CarMax Inc

Good morning. My name is Carol and I will be your conference operator today. At this time, I would like to welcome everyone to the CarMax fiscal 2020 third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to Stacey Shirley, Vice President, Investor Relations.

Thank you, Carol. Good morning. Thank you for joining our fiscal 2020 third quarter earnings conference call. I'm here today with Bill Nash, our president and CEO, Tom Reedy, our executive vice president of finance, and Enrique Mayamora, our senior vice president and CFO. Let me remind you our statements today 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 management's current knowledge and assumptions about future events that involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see the company's annual report on Form 10-K for the fiscal year ended February 28, 2019, filed with the SEC. Should you have any follow-up questions after the call, please feel free to contact our Investor Relations Department at 804-747-0422, extension 7865. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-ups.

Bill? Thank you, Stacey, and good morning, everyone. Before we get started, I want to take a moment to personally congratulate Enrique on his recent promotion to CFO. Enrique and I have worked together for many years, and he has made a lot of great contributions during this time. I also want to thank Tom for serving as our CFO for the past nine years. I look forward to continuing to work with him as he shifts his focus to our strategic initiatives in addition to continuing to oversee all of finance. For today, I'll start with our third quarter highlights before turning the call over to Enrique, who will discuss our financials in more detail. Tom will then provide additional color around customer financing, and I will wrap up with an update on our omnichannel experience before opening it up for your questions. As you read in earnings release, we delivered a strong sales performance this quarter, with revenues up 11.5% on a 7.5% increase in used unit comps, and an 11% increase in total used units sold. Net income and EPS for the quarter were down 9% and 4.6% respectively. This is largely the result of significantly higher stock-based compensation due to an increasing share price during the quarter, combined with a planned increase in third-quarter expense due to the timing of advertising. As a reminder, volatility in stock-based compensation expense is driven by restricted stock units that are awarded broadly to our non-executive associates. Enrique will provide additional details on these items shortly. Keep in mind, despite these third quarter cost headwinds, year-to-date comps are up 6.7%, EPS is up 10.1%, earnings are up 3.6%, and while we have delevered SG&A by $37 per unit, this includes $42 per unit of stock-based compensation. We attribute our sales growth to a variety of factors, including solid execution in operations, finance, customer progression, and marketing, in addition to an overall favorable used car sales environment. Web traffic increased 15% year-over-year as we continue to benefit from our various marketing efforts. During the third quarter, our markets offering an omni-channel experience had slightly stronger comp sales than our non-OMNI markets. The strong performance in both was supported by many of our OMNI-related digital initiatives that have been rolled out nationally. This includes improved customer lead management tools, finance self-service tools, and digital merchandising. And we believe all stores benefited from our national marketing campaign launched in October, which reinforces the strength of our brand. For the quarter, gross profit per huge unit was $21.45, up slightly when compared with the prior year. Our teams have done an exceptional job in continuing to drive efficiencies, allowing us to maintain margins while offering competitive prices. Wholesale unit sales were also higher this quarter with volume up 3.3% year over year. The increase in wholesale volume was slightly offset by a small decrease in gross profit per wholesale unit due to heavier depreciation at auction since the beginning of the third quarter. As a percentage of sales, zero to four year old vehicles are 77% similar to last year. Total SUVs and trucks accounted for about 49% of sales up from 45% last year. At this point, I'll turn the call over to Enrique to provide more information on the third quarter financial performance.