Ladies and gentlemen, thank you for standing by. Welcome to the third quarter fiscal year 2022 CarMax earnings release conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, David Lowenstein, AVP, Investor Relations. Please go ahead. Thank you, Jerome. Good morning. Thank you for joining our fiscal 2022 third quarter earnings conference call. I'm here today with Bill Nash, our President and CEO, Enrique Mayor-Mora, our Senior Vice President and CFO, and Jon Daniels, our Senior Vice President, CAF Operations. 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 Form 8-K issued this morning and its annual report on Form 10-K for the fiscal year ended February 28th, 2021, 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? Great. Thank you, David. Good morning, everyone, and thanks for joining us. We're very pleased with this quarter. We delivered record levels of used and wholesale sales as well as EPS for the third quarter. We also delivered all-time high margins in both used and wholesale. For the third quarter of FY 2022, our diversified business model delivered total sales of $8.5 billion, up 64% compared to the third quarter of FY 2021, driven by both higher average selling prices and volume gains. Net earnings per diluted share was $1.63, up 15% from a year ago. Across our retail and wholesale channels, we sold approximately 415,000 cars in total, up 29% versus third quarter last year. For the first nine months of FY 2022, we sold approximately 1.3 million retail and wholesale cars combined as we set new records in each month. We continue to be the largest buyer of vehicles from consumers. We bought approximately 383,000 cars from consumers in the third quarter, which is up 91% versus last year. Again, we achieved self-sufficiency above 70%. Our customer-centric omni-channel strategy, solid execution, and macro factors are driving performance across our company. In our retail business, total unit sales in the third quarter were up 16.9%, and used unit comps were up 15.8% versus the third quarter last year. We experienced robust demand as we ramped staffing levels and built inventory. CAF and our credit partners also supported our sales by continuing to deliver strong credit offers even as our average sales price grew by over 30% year-over-year. We achieved sequential growth in saleable inventory each month within the quarter. While inventory and staffing remain below our targets, we are pleased with our momentum and are confident that we have access to the resources we need to build inventory ahead of tax season, though retail demand will determine the pace. In addition to strong unit sales, we reported record retail gross profit per used unit of $2,235, up $84 per unit versus the third quarter last year. With used car prices at all-time highs, we chose to pass along the majority of our self-sufficiency driven acquisition cost savings to consumers via lower prices. We believe we struck the right balance between increasing our margins and supporting our customers at the time of elevated industry prices. Wholesale units were up 48.5% from the third quarter last year, and gross profit per unit achieved an all-time record of $1,131 compared with $906 a year ago. The strength in wholesale units was primarily driven by the ongoing success of our instant online appraisal offering. We also benefited from still elevated valuations of used autos in the broader market. CarMax Auto Finance or CAF delivered income of $166 million, down from $176 million during the same period last year. CAF margins remained strong. Year-over-year financial results were impacted by a $68 million headwind in reserve adjustment. As a reminder, last year's quarter benefited from a reduced provision coming out of the pandemic, and this year's quarter reflects a more normalized provision. CAF and our partner lenders delivered strong offers in all credit tiers. In a few moments, Jon will provide more detail on customer financing and CAF contributions as well as on the impact of the auto loan receivable systems conversion. Right now, I'd like to turn it over to Enrique, who will provide more information on our third quarter financial performance. Enrique? Thanks, Bill, and good morning, everyone. Total gross profit was $837 million, up 32% from last year's record third quarter. This was driven by wholesale vehicle margin of $212 million, which was up 85%, and used vehicle margin of $508 million, which was up 21% from last year's third quarter. Other gross profit was $116 million, up 18% from last year's third quarter. Favorability in the quarter included $20 million of margin contribution from Edmunds. Other gross profit also benefited from a $12 million improvement in third-party finance fees, with income of $1.6 million, compared to a $10.6 million cost last year. This was driven by renegotiated third-party finance fees and lower tier three volume compared with last year. Also positively impacting other gross profit, EPP was up $5 million or 4.8%. While penetration was stable at approximately 60%, this year's third quarter reflects a $6 million unfavorable return reserve adjustment compared to a $3 million favorable return reserve adjustment during the prior year's quarter. Partially offsetting gross profit favorability, service was down $21 million from the prior year's quarter. This was driven by pressure primarily related to our efforts to grow technician staffing, as well as a shift in some retail service capacity to instead support used car reconditioning. Service gross profit versus the prior year period improved in each month during the quarter, and we anticipate that results will continue to improve into the fourth quarter. On the SG&A front, expenses for the third quarter increased to $576 million, up 34% from the prior year's quarter due to costs related to unit volume growth and continued investment in our strategic initiatives. SG&A as a percent of gross profit was roughly flat at 68.8% compared to 68.2% during the third quarter last year. The increase in SG&A dollars over last year was primarily driven by three main factors. First, a $100 million increase in total compensation and benefits driven by a strong ramp in staffing, a $23 million increase in stock-based compensation, unit volume-related commissions, and the inclusion of Edmunds payroll this quarter versus a year ago. Second, a $22 million increase in other overhead, which includes our receipt of a $23 million settlement from a class action lawsuit. The remainder of the change primarily reflects investments to advance our technology platforms and strategic initiatives and the impact of COVID-related cost savings in the prior year quarter. Third, a $17 million increase in advertising expense, as previously communicated, to drive customer acquisition and to amplify the CarMax brand by continuing to build awareness of our omni-channel offerings. For the first nine months of fiscal year 2022, SG&A as a percent of gross profit was 66.1%, leveraging approximately 3 pts over last year's nine-month percentage of 68.9%. We remain committed to ensuring that we are efficient and effective in our spend, and we expect that our targeted areas of focus will continue to deliver results over time. During the third quarter, from an efficiency and effectiveness perspective, we saw solid improvements in the service levels of our CECs and their conversion of web leads. This was despite the record level of volume that our CECs handled in the third quarter. This improvement was due to a combination of successful staffing ramps and ongoing utilization of our AI and machine learning processes that drive the right work to the right associates. We also continue to see efficiency gains in our buying organization. The combination of our instant offer program, along with the investments we've made in data science, automation, and AI, continue to materially drive down our costs per buy. From a capital structure perspective, we ended the quarter with an adjusted debt-to-capital ratio in the middle of our targeted range of 35%-45%. During the quarter, we entered into a $700 million term loan agreement primarily to support the growth of our total inventory dollars. In regard to our share repurchase program, we remain committed to returning excess capital to shareholders and repurchased approximately 850,000 shares in the quarter for approximately $115 million. Now I'd like to turn the call over to Jon. Thanks, Enrique, and good morning, everyone. Once again, our finance business has delivered solid results. For the third quarter, CAF penetration net of was 42.2%, compared with 45.7% observed last year. Tier Two increased to 22.2% of used unit sales, compared with 19.5% last year. Tier Three accounted for 6.5% of sales, compared with 9.7% a year ago. The year-over-year change in CAF penetration was driven by a larger percentage of customers leveraging cash or outside financing for the purchase of their vehicle, as well as CAF comping over a historically high penetration in Q3 of FY 2021. We continue to observe strong credit offers from our tier two partners as they compete for additional volume within the CarMax channel. These offers, along with a decrease in application volume in the lower portion of the credit spectrum, contributed to the swap in volume between tiers two and three. CarMax continues to provide outstanding access to financing for our customers across the credit spectrum. Our approval rates this quarter remain over 95% despite financing amounts that are approximately 25% above the same period in 2020. This ability to maintain such a strong credit offering speaks to the value of our multi-lender credit platform supported by CAF and our long-term finance partners. During this year's third quarter, on the strength of record used unit sales, CAF's net loans originated was nearly $2.4 billion. The weighted average contract rate charged to new customers was 8.3%, down from 8.6% a year ago and 8.5% in the second quarter. The difference in APR is primarily a result of the change in the credit mix of customers along with rate testing that CAF executed within the quarter. CAF income for the quarter was $166 million, up $10 million from the same period last year. This included a more normalized loan loss provision of $76 million as compared to the significantly reduced provision of only $8 million in the same quarter last year that was driven by the continued reduction of the reserve that was established at the start of the COVID pandemic. Almost fully offsetting the provision headwind was a year-over-year increase in total interest margin of $65 million or 7.2% of managed receivables. This year-over-year margin increase highlights the strength of our ABS program, the favorable state of the capital markets, and our continued growth in receivables. The current quarter's provision of $76 million results in an ending reserve balance of $427 million or 2.75% of managed receivables. This is up from 2.66% at the end of the second quarter and includes a six basis points adjustment for the added tier two and tier three volume CAF is now originating. The adjustment was primarily driven by the implementation of our tier two origination test. Remember, contribution from CAF originations is recognized over the life of the receivables while the loss reserve is recognized at the time of origination. Note also that the core portion of the reserve allocated to tier one loan losses remains well within our historical range of 2%-2.5%. During the third quarter, we transitioned from CAF's legacy auto loan receivable servicing systems to brand-new systems. The new platform went live in October and included a period of planned downtime in a number of operational areas, including collections and customer service. This required pause in our business resulted in an increase in delinquencies and losses that we expect to normalize over the coming months as our systems and processes stabilize. This had an immaterial impact to the loan loss provision on the quarter. Additionally, CAF absorbed roughly $5 million in deployment expense in the third quarter related to items such as temporary contractor support, proactive customer communication regarding the systems change, and added staffing to handle the elevated call volume once back online. We are extremely excited about this new platform that will not only provide CAF a modernized foundation for growth and efficiency, but will also allow us to enhance our customer experience and self-service capabilities. I would like to take this opportunity to thank the CAF organization along with the corresponding project teams who have worked so tirelessly to build and implement such a transformative solution for both our associates and our customers. Now I'll turn the call back over to Bill. Thank you, John. Thank you, Enrique. This quarter continues this year's strong top-line performance trend. We're benefiting from our investments and are excited about the opportunities that lie ahead. We provide the ability for customers to buy a car 100% in store or 100% online, and our omni-channel capabilities allow our customers to personalize their experience with a mix of digital and physical interactions to meet their needs. As our omni-channel and online sales continue to grow, we have observed that the vast majority of our customers who buy digitally still elect to take delivery in our stores. This is another proof point that our ability to offer seamless integration across digital and physical transaction is providing value to our customers and is a key differentiator for us. In the third quarter, a little more than 9% of retail unit sales were online, up from the prior year's quarter of 5%. Our wholesale auctions remain virtual, so 100% of wholesale sales, which represents 23% of total revenue, are considered online transactions. Total revenue resulting from online transactions was approximately 30%. This is up from 20% in last year's third quarter. Approximately 57% of retail unit sales were omni sales this quarter, up from 49% in the prior year's quarters. We've been focused on completing the rollout of our 100% self-service experience where customers, if they choose to, can independently complete the entire car buying process online. Currently, more than two-thirds of our customers have access to complete end-to-end unaided online experience, an increase from a little over 50% from our last call. This expansion reflects customers' ability to incorporate trade-ins without liens to their online orders. The remaining two use cases that we will be working through during the fourth quarter are paid transfers and trade-ins with liens. In the third quarter, we bought approximately 194,000 vehicles from customers through our online instant appraisal, which represents about half of our total buys from customers. That's a new record, a 4% increase from our second quarter number and a 19% increase compared to the first quarter. This growth supports our belief that we remain the largest online buyer of used autos from consumers in the U.S. We are continuously enhancing our e-commerce offerings to exceed customer expectations and to seamlessly integrate with our best-in-class store experience. In the third quarter, we continued to make progress on our online finance experience by expanding our finance-based shopping or FBS capability. FBS enables our customers to see personalized finance terms from multiple lenders across the full inventory of vehicles on our website, which is a key differentiator in the retail marketplace. Roughly 75% of our customers are able to enjoy this experience today, and going forward, we are working towards adding the remaining customers and integrating additional lenders to this experience. Additionally, during the fourth quarter, we will be launching a more sophisticated version of the tool and increasing the speed of digital decisions. Again, we're proud of our strong results for this quarter and year to date. By delivering the most customer-centric experience in the industry, we will enable sustainable growth and create meaningful long-term shareholder value. With that, we'll be happy to take your questions. Jerome? Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, press the pound key. Your first question comes from the line of Sharon Zackfia with William Blair. Her line is open. You may now ask your question. Hi, good morning and happy holidays. Morning, Sharon. Morning. I guess a question on SG&A per car. I mean, it's been up kind of at a double-digit percentage rate over the last few quarters, and I know that's comparing against, you know, a year ago, capacity restrictions and, you know, lesser investments in the business. But I'm curious what your line of sight is into kind of SG&A per car returning to more of a low single-digit percentage increase or even starting to leverage that in the future. Hey, Sharon. Good morning. Happy holidays to you as well. You know, about three quarters ago in our Analyst Day, we communicated kind of the new way that we were looking at SG&A, that which is SG&A as a percentage of gross margin or gross profit dollars, as we believe that's much more reflective of how we actually run the business and more reflective of our efficiency. As we are investing not only in our used car business, but we're investing in technology and platforms and resources to grow our wholesale business, which certainly we've seen so far this year and certainly this quarter, as well as our CAF business. We're investing across the board. If you take a look at SG&A as a percentage of gross profit, that's kinda how we manage the business. You know, year to date, we've leveraged that by 300 basis points. Our intent is that we will leverage this year when it comes to SG&A, and our plan is to leverage that into the fourth quarter as well. Okay, great. Thank you. Then a follow-up question on used car pricing. I mean, there's a lot of debate, you know, among investors on how much, you know, companies such as yourself are benefiting from used car prices. Is there any way to disaggregate what you think the benefit is, particularly maybe in wholesale GPU from prices as opposed to the initiatives that you've done that have increased the appraisal volume in general from the online arena? Yeah, Sharon. You know, when I think about used car prices, it's on one side a bit of a headwind, on another side it's a bit of a tailwind. I think, you know, you've hit the area where I think it's more of a tailwind, which is wholesale. So anytime used price valuation goes up, that's a good thing for organizations that are buying cars, and certainly is a good thing for us. As I think about the wholesale growth or just our growth in self-sufficiency in totality, you know, I would still go back to that we believe that the majority of that growth is really a result of some of the innovations, things like instant appraisal or the instant offer that we have on for appraisals. I think that's driving the majority of the growth. 'Cause even if I go back to the first quarter where we didn't see, you know, it was prior to kind of this continued ramp-up in valuations, we saw a huge increase in wholesale and just overall buys. While it is hard, to your point, to disaggregate the two, I think, you know, we believe that the majority of the increase is driven by things that we're doing internally. Okay, great. Thank you. Thank you, Sharon. Your next question comes from Rick Nelson with Stephens. Your line's open. Thanks a lot. Good morning. Nice quarter. I'd like to follow up on the online penetration. It was 9%, up from 5% a year ago, but yet that stayed stable sequentially. Any thoughts on, you know, why we didn't see that grow sequentially? Yeah. Good morning, Rick. It was up a little bit. You're right. It was fairly a small increase from the last quarter. You know, as I think about it, one of the reasons that we got our self-progression up to about two-thirds was because we added some functionality to the trades that don't have liens, and we added that more to the latter part of the quarter last year. I think what we're really seeing is we're giving customers options to do different things. While they may think, okay, I'm gonna do it online, as I said in my opening remarks, some people are still, you know, they're coming in and wanting to deliver in the store. They wanna do a couple things in the store. I think a big driver is just options. We give consumers options, and so they may think they're gonna do one thing, and they actually take a different path, which, that's what we're all about. We don't, you know, we don't care which way a consumer wants to buy or how they want it delivered. We just wanna make sure that we're giving them the most personalized experience. I'd expect to see this percent continue to go up. Again, it's gonna be more driven by the customer's behaviors than us forcing anybody to go one way or the other. Great. Thanks, Bill. Sure. Your next question comes from the line of Craig Kennison with Baird. Your line is open. Hey, good morning and happy holidays. My question has to do with affordability. With your ASPs up over $6,000 to more than $28,000, are you seeing the high prices crowd out any segment of your customer base, especially among your less affluent consumers? Yes. Craig, I think it just goes back to a little bit of Sharon's question where I said, you know, we've got some headwinds, we've got some tailwinds. When you think about ASPs, the tailwind is more on the wholesale. The headwind, I think there is a little bit of a headwind on the retail side. While you know, you're benefiting from less new cars that are out there, so you know, probably getting some new car customers are looking for a higher selection. The fact that the price is up, I think that does pinch some consumers out, especially at the lower end of the credit spectrum. It could make it more difficult for them. This is also the reason why we stay very focused on trying to make sure we can continue to pass along efficiencies to customers, just to make sure that we can give them as good a deal as possible. Which again, is why we took a lot of our self-sufficiency gains and put it through in prices. Yeah, Craig, I'll just accentuate that comment I made in my prepared remarks. You know, I think this makes us feel all the more better given the ASPs on our 95% plus approval rate on those that did come through the door and our, you know, our lending platform and our lenders down in that space still able to provide strong quality offers. Certainly recognize it can be a challenge down there, but we feel like we have the credit to provide those customers. Great. Thank you. Thank you, Craig. Your next question comes from the line of John Murphy with Bank of America. Your line is open. Good morning, everyone. This is Aileen Smith on for John. I wanted to ask a question and circle back to one of the targets that you provided at your Analyst Day back in May, which was to sell two million vehicles per year by 2026 across the retail and wholesale channels. At the time, your volume levels were closer to the 1.2% range, but based on where Q4 lands, you're probably gonna be close to 1.6%, 1.7% for this year, which is impressive. First question, relative to when you provided that outlook six months ago, what segment of the business has been performing perhaps better than expectations, retail or wholesale? Second, what factors would you attribute to this? More so increasing inventory through sourcing efforts or making progress with your customers on omni-channel or other offerings? Yeah. I mean, the way I think about it is we've been pleasantly surprised by some of our innovations. We expected to increase sales, both wholesale and retail, and which is why we set the goal out there. Obviously, you know, wholesale has been very strong, but so has retail. Top of retail has been strong as well. We're very pleased, and I think it's a little too early. We just put those targets out there, you know, not that long ago, but we'll be re-reviewing those targets probably later on in the year after the year-end, you know, and potentially updating. I think it's a little early at this point. Yeah. I would agree with that. I think, you know, we've said on our previous calls, we have our performance and our instant offer has really exceeded our expectations. You know, we put that product out really in the first quarter, and it just has taken off. It's resonated with our consumers, it's resonated with the marketplace, and that has really driven a good part of our business through self-sufficiency, but also driving wholesale business as well. That has exceeded our expectations, you know, and it's gotten our instant offer program has gotten stronger every single quarter. Second quarter was stronger than the first, third quarter was stronger than the second. That seems to be building momentum out there in the marketplace. Great. That's helpful. Thanks for taking the question. Thank you. Your next question comes from the line of Rajat Gupta with JPMorgan. Your line's open. Great. Good morning. Thanks for taking the question. Yeah, just wanted to follow up on, you know, just, you know, with the labor and capacity situation today, how comfortable are you with, you know, the pace of hiring, and the level of staffing that you have, at your stores, you know, just to serve, the demand, that is to come, in the near to medium term? I had a follow-up. Yeah. We feel like I said in my prepared remarks, we feel great about the momentum, both in inventory and staffing. If I look at staffing just for the quarter, we hired more than 2,000 associates, and obviously the majority of those are in the field and the customer experience centers. So we're on a good trend there. We're a little light of where we would like to be, and also this is a time of year where we start to ramp up for the traditional tax season. We feel great about that. We also feel great about our ability to produce cars. As I said earlier, we're sequentially building every single month, and we've continued that trend early into this fourth quarter. We're very confident that we can get both to where we need, that we've got the resources and the wherewithal to take care of both. Got it. That's helpful. Just kind of follow up on gas. You've increased your tier two, tier three mix within that within gas, you know, over the last, you know, few quarters. You know, if I compare it to two years ago, you know, it looks like your third-party tier two mix is also higher, whereas you've also increased the tier two mix within gas. Just curious as to, like, what's changing in your overall customer base in general. Is there like a more permanent shift taking place in the tier two, tier three mix or, you know, is this just more a one-time thing? I'm just curious how that's gonna change. Yeah, I appreciate the question. Yeah, so within the tier two percentage, obviously, you saw that went up within the quarter. You know, a couple things going on there. You know, penetration or the amount of sales that a tier or a lender will take is certainly a function of those that are applying for credit. We did mention that there was less volume down in the lower kinda subprime space. So that'll take volume from tier three. But I think also an important note is the credit offers from our tier two lenders has been spectacular, you know, and they're probably pulling some volume up out of tier three, which is positive, obviously from a participation standpoint. So that's strong. Obviously, you did recognize that CAF is in the tier two space as well, so we're taking some from some volume there. I think the combination of the credit quality that are applying and then the tier two strength of offers is what's changing in the tier two and tier three space. Understood. Great. Thank you. Your next question comes from the line of Brian Nagel with Oppenheimer. Your line's open. Hi, good morning. Nice quarter. Congratulations again. Thank you, Brian. Thank you, Brian. The question I wanna ask, you know, and maybe probably a bit of a follow-up to some of the prior questions. Look, there was definitely a nice acceleration in used car business from fiscal Q2 to fiscal Q3. You know, Bill, you talked in your prepared comments about, in some of the response to some of the questions about the inventory, maybe the inventory constraints lighting up. I guess my question is what? How should we really think about this acceleration? I mean, what were the key factors behind it? And was it more supply, more demand driven? And then I recognize that you don't give guidance. You know, how should we think about the sustainability of what we're seeing in the business, at least as of the end of Q3? Yeah. Brian, thank you for the question. First of all, I gotta give a shout-out to the team 'cause they've done just a phenomenal job from an execution standpoint, taking advantage of the opportunities. You know, like I say, you know, I think the fact that we have been light in inventory, especially in the second quarter, and how we've continued to work through that, I think that's a big factor. I think the staffing is another big factor 'cause we're understaffed in the stores and our customer experience centers. You know, we continue to make enhancements on our omni-channel experience. You know, if I think about just year-over-year, online and omni-channel, you know, this year was roughly, let's call it 66% of sales. A year ago, it was 53% of the sales. I think passing along efficiencies in pricing. You know, last quarter was really the first quarter that we had seen self-sufficiency above 70%. We saw that continue through this quarter. Being able to pass those savings along I think were also a good thing. I think there's a lot that's playing into, and it's really hard to say, "Okay, well, this piece of it or that piece." You know, we felt great about the quarter. It was strong every month in the quarter. You're right, we don't give guidance, but I'll tell you we're you know pleased with the start of the fourth quarter. Perfect. If I could follow up to that. As we think about the business, you know, what constraints are still in place? You know, is it inventory, labor, other things? I mean, and then how should we think about those constraints abating, you know, again, in just, you know, over the next, say, few months or whatever? Yeah, I think, you know, you hit labor. I think labor is one that we'll continue to focus on. While we've made great progress, we wanna hire some more folks there, and that's pretty much across the whole organization. I think that's another one that we'll continue to focus on making great progress, as well as inventory. We'll continue to build out inventory. Like I said earlier, I think we have the resources and we're on the right path to make sure that, you know, we'll be able to get our inventory to where it needs to be in time for any type of tax time. I'll tell you the other thing is, if I look over the next year, we're also, you know, as part of our planned growth, we have, you know, roughly, let's call it 10 new production centers opening up. Some of them are part of geos, some of them are part of expansion plans that we'd already started. You know, we've got the resources we need and we're on a good trajectory. Those are our, you know, I think, shorter term focuses for us certainly. Yeah. Brian, what I would add to that is between the improvements in staffing and certainly the physical capacity that we have today and moving forward, what I'd tell you is that, you know, we have a strong belief that we are operationally strong and ready for growth. We are well positioned for that. Got it. Congrats again. Thank you. Happy holidays. You too. Your next question comes from the line of Seth Basham with Wedbush Securities. Your line is open. Thanks a lot, and good morning. My first question is regarding the self-sufficiency ratio, which was again up over 70% this quarter, second time in a row. This quarter, we saw your retail unit comps really accelerate and your GPU be much stronger, year-over-year than last quarter. Can you help understand the dynamics that are driving those big changes from one quarter to the next? Yeah. You know, I think I spoke a little bit about the comps and all the factors that kind of drove that in there. I mean, obviously, the self-sufficiency is at a high for a second, an entire second quarter. You know, we were able to pass those efficiencies along. Like I said in my prepared remarks, you know, what we're trying to do is walk a fine balance here. You know, we know prices are up 30% for us. We know that puts pressure for some customers, so we're really trying to make the vehicles as affordable as possible. We'll continue this quarter just like we did last quarter. We continue to look at inventory levels, test elasticity, check competitors' inventory. There's a lot of things that go into this. I do think we struck, you know, the right balance, both from a margin standpoint, kind of coming in historically high. If you look at the recent margin ranges for the last few years, I think we, you know, came in high on that. Still we're able to pass along some great efficiencies to the consumers. Right. Just to follow up, last quarter, we didn't see as much improvement in GPU or comp. Is the delta between last quarter and this quarter therefore due to market forces, such as the difference between market retail and wholesale prices, or is there something else? Well, I think this is. You know, last quarter was the first time we'd really achieved a self-sufficiency over 70%. You know, what we did realize last quarter, we pretty much were passing along. You know, what I would tell you is if you look at the market and we don't talk about market share till the end of the year because there's definitely a lag and it you have to look at it on a calendar year basis due to that lag. You know, some of the external sources are out there that will tell you that the used car just overall market is either flat or maybe even negative in you know, the last few months. We think that bodes well for the gains that we're starting to see. I think what you're really seeing here is you're just seeing a combination of a whole bunch of things that are really kind of came to fruition, like I talked about on all the different things for comp. I think what you're starting to see, there's just a lot of factors that really played in on the third quarter results. Good to see. Thanks. Congrats and happy holidays. Thanks, Seth. You too. Your next question comes from the line of Michael Montani with Evercore ISI. Your line's open. Oh, great. Thanks for taking the question and congrats on the quarter. Thank you, Michael. Thanks, Michael. I just wanted to clarify one thing and then had a question on provisioning. From a clarification standpoint, into the fourth quarter, Enrique, I just wanted to make sure I heard you correctly that you all would look to potentially lever the SG&A to gross ratio in the fourth quarter. Just wanted to clarify that, first of all, and then had a follow-up. Yeah. No, that's what I said. Our intent is to lever in the fourth quarter. Okay, great. The follow-up I had was just from a provisioning standpoint. Just wanted to understand moving forward, you know, how you all are thinking about basically that line item within CAF, because obviously you've got potential for further improvements in unemployment rate and stubbornly high kind of used car prices, which theoretically should help you out. There's obviously more tier two that you're doing and so forth. You know, now that the reserve has been kind of built up again a little bit, you know, should we say $75 million a quarter more or less? Any color you can provide there would help a lot. Yeah, great question, Michael. Yeah, if we think about the combination of the reserve and the provision, exactly as you stated, our reserve right now, you know, the metric we use is the 2.75% reserve versus. Remember, there's, as you stated, tier one, but also tier two, tier three volume, and then some expense for recovery there. If you back out that tier one, as I mentioned, we feel like we're at our normal range of 2%-2.5% for that tier one business. Also, if you look at what we originated this quarter, $2.4 billion, again, recognizing that there's tier one, a higher loss of tier two and tier three in that originations, as well as the recovery expense. $76 million feels very much close to normal for that origination. I think you're right on the mark here. It's something we feel like we're at a normal percentage from a loss rate perspective, and I would think about that going forward. One thing I'll point out as a reminder, again, the provision was substantial at the beginning of the pandemic. $122 million done back in quarter one of FY 2021. As we saw performance improve, really fantastic performance from our consumers, we were able to reduce that provision over time. The fact that we comped over last year's quarter three is fantastic. Realize we've still got that comping to do. Yes, agree, we're in a normal environment right now. Thank you. Thank you, Michael. Your next question comes from the line of Adam Jonas with Morgan Stanley. Your line's open. Thanks, everybody. Happy holidays. You too, Adam. Yeah, got it. Would love to know how online looks on GPU versus the $2,235. Is it higher or lower than that? As a follow-up, you mentioned the vast majority of your customers still prefer pickup in store within the online label. I'm curious if you can tell us how many or what portion of the 9% did opt for home delivery. Thanks. Okay. On your first question, online GPU, it's the same as in the in-store. It doesn't matter if you buy it online or in store, the GPU is relatively the same. As far as the 9% online sales, the way we think about it is we speak to it more alternative delivery, which is home as well as express pickup. When I think about that percent of just total sales obviously is less than 10%, with the bulk of it being more express pickups, where the customers come into the store, they've already filled out everything and maybe one or two little things to do, but we get them in and out very quickly. That's the bigger share versus the home delivery. Yeah, I just didn't know if you wanted to specify that. You did say vast majority. I just didn't know if it was 90% of the nine or 70% of the nine. Oh, you mean for the. For home delivery. You mean for GPU and home delivery? It's much smaller. It's a much smaller percent of that. [audio distortion] Your next question comes from the line of Chris Bottiglieri with BNP Paribas. Your line's open. Hey guys, thanks for taking the question. Morning. I said like a quick follow-up on the credit and then I have another credit question. The first one, it sounds like in response to Mike's question, like [Montani's] question earlier, like there was no impact. I mean the systems impact, you seem to imply there was some kind of impact on gross losses recovery, but then said like it wasn't having a provision. I'm just trying to triangulate those two. Like was there any impact on gross losses recovery this quarter, or is it more like just on the overhead expense? Yeah, fair question, Chris. Yeah, as I stated in my prepared remarks, a big systems change a lot of, you know, a fair amount of disruption that we were fully expecting and planned for. As we've come online and caught up with the volumes, we've seen those delinquencies trend down to more normal levels. Absolutely no impact or we believe it's immaterial on the full lifetime loss of the portfolio. That's, you know, obviously nothing in there in the provision and the corresponding reserve, so. Yeah, just to add on that, Chris, it was immaterial last quarter in anticipation of it, and was immaterial again this quarter. Gotcha. That's helpful. Okay. Just bigger picture question. Can you elaborate more on the lower rates on new loans this quarter compared to last quarter? You mentioned like kind of rate testing. You know, your peer, a large online peer, made a similar comment last quarter. Just timing feels a little bit unusual to be experimenting cutting rates when we're actually seeing the inverse happening where you know, the market's raising rates now in terms of like the tier rates. I guess like first question is with that backdrop, have you found customers historically become more rate sensitive when rates rise and is that the motivation for testing? Just using some kind of historical precedent, how should we think about the impact on rates to customers in periods where funding costs go up? Like how big of a lag is there between passing those rate increases through? Yeah, great questions, Chris. Yeah, as I mentioned in the prepared remarks, yes, we did execute some rate testing this quarter. You know, it's always trying to keep an eye on what the market is doing. We look at a number of metrics internally. Again, our capture rate or our booking rate, which results in our penetration, three-day payoffs, a number of metrics we can keep an eye on. But most importantly for CAF is as the sole tier one lender, we want to be highly competitive for our customers, provide the best possible offers we can. So it made sense. You know, we just wanted to get the pulse of the market. We did some rate testing, and we're watching that very carefully. As you mentioned, certainly the Fed did come out and signal that there's going to be rate increases in the future. Again, we will manage that as we always do. We'll look at what the peers do, how the market reacts. Often in a rising rate environment, to your point, you will see a lag there. It won't get passed along to the customer right away. We're not looking to get out in front of that, but we'll get rates and we will test. We will test as we always do accordingly. We will watch how the market's moving, what those take rates are, and then if it makes sense to pass along to the customers, we will. But if it impacts sales to cars or the experience or our CAF capture rates, then we may not. The testing will drive what we do. Yeah. I think the great thing about CAF, Chris, is that they're not just focused on maximizing their own profit. You know, the beauty is they're working on profit, but they're also working to help maximize sales. Our decisions may sometimes vary from other players that are just purely in the finance arena. Gotcha. That makes sense. Thanks for the help. Appreciate it. Thank you. Your next question comes from the line of David Bellinger with Wolfe Research. Your line is open. Hey, good morning. Thanks for taking my question. I want to ask on the nearly 200,000 vehicles sourced from consumers through the instant appraisal, can we get a sense of just how many offers you're making each quarter? Is the conversion rate improving sequentially? And given all the data you're now armed with and effectively, are you seeing better engagement or even repeat activity from past customers? Yeah. Good morning, David. On the online offers, as you can imagine, we make a lot of online offers. You know, some of the customers are just really shopping for their value, and they're not really interested in selling or even buying a car. You know, we're making a couple million offers a year. As I think about the conversion of those, really the way we've talked about it in the past is, you know, if the customers that show up at our store, they're, you know, are there to get their vehicle appraised, whether they haven't had it appraised online or whether they have had it appraised online, we look at the buy rate from that standpoint. If I look at the traditional appraisal lane where our customer hasn't had it appraised online, we're really seeing, you know, mid-30 buy rate, which is great. On the online side, as you can imagine, if they've already had their vehicle valued online and they're showing up at the store, then, you know, that certainly is gonna be a higher buy rate. It pulls the overall buy rate up. I don't think we should look at it necessarily as of the ones that have offers, how many of them actually sold. We do see some good improvement there, but that's not really how we think about the business. Got it. Is anything on the repeat activity? Do you see more engagement from past customers in terms of the instant appraisal? You know what? David, I'd have to go back and look and see how many of them are customers that have had them appraised prior. I don't have that number off the top of my head. Okay. Well, thanks for the color. I appreciate it, Bill. Yep. Your next question comes from the line of David Whiston with Morningstar. Your line's open. Thanks. Good morning. I'm curious if you don't mind looking forward ahead into the future a bit. I'm just curious what your thoughts are on as the chip shortage improves a new vehicle inventory over say the next 18 months. Will that cause used pricing to crash kind of hard and abruptly? Or do you see a soft landing? If you see a harder landing, are you worried about your customers perhaps having too much negative equity that they can stay out of the store or stay out of the market in 2023? Yeah. It's a tough question to really gauge when I think the chip shortage will kind of correct itself. I mean, you know, whatever I tell you is probably gonna be wrong. What I believe will be, you know, we'll start to see some relief maybe latter part of next year. I think it's not gonna be like a faucet that just automatically turns on overnight. As more chips are available, more new cars are available, you'll start to see the impact on used vehicle prices. I think, you know, anytime sales prices are up 30% year-over-year, I think there is a risk that down the road, you know, there could be some more negative equity out there. But I can tell you, we've been in this business a long time. We've been through a lot of cycles up and down, and we've proven that we can work through any such factors, whether it be negative equity, whether it be depreciation in the marketplace. I would actually tell you, I think, you know, we are able to handle that and do a much better job than anybody else, just given our experience. So stay tuned. It's hard to know when we'll get some relief on just overall used car prices. Just one other thing. Oh, that- Just one other thing, on the previous David's question on the IO, the team here informed me I misspoke. It's actually. I think what I said was $2 million a year. It's actually $2 million per quarter. I misspoke. I meant to say quarter versus year. I just wanted to clarify that for him as well. You talked about mitigating negative equity. Is it possible that CAF can be more aggressive in a negative equity situation? Yeah, I mean, I don't think that we're gonna necessarily adjust our underwriting given a particular situation of where ASPs are and negative equity and all that. I you know we again all in all you know CAF being the captive lender a great environment to always think about sales and capture that in our decisions. But again, we want to underwrite a strong credit customer, or we're going to the ABS market. We need to sell a book of business. You know, I just think we are very focused on delivering sales and credit quality. Yeah. We deal with negative equity customers all the time. Sure. The CAF team does a phenomenal job there, just like our third-party lenders do. Okay. Thanks, guys. Thank you. Thank you. We don't have any further questions at this time. I'll hand the call back to Bill for any closing remarks. Great. Thank you. Well. Thank you all for joining the call today and your questions and your support. You know, as I said earlier, we're really excited about the opportunities in front of us. As I always do, I wanna thank all of our associates for everything that they do, how they take care of each other and our customers. They are really the reason for our success and why we remain such a positive disruptive force in the used car industry. I wish all of our associates and all of you a happy holiday season, and we'll talk again next quarter. Thank you for your time. Thank you. Ladies and gentlemen, that concludes third quarter fiscal year 2022 CarMax Earnings Release Conference Call. You may now disconnect.