With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

This year's 100 Best Companies to Work For are rebuilding the social contract at work so people feel supported, trusted, and future-ready as they undergo that transition.

100 Best Places to Work 2026_CarMax

Employees say:"I love working for CarMax and I will retire with CarMax. CarMax truly cares about the individual, whether customer, associate or community. CarMax is more than a place to work and make money, it completely changed my life. I feel like my personal values align with the CarMax core values and CarMax truly embraces each associate for their own authentic self. I have grown my career from an hourly associate to a Senior Manager and I have felt so much support. I have built financial success in my life through CarMax valuing me as an individual, having honest conversations on where I can improve as well as recognizing me for the strengths I bring to the table. CarMax is the best place to work!"

Fortune 100 Best Companies to Work For

See which workplaces made this year's list.

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Employees say:"CarMax truly cares about innovation and allows employees the opportunity to present ideas and solutions as well as the time to prove out those ideas. Everyday I see people coming together to improve and develop new solutions that make this a great place to work for associates, and provide a better shopping experience for our customers."

Best Large Workplaces in Retail

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The top companies on our list have one thing in common: Staff largely trust leadership to see them as well-rounded people and reward them for a job well done.

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Employees say: "CarMax is very much driven to create a welcoming and associate-first culture. I am confident that company leadership wants to create a company and business model that is ethical and respects customers and employees, instead of chasing short-term profitability."

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

America's Most Innovative Companies

2025 Best Large Workplaces for Parents_CarMax_US1__68b9ad8e7757c3af0ca2bb8e_1

Employees say:"CarMax is, hands down, the best place I have worked in my long career. I truly feel valued here, and I believe my work makes a difference. My colleagues and managers are smart, competent, kind, and enjoyable to work with. Twice a year, we provide company feedback via a survey, and the company has made meaningful changes based on that feedback."

Best Large Workplaces for Parents

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Employees say:"CarMax is very much driven to create a welcoming and associate-first culture. I am confident that company leadership wants to create a company and business model that is ethical and respects customers and employees, instead of chasing short term profitability."

Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

Fortune Sector Leaders: Retailing

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

Creating a more empathetic workplace looks like staying loyal to workers, emphasizing D&I initiatives, and paying well.

100 Best Companies 2024-CarMax

This is the 20th year that CarMax, a used autos retailer, has appeared on the list.&nbsp;The company has started using AI to support business processes and consumer-facing content, such as car reviews, to help free up employees' time. In addition, CarMax is using AI to power multiple customer experiences, such as giving online offers to customers to sell their car to CarMax in minutes, and providing personalized car recommendations to help customers buy their next car from CarMax quickly. CarMax also invests in its virtual AI assistant, Skye, to help streamline its customer experience centers and support customers as they are shopping, through steps like vehicle shipping and appointment preparation and management. &nbsp;For CarMax, community involvement is big. One of its longest-lasting key relationships is with <a href="https://kaboom.org/">KABOOM!</a>, an accredited charity that builds playgrounds in underfunded and underinvested communities. Since the partnership formed in 2011, more than 11,000 employees have come together to build 206 play spaces.

The 200 companies on this list are transforming industries from the inside out.

Building a culture of trust and transparency is essential to help everyone thrive, especially in rocky economic times.

100 BEST COMPANIES 2023-CarMax

The no-haggle retailer of used autos is appearing on the Best Companies to Work For list for the 19th time this year. 
<ul> 
 	<li>New hires receive a warm welcome even before their first day. As soon as someone accepts a job offer, the team leader calls to welcome them, and a mentor calls to answer any questions they might have before they start.</li> 
 	<li>Elaborate onboarding includes making sure new hires have clear direction about their schedule and are provided with smaller details, such as where they should park and what restaurants are nearby, before their first day.</li> 
 	<li>Workers can utilize the CarMax Connect web platform to get personalized information, aggregated news, and useful company resources.</li> 
 	<li>“It's the first company that I've worked for that makes you feel the company puts its employees first, and truly understands that it's the sum of its parts that make up the whole,” said one employee. “They're also very understanding when it comes to personal issues getting in the way of work and allowing you to take time off to address them, and not make you feel like you're letting the whole company down for doing so.”</li> 
</ul>

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

Fortune Global 500

GPTW 2023 Best Workplaces Retail Large CarMax_6

Employees say: 
 
"I truly feel I am an equal employee. This is the first place that I have worked at where all of management makes you feel equal to them. There are no favorites here, which makes it a very relaxed, amazing place to work."

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

When it comes to supporting employees, flexibility, diversity, and a few extra paid days off go a long way.

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CarMax, the nation’s leading used-car retailer, believes that good customer service begins with treating employees right. At the peak of the pandemic, every CarMax manager met with their associates to help them balance work and family life. As a result, some employees were able to modify their schedules or take a leave of absence that enabled them to continue receiving benefits. And CarMax aims to hold itself to a high standard; associates with concerns over safety or ethics are encouraged to speak up via an open door policy. “The most amazing thing about working here is our managers genuinely care about us,” says one employee. “They will put in extra time and effort to help us with anything we need, even if it’s something in our personal life.”

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

Great Places to Work in Retail Large- 2022-CarMax_1000333-1

Employees say: 
 
“I feel that everyone here is welcoming and accepting of everyone. We are encouraged to develop relationships within our department as well as others. We are empowered to make decisions we feel are necessary in the moment whether it is business or customer related. I can be myself at work and that is a great feeling. I feel people have the best interests of everyone on a personal as well as professional level.”

This year’s Fortune 500 marks the 68th running of the list.

Our 2021 list of the 100 best companies to work for, as ranked by their employees. See which companies made the list.

100-best-companies-2021-37-Carmax

When closures led to furloughs of some employees, it wasn’t just hourly workers who felt the squeeze. “I appreciated that executives took a pay cut and that the board of trustees did not receive any compensation,” one employee writes. (Indeed, CEO William Nash took a 50% cut.) The company covered health insurance premiums for furloughed workers, and an associate disaster relief fund enabled employees to apply for help if they became ill or experienced a qualifying hardship. By the end of July 2020, CarMax no longer had any associates on furlough, and positions had been made available for approximately 99% of impacted employees.

See which retailers made this year's list.

Best-Workplaces-Retail-2021-CarMax

Employees say: 
 
“The culture at CarMax is by far the best out of all the companies I have worked for. I truly feel CarMax appreciates their associates and will go above and beyond to demonstrate that to them. I am proud to say CarMax when people ask where I work!”

This year’s Fortune 500 marks the 67th running of the list.

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As the largest used car retailer in the United States, CarMax generates revenue from both the retail business and its wholesale auction house.

Our 2020 list of the 100 best companies as ranked by their employees. See which companies made the list.

Best-Workplaces-Retail-2020-CarMax

Employees say: 
 
"Carmax is the first company I've worked for that 'walks the walk.' Being a female in a male-dominated industry was difficult, but here I'm treated as an equal, and have had the opportunity to learn in stretch roles, and am now managing my own store!"

This year's Fortune 500 marks the 66th running of the list.

F500-2020-173-CarMax

Founded in 1993, the auto retailer buys and sells used vehicles in its more than 200 store locations across the U.S.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

World's Most Admired Companies

Our 2019 list of the 100 best companies as ranked by their employees. See which companies made the list.

From groceries to apparel to home decor, see which companies made the list.

CarMax-Best Workplaces in Retail 2019

Employees say: 
“I believe the people that are hired here are not just hired by credentials, but also integrity, which plays a big part in creating the Carmax atmosphere. There is plenty of room for growth and opportunity for many people.”

This year's Fortune 500 marks the 65th running of the list.

We surveyed tens of thousands of young employees to create this list of millennials’ favorite workplaces.

Carmax-best workplaces millennials 2019

Employees say: 
“At CarMax everyone cares for each other and is there for each other. We make friends and have a wonderful time at work. We share and help each other through any situation work related or not.”

100 Best Large Workplaces for Millennials

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

Our 2018 list of the 100 best companies as ranked by their employees. See which companies made the list.

This year's Fortune 500 marks the 64th running of the list.

best-workplaces-millennials-2018-CarMax

Employees say: 
 
&nbsp; 
 
"CarMax really focuses on building skill levels vs. driving numbers. We all know that numbers are the bottom line, but here they focus more on behavior. From my sales experience, if you have the behaviors, and they're strong, the numbers always come." 
 
&nbsp; 
 
"I was hired as a detailer, I couldn't even drive as stick shift. An entry level mechanic position opened and I was afforded the opportunity. I went on to become a master mechanic. After 8 years with the company, I've just accepted an offer for an analyst position at home office. The room for advancement is incredible." 
 
&nbsp;

Our 2017 list of the 100 best companies as ranked by their employees. See which companies made the list.

This year's Fortune 500 marks the 63rd running of the list.

best workplaces for millennials 2017 CarMax

Employees say: 
 
&nbsp; 
 
"Although I perform the same business functions every day, no two days are the same at CarMax. The employees are a diverse group of people, which makes it especially enjoyable to work here. I have worked at CarMax for over 5 years and plan on working here for many more years to come!" 
 
&nbsp; 
 
"[The company] will not only teach you what you need to or want to know, but will also give you the opportunity to advance yourself by helping pay for schooling. CarMax teaches you a lot about yourself as a person by helping you work on your skills ... They inspire me to be a better person every day." 
 
&nbsp;

Google/Alphabet is the No. 1 place to work for the seventh time in 10 years. Six newcomers include Veterans United at No. 30, Hilton Hotels at No. 56, and Slalom Consulting at No. 100. IKEA’s U.S. arm returns to the list, along with GoDaddy and Sheetz.

This year's Fortune 500 marks the 62nd running of the list.

The second annual ranking of the best employers for workers 35 and under.

best workplaces for millennials 2016- CarMax

"I always enjoy the camaraderie and family feel. CarMax allows me to grow knowing mistakes will happen, making the environment a positive one to work in. The exposure and trainings I have received have given me valuable skill sets that will stick with me for the rest of my life. I also feel that I am a person and not a number!" says one millennial worker. 
 
&nbsp; 
 
"Management really cares about employee development. My manager works closely to help me improve in preparation for a promotion. I am also encouraged to focus on projects and types of work that interest me," explains another millennial. 
 
&nbsp; 
 
Read the .

This year’s list marks Fortune's 18th year of partnering with Great Place to Work. Google ranks No.1 for the sixth time, and 16 new companies make impressive debuts, including Acuity (No. 3), Twitter (No. 24), and Riot Games (No. 13).

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Google tops the list once again, marking its eighth appearance and fifth time as No. 1.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Best Workplaces For Parents

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Best Workplaces In Retail

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CarMax started as a solution for consumers who dreaded a trip to the car dealer. Emphasizing a stress-free experience, it introduced the concept of “no-haggle” purchasing through slogans like “You shouldn’t have to argue to get a fair price.” Now CarMax is the largest U.S. retailer for used cars with 250 stores nationwide and a portfolio of assets worth nearly $18 billion. In its fiscal year ended February 2025, the company sold roughly 790,000 pre-owned vehicles and another 540,000 wholesale vehicles at auctions.

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CarMax (KMX): Company Profile, Stock Price, News, Rankings

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CarMax

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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.

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.

CarMax (KMX) Q4 2026 Earnings Call Transcript

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