CarMax (KMX) 22 Sep 172018 Q2 Earnings call transcript

Company Profile

Participants

Katharine Kenny	VP, IR
Bill Nash	President and CEO
Tom Reedy	EVP and CFO
Sharon Zackfia	William Blair
Brian Nagel	Oppenheimer
Matt Fassler	Goldman Sachs
Rob Iannarone	RBC Capital Markets
Craig Kennison	Baird
John Murphy	Bank of America
Mike Levin	Deutsche Bank
Seth Basham	Wedbush Securities
Derek Glynn	Consumer Edge Research
Rick Nelson	Stephens
Bill Armstrong	CL King & Associates
Adam Jonas	Morgan Stanley
David Whiston	Morningstar
Chris Bottiglieri	Wolfe Research

Call transcript

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Operator

Good morning. My name is Victoria, and I will be your conference operator today. At this time, I would like to welcome everyone to the CarMax Fiscal 2018 Second 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. you. Thank like Investor call Relations. now Kenny, to turn President, Vice to would over the Katharine I

Katharine Kenny

Hi. joining second call. our morning fiscal Good and XXXX quarter thank earnings you for conference

Nash, today Tom and our Executive CFO. usual me Executive and Reedy, with President call and Chief the are On Bill our Vice President Officer; as

the business of assumptions are remind that uncertainties financial future and performance or Private forward-looking obligation statements based Company let Before our on results our management’s Reform current them. cause XXXX. and today prospects we update could to me Act begin, provisions providing regarding These plans, that statements make knowledge Safe to pursuant Securities and the Litigation and other statements risks to we In any materially statements, that the from you about expectations. disclaims involve the intent Harbor Company’s future actual of differ events that are projections forward-looking

see these on For year important information please with the XX, for Form ended additional annual the could February fiscal XXXX factors affect report XX-K filed on expectations, the SEC. that Company’s

Before in for in only I let question to over getting one before a Bill? advance and follow-up the asking you thank queue. turn back call me the again Bill,

Bill Nash

good and morning, Katharine, you, Thank everyone.

to another We are pleased report strong quarter.

will on comment share call to will Irma. Tom over as results As including financing then the turn which information the initiatives talk I some quarterly I about the Hurricane well Harvey, to always, will impact of on I Hurricane our after as review

by experience, an higher of by by continue conversion online of by was units offset the enhancements as lower comps and unit increased of impact conversion. XX.X%. to strong increase total the both unit traffic. customer well execution grew for The the as used Used comps support Our effects store on to comps which partially in X.X% be driven quarter used second store

CarMax’s first second may the be priority our week safety Harvey of the of will and quarter. Houston hit last during recall, wellbeing always you As our associates.

all area were affected scheduled Houston by We while them now, have in Relief while approximately them Associate X,XXX regularly with safe the financial are for stores our them pay the and provided and the We Fund of shifts were closed. the supported hurricane. assistance through Disaster associates many

In relatively addition, Houston we of the as as of our families. to in the six little associates sent damage. to September and working reopened soon emergency Friday quarter. Houston for support closed supply market days with Five on All possible Houston Xst the last of were X.X stores the their stores

store as me September comps the Freeway transportation said make footprint Gulf up network. remained sales Friday but was closed Our national until Xth. and we of small closures reminded This periods. once future in our these event expect weather nationwide past, incredible and again can them delay the estimate our impact we the generally in of We our to to to value

with damaged markets have able support both the our of to We to as needs vehicles quickly from be to been other replaced removed and needed customers. vehicles leverage

website some consistent of second per on the efforts SEO. in of to the our to partially believe quarter In the more you profit update we of year. unit pleased result were in $X,XXX traffic of was I’ll Now, see numbers. used Gross which remained $X,XXX compared we quarter, XX%, growth at last

turn over other second and quarter. A $XXX topics favorable increased last in to I’ll compared call wholesale profit in increase base the the appraisal an in $XXX continuation due to grew quarter. year’s The growth second and in depreciation slightly offset store environment Gross quarter, a the units to for our buy largely traffic. of to by rates were few wholesale unit in this lower Our Tom. second

increased vehicles of about XX% second percentage a versus old quarter. to to four-year XX% mix, As our last sales year’s in zero

$XX.X $XX over a As to XX% the an our million the for cost quarter year, offset SG&A, SG&A about $XXX $X expense is This last up we SG&A. or in related incentive incentive rose trucks similar due large last increased year-over-year Remember to our last quarter by and per XX% XX%, accrual from which and the sales, a of base our increase to million the for expense increase reduction of retirement quarter and compensation the including which of due Several share-based variable year, factors to sales, pay. in growth represents disclosed former measurable in unit pay. On SG&A was were recorded that in largely SUVs second higher in but related These expenses XX-store quarter. million. quarter. to almost medium an in second percent XX% last increased our impacted about CEO, $XX.X million of beginning decrease year’s in comping since last year’s partially second of to for reduction

in later but As continue we to first saw the quarter expense SG&A initiatives our in the customer timing, recall and to which heavily that expense previously technology with experience. of expectations digital in line favorable was the the in invest improve the we discussed, benefit could some year. second materialize from quarter

one one Maryland. in in three quarter, second the stores, Francisco Hartford Salisbury, we San and one the during market, Lastly, in opened

one the Seattle. open including stores open markets five During we four are of in Tyler, other a new just us, will plan for is we the stores, Philadelphia which Vegas, Francisco couple quarter, Las to current Texas, days a ago, third opened and market in which San

to over Now, I’ll turn call Tom. the

Tom Reedy

everybody. Thanks, CAF Bill. last morning, XX.X% quarter. net year’s to second compared XX.X% penetration was Good

unit the quarter, in at in to compared of the Remember, X overall higher low spectrum. but X% and seeing end. second credit used high and to the and XX.X% credit of a of lower growth measurable decline credit continue see end last year’s more volume year, sales, year. end to were credit grew to the Tier same pronounced applications, application this third-party the we represented at We last for X last XX% modestly Tier compared applications in at spectrum period the growth financing X.X% of sales in

quarter. allowance sequentially at see the the from X.X% $XXX compared lower sales loan down CarMax X.X% We the weighted managed partially interest but to interest was driven consistent The loans also increased X.X% an X.XX% $XXX.X originated about XX.X%, was the receivables year-over-year rate the to during in million release. to average second XX.X% CAF X.XX% growth margin. a at last the offset lower average X.X% quarter ending cash and by to provision. losses the in that you income the year, of receivables was net slight managed was by year but The growth last year $X.X ago to partially in charged due up their originated by in growth in in see compared loss million, from during to continue the a brought managed of portfolio and what financed, quarter table amount or Total as to in paid loan QX. sales in quarter This increase offset X.XX% XX.X% quarter the first billion. X.X% penetration. with in the of we ending up portfolio and second reported CAF in average customer for average of first compression margin X.X% customers where can own was in receivables, to quarter. This was rose the the contract financing;

remember, we the As course losses in you year. were unfavorability seeing over of last

potential were capital in directly loss provision impacts million unknown in QX not Losses the affected time. we quarter, experience with loss events This expectations. are line our include weather experience current Harvey second during and any as the $XXX at not repurchased the million. structure, to shares X.X our regard from for quarter’s by Hurricane is With the does

it Now, turn to over Bill. back

Bill Nash

Thanks, Tom.

and on continue through what’s be We execution focused to innovation. possible driving both

car update receive combine appraisal we the We Midwest. market customers rolled are by of to to and with then of an our and our the for all out appraisal vehicle online. in past position to to own our gave that receive purchase the our this terms. and expand associates you product an we Charlotte on car the is stores Whether give value the customers online that This tool online perfect quarter new information find tool. allows submitting for. a experience we more the quarter in We a online, or rest customer service in third their online quarter, car, the want this that support the state-of-the-art stores are plan test to exceptional store known in tools to the Last on to unique

demand take customer of a from product our customers for offering. and is to feedback sales test and the further round to new rolled appraisals great across the learnings purpose about this We’ll stores. this receiving determine it our great team should learn of to scalable is the be to We’re that more about when next this test online from experience ensure all enhance The continue and out stores. to of

quarter which vehicles is showcase shared making merchandising, also our last how with you digital We we’re progress the we on in carmax.com.

our interior improvement In offering photo XXX addition photos capabilities and to studios, by we’re rollout zoom of degree expanding the with indoor capability.

vehicles on. couple testing a seven stores. examples working at now in improvements These this just we’re We’re product of are

seamless, the a associates with buying and online both in entire to e-commerce equip in that to stores, continue we that than out and our build will position tools us. We and our to truly better capabilities is simple one and make no right feel do car our process the

me impact Irma. for Hurricane give the I up update Before of a let open line brief questions, on the you

previously And report Florida weather in for XX for to to We primarily pleased would that are business. we those our later. September. stores sales lengths expect in we Georgia with realize time varying as of closed stores, We’re all events, of and discussed open

this Now, your be at take to we’ll time, questions. happy

Operator

comes Sharon from [Operator of line the with Your question first Instructions] Blair. William Zackfia

Sharon Zackfia

Hi. Good morning.

the of better test on visual, system? of online. well, on conversion? either long in across how are you And would of those assessing just question tests these the going a talked entire working assuming How traffic to then, photography on. the as processes the kind to the are implement you’re I you it online another doing you’re kind different to it and or impact relates work the about know, you’re that that take store Just visuals

Bill Nash

Sharon. morning, Good Yes.

photos, XXX by photo those on we the on those particular and assess those, booths the of on clicks both success the cars. the websites So,

photo all done So, obviously, photos of our booths. are not in

those look that of on clicks the at the vehicles those the inventory compared as number we we utilize other doesn’t so, And those capabilities. see cars, as to well success, of conversion

as already we schedule had at time, I would XX last the quarter, XXX, we’ll already thing. get roll have see the this Right and XX the As to how time for to we’re of booths, the about kind we’ll the on more take that then see. open; now, it on talked goes, out, it far year, those seven stores, working And and open. it equipment, it of in we still we’re that photo

tuned. to experiences. We we would standpoint we’re you, stay will expect we can’t that be still it from it what at number, looking So, the from sure, more and number I widely okay, next CarMax meets out tell quarter exceptional really this experience. roll because want make when that a

Sharon Zackfia

you just of I it? rollout based being it the a sure booths the on in of So, ROI can the on particular just the quick based expense pace And photo of is follow-up? or not

Bill Nash

No.

with there the is many different quicker. any why the in we reason that’s we rolling so handle an think it, out -- rollout aren’t while them associated given can one is projects expense only year, I not

those we takes I just It XX additional an -- built. time a and year more So, adding of base only resource we’re on get mean, to XX. can this

Tom Reedy

it a rehabs we’re thinking Sharon, little planned stores. the up with Yes. of also just bit

Bill Nash

Yes.

certain full like and So, to the into on doing go go more to markets XX we’re in. booths photo remodels. back choose that and the other to work then remodels, we and booths put We’d we

Operator

of comes with Your the line Nagel next Oppenheimer. question from Brian

Brian Nagel

I couple prepared the to comments. the your you So, have of color gave appreciate in regard questions hurricanes. I with

Texas us any provide result parameters back or recognizing As there demand or can could as history, And give Florida of looking that in as type to benefit you what you of help second just elsewhere? at us question. seen recently, understand then, don’t come storms far guidance, we’ve the that is either a

we’d in inventories comments. of vehicles the would there in you a there You that result to be see think Was mentioned that? -- and some cars, of mentioned some damage prepared your as inventory type charge I of

Bill Nash

Okay.

I’ll talk about So, part. the first Brian,

You hit it head. on the

vehicles having is We’re an we’re not great being will guidance. going inflow bought, I there shape that at in the not, to that prepared is tell inflow if events markets look benefit by Believe that provide we extra we What we’re to often. you of handle if or catastrophic and with prepared, are inventory; the in it of you that not were impacted historically, that this had hurricane. like big

last it in able think that something you, cited like meet this would that the with about ourselves surfaces. the actually But, be tell was to probably Wilma we’ve I I demand positioned talked Rita we’ll just where and we any time, back so we call.

As there as were any X,XXX talk will expense. bit were rid damaged. little Tom I about far We were a -- damaged And the be of, that that let vehicles a to cars basically had had scrapped. gotten about

Tom Reedy

between that of insurance Houston that in quarter. number deductibles damaged relatively out market, a weren’t of about we for X we’re destroyed the of our bucks and had fortunately cars event. do of in for And covered, but carry property Brian, Bill pocket significant fortunate then the or Yes. had as we type and million said, we vehicles expense

to catastrophic in So, that property. there we’ve of for kind seen the similar events in but we about ballpark other the have that’s past,

Brian Nagel

able side, you provided, to it, lift question, been on the the finance seems as data, Got recently table with then lending And recent looking it my securitization though helpful. your the at follow-up rates. regard you’ve to

but there are about confirm I charging also that? the customer So, all any this have that in beginning which the kind is trend, going should pushback of forward, is think to we guess the the at customers I of question rates you how

Bill Nash

this We I last end last correct. late year, quarter -- of we think talked pretty board. and rates did about last at are raise the the you at Yes, across year much

going the look are recent -- you the of seeing other the this deals. versus start actually and at I if think I think see that is in in first can impact deal, impact you the securitization where XXXX-X you spread, to that that

for rates years, market I going to is that seven on always As am with answer going margin far as the where the driven go. going by to ability which, lenders. be our the other what’s that this I way answer that last to preserve and

try looking how there. the we offers constantly up, other -- we rates about our We make are to competitiveness test feel at we out X-day rates versus our We We stores. we watch payoff test rate, down. of watch conversion

we’ll to if could increasing, be the test go extent into be up, funds][ph] that ongoing analytical account. uncompetitive the up, if will it’s to an other sales of test exercise. [cost are competitors make but to it take So, To we’ll rates doing, increasing you imagine we’ll I relative or going what APRs, mean go detrimental to us have

Operator

comes next Matt of Your Sachs. from with question Fassler the line Goldman

Matt Fassler

point first a lot. Good a actually follow-up My that is morning. just you to question Thanks a made.

penetration up am your points terms and pricing? was called new favorably is But, little you of totality of the bit penetration to the unit wondering, basis note it other doing also, financing that So, in Clearly, you in working pricing of is were QX. that year-to-year extent of CAF basis. a down what that while where a was CAF slightly down function did category your about sort And the loans XXX penetration, that? in from I the function a think on so is of by did on APRs we the tick is

us, for please? put together you if kind of So, that

Bill Nash

Yes.

door. run will I So, we in saw just what coming through kind of the

range. were customer plus mentioned, applying. saw means of XXX growth profile greatest we I kind As of barbelled the the at we credit in That coming the in FICO

or folks those to that financing are elsewhere. can tend their to ones CAF arrange the going So, be be

the may last think just But the saw volume fourth rates to impacted tightening of may some how think competitive through. have at that use but I was we coming closely in quarter due did impact very bit. some what So, the in of have We that look we are. we nature our Matt, quarter a year’s

modestly less competitive. very like That is indicator think I and of whether payoff high the get offers, good that quarter. at down sequentially are the point, track is bit which from a last than also little CarMax. Our rate it’s end up they we year-over-year, offers particularly actually rate still a from X-day people And

So, I wouldn’t read into that.

the bringing more got think off whether table are people people lot When paying I a it’s financing seeing just we’ve more the show something it, look I their car. loans. buy to cash or We’re they that at when own up to else, the

Matt Fassler

slightly And as level of of Tier view then, kind terms of year-on-year. my Should now Tier the of this X follow-up relates piece, level up high-single reasonable a baseline X sort sustainable penetration? to digit that in we

Bill Nash

when we’ve Tier we at business talked higher. this don’t as was is It about look -- X a before that Yes. incremental. I significantly

So, forward slightly. spectrum, across because this what demand I to right the I just the that going implies I’d economy up kind know year’s think the healthy like don’t growth see baseline healthy But nice is number credit of is? and environment.

As significant increase was And said, number. is we’re X some and in that declines that. year, spectrum. remember, I volume, we we’re in the And the seeing in year’s actually weak last comping applications were down seeing a volume number this quarter first over Tier where last

Operator

RBC comes next from Your Markets. Scot of Ciccarelli line with question the Capital

Rob Iannarone

the on quarters? what for that seen commented guys. there and was recent with conversion wondering, Hey, wondering was it any we’ve Scot. partial if order you Is Iannarone of I just that. around provide up on good traffic. a was you can I quarter. offset Congrats from magnitude was in a Rob consistent

Bill Nash

modest mean, been similar amount, quarters. recent the to Yes. of It’s which down conversion. a traffic I was some offset

Rob Iannarone

what SEO, can different online Great. about think through seeing? you rates just and When kind update other on of click including of online the topic. on us you kind you’re And initiatives a appraisal

Bill Nash

Yes.

main pleased seen with bit what SEO, other nearly on linking talk the to pages because ratings. to quarter, get And picked hundred the on three that want a we putting really site, that things. by the focusing little I is XXX% quarter we’ve was think thousand folks, our there a content to very more In up the year non-brand there. growth continued added significantly; and add a the SEO, we’ve produce in We’ve in them. really so been SEO traffic we me so second links articles out few we’re helpful grow is it new to to about back continue the One, Let ago. from really that

a to have talked -- F-XXX Ford Ford So, about Raptor. we a having we last used quarter, and page said I F-XXX page

a got more Ford we we’ve the we’ve relevant you you’re Now, also are And there. been searches. XXXX, content F-XXX content pages and Again, the pleased, Raptor able add to XXXX. the in then, put in have, the

So, engines helps which search us. see have, and read what we and it Google the can actually also actually can

So, think of been we’ll going with on very continue is we’ve that still we work. there pleased SEO. what’s there. with a And And been lot opportunity

again, down, about at store And great that say traffic, would really it the store web growth the thing we more earlier other look about think we The think there. I we traffic we’ve that on on traffic, number’s piece earlier holistically. I about just while the gone the had talked traffic, and which

to double-digit us because leads, We growth to that also which is something continue great see on execute on. gives

good turn momentum them interact and that we customers So, with having very the the into to when sales. we have it comes about to possibilities feel

Operator

you. Thank

with from line Kennison the question comes Craig next of Baird. Your

Craig Kennison

With to avoid Yes. any And vehicles, respect hurricane. for you to all controls and buying in Harvey have those this the taking lemons flooded getting to for of back Thanks place example? is what my questions.

Bill Nash

took them cars vehicles did are through them We damaged all there. we of there Katrina, like salvage flood to through. be lot to auctions; not a going we sold similar Well, and them them auctions. we And through that had, sell sold actually out the of Yes.

cars the our way them our at systems on system. than more are advanced they the Our got Hurricane lot, time We on today of Katrina. were we’ve for were back example know, that

somewhere not know So, we’ll ever them. pop up else, if to they purchase

and shouldn’t are the auctions so to they vehicles, know they But that buyers up else. vehicles our our fact when this other or marked come we’re to we if thing at that marked hey other they salvage, then alert should Now, point salvage, salvage. same some be our at the lane, for all pop was information vehicle appraisal that systems somewhere will

identify skilled some ones I that thing our in would you cracks other through out and those this the could come into sure get end that think that’s can look but buyers to than analytics. telltale and the vehicles. is that The any there data is a they be come competitive play, to are buyers to didn’t of that that salvage, the advantage -- might And skilled our for don’t There and appraisal tell is buying our fall there of able trained more those not times and our cars slipped lane. we up make be I X,XXX huge through cracks where that vehicles

Craig Kennison

my on if even is behavior, that I you you’re sales seen the growth and that consumer And that to way in than a marketing the is growth, rapid follow-up And are more category you’ve Thanks. changing consumers? curious or in driving think what’s your change growth. there extended protection plan car

Bill Nash

Yes.

we is mildly characterize the Auto favorable. put that every CarMax quarters business, think negative; number a return because way a little like couple Finance last some bit have thing the move that some And you experience, on then, for that see reserve mildly I might going to it quarters is around favorable been mildly the quarter to returns.

tailwind it I pace to it’s number growth of And that a grown think reserve there of in of a general, that’s is about how on over longer little return percentage. So, bit term. the the the But due sales. with

Operator

from Your with of next question John of comes Bank Murphy America. line the

John Murphy

morning. Good

so here, try question single to multipart keep I’ll simple. it a of sort Just

lower or total in flat if website curious the you were I’m consumers eyeballs just your wrap with but together about if with increase traffic, it in up. think you traffic, talked to store interaction You XX%

time spending your online to into online showroom? coming with kind As we the appraisals think of where consumer context off more about as being the the of in ticked that opposed you

Bill Nash

Yes.

X you digital search of it all, way the on start is and first prepared. online us are properties. I out a like feel coming customers the do buy more to do should know, think of customers stores the I their of we from XX with the absolutely about interact

may example, having Certain they’re coming in finance or a like versus new only I would be There coming need prequalification. leave. down with would some them that and car. count come can’t from it cause sales it spent to to we them a innovation So, to know would to your the to customers where cause step; weren’t would that that in it store afford for because go things find realize keeps actually they into the eligible them online they out like buy that being going bring online have actually by braced and it go with traffic store and time have car a used they they consultants before,

to senses, make So, innovation, continue the innovate of down, traffic more and as go of would would functionality we in some available the I our expect because online.

whether I are, about have we again, the touch in store whether online. with it’s I’m where So, or with pleased the we if that customers, it’s think points

John Murphy

And it, eat into when just there like big bid in there a there? the think case, does that on in need sourcing may appraisal GPU mean, maybe auctions. delta auction, ability more we to vehicles and is profitability about as may think that be versus Do on you think source and trading the you from follow-up, to or the year a then, about appraisal lane may I sound we vehicles it

Bill Nash

been talked our the about more lane have We’ve offsite. appraisal history profitable always than vehicles

I about going if itself. As Is understand far online appraisals the think think, your question? to manifest and that question, that’s the really asking how as, I we

John Murphy

ability or just to versus if understand, the to shift. are the like, be online Well, going auction might store I’m because what at that’s it curious, or you’re from forward the appraisals just your consumer I’m trying case. convert seems in what doing

Bill Nash

we shift. store, have that intending another mean, is customers don’t customer the we I wouldn’t prior -- offering to is out reach know appraisal their mean online gotten to experience, Yes. into we’re way vehicle enhance prior before I that it. to and the what the coming think that folks so maybe to worth, not also just selling

is an in look appraisals. sales. Look, in more way it XX% growth at you like had the it’s really we have to that. double-digit So, growth When I extension sales generate

have You’re offsite on buys of all going continue It’s it I the think cars coming think the the out to been number higher is it obviously I to year lot year I would that in offsite. and be there to way. rely has there. will of good a auction is four you, into to past than tell lanes

change a don’t real see in I So, dynamics. the

to as continue outside can we’ll through think after we’ll need I buys go appraisal supplement many channels. as we whatever with then and

Operator

of with Your Bank. next Deutsche question Mike comes from the line Levin

Mike Levin

to appraisals Midwest. Talked about online the out rolling the

you’re expecting to with you’ve the test markets. Just wanted how seen color that see, a to uplift traffic out rollout? play give if you little of And the bit around of larger what sort in

Bill Nash

folk, talk to tell by at roll it, another it’s early to why said early additional opening received with mean, be is too well very Mike, in sales No. going my customers; reason It remarks. to stores. are I pleased to this but seems sales teams It’s to that I point. too some we’re about which like it our

Mike Levin

a And terms just want of as the all kind can bit see just storms, in your in about scrappage you’re overall perspective to if out following you the Irma? Harvey little of environment of on as you’re used what pricing well what give coming from thinking of seeing color

Bill Nash

is prices. the have falling, used it longest to going time, comes sky used in the and drop when there for said think that I is to car pricing people car be big a

price the go acquisition favorable, bit, up, and went that’s more prices impacting seeing this are then quarter ASPs we but like some up. our little actually down to While going of it a mix our combination acquisition

zero trucks. four-year So having more cars, to and large SUVs having old more

to to model are cars. hard numbers, X.X is what of wonder this cars entering late X is from I anywhere them to go continue the into think million to storms, we’ll we’ll of what marketplace. be more It’s to actually to And see different of see think I replaced. how many going million lots continue you that, tell, the two

tell little -- it’s impact to what tell as think, you I will far going opening on to I us I year. So, as remarks, overall have of been market. the is more is and early two this years in saw what margin the the over up depreciation we of environment favorable. is the wholesale It’s one more absolutely has which reasons last why ago, our mentioned representative

think it’s little far as to impact go tell I going So, early storms the it’s us what as to values. to on too as have

Operator

of from Basham Your Wedbush the Securities. line with Seth next comes question

Seth Basham

a morning. question is leads. My Thanks digital lot good just first and on

You talked about or that continued but figure growth, is accelerating decelerating? double-digit

Bill Nash

what’s It’s the saw. it’s been growth quarters. than with pretty That’s the it’s few traffic little we double-digit that a bit and more website last consistent

Seth Basham

And improving Got leads, you about think them types to few asses would you are you those quarters, quality of leads relative the last are that how based or they the as it. of getting? not on

Bill Nash

Yes.

I similar over think few the of we quality the to very what is quarters. leads the have seen last

there. real is there So, big difference no

Seth Basham

Got it.

trend? forward expect pull roll like some as well these do pre-approval associated with a of things those of credit how So, as to tools, go other as out you appraisals you and you soft financing,

Bill Nash

us to is any think we I opportunity time get a execute for Look, an better. lead

there functionality again, associates make continue us be to train at to love And to have on to experiences how even would those that out convert our job for and to higher. think there and maximize leads. put out our we able leads those is to continue I So, I sure

we what on. focused that’s are So,

Operator

line with of from Consumer question Edge next James Your comes Albertine Research. the

Derek Glynn

update on And taking This efforts for my Derek just seen you’ve Yes, Jamie. in hi. get I want Glynn your an of it may delivery. quarters, couple broad reaffirming service delivery in on apprehensions on based testing? you have to for inspiring embarking had past question. is as the a more home are or home what strokes perhaps Thanks confidence is that before on

Bill Nash

find remind this And progress. that Yes, ways. those pleased car we’ve sure is it home we I to in delivery that think with that expedite right delivery no, receive take success the additional would want and that delivery and the the car, in home delivery is mean, are out, terms where at one car. we another are And look, I those on Home I store point they whatever about can buy we want the is of it deliver learned you. we one ways. on to this make then big the functionality point. of at customer

able to So, would to online customer you move to be continuing we customers expand to appraisals, that that see, would expect. We up expect for want that home exceptional are we as And and need it when home make online appraisals. sure our delivery, for example, meets experience forward you that to with we do the delivery.

Charlotte market have expanded now. right not We the beyond

capabilities evaluating are We that that next. next much go to tell what also would we where we’re better. it But wherever to is going with take progressing be even so that is, you I experience the

things. with pleased where am enables am that delivery, I So, functionality with so we really it home we delivery, the home I use other in and can in that are all pleased

Operator

Nelson Rick of comes from Stephens. with the line question next The

Rick Nelson

more less Curious, provision, the Thanks. CAF since losses growing than we expectation this was and XXXX; Good A just... which your charge-offs. morning. if quarter has noticed question been says that or growth on the something about that every quarter future charge-offs, for than

Bill Nash

as to line seeing that losses. we where remarks moving and our unfavorable the mentioned I allowance that based it we it think from needed environment catch-up year, losses were as what those be, the we’re of into says Rick, the And in last that us. losses on remember, my play And is some are in are to that more kind having we of were manner look were level provision, Yes. getting migration in with prepared I in expectations. to

we’re we’re the absolutely migration we’re where than an loss at loans are of more not in playing expected of seen two quarters the we’re a higher playing last environment now -- booking think we’re last been and booking we I performance haven’t catch-up. that not But bad So, year. -- not

Rick Nelson

due My on shifting if quarter, to credit quality? similar spectrum follow-up is up the X.X% loans on origination Is the you rate, better getting are this last weighted quarter. fact pricing of X.X% in and curious, average contract this

Bill Nash

mentioned, over all changes of year. last quarter that made course the I fourth pricing As we the of the were

our essentially decisions. same sequentially and you last if pricing the quarter, our underwriting behaving we’re So, in decisions at versus look

coming where the that So, lower I that what as of those that rates would -- because to then into mentioned in door. growth this qualify quality the kind credit and quarter, we’re highest we’re attribute translate going seeing better credits, largest seeing I the are to And the that rates. would folks for

Operator

from with question CL King comes line Armstrong the Bill next & of Your Associates.

Bill Armstrong

Hi. everyone. Good morning,

up question. on Just kind Rick’s following of

that’s went customers any mix the in a with why us commentary allowance you of years. to the went seeing X.XX%, sequentially decrease seen your Anything down that first you’re that in other actually provide and couple on we’ve of can So, down? or

Bill Nash

customers, I portfolio performance the trends. we’re said, think, mix have looking any, seen recent higher So, I we the of of but and a if at as

some it’s like make As trends. year last last and of it a unfavorability; the year, we I allowance consistent. made mentioned end that quarter to reactive at our we more little changes were current the year, this little are been calculating the we bit bit loss way last more to And we to chasing said,

Bill Armstrong

you my then, And and do profit spreads question you gross from how I’m environment. between unit, that? that, how what wholesale depreciation with benefited to per and your sure a what them not paid benefiting Okay. favorable to fill has follow-up more from for interpret your

Bill Nash

Yes.

of The little So, happened depreciation slope the couple a see year. Normally, throughout like of representative said, it’s ago what ramped. the much years a ramp muted. where I bit pretty depreciation was of that you

vehicles less normally proactively lot of off not speculate what doesn’t a of we’re there wasn’t typically worth. whatever when there And depreciation the or in on depreciation. happens what So, value, that’s their vehicles that year. is this wanting time But are

where favorable and there pay value lot So, to there, are when there dealers up is the of willing environment up. drove not prices and holds a the depreciation what a the is more that’s money,

Bill Armstrong

kind you. I yes, for what But, thanks thought. the clarification. That’s of great. Thank Okay,

Bill Nash

Sure.

Operator

with line of The comes Adam the Jonas next question Morgan Stanley. from

Adam Jonas

hey Hey Tom. Bill,

just Amazon’s question total definition their a or as of And argue One buying roll automotive team Amazon retail? and aggressive out to wondering you So, your auto rather technology closely, power guys. have Board Amazon emerging digital to related and your combination following make including very combination I’m moves potential I’m commerce seems be with of management kind could sure. formidable the for CarMax platform course, or of a Foods Could anything retail. competitor partner? strategic of seem are Amazon’s best-in-class your addressable view if you a market. auto could don’t really ecosystem. They of Whole Amazon’s

Bill Nash

used mean have mean, continuing on regardless what focused that. business to we’re you’d Amazon our better cars. a I I going in focused about is ask of All think who really the I we’re now. working we’re late point focused to we’re where what making be direction. right model know. don’t and be, and right think is I us might the that our feel on I initiatives the that’s competitor focus leader good I on on in we’re

Adam Jonas

Thank you.

Bill Nash

Yes.

Operator

comes question Morningstar. the Whiston from next of David with Your line

David Whiston

then, after next calendar back And Thanks. additional Good focus by end of want morning. that my would when online timeline that big nationwide, you on any say is I Do wanted to the XXXX? you out to you? go appraisal. for have rolled what be, follow-up

Bill Nash

we we’re of point said into to in we’re we’ll want next it’s it’s make. that And the is to opening to appraisal, what sure do. remarks, the of want online to There’s and step doing probably it is determine is out. On and and experience a like what to going the that going some the that make that what purpose putting some my enhancements in Midwest great roll at stores the the one,

So, I can’t tell timeframe the is. you what

depends that next And on far goes. your will I sorry. when test the As question? part of am rolled What as this out, how be it was second

David Whiston

want focus the on completed do what appraisal, either for be you’re Once done what next digital big online rolling you? it to will you or out

Bill Nash

the XX product from strides in different it’s an application out on this online made that to calculator. working last new are accurately that finance all the have mean, SEO big example, improving these the co-applicants; for value digital some some everything sources we I probably mobile of financing. We teams enhanced like enhancements, about putting of things but friendly, a educate income and it helps easier to has consumers enter quarter, more that’s

product need can better. of Some to going continue In evolve continue teams and end we’re that sight. to there we in on. things these and other words, to to that isn’t make things an we to continue doing, they’re be work We them

we have online will things, I it of some one evolve, when it that these to rolled think we’re done. that’s So, doesn’t that appraisals, everywhere, continue even mean

mid-term is different provide results there and on we’re organization. of that things for a think lot near-term, I both, that So, long-term working will the

Operator

from line Bottiglieri Research. comes the Chris with question Wolfe next Your of

Chris Bottiglieri

Thanks of growth. comp getting from support for support understanding store refresh taking you’re the question. Hoping the your to from

just how in So, stores, remind I maturity of you does could target quickly years percent store for us new was what do is between wondering if and five? do your what two ramp and year rent one, you that

Bill Nash

all there of internal going not all between this that, with our said to we’re a rate. XX color is we’re we’re how We’ve open growth lot year and So, doing our XX they’re of Outside pleased stores, new up as we’ve meeting are of to add. said XX stores. performing; along, stores

Chris Bottiglieri

to number think XXX, is right about XXX in small the that And to then, format? XXX the still

Bill Nash

the was What sorry. number? I’m

Chris Bottiglieri

my within XXX in note to format have XXX, I XXX stores? think small I the

Bill Nash

drop over think is you But I is we different to in a continues on customers’ lot going target tell got think what to things. because what are about you space. to -- We’ve going end the digital at business think a said we’re the I it’s XXX be, the I changes, the expectations change, evolve; to XXX, about. game still continuing think you equation; XXX; from XXX to obviously can’t time can good our looking

we So, we ways found I and today. things to is. don’t some I XXX% probably customers We think don’t store also have them don’t methods. where reach that a cap delivery know that reach our the of

So, could be. it’s put on that to hard really number a what high-end

Operator

line have We do Basham [Operator follow-up Wedbush. Instructions] the from question of a with Seth

Seth Basham

events, on have follow-up market been Historically, you share after hurricanes. guys occurred? question to have markets they in these increase your Hi, where able

Bill Nash

any have we we didn’t even of, that like Katrina, stores with had we, bunch market. Yes. Like down not, I Seth, in a believe said, or whole earlier, haven’t

a of there. So, experience we haven’t had lot

we sales are going coming what last see we’re vehicles, that. extra talk we’ll the then, think sales third we did it something in we and back it be an with was cited those if earlier, we’ll impact Wilma the on from to like I -- for be customers. replacement quarter, And said talk in to about about prepared incremental service time, again prepared, and there saw. But we actually Rita will

Seth Basham

guys obviously think then, Fair to the that years. enough. one piece that year? about have; that How is next And you your you ramped into related spend recent technology of innovation fiscal do other question in

Bill Nash

Yes.

want this to I -- year, year’s think fiscal talk don’t fiscal point. year at next about the really I

I you along that this is a this think spend heavy be told year, I’ve on all going to there. year

of While existing reprioritize SG&A. it’s not our some all we should incremental,

putting I’ve lot money business leverage. normally We’ve that told the the past you comps back We’re a guys as so say much so have that said in mid-single-digits. we’ll of into X%

we on year. this depending be end what progress mid-single-digits year. we there of next higher will for to year I what think much out do and going And we it’s dictate this see make how opportunities

Operator

questions. further no currently are There

Bill Nash

Okay, great.

work I through you want to our proud And want XX,XXX to It inspiring. challenging a communities thank why I’ve them we thank few never you more thank they talk differentiator country. Their I the these than quarter. we been associates for These other, CarMax. And have our customers, for weeks. daily for your once next our absolutely and to challenging moment hurricanes their to call. spirit, Before each across have for the these basis. support. And been definitely what thank really associates want want a is more determination, for I their for joining I will close, do support I’m our for times reminded on has incredible. truly truly last to we are with tell them I’d take true been to again you, you to

Operator

Again, concludes your you participation. This thank call. today’s for

now may You disconnect.

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