Cuộc họp công bố kết quả kinh doanh quý 2 năm tài chính 2027 của CarMax (KMX): Doanh thu tăng 19%, EPS tăng 81%

Điểm tin chính

• CarMax đã báo cáo doanh thu quý 2 năm tài chính 2027 đạt 7,9 tỷ USD, tăng 19% so với cùng kỳ năm ngoái. Doanh số xe cũ cùng cửa hàng tăng 13%, trong khi tổng sản lượng xe bán lẻ và bán buôn tăng 15% lên khoảng 388.000 xe.
• EPS pha loãng tăng 81% từ 0,64 USD lên 1,16 USD. Sự cải thiện này phản ánh sản lượng bán ra cao hơn, biên lợi nhuận của kế hoạch bảo vệ mở rộng tăng mạnh hơn, đóng góp tăng từ CarMax Auto Finance và đòn bẩy chi phí bán hàng, quản lý doanh nghiệp (SG&A).
• Lợi nhuận gộp trên mỗi xe cũ bán lẻ giảm 111 USD xuống 2.105 USD do CarMax áp dụng mức giá cạnh tranh hơn để kích cầu. Ban lãnh đạo hiện kỳ vọng mức giảm cả năm sẽ thấp hơn so với dự báo giảm 200 USD/xe trước đó.
• Thu nhập từ CarMax Auto Finance tăng 32% lên 136 triệu USD, chủ yếu do khoản giảm 29 triệu USD trích lập dự phòng rủi ro tín dụng và khoản lãi 17 triệu USD từ bán tài sản. Ban lãnh đạo dự kiến thu nhập của CAF trong năm tài chính 2027 sẽ thấp hơn một chút so với năm tài chính 2026 khi công ty mở rộng hoạt động cho vay Nhóm 2.
• Công ty vẫn đang đi đúng hướng để đạt mức tiết kiệm được xác định là 200 triệu USD theo tỷ lệ quy năm vào cuối năm tài chính 2027. Công ty cũng dự định khởi động lại việc mua lại cổ phiếu với tốc độ khiêm tốn trong quý 3 năm tài chính, với 1,31 tỷ USD còn lại trong hạn mức được phê duyệt.
• Ban lãnh đạo cho rằng khoảng một nửa kết quả doanh số bán hàng cùng cửa hàng là nhờ các hành động nội bộ—bao gồm định giá, hiệu quả chi phí và cải thiện trải nghiệm khách hàng—và một nửa còn lại là nhờ lợi ích từ việc FTC tăng cường thực thi quy định về định giá.

Dữ liệu tài chính quan trọng

Kết quả kinh doanh và hoạt động

CarMax đã thu mua khoảng 310.000 xe trong quý, tăng 6%. Thu mua từ người tiêu dùng tương đối đi ngang ở mức khoảng 262.000 xe, trong khi nguồn cung từ đại lý thông qua đội ngũ bán hàng của Edmunds tăng 54% lên khoảng 48.000 xe.

Công ty tiếp tục chuyển giao hiệu quả từ chi phí tân trang và giá vốn bán hàng sang người tiêu dùng thông qua mức giá cạnh tranh hơn. Các thuật toán định giá cũng được cập nhật thông tin thị trường địa phương chi tiết hơn và tập hợp so sánh xe rộng hơn. Ban lãnh đạo cho biết những hành động này đã cải thiện tỷ lệ chuyển đổi bán hàng.

Biên lợi nhuận của kế hoạch bảo vệ mở rộng tăng 27 triệu USD. Biên lợi nhuận trên mỗi xe tăng 46 USD sau khi thiết kế lại sản phẩm và giới thiệu gói dịch vụ bánh xe, lốp xe và vết móp. Biên lợi nhuận dịch vụ tăng 22 triệu USD, chủ yếu do hiệu quả chi phí và đòn bẩy từ sản lượng xe cao hơn.

CarMax cũng mở rộng các năng lực kỹ thuật số và đa kênh. Công nghệ giọng nói AI hiện tiếp nhận tất cả các cuộc gọi đến các cửa hàng và trung tâm trải nghiệm khách hàng. Các cập nhật đối với trang chi tiết xe đã bổ sung khả năng hiển thị hàng tồn kho rõ ràng hơn, khoản thanh toán hàng tháng được cá nhân hóa và các bước mua hàng rõ ràng hơn.

Lượng truy cập website giảm vài phần trăm, nhưng ban lãnh đạo cho biết cơ hội bán hàng, khách hàng tương tác và tỷ lệ chuyển đổi ở nhóm khách hàng đó đều tăng. Công ty mô tả đây là sự cải thiện về chất lượng lượng truy cập thay vì tăng trưởng đầu phễu khách hàng.

CarMax Auto Finance

CAF đã phát hành 2,3 tỷ USD khoản vay trong quý. Tỷ lệ thâm nhập đạt 40,9% sau các khoản thanh toán trong ba ngày, so với 42,6% một năm trước đó. Lãi suất hợp đồng khách hàng bình quân gia quyền tăng 60 điểm cơ bản lên 11,8%.

CAF đã tài trợ 22% sản lượng Nhóm 2, tăng từ mức 10% một năm trước đó, trở thành bên cho vay Nhóm 2 lớn nhất trong kênh CarMax. Ban lãnh đạo cho biết hiệu quả tín dụng Nhóm 2 ghi nhận được vẫn nhất quán với kỳ vọng ban đầu.

Tỷ lệ thâm nhập CAF tổng thể giảm do tỷ lệ thâm nhập Nhóm 1 thấp hơn. Chi phí vốn cao hơn khiến CAF phải tăng lãi suất Nhóm 1, trong khi các khách hàng chất lượng cao (prime) có các lựa chọn thay thế bao gồm tiền mặt và tài trợ từ liên minh tín dụng.

Tổng khoản dự phòng là 497 triệu USD, tương đương 3,07% các khoản phải thu giữ để đầu tư. Biên lãi ròng (NIM) không đổi so với cùng kỳ năm ngoái ở mức 6,6%.

Triển vọng từ Ban lãnh đạo

• Ban lãnh đạo dự kiến lợi nhuận gộp trên mỗi xe cũ bán lẻ năm tài chính 2027 sẽ giảm ít hơn 200 USD so với năm tài chính 2026, một sự cải thiện so với triển vọng trước đó. Lợi nhuận gộp trên mỗi xe vẫn được dự báo sẽ giảm so với cùng kỳ năm ngoái trong cả quý 3 và quý 4 năm tài chính.
• CarMax vẫn đang đi đúng hướng để tạo ra thêm khoảng 35 USD biên lợi nhuận trên mỗi xe từ kế hoạch bảo vệ mở rộng cho cả năm tài chính.
• Công ty tiếp tục hướng tới mục tiêu tiết kiệm 200 triệu USD đã xác định theo tỷ lệ quy năm vào cuối năm tài chính 2027.
• Các hành động tinh gọn doanh nghiệp gần đây dự kiến sẽ phát sinh khoảng 6 triệu USD chi phí trợ cấp thôi việc trong quý 3 năm tài chính.
• Ban lãnh đạo dự kiến khoảng 50 triệu USD chi phí thanh toán hưu trí phi tiền mặt, không thường xuyên, với số tiền tương tự được dự báo trong quý 3 và quý 4 năm tài chính. Tài sản quỹ tín thác hưu trí dự kiến sẽ tài trợ đầy đủ cho các nghĩa vụ thanh toán này.
• Thu nhập của CAF trong năm tài chính 2027 dự kiến sẽ thấp hơn một chút so với năm tài chính 2026, trong khi các khoản cho vay mới Nhóm 2 được kế hoạch tiến tới gần 1 tỷ USD vào cuối năm tài chính.
• Hoạt động mua lại cổ phiếu dự kiến sẽ khởi động lại với tốc độ khiêm tốn trong quý 3 năm tài chính, thấp hơn tốc độ trung bình hàng quý trước khi chương trình bị tạm dừng.

Rủi ro và yếu tố cần theo dõi

Khả năng chi trả và mặt bằng lãi suất neo cao vẫn là những lo ngại trọng tâm. Ban lãnh đạo mô tả người tiêu dùng có khả năng chống chịu tốt ở các nhóm thu nhập khác nhau nhưng thừa nhận rằng các khoản thanh toán hàng tháng cao hơn có thể tạo ra áp lực lớn hơn đối với các phân khúc tín dụng thấp hơn.

Chi phí vốn cao hơn đã làm giảm tỷ lệ thâm nhập của CAF đối với nhóm khách hàng Nhóm 1. Thời điểm và cơ cấu của các giao dịch tài trợ trong và ngoài bảng cân đối kế toán cũng có thể tạo ra biến động theo từng quý đối với thu nhập và chi phí dự phòng của CAF trong 12 đến 24 tháng tới.

Lợi nhuận gộp trên mỗi xe bán lẻ và bán buôn đều giảm so với cùng kỳ năm ngoái. CarMax có kế hoạch tự tài trợ cho năng lực cạnh tranh về giá trong tương lai thông qua hiệu quả tân trang, hậu cần, hàng tồn kho và các hoạt động vận hành khác, nhưng những khoản tiết kiệm đó vẫn là yêu cầu thực thi then chốt.

Ban lãnh đạo cũng dẫn chứng chi phí nhiên liệu đi-ê-zen và vận chuyển cao hơn. Công ty đã bù đắp những áp lực đó bằng hiệu quả ở các mảng khác trong quý.

Lợi ích từ việc thực thi quy định của FTC rốt cuộc sẽ phải đối mặt với mức so sánh cùng kỳ năm trước. Ban lãnh đạo chỉ ra rằng sự tuân thủ rộng rãi hơn trong toàn ngành đã bắt đầu xuất hiện vào khoảng tháng 5, mặc dù việc triển khai không diễn ra ngay lập tức ở tất cả các đại lý.

Điểm nhấn phần Hỏi & Đáp với chuyên gia phân tích

Ban lãnh đạo cho biết mức tăng 13% doanh số bán hàng cùng cửa hàng được chia tương đối đều giữa các sáng kiến có thể kiểm soát và lợi ích từ việc thực thi quy định của FTC. Các động lực nội bộ bao gồm giá vốn bán hàng thấp hơn, đầu tư vào định giá, cải thiện thuật toán và những thay đổi về trải nghiệm khách hàng.

Về việc duy trì đà tăng thị phần, ban lãnh đạo cho biết chiến lược 'Shifting Gears' được thiết kế để giúp năng lực cạnh tranh về giá trong tương lai tự túc về nguồn vốn. CarMax dự định tiếp tục tinh chỉnh giá theo thị trường địa phương và phân khúc xe trong khi bảo vệ lợi nhuận gộp trên mỗi xe thông qua hiệu quả vận hành.

Hiệu quả sử dụng hàng tồn kho là một trọng tâm khác. Ban lãnh đạo đã xác định vòng quay hàng tồn kho nhanh hơn, giảm việc giữ hàng không hiệu quả và chuyển giao hiệu quả hơn là những cơ hội. CarMax hiện chuyển giao khoảng 2 triệu đến 2,5 triệu xe mỗi năm.

Theo ban lãnh đạo, hàng tồn kho thu mua từ đại lý nằm ở mức trung bình về khả năng sinh lời giữa thu mua trực tiếp từ người tiêu dùng và thu mua qua đấu giá. Thu mua trực tiếp từ người tiêu dùng vẫn là nguồn mang lại lợi nhuận cao nhất, trong khi thu mua qua đấu giá mang lại lợi nhuận thấp nhất.

Ban lãnh đạo cho biết hoạt động tài trợ Nhóm 2 không tạo ra nhiều doanh số bán xe bổ sung. Sự mở rộng này chủ yếu cho phép CAF giữ lại sản lượng tài trợ mà nếu không thì có thể đã chuyển sang các đối tác cho vay bên thứ ba.

Toàn văn biên bản cuộc họp kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Fiscal Year 2027 CarMax Earnings Release Conference Call. [Operator Instructions] 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.

David Lowenstein

Good morning. Thank you for joining our Fiscal 2027 Second Quarter Earnings Conference Call. I'm here today with Keith Barr, President and CEO; Enrique Mayor-Mora, Executive Vice President and CFO; and 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 2026 and our quarterly report 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.

Our commentary today may include non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available in the investor presentation.

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 1 question and getting back in the queue for more follow-ups. Keith?

Keith Barr

Thank you, David. Good morning, everyone, and thanks for joining us. As I reflect on my first 6 months at CarMax, I am proud of the progress we have made in strengthening the business. Last quarter, I introduced our strategy for growth built around 4 pillars that place the customer at the center of everything we do and that are designed to meaningfully improve how we operate at scale and support consistently strong performance. Our strong second quarter results reflect solid execution and the initial benefits we are seeing as we deliver on the strategy. Used unit comps grew 13%, driven largely by improved price competitiveness with total units across used and wholesale growing 15%. Earnings per share grew 81% year-over-year to $1.16, supported by robust comp growth other gross profit expansion through the performance of our extended protection plan products, an increase in CAF contribution and continued SG&A leverage.

I want to thank all of our associates for their hard work, which has underpinned these results. Enrique and Jon will speak to our second quarter performance in more detail in a few moments.

Our improving performance has been driven by the speed and focus our teams have put into delivering our strategy. We have named our strategy for growth Shifting Gears and have rolled it out across our corporate offices and entire field organization. Our associates are highly engaged with the steps we are taking to strengthen our core operations, which are designed to deliver robust financial results over the years to come.

We have a lot to be proud of, and I want to highlight a few examples of the progress we made across each of our 4 pillars this quarter. While we speak to the pillars individually, like many aspects of our business, they are interconnected and many overlapping benefits exist. As a reminder, Shifting Gears starts with a great offering. We will give customers every reason to choose CarMax by offering a great car at the right price. During the second quarter, we further strengthened our price competitiveness to support retail sales growth. We did this by continuing to drive efficiencies and reconditioning, dynamically managing GPUs and then passing savings on to customers.

In addition, we continue to improve our pricing algorithms to ensure we remain more competitive across demand cycles. We did this by incorporating local market insights more granularly and by expanding comparison points across a broader set of vehicles. These enhancements resulted in sharper pricing that resonate well with our customers and supported our sales.

Our second pillar is easy experience. We will make it easy to do business with us, both online and in our stores. This quarter, we enhanced the customer experience to better support the purchase journey from digital to in-person. We scaled AI voice technology to 100% of both inbound store and customer experience center calls which enables customers to quickly resolve their increase through our agent AI tools or directly connect to the right associate for help. Additionally, we improved our digital experience by redesigning our car detail page to make it easier for customers to find and buy the right car for them. Recent updates include providing greater visibility into our inventory selection, incorporating personalized monthly payments and communicating next steps in the purchase process more clearly. The enhancements we made this quarter supported sales conversion, and we anticipate further gains over time.

Our third pillar is add value. This pillar focuses on growing profitability by maximizing value across all aspects of our business. This will be done by connecting customers with valuable offerings and by capturing a larger portion of customer financing through CAF. During the second quarter, we grew our extended protection plan unit margins materially year-over-year as we continue to launch our redesigned offering. Additionally, we increased our Tier 2 penetration and recorded a gain on the residual sale related to our 26 nonprime securitization.

Our final pillar is run lean. We will unlock efficiencies to enable a great offering meaningfully improve how we operate at scale and support strong returns for our shareholders. During the second quarter, as I noted earlier, we continued taking costs out of our reconditioning operations and maintained our approach of passing savings on to customers to more competitive pricing to drive sales. Also, from an SG&A perspective, we took additional steps this quarter to solidify achieving our commitment of $200 million in fiscal year 2017 exit rate savings. To support advance shift into gear, we are strengthening our leadership team. Today, I am pleased to announce 2 key appointments that will help us build on the momentum we are seeing as we begin to deliver on our strategic plan. First, effective October 5, Elizabeth Bergens will join CarMax's Executive Vice President, Chief Digital and Customer Officer. In this newly created role, Elizabeth will own and unify the end-to-end customer experience from customer acquisition through vehicle transaction. In this capacity, she will oversee our marketing, product and Edmunds team.

With more than 2 decades of digital product and customer experience leadership, Elizabeth comes to us from Volkswagen Financial Services, where he served as Chief Digital Officer for the North American region. Second, Jeff Campbell, who has been with CarMax for over a decade, joined our senior leadership team in August as Senior Vice President, Strategy. Jeff is leading a newly centralized function designed to accelerate key decisions by bringing together all of our strategy, data science, AI and pricing teams. Jeff has held leadership roles at CarMax spanning Product, Strategy and Transformation. Elizabeth and Jeff both bring skills, experience and focus we need as we build a faster, more connected company that puts the customer at the center of everything we do. Both positions will report directly to me.

Our customer promise is to deliver a great car at the right price with an online and in-store experience that our customers love. All the steps we have been taking are in service of that promise and to create confidence for the road ahead for our associates, customers and investors. We have a clear strategy, a solid foundation and a team that is committed to delivering strong unit and earnings growth that enables us to consistently reward our shareholders.

Based on our second quarter performance, continued momentum and improving leverage, we intend to resume share repurchases at a modest level in the third quarter.

Now I'd like to turn the call over to Enrique to discuss our second quarter financial performance in more detail. Enrique?

Enrique Mayor-Mora

Thanks, Keith, and good morning, everyone. We are encouraged by the recent growth across the business as our Shift Into Gear strategy is yielding strong financial results, highlighted by the continued improvements in our year-over-year sales and earnings trends. During the second quarter, we delivered total sales of $7.9 billion, up 19% compared to last year. Across our retail and wholesale channels, we sold approximately 388,000 vehicles, up 15% versus the second quarter last year. In our retail business, used unit comps increased 13% and total used unit sales grew by 14%.

Sales performance this quarter was primarily supported by more competitive pricing. As Keith discussed, we continue to realize efficiency gains and cost of sales, and we dynamically manage GPUs, passing those benefits on to customers.

Together with the enhancements we are making to our pricing capabilities, these actions supported a significant improvement in our year-over-year sales trend.

In addition, we benefited from enhanced FTC regulatory focus that has brought greater transparency to advertise vehicle pricing industry-wide by requiring fees to be included. Given our long-standing commitment to transparent no haggle pricing, this brings more clarity to the strength of the CarMax consumer offer by enabling customers to make more direct price comparisons and is a tailwind to our business.

Average selling price was $27,623, a year-over-year increase of $1,630 per unit. Wholesale unit sales were up 16% versus last year's second quarter. Average wholesale selling price increased by $145 per unit to $8,036. We bought approximately 310,000 vehicles during the quarter, up 6% from last year. We purchased approximately 262,000 vehicles from consumers, relatively flat to last year's second quarter.

With the support of our Edmunds sales team, we source the remaining approximately 48,000 vehicles through dealers, which was up 54% from last year.

Second quarter net earnings per diluted share was $1.16 versus $0.64 last year, an 81% increase, a strong positive change in year-over-year trend relative to the preceding 4 quarters.

Total gross profit was $799 million, up 11% from last year's second quarter. Used retail margin of $479 million increased by 8%, driven by higher volume and partially offset by lower profit per used unit of $2,105, which was down $111 per unit from last year's second quarter.

In managing margins more dynamically, we lowered GPUs by less than the full year $200 per retail unit outlook we provided previously as we balance demand, margins and efficiency gains in our reconditioning processes to support sales.

We expect FY '27 full year retail margins will be down less than the $200 per unit as compared to FY '26.

Wholesale vehicle margin of $138 million was flat to a year ago with higher volume offset by lower gross profit per unit of $858, which was down $135 per unit.

Other gross profit was $183 million, an increase of $46 million or 33% from last year's second quarter. EPP margin dollars were up $27 million, driven by growth in both unit volume and unit margins, which are up $46 per unit in the second quarter. We have been encouraged with the impact from our EPP product redesign, focused on providing our customers with more affordable options and from our new real tire and dent product offering.

We remain on track to drive approximately $35 per unit in incremental EPP margin for the full fiscal year.

Service margin increased by $22 million, driven primarily by efficiency gains and cost of sales and leverage from unit volume growth.

CarMax Auto finance income of $136 million was up 32% year-over-year. Jon will provide detail on CAF in a few moments.

On the SG&A front, expenses for the second quarter were $629 million, up 4.6% from the prior year. SG&A levered robustly by $157 per total unit or 9% to $1,621. SG&A dollars for the second quarter versus last year were mainly impacted by the 2 factors. First, compensation and benefits, excluding share-based compensation expense increased by $11 million. This year-over-year comparison reflects materially lower corporate incentive compensation in the prior year and strong performance this year. Excluding this impact, compensation and benefits would have decreased by over $14 million, primarily reflecting lower field and corporate payroll, partially offset by variable costs associated with higher sales.

We expect the year-over-year corporate incentive compensation dynamic to remain similar in the third quarter and to moderate in the fourth quarter.

Second, share-based compensation increased by $7 million, driven by upward movement in our stock price.

Regarding SG&A, we remain on track to deliver on our $200 million in identified savings as an FY '27 exit rate target, and we continue to drive toward expense efficiencies. As part of these efforts, we recently took additional actions to further streamline our corporate cost structure, which we expect will result in approximately $6 million in severance expense in the third quarter.

Also worth noting in this quarter's P&L, other income increased by $15 million compared to the same period last year, primarily reflecting unrealized gains on a small number of equity investments. As we have noted previously, we maintained a modest portfolio of investments across the used auto ecosystem. Separately, we are completing the termination of our legacy pension plan and expect it to be materially complete by the end of the fiscal year. As part of this process, we estimate approximately $50 million in total settlement-related noncash nonrecurring charges will be recorded in other expense with relatively similar amounts expected to be recognized in the third and fourth quarters of this fiscal year. Our expectation is that the assets in our pension trust will fully fund the settlement of the pension liabilities.

Further, the plan's termination will eliminate potential future corporate funding requirements.

Regarding capital structure, as Keith mentioned, with a strong second quarter, a positive outlook on the balance of the year and traction on our strategy, we intend to restart our share repurchase program in the third quarter. We expect to begin our buybacks at a modest pace, below the average quarterly pace prior to our pause. Our objective is to appropriately manage our net leverage to maintain financial flexibility and to efficiently access the capital markets for both CAF and CarMax as a whole, while also returning capital back to our shareholders.

As of the end of the quarter, we had $1.31 billion of repurchase authorization remaining.

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?

Jon Daniels

Thanks, Enrique. Good morning, everyone. During the second quarter, CarMax Auto Finance originated $2.3 billion, resulting in sales penetration of 40.9% net of 3-day payoffs versus 42.6% last year. The weighted average contract rate charged to new customers was 11.8%, up 60 basis points from the prior year. Third-party Tier 2 penetration was 15.9% versus 16.5% last year. And third-party Tier 3 was 7.6% versus 7.3% a year ago.

We continue to make meaningful progress, expanding across the credit spectrum. During the quarter, CAF was once again the largest Tier 2 lender, financing 22% of Tier 2 volume as compared to 10% a year ago. The observed credit performance in this space continues to be in line with our original expectations, reinforcing confidence in our decision to expand.

Despite this growth in Tier 2, overall CAF penetration declined year-over-year, reflecting lower Tier 1 penetration. Increased funding costs driven by the interest rate environment resulted in CAF increasing rates in Tier 1 where customers have more funding alternatives, including cash or financing through credit unions. We view this as a normal response to the higher interest rate environment versus a structural change in behavior from CarMax customers.

CAF income was $136 million, up 32% from the prior year's second quarter, driven by a $29 million decrease in the loan loss provision to $113 million. During the second quarter of the prior year, we recorded additional provision due to the worsening performance of older vintages at that time, whereas performance this year has been in line with expectations. This was partially offset by provisioning related to Tier 2 originations in the quarter from our full credit spectrum expansion.

Additionally, CAF income benefited from a $17 million gain on sale recorded during the quarter and a $6 million increase in servicing fees year-over-year. This was partially offset by impacts from a $1.2 billion year-over-year reduction in outstanding receivables related to the combination of selling the residual interest for 2 nonprime securitization and lower sales during fiscal 2026. Please note, the timing of our receivable sale differs from last year when we recorded a $27 million gain on our 25B transaction during the third quarter.

Our total reserve balance at the end of the quarter was $497 million or 3.07% of receivables held for investment. Net interest margin on the quarter was 6.6% and consistent year-over-year. As we reflect on another solid quarter, our multifaceted strategy to enable CAF income growth is hitting the mark. First and foremost, credit losses were within our expectations across both the Tier 1 and Tier 2 portfolios. Second, the refinement of our nonprime credit underwriting strategy continues to build momentum with origination volume up substantially compared to just a year ago. Third, we continue to benefit from flexibility in how we fund our receivables. Our ability to retain assets on our balance sheet when prioritizing attractive longer-term economics is now well complemented by our evolving method of utilizing off-balance sheet transactions to more quickly monetize cash flows and reduce future risk. This funding flexibility is an important advantage as we continue to grow CAF.

The timing and mix of these transactions may create near-term variability in reported income and provision expense from quarter-to-quarter. However, as our evolving mix of funding strategies begins to mature and becomes more routine over the next 12 to 24 months, we would expect the variability to decrease.

To provide you into our near-term performance, we anticipate CAF's FY '27 income will be slightly lower than FY '26, all while planning to originate nearly $1 billion in Tier 2 by year-end. It is disciplined scaling in Tier 2, along with an appropriately sized loss reserve that should lead to significant CAF income growth over time. We plan to share more details during our upcoming strategic update.

Now I'd like to turn the call back over to Keith. Keith?

Keith Barr

Thank you, Jon. Before we open the line for questions, let me leave you with a few final thoughts. We are encouraged by our performance this quarter and the progress we are making across the business. While we're still early in our journey, the results we are seeing reinforce our confidence in our strategy and the opportunity ahead. Shifting to gear is focused on strengthening our core business in getting CarMax back to sustained growth. We are steadfast in our focus on delivering the right cars at the right products, making it easier for our customers to do business with us, capturing more value from each transaction and operating more efficiently at scale.

This quarter's strong unit and earnings growth reflects solid execution against these priorities. What encourages me most is that we are delivering these results while much of the work across our 4 gear pillars is still ahead of us.

We have a solid foundation, an exceptional team, and we are adding leadership in key areas to accelerate our progress. I am confident in our ability to build on this early momentum, continue to improve our business and create long-term value for our shareholders.

None of this happens without our associates, and I want to thank them again for their hard work in embracing our new strategy to create a stronger CarMax. I look forward to sharing more about our strategy, including key initiatives and milestones during our upcoming strategic update, which will take place virtually on November 3.

Thank you for your continued interest in CarMax. Operator, we are ready to take questions.

Operator

[Operator Instructions] Your first question comes from the line of Daniela Haigian with Morgan Stanley.

Phần hỏi đáp

Daniela Haigian

So GPU, along with a lot of other areas of the business came in really strong this quarter and you're now trending better than that down $200 year-over-year full year guide. How would you characterize that strength? What was the impact from greater efficiencies in COGS per unit versus maybe some of this FTC uplift or retail wholesale spread?

Keith Barr

Daniella, thank you for being here. I'll let Enrique respond to that.

Enrique Mayor-Mora

Nil, we've been really pleased that we've been able to come in better than our previous outlook on GPU, certainly, now expecting the year to be below a $200 decrease year-over-year. And we've done that while maintaining strong sales as we've effectively balanced demand we're seeing in the marketplace for our cars, margins as well as efficiency gains. And it's really the balance of all 3 of those things that has allowed us to come in better, if you will, on our GPU. And specifically around cost efficiencies that we're seeing in the business, the teams have done tremendous work around rolling out different tools for our operators. We have a new part selection tool that's benefiting the organization. We switch, as we've talked about before, from a 90-day warranty to a 30-day warranty for our customers and actually given that back in terms of lower pricing for our customers as well, and that supported our sales. But overall, really pleased that the demand we're seeing in the marketplace and our ability to, again, come in better than our GPU previous outlook.

Daniela Haigian

And maybe the macro part, the impact of spreads or FTC?

Enrique Mayor-Mora

Yes. The FTC impact definitely is a tailwind. When we take a look overall, like our comp performance, right, on the quarter, I would say it's evenly mixed between items we control directly, so COGS efficiencies, the GPU decrease, pricing algorithm improvements, customer experience improvements. So those items that we control directly, we think is about half of the comp performance, while the other half is really coming from what we think is the SEC enforcement benefits that we're seeing.

Keith Barr

Yes. And just to build on that a little bit. I mean, I think there's 2 aspects as Enrique said, having a really clear strategy that focuses on the core of this business is going to drive performance. And also really the strength of the CarMax brand that price transparency, which have been known for disproportionately benefits us now going forward. So that FTC is focused on compliance to their guidelines, we've always had more transparency and it's helping us with price competitiveness too. So it's execution of strategy and also the strength of the CarMax customer value proposition.

Daniela Haigian

That's really helpful. And then maybe, Keith, just a broader question for you. I know it's early days here, but how do you think about CarMax's omnichannel architecture and brand positioning in this future of agentic AI, right? Where these agents are doing searching and comparing on the consumers behalf. Maybe more to hear on this in November, but curious to hear how you think about it.

Keith Barr

Sure. Yes. I mean we'll talk a little bit about AI. Again, we have an AI center of excellence here at CarMax, which basically makes sure we're responsibly use AI and look at all the different use cases here we implement. And so things like our agentic voice call center now handling 100% of stores and our customer experience under calls and helping to do that. Your question is related to search. And I think that AI is going to be actually a real benefit to the consumer to be able to go there and really understand different vehicles and how those vehicles meet their needs. In terms of actually getting them to transactions, I think that was really difficult for the used car industry to be negatively impacted by it because every vehicle is an individual SKU. You can see how agentic AI e-commerce will impact more CPG faster. And we think it's a real benefit to our business here to drive us and become more efficient and deliver better customer experiences.

Operator

Our next question comes from Rajat Gupta with JPMorgan.

Rajat Gupta

Congrats on the good execution here. I had a question on just comps for the rest of the year. If I look at normal seasonality in the business, based on the 13% comp in 2Q, normal seasonality would imply somewhere around mid-teens in the third quarter -- mid- to high teens in the third quarter? I'm curious like if you're seeing anything there in the macro or just a consumer backdrop that would deviate from that seasonality? That's question number one, and then I have a follow-up.

Keith Barr

Yes. Thanks, Rajat. I'll talk about the consumer. I mean, affordability is on everyone's mind. It sees like every single discussion around that. And I think it speaks to the strength of the CarMax brand effectively and our focus on having incredibly competitive pricing. And the other word I would say about the consumer is resilient at the end of the day. Across all the different spectrums of the lower end consumer to the higher-end consumer we're definitely seeing resiliency there. I mean the broader industry is down 1% or flat to 1%, and we posted comps of 13%. So I think having great cars, great vehicles at great pricing and making it easy to work with will drive continued growth and performance in the business.

Enrique Mayor-Mora

In terms of an outlook for the back half of the year, look, we captured it in our prepared remarks. And you can see it in our bullishness around the business. We're turning our share repo back on. we're seeing continued momentum into the business. And so we're really pleased in terms of where we are and kind of what we're seeing in front of us.

Rajat Gupta

Got it. And then once you lap -- you're going to lap the price cuts here in December. Do you believe like the business has gotten to a place where there's enough efficiency you're able to drive to remain competitive on price to sustain the share gain? I'm curious how you feel about that based on what you've observed over the last 6 months.

Keith Barr

Yes, absolutely. I mean, again, when you think about our strategy, Shift into Gear and running lean being that pillar and that running lean make sure coal we can have a great offering. And we've committed to saying we want to self-fund our price competitive moving forward to continue to find efficiencies in the business so that we can deliver great vehicles at exceptional prices, but not having the lower GPU moving forward. So that's the focus of the business, and I'm really confident in the team.

Enrique Mayor-Mora

Yes. And I would say, certainly from FY '28, that is the intent, right, as we've talked about before, to sell fund any kind of GPU investments and lower price. Think for this year, for the guidance we've given here, the outlook, we do expect to be lower, less than $200 year-over-year in a reduction in GPU, and I would expect some decrease in the third quarter and in the fourth quarter as well. We'll be comping over a record quarter in FY '25 in terms of GPU. So we are maintaining some flexibility in the business. We're running the business more dynamically, and that includes some flexible. So I would expect GPUs for this year as a whole and by quarter to be down year-over-year in support of driving sales.

Operator

Our next question comes from Jeff Lick with Stephens.

Jeffrey Lick

Congrats on the great results. Enrique, maybe for you, the EPP gain was probably a little more than people were expecting. I was wondering if you could unpack that a little bit and just the dynamics of where that's coming from?

Enrique Mayor-Mora

Yes. I would say that we're very pleased on the execution as a pool in terms of EPP and the incremental margin we're seeing from product redesign from our new product, wheel, tire and dent, all that is in line with our expectations. And I would say our full year guidance of $35 an incremental EPP for the full year is pretty much in line, I would tell you with where we ended this quarter being at unit recognizing that in the first quarter, we are still rolling out nationally. We had a lot less than that. So I would tell you it's very much in line with what we had expected and where we expect to be for the year.

Jon Daniels

Yes, Jeff, this is Jon. I'll just add to that kind of qualitatively. Look, I think this is something we signaled. We knew that we could make progress here. We saw an opportunity to really refresh our product. We've gotten this in the stores. It will be naturally rolled out by end of the year just with getting in California. Our stores have done an outstanding job at selling this product. It's a more affordable product for our customers. We've tacked on what we think is a fantastic cosmetic protection product, wheel, tire and dent, like we saw it come in, we knew that we could deliver in the stores have done so...

Jeffrey Lick

And then just a quick 1 for Keith. Keith, on the last call, we talked about dynamic pricing that seems -- is it related to your previous career. And I'm just curious -- I mean, the big question as we get into the next year and we get through easy comps as people are going to look at, okay, can they comp positive and they continue to hold GPU. Just any high-level thoughts as you've kind of been observing the data in the business on how you might give investors comfort that this just isn't an easy comp phenomenon.

Keith Barr

Yes. No, thanks, Jeff. And that's everything about Shift into Gear is about making sure we have sustainable growth. And that's the complete focus of the team here right now is making sure that, again, we have the right level of saleable inventory, we can maintain competitive pricing so we can price dynamically depending upon where demand is and by segments, and we're continuing to evolve our pricing algorithms every single month, sharpening up, pulling in external data to make sure we have those local market pricing points, too. So we have a lot of confidence that this should be a growth business and we show positive comps and outperforming the industry moving forward.

Operator

Our next question comes from Craig Kennison with Baird.

Craig Kennison

Keith, I'm wondering, could you provide examples of how you are taking friction out of the digital journey in order to impact conversion?

Keith Barr

Yes, absolutely. Part of it is just really understanding what customers are looking for and making sure we're providing that information in the most easy way possible. And so a couple of examples we've used was like car details page, sharpening up like what consumers are doing in terms of search and making sure we're putting those pieces of information front and center, putting forward monthly payments, taking steps out of the purchase process and simplifying it. I think I mentioned previously, we had our EPP. We had a super complex matrix. And now the way that we're serving it up to customers, it's really self-driven by them, putting in a bit of information and serving up the exact right offerings to them too. So it's really understanding everything from search all the way through transaction and then how we communicate with customers, just make it easy to do business with us.

We're still early days in some parts of the journey. There's things that we can continue to sharpen up, but I'm really excited about having Elizabeth Bergens join us as our new Chief Digital and Customer Officer. She's got 20-plus years in product in financial services and in automotive. And so she's the perfect person to join our team here and really own the customer journey looking forward.

Operator

Our next question comes from David Bellinger with Mizuho.

David Bellinger

I have a couple of strategic ones. Following up on the GPU outlook being down less than $200 per unit for the year. That would put you at around $2,100 and still within, call it, the legacy guardrails that govern the business for a while. Why not be more aggressive there? Or is there some optionality to further push GPU down beyond this fiscal year if you are seeing the proper payoff in terms of unit growth?

Enrique Mayor-Mora

Yes. Look, I think we -- as we've talked about, we can largely self-fund those movements, right? So shifting to focus, focus on sustainable comp sustainable EPS growth. And we recognize at the same time, we need to self-fund and find efficiencies in the system. We believe those efficiencies to be had in the system where we don't necessarily need to go down that route as the first selection, if you will. And we're going to focus on driving efficiencies in COGS and logistics business and so on and so forth in order to actually not have to go with margins lower than our initial guidance.

Keith Barr

And I think, in our November strategic update, we'll be walking through each one of the pillars of the strategy. and understanding really the run lean piece and the great offering piece, how interconnect those are and talk about the initiatives we have that will deliver the self-funding, which would deliver the price competitive and protect GPU moving forward.

David Bellinger

Got it. I also want to touch on inventory levels. CarMax has been operating pretty consistently with about 80,000 to 90,000 vehicles in any given week. Is there an opportunity to compress that number and get some more efficiency on the inventory base, maybe add another source of GPU upside, if you can bypass some of that natural depreciation from holding on to vehicles?

Enrique Mayor-Mora

Yes. So that is a definite area of focus that we have. So like I was just talking about in terms of efficiencies in our COGS, and our logistics. An area of focus for the teams are basically inventory, right? And how can we turn our inventory faster, how do we have less unproductive transfers, unproductive holds, things like that, that will slow down your [indiscernible] that will actually drive slowing down returns. Those are items that we think are ahead of us in terms of opportunity and are definitely part of the purview of Shift into Gear. So absolutely on our list of opportunities.

Keith Barr

And we're regularly testing, understanding how this impacts the consumer. So understanding if we -- how we handle holds, is that driving sales, but slowing down our inventory turns? Transfers. We transfer over 2 million, close to 2.5 million vehicles a year. How do we make those tranches more productive and have fewer of them over time? So it's really understanding again, have a decision to make on holds and transfers impact sales, but also impact inventory productivity. And we got a lot of work underway there right now as part of our strategy.

Operator

Our next question comes from Joe Spak with UBS.

Joseph Spak

I know you mentioned you're seeing resiliency across consumers of all income, but I was wondering if you could provide any detail if you had in terms of your traffic or conversion however you sort of tier your customers, whether it's deciles or quintiles. And I guess just if rates stay high, some other macro pressures persist, I know the goal is eventually to sort of get to self-funding that growth. But in a tougher macro environment, sort of how do you think about the strategic plan? Is GPU still a driver to help drive that growth in a tougher macro?

Keith Barr

Yes. I mean, I'll talk about consumers because we look at our consumers by different cohorts, effectively on income levels. And again, resilient is the word I would use. So even at our lowest income cohort, we basically have the same number of customers year-over-year. And then as you move up the income cohorts, we had those growing year-over-year, too, which is how our inventory developed during the quarter as well, too. So we sold more newer vehicles, higher-priced vehicles in this quarter because of the strength of that cohort. Again, that was just for this quarter, and that could change in future quarters, and we can manage our inventory dynamically based upon where we're seeing demand come from too.

So again, across all the different spectrums, we saw basically either the same number of customers or a growing number of customers in a tougher macro environment. And again, I think our price transparency and our price competitiveness is a real, real strength of CarMax.

In terms of GPU moving forward, we believe we can find the efficiencies in the business to make sure we can protect our GPU. Again, it will go down a bit in Q3 and a bit in Q4 as we've already signaled. But going forward, in the future fiscal years, we'll fund the GPU savings that we need to find in this business.

Operator

Our next question comes from John Babcock with Barclays.

John Babcock

Just quickly on that last comment about the GPUs being down in 3Q and 4Q. And I know you also mentioned that earlier. Can you just talk about what's driving that?

Enrique Mayor-Mora

So you broke up a little bit. Did you ask what's driving them?

John Babcock

Yes,Yes. So why are you expecting GPUs to be down in 3Q and 4Q?

Enrique Mayor-Mora

Yes. So consistent strategy this year, right, which we've communicated like in support of sales we are lowering our GPUs for the year, right, in order to support our sales performance. We're driving efficiencies in the business. And as we talked about, we also have a tailwind from FTC, mix all those things together, and we're, I believe, very effectively balancing demand, efficiencies and in order to support sales. So I mean that's why it's very consistent with what we've said. I think the benefit has been really that we haven't had to lower our margins by as much we initially provided an outlook for because of that mix of benefits that we're actually seeing.

John Babcock

Got you. And then next question, I noticed in going back and looking at some of the historical data that the percentage of vehicles you've been buying from dealers has trended higher over the last couple of years, and you obviously had a pretty sizable increase this quarter. Just kind of curious, like, is that availability driving that? Or is there something else? And then also, can you talk about the profitability on those vehicles that you're buying directly from dealers versus if you buy a vehicle from customers?

Enrique Mayor-Mora

Yes, absolutely. So we've been really pleased, really since inception of our acquisition of Edmunds, and they have a sales force out there that partner with our organization, and they've been driving our Max offer, buying cars from dealers for a few years now. This quarter is just continued testament to the strength of that product that we have out there, where you saw a 54% growth year-over-year in the quarter.

Now I will say in terms of profitability, the most profitable buy that we'll have is directly from a customer, right? That is the most profitable buy, as we've always talked about. The least profitable is going to an auction house and buying a car in axon house, all you know there is that you paid more than anybody else for the car, but you got the car. And in between there, I'd tell you is buying a far from a dealer. So kind of midway between buying a car from a customer and going to an auction. So definitely accretive to the organization is another contributor to that allows us to be more competitive on our pricing as well. So very pleased with our performance this quarter.

John Babcock

Okay. And then just my last question. Obviously, we've seen diesel and transportation costs rise up pretty sharply. I'm just kind of curious if you could talk a bit more about how that's impacting your business, how you're managing through that?

Enrique Mayor-Mora

Yes. It's another component within our cost of sales. And -- but as we talked about this quarter, we've -- effectively, the teams have done a great job in driving efficiencies outside of that impact that have allowed us to be even more price competitive moving forward here, certainly in the quarter and our outlook moving forward. So we've been able to absorb it, the increase in price and diesel. But definitely, it's impacted our costs. But again, our efficiencies elsewhere have allowed us to offset it.

Operator

We'll go next to Scot Ciccarelli with Truist.

Scot Ciccarelli

So I know you've put up a few different ways. But when you look at the sharply improved sales rate, can you help us better understand how much of it was driven more by what you guys have historically called top of the funnel, more people coming into your stores and digital channels versus how much was driven by better conversion rates?

Enrique Mayor-Mora

Yes. I would say that overall in the quarter, our web traffic actually was down by a couple of points. So -- but what we absolutely saw was our sales opportunities being up and our engaged customers being up and our conversion of those engaged customers being up as well. So what we're seeing is better quality customers coming through, if you will, right? So web traffic down, but overall kind of quality customers coming through the digital door and the physical door is up and our conversion of those customers are up as well.

Keith Barr

Yes. I think our marketing team has done an exceptional job of really driving efficiencies in the marketing funnel. And so even though that the web traffic is down a bit, again, the quality of that traffic is significantly improved, which led to all of those factors as Enrique just pointed out to. So again, a great job by the marketing team.

Scot Ciccarelli

SP30463510 That's helpful. And then I know it's a little difficult to tease out, and there's obviously some substitutability. But do you think your Tier 2 penetration were all incremental sales? Just trying to figure out there's a sales impact, if any, as you guys have moved a little bit lower into the credit pool on a direct basis.

Keith Barr

Yes, I appreciate the question. Yes, the short answer is no. I would say it is not all incremental sales. There's always going to be some incrementality. I think we've provided an outstanding offer out there. But no, this is really about us being opportunistic and moving down to the volume where, again, our credit partners are great. They have always provided great offers to our customers. just taking the opportunity to take some of that volume for ourselves, that's above and beyond what they would typically pay us. So no, not incremental largely at all.

Operator

[Operator Instructions] We'll move next to Alex Perry with Bank of America.

Alexander Perry

I just wanted to get your thoughts on how the FTC regulation could affect the GPU profile longer term? Do you think that dealers start to alter their prices with now having to include the dock fees? And then how long should we expect the FTC tailwind to last for you? And what are you seeing sort of in terms of compliance in the overall market?

Keith Barr

Sure. I mean, I can give you an example of the FTC benefit for CarMax. And I can't comment on specific to what other companies are going to do with their pricing. But when you think about our competitive pricing overall versus the broader industry, the percentage of vehicles rated great deals on cars.com for CarMax more than doubled this quarter compared to Q2 the previous year. So that's just significant, right? And so customers out there digitally shopping for vehicles and seeing the fact that, again, the number of great deals on third-party sites like cars.com, we've doubled there. So that's going to be a great, great tailwind for us for the remainder of this year. Compliance really started kind of in the May time frame. And so you probably think about it ramped up into May. So that's probably going to last that sometime...

Enrique Mayor-Mora

Yes, there was a bleed in actually, not everybody complied certainly right away, and there's still some migrates, I'm sure. But really May is when we saw actually a movement there. So again, we have until May and then certainly thereafter the benefit...

Keith Barr

And I think the FCC sent out like 97 letters to different companies. And back in March, telling that we're going to -- again, these aren't new guidelines. These guidelines have existed. This is basically saying they were going to enforce compliance. And so the vast majority of the industry is headed in that direction, again, which is a tailwind for CarMax because we've already spent more transparent.

Alexander Perry

And just a follow-up on that. What impact do you think that has on pricing longer term as dealers move to include just the dock fees into a sort of all-in more transparent pricing? What impact do you think that has on sort of GPUs and the overall pricing environment?

Keith Barr

I think it's just going to continue to show how price competitive we are. I think Interestingly, the noncompliance by the broader industry actually was a disadvantage for CarMax. Our customer value proposition being no haggle and being transparent to customers, again, it was exactly the right thing for CarMax to do in terms of building this brand. Now that people have to comply with this, it basically shows again how price competitive we're going to be in being able to maintain our pricing and our GPUs moving forward, and we'll see again how other people choose to price.

Operator

Our next question comes from Chris Pierce with Needham.

Christopher Pierce

You kind of just hit on it. I really wanted to get a sense of these third-party sites, if we assume a lot of people start there. I'm just kind of curious the tie-in between marketing and pricing? And does it really just come down to price? And I kind of love to get your thoughts on what you're seeing from those sites and the conversion of customers you're seeing from those sites that I just have 1 of the consumer?

Keith Barr

Mean again, we don't really talk about it in that level of detail. I mean what we think about is our research is that 90-plus percent of customers start their search for a vehicle online. I have to believe it's probably almost 100% in reality. And again, they're going to be searching at multiple sites. They're going to come to carmax.com, and they're going to the. There going to look at third-party sites. They're going to really understand kind of what vehicles are out there. And then, again, our marketing team does an exceptional job through SEO and GEO to be able to attract the right customers to our site and then convert them through the funnel too. So again, it's making sure that you are priced competitively and that you're showing up in all the right channels and that's how you maximize again the customer acquisition, the customer conversion.

Christopher Pierce

Okay. Perfect. And I think you talked about rates up 60 bps on average maybe across the quarter and probably gone up through September here. I mean, how should we really think about the consumer being impacted here because it's just like you've got consumers dropping down from new corn to use that are better credit quality because the new car prices like a 1% move in rates, I think is like cost is like $12 to $15 in monthly payments like. Is this something investors are sort of overreacting to? Or what's sort of the right reaction or what level of rates is something that changes the dynamic for you guys? I just want to sort of kind of level set how investors -- how we should think about this?

Jon Daniels

Sure. Yes. I'll kind of initially answer that question. When I think about it from the credit lens, I think the consumer -- you're certainly going to have -- it will be bifurcated the higher-end prime consumer, right? They have options. They're going to go to cash. The credit unions just have obviously an advantage there where they can keep rates low. So for CarMax in particular, CAF, you're going to see probably some leakage from using the internal financing to those channels. Now CAF in particular, we have options there, right? We can choose, and that's the benefit of a captive. We can choose at any given point to keep the rate low or raise the rate as -- and protect our finance margin. So it happened this quarter, we chose to raise rates, and we saw great comps that were coming in place. So that's an option we have in any given quarter. But I think overall, in the prime consumer, they're just going to switch to a different financing mechanism.

As you get further down the credit spectrum, that's where can that payment will be $12, $15, that might mean a lot. Terms are already extended. Can they find a way to fit that into their budget, there can be a challenge there. Our goal here is to make sure that we have a great competitive front lot price, provide great credit offerings and make it as affordable for them as possible even in the face of macroeconomic changes.

Operator

We'll now take a follow-up from John Babcock with Barclays.

John Babcock

Sorry for the follow-up here. Just wanted a clarification though, on the GPUs because you said down 3Q and 4Q. Is that sequentially or that's year-over-year?

Keith Barr

Year-over-year.

Operator

We don't have any further questions at this time. I'll hand the call back to Keith for any closing remarks.

Keith Barr

Thank you, operator, and thanks, everyone, for joining the call today. And I appreciate all your questions and all your support. And we look forward to talking to you next quarter and seeing you in November.

Operator

Thank you. Ladies and gentlemen, that concludes the Second Quarter Fiscal Year 2027 CarMax Earnings Release Conference Call. You may now disconnect.