. And I think the way it enhances is, again, if consumers are challenged on just everyday expenses and they're trying to figure out how to work a budget and they need to they would traditionally buy a three or four year old car, they may be saying, okay, well, I'm going to buy a six or seven year old car and we want to be able to meet that need. I think it's very similar to the folks that are thinking they're going to buy a new car and they realize, well, I can't get the new car to work in my monthly payment. I'm going to go down to a one or two year old late model car. Bill NashPresident & CEO at CarMax00:53:07So I think it's just kind of an evolution of the business and where the consumer is going. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:53:14Just one thing I want to clarify Chris. You made the comments as you go full spectrum and go 6% to 10 I think they're relatively disconnected. The fact that CAF is going full spectrum, all we're doing is likely taking some volume from our Tier two and Tier three partners. We will drive some incremental sales. But our Tier two, Tier three, even our Tier one players love six to 10 year old cars. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:53:39So I'd separate the inventory needs that we have from where CAF is playing in the credit spectrum. Bill NashPresident & CEO at CarMax00:53:45As well as they love zero to four. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:53:47Mean, you can get it back Bill NashPresident & CEO at CarMax00:53:47and forth. Absolutely. I'm glad you made that point, John. Chris PierceSenior Analyst at Needham & Company00:53:51Okay. And then just to follow-up on Chris PierceSenior Analyst at Needham & Company00:53:52that though, is it can it be thought of as a DPE tailwind as you move into these I don't want say move into these older cars, but maybe as you sell it. Bill NashPresident & CEO at CarMax00:54:01Yeah. Yeah. I'm sorry. If you ask, I didn't I didn't catch that part the question. So GPU tailwind. Bill NashPresident & CEO at CarMax00:54:05Look, when you sell older vehicles, they cost more to recondition. But especially in CarMax's case, they're they're they're kind of like a unicorn, you know, where it's at the CarMax quality standard. It certainly isn't a commodity. We think the quality is better than others. So those do bring a little bit more margin. Chris PierceSenior Analyst at Needham & Company00:54:22Okay. Thank you. Bill NashPresident & CEO at CarMax00:54:24Thank you. Operator00:54:25Thank you. And your next question comes from the line of David Wichten with Morningstar. Your line is open. David WhistonEquity Strategist - U.S. Autos at Morningstar00:54:34Thanks. Good morning. Bill NashPresident & CEO at CarMax00:54:35Good morning. David WhistonEquity Strategist - U.S. Autos at Morningstar00:54:35Can you just talk a little bit more about the decision making process to to change the 2,000,000 goal where you just withdrew the timeline completely as opposed to saying given macro factors, we think it'll be more like fiscal thirty? Because doing it the way you did, it just seems like it's a bit more pessimistic and maybe that was intentional or maybe it wasn't. I just wanted to get more clarification. Thanks. Bill NashPresident & CEO at CarMax00:54:57Yes. I definitely wasn't pessimistic. Look, I think the important thing right now is everybody should know that we're focused on driving sales and driving robust EPS growth. And look there are a lot of macro factors. If you see a and I'll give you a prime example. Bill NashPresident & CEO at CarMax00:55:11If you see highly appreciating market where you can get to the $30,000,000,000 way quicker and it's really nothing that we've done at this point. Same thing as if you see a slowdown it may delay Right now, there's just so much uncertainty out there. Why put a target out there that's really speculative, not knowing exactly where this environment is going to go? And we just think that that's the prudent thing. Bill NashPresident & CEO at CarMax00:55:33But it does not take the focus on what we're going after and those targets. It doesn't make sense to put a range on them at this point. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:55:42Yes. And just to build on that, like even in our earnings release, you'll notice like we are focused on growing sales and focused on growing the bottom line. And I think that's what's important in this kind of environment. And then at the appropriate time, we'll come back with a timing outlook as well. We just need some more stability in what's out there. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:55:58But again, we are focused on driving sales and driving profitability. David WhistonEquity Strategist - U.S. Autos at Morningstar00:56:04Okay. Thanks, guys. Operator00:56:07Thank you. And your next question comes from the line of John Murphy with Bank of America. Your line is open. John MurphyManaging Director at Bank of America Merrill Lynch00:56:21I just wanted to sneak one follow-up in. I understand that the long term goals have been postponed here in the guidance, but you did reiterate the earnings per share growth model, give an update there. When you talk about double digit earnings per share growth for years to come, you're talking about sort of mid that has to come with you'll get a CAGR of high teens on EPS with unit growth in the mid single digits. Just curious, when you think about that, does that include the normalization of SG and A from this 90% range back down to 70%? Or is that after that's happened? John MurphyManaging Director at Bank of America Merrill Lynch00:56:59Because if you're taking SG and A down to back to the normal level, I mean, you're really kind of taking some of the growth capital that you've either you're putting into the model, which makes sense. But I'm just curious, is this kind of run rate basis once we've gotten back to 70%, seventy five % SG and A to gross? Or does that include the normalization from 90% down to 70% in that statement? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:57:21Yes. Like over time, we expect to get back to the mid-70s. It's going take us some time to get there. All of that's factored into the guidance that we're providing. Right? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:57:31So we expect that, again, with mid single digit retail unit growth, we'd expect a CAGR of high teen EPS growth. And there's a certain there's an assumption of SG and A kind of ramping down over time, but that's embedded in that guidance. John MurphyManaging Director at Bank of America Merrill Lynch00:57:48But to be fair, the mid-seventy %, the gap between 90% and mid-70s, that's analogous to sort of CapEx or growth capital. That shouldn't be viewed as operating. So I'm just trying to understand is this something that on an operating basis you think you can do once as regardless of that normalization of SG and A? Bill NashPresident & CEO at CarMax00:58:12John, unless we got some robust volume this year, I can't see us getting back to the mid-70s this year yet. We stand by what the model, we feel really good about the momentum and think that we can provide great robust EPS growth even in the range that we're at right now. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:58:28Again, the timing of getting back to the mid-70s is embedded in that guidance. And what I'd tell you is that you mentioned 9091% where we ended this quarter relative to mid-70s. Q four is the high point of s g and a as a percent of gross profit. For the year, we were in the low eighties. Right? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:58:49And so just as a point of clarification. John MurphyManaging Director at Bank of America Merrill Lynch00:58:53Okay. All right. Thank you very much. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:58:55Thank you. Operator00:58:57Thank you. And your next question comes from the line of Rajat Gupta with JPMorgan. Your line is open. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:59:05Great. Thanks for thanks for allowing me to ask another follow-up. I just wanted to clarify because you've gotten some like in balance like through the course of the call. Just on the comments around CAF and provisioning, I understand the mechanics around the first quarter step up clearly. Just curious, like, what the suggestion from John that that level of provisioning will continue through the remainder of the year or into 2Q, 3Q? Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:59:32Or it was just the fact that you're increasing the subprime mix or the Q3 mix that will continue? Just wanted to make sure we're tying those two comments appropriately. Thanks. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:59:43Yes. Happy to clarify that, Rajat. Appreciate the question. So yes, I think if you couple the two things, the larger one really in Q1 is certainly the step up in volume and the lower credit quality nature of Q1. So that is going to be the real big driver of the significant growth in the Q1 provision, again, as compared to the Q4 provision referring to. Enrique Mayor-MoraExecutive VP & CFO at CarMax01:00:06And then yes, you tack on to there the fact that we are going to capture 100 basis to 150 basis points back at obviously a highly profitable, but at a higher loss reserve requirement, so higher provisioning there. Now that 100 basis 150 basis points, we anticipate keeping through subsequent quarters. And then again, on the back half, we look to tack on more as we continue our testing in the Tier two and Tier three space. So that will add further. Again, different seasonality in different quarters. Enrique Mayor-MoraExecutive VP & CFO at CarMax01:00:35But I just want you to keep in mind that, that added penetration, added volume from CAF going deeper has to be factored into your provisioning going forward. Again, long run, it's a win, but I want you to keep that in mind. And then of course, always the overarching comment of we will watch the macroeconomic situation, decide what we do. But I want to make sure you keep the added penetration in mind in subsequent quarters. Bill NashPresident & CEO at CarMax01:01:00The other thing I would just add to that Rajat because you said something about subprime mix. I mean, what John's talking about here in the near term is taking back stuff that we were originating earlier, not I just want to be clear, it's not going into subprime. It's basically pulling stuff back in that we had passed off to our Tier two partners. Now later in the year, when we decide to go deeper into Tier two and Tier three, then you could see a little bit of that. So I just wanted to make that distinction. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co01:01:27Understood. Thanks so much for clarifying that. Again, thanks again and good luck. Bill NashPresident & CEO at CarMax01:01:31Thank you. Enrique Mayor-MoraExecutive VP & CFO at CarMax01:01:32Thank you. Operator01:01:33Thank you. And your next question comes from the line of Michael Montani with Evercore ISI. Your line is open. Michael MontaniManaging Director at Evercore01:01:40Yes. Hi. Thanks for letting me sneak another one in. I was just hoping could you clarify a little bit more what the Edmunds lease impairment charge was for? And then secondly, when could we think about the added penetration turning into a win? Michael MontaniManaging Director at Evercore01:01:57I guess, specifically, can you grow CAF profits if provisioning have to step up that much for this year? Enrique Mayor-MoraExecutive VP & CFO at CarMax01:02:04Yeah. I'll take I'll take the first one. So have a couple floors in the Edmonds, Santa Monica headquarter that we've been actively trying to sublease really since we acquired them. But it's been a hard market in LA as you can imagine. So, more recently, an elementary school was impacted by the LA fires, unfortunately, and unfortunately, and and they were in need of space. Enrique Mayor-MoraExecutive VP & CFO at CarMax01:02:24So we ended up subleasing one of the floors to them. So we're able to find the subleaser while helping the community. So it really was a win win situation, and that's kind of what is what drove the impairment there. Yes. And Michael, to your second question, do we see given the provision growth in CAF income? Enrique Mayor-MoraExecutive VP & CFO at CarMax01:02:41Short answer is absolutely yes. We see growth in FY 2026 for CAF income on top of the provision that comes from strong net interest margins, obviously mentioning our expenses and all of that. But yes, we absolutely see growth within the year and then obviously strong growth beyond that as the provision is trumped by the overall income we're going to gain. Michael MontaniManaging Director at Evercore01:03:03Understood. Thanks for the clarity. Operator01:03:07Thank you. We do not have any further questions at this time. I'll hand the call back to Bill for any closing remarks. Bill NashPresident & CEO at CarMax01:03:14Well, great. Well, thank you all for joining the call today and for your questions and support. Again, I want to just congratulate all of our associates for how they've built and enhanced our great culture for everything they do to take care of each other, our customers and our communities. And we'll talk again next quarter. Thank you. Operator01:03:30Thank you. Ladies and gentlemen, that concludes the fourth quarter fiscal year twenty twenty five CarMax earnings release conference call. You may now disconnect.Read moreParticipantsExecutivesDavid LowensteinVice President - Investor RelationsBill NashPresident & CEOEnrique Mayor-MoraExecutive VP & CFOJon DanielsEVP, CarMax Auto FinanceAnalystsSharon ZackfiaPartner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.CSeth BashamMD - Equity Research at Wedbush SecuritiesJohn MurphyManaging Director at Bank of America Merrill LynchBrian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.Josh YoungEquity Research Senior Associate at Truist SecuritiesJeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens IncRajat GuptaExecutive Director, Autos at JP Morgan Chase & CoMichael MontaniManaging Director at EvercoreChris BottiglieriAnalyst at BNP ParibasJohn HealyMD & Research Analyst at Northcoast ResearchChris PierceSenior Analyst at Needham & CompanyDavid WhistonEquity Strategist - U.S. Autos at MorningstarPowered by Conference Call Audio Live Call not available Earnings Conference CallCarMax Q4 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsPress Release(8-K)Annual report(10-K) CarMax Earnings HeadlinesWilliam Blair Comments on CarMax's Q4 Earnings (NYSE:KMX)May 2 at 3:37 AM | americanbankingnews.comINVESTOR ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of CarMax, Inc. - KMXApril 29, 2025 | globenewswire.comElon’s Terrifying Warning Forces Trump To Take ActionElon Musk has avoided two major financial crises before. He pulled Tesla and SpaceX back from the brink of collapse and built two of the most valuable companies in history. Now, he's sounding the alarm about America's $36 trillion debt time bomb that could destroy the fabric of our society.As head of the Department of Government Efficiency (DOGE) under President Trump, Musk is exposing just how bad things are...May 5, 2025 | American Hartford Gold (Ad)INVESTOR ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of CarMax, Inc. - KMXApril 28, 2025 | prnewswire.comJim Cramer Holds on CarMax (KMX): “Don’t Sell It Down Here — That’s a Remarkable Decline”April 23, 2025 | msn.comKMX Q1 Earnings: CarMax Matches Revenue Expectations, Misses Profit Targets Amid Shifting Market DynamicsApril 23, 2025 | msn.comSee More CarMax Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like CarMax? Sign up for Earnings360's daily newsletter to receive timely earnings updates on CarMax and other key companies, straight to your email. Email Address About CarMaxCarMax (NYSE:KMX), through its subsidiaries, operates as a retailer of used vehicles and related products in the United States. It operates in two segments: CarMax Sales Operations and CarMax Auto Finance. The CarMax Sales Operations segment offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles; used vehicle auctions; extended protection plans to customers at the time of sale; and reconditioning and vehicle repair services. The CarMax Auto Finance segment provides financing alternatives for retail customers across a range of credit spectrum and arrangements with various financial institutions. 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PresentationSkip to Participants Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter Fiscal Year twenty twenty five CarMax Earnings Release Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. Operator00:00:18I would now like to hand the conference over to your speaker today, David Lowenstein, VP of Investor Relations. Please go ahead. David LowensteinVice President - Investor Relations at CarMax00:00:27Thank you, Madison. Good morning, everyone, and thank you for joining our fiscal twenty twenty five fourth quarter earnings conference call. I'm here today with Bill Nash, our President and CEO Enrique Mayer Mora, our Executive Vice President and CFO and John Daniels, our Executive Vice President, CarMax Auto Finance Operations. Let me remind you our statements today that are not statements of historical fact, including, but not limited to, statements regarding the company's future business plans, prospects and financial performance are forward looking statements we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our current knowledge, expectations and assumptions and are subject to substantial risks and uncertainties that could cause actual results to differ materially from our expectations. David LowensteinVice President - Investor Relations at CarMax00:01:24In providing projections and other forward looking statements, we disclaim any intent or obligation to update them. For additional information on important factors and risks that could affect these expectations, please see our Form eight ks filed with the SEC this morning, our annual report on Form 10 ks for fiscal year twenty twenty four and our quarterly reports on Form 10 Q 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 700865. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow David LowensteinVice President - Investor Relations at CarMax00:02:12ups. Bill? Bill NashPresident & CEO at CarMax00:02:13Great. Thank you, David. Good morning, everyone, and thanks for joining us. We're very pleased with the continuing momentum across our diversified business during the fourth quarter. Our results reflect solid execution and the strength of our business model. Bill NashPresident & CEO at CarMax00:02:25We delivered robust year over year EPS growth as we drove unit volume increases in sales and buys, materially increased gross profit, grew CAF income and realized additional cost efficiencies. Our associates, stores, technology and digital capabilities all seamlessly tied together enable us to provide the most customer centric car buying and selling experience. This is a key differentiator that gives us the right to win and access to the largest total addressable market in the used car space. This also positions us to drive sales, gain market share and deliver significant year over year earnings growth for years to come. In the fourth quarter, on a year over year basis, we grew retail and wholesale unit volume. Bill NashPresident & CEO at CarMax00:03:04We delivered strong retail, wholesale and EPP GPUs and materially improved service gross profit. We bought more vehicles from both consumers and dealers achieving an all time record with dealers. We grew CAF's net interest margin and continued to advance our full credit spectrum underwriting model. We materially leveraged SG and A as a percent of gross profit and we also achieved double digit EPS growth for the third consecutive quarter. For the fourth quarter of FY twenty twenty five, we delivered total sales of $6,000,000,000 up 7% compared to last year, primarily driven by higher volume. Bill NashPresident & CEO at CarMax00:03:39In our retail business, total unit sales increased 6.2% and used unit comps were up 5.1% despite having one less selling day, inclement weather and a delayed start to this year's tax season. Average selling price was in line with last year's fourth quarter. For the full year, total retail unit sales increased 3.1% and used unit comps were up 2.2%, with a decline in the first quarter more than offset by gains across the second, third and fourth quarters. Our market share data indicates that our nationwide share of age zero to 10 year old used vehicles was 3.7% in calendar twenty twenty four consistent with 2023. External title data shows year over year, while our share came under pressure during the first half of twenty twenty four, it then recovered as we achieved accelerating gains through the second half with particular strength in age zero to four vehicles, which grew for the entire year. Bill NashPresident & CEO at CarMax00:04:35The data indicates that our market share continued to grow year over year during January 2025, the latest period for which information is available. While I do not intend to provide another update until this time next year, we remain confident in our ability to achieve further market share gains and across 2025 and beyond. Fourth quarter retail gross profit per used unit was $2,322 a fourth quarter record up from last year's 2,251 Wholesale unit sales were up 3.1% versus the fourth quarter last year. Average selling price was flat year over year. Fourth quarter wholesale gross profit per unit was $10.45 dollars which is historically strong, though down from the $11.20 dollars a year ago. Bill NashPresident & CEO at CarMax00:05:20We bought approximately 269,000 vehicles during the quarter, up 15% from last year. We purchased approximately 223,000 vehicles from consumers with more than half of those buys coming through our online instant appraisal experience. With the support of our Edmond sales team, we sourced the remaining approximately 46,000 vehicles through dealers, is up 114% from last year. For the fourth quarter, approximately 15% of retail unit sales were online, up from 14% last year. Total revenue from online transactions was approximately 29% compared with 30% last year. Bill NashPresident & CEO at CarMax00:05:55All of our wholesale auctions in sales were virtual and are considered online transactions, which represented 17% of the total revenue for the quarter. Approximately 58% of retail unit sales were omni sales for this quarter, up from 55% in the prior year. As a reminder, our omni channel sales definition incorporates customers who complete some, but not all of the following transactional activities online: reserving the vehicle, financing the vehicle if needed, trading in or opting out of a trade in and creating a sales order. To better reflect the ways customers are utilizing our digital capabilities to buy a car, Going forward, we are updating our definition of an omni channel sale to also include customers who complete any of the following steps online: prequalifying for financing, setting appointments and signing up for notification on cars coming soon. Based on this updated definition, approximately 67% of our retail unit sales were omni this quarter, up from 64% last year. Bill NashPresident & CEO at CarMax00:06:54Of note, this does not impact how we calculate online sales since the steps to complete an online retail transaction remain the same. Across omni and online, our digital capabilities supported over 80% of our sales during the fourth quarter. We expect that our mix of digitally supported sales will continue to grow over time we add further enhancements to our online tools, customers become more accustomed to leveraging them and as we improve our ability to track their use. Turning to finance, CarMax Auto Finance or CAF delivered income of $159,000,000 up 8% from the same quarter last year. In a few moments, John will provide more detail on customer financing, the loan loss provision and CAF contribution as well as our progress on full credit spectrum lending and increasing CAF's penetration. Bill NashPresident & CEO at CarMax00:07:41At this point, I'd like to turn the call over to Enrique, who will share more information on our fourth quarter financial performance. Enrique? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:07:48Thanks, Bill, and good morning, everyone. The momentum we built over the last few quarters continued into the fourth quarter. We achieved positive growth in retail and wholesale units, increased per unit and total dollar margin, grew CAF income and had strong flow through to our bottom line. Fourth quarter net earnings per diluted share was $0.58 up 81% versus a year ago. Adjusted for a $12,000,000 noncash impairment within other expense related to an Edmunds lease, EPS was $0.64 which is doubled from a year ago. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:08:23Total gross profit was $668,000,000 up 14% from last year's fourth quarter. Used retail margin of $424,000,000 increased by 9% with higher volume and per unit margins. Wholesale vehicle margin of $125,000,000 declined by 4% with an increase in volume offset by a reduction in per unit margins. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:08:48Other gross profit was $119,000,000 Enrique Mayor-MoraExecutive VP & CFO at CarMax00:08:51up 72% from a year ago. This was driven primarily by a combination of EPP and service. EPP increased by $8,000,000 or $10 per retail unit as we lapped over the initial rollout of margin increases that took place in last year's fourth quarter. Service recorded a $1,000,000 loss, which was a $44,000,000 improvement over last year's fourth quarter. We achieved this performance improvement through successful cost coverage, efficiency measures and growth in sales. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:09:23On the SG and A front, expenses for the fourth quarter were $611,000,000 up 5% or $30,000,000 from the prior year. SG and A leveraged by seven seventy basis points, driven by growth in gross profit and our ongoing actions to improve expense efficiency. SG and A dollars for the fourth quarter versus last year were mainly impacted by two factors. First, total compensation and benefits increased by $22,000,000 Over half of this increase was due to our corporate bonus accrual with the majority of the balance driven by unit volume growth. Second, advertising was up by $9,000,000 due to timing. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:10:06This was in line with the guidance we provided last quarter. In respect to capital allocation, during the fourth quarter, we repurchased approximately 1,200,000.0 shares for a total spend of $99,000,000 As of the end of the quarter, we had approximately 1,940,000,000 of repurchase authorization remaining. As we look ahead, I'll highlight a few key areas which support our earnings model that Bill will speak to shortly. We are testing EPP product enhancements that will focus on increasing penetration and per unit margins. These enhancements are expected to drive a small year over year increase in per unit EPP margin in FY 2026 with the potential for more expansion in fiscal twenty twenty seven. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:10:53We expect service margin in FY 2026 to grow year over year, predominantly in the first half of the year and to deliver a slight positive profit contribution for the full year as governed by sales performance given the leverage deleverage nature of service. Additionally, we expect service to continue to serve as a slight profit lever beyond FY 2026. In respect to SG and A, in the near term, we expect to require low single digit gross profit growth to lever on an annual basis, including in FY 2026. This will be supported by our goal of hitting full year omni cost neutrality in FY 2026 for the first time with continued improvement thereafter. We expect all three metrics per used unit, per total unit and as a percent of gross profit to be more efficient than pre omni for the full year. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:11:46This reinforces our pathway back to a lower SG and A leverage ratio with the initial goal of returning to the mid-seventy percent range over time as we see healthier consumer demand. In FY 2026, we expect that marketing spend will be approximately the same as in FY 2025 on a total unit basis. With regard to capital expenditures, we anticipate approximately $575,000,000 in FY 2026. The increase is primarily driven by the timing of land purchases as we experienced favorability to our FY 2025 outlook due to the timing of certain deal closures. Similar to FY 2024 and FY 2025, the largest portion of our CapEx investment is related to the land and build out of facilities for long term growth capacity in off-site reconditioning and auctions. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:12:38In FY twenty twenty six, we plan to open six new store locations, up from five in FY 2025 and four stand alone reconditioning and auction centers, up from two in FY 2025. Our extensive nationwide footprint and logistics network continue to be a competitive advantage for CarMax. Now I'd like to turn the call over to John. Jon DanielsEVP, CarMax Auto Finance at CarMax00:12:58Thanks, Enrique, and good morning, everyone. During the fourth quarter, CarMax Auto Finance originated approximately $1,900,000,000 resulting in sales penetration of 42.3% net of three day payoffs, which was in line with last year's fourth quarter. Jon DanielsEVP, CarMax Auto Finance at CarMax00:13:13The weighted average contract rate charged to new customers was 11.1%, a decrease of 40 basis points from a year ago, which was reflective of credit tightening and APR reductions executed prior to Q4. Third party Tier two penetration in the quarter was 17.6% of sales, down 110 basis points from last year, while third party Tier three volume accounted for 7.9% of sales, down 30 basis points from last year. GAAP income for the quarter was $159,000,000 which was up $12,000,000 from FY 2024. This increase was driven by net interest margin, which remained steady from the third quarter at 6.2%, but is up 30 basis points from last year's fourth quarter. Provision for loan losses was $68,000,000 and results in a total reserve balance of $459,000,000 or 2.61% of managed receivables. Jon DanielsEVP, CarMax Auto Finance at CarMax00:14:08This sequential improvement in the reserve to receivable ratio reflects an additional quarter with a more normalized provision along with the continuation of previous credit tightening. Regarding our full spectrum lending initiative, we remain excited about CAF's continued efforts in this space as well as the tremendous growth potential unlocked by the broadening of our securitization program. During the month of March, CAF began measured expansion by recapturing profitable portions of Tier one originations that we had shifted to our Tier two lenders as we tightened lending standards. This adjustment is targeted to grow our penetration by 100 to 150 basis points in the near term and is enabled by our non prime securitization program, which allows us to efficiently fund these non prime receivables while retaining the full economic value of the contracts. We were also pleased to successfully execute our second non prime ABS transaction, which closed in late March and was well received in the market. Jon DanielsEVP, CarMax Auto Finance at CarMax00:15:09We continue to learn from our new underwriting models and corresponding tests currently in place and anticipate capturing additional volume across Tier two and Tier three during the back half of the fiscal year. But as always, we will carefully monitor the consumer and the broader economy and will adjust our origination strategy as needed. It is worth noting that in the first quarter, we are forecasted to have a larger provision sequentially and year over year driven by new origination volume. This stems from seasonally higher sales and a lower credit quality period plus the need for additional reserve given the profitable but higher loss nature of the recaptured receivables that I mentioned a few moments ago. As a reminder, we expect this initial impact from building the loss reserve as we grow cap penetration to be materially offset by future income over time. Jon DanielsEVP, CarMax Auto Finance at CarMax00:16:00Now I'll turn the call back over to Bill. Bill NashPresident & CEO at CarMax00:16:02Thank you, John and Enrique. As I mentioned at the start of the call, I'm pleased with the momentum we are seeing across our business. The associate and customer facing tools we launched during fiscal twenty twenty five are contributing to our results and to providing the most customer centric car buying and selling experience. I'm proud of the steps we took during the year to further differentiate our offering and drive incremental operational efficiencies. Some examples include: for retail, we rolled out a number of new systems that enhance consumer shopping experiences, support conversion and enable our associates to be more efficient. Bill NashPresident & CEO at CarMax00:16:33These include order processing in our stores, customer accounts online, AI driven knowledge management in our CECs and EV research and shopping tools on the Edmunds and CarMax websites. Our digital tools enhancements have made it easier for consumers to self progress in their shopping journey. Sky, our AI powered virtual assistant is now able to independently answer over half of the questions our customers ask it, reflecting more than a 20% year over year improvement. Additionally, the rate of fully self progressed online sales grew by 25% across fiscal twenty twenty five. For Supply, we enhanced both our consumer and dealer facing appraisal experiences. Bill NashPresident & CEO at CarMax00:17:14We are now able to give digital offers to approximately 99% of the customers who come to CarMax.com for an appraisal and we made Max offer even easier to use. This has attracted more dealers to the offering and has driven strong record sourcing volume each quarter. For finance, we began testing new credit scoring models and corresponding strategies across the full credit spectrum, which positions us to further grow cap income modestly in the near term and more materially over time. We also released an update to our finance based shopping experience that seamlessly incorporates existing instant appraisal offers into our prequalification offering giving customers more precise credit terms. And finally, we continue to focus on driving down cost of goods sold by pursuing incremental efficiency opportunities across our logistics network and reconditioning operations. Bill NashPresident & CEO at CarMax00:18:02We achieved savings of approximately $125 per unit this year and anticipate that we will achieve at least another $125 per unit in fiscal twenty twenty six. This exceeds the initial $200 target we set at the beginning of fiscal twenty twenty five. These efficiencies support affordability as we pass savings on to our customers and also support our margins. In fiscal twenty twenty six, we will leverage and enhance our capabilities to drive growth through better execution, innovative offers, innovative efforts and up leveled experiences. Some examples include, for retail, we will continue leveraging data science and AI to offer even better digital experiences for our associates and consumers driving conversion and efficiency. Bill NashPresident & CEO at CarMax00:18:44We plan to improve our online vehicle transfer experience and to expand Sky's functionality with additional data and new architecture. In recognition of the breadth and seamlessness of our best in class offering, we will also launch a new marketing campaign over the summer that will bring our omni channel experience and our digital capabilities to the forefront for a broad set of consumers. For supply, we plan to streamline the online appraisal checkout process and expand appraisal pickup availability to new markets. We will also further enhance Mac's offer to attract new dealers expanding our access to directly sourced vehicles. For credit, as John mentioned, we plan to continue expanding CAF's participation across the credit spectrum to grow penetration and capture profitable returns. Bill NashPresident & CEO at CarMax00:19:31Additionally, we plan to modernize the ownership experience on CAF's digital platform, which will enhance customer experience and drive operating efficiencies. Looking ahead, we've positioned the company to achieve ongoing growth in retail and wholesale unit sales and market share with double digit EPS growth for years to come. We're excited about the power of the earning model we have built. Our model is designed to deliver an earnings per share growth CAGR in the high teens when retail unit growth is in the mid single digits. In addition to retail and wholesale unit growth, other key inputs driving our model are strength in other gross profit, CAF's credit spectrum expansion, continued operating efficiencies, SG and A leverage and our share repurchase program. Bill NashPresident & CEO at CarMax00:20:14Regarding our long term goals, we are focused on growing the business and we continue to make progress towards those goals. However, at this point, we are moving the timeframes associated with them given the potential impact of broader macro factors. Before turning to Q and A, I want to recognize two significant milestones. First, Fortune Magazine recently named CarMax as one of its 100 Best Companies to Work For for the twenty first year in a row. I'm incredibly proud of this recognition. Bill NashPresident & CEO at CarMax00:20:42It's due to our associates' commitment to supporting each other, our customers and our communities every day. Second, we opened up our 200 store during the fourth quarter. Reaching two fifty stores across the country is a fantastic accomplishment. I want to thank and congratulate all of our associates for the work that they do. They are a differentiator and the key to our success. Bill NashPresident & CEO at CarMax00:21:04In closing, we're excited about the strength of the business model and the opportunities that lie ahead to grow sales and earnings. We are proud to offer customers the ability to progress seamlessly through and across online and in store channels delivering what our research affirms is the most customer centric buying and selling experience. This competitive advantage gives us access to the largest total addressable market in the used car space and provides a strong runway for future growth. With that, we'll be happy to take your questions. Madison? Operator00:21:34Thank And your first question comes from the line of Sharon Zackfia with William Blair. Your line is open. You may now ask your question. Sharon ZackfiaPartner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C00:22:01Hi, good morning. Bill NashPresident & CEO at CarMax00:22:02Good morning. Sharon ZackfiaPartner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C00:22:04As we As we think about fiscal, '25 and kind of that tale of two halves where there were some share losses in the first half followed by the accelerating gains in the second half, As you kind of diagnose that, can you give us some insight into kind of what you think the drivers were between the first half and the second half and why you kind of saw that inflection? And I guess, secondarily, as as we're kind of staring down this idea of of maybe used car prices going up again with tariffs, I mean, what lessons did you learn over the past several years that could maybe help the business more if affordability becomes more challenged again in the industry? Sharon ZackfiaPartner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C00:22:47Thank you. Bill NashPresident & CEO at CarMax00:22:48Okay, Sharon. On the first question about kind of first half versus second half, look, main driving factor that we talked about that being in the years. We were coming off of, if you remember last calendar year that last quarter there was a big price correction. Remember it was the third last and third one that we saw. And when you have those big price corrections I think if I remember correctly it was probably around $3,000 in a very short period of time of depreciation. Bill NashPresident & CEO at CarMax00:23:14That impacts us a little bit differently. So I think you had that to kind of really worked into the fourth quarter that masked a lot of the things that were providing benefit for the rest of the year. If you think about the improvements and I cited a lot of them on the call today, but I think there's just a lot of factors. You take we're continuing to make the experience better for the consumers and our associates. We've got better execution. Bill NashPresident & CEO at CarMax00:23:35You've got the benefit of efficiency gains and kind of flexibility that gives you both in your pricing and your margin making sure that you're competitively priced. Our inventory acquisition expansion, we continue to set new records with our MAX offer. It just gives you a wider variety of inventory. And then I think the other thing is this year we've also just seen a more normal pricing environment. So I think there's a lot of things going on there. Bill NashPresident & CEO at CarMax00:23:56But I do think that the actions that we've taken are really what's driving the momentum. And I think they were masked a little bit in the first quarter because we were coming off of a big macro factor. As far as your second question goes, think it was just kind of if I remember correctly, it's what have we kind of learned? How are we better positioned now versus previous? And again, I think there's a lot of things that we learned in the last two or three years. Bill NashPresident & CEO at CarMax00:24:27One of them obviously is we've sharpened our skills. When we came out of COVID, our six to ten year old cars just wasn't a big focus for us, as big a focus and that's not really what customers were looking for. So we had to build that muscle up. So we have more six to 10 year old cars that over time, I think other things we've expanded the sourcing, which I just talked about. I think John spoke about the ABS bifurcation. Bill NashPresident & CEO at CarMax00:24:51If you remember, coming out of COVID, there's a lot of profitable loans out there, but we couldn't we had to pass them on to lenders because we had one ABS that required a certain return and certain loss ratios. So now having a second ABS think absolutely helps us preserve some of those sales. You like to think all of them get picked up, but some of them won't get picked up. So I think that's another one. You got the cost improvements that we've been focused on over the last couple of years. Bill NashPresident & CEO at CarMax00:25:16The work that John and his team have done on the FBS and making sure that we make it very easy for customers to understand their monthly payment and look for options that fit that monthly payment. So I think there's just a lot of great things as well as just the overall omni experience. We didn't slow down during the last few years. We kept plugging along at it because we knew this is where we wanted to get. So I think there's a lot that goes into that. Operator00:25:45Thank Operator00:25:47your next question comes from the line of Seth Basham with Wedbush Securities. Your line is open. Seth BashamMD - Equity Research at Wedbush Securities00:25:54Thanks a lot and good morning. Bill, if you wouldn't mind commenting on quarter to date use comp trends, that would be great. And then as you think about this macro environment and the potential for new car tariffs driving double digit increases in new car prices, what does that mean for you guys from a share gain perspective and from a used car industry growth perspective? Thank you. Bill NashPresident & CEO at CarMax00:26:16Yes. Good morning, Seth. On the comp trends, look, if I look at the fourth quarter, December and January were very strong. February was a little softer, which we expected given that we had leap day last year. We also think February is slightly impacted by the delay of refunds. Bill NashPresident & CEO at CarMax00:26:32And what I mean by there is, if you remember probably halfway through February refunds were off significantly year over year. Now they caught up pretty much by the February, but I think it pushed a little bit into March as well as we had some weather impacts. Then we get into March and we saw a step up that was a little stronger than the fourth quarter comp. And it continued the whole month until the March where we saw some strength some additional strength, which continued and then accelerated into the first few days April, which obviously we're early into April right now. From a comp standpoint, first quarter to date, we're running high single digits. Bill NashPresident & CEO at CarMax00:27:16Your second question, I Bill NashPresident & CEO at CarMax00:27:19think it Bill NashPresident & CEO at CarMax00:27:19was on tariffs. Is that correct? Seth BashamMD - Equity Research at Wedbush Securities00:27:22Yes. New car tariffs, if they drive double digit increases in new car prices, what does that mean for the used car industry and your ability to gain market share in that environment? Bill NashPresident & CEO at CarMax00:27:31Yes. You know, think it's it you know there's a lot of moving pieces here, and I'm sure it's probably changed even while we've been on this call. But there's a lot to watch. You wanna look at the new car pricing, the supply, parts costs, used vehicle supply, just market volatility in general with consumer sentiment. Obviously, as you pointed out, new car prices are definitely going to go up. Bill NashPresident & CEO at CarMax00:27:51I think certainly as new car prices go up that will put a bigger spread between late model used and new cars. So obviously just the speculation of the tariffs and now the tariffs actually being out there, it's driven demand. I mean you're seeing it in the franchise dealers. We're seeing it just based off of the step up that I just spoke to. I think it will push some folks into looking at used cars, late model used cars, which is interesting because that's what we're seeing a lot of interest in right now. Bill NashPresident & CEO at CarMax00:28:24Now I think over time what could happen is that the used car prices will also go up. Now the question is how much will they go up over what period of time. I think the other thing to think about on the tariffs that impacts our business as well as anybody that sells used cars is just the parts piece. When it comes to reconditioning, the parts will be going up. And it just makes our work that much more important on the efficiencies that we're going after on cost of goods sold to offset those increases. Seth BashamMD - Equity Research at Wedbush Securities00:28:54Thank you very much. Bill NashPresident & CEO at CarMax00:28:56Yes. Operator00:28:57Thank you. And your next question comes from the line of John Murphy with Bank of America. Please go ahead. John MurphyManaging Director at Bank of America Merrill Lynch00:29:04Good morning, guys. I mean, I love hearing about the investment in the recon centers and the auctions because it gives you more throughput and production capacity. I'm just curious, Bill, as you think about that, does that give you the ability to stay and maintain this presence in the six to ten year old sort of segment of the cart population? And could that actually be increased over time? And sort of kind of along that same you talk about the 200,000,000 in COGS savings going it sounds like now $250,000,000 How much of that do you think you're going to be able to maintain as you kind of go through this reconditioning and other efficiencies? John MurphyManaging Director at Bank of America Merrill Lynch00:29:45And is 2,300 to 400,002,000 the new 2,200 Bill NashPresident & CEO at CarMax00:29:49Okay. Good morning, John. So on the reconditioning and the auctions, yes, look, we're thrilled. I mean that's going to give us additional capacity, is why you're seeing that we open up more. Certainly, we want to have the cars out on the lot. Bill NashPresident & CEO at CarMax00:30:04We sell zero to 10 year old cars. We want to have what the consumers are looking for. And if they're looking for six to 10, we're certainly going to continue to try to move that mix without sacrificing the quality. I mean, that's something that you and I we've talked about in the past is we don't want to push cars out there to meet an age parameter that don't meet our quality standards. Because quite honestly, we're fine with taking those cars and wholesaling them. Bill NashPresident & CEO at CarMax00:30:24And we just we don't get the retail market share from them, we you know, it's a great business when you're turning $8,000 car making $1,000 every every seven days. So interestingly, if I look at the sales mix this last quarter, we actually sold a little bit more zero to four cars than we did older cars. That's not to say we're not pushing on the older cars and putting out those at the consumers. It's just an interesting anecdote that actually the consumers are looking a little bit more for the younger cars this quarter. I think on the $250 efficiency that we're going after, look, I think the big wildcard there is just how much tariffs end up impacting parts. Bill NashPresident & CEO at CarMax00:31:03I feel great about the fact that we're getting these efficiencies across the system in old stores, in old production centers, in new stores. So I feel good about getting those. Then the question becomes how much will tariffs kind of offset that, which again we're going to continue to focus and go after that. The other thing I would tell you on these reconditioning centers, these offset reconditioning centers, the additional benefit that you get from that is that you now have the cars closer to the stores in the markets. And we put them in we're putting them in markets where we have capacity challenges. Bill NashPresident & CEO at CarMax00:31:39And so we're having to pull cars from further distance for retail. Now with these auction these production centers being closer, you cut down on your logistics, which is a savings that we're going to continue to get whether there's tariffs or not. John MurphyManaging Director at Bank of America Merrill Lynch00:31:55It's good to hear. Thank you very much. Bill NashPresident & CEO at CarMax00:31:57Thank you, John. Operator00:31:59Thank you. And your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open. Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:32:06Hi, good morning. Nice quarter. Congratulations. Bill NashPresident & CEO at CarMax00:32:09Thank you, Brian. Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:32:11So I wanna I I don't know. I think Seth asked the question about the quarterly trend business. And you you said, you know, Bill, you're running high high single digits would would be a step up from what we what you did in q four and then particularly as you talked about February. So I guess and I know you're not I know you don't give guidance, but what I wanna ask is, I mean, as you're looking at the business, how should we think particularly against what is a very, fluid macro backdrop, I mean, how should you think about how should we think about the sustainability of that fully fiscal Q1 performance? I mean, do you Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:32:39think it is it a Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:32:41catch up from maybe February? Does it reflect potentially people buying cars ahead of time because of tariffs? Or is this overall sustainability from your standpoint? Bill NashPresident & CEO at CarMax00:32:50Yes. First of all, I don't think it's a catch up for February. I think we probably got a little bit of benefit there because, again, you're not going get the catch up on the leap day miss. What you will get a little catch up on is the tax refunds, little bit of weather. But that's very small in the scheme of things. Bill NashPresident & CEO at CarMax00:33:06So I wouldn't look at it nearly as nearly like a catch up. As you said, we don't give guidance for the full year. But I will tell you, Brian, mean, we expect that momentum that we've been seeing for the last three quarters. We're we're coming into the year very strong, and we've got some good momentum, and we would expect to continue that momentum. Obviously, you alluded to it. Bill NashPresident & CEO at CarMax00:33:25I mean, there's a lot that's going on in the macro right now, and it's changing. It's a very fluid situation. We're constantly monitoring it. We're looking at mitigation plans from a part standpoint, all kinds of things. So it's a little hard to speak on the whole year, but I will tell you that we feel good about the momentum coming into this year. Brian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.00:33:43That's helpful. I appreciate it. Thank you. Bill NashPresident & CEO at CarMax00:33:45Sure. Operator00:33:47Thank you. And your next question comes from the line of Scott Ciccarelli with Truist. Your line is open. Josh YoungEquity Research Senior Associate at Truist Securities00:33:54Hi, good morning guys. Josh Young on for Scott. You talked a bit about the improving market share here in the back half of the year. But with it sitting just under 4% today, curious what do you think you have Josh YoungEquity Research Senior Associate at Truist Securities00:34:06to do from here? Josh YoungEquity Research Senior Associate at Truist Securities00:34:07And what has to happen to get closer to that 5% target over time? Bill NashPresident & CEO at CarMax00:34:11Yeah. I think everything that they're working on that I've highlighted earlier on this call, this continue look, our big focus right now is growing sales and robust EPS. And if you do those things, all the other stuff is going to work out great including market share. If I look at the market share for this last year, we're gaining market share. We're taking it from other dealers. Bill NashPresident & CEO at CarMax00:34:31The interesting thing is you also see where P2P is growing market share when you look at that zero to 10 space. And the P2P strength is really in kind of the older vehicles, which you would expect. So I think we're we've got all the steps in place to continue. As I said, January, which is the latest title data that we have at this point, we're continuing that share gain. And like I said, with Brian, we like the momentum that we're on and we would expect to continue to gain market share. Josh YoungEquity Research Senior Associate at Truist Securities00:35:02Got it. That's helpful. Thanks. Bill NashPresident & CEO at CarMax00:35:03Thank you. Operator00:35:05Thank you. And your next question comes from the line of Jeff Licht with Stephens Inc. Your line is open. Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:35:12Good morning, guys. Congrats on a nice quarter. I was wondering if we could talk about sourcing. In this quarter, you bought 46,000 units from dealers, which is the most you've ever done on a percent basis in terms of improvement or even unit basis. And also your overall purchase of $2.69 was 89% of the combined units. Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:35:37I think a big thing going forward, especially in this tariff scenario, is going be your ability to source. Could you talk about both on the dealer front and the consumer front and any evolutions or changes and what drove the kind of pickup there and improvement in Q4? Bill NashPresident & CEO at CarMax00:35:53Yes. It's a great question. And you're right. I think sourcing is critical. We're very pleased with the Max Offer product. Bill NashPresident & CEO at CarMax00:36:00I think it's a solution that works well dealers obviously with the expansion. When I think about the performance there over the last year, it's being driven by first and foremost just dealer expansion. This quarter we were up from active dealer standpoint 40% year over year. As I said in my prepared remarks, we also made it very easier for them to use. If you look at the last year, we've got a great instant offer program for them. Bill NashPresident & CEO at CarMax00:36:26We also have one that allows them to take pictures if they'd like us to see some of the pictures that might be unique to that vehicle. We consolidated the vehicle condition information making it faster and easier. We've made improvements so because you realize a dealer may start this MAX offer on the desktop, but they need a mobile device to go see the car or whatever. So we've made a very seamless transition to go from device to device. So this past year was really about trying to make that experience better. Bill NashPresident & CEO at CarMax00:36:52Other thing that I would add is that we've also started to embed it in their inventory management system in the dealership, which just makes it more convenient. And as I look forward to the upcoming year, I think we can still we've got some improvements. We're working on some landing page improvements and I think some more integrations into dealers, which will continue to attract dealers. We feel good about it. Feel good about the momentum. Bill NashPresident & CEO at CarMax00:37:19Thought I'd Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:37:20you about Congrats. Bill NashPresident & CEO at CarMax00:37:21Yeah. I think you also asked about the consumers. And again, the consumers, as I said in my prepared remarks, we pretty much can give you an offer online now. There's very few cars that we can't. There's a small subset that we really need to see the car. Bill NashPresident & CEO at CarMax00:37:34But essentially 99% you can get those offers. We've made it easier. I think there's progress. We've got some things queued up there again with appraisal express drop off, appraisal pickup. There are some other things that we're working on there again just to enhance that experience and continue to drive incremental buys. Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:37:54And then the last two weeks have been kind of crazy. There's been a pickup in conversion at the auction lanes in general. Any comments in terms of just looking at what we just talked about with Q4, any changes with the last two weeks? Bill NashPresident & CEO at CarMax00:38:07Yeah. Well, I think you hit the nail on the head. If you look at the wholesale the last couple of weeks, it's there's a lot of folks out there trying to bid, which again, I think it just makes me feel really good about all of our initiatives on supply and sourcing directly versus having to go that route. Jeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens Inc00:38:26Awesome. Well, congrats and good luck in the next quarter. Bill NashPresident & CEO at CarMax00:38:29Thank you, Jeff. Operator00:38:32Thank you. And your next question comes from the line of Rajat Gupta with JPMorgan. Your line is open. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:38:39Great. Thanks for taking the question. I just had a follow-up to Jeff's question earlier. Bill, I'm trying to understand how are you as an organization trying to manage inventory acquisition over the next few weeks, couple months given, firstly, there's already a lot of uncertainty around the tariffs. It may happen. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:39:01It may go away. You know you know, you're hearing a lot about the auction win activity. I mean, I'm curious, like, how are you managing your inventory acquisition in that backdrop? I mean, you think you need to be aggressive or you're just being cautious, you know, just in case, you know, like, tariffs actually don't stick ultimately. I'm just curious, like, how is the company strategizing around that? Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:39:24And I have a very quick follow-up on service gross profit. Bill NashPresident & CEO at CarMax00:39:27Yeah. Well, look, I think we manage inventory better than anybody in the business. We've been doing it for over thirty years. We are very familiar with operating and changing a fluid type of environment. Keep in mind, we have the benefit of professional buyers who are on the ground. Bill NashPresident & CEO at CarMax00:39:44They're seeing things coupled with data that we're getting coupled with our own auctions. So I feel really good about where we are both from an inventory on the ground and our inventory going forward. And I have no doubt that the team will continue to execute at a very high level. And then you said you had a question on service as well? Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:40:04Yes. Curious what drove the significant mean, typically, seasonally, you know, we see, a big drop in, service gross profit. I'm curious what drove, you know, the improvement. It it was it just, you know, just better productivity, you know, you know, just maybe some, like, cost takeout? Just trying to understand, you know, the cadence there. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:40:25I know I I think and we could talk about, like, flattish gross profit or a little more than flattish for the full year. So does it mean that this is going to be less seasonal from here on on just that cadence? Just curious if you could add any more color on the service gross profit. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:40:43I'll start maybe with your second point. Seasonality will still be in place. So from quarter to quarter, there's definitely still seasonal aspects to it, which is why we expect the first quarter of the year, as I had in my prepared remarks, to be probably the strongest in the year because volume is higher. We'll also be comping over some cost coverage metrics we did last year. But I'd tell you in terms of why it's getting better, there's really three things that are driving the improvement. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:41:08That we've seen over the past two years now, we've consistently improved our performance in service. Number one is efficiency opportunities that we've driven. We've made investments in technologies like RFID trackers, investments in technologies we can better have have better reporting in the stores to manage our our costs. That's number one. Number two is we have taken cost coverage as well. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:41:29So to match cost inflation that we've seen, we've had an ability to increase our our fees there. And part of that is also driven by what Bill has talked about, the efficiency improvements in COGS and logistics gives us an ability to take some fees there without increasing the price of our cars. And then lastly, certainly, sales being positive helps because service does have a large component of fixed cost. Certainly, when you think of all the technicians that we're trying to retain, there is an aspect of fixed cost, especially in the shorter term. So you have positive sales, stronger ability to leverage. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:42:03And we would expect going into this year to have a year of profitability in service, which we haven't had in several years. And thereafter, too, feeding the earnings model that Bill talked about and our ability to deliver double digit EPS growth over several years is also because of that as well. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:42:24Got it. Great. Thanks for all the color and good Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:42:26luck. Bill NashPresident & CEO at CarMax00:42:28Thank you. Operator00:42:29Thank you. Your next question comes from the line of Michael Montani with Evercore ISI. Your line is open. Michael MontaniManaging Director at Evercore00:42:38Yes. Hey, good morning. Thanks for taking the question. Bill NashPresident & CEO at CarMax00:42:41Good morning. Michael MontaniManaging Director at Evercore00:42:43Just wanted to ask, I guess, a two part thing. One was, if you look at historically periods of appreciating prices, what does that typically do for your market share and then also your margins? How would you typically respond there? Because historically, you've called out it can be challenging if we have abnormal depreciation. So if you get a appreciation in price, does that help you from a share and margin perspective? Michael MontaniManaging Director at Evercore00:43:11And the follow-up question was, you guys had mentioned an EPS outlook that includes, if mid single digit unit growth is there, could have high teen EPS growth. So I'm wondering if there's anything we need to keep in mind as it relates to that for this current year? And then also anything we should know about from a timing perspective as we think through quarterly cadence? Bill NashPresident & CEO at CarMax00:43:36Okay. So Michael, good morning. On appreciating price environment, I think for every group that sells used cars, when you're in an appreciating environment, it makes it easier. And I think generally in an appreciating environment, your margins are easier to manage because you're not having to do as many markdowns. Again, you're going to sell the car and if it's appreciating the next car is going be a little bit more expensive. Bill NashPresident & CEO at CarMax00:43:58So I think it helps your margin. Think from a market share standpoint too, it would also help that. So I think that's good. And then your second question was on the model. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:44:10Yes. So from a model, we've spent the past several years, as we all know, investing in our omnichannel model, investing in capabilities, investing in efficiencies. And we feel very confident about our ability at this point to deliver robust EPS CAGR growth for several years at least, talking to high teens, like we mentioned in our prepared remarks, on just mid single digit retail sales. And what that's enabled on are strong margins, strong growth in other GPU as well, exceeding retail units. I talked about service. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:44:45We talked about EPP opportunities. You're also talking about SG and A. We're done with the heavy investment period. We're pivoting from building capabilities to leveraging and enhancing them to grow efficiencies and to grow the bottom line. So we think we are really well positioned to grow. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:45:03And then you throw in the share repurchase program that we're committed to, that's also going to to juice our EPS. And then you take a look at CAF, we're making those investments there in terms of the full spectrum credit that John talked about. Those are also kind of in the in the shorter term and the medium term and definitely in the longer term accelerators to our EPS growth. So we think we've built a model here that is in this really strong position to deliver outsized returns. Michael MontaniManaging Director at Evercore00:45:28Anything cadence wise to think about as we progress through the year? Because I think you called out there could be some CAF related things to keep in mind in the first quarter. But then on the flip side, you also have potentially some benefits from the work you've done in service and EPP. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:45:44Yes. Before jumping into CAF, I'll turn it over to John. Certainly, service, we do expect the first half of the year to perform probably better, holding everything constant than the back half purely due to seasonality when you think of higher volume and comping over some some cost coverage metrics we did last year. So for Service, I would expect outsized performance in the front half. And then for CAF, I'll Enrique Mayor-MoraExecutive VP & CFO at CarMax00:46:07just turn it over to John. Jon DanielsEVP, CarMax Auto Finance at CarMax00:46:08Sure. Yes, I'd definitely like to take the opportunity to speak to cadence on provision coming up. I mentioned in the prepared remarks that anticipate a sequentially higher year over year increase in provision. And just to give some orders of magnitude around that. So I'll jump off Q4. Jon DanielsEVP, CarMax Auto Finance at CarMax00:46:26So we had a $68,000,000 more normalized provision in Q4. You're going to have a sequentially higher provision in Q1 because it's a higher from a seasonality standpoint, it's a higher volume quarter. It is a lower credit quality quarter. So you can anticipate a 30% to 35% increase off of that Q4 number simply from that aspect. Couple that with the fact that we said we are going to we have taken some volume back that we were giving to flowing to Tier two partners, kind of undo a portion of our tightening. Jon DanielsEVP, CarMax Auto Finance at CarMax00:47:00So you can add probably another 10% to 15% increase off of the Q4 number there. So you absolutely could see a 45% to 50% increase in provision in Q2 and that can sorry, in Q1 and that tightening will continue sorry, that increase will continue because again, this is volume that we anticipate keeping. You're going to have to continue to provision for that added volume you're taking on. And then again, we will watch that economy very, very carefully. But the back half of the year, we're taking in more volume, from our Tier two and Tier three testing. Jon DanielsEVP, CarMax Auto Finance at CarMax00:47:33So again, that would stack on there. All in the long run, a very, very good thing for CAF, but an impact in the near term to our provision. And that's relative to Q4 is the key, yes. Michael MontaniManaging Director at Evercore00:47:45All right. Michael MontaniManaging Director at Evercore00:47:46Thank you. Operator00:47:48Thank you. And your next question comes from the line of Chris Bottiglieri with BNP Paribas. Your line is open. Chris BottiglieriAnalyst at BNP Paribas00:47:58Hey guys, thanks for taking the question. So you've done a really nice job taking costs out of business for the last few years, fairly consistently my own expectations. The question is though, if the economy slows from here and sales turn negative to mid single or high single digits again, does EPS decline high teens very much at the upside? Or do you have levers left at your disposal to continue to cut costs and mitigate the operating leverage? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:48:25Yeah. We feel good. Look, a couple of things. I mean, one is we still have room for efficiency improvements. Those are part of our plan irrespective of kind of the macro economy. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:48:35We're we're going after those efficiency improvements. That's number one. Number two is if if there is a downturn in in the economy, you know, we have pulled levers in the past. You know, we're positioned to to pull those levers if we had to. Again, you know, you're looking at a management team here that's been through quite a few things here over the past few years. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:48:54So we know kind of how to manage through these kind of environments, whether they're upswing or downswing. Chris BottiglieriAnalyst at BNP Paribas00:49:00Yes. Good. Thank you. Operator00:49:04Thank you. And your next question comes from the line of John Healy with Northcoast Research. Your line is open. John HealyMD & Research Analyst at Northcoast Research00:49:12Thanks for taking my question. Just kind of wanted to ask a big picture question, Bill. In the last couple of weeks, obviously, outside of the macro, probably the biggest item on used retail has just been some of the Amazon news. And, you know, obviously, it doesn't appear like they're becoming a retailer per se in the auto space, but would love to get your thoughts about them entering in the fray. And, you know, do you view them as a, you know, adversary competitor, you know, maybe elevating your peers? John HealyMD & Research Analyst at Northcoast Research00:49:39Or do you view them potentially as a partner? You know, would you be surprised if you maybe work collaboratively with them going forward? Thanks. Bill NashPresident & CEO at CarMax00:49:47Yeah. Good morning, John. Yeah. I don't think anybody was surprised to see them actually get into this space. They've been kind of talking about it. Bill NashPresident & CEO at CarMax00:49:57And to your point, they recently clarified either more interested in kind of the listings, the lead generation, the advertising. So the way I see it is at this point it's more like a facilitator that we facilitate with I mean we work with a lot of different facilitators. I would see us as more of a collaboration. We obviously a lot of traffic just through carmax.com, but we also we work with facilitators to help complement the CarMax.com traffic. And I think that that's the way we kind of view it at this point. Bill NashPresident & CEO at CarMax00:50:24But certainly, it's something that we you continue to monitor. I would also just tell you, it just makes me really glad that gone through this pivot to really become an omni channel retailer because I think customers are really looking for this combination of physical and digital assets when it comes to buying a car. And it's just it's a big competitive moat that we built and it's very hard to replicate. So if you're going to get into the used car business, there's a lot that has to be considered. Operator00:50:58Thank you. And your next question comes from the line of Chris Pearce with Needham. Your line is open. Chris PierceSenior Analyst at Needham & Company00:51:05Hey, good morning, everyone. Bill NashPresident & CEO at CarMax00:51:06Good morning. Chris PierceSenior Analyst at Needham & Company00:51:08Just was curious, as you move kind of more into six to 10 less late model because of the opening of the credit spectrum, is that an opportunity for are you competing against dealers you haven't traditionally competed against at a larger rate and there's potential for a new set of share gains? Or is, like, the six to eight year old car now the what used to be the two to four year old car because of what's happened with new car production? Like, is this a new competitive set, or is it just kind of continuation of the dealers you've been competing against for years now? Bill NashPresident & CEO at CarMax00:51:41Yes. I think look we've always sold one to 10 year old cars. And I think the and I talked a little bit about this earlier. The biggest thing that we want to make sure that we do is that whatever we put the CarMax label on, it meets our quality standards. And when you start getting into the six to 10 population, there's a lot of vehicles that just don't meet the CarMax standards and we're just not going flinch on that standard. Bill NashPresident & CEO at CarMax00:52:06That being said though, we've obviously built the muscle to continue to produce that type of car and get it up to the CarMax standard. So what I would say is it's continuing to compete in the space that we've been in. But quite honestly, it's a space where there's a lot of transactions that happen. I talked about the P2P, consumer to consumer selling each other, especially in the seven, eight, nine year old, 10 year old cars. There's a lot of vehicles in there that just while it's in the denominator, it's not going to necessarily be in our numerator set. Bill NashPresident & CEO at CarMax00:52:35It's just not going be able to be brought up to the quality standard. So I think that's the thing to think about. And I think the way it enhances is, again, if consumers are challenged on just everyday expenses and they're trying to figure out how to work a budget and they need to they would traditionally buy a three or four year old car, they may be saying, okay, well, I'm going to buy a six or seven year old car and we want to be able to meet that need. I think it's very similar to the folks that are thinking they're going to buy a new car and they realize, well, I can't get the new car to work in my monthly payment. I'm going to go down to a one or two year old late model car. Bill NashPresident & CEO at CarMax00:53:07So I think it's just kind of an evolution of the business and where the consumer is going. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:53:14Just one thing I want to clarify Chris. You made the comments as you go full spectrum and go 6% to 10 I think they're relatively disconnected. The fact that CAF is going full spectrum, all we're doing is likely taking some volume from our Tier two and Tier three partners. We will drive some incremental sales. But our Tier two, Tier three, even our Tier one players love six to 10 year old cars. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:53:39So I'd separate the inventory needs that we have from where CAF is playing in the credit spectrum. Bill NashPresident & CEO at CarMax00:53:45As well as they love zero to four. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:53:47Mean, you can get it back Bill NashPresident & CEO at CarMax00:53:47and forth. Absolutely. I'm glad you made that point, John. Chris PierceSenior Analyst at Needham & Company00:53:51Okay. And then just to follow-up on Chris PierceSenior Analyst at Needham & Company00:53:52that though, is it can it be thought of as a DPE tailwind as you move into these I don't want say move into these older cars, but maybe as you sell it. Bill NashPresident & CEO at CarMax00:54:01Yeah. Yeah. I'm sorry. If you ask, I didn't I didn't catch that part the question. So GPU tailwind. Bill NashPresident & CEO at CarMax00:54:05Look, when you sell older vehicles, they cost more to recondition. But especially in CarMax's case, they're they're they're kind of like a unicorn, you know, where it's at the CarMax quality standard. It certainly isn't a commodity. We think the quality is better than others. So those do bring a little bit more margin. Chris PierceSenior Analyst at Needham & Company00:54:22Okay. Thank you. Bill NashPresident & CEO at CarMax00:54:24Thank you. Operator00:54:25Thank you. And your next question comes from the line of David Wichten with Morningstar. Your line is open. David WhistonEquity Strategist - U.S. Autos at Morningstar00:54:34Thanks. Good morning. Bill NashPresident & CEO at CarMax00:54:35Good morning. David WhistonEquity Strategist - U.S. Autos at Morningstar00:54:35Can you just talk a little bit more about the decision making process to to change the 2,000,000 goal where you just withdrew the timeline completely as opposed to saying given macro factors, we think it'll be more like fiscal thirty? Because doing it the way you did, it just seems like it's a bit more pessimistic and maybe that was intentional or maybe it wasn't. I just wanted to get more clarification. Thanks. Bill NashPresident & CEO at CarMax00:54:57Yes. I definitely wasn't pessimistic. Look, I think the important thing right now is everybody should know that we're focused on driving sales and driving robust EPS growth. And look there are a lot of macro factors. If you see a and I'll give you a prime example. Bill NashPresident & CEO at CarMax00:55:11If you see highly appreciating market where you can get to the $30,000,000,000 way quicker and it's really nothing that we've done at this point. Same thing as if you see a slowdown it may delay Right now, there's just so much uncertainty out there. Why put a target out there that's really speculative, not knowing exactly where this environment is going to go? And we just think that that's the prudent thing. Bill NashPresident & CEO at CarMax00:55:33But it does not take the focus on what we're going after and those targets. It doesn't make sense to put a range on them at this point. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:55:42Yes. And just to build on that, like even in our earnings release, you'll notice like we are focused on growing sales and focused on growing the bottom line. And I think that's what's important in this kind of environment. And then at the appropriate time, we'll come back with a timing outlook as well. We just need some more stability in what's out there. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:55:58But again, we are focused on driving sales and driving profitability. David WhistonEquity Strategist - U.S. Autos at Morningstar00:56:04Okay. Thanks, guys. Operator00:56:07Thank you. And your next question comes from the line of John Murphy with Bank of America. Your line is open. John MurphyManaging Director at Bank of America Merrill Lynch00:56:21I just wanted to sneak one follow-up in. I understand that the long term goals have been postponed here in the guidance, but you did reiterate the earnings per share growth model, give an update there. When you talk about double digit earnings per share growth for years to come, you're talking about sort of mid that has to come with you'll get a CAGR of high teens on EPS with unit growth in the mid single digits. Just curious, when you think about that, does that include the normalization of SG and A from this 90% range back down to 70%? Or is that after that's happened? John MurphyManaging Director at Bank of America Merrill Lynch00:56:59Because if you're taking SG and A down to back to the normal level, I mean, you're really kind of taking some of the growth capital that you've either you're putting into the model, which makes sense. But I'm just curious, is this kind of run rate basis once we've gotten back to 70%, seventy five % SG and A to gross? Or does that include the normalization from 90% down to 70% in that statement? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:57:21Yes. Like over time, we expect to get back to the mid-70s. It's going take us some time to get there. All of that's factored into the guidance that we're providing. Right? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:57:31So we expect that, again, with mid single digit retail unit growth, we'd expect a CAGR of high teen EPS growth. And there's a certain there's an assumption of SG and A kind of ramping down over time, but that's embedded in that guidance. John MurphyManaging Director at Bank of America Merrill Lynch00:57:48But to be fair, the mid-seventy %, the gap between 90% and mid-70s, that's analogous to sort of CapEx or growth capital. That shouldn't be viewed as operating. So I'm just trying to understand is this something that on an operating basis you think you can do once as regardless of that normalization of SG and A? Bill NashPresident & CEO at CarMax00:58:12John, unless we got some robust volume this year, I can't see us getting back to the mid-70s this year yet. We stand by what the model, we feel really good about the momentum and think that we can provide great robust EPS growth even in the range that we're at right now. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:58:28Again, the timing of getting back to the mid-70s is embedded in that guidance. And what I'd tell you is that you mentioned 9091% where we ended this quarter relative to mid-70s. Q four is the high point of s g and a as a percent of gross profit. For the year, we were in the low eighties. Right? Enrique Mayor-MoraExecutive VP & CFO at CarMax00:58:49And so just as a point of clarification. John MurphyManaging Director at Bank of America Merrill Lynch00:58:53Okay. All right. Thank you very much. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:58:55Thank you. Operator00:58:57Thank you. And your next question comes from the line of Rajat Gupta with JPMorgan. Your line is open. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:59:05Great. Thanks for thanks for allowing me to ask another follow-up. I just wanted to clarify because you've gotten some like in balance like through the course of the call. Just on the comments around CAF and provisioning, I understand the mechanics around the first quarter step up clearly. Just curious, like, what the suggestion from John that that level of provisioning will continue through the remainder of the year or into 2Q, 3Q? Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co00:59:32Or it was just the fact that you're increasing the subprime mix or the Q3 mix that will continue? Just wanted to make sure we're tying those two comments appropriately. Thanks. Enrique Mayor-MoraExecutive VP & CFO at CarMax00:59:43Yes. Happy to clarify that, Rajat. Appreciate the question. So yes, I think if you couple the two things, the larger one really in Q1 is certainly the step up in volume and the lower credit quality nature of Q1. So that is going to be the real big driver of the significant growth in the Q1 provision, again, as compared to the Q4 provision referring to. Enrique Mayor-MoraExecutive VP & CFO at CarMax01:00:06And then yes, you tack on to there the fact that we are going to capture 100 basis to 150 basis points back at obviously a highly profitable, but at a higher loss reserve requirement, so higher provisioning there. Now that 100 basis 150 basis points, we anticipate keeping through subsequent quarters. And then again, on the back half, we look to tack on more as we continue our testing in the Tier two and Tier three space. So that will add further. Again, different seasonality in different quarters. Enrique Mayor-MoraExecutive VP & CFO at CarMax01:00:35But I just want you to keep in mind that, that added penetration, added volume from CAF going deeper has to be factored into your provisioning going forward. Again, long run, it's a win, but I want you to keep that in mind. And then of course, always the overarching comment of we will watch the macroeconomic situation, decide what we do. But I want to make sure you keep the added penetration in mind in subsequent quarters. Bill NashPresident & CEO at CarMax01:01:00The other thing I would just add to that Rajat because you said something about subprime mix. I mean, what John's talking about here in the near term is taking back stuff that we were originating earlier, not I just want to be clear, it's not going into subprime. It's basically pulling stuff back in that we had passed off to our Tier two partners. Now later in the year, when we decide to go deeper into Tier two and Tier three, then you could see a little bit of that. So I just wanted to make that distinction. Rajat GuptaExecutive Director, Autos at JP Morgan Chase & Co01:01:27Understood. Thanks so much for clarifying that. Again, thanks again and good luck. Bill NashPresident & CEO at CarMax01:01:31Thank you. Enrique Mayor-MoraExecutive VP & CFO at CarMax01:01:32Thank you. Operator01:01:33Thank you. And your next question comes from the line of Michael Montani with Evercore ISI. Your line is open. Michael MontaniManaging Director at Evercore01:01:40Yes. Hi. Thanks for letting me sneak another one in. I was just hoping could you clarify a little bit more what the Edmunds lease impairment charge was for? And then secondly, when could we think about the added penetration turning into a win? Michael MontaniManaging Director at Evercore01:01:57I guess, specifically, can you grow CAF profits if provisioning have to step up that much for this year? Enrique Mayor-MoraExecutive VP & CFO at CarMax01:02:04Yeah. I'll take I'll take the first one. So have a couple floors in the Edmonds, Santa Monica headquarter that we've been actively trying to sublease really since we acquired them. But it's been a hard market in LA as you can imagine. So, more recently, an elementary school was impacted by the LA fires, unfortunately, and unfortunately, and and they were in need of space. Enrique Mayor-MoraExecutive VP & CFO at CarMax01:02:24So we ended up subleasing one of the floors to them. So we're able to find the subleaser while helping the community. So it really was a win win situation, and that's kind of what is what drove the impairment there. Yes. And Michael, to your second question, do we see given the provision growth in CAF income? Enrique Mayor-MoraExecutive VP & CFO at CarMax01:02:41Short answer is absolutely yes. We see growth in FY 2026 for CAF income on top of the provision that comes from strong net interest margins, obviously mentioning our expenses and all of that. But yes, we absolutely see growth within the year and then obviously strong growth beyond that as the provision is trumped by the overall income we're going to gain. Michael MontaniManaging Director at Evercore01:03:03Understood. Thanks for the clarity. Operator01:03:07Thank you. We do not have any further questions at this time. I'll hand the call back to Bill for any closing remarks. Bill NashPresident & CEO at CarMax01:03:14Well, great. Well, thank you all for joining the call today and for your questions and support. Again, I want to just congratulate all of our associates for how they've built and enhanced our great culture for everything they do to take care of each other, our customers and our communities. And we'll talk again next quarter. Thank you. Operator01:03:30Thank you. Ladies and gentlemen, that concludes the fourth quarter fiscal year twenty twenty five CarMax earnings release conference call. You may now disconnect.Read moreParticipantsExecutivesDavid LowensteinVice President - Investor RelationsBill NashPresident & CEOEnrique Mayor-MoraExecutive VP & CFOJon DanielsEVP, CarMax Auto FinanceAnalystsSharon ZackfiaPartner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.CSeth BashamMD - Equity Research at Wedbush SecuritiesJohn MurphyManaging Director at Bank of America Merrill LynchBrian NagelMD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.Josh YoungEquity Research Senior Associate at Truist SecuritiesJeff LickManaging Director & Equity Research - Consumer & Auto Ecosystem at Stephens IncRajat GuptaExecutive Director, Autos at JP Morgan Chase & CoMichael MontaniManaging Director at EvercoreChris BottiglieriAnalyst at BNP ParibasJohn HealyMD & Research Analyst at Northcoast ResearchChris PierceSenior Analyst at Needham & CompanyDavid WhistonEquity Strategist - U.S. Autos at MorningstarPowered by