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Share Name | Share Symbol | Market | Type |
---|---|---|---|
CarMax Group | NYSE:KMX | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-2.58 | -3.52% | 70.75 | 74.57 | 72.86 | 73.33 | 2,223,377 | 00:09:30 |
Announces the expansion of its asset-backed securitization program to enable incremental growth in finance income
CarMax, Inc. (NYSE:KMX) today reported results for the first quarter ended May 31, 2024.
First Quarter Highlights:
CEO Commentary:
“I am encouraged by the trends we saw in the first quarter including continued year-over-year price declines, improvements in vehicle value stability, and ongoing growth in upper funnel demand. We delivered strong retail, wholesale, and EPP gross profit per unit, sourced a record 35,000 vehicles from dealers, continued to actively manage SG&A, and repurchased over $100 million in shares of common stock. As CAF advances to a full-spectrum credit model, we launched our first non-prime asset-backed securitization deal early in the second quarter as part of the expansion of our securitization program that will enable incremental growth in finance income,” said Bill Nash, president and chief executive officer. “I am proud of the durable actions we have taken to support our future growth and to further differentiate the value and experience we offer to consumers.”
First Quarter Business Performance Review:
Sales. Combined retail and wholesale used vehicle unit sales were 358,817, a decline of 5.3% from the prior year’s first quarter.
Total retail used vehicle unit sales decreased 3.1% to 211,132 compared to the prior year’s first quarter. Comparable store used unit sales decreased 3.8% from the prior year’s first quarter. Though average retail selling price declined year-over-year, we believe vehicle affordability challenges continued to impact our first quarter unit sales performance, with ongoing headwinds due to widespread inflationary pressures, higher interest rates, and tightened lending standards. Total retail used vehicle revenues decreased 5.4% compared with the prior year’s first quarter, driven by the decrease in retail used units sold, as well as the decrease in average retail selling price, which declined approximately $700 per unit or 2.7%.
Total wholesale vehicle unit sales declined 8.3% to 147,685 versus the prior year’s first quarter. Total wholesale revenues decreased 17.0% compared with the prior year’s first quarter due to a decrease in the average wholesale selling price of approximately $900 per unit or 10.3%, as well as the decrease in wholesale units sold.
We bought 314,000 vehicles from consumers and dealers, down 8.6% compared to last year’s first quarter, which was impacted by lower seasonal appreciation year-over-year. Of these vehicles, 279,000 were bought from consumers and 35,000 were bought through dealers, a decrease of 13.7% and an increase of 70.8%, respectively, from last year’s first quarter.
Other sales and revenues increased by 4.8% compared with the first quarter of fiscal 2024, representing an increase of $8.3 million, primarily reflecting an increase in EPP revenues resulting from stronger margins.
Online retail sales(1) accounted for 14% of retail unit sales, in line with the first quarter of last year. Revenue from online transactions(2), including retail and wholesale unit sales, was $2.1 billion, or approximately 30% of net revenues, consistent with last year’s first quarter.
Gross Profit. Total gross profit was $791.9 million, down 3.1% versus last year’s first quarter. Retail used vehicle gross profit decreased 3.7% and retail gross profit per used unit was $2,347, in line with last year’s first quarter.
Wholesale vehicle gross profit decreased 6.4% versus the prior year’s first quarter, reflecting lower wholesale unit volume. Gross profit per unit increased $22 from the prior year’s first quarter to $1,064.
Other gross profit increased 3.2% primarily reflecting an increase in EPP revenues resulting from stronger margins.
SG&A. Compared with the first quarter of fiscal 2024, SG&A expenses increased 14.1% or $78.7 million to $638.6 million. Excluding the prior year’s $59.3 million legal settlement, SG&A expenses increased 3.1% or $19.5 million. SG&A as a percent of gross profit increased to 80.6% in the first quarter compared to 68.5% in the prior year’s first quarter. Excluding the legal settlement, SG&A as a percent of gross profit was 75.7% in the prior year’s first quarter.
Continued cost management efforts in our stores and CECs as well as in non-CAF uncollectable receivables drove an SG&A decrease year-over-year when excluding the prior year’s legal settlement and the approximately $22 million combined impact from the retirement eligibility of certain senior executives on this year’s share-based compensation expense and lapping over the favorable non-CAF uncollectable receivables reserve adjustments in the prior year.
CarMax Auto Finance.(3) CAF income increased 7.0% to $147.0 million driven by growth in CAF’s average managed receivables and net interest margin percentage. This quarter’s provision was $81.2 million compared to $80.9 million in the prior year’s first quarter.
As of May 31, 2024, the allowance for loan losses was 2.79% of ending managed receivables, consistent with 2.78% as of February 29, 2024, as expanded Tier 2 originations within CAF’s portfolio offset the effect of the previously disclosed tightening of CAF’s underwriting standards.
CAF’s total interest margin percentage, which represents the spread between interest and fees charged to consumers and our funding costs, was 6.2% of average managed receivables, up from last year’s fourth quarter and the prior year’s first quarter. After the effect of 3-day payoffs, CAF financed 43.3% of units sold in the current quarter, up from 42.7% in the prior year’s first quarter. CAF’s weighted average contract rate was 11.4% in the quarter, up from 11.1% in the first quarter last year.
Expansion of Asset-Backed Securitization Program. Going forward, we plan to expand our current asset-backed securitization program from a single issuance to one that more broadly incorporates CAF’s receivables across distinct prime and non-prime segments. In June 2024, CAF launched its first non-prime securitization deal.
This strategy will enable us to efficiently fund incremental originations and support future CAF growth across the credit spectrum by creating additional funding capacity, driving additional finance income for the business over time. Our unique finance platform with a full-spectrum in-house lending operation coupled with a robust network of partner lenders will strengthen our competitive advantage.
Share Repurchase Activity. During the first quarter of fiscal year 2025, we repurchased 1.4 million shares of common stock for $104.0 million. As of May 31, 2024, we had $2.26 billion remaining available for repurchase under the outstanding authorization.
Location Openings. During the first quarter of fiscal 2025, we opened our second stand-alone reconditioning center in Richland, Mississippi. We are utilizing our stand-alone reconditioning and auction locations to balance capacity and drive efficiencies across the network.
(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 May 31
(In millions)
2024
2023
Change
Used vehicle sales
$
5,677.5
$
6,001.5
(5.4
)%
Wholesale vehicle sales
1,256.4
1,514.4
(17.0
)%
Other sales and revenues:
Extended protection plan revenues
118.8
111.2
6.9
%
Third-party finance (fees)/income, net
(1.7
)
0.3
(613.8
)%
Advertising & subscription revenues (1)
34.7
31.4
10.5
%
Other
27.7
28.3
(2.5
)%
Total other sales and revenues
179.5
171.2
4.8
%
Total net sales and operating revenues
$
7,113.4
$
7,687.1
(7.5
)%
(1) Excludes intercompany revenues that have been eliminated in consolidation.
Unit Sales
Three Months Ended May 31
2024
2023
Change
Used vehicles
211,132
217,924
(3.1
)%
Wholesale vehicles
147,685
161,048
(8.3
)%
Average Selling Prices
Three Months Ended May 31
2024
2023
Change
Used vehicles
$
26,526
$
27,258
(2.7
)%
Wholesale vehicles
$
8,094
$
9,024
(10.3
)%
Vehicle Sales Changes
Three Months Ended May 31
2024
2023
Used vehicle units
(3.1
)%
(9.6
)%
Used vehicle revenues
(5.4
)%
(14.4
)%
Wholesale vehicle units
(8.3
)%
(13.6
)%
Wholesale vehicle revenues
(17.0
)%
(28.5
)%
Comparable Store Used Vehicle Sales Changes (1)
Three Months Ended May 31
2024
2023
Used vehicle units
(3.8
)%
(11.4
)%
Used vehicle revenues
(6.1
)%
(16.2
)%
(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 May 31
2024
2023
CAF (2)
45.3
%
45.5
%
Tier 2 (3)
18.7
%
20.4
%
Tier 3 (4)
7.5
%
6.7
%
Other (5)
28.5
%
27.4
%
Total
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 2 and Tier 3 loan originations, which represent approximately 3% 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 May 31
(In millions)
2024
% (1)
2023
% (1)
Net sales and operating revenues
$
7,113.4
100.0
$
7,687.1
100.0
Gross profit
$
791.9
11.1
$
817.4
10.6
CarMax Auto Finance income
$
147.0
2.1
$
137.4
1.8
Selling, general, and administrative expenses
$
638.6
9.0
$
559.8
7.3
Interest expense
$
31.4
0.4
$
30.5
0.4
Earnings before income taxes
$
206.6
2.9
$
307.2
4.0
Net earnings
$
152.4
2.1
$
228.3
3.0
(1)
Calculated as a percentage of net sales and operating revenues.
Gross Profit (1)
Three Months Ended May 31
(In millions)
2024
2023
Change
Used vehicle gross profit
$
495.5
$
514.6
(3.7
)%
Wholesale vehicle gross profit
157.1
167.8
(6.4
)%
Other gross profit
139.3
135.0
3.2
%
Total
$
791.9
$
817.4
(3.1
)%
(1)
Amounts are net of intercompany eliminations.
Gross Profit per Unit (1)
Three Months Ended May 31
2024
2023
$ per unit(2)
%(3)
$ per unit(2)
%(3)
Used vehicle gross profit per unit
$
2,347
8.7
$
2,361
8.6
Wholesale vehicle gross profit per unit
$
1,064
12.5
$
1,042
11.1
Other gross profit per unit
$
660
77.6
$
619
78.8
(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 category, which is divided by total used units sold.
(3)
Calculated as a percentage of its respective sales or revenue.
SG&A Expenses (1)
Three Months Ended May 31
(In millions)
2024
2023
Change
Compensation and benefits:
Compensation and benefits, excluding share-based compensation expense
$
328.1
$
330.7
(0.8
)%
Share-based compensation expense
47.1
35.3
33.4
%
Total compensation and benefits (2)
$
375.2
$
366.0
2.5
%
Occupancy costs
70.6
66.2
6.7
%
Advertising expense
71.7
71.9
(0.2
)%
Other overhead costs (3)
121.1
55.7
117.0
%
Total SG&A expenses
$
638.6
$
559.8
14.1
%
SG&A as a % of gross profit
80.6
%
68.5
%
12.1
%
(1)
Amounts are net of intercompany eliminations.
(2)
Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales.
(3)
Includes IT expenses, non-CAF bad debt, insurance, travel, charitable contributions, preopening and relocation costs, and other administrative expenses.
Components of CAF Income and Other CAF Information
Three Months Ended May 31
(In millions)
2024
% (1)
2023
% (1)
Interest margin:
Interest and fee income
$
452.5
10.3
$
400.5
9.4
Interest expense
(182.3
)
(4.2
)
(142.6
)
(3.4
)
Total interest margin
270.2
6.2
257.9
6.1
Provision for loan losses
(81.2
)
(1.9
)
(80.9
)
(1.9
)
Total interest margin after provision for loan losses
189.0
4.3
177.0
4.2
Total direct expenses
(42.0
)
(1.0
)
(39.6
)
(0.9
)
CarMax Auto Finance income
$
147.0
3.3
$
137.4
3.2
Total average managed receivables
$
17,551.2
$
17,003.4
Net loans originated
$
2,265.7
$
2,340.4
Net penetration rate
43.3
%
42.7
%
Weighted average contract rate
11.4
%
11.1
%
Ending allowance for loan losses
$
493.1
$
535.4
Warehouse facility information:
Ending funded receivables
$
4,176.6
$
4,241.6
Ending unused capacity
$
1,923.4
$
1,358.4
(1)
Annualized percentage of total average managed receivables.
Earnings Highlights
Three Months Ended May 31
(In millions except per share data)
2024
2023
Change
Net earnings
$
152.4
$
228.3
(33.2
)%
Diluted weighted average shares outstanding
157.7
158.6
(0.5
)%
Net earnings per diluted share
$
0.97
$
1.44
(32.6
)%
Conference Call Information
We will host a conference call for investors at 9:00 a.m. ET today, June 21, 2024. Domestic investors may access the call at 1-800-225-9448 (international callers dial 1-203-518-9708). The conference I.D. for both domestic and international callers is 3171396. 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 September 25, 2024, or via telephone (for approximately one week) by dialing 1-800-839-5204 (or 1-402-220-2697 for international access) and entering the conference ID 3171396.
Second Quarter Fiscal 2025 Earnings Release Date
We currently plan to release results for the second quarter ending August 31, 2024, on Thursday, September 26, 2024, 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 early September 2024.
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. During the fiscal year ended February 29, 2024, CarMax sold approximately 770,000 used vehicles and 550,000 wholesale vehicles at its auctions. In addition, CarMax Auto Finance originated more than $8 billion in receivables during fiscal 2024, adding to its more than $17 billion portfolio. CarMax has 245 store locations, nearly 30,000 associates, and is proud to have been recognized for 20 consecutive years as one of the Fortune 100 Best Companies to Work For®. CarMax is committed to making a positive impact on people, communities and the environment. Learn more in the 2024 Responsibility Report. For more information, visit www.carmax.com.
Forward-Looking Statements
We caution readers that the statements contained in this release that are not statements of historical fact, including statements 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, financial targets, revenue, margins, expenses, liquidity, loan originations, capital expenditures, share repurchase plans, 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,” “enable,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “positioned,” “predict,” “should,” “target,” “will” and other similar expressions, whether in the negative or affirmative. Such forward-looking statements are based upon management’s current knowledge, expectations and assumptions 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:
For more details on factors that could affect expectations, see our Annual Report on Form 10-K for the fiscal year ended February 29, 2024, 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 May 31
(In thousands except per share data)
2024
%(1)
2023
%(1)
SALES AND OPERATING REVENUES:
Used vehicle sales
$
5,677,476
79.8
$
6,001,471
78.1
Wholesale vehicle sales
1,256,439
17.7
1,514,363
19.7
Other sales and revenues
179,482
2.5
171,229
2.2
NET SALES AND OPERATING REVENUES
7,113,397
100.0
7,687,063
100.0
COST OF SALES:
Used vehicle cost of sales
5,181,979
72.8
5,486,846
71.4
Wholesale vehicle cost of sales
1,099,311
15.5
1,346,538
17.5
Other cost of sales
40,212
0.6
36,289
0.5
TOTAL COST OF SALES
6,321,502
88.9
6,869,673
89.4
GROSS PROFIT
791,895
11.1
817,390
10.6
CARMAX AUTO FINANCE INCOME
146,970
2.1
137,358
1.8
Selling, general, and administrative expenses
638,578
9.0
559,837
7.3
Depreciation and amortization
61,869
0.9
58,419
0.8
Interest expense
31,362
0.4
30,466
0.4
Other expense (income)
416
—
(1,214
)
—
Earnings before income taxes
206,640
2.9
307,240
4.0
Income tax provision
54,200
0.8
78,942
1.0
NET EARNINGS
$
152,440
2.1
$
228,298
3.0
WEIGHTED AVERAGE COMMON SHARES:
Basic
157,161
158,116
Diluted
157,706
158,561
NET EARNINGS PER SHARE:
Basic
$
0.97
$
1.44
Diluted
$
0.97
$
1.44
(1)
Percents are calculated as a percentage of net sales and operating revenues and may not total due to rounding.
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of
May 31
February 29
May 31
(In thousands except share data)
2024
2024
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
218,931
$
574,142
$
264,247
Restricted cash from collections on auto loans receivable
536,407
506,648
506,465
Accounts receivable, net
212,370
221,153
321,994
Inventory
3,772,885
3,678,070
4,081,220
Other current assets
229,714
246,581
189,742
TOTAL CURRENT ASSETS
4,970,307
5,226,594
5,363,668
Auto loans receivable, net
17,268,321
17,011,844
16,744,865
Property and equipment, net
3,734,736
3,665,530
3,499,384
Deferred income taxes
100,104
98,790
99,770
Operating lease assets
509,043
520,717
541,908
Goodwill
141,258
141,258
141,258
Other assets
518,325
532,064
571,503
TOTAL ASSETS
$
27,242,094
$
27,196,797
$
26,962,356
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
$
911,348
$
933,708
$
967,420
Accrued expenses and other current liabilities
456,277
523,971
528,596
Accrued income taxes
24,792
—
49,191
Current portion of operating lease liabilities
57,534
57,161
55,126
Current portion of long-term debt
21,550
313,282
12,305
Current portion of non-recourse notes payable
514,394
484,167
501,333
TOTAL CURRENT LIABILITIES
1,985,895
2,312,289
2,113,971
Long-term debt, excluding current portion
1,591,366
1,602,355
1,906,496
Non-recourse notes payable, excluding current portion
16,626,011
16,357,301
16,252,958
Operating lease liabilities, excluding current portion
484,632
496,210
519,184
Other liabilities
387,320
354,902
346,579
TOTAL LIABILITIES
21,075,224
21,123,057
21,139,188
Commitments and contingent liabilities
SHAREHOLDERS’ EQUITY:
Common stock, $0.50 par value; 350,000,000 shares authorized; 156,352,956 and 157,611,939 shares issued and outstanding as of May 31, 2024 and February 29, 2024, respectively
78,176
78,806
79,105
Capital in excess of par value
1,834,218
1,808,746
1,731,341
Accumulated other comprehensive income
61,678
59,279
61,330
Retained earnings
4,192,798
4,126,909
3,951,392
TOTAL SHAREHOLDERS’ EQUITY
6,166,870
6,073,740
5,823,168
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
27,242,094
$
27,196,797
$
26,962,356
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended May 31
(In thousands)
2024
2023
OPERATING ACTIVITIES:
Net earnings
$
152,440
$
228,298
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization
69,244
62,998
Share-based compensation expense
48,098
36,384
Provision for loan losses
81,226
80,890
Provision for cancellation reserves
24,343
24,070
Deferred income tax benefit
(2,036
)
(7,127
)
Other
2,545
2,976
Net decrease (increase) in:
Accounts receivable, net
8,783
(22,439
)
Inventory
(94,815
)
(355,078
)
Other current assets
32,881
30,923
Auto loans receivable, net
(337,703
)
(483,964
)
Other assets
(3,797
)
634
Net (decrease) increase in:
Accounts payable, accrued expenses and other
current liabilities and accrued income taxes
(75,206
)
239,276
Other liabilities
(23,692
)
(23,126
)
NET CASH USED IN OPERATING ACTIVITIES
(117,689
)
(185,285
)
INVESTING ACTIVITIES:
Capital expenditures
(103,914
)
(136,719
)
Proceeds from disposal of property and equipment
1
1,171
Purchases of investments
(2,093
)
(1,228
)
Sales and returns of investments
136
17
NET CASH USED IN INVESTING ACTIVITIES
(105,870
)
(136,759
)
FINANCING ACTIVITIES:
Proceeds from issuances of long-term debt
—
98,600
Payments on long-term debt
(303,080
)
(201,377
)
Cash paid for debt issuance costs
(5,668
)
(3,608
)
Payments on finance lease obligations
(4,548
)
(3,785
)
Issuances of non-recourse notes payable
3,676,000
3,125,929
Payments on non-recourse notes payable
(3,376,447
)
(2,706,222
)
Repurchase and retirement of common stock
(106,850
)
(3,931
)
Equity issuances
8,209
989
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
(112,384
)
306,595
Decrease in cash, cash equivalents, and restricted cash
(335,943
)
(15,449
)
Cash, cash equivalents, and restricted cash at beginning of year
1,250,410
951,004
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD
$
914,467
$
935,555
View source version on businesswire.com: https://www.businesswire.com/news/home/20240621330191/en/
Investors: David Lowenstein, Vice President, Investor Relations investor_relations@carmax.com, (804) 747-0422 x7865 Media: pr@carmax.com, (855) 887-2915
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