Ladies and gentlemen, thank you for standing by. Welcome to the fourth 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, VP Investor Relations. Please go ahead. Thank you, Angela. Good morning. Thank you for joining our fiscal 2026 fourth quarter earnings conference call. I'm here today with Tom Folliard, Interim Executive Chair of the Board, Keith Barr, 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. Good morning, everyone, and thanks for joining us. Today, I'm going to provide some brief commentary on our performance during the quarter. I'll also introduce our new President and Chief Executive Officer, Keith Barr, before turning the call over to him to say a few words. After that, Enrique and Jon will speak to our fourth quarter results in more detail, as well as highlight a few key expectations for fiscal year 2027 before we open the line for your questions. During the fourth quarter, we made solid progress on the priorities outlined last call to strengthen the business. We improved sales trends by lowering our prices, investing in acquisition marketing, and deploying an initial set of digital enhancements designed to drive conversion. We also continued streamlining our cost structure and lowering the cost to bring cars to market, helping us offer more affordable vehicles. Concurrently, we made meaningful progress on our SG&A reduction goals, CAF full spectrum ambitions, and extended protection plan redesigns. Before I get to Keith, I'd like to thank David McCreight for stepping into the role of Interim President and CEO over the past several months. As we search for the right leader to guide CarMax through its next phase of growth, David's leadership was critical in strengthening the business in the near term and solidifying the foundation for growth ahead. David will continue to be a tremendous asset to the company, serving as an Independent Director of the Board. Well, the Board and I are thrilled to welcome Keith to CarMax. In searching for a CEO, we were looking for several attributes. First and foremost, a people-first leader who will fit well with CarMax's award-winning culture, an established proven leader with experience leading a complex business, someone with a strong customer focus and a track record of driving growth and strengthening brands, experience maximizing the benefits of an integrated omnichannel model, and finally, experience leading digital transformations, Keith embodies each of these characteristics, making him the right choice to lead CarMax through a critical juncture and drive the company's next chapter of growth. I'll now turn the call over to Keith to introduce himself and say a few words. Keith? Thanks, Tom, and good morning, everyone. I want to thank the Board for their trust in me. I am honored to join CarMax and lead this iconic organization alongside our talented associates. For more than 30 years, CarMax has helped shape the way people buy and sell used cars, and in doing so, it's earned something rare, the trust of its customers. A customer and associate-centric approach is central to how I lead, and I recognized right away that it is central to CarMax as well. This is one of the many things that attracted me to this team. CarMax has built something truly exceptional, a beloved brand, the combination of an unmatched physical footprint and strong digital infrastructure, and an award-winning people-first culture. I am confident that we can build on this strong foundation and better serve our customers and unlock the significant opportunity ahead of us. Before joining CarMax, I spent my career in hospitality, holding numerous leadership roles in commercial, operations, and technology, and ultimately serving for six years as CEO of IHG Hotels & Resorts. I led a successful transformation that created value for shareholders through empowering associates and pioneering a better experience for customers that has become the industry standard. On the surface, hotels and used cars may seem different, but at their core, both businesses succeed by delivering the right product at the right price in the right way for the customer. My time in hospitality was defined by placing the customer at the center of every decision. The auto market is evolving quickly, and I believe a fresh outside perspective can be a real advantage, especially when it's grounded in respect for the complexity of the industry, a deep understanding of the competitive landscape, and a clear focus on changing customer expectations. I believe there's a tremendous opportunity ahead to better meet the needs of today's consumer. CarMax's scale, including the fact that we reach 85% of the U.S. population, is a competitive advantage in this market. Paired with our brand and culture, we are well-positioned for success. Our recent performance has not reflected our potential, and closing that gap is exactly what we are focusing on. I have been spending my first few weeks deeply familiarizing myself with every aspect of the business. This has included meeting many talented associates across the organization, both in our corporate offices and in the field, studying our customer and associate experience in both the buying and selling journeys, assessing our omnichannel capabilities, and understanding our approach to reconditioning, inventory, pricing, marketing, and cash. In addition to the actions that Tom and David initiated during the fourth quarter, we're working hard to identify where we can improve. When we have more detail, we will communicate our plans with you. What I can already say with absolute certainty is that we will put the customer at the heart of every decision we make to drive better performance. Through that lens, this is what we will prioritize. First, make CarMax the obvious and easy choice. That starts with consistently delivering three things that matter most to customers, a competitive price they trust is fair, access to a broad selection of high-quality vehicles, and an end-to-end experience that meets the needs of today's consumer. Second, use technology to drive more differentiated experiences and efficiencies. We'll use software, data, and AI in practical ways that make it even easier for customers to buy and sell cars and easier for our associates to serve them. That means reducing friction across the journey, personalizing the experience, improving how we match inventory and pricing to meet customer demand, and ensuring a great experience both in our stores and online. Third, act with more urgency and intention while ensuring there's alignment across the organization. We will change what is not working, double down on what is, and keep evaluating opportunities and risks as we move. We'll be bold, hold ourselves accountable, and move with the speed as we build a durable, long-term growth engine. These three priorities are where we'll begin, and I expect our work to evolve as I continue to listen, learn, engage with our teams and investors. We have a meaningful opportunity ahead of us as we strengthen the business and improve our execution to drive growth and returns. I look forward to sharing more about our strategy and long-term objectives in due time, and I'm confident in what we can accomplish. Now I'd like to turn the call over to Enrique to discuss our fourth quarter financial performance in more detail. Enrique? Thanks, Keith, and good morning, everyone. During the fourth quarter, we improved our sales trends and made progress toward our SG&A reduction goal, which we now expect to be greater than the FY 2027 exit rate reduction targets we had previously set. Our EPS during the quarter was impacted by restructuring costs as well as by a non-cash goodwill impairment, while our margins decreased from the prior year quarter as we continue our focus on targeted price reductions and driving sales. During the quarter, we delivered total sales of $5.9 billion, down 1% compared to last year. Across our retail and wholesale channels, we sold approximately 304,000 vehicles combined, up 1% versus the fourth quarter last year. In our retail business, total unit sales declined 0.8% and used unit comps were down 1.9%. This marked a strong positive change in trend relative to the second and third quarters, which saw used unit comps of -6.3% and -9% respectively. Sales performance in our fourth quarter was supported by the actions that Tom noted. Average selling price was $26,019, a year-over-year decrease of $114 per unit. Wholesale unit sales are up 3% versus the fourth quarter last year. Average wholesale selling price declined by $268 per unit to $7,776. We bought approximately 270,000 vehicles during the quarter, up slightly from last year. The actions that we implemented also supported a strong positive change in trend as compared to the third quarter, which was down 12% year-over-year. We purchased approximately 229,000 vehicles from consumers, with approximately half of those buys coming through our online instant appraisal experience. With the support of our Edmunds sales teams, we sourced the remaining approximately 41,000 vehicles through dealers, which is down 9% from last year. Fourth quarter net loss per diluted share was $0.85 versus $0.58 in earnings in the fourth quarter of last year. Adjusted earnings per diluted share, a non-GAAP measure, was $0.34 in the quarter, compared with $0.64 a year ago. Our EPS this quarter was impacted by a few items. This includes a non-cash goodwill impairment of $0.99, driven by a decline in our market capitalization, which coincided with a prescriptive impairment measurement period and pressured financial performance. Restructuring charges of $0.20 related to corporate workforce reductions and the early abandonment of the underutilized space associated with our Edmunds office. Altogether, these items reduced EPS by $1.19 this quarter. Total gross profit was $605 million, down 9% from last year's fourth quarter. Used retail margin of $383 million decreased by 10%, driven primarily by lower profit per used unit of $2,115, which was down $207 per unit from last year's record high fourth quarter. Wholesale vehicle margin of $115 million decreased by 7% from a year ago, with lower wholesale gross profit per unit of $940, a decline of $105 per unit, partially offset by higher volume. Other gross profit was $107 million, down 11% from a year ago. This was driven primarily by service. In line with the outlook we gave in the third quarter call, service was pressured by seasonal sales and the annualization of cost coverage levers taken last year. For the full year, service returned to profitability despite sales headwinds. CarMax Auto Finance income of $144 million was down 10% year-over-year. Jon will provide detail on CAF in a few moments. On the SG&A front, expenses for the fourth quarter were $611 million. When excluding the previously noted restructuring costs, SG&A was $577 million, down 5% from the prior year. SG&A dollars for the fourth quarter versus last year were mainly impacted by three factors. First, total compensation and benefits increased by $31 million, driven by lower corporate bonus and stock-based compensation, as well as lower CEC payroll following the actions taken last quarter. These savings were partially offset by $12 million in restructuring charges tied to our SG&A cost reduction efforts. Second, occupancy costs increased by $27 million, including a $21 million charge related to the exit of our Edmunds office lease. That action will support lower SG&A moving forward. The balance of the increase was primarily timing-related. Third, advertising expense increased by $6 million, reflecting higher acquisition marketing spend. Turning to capital allocation, during the fourth quarter, we repurchased 1.3 million shares for a total expenditure of $50 million. As of the end of the quarter, we had $1.31 billion in repurchase authorization remaining. As we look ahead into FY 2027, I'll highlight a few key areas. We expect to take a more dynamic approach to margin management as we run the business. As a guidepost for FY 2027, we currently expect used margins for the full year to decline at a rate broadly in line with our fourth quarter year-over-year trend, although actual results may vary as we continue to optimize performance. We expect the first quarter to reflect the largest year-over-year decline at closer to $300 per unit as we lap record margins. This outlook reflects our pricing actions and our ongoing efforts to reduce logistics and reconditioning COGS in support of more competitive pricing and stronger sales. We have completed our EPP product redesign and testing and have begun our national rollout, which we expect will drive approximately $35 per unit in margins in FY 2027. We will ramp throughout the year, driven by the rollout plan. Regarding SG&A, we expect FY 2027 exit rate reductions of $200 million, an increase over the previous guidance of $150 million. However, the year-over-year savings within FY 2027 are expected to be offset, primarily as we annualize over the materially reduced corporate bonus and share-based compensation in FY 2026, which offsets approximately half of the FY 2027 in-year savings, inflationary pressures and new location growth. With our focus on lowering vehicle pricing through lower GPUs and COGS efficiencies, we will be transitioning our SG&A efficiency metric to a per total unit ratio, which will consist of retail plus wholesale units. We expect SG&A to lever in FY 2027 when excluding the restructuring charges incurred in FY 2026. Regarding capital expenditures, we anticipate approximately $400 million of spend in FY 2027, down materially from the past two years. The largest portion of our CapEx investment continues to be related to the land and build-out of facilities for long-term growth capacity in off-site reconditioning and auctions. In FY 2027, we plan to open four new stores, two new off-site reconditioning and auction locations, and two new off-site auction locations. Regarding capital structure, our priority remains funding the business and maintaining financial flexibility. We continue to take a disciplined approach to our capital structure, including managing our net leverage to preserve efficient access to the capital markets for both CAF and CarMax overall. With leverage slightly above our targeted range, and as we focus on improving the business during this transitional period, we have paused our share buybacks. Our $1.1 billion authorization remains in place, and we remain committed to returning capital to shareholders over time. 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 fourth quarter, CarMax Auto Finance originated almost $1.9 billion, resulting in sales penetration of 42.8% net of three-day payoffs versus 42.3% last year. The weighted average contract rate charged to new customers was in line with last year at 11.1%. Third-party Tier 2 and Tier 3 penetration in the quarter combined for 25.6% of sales, which was also in line with last year. The year-over-year increase in CAF penetration in the fourth quarter reflects our continued focus on expanding in Tier 2, supported by our flexible funding strategy and newest underwriting models. We expect our penetration growth targeting the top half of Tier 2 will accelerate in FY 2027. CAF income for the quarter was $144 million, down $16 million from the same period last year. The loan loss provision was $74 million as compared to $68 million last year. Net interest margin on the portfolio was up slightly, both sequentially and year-over-year at 6.3%. Consistent with the third quarter, credit losses in the fourth quarter were in line with our expectations. CAF's $74 million loan loss provision largely reflects expected charge-offs on newly originated loans, including those tied to our credit spectrum expansion, primarily into the top half of Tier 2. Total reserves ended the quarter at $453 million, or 2.78% of auto loans held for investment. We also designated a $100 million pool of non-prime loans as held for sale during the quarter, which does not require a loss reserve. As signaled previously, we anticipate leveraging future off-balance sheet funding transactions strategically as it supports our full spectrum growth strategy by balancing income and future provision risk. While CAF income was down year-over-year in the quarter, this is largely reflective of a reduced held for investment receivable base impacted by the $900 million 25B transaction executed in Q3, coupled with lower origination dollars over the last few years. CAF realized approximately $5 million in servicing fees during both the third and fourth quarters. The third quarter also included a $27 million gain on sale as a result of the 25B transaction. As we grow our volume in Tier 2, we will continue refining our funding strategy and earnings model throughout the year. We believe a diversified funding approach gives us flexibility to optimize returns beyond traditional third-party lender fees while maintaining appropriate risk discipline. More broadly, we see CAF penetration growth as a contributor to the larger strategic goal of retaining a higher percentage of finance income. As always, we will carefully consider the current state of the economy and consumer as we shape our strategy. I also want to provide an update on our redesigned extended service plan, MaxCare, which focuses on mechanical coverage and our new MaxCare Plus offering, which adds cosmetic protection. The redesign of these products is aimed at increasing penetration by improving affordability amid higher vehicle prices and has shown encouraging results across multiple markets to date. As Enrique mentioned, we have completed our product enhancement testing and expect to achieve nationwide rollout by Q2 of FY 2027. Now, I would like to turn the call back over to Keith. Keith? Thank you, Jon. Before we open the line for questions, let me leave you with a few final thoughts. I want to thank Tom, David, and all our CarMax associates for the foundation they have built. We made progress in the fourth quarter to improve affordability and streamline our cost structure. The time I've spent with associates in our offices and in the field has only reinforced my confidence in the opportunity ahead. We have a strong foundation, a powerful brand, and our focus is clear. Make CarMax the obvious choice for customers, use technology to create more differentiated experiences and efficiencies, and operate with greater urgency and intention. If we do that well, we will build a stronger, more efficient business with the customer at the center of every decision we make. Before I close, I want to recognize a point of pride for CarMax. We were once again named by Fortune as one of the 100 Best Companies to Work For, marking 22 consecutive years on that list. Even in my first few weeks here, I have seen the culture behind that recognition firsthand. The trust, care, and support associates show for one another every day are real strengths of this company. I'm honored to be part of this team. I look forward to updating you on our progress in the quarters ahead and to sharing more about our strategy and long-term objectives in due time. Thank you for your continued trust and confidence in CarMax. With that, we'll open the line for questions. Operator? Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. As a reminder, we do ask that you limit yourself to one question. Once again, that is star one to ask a question. Your first question comes from the line of Craig Kennison with Baird. Your line is open. You may now ask your question. Hey, good morning, Keith. Congratulations on the new role. I guess I'd start with, what are your general observations after the first few weeks in the role? More specifically, as you draw upon your experiences in the hotel industry, what are your thoughts on how to streamline the click-through experience at CarMax? It feels like that's an area where you lag the best-in-class experience. Thanks, Craig, and yeah, I'm thrilled to be here, and it's a pleasure to meet you. I think it's been great to get to know the team in the first few weeks, and what really stood out to me so far has been the caliber of our associates, both in the corporate office and in the field, and the culture that's really palpable. There's an amazing culture here in the company. Right now we're focusing on sharper execution on the fundamentals of the business, about pricing, about selection, availability, and experience. It's an amazing team. I think you're right on the hotel experience. One of my rallying cries in my old role was how do we reduce friction in the customer experience? If it takes us six clicks to do something, how can we make it three? What are the things that really matter most to customers? Really understanding that end-to-end customer journey, both online and in store, and how we can streamline those processes. That's going to be one of my main focuses in the omnichannel experience is just streamlining the experience, and really making it easier for our customers. Thank you. Our next question comes from Brian Nagel with Oppenheimer. Your line is now open. Good morning. Keith, welcome. Look forward to working with you. Thank you. My question, just looking at this quarter, I think one of the big efforts here has been the price investment, so to say, in the used car business. Maybe you can discuss further what you saw in terms of elasticity and demand as you adjusted prices. While used car unit comps were still down, they did improve rather significantly from the prior couple of quarters. How much of that could you attribute to these price investments? I know you gave us at least some guidance for the first quarter, but how should we think about these price investments going forward? Yeah, Brian, thanks for the question. The impact that we had on the quarter was really, there were several things that we did, right? We took our prices down. You can see that in the GPU. We increased our acquisition marketing spend as well, and we also made improvements to our online selling capabilities just through our website experience. I would tell you, out of those three things, pricing certainly we believe had the biggest impact, although we think all of those levers impacted our trend positively. I'd tell you the results that we saw this quarter were pretty much in line with what we had expected, given the actions that we took. We are really pleased with the change in direction. Coming out of the third quarter, we made it very clear, our objective right now is to get the sales flywheel going, and we're pulling these levers, and that's exactly what we saw. We have those levers in place here moving forward as well. Could I follow up quickly, David, on that topic? Is there a way to quantify, again, looking at the improvement, so to say, that we saw in used car unit comps here in fiscal Q4 versus three and two? Is there a way to quantify how much of that was a direct result of these efforts you took? Yeah. Not really. We haven't really talked externally about the price elasticity. We have a very deep understanding of price elasticity. It's not something we've necessarily communicated externally exactly what it is. Again, what I'd tell you is that change in trend and that positive change in direction, those three items drove it, lower prices, increased marketing, better selling capabilities online. Of those items, we do believe that our lower pricing had the biggest impact on the quarter. I appreciate it. Thank you. Hey, Brian, it's Tom. How are you? Hey, Tom. How are you? Good. I think it just proves price matters in this business. As we said at the beginning of last quarter, we kind of had let our prices drift up where we weren't as competitive as we'd like to be. As Enrique mentioned, we took several actions immediately at the beginning of the fourth quarter, and as you noted, we saw a significant change. Clearly the biggest one was price. Now as you've heard the team talk about cost, if we could get sales moving in the right direction and we can address some of the cost issues behind it, whether it's COGS or SG&A, we're going to have a fantastic business. Price really matters to the consumer. That's very helpful. Thank you. Thank you. Our next question comes from Rajat Gupta with JP Morgan. Your line is now open. Great. Thanks for taking the question, and look forward to working with you, Keith. I have an initial question, just to follow up on Enrique's comments around SG&A. How much of the $200 million do you expect to hit this year's P&L? And could you double-click a little bit more on some of the commentary around, accruals and stock-based comp and how we should think about the magnitude there? And maybe on any of the guide rails around SG&A, with respect to ad expense for you, that would be helpful. Thanks. Yeah, no, absolutely. Thanks, Rajat. A couple things, I think one way to think about it is the exit rate dollars we have coming out of FY 2026. In between, the CEC actions we took last quarter, the home office actions we took this quarter that we talked about on the call, as well as the Edmunds lease, all those things combined mean FY 2026, we're exiting the year with about $100 million in savings. As we said, we have a line of sight to another $100 million exit rate FY 2027. Some of those will be recognized within FY 2027, but really you're looking at a full realization in FY 2028 for the full annualization. What I would say, though, and as I said in my prepared remarks, in FY 2027, the in-year savings we do expect to be offset as we annualize over the materially reduced corporate bonus and share-based compensation. That's about half of the actual expectations we have for savings in FY 2027. Now, in normal course of business, we don't expect those items to actually be around, right, and have the same magnitude of impact. That's really where you look at FY 2028 and you say, Okay, that'd be a full annualization of the savings. That's how to kind of think of FY 2027 and the exit rate savings. Look, we are laser focused. Just to be absolutely clear, we are laser focused on running as efficiently as we can. I think us taking up our target from $150 million-$200 million is a sign of that intent. We're certainly plowing forward and excited about those savings. Again, the full impact will really be in FY 2028. Did you have a second part of your question, Rajat? I have just a quick follow-up for Keith. Sure. Go ahead. Yeah. Just curious, I've had a chance to look at the portfolio a little bit. Would you consider taking a look at just your store count as well, and maybe think about pruning the number of locations you need, the density you need? I'm curious how that would fit into how you're thinking about rationalizing and just creating more efficiency. Thanks. Yeah, it's Enrique again. As we go through our strategic planning process here with Keith's new leadership, it's certainly something that we're going to be assessing. We're going to go through a strategic plan outlook. We're going to come back, and as Keith mentioned in his prepared remarks, we're going to come back at the appropriate time and communicate what those longer-term objectives are, what the goals are, and the key underpinnings of that strategy. At the current moment, I think that a lot is on the table, and that's something that we'll be assessing as part of the strategy. Understood. Great. Thanks for all the color. Thank you. Our next question comes from Sharon Zackfia with William Blair. Your line is now open. Hi. Good morning. Thanks for taking the question. I guess as you think about improving affordability and clearly taking this GPU hit currently, are you also considering maybe relaxing some of CarMax's standards? I don't mean on the mechanical side, but on the cosmetic blemishment side. Is there an opportunity to sell a few cars with dings or modest scratches where it might be more affordable to the consumer and could be clearly disclosed, given that most of the research is done online? Yeah, Sharon, thank you for the question. Certainly, if you look over the past year, we have taken what we internally call, but I think everyone kind of externally knows as well, Value Max cars. Our older cars, we've taken the mix of our Value Max cars up pretty considerably this year, which is really a sign towards we recognize, as Tom mentioned, pricing is key, affordability is key. That's one way of thinking of us meeting the customer where they want to be met on price, is just increasing our mix of Value Max. I think at the same time, taking a harder look at how exactly can we even better do that is something that as part of our strategy we're going to consider, because clearly over the past year, sales have not been where we want them to be. We need to consider all potential levers when it comes to going to the market. I think the one thing that we will not change, though, is absolutely the overall relative quality standards that we have and that we're known for. CarMax is known for a quality car, and that will continue. There's probably items around the edges that we can take a harder look at and make sure that we meet today's customer's demands today. Enrique, can I follow up? I know Keith's been there for a minute, but is there any kind of time frame when we should expect the strategic plan and some maybe more concrete benchmarks on SG&A per car and things like that? Yeah. You're right, Keith has been here a minute. We have our planning sessions that are underway here, and we'll start doing those over the next quarter here. I think in June you'll probably start to see some headlines maybe. I don't expect by June there'll be a full strategic path forward. In June you'll start to get a sense of where we're going. Certainly after that, shortly after that, I would expect that we'd have a strong point of view on where we're going and the key metrics that go along with that and our outlook for the future, which we're really excited about. Okay. Thank you. Thank you. Our next question comes from Scot Ciccarelli with Truist. Your line is now open. Good morning, everyone. Two strategic questions, if I may. First, on sales, if price reductions and a $300 GPU drop were to accelerate comps to the positive range, would you expect it to push it even further because it's working, or is there a floor on GPU levels that you're kind of thinking about? Secondly, on the SG&A side, it sounds like you have an expectation to improve the customer experience, especially with online transactions. Can you help us reconcile, you're also expecting to cut OpEx and CapEx pretty significantly, and presumably some of those things cost money? Thanks. Yeah, maybe just to start with SG&A. We have increased our target from $150 million-$200 million, and we'll continue to assess, is that the right number? I think the key point here is that it's critical that we balance our cost reduction goals with our ambitions to grow the business, right? To your point, there is a little bit of tension between the two, and I fully expect as part of our strategic planning deliberations, that's going to be a topic. We want to make sure we're running as efficiently as possible, but we also want to make sure that we're actually funding the business appropriately. That may mean reallocating certain resources, it may mean reducing certain resources, and in certain areas perhaps increasing resources. That's going to be a key point of tension as we build out our strategy kind of moving forward. When it comes to price, I think the other lever to consider that we're always focused on, but I think will take on heightened importance, is COGS and reducing our COGS and logistics costs. Because when you do that, you actually then have multiple choices ahead of you. You can either just take it straight and give it to the customer. You can take it to margin to help offset some of that pressure, or you can do a combination of the two. That's really something that we're laser-focused on kind of moving forward. That certainly will be a key tenet of our strategy moving forward as well. Hey, Scot, I'm just going to build on what Enrique said. In my past experience, becoming a more efficient business and lowering SG&A doesn't come at the expense of a great customer experience. You can actually improve quality, leverage technology, and become a more efficient business at the same time. I think that's what we're going to be very focused on. Spending time with the team in the stores, there's a number of opportunities for us to, again, make it easier for our associates to serve our customers and give a better experience for our customers, both in-store and online, more efficiently. I've done that before and looking forward to working with the team to do it again. Okay. Thanks, guys. Thank you. Our next question comes from Daniela Hagia with Morgan Stanley. Your line is now open. Hi, Keith. Congratulations on the role. Looking forward to seeing what you and the team will accomplish here. I appreciate the overview on goals and understand we'll have to wait till June for the full strategic update. I guess in the first 90-100 days here, what are the specific changes or low-hanging fruit that you'll prioritize to simplify that digital experience and improve conversion? What are, I guess, areas or metrics that we can track against those goals? Well, thanks for the question. Again, I've been here four weeks, which has been an amazing experience just spending time with it in stores, in the office, and with the teams. I'm really enjoying learning about the car industry and understanding our strengths. I guess I'll start there because I think the Company's made great long-term investments in its digital platform and the geographic footprint. The thing that we're focusing on is how do you connect that digital innovation with physical retail to create something that's really powerful that we can leverage to drive growth. The team right now is incredibly focused on the customer experience, particularly in digital, and understanding how we can more efficiently move customers through the funnel, reduce friction, and to one of the earlier questions, if it's taking us 10 clicks to do something, how can we do it in seven or five? Really understanding what are the features and benefits that matter most, and so really making sure that we're driving customer acquisition, but then also more effectively moving customers through the experience, both online and in the stores. In regards to specific metrics, I think we're going to have to come back to you once we have a clear view on the long-term strategy, because the metrics that are going to be most important to this business have to be aligned to those outcomes. I don't know, Enrique, if you want to add anything else. No, I think that's absolutely correct. Again, in June, maybe some signals in terms of where we're going. June is really not that far away, but I think thereafter is when we'll come back with a fuller point of view on our strategy, the metrics to hold us accountable by that we'll hold ourselves accountable to, and again, we're really, really excited about where we are and our path forward here. Great. Thank you. Thank you. Our next question comes from David Bellinger with Mizuho. Your line is now open. Great. Thank you. Keith, congrats on the new seat. Two areas where we were looking for a bit more detail. First one on conversion. I know you just talked about this a second ago, but how do you assess the level and quality of traffic that's coming into your site and your app, and just how you benchmark against others in the sector on conversion? Second piece on vehicle inventories. Looking at your app, you've got 55,000 cars in there right now. That's been as high as 60,000 or 70,000. As you implement some of these new tools, even some AI tools, is there an opportunity to operate the business with simply less inventory while still giving that core customer the breadth and depth that they need? Thank you. Yeah, I think on the inventory piece, look, that certainly is a key aspect that we need to consider, and we need to balance what is the right amount of inventory by market, how quickly can we get it to customers, and I expect that'll be a key component of our strategic deliberations as well, making sure we have the right amount of inventory. Is it less? Is it more? We'll end up seeing what that looks like. In regards to conversion, I think as well, that's going to be a key point of view. This past quarter, I would tell you conversion was relatively flat. Our selling opportunities were actually relatively flat as well. Our web traffic was up 14% this past quarter. For the first time in five quarters, we saw selling opportunities actually relatively flat as opposed to being down year-over-year. Positive movement there. Again, conversion was relatively flat. I think the items that Keith has pointed out in terms of getting the customer through our website to buy a car in an easier way, in a faster way, undoubtedly is going to help our conversion rate when folks land on the website. Pretty immediately, he's been here a hot minute, but already identifying, I think, the key areas of opportunity for us moving forward. Look, our goal is to drive selling opportunities and to also drive conversion as well. Thank you. Our next question comes from Jeff Lick with Stephens Inc. Your line is now open. Good morning, and my welcome to Keith. Question, Tom, because this is probably going to be your last call, we get the benefit of your wisdom. I was wondering if maybe you could just give any granularity or color on just as you drop prices. Obviously, you didn't drop every price $207. Some you dropped, some you might even have increased. Any color on where you do see more elasticity in terms of cohorts, age of car, where you're getting more traction versus where you're getting less or where it's not worth it to try to play the price game? First, hey Jeff, how you doing? He talked earlier about optimizing the price and cost differences. As I mentioned, clearly when we lowered price, it changed the trajectory of our sales. As you just rightly pointed out, when we say our margins are down $200 bucks, they're not down $200 bucks on every car. You see all of our cars practically end in 998. That means we're more likely to drop a car $1,000, like 20% of the cars $1,000 to achieve the $200 price drop. We are very analytical about that and how we approach it and do it in a way that we think will maximize the change in sales. The backdrop of that is we have to run a profitable business. As Enrique mentioned, some of the things on cost, we felt like lower the prices, get sales moving in the right direction, and then pay for it by taking cost out of the business. I think that'll be a theme for this team going forward as well, which is figuring out how to grow the company. There's no reason we shouldn't be able to grow this business with our current footprint and do it in a profitable way. That's a combination of pricing, margins, CAF, all the ancillary products that we sell. Look, I think it was great to come out of the quarter with a change in sales trajectory, and we believe that price was a big factor there. Just a quick follow-up, and maybe, Keith, you could chime in on your thoughts. Tom, if I think back call it 10, 15 years ago, when the world was really all brick and mortar, I think the strategy was you're trying to have a used car lot that was a little bit more customer friendly than your typical used car lot, would lend itself to selling newer cars. It seems like there's less competition, relatively speaking, in your ValueMax. I wonder, culturally, are you more willing now to explore that seven, eight-year-old, nine-year-old sale and, kind of mix the person who's coming in looking for that three-year-old Jetta versus the person that's coming in looking for the eight-year-old Ford Explorer? Again, we're a demand-driven business. Enrique mentioned earlier about internally we call it ValueMax. It's really just an older car with higher miles, but we want to keep it at the same quality standard. I believe, Enrique, our inventory is around 50% ValueMax. That was 15%-20%, 10 or 15 years ago. Yeah. Again, this year, we have absolutely increased our inventory and sales of our older cars to meet the customer where they want to be met on affordability to help support sales. At the same time, Jeff, clearly overall, if you take a look at the entire year, we're not where we want to be. Right? I think we need to continue to assess sales standpoint. We need to continue to assess what is the right level of inventory, what is the right age of inventory and the price points. That'll be part of our deliberation, certainly. Yeah. Jeff, it's a double-edged sword. You buy older cars with higher miles, they cost more to recondition, and they take longer to recondition. Absolutely As Keith said it earlier, it's the right car in the right place at the right price. It's a combination of those variables. Awesome. Well, thanks for taking my question. Keith, I am looking forward to working with you. Thank you. Thank you. Our next question comes from Michael Montani with Evercore ISI. Your line is now open. Yes. Hi. Thanks. Good morning, and welcome to Keith. I'm looking forward to working with you as well. Thanks, Michael. Wanted to ask if i could, Jon, if you could unpack a bit more some of the trends that we're seeing on the credit side with respect to roll rates and delinquencies both in terms of on a like-for-like basis of credit quality in applicants as well as given some of the mix changes that have occurred maybe towards more of Tier 2. Sure. Yeah. I appreciate the questions, Michael. With regard to roll rates and delinquencies, I think across the kind of the auto lending industry, lenders would say the customers, maybe absent exception of maybe the highest credit quality, the 800+ FICO, they certainly are feeling the stress of affordability, inflation, et cetera. Those customers from mid- Tier 1 all the way down to deep subprime are feeling the stress. Delinquencies are higher, roll rates are higher, and for us as a lender, our job is to support them, help to service them, and then set the reserve accordingly in preparation for that. I think we've done that. At the end of Q3, we've hit our losses right on the mark in Q3 and Q4. We feel good about where we sit, but there is a stressed customer out there, and we are thoughtful on that. That being said, again, it's a highly profitable business. We provide a fantastic car and a fantastic experience. That's why we are willing to go into the Tier 2 space, and we are growing that space. You've got loans value of $3,000, $3,500 on top of the Tier 1 business. We look forward to growing that. We have shifted our focus. Obviously, we will always take all the Tier 1 volume, but we're growing in Tier 2. We signal that. We're at 43% penetration this quarter. We anticipate that accelerating over the course of FY 2027. We've made market changes to grow that across the last year, including Q4. We will look forward to booking that Tier 2 volume. We were approximately less than 10% of Tier 2 a year ago. We are closer to 20% in this quarter of Tier 2, and actually exiting the quarter, we're actually a little higher than 20%. We look forward to taking on that volume, servicing that customer, reserving accordingly, nailing that, and obviously generating more income for CarMax. Thank you. Thank you. Our next question comes from John Babcock with Barclays. Your line is now open. Please go ahead. All right. Thanks for taking my questions. I just have two quick ones here. I guess just first of all, on capital spending, you talked about how that's going to be down over the last couple of years. Are you able to provide any color in terms of where you're reducing spending, whether that's on the maintenance side or the growth side? Yeah, it's actually a little bit of both. Number one, on the growth side, we're taking new stores down from six to four, as I talked about in my prepared remarks. That's one of the drivers. At the same time, from an off-site reconditioning and auction standpoint, we have spent the past several years buying the actual real estate when it comes to those sites. What you see this year is a little less on real estate spend as well. Overall, just for our stores as well, a little more heightened focus on prioritization of resources there. You kind of see it across the board really. Okay. That's very helpful. Also, just given everything that's going on in the Middle East right now, I was wondering, I know you've talked about lowering pricing and marketing spend and everything else you're doing to really try to drive more traffic, drive more consumer interest in CarMax. Just kind of curious, though, how have the Middle East tensions impacted what you're seeing? Do you think that's going to have a notable impact on your overall year-over-year growth trends, or do you think that you can grow through despite that? That's a great question. What I'd tell you is, what I'd point you to really is more the industry, right, for the month of March. In the month of March, the industry actually, supported by a pretty strong tax season, was pretty healthy. We're not going to talk about our inter-quarter performance, but what I'd tell you, the industry itself is actually pretty healthy coming out of March, or into March. I'd tell you, moving forward, yeah, I do think it's something that we need to watch between inflationary pressures, between what has now been on record, the lowest consumer sentiment on record here. It's something we're watching, right? At the same time, we are focused on what we can control. What we can control, especially given now that we have a much more dynamic approach to margin management, is we can react to what's happening in the market pretty quickly. We're excited to have that approach a little bit more dynamic, as I mentioned, and we'll control what we can control. All right. Very helpful. Thank you. John, just to add one more thing there, what I've been really impressed about is just how the team has been talking about what's happening in the market. Thinking about on the supply side as well, talking about, okay, do we bring more EVs into inventory? Do we bring in more gas efficient vehicles as well too? Constantly thinking about what does the customer want and how we make sure we can deliver that to them to drive sales. All right. Sounds good. Thank you. Thank you. Our next question comes from Chris Pierce with Needham. Your line is now open. Hey, good morning. If we just fast forward a year from now and we're looking out to 2028, I just want to sort of understand, is it lower prices, lower SG&A per unit, and structurally lower retail GPU? Are there levers you can pull on the retail GPU side of the world as well? I'm just sort of asking because you've got a competitor being aggressive on financing rates to customers. What would happen if that competitor got aggressive on pricing as well? I'm just sort of curious, could you pull this lever again and drive growth again? Is this like a one-time lever and retail GPU needs to sort of move higher over time? Yeah, no, I don't think it's a one-time lever. Look, I think a year from now, yeah, we're laser-focused on affordability for customers. That does move the needle. We need to now go back and figure out how to deliver on that. As I mentioned earlier, certainly a focus on COGS, logistics costs is going to take a heightened focus in our strategic planning process. Because again, that is a lever that you can either give to the customer, you can either take the margin, or you can do a combination of those two things. That is a very powerful lever, and it's one where we think we have opportunity and one that we're laser-focused on. What I think is non-negotiable is being more price competitive. We've actually seen that. We do track our relative price competitiveness on pretty much a weekly basis here. What we have seen is that that price competitiveness has gotten better and pretty much in line with what we expected for the quarter. We've been pleased with that movement, and you saw the results. Chris, I'll just add to that. Okay. As Enrique mentioned about, you talk about the retail side and the retail margin. We've signaled and clearly have shown in what we're doing in the CAF side of it, there is clear opportunity on the finance margin, and we're going to go after that. We're excited about the EPP product and the added margin there. We look at it holistically, we're going to look at it dynamically, and I think we can really support in those two buckets as well. Okay. Just Enrique, if you could sort of help me kind of, if I think about logistics as part of retail GPU, what kind of lever are we talking about? Is that a couple hundred dollars or just kind of bucket it a little bit, so if you did decide to take that back and pass something on, how much of a lever is that on retail GPU to the extent you can say? Yeah, no, I mean, our overall spend on logistics is north of that, right? In terms of where the actual dollars will come from, logistics is an opportunity we know. Just the actual labor that goes into reconditioning and all the costs associated with that, parts, everything is an area of opportunity. We believe there's plenty of opportunity there to further increase and improve our price competitiveness. Thank you, and good luck. Thank you. Our last question comes from John Healy with Northcoast Research. Your line is now open. Great. Thanks for taking my question. Keith, why don't I give a big-picture question? I know we've talked a lot about the retail approach, but your view on the financing business, are you fans of it? Are you liking the approach to kind of maybe reach down a little bit deeper in that category? Secondly, just as you look at the capital structure of the business, I always felt CarMax is unique in that it doesn't floor a lot of its inventory or much of it at all. Is that something that you would consider to do to maybe take advantage of maybe raising some capital to maybe recapitalize or buy in a lot of stock? How would you think about maybe even the need to have CAF and maybe try to be creative with that asset as maybe some other entities have recently done? I would just love to get your thoughts if that is something that's also on the table for you guys. Thanks. Thanks, John. A pretty wide-ranging question. I'll take the first part, then I'll let Enrique talk about kind of capital structure. I was with the CAF team last week, and it was absolutely fantastic to spend time with Jon and his team to see just the caliber of talent we have there and how we're thinking about the business. As we build our strategy moving forward, which we'll come back and talk more about in June, it's really understanding all the leverage we can pull to make this a growth business and drive returns for shareholders. CAF is going to play a key piece in that. That's going to be in the lending environment. That's also going to be in the other products that we can sell. How does that pair into our overall selling strategy for the business and giving the right price, right cars, improving logistics too? CAF is going to be a critical lever for profit growth for this company moving forward. We're going to really kind of see how it fits into the broader strategy overall. I'll let Enrique talk about capital structure. Yeah, a couple things. Certainly capital structure, supporting CAF funding and all that is very dynamic, and it's a very exciting area for us. I think number one on a floor plan, the revolver that we have is the most efficient use of capital when it comes to funding the CAF business. I would not expect that to change. What I would tell you, though, is from an overall CAF funding opportunity, we are looking at, as we've talked about before, right, alternative funding vehicles, right? Last year, we executed our first residual sale, which allowed us to have a gain on sale in the third quarter. That's something that we intend on continuing to lever. We were really pleased with the execution of that deal and the reception that we had in the marketplace for that deal. Alternatively, we're also looking at different levers too, such as a co-loan sales. Is that an opportunity, right? There's multiple ways to access capital to support CAF, and we're exploring them all. We have a strong portfolio of banks and capital providers that we've been dealing with for years and years that are supportive of us. We also have some new potential partners as well out there that we're exploring those options with as well. I would expect as the year unfolds here, you'll see us kind of exploring new ways to fund the CAF business. Thank you. Great. Thank you. Well, I think I'll bring that to the last question. Thank you for joining the call today, for your questions and for your support, and I look forward to getting to know all of you better in the quarters to come, and we will talk again next quarter. Thank you. Ladies and gentlemen, that concludes the fourth quarter fiscal year 2026 CarMax earnings release conference call. You may now disconnect.