CarMax Inc

Ladies and gentlemen, thank you for standing by. Welcome to the third quarter fiscal year 2023 CarMax earnings release conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Lowenstein, AVP Investor Relations. Please go ahead.

Thank you, Ashley. Good morning, everyone. Thank you for joining our fiscal 2023 third quarter earnings conference call. I'm here today with Bill Nash, our president and CEO, Enrique Mayor Moore, our executive vice president and CFO, and John Daniels, our senior vice president, CarMax Auto Finance Operations. Let me remind you, our statements today that are not statements of historical fact including statements regarding the company's future business plans, prospects, and financial performance are forward-looking statements we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 that could affect these expectations, please see our Form 8K filed with the SEC this morning and our annual report on Form 10K for the fiscal year ended February 28, 2022, previously filed with the SEC. Should you have any follow-up questions after the call, please feel free to contact our investor relations department at 804-747-0422, extension 7865. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-ups. Bill?

Thank you, David. Good morning, everyone, and thanks for joining us. Our third quarter results reflect the continuation of widespread pressures across the used car industry. Vehicle affordability remained challenging due to macro factors stemming from broad inflation, climbing interest rates, and continued low consumer confidence. In addition, persistent and steep depreciation impacted wholesale values throughout the quarter. In response, we have been taking deliberate steps to support our business for both the short term and for the long run. We are leveraging our strongest assets, our associates, our experience, and our culture to manage through this cycle. Actions that we took during the quarter include further reducing SG&A, selling a higher mix of older, lower-priced vehicles, slowing buys in light of the steep market depreciation, maintaining used saleable inventory units while driving down total inventory dollars more than 25% year over year, raising CAF's consumer rates to help offset rising cost of funds, pausing share buyback to give us capital flexibility, and slowing our planned store growth for next fiscal year to five locations while maintaining our ability to open more locations if market conditions change. In the near term, we are prioritizing initiatives that unlock operational efficiencies and create better experiences for our associates and our customers. While we continue to selectively invest in initiatives that have the potential to activate new capabilities, we have slowed the pace of those investments. We believe these steps will enable us to come out of this cycle leaner and more effective while positioning us for future growth. We will provide more details on these actions later during today's call. And now onto our results. For the third quarter of FY23, our diversified business model delivered total sales of $6.5 billion, down 24% compared with last year's third quarter, driven by lower retail and wholesale volume. In our retail business, total unit sales in the third quarter declined 20.8% and used unit comps were down 22.4% versus the third quarter last year when we achieved a 15.8% used unit comp. In addition to the macro factors that I mentioned previously, we believe our performance was impacted by transitory competitive responses to the current environment. External title data indicates that we gained market share on a year-to-date basis through October though we've seen some recent loss of share. As we have said before, we are focused on profitable market share gains that can be sustained for the long term. Through expansive price elasticity testing, we determined that holding margins during the quarter was the right profitability play. Third quarter retail gross profit per used unit was $2,237, which is consistent with last year's third quarter. Wholesale unit sales were down 36.7% versus the third quarter last year, driven by rapidly changing market conditions, which included about $2,000 of depreciation. This is incremental to approximately $2,500 of depreciation experienced during the second quarter. Wholesale performance was also impacted as we continue to reallocate some older vehicles from wholesale to retail to meet consumer demand for lower priced vehicles. Wholesale gross profit per unit was $966, down from a third quarter record of $1,131 a year ago. Recall, last year prices appreciated approximately $2,500 during the quarter, which was a margin tailwind. Just as we are doing in retail, we will continue to focus on maximizing total wholesale margin profitability. We bought approximately 238,000 vehicles from consumers and dealers during the third quarter, down 40% versus last year's period. Our volume was impacted by steep depreciation and our deliberate decision to slow buys in reaction to the depreciation. We purchased approximately 224,000 cars from consumers in the quarter, with about half of those buys coming through our online instant appraisal experience. We also sourced about 14,000 vehicles through Max Offer, our digital appraisal product for dealers, up 16% from last year's third quarter. Our self-sufficiency remained above 70% during the quarter. In regard to our third quarter online metrics, approximately 12% of retail unit sales were online, up from 9% in the prior year's quarter. Approximately 52% of retail unit sales were omni sales this quarter, down from 57% in the prior year's quarter. Our wholesale auctions remain virtual, so 100% of wholesale sales, which represent 18% of total revenue, are considered online transactions. Total revenue resulting from online transactions was approximately 28%, down from 30% during last year's third quarter. Pharmax Auto Finance, or CAF, delivered income of 152 million, down from 166 million during the same period last year. John will provide more detail on consumer financing, the loan loss provision, and CAF contribution in a few moments. At this point, I'd like to turn the call over to Enrique, who will provide more information on our third quarter financial performance and the steps we've taken to further align our business to the current sales environment. Enrique?