CarMax (KMX) 21 Dec 172018 Q3 Earnings call transcript

Company Profile

Participants

Katharine Kenny	Vice President, IR
Bill Nash	President and CEO
Tom Reedy	Executive Vice President and CFO
Cliff Wood	Executive Vice President and COO
Sharon Zackfia	William Blair
Matt Fassler	Goldman Sachs
Michael Montani	MN Retail
Craig Kennison	Baird
Brian Nagel	Oppenheimer
Scot Ciccarelli	RBC Capital Markets
Seth Basham	Wedbush Securities
John Healy	Northcoast Research
John Murphy	Bank of America
Rick Nelson	Stephens
James Albertine	Consumer Edge
Chris Bottiglieri	Wolfe Research

Call transcript

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Operator

Good morning. My name is Denise, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the CarMax FY2018 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. you. Thank like Investor call Relations. now Kenny, to turn President, Vice to would over the Katharine I

Katharine Kenny

conference Thank you fiscal earnings for and joining you, good our XXXX morning, third everyone. Thank call. quarter

usual are the Chief Officer; and Tom and today President On our Vice Bill Executive Executive call Reedy, CFO. our President Nash, and as

the statements regarding performance begin and are uncertainties future business that current forward-looking to disclaims plans, future as company other expectations. remind Harbor are Before differ make company’s statements or Safe let and we and we you events actual that cause assumptions the our Litigation and results to statements, to financial of the the based about on intent me update usual our forward-looking management’s that XXXX. them. could statements materially any risks Private today Act Reform provisions prospects projections These pursuant Securities that obligation providing involve from knowledge In of

factors affect We XXXX remember filed it. XX-K only SEC. important year and Bill? ask XX, for February on Form before question information know back follow-up you ended getting I that a the on one please additional these see with queue. company’s report can to For fiscal annual the in all expectations, the appreciate

Bill Nash

everyone. Thank you, morning, Katharine, and good

review As usual, I’ll our to talking financing, on call Tom initiatives. by quarterly about then results, I’ll the update start-off to then I’ll over turn our you

by our with quarter comps hurricane in by increased of by total third the X.X% stores, conversion driven along partially traffic. for Used higher and units unit were X.X%. the Irma, Harvey Our comps used grew by lower used unit offset and effects

would this comps have essentially impact, been hurricane the flat. quarter Excluding

year. SCO third the again is to additional by functionality. $X,XXX the profit including in quarter used traffic in last at website result our per in Gross $X,XXX remained customer online of investment the grew Our experience, consistent of unit compared XX%. continued once and quarter This third a

Our units the grew third quarter. wholesale year-over-year X% in more than

the the environment base, saw of most to by through favorable depreciation our was supported quarter. addition store we the In expansion this growth of

we wholesale result, we offers, to compared a more increased environment. year’s for a believe rate. profit unit provide due last strong to appraisal As $XXX largely seasonally quarter this higher the also believe quarter. able depreciation to overall led Gross $XXX, third this Again, in which were buy favorable to was to we

SG&A Before the I over and openings. turn cover to let mix, our Tom, call me sales store

in our percentage old year’s third to sales quarter. As increased last zero a four-year versus vehicles XX% mix, XX% of to

and Remember stores large which unit, base to is expense third XX% sales, XX trucks half the per opening and $XX our there last last incentive from SUVs or beginning medium XX%, related third an SG&A SG&A. year’s second XX% of and was the since last quarter to This the impacted of of percent a growth, million. including quarter. $XXX increased year-over-year but about was for increase a represents SG&A, which in Several to the and On As quarter, factors third unit expenses down approximately similar somewhat the increase $X of the $XX of higher in share-based our for in represents million of per accrual year due no a half growth to quarter. accrual pay. quarter compensation year,

customer and and we associated we heavily technology experience. in discussed, improve digital invest As to initiatives previously to continued the

which Beach, for In and this market five Portland, we us, new are and a opened Vegas, including during markets, Carolina, South one Tyler, stores, in earlier will we open the existing Maine. stores, new others month Francisco in four Seattle. in Philadelphia, San opened four quarter, fourth quarter Lastly, two third the and Las Texas markets Myrtle in

Denver. our two be will existing markets of and other Boston in The

over call the turn I’ll Now, Tom. to

Tom Reedy

to by compared net third mix XX% prior was periods year to sales last Thanks, our used mix relative this cash of channel, last of sales customers penetration XX.X%, increased Bill. XX.X% and allocation Tier to to by modestly financing most to The quarter, year’s their quarter, applications. Good to where decreased unit year’s the parties third part grew X lending represented sales CAF finance of morning, own to XX.X% year, the credit brought compared compared quarter. last in X regards last sales in everyone. to similar third also X.X% paid from sales XX% driven Tier across third or channels of With year’s for

pronounced some continued weakness we in more at the It of credit from the to in the spectrum. see space. across ends. the and our X one Tier applications higher was lower Also, We growth observe did lenders

managed loss to by net For slight Total in a compared offset amount the in second This a and year. year-over-year an rose penetration. by year million, to was increase both receivables X.X% growth last CarMax’s billion. average $XXX.X in driven quarter average quarter in margin. lower the originated interest of to due $X.X compression growth interest of increased XX% X.X% the CAF, financed, to third which and X.X% was income offset this portfolio margin lower XX.X% average receivables, provision, loans the partially sales and managed by the partially was quarter portfolio CAF in of the

or quarter slightly million to customers quarter. X.X%, third to $XXX from QX manage this in but for ago during ending second from year X.XX% of was down receivables, a quarter, the allowance charged rate X.XX% X.X% ending in in last up originated was year, sequentially X.XX% contract of year. losses loan the of average X.X% the loans compared and the weighted The For

to finance items. Now, I’ll corporate turn

share-based to whereas of year impact the settlements reflected through new The awards experienced adoption compensation. ran shareholders’ of equity. the release, $X.X rate. The by before regarding we effective in requires relates tax standard provision noticed positively new guidance share-based was FASB you to impacted be As the reduction tax tax in in This a this in the rate, QX. probably million our our it

our million shares introduce has for tax We quarter’s it the quarter, first capital expect expected That’s as this this quarter. X.X repurchased structure, is second where last quarter the the stock significant. you and $XXX to rate pace million. during we the down price during on been from based would to regard In would volatility

Before call tax I’ll comment and briefly its back Bill, CarMax. to I over anticipated on turn the on reform impact

forward. Our federal pretty tax picture is straight

So we periods. to results corporate financial lower flow in substantially would the expect our future tax benefit and rate cash

finalized magnitude benefit, and We that of are the evaluating awaiting President’s the is signature. has the legislation the been now

rate. law required one-time provision would Additionally, million. asset new our to million be which revalue financial believe our expect an our will quarter, of in be based We tax the this enactment, impact we period This our estimated be tax tax our unfavorable analysis to deferred a estimated we in on our could fourth result results. $XX quarter of final range of by fourth to and impacted $XX on

turn to over I’ll call back Bill. Now, the

Bill Nash

Tom. Thanks,

a exceptional want with specifically I provide easier, digital an and making moment capabilities. strategic The focus to associates our few online efficient on is innovation experience. a more provide technology an in to with efforts, to customer for take update Now, developments technology you initiatives our faster and around it

leveraging over While new our XX the past on served have legacy focused we’re well mindset. us mobile technology first systems with a years,

sales and side, enterprise-wide history customer unified a CRM technology at their to personalized platform relationship platform experience. with and provides are our or view The fingertips. consultants we management more new car-buying right customer of develop CRM implementing shopping a On seamless the a selling

in is As will fiscal activities. currently we the consultants. rollout end customer’s support complete the been it The evolve to and has to we so great The sales our the more far all research platform by to of success with received continue year. platform, even sales consultants the feedback and plan stores a we’ve and rollout the XXX online our from provide including visibility, stores

in and appraisal it the accuracy. example customers’ faster, With the preparing write handheld platform they our of at offer. buyers a appraisal new buyers. technology Another a all new our prepare improve the and when vehicle the to by car. buyers information new upload our vehicle. should device use for to mobile use an down been platform, and buyers is Historically, all to a makes need assess the well-received a easier process has mobile offer technology for This information The appraisal real-time

to We stores XXX already planned to out rolled our it the roll more than several remaining to months. and have out the next capability over stores

enhancing innovations for digital we have updates. online our customer few a the Regarding experience,

quarter. offer quarter submitting continuing for total on tool This their is we Midwest. of feedback, the appraisal we by to online to underway appraisal next now and tool expanded improving an our focus a the the seven vehicle test The to and product an ten allows in customer of get stores are over test evaluate online. information customers we’ll in stores The

has quarter, with see positive that both their online car on finer receive making feature. testing Last year. by inside to also their perfect pan including physically merchandising, to see plan our the we on car It and showcase are the photo the purchase highly We sitting goal store find significant is this interior it our we Remember, roll all experience provide talked exceptional been zoom is on The capability progress fiscal which terms. to from car, customer and and new our stores an of end to offering and we everything the inside, vehicle, out customers customers a digital and own vehicles details. simulates about a how around response ability XXX helps all degree to carmax.com. in that that

the With towards happy that, these continue of your questions. that others we take progress proud and we’ll as and are about ahead. are Denise? to future improvements, be goal, we We to excited make

Operator

William from first [Operator Sharon comes Instructions] question Blair. with Zackfia Your

Your open. line is

Sharon Zackfia

the a corollary, getting that a when quarter the as question I kind saw, of first there to? comps the mix, into now would seasons I the in non-hurricane quarter? that do bigger a the the And you slowdown in higher bit that related of subprime think expect you mean, be better as percent then, guess the as in is subprime a anything get you to fourth markets about we you attribute and little driver that quarter, that on is

Bill Nash

Yeah.

the depreciation. I of normally think because did. of time reason vehicles, the went up not we environment. on boost because first quarter I the that I depreciation Sharon, to was actually talked of in acquisition was point the So, the first this something part about caused business, comps did And see this year markets, was values hold the price those up in hurricane slowdown see the stronger the the the is benefit would which we This year replenishment they a of hurricane wholesale year-over-year, normal that what the overall of which for the tell the the to didn’t normal I question, depreciation where part than for you, non-impacted of

pressure probably So, continued think, incentives, a I of those what sorry, combination your question? that things. I think, obviously, I’m with it’s new from second was then, car And

Sharon Zackfia

The…

Tom Reedy

Sharon? subprime, The

Sharon Zackfia

Yeah.

the looks tax refund seasonally, that’s year-over-year a the a more like, it’s as been mix, get it’s just a quarter on into subprime So improving percent mean, second you business and basis of important I as season. that’s

of kind excited just driver be comps how So that some that perspective be of you might of a looking going could forward? for more on

Tom Reedy

we right I of don’t you overall obviously little for because subprime. I word, the color But best denominator can know us. and the concerned would bit the more growth about if on excited be is give a are

in saw at the and lowest volume of mentioned the I As being strongest customer we ends. applications highest the remarks, prepared

at that system we that from So, piece credit think, our in I And in says low the another customers past. their end seen last for that sale. the of applications than as are puzzle of least that they some have more applying in quarter perspective conversion penetration have an of this conversion see, the we meaning in to the quarter uptick well is, seen and subprime at

know been performance ago, encouraging. but a in saw of persists, where period it’s don’t subprime we modest those there’s lenders. them a declining obviously, uptick after So that I quarters the several how

Sharon Zackfia

Thank you.

Operator

comes question Matt with Fassler Your next from Goldman Sachs.

is line open. Your

Matt Fassler

the of Sharon’s, questions, on answer momentum you Thanks non-hurricane sales so morning. and Two the first gave follow-up all, much to in that the markets. good

change or the rose prices you and and walked profitable perhaps broadly share environment some equation back that this price as used depreciation quarter? from suggesting wouldn’t that you you dynamic. market down the deliberately moment more a wholesale Are that you held clanged rising suggest in in the about the spoke that think would value You new be for that time you thought slowed because do

Bill Nash

just have more I Matt, market because the depreciation it’s Yeah. of think, of dynamics the slowed environment. down

that’s the it’s -- the question? of part second So your

Matt Fassler

this adapted, you Thanks. think from given the helpful. saw enabled the you I wholesale my well, That’s adopted should on you Do there pricing market about then view? rate case that talked this more of you was to volumes, than aggressive did wholesale a that And in some your it have read follow-up, say, you be as your was in or dynamic or environment dynamics. kind you moving pricing differently differently, perspective buy a that purchasing up similarly, to market-wide

Bill Nash

No.

I have it think, you is to what you think have basis. over to a kind do of year-over-year about

And seasonal the not or we of on the market and and are depreciation the and we it margin, so you normal market on because so last have year, rate. down an where it when giving adjust more if In market, we are offers saw maintain this of this are that higher don’t follow offers -- puts where bit your as it easier the year, we quarter, flat a time depreciation, makes the appreciating a is kind have of pressure buy offers to trail it going market time you your depreciation speculating goes your down, consumers. going, percent, for any more little to it you impacts down, buy

Matt Fassler

Understood. so Thank much, you guys.

Bill Nash

You’re welcome.

Operator

Montani Retail. MN with question comes from next Your Michael

open. is line Your

Michael Montani

Hey, the taking guys. Good Thanks for question. morning.

Bill Nash

morning. Good

Tom Reedy

morning. Good

Michael Montani

guys reform how sharper a wanted thinking into trying philosophical windfall? about potential pricing any versus the further think first either but reinvest even tax level, you just to about increasing service share potential or when think more that dividends, off to spend or can Just enhance on around level you buybacks store to you the might ask impacts,

Bill Nash

don’t we at. a say our will be materializes, customers I our we can in we we business, once of capital believe opportunities shareholders. be there’s we consider that and in associates, ways as We well, utilize Yeah. that different all guidance. capital opportunities And the could lot give I will our this think and the evaluating of the like will Michael, our best carefully so look it of and interest said, materializes, that

Tom Reedy

little a that also. add can we Mike, Yeah. color to

for you plans not back at growth and factor in and has in decisions our been our initiatives. our us If strategic capital our look availability gaining growth history, regarding investing a

execute that at we can We the sure that we pace to we at successfully that make and focus want innovation. the have are are bandwidth because we on on the to growth

fast pace as to growth we So going regard of our to that’s always and on into play move our thinking with things how well.

Michael Montani

could a you optimization home all innovation if there’s that lot delivery doing tests. And been of That’s I the great. online work just follow-up search with have on comment, financing, also engine and then

So, kind just out I what are guess, just wondering you can there update to Board the I win am latest give continue you us to the an of across share? and if on seeing learnings

Bill Nash

their to I Again, the trying from approaching we Yeah. make sure think, on customer we’re that meet terms. this

pages, be find of continue some future are going hit on everything to the the we of are search to combination there’s and the to opportunities I some new percentage helping the So we’re to they the that SCO whether I lot there, We percent focus do. online engines, two, a our continues come that every on a to that’s making do thousands to they about think, be store, a like the the pages that optimizing customers SCO want continue something SCO. store, sure we day, from our changing. to I think on lot into on because prepared something financing, non-brand make growth content it’s between you there. large is and can is from the -- day big think, about the come that when growth, a algorithms single sure is, them a coming that web allowing want I is progress not there. the of in every to at of SCO -- growth, to, to And search made think we’ll -- benefits, traffic that see look of provide going the of adding we capability pages, that content, of still engine is a growth, the

to going have think really building, in capability all delivery, continue we’re home been when home would these of things. the invest it’s to The we I I say about delivery, So, that we appraisals, home things absolutely are market, progressing we though online with that expanded the financing, to driving test haven’t website. more even Charlotte delivery forward like the with beyond that the online traffic

feel the I in good those pace we and So, about which invest experiences. with the we’ll continue making to are digital change

Michael Montani

you. Thank

Operator

Baird. with Craig comes question from next Your Kennison

Your line is open.

Craig Kennison

the and and against question. tax President will tax profile, soon morning for see that your thanks a whether reform taking Good for revised the I mapped typical if you income you brackets catalyst may bill curious the sign consumer? just my am if CarMax the as consumer and you’ve

Bill Nash

No. Yeah.

We the can haven’t been it Craig. even hasn’t to passing. looked at haven’t even it truthfully President, at hasn’t we this looked look bill we That’s with just been certainly at up just point. and going signed, actually signing the by forward. that something that, But that And signed but

Craig Kennison

hurricane are traffic all Thanks. And in that still as a markets, seeing any is follow-up, the excess or subsided? you

Bill Nash

am get we seen Look, you not have I actual tell and the going talk from vain specifically event, the you market. the certainly that the actual But benefits to patterns any will about hurricanes. I since traffic one away is further in

Craig Kennison

for my Thanks taking questions.

Bill Nash

Sure.

Operator

Nagel with Your Oppenheimer. next question Brian comes from

Your line is open.

Brian Nagel

morning. Good Hi. question. my for taking Thanks

Bill Nash

Good Brian. morning,

Tom Reedy

Hi, Brian.

Brian Nagel

a I guess, a some start -- see And focused these initiative, So, a in question, you fourth on look depreciation ex-hurricanes it as what will issue third and but first to abating or -- do headwind into question, talked and remain sales? my lot don’t while, quarter. follow-up you -- you quarter, there the guys fourth sales that given impact pricing that quantify about seemed picture, -- recognizing now to the Thanks. then for the Should that very been headwind is we would we they be we could way the have bigger fade? guidance, are as obviously fiscal give have to digital follow-up to into look used a or there, we here of a the initiatives type you on again articulated, that is car just but placed quarter started a

Bill Nash

Okay.

at about did on tell of question, guidance, depreciation it for -- you quarter. some third the I quarter of start So, don’t depreciation the end got environment, see your so give the what third you we Brian, to right, the at fourth first But we quarter. the will the end

the to but initiatives, different As I speak specific digital far not that are result. to also the in can’t to digital a It’s of bulk both we things on, think the digital think are the as we about we the the is about execution one things initiative of working I that and think I the a I bottomline. it’s specifically produced am going of I any the store. combination lot bringing has comps, to point our that that working of the initiative If leading way initiatives, that product it and it’s one it’s on comps. is just -- not all And think what

Brian Nagel

All right.

you. Thank Okay.

Bill Nash

Thank you, Brian.

Operator

comes question RBC Scot Capital Ciccarelli Markets. with from next Your

Your open. line is

Scot Ciccarelli

monthly by negative estimate tracking a your for way about of asked Bill, in the even of a wholesale there have I I sales the Is the the Hey, know or weekly changing to wanted there. Scot but from to throw guys. vehicle been more sales environment? one cadence Ciccarelli. against results, price some values, you of cadence rising a and impact maybe magnitude number you times

Bill Nash

way down. pinpoint There’s to that Yeah. really no to

opening absolutely mean, about degree in that’s hard but that impact, to remarks, believe a having I an pinpoint. it’s really talked I As the to I

Scot Ciccarelli

a drag a and impact you the is your a just following impact Okay. then, X chance that from providers, size remain any you follow-up quick did expected help can negative of quarter? Tier one mention Then that then to into

Tom Reedy

and going hasn’t are really about see color, it in happened little to you pronounced the Tier -- been since more a on Tier But applications as you Scot. going I and yet. what we X The talk here. seeing can’t number been more low there’s can the of volume the quarter, that has X overall, I -- hey, give end. much X things at are I high following has Tier am been I because said, growth a I that flattish, have of

little expected partnering -- on are a bit Tier have So as pullback. has had every is the that’s we the the that we mentioned, did incremental to we going value to lender I lender And some planning it bring X X. Tier then, a with In a table. that significant space

trickle some is see and there. one in -- of see we weakness Tier probably, conversion value and likely has to bit less incremental the a providing if that X lenders, So down that lender to been have the is little them,

So some can’t that expect bit, it we percolating volume, conversion the so be. I combination quarters. And a in of it’s several issue really an would conversion long because weaker Tier one for Tier I some little a has into on we up because that from seen. a it performance a are stronger, have seeing going been I of Tier is think, -- historically. seeing we been the and to space, wouldn’t bit the that it’s bit sales. impact bit, then But Tier the conversely, been X has for feeling are is down their and last that say X has than otherwise that trickle is lender, that And we particular little are little and a think, down X X how we

Scot Ciccarelli

guys. Got right. Thanks Okay. All it.

Operator

Your Wedbush next line Securities. your is with question comes open. from Seth Sir Basham

Seth Basham

a good morning. Thanks lot and

Bill Nash

Seth. morning, Good

Tom Reedy

Hi, Seth.

Seth Basham

terms in accelerated online is how that you the question traffic, trending? you and your are traffic there, a growth My bit. growth to lead generation on web comps of decelerated quality is of speak what Can seeing first

Bill Nash

Yeah.

differently. we different at online our So, appointments so holds, or growth, lead leads, with for look individual types example, website convert we lead types, are pleased financing, prequalifications, once if again different

conversion, seen, we change, So traffic saw can before, lead that types of those rather those. coming of growth or in can the on. that opportunity conversion that growth coming -- an an in, on as coming overall area continue can are have quarter, because have we tell better mix we have the I which would lead similar but ones to of you, that given actual we that’s which any can much given I producing in, the quarter any that execute will the the change traffic it’s would --

growth. So pleased the am I with

We haven’t seen by conversion, type but a are of lead in. just the decline depends real mix coming that in leads on it

Seth Basham

it. Got

biggest a the clarify mix to thing to shift So this quarter coming in type as of opposed is in that on leads individual had conversion the each you lead? of

Bill Nash

right. That’s right. exactly That’s exactly

Seth Basham

Thank you.

Bill Nash

Sure.

Operator

Your next question with Research. comes from Healy Northcoast John

Your line is open.

John Healy

in types XXXX CarMax of stores to the wanted the your value, guys awareness the is what maybe and a kind a know there bigger know good doing anything store there should customer, they reinvigorate or you It’s model any say conversion picture innovating coming kind with from But try those the of underway you. technology store calendar brand? I that just question the on you, Thank because initiatives of and level you drive provide and to business of a community shoppers? traffic, way people clear well expect maybe traffic. a of Is into older I a people to we driving ask are getting you standpoint. just in to to

Bill Nash

about buy of by business little out differently. traffic. on the they start nine XX store have focused of digital talked properties. I’ve of to hitting us, from Historically, John, a this before. people trying But bit about to I our Yeah. the always think one we customers really am that get

So to or really turn be may many quality It’s customer web leads, leads. the way is example, do stores. just digitally, but think finance you we a prequalification opportunities do have prevent may into that There online someone customer. from people that traffic, traffic, the we coming how for things about into of store a turn not some

actually good somebody So, come on gets store. don’t in a and they financing, for they the prequalified thing. realize and example, That’s can’t they therefore, get goes and

traffic Now a time. that that it consultant’s store drive in would keeps coming store person down, but utilizing from and the sales

So doing we how many we’re really do we looking engagement touch are that. how points and have at with

So traffic, just think, store of about more I as specifically end funnel. driving upper as at okay, the start and think holistically far let’s the about, it

John Healy

enough. Fair Okay.

Bill Nash

a John, you, broadcast the as we our spend thing if whole, we haven’t, of is, advertising would spending, And, our Yeah. about still TV, the you digital awareness like think an is bulk which on other about radio, brand building. I still traditional tell think advertising really

more And we do that, I’m advertising about more continue would it’s will to spend of So XX%’s our ad of upper our of that that going high maintain in sorry, spend, mix to a probably the XX% is kind digital. I think for we’re while.

John Healy

that industries have the then reform don’t profit think the the and that that in business think business used that Bill necessarily sure margins on think kind am not where holds place about highly follow-up been And gross it’s necessarily or for timeframe is you when kind the a just spectrum. absolute tax in I this that do maybe you, enough. you to reform, question a is that and But likely auto competitive benefit or either adjust or Fair I to things Tom, industry an operating you associated hold about tax one margins multiyear of thinking do with on over to the you that of of savings?

Bill Nash

factors earlier, going capital. able a available don’t materializes. considering one standpoint, speak are said the evaluate of one that competitive going Like to again, I at certainly, do time we and, of they’re to is money with know it I materialize, this But, starts the and how be the things we’re as to at John, the to that be will looking to looking. it that’s what just will we to that be industry whole from Yeah.

John Healy

guys. Fair enough. you, Thank

Operator

Murphy from with comes question America. next Your John of Bank

is line open. Your

John Murphy

floated had long-term with and relative third just seem about sort lease resids in have we may a it closer question used might short-term the to see and resids. that increase does used the those agreements come but vehicle even and the or resids, I like under supply, and as guys. expectations, above and to go maybe relative increasing versus pricing, of the vehicle on morning, below forward pricing price back in about the the might Good go quarter pressure we thinking used resids

third am this on off dealers out result forward coming to sort a to that degree, think some I quarter out? anyway. to which third will hold is trying third in of temporary stuff vehicles you this? going there’s impact So this appears and just on How lease, your this of am just curious, is the you thesis back sort quarter I that in that happen I figure there these saw the about quarter what to mean, of

Bill Nash

itself. If long dealers and aren’t cars. so say, are buy efficient. John, not and I’ll write very going will selling auction. when hold only the coming quickly is the I of to the third very not demand and to it Yeah. market those you Dealers the down, dynamics goes selling out see effective be can vehicles, they and And something wholesale bringing cars like cars not think, the

eventually past So, what the it eventually, because efficient, we’ve is, is is it I from this, experience seen when around. can turns say things market like

John Murphy

comps result for opinion, And in sales I in your that least my that’s better put you, should won’t ultimately mouth? same-store words at

Bill Nash

the result the customers pricing that the an pass of absolutely course, It attractive standpoint, car more in new have even much should and acquisition it deal should a attractive we drive when that and of from and we more to becomes versus used attractive down -- can that car. more pricing pricing

John Murphy

wings of are the we hearing is institutional Yeah. lot And in of cars that the sort skittish. there’s that waiting a from auction were what

point tail like-for-like may to, as Just where spending sort it we rating up is inflationary of you we it spend think your up step tech about year-over-year follow-up, -- off going technology run per if of factor think, and SG&A there’s factors, and anticipation SG&A I on significant would $XX of that time? and basis a inflated one a similar anything there. forward inflate the sort unit, the no of at didn’t just a over cite sort when Are

Bill Nash

done off. the that, and initiative. of tail spend about accrual, part in And I and what on good we for where said They we This that’s we of costs is the are If the not showing over us. benefits, embedded to are our dollars. also of are that had things, and growth strategic compensation in comp Well, heavy fairly along increase growth job But sizable highlighted a of I think, -- make other we overhead think a bonus some all time, there do part up. is millions stock-based we reprioritizing, think repurposing of investment try have absolutely it that all the incremental that folks of the costs, stopping this year, is I like and the this -- will is people. SG&A, I working will a but

our surrounding just is that do the think in of and tell decided I would I baked aren’t things different the on is, you it’s breakout what by within investment some not here. So, couple to of offset It’s initiatives. a we SG&A lines the

a we’ll I year investment The is, year be continue depending I year this ends, other I’ll is changes. invest. thing talked would going on tell to about expect next you to the technology briefly how this and heavy

end two made experience. are those cited added I things, think facets a now am have, really have rollout both facets improvement on I that will our and our get still of year that couple down functionality, one two be year, this about the as appraisal of we that’s the one out started other as are our we buyers. the the them things pretty that and the and other mean, the pleased, by after app We on the side we business soon much and technology and associates well. gives have a and of I tackle for end business CRM the to the doubling of rolled and And mobile to we’ll customer experience want we of completely lot those of year I world-class the

journey a here. So bit on we are of little a

John Murphy

much. you Thank very Okay.

Bill Nash

You’re welcome.

Operator

question with next comes Rick from Your Nelson Stephens.

line Your open. is

Rick Nelson

through to an it’s sales third-party and What I’d these view lead on like had generators lead your of proportion come opportunity? get generators.

Bill Nash

Yeah.

of primary on first our website. So, all, our is focus

There’s the to about few. said quarter to that, to And third there. a vehicles are Edmunds, they on hits to trying XX in website. generators, website. through name to use We’re the we we continue those customers we our coming million the way to our Having KBB, probably come get to think want million is had third-party XX CarGurus, complementary

It talk that constantly look leads at are for spend, about overall to by lead them we’ll than decision are. economic those talked we we search fluctuate generators and dollars to good also third-party is We or way more digital our as continue If those majority productive depending offset quarter-to-quarter, make that engine our sure And digital it’s actually the getting. spend. I we third-party there. the of part paying what is sales are earlier, marketing that advertising, a put as how from on of generators will

Rick Nelson

to for that’s how tests an Thanks I’d delivery get Also home that, Bill. on like your progressing? update and

Bill Nash

Yeah.

have we to earlier, Charlotte progress enable not making the will capabilities on home like like to the build whether the What ways on said, we’re whether market that only this consumer is I delivery be continuing in point. Rick, be still by been functionality, financing. the but customers. deliver delivery at So, I the said home appraisals, we this got it focused the mobile delivery on it adding prequalification is think other I all the of home And out

deliver thing. enables to the of capabilities, to very You build that to home other quickly, kind delivery like ways that cars it delivery, not only scale expedited maybe enables customers, but

we So are that making. I really good about feel progress the

Rick Nelson

and good luck. Thanks Okay.

Bill Nash

Thanks, Rick.

Operator

Your comes next from Consumer question with James Edge. Albertine

line open. Your is

James Albertine

his very congratulations miss and promotions And and in you may going to Thank Great. as the to we’re want him their you I say just well. best Cliff, quickly Joe and if Darren Ed, retirement to on morning. thank good wish but and

Bill Nash

Jamie. Thanks,

Cliff Wood

Thanks.

James Albertine

a are long-term am I leverage sort theoretically off if leverage an if the and more hope you from from digital just impact your more to this and time or of digits. wondering, points maturity that sort perspective, of pivoting of with at on mid-single of strategy, would seeing the in sort -- to count comp a this has growth bringing more On provide sort XXX not of sort lower and stores think, fill store working of sort idea on a to learning could update brick of XXX of mortar all your over point and and whether in of we are down initiatives, strategic comp and I sort success an as digital you initiatives markets you as are well?

Bill Nash

question, Jamie. great a That’s Yeah.

think, in people certain XXX the really of stop to one talked some take range, we’re because business. to much grow want can range the recent about we XXX, there. to we’ve to historically, calls you necessarily So, about, share. I on the more continuing on think and, are XXX said, people of pretty the target learn can I because off I focusing our how we continue want to end I market essentially

I we know If that share. nationwide, to X% than you we can about capturing are want make bit a eventually little zero I in only at grow. XX-year don’t that old look our market higher XX%, markets mature where vehicles are it’s and more and capturing sure to

we few over mortar to do it leveraging that’s stores and or what the So evolve whether be how brick digital, next that, continue add continuing years. will we to

XX year. up are this opening We

point, behaviors have and as and comfortable really do that to with the are to out I number, existing pace. at with more very comfortable an I business market our we is as store there be you, putting changing, that consumer look, grab far is the But because already can committed changing think a honest ending infrastructure huge feel XX. share We win. with XX expectations to not and this I am

James Albertine

Understood. to Merry you and for talk we’ll Well, thanks happy questions. taking the holidays Christmas, next quarter.

Bill Nash

Jamie. Thanks,

Operator

Wolfe Bottiglieri Chris are from comes question with Research. next Your

open. is line Your

Chris Bottiglieri

for Thanks question. the taking Hi.

I tactically able at stepping could saw like you about looks you volumes through more it if wholesale. you was pocket the talk air to So ‘XX. wondering ‘XX broadly in drive were back

what you As cohort average you like on your you’re then? vehicle going to are when like that, able you are in experience Thank what’s wholesale? lastly, typical that lap in age cycling could we if view us just through maybe you. the what’s to And tell that, this of do

Bill Nash

Sure.

wholesale XX is of vehicles age in years. average the still around right our Chris, So,

and As years an seven cars to really through, the of far years returns it’s that that bubble really the at impact or funneling still as being years half two you through those SAR still or think lack a before having SAR impacts working ago, to When nine are that think still are and seven-year I think about of old I of are those to year we vehicles. cars another nine-year in out probably normal. kind reduced, least

Chris Bottiglieri

Got you. That’s helpful.

to am Katharine myself to gift end give and year limit I one going Okay. an question. early

you. So thank

Bill Nash

Thank Chris. you,

Operator

[Operator Your next from Nagel Brian comes Instructions] with question Oppenheimer.

open. is line Your

Brian Nagel

the a was This quarter question Hi. here is one finance, the follow-up look in think of clear on we finance. trend I as a at better positives

I from performance too you I should bucking think I happening true businesses? expectations are is, question markets, finance or but have a a question the finance year? trends what stepping function been look how of last there’s trend? do certain saw say, The maybe the stress So the better a I more elsewhere, and of, in you change guess, some here, signs function what’s back are well is your so better seeing And guess as are a in is, more we what’s I performing follow-up, now we guess, you a guys on -- is that in of, that, the CarMax you extent to -- it if

Tom Reedy

and the are Yeah. what’s that’s I’ll big the picture off. perspective, what mean, picture are to you if at what is of CAF a from in originating, XX.X% receivables we kind that, portfolio, rolling combination speak -- Brian. I up the look income of

X.X%. interest contributions only Our margin are up

bit in of reflection million year the by losses. $X.X this that. still lower we But So last loss provision a are really is escalating portfolio, of were we as environment that’s in growing and we compression seeing of are year an the

this were missing higher we were with provisions only all year line losses. of booked have not expectation So, we but expectations, been building for in our we generally And three in quarters our the expectations.

that With can we’ve the just lenders, the seen in we of not back it that we our what to as it’s we to the were seeing if regard bit when time our the decline, versus applications the see. has not start people that elsewhere. where partner you’re could from And our and don’t am remind think I saw improvement or part pretty seeing I you run mentioned hearing in some than in know system But of either. straightforward other are I bellwether we’re -- business performance conversion thing they sure. only were to the goes of and here, subprime I how little X us at we also same I others, -- speak differently a evolved, -- that we space, I like, Tier environment what So

Brian Nagel

Okay. That’s helpful. Thank you.

Operator

Fassler Your next question Sachs. comes Goldman from with Matt

You line is open.

Matt Fassler

the again. of you quarter benign a particularly in as early used of to the depreciation Thanks midway one you fact that about whether Also have had more GPUs. have cadence would quarter wholesale helped a car we that is the to approached sell and and through between quick the a relationship able vehicles, through purchased the environment follow-up, wholesale market the GPU, questions gotten your we the question have were

a curious that the did of whether am that the such -- that might that for play or part there? the market arbitrage we might out expected quarter I have adjusted whether So wasn’t

Bill Nash

are you Matt, talking GPUs? wholesale about

Matt Fassler

the you you cars that to higher, managed retail, move the would the whether come the more were just cost advantageous GPUs, profit selling every so or to price or XX turn moved you talking would extent the potential through units? whether have frankly about goods in inventory of reign the XX quarter early moved the through you a at am days your days, higher I that market if two

Bill Nash

been pretty this Matt, our have Yeah. now, long we GPUs. enough quarter on been consistent is the us think, Katharine, you much following XXth I mean, I have

think, part, prove that it’s so I early we to benefit able inventory. it’s or as having in able our different whether depreciation And been whether manage to far the declining, have been during as rising, the we a part have latter times,

-- tell any an the the strengths it’s standpoint little free we from I challenge. abnormal will a really customers transfers and that in. didn’t that’s in help quarter only say, was a one the with organization, of Houston this around bit would time present think have the other GPU was you, as this decision I I to abnormal of thing

we So saw that kind abnormal the thing that quarter. this of was probably only

Matt Fassler

back just any -- EPS, have up a might Was on that think cost impact the I any or one, and that, there weighed bit is this that measurable number have you a last following don’t from held your that the on hurricanes this my of us aggregate given quarter? you

Bill Nash

non-material. Yeah. I it’s would tell -- it would much pretty you, probably, I was

Matt Fassler

Thank Got it. Understood. you.

Bill Nash

you. right. All Thank

Operator

further Nash. questions call no queued at Bill to are There back time. up this I’ll over turn the

Bill Nash

Denise. want is our to our to you, I the DNA this want and we thank you Thank to all continuing Great. that again grateful XX,XXX happy I them part improve they Thank quarter. all service have customer joining am and and for today. associates thank and a of for for all took everything and each than want really of wish next we all possible. will of you. to I exceptional you more make of to day talk continued business I holiday call do providing you your support, that

Operator

conference concludes This today’s call.

You disconnect. may now

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