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CarMax, Inc. Stock Price: Quote, Forecast, Splits & News (KMX)

Perplexity Finance

Company Profile

CarMax, Inc. Price & Performance (KMX)

Stock Performance

Updated Apr 17, 8:00 PM UTC

CarMax, Inc.

$64.59USD

+$0.48 (+0.75%)

After Hours

+$0.41 (+0.63%)

Open

$64.04

Market Cap

$9.86B

Year High

$91.25

High

$64.77

P/E Ratio

20.1

Year Low

$63.23

Low

$63.64

Dividend Yield

0.00%

Volume

2.27M

Latest News

Tariffs Drive CarMax to Prioritize Newer Used Cars Amid Market Shifts
Apr 10, 2025
CarMax is ramping up its inventory of newer pre-owned vehicles as recent U.S. tariffs on new car imports push consumers toward more affordable alternatives. The company is shifting focus to six-to-ten-year-old models, but warns that tariffs could also increase used car prices and reconditioning costs. Shares dropped 20% after earnings missed forecasts.12
Earnings Surge for CarMax in Fourth Quarter Despite Broader Market Volatility
Apr 10, 2025
CarMax reported over 80% earnings growth in its latest quarter, with total retail and wholesale used vehicle sales rising nearly 5%. The company credits operational efficiencies and a customer-centric approach for its strong performance, even as economic headwinds impact the broader auto retail sector.34
Economic Uncertainty Leads CarMax to Withdraw Long-Term Financial Targets
Apr 14, 2025
Facing ongoing economic instability and volatile trade policies, CarMax has retracted its long-term financial timelines. The move follows disappointing quarterly earnings and a sharp 21% drop in share price, reflecting heightened caution among U.S. retailers regarding future forecasts.56

What's Happening

Peers

Earnings

Report Date

Apr 10, 2025

Reported Revenue

26.4B

Avg 1d Change

6.46%

Report Period

Q4 2025

Reported EPS

0.64

Implied Move 1d

8.75%

Transcript

11m 17s

Thank 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 Moore, 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. In 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.

12m 42s

Should you have any follow-up questions after the call, please feel free to contact our Investor Relations department at (804) 747-0422. Extension 7865. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow ups. Bill? Great. 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. We delivered robust year over year EPS growth as we drove unit volume increases in sales and buys materially increased gross profit grew cap income 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, grew retail and wholesale unit volume We delivered strong retail, wholesale and EPP GPUs and materially improved service gross profit.

14m 1s

We bought more vehicles from both consumers and dealers achieving an all time record with dealers. 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, delivered total sales of $6,000,000,000 up 7% compared to last year primarily driven by higher volume. In 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 the 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 the 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 2024 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.

15m 25s

The 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 2,000 hundred $51 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. We 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 source the remaining approximately 46,000 vehicles through dealers which 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.

16m 45s

All 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. Of 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.

17m 58s

We expect that our mix of digitally supported sales will continue to grow over time as 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 penetration. At this point, I'd like to turn the call over to Enrique who will share more information on our fourth quarter financial performance. Enrique? Thanks, Phil, 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.

19m 2s

Adjusted for a $12,000,000 noncash impairment within other expense, related to an Edmunds lease, EPS was $0.64 which has doubled from a year ago. Total 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.

19m 28s

Wholesale Vehicle margin of $125,000,000 declined by 4% with an increase in volume, offset by a reduction in per unit margins. Other gross profit $119,000,000 up 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.

20m 13s

On 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, the majority of the balance driven by unit volume growth. Second, advertising was up by $9,000,000 due to timing. This was in line with the guidance we provided last quarter.

21m

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. 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. We expect service margin 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 '27.

22m 6s

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 Omnicost neutrality in FY 2026 for the first time. With continued improvement thereafter. We expect all three metrics per used unit, per total units and as a percent of gross profit to be more efficient than pre omni for the full year. This 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 twenty twenty six, 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 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.

23m 28s

In FY 2026, we plan to open six new store locations up from five in FY 2025 and four stand alone reconditioning and auction centers. From two in FY 2025. Our extensive nationwide footprint and logistics network continue to be a competitive advantage for CarMax. I'd like to turn the call over to John. Thanks, Enrique, and good morning, everyone.

23m 51s

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. 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.

24m 16s

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. Cap income for the quarter $159,000,000 which was up $12,000,000 from FY 2024.

24m 37s

This increase was driven by net interest margin 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. This 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.

25m 33s

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. We 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 will adjust our origination strategy as needed. 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, 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.

26m 50s

Now I'll turn the call back over to Bill. Thank you, John and Enrique.

26m 54s

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.

27m 23s

These 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. We 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, began testing new credit scoring models 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.

28m 42s

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.

28m 52s

We 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. We 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 availability to new markets.

30m 5s

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 participation across the credit spectrum to grow penetration and capture profitable returns. Additionally, 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 our share repurchase program. Regarding our long term goals, we are focused on growing the business and we continue to make progress towards those goals.

31m 11s

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 100 best companies to work for for the twenty first year in a row. I'm incredibly proud of this recognition It's due to our associates' commitment to supporting each other our customers and our communities every day. Second, we opened up our two hundred and fiftieth 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 our differentiator and the key to our success. In 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.

32m 19s

With that, we'll be happy to take your questions.

32m 22s

Madison?

32m 24s

Thank you. And your first question comes from the line of Sharon Zackfia with William Blair. Your line is open. You may now ask your question. Hi, good morning. Good morning. I guess, as we good morning. 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. Thank you.

33m 38s

Okay, Sharon. On the first question about kind of first half versus second half, look the main driving factor that we talked about that being in the year is we were coming off of if you remember last last calendar year, that last quarter, there was a big price correction. Remember it was the third last and third one we saw. And when you have those big price corrections, I think it I remember correctly, was probably around $3,000 in a very short period of time of depreciation. That impacts us a little bit differently. So think you had that to kind of really work 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 there's just a lot of factors. You take we'll continue to make the experience better for the consumers and our associates. We've got better execution. You've got the benefit of efficiency gains and kind of 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.

34m 37s

Just gives you a wider variety of inventory. And then I think the other thing is we've this year we've also just seen a more normal pricing environment. So I think there's a lot of things going on there. But I do think that the actions that we've taken are really what's driving the momentum I think they were masked a little bit in 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 I remember correctly, how 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. One of them obviously is we've sharpened our skills. When we came out of COVID, our six to ten year old cars wasn't a big focus for us, as big a focus and that's not really what were looking for. And so we had to build that muscle up. So we have more six to ten year old cars that over time, I think other things we've expanded the sourcing, which I just talked about.

35m 38s

I think John spoke about the ABS bifurcation. If you remember, coming out of COVID, '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 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. The work that John and his team have done on the FDS and making sure that 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 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 where we wanted to get. So I think there's a lot that goes into that. Thank you.

36m 36s

And your next question comes from the line of Seth Basham with Wedbush Securities. Your line is open.

36m 44s

Thanks a lot and good morning. Bill, it's 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.

37m 6s

Yes. Good morning, Seth. On the the comp trends, look, 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 was slightly impacted by the delay of refunds. And 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 some weather impacts. Then we get into March and we saw a 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 of April. Which obviously we're early into April right now. From a comp standpoint, first quarter to date, we're running high single digits. Second question, I think it was on tariffs. Is that correct?

38m 12s

Yeah. New car tariffs, if they drive double digit increase in new car prices, what does that mean for the used car industry and your ability to gain market share in that environment?

38m 21s

Yeah. You know, think it's it's you know there's a lot of moving pieces here, and and I'm sure it's probably changed even while we've been on this call. But there's a lot to watch. Want to look at the new car pricing, the supply, parts costs, used vehicle supply, just market volatility in general with [indiscernible] Obviously, as you pointed out, new car prices are definitely going to go up. I 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. Now I think over time what could happen is that the used car prices will also go up. Now the question is how much how much will they go up, over what period of time.

39m 23s

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 to offset those increases.

39m 44s

Thank you very much. Yes.

39m 47s

Thank you. And your next question comes from the line of John Murphy with Bank of America. Please go ahead.

39m 54s

Good morning, guys. 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 10 year olds sort of segment of the car population? And could that actually be increased time and sort of kind of along that same line, you talk about the 200,000,000 in COGS savings going, it sounds like now $2.50 COGS 50 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? And is 2,003 to 2,400 the new 2,200?

40m 39s

Okay. Good morning, John. So on the reconditioning and the auctions, look, we're we're thrilled. I mean, that's going to give us additional additional capacity, which is why you're seeing that we open up more. Certainly, we want to have the cars out on the lot. We sell zero to ten year old cars. We want to have what consumers are looking for. And if they're looking for six to ten, 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 '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. And we just we don't get the retail market share for them, but it's a great business when you're turning $8,000 car making $1,000 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 cards than we did we did older cars. That's not to say we're not pushing on the older cars and putting out those at the consumers.

41m 37s

It's just an interesting anecdote that actually the consumers are looking a little bit more for the younger cars this quarter. 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. I 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 after that. The other thing I would tell you on these reconditioning centers, these offset reconditioning centers [indiscernible] 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 we're putting them in markets where we have capacity challenges. And 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.

42m 45s

It's good to hear. Thank you very much. Thank you, John.

42m 49s

Thank you. And your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open.

42m 56s

Hi, good morning. Quarter. Congratulations.

42m 59s

Thank you, Brian.

43m 1s

So I wanna I I go and go 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 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 q one performance? I mean, do you think it is it it a catch up from maybe February? Does it reflect potentially people buying cars ahead of time because of tariffs? Or this overall sustainability from your standpoint?

43m 40s

Yes. First of all, don't think it's a catch up for February. Think we probably got a little bit of benefit there. [indiscernible] again, you're not going to 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 that's very small in the scheme of things. So 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, I expect that momentum that we've been seeing for the last three quarters, we're coming into the year very strong. And we've got some good momentum, and would expect to continue that momentum.

44m 14s

Obviously, you alluded to, I 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 a little hard to speak on the whole year, but I will tell you that we feel good about the momentum coming into into this year.

44m 33s

That's helpful. I appreciate it. Thank you.

44m 35s

Sure. Thank you. And your next question comes from the line of Scot Ciccarelli with Truist. Your line is open.

44m 44s

Hi, good morning guys.

44m 45s

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 to do from here? And what has to happen to get closer to 5% target over time?

45m 1s

Yeah. 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 going to work out great including market share. If I look at the market share for this last year, we're gaining market share taking it from other dealers. The 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'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.

45m 52s

Got it. That's helpful. Thanks.

45m 53s

Thank you.

45m 55s

Thank you. And your next question comes from the line of Jeff Licht with Stephens Inc. Your line is open.

46m 2s

Good 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 $269,000,000 was 89% of the combined units. I think a big thing going forward, especially this tariff scenario, is going to be your ability to source. Could you talk about both on the dealer front and the consumer front and any evolutions changes and what drove pickup there and improvement in Q4?

46m 43s

Yes. Yes. It's a great question. And you're right. Think sourcing is is critical. We're very pleased with the Max Offer product. I think it's a solution that works well for 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 use. If you look at the last year, got a great instant offer. Program for them. We 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.

47m 22s

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 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. The other 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 some more integrations into dealers which will continue to attract dealers. So we feel good about it. Feel good about the momentum.

48m 9s

Thought that's Possible.

48m 10s

Congrats. I think you also asked about the consumers. And, the consumers 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 that we really need to see the car. But 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 pick up, there's some other things that we're working on there. Again, just to enhance that experience and continue to drive incremental buys.

48m 44s

And then the last two weeks have been kind of crazy. There's been a pickup in conversion at the 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?

48m 57s

Yes. Well, I think you hit the nail on the head. You you if you look at the the wholesale the last couple weeks, it's there's a lot of folks out there trying to bid, which again I think just makes me feel really good about all of our initiatives on supply and sourcing directly versus having to to go that route. Awesome. Well, and good luck in the next quarter.

49m 19s

Thank you, Jeff.

49m 22s

Thank you. And your next question comes from the line of Rajat Gupta with JPMorgan. Your line is open.

49m 30s

Great. Thanks for taking the question.

49m 32s

I just had a follow-up to Jeff's question earlier. Bill, was trying to understand how are you as an organization, trying to manage inventory acquisition over the next, you know, few weeks, couple months. Given, firstly, there's already a lot of uncertainty around the tariffs that may happen. It may go away. You know, you know, you're hearing a lot about the auction lane activity. I mean, I'm curious, like, how are you managing your inventory acquisition that backdrop? I mean, you think you need to be aggressive or you're just being cautious 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? And I have a very quick follow-up on service cost process.

50m 17s

Yeah. Well, look, I think we manage inventory better than anybody in the We've been doing it for over thirty years. We are very familiar with operating and changing a fluid type of environment.

50m 29s

Keep in mind, we have the benefit of professional buyers who are on the ground. They'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 at a very high level. And then you said you had a question on service as well?

50m 54s

Yes. Curious what drove the significant mean, typically, seasonally, we like a big drop in like service gross profit. I'm curious what drove the 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. I know I I think and we could talk about, like, flattish gross profit 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.

51m 33s

I'll start maybe with your second point. The 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 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 you in terms of why it's getting better, there's really three things that are driving the improvement. That 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. So to match cost inflation that we've seen, and ability to increase 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.

52m 35s

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, 's an aspect of fixed cost, especially in the shorter term. So you have positive sales, you know, stronger ability to leverage. And 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.

53m 14s

Got it. Got it. Great. Thanks for all the color, good luck. Thank you.

53m 20s

Thank you. And your next question comes from the line of Michael Montani with Evercore ISI. Your line is open.

53m 28s

Yes. Hey, good morning. Thanks for taking the question. Just wanted to ask, I guess, a two part thing. One was 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 appreciation in price, does that help you from a share and margin perspective? And 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. 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 think through quarterly cadence? Okay. 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 easier. Think generally in appreciating environment, your margins are easier to manage because you're not having to do as many markdowns because again sell the car if it's appreciating the next car is going be a little bit more expensive.

54m 48s

So I think it helps your margin. Think from a market share standpoint too it would also help that. So I think that's that's good. And then your second question was on the model.

55m

Yes. 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 high teens like we mentioned in our prepared remarks, on just mid single digit retail sales. And what that's enabled on a strong margins, strong growth in other GPU as well, exceeding retail units. I talked about service, 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 leveraging and enhancing them to grow efficiencies and to grow the bottom line.

55m 50s

So we think we are really well positioned to grow. And then throw in the share repurchase program that we're committed to, That's also going to induce our EPS. Then you take a look at CAF, we're making those investments there. Terms of the full spectrum credit that John talked about. Those are also kind of in 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.

56m 18s

Anything cadence wise to think about as we progress through the year? Because I think you called out there could be some 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.

56m 34s

Yeah. Before jumping into cap, 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 in the back half purely due to seasonality. You think of higher volume, and comping over some cost coverage metrics we did last year, for service, I would expect outsized performance in the front half. And then for capital, just turn it over to John. Sure. Yes, would 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. So 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 a seasonality standpoint, it's a higher volume quarter It is a lower credit quality quarter. So you can anticipate a call it, 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 you can add probably another 10% to 15% increase off of the Q4 number there.

57m 54s

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 anticipating taking in more volume from our Tier two and Tier three testing. So again, that would stack on there.

58m 25s

All in the long run, a very, very good thing for CAF. But an impact in the near term to our provision. That's relative to Q4. And that's relative to Q4 is the key, yes.

58m 35s

Got it. Thank you.

58m 38s

Thank you. And your next question comes from the line of Chris Bottiglieri with BNP Paribas. Your line is open.

58m 48s

Hey guys, thanks for taking the question. So you've done a really nice job taking costs out of business the last few years. Certainly consistently my own expectations. The question is, though, the economy slows from here, and sales turn negative to mid single or high single digits again, because EPS declined high teens very much like the upside, or do you have levers left at your disposal to continue to cut costs and mitigate the operating leverage?

59m 15s

Yeah. We feel good. Look. A couple things. I mean, one is we still have room for efficiency improvements. Those are part of our plan irrespective of the macro economy. 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. 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. So we know how to manage through these kind of environments, whether they're upswing or downswing.

59m 51s

Yeah. Good. Thank you.

59m 54s

Thank you.

59m 55s

And your next question comes from the line of John Healy with Northcoast Research. Your line is open.

1h 2s

Thanks for taking my question. Just kind of wanted to ask a big picture question, Bill.

1h 6s

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? Or do you view them potentially as a partner in would you be surprised if you maybe work collaboratively with them going forward. Thanks.

1h 37s

Yeah. Good morning, John. You know, it's don't think anybody was surprised to see them actually get into this this space. They've been kind of talking about it. And to your point, they recently clarified the 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 have lot of traffic just through carmax.com, but we also we work with facilitators to help complement the the carmax.com traffic and I think that that's the way we we kind of view it at at this point. But certainly, it's something that we continue to monitor. I would also just tell you it just makes me really glad that we've 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 it's a big competitive moat that we built, and it's very hard to replicate.

1h 1m 38s

So if you're going to get into the used car business, there's a lot lot that has to be considered.

1h 1m 48s

Thank you.

1h 1m 49s

And your next question comes from the line of Chris Pearce with Needham. Your line is open.

1h 1m 55s

Hey, good morning everyone. Good morning. I just was curious, as you move kind of more into six to ten 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?

1h 2m 31s

Yeah. You know, I think look. We've always sold one to ten 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 whatever we put the CarMax label on, it meets our quality standards. And when you start getting into the six to ten population, is a lot of vehicles that just don't meet CarMax standards and we're just not going to not going flinch on that standard. That being said though, obviously built the muscle to continue to produce that type of car and get it up to the 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 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 ten year old cars. There's a lot of vehicles in there that just well, it's in the denominator. It's not not gonna net be in our numerator. It's just not going be able to be brought up to the quality standard.

1h 3m 28s

So I think that's the thing to think about. And I think the way it enhances is again if consumers are 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. We want to be able to meet that need. I think it's very similar to the folks that are thinking they're going buy a new car and they realize, well, I can't get the new car to work in my monthly payment. I'm gonna I'm gonna go down to a one or two year old late model car.

1h 3m 57s

So I I think it's just it's just kind of an evolution of the business and where the consumer is going. [indiscernible] yes, I think I think Yes.

1h 4m 8s

Just one thing I want to clarify, Chris. You made the comment 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 We will drive some incremental sales. But our Tier two, Tier three, even our Tier one players love six to 10 year old cars. So I'd separate the inventory needs that we have from where CAF is playing in the credit spectrum. As well as love zero to four. Mean, you can do it back and forth.

1h 4m 38s

So I'm glad you made that point, John.

1h 4m 41s

Okay. And then just to on that though, is there can it be thought of as a DPU tailwind as you move into these I don't wanna say move into these older cars, but maybe as you sell it.

1h 4m 51s

Yeah. Yeah. I'm sorry. If you ask, I I didn't I didn't catch that part of the question. So GPU tailwinds Look, when you sell older vehicles, they cost more to recondition. But especially in CarMax's case, they're kind of like a unicorn, where it's at the CarMax quality standard. It certainly a We think the quality is better than others. So those do bring a little bit more margin.

1h 5m 12s

Okay. Thank you. Thank you.

1h 5m 15s

Thank you. And your next question comes from the line of David Wishtin with Morningstar. Your line is open.

1h 5m 24s

Thanks. Good morning. Can 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 will 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.

1h 5m 47s

Yeah. 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 I'll give you a prime example, if you see highly appreciating market where you can get the $30,000,000,000 way quicker and it's really nothing that we've that we've done at this point. Same thing as if you see a slowdown, it may delay total units. 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 is going to go? And just think that that's the prudent thing. But it does not take the focus on what we're going after and those targets. It's just it doesn't make sense to put a a range on them at this point.

1h 6m 32s

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. 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. But again, we are focused on driving sales and driving profitability.

1h 6m 54s

Good. Thanks, guys.

1h 7m 4s

And your next question comes from the line of John Murphy Bank of America. Your line is open.

1h 7m 11s

Sorry, guys. I just wanted to sneak one follow-up in. I understand 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. I'm just curious, when you think about that, does that increase include the normalization of SG and A from this 90% range back down to 70%? Or is that after that's happened? Because if you're taking SG and A down to back to the normal level, I mean, really kind of taking some of the growth capital that 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%, 75% SG and A to gross? Or does that include the normalization from 90% down to 77% in that statement?

1h 8m 11s

Yes. 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? So 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 that's embedded in that guidance.

1h 8m 38s

But to be fair, mid-seventy percent the gap between 90% and mid-70s that's analogous to sort of CapEx or growth capital. That's 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?

1h 9m 2s

John, unless we got some robust volume this year, I can't see us getting back to the mid seventies this year yet. I 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. And again, the timing of getting back to the mid-70s is embedded in in that guidance. And what I'd tell you is that you you mentioned 90 you know, 91% where we ended this quarter. Relative to mid seventies. Q4 is the high point of SG and A as a percent of gross profit. For the year, were in the low eighties. Right? And so just as a point of clarification.

1h 9m 43s

Okay. Alright. Thank you very much.

1h 9m 45s

Thank you.

1h 9m 47s

Thank you. And your next question comes from the line of Rajat Gupta with JPMorgan. Your line is open.

1h 9m 55s

Great. Thanks for allowing me to ask. Another follow-up. I just wanted to clarify because you've gotten some like inbound like, through the course of the call. You know, just on the comments around CAF and provisioning, understand the mechanics around the first quarter step up fairly. Just curious, like, what was the suggestion from John that you know, that level of provisioning will continue through the remainder of the year or into 2Q, 3Q? Or it was just the fact that you're increasing the prime mix or the tier two mix that will continue. Just wanted to make sure we're tying those two comments appropriately. Thanks.

1h 10m 33s

Yes. Happy to clarify that, Rajat. Appreciate the question.

1h 10m 37s

So yes, I think if you couple the two things, the larger one really in Q1 is certainly the step up in volume.

1h 10m 44s

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. And then you tack on to there the fact that we are going to capture 100 basis to 150 basis points back at obviously 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 Tier three space. So that will add further. Again, seasonality in different quarters. But 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, Again, long run it's a win, but I want you to keep that in mind. And then of course, all always the overarching comment of we will watch the macroeconomic situation decide what we do. But when you make sure you keep the added penetration in mind in subsequent quarters.

1h 11m 50s

The 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 wanna 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 decided to go deeper into Tier two and Tier three, you could see a little bit of that. So I just wanted to make that distinction.

1h 12m 17s

Understood. Thanks so much for clarifying that. Again, thanks again, and good luck.

1h 12m 21s

Thank you. Thank you.

1h 12m 23s

Thank you. And your next question comes from the line of Michael Montani with Evercore ISI. Your line is open.

1h 12m 31s

Yes. Hi. Thanks for letting me sneak another one in. 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, you know, the added penetration turning into a win I guess more specifically, you grow CAF profits if provisioning has to step up that much for this year?

1h 12m 54s

Yeah. 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. It's been a hard market in LA as you can imagine. So more recently, an elementary school was impacted by the LA fires. And four unfortunately, and they were in need of space. So 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.

1h 13m 24s

There.

1h 13m 26s

Yes. And Michael, so your second question, do we see given the provision growth in cap income? Short answer is absolutely yes. We see growth in FY 2026 for cap 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.

1h 13m 53s

Understood. Thanks for the clarity.

1h 13m 57s

Thank you. We do not have any further questions at this time. I'll hand the call back to Bill for any closing remarks.

1h 14m 4s

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 Thank you.

1h 14m 20s

Thank you. Ladies and gentlemen, that concludes the fourth quarter fiscal year twenty twenty five CarMax earnings release conference call. You may now disconnect.

Key Insights

CarMax delivered strong Q4 results with total sales of $6B (up 7% YoY), double-digit EPS growth for the third consecutive quarter, and record retail gross profit per used unit of $2,322; retail unit sales increased 6.2% and used unit comps were up 5.1%.
The company achieved significant cost efficiencies, including $125 per unit in COGS savings in FY25 and expects at least another $125 per unit in FY26, exceeding initial targets; SG&A leveraged by 770 basis points, with a focus on returning to the mid-70% range over time.
CarMax Auto Finance (CAF) income grew 8% YoY to $159M, with a net interest margin of 6.2%; the company is expanding its full credit spectrum lending, targeting a 100-150 bps increase in penetration, though this will drive higher loan loss provisions in the near term.
Digital and omni-channel capabilities continue to expand: 15% of retail unit sales were fully online, 67% were omni-channel under a new definition, and over 80% of sales were digitally supported; ongoing enhancements are expected to further grow this mix.
Looking ahead, CarMax expects ongoing growth in retail and wholesale unit sales and market share, with a business model designed to deliver high-teens EPS CAGR when retail unit growth is in the mid-single digits; however, the company has withdrawn specific long-term unit/sales targets due to macro uncertainty but remains focused on robust EPS and sales growth.

Recent Transcripts

CarMax achieved strong Q4 EPS growth, record gross profit, and robust unit sales momentum.

+6.2% Retail, +3.1% Wholesale

Income Statement

Revenue

	2021	2022	2023	2024	2025
Revenue	$19B	$32B	$30B	$27B	$26B
Cost of Revenue	$17B	$29B	$27B	$24B	$23B
Gross Profit	$2.4B	$3.3B	$2.8B	$2.7B	$2.9B
Gross Profit %	13%	10%	9.4%	10%	11%
R&D Expenses	$0	$5.7M	$13M	$0	$0

2021

2022

2023

2024

2025

Revenue

$19B

$32B

$30B

$27B

$26B

Cost of Revenue

$17B

$29B

$27B

$24B

$23B

Gross Profit

$2.4B

$3.3B

$2.8B

$2.7B

$2.9B

Gross Profit %

13%

10%

9.4%

10%

11%

R&D Expenses

$5.7M

$13M

Cash Flow

Net Income

	2021	2022	2023	2024	2025
Net Income	$747M	$1.2B	$485M	$479M	$501M
Dep. & Amort.	$242M	$273M	$265M	$260M	$295M
Def. Tax	-$36M	$15M	-$6.6M	-$4.8M	-$24M
Stock Comp.	$122M	$109M	$86M	$120M	$135M
Chg. in WC	-$639M	-$4.3B	$34M	-$796M	$0

2021

2022

2023

2024

2025

Net Income

$747M

$1.2B

$485M

$479M

$501M

Dep. & Amort.

$242M

$273M

$265M

$260M

$295M

Def. Tax

-$36M

$15M

-$6.6M

-$4.8M

-$24M

Stock Comp.

$122M

$109M

$86M

$120M

$135M

Chg. in WC

-$639M

-$4.3B

$34M

-$796M

Balance Sheet

Cash

	2021	2022	2023	2024	2025
Cash	$132M	$103M	$315M	$574M	$0
ST Investments	$0	$0	$0	$17B	$0
Cash & ST Inv.	$132M	$103M	$315M	$574M	$247M
Receivables	$239M	$561M	$299M	$221M	$189M
Inventory	$3.2B	$5.1B	$3.7B	$3.7B	$3.9B

2021

2022

2023

2024

2025

Cash

$132M

$103M

$315M

$574M

ST Investments

$17B

Cash & ST Inv.

$132M

$103M

$315M

$574M

$247M

Receivables

$239M

$561M

$299M

$221M

$189M

Inventory

$3.2B

$5.1B

$3.7B

$3.9B

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Financial information provided by Financial Modeling Prep. Options data provided by Unusual Whales. Live transcripts provided by Quartr. All data is provided for informational purposes only, and is not intended for trading purposes or financial, investment, tax, legal, accounting or other advice. · See all tickers.

Overview
Latest News
Earnings
Income Statement
Cash Flow
Balance Sheet
Related

Earnings

Report Date

Apr 10, 2025

Reported Revenue

26.4B

Avg 1d Change

6.46%

Report Period

Q4 2025

Reported EPS

0.64

Implied Move 1d

8.75%

Transcript

11m 17s

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26m 50s

Now I'll turn the call back over to Bill. Thank you, John and Enrique.

26m 54s

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28m 42s

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.

28m 52s

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32m 19s

With that, we'll be happy to take your questions.

32m 22s

Madison?

32m 24s

33m 38s

34m 37s

35m 38s

36m 36s

And your next question comes from the line of Seth Basham with Wedbush Securities. Your line is open.

36m 44s

37m 6s

38m 12s

Yeah. New car tariffs, if they drive double digit increase in new car prices, what does that mean for the used car industry and your ability to gain market share in that environment?

38m 21s

39m 23s

39m 44s

Thank you very much. Yes.

39m 47s

Thank you. And your next question comes from the line of John Murphy with Bank of America. Please go ahead.

39m 54s

40m 39s

41m 37s

42m 45s

It's good to hear. Thank you very much. Thank you, John.

42m 49s

Thank you. And your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open.

42m 56s

Hi, good morning. Quarter. Congratulations.

42m 59s

Thank you, Brian.

43m 1s

43m 40s

44m 14s

44m 33s

That's helpful. I appreciate it. Thank you.

44m 35s

Sure. Thank you. And your next question comes from the line of Scot Ciccarelli with Truist. Your line is open.

44m 44s

Hi, good morning guys.

44m 45s

45m 1s

45m 52s

Got it. That's helpful. Thanks.

45m 53s

Thank you.

45m 55s

Thank you. And your next question comes from the line of Jeff Licht with Stephens Inc. Your line is open.

46m 2s

46m 43s

47m 22s

48m 9s

Thought that's Possible.

48m 10s

48m 44s

48m 57s

49m 19s

Thank you, Jeff.

49m 22s

Thank you. And your next question comes from the line of Rajat Gupta with JPMorgan. Your line is open.

49m 30s

Great. Thanks for taking the question.

49m 32s

50m 17s

Yeah. Well, look, I think we manage inventory better than anybody in the We've been doing it for over thirty years. We are very familiar with operating and changing a fluid type of environment.

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53m 14s

Got it. Got it. Great. Thanks for all the color, good luck. Thank you.

53m 20s

Thank you. And your next question comes from the line of Michael Montani with Evercore ISI. Your line is open.

53m 28s

54m 48s

So I think it helps your margin. Think from a market share standpoint too it would also help that. So I think that's that's good. And then your second question was on the model.

55m

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58m 25s

All in the long run, a very, very good thing for CAF. But an impact in the near term to our provision. That's relative to Q4. And that's relative to Q4 is the key, yes.

58m 35s

Got it. Thank you.

58m 38s

Thank you. And your next question comes from the line of Chris Bottiglieri with BNP Paribas. Your line is open.

58m 48s

59m 15s

59m 51s

Yeah. Good. Thank you.

59m 54s

Thank you.

59m 55s

And your next question comes from the line of John Healy with Northcoast Research. Your line is open.

1h 2s

Thanks for taking my question. Just kind of wanted to ask a big picture question, Bill.

1h 6s

1h 37s

1h 1m 38s

So if you're going to get into the used car business, there's a lot lot that has to be considered.

1h 1m 48s

Thank you.

1h 1m 49s

And your next question comes from the line of Chris Pearce with Needham. Your line is open.

1h 1m 55s

1h 2m 31s

1h 3m 28s

1h 3m 57s

So I I think it's just it's just kind of an evolution of the business and where the consumer is going. [indiscernible] yes, I think I think Yes.

1h 4m 8s

1h 4m 38s

So I'm glad you made that point, John.

1h 4m 41s

Okay. And then just to on that though, is there can it be thought of as a DPU tailwind as you move into these I don't wanna say move into these older cars, but maybe as you sell it.

1h 4m 51s

1h 5m 12s

Okay. Thank you. Thank you.

1h 5m 15s

Thank you. And your next question comes from the line of David Wishtin with Morningstar. Your line is open.

1h 5m 24s

1h 5m 47s

1h 6m 32s

1h 6m 54s

Good. Thanks, guys.

1h 7m 4s

And your next question comes from the line of John Murphy Bank of America. Your line is open.

1h 7m 11s

1h 8m 11s

1h 8m 38s

1h 9m 2s

1h 9m 43s

Okay. Alright. Thank you very much.

1h 9m 45s

Thank you.

1h 9m 47s

Thank you. And your next question comes from the line of Rajat Gupta with JPMorgan. Your line is open.

1h 9m 55s

1h 10m 33s

Yes. Happy to clarify that, Rajat. Appreciate the question.

1h 10m 37s

So yes, I think if you couple the two things, the larger one really in Q1 is certainly the step up in volume.

1h 10m 44s

1h 11m 50s

1h 12m 17s

Understood. Thanks so much for clarifying that. Again, thanks again, and good luck.

1h 12m 21s

Thank you. Thank you.

1h 12m 23s

Thank you. And your next question comes from the line of Michael Montani with Evercore ISI. Your line is open.

1h 12m 31s

1h 12m 54s

1h 13m 24s

There.

1h 13m 26s

1h 13m 53s

Understood. Thanks for the clarity.

1h 13m 57s

Thank you. We do not have any further questions at this time. I'll hand the call back to Bill for any closing remarks.

1h 14m 4s

1h 14m 20s

Thank you. Ladies and gentlemen, that concludes the fourth quarter fiscal year twenty twenty five CarMax earnings release conference call. You may now disconnect.

Key Insights

CarMax delivered strong Q4 results with total sales of $6B (up 7% YoY), double-digit EPS growth for the third consecutive quarter, and record retail gross profit per used unit of $2,322; retail unit sales increased 6.2% and used unit comps were up 5.1%.
The company achieved significant cost efficiencies, including $125 per unit in COGS savings in FY25 and expects at least another $125 per unit in FY26, exceeding initial targets; SG&A leveraged by 770 basis points, with a focus on returning to the mid-70% range over time.
CarMax Auto Finance (CAF) income grew 8% YoY to $159M, with a net interest margin of 6.2%; the company is expanding its full credit spectrum lending, targeting a 100-150 bps increase in penetration, though this will drive higher loan loss provisions in the near term.
Digital and omni-channel capabilities continue to expand: 15% of retail unit sales were fully online, 67% were omni-channel under a new definition, and over 80% of sales were digitally supported; ongoing enhancements are expected to further grow this mix.
Looking ahead, CarMax expects ongoing growth in retail and wholesale unit sales and market share, with a business model designed to deliver high-teens EPS CAGR when retail unit growth is in the mid-single digits; however, the company has withdrawn specific long-term unit/sales targets due to macro uncertainty but remains focused on robust EPS and sales growth.

CarMax, Inc. Price & Performance (KMX)

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Transcript

Key Insights

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Income Statement

Cash Flow

Balance Sheet

Go Deeper

Related

Latest News

Go Deeper

Recent Transcripts

Earnings

Report Date

Reported Revenue

Avg 1d Change

Report Period

Reported EPS

Implied Move 1d

Transcript

Key Insights