Ladies and gentlemen, thank you for standing by, and welcome to the Q3 fiscal year 2024 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, Jamie. Good morning, everyone. Thank you for joining our fiscal 2024 third quarter earnings conference call. I'm here today with Bill Nash, our President and CEO, Enrique Mayor-Mora, our Executive Vice President and CFO, and Jon 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 provision s 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 8-K, filed with the SEC this morning, and our annual report on Form 10-K for the fiscal year ended February 28, 2023, 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? Great. Thank you, David. Good morning, everyone, and thanks for joining us. Our third quarter results reflect the continuation of our strategy that has yielded sequential year-over-year improvements across key components of our business for four straight quarters. While affordability of used car remains a challenge for consumers, we're excited about the positive impact we are seeing from our omni-channel investments, which reinforces our strong belief that we are well-positioned for the future. This quarter, we delivered strong retail and wholesale GPUs. We bought more vehicles from consumers and dealers, and we also sold more wholesale units than a year ago. We further reduced SG&A from the prior year. We continued to strengthen the credit mix within CAF's receivables portfolio, which had a positive impact on our loan loss provision, and we resumed our share repurchase program. For the third quarter of FY 2024, our diversified business model delivered total sales of $6.1 billion, down 5% compared to last year. This was driven by lower retail and wholesale prices and lower retail volume, partially offset by higher wholesale volume. In our retail business, total unit sales declined 2.9%, and used unit comps were down 4.1%. Average selling price declined approximately $1,300 per unit or 5% year-over-year. Third quarter retail gross profit per used unit was $2,277, relatively consistent with $2,237 from last year. For the fourth quarter, our expectation is that our margin, our per-unit margin will be lower than last year's fourth quarter record margin. We continue to expect that per-unit margin for the full year will be similar to last year. As always, we will continue to actively manage this as we test price elasticity and monitor the competitive landscape. Wholesale unit sales were up 7.7% versus the third quarter last year. Average selling price declined approximately $600 per unit or 7% year-over-year. Third quarter wholesale gross profit per unit was $961, in line with $966 a year ago. Like our outlook on retail GPU, we anticipate wholesale per-unit margin for the full year will be similar to last year. As a reminder, last year's fourth quarter wholesale GPU was within $4 of our all-time record and benefited from appreciation and strong dealer demand, particularly at the end of the quarter. We expect this year's fourth quarter per-unit margin will be more in line with our year-to-date performance and lower than last year. We bought approximately 250,000 vehicles from consumers and dealers during the quarter, up 5% from last year. Of these vehicles, we purchased approximately 228,000 from consumers, with slightly more than half of those buys coming through our online instant appraisal experience. As a result, our self-sufficiency remained above 70% for the quarter. With the support of our Edmunds sales team, we sourced the remaining approximately 22,000 vehicles through dealers, up from approximately 14,000 last year. In regard to our third quarter online metrics, approximately 14% of retail unit sales were online, up from 12% last year. Approximately 55% of retail unit sales were omni-sales this quarter, up from 52% in the prior year. All of our third quarter wholesale auctions and sales were virtual and are considered online transactions. This represents 19% of total revenue. Total revenue from online transactions was approximately 31%, up from 28% last year. CarMax Auto Finance, or CAF, delivered income of $149 million, down slightly from $152 million during the same period last year. Jon will provide more detail on customer 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. Enrique? Thanks, Bill, and good morning, everyone. ...As Bill noted, we drove another quarter of sequential improvement in year-over-year performance across our business and our P&L. Notable areas of improvement included used and wholesale unit sales and their respective margin dollars, total gross profit, CAF contribution, SG&A leverage, and EPS. Third quarter net earnings per diluted share was $0.52 versus $0.24 a year ago. Total gross profit was $613 million, up 6% from last year's third quarter. Used retail margin declined by 1% to $398 million, with lower volume partially offset by a slightly higher per unit margin. Wholesale vehicle margin increased by 7% to $123 million, with an increase in volume and flat per unit margin compared to last year. Other gross profit was $92 million, up 55% from a year ago. This increase was driven by service, which delivered a $33 million improvement over last year, with this year's quarter reporting a $21 million loss. The efficiency and cost coverage measures that we put in place towards the end of FY 2023 continued to drive improved year-over-year performance in FY 2024. Extended Protection Plan, or EPP revenues, were relatively flat compared to last year's third quarter. We do not expect to receive profit sharing revenues in the fourth quarter due to the inflationary pressures our partners have experienced. Third-party finance fees were down $2 million from a year ago, driven by lower volume in Tier 2, for which we receive a fee, and higher volume in Tier 3, for which we pay a fee. On the SG&A front, expenses for the third quarter were $560 million, down 5% from the prior year's quarter, as we continued to see benefits from our cost management efforts. SG&A, as a percent of gross profit, levered by 11 percentage points as compared to last year. The decrease in SG&A dollars over last year was mainly due to three factors. First, other overhead decreased by $19 million. This decrease was driven primarily by continued favorability in non-CAF uncollectible receivables, and to a lesser degree, from reductions in spend for our technology platforms and from favorability in costs associated with lower staffing levels. Second, total compensation and benefits decreased by $20 million, excluding a $3 million increase in share-based compensation. This decrease was primarily driven by our continued focus on driving efficiency gains and aligning staffing levels in stores and CECs with sales. The decrease was also impacted by a lower corporate bonus accrual in the quarter. Third, advertising increased by $5 million. This reflects an increase in per unit spend as compared to last year's quarterly low level of per unit spend, and was partially offset by lower units. As we have previously communicated, our expectation is for our full year marketing spend on a per unit basis to be similar to last year. Accordingly, we expect that our per unit spend in this year's fourth quarter will exceed last year's fourth quarter. Entering the fourth quarter, we have now passed the year mark since we initiated our significant cost management efforts. We are well on track to outperform the target we set out at the beginning of the year of requiring low single-digit gross profit growth to lever SG&A for the full year, even when excluding the benefits from this year's legal settlements. That being said, we remain disciplined with our spend and investment levels. Regarding capital structure, we resumed our share repurchase program in October, repurchasing approximately 649,000 shares for a total spend of $42 million in the quarter. This pace is in line with the guidance we provided last quarter. As of the end of the quarter, we had $2.41 billion of repurchase authorization remaining. In terms of other uses of capital, such as new store openings, we will open four stores in the fourth quarter, including two in the New York metro market and one in each of the Los Angeles and Chicago metro markets. We will also open our first standalone reconditioning center in the Atlanta metro market. Our extensive nationwide footprint and logistics network continue to be a competitive advantage for CarMax. Now I'd like to turn the call over to Jon. Thanks, Enrique, and good morning, everyone. During the third quarter, CarMax Auto Finance originated approximately $2 billion, resulting in penetration of 44%, net of three-day payoffs, which was up from Q2 and relatively in line with the 44.4% observed during the third quarter last year. The weighted average contract rate charged to new customers was 11.3%, an increase of 150 basis points from the same period last year and up 20 basis points from Q2. Tier 2 penetration in the quarter was sequentially in line with Q2 at 18%, but remains lower year-over-year as we have yet to fully comp over the partner tightening observed in the back half of calendar 2022. Tier 3 accounted for 6.9% of sales, as compared to 6.1% last year. Impacting each of these results is CAF's decreased percentage in Tier 3, as well as the increased test volume in Tier 2. CAF income for the quarter was $149 million, down $3.5 million from the same period last year, but up $14 million sequentially. The provision for the quarter was $68.3 million, as compared to $85.7 million in the prior year's Q3. The $17 million favorability was offset by a year-over-year reduction in total interest margin of $20 million, driven by additional interest expense of $81 million. Note, fair market value adjustments from our hedging strategy accounted for $6 million in expense this year versus $5 million of income last year. The total interest margin of the portfolio decreased to 5.9% from the 6.1% seen last quarter. This slight reduction is primarily a result of increased funding costs, including the fair market value adjustments, along with CAF's deliberate credit tightening that began last year, which inherently removes higher margin, higher loss assets from new originations. CAF continued to offset these headwinds by adjusting customer rates, but with a careful eye on three-day payoffs, sales, and overall CarMax profitability. We are pleased with our ability to maintain a relatively stable net interest margin despite the volatile interest rate environment. The $68 million provision within the quarter resulted in a reserve balance of $512 million, or 2.92% of receivables, compared to 3.08% at the end of the second quarter. This 16 basis point reduction has occurred even with CAF's continued investment in the Tier 2 space and is evidence of the growing impact that our broader credit tightening is having on the overall portfolio. While CAF delinquency levels remain elevated versus historic norms, as has been the case industry-wide, we believe our reserve adjustment adequately reflects the anticipated future loss performance of our portfolio. The underwriting adjustments executed to date have been the right strategic moves to ensure we hit targeted loss levels, preserve our access to efficient funding, yet still deliver strong future CAF earnings. We are well-poised to recapture Tier 1 and Tier 3 volume as economic conditions improve, and our continued learning in the Tier 2 space should provide a future growth opportunity. Now I'll turn the call back over to Bill. Great. Thank you, Jon and Enrique. As I mentioned at the beginning of the call, we're excited about the contributions we are seeing from our omni-channel investments. Our omni-channel capabilities offer our customers a uniquely personalized car buying experience that enables them to do as much or as little online and in-store as they want. I'm proud of the progress that we've made on our journey to deliver the most customer-centric experience in the industry. As we have said before, we believe consumers in the used car industry will increasingly prefer to have the ability to progress digitally. We are seeing this in our data. At the end of fiscal year 2020, when we completed our initial omni-channel rollout, approximately 40% of our customers leveraged some or all of our digital capabilities to complete their transactions. That has grown to approximately 70% this year. I recognize that the market volatility over the past few years has made it challenging to see the direct benefits omni-channel has delivered to our business, so I want to share some proof points that we are seeing. First, our data indicates that omni-channel is driving incremental retail customers to CarMax. Customers who fully complete an online transaction are 10% more likely to be new to CarMax compared with our omni-channel and in-store customers. We have also found that our online consumers skew younger, which creates the opportunity to participate in more of their lifetime purchase cycles. Additionally, since initially completing our omni-channel rollout, we have seen outsized market share growth in our oldest 15 markets, where we have not opened new stores since calendar 2013. In calendar 2019, the market share annual growth rate for these markets doubled from the average annual growth rate for the previous five years. Moreover, from the beginning of calendar 2019 to the end of calendar 2022, the market share average annual growth rate for these older markets continued to exceed their pre-omni-channel average growth rate. Second, Instant Offer, our online consumer-facing appraisal tool that is a core part of our omni-channel capabilities, is significantly driving our vehicle purchases and wholesale sales. We doubled our buys from consumers the year we launched Instant Offer. This enabled us to grow our self-sufficiency to over 70%, which we have maintained since we launched the tool. Online buys have also fueled our wholesale volume, which grew approximately 65% during the launch year and has remained well above the volume prior to Instant Offer. It's worth noting that our Instant Offer algorithms also support our dealer-facing MaxOffer vehicle sourcing application. Third, our omni-channel products are supporting double-digit web traffic growth. Finance-Based Shopping has been our number one lead source. This multi-lender pre-qualification products gives customers the ability to digitally receive quick credit decisions across our inventory with no impact to their credit score. Over 80% of our customers are using this online tool as they begin the credit process. Finally, omni-channel is on track to be a more efficient cost structure compared to our store-only model. Our omni-channel cost structure has more fixed costs than our historical store-only structure. We continue to show sequential year-over-year improvements in key cost efficiency metrics for our omni-channel overhead model. With a more fixed cost structure, we expect to lever more strongly than in the previous model as demand picks up. We expect the impact of our omni-channel capabilities will continue to grow over time as consumers demand a more personalized experience that combines online and in-store progression. We believe that many of our competitors across the used car industry will not be able to deliver this experience in a simple and seamless manner. In closing, we're confident we have the right strategy in place. Our consistent approach to control what we can and deliver the most customer-centric experience in the industry is driving sequential quarterly improvements across our business. We are well-positioned to emerge from this cycle an even stronger company. With that, we'll be happy to take your questions. Operator? Thank you. Ladies and gentlemen, if you would like to ask a question, you may do so by pressing the star key, followed by the digit one on your telephone keypad. Once again, that is star one to ask a question. If you find that your question has been answered, you may remove yourself from the queue by pressing star two. Again, that is star one to ask a question and star two to remove yourself. ... We'll go first to Daniel Imbro with Stephens. Your line is open. Please go ahead. Yes. Hey, good morning, everybody. Thanks for taking our questions. Morning. Enrique, maybe I just want to circle back on the CAF provision, just given the impressive results here. I'm trying to understand the puts and takes. So the allowance came down quite a bit. Enrique, I think you talked about maybe just tighter underwriting there, but it looks like net charge-offs are at maybe the highest level we've seen in over a decade. So I guess, how can you—can you help us reconcile those two factors? And how should we think about provisions? Have the credit improvements meant that nominally this is the right level of provisions going forward, or how would you think about those trends as we move through the end of the year into kind of tax refund season? Thanks. Yeah, Dan, I absolutely appreciate the question and, and fully expected it. So first, let's start on the provision piece. Our provision in the quarter is going to be made up of, of two components. It's going to be our change in outlook on the losses that we expect on the existing book of business versus what we set at the end of Q2. Second, it's going to be the required reserve on losses on the new originations. So let's touch on the first piece. What I can tell you is if you look at our expectation at the beginning of Q2 and what we observed on that existing book of business over the course of Q3, there hasn't been a lot of change. Let's talk about the actuals and what we have observed because you referenced that. You know, we publish on a monthly basis our securitizations and how they're performing. It's important to note that that's about 60% of our receivables. We have a lot of stuff that has not yet been securitized. We've also mentioned that's been tighter. But, of what you see out there in the securitizations, we certainly observed two separate books of business there, the pre-COVID and the early COVID stuff that came in markedly lower than our target, well below the 2%-2.5%. We knew that was going to come back into more normalized levels, and that's what we're seeing on the new stuff. We've also said that we believe there's front-loading occurring. If you look at those newer securitizations, especially in, like, the 2021-3, the 2021-4, the early 2022 stuff, there is a clear curve difference in, in when the losses come in. We think it's front-loaded. All of that was contemplated when we set a reserve at the end of Q2. So largely, this first component of the provision did not. Well, there wasn't a major adjustment that we had to make, which means at the end of the day, our provision is primarily made up of our new originations. And we talked about this. Our new originations are significantly tighter. There's very limited Tier 3 volume, there's a test amount in Tier 2, and then our Tier 1 stuff, we've even been tightened there. On that roughly $2 billion, it's a tighter book of business, it's a lower amount of overall loss, it's a relatively modest required provision, and that is the bulk of the Q3 provision. Thanks so much for all the color. Great. Thanks, Dan. Our next question will come from Brian Nagel with Oppenheimer. Please go ahead. Good morning. Morning. Congrats on the nice continued solid progression here. Thank you. So my question, I guess just looking first at the wholesale business, that definitely inflected stronger here in the fiscal third quarter. You know, I guess the question I would have is, can you explain more kind of what was behind that, you know, that inflection in sales growth? And are there read-throughs, as you look at the wholesale business, are there read-throughs over to your used car business, just given the natural kind of association between those two segments? And then just a quick follow-up, any commentary, I mean, given kind of what we saw here in Q3, any commentary, you know, how the quarter progressed and what we're seeing into early Q4? Yeah, great. Thank you for the questions, Brian. So yeah, we are pleased with the the wholesale growth. I think it's a combination of factors. I think, one, there's a little bit of year-over-year dynamics playing in. You know, last year, given where we were, given where we saw sales, things that were going on in the marketplace, we actually pulled back on our offers. So I think you've got a little bit of that reflecting in kind of the year-over-year growth. But I also feel really good about the the innovation on the the product side of things. So when you think about MaxOffer and, you know, one of the things with MaxOffer, we completed this quarter, the rollout of our Instant Offer component of it. We still had a few markets that did not have Instant Offer, which meant they had to take pictures of vehicles and then get a value. Now they have the option to just not take pictures. If they want to take pictures, they still can. So, you know, that's some of the innovation there that I think that helps. So we feel really great about the innovation, and as we go forward, it'll probably be dependent more on, you know, what's going on in the market dynamics, that kind of thing, at any given time. As far as kind of the quarter and just outlook, look, obviously, the industry is still challenged, and everybody knows that, and obviously, our business isn't where we want it to be. But I do think there are some encouraging signs out there. I mean, besides the fact that we have continued to have sequential improvements, we saw a lot of depreciation this quarter, really, really steep depreciation, and while that causes some headwinds in the near term, and it's going to cause some headwinds just in, you know, wholesale a little bit and even on the retail side, it's a short-term thing, and I think it benefits the overall used car industry, and it'll benefit us because that will continue to come out on front lot prices. You saw we were about $1,300 down this year-over-year on sales prices. From an acquisition standpoint, it was more like $1,500, but we had some mix adjustment stuff in there. So again, I think the steep depreciation is good. You know, interest rates, if they at least stabilize, I think that's great. I think it's great for the business. I think that'll help, and if they come down, I think that'll be, you know, kind of extra icing on the cake. You know, another thing that I would point to is our market share. October, which is the latest period that we've gotten market share data on, is the first month that we've actually comped our market share year-over-year. So I think that's encouraging. And then the other thing I would tell you is, we've talked before about comps and where the sales might be going. And we've done some analysis with one of the credit bureaus just to try to understand the customers that apply for a loan through CAF, where do they go? And it seems like from the analysis we've done, there's a lot of customers that just once they decide they're not buying, they're not buying. So it's almost like there's a maybe, hopefully there's some pent-up demand that I think we'll see as the market comes back. So again, I think, you know, while there's some signs of encouragement, yes, the industry is still challenged. We're encouraged by that, and I think taking all that in consideration, also just bearing in mind, this whole time we've been working on cost control, becoming more efficient, having better experiences for our customers and our associates. I think all that plays well, too, into the future. So hopefully that's, that's helpful. Very helpful. Thanks a lot. Appreciate it. Sure. We'll turn now to Seth Basham with Wedbush Securities. Thanks a lot, and good morning. My question is also on CAF. Jon, could you give us some more color on those securitizations from late 2021 through 2022, in terms of your expectations that the loss curves are going to flatten out? Because we haven't really seen that in the data yet. Yeah, Seth, appreciate the question. Yeah, I, I think the key thing to, to point to here is if you look at... Obviously, what's published out there right now is, I think, the 2019 stuff going forward. If you, if you pull back and you look at sort of the 2016, 2017, 2018 stuff that, you know, I, I think is, you, you probably have access to, Seth, and you look at the, the typical shape of that curve, what we absolutely are seeing is the 2021-3, the 2021-4, it looks like it's turning over. Now, everybody's going to trend it their own way, but when we look at that and you look at the timing of loss, we absolutely see these things coming in, certainly within our targeted range. The 2022-1 and the 2022-2, we're watching very closely. Looks like that's beginning to turn over. Admittedly, the 2022-3, 2022-4 earlier in the life have not yet turned over, and so we're watching that very carefully, but neither had those previous ones I mentioned at the point at which they exist. So, all of this, when we trend it out, we know the subsegments that are in there, we know how they perform and how early the loss comes. We absolutely believe all of this is coming in in the 2-2.5 range, which is truly our target. So, does that give you the color you need, Seth? Anything further on that? That's helpful. Of the securitizations you have outstanding, are you forecasting losses for any of them above that 2-2.5 range? No, for the securitizations we have today, because again, we have the luxury of breaking that down by subsegment, by different pockets, and no, we right now do not see anything above the 2.5%. Yeah, again, that's, and again, that's a target. Yeah. Not saying that anything is going to come above there. If something came up at 2.25, 2.55 at the end of the day, we will reserve for it accordingly. It will be what it is. But no, right now, we do not see that. And I think the only other point I'll make is, again, this is what has been securitized to date. Bear in mind, and I think you're well aware of this, Seth, it's you know, four, five, six months before it ends up in a securitization. A bulk of our tightening has absolutely occurred over the last year. So I fully expect as that stuff hits the market, you're going to see, you know, clearly the evidence of the tightening that we have done over the last year. Thank you. I think as Jon- We'll go next to Craig. As Jon had mentioned, a lot of the receivables that we don't see are in our warehouses, right? There's about, what, 60% roughly of what you'll see are in the securitization data that's public, but there's a good chunk of receivables that are not necessarily public because they're in the warehouses, they're in alternative facilities, and that's really where you see a lot of that tightening that's blending into the overall loss rate. Thank you. We'll go next to Craig Kennison with Baird. Please go ahead. Hey, good morning. Thanks for taking my question. I had a question on AI. At your Analyst Day a few months ago, you highlighted several ways in which your tech team was driving innovation. I guess I'm wondering, very big picture, whether you see AI as a technology that is going to level the playing field for other used car retailers, or rather, you know, might be a wedge technology that really does ultimately separate winners from losers? Yeah. Well, thank you for the question, Craig. Well, first of all, I think, you know, we kind of have to separate AI versus generative AI, because AI has been around a long time. We've been leveraging it for a long time in a lot of different aspects of the business. And when we talked about it most recently at the day that you're referring, it was really more generative AI. And I think at some point, you know, folks will be embracing generative AI. I think the early adopters are the ones that get the benefit in the near term. And as you referenced, I mean, we're leveraging in a lot of different spots. We're leveraging it in our creative, we're leveraging it in our coding. We're working on some AI, generative AI assistance on a knowledge base for our CECs, which we think is going to be really powerful. We're leveraging it on a conversational search. We've got some tests going on right now where, instead of typing in key search things, we can actually do conversational search with consumers. So again, I think it's one of those things that's kind of going to be at the end of the day, you just need to have it, and if you don't, you're going to be at a disadvantage. So I think those that embrace it earlier actually get an early benefit of embracing it. Thank you. Sure. We'll turn now to Rajat Gupta with JP Morgan. Hey, thanks for taking the question. I had a follow-up question on CAF, around net interest margins. Should we look at that 5.9% as, you know, as a low, low here and, you know, stable around that level going forward? Just wanted to clarify that, and just have one quick follow-up on SG&A. Sure, yeah. I appreciate the question, Rajat. Yeah, I think that's a fair thought, right? I mean, we signaled a couple quarters ago that we felt like that 6% range was about where we were gonna level off, level off. Remember, we're coming off of at a relatively historic high. So, we've been pleased that our ability to pass this rate along to the customer. Obviously, there was a shock on the interest rate market, so we said it was coming, those higher interest rates were coming, and it clearly has helped us to level off. So we're pleased where we sit right now, and I think, you know, we would anticipate stabilizing at this level. Obviously, all bets are off with where the Fed heads. Hopefully, rates aren't going up. If they remain stable, we think we're in a good spot. If they come down and turn down, as a reminder, you know, typically, rate increases lag when rates go up, and rate decreases lag when rates come down. So hopefully, potentially, we could enjoy some, some added margin on the way down. But right now, I think we're in a stable spot. Yeah, Rajat, I just would add, look, I think Jon's done a good job of kind of saying, "Look, we expect to be in this range." We've said, you know, we're 6.1 the last couple quarters. Give us a little wiggle room, depending on what the, you know, the cost of funds in here. It's down a little bit, but it's really reflected the cost of funds. So I think the way we think about it, it's really no change in story, as Jon said. Understood. And just on SG&A, I mean, looks like there are some continued actions you are taking there on the headcount side. Can you give us a sense of what areas are these taking place at? You know, is it the CECs, you know, or salespeople or admin? And is this an indication of your view on the market backdrop in any way, in the near to medium term? And relatively, could you quantify how much the impact was from, you know, the bonus accruals, this quarter as well? Thank you. That was a multi-pronged question there, Rajat. If I miss one, just, just- I tried. If I miss one, just remind me what the question was. In terms of where the reductions have been when it comes to compensation, which I think was your first question, it's really been across the board. You know, we've had, compared to last year, almost a 10% decrease in our headcount when it comes to SG&A, and that's been across the board in our CECs, it's been in the business offices, in the stores, in the field, sales consultants down as well. So what you're really looking at is, you know, tight control of our overhead and compensation, better matching to sales, but also really driving efficiency. You know, we continue to see quarter-over-quarter, year-over-year improvements in the efficiency of the omni model, and we've talked about that. You know, on two of the three metrics that we track in terms of the impact of omni on total, total units, so used plus wholesale, we're more efficient than we used to be at this point. When you look at as a percent of total gross profit, we're more efficient than we used to be versus when we launched omni. And one indicator, we're still not as efficient, but we're working our way there, is the omni operating model as compared on a per retail unit basis. Our goal is to be more efficient, but we're not quite there yet. So we feel really good about the progress we're making. And what that really does, that focus on efficiency positions us really well for when sales rebound, and they will. When they do, you know, we do expect to flow through those sales at a stronger clip. I think that was one of your questions, Rajat. The other was like just, you know, are these continued reductions in any way, you know, trying to... Or is it an indication of, like, the market backdrop in any way? You know, is there a view that you're taking on the volume recovery here, over the next few quarters? And then the third part of the question was just what would be if you could quantify the impact on the bonus accruals in the third quarter. Rajat, this is Bill. I'll take the first part, Enrique, you take SG&A. You know, as far as... Look, if you look at our staffing, I think for this whole year, we've been fairly stable. Like Enrique said, we're down about 10%, but, you know, headcount total is, is, you know, been fairly consistent the last few quarters. And I think we've really put ourselves in a position that, you know, we can be very nimble here. So depending on what happens with the business, if the business picks up, we feel really good about where we are from a staffing-wise, we can manage hours, that kind of thing. If the business took a downturn for some reason, we also feel like we have some flexibility. So I think we've really kind of given ourselves a nimbleness, that we feel good about going forward, and then I'll pass it to you, Enrique. Yeah, for the corporate bonus piece within compensation, so very specifically, that was about $5 million on the quarter in terms of favorability. Understood. Great. Thanks for answering the questions. We'll turn now to Scot Ciccarelli with Truist. Good morning, Scot Ciccarelli. So I have a follow-up on the affordability issues. Do you guys think you need to get back to 2019 levels in affordability to get your 2019 volume levels back to on a get back to on a 2019 levels on a per store basis? And then related to that, any insight you guys could provide in 4Q? I think investors have generally been expecting comp to turn positive in 4Q, just due to easy comparisons. But I believe some of the third-party data suggests trends might be still negative. I appreciate that. Thanks. Yep. Sure, Scot. I think on, on the first part of your question, you're talking about the affordability, and I assume you're talking about the price of cars, where it was in 2019 versus where it is today. Am I interpreting the question right? Correct. Yep. Yeah. Yep, yep. Look, I don't think, I'd be hard pressed to say I think we'll get back to the 2019 levels. I do think there's plenty of room. You know, back in 2019, I think our average sales price was $20,000. You know, this period it was a little over $27,000. You know, I think it's, you know, we'll get back down, hopefully in the low $20,000s, low $20,000s or so, maybe mid-$25,000s, like $25,000 or so. All those are better than where they are today. And we already see kind of year-over-year, where our under $20,000 cars and our under $25,000 cars, we're making progress there. So we think that's a good sign. But do I think they'll get all the way there? I don't think so, partly because just new cars are becoming more and more expensive. So I think the bigger thing there is: what does that gap look like in the future? And then as far as comps go, yeah, look, I think the market, it's been a little choppy and from a consumer demand standpoint, you know, if I look at the three months of the quarter, it was choppy. I mean, September was our best month, although it was still negative. October was the lowest month. November was similar to October, although it was a little... It was better than November was better than October, although they were similar. And then December is similar to November, although right now it's a little bit better. So, you know, I think we're continuing to monitor elasticity, doing the things that we need to do. And, you know, look, I'm hopeful that it's we see some of this depreciation manifest itself out on the front lot. I think that'll be good for the industry going forward. But Bill, like, I guess my question is on the affordability issue. Like, do you need... How much of improvement do you need in affordability to get your volume back on a kind of a per store basis to what you saw in 2019? Yeah, look, you know, it's a hard question to be able to exactly answer what that needs to be. You know, I think that again, I think we can get back on to the comp growth without having to get back to 2019. And, you know, again, we've seen sequential improvements this year, even though the prices haven't come down dramatically from the start of the year. So it's a hard question to answer, Scot. But, you know, look, our goal is to get back onto the comp growth. The reality is, if I look at the first 10 months of this calendar year, which we have market share data for, versus the last six months of last year, we're doing better from a market share standpoint for the first 10 months than we were the last six months of last year, which I think is encouraging. We haven't comped total year-over-year yet, because the first half of last year was so strong. But as I said earlier, I'm encouraged by the fact that October is the first month we have month-over-month year-over-year market share growth. Got it. Thanks. Happy holidays, everyone. You too, Scot. We'll go now to John Healy with Northc oast Research. Thanks for taking my question. Just wanted to ask, Bill, just your expectations kind of maybe on this year's tax season. It's just around the corner, and, you know, what you see as kind of maybe pluses or minuses. I don't know, you know, I know we all fixate on kind of the monthly trends, but anything relating to tax season, how you guys are feeling like that might impact this year's business, or any kind of other exogenous factors that might go into kind of, you know, maybe how we see February or March demand levels kind of materialize? Yeah, I tell you, John, if you know, I'd appreciate a call afterwards, and let's talk about it if you know the answer to that. You know, I don't-- right now, I don't foresee... There's nothing I can say that would say, "Okay, tax season is going to be dramatically different than last year." I mean, I think in tax season, you expect to sell more cars. I think it'll be similar. I think what's going to be interesting is, last year, at the beginning of the calendar year, there was really steep appreciation in vehicles, and I think it'll be interesting. We aren't counting on that steep appreciation, so it'll be interesting to see the year-over-year dynamics of that from a pricing standpoint. As we sit here right now, we're kind of planning a tax season that was similar to, to last year, because we don't really see any signs that would make it dramatically different. Got it. Thank you. Sure. We'll go now to Sharon Zackfia with William Blair. Hey, good morning. I guess a follow-up on that. Have you changed the way you show inventory on the website? Because it does look like there's been a big inventory build, you know, so far in the last few months. If you're not expecting kind of a sea change in the tax refund season, I'm just curious on why we're seeing that inventory build. Yeah, Sharon, it's a, that's a great question. And what you're seeing there is, if you look at the average salable inventory for the quarter year-over-year, and the average, it's very similar to last year. If you look at the end of the quarter, to your point, it's up. And the reality is, total inventory is up a little bit, and it's up in salable versus non-salable. And the reason it's up in salable is because we're planning some production shutdown. If you remember last year, the holiday fell on the weekend. Well, we don't build cars on the weekend. This year, it falls on a day, both January, both the 1st and December 25, 1st, 5th, fall on weekdays. And we want to give our folks time off and be able to enjoy the holidays. So we actually did a little bit of a pre-build early on to make sure that, we took into consideration that, you know, we want to have the shops closed and give times off for the holiday. So it's really, that's kind of what you're seeing. There is a little bit of year-over-year dynamics as well, but that's bulk of what you're seeing. Okay. Any thought process yet on kind of how you're viewing expansion from a unit standpoint for next year? For new locations? Yeah. Yeah, we'll provide that guidance in- Did I miss that? ... We usually provide that guidance in our Q4 call, and that's what we'll intend to do. Okay, thank you. Thanks, Sharon. We'll go next to Chris Bottiglieri with BNP Paribas. ... Hey, guys, thanks for taking the question. I was just hoping you could elaborate on the comment on not expecting to see a profit share in EPS. Would you expect F&I in Q4 to be similar to Q3? Is the historical seasonal difference primarily profit share? And then does that have any spillover effect into next fiscal year, like, in terms of how you set the—Anyway, just is there any spillover effect from the lower Q4 profit share? Yeah. Thanks for the question, Chris. The seasonal effect is really more related to sales, right? And as sales map, so will ESP penetration and dollars. So the only thing we've seen in the past couple of years is really in the fourth quarter, where we've seen that profit share from our partners materialize at the end of the quarter. And last year was pretty material. I think it was over $15 million. And so I wanted to make sure we call that out. Just given the inflationary pressures that our partners have seen over the past year, it's just made their profitability a little bit more pinched. At the end of the day, when we look for profit share, you know, there needs to be a certain amount that they're seeing for us to have that, to share in that. What we've anticipated so far for this year is that we will not see that profit share. Again, that's really due to inflationary pressures that our partners are seeing. Got you. Okay. And then I was hoping you could kind of elaborate on the warehouse portfolio. It's roughly two-thirds the size of the securitized stuff. Like, could you just maybe tell us a little bit more about what's in there? What's the average age today versus the securitized portfolio? If you were to look at these, like, non-securitized, non-Tier 2, 3 test receivables, like, how does the loss performance of those vintages compare to, like, the like-for-like vintages that are in the securitized books? It sounds like you're signaling that it's better, but just hoping you can just kind of elaborate on that a little bit more. Sure. Yeah, I'll take that one, Chris. Yeah, really, our warehouse lines provide that short-term funding until we take it to an ABS market, or we look at other instruments to do a more permanent funding solution there. But, yeah, our conduit lines right now primarily hold the newest assets until we take them to the market. So you've got, you know, this quarter stuff is going to sit there, last quarter stuff is going to sit there. Let's call that $4 billion. There could be some spillover as well. So, as we've mentioned, you know, we've done significant tightening, certainly from the Tier 3 and Tier 2, but if we isolate the Tier 1, we've tightened in the Tier 1 space. So we would absolutely expect those Tier 1 assets to perform better than what's in the securitization. Again, all of it we think performs very well, but from a loss perspective, in particular, that conduit stuff is going to be a lower loss than what you're seeing in the most recent securitizations. Yeah. Thank you. The receivables will tend to sit in our warehouses for between three-six, seven months, right? Until the time they then go into the securitizations. So that's why you see a little bit of a timing delay, right, between the performance of those two buckets of receivables. Got you. Okay. Just one last quick one, just we brought it up. The seasoning has been ticking up a little bit. Is that— Is there any— I know some of it's the Tier 2, Tier 3, but is that just the ABS markets still aren't perfectly loose, you're just not securitizing as much as you would like to? Or why— I guess, why is the seasoning up a little bit versus what we might have seen previously? Sure. Yeah, I think that really comes down to volume. I mean, we're obviously a ton of sales. CAF continues to originate, you know, $2 billion a quarter. We look at the securitization market and, you know, we try and match the amount of, the volume that we put into each deal with the demand that's out there. Obviously, with our growth, you know, we're doing about $1.5 billion each deal times four deals. We're originating about $8 billion. That has grown over time, so therefore, naturally, it has to sit a little, a little bit longer in the warehouses. It's I don't think it's anything unique going on there. It's just purely a timing thing. Got you. Okay. Makes sense. Thank you. We'll go now to Michael Montani with Evercore ISI. Yes, good morning. Thanks for taking the questions. I wanted to ask, first off, on the provisioning front, you know, we, we were thinking kind of $90 million plus seemed to be a run rate trend and obviously came in better. So is that the right way to think about this, maybe starting with a six handle in the near term, given some of the tightening that you've done and all that we know? And then, I just had an SG&A follow-up. Sure. Yeah. So, just to touch on the provision once again. Again, two main components. It's any change we believe in the existing book of business versus what we had, reserved for in the, you know, the preceding quarter, and then the new originations. You know, the way I think about that is, let's, you know, let's take the second one first. If new originations, we did $2 billion this year. There's a piece of Tier 1, Tier 2, Tier 3 business. We've cited Tier 3 as limited, Tier 2 is in test volume, Tier 1 is the bulk of it. You know, you sign an anticipated lifetime loss rate, plus the cost to recover from a repossession standpoint, which is relatively small, but you assign an overall expectation of the $2 billion. That's one piece of your provision, and then it's a function of how, you know, how well we've reserved for it from the preceding quarter. As we mentioned this quarter, we felt like we've done a good job. Nothing we saw within the quarter performance suggested we were materially off. And so that's how you ended up with $68 million. So I think you've got to bifurcate those two pieces, and, and that's how you'd set your provision each successive quarter. I guess just to follow up then on SG&A to gross, you know, is the mid-seventies kind of near-term target still the right way to think about that level? Just overall, I mean, do we think that SG&A dollars can continue to come down in the near term if this is kind of the demand backdrop, or do we start to build SG&A dollars to try to drive volume and share? ... Yeah, so a couple questions there. In terms of the mid-70% SG&A as a% of gross profit, that's absolutely our next step that we've communicated. You know, we've made material strides in driving efficiency in our business, and that hitting that mid-70 is our next goal. But in addition to the cost management efforts that we've undertaken, we're also gonna require the consumer to return with some strength. You know, SG&A efficiency is also a function of gross profit, and so to hit that mid-70%, we are gonna need to see some decent gross profit growth as well. But that's absolutely our next step. When it comes to SG&A, kind of moving forward, you know, again, we're proud of the material year-over-year reductions that we've been able to deliver. What I'll point out is that we've done that at the same time that we've improved our customer and our associate experience as we migrate further along in our, in our omni-channel, right? And this focus on efficiency really positions us well for when sales rebound. Now, for Q4, it will be a little bit more challenging, as we've largely anniversaried over our cost levers. So Q4, I would tell you, will be more impacted by our sales performance in terms of that year-over-year, SG&A dollar movement. Yeah, and generally, historically, Q3 to Q4, your SG&A does go up to the reasons you're pointing- Yeah ... which is more volume, and as Enrique said, volume driven. Thank you. Thank you. Our next question comes from John Murphy with Bank of America. Good morning, guys. Good morning, John. Just a question on inventory. I don't know if you can disclose this or if you have any information, but, you know, what do you think the average ASP is, you know, in your inventory that you, you'll sell out? I mean, it's, you know what I mean? We've seen ASP come down about $2,000 from the peak, and we're still not getting the same store, you know, sales comp, you know, lift that you might expect as that price is coming down. So I'm just curious, you know, what's in inventory and, you know, are you able to acquire inventory at lower level, you know, lower prices, you know, going forward just to drive the comps? Yeah. Thanks for the question, John. Yeah, the- what's in inventory now, keep in mind, what we sold through the quarter, you know, it's more than 50% of that was bought prior to the quarter. So what's in inventory now is stuff that was bought during the quarter, which talked about. There's been some steep depreciation during the quarter, and we're continuing to see depreciation. So that should bring prices down. Keep in mind, though, just to kind of ground everyone, in any given year, you need about just during the year, you need about $1,500 of depreciation just to keep your sales prices flat, and that's just because the new cars come out, they're more expensive. So, you know, you really don't get much benefit until after you get over $1,500 on an annual basis. So we do feel, while we don't disclose what we think the average price is, it is our inventory, salable inventory at this point, is cheaper than what was sold in the quarter. That's very helpful. And then just one follow-up, you know, on the market share. I mean, obviously, that's an output of what's going on in the market and your actions and competitive forces. I mean, how do you think about what's going on in the competitive landscape? Because, I mean, you know, if you think about a company like AutoNation, did about 1.3 million used vehicles last year, or on an LTM basis. You know, they just stepped up their buying, you know, outside of their dealerships, and they did about 100,000 units outside the dealerships, which they hadn't been doing before. So it just seems like the franchise side, and that's, you know, one maybe unique example, but you know are, you know, going after some of the same vehicles that you are, even outside the traditional channels. Are you seeing that, you know, as you're, you know, going out there and acquiring, or is that just, you know, is that kind of a one-off? You mean as far as the acquisition of vehicles? Well, I mean, the franchise dealers traditionally would take flow from their, their new vehicle, their trade-ins and- Right ... and other sources, but they've stepped outside of that traditional channel. They're going out and, you know, going out to, you know, third parties and- Right ... not in auctions, but direct to consumer as well. And that, that was an incremental source of 100,000 units for them in on an LTM basis. And, and that's just new, right? Yeah. That's just incremental- Yeah ... and, you know, new activity. So I'm just curious if that's unique to them or you're seeing that sort of more in general? Yeah, no, I think, look, you're very aware of just kind of the volume that's out there in auctions, especially 0-4-year-old vehicles. And, you know, it's if folks are looking for that inventory, they got to be a little bit more creative, so it doesn't surprise me that other folks are doing that. Our 0 to 4 sales, actually, year-over-year, went up a little bit. So, you know, I would—I mean, that's one data point that you have. I think all the dealers are just trying to get vehicles from wherever they can, and, you know, that's why I'm excited about some of the product innovation when it comes to things like MaxOffer. You know, when we talk about self-sufficiency, that's just from the consumers. We don't, we don't add in there, you know, what we're getting from, from other dealers. And, you know, that, that product skews more retail than it does, than it does wholesale. So it doesn't surprise me that you have an example of that. I think folks that can do things like that, they're gonna try to do that. And then there's a lot of competitors. I mean, keep in mind, there's tens of thousands of competitors that sell zero-to-ten-year-old cars. Some of them don't have that ability. Great. All right. Thank you very much. Happy holidays, guys. Thank you. Thanks, John. You too. We'll take our final question from David Whiston with Morningstar. Thanks. Good morning, just wanted to ask about advertising expense, which did go up year-over-year, whereas for the nine months it's down. What was the catalyst to make you increase spending this quarter, is what I'm curious about? Yeah, that's gonna be very much a function just of our CapEx spend and the depreciation there. But then also, when it comes to our technology spend, a good portion of our technology spend is gonna be depreciated, right? And so you'll see that impacted in our D&A. Yeah, I think on the advertising piece, look, we're in this for the long haul, and so we're gonna spend money on brand, we're gonna spend money on acquisition. Keep in mind, you know, we're trying to think about in the new year how to talk about advertising. When we talk about advertising, keep in mind, that's advertising for sales, that's advertising for buy, that's advertising on Edmunds. So all along we've said, "Hey, we're gonna spend more in the back half of the year, but it's gonna be similar on a full year basis." And so we're actually executing it. Now, I don't want you to think that we're just, like, going and advertising. We're absolutely measuring the ROI, but what you got to realize is, you know, sometimes if the ROI is not as good on sales, you may ship some to buys, or you may ship some to Edmunds. So it just depends on what's going on, you know, in the given quarter. But we would expect... And generally, you spend a little bit more in the fourth quarter because it's, you know, you've got tax season coming, which is an increase in volume. So that's really what you're seeing. Yeah, David, sorry, I apologize. I thought you were asking about depreciation. No, I appreciate the clarification. You got an extra answer. Are you, are you guys, being more aggressive on your offers to consumers who want to sell a vehicle to you? Because with wholesale units up nearly 8%, I was just curious if you were looking to acquire more vehicles. Look, we wanna acquire all the vehicles, but we're gonna do it in a very thoughtful, profitable way. I mean, you could, we could buy a lot more cars, but it wouldn't make sense from a profitability standpoint. So I think the team has done a phenomenal job, especially given the steep depreciation that we've seen, how they've been able to stay on top of it, because that's definitely a short-term headwind. Okay. Thanks, guys. Thank you. Thank you. At this time, we have no additional questions standing by. I'd like to turn the call back over to Bill for closing remarks. Great. Thank you, Jamie. Well, I wanna thank all of you for joining the call today and for your questions and your continued support. As always, I want to thank our associates for everything they do to take care of each other and the customers in the communities. I want to wish all of them a happy holiday season, as well as all of you all, and we will talk again next quarter. Thank you. Once again, ladies and gentlemen, that does conclude today's program. Thank you for your participation. You may disconnect at this time.