Ladies and gentlemen, thank you for standing by. Welcome to the Q1 quarter fiscal year 2025 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, and I would now like to hand the conference over to your speaker today, David Lowenstein, VP, Investor Relations. Please go ahead. Thank you, Savannah. Good morning, everyone. Thank you for joining our fiscal 2025 first quarter earnings conference call. I'm here today with Bill Nash, our President and CEO, Enrique Mayorga, 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 Provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our current knowledge, expectations, and assumptions, and are subject to substantial risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, we disclaim any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our Form 8-K filed with the SEC this morning, and our annual report on Form 10-K for the fiscal year ended February 29, 2024, 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. During the quarter, we saw continued positive trends, including year-over-year price declines, improvement in vehicle value stability, and ongoing growth in upper funnel demand. We're encouraged by what we are seeing and are continuing to strengthen our business by delivering associate and customer wins that are differentiated and durable. In the first quarter, we delivered strong retail and wholesale GPUs and grew EPP margins. We sourced approximately 35,000 vehicles from dealers, an all-time record. We increased used salable inventory units 5% year-over-year, while decreasing used total inventory, inventory units 4%. We grew CAF income 7% year-over-year under tightened lending standards, and post-quarter end, we launched our first non-prime securitization deal. We continued to actively manage our SG&A, and we repurchased over $100 million in shares. For the first quarter of FY 2025, our diversified business model delivered total sales of $7.1 billion, down 7% compared to last year, reflecting lower retail and wholesale volume and prices. In our retail business, total unit sales declined 3.1%, and average selling price declined approximately $700 per unit, or 3% year-over-year. Used unit comps were down 3.8%, and we saw comp performance strengthen in the back half of the first quarter. First quarter retail gross profit per used unit was $2,347, in line with last year's $2,361. Wholesale unit sales were down 8.3% versus the first quarter last year, as the industry experienced lower seasonal appreciation year-over-year. Average selling price declined approximately $900 per unit or 10%. Wholesale gross profit per unit was a first quarter record of $1,064, up from $1,042 a year ago. We bought approximately 314,000 vehicles during the quarter, down 9% from last year. The appreciation dynamics that I just mentioned impacted our overall buys as well. We purchased approximately 279,000 vehicles from consumers, with slightly more than half of those buyers coming through our online instant appraisal experience. With the support of our Edmunds sales team, we sourced the remaining approximately 35,000 vehicles through dealers, up 70% from last year. For our first quarter online metrics, approximately 14% of retail unit sales were online, consistent with last year. We continue to see ongoing adoption of our omni-channel retail experience. Approximately 57% of retail unit sales were omni sales this quarter, up from 54% in the prior year. Total revenue from online transactions was approximately 30%, in line with last year. All of our first quarter wholesale auctions and sales were virtual and are considered online transactions, which represent 18% of total revenue for the quarter. CarMax Auto Finance, or CAF, delivered income of $147 million, up 7% from the same period last year. In a few minutes, John will provide more detail on customer financing, the loan loss provision, CAF contribution, and our progress in becoming a full spectrum- full credit spectrum lender, which enables incremental growth in financing income. At this point, I'd like to turn the call over to Enrique, who will provide more information on our first quarter financial performance. Enrique? Thanks, Bill, and good morning, everyone. As Bill noted, we drove strong per unit margins this quarter for both used and wholesale. We also delivered growth in other gross profit margins and CAF contributions while staying focused on managing SG&A. First quarter net earnings per diluted share was $0.97 versus $1.44 a year ago. As a reminder, last year's quarter had a benefit of $59 million, which translates to a $0.28 per share from a legal settlement. Total gross profit was $792 million, down 3% from last year's first quarter. Used retail margin of $495 million declined by 4%, with lower volume and relatively flat per unit margins. Wholesale vehicle margin of $157 million declined by 6%, with lower volumes partially offset by higher per unit margins. Other gross profit was $139 million, up 3% from a year ago. This was driven by an $8 million increase in EPP. As a reminder, in the fourth quarter of FY 2024, we tested raising MaxCare margins per contract, which drove overall product profitability despite a lower product penetration rate. With that, we rolled out the margin increases in late Q4 FY 2024. Service delivered $3 million in margin, flat with last year's first quarter. Performance was primarily supported by efficiency and cost coverage measures, offset by deleverage due to lower year-over-year sales in the quarter, as well as by timing. We expect year-over-year improvement for the balance of the year, as governed by sales performance, given the leverage, deleverage nature of service. On the SG&A front, expenses for the first quarter were $639 million, up 3%, or $19 million from the prior year's quarter, when excluding the benefit from the $59 million legal settlement received during the first quarter of FY 2024. Also pressuring SG&A this quarter was approximately $22 million of expense from share-based compensation for certain retirement-eligible executives, and the lapping of favorable reserve adjustments related to non-CAF uncollectible receivables during last year's first quarter. Excluding these items, which we noted in our FY 2024 year-end call, SG&A total dollars were down year-over-year in the first quarter due to our continued discipline in spend levels. SG&A dollars for the first quarter were mainly impacted by two additional factors. First, other overhead increased by $6 million when excluding last year's favorable legal settlement. Continued year-over-year favorability in non-CAF uncollectible receivables was more than offset by lapping over last year's first quarter favorable receivable reserve adjustment. Second, total compensation and benefits, excluding share-based compensation expense, decreased by $3 million, mostly driven by our ongoing focus on efficiency in stores and CECs. Regarding capital allocation, during the quarter, we repurchased approximately 1.4 million shares for a total spend of $104 million, which was an acceleration in the pace from the repurchase levels in the second half of fiscal year 2024. As of the end of the quarter, we had approximately $2.3 billion of repurchase authorization remaining. In the first quarter, we also paid off our $300 million floating rate term loan, which was scheduled to mature in early June. Now I'd like to turn the call over to Jon. Thanks, Enrique, and good morning, everyone. During the first quarter, CarMax Auto Finance originated approximately $2.3 billion, resulting in sales penetration of 43.3% net of three-day payoffs, which was up 60 basis points from last year's first quarter. The weighted average contract rate charged to new customers was 11.4%, an increase of 30 basis points from a year ago. Partner Tier two penetration in the quarter was 18.7%, down from 20.4% observed last year. Partner Tier three volume accounted for 7.5% of sales, up from 6.7% compared to last year, as our partners' improved offers were in place for the entirety of the first quarter. Both tiers saw less application volume year-over-year, as lower credit customers remained challenged with affordability. Also impacting each of these year-over-year results, but to a lesser degree, is CAF's continued decreased volume in Tier three, as well as the increased test volume in Tier two. CAF income for the quarter was $147 million, up $10 million from the same period last year, primarily driven by an increase in total interest margin. Note, fair market value adjustments from our hedging strategy accounted for $3 million in expense this quarter, versus $9 million in expense during last year's first quarter. The net interest margin percentage for the quarter was 6.2%, up from last quarter, but in line with our expected level of near 6%. The provision for loan losses was flat to last year at $81 million, and resulted in a reserve balance of $493 million, or 2.79% of receivables, compared to 2.78% at the end of last quarter. CAF's continued investment in the Tier 2 space, all set by the previously implemented tightening in Tier 1, contributed to a consistent reserve to receivable ratio. As was highlighted last quarter, CAF has been building the capability and infrastructure to scale its participation across all credit tiers. First, CAF has leveraged its learning in Tier 2, along with its experience operating in both tiers 1 and 3, to develop a new full-spectrum underwriting model, which we will begin to test in the second quarter. From a funding perspective, we plan to expand our current asset-backed securitization program from a single platform to one that more broadly incorporates CAF's receivables across distinct prime and non-prime segments. We believe this will allow us to better align our offering with each investor base and ultimately generate added funding capacity. To that end, our first non-prime ABS transaction is currently in the market with $625 million of offered notes. Having the ability to both successfully decision and efficiently fund the entirety of the credit spectrum at scale, puts CAF in a strategic position to further complement our full roster of lending partners, while also driving additional finance income for the business. ... Now I'll turn the call back over to Bill. Great, thank you. As I mentioned earlier, we are encouraged by the positive trends we're seeing in pricing and vehicle value stability. I am proud of the durable actions we have been taking to support our business and further differentiate our offering, which are setting us up for continued improvements in our performance and future growth. Some examples include: we've expanded our vehicle sourcing capabilities by attracting more dealers to MaxOffer through product enhancements that make it even easier to use. We achieved record sourcing volume each month of the quarter and are excited about launching this capability in New York during the second quarter. We've increased used saleable inventory units while lowering total used inventory units through width reductions from new title management capabilities and focused inventory management in non-production stores. We have enhanced CAF's ability to become a full spectrum lender, which positions us to further grow CAF income over time. We've raised our EPP margins and improved service gross profit. We have achieved efficiency gains in our stores and CECs that will scale very well as we buy and sell more cars. We have launched a number of EV research tools through Edmunds to help educate and build trust with consumers. We've also established test stores in California to evaluate new capabilities that support our operational readiness for increased EV sales and also enhance the customer experience. Finally, we have continued to further enhance our omnichannel capabilities. We are rolling out our new order processing system to our stores and plan for it to be available nationwide later this year. The system helps associates guide customers through each step of the buying journey and provides a more seamless experience for consumers who prefer to blend self-progression with assistance from associates. In addition to these actions, we are focused on driving down cost of goods sold by pursuing incremental efficiency opportunities that we've identified across our logistics network and reconditioning operations. For logistics, we're testing a transportation management system that dispatches moves through a centralized team. The system automates communication between drivers and stores and provides new planning and execution capabilities. For reconditioning, we've identified opportunities to reduce costs, such as parts acquisition, bringing elements of sublet work in-house, and optimizing production workflow. In addition, we believe that balancing production capacity across our stores and standalone reconditioning centers will drive further efficiencies and potentially enable us to take on more MaxCare work over time. All of these actions continue to make us stronger, better positioned to support consumers, and fuel our excitement about our future growth in sales and profitability. With that, we'll, we'll be happy to take your questions. Savannah? Thank you. And at this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. And our first question will come from John Healy with Northcoast Research. Please go ahead. Thank you. Bill, I'd love to just kinda start with the, you know, the top of the funnel for you guys, just on same-store sales. I think you mentioned that comp trends improved as we moved through Q1, and would just love to get your thoughts on maybe how those improved and maybe what you're seeing now. And just as a follow-up to that, how do you, how do you answer the share question? Because I think that's the biggest one investors bring up is, you know, we see these numbers for CarMax, but, you know, how do you feel you guys are performing in the market versus peers? And if there is a delta, you know, how, how, how do you explain that delta? Thanks. Yeah. Thank you, John. All right, on your first question, I think what you're asking is basically kind of comp cadence. So again, if you go back to the fourth quarter, the last call we did, halfway through the quarter, we were running mid-single digit negative comps. Obviously, the back half of the quarter was better than the first half of the quarter, which we were encouraged by. And then if you look at, you know, June month to date for the new quarter, we continue to see some improved performance, and we're actually running slightly positive comp, June month to date. So we're encouraged to see this continued improvement there. As far as market share data, if we look at the first three calendar months of the year, which we have the title data for, we're higher in the first calendar quarter of 2024 than we were in fourth quarter of calendar 2023. We're also similar to where we were last year in the first quarter calendar quarter. And just to remind you, the last two fourth quarters, we've seen big price corrections, and so that's this one was similar. We kind of bottomed out December, we're coming back up. It looks like we're coming up about the same rate as we did last year. So year-over-year, market shares is fairly similar. On the market share, look, there's a lot of volatility there on short periods. You know, barring any other big price correction, my plan is not necessarily talk about the market share again until the end of the year. Because already we're seeing, we got some markets that are up, some markets that are down. I think looking over the longer period of time is the way to really look at it. Again, I'll update this again at the end of the year, unless we see some big macro factor that's having an outsized impact on it, but we feel good about the trends. Thank you, guys. Thanks, John. Our next question will come from Seth Basham with Wedbush Securities. Please go ahead. Thanks a lot, and good morning. My multi-part question is on CAF. First, looking at the loss trends in your reserves, we continue to see losses increase in your securitized portfolio. Your reserves look a little bit light. Do you think that you're going to have to reserve more aggressively if the loss trends continue? And then secondly, how quickly can you ramp Tier Two and Tier Three lending as you now have a non-prime securitization program? ... Yeah, appreciate the question, Seth, Seth. So, with regard to losses and delinquencies, you know, within the quarter, I'd say largely we were very much in line with what we expected for the quarter. And I think that's reflected in the provision. Year over year, it's basically flat. If you look at our reserve-to-receivables ratio, flat sequentially. You know, certainly we publish data on a quarterly basis. You know, remember, that's roughly 60% of our portfolio. But again, the trends there are as expected. You know, and bear in mind, in the quarter, this quarter is typically a high volume quarter, so your actual provision will typically be higher because you've originated more, and it's typically a lower credit quality quarter because of tax time as well. So I'll add that. But for the most part, a non-event for us from a delinquency and losses, as it was right in line with our expectations. To your second question, how quickly can we ramp the tier two and tier three volume? You know, I think the easier way to answer that is kind of let's anchor to what we originate today. So 43% of sales, you know, give or take in any given point, is largely what we're doing today. The vast majority clearly is in tier one. In tier three, we've been historically larger, but we're at a small piece because we're really investing in tier two and trying to understand that. It's in the higher portion of tier two. We are really excited about our, you know, our non-prime securitization program. We think that's truly gonna enable growth, both in the lower end of the credit spectrum for us to take a larger percentage of sales, but also to expand what we do in the higher end, in what we'll call our higher prime segment. So we're looking forward to that. Now, as far as ramping and the timing of the ramp, I would say in the near term, maybe for the balance of the year, we're gonna continue to just learn about the tier two space. We're gonna roll out our new models or sorry, test our new models in the quarter. We're gonna begin to learn about the entirety of the tier two spectrum. And that will take some time. And as we grow that, we will certainly let folks know. But beyond that, we do think there's room for us to grow beyond 43%. You know, will it be 45, 47, 50? Remains to be seen, the timing of how much and when, but we do believe it's substantial. But, you know, probably not doing much more than what we're doing today for the balance of the year. I do think longer term as well, when you, when you assess, when you think about funding capacity, I do think us entering into this market, which we're really excited about, is probably another $2 billion-$3 billion worth of funding capacity that we're gonna give ourselves when you think about how deep we can eventually go over time. So this, this is a really exciting program, and we expect to drive our financing income incrementally moving forward. Absolutely. Thank you. Our next question comes from the line of David Bellinger with Mizuho. Hey, great. Thanks for taking the question. It's on the expense side. So if you look at the ad spend per total unit, I think that was up about 5% year-over-year, compares to your guidance for flattish. Maybe just walk us through any changes you're seeing there on the ad spend line, and just overall, how we should think about SG&A dollars in Q2 and over the balance of the year. You know, thanks for the question. I would tell you that's pretty benign, right? I think quarter-to-quarter is gonna be a plus here, a little bit negative here on a total unit basis, which is, again, how we manage our total advertising spend. So I wouldn't look at that as anything other than just kind of quarter-to-quarter fluctuations. But, you know, we are committed to managing to that roughly $200 per total unit for the balance of the year. For the entire year, I should say. ... SG&A on, on the rest of the year. For the rest of the year? Sorry, can you repeat the question again? Yeah, and just the second part, just overall SG&A expense dollars. Just how should we think about that level through the balance of the year? Yeah, I think for the entire year, you know, we're really focused. In the first quarter, we're really proud of the fact that once you back out some of the noise, that I spoke to, we were actually down SG&A year-over-year. You know, I would expect that for the balance of the year, that's gonna be a little bit more challenging from a total dollar standpoint. But what I'll reemphasize here is what we're focused on, and what we're focused on is putting ourselves in a position through active cost management to be able to lever on low single-digit gross profit growth. And that's really what we're focused on. And so when you look at where we've been for the past several years in our heavy investment phase, that's a different story, right? It really speaks to us migrating more to a little bit more of a fixed cost structure and an ability to lever when sales roll around, which they will. So that's how we think about our ability to leverage moving forward. Got it. Thank you. Our next question comes from Brian Nagel with Oppenheimer. Hi, good morning. Good morning, Brian. A couple questions. I'll, I'll lump them together. I mean, the first, just with regard to the, this, this first, non-prime securitization, I think it's a follow-up to Seth's question before. But, you know, as we think about this development, I mean, how... what are the ramifications, you know, longer term for CarMax? Is this, is this gonna be a, a, you know, a potential vehicle to, to, to drive better share or better profitability, both? I mean, again, how should we think about the model flexing now with this capability? And then my second question, unrelated, you know, you keep calling out the, you know, this, this, the sourcing vehicles from, from dealers. I guess the question is, the sustainability of that and, and, and, and just also the, the potential positives for, for margins or other, other sourcing. Thank you. Yeah, appreciate, Brian, appreciate the question. I'll take the first one, with regard to the, the non-prime securitization. Yeah, I'm, I'm gonna continue to anchor us to this kind of 43% of sales. As mentioned, we think there is some substantive volume that we can take above that. And the best way to kind of give orders of magnitude of the value, the long-term value here is we see it under the current financial situation, the current economics. For every 1 point of sales that we can grab, we think that can drive $10 million-$12 million worth of value to CarMax. ... Now bear in mind, that doesn't start day one when you begin to add that volume. Initially, you originate additional volume, you need to provision for loan losses, but eventually becomes accretive. And once you get to steady state, that's where I'm referring to the, to the $10 million-$12 million. So as you can imagine, as you tack on additional points, you tack on additional value for CarMax, and in the long run, we think it's very substantial and something we're looking forward to going after. Yeah, and as far as the second part of your question, Brian, on dealer sourcing. Look, we're all about sourcing vehicles wherever we can find them. And, you know, traditionally, for us, we've been sourcing them through consumers, and then what we don't get from consumers, we've been buying at off-site auctions. This is just another step to diversify. You know, we buy from consumers, we can buy directly from dealers. And the ones that we're buying from dealers, the bulk of the... It's a little different than we buy from consumers. The majority of those are, there's a higher percentage of retail cars that we're buying from dealers. So while they're not as profitable as the ones we buy from consumers, they're certainly more profitable than when we have to go off-site for. So we're encouraged by it. We think it's, you know, this is an area that we can continue to grow. We're getting great responses from the dealers. We've made some improvements to the platform, which I think is part of why you're seeing this continued demand. And, you know, if I look at a year ago versus now, the dealers that are actively using it have bumped up, let's call it roughly 50% in the last year, and we really haven't added... I mean, we added a few more markets, but really haven't added that many more markets. So we're encouraged by it. Thanks, guys. I appreciate all the color. Sure. Our next question comes from Sharon Zackfia with William Blair. Hey, good morning. Thanks for taking the question. I guess, you know, it's kind of on the improvement in sales you've been seeing. I mean, do you think that's broader industry dynamics? Do you think there's something operationally you're doing? You know, I know obviously, if the top of the funnel is increasing, conversions then been down a little bit. Is that starting to improve for you? And if so, kind of where and why? Thanks. Yeah, thank you for the question, Sharon. Look, I think it's a combination of things. I think it reflects on just some of the continued work that we're doing internally, but it's also... Look, vehicle prices are, you know, even though they were up quarter over quarter, they're always up from the fourth to the first. You know, they were down $700 year over year. So we're seeing vehicle values be a little bit more stable. If you look at depreciation trends, for example, if you look at the last two years, they're all over the board, from appreciation to depreciation, and they're steep both ways. This year is a little bit more what I would call normal, although there is a difference in the first quarter of last year. Just to expand on some of my comments earlier. Last year, we saw appreciation kind of in this first time period of the year of about $2,500, and then we saw about, you know, $1,100 depreciation. This year, we only went up about $1,000, and then it's kind of flat by the end of the quarter. So you have a little bit of year-over-year dynamics, but again, just the value stability, that's nice. I mean, we've always worked in an environment where there's been appreciation, depreciation. What's more impacted us the last year and a half, two years, is these big price corrections. So I think it's a combination of factors. We will take our next question from Rajat, Rajat Gupta with JP Morgan. Please go ahead. Great, thanks for taking the question. Bill, I just had a question on strategy and operations. I think, like, we can all see, like, the factual data on the unit comps, you know, the market share. It's not where CarMax used to be historically. And if you look at your margins and, like, the EBITDA per unit, I mean, even if you exclude the one-time items this quarter, they have not changed or improved. So I'm curious, you know, if you think, you know, that the current strategy that you have around sourcing, you know, the impact omni-channel has had on the on your in-store culture, is all of that still the right approach? Or do you think something needs to change? Or we're just waiting for the industry backdrop to improve for CarMax to do better on all these metrics, especially when some of the public peers are doing better? Thanks. Yeah, Rajat. Look, I feel great about the strategy. I feel great about all the things that you, you know, that you talked about. I think what's really been the story for us, particularly, is really what you've seen over the last year and a half, and it's been more about these big price corrections and what's going on in the market, the fact that we sell a late-model, high-quality car from an affordability standpoint. So you know, if you look at the data, you're seeing more 10+ year-old cars being sold here, you know, in the last, you know, two years. I think that's even the same case for the first calendar quarter. So I think the impacts on the business have been more macro-related, but we certainly have not been sitting here waiting for them to get better. We've been making ourselves stronger, and I think those dividends will continue to come back. They'll pay dividends as we go forward, as sales come back. I mean, keep in mind, you know, last year, I think the total used cars exchanged was 35.5 million. It's typically north of 40 million, and the most impacted share of that group is the less than six-year-old. And again, it goes back to the affordability. So we feel great about our strategy. We feel great about the durable actions I told you that we've taken, which will continue to give us benefits as we go forward. Yeah, I do think it's important to point out as well, and Bill talked about it in his prepared remarks. Going after, aggressively going after reconditioning costs, going after logistics costs, and bringing those down. Those are, those are material items moving forward that we anticipate that can support sales, that can support margin, both of those items. So we're excited about those. So, you know, Rajat, it's a matter of aggressively also going after, you know, what we can control, and we can control that. ... Yeah, the only other thing I would add to that- Yeah. The only other thing I would add to that, Rajat, is, you know, when you go through experiences like this, you want to be a better, stronger company. So if this was to happen again in the future, you know, what might you do different? And some of the things we've already talked about, the expanding our sourcing. You know, Enrique just talked about really focusing on the cost of goods sold. Jon talked about the financing. I actually think the financing, not only are they going to allow us to grow CAF income, I think there's an opportunity to actually grow units. Because I think there's little pockets that maybe our partners aren't picking up, that we, that we think are actually good little pockets that we can, that we can now do. I think the work that we've done on the variable cost, for example, a lot of those factors, the EPP, the increase in that, all those factors also enter into the equation on elasticity when it comes to measuring, like, should we lower prices? Should we keep the prices the same? So again, I think we've learned a lot. We've made a lot of improvements, so if the situation has to happen together, we have more tools in our tool chest. Maybe just like on the June commentary, I mean, is it fair to expect that the positive trends you're seeing should only get better through the course of the quarter? Or is there some monthly seasonality or comps to keep in mind there? Thanks. Yeah. No, look, we're encouraged by really the trend since the second half of the first quarter. Like I said, it's even, you know, continued into June. So we're encouraged by that, and you know, we're gonna keep getting after it. So I don't have a crystal ball to tell you exactly what's gonna happen this year, but we feel good about the trajectory. Great. Thank you. Thank you. Our next question will come from Craig Kennison with Baird. Please go ahead. Hey, good morning. Thanks for taking my question. Bill, you mentioned some cost of goods sold initiatives related to logistics and reconditioning. Do you expect those savings to flow through to the bottom line or to drive lower prices? And then, is there any way for you to quantify the per unit impact of those initiatives? Yeah, great questions, Craig. And yeah, we're from a quantification standpoint. Look, I think we have $200 per unit, per retail unit that we're going after over the next year or two, between reconditioning and logistics. So as you know, that's not insignificant at all. And you know, we're excited about it. It's not gonna hit day one tomorrow, but you know, across the two, we feel like there is kind of that amount of opportunity there. And then the other part of your question- Do you expect that to hit the bottom line, or is that- Oh, yeah, yeah. Yeah, so I, what I would tell you is, I mean, obviously, you have a decision to make when you start to pull that in. As I sit here right now, I'd say, look, we'd probably flow that through in the, in the form of, of pricing, but certainly you have decisions to make as you realize some of those efficiencies. Why, I guess just to follow up, why not take... You know, if your prices are competitive today, why not take those efficiencies to the bottom line? Well, again, you have decisions to make. Again, we'll be looking at the affordability, we'll be looking at elasticity. It's hard for me to say what the situation is gonna look like once we get there, because there's a lot of factors that play into that. We may take some of it, we may take... You know, in the past, I mean, you've followed us long enough. You know that at one point, we picked up some reconditioning savings, we took them to the bottom line. Mm-hmm. But a lot of the years since then, we've been passing along, and it helps us just manage overall margins. It helps manage, you know, the price. So I just think there's a lot that goes into the equation that we'll have to look at that point in time. Yeah. Yeah, makes sense, Bill. Thank you. Yep. Our next question comes from Chris Bottiglieri with BNP Paribas. Please go ahead. Hey, thanks for taking the question. So first, I just wanted to follow up that last question, actually. Can you elaborate more on the parts acquisition? That sounds pretty material. Are you going direct to vendor and just sourcing yourself, or are you asking your retail partners to reduce pricing? I have a question on credit. I know I'm breaking David's rule. I apologize. But I'm doing it intentionally, so sorry. But the prospectus on new, you know, new non-prime securitization would suggest there's $5 billion of this type of, you know, receivable. How does that $5 billion legacy portfolio that, you know, that's behind that securitization, how does that differ between tier two? Like, is tier two just like a higher CNL than the legacy five? Can you just elaborate, like, how this is different and why you see this yielding? Thank you. Sure, Chris. Well, first of all, breaking David's rule, you're the only one that apologized, and everybody's broken it up to this point, so we forgive you. The first part of the question, I'll answer, and I'll toss it over to John on the non-prime. So look, we've got unbelievable parts partners. Parts partners have been around for a long time, so we have national relationships with. So that's been great. We just see that there's some parts optimization internally that we can do better on, and which parts we're getting from which source, and which parts are being applied and not being applied. So, you know, I, that's just one of many things that we're working on. But, I don't want you to come away thinking we have this—we don't have good parts, partners or whatever, 'cause we do. We have great national relationships, and we're pleased with those partners. We just think we can do a better job optimizing the parts. So, Jon? Yeah, appreciate the question, Chris. So if we think about, you know, the legacy $5 billion you referred to, if I look at kind of our overall portfolio or what we originate across, so 43%, you know, again, we've historically operated our current program, the vast majority of that has been Tier 1 that we're putting into the current ABS program. If we think about that, those receivables, we're gonna basically split that, and we're gonna create a higher Prime program, which is gonna, you know, target again, we think a different investor base, really give us scale, across what we would consider the higher portion of those historically securitized receivables. And then we drop down the residual there, including, and then add to that, the Tier two and the Tier three volume that we have not historically securitized, will be able to be lumped together into this non-prime program. ... So that's how you think about what we originate today. If you think about what we might go after in the future, there are small pockets of Tier One that we've, you know, tightened on today, that we would be able to capture back, and we're always looking to do that. But then, if you look at the entirety of Tier Two and Tier Three, call that today, it's 27% of sales. You know, that's a wide spectrum, in all honesty, across that 27%. And so we think that there's volume to be captured across all of that, and we will figure out what the right spot to be in is. So, but again, this will enable us to grow down there. Now, last thing I'd wanna make a point on is, our partners have enjoyed that volume, and we love that they enjoy that volume. We anticipate selling a lot of cars in the future, and we want our partners right there with us along for the ride. So we will go after some of that volume in that Tier Two and that Tier Three space. We don't want it all, but we do think there's opportunity to grow there. So hopefully that broad answer answers your question. I would just add one thing- Yeah, sure. Say one thing, Chris. I think a general way to think about that split in the program between high prime and non-prime, from a FICO perspective, is think of the non-prime as less than 650, and then the high prime is greater than 650. Just a general way to think about the two pools. Gotcha. Okay, thank you for all the help. Appreciate it. Our next question comes from Scot Ciccarelli with Truist. Please go ahead. Good morning, guys. Morning. Bill, I know you've had a couple different questions on market share, but I'm gonna try to swing it out a little bit differently here. From the outside, I guess we can see growth rates of Carvana and the public dealers. Given your commentary earlier on mix, do you think it's your mix of late model products that's kind of the key driver to the relative growth rates that we're seeing? Or could there be other factors at play, whether it's credit approvals or something else? No, Scot, I mean, I think the biggest factor is really coming off that big price correction at the end of the calendar year, last year. Remember, we hold our margins. Obviously, it's a highly fragmented market. There's lots of folks that don't hold their margins, they're getting rid of the inventory. So I think that's been, that's been a big factor, most recently in the drop in the fourth quarter, and now as we're starting to climb back out. But certainly, I think beyond that. Look, I, I said earlier, I think, you know, there's more cars that are being sold that, for example, that are 10 years and older, and that's just not a space that we really do anything. And I think the other thing is, you know, our bread and butter has always been kind of 0- 4. That's probably 70% of historically what our sales are, and that's been an expensive ticket for folks. So they're—you know, we've seen people migrate down. We've seen, like, you know, throughout the last couple of years, when you look at credit apps, people are looking for a little bit cheaper car, and that's across all the credit spectrum. So I think there's a combination of things that are going on. And, you know, the other thing is, we're just not gonna—we've spent 30 years making sure that we have a high-quality product, and we wanna maintain that high-quality product. So we understand that there's gonna be some consumers that have traded down. So I think it's a combination of things. So can I ask a follow-up? Sure. You know, when you look across your markets, I know historically, you know, the older management team used to refer to kind of 10% market share in, you know, certain markets. Like, what is your highest market share, you know, in a specific market? Just so we can kinda compare the 4% average to it. Yeah. So our highest markets are over 10% still. And, you know, when we and I've talked about this in the past, when we rolled out Omni originally in 2020, we looked at those 15 oldest markets, and we actually saw a nice little acceleration in market share. Obviously, they grow a lot slower than the younger stores, but, you know, I don't know where the top end of that is, but it is, the older ones, they're over, over, you know, double digits, over 10%. Got it. Thanks, guys. Thank you, Scot. Our next question will come from Chris Pierce with Needham. Please go ahead. Hey, good morning. Can you talk about supply? I know we're seeing commercial vehicles at auction kind of grow year over year, with more growth ahead, but is that the supply of cars that you need to come back that will help the overall share of newer cars in the market gain share versus older share, older cars, and that helps you sort of gain share? Like, what are you seeing from a supply perspective? Yeah, you know, I know a lot's been written and folks saying that we have a supply problem, and the reality is, we're not having a problem sourcing the cars. If there's any impact on supply or from supply, it's just that it goes into the overall affordability question, but we can get the supply. Now, having said that, I think it's great that the SAAR continues to go up. I think the most recent number I saw was, like, 15.7. You know, eventually, and we've already started to see it, to your point, you know, more cars that come into the market, again, help bring the price down of the used cars, and you know, more specifically, 0-4. So I think it's more inventory enters, and I think that's good for the industry, and I think it's good for us. Okay. So just to... You're not having problems getting supply, but you, you, you're choosing not to source older vehicles, and that's what's sort of hurting the share. But I just wanna make sure I'm kinda understanding where supply- Yeah ... is going and the supply decisions you're making. Yeah. So, no, so appreciate the clarification, 'cause, you know, when you asked the question, you were talking more about the supply of about later model cars. If there's any supply issue, it's just, if you're looking for an older vehicle, you know, for us, we buy lots of older vehicles, but there's only so many of them that you can bring up to the quality standard. So if we have any supply issue at all, it would be more in the, hey, older vehicles that meet the CarMax standards. But, but again, I mean, we've had roughly a third of our cars are, let's call it, more than six years old. That's, you know, quite up, it's up a lot from where it was before. You know, if there's any supply issue, it'd probably be more in that bucket versus the late model bucket. ... So just is the supply of vehicles that meet the CarMax standard growing, or has it been flat and not changing it? You know, what's the right way to think about the supply of vehicles that you're willing to retail? Yeah, I think as we look forward, and you look holistically, whether it's an older CarMax vehicle that meets our parameters or a younger one, I think the supply is improving. Just because of with the dynamic that you talked about earlier, because the SAR is continuing to go up, eventually those cars come in. So, and the impact it has on us is, well, prices just start to come down, and I think that's, that's good for the industry, and it's good for us. Okay, thank you for that. Appreciate it. Thank you, Chris. And as a reminder, that is star one if you would like to ask a question. And we will take our next question from David Bellinger with Mizuho. Please go ahead. Hey, thanks, guys. Just another one. Regarding the CDK and the dealer software issues that are pretty widespread right now- Yeah. Does CarMax have any exposure there? And are you seeing any changes in volumes or consumer activity? Just, just any clarity you can provide on just some of the near-term implications from this, this widespread issue? Yeah, you know, it's unfortunate for those dealers because I know there are a lot of them. We do not use CDK as our DMS. It has a small impact on us, and the way it has an impact on us is we obviously work with a lot of other dealers from a parts standpoint, and if their systems are down, it can slow down parts. There's a little impact on title work as well. But, I would say it's just minor in the scheme of things as far as the impact on us. Got it. Thank you. Sure. I think one question at a time. I'll hand the call back to Bill for any closing remarks. Okay, great. Well, I want to thank, as always, Bill, I want to thank all of our associates for everything they do. I also want to thank you all for joining the call today. And just let you know, we just recently published the 2024 responsibility report, and I would encourage all of you to read it. It provides great updates on several of our key initiatives, from climate related to the tangible impact we're making on our local communities. I think we're proud. I think it demonstrates our values and how we live, and it also positions us well to drive long-term sustainable value for all of our shareholders. So again, we appreciate your time today, and we'll talk again next quarter. This will conclude today's conference. Thank you for your participation, and you may now disconnect.