KMX - Earnings call transcript Q1 2022

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 FY '22 KMX Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Stacy Frole. you. Thank ahead. go Please

Stacy Frole

our Good Operations. quarter you here earnings our Senior Enrique Bill Shelby. and and fiscal Daniels, Jon today joining 'XX Nash, our Mayor-Mora, CEO; and first conference President, President Vice morning. you, President for CFO; CAF Thank Vice our with Senior Thank call. I'm

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

information Company's XXXX, contact XX-K any feel expectations, fiscal after that the on on questions Form ended could for For issued factors Should you to its SEC. please report with follow-up the these our XXXX. and XX, February XXX-XXX-XXXX X-K free morning Investor Form department Relations year at call, affect important annual additional the filed the see have extension please this

for let thank follow-ups. more queue getting Bill? advance you in for in back asking Lastly, the me and only one question

Bill Nash

you, and Stacy. us. for Thank Great. Good everyone, morning, joining thanks

a aspects morning, our solid and earnings this with in our we in and results first read release wholesale EPS. to auto business, record of exceptional you all delivered quarter As flow-through the retail, across finance performance

commitment experience, and execution our and with in reflects management. the success continued Our cost disciplined solid making we are along to our transformation digital online progress ongoing

impact benefited from recent the most payments. the of of the strong In by addition, government backdrop stimulus environment, round a enhanced demand of we

ago. respectively, 'XX FY with diversified and XX%, delivered first quarter 'XX, first business XXX% up last from 'XX. first FY cars, compared of sales of up the For increases on the and Across sold per XXX% first XXX,XXX XX% previous 'XX. record in of from $X.XX of and FY also wholesale diluted the quarter a versus FY billion, share channels, a approximately XX% $X.X the our a quarter up represents our of quarter the $X.XX, and basis year we two-year model This first net year the earnings increase quarter of of retail from set

ago. more also in this quarter two with more years bought versus compared cars first the of and year year XXX% XX% We last

priorities massive that our past you As for the seamlessly on experience. customers a leading to hybrid and transformation to with whatever they many of that our years, The result integrates want focused digital e-commerce several building best-in-class in-store know, organizational with way platform has accommodate unmatched our investments been a of an have processes includes and with set interact us. comprehensive a building experience in

'XX, X million and per very up remain the same-store of first wholesale quarter unit Our in units sales comps up of up FY targets our retail with XXX% executing were of retail us given we revenue to Compared total has XX%. $XX and our 'XX and announced this 'XX. recent Analyst the XX% sold first at used long-term solid total a billion confident by In unit year. in year XX% progress last were start comps FY in unit the strategy Day combined retail and quarter up business, and our first were quarter sales FY were versus

unit ago In FY $XXX quarter the line for profit versus of of addition strong 'XX. gross to year up $X,XXX a first with sales, unit retail we in used and reported the quarter, per

on back constraints and we'll demand throughout used the elasticity macro we for the expanded pricing introduced four and accordingly sales environment quarter, adjust we strong inventory pricing profitability. monitor continue and autos we'll factors automotive test to the pricing our Given pulled to the and in unit industry, maximize

XXX% were the sold first year's out For per up $XXX with first were compared wholesale, period FY gross quarter same with unit and to when compared $X,XXX up XX% quarter Wholesale the last 'XX. increased for compared our with units profit in of in primarily last was edmonds.com of last online offering, quarter carmax.com year. our 'XX. the we instant nationwide introduction launching was first and FY year February with in after by which wholesale the line of driven The rolled appraisal on on strength

broader CarMax appreciation used of continued in CAF, of million. to or Finance, $XXX results We autos deliver solid income market. also significant Auto from the benefited with

In our will with in opportunities give and on you Overall, coming tiers. all our lenders but we're addition, pleased Jon strong to up be details more conversion here credit partner we extremely some shortly. CAF know better. that are delivered there performance, even

throughout the the the the entire are we and ramping levels For fourth inventory when weather-impacted recent These peak production below quarter. time quarter. was quarter slowdown tax season. example, operational in sale on COVID result are experienced Remember, the first levels we available demand of front, fourth demand the refund targeted temporary the lower ahead the and for of production is

inventory locations. continue at producing Our add additional to existing teams an expect increase have the done we we to amazing first in inventory and as capacity production job quarter,

provide I'll information around Enrique, who Now, detail customer financing. our additional and will more over Jon financial call share will the to first performance, turn then on quarter

So Enrique?

Enrique Mayor-Mora

of volume-related from retail up due was profit good penetration labor million rate growth and growth Bill $XX by XX%. gross first $XX increased $XXX above year's Thanks, Together Service discussed, profits quarter XX%, XXX%, driven million gross $X growth strong just retail or fees year tier in and everyone. with offset growth primarily million in XXXX, prior by million or Relative driven grew changes service to This partially finance profit XX% fiscal growth sales a $XXX benefit other sales. gross and and wholesale first and the to and our penetration, increased due by pay; increase partially EPP sales deleverage. by of or the the fee XX%. last offset third-party strong of morning, primarily EPP an stable million by our fees, in renegotiated year or of Bill, renegotiated quarter. our third-party to This performance due other improvement driven company to finance to million, $XX leverage structure and support from was in

awareness increase with to of profit XX. On gross $XXX down first in strong costs and the by in compensation pandemic. omni-channel along advertising our up quarter. dollars year leveraged as Robust a the to our headcount previously prior versus advertising COVID-impacted by year's the in $XX Marketing variable acquisition. a a investment XX% and year's spend last primarily SG&A year, last year leverage due last in against increase percentage the to increase our along in quarter of we X% our This which with X.X was cost expenses and XX.X%, management, increase an over sales The Takata over the percent XX.X year was by for benefits, increase year's impacted leverage increase from increased front, quarter. year's Compensation due million year, delivered with first quarter, versus in overhead of in reductions other was quarter million last drive spend as million, a the driven settlement disciplined higher million invest $XXX comping COVID-related $XX last growth offerings communicated SG&A benefit in reductions CarMax first and customer build driven of from in in to volume million primarily by points also expense due recognized by a comparing continue result $XX amplify SG&A payroll the ago. to brand, in the in points last percentage to the initiatives.

strategic of initiatives investments XXXX. targeted SG&A to last remain continue was Our are pandemic-related of comping year over comparable to first will a and deliver fiscal the reductions improvements efficient spend, platforms we as areas quarter committed advance ensuring year. our of and technology time. profit that focus We expect over we our gross to continued in percent with and

differentiator CECs first In automation, of example, through and routing for algorithms gains ensures customers efficiency in CECs smart us support. opportunity. effectiveness a data-driven and our year-over-year and the are For their that significant get our right quarter, continued an area the

future, we grow our leadership strength trajectory the We long-term current given the of opportunities and opportunity bullish and capitalize deliver We market broader our and value. about recognize to into expand used auto to are the on have an position business shareholder our very to share ecosystem. that

of generates. with significant allocation capital to is our the approach by Our is cash this supported belief amount diversified business model and aligned

our in very the ROI are of vehicle omni-channel footprint. note vehicle primarily core business acquisition, continue we instant through Of capabilities on First, customer our quarter required store strong appraisal enhance by the in strategic investing digital to the was acquisition, experiencing to and offerings. our this and aggressively online our expansion particular we focus experience,

will X, our we June Edmunds. we acquisitions. completed of to growth opportunities deploy partnerships Second, and On pursue through investments, capital new acquisition

transaction We significant shareholder value will time. are create confident this over

same the $XX year to Additionally, note with an on quarter, period on of a million P&L due increased primarily last investment. $XX million gain this unrealized when compared income the other

have noted we auto we've used of the ecosystem. a relatively past, across As investments in portfolio modest the

to excess our will Finally, back we continue capital to return shareholders.

for approximately During $XXX the X quarter, shares repurchased million we million.

billion remaining $X.XX authorizations. current have We in

the turn Jon. call to over I'd to Now like

Jon Daniels

Enrique, good Once the results. and finance Thanks, morning, again, business outstanding has everybody. delivered

sales Tier XX.X% net with to used For XX.X% unit accounted payoffs year. was of with X X compared year the ago. for a ago. CAF's first compared quarter, XX.X% XX% a with last XX.X% compared free-day decreased XX.X% of Tier penetration year

of in tier the quarter Tier portion of routing Tier the our as partners, year, will long-term of a preserving CAF's while quarter temporary leveraged volume end we've and limited Note, mix. explains recall and of By high FY normal pandemic, the portfolio. first and year-over-year volume X relationships done which all in volume of returned routed which measure, the the origination of the allocated beginning the quality much X was second Tier a we to this Tier at to X the last our X 'XX, of procedures. CAF's this shift our You

contract from was an quarter fourth During the history a the largest in single first this year the customers above of rather marking ago rate billion. average than and the credit in X%, APR charged X.X% up quarter, the was fourth Similar first customers The mix weighted to quarter, CAF's quarter. net and new originated difference this in in of X.X% $X.X loans year-over-year origination CAF's increase billion, a result $X rate is to charged. quarter the

versus increased our Regarding the significant Total and losses, margin X.X% interest as program quarter interest benefits year the in $XX the in to XX%, loan the strength of lower and for million the last interest our margin margin portfolio, stronger provision required higher yield increased driven period quarter net was $XX million increase in to by million, by growth the form receivables. overall or ABS X.X% cost significant the same originations the experienced in for in comes respect credit provision for loss of XX year-over-year in loan in million improvement lower managed of income to With points $XXX losses, net up average a funding ago. quarter, This $X.X substantial first of funds. costs. result basis we the CAF as the a receivables. year continues from or a of

the corresponding the we the versus adjustment in years. the for in this The percentage future the is to of portfolio, $XXX our experienced balance favorability ending in million an compared year. provision first related period receivables, resulted This of fourth last over lowest outlook of our in quarter quarter. same first million quarter. $XXX X.XX% income a the a of in the resulting expense of is release decrease and have of the resulted at a X.XX% in million provision reported managed coupled which the is expectations, loss for reserve from XX reserves with $XX the losses, to This or As end

to ability payment towards current of four customers and reserve downward more the performance current effectively in We levels their to willingness despite persistent captures we has managed continued a past receivables this as for trend loss believe Our percentage environment. is our appropriate quarters make their historical environment. remain macroeconomic the the the have seen uncertain positive adjustment auto and as over

the within of in the when the increased on where are This our to CAF as the of end X minimal volume Finally, accordingly. sustainable changes credit as continue future, reserve XX% mentioned, quarters, to continues environment the the regard flow over percent of CAF and the and in volume consider and by adjustment its the provision adjustments but will will previously a if to as the first higher With goals. we had long-term impact believe we quarter. to participate to future into portfolio expect evaluate the and quarter, income the subsequent always, increase spectrum best interest those will business we lending in Tier

to I'll call over back Bill. the Now turn

Bill Nash

Thank you, Jon Great. and Enrique.

As in and proud the about the done I really Day May, of said we today, Analyst of us. are CarMax our work have in to in excited opportunities we're put position we our at are teams the ahead tremendous excellent

multiyear investment experience experience industry. which within offering, auto Our used enhanced has customer-centric in further the omni-channel our the most is

within us are of were market positioned our to a approximately every X% customers to how states. give are our buying In the sales this quarter, largest shop because us. gives We the we how shop they with the addressable online. agnostic first about buy regardless experience unit of In retail and access customer world-class turn,

reminder, completes are wholesale the a a the wholesale sales, vehicle, sale. that's a transactions. an major revenue, Because made customer all a and activities our when represents needed, trade-in; XX% quarter, opting We online of that's online four of sales creating virtual auctions which if consider this financing or vehicle; so of order. all remotely, XXX% the As out were this of retail trading transactional in reserving total considered

last the was of result, represented revenue from a As sales from total quarter. quarter. XX% XX% unit online Omni sales, coming up transactions in XX% retail approximately first

on least sales been an providing one fourth a focused As buy at Today, complete our have with those major omni self-service retail of car online at up from where we a end experience. independently our complete can retail assistance, of or XXX% reminder, XX% all activities customers XX% sale, sales of quarter. the can the transactional of customers while remotely, customers a online

most by We the end have the quarter. expect to to available this of second customers capability

offerings in growth used especially allows U.S. And We payment XXX,XXX nationwide their have rolling from in offerings, during where online out high from on receive In have the the continue to the the leverage online audits online bought appraisal efficiently GPUs. quarter, instant with can two than XX% digital we become first is we our significant while vehicles offer consumers. competitive of which believe and buyer This buys since less us last in of at to producing periods drive through demand, we an end innovations these the hand online our to consumers to customers approximately of represent car priced largest vehicles, day. same quarter, that minutes of us the a source advantage enabling remain competitively attractive total

journey. greater they This request track confidence they providing by by shopping approval our their and finance faster afford first to empowering vehicle the in online them retail making the inventory making our manage select. side, our enabling with gives the customers and customers across experience can improving process. all flow we're On online. information as And we're our our it easier step by card entire We're financing and transfers then them customers

web need both As strong Guarantee of experience, and of expand awareness our Love we and awareness at of Since Your our to CarMax's reinforce omni-channel new search volumes growth further aspects access experience last values increase. and our Google offerings brand to new campaign traffic the year, seen digital enhance capabilities to we've customers. in with of their we continuing the Car end and launching

in in opportunities businesses. on technology leverage in brand pursuing and the by capabilities strong proprietary keep our auto maximize adoption ecosystem reputation growth additional We're and dealers stack to used building trillion-dollar-plus also industry. to core continues our our that and in consumers growth grow, broader our strength investments digital omni, As we'll our the

set trusted acquisition As dealers. brings a one innovations. Enrique information and of of to broader in to and car mentioned, online the and we the of automotive recognized closer a guides Edmunds, brings consumers Edmunds recently completed leader us most us for well-established closer digital shopping

support as we'll continuing and truly are opportunity this absolutely new on super partners collaborate new products exceptional consumers. summary, more future. see updates and tremendous broadly. an provide are we was teams and excited offerings We are and Edmunds that for In Our launch to excited we the dealers quarter, will

strong offering reflect market. diversified further in and on our creation. across to to model disciplined online sustainable strategies most validate execution enable results growth long-term and focused and Our shareholder customer-centric the value business remain our enhancing our meaningful deliver the We capabilities

and growth while gains accelerate continue market groundwork opportunities. future to growth will also share and for laying initiatives We our the

to Shelby? happy questions. be your we'll Now take

Operator

is question of First Instructions] from Craig Kennison Baird. [Operator

Craig Kennison

the taking market the wholesale mention you Will the Did market? my goes Thanks Congratulations My pulled to the question. hot to for that the Hey, momentum. GPU GPU. on experimentation on in you good normalizes? back once you back morning. question go experiment

Bill Nash

Yes, great question.

suspend So the about factors, it we're continue to do talked elasticity, remember to yes, like in sense be constraints the you the we And macro the factors. we if I it. macro especially going monitor And did to make last quarter, as inventory that. continue those monitoring to fourth didn't and quarter,

I some in pricing. very my I GPUs above would I factors, opening either do tell continuing right the it, said things as way, able we're reserve remarks, do but macro wouldn't continue say But open and like monitor you we probably we'll As would provide the just $X,XXX. we to will we'll right with quarter those different now, be progresses. to great to to

Operator

of William Your Blair. next question Sharon is from Zackfia

Sharon Zackfia

morning. good Hi,

obviously comparing which ratio Or customer online quarter? those did in relatively online as you the the retail of have Are ramped in-person then -- how you're the terms GPU be similar? the Sorry looking how if that talk time? missed this, business I of you And for over your but narrow there a is appraisals? at purchases, was really on kind are what about to appraisals the those of variance the is can kind quickly, seeing sourcing

Bill Nash

question. Great

buys we split the also very think to total And a bought store between purchases. that's I both the the the about coming from but customers when that as about about similar is and So into XX-XX think traditionally you retail appraisal, that and online consumers, it's wholesale. doing

able online the and inventory GPUs, in-store great thing. traditional pricing, purchase As huge is a both of the benefit think very productivity the as they're appraisals, being about we manage as and far versus similar, kind that which again, to of they're sourcing

Operator

of is America. Your Bank John question next from of Murphy

John Murphy

the bought actually total the vehicles. a for history I Just as vehicles build. quarter. question of maybe of in you XXX,XXX on much follow-up supply consumers think -- that's mean quarter in I in had one you I XXX,XXX mean

mean as as out bought I many So ever vehicles selling. peaked you almost you on

curious sellers, when on at you So some also, auctions auctions, consumer is stuff the and your consumers? going when going flow supply wacky then important think side. you on up? eases the to and then How I'm wacky and and normalize I does on what's and cars How supply, traditionally, is sources from on the consumer? then I moment, buying which And there's chomp there's from totally in the Davis supply mean And So supply? going naturally forward? you more like things supply they're wood on right? at that think be directly much on going Hertz buying can the going both there do buy to from on if side, just the even mean, and ability crazy

Bill Nash

Yes.

fruition. we FY versus been And consumers online traditional the I've XXX,XXX seeing and from access XX% that, also It's piece really 'XX. a that up appraisals it new big we're directly coming from that just store big of obviously, focus. having about our with you're A remarkable. It's I XXX%. to offering. think mean area. But buying in it, coming is has consumers, just talked consumer that bought think the just way. truly investments customers what encouraged easier up with into the us doing by more is obviously, you putting to cars I about than John, it's So

I mentioned feel we abnormal things back supply has But both an is I'll in The the go about us. for there. So, quarter, some supply said piece that been those. fourth good not you There's of issue what to interesting.

also more now, where offering with very the saleable While it if matter out to look And supply, addition appraisal 'XX. there question is you be I with some FY in got some to inventory, traditional your those supply production. doing line more diminishes we're think than that of long general just for external we lane were inventory things. our we certainly because at our much folks a to want through It's of right in you've there's constraints different different the the lower total really how going -- And in absolutely, need sources. supply other where

the cars. car You new for maybe also used moving have demand some customers into

will it think time I will tell. --

the in going I think the of the we're I next quarter new car more work or part to two, out looking itself isn't latter probably the towards think year.

cars So, of changing I quarters. lot out over next in of a issue, are the that don't again, But not hands lot the there. there's couple a changing see supply supply still an is

if -- standpoint. from bit feel work to off you're little where site, are about may you inventory But have we harder. You a great total a we buying

Enrique Mayor-Mora

the by really, That making example through the up has our it's offers we exceeded just consumer's well And innovation investments in received at through to expectations. Yes, a online really the our of stood extremely John, we've would that what make a mind. we instant customers. really say forefront our been again, I that ago. I of XXX,XXX the offer. And product cars sure think been online quarter XXX,XXX cars we're is bought that's good And

pleased really really, that we're performance. with So,

John Murphy

direction heading? just be. what the Can vehicles XX%? might mean, curious that is that you're I'm target significantly the ever drive source way above I consumer that

Bill Nash

possible. above several this want we've high XX%. that high this that. for seeing, as very, encouraged And the we're drive range our this already quarter. very and target in years, between I quarter. possible. XX% been we last of as historically -- to XX% as by drive to as We're what Look, Yes. again, And that We've goal range XX% that is to We're for we're think,

Operator

Michael Your next Montani is Evercore. of question from

Michael Montani

environment, to have our thoughts wanted might like recently might any discussions And side? both seen they an ask where starting may well the be seeing as pricing wholesale It terms just the pricing about is inflection you in at of on I what the side have to as you point sounds with all the moderate. Manheim? retail in least

just I'd some we wholesale? thoughts do to So does love may the mean that get all if And what then for incremental you business does for that and that mean secondly, have. see some moderation, what retail

Bill Nash

Michael, it's a great Good morning, question. Yes. yes,

You've this know environment enough been following really to is us really long that pricing it's -- unprecedented.

of think you to truly $X,XXX it's $X,XXX that seen, January we've If until now, about remarkable. appreciation from the worth

Our average up actually bit more point. think off it I was reaching inflection a a they're an up based and acquisition dollars. a From that, thousand than do little little we're of selling bit couple offset prices an were mix standpoint, but of age.

gap definitely between consumer difference the and index and late-model cars, has new the at that cars look you narrowed. used price If

new are and narrows, that's new, and up for obviously, great to the the up great gone to When when thing point And inflection think car a its point. headwind that's gap sells. that we getting cars purchases. close think used a car. because cars late And the between car pace have model of for used self-correct fairly not are used I gap used I widens, used the against get think it's gap a is While bumping that's new at cars. I the where, going okay, up, they And

So thing. I a that's think positive

Operator

is Brian Your of next from Oppenheimer. question Nagel

Brian Nagel

Nice quarter, congratulations.

this to -- price mean all talked heard very much to all So used environment if prior I follow-up bill. a will, you my question, question with is we've pricing that about we've right regard just cars. precedent,

forward So environment is tailwind have of towards various is this And again I the And I going we the look business, headwind as how balance for across question these results we or year? CarMax? this pricing a was guess then again, in follow-up the the about we up. facets should think look the as a the at

Bill Nash

general. car Yes. Normally, environment just that be industry used a headwind pricing would in to the

I down I a new was into of price to customers raise the used the think was availability, car this that because car helped used it cars. quarter there of which lack the market, pushed difference think

-- pull really there. factors it's of got that different now customers There's lot because kind coming it's apart. on going to new of So hard there you've a in

that's driving there up out stimulus the demand. have You

would So, used I you what the from the same was cars, you it don't on normal that -- price the increases see see. hard. effect really normally would high had -- it's same it normally think elasticity I think

I go having pricing, elasticity seen think I point, And out that's going I there, inflection to not some stimulus think of think, back that normal to point Now forward, and starts we've the Michael's start down, good I I think will this to return. think if a thing.

Enrique Mayor-Mora

Yes.

perform in diversity of really model to of environment. I any allows think the that kind our other thing is us the business as well

our a be may from the unparalleled a that And that is business. other industry. in diversity of see results pricing headwind see our sense, kind our parts tailwind that some while results, in and So of you that in in just it's to you quarter-to-quarter

Bill Nash

thing the that other look, here think rapid depreciation. at been I this doing you whether we've rapid And long enough or appreciation is, Yes. play see

I think buy I we that leverage, the data we how our we technology way we advantage. competitive certainly the manage think that it's inventory, the a leverage that and

Operator

Nelson of from Rick next question Stephens. is Your

Rick Nelson

Thanks.

X. we guess allowance more range reserve Tier allowance reversal that should of at number Historically, X% reversals? receivables. now account to X.X% for we X.XX% I has and been in saw think how the the So, that potential this I about believe quarter, for more

Bill Nash

at Historically, the our reserve correct. as Rick. a now. our And X.XX% Tier Yes. our we portfolio. mark, Appreciate X.X% is Yes, is for receivables on percentage right to range X% question, the targeted the X right have of sustained

there. included X.XX% in Now Tier that X Tier X mind bear in both and incorporates

we were So stated. that downward can back nicely operating range to you we've trended really that that. are see in the if you out, since that previously And we've

performance pretty to a of quarter. we that the end obviously, I And think the that's since great now. the substantial move reflection we've it's QX in made a saw of

X.XX% and future. us performs Tier So across and going Tier really how the we'll both the is we a in forward, for number X X customer the portfolio, solid think see

Operator

of next from Healy is question Northcoast. John Your

John Healy

ads. I ad and I are some kind a little still view you And as talked radio ask effective some I variety wanted How to you've wanted know think about that you've SG&A to into bit you've clearly, happy And front? that next maybe as of it on that it of the paying now. go you as levels. right on things big launched? NBA year? part I right television recalibration it the But and a of with about expect Is new once you with Or traditional the now? I do the done that get to see we SG&A continuing should your the spend? those was? investments. feel off campaigns be about know do Are

Bill Nash

Yes, John.

talk let So spend. me productivity just ad the of the first about

we're all, with it. thrilled of First

at doing, way. just a If you that year. committed given in we hit. you, as spend for been to would timing. And kind ROI look what a guidance tell about of this it's at I had the advertise below We're we've record that's think continuing would actually a I advertising thoughtful just the quarter, looking for we've the to

is our you compare We're XX% web double year-over-year, up to prior Our this up was are website is 'XX. searches hits from visits of average digits. roughly which record. to million, any seeing back which up if FY quarter significantly significantly number XX% Google for XX.X up

experience and very, I'll there the we're it's good isn't new to don't tell But feel be at we're have this to and So you doing really need -- about programs the going we kind the thoughts SG&A. very I one of committed spreading to omni-channel We this, you, how out quarter consumers. relates any to and to to continue spend. know a it Enrique, And as if thing. continue that other we're not

Enrique Mayor-Mora

Yes, absolutely.

was what half going a our And basis, in communicated on quarter said intend spending a what If at unit we're ramp-up year you look pretty on we last which take a Analyst Day, we and to per spend we spent in of expense. last in the more. much back we advertising, was, year, this

just advertising perspective FY think some to communicated. our And of and compare how of that so take the basis an more what over and you importantly, costs, a looking on if spend. a in getting year. normalized give per consistent returns importance to you more that is at years XX% you We're we two and in context we've on certainly of which our it But with increase look a the 'XX, advertising from we're unit ago, at

Operator

Next Instructions] from is of JPMorgan. Gupta [Operator question Rajat

Rajat Gupta

how through the have Then level? April, give the or could quarter, the color that would XXXX like three there, about March, Congrats helpful. first you this impact if on extent. pricing is you to how reaching just probably it's a color the to I of progression strong on on us earlier level maybe sprint. June like Could us starting the question some had any versus was a May on trended demand four pound give mentioned where -- the how be you weeks some on

Bill Nash

Yes, Rajat.

it was entire quarter. first I that. in to And 'XX So, month was comp of we're whole a to about saw about quarter FY every comping X.X% strong top we 'XX, and new back the talk growth as I've looking also month was May how forget a we month on mean the we're call pleased month for FY XX% when talked the record in us. on don't to April. March with the And also relates it last May. quarter. a a was as record April relates it of record

how with quarter. second pleased because And because at it's last quarter I'll but we the the we performance comp year, going to we're you the be quarter. to I'm that the started. remember But there. quarter, tell if second the strong the get remember. to to the you, enter a And keep throughout I'll knock more of we pleased quarter quarter wood lot positive on we had the have we'll new numbers a excited FY 'XX end in to very back we're that to feel into great talk about second very as of certainly So performance talking with don't

Operator

question next RBC Scot Capital Markets. Your from is of Ciccarelli

Scot Ciccarelli

guys. morning, Good Ciccarelli. Scot It's

add reconditioning is market, in hot, in dynamics your and used the So seeing the further were shorten aggressive process Can vehicle more we're sounds listening offerings, given like or throughput sales some you, improve own maybe thus, obviously, to you your the limited activity. capabilities very Because, more that performance. inventory you day your your when it have I'm production Bill, of may purchasing posture vehicle category capacity? to and

Bill Nash

lower below if normal Yes. than probably in quarter, inventory, the now, And our whole mean have a I where less like we to is obviously, it level is would target No, that be. we're a right I headwind. you right. much Scot, XX% think certainly absolutely you're we're environment, inventory --

just the ahead was weren't going think I that. it was production. think the see I ready. to on marketplace. elasticity rest to given to able what We normal really get And we of don't of a was But about do build that it is you the would headwind. in normally time it

existing Our doing a adding We're additional operations is job. those facility. phenomenal capacity team in

that continue expect So I to would up. to go

standpoint from the on we talked system, we've areas existing past, One the we've of focused the we get is throughput to I've of of now version look more way the the been to one out as and of kind through production. that flow next would efficiency side in And about areas of take And resources. expect our finished actually facilities that. an rolling

say additional to but side. on recently, that So they operations go production as be adding can't you long-term not that up. was demand, we're course, And we're it's that not But watch you've And the the will our that, headwind then, enough it's of it building us. inventory about ramp if inventory fair think again, to meeting And to have yes, give it. And the they're forward. excited shout-out that more only us. team absolutely capacity goals, It's to seen back and our for help your of we side. I been we'll continue meet I a supply to because starting

Scot Ciccarelli

average does long call could Or today? of knock where you're where a it, an how time? car it can recondition, you just optimized. significant let's of to amount And pretty to off kind So you're take close that Like you potentially go?

Bill Nash

traditional depends to it I No, vehicles. optimize also of on Remember, more the say car. we think can mix

bit take vehicles. newer your than longer vehicles little a older Your

is think what probably -- the in mind, if and the on. I really that we're that's time about worked -- cycle car time. think the be whole about keep asking is Cycle I time, you're ready to

stuff. wait for all You that of to parts got kind and

and You that the on it's X days, think probably the it's depends vehicle. and cycle about between somewhere -- in that XX time,

have than vehicles that. phases some I is But we production our an opportunity. this certainly, lot a measure that less obviously think take area And we in Now by minutes. are do of

that production with I flow think system. this new already, we're our is one

I think realize to already more we're throughput, great. is which starting

Operator

BNP is question next from Paribas. Chris Your Exane of Bottiglieri

Chris Bottiglieri

question. Strong had taking GPU. on a Thank question for the you quick I the quarter.

anything to these could environment like or that if GPU So, you a there offsets sourcing to? But it work you I've It true mix on investments, that costing I would is is high as or sounds cars pricing confirm was it. tailwinds ever like know were this sounds price used if like GPUs. to some the tailwind like customer pulled any of as back just mitigate on recondition the speak that. seen that's can it don't

Bill Nash

tailwind pricing to don't expensive GPU. how for Well, to us, used a necessarily a car our is. according the We first of all, vehicle margin isn't manage

a lot factors. of We other have

of that's So might a tailwind necessarily it the other not folks. some be for us like

now. to our that driving I'd as look for higher I our self-sufficiency forward, be tell as we you, are as we've prices a us. think -- are And And said very competitive. -- think right prices I've certainly competitive I ever having tailwind is always going

direction provide to feel our also per great car be GPU So competitive. retail I that do are it but for able have I I the great in we're we only the flexibility very about way very, world-class about our feel great prices. prices that going. feel car, about a to not

Operator

Your Instructions] Basham is next [Operator Wedbush. of Seth question from

Seth Basham

a buy Thanks that this My the is eligibility solely versus move XX%? lot closer of online, purchased up quarter quarter. last question the you to customers online? morning. able eligibility were and would to rollout other XXX% of that to Or increased as get are on expect to being And factors? there god to X% X% due mix you Is metric sales entirely that of

Bill Nash

Yes.

X% the up. was capabilities. I geographic to would that So, driven to by and continue some X% expect to number expansion go additional

I I'm the asking just we And about good sorry, progress. self-serve. you're the some As actually, total said, made not online,

think to up to I will forward. And we XX%. go -- be, continue as what's drive from continue capabilities go going we're on, self-serve to to went the primarily, we some would of mean, adoption add adding areas that I online self-service to So XX% as number features. I that the focused the And expect again, additional

simple the we're when seamless on as make think so transfers bit on it to And is about a trade-ins. I that, areas focused well more little and as

Enrique Mayor-Mora

they they degree the online, percent that and that that consumer the expect to can that shop certainly to to from really at our store business of of omni, come to and the model the the But that want beauty percent it's time, consumer can way, wants online the do to revenues well. right? sales and We up degree buy of and go So is the same To do so. and as into more of more up. they

to in-store be up. whether really numbers it's the the and by go or they to to driven expect how online. again, us, interact want going We it's consumers But with

Seth Basham

it. through entirely gross the How versus Got per days? is comparing the And per profit purchased vehicle these that all-in stores. unit online

Enrique Mayor-Mora

similar, about about They're similar.

Bill Nash

Yes.

Operator

Your Whiston is David from final Morningstar. of question

David Whiston

time, -- integration the lead I think, Good them retailing. to competitors I rationale the the I'm Thanks. wanted it. same morning. are there for acquisition, not there's vertical still get go for on benefits, generation. that and I CarMax Edmunds paying clear At But procuring to back are honestly, their totally

and want CarMax me? dots So to a some not how getting Can shake for still connect you otherwise, business you because are to they're going ensuring that Edmunds preferences? a they is fair get just with do

Bill Nash

Yes.

as we're acquisition on to both again, the So complete teams are thrilled sides. the

services example brand, And to for to a for the the lot reminder, and excited that they OEM We them, rolled Edmunds, both out think developed to continue of And help that the and and we instant in on going automotive operate We're that consumers to to there's are their is lot their to with brand a their As as think but about teams on of and it great there's premium opportunity it drive continuing invest more and of excited brand still a a there separate with We're we're we progress dealers on have to and work them then their on with also content. collaborate them opportunity research. and carmax.com. we programs of a going offers. partners. separate companies we're that continue initially a company.

we both it's their we we the very as together separate, making that to continuing to to things to Company companies, think continue then that customers. keep we they're keep individual benefit sure those add that value highlight do I in develop important and think continue I can both. And we'll the jointly So future. And

David Whiston

was you you Okay. investment gain on? And do disclose the can have

Enrique Mayor-Mora

that modest what's a know across have space. about we auto relatively -- mentioned, primarily make have we -- sure as talk the No, we on going we of to and used really we understand don't that I strategic investments portfolio ecosystem, in

gain quarter on companies one but just investing outsized disclose of which we an investments, we don't had in. we're those so, really this And

Operator

other to remarks. closing are questions There Bill in I'd like the queue. to no any turn call back for

Bill Nash

results are tell can about extremely from having it's guys largest other you the core that very retail, that with also auto our about the come in first hopefully, comments And excited Well, and the Shelby. future. we're you, pleased opportunities the exist Thank quarter that it's our businesses. market the Great. with not opportunities just that but this in total we addressable used

I our questions the communities. associates some offerings today's of then to proprietary continued our living that want customers think And our each we care it and support; want stack, tech highlighted thank you of for call. I on So experiences, supported transformation, are into taking our continued and you dedication it's tremendous as ecosystem. this to your your larger or that omni-channel taking auto by They other, of think beyond it's our whether is CAF, for I success their wholesale, thank CarMax. other all want whether of thank you care going to always, the for today. values, if the and data of you it's of even truly

truly success look CarMax. of we forward So to the

for So forward quarter. to next you time. we look your talking Thank again

Operator

this gentlemen, your conference for you today's call. concludes participation. Ladies Thank and

may You now disconnect.

CarMax (KMX) 25 Jun 212022 Q1 Earnings call transcript