Good morning. My name is Carol, and I will be your conference operator today. At this time, I would like to welcome everyone to the CarMax Fiscal 2020 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Stacy Frole, Vice President, Investor Relations.

Thank you, Carol. Good morning. Thank you for joining our fiscal 2020 third quarter earnings conference call. I am here today with Bill Nash, our President and CEO; and Tom Reedy, our Executive Vice President of Finance; and Enrique Mayor-Mora, our Senior Vice President and CFO. Let me remind you, our statements today 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 management’s current knowledge and assumptions about future events that involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the Company disclaims any intent or obligation to update them. For additional information or on important factors that could affect these expectations, please see the Company’s annual report on Form 10-K for the fiscal year ended February 28, 2019 filed with the SEC. 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. Bill?

Thank you, Stacy, and good morning, everyone. Before we get started, I want to take a moment to personally congratulate Enrique on his recent promotion to CFO. Enrique and I’ve worked together for many years, and he’s made a lot of great contributions during this time. I also want to thank Tom for serving as our CFO for the past nine years. I’ll look forward to continuing to work with him as he shifts his focus to our strategic initiatives, in addition to continuing to oversee all the finance. For today, I’ll start with our third quarter highlights before turning the call over to Enrique, who will discuss our financials in more detail. Tom will then provide additional color around customer financing. And I’ll wrap up with an update on our omni-channel experience before opening it up for your questions. As you read in earnings release, we delivered a strong sales performance this quarter with revenues up 11.5% on a 7.5% increase in used unit comps and 11% increase in total used units sold. Net income and EPS for the quarter were down 9% and 4.6%, respectively. This is largely the result of significantly higher stock-based compensation due to an increasing share price during the quarter, combined with a planned increase in third quarter expense due to the timing of advertising. As a reminder, volatility in stock-based compensation expense is driven by restricted stock units that are awarded broadly to our non-executive associates. Enrique will provide additional details on these items shortly. Keep in mind, despite these third quarter cost headwinds, year-to-date comps were up 6.7%, EPS is up 10.1%, earnings are up 3.6%. And while we have delevered SG&A by $37 per unit, this includes $42 per unit of stock-based compensation. We attribute our sales growth to a variety…

Thanks, Bill, and good morning, everyone. For the quarter, other gross profit decreased slightly. EPP profits grew by $11 million with 13.3% due to the combined effects of strong used volume growth and increased margin. Like the prior year, we did not recognize any additional EPP profit sharing revenue. This increase was offset by an $11 million decline in service department profits for the quarter versus a year ago. The decrease in service profits was largely due to three factors. First, we increased our post sale warranty period from 30 to 90 days back in May. We view this as an investment in providing a better customer experience. Second, we experienced near-term inefficiencies due to a sharp ramp in technician hiring support future sales growth. And finally, a portion of stock-based compensation runs through the service department. On the SG&A front, expenses for the quarter increased $75 million to $485 million. SG&A deleveraged by $157 per unit. A material component of this growth and the resulting deleverage was driven by stock-based compensation. $11 million or 25% of the overall year-over-year growth in SG&A on the quarter was due to the 17% increase in our share price for the quarter versus a 15% decrease in the prior year period. This resulted in a $94 per unit deleverage to SG&A and represents $0.09 of EPS. We also had a planned increase of $14 million or 39% in advertising costs for the new ad campaign and the rollout of our omni-channel experience that Bill mentioned earlier. This spend on the quarter brings our year-to-date advertising expense per unit to $225. On a year-to-date basis, this is slightly higher than last year and consistent with our earlier communications that our intention is to spend slightly more per unit for the full year. Other notable expense drivers included the opening of 19 stores since the beginning of the third quarter last year which represents a 10% growth in our store base. Higher variable costs associated with our strong sales growth and continued spending to advance our technology platforms, digital initiatives and our omni-channel roll out. During this period of investment, we continue to believe comps in the range of 5% to 8% will be needed to leverage SG&A on an annual basis. As part of our expansion strategy, we opened four stores in the third quarter, two in new markets, Palm Springs, California and Gulfport, Mississippi, and two in existing markets, Dallas and Atlanta. Over the next 12 months, we anticipate opening 11 more stores. Earlier this month, we also opened our Phoenix Customer Experience Center or CEC. We continue to enhance shareholder returns through our repurchase program. During the quarter, we repurchased approximately 1.3 million shares for $115 million. This program has contributed to our 10% year-to-date EPS growth that Bill mentioned earlier. We have $1.67 billion remaining in our current authorizations. Now, I’ll turn the call over to Tom to discuss customer financing.

Thank, Enrique, and good morning, everybody. CarMax Auto Finance and our partner lenders continued to deliver solid results with CAF income growth and strong conversion in Tier 2 and Tier 3. During the quarter, we saw modest growth in application volume and strong performance across all credit tiers. Tier 2 accounted for 20.4% for used unit sales compared with 18.3% last year. Tier 3 was up slightly to 9.5% compared with 9.3% a year ago, and CAF penetration net of three-day payoffs was 43.3% versus 44.1% in last year's third quarter. Year-over-year, CAF's net loans originated grew by 13% to $1.7 billion as the increase in used cars sold and the average amount financed was somewhat offset by the decrease in CAF’s net penetration rate. For loans originated during the quarter, the weighted average contract rate charged to customers was 8.1%, down from 8.5% a year ago and 8.6% in the second quarter. Portfolio interest margin increased to 5.7% versus 5.6% in Q3 last year. CAF income was up 3.9% to $114 million, primarily driven by the 7.5% growth in average managed receivables and a small increase in interest margin, offset by an increase in the loss provision as a percent of average receivables. The provision for loan losses was $49 million in Q3 versus $40.8 million in the prior year period. The increase arises from portfolio growth and a modestly higher allowance based on loss experience we began to see earlier this year. At $153.6 million the allowance represents 1.15% of ending managed receivables, up slightly from 1.12% a year ago and comparable to the second quarter. This remains well within our range of expectations, given our origination strategy and portfolio mix. Before I turn the call over, I will touch on the impending Current Expected Credit Loss accounting standard, which is commonly referred to as CECL. CECL will be effective for us at the start of our fiscal 2021 and a number of you have inquired about it. This is a non-cash accounting change and won't impact our previously disclosed cumulative net loss expectations. The most significant element of the new standard is that it requires companies to reserve for the expected lifetime losses, whereas currently we reserve for the following 12 months. As a result of the adoption, we will increase our allowance for loan losses by $200 million to $250 million. This is based on information as of November 30, 2019 and the adjustment will flow through retained earnings. Post adoption, CECL could also create more volatility in the quarterly provision for loan losses as any true-ups will be projected over the life of the portfolio versus the 12 months we're currently estimating. Now, I'll turn the call back over to Bill.

Thanks Tom and Enrique. Now, I'll provide an update on the rollout of our omni-channel experience, and how we are continuing to innovate and improve the business for the future. First, the numbers. We now have four CECs that we continue to staff, Raleigh, Atlanta, Kansas City and our newest in Phoenix, which opened earlier this month. Approximately 40% of our customer base currently has access to our omni-channel experience, and we are on track to reach the majority of our customers by the end of this fiscal year in February. We plan to complete the rollout in the next fiscal year. ESP penetration in our omni markets is slightly lower than our overall penetration, which is a little above 60%. We have not seen a material change in finance penetration or mix with the rollout of omni. We are pleased to achieve 7.5% comps while at the same time, implementing the largest transformation in the Company's history. While we continue to run some inefficiencies in both our CECs and stores, we are confident we will be able to improve productivity as we roll out and mature the new experience. We also still believe our unique omni-channel experience will be more cost efficient than our current model. We've already begun to drive cost efficiencies in our Atlanta CEC quarter-over-quarter. We are also excited about the opportunities ahead as we continue to improve our customer offerings. Two key areas where we see opportunity are our Customer Relationship Management or CRM platform and our new delivery options. Our CRM platform enhances the experience for both our customers and our associates. It provides associates with valuable insights and data about our customers that allow us to better personalize their experience. It provides customers with the access to our customer hub. This hub makes…

At this time, we will be conducting our question-and-answer session. [Operator Instructions] Our first question today comes from Scot Ciccarelli from RBC Capital Markets. Please go ahead.

Good morning, guys, and happy holidays to you.

Good morning, Scot.

Can you guys talk about the change that you had in your service policy, specifically what caused you to make that change, the 30 to 90 days? And was there any financial catchup in the quarter or is this more of a reset that will continue for the next few quarters?

Sure, Scot. So, for the longest time we had a 30-day limited warranty program. And as Enrique said, we changed that over in May to 90 days, and we feel like that's best for the customer experience. So, what you're seeing is that it’s -- now that it's everywhere, it's been in place since May, it's this -- from an expense standpoint, it's a couple of dollars per unit that's a little bit of additional headwind.

And so, we should expect, let's call it, similar effect to that service department revenue for the next three quarters, let's call it?

Well, keep in mind, when Enrique was talking about the service profits, there is really three different buckets that are going in there. Part of it was the shift from 30 days to 90 days, and of that, I would say that's about a third of the overall change, another third was stock-based compensation and the other third of the staffing inefficiencies that we see, because we're ramping up our technicians. And as we ramp up technicians, until we get a critical mass, it's hard to turn on new shifts. So, each one of them make up about a third. And on the 30 to 90-day warranty, of that third, about half of it is a little step up on a per unit basis of the expense. We also had in that third a mix shift, where we did more 90-day warranty work in retail service work.

Got it. And just for clarification purposes, the 90 days, does that basically put you at par with the CPO -- most CPO programs that are out there?

I'm not sure about the CPO program, Scot. I would have to go and look at that. I think that we feel like 90 days is certainly best-in-class for used cars.

Got it. All right. Thanks, guys.

Thank you.

That's a program that will anniversary itself in the first quarter of fiscal year 2021, as we rolled it out in May of this past year.

Our next question comes from Brian Nagel from Oppenheimer. Please go ahead.

So first off, Enrique and Tom, congratulations on your new roles.

Thank you.

Thanks.

So, the question I want to ask, I guess, my first question, really just from a bigger picture perspective. Clearly, the business has turned much healthier here lately with used car unit comps in this quarter tracking at over 7%. So, Bill, as we look at this, as we look at the improved trajectory in used car unit comps, how should we think about -- and maybe you could help us understand better the split, so to say, between -- the data we're looking at suggests the overall environment has gotten better, maybe with some help from used car pricing other factors. But, you also clearly have a number of initiatives taking place at CarMax, a lot of these tied to the omni-channel. So, how much of this strengthening used car unit comps is internal versus external? And if you look at maybe the internal side, what should we think as the kind of the bigger drivers of all that you're doing?

Yes. That's a great question, Brian. As I noted earlier, it is part of great execution. It's also some favorable environment. When I think about the favorable environment, obviously, favorable access to credit -- new car prices at an absolute level are still high, although in the quarter, we seem to see a little bit of narrowing of the new to used car gap, but the absolute prices of new cars are still high. You've got low unemployment, you've got good consumer confidence, inventory build that I said. You’ve got those external factors. But, I also salute a lot of the internal factors, especially from an execution standpoint, when you look at buying -- acquiring the right car at the right price, especially in a time where we saw depreciation that we would normally see in this time of year. Our operations teams continue to find efficiencies in ways that we can pass along to the customers. The customer progression, both in-store and online, we've made great strides there, moving customers along, online in our CECs, we've got new tools that we started to roll out to help our new associates there. CAF executed well, supporting sales, driving CAF margins and still offering great customer offers, we've got the marketing campaign that launched. And as we look at it, there is no one factor that's the majority of that comp growth. I really do feel, we really believe that it's a combination of all those factors.

Got it. It's very, very helpful. Then, my follow-up -- my related follow-up question, just with regard to the marketing expense you called out here in Q3, which was somewhat of a headwind to earnings. How is the new marketing campaign -- or how should we look at the new marketing campaign as an enhancement to what the changes you've already made to marketing, over the past few quarters?

Yes. I think, periodically we rework our marketing. This was a big change. We have a new outside agency, between the outside agency and our internal team, I think they've done a great job really bring it to life, not only our brand, but also the omni-channel experience in those markets. So, as you've seen in the past, when we go with the new marketing campaign, if you look at the last one with Andy Daly, we run that for a while, we build off of that. I would think that this marketing campaign, the same type thing will continue to build off of the strength of this. And as we go forward, you will just continue to see this new campaign versus running ads on all campaigns. In the third quarter, I've talked about this on previous calls, in the first and second, we knew that we were going to be heavy on the backside of the year. We ran light on advertising as a matter of fact. Through the second quarter year-to-date on a per unit basis, we were spending less than what we spent last year on an annual basis. And I've said all along, we're going to spend a little bit more to also help market our omni-channel experience. And I think, as you look at where we are now year-to-date, Enrique cited earlier, we're about $225 per unit, slightly above last year. And I think that's a good proxy. We will be slightly above where we finished the year last year. We still expect that's where we will come in, on a per unit basis.

Our next question comes from Sharon Zackfia from William Blair. Please go ahead.

Hi. Good morning. Question on SG&A. There's obviously a lot of moving parts in there this quarter. And, I appreciate the commentary on the 5% to 8% to leverage comps, I guess, going forward. Can you talk about whether that 5% to 8% would be applicable for the fourth quarter? And then, as we go into fiscal 2021, I know there is still continued investments in omni-channel, but does that start to abate somewhat in terms of the incremental spending and in efficiencies that you're seeing?

Yes. Enrique will take the first part. I'll take the second part.

Yes. On a quarterly basis, there is so much -- there can be so much variability that when we refer to the 5% to 8%, it's on a longer annual basis. If you take a look at this quarter between stock-based comp and between the advertising timing, that alone caused us to deleverage. So, within any particular quarter, it's difficult to say. But certainly on an annual basis, that is our expectation.

Yes. And Sharon on the second part of your question about what you should expect to see in the New Year. I've said earlier in previous calls, last year was a step-up year. We expected this year to be another step-up year. Next year, we expect it to be a continued step-up year but less to a degree than what you've seen from a growth percent, less so than what you saw this year or last year. And of course, we'll provide some more direction in our fourth quarter call when we're back here, then.

Our next question comes from John Murphy from Bank of America. Please go ahead.

Good morning, guys. I just wanted to follow-up on one of the comments you made on the call. The development of the CRM system and making it more advanced, so there's more data available to your sales team. And I'm just curious, is there an intention to maybe go more proactively and market sales directly to individual consumers to drive same-store sales, as you're developing that CRM system, or is this more just as people come in and inquire about vehicles, you just have more information to help out the process? It just seems like there may be an opportunity here to get more directed advertising going.

Yes. I think, when I think about the CRM, the CRM is more of a tool to help our associates, whether they're in the customer experience center or in the store. I think, the beauty of the CRM is we collect data and we can analyze data. We can do what we call smart routing to make sure that we handle those leads -- how we handle those and who handles those leads, we're becoming much more savvy of that, which is one of the areas that I'm excited about as we go forward, continuing to pick up efficiencies. As far as being able to directly target more customers, we've already shifted that way. When you think about our total advertising spend, probably half of it is more on a digital advertising, which is much more pinpointed than what I would call traditional advertising, which is more of the broadcast TV, radio type of stuff. I do think that the data that we're collecting from the CRM can assist us in helping to target future customers, but I kind of think about them in different buckets, if that makes sense.

Okay. And then just one follow-up on the express pickup and in-home delivery. You said a little bit less than 10% in the eligible market. So, it sounds like it’s somewhere between 5% to 10%. I mean, would you call those folks that are doing the express pickup and in-home delivery incremental consumers or buyers in your stores or is there some kind of cannibalization? Just trying to understand what's incremental and what's cannibalized?

Yes. At this point, I would say, it's probably both. And when I look at those two, we're doing more express pickups than we are home deliveries, at this point. It's interesting because sometimes we'll have customers that think that they want to be home delivery and then they start working through the process and they realize, you know, I'd like to come in and test drive a couple of cars, and so they convert over to in-store. The express pickup, just as a reminder, that allows a customer really do everything online and still come into the store, get their keys, if they want to take the car for a test drive, maybe learn about the options that we can have them out in less than 30 minutes. So, I see both those -- as I said earlier, I see both of those as continuing to grow as we mature the experience and also as we highlight the mix -- the experience in our marketing efforts.

Our next question comes from Armintas Sinkevicius from Morgan Stanley. Please go ahead.

Great. Thank you for taking the question. 7.5% same-store sales growth year-over-year, that's quite a strong number. How do we think about how much of that comes from a favorable used car sales environment versus how much of that comes from the omni-channel rollout? Any way you can help us contextualize that that would be very much helpful.

Yes. As I said earlier, there is a lot of different factors. I don't think any one of those factors is the majority. So, I don't think necessarily the favorable environment is a majority when you add all those things I talked about earlier. I think, a lot of these execution things that we highlighted, I think, the -- especially the digital initiatives improvements that we've made as part of omni and rolled that out to the other locations that don't have omni, I don't think -- we don't believe any one of them lines up and has the majority of that lift. It's really a combination of all of them.

Okay. And when you talk about lift, does that mean versus the comp a year ago or just the 7.5% number itself?

When I think about that 7.5% number and what contributes to that performance, that's what I'm saying, I don't think -- we don't believe in any one of those items is the majority of that 7.5%.

Our next question comes from Craig Kennison from Robert W. Baird. Please go ahead.

Hey. Good morning. Thanks for taking my question. I guess, first, I want to tell you that my daughter contributed to your comp this quarter. We had a great experience. So, thank you for that.

That's great. Thank you, Craig.

Yes. It was a good experience. We didn't get to do the internet omni-channel experience yet, but I'm sure that will come. The question I had was on your recon business or your recon work. You always seem to drive cost out of the reconditioning process. Has that trend continued? And as a follow-up, is it still your policy mostly to return that to the consumer rather than trap some of that in the gross profit line?

Yes. Craig, to answer your question on giving it back to customer, yes, at this point, we like passing that along to the customer. It helps make the prices as competitive as possible. The reconditioning, we continue to look for efficiencies there. I would say the area that we're seeing a little bit more improvement on is more of the procurement. So, think about parts, that kind of thing, we've equipped our associates in the field with certain tools that allow them to buy the right part at the right time, at the right expense. I would also tell you picking up some efficiencies in our transportation, as we move more vehicles with our internal and dedicated fleets, that helps as well. And then, of course, I always put an emphasis on our buying, because that's really when you think about price competitiveness. It really starts with where you purchased the cars. And I think, the buyers have helped to make sure that we are buying them at the right price and the right time. The other thing I would just say is that, not only does it help us be competitive on prices all those savings, but it also helps us manage our margin and keep that stable as well.

Our next question comes from Rick Nelson from Stephens. Please go ahead.

So, the New York Fed this week pointed to a higher rejection rate for auto loans. I'm curious, if you see any need for tightening of CAF? I did notice a shift toward the Tier 2 and Tier 3 finance providers away from CAF?

Rick, could you just repeat the first part of your question, please?

So, the New York Fed this week, they had a report out that pointed to higher rejection rate on auto loans. And I'm curious, if you need to tighten CAF?

No. I think, as I mentioned, we've seen real strong performance from both our partner lenders who are originating in our system, which is as Bill mentioned, providing a little bit of a lift year-over-year. And in CAF, we saw losses tick up a little bit earlier in the year and our increased provision this quarter kind of reflects that's just going at that run rate that we've been experiencing in all year versus a little bit more favorable environment last year. But, we've seen no need to adjust our credit appetite. We're still generating portfolio that we're very comfortable with and happy with the business.

Also, on the GPU front, another solid quarter. You talked about gaining leverage from omni-channel? Is your intent, Bill, to pass those -- that leverage on to the customer to drive more volume or does that spend...

Yes. Right now, the leverage that I referred to on the call was we started to see one of our -- the oldest customer experience in Atlanta, customer experience, we started to see some cost leverage there. And that would really show up more in the SG&A line versus the GPU or passing along to the customer in the form of the price. So, you'll see that show up in SG&A savings.

Our next question comes from Derek Glynn from Consumer Edge Research. Please go ahead.

Good morning. Thanks for taking our question. We had a follow-up on the home delivery attach rate at a little less than 10% of sales in omni-channel markets. Where do you think that steady state number is? What percent of your overall sales do you think home delivery can be in the long run?

Well, just for clarification, Derek. The 10% that I cited is both home delivery and express pickup. And express pickup is home delivery. So, it’s higher than home delivery. So, both are still, if you take each one individually, very small percent of our overall sales. But, as far as where I think it can go, to be honest with you, I don't know. But, to be honest, it doesn't really matter to us because we're there to support the customer and give them the experience they want. So, if more want home delivery, great, we’ll be able to satisfy that. If they want to come into the store, we’ll be able to satisfy that. So, I don't know where it's going to go. We did see -- throughout the quarter, we saw more people leveraging express pickup and home delivery. But, I don't know what the top end of that could be.

And then, just as a follow-up, as we think about your SUV and truck mix, I would think that follows a pattern unfolding in the new market with the mix of those vehicles is much higher. To what extent do you view that as a tailwind to your ASPs? And is there any opportunity or appetite to take more price drive higher GPUs?

Remember, when we look at GPUs, it's not driven by the expense of the car. That's not -- we don't make necessarily more money on a more expensive vehicle. As far as how do we see this going forward? The truck mix, I think, and I'd have to go back and confirm for sure, but the truck mix has been ticking up a little bit. And that's more representative of what's coming into the marketplace, either through our appraisal lane or through the outside auction. So, I would continue to see that that pattern exist in the upcoming quarters.

Our next question comes from David Whiston from Morningstar. Please go ahead.

Thanks, good morning. My question is on new vehicle leasing as a substitute to buying a used car from CarMax. I think, leasing has very much peak for the cycle but it’s -- in the past, there's been some very attractive offers to the consumers. So, do you see new vehicle leasing as less of a substitute threat than say 12 months ago or is it about the same or…

Well, I think, the industry data would say that this year probably the off-leasing vehicles will peak -- between this current year and last year, there'll be at a peak level. As far as where we think leases might go next year, again, it would be a shot in the dark. I'm certainly not a leasing expert. But, wherever it goes, whether leases continue to persist in the next quarter or if they drop off a little bit in the next quarter, inventory availability for us will still be in good shape as far as acquiring inventory and as leases -- the peak of off-leases come down, there will be something else that fills in that spot. I mean, we've seen this cycle run many times over the years that we've been in business.

Our next question comes from Chris Bottiglieri from Wolfe Research. Please go ahead.

First question is on advertising, the step-up. Was most of this incremental spend distributed nationally, or was it more targeted to where you have omni-channel markets? And then, two -- sorry.

I'm sorry. Go ahead. Finish your question.

Yes. Then, I was just like kind of -- related to that was kind of like, as you push more online, have you rethought like what the right advertising budget is, maybe advertising more makes more sense, I'm just curious how you think about that.

Yes. The majority of the spend on the quarter was actually the national spend, not the omni-market spend.

Got you. Okay. That's helpful. And then, I wanted to talk more about the wholesale business. You talked about like the web traffic looks great, you talked about lower -- like your unit growth was great, but then talked about lower appraisal traffic at wholesale. So, A, wanted a sense for what you think drove that. Is the competitive environment for trade is getting more difficult, just given were we are in the cycle of competitive threats? And then, two, can you talk about the supply of the 8 to 10-year old vehicles that should be increasing, has that manifest the way that you thought it would have earlier in the cycle.

Yes. So, Chris, I mean, I think that it's been -- there has been robust competition for what we would consider A lane vehicles. I mean, a lot of different dealers are focused on trying to buy more outside of the auction. But, that's nothing new. The comments I made earlier about wholesale was more around GPU. And with that, the GPU went down a little bit, but that's more of a function of what we saw in the marketplace from a depreciation standpoint as the vehicles depreciate and we put less on the offer, which also has an impact on buyer rate and volume. So, we had a little bit of pressure on buyer rates, still up around 30%, little over 30%. So, we're still pleased with that. But anytime you have a depreciating market, it puts a little headwind on your offers which then puts a little headwind on your volume.

Yes, it certainly makes sense. Did the number of wholesale locations change this quarter? It looks like you closed a couple, but I might just get the way on reading the schedule.

No, we did not close any auctions.

[Operator Instructions] Our next question comes from Seth Basham from Wedbush Securities. Please go ahead.

Stock-based comp was a big headwind this quarter. You mentioned some additional stock compensation to service line associates, which is captured in SG&A, but are you also giving more stock-based comp to associates that would be captured in that SG&A?

Yes. Stock-based compensation, the majority is going to be in SG&A, but there's also components in service profits as we mentioned related to service associates, it’s also a component related to CAF as well. But, by far the largest component is within SG&A. I think, it's also -- it's just important to emphasize again, this is our broad-based equity program, it's targeted at non-executive management, settled in cash and runs through the P&L.

Yes. And Seth, just to also clarify, we didn't increase that program. It's not like there were more shares or anything out there. It's just the market volatility to change from quarter-over-quarter.

Got it. Thank you for that clarification. And then, secondly, as it relates to the performance of your comparable store sales overall relative to your omni-channel markets, you mentioned omni-channel is slightly better. That sounds a little bit different than what you're describing. The omni-channel outperformance in prior quarters, is that A, correct; and B, is that surprising; and C, is it still a good investment, if you're not getting a big lift on those omni-channel sales?

There is a lot of different questions in that one question, Seth, but I'll try to do my best to remember all of them. You have to keep me honest. But, is it surprising where we are, absolutely not. I mean, if you're comparing it to what we have seen in the Atlanta market, it is different than that. But, I said all along, look, every market's is going to be a little bit different. We're going to have different levers that we pull. I actually feel really good about where we are with the omni rollout and the comp contribution to that. Because right now we have a headwind in our omni markets as it relates to our customer experience centers. If you think about it, when a market rolls onto to the omni -- the omni experience, the day it rolls on, we turn the e-offices in the stores. While the e-offices have been manned by associates that have been around a long time, they know what they're doing when it comes to progressing customers. We now turn them on to the customer experience centers. And I would just remind you that our customer experience centers, the most tenured associates that we have working with customers has only been doing it for about six months. So, as we continue to roll out and we continue to stand up and open these new customer experience centers, the Kansas City one, the Phoenix one, you have a lot less tenured associates that are handling the customer progression. I think, it's a great opportunity for us and it's one of the things that I think about when we think about efficiencies going forward and productivity gains. But, I feel good about where we are given that our omni markets actually have a headwind working against them.

Understood. Thank you very much. Happy holidays, guys.

You too.

This concludes our question-and-answer session. I’ll now turn the call back over to Bill Nash for closing remarks.

Great. Thank you, Carol. I want to thank all of you for your interest in CarMax and for joining us today. As always, our success is because of our associates and the culture that they have created. I want to thank them for what they do every day, for driving what's possible for each other, for our customers and for our communities. I want to wish all of them and all of you all a happy holiday. And we will talk again next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.