CarMax (KMX) 30 Sep 212022 Q2 Earnings call transcript

Company Profile

Participants

Bill Nash	President, Chief Executive Officer
Enrique Mayor-Mora	Executive Vice President, Chief Financial Officer
Jon Daniels	Senior Vice President, CarMax Auto Finance
David Lowenstein	Assistant Vice President, Investor Relations
Brian Nagel	Oppenheimer
Sharon Zackfia	William Blair
Rick Nelson	Stephens
Craig Kennison	Baird
Rajat Gupta	JP Morgan
Michael Montani	Evercore
Seth Basham	Wedbush Securities
Adam Jonas	Morgan Stanley
John Murphy	Bank of America
Ali Faghri	Guggenheim Securities
David Whiston	Morningstar
Chris Bottiglieri	Exane BNP Paribas

Call transcript

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Bill Nash

Good morning and thank you for joining us.

As you read in our earnings release this morning, we delivered a record level of used sales for the second quarter and all-time record for wholesale vehicle sales, as well as robust CarMax auto finance income growth.

For the second quarter of FY22, our diversified business model delivered totaled sales of $8 billion, up 49% compared with the second quarter of FY21, driven by higher average selling prices and volume gains. Net earnings per diluted share was $1.72, down $0.07 from a year ago as we rolled over last year’s pandemic-driven expense reductions and also continued to invest in our growth. Across our retail and wholesale channels, we sold approximately 420,000 cars in total, up 20% versus the second quarter last year.

of cars have combined. months retail approximately six wholesale and the FYXX, sold we XXX,XXX For

year self We consumers quarter last in bought the achieved also XX% second this more year XX%. of approximately sufficiency cars from and record versus

second customer In used X.X% Our company. quarter and levels, macro across retail were last the unit second business, up total quarter up solid factors omnichannel offerings, the used headwinds execution and driving comps despite are were from versus and platform, staffing, performance in car X.X% unique our our year valuations. unit sales inventory overall

Our second we our achieved building quarter. teams that the saleable and each growth the demand month despite quarter progress made sequential steady strong the inventory into in retail during carried

remains on targeted saleable it the below our grow balance are year. during to we inventory levels, pace the of our While

to In profit in used unit, strong we retail performance. of sales, our quarter gross addition reported per second with unit line $X,XXX historical

sold online For the same after a per strength last compared rolled launching of by for $X,XXX were the Wholesale primarily record with February was nationwide unit last in that instant was ongoing wholesale, year. profit carmax.com units year. last up our in period The gross units appraisal driven quarter offering $X,XXX year. second from wholesale out success XX.X% on edmunds.com on

valuations autos continued the in million. elevated used broader auto of of from solid deliver to CAF still results finance, CarMax We or also with benefited $XXX market. income

Tier relative the will details CAF offers did financing a tiers, on we contribution John and CAF see volume provide in delivered our to in all decline customer addition, partner credit quarter. more and strong In lenders shortly. first sequential though X

who performance, the against then by on the call Enrique? progress like will the you to financial on After our information to Enrique, call I’d our and open strategic John. followed up that, Now update second quarter provide I’ll to Q&A. over more turn priorities

Enrique Mayor-Mora

quarter. vehicle gross Total million, was up XX%, profit in service Offsetting favorability, volume also the prior by was in earnings year’s million, quarter This million last everyone. over last year’s finance renegotiated on from lower included was morning which quarter. year. noted from $XXX $XX contribution as good our and result an benefited year million, of million primarily revenues favorable advertising compared million profit $XXX compared second from and second from X% $XX and of Tier was $XX.X margin up This wholesale X% with quarter. million was with million, last rolling which the year’s fees. headwinds was last of costs Bill down gross gross third term in this release. of million, million finance subscription $X of second the this Thanks revenues party fees $XX margin year’s from in Other $XXX over year’s $XXX by the Favorability with and vehicle driven of last during quarter. income acquisition. short $XX June improvement of used XXXX down million, third our Edmunds up profit and $X X driven party items was This Other was quarter which is margin X, since

we Specifically, comped year’s over last cost reductions. COVID-related

compared quarter. first the from year first ’XX significant quarter to experienced year’s last the of Additionally, stemming fiscal increase sales we XX-day in cost timing warranty higher during

was gross profit, production also Also EPP impacting service We down as retail realized focused or margin retail was X.X%. reconditioning million $X other on lower cars. capacity

not our sharing $X recognized timing the for period that While of benefit to shift was revenues million in due penetration above last year stable in a was quarter at one second this XX%, a performance approximately included profit year’s providers. of

to growth. XX% continued increased On initiatives million, as and from quarter the strategic invest year COVID to S&GA impacted our we our up $XXX front, a and in the quarter expenses second ago for

a during year As SG&A over compared by of benefits brand, in to platforms of growth driven Edmunds main third, second of other increase profit payroll total year as million COVID-related last quarter; cost primarily CarMax the We $XX to million the as pandemic, took quarter year. overhead strategic of first, a million by our the in this year to in actions to a a and particularly quarter. reminder, omnichannel and the was the and XX.X% during gross expense second, and last The three increase compensation advertising in increase inclusion sales the advance and that million. we SG&A factors: offerings, XX.X% was containment the percent in $XX aggressive $XX by was the a build acquisition. technology driven dollars due during increase savings our prior between estimate $XX staffing initiatives; to million first half awareness cost year communicated customer amplify investments SG&A $XX prior in drive previously

gross quarter. first For percent XX.X%. leveraging SG&A to CDC rate deliver as profit half spend in the of of FYXX, time. from year-over-year the achieved cost five reduction over of of core XX.X%, structure an our We expect committed remain second our points are six ensuring first during over was will that we a we to months improvements efficient targeted and last year’s additional focus areas We continue

we Additionally, streamline reduce automation operations. opportunities capabilities as unlock new expenses our to and omnichannel leverage will

digital On our acquisition resulting ROI. in data example, deliver That experience, enhance omnichannel to shareholder deploy generating our capabilities organization in to is capital of For capital AI to in offer aspects vehicle a already power to focus buying long-term our program we value. online and more all efficient includes share strong as continue our ongoing as and the market is investing such leverage allocation, online grow automation, business in instant science. which of

$XXX for and to program, additional for continue paths capital share to remain million. footprint to X.X in excess strategic approximately also shareholders and we shares returning million the regard committed expansion to repurchase In look value. store We create repurchased the approximately of invest incremental to our in quarter our

over to to Now John. like call turn I’d the

Jon Daniels

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

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

back its portion of the the its last to a quality QX As route the Tier of end of preserve to year pandemic. of CAF all partners reminder, rolled high These year. changes X and last volume strategically volume start portfolio decided X to allocated during the a its of Tier by were

offers During as strong volume CarMax the we additional X our observed partners within the quarter, Tier for from they channel. competed

for to to average conversion the prices We decrease in seen also large the portion credit saw selling across believe these We in of applications volume lower the application the higher due in industry. a part decreases spectrum. and sale are

quarter weighted mix this difference year’s new rate result Similar first up originated contract of was the in loans quarter, During the in average billion. rate of from was CAF’s $X.X of charged strength than down the record second credit to to customers year-over-year charged. in this on but first X% year increase The APR a rather a an used in nearly sales, unit the quarter. ago is the change net customers X.X% X.X%, from

of increased period the program capital margin year, For a X.X% markets. interest million the overall in $XX resulting last margin to of state This year-over-year portfolio, interest versus same of the or strong favorable our highlights and the ABS X% XX%. strength in net increase our

net Given significant the year we recognize life year-over-year we income years. increase This as margin the this result income up net multiple quarter million a of $XXX comes higher was from a the our loans, over CAF’s interest receivables. from and benefit interest $XXX higher for margin ago. stronger of million, across will

$XX XX% the balance ending Our the our credit decisions interests second quarter, best X making in decision a of to for the where to expense given long the a CAF spectrum, lending or volume. higher We managed while we X.XX% $XXX to is our regard of participates environment. our was related portfolio specifically and the receivables. current across result that in committed macroeconomic end of million retain we remain the on the This With is of an also outlook are the are in of at reserve the second as evaluating provision reserve the quarter corresponding landscape and line and and first resulted customers. believe million X.XX% future the to appropriate in with and in Tier platform of losses loans believe Tier sustainable constantly the of term reflecting X modestly percentage in quarter our

originating the in when Tier Tier test in coordination as enhance range take drive customer we X can this understand Much in quarter will period profitability. began small space partners, space. a participation of and best both in at test CAF’s this CAF extended our the CAF options, experience, During business of volumes low we and time credit the second place the like an X the for to customer improve entered X, remain how with the Tier

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

Bill Nash

have very shop they a us. to lies driven built to tied I’m excited omnichannel in across about sale every the platform thank and found ahead. way with teams or customers or want is this that model, incredible intentionally that a opportunity customer to buy, a how don’t We’ve for our proud progress diversified you We’ve business Jon, experience. an that in-store to digital our strong you Thank the of how ability results most of Enrique. regardless a we’re our quarter car shop give to solely

prior a customers provide their or to their our of personalize differentiate buy with first a omnichannel and quarter by X%. were second in-store our online, needs. sales the CarMax from for mix the online, approximately enabling unit of physical and with up consistent really to of retail digital ability quarter interactions capabilities we our XXX% customers While meet experience X% XXX% year’s the to quarter, In our car

consider transactional retail of a the vehicle opting it car, that’s completes all of trading a out reserving As four financing activity so remotely, creating needed, a in sales major sale online trade-in, when an if order. that’s customer or a a reminder, and we the

choose. from is and quarter. this from XXX% total online up in This omni up those of completing the auctions quarter on which and are quarter, where remains transactions. up the transactions sales, second so wholesale focused sales to quarter they the where represents rollout from second sales was can a one Omni unit quarter complete from wholesale XX% than to of end-to-end, our Approximately customers if customers first Currently, our entire major in We’ve year’s so flat self-service of last least the transactional revenue, process independently retail unaided of XX% XX% at XX% have been car buying first our a access resulting of of of remotely. little virtual, complete experience, those prior complete Our XX%. experience. are Total revenues were online the customers XX%. more sales online XXX% year’s considered XX% activities online

to record a quarter, an our U.S. XXX,XXX a XX% our autos enable our become position and second end That’s further more by a with that about associate. We are represents car from to customers which half to quarter out online complete on self-service we’ve online increase our can while track Remember, the these consumers as year. total rolling buys bring capability vehicles retail of largest used from buyer experience, the consumers currently the buy growth our of XXX% will of approximately of access all customers from instant the In through customers the number. to from fiscal assistance are This our online from online in expanding we this supports all belief customers. appraisal, first bought capabilities

to to enhancing and exceed integrate store best-in-class our experience. with seamlessly are offerings We continuously ecommerce our expectations customer

share examples. me few Let a

more through our A their to the application, of quarter the customers financing access of terms. XX% second digital now or One confidence. loan in process. finance process pre-approval provided and inventory, we’ve no a those digital those online customized them to start financing majority includes a our effort are allowing our of receive XXX% of that every areas on customers decision loan additional is with Nearly customers time enhanced as shop with of care terms their personal

our what inventory-wide terms. using In most finance and customers CAF. differentiates these multiple partners, provide the provide ensures to is attractive ability This addition, the experience credit we including offers our rates with

We’re excited progress journey. on of car about crucial our part buying the this

they an is providing also remotely. immersive shop experience customer inventory We digital what we is to with continue our advance believe as industry-leading merchandising, to which critical

customer This vehicle key vehicle seat and continue side to views which help the quarter, vehicle from we added call-outs XXX and degree the to the hotspots, are back advance interior driver’s of features. the understand

artificial represent We also are consistently leverage ensure to our quality photos to continue inventory. that high our intelligence to best

We’re online. In have advancements as customers very help these the very of on on fall shop our new relation as our teams we’re feedback hit understand in pleased innovations. hearing acquisition running with they with our Edmunds, our love that ground positive and progress vehicles to

to continue work and will opportunities across in to We invest Edmunds brand the ecosystem. larger compete the unlock auto to used together

We are have quarter made our and strategy. advancing really the we omnichannel proud the progress of in significant

take We long auto questions, sustainable will the industry, term which used are and we’ll happy Kevin? value. in that, to deliver so the well most shareholder With to positioned experience meaningful create customer-centric your enable growth be

Operator

from Oppenheimer. Brian of question [Operator Nagel instructions] comes first Our

Brian Nagel

Hi, good morning.

Bill Nash

morning Good Brian.

Brian Nagel

the congratulations new role. David, on

David Lowenstein

you. Thank

Brian Nagel

can the guess this unit contextualize and Does number about versus your health, the the as but to from tracking with that against better initiatives, used a follow-up, standpoint, basis? are this strategic more what help and think positioning a is wholesale more to you. in bit comments, you team comp, at you part with clearly ask, view a crisis, the that that. out on of maybe is of want us of more reflect of on about used shift sales. now COVID a of and and COVID, normalized you and there health know the the I the real business? as measure lot underlying a question it a your overall talking as internal I that look Then your together I CarMax? a talked Thank as just I we X.X% coming you backdrop way quarter mean, about a How cars more cars

Bill Nash

the Thank Brian. questions, you for

little comps, really environment. with roughly quarter. the several put we’re headwinds the have had We also the - On first context I also question, faced to pleased the that a you look say X% and because we that around during

inventory probably would we all, of off of--at normally inventory where about than be. off the probably - want It’s the about lower of target. First XX% end to is of where we XX% quarter,

market. think customers that thing so the $X,XXX, only also remarks understaffed prices and up car In addition how acquisition but good Jon the some weren’t in to I are because we’re understaffed to in that. hinders that’s important of still cases the we and the I year-over-year mean, just talked were about able back inventory macro to to with is headwind, and hit it some remarks--or not understaffed, were on get pretty just thing, we degree. working our think the are opening opening board, and We in out but across I Enrique SLAs, just customers, much about not used we a is Then which about the his ability a may his our used push broader never car talked about valuations. just

in the those comps with so that really that you than material them a on goes bit people about about and fact headwinds talk know, much yes add bit - which us the that. used that this the progress. we’re car great I what differently when great, day, also about feel quarter little the and headwinds, in but I of talked but used always those back little when that, we is think more are think think we we as a how light do is--you wholesale, about all take talk to retailer, headwinds, analyst and for you question, about together feel second we your comp On about overall I great

retailer, added services, that’s of greater broader We’re both. wholesaler, talk so a why great a used great to this financier. Edmunds, to it we’ve We’ve got dealer goes a really and change about as the really ecosystem, we kind auto

Brian Nagel

That’s helpful, Bill.

what a you in to been the quarter? that faced Just way headwinds is a there question, these initial on quantify would have X.X follow-up not the had

Bill Nash

down Yes be being would hard, significant in it’s that inventory and one inventory substantially itself that give just I’ll you The down, tell Brian, headwind. I’ll you, example. a

applies I under-inventoried; Now, perspective I but like will take when you, so add lot of pleased the elasticity we the think because now comp will feel we’re how with and things what overall. normal right are up, I came just and tell three all from you them you don’t a of a tell is folks they’re headwinds, material those again out quarter

Operator

you. Thank

Sharon from Blair. William question Zackfia Our with next comes

Sharon Zackfia

Hi, it inventory good sight inventory of throughout it has know but your as six acquiring back something obvious of issue, issue? normalized inventory What it mentioned where levels? is kind that’s into improve, is is morning. months I anyone out? to for Help you continue where expect point kind side. right three, of of vehicles The more you’re your quarter this been, To the understand the now the into staffing is the quarter, August line to at during I did dynamic looking website. pinch us quantify, pretty getting the the on it a think, you is

Bill Nash

Thank the it’s approximately you my XX% first talked sourcing. not Sharon. self that the in Well of remarks the acquiring sufficient, I opening just we’re vehicles. definitely it’s so about fact not all,

about we’re we’re relates we year-over-year. about a As production, certainly question, XX% build told still of record of typically COVID I we’re quarter first XX% time target, light out is that I fourth the sales able hole. and to we The and our really headwind first do that quarter, weren’t in what about in digging so disruption because Like it - quarter. Brian, had and to winter some then has the with a up back happened inventory talked we all the Brian’s been when to it fourth

we’re look quarter where second XX% progress plan month. year’s If to the quarter, every about we to at We light. did We look make great our and last you grew we’re this depend - sequentially inventory, inventory second get the somewhat on the timing is to want build of really going to the really will to I we where over to rest we back think demand. be--when continue year, and be

across - I throughout staffing, the some in even continue to far making although we As the progress. as were but build progress we the the we side; as on great did quarter this general, to we’re made again, yes well. great great inventory, progress staffing have in quarter, staffing during board think make able quarter and staffing We headwinds

Sharon Zackfia

snowflake I you like the impact to know any kind sales. that broad look that way a have indicate seen conversion curious I’m if there losing don’t at if conversion the have and Brian inventory, metric of on mentioned obviously might as quantify is you’ve a but to every car been you used as table? Is it’s inventory, what’s you hard just an be to to go because the down, of left

Bill Nash

different go people start top looking buy but is the and don’t down. which fairly always because inventory the little down they’re because strong, have We know, then said--you certainly for, we main of is conversion your don’t reasons think from conversion us conversion of was but the Yes, of when vehicle a also is we’ve magnified great funnel, top that The I opportunity is think down, up store. from both was one we conversion at the when bit. look we in store a ways, they a saw couple funnel

Operator

Thank you.

with Nelson Stephens. next comes from question Our Rick

Rick Nelson

up you a what risks, X this party third strategy? to CAF. Wanted business sale CAF strategy and Can of to the lender, Tier morning. a more Tier I are to X unit the on profitability follow the with and good compare Thanks, guess, at

Jon Daniels

a aspect is fund, a Sure, it’s Tier X perspective, more to yes. Tier question, higher sale going charge, obviously you’re able potentially. so be the there there, risk you a risk say just a unit, there. a environment if all X the is if the maybe of Rick. loan, APR funding a obviously from finance on higher With $X,XXX in there range we generally there, But prime there’s finance so there’s cost your to but to a can south customer so will, little to higher funding that to Appreciate and $X,XXX but capture depending regard economics

renegotiate our Now we able obviously to partners, were fees. with

the $XXX volume to taking We’re and loans currently obviously Tier partners beginning--over the within mentioned X Tier those started pick about paying up, course space. of we the we X our XX% QX, that of

that and make more make the offers are take volume great that appreciate feel assess with answers continue it, that X, want But way we and credit we credit able happy we to so we’ll we economics your the mix those the to should we we Tier sure our whether X, we have. We’re us, more construct, to for to play take great we that partners love at ultimately want Tier But and we to it’s that, we to those customers. current provide are provide those In customers. our question. offers do platform constructed again, today that sure

Bill Nash

and is thing to program, would I so take of sustainability whether really X it into Yes, experience, the Tier we consideration. the matter, for that, that the then profitability, the all the customer and X it’s balancing add that only about Rick, or Tier

Rick Nelson

Thanks luck. and enough. Fair good

Bill Nash

Thank you Rick.

Operator

comes from Craig Our question with Baird. Kennison next

Craig Kennison

they a from feel really impressive. listing they up would in Thanks coming online Bill, dealer, have a without is would the surge to done Hey, you appraisal your they some my have have tool taking good for sold shown they tool CarMax question. from? service? have Do morning. those vehicles sellers for store, - the Where gone would have sourced are would person-to-person another at through what

Bill Nash

I the think--look, with pleased online. we’re Craig,

but we we I appraisal not think because units would our tremendous have a feel even a getting there, lane absolutely there’s of where strong. incremental traditional very we’re is still they sure gone, I’m lot but know and the other sold by gone channels, about good channels, service, would which offering so that this incremental fact feel there they don’t I the in maybe incrementality. are we value have

Craig Kennison

about your you offer? are and the able that tell competitiveness to And online you what of anything offers purchase, percentage of does

Bill Nash

the through know, traditionally about how mean, and XXs. rate rate lane is trade--appraisal low high, is still--I it’s rate--you appraisal we’ve our buy our our in talked buy very it’s buy the so Yes,

offers, at show way many the we you of how out point online really is we there once up traditional because The of offer customers that we’re putting it, look the show at an think those if customers offer, can A-lane. this of imagine, the the much with customers On of we’ve an online put buy get As offer, and online each think okay, up store, about about quarter. it online higher millions at many that this actually way offers that is them an how actually the store, sell? rate--the show you at those up that actually sell is, than

Operator

Thank you.

comes Our JP question Morgan. Rajat with from next Gupta

Rajat Gupta

taking thanks Great, for questions. the

useful, be useful. August That’d GPU. be and [indiscernible] be rising Any likely fourth us the for you’ve as given October-November if the on tracking, us us number would headcount. pricing question could environment is all, will given how similar September Just comps? GPU, had the Then picked second thanks. you’re quarter. investments any in you provide in vehicle Could into you give color much benefit made the how that up, give has that Maybe a color us you’ve some to this up, some you other used Clearly had color picked that of again, previously well? into advertising you great could September, started more color as on back retail some well, quarter added on just of investments for on on

Enrique Mayor-Mora

is right to Hey time to firmly believe invest our SG&A, business. now in the that regard we Rajat. growing With

track bullish going omni of to the future, self we as customers forward. about and sufficiency to very to retail year in our up we’re on by continue XXX% business, of of our invest to But this trajectory the We’re are online, to continue end functionality given and strength in all and to service offer online. our move growth, going we invest the ecommerce we’re self our our

our success we to going and other and well. continue a by the advertising year, in we way to We’re investment last were we marketing invest is to we’re the acquisition The platform as The in very something time and believe vehicles. as to invest targeted to instant offer advertising program investments then that the had lastly we’re an same going going we’re that make to well tremendous to acquisition outstanding those in in of that we continue one also that opportunity there’s communicated that to step we of just in that up channels that we provides example a investing is of Again, ROI want had marketing invest. that effective have going has marketing. just but at to so customers launched communicating we’re in, sure an an superior continue ROI, consumers, our of

at buying as or whether that also do expect over the we said, it’s because to well. it’s same other efficiency Now being channels that organization investing, time lever we have plays, the longer the cost we’re term the whether it’s whether CECs or

our to how to on so we’ll to our that. work, more with point. we’re performance in do we I think it investments, that But continue efficient remember we’re on important opportunities get this track have at with We and is track

Bill Nash

the--like, Yes, advertising with increase in really the to on example, we’re that. pleased a is I of for Rajat, only thing the would traffic. We performance the about that web add XX% and saw

Our about--it’s average example flow the that’s to you a million where feel so like off. paying another was our more investment’s website a little XX month, than

when of your this. quarter very talked it’s second the that part we kind a far of we were a in question. last think about today situation as similar question, about--we’re I the GPU, As great

exist, profit to quarter, some ago those while make A were just sure--you’ve the just because does talked we got still testing. scale factors doing of wanted couple some really and that coming some channels about we sense. of the monitor through of testing We’re make constantly the and quarters broader factors, other to it macro the like organization, last other

inventory again, At have margins. elasticity see you’ve that tests deviate end are inventory. have day, which, sense still we’re going, we make what understand at just the to look the didn’t that want with getting always got You’ve want elasticity competitors read your trend it on the priced more to got levels, and to you very competitive--competitively on to to the from have that very, historical the doing, we of we

I that certainly sufficiency, think helps. with self the

you quarter I like think averages, GPUs the the line about forward, how should think going historical more was. third is in with quarter probably second just

Operator

Thank question you key the please comment or if then have press touchtone you. gentlemen, at time, Again telephone. star ladies one your a this and on the a

Montani question next Michael with from Our comes Evercore.

Michael Montani

for question. thanks Hi, the taking

work, the comps looked wanted like to the to been follow wanted the August digits up trends and have start had double the then could throughout into up Just to quarter that, provide nicely on the could color into it accelerated and From of basically trends quarter. our if cadence and enhanced if channel. third it may as see or strengthened, that, quantitatively, all you you some just it’s so have could would if you do not to if why inventories comment September, on multi if

Bill Nash

your so also pleased in was good since quarter. not already very to of comps it Michael. a month month. It March. a we the their all-time for morning for respective We April-May-June-July-August the with month was Obviously trend. had continue point, every with us, March record, about really been started the record, a Yes, the quarter. for feel third said overall great and start comps record pleased but only I’ve that. we’re high positive To we have record all we’re single

third about of end talk we’ll quarter. detail the at that in more Now, obviously the

Michael Montani

demand just due there. had a at been could, GPU on to was the margin anticipating inelastic on folks One the moment. then if some two and upside little front, I Okay, questions pretty

advertising pricing the Just to also making. to the consider and all the there’s XQ. kind if need any of of was other there’s for was or to something we consider we if reductions are XQ What you in more just helpful, spend there’s volatility the understand the million. and cost called Then environment, on investment one year perhaps $XX you as wanted in million, cycle if in out of $XX terms XQ

Bill Nash

Okay, yes.

selling at we always look some looking On - they’ll spike the in have margin. the know average margins, big our where margins, probably we’re up competitors prices, take more I and

very feel ASPs our about are. comfortable our that You’ve drive followed We don’t long really where enough us to know margins margins.

to having this the we about but can but in us, Enrique a to For historical quarter, the our feel think great we to and prices speak more are the have let advertising. it’s I trend. I Could long earlier, want the haul in margin margin? answered third prices, sure super about you competitive think Yes, great we again all we’re that. margins question about I’ll also you making get taken the more make the great again, so sure and for time,

Enrique Mayor-Mora

be our had was to Yes, we’re not track the advertising on expectation a spent are we kind carry that that into of really two that half regards year going in estimate this to front first in going to to advertising, but of was the year. over back of last the was certainly so for is for year. we what we’re this mid-XXXs the level the last far meet the communicated so that will and In basis million so same similar On year, QX, as year expectation questions. savings, year this the per-unit still half somewhere earlier unit, to materiality we to the we that per in on and comping $XX of quarters one-time those the COVID of year. of year $XX There on for that our what saw focused over two full that some million and

Operator

Thank you.

Seth Our Wedbush with comes Securities. question next from Basham

Seth Basham

pricing and around question GPU quarter with trends that’s Thanks GPU. maybe how through a retail you on trends is retail price Bill, the and lot, price what’s happening impacted your and and comment good morning. environment. wholesale can My the

Bill Nash

$X,XXX. retail jumps an look standpoint, I’ve up it around those was ever standpoint, retail, was up acquisition the was doing both can remember so long from at so a probably I pricing adjustment are I about--from obviously about mix as if Wholesale as this, seeing. $X,XXX, are--actually Yes, been biggest up

a opportunities lot pricing think a self into but only us, forward not comes go structure. of as we I your the margin on that Now, I high play think provides fact us for is that because sufficiency that so

of It’s you can what that cars. at longer saw the - little think quarter, probably I I high maybe We quarter be started actually it very I the to the looks very while. to a bit the think thought for because but I was--you finished place, back, we we dynamic. the during know, quarter. depreciation saw speculate then new it shortages, surprisingly It out finished interesting hung think in a first a for prices. chip people we high we first than there only of elevated little again, went what when appreciate of it’s the of originally we like quarter take know, going came so

there dynamic to used some new think replenish lots more I going it interesting but not maybe out seeing. we’re folks that they’re their buying to since cars an cars, is there’s have

Seth Basham

after it? incremental started so the beginning again to could was stronger those the quarter? was the quarter sales, so think your you that half to captured appreciate unexpectedly way GPU indicate margin the of that back it about should than in your quarter unit Yes, the of the right exiting probably that prices have fact on Is

Bill Nash

No, that manage I is you would throughout we There’s really the our so much--you think factors think average fairly should doesn’t GPU doesn’t--it selling it. I that, it’s consistent into the consideration into go just quarter the the way prices. think that way other take about would pretty know

Operator

Thank you.

Our comes Stanley. Adam Morgan from next with question Jonas

Adam Jonas

business growth isn’t the and it but understand to a you guys against you license business a buying opportunity, up cash expectation on return stuff? have just to to down I money are zero off of time and Why an the I change spins the back unbelievable--once cash. the buyback cut stock? philosophy growth everything, the that competitors still in mean, and double have generation such you’re and lose

Enrique Mayor-Mora

we’re with we Like an the amount the our shareholders. we and you stock a in and buy a to can model we time, have believe model generate generates generate--we’re that and back making cash with at excess of right and investments growth, are to we that cash, said, business operating we significant think mind, blessed the still--still investments right return it back

so holding can do level not scenario, back shares. cash spend that in to We’ll and that our in have you to and we on buy see of enough and investing capex, we We’re our our are even back investments, continue aggressively. that in

We are investments. back not holding on our

Operator

you. Thank

John next from question comes Our with Murphy of Bank America.

John Murphy

guys. morning Good

pressure points. two on question a Just

until they’re First and macro to alluded to you’re the the when doing up change it’s the new and of there, vehicle or you is story, going SG&A dynamics trying based just we harder, difficult you strategy it and the certainly it’s then new so reasonable XXXX. strategy, I’m might strategy, shortage be probably because you mid but well staffing if these it’s macro the fault get change muddling issues that and as and good getting on through. to just finding know year on just I’m stuff cost vehicle the to through also as they’ll your past on you and will that the next prices understand factors, going as just persist side well. alter certainly side, inventory, kind relieved into have inflation think calendar year fight not be two is growth seems--Bill, and relieved, about masking on be to you what that you’re just inventory year, all if on side levels, this next at we curious staffing fight and can think folks harder your

Bill Nash

some really reason and our I so be also we’ve feel I’m probably about do you I year a throughout to about good those up, an instant earlier, know, will a I keep persist agree think Like at strides, going I guarantee chip it’s think used it’s But to with think, the headwinds year, can things elevated. because the and prices made but the keep that. gives part of could vehicle on tell acquisition we that excited I of lot or next through next making whatever of will really offset so wrong; like thing situation, why I pretty the this elevated--you and, continuing it through helps inventory Yes, persist you, cars is this said to in which offer, I year us which opportunity. investments I’ll only get we’re much good our year,

They’re really our staffing, to quarter On the during in invest in period, that different. and pay about. the reason out we’ve our looking we’ve and every continued made there great time staffing, look We’ve you know no more associates, - employer in of feel is success, our we’re always invested associates. this changes for we this

side, standpoint, on places in best on. we’re a about which the great so thing XX staffing of work, even we’ve from employer the great for a we also--look, We row, to one brand again years that feel an the going been trajectory is

there some but and we’re things are there, yes, give the that on the inventory and progressing both sufficiency So great both and that the on some headwinds side opportunities like IO about we self of feel staffing, have you.

John Murphy

executed say, these despite grosses to pressure? through incredibly period seems you store to is guys it to and get headwinds. follow-up, It leverage fair just or of be mean, Is going have this sales SG&A difficult macro like--I the maybe a well just on same

what get grosses like end until this to people that be going leverage volumes. to on think seems some concerned the remarkable is about done XXXX? about point? you’ve to Are think just of the able be through thought SG&A What’s pull it, but the quarter It and get then your year we we are I about pretty hard and to off. that where inflection calendar going it’s you should

Enrique Mayor-Mora

certainly are and can our we’ve Yes, you we analyst as investment go back made mode, to in day. clear,

our focused really on line. We’re driving top

leverage? like is that require than X% expectation and back our our the we market opportunities our about, it a is profit robustly, which We and grow growth, will driving there, that entire we market harder there to grow, year. to we’ve of Well, will gross been environment the for right, mentioned, kind it are that leverage in be laid to is out this it of harder year are the on gross to meeting that specifically for leverage, does that and focused that different greater the exceeding talking certainly. by in investments target share on share investments Will and areas FYXX, and profit little continue

It’s this should look we able quarter that to be be leverage to continues expectation to hard Our for quarter. to year.

do we about things You pop a of the moving just year, that. more and just mode the focused quarter; share top growth well, of I ahead drive efficient. best the help because sharp investments that, out as There and many so to good cost on that and to At we are but really market look we forward, pull lay that we’re to we’re making and there’s as quarter to again can’t same investments in line, quarter, opportunities the to look there continue pretty always are we’re every quarter to so are out we’re we’ll a full making in are have opportunities in to about feel accordingly, time us, growth and get and we on we at at speak do excited them. and time, Then the that. investing same our for eye

Operator

Thank you.

Ali with comes from question next Faghri Our Guggenheim.

Ali Faghri

Good for morning, taking thanks question. my

so auction. you how kept doesn’t consumers given your really from big seem, it least the either, cost that don’t also on together? drive the this been all work, improvement acquiring here. volumes advantage retail do itself I I have on sub-XX% GPU know should recognize by prices at tie just competitive, a our question boost to self you peers that versus I but are GPU, outperforming retail another sourcing said Sorry, quarter but that XX% but CarMax’s prices based from to you meaningfully from on GPU

Bill Nash

a we really quarter. been looking this this pricing all, are position, a of we standpoint. about very first our Look, pricing well time, we for good Yes, one long feel good where at from is about and very feel we’ve so

inventory, when they the Those the which a longer together, had headwinds, we have just staffing. up some pricing, you about fact major the are would I talked over know, things and overcome, add I’ve that, also were all back headwinds Some the - to hard self go them but to sufficiency. look, the tail, you already

we’re most as we opportunity about gives the us I is to that move and that continue sufficiency what think forward. excited this self

Operator

Thank you.

Whiston David with from Morningstar. comes question next Our

David Whiston

quarter the a gross it’s marketplace Thanks, good but prices? to It’s I two with years you at happy considerably you down X look hear Do competitive year-over-year the when raise say you’re Page too. margin versus [indiscernible] though, then also there, at pricing, GPU, and obviously I morning. ago. unit down per

Bill Nash

David, GPU that, second off we’re so clear, historical we’re look was you quarter it--like, on you the would only just so of last year, record at at and Well a bit say average, look GPU. our a GPU, if we’re I end little the if higher of

look same time, the all and to disconnect to might what forward, sufficiency there forward. make sense. to as makes are at we Absolutely, think want see day, to as term think I we’re sure we go opportunities go are for long a but the we’re factors going Could weigh great this there. - we I little monitor raise every be Self we going and gives us so the continue GPUs? in continue to a and factors to we macro of customers lot getting value

David Whiston

Okay.

was the Just versus about ago. I XX%, then the I about to the two That’s X.X% XX.X% be clear, years asked why and talking pricing.

Bill Nash

I’m Oh, sorry.

relates again, Yes, just to more that talking out-- it ASP? were You throw and as I’d

Enrique Mayor-Mora

business look skewed to at skewed, percent hard be of prices at retail just as revenue to look per-unit really on since of it’s a look basis. at percent are the a it’s artificially up, so a the of you it as beginning revenue. If because going on basis, just like, year, XX% per-unit a We the

Bill Nash

a traded retailers. Yes, differently the lot auto publicly other and it than we manage of

Operator

you. Thank

comes Chris Exane BNP Bottiglieri with question next from Our Paribas.

Chris Bottiglieri

for taking question. thanks Hey, the

trying just warranty profit Just other quarter to seemingly this gross on negative had the two of profit. quick went guess issue. gross service understand the because first, I ones

we whenever, this should to warranty stuff back rate a is historically gross all go or margin Next kind some there of the to you’ve or to had, about? quarter this like lag, does thinking XX% something, XX% that be

Enrique Mayor-Mora

the employee move shorter material and second a margin in COVID-related support we’ve piece we that we years that in tell ones - term you, mentioned, nature. margin I’d year it Yes, and quarter, contributor, not, two you that amount quarter, quarter, on I’d certainly but this in forward you upside service were margin estimate when on service SG&A, savings to that retention one think The a of number positive prior faced prior continue was positive XX-day quarter, had is, positive shorter one-time and term. that this as exception a plan run do the warranty was material that year were more comps headwinds we of really first XX%, say the had volume a down largest quarter $XX the shorter were historically were The been two amount in they harder. over we expect an year-over-year quarter, COVID just well, million was is our right, contributor annual that a and right credit it it, during were in so headwinds a the contributor. nature. really much about we that very is at you’re the basis, as Last work term the perspective more XX%. into little What in to looking as quarter, from we well. this to last play a as so The it negative there. is be certainly a Then those are similar lot carries But warranty and that XX-day timing subsequent made first year pay year bit the

Operator

please one this ladies on comment gentlemen, question the Thank then have press if a time, a the you. at your telephone. and key you Again touchtone or star

with JP a Our Morgan. Rajat next from question question follow-up is Gupta

Rajat Gupta

me follow question the to the SG&A some that back pick-up just SG&A. if How might housekeeping for could much Thanks Edmunds are of around a to was get Thank in in due be in in helpful. say queue very of and of you. wanted quarter-over-quarter acquisition, what up here. buckets terms also, letting I the the SG&A you

Enrique Mayor-Mora

Yes, spoke that about Edmunds remarks in my $XX prepared profit a as Edmunds, from I contributed million. gross regards to standpoint,

the revenues, see gross SG&A is-we’re could on overall, tell to reporting slightly that XX-Q segment, so when not file. their which reporting that we’re on is on though accretive to kind an of be segment, their can moving so tomorrow You’re we CarMax, to them. into segment, Rajat, Edmunds we’re Overall, going What going you, to going forward to that’s so that they their as it’s the it operating on to extent be in report an you back operating using reporting of I kind approach. but going were a profit,

Operator

any any back to I’m further turn Nash I’d closing questions Bill at not to comments. call showing the this like for time.

Bill Nash

thanks your Great, questions your support. thank Kevin. you today, listen, Well and continued for joining for us

to in drive to we’ll growth move experiences, to our to gains confident market world-class in-person model We’re and ability seamlessly our as share be merge forward. our we and online that diversified able add and business continue

want our XX,XXX dedication, customers to than As communities. taking of thank your day, to our more values living the I associates each our for and care each continued always, other,

next talk within disruptive that all You today, a the Again, we time force everyone’s reason are we car the used for positive thanks remain industry. and will again quarter.

Operator

today’s gentlemen, and conclude presentation. this does Ladies

You now a may and disconnect day. have wonderful

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