Carmax Inc Q4 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Sharon Zackfia - William Blair & Company, L.L.C. (Research) - Analyst : Hi. Good morning. I guess, as we think about fiscal '25 and kind of that tale of two halves where there were some share losses in the first half followed by the accelerating gains in the second half, as you kind of diagnosed that, can you give us some insight into kind of what you think the drivers were between the first half and the second half and why you kind of saw that inflection? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 10, 2025 / 1:00PM, KMX.N - Q4 2025 Carmax Inc Earnings Call And I guess secondarily, as we're kind of staring down this idea of maybe used car prices going up again with tariffs, I mean, what lessons did you learn over the past several years that could maybe help the business more if affordability becomes more challenged again in the industry? Thank you.

Question: Seth Basham - Wedbush Securities Inc. - Analyst : Thanks a lot, and good morning. Bill, if you wouldn't mind commenting on quarter-to-date used comp trends, that would be great. And then as you think about this macro environment and the potential for new car tariffs driving double-digit increases in new car prices, what does that mean for you guys from a share gain perspective and from a used car industry growth perspective? Thank you.

Question: Seth Basham - Wedbush Securities Inc. - Analyst : Yeah. New car tariffs, if they drive double-digit increases in new car prices, what does that mean for the used car industry and your ability to gain market share in that environment?

Question: Seth Basham - Wedbush Securities Inc. - Analyst : Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 10, 2025 / 1:00PM, KMX.N - Q4 2025 Carmax Inc Earnings Call

Question: John Murphy - BofA Global Research - Analyst : Good morning, guys. I mean, I love hearing about the investment in the recon centers and the auctions because it gives you more throughput and production capacity. I'm just curious, Bill, as you think about that, does that give you the ability to stay and maintain

Question: John Murphy - BofA Global Research - Analyst : Good to hear. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 10, 2025 / 1:00PM, KMX.N - Q4 2025 Carmax Inc Earnings Call

Question: Brian Nagel - Oppenheimer & Co., Inc. - Analyst : Hi. Good morning. Nice quarter, congratulations. So I want to -- I think Seth asked the question about the quarter to trend business and you said, Bill, your running high-single digits would be a step-up from what you did in Q4 and then particularly as you talked about February. So I guess, I know you're not -- I know you don't give guidance. So what I want to ask is, I mean, as you're looking at the business, how should we think particularly against what is a very fluid macro backdrop? I mean, how should you think about -- how should we think about the sustainability of that early fiscal Q1 performance? I mean, do you think -- is it a catch-up from maybe February? Does it reflect potentially people buying cars ahead of time because of tariffs there is this overall sustainability from your standpoint?

Question: Brian Nagel - Oppenheimer & Co., Inc. - Analyst : That's helpful. I appreciate it. Thank you.

Question: Josh Young - Truist Securities - Analyst : Hi. Good morning, guys. Josh Young on for Scott. You talked a bit about the improving market share here in the back half of the year, but with it sitting just under 4% today, curious, what do you think you have to do from here and what has to happen to get closer to that 5% target over time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 10, 2025 / 1:00PM, KMX.N - Q4 2025 Carmax Inc Earnings Call

Question: Josh Young - Truist Securities - Analyst : Got it. That's helpful. Thanks.

Question: Jeff Lick - Stephens Inc. - Analyst : Good morning, guys. Congrats on a nice quarter. I was wondering if we can talk about sourcing. In this quarter, you bought 46,000 units from dealers, which is the most you've ever done on a percent basis in terms of improvement or even unit basis. And also, your overall purchase, 269,000, was 89% of the combined units. I think a big thing going forward, especially in this tariff scenario, is going to be your ability to source. Could you talk about, both on the dealer front and the consumer front, any evolutions or changes and what drove the pickup there and improvement in Q4?

Question: Jeff Lick - Stephens Inc. - Analyst : And then the last two weeks have been kind of crazy. There's been a pickup in conversion at the auction lanes in general. Any comments in terms of just looking at what we just talked about with Q4, any changes with the last two weeks?

Question: Jeff Lick - Stephens Inc. - Analyst : Awesome. Well, congrats, and good luck in the next quarter.

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : Great. Thanks for taking the question. I just had a follow-up to Jeff's question earlier. Bill, trying to understand how are you, as an organization, trying to manage inventory acquisition over the next few weeks, couple of months, given firstly, there's already a lot of uncertainty around the tariffs that may happen. It may go away. You're hearing a lot about the auction and activity. I mean, I'm curious how are you managing your inventory acquisition in that backdrop? I mean, do you think you need to be aggressive or are you just being cautious just in case tariffs actually don't stick? Ultimately, I'm just curious, how is the company strategizing around that? And I have a very quick follow-up on service.

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : Yeah. Curious what drove the significant -- I mean, typically seasonally, we see like a big drop in like service gross profit. Curious what drove the improvement. It was just better productivity, just maybe some like cost takeout. Just trying to understand the cadence there. I know -- I think -- and we could talk about like flattish gross profit or a little more than flattish for the full year. So does it mean that this is going to be less seasonal from here on on just that cadence? Just curious if you could add any more cover on the service front.

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : Got it. Great. Thanks for all the color, and good luck.

Question: Michael Montani - Evercore ISI - Analyst : Yes, hey. Good morning. Thanks for taking the question. Just wanted to ask, I guess the two-part thing. One was, if you look at historically periods of appreciating prices, what does that typically do for your market share and then also your margins? How would you typically respond there? Because historically, you've called out it can be challenging if we have abnormal depreciation. So if you get a appreciation in price, does that help you from a share and margin perspective? And the follow-up question was, you guys had mentioned an EPS outlook that includes, if mid-single-digit unit growth is there, you could have high-teen EPS growth. So I'm wondering if there's anything we need to keep in mind as it relates to that for this current year. And then also, anything we should know about from a timing perspective, as we think through quarterly cadence? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 10, 2025 / 1:00PM, KMX.N - Q4 2025 Carmax Inc Earnings Call

Question: Michael Montani - Evercore ISI - Analyst : And anything, cadence-wise, to think about as we progress through the year? Because I think you called out, there could be some CAF-related things to keep in mind in the first quarter, but then on the flip side, you also have potentially some benefits from the work you've done in service and EPP.

Question: Michael Montani - Evercore ISI - Analyst : Got it. Thank you.

Question: Chris Bottiglieri - BNP Paribas Exane - Analyst : Hey, guys. Thanks for taking the question. So you've done a really nice job taking costs out of business the last few years, certainly consistent with my own expectations. The question is though, if the economy slows from here and sales turn negative to mid-single or high-single digits again, does ETF decline high teens very much like the upside, or do you have levers left? Any disposal to continue to cut costs and mitigate the operating leverage?

Question: Chris Bottiglieri - BNP Paribas Exane - Analyst : Thank you.

Question: John Healy - Northcoast Research - Analyst : Thanks for taking my question. Just kind of wanted to ask a big picture question, Bill. In the last couple of weeks, obviously outside of the macro, probably the biggest item on used retail has just been some of the Amazon news. And obviously, it doesn't appear like they're becoming a retailer per se in the auto space, but we'd love to get your thoughts about them entering in the fray. And do you view them as a adversary competitor maybe elevating your peers? Or do you view them potentially as a partner, and would you be surprised if you maybe work collaboratively with them going forward? Thanks.

Question: Chris Pierce - Needham & Company Inc. - Analyst : Hey. Good morning, everyone. I just was curious, as you move kind of more into 6 to 10 less late model because of the opening of the credit spectrum, is that an opportunity for -- are you competing against dealers you haven't traditionally competed against at a larger rate and there's potential for a new set of share gains? Or is like the 6- to 8-year-old car now, what used to be the 2- to 4-year-old car because of what's happened with new car production, is this a new competitive set or is it just kind of continuation of the competition you've been competing against for years now?

Question: Chris Pierce - Needham & Company Inc. - Analyst : Okay. And then just to follow up on that though, is there a -- can it be thought of as a GPU tailwind as you move into these -- I don't want to say move into these older cars, but maybe as you sell it?

Question: Chris Pierce - Needham & Company Inc. - Analyst : Okay. Thank you.

Question: David Whiston - Morningstar, Inc. (Research) - Analyst : Thanks. Good morning. Can you just talk a little bit more about the decision-making process to change the $2 million goal where you just withdrew the timeline completely, as opposed to saying, given macro factors, we think it'll be more like fiscal '30. Because doing it the way you did, it just seems like it's a bit more pessimistic, and maybe that was intentional or maybe it wasn't. I just wanted to get more clarification. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 10, 2025 / 1:00PM, KMX.N - Q4 2025 Carmax Inc Earnings Call

Question: David Whiston - Morningstar, Inc. (Research) - Analyst : Yeah. Thank you.

Question: John Murphy - BofA Global Research - Analyst : Sorry, guys. I just wanted to sneak one follow-up in. I understand that the long-term goals have been postponed here in the guidance, but you did reiterate the earnings per share growth model, give an update there. When you talk about double-digit earnings per share growth for years to come, you're talking about sort of mid -- that has to come with -- that you'll get a CAGR of high teens on EPS with unique growth in the mid-single digits, I'm just curious when you think about that, does that include the normalization of SG&A from this 90% range back down to 70% or is that after that's happened? Because it's just -- because if you're taking SG&A down to back to the normal level, I mean, you're really kind of taking some of the growth capital that you've -- you're putting into the model, which makes sense. But I'm just curious, is this kind of run rate basis once we've gotten back to 70%, 75% SG&A gross, or does that include the normalization from 90% down to 70% in that statement?

Question: John Murphy - BofA Global Research - Analyst : But to be fair, the mid-70 did -- the gap between 90% and mid-70s, that's analogous to sort of CapEx or growth capital that shouldn't be viewed as operating. So I'm just trying to understand, is this something that, on an operating basis, you think you can do once as -- regardless of that normalization of SG&A?

Question: John Murphy - BofA Global Research - Analyst : Okay. All right. Thank you very much.

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : Great. Good. Thanks for allowing me to ask another follow-up. I just wanted to clarify because we've gotten some like inbound through the course of the call, just on the comments around CAF and provisioning, understand the mechanics around the first-quarter step-up clearly. Just curious what was the suggestion from Jon that that level of provisioning will continue through the remainder of the year or into 2Q, 3Q, or it was just the fact that you're increasing the sub-prime mix or that will continue? Just wanted to make sure we're tying those two comments appropriately. Thanks.

Question: Rajat Gupta - J.P. Morgan Securities LLC - Analyst : Understood. Thanks so much for clarifying that. Again, thanks again, and good luck.

Question: Michael Montani - Evercore ISI - Analyst : Yes, hi. Thanks for letting me sneak another one in. I was just hoping, could you clarify a little bit more what the Edmunds lease impairment charge was for? And then secondly, when could we think about the added penetration turning into a win? I guess more specifically, can you grow CAF profits if provisioning have to step up that much for this year?

Question: Michael Montani - Evercore ISI - Analyst : Understood. Thanks for the clarity.