Executive Summary
CarMax reported a resilient QQ3 2025 with revenue of $6.223 billion, up 1% year over year, driven by higher unit volumes across retail and wholesale, and continued expansion of their omni-channel platform. Despite robust top-line growth and a meaningful improvement in gross profit, operating income remained negative at -$58.6 million, yielding an operating margin of -0.94%. Net income reached $125.4 million or $0.81 per share (diluted), supported by CAF contributions, while the company continued to deleverage SG&A, achieving double-digit EPS growth for the quarter. Management emphasized that the business is transitioning from an investment phase to leveraging capabilities for sustainable growth, aided by the omni-channel experience and cost efficiencies.
The quarter highlighted several structural trends: (1) strong omni-channel adoption and conversion improvements across online, in-store, and agent-assisted channels; (2) CAF momentum with $1.9 billion originations and a 6.2% net interest margin, supported by a more normalized loan loss provision; (3) cost-out initiatives targeting approximately $200 per total unit in GPUs, with roughly half realized to-date (roughly $100 in reconditioning and $100 in logistics), all of which are being deployed to protect margins and support price competitiveness. The outlook remains constructive, with management signaling that Q4 comps should be stronger than QQ3 and full-year SG&A leverage on gross profit remains a priority. The investment thesis hinges on continued top-line growth from the diversified model, disciplined expense management, and the scalable CAF platform, albeit with elevated leverage and working-capital sensitivity in the near term.
Key Performance Indicators
QoQ: -10.89% | YoY:10.57%
QoQ: -139.07% | YoY:-210.70%
Key Insights
Revenue: $6.223B, YoY +1.22%, QoQ -11.27% (four-quarter data).
Gross Profit: $677.6M, YoY +10.6%, QoQ -10.9%; Gross Margin ~10.89%.
Operating Income: -$58.6M, Margin -0.94% (Y/Y and Q/Q deterioration in operating leverage).
Net Income: $125.4M, Margin ~2.02%, YoY +52.97%, QoQ -5.55%.
EPS (GAAP): $0.80; Diluted EPS: $0.81, YoY +53.85%, QoQ -5.88%.
CAF (CarMax Auto Finance): Income $160M, +8% YoY; Originations ~$1.9B; Net interest margin 6.2% (up 35 bps YoY); Provision for loan losses $73M; R...
Financial Highlights
Revenue: $6.223B, YoY +1.22%, QoQ -11.27% (four-quarter data).
Gross Profit: $677.6M, YoY +10.6%, QoQ -10.9%; Gross Margin ~10.89%.
Operating Income: -$58.6M, Margin -0.94% (Y/Y and Q/Q deterioration in operating leverage).
Net Income: $125.4M, Margin ~2.02%, YoY +52.97%, QoQ -5.55%.
EPS (GAAP): $0.80; Diluted EPS: $0.81, YoY +53.85%, QoQ -5.88%.
CAF (CarMax Auto Finance): Income $160M, +8% YoY; Originations ~$1.9B; Net interest margin 6.2% (up 35 bps YoY); Provision for loan losses $73M; Reserve balance $479M; Reserve/receivables 2.7% (down 12 bps QoQ).
Cash Flow: Operating cash flow -$23.4M; Free cash flow -$150.6M; Capex -$127.2M; Net change in cash -$277.5M; Cash at end $975.8M; Cash at beginning $1,253.3M.
Balance Sheet: Total assets $27.30B; Total debt $17.63B; Long-term debt $17.04B; Cash & equivalents $271.9M; Total equity $6.21B.
Liquidity/Leverage: Current ratio 2.30; Quick ratio 0.55; Debt/Total capitalization ~73.9%; Debt/Equity ~2.84x; Net debt ~$17.35B.
Store footprint: 249 stores (QQ3 2025).
Omni-Channel/Online Share: ~15% of retail unit sales online; ~56% omni sales; Online revenue ~32% of online transactions; 270k vehicles bought in quarter; Online digital appraisal offers ~99% of customers.
Sustainability/Capital Allocation: $2.04B remaining repurchase authorization; ~1.5M shares repurchased in Q3 for $115M.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
6.22B |
1.22% |
-11.27% |
| Gross Profit |
677.65M |
10.57% |
-10.89% |
| Operating Income |
-58.56M |
-210.70% |
-139.07% |
| Net Income |
125.44M |
52.97% |
-5.55% |
| EPS |
0.80 |
53.85% |
-5.88% |
Key Financial Ratios
operatingProfitMargin
-0.94%
operatingCashFlowPerShare
$-0.15
freeCashFlowPerShare
$-0.97
Management Commentary
- Omni-channel leadership and conversion focus: Bill Nash emphasized that the best-in-class omni-channel experience remains a key differentiator and will drive future growth, with increases in retail and wholesale unit volumes and a higher mix of online and omni-channel transactions. Key quotes include: “our best-in-class omni-channel experience is and will continue to be a key differentiator that gives us access to the largest total addressable market in the used car space” and that December momentum is tracking stronger than the third quarter.
- Cost efficiency and SG&A leverage: Enrique Mayor-Mora highlighted ongoing efficiency actions and a target to achieve mid-70s SG&A-to-gross-profit leverage, noting the shift from heavy investment to leveraging capabilities. A notable point: “we are past the heavy investment phase of our evolution… we remain committed to our mid 70% SG&A leverage ratio.”
- CAF progress and credit risk management: Jon Daniels outlined CAF originations of ~$1.9B, net interest margin at 6.2% (up 35 bps YoY), and a normalized loan-loss provision of $73M with a reserve balance of $479M (2.7% reserve-to-receivables). He also discussed ongoing Tier 1–3 credit testing and the second higher-prime ABS deal, signaling growth potential within full-spectrum lending.
- Payment extensions and risk management: The team discussed a targeted, lower-friction payment-extension policy for delinquent customers, with initial results “encouraging” and a reserved approach for potential future delinquencies. This illustrates ongoing balance between customer assistance and credit risk control.
"We materially levered SG&A as a percent of gross profit and we achieved double-digit EPS growth."
— Bill Nash
"Our best-in-class omni-channel experience is and will continue to be a key differentiator that gives us access to the largest total addressable market in the used car space."
— Bill Nash
Forward Guidance
- Revenue and profitability trajectory: Management signaled that Q4 comps are expected to be stronger than Q3, aided by continued omni-channel execution and a better conversion dynamic.
- Margin and GPU outlook: Margins per unit are expected to be up slightly year-over-year in Q4, though not as pronounced as year-to-date improvements. Advertising spend for the full year is guided to approximately $200 per total unit, consistent with a transitioning cost-out program (roughly 50/50 between reconditioning and logistics, with roughly half realized to date).
- Capital allocation and liquidity: Approximately $2.04B of repurchase authorization remains; the company repurchased about 1.5M shares for $115M in the quarter, underscoring an active capital return stance.
- Key risks to monitor: (1) sustained pricing normalization and used-vehicle supply dynamics (new/used mix, trade-ins, and wholesale pricing), (2) CAF credit performance under full-spectrum lending (Tier 2/3 testing outcomes and macro credit conditions), (3) working capital and free cash flow sensitivity given inventory build for tax season, and (4) competitive dynamics in sourcing and pricing. Overall, the path to margin expansion appears tied to continued SG&A leverage, cost-out realization, and CAF growth, with execution risk in converting omni-channel capabilities into sustained profitability.