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.

F500-2021-136-CarMax

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 second quarter fiscal year 2027 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.

Good morning. Thank you for joining our fiscal 2027 second quarter earnings conference call. I am here today with 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 2026, 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. 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 one question and getting back in the queue for more follow-ups. Keith?

Thank you, David. Good morning, everyone, and thanks for joining us. As I reflect on my first six 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 four 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 cash 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 Shift into GEAR, and have rolled it out across our corporate offices and entire field organization. Our associates are highly engaged with the steps we have taken 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 four 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, Shift into GEAR 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 continued 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 resonated 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 enabled customers to quickly resolve their inquiries through our agentic 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 continued to launch our redesigned offering. Additionally, we increased our Tier 2 penetration and recorded a gain on the residual sale related to our 26B non-prime 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 cost out of our reconditioning operations and maintained our approach of passing savings onto customers through 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 FY 2027 exit rate savings. To support and advance Shift into GEAR, we are strengthening our leadership team. Today, I am pleased to announce two 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 5th, Elizabeth Dirgins will join CarMax as 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 two decades of digital product and customer experience leadership, Elizabeth comes to us from Volkswagen Financial Services, where she 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 of 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 the 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?

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 in 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 advertised 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 sourced 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 four 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 2027 full-year retail margins will be down less than the $200 per unit as compared to FY 2026. 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 wheel, 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 in 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 leveraged 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 two 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 2027 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've noted previously, we maintain 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 non-cash, non-recurring 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?

Thanks, Enrique, and good morning, everyone. During the second quarter, CarMax Auto Finance originated $2.3 billion, resulting in sales penetration of 40.9% net of three-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 two non-prime securitizations and lower sales during fiscal 2026. Please note, the timing of our receivables 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%, 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 non-prime 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 12-24 months, we would expect the variability to decrease. To provide a view into our near-term performance, we anticipate CAF's FY 2027 income will be slightly lower than FY 2026, all while planning to originate nearly $1 billion in Tier 2 by year end. It is this 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. I'd 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. 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. Shift into GEAR is focused on strengthening our core business and getting CarMax back to sustained growth. We are steadfast in our focus on delivering the right cars at the right price, 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 four 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 and 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.

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. Once again, that is star one to ask a question. Your first question comes from the line of Daniela Haigian with Morgan Stanley. Your line is open. You may now ask your question.

Great. Thank you for taking the question. 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 spreads?

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

Yeah. Hey, good morning, Daniella. We've been really pleased that we've been able to come in better than our previous outlook on GPUs. 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 three 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 switched, 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 at the demand we're seeing in the marketplace and our ability to, again, come in better than our GPU previous outlook.

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

Yeah, the FTC impact definitely is a tailwind. When we take a look overall at our comp performance on the quarter, I would say it is 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 FTC enforcement benefits that we are seeing.

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

CarMax (KMX) Q2 2027 Earnings Call Transcript

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