Ladies and gentlemen, thank you for standing by. Welcome to the third quarter, fiscal year 2026, 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, Vice President, Investor Relations. Please go ahead. Thank you, Nikki. Good morning, everyone. Thank you for joining our fiscal 2026 third quarter earnings conference call. I'm here today with Tom Folliard, Interim Executive Chair of the Board, David McCreight, Interim President and CEO, Enrique Mayor-Mora, Executive Vice President and CFO, and Jon Daniels, Executive Vice President, CarMax Auto Finance. Let me remind you, our statements today that are not statements of historical fact, including, but not limited to, 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 and risks that could affect these expectations, please see our Form 8-K filed with the SEC this morning, our annual report on Form 10-K for fiscal year 2025, and our quarterly reports on Form 10-Q previously filed with the SEC. Please note, in addition to our earnings release, we have also prepared a quarterly investor presentation, and both documents are available on the investor relations section of our website. 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. Tom? Thank you, David, and good morning, everyone. Thanks for joining us. Today, I'm going to provide some perspective on our leadership changes and CEO search. I'll then turn the call over to David, who will review our initial observations and the actions we are taking in response. After that, Enrique and Jon will speak to our third quarter results before we open the line for your questions. As many of you know, I've been part of CarMax for more than 30 years. Over that time, we've developed a beloved brand with national scale, unmatched physical and digital infrastructure, and an award-winning culture. However, recent results have been unacceptable and do not reflect the company's potential. As a result, even though the board was already working on a succession plan, we determined that more immediate change was required and that direct involvement from David and myself was the best approach to strengthen the business in the near term. The board has been searching for a permanent CEO with urgency. We are seeking a proven leader who can drive sales, maximize the benefits of our omnichannel experience, strengthen our brand, improve operations, and champion our culture. Conversations are underway, and we have some promising candidates. What is most important is that the next CEO captures the tremendous opportunity that we have in front of us. As Interim Executive Chair of the Board, I'm focused on supporting David and the leadership team. David is in Richmond five days a week, and I'm spending a significant amount of time here myself. We are operating with a renewed sense of urgency to drive the business forward. I want to thank David for stepping into the Interim President and CEO role. As you know, he has served on our board since 2018. David has more than 20 years of executive leadership experience at prominent retail brands in highly competitive and fast-paced markets. He has led several successful brand transformations, new Omnichannel strategies, and growth initiatives for digitally native brands. What made him a great addition to our board has also been a tremendous asset in this transition. And before I turn it over to David, I also want to thank Bill Nash for his more than 30 years of service with CarMax. David? Thanks, Tom, and good morning, everyone. I'm honored to serve as the Interim President and CEO at this important juncture in CarMax's history, while our top priority is to find a terrific next leader. In the interim, Tom and I are committed to lead and take the steps needed to set up the next CEO for success. After three decades in the retail industry and having led multiple companies through turnarounds, I am familiar with the rigor and critical thinking required to succeed. The good news is CarMax already possesses many of the vital attributes needed to turn the business and regain momentum for growth, including a well-known and trusted brand, a strong culture supported by a base of 28,000 talented associates, and an expansive digital and physical infrastructure, including over 250 premium locations that put us near 85% of the U.S. population. Despite these advantages and after decades of industry leadership, based on recent results, it is clear CarMax needs change, and while it has been only a few weeks in our interim roles, here are some of our observations. Prices. Our average selling prices have drifted upward and appear to be less attractive to customers. To ensure that CarMax is a preferred choice, we will work to shrink the gap between our offering and the marketplace. We are lowering margins and supporting this action with marketing spend while also building out more effective ways to communicate our value to the consumer. We are also comprehensively reviewing all the costs associated with bringing a car to market. We're going to find ways to eliminate the unproductive while maintaining our reputation for having a high-quality fleet. Around the consumer, we need to bring an even sharper focus on the customer throughout the organization. In guiding decisions, we will reawaken our intellectual curiosity and challenge long-held institutional beliefs as we work to discover the most important elements to the customer in closing the sale. We will emphasize customer-insighted decision-making rooted in fact-based consumer research. Digital. We have the opportunity to incorporate a clearer and more effective selling voice in our digital experience. While we have spent several years building out capabilities for customers to shop how they want and where they want, we must now focus our energies on making the digital shopping experience easier and shift our digital voice from one that earnestly delivers abundant information to one that focuses on delivering sales. This will drive conversion and further improve customer satisfaction, just as we do so successfully in our stores. SG&A. Similar to our approach in tackling the cost of bringing our cars to market, we believe our expense structure is too high. It is clear that we have the opportunity to leverage our technological platforms and process enhancements to reduce our spend. We are committed to sharpening our business model and eliminating unproductive costs. And in just a moment, Enrique will provide a progress update on the decisive actions we are taking to reduce at least $150 million in SG&A. Profitability. We will more aggressively tap into opportunities in the selling experience to enhance our profitability. We are excited about the outstanding growth potential we have across CAF and our ancillary products. You will hear more from Jon today about our progress in full spectrum lending, as well as the steps we are taking to capture incremental flow-through in our extended protection plan business. Culture. We've always been a company intensely focused on operations. But with the advent of disruptive technologies, we now need to reignite the entrepreneurial spirit that made CarMax the industry leader for decades. Simply put, we will move faster and operate leaner while taking smart risks. We are optimistic that our immediate pricing and marketing actions will improve our sales performance, but pressure earnings in the near term. As we consider the business model more holistically moving forward, we anticipate that earnings pressure will be offset by unit growth, expanded profitability in CAF and ancillary products, and through reductions in SG&A and COGS. Tom, the board, and I believe that CarMax has many of the requisite attributes for a successful turnaround. We are confident the actions we're taking will begin to strengthen performance while the board identifies the right permanent CEO to lead CarMax for the future. Now I'd like to turn the call over to Enrique to discuss our third quarter financial performance in more detail. Enrique? Thank you, David. During the quarter, we delivered total sales of $5.8 billion, down 6.9% compared to last year, reflecting lower volume. In our retail business, total unit sales declined 8%, and used unit comps were down 9%. Poor performance across our age zero to five inventory was partially offset by increased sales of older, higher-mileage vehicles, which represented over 40% of our sales for the quarter, an increase of approximately five percentage points compared to the second quarter and last year's third quarter. Average selling price was $26,400, a year-over-year increase of $230 per unit. The increase was due to higher acquisition costs driven by year-over-year increase in market prices, partially offset by the increase toward older, higher-mileage vehicles. Wholesale unit sales were down 6.2% versus the third quarter last year. Average wholesale selling price declined by $40 per unit to $8,100. We bought approximately 238,000 vehicles during the quarter, down 12% from last year. We purchased approximately 208,000 vehicles from our consumers, with more than half of those buys coming through our online instant appraisal experience. With the support of our Edmunds sales team, we sourced the remaining approximately 30,000 vehicles through dealers, which is down 9% from last year. Third quarter net earnings per diluted share was $0.43 versus $0.81 a year ago. This quarter was impacted by $0.08 of restructuring expenses related primarily to our CEO change and the workforce reductions in our customer experience centers. Total gross profit was $590 million, down 13% from last year's third quarter. Used retail margin of $379 million decreased by 11%, driven by lower volume and profit per used unit of $2,235, in line with historical averages, though down approximately $70 per unit from last year's record high. Wholesale vehicle margin of $115 million decreased by 17% from a year ago, with lower volume and wholesale gross profit per unit of $899, a decline of approximately $120 year-over-year. Both wholesale volume and margin were impacted by steep depreciation. Other gross profit was $96 million, down 16% from a year ago. This was driven primarily by the impact of lower retail unit volume on EPP. CarMax Auto Finance income was $175 million, up 9% over last year. Jon will provide detail on CAF's growth in a few moments. On the SG&A front, expenses for the third quarter were $581 million, up 1% from the prior year, driven by our previously communicated investment in marketing as we supported our new brand positioning launch and the restructuring expenses that I previously noted. These were partially offset by a reduction in the corporate bonus accrual. As David noted, we are on track to achieve at least $150 million in exit rate savings by the end of fiscal year 2027. We took our first significant step toward these savings this quarter with an approximately 30% reduction in our CEC workforce. This reduction was supported by our continued process and technology enhancements, which are making our associates more efficient, as well as empowering our customers to perform more of their shopping activities themselves. Turning to capital allocation, during the third quarter, we continued our share repurchases, buying back 4.6 million shares for a total expenditure of $202 million. As of the end of the quarter, we had approximately $1.36 billion of our repurchase authorization remaining. Looking forward, I'll cover two items. We are optimistic the actions of lowering margins and increasing marketing will improve our sales performance trends, but may pressure near-term earnings. We expect marketing spend on a total unit basis to be up year-over-year in the fourth quarter, though to a lesser degree than during the third quarter, with a focus on investing in acquisition to drive buys and sales. Secondly, we expect pressure on our service margins in the fourth quarter due to seasonal sales and as we annualize over cost coverage leverage taken last year. At this time, I will now turn the call over to Jon to provide more detail on CarMax Auto Finance and our continuing focus on full credit spectrum expansion. Jon. Thanks, Enrique, and good morning, everyone. During the third quarter, CarMax Auto Finance originated $1.8 billion, resulting in sales penetration of 42.6% net of three-day payoffs versus 43.1% last year. Weighted average contract rate charged to new customers was 11% versus 11.2% last quarter as we continued to adjust consumer rates in reaction to the broader interest rate environment. Third-party tier two volume for which we collect a fee and tier three volume for which we pay a fee combined for 24.9% of sales versus 24.4% last year. Weakness in tier two application volume, along with the impact from CAF's expansion in the tier two space, was more than offset by growth from our tier three partners. CAF penetration continues to benefit from underwriting and pricing adjustments implemented since the beginning of the fiscal year, estimated to be 100 to 150 basis points in the quarter. However, this volume has been offset primarily by lower application volume in the prime credit segment, along with the aforementioned tier three partner lender overperformance. CAF income for the quarter was $175 million, up $15 million from the same period last year. Included in the quarter is a $27 million gain on sale, along with an additional $5 million of servicing fees attributed to the closing of the 25B deal in September. Note that while the gain on sale is fully recognized at the time of sale, servicing fee income will continue over the remaining life of the deal and will be proportional to the receivable volume remaining. Net interest margin on the portfolio was flat year-over-year and down to 6.2% from 6.6% last quarter, and largely reflects the higher margin receivables removed from the balance sheet as a part of 25B. CAF had a loan loss provision of $73 million, resulting in a total reserve balance of $475 million, or 2.87% of auto loans held for investment. Losses observed during the quarter were in line with our expectations, upon which we based our reserve at the end of Q2. With regard to growing the CAF business, I'm immensely proud of our accomplishments today. Over the last 18 months, we have greatly expanded our funding options, including this quarter's off-balance sheet transaction, which have been critical prerequisites to this growth. In addition, we continue to add underwriting capabilities and modeling refinements that will support profitable expansion. Separately, I am also excited about the significant future earnings potential from both our redesigned MaxCare plan, which focuses on mechanical coverage, and our new MaxCare Plus plan, which focuses on cosmetic protection. These products have already migrated from test phase to pilot in multiple markets, and we expect to achieve near nationwide rollout during Q1 of FY27. Now I'd like to turn the call back over to David. David. Thank you, Enrique. Thank you, Jon. Today, we outlined our initial observations and near-term priorities to drive improvement, shrinking the price gap between our offering in the marketplace with a stronger focus on customer experience, increasing digital monetization capabilities, reducing costs, enhancing profitable growth drivers, and improving the speed of decision-making. And while we are realistic about the near-term challenges, CarMax's competitive foundation remains strong. We have a trusted brand, national scale that is difficult to replicate, leading omnichannel capabilities and growing digital infrastructure, a strong financing platform in CAF, and an award-winning culture. Our execution has not matched the potential of these assets, but that's what's changing. Tom, the board, and I are focused on strengthening performance and creating a solid foundation for the permanent CEO to build upon. We appreciate your continued confidence in CarMax and are committed to being transparent about our progress. With that, we'll open the line for questions. Operator. Thank you. If you would like to ask a question, please press Star 1 on your keypad. To leave the queue at any time, press Star 2. Once again, that is Star and 1 to ask a question. And your first question comes from the line of Sharon Zackfia with William Blair. Your line is open. You may now ask your question. Good morning. Good to hear you again, Tom, on a conference call, and welcome, David, to the world of CarMax conference calls. Thank you, Sharon. Yeah. I guess maybe if you could give some color on the magnitude of the GPU reset that you're looking to see here in the February quarter. And then as you look at the business, kind of I guess with a fresher perspective, are there any customer cohorts that you can delve into where you think somehow CarMax has become a bit less competitive or a bit less attractive? And what's the game plan to win those customers back? Yeah. Sharon, hey, it's Enrique. Let me jump in. The margin reductions, which are going to be supported with acquisition spend on marketing, will be meaningful in our design just to narrow the gap that we talked about with the broader marketplace. And we're optimistic that those can actually improve our retail sales trends into the quarter. But they're big enough for us to talk about. And we're going to see how they roll out. We're going to see the impact within this quarter. And then when we have our year-end call in April, we'll provide insight and an outlook on what those margin reductions and marketing spend increase mean to us. Yeah. Sharon, this is Jon. I'll jump into your customer cohort question. Yeah, I think there's obviously places across the spectrum that we're looking to improve and grow sales. One in particular that stands out for me is if you look at maybe the higher FICO segments. We mentioned in the prepared remarks sort of in CAF and the tier two section that maybe 650-750 space feels like we've lost volume there. We can track that through application volume coming through the door and then progression further on. So a lot of speculation around what that could be. Certainly, we're going to look at all things. David mentioned a number of things, pricing. Obviously, we try and keep our rates competitive, just overall the offering that we provide the consumer. but I think that's one spot in particular that I think there's a lot of chance to recapture and fuel our growth. Can I ask a follow-up? You have a competitor who will be kind of lowering finance rates proactively in the current quarter to reinvest some of their GPU to the customer. I think historically you followed the market on finance rates. Would there be something you'd be willing to do on interest rates to kind of weaponize that a bit more to gain more conversion? Sure. I appreciate that question. Yeah, I think we're always keeping the pulse on the markets, looking at how we compare to obviously credit unions and banks and what have you, and certainly competitors as well to the degree we can measure that. Yeah, I'm not going to speak to what they're going to do. But we think our APRs are quite competitive with the Fed making the moves that they've had to make. We will adjust accordingly. We always have a test and learn methodology there. I'm not going to say we're going to try and get further ahead of the market. But I still think in maybe this space, there is a gap in interest rates that still exists, although it might be closing. But I think it's the broader offering question. How do we compare from an interest rate standpoint, certainly in maybe term, but obviously couple that with what's the price of the car and all the other fees associated with that? So I think the bigger offering picture is the one that's really going to be the focus here. And Sharon, what I'd say, looking at it a bit more broadly as well, is that the reductions in SG&A, so these are levers that we've talked about, the reductions in SG&A, the focus on COGS, growth opportunities in CAF in full spectrum, as well as EPP products that Jon talked about and we're happy to elaborate on. Those are all levers that bring to bear an ability to be more competitive in the marketplace. At the same time, we're reevaluating, as David talked about, reevaluating how we go to market. And how we go to market, as Jon mentioned, it's the kind of cars, it's the price of the cars, it's how we communicate on our website. It's all of those items. And so we do think we have levers at this point that are lining up to be materially more competitive and to go to market with. Okay. Thank you. Thank you. Our next question comes from Scot Ciccarelli with Truist. Please go ahead. Your line is open. Good morning, everyone. So historically, I'm going to take another shot at this GPU question. Historically, I believe the management teams have talked about needing to lower prices by about $500 per unit to see a real inflection in the sales pace. So that would obviously be meaningful to use Enrique's words. So is that in the range of how you guys are thinking about reducing your GPU? Yeah. What I'd say is I don't think we've said $500 is a meaningful or a needed amount to drive sales. We do price elasticity testing. We're always in the market doing price elasticity testing. I'd tell you the number to move sales is well south of that. And in terms of what we're doing this quarter, look, we're trying different things. We are going out. It was, again, sizable for us to talk about on this call. We're going to test the impact on sales, again, in combination with an increase in marketing, kind of get a boost there overall. And we're going to report out in the fourth quarter call in April and communicate what we saw in the market. We're optimistic it's going to change the trend in sales. But I wouldn't say that $500 is what we need to move sales, if that's what you're saying. Got it. Thank you. And then just to follow up, if I can, I guess it's a bigger picture question for Tom and David. What do you think CarMax represents to consumers today in late 2025, given some of the alternatives that are out there? And where do you think you would like to end up in, call it, two to three years? Thank you. Hey there. Nice to talk to you, David, here. We think many of the things that CarMax has meant to the customers in the past can continue to be. We believe we're a leading used car destination for customers. We've invested a lot of money and time and effort in building and broadening those capabilities to be able to let them shop where they want and how they want, and ultimately, we believe we're the most trusted brand out there. The differences in where we've been and the performance we need to adjust to and adjust our model towards getting to and have confidence we're going to be able to get there in the near term. Hey, Scott. It's Tom. Good to talk to you again. From my perspective, and I'm a little biased, over the last 30 years, we've built an iconic brand. And I don't think that's changed at all. I think the consumer knows what we represent. They know the quality that we represent. I think our associates in our stores and in our CECs and across the board are completely engaged and ready to serve the customer. We've spent a lot of money investing so that we could serve the customer however they want to be served, whether it's online or in our stores. And I just think we need to activate that. We need to do a better job of presenting that to the customer upfront. But in terms of the brand and the strength and the quality of our vehicles, all that stuff is fully intact. And I think it's the basis for us moving forward and a basis from which we can grow again. Thank you. And happy holidays. Thanks, Scot. Thank you. Thank you. We will move next with Craig Kennison with Baird. Please go ahead. Your line is open. Hey, good morning. Thanks for taking my question. On the SG&A topic, what is the baseline SG&A from which you expect to cut $150 million? Just curious so that we can track your performance against that goal. Yeah. No, absolutely. And so when we talk about our SG&A goal of a $150 million reduction, it's a reduction of SG&A opportunities. That's really comparing it to last year, if you will. So if you want to use our base was $2.5 billion, right, roughly. And so that's what we're using as a baseline. And those are the reductions that we're going after. That is an exit run rate as of Q4 of fiscal 2027? Exactly. Okay. Thank you. Thank you. Our next question comes from Rajat Gupta with JPMorgan. Please go ahead. Your line is open. Great. Thanks for taking the question. And thanks for the candid assessment on the prepared remarks. I had a follow-up on just the margin versus same store expectation. Could you give us any sort of early read? Because we got the sense that last quarter, also, there was some effort to become more price competitive. Anything you can give us in terms of early reads in December and how those actions have already started to show some results? Or is it still very early? Or have you not implemented them yet? And what kind of equation are we looking at in terms of dollar versus same store volume trade-off, dollar GPU versus same store volume trade-off? Any more insight you can give us on how you see this equation playing out? I have a very quick follow-up. Thanks. Yeah. Hey, Rajat, so we just rolled out the price changes, so it is too early to provide any kind of insight into that, and again, we will provide a view into that in a Q4 call, but we literally just rolled out those changes, so. Rolling them. They're underway. Yeah. And they're underway. Actually, that's a good point. They're not fully rolled out. They're underway. But we just started this week, so. Is the hope to go back to share gains or positive unit growth? What kind of the expected outcome in the near term? Yeah. No, look, we are optimistic that this lever that we're pulling, and again, it's really the combination, right, of having lower margins, lower prices out there, being more price competitive, supporting it with acquisition marketing, right? So think of paid search, other direct levers like that directly to support sales is going to change the trend of our performance. So we just reported a negative nine comp. Last quarter was a little better than that, but not great, and our goal is to change the trend and to get the sales flywheel going. That's what we're looking to do. At the same time, we're working really hard on getting other profitability metrics or levers, I should say, in place. Again, those things are SG&A reductions, COG reductions, EPP growth, CAF full spectrum, so CAF income growth over time. These are all levers that we're pulling because our goal is to drive sales over time, absolutely, and to drive earnings power over time as well. Just a quick follow-up on CAF. It looks like, as you mentioned, third-party tier two penetration went up. Is there any meaningful tightening effort going on right now? I'm curious how those reserves will change going forward once you go back to having more in-house tier three, tier two type penetration. Or maybe any color you can give us on just CAF provisions in the fourth quarter would be helpful as well. Thanks. Sure. Yeah. Appreciate the question, Rajat. Yeah. I don't think there's a tremendous story in the tier two, tier three. We always just provide the numbers and provide a little guidance to set the delta there. But there's always swapping between maybe a tier two lender that is choosing to be a little more aggressive or doing tightening. Again, they're going to make their own individual decisions versus the tier three partner that, again, may be the recipient of that tightening higher upstream or, again, being a little looser on their side. So I don't think there's a meaningful story there, just to clarify, just really providing the numbers. And ultimately, to your second question, I don't think that I wouldn't read much into that in terms of CAF provision. Again, we're, as we've stated, very, very excited about our opportunity as we go down into the tier two spectrum. Just for a point to note, we were over 10% of the Tier 2 volume came to CAF this quarter we went after. And so we're really excited about that. And as we continue to go further spectrum, we're generally operating in the higher 50% of Tier 2. But we think we can get the entirety of that credit spectrum as we methodically roll out refinements to our model. We're excited about the funding solutions we have in place. And so we will reserve for it accordingly. And we will enjoy the income, and we will get there. Thanks, Paul. Thanks for all the color, and good luck. Thank you. Thank you. Our next question comes from Brian Nagel with Oppenheimer. Please go ahead. Your line is open. Hey, guys. Good morning. Tom, welcome back to the call. Hey, Brian. Thanks. Look, this is going to be potentially repetitive. I want to make this point across. So we're talking about pricing and being more aggressive in pricing here. For as long as I can remember, and I've talked to CarMax for some time now, you've done these pricing tests. And the message from CarMax has always been the same, is that they really lower prices, but the net result has not been favorable. So I guess the long ask is you're talking about, once again, either testing or moving forward with lower prices and accepting lower GPUs. What's different this time? Why do you think that this time around is going to be different than the past, which actually can drive better unit volume? Yeah. I think in the past, look, when we've lowered our prices, and we do price elasticity all the time, right, Brian? We talk about that. I think the equation in the past has been you lower your prices, and then when you flow it through to the business, do you make enough money to offset the lower margin with increase in sales? It absolutely drives sales, right? But the equation was, well, it didn't always drive enough profit. I think the difference, absolutely, right now, there's a clear difference. The clear difference is that we have stronger levers that are now supporting to look at the business more holistically. So again, think of the reduction in SG&A, that aggressive cost we're going after. You think of COGS and how aggressive we're going after COGS. You think of EPP growth. You think of CAF full spectrum income growth. These are all levers that are offset. Some of that pressure we had seen when we looked solely at the impact of lowering prices. So there's absolutely a difference. And we're just looking at the business a bit more holistically. And we have those levers at hand here. Yeah. And Brian, I would just add that, as Enrique mentioned, we've always talked about it in terms of total profitability. When we do price changes, we definitely see some sales movement. And then we've always had kind of the guardrails around what total profitability is. I would just tell you that our focus in the near term, given our current performance, is to drive sales and to get things moving in the other direction. The other thing to remember is when we say we're going to lower prices $100 or $200, it doesn't mean we're taking $100 across the board on cars. It's more like if we say $100, think of it as 10% of our cars $1,000 or 5% of our cars $500. So it meaningfully impacts the trajectory of sales because of the way we execute price changes. But back to our near-term priority is to get things turned around and get sales moving in the other direction. And thank you. And then just a follow-up, sorry, David. With regard to marketing, so you talked about, if I understand correctly, a stepped-up marketing now. So to say, press down the gas a little bit more. When you think about it, is it more of the same, or is CarMax really working on coming to market with a new marketing message? So yeah, good question. Thank you. So what we're doing is taking the new campaign was launched recently as the team took you through. And what we're focusing on now in the near term is sort of optimizing the campaign we have with the results and tests we have. So shifting things that are going to drive more conversion, messaging, perhaps some of the, and dialing back, perhaps some of the brand longer-term spend on it. But ultimately, we think the review and positioning of the campaign is really something for the new CEO who's going to align it with the new strategy. And we're working with the existing campaign and resources we have right now. But the team has been working to optimize the results based on media, based on geographies, and based on messaging. Thanks. Appreciate all the color. Thank you. Thanks, Brian. Thank you. Our next question comes from Daniela Haigian with Morgan Stanley. Please go ahead. Your line is open. Thank you. Good morning, Tom, David. Appreciate your color in the prepared remarks. My first question is on that digital redefining the digital platform. What specifically within that needs to change to drive more of a selling experience? And how does that impact the operating cost structure with your store base? What would be early indicators of progress in that redefinition? Yeah. So we'll take the first part of the question first. We have worked very diligently and over the years to build the capability set. But we have not been as focused yet on the next stage, which is to make it easier. Look, shopping online with us is not easy. We have ways to streamline it, and we have ways to make the digital selling voice, really, just like our sales associates in the stores, make it easier to bring to get them to the ultimate sale. And the ultimate satisfaction is finding a car they like that they can afford. And we recognize that with all the good work that's been done, it's still not an easy experience. And so in our earnest efforts to provide information and countless options, we still have opportunity to streamline it, bring it there. And then in terms of the impact downstream, we'll work in lockstep with the organization and the field to figure out what those best options are. As both Jon mentioned and Enrique mentioned earlier, we have an opportunity to look holistically at our business model from our COGS, our SG&A, our messaging, and all those components. And that includes how we make decisions, not necessarily individually, but more holistically and what that means for an offer for the customer so that we don't lose sight of what's most important to them. But I would expect you're going to see some of the changes. Tom and I would expect you'll see some of the changes. And it'll be iterative in the next month or two. You'll see it, and we'll continue after that. But you should see the efforts are underway, and the team's very excited about this next step in that digital journey and how important it is in linking with the field team. Very symbiotic. Got it. Got it. That's helpful. And appreciate your transparency there. My follow-up is on COGS, right? You and Enrique, you keep calling out COGS as a key lever. What's the strategy with reducing that line item? And are you still progressing towards that regional reconditioning center approach? Yeah. I would tell you, look, we have been focused on COGS. I mean, we're always focused on COGS. What we've done is that we've called it out over the past couple of years. Last year, we had communicated a goal of $125 per unit. We hit that goal this year. We had communicated, again, another goal of $125 per unit. I would tell you, given where sales are or have been for the past two quarters, we're probably a little bit behind that goal. Not because the initiatives aren't there and the teams aren't doing great work. It's just because you deliver in a tough sales environment. But we will continue to put even more accelerated goals internally to go after COGS opportunities. Some of that is through the reconditioning centers, right? Some of that for, I'll give you a real example. We just rolled out a parts selection tool in our stores. We're already seeing benefits from that, right? Really kind of forcing our associates in the stores to pick balance, speed with quality, with cost, and making it really easy for our associates to do that. And we're seeing results fairly immediately. And that's just an example of items we're focused on in COGS. In terms of the reconditioning centers, yeah, we've rolled out at this point in time five. Only two of them have been open for about a year. So it's still kind of early to tell what the goals are. I mean, the ultimate goal is absolutely to get them more efficient. We're already seeing logistics savings in the system because we've rolled these things out. We expect that those will perform in line with some of our larger reconditioning units that we have in stores like Murrieta in LA that we've seen. They're a highly efficient store because of the volume that we pump through. We have the same expectations with these more regional reconditioning centers. Again, we've only rolled out a few at this point in time. Thank you. Thank you. Our next question comes from David Bellinger with Mizuho Securities. Please go ahead. Your line is open. Hey, good morning, everyone. Tom, nice to talk to you again. In the prepared remarks, you guys mentioned reassessing the cost of bringing a car to market. What about the time to turn vehicles? CarMax has been a leader in that area for a long time. Looks like some competitors have increased their speed to market pretty dramatically. Is there anything you guys can do around AI implementation, cut down that timeline, use your 30-plus years of data, and potentially avoid some of those sharper depreciation swings that have disrupted the business over the last few quarters? How should we think about that opportunity? Yeah. I think, look, we're always focused on reconditioning, on speed, on lowering our WIP. For example, this quarter, we increased our sellable inventory and decreased our overall inventory, right? So that's really a strong focus on WIP. That actually this quarter helped our turns relative to last year despite comps being down 9%. So you can see the organizational focus on just getting better in terms of turning vehicles. I think our off-site reconditioning locations will help as well because we'll be even more efficient. So just a couple of examples there in terms of the focus moving forward. Enrique, maybe a second question. Just can you update us on the real estate strategy? Anything that's changing there? You guys own a lot of your real estate. Is that a potential area where you could monetize and use that to fund more investment in the business if you need to? Yeah. Look, I think it always is a potential. We own a lot of our sites out there for our store locations. I would tell you we have better sources of capital versus doing a sale-leaseback or something. So we have great banking relationships, great partners out there, capital providers. And we have a revolver, a $2 billion revolver. We can dip in there, and just more efficient ways to get capital for us rather than kind of monetize our stores or the land under our stores. Got it. Thank you. Thank you. Our next question comes from Chris Bottiglieri with BNP Paribas. Please go ahead. Your line is open. Hey, guys. Thanks for taking the question. First, one more clear call, I suppose, and then just a bigger question. Did you give the service profit? I think it was $4 million last quarter. Just curious what that was for Q3. Is that a good run rate for Q4 given volumes are pretty similar Q4 versus Q3? And then my actual question, can you just elaborate what's happening with the credit penetration? It sounds like the prime side, I suppose, you're seeing less appraisal traffic or less traffic coming in. I would think that with a K-shaped economy, that's probably the healthier side of the market. Just kind of curious what's causing that, what you're seeing there. Thank you. Do you want to do that with Chris now, Jon? Yeah, that's fine. Chris, this is Jon. I'll take the credit side. Yeah. As we noted in the remarks and even reflecting on Sharon's question, when we look across the credit spectrum, we really can gauge who's coming and shopping with us through our pre-qual product. It's a great place to do it. Customers love it. They take full advantage of it. 80+% of our customers start with credit online. Yeah, I think we see definitely an opportunity in that sort of 650-750 credit space. As I mentioned earlier, hard to speculate what's driving that. Is that we think our rates are quite competitive there. But it's always a question of inventory, price, availability, all of that. I think, as we mentioned on this call, holistically, all of that is up for discussion, and we're going to look at improving our overall offering there. While we say K-shaped economy, ultimately, we do see those folks probably are less stressed by affordability. We want to make sure we have the right product at the right price at the right time for them when they're ready to purchase. I think there's improvement there. That's really what the comments, I think, are in that space. Yeah. And regarding service in the quarter, there definitely was pressure in service, as you know. And as we've talked about, it is a line item service margin that deleverages when sales are more challenged. But look, over the past couple of years, the teams have made material strides in service margin over the past couple of years. And we had even talked at the beginning of this year that we expected to be, I think, slightly positive for the year in service margin. Certainly, our sales expectations at that point in time were not where we are currently actualizing. But I'll tell you, for the full year, our outlook right now is maybe a little unprofitable or a little profitable, depending on sales performance in the fourth quarter. And that just tells you the incredible work the teams are doing for service margin there. But we did have a negative margin in the third quarter. And we do expect, as I talked about in my prepared remarks, some pressure in the fourth quarter. We'll be copying over some cost coverage that we took last year. But again, if I take a step back and I look more holistically at it, the teams have done tremendous work. It's going to be borderline whether or not we hit that positive margin for the full year. But again, sales have been definitely more pressured than what we had anticipated versus the beginning of the year. Thank you. Thank you. We will move next with John Babcock with Barclays. Please go ahead. Hey, good morning, and thanks for taking my questions. I guess just first of all, I was wondering if you could talk a bit more about what the board is looking for in its next CEO and also how we should think about timing in terms of when something might be announced there, recognizing that might be variable. Yeah. I would just tell you it's the board's highest priority right now. It's my personal single highest priority as I'm leading the search along with the rest of the search committee. We're looking for somebody that has led a complex business with a diverse set of assets. We're hoping to find somebody that's also led some type of a digital transformation. Doesn't have to come from automotive necessarily. Doesn't necessarily have to come from retail. But one of the most important things is that it's somebody who understands our culture and can lead this team onto the next phase of our success. In terms of timing, we're moving as quickly as we can, but I don't really have an update on timing. Okay. Totally fair and then next, at least based on the work that you've been doing over the last couple of months and even in knowing the business, I was just wondering, how are you thinking about the omnichannel business? I mean, do you think this is kind of the setup that you want to keep longer term? Do you think you want to shift more towards digital over time? What's the benefit of omnichannel versus digital or pursuing more of a brick-and-mortar strategy? I think for us, it's really all of the above. Over the last several years, as the team has been communicating, we've spent hundreds of millions of dollars in our infrastructure and giving us the capabilities to meet the customer wherever they want to be. I think having a national physical footprint is an advantage for us. Over 250 locations, as David mentioned in the beginning of the call, near 85% of the U.S. population. So I think it's more of an all of the above strategy. I think some of the comments you've heard today is that we're not happy with how we present to the customer from a digital standpoint. And I think you'll see us make some significant improvements there. But we think our stores are extremely valuable, and our store teams do a great job converting customers once we get them in the store. But we clearly need to get better on the digital side. Yeah. And just to add a little color to Tom's comments on that, again, CarMax has built out so many capabilities. And now when we are talking about holistically looking at our business model, we've built out so many potential capabilities, and many of them are helpful. But some of them probably are adding. Clearly decisions we've made, things we're trying to do, and our best efforts to please everything for every customer. We have an opportunity to streamline, make some decisions, prioritize some things based on real quantified insight from the consumer in ways that we can streamline and optimize the advantages that omni should provide versus getting caught in some of the complexities that Omni also provides. So I think you'll see that in the near term as the team sort of finishes that infrastructure build-out, but then gets to really sharpen it and hone it into a competitive advantage. All right. Thank you. That's very helpful. Thank you. We will move next with Jeff Lick with Stephens Inc. Please go ahead. Good morning. Thanks for taking my question, Tom. It is absolutely awesome to hear your voice. So listen, David, a question for you. You've been a senior leader at retail organizations that were digitally native and also retail organizations that are kind of a hybrid. They have a physical business and a digital business. I was wondering if you could speak to the challenges of CarMax as a hybrid business where there are people that are wedded to the physical part of the business, and there's some natural tension which makes it more difficult to have an ideal digital business. Yeah. Jeff, great insight. And thank you for that question. Yeah. There are examples of that. And that's a little bit of what I was alluding to. Now, recognize, Tom and I have been in the chair for two and a half weeks or so. But the most important things I see is that the team's very excited about breaking through, and it's an incredibly talented and dedicated group. We just need to work across those channels to make sure we're putting the customer at front of those decisions and not having the operational biases or legacy approaches come through. So there is not a battle between one version versus another. But what we need to do is provide some leadership and focus to the team so we can start executing more with that. What's most important to the customer. Streamline, make sure it's a competitive offer because we know we own the brand, and we know we own the trust in a great part of the American consumer. But you're absolutely right. Many organizations, omnichannel causes them to trip up. I would say we're just going through finishing sort of like an awkward adolescence, and we'll be moving into a much more refined effort in the upcoming time. Now, that being said, you want to confirm that answer with the new CEO when they come in. But in the interim, that's why we're so optimistic about the improvement because we have so many of the components already in place. And I was just wondering if we could quick double back to Sharon's first question about potential cohorts that you might have lost or been less effective with. I don't think she was thinking about necessarily the FICO score. And this kind of gets into the advertising strategy. And Tom, just wondering, back in the day, it always seemed like you over-indexed with that young professional, likely a female that didn't want to go into the franchise dealer and do battle. You provided a much more easy professional experience. Do you think that your primary competitor has maybe cut you off at the pass and has even done a better job of providing an experience for that person where it's like, "Look, now it's super easy"? Your question about cohorts, the second quarter, we were down 6%. Last quarter, we were down 9%. So we need to improve across the board. I would just go back to the comments we've already made. We're not as easy as we need to be for the consumer. We need to simplify our processes. It's so easy to buy stuff online. It doesn't matter what it is these days. And it's true for automotive. It's not just true for one or two competitors. It's across the board. And again, we've invested the money to put ourselves in a position to be the best at this. And we got some work to do to get there. But we need to simplify for the consumer how they go through the process with us, whether it's on our website or in our app or in our stores. Fair enough. Best of luck. And look forward to hearing from you again. Thanks, Jeff. Thank you. We will move next with Chris Pierce with Needham. Please go ahead. Your line is open. Hey, sort of following up, good morning, on Jeff's thought there. I guess, do you think you have the customer base that wants to do more of the work online to sort of drive an OpEx offset in GPUs? Or do you need to reposition the brand to get younger? Or would you sort of reject that framing? Can you say that again? Sorry. Yeah. Sorry. We missed that. Yeah. I'm just curious. Do you think you have the customer base that wants to do more of the work online? Do you think you need to get younger with this new ad campaign? Or do you think it's just about pricing and the experience you're offering? I absolutely think we have the customer base that wants to do more of the process online. By the way, the younger you go, the less money you have, and the less likely you are to have the credit required to buy a car that's $26,000. But I think we have plenty of customer flow, and we need to take better advantage of it. Yeah, and as David and Tom talked about, look, we have enviable assets, right? We have an awareness level that's off the charts. We have consumers that are extremely loyal and that love our brand. We have associates that are outstanding. We have more than 250 stores across the country that operate extremely well. We have a strong. We've invested in the digital capabilities. We just need to kind of fine-tune how those things mesh together. But in terms of whether or not we have customers out there that want to buy us, I would tell you, absolutely. That's not the concern that we have. The opportunity that we have is to make our offering based on the consumer the most compelling that we can make it. And that's what we're focused on. Okay. Thank you and good luck. Thank you. Thank you. We will move next with Michael Montani with Evercore. Please go ahead. Yes. Hi. Good morning. Thanks for taking the question, and Tom, good to hear from you again as well. Just wanted to dig into, I guess it's a three-parter, but it's kind of all related, which was depreciation trends, just some incremental color about what you're seeing. The competitive backdrop was the intensity ratcheting up. And then lastly was on the reinvestment into GPU. How much of a reinvestment we ought to be thinking about moving ahead? Yeah. Look, separate depreciation. My comments were really in the wholesale area, right? We did see very sharp depreciation within the quarter, greater than 10% depreciation within the quarter. So very sharp. And that impacted performance within the quarter. But as that abates, then we would expect that performance would turn around. In terms of GPU, we did talk about that. Look, it's material enough for us to talk about it on the call. But at the same time, we've just rolled out different levels of pricing changes. We're going to see kind of how it performs within the quarter. And then in our Q4 call, we'll come back and we'll talk about what we saw and also what that means for our plan moving forward. I say that, but we're also optimistic that it's going to change the sales trend that we've had, negative six, negative nine comps sequentially. And that's what we're looking to change. We're looking to change that trend. And we'll come back with that. And I forget your number two question, but that's. Good. Just the competitive intensity. Yeah. Number one and number three. I don't know. Yeah. Let me add to the pricing part, which is our pricing is not, it's not like we have a static pricing model where we just lower all of our prices and leave them there. This is going to be very dynamic throughout the quarter. I think one of the things David and I and the rest of the team here assessed in a short period of time is if you want to get things moving in the other direction, there's some significant levers that you can push, but the two biggest are clearly pricing and marketing. So we're making moves there to try to get the trend moving in the other direction. But it'll be very dynamic throughout the quarter. It's why we're not trying to be evasive with what we think the margin impact will be, but we're trying to be as impactful as we can. Again, we're 18 days into the quarter. This will be a dynamic process throughout the next three months. Thank you, and we don't have any further questions at this time. I will hand the call back to David for any closing remarks. Thank you. We'd like to thank the thousands of CarMax associates who helped build the business that we have today and will be part of our next leg of growth in the future. Thank you all for joining our call today. And before we sign off, Tom has some closing remarks. Yeah. I just thank all of you guys for your support. Many of you, I know and have heard your voice in the past. And although it's good to be back, I wish it was under slightly different circumstances. But what I would tell you is, from the board perspective, we are absolutely committed to getting this right. David is the perfect person to sit in this role while we search for our next CEO. I'm happy to spend more time on the business. What I've been most enthusiastic about in the last two weeks is how engaged all of our employees are and how excited they are to win. And as we've mentioned multiple times, and Enrique just kind of covered in total, we have incredible assets in this company. We have a great balance sheet. We have an iconic brand. We have 250 locations. And most importantly, what has always separated us from everybody else is the engagement of our more than 28,000 associates. And none of that has wavered. So I just wanted to close by saying the board is absolutely committed to getting this right. And I wanted to also thank David for the role that he is playing while we're in the middle of this search. And lastly, I wish everybody a happy holiday season. Thank you for joining us. And we'll talk to you next time. Thank you. Ladies and gentlemen, that concludes the third quarter fiscal year 2026 CarMax earnings release conference call. You may now disconnect.