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CarMax Reports Second Quarter Fiscal 2022 Results

September 30, 2021

CarMax, Inc. (NYSE:KMX), the nation’s largest and most profitable retailer of used cars, today reported results for the second quarter ended August 31, 2021.

Highlights:

  • Record net revenues of $8.0 billion, up 48.7% compared with the prior year second quarter.
  • Sold 419,895 units through our retail and wholesale channels combined, up 19.9% from the prior year quarter, primarily driven by strong demand for used autos and solid execution supported by our omni-channel experience.
    • Retail used unit sales increased 6.7% to a second quarter record of 231,797 vehicles and comparable store unit sales increased 6.2% compared with the same quarter a year ago.
    • Wholesale units increased 41.4% to 188,098 vehicles from the prior year second quarter, an all-time high quarterly record.
  • Bought 364,263 vehicles from consumers in the second quarter, a 59% increase versus the prior year quarter. Approximately 188,000 vehicles bought in the quarter were purchased from consumers through our nationwide online instant appraisal offerings.
  • Gross profit per retail used unit was $2,185, in-line with historical performance and down slightly from the second quarter last year. Wholesale gross profit per unit was $1,005, an $81 per unit decrease when compared with the second quarter last year.
  • CarMax Auto Finance (CAF) income increased 35.9% to $200.0 million due to higher net interest margin and an increase in average managed receivables.
  • Net earnings per diluted share of $1.72, down from $1.79 per diluted share a year ago primarily due to last year’s COVID-related cost savings.

CEO Commentary:

“Our omni-channel platform, in combination with our unique customer offerings, industry expertise and solid execution, drove performance across our diversified business and led to a record level of used sales for the second quarter and an all-time record for wholesale vehicle sales” said Bill Nash, president and chief executive officer.

“Of particular note is the performance of our online instant appraisal offering, which continues to exceed our expectations. Just six months after the nationwide launch, we have already purchased over 350,000 cars from consumers online with this digital product,” Nash continued. “We continue to make investments in growth and innovation for our customers’ benefit and remain on track to bring our fully self-service online experience to all of our retail consumers by the end of the fiscal year.”

Nash concluded, “We’ve intentionally built our omni-channel platform to give every customer the ability to progress to a sale or buy regardless of how they shop with us, which will enable sustainable growth and create meaningful long-term shareholder value.”

Second Quarter Business Performance Review:

Sales . Combined retail and wholesale used vehicle unit sales were 419,895, an increase of 19.9% from the prior year’s second quarter. Online retail sales(1) accounted for 9% of retail unit sales, compared to 3% in the second quarter last year. Revenue from online transactions(2), including retail and wholesale unit sales, was $2.2 billion, or approximately 28% of net revenues, compared to 18% of net revenues in last year’s second quarter.

Total retail used vehicle unit sales increased 6.7% to 231,797 and comparable store used unit sales increased 6.2% from the prior year’s second quarter. We believe several factors contributed to our comparable store sales growth, including a robust used auto demand environment and solid execution supported by our omni-channel customer experience. Total retail used vehicle revenues increased 39.1% compared with the prior year’s second quarter due to the increase in both average retail selling prices, which rose more than $6,000, or 30.8%, and used units sold. The price increase largely reflected higher vehicle acquisition costs resulting from strong wholesale industry valuations.

Total wholesale vehicle unit sales were 188,098, an increase of 41.4% compared with the prior year’s second quarter. Wholesale sales benefited from the large increase in appraisal volume from online offerings and strong offers aided by higher market prices. Total wholesale revenues increased 107.7% compared with the prior year’s second quarter due to average wholesale selling prices rising almost $3,000, or 47.7%, and the increase in units sold.

Other sales and revenues increased 11.3% compared with the second quarter of fiscal 2021, reflecting an increase of $18.6 million. The increase was largely driven by the addition of Edmunds advertising and subscription revenues and an improvement in net third-party finance provider fees due to lower Tier 3 originations and favorability from our renegotiated fee agreements. This increase was partially offset by last year’s sale of a new car franchise and a decrease in both extended protection plan (EPP) profit sharing revenues and service revenues compared to last year’s second quarter.

Gross Profit . Total gross profit increased to $815.5 million, an increase of 8.4% versus last year’s second quarter. Retail used vehicle gross profit rose 5.3%, reflecting the increase in total used unit sales. Retail used vehicle gross profit per unit of $2,185 was in-line with historical performance and down slightly from $2,214 in the prior year’s quarter. Wholesale vehicle gross profit increased 30.9% versus the prior year’s quarter, largely reflecting an increase in volume. Wholesale vehicle gross profit per unit of $1,005 was down from $1,086 in the prior year quarter. Other gross profit decreased 5.3% reflecting a decrease in service margin due to the impact of COVID-related savings reflected in last year’s second quarter, an increase in warranty service costs, shifting retail service capacity to support production, as well as a decrease in EPP profit sharing revenues when compared to last year’s quarter. The decrease in other gross profit was partially offset by the inclusion of Edmunds gross profit in our consolidated financial results and favorability from third-party finance fees compared with the second quarter of fiscal 2021.

SG&A . Compared with the second quarter of fiscal 2021, SG&A expenses increased 30.0% to $574.3 million. Contributing factors include an increase in staffing and sales related compensation, continued spending on our technology platforms and strategic initiatives to support increased consumer demand for our omni-channel experiences and the planned increases in advertising expense. In the prior year’s second quarter we took material cost reduction actions in response to the pandemic, which included streamlining investments presented in other overhead and lowering compensation and benefit costs.

SG&A as a percent of gross profit was 70.4%, up from 58.8% in the prior year’s second quarter that included COVID-related cost reductions. For the first six months of fiscal 2022, SG&A as a percent of gross profit was 64.8% versus 69.3% in the prior year period.

CarMax Auto Finance .(3) CAF income increased 35.9% to $200.0 million, primarily reflecting the increase in net interest margin and average managed receivables, partially offset by the $35.5 million loan loss provision compared with the $26.0 million provision in the same period last year. As of August 31, 2021, the allowance for loan losses of $398.1 million was 2.66% of ending managed receivables, in-line with 2.62% as of May 31, 2021.

CAF’s total interest margin percentage, which represents the spread between interest and fees charged to consumers and our funding costs, improved to 7.2% of average managed receivables from 6.0% in the prior year’s second quarter, due to lower funding costs and higher interest and fees from consumers. After the effect of 3-day payoffs, CAF financed 43.0% of units sold in the current quarter, in-line with 42.6% in the prior year’s second quarter.

During the second quarter, CAF retained 10% of Tier 3 volume, up from 5% of Tier 3 in previous quarters. Additionally, CAF began a small test originating in the Tier 2 space. Any future adjustments in Tier 2 and Tier 3 will carefully consider the broader lending environment along with the long-term sustainability of the change.

Share Repurchase Activity . We repurchased 1.8 million shares of common stock for $220.0 million pursuant to our share repurchase program during the second quarter of fiscal 2022. As of August 31, 2021, we had $991.5 million remaining available for repurchase under the outstanding authorization.

Store Openings . During the second quarter of fiscal 2022, we opened three new locations. In fiscal year 2022, we plan to open a total of 10 new locations.

(1)

  An online retail unit sale is defined as a sale where the customer completes all four of these major transactional activities remotely: reserving the vehicle; financing the vehicle, if needed; trading-in or opting out of a trade in; and, creating a remote sales order.

(2)

  Revenue from online transactions is defined as revenue from retail sales that qualify for an online retail sale, as well as any EPP and third-party finance contribution, wholesale sales where the winning bid was an online bid and all revenue earned by Edmunds.

(3)

  Although CAF benefits from certain indirect overhead expenditures, we have not allocated indirect costs to CAF to avoid making subjective allocation decisions.

Supplemental Financial Information
Amounts and percentage calculations may not total due to rounding.

Sales Components

 

Three Months Ended August 31

 

Six Months Ended August 31

(In millions)

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Used vehicle sales

$

6,104.4

 

 

$

4,389.2

 

 

39.1

%

 

$

12,261.7

 

 

$

7,175.4

 

 

70.9

%

Wholesale vehicle sales

1,701.6

 

 

819.1

 

 

107.7

%

 

3,075.9

 

 

1,161.9

 

 

164.7

%

Other sales and revenues:

 

 

 

 

 

 

 

 

 

 

 

Extended protection plan revenues

113.0

 

 

119.4

 

 

(5.4)

%

 

247.3

 

 

192.8

 

 

28.2

%

Third-party finance fees, net

2.8

 

 

(15.4)

 

 

118.0

%

 

(1.8)

 

 

(26.2)

 

 

93.1

%

Advertising & subscription revenues (1)

34.5

 

 

 

 

100.0

%

 

34.5

 

 

 

 

100.0

%

Other

32.1

 

 

59.9

 

 

(46.4)

%

 

68.3

 

 

97.0

 

 

(29.5)

%

Total other sales and revenues

182.4

 

 

163.9

 

 

11.3

%

 

348.3

 

 

263.6

 

 

32.1

%

Total net sales and operating revenues

$

7,988.4

 

 

$

5,372.2

 

 

48.7

%

 

$

15,686.0

 

 

$

8,600.9

 

 

82.4

%

(1)

  Excludes intersegment revenues that have been eliminated in consolidation.

Unit Sales

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Used vehicles

231,797

 

217,330

 

6.7

%

 

502,596

 

352,358

 

42.6

%

Wholesale vehicles

188,098

 

132,980

 

41.4

%

 

369,487

 

196,275

 

88.2

%

Average Selling Prices

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Used vehicles

$

26,141

 

 

$

19,991

 

 

30.8

%

 

$

24,197

 

 

$

20,127

 

 

20.2

%

Wholesale vehicles

$

8,701

 

 

$

5,891

 

 

47.7

%

 

$

7,997

 

 

$

5,639

 

 

41.8

%

Vehicle Sales Changes

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2021

2020

 

2021

2020

Used vehicle units

6.7

%

3.9

%

 

42.6

%

(18.7)

%

Used vehicle revenues

39.1

%

1.0

%

 

70.9

%

(19.3)

%

 

 

 

 

 

 

Wholesale vehicle units

41.4

%

5.1

%

 

88.2

%

(20.6)

%

Wholesale vehicle revenues

107.7

%

20.8

%

 

164.7

%

(13.3)

%

Comparable Store Used Vehicle Sales Changes (1)

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2021

2020

 

2021

2020

Used vehicle units

6.2

%

1.2

%

 

41.8

%

(21.0)

%

Used vehicle revenues

38.8

%

(1.6)

%

 

70.4

%

(21.6)

%

(1)

  Stores are added to the comparable store base beginning in their fourteenth full month of operation. Comparable store calculations include results for a set of stores that were included in our comparable store base in both the current and corresponding prior year periods.

Used Vehicle Financing Penetration by Channel (Before the Impact of 3-day Payoffs) (1)

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2021

 

2020

 

2021

 

2020

CAF (2)

47.1

%

 

45.7

%

 

46.9

%

 

42.8

%

Tier 2 (3)

21.6

%

 

22.3

%

 

22.2

%

 

24.7

%

Tier 3 (4)

7.2

%

 

11.1

%

 

8.7

%

 

12.4

%

Other (5)

24.1

%

 

20.9

%

 

22.2

%

 

20.1

%

Total

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

(1)

  Calculated as used vehicle units financed for respective channel as a percentage of total used units sold.

(2)

  Includes CAF's Tier 3 loan originations, which represent less than 1% of total used units sold.

(3)

  Third-party finance providers who generally pay us a fee or to whom no fee is paid.

(4)

  Third-party finance providers to whom we pay a fee.

(5)

  Represents customers arranging their own financing and customers that do not require financing

Selected Operating Ratios

 

Three Months Ended August 31

 

Six Months Ended August 31

(In millions)

2021

% (1)

 

2020

% (1)

 

2021

% (1)

 

2020

% (1)

Net sales and operating revenues

$

7,988.4

 

100.0

 

 

$

5,372.2

 

100.0

 

 

$

15,686.0

 

100.0

 

 

$

8,600.9

 

100.0

 

Gross profit

$

815.5

 

10.2

 

 

$

752.1

 

14.0

 

 

$

1,740.0

 

11.1

 

 

$

1,106.3

 

12.9

 

CarMax Auto Finance income

$

200.0

 

2.5

 

 

$

147.2

 

2.7

 

 

$

441.8

 

2.8

 

 

$

198.1

 

2.3

 

Selling, general, and administrative expenses

$

574.3

 

7.2

 

 

$

441.9

 

8.2

 

 

$

1,128.4

 

7.2

 

 

$

766.8

 

8.9

 

Interest expense

$

22.4

 

0.3

 

 

$

22.5

 

0.4

 

 

$

42.9

 

0.3

 

 

$

46.4

 

0.5

 

Earnings before income taxes

$

367.8

 

4.6

 

 

$

388.3

 

7.2

 

 

$

935.1

 

6.0

 

 

$

392.5

 

4.6

 

Net earnings

$

285.3

 

3.6

 

 

$

296.7

 

5.5

 

 

$

722.0

 

4.6

 

 

$

301.7

 

3.5

 

(1)

  Calculated as a percentage of net sales and operating revenues.

Gross Profit (1)

 

Three Months Ended August 31

 

Six Months Ended August 31

(In millions)

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Used vehicle gross profit

$

506.5

 

 

$

481.2

 

 

5.3

%

 

$

1,103.5

 

 

$

742.7

 

 

48.6

%

Wholesale vehicle gross profit

189.0

 

 

144.4

 

 

30.9

%

 

374.9

 

 

206.3

 

 

81.7

%

Other gross profit

120.0

 

 

126.5

 

 

(5.3)

%

 

261.6

 

 

157.3

 

 

66.3

%

Total

$

815.5

 

 

$

752.1

 

 

8.4

%

 

$

1,740.0

 

 

$

1,106.3

 

 

57.3

%

(1)

  Amounts are net of intercompany eliminations.

Gross Profit per Unit (1)

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2021

2020

 

2021

2020

 

$ per unit(2)

%(3)

$ per unit(2)

%(3)

 

$ per unit(2)

%(3)

$ per unit(2)

%(3)

Used vehicle gross profit

$

2,185

 

8.3

 

$

2,214

 

11.0

 

 

$

2,196

 

9.0

 

$

2,108

 

10.4

 

Wholesale vehicle gross profit

$

1,005

 

11.1

 

$

1,086

 

17.6

 

 

$

1,015

 

12.2

 

$

1,051

 

17.8

 

Other gross profit

$

517

 

65.8

 

$

583

 

77.3

 

 

$

521

 

75.1

 

$

447

 

59.7

 

Total gross profit

$

3,518

 

10.2

 

$

3,461

 

14.0

 

 

$

3,462

 

11.1

 

$

3,140

 

12.9

 

(1)

  Amounts are net of intercompany eliminations. Those eliminations had the effect of increasing used vehicle gross profit per unit and wholesale vehicle gross profit per unit and decreasing other gross profit per unit by immaterial amounts.

(2)

  Calculated as category gross profit divided by its respective units sold, except the other and total categories, which are divided by total used units sold.

(3)

  Calculated as a percentage of its respective sales or revenue.

SG&A Expenses (1) (2)

 

Three Months Ended August 31

 

Six Months Ended August 31

(In millions)

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Compensation and benefits:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits,
excluding share-based compensation expense

$

299.5

 

 

$

239.3

 

 

25.1

%

 

$

583.6

 

 

$

430.5

 

 

35.6

%

Share-based compensation expense

28.7

 

 

34.3

 

 

(16.3)

%

 

67.1

 

 

58.0

 

 

15.8

%

Total compensation and benefits (3)

$

328.2

 

 

$

273.6

 

 

19.9

%

 

$

650.7

 

 

$

488.5

 

 

33.2

%

Occupancy costs

55.1

 

 

52.8

 

 

4.3

%

 

105.6

 

 

98.6

 

 

7.2

%

Advertising expense

85.0

 

 

50.5

 

 

68.5

%

 

157.5

 

 

85.0

 

 

85.4

%

Other overhead costs (4)

106.0

 

 

65.0

 

 

63.0

%

 

214.6

 

 

94.7

 

 

126.3

%

Total SG&A expenses

$

574.3

 

 

$

441.9

 

 

30.0

%

 

$

1,128.4

 

 

$

766.8

 

 

47.1

%

SG&A as % of gross profit

70.4

%

 

58.8

%

 

11.6

%

 

64.8

%

 

69.3

%

 

(4.5)

%

(1)

  Depreciation and amortization previously included in SG&A expenses is now separately presented and is excluded from this table. Prior period amounts have been reclassified to conform to the current period’s presentation.

(2)

  Amounts are net of intercompany eliminations.

(3)

  Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales.

(4)

  Includes IT expenses, non-CAF bad debt, insurance, preopening and relocation costs, charitable contributions, travel and other administrative expenses.

Components of CAF Income and Other CAF Information

 

Three Months Ended August 31

 

Six Months Ended August 31

(In millions)

2021

% (1)

2020

% (1)

 

2021

% (1)

2020

% (1)

Interest margin:

 

 

 

 

 

 

 

 

 

Interest and fee income

$

324.1

 

8.8

 

$

280.1

 

8.5

 

 

$

634.4

 

8.8

 

$

562.6

 

8.5

 

Interest expense

(60.6)

 

(1.7)

 

(81.3)

 

(2.5)

 

 

(126.4)

 

(1.8)

 

(165.9)

 

(2.5)

 

Total interest margin

263.5

 

7.2

 

198.8

 

6.0

 

 

508.0

 

7.0

 

396.7

 

6.0

 

Provision for loan losses

(35.5)

 

(1.0)

 

(26.0)

 

(0.8)

 

 

(11.1)

 

(0.2)

 

(148.0)

 

(2.2)

 

Total interest margin after provision
for loan losses

228.0

 

6.2

 

172.8

 

5.2

 

 

496.9

 

6.9

 

248.7

 

3.7

 

 

 

 

 

 

 

 

 

 

 

Total other expense

 

 

(0.3)

 

 

 

 

 

(2.2)

 

 

 

 

 

 

 

 

 

 

 

 

Total direct expenses

(27.9)

 

(0.8)

 

(25.4)

 

(0.8)

 

 

(55.1)

 

(0.8)

 

(48.4)

 

(0.7)

 

CarMax Auto Finance income

$

200.0

 

5.4

 

$

147.2

 

4.5

 

 

$

441.8

 

6.1

 

$

198.1

 

3.0

 

 

 

 

 

 

 

 

 

 

 

Total average managed receivables

$

14,683.3

 

 

$

13,218.8

 

 

 

$

14,416.0

 

 

$

13,313.6

 

 

Net loans originated

$

2,372.4

 

 

$

1,790.6

 

 

 

$

4,855.8

 

 

$

2,782.9

 

 

Net penetration rate

43.0

%

 

42.6

%

 

 

43.4

%

 

40.1

%

 

Weighted average contract rate

8.5

%

 

8.2

%

 

 

8.7

%

 

8.3

%

 

 

 

 

 

 

 

 

 

 

 

Ending allowance for loan losses

$

398.1

 

 

$

432.5

 

 

 

$

398.1

 

 

$

432.5

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse facility information:

 

 

 

 

 

 

 

 

 

Ending funded receivables

$

3,181.9

 

 

$

2,253.7

 

 

 

$

3,181.9

 

 

$

2,253.7

 

 

Ending unused capacity

$

1,643.1

 

 

$

1,246.3

 

 

 

$

1,643.1

 

 

$

1,246.3

 

 

 

 

 

 

 

 

 

 

 

 

(1)

  Annualized percentage of total average managed receivables.

Earnings Highlights

 

Three Months Ended August 31

 

Six Months Ended August 31

(In millions except per share data)

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Net earnings

$

285.3

 

 

$

296.7

 

 

(3.9)

%

 

$

722.0

 

 

$

301.7

 

 

139.3

%

Diluted weighted average shares outstanding

165.6

 

 

165.6

 

 

%

 

166.0

 

 

164.6

 

 

0.8

%

Net earnings per diluted share

$

1.72

 

 

$

1.79

 

 

(3.9)

%

 

$

4.35

 

 

$

1.83

 

 

137.7

%

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, September 30, 2021. Domestic investors may access the call at 1-888-298-3261 (international callers dial 1-706-679-7457). The conference I.D. for both domestic and international callers is 3464618. A live webcast of the call will be available on our investor information home page at investors.carmax.com.

A replay of the webcast will be available on the company’s website at investors.carmax.com through December 21, 2021, or via telephone (for approximately one week) by dialing 1-855-859-2056 (or 1-404-537-3406 for international access) and entering the conference ID 3464618.

Third Quarter Fiscal 2022 Earnings Release Date

We currently plan to release results for the third quarter ending November 30, 2021, on Wednesday, December 22, 2021, before the opening of trading on the New York Stock Exchange. We plan to host a conference call for investors at 9:00 a.m. ET on that date. Information on this conference call will be available on our investor information home page at investors.carmax.com in December 2021.

About CarMax

CarMax, the nation’s largest retailer of used autos, revolutionized the automotive retail industry by driving integrity, honesty and transparency in every interaction. The company offers a truly personalized experience with the option for customers to do as much, or as little, online and in-store as they want. CarMax also provides a variety of vehicle delivery methods, including home delivery, contactless curbside pickup and appointments in its stores. During the fiscal year ending February 28, 2021, CarMax sold more than 750,000 used vehicles and more than 425,000 wholesale vehicles at its in-store and virtual auctions. In addition, CarMax Auto Finance originated more than $6 billion in receivables during fiscal year 2021, adding to its near $14 billion portfolio. CarMax has more than 220 stores, approximately 27,000 Associates, and is proud to have been recognized for 17 consecutive years as one of the Fortune 100 Best Companies to Work For®. For more information, visit www.carmax.com.

Forward-Looking Statements

We caution readers that the statements contained in this release about our future business plans, operations, challenges, opportunities or prospects, including without limitation any statements or factors regarding expected operating capacity, sales, inventory, market share, revenue, margins, expenses, liquidity, loan originations, capital expenditures, debt obligations or earnings, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “positioned,” “predict,” “should,” “will” and other similar expressions, whether in the negative or affirmative. Such forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from anticipated results. Among the factors that could cause actual results and outcomes to differ materially from those contained in the forward-looking statements are the following:

  • The effect and consequences of the Coronavirus public health crisis on matters including U.S. and local economies; our business operations and continuity; the availability of corporate and consumer financing; the health and productivity of our associates; the ability of third-party providers to continue uninterrupted service; and the regulatory environment in which we operate.
  • Changes in general or regional U.S. economic conditions.
  • Changes in the availability or cost of capital and working capital financing, including changes related to the asset-backed securitization market.
  • Changes in the competitive landscape and/or our failure to successfully adjust to such changes.
  • Events that damage our reputation or harm the perception of the quality of our brand.
  • Our inability to realize the benefits associated with our omni-channel initiatives.
  • Our inability to realize the expected benefits of strategic transactions, including our acquisition of Edmunds.
  • Our inability to recruit, develop and retain associates and maintain positive associate relations.
  • The loss of key associates from our store, regional or corporate management teams or a significant increase in labor costs.
  • Security breaches or other events that result in the misappropriation, loss or other unauthorized disclosure of confidential customer, associate or corporate information.
  • Significant changes in prices of new and used vehicles.
  • Changes in economic conditions or other factors that result in greater credit losses for CAF’s portfolio of auto loans receivable than anticipated.
  • A reduction in the availability of or access to sources of inventory or a failure to expeditiously liquidate inventory.
  • Changes in consumer credit availability provided by our third-party finance providers.
  • Changes in the availability of extended protection plan products from third-party providers.
  • Factors related to the regulatory and legislative environment in which we operate.
  • Factors related to geographic and sales growth, including the inability to effectively manage our growth.
  • The failure of or inability to sufficiently enhance key information systems.
  • The performance of the third-party vendors we rely on for key components of our business.
  • The effect of various litigation matters.
  • Adverse conditions affecting one or more automotive manufacturers, and manufacturer recalls.
  • The failure or inability to realize the benefits associated with our strategic investments.
  • The inaccuracy of estimates and assumptions used in the preparation of our financial statements, or the effect of new accounting requirements or changes to U.S. generally accepted accounting principles.
  • The volatility in the market price for our common stock.
  • The failure or inability to adequately protect our intellectual property.
  • The occurrence of severe weather events.
  • Factors related to the geographic concentration of our stores.

For more details on factors that could affect expectations, see our Annual Report on Form 10-K for the fiscal year ended February 28, 2021, and our quarterly or current reports as filed with or furnished to the U.S. Securities and Exchange Commission. Our filings are publicly available on our investor information home page at investors.carmax.com. Requests for information may also be made to the Investor Relations Department by email to investor_relations@carmax.com or by calling (804) 747-0422 x7865. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

 

 

Three Months Ended August 31

 

Six Months Ended August 31

(In thousands except per share data)

2021

% (1)

2020

% (1)

 

2021

% (1)

2020

% (1)

SALES AND OPERATING REVENUES:

 

 

 

 

 

 

 

 

 

Used vehicle sales

$

6,104,366

 

76.4

 

$

4,389,233

 

81.7

 

 

$

12,261,710

 

78.2

 

$

7,175,435

 

83.4

 

Wholesale vehicle sales

1,701,572

 

21.3

 

819,082

 

15.2

 

 

3,075,929

 

19.6

 

1,161,934

 

13.5

 

Other sales and revenues

182,421

 

2.3

 

163,851

 

3.0

 

 

348,319

 

2.2

 

263,579

 

3.1

 

NET SALES AND OPERATING REVENUES

7,988,359

 

100.0

 

5,372,166

 

100.0

 

 

15,685,958

 

100.0

 

8,600,948

 

100.0

 

COST OF SALES:

 

 

 

 

 

 

 

 

 

Used vehicle cost of sales

5,597,842

 

70.1

 

3,908,065

 

72.7

 

 

11,158,179

 

71.1

 

6,432,741

 

74.8

 

Wholesale vehicle cost of sales

1,512,559

 

18.9

 

674,712

 

12.6

 

 

2,701,072

 

17.2

 

955,634

 

11.1

 

Other cost of sales

62,474

 

0.8

 

37,246

 

0.7

 

 

86,714

 

0.6

 

106,247

 

1.2

 

TOTAL COST OF SALES

7,172,875

 

89.8

 

4,620,023

 

86.0

 

 

13,945,965

 

88.9

 

7,494,622

 

87.1

 

GROSS PROFIT

815,484

 

10.2

 

752,143

 

14.0

 

 

1,739,993

 

11.1

 

1,106,326

 

12.9

 

CARMAX AUTO FINANCE INCOME

200,033

 

2.5

 

147,195

 

2.7

 

 

441,764

 

2.8

 

198,145

 

2.3

 

Selling, general, and
administrative expenses

574,286

 

7.2

 

441,923

 

8.2

 

 

1,128,355

 

7.2

 

766,814

 

8.9

 

Depreciation and amortization (2)

52,789

 

0.7

 

48,285

 

0.9

 

 

102,679

 

0.7

 

97,110

 

1.1

 

Interest expense

22,410

 

0.3

 

22,469

 

0.4

 

 

42,944

 

0.3

 

46,427

 

0.5

 

Other (income) expense

(1,782)

 

 

(1,680)

 

 

 

(27,359)

 

(0.2)

 

1,615

 

 

Earnings before income taxes

367,814

 

4.6

 

388,341

 

7.2

 

 

935,138

 

6.0

 

392,505

 

4.6

 

Income tax provision

82,547

 

1.0

 

91,645

 

1.7

 

 

213,115

 

1.4

 

90,831

 

1.1

 

NET EARNINGS

$

285,267

 

3.6

 

$

296,696

 

5.5

 

 

$

722,023

 

4.6

 

$

301,674

 

3.5

 

WEIGHTED AVERAGE COMMON SHARES:

 

 

 

 

 

 

 

 

Basic

162,966

 

 

163,434

 

 

 

163,058

 

 

163,053

 

 

Diluted

165,643

 

 

165,623

 

 

 

165,969

 

 

164,580

 

 

NET EARNINGS PER SHARE:

 

 

 

 

 

 

 

 

 

Basic

$

1.75

 

 

$

1.82

 

 

 

$

4.43

 

 

$

1.85

 

 

Diluted

$

1.72

 

 

$

1.79

 

 

 

$

4.35

 

 

$

1.83

 

 

(1)

  Percents are calculated as a percentage of net sales and operating revenues and may not total due to rounding.

(2)

  Depreciation and amortization previously included in Selling, general, and administrative expenses is now separately presented. Prior period amounts have been reclassified to conform to the current period’s presentation.

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

As of

 

 

August 31

 

February 28

 

August 31

(In thousands except share data)

2021

 

2021

 

2020

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

$

58,095

 

 

$

132,319

 

 

$

711,561

 

 

Restricted cash from collections on auto loans receivable

570,567

 

 

496,415

 

 

520,876

 

 

Accounts receivable, net

517,260

 

 

239,070

 

 

203,155

 

 

Inventory

4,105,458

 

 

3,157,159

 

 

2,824,959

 

 

Other current assets

119,916

 

 

91,833

 

 

67,308

 

 

TOTAL CURRENT ASSETS

5,371,296

 

 

4,116,796

 

 

4,327,859

 

 

Auto loans receivable, net

14,656,170

 

 

13,489,819

 

 

13,013,106

 

 

Property and equipment, net

3,128,896

 

 

3,055,563

 

 

3,044,773

 

 

Deferred income taxes

117,288

 

 

164,261

 

 

133,749

 

 

Operating lease assets

553,727

 

 

431,652

 

 

444,158

 

 

Goodwill

150,343

 

 

653

 

 

8,676

 

 

Other assets

475,602

 

 

282,797

 

 

273,985

 

 

TOTAL ASSETS

$

24,453,322

 

 

$

21,541,541

 

 

$

21,246,306

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

$

903,847

 

 

$

799,333

 

 

$

683,715

 

 

Accrued expenses and other current liabilities

487,771

 

 

415,465

 

 

350,185

 

 

Accrued income taxes

422

 

 

218

 

 

64,734

 

 

Current portion of operating lease liabilities

43,676

 

 

30,953

 

 

31,616

 

 

Short-term debt

167

 

 

 

 

838

 

 

Current portion of long-term debt

10,562

 

 

9,927

 

 

10,005

 

 

Current portion of non-recourse notes payable

512,515

 

 

442,652

 

 

457,849

 

 

TOTAL CURRENT LIABILITIES

1,958,960

 

 

1,698,548

 

 

1,598,942

 

 

Long-term debt, excluding current portion

2,190,415

 

 

1,322,415

 

 

1,896,784

 

 

Non-recourse notes payable, excluding current portion

14,439,700

 

 

13,297,504

 

 

12,900,984

 

 

Operating lease liabilities, excluding current portion

538,296

 

 

423,618

 

 

435,113

 

 

Other liabilities

410,772

 

 

434,843

 

 

431,923

 

 

TOTAL LIABILITIES

19,538,143

 

 

17,176,928

 

 

17,263,746

 

 

 

 

 

 

 

 

 

Commitments and contingent liabilities

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

Common stock, $0.50 par value; 350,000,000 shares authorized;
162,470,173 and 163,172,333 shares issued and outstanding as of
August 31, 2021 and February 28, 2021, respectively

81,235

 

 

81,586

 

 

82,081

 

 

Capital in excess of par value

1,653,066

 

 

1,513,821

 

 

1,460,300

 

 

Accumulated other comprehensive loss

(112,343)

 

 

(118,691)

 

 

(160,426)

 

 

Retained earnings

3,293,221

 

 

2,887,897

 

 

2,600,605

 

 

TOTAL SHAREHOLDERS’ EQUITY

4,915,179

 

 

4,364,613

 

 

3,982,560

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

24,453,322

 

 

$

21,541,541

 

 

$

21,246,306

 

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

Six Months Ended August 31

(In thousands)

2021

 

2020

OPERATING ACTIVITIES:

 

 

 

Net earnings

$

722,023

 

 

$

301,674

 

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

 

 

 

Depreciation and amortization

129,300

 

 

118,967

 

Share-based compensation expense

72,780

 

 

62,794

 

Provision for loan losses

11,107

 

 

147,977

 

Provision for cancellation reserves

62,886

 

 

35,678

 

Deferred income tax provision

32,502

 

 

8,598

 

Other

(19,883)

 

 

5,098

 

Net (increase) decrease in:

 

 

 

Accounts receivable, net

(244,471)

 

 

(12,065)

 

Inventory

(948,299)

 

 

21,457

 

Other current assets

(26,496)

 

 

19,691

 

Auto loans receivable, net

(1,177,458)

 

 

188,601

 

Other assets

(9,745)

 

 

(6,586)

 

Net increase (decrease) in:

 

 

 

Accounts payable, accrued expenses and other

 

 

 

current liabilities and accrued income taxes

115,542

 

 

24,912

 

Other liabilities

(105,109)

 

 

(27,020)

 

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

(1,385,321)

 

 

889,776

 

INVESTING ACTIVITIES:

 

 

 

Capital expenditures

(137,838)

 

 

(91,998)

 

Proceeds from disposal of property and equipment

260

 

 

826

 

Proceeds from sale of business

602

 

 

 

Purchases of investments

(12,651)

 

 

(2,566)

 

Sales and returns of investments

10,954

 

 

1,381

 

Business acquisition, net of cash acquired

(241,563)

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

(380,236)

 

 

(92,357)

 

FINANCING ACTIVITIES:

 

 

 

Increase in short-term debt, net

167

 

 

798

 

Proceeds from issuances of long-term debt

3,035,601

 

 

1,542,500

 

Payments on long-term debt

(2,168,411)

 

 

(1,425,084)

 

Cash paid for debt issuance costs

(9,547)

 

 

(8,037)

 

Payments on finance lease obligations

(5,709)

 

 

(2,880)

 

Issuances of non-recourse notes payable

7,414,283

 

 

4,798,000

 

Payments on non-recourse notes payable

(6,201,801)

 

 

(5,028,898)

 

Repurchase and retirement of common stock

(355,495)

 

 

(54,151)

 

Equity issuances

60,087

 

 

91,724

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

1,769,175

 

 

(86,028)

 

Increase in cash, cash equivalents, and restricted cash

3,618

 

 

711,391

 

Cash, cash equivalents, and restricted cash at beginning of year

771,947

 

 

656,390

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD

$

775,565

 

 

$

1,367,781

 

 

Investors:
David Lowenstein, Assistant Vice President, Investor Relations
investor_relations@carmax.com, (804) 747-0422 x7865

Media:
pr@carmax.com, (855) 887-2915

Source: CarMax, Inc.

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