CarMax Reports Third Quarter Fiscal 2022 Results

December 22, 2021

RICHMOND, Va.--(BUSINESS WIRE)-- CarMax, Inc. (NYSE:KMX), the nation’s largest and most profitable retailer of used cars, today reported results for the third quarter ended November 30, 2021.

Highlights:

  • Record net revenues of $8.5 billion, up 64.5% compared with the prior year third quarter.

  • Net earnings per diluted share of $1.63, up 14.8% from a then-record $1.42 per diluted share a year ago.
    • Net earnings per diluted share for the current year’s quarter included a one-time benefit of $0.10 in connection with the receipt of settlement proceeds in a class action lawsuit.

  • Sold 415,054 units through our combined retail and wholesale channels, up 29.3% from the prior year quarter, primarily driven by solid execution, the growing demand for our online offerings, ramping inventory and staffing levels, and the continued success of vehicle sourcing directly from consumers.
    • Retail used unit sales increased 16.9% to a third quarter record of 227,424 vehicles, and comparable store used unit sales increased 15.8%.
    • Wholesale units increased 48.5% to 187,630 vehicles, also a third quarter record.

  • Bought 383,215 vehicles from consumers in the third quarter, a 91% increase versus the prior year quarter.  Approximately 194,000 of these vehicles were purchased through our nationwide online instant appraisal offerings.

  • Gross profit per retail used unit of $2,235 and gross profit per wholesale unit of $1,131, representing increases of $84 and $225 per unit, respectively, versus last year’s third quarter. 

  • CarMax Auto Finance (CAF) income decreased 5.9% to $166.0 million, as last year’s third quarter benefited from a significantly reduced loan loss provision.  Improvements in CAF’s net interest margin and robust growth in average managed receivables in the current year’s quarter largely offset the effect of this year’s more normalized provision.

CEO Commentary:

“Our solid execution, customer-centric omni-channel strategy, and macro factors are driving strong performance across our diversified businesses,” said Bill Nash, president and chief executive officer. “Our top line momentum continued into this quarter and we achieved record levels of third quarter unit sales in both retail and wholesale, generating all-time record revenues. We also bought more cars from customers than ever before. We are excited about the opportunities ahead of us and believe that by delivering the most customer-centric experience in the industry, we will enable sustainable growth and create meaningful long-term shareholder value.”

Third Quarter Business Performance Review:

Sales . Combined retail and wholesale used vehicle unit sales were 415,054, an increase of 29.3% from the prior year’s third quarter. Online retail sales(1) accounted for 9% of retail unit sales, compared with 5% in the third quarter of last year. Revenue from online transactions(2), including retail and wholesale unit sales, was $2.5 billion, or approximately 30% of net revenues, compared with 20% of net revenues in last year’s third quarter.

Total retail used vehicle unit sales increased 16.9% to 227,424 and comparable store used unit sales increased 15.8% from the prior year’s third quarter. We believe several factors contributed to our comparable store sales growth, including solid execution, the growing demand for our online offerings, ramping inventory and staffing levels, and the continued success of vehicle sourcing directly from consumers. Total retail used vehicle revenues increased 52.9% compared with the prior year’s third quarter due to an increase in the average retail selling price, which rose nearly $6,600 per unit, or 30.8%, together with the growth in retail used units sold. The increase in average retail selling price largely reflected higher vehicle acquisition costs resulting from strong wholesale industry valuations.

Total wholesale vehicle unit sales increased 48.5% to 187,630 compared with the prior year’s third quarter. Wholesale sales benefited from the large increase in appraisal volume associated with our online appraisal offerings and a record third quarter buy rate. Total wholesale revenues increased 132.1% compared with the prior year’s third quarter due to the average wholesale selling price rising by more than $3,600 per unit, or 58.4%, together with the increase in wholesale units sold.

Other sales and revenues rose 15.7% compared with the third quarter of fiscal 2021, representing an increase of $23.1 million. The increase was largely driven by the consolidation of Edmunds earlier this fiscal year, as well as an improvement in net third-party finance fees due to favorability from our renegotiated fee agreements and lower Tier 3 originations. The increase was partially offset by the effect of the divestiture of our remaining new car franchises since last year’s third quarter.

Gross Profit . Total gross profit increased to $836.6 million, up 32.5% versus last year’s third quarter. Retail used vehicle gross profit rose 21.4%, reflecting the increase in retail used unit sales and an improvement in the related gross profit per unit, which rose $84 to $2,235.

Wholesale vehicle gross profit increased 85.5% versus the prior year’s quarter, reflecting both the growth in unit volume and an increase in the related gross profit per unit, which rose $225 to $1,131.

Other gross profit increased 17.9% largely reflecting the consolidation of Edmunds and the improvement in net third-party finance fees. This increase was partially offset by a reduction in service department margins resulting from our efforts to support our higher level of retail unit sales, which primarily included growing technician staffing, as well as shifting retail service capacity to support vehicle reconditioning. In addition, extended protection plan (EPP) profits rose 4.8%, as the benefit of our retail unit volume growth was largely offset by an unfavorable year-over-year change in cancellation reserves.

SG&A . Compared with the third quarter of fiscal 2021, SG&A expenses increased 33.7% to $575.9 million. Contributing factors included increases in staffing and sales-related compensation in the face of strong demand; continued spending on our technology platforms and strategic initiatives to support increased consumer demand for our digital experiences; an increase in share-based compensation largely reflecting changes in the company’s share price; the consolidation of Edmunds; and planned increases in advertising expense. In addition, the current year’s third quarter also included a one-time pretax benefit of $22.6 million from the receipt of settlement proceeds in a class action lawsuit.

SG&A as a percent of gross profit was 68.8%, versus 68.2% in the prior year’s third quarter. For the first nine months of fiscal 2022, SG&A as a percent of gross profit was 66.1% versus 68.9% in the prior year period.

CarMax Auto Finance .(3) CAF income decreased 5.9% to $166.0 million, primarily reflecting an increase in the provision for loan losses to $76.2 million in the current year’s third quarter compared with $8.2 million in the prior year’s third quarter. In the prior year’s third quarter, the provision for loan losses benefited from the continued reduction in the reserve that was established at the start of the COVID pandemic. Improvements in CAF’s net interest margin and the growth in average managed receivables largely offset the effect of the higher loan loss provision.

As of November 30, 2021, the allowance for loan losses was 2.75% of ending managed receivables, up from 2.66% as of August 31, 2021. The current quarter’s provision for loan losses largely reflected the expected lifetime losses on loans originated in the current quarter, but also included a 6 basis point adjustment for added Tier 2 and Tier 3 originations. The adjustment was primarily driven by the implementation of our Tier 2 origination test. Any future changes to the Tier 2 test will carefully consider the broader lending environment along with the sustainability of the change.

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 6.3% in the prior year’s third quarter, primarily due to lower funding costs. After the effect of 3-day payoffs, CAF financed 42.2% of units sold in the current quarter, compared with a historically high 45.7% in the prior year’s third quarter. In addition, we estimate the conversion of CAF’s auto loan servicing system during the current year’s quarter reduced CAF income by approximately $5 million for conversion-related costs.

Share Repurchase Activity . During the third quarter of fiscal 2022, we repurchased 0.9 million shares of common stock for $115.3 million pursuant to our share repurchase program. As of November 30, 2021, we had $876.2 million remaining available for repurchase under the outstanding authorization.

Store Openings . During the third quarter of fiscal 2022, we opened one new location. For the full fiscal year, we plan to open a total of ten new locations, including four new locations expected to open in the fourth quarter.

(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 November 30

 

Nine Months Ended November 30

(In millions)

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Used vehicle sales

$

6,435.6

 

 

$

4,209.7

 

 

52.9

%

 

$

18,697.3

 

 

$

11,385.2

 

 

64.2

%

Wholesale vehicle sales

1,922.3

 

 

828.4

 

 

132.1

%

 

4,998.2

 

 

1,990.3

 

 

151.1

%

Other sales and revenues:

 

 

 

 

 

 

 

 

 

 

 

Extended protection plan revenues

106.6

 

 

101.7

 

 

4.8

%

 

353.8

 

 

294.5

 

 

20.2

%

Third-party finance fees, net

1.6

 

 

(10.6)

 

 

114.7

%

 

(0.3)

 

 

(36.7)

 

 

99.3

%

Advertising & subscription revenues (1)

33.3

 

 

 

 

100.0

%

 

67.9

 

 

 

 

100.0

%

Other

28.4

 

 

55.7

 

 

(49.0)

%

 

96.8

 

 

152.6

 

 

(36.6)

%

Total other sales and revenues

169.9

 

 

146.8

 

 

15.7

%

 

518.2

 

 

410.4

 

 

26.3

%

Total net sales and operating revenues

$

8,527.8

 

 

$

5,184.9

 

 

64.5

%

 

$

24,213.7

 

 

$

13,785.9

 

 

75.6

%

(1)

 

Excludes intersegment revenues that have been eliminated in consolidation.

Unit Sales

 

 

Three Months Ended November 30

 

Nine Months Ended November 30

 

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Used vehicles

227,424

 

194,576

 

16.9

%

 

730,020

 

546,934

 

33.5

%

Wholesale vehicles

187,630

 

126,317

 

48.5

%

 

557,117

 

322,592

 

72.7

%

Average Selling Prices

 

 

Three Months Ended November 30

 

Nine Months Ended November 30

 

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Used vehicles

$

27,995

 

 

$

21,402

 

 

30.8

%

 

$

25,380

 

 

$

20,581

 

 

23.3

%

Wholesale vehicles

$

9,890

 

 

$

6,245

 

 

58.4

%

 

$

8,634

 

 

$

5,877

 

 

46.9

%

Vehicle Sales Changes

 

 

Three Months Ended November 30

 

Nine Months Ended November 30

 

2021

2020

 

2021

2020

Used vehicle units

16.9 %

1.0 %

 

33.5 %

(12.6) %

Used vehicle revenues

52.9 %

4.5 %

 

64.2 %

(11.9) %

 

 

 

 

 

 

Wholesale vehicle units

48.5 %

10.8 %

 

72.7 %

(10.7) %

Wholesale vehicle revenues

132.1 %

35.6 %

 

151.1 %

2.0 %

Comparable Store Used Vehicle Sales Changes (1)

 

 

Three Months Ended November 30

 

Nine Months Ended November 30

 

2021

2020

 

2021

2020

Used vehicle units

15.8 %

(0.8) %

 

32.5 %

(14.8) %

Used vehicle revenues

51.4 %

2.5 %

 

63.4 %

(14.1) %

(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 November 30

 

Nine Months Ended November 30

 

2021

 

2020

 

2021

 

2020

CAF (2)

46.1 %

 

48.9 %

 

46.6 %

 

45.0 %

Tier 2 (3)

22.2 %

 

19.5 %

 

22.2 %

 

22.8 %

Tier 3 (4)

6.5 %

 

9.7 %

 

8.0 %

 

11.5 %

Other (5)

25.2 %

 

21.9 %

 

23.2 %

 

20.7 %

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 November 30

 

Nine Months Ended November 30

(In millions)

2021

% (1)

 

2020

% (1)

 

2021

% (1)

 

2020

% (1)

Net sales and operating revenues

$

8,527.8

 

100.0

 

 

$

5,184.9

 

100.0

 

 

$

24,213.7

 

100.0

 

 

$

13,785.9

 

100.0

 

Gross profit

$

836.6

 

9.8

 

 

$

631.4

 

12.2

 

 

$

2,576.6

 

10.6

 

 

$

1,737.8

 

12.6

 

CarMax Auto Finance income

$

166.0

 

1.9

 

 

$

176.4

 

3.4

 

 

$

607.7

 

2.5

 

 

$

374.6

 

2.7

 

Selling, general, and administrative expenses

$

575.9

 

6.8

 

 

$

430.8

 

8.3

 

 

$

1,704.3

 

7.0

 

 

$

1,197.6

 

8.7

 

Interest expense

$

24.3

 

0.3

 

 

$

19.5

 

0.4

 

 

$

67.2

 

0.3

 

 

$

65.9

 

0.5

 

Earnings before income taxes

$

356.0

 

4.2

 

 

$

310.5

 

6.0

 

 

$

1,291.1

 

5.3

 

 

$

703.0

 

5.1

 

Net earnings

$

269.4

 

3.2

 

 

$

235.3

 

4.5

 

 

$

991.5

 

4.1

 

 

$

537.0

 

3.9

 

(1)

Calculated as a percentage of net sales and operating revenues.

Gross Profit (1)

 

 

Three Months Ended November 30

 

Nine Months Ended November 30

(In millions)

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Used vehicle gross profit

$

508.4

 

 

$

418.6

 

 

21.4

%

 

$

1,611.9

 

 

$

1,161.3

 

 

38.8

%

Wholesale vehicle gross profit

212.2

 

 

114.4

 

 

85.5

%

 

587.0

 

 

320.7

 

 

83.0

%

Other gross profit

116.0

 

 

98.4

 

 

17.9

%

 

377.7

 

 

255.8

 

 

47.7

%

Total

$

836.6

 

 

$

631.4

 

 

32.5

%

 

$

2,576.6

 

 

$

1,737.8

 

 

48.3

%

(1)

Amounts are net of intercompany eliminations.

Gross Profit per Unit (1)

 

 

Three Months Ended November 30

 

Nine Months Ended November 30

 

2021

2020

 

2021

2020

 

$ per unit(2)

%(3)

$ per unit(2)

%(3)

 

$ per unit(2)

%(3)

$ per unit(2)

%(3)

Used vehicle gross profit

$

2,235

 

7.9

 

$

2,151

 

9.9

 

 

$

2,208

 

8.6

 

$

2,123

 

10.2

 

Wholesale vehicle gross profit

$

1,131

 

11.0

 

$

906

 

13.8

 

 

$

1,054

 

11.7

 

$

994

 

16.1

 

Other gross profit

$

510

 

68.3

 

$

506

 

67.0

 

 

$

517

 

72.9

 

$

468

 

62.3

 

Total gross profit

$

3,678

 

9.8

 

$

3,245

 

12.2

 

 

$

3,529

 

10.6

 

$

3,177

 

12.6

 

(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 November 30

 

Nine Months Ended November 30

(In millions)

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Compensation and benefits:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits, excluding share-based compensation expense

$

308.3

 

 

$

230.8

 

 

33.6

%

 

$

891.8

 

 

$

661.3

 

 

34.9

%

Share-based compensation expense

33.3

 

 

10.7

 

 

210.7

%

 

100.5

 

 

68.7

 

 

46.3

%

Total compensation and benefits (3)

$

341.6

 

 

$

241.5

 

 

41.4

%

 

$

992.3

 

 

$

730.0

 

 

35.9

%

Occupancy costs

59.3

 

 

53.8

 

 

10.3

%

 

165.0

 

 

152.4

 

 

8.3

%

Advertising expense

76.1

 

 

58.8

 

 

29.4

%

 

233.6

 

 

143.8

 

 

62.5

%

Other overhead costs (4)

98.9

 

 

76.7

 

 

29.1

%

 

313.4

 

 

171.4

 

 

82.8

%

Total SG&A expenses

$

575.9

 

 

$

430.8

 

 

33.7

%

 

$

1,704.3

 

 

$

1,197.6

 

 

42.3

%

SG&A as % of gross profit

68.8

%

 

68.2

%

 

0.6

%

 

66.1

%

 

68.9

%

 

(2.8)

%

(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 November 30

 

Nine Months Ended November 30

(In millions)

2021

 

% (1)

2020

 

% (1)

 

2021

 

% (1)

2020

 

% (1)

Interest margin:

 

 

 

 

 

 

 

 

 

Interest and fee income

$

330.0

 

 

8.6

 

 

$

288.5

 

 

8.5

 

 

 

$

964.4

 

 

8.7

 

 

$

851.1

 

 

8.5

 

 

Interest expense

(53.6

)

 

(1.4

)

 

(77.1

)

 

(2.3

)

 

 

(180.0

)

 

(1.6

)

 

(243.0

)

 

(2.4

)

 

Total interest margin

276.4

 

 

7.2

 

 

211.4

 

 

6.3

 

 

 

784.4

 

 

7.1

 

 

608.1

 

 

6.1

 

 

Provision for loan losses

(76.2

)

 

(2.0

)

 

(8.2

)

 

(0.2

)

 

 

(87.3

)

 

(0.8

)

 

(156.1

)

 

(1.6

)

 

Total interest margin after provision for loan losses

200.2

 

 

5.2

 

 

203.2

 

 

6.0

 

 

 

697.1

 

 

6.3

 

 

452.0

 

 

4.5

 

 

 

 

 

 

 

 

 

 

 

 

Total other expense

 

 

 

 

 

 

 

 

 

 

 

 

 

(2.2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total direct expenses

(34.3

)

 

(0.9

)

 

(26.8

)

 

(0.8

)

 

 

(89.4

)

 

(0.8

)

 

(75.2

)

 

(0.7

)

 

CarMax Auto Finance income

$

166.0

 

 

4.3

 

 

$

176.4

 

 

5.2

 

 

 

$

607.7

 

 

5.5

 

 

$

374.6

 

 

3.7

 

 

 

 

 

 

 

 

 

 

 

 

Total average managed receivables

$

15,288.8

 

 

 

$

13,517.5

 

 

 

 

$

14,706.9

 

 

 

$

13,381.6

 

 

 

Net loans originated

$

2,420.3

 

 

 

$

1,824.9

 

 

 

 

$

7,276.1

 

 

 

$

4,607.8

 

 

 

Net penetration rate

42.2

 

%

 

45.7

 

%

 

 

43.0

 

%

 

42.1

 

%

 

Weighted average contract rate

8.3

 

%

 

8.6

 

%

 

 

8.6

 

%

 

8.4

 

%

 

 

 

 

 

 

 

 

 

 

 

Ending allowance for loan losses

$

426.5

 

 

 

$

431.6

 

 

 

 

$

426.5

 

 

 

$

431.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse facility information:

 

 

 

 

 

 

 

 

 

Ending funded receivables

$

3,155.9

 

 

 

$

2,308.0

 

 

 

 

$

3,155.9

 

 

 

$

2,308.0

 

 

 

Ending unused capacity

$

1,669.1

 

 

 

$

1,217.0

 

 

 

 

$

1,669.1

 

 

 

$

1,217.0

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

Annualized percentage of total average managed receivables.

Earnings Highlights

 

 

Three Months Ended November 30

 

Nine Months Ended November 30

(In millions except per share data)

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Net earnings

$

269.4

 

 

$

235.3

 

 

14.5

%

 

$

991.5

 

 

$

537.0

 

 

84.6

%

Diluted weighted average shares outstanding

164.9

 

 

165.8

 

 

(0.5)

%

 

165.6

 

 

165.0

 

 

0.4

%

Net earnings per diluted share

$

1.63

 

 

$

1.42

 

 

14.8

%

 

$

5.99

 

 

$

3.25

 

 

84.3

%

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, December 22, 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 8992460. 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 April 11, 2022, 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 8992460.

Fourth Quarter Fiscal 2022 Earnings Release Date

We currently plan to release results for the fourth quarter ending February 28, 2022, on Tuesday, April 12, 2022, 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 March 2022.

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, express 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 nearly $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 November 30

 

Nine Months Ended November 30

(In thousands except per share data)

2021

% (1)

2020

% (1)

 

2021

% (1)

2020

% (1)

SALES AND OPERATING REVENUES:

 

 

 

 

 

 

 

 

 

Used vehicle sales

$

6,435,590

 

75.5

 

$

4,209,748

 

81.2

 

 

$

18,697,300

 

77.2

 

$

11,385,183

 

82.6

 

Wholesale vehicle sales

1,922,283

 

22.5

 

828,362

 

16.0

 

 

4,998,212

 

20.6

 

1,990,296

 

14.4

 

Other sales and revenues

169,886

 

2.0

 

146,834

 

2.8

 

 

518,205

 

2.1

 

410,413

 

3.0

 

NET SALES AND OPERATING REVENUES

8,527,759

 

100.0

 

5,184,944

 

100.0

 

 

24,213,717

 

100.0

 

13,785,892

 

100.0

 

COST OF SALES:

 

 

 

 

 

 

 

 

 

Used vehicle cost of sales

5,927,237

 

69.5

 

3,791,134

 

73.1

 

 

17,085,416

 

70.6

 

10,223,875

 

74.2

 

Wholesale vehicle cost of sales

1,710,103

 

20.1

 

713,961

 

13.8

 

 

4,411,175

 

18.2

 

1,669,595

 

12.1

 

Other cost of sales

53,859

 

0.6

 

48,419

 

0.9

 

 

140,573

 

0.6

 

154,666

 

1.1

 

TOTAL COST OF SALES

7,691,199

 

90.2

 

4,553,514

 

87.8

 

 

21,637,164

 

89.4

 

12,048,136

 

87.4

 

GROSS PROFIT

836,560

 

9.8

 

631,430

 

12.2

 

 

2,576,553

 

10.6

 

1,737,756

 

12.6

 

CARMAX AUTO FINANCE INCOME

165,968

 

1.9

 

176,445

 

3.4

 

 

607,732

 

2.5

 

374,590

 

2.7

 

Selling, general, and administrative expenses

575,930

 

6.8

 

430,781

 

8.3

 

 

1,704,285

 

7.0

 

1,197,595

 

8.7

 

Depreciation and amortization (2)

54,428

 

0.6

 

48,016

 

0.9

 

 

157,107

 

0.6

 

145,126

 

1.1

 

Interest expense

24,303

 

0.3

 

19,462

 

0.4

 

 

67,247

 

0.3

 

65,889

 

0.5

 

Other (income) expense

(8,094)

 

(0.1)

 

(887)

 

 

 

(35,453)

 

(0.1)

 

728

 

 

Earnings before income taxes

355,961

 

4.2

 

310,503

 

6.0

 

 

1,291,099

 

5.3

 

703,008

 

5.1

 

Income tax provision

86,523

 

1.0

 

75,203

 

1.5

 

 

299,638

 

1.2

 

166,034

 

1.2

 

NET EARNINGS

$

269,438

 

3.2

 

$

235,300

 

4.5

 

 

$

991,461

 

4.1

 

$

536,974

 

3.9

 

WEIGHTED AVERAGE COMMON SHARES:

 

 

 

 

 

 

 

 

Basic

162,006

 

 

163,732

 

 

 

162,710

 

 

163,278

 

 

Diluted

164,873

 

 

165,773

 

 

 

165,606

 

 

164,976

 

 

NET EARNINGS PER SHARE:

 

 

 

 

 

 

 

 

 

Basic

$

1.66

 

 

$

1.44

 

 

 

$

6.09

 

 

$

3.29

 

 

Diluted

$

1.63

 

 

$

1.42

 

 

 

$

5.99

 

 

$

3.25

 

 

(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

 

 

November 30

 

February 28

 

November 30

(In thousands except share data)

2021

 

2021

 

2020

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

$

62,598

 

 

$

132,319

 

 

$

236,643

 

 

Restricted cash from collections on auto loans receivable

552,487

 

 

496,415

 

 

492,610

 

 

Accounts receivable, net

563,135

 

 

239,070

 

 

168,979

 

 

Inventory

4,659,460

 

 

3,157,159

 

 

2,780,205

 

 

Other current assets

117,390

 

 

91,833

 

 

58,660

 

 

TOTAL CURRENT ASSETS

5,955,070

 

 

4,116,796

 

 

3,737,097

 

 

Auto loans receivable, net

15,167,170

 

 

13,489,819

 

 

13,267,364

 

 

Property and equipment, net

3,175,577

 

 

3,055,563

 

 

3,043,345

 

 

Deferred income taxes

134,382

 

 

164,261

 

 

159,209

 

 

Operating lease assets

543,645

 

 

431,652

 

 

439,074

 

 

Goodwill

141,258

 

 

653

 

 

8,676

 

 

Other assets

458,117

 

 

282,797

 

 

278,083

 

 

TOTAL ASSETS

$

25,575,219

 

 

$

21,541,541

 

 

$

20,932,848

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

$

936,556

 

 

$

799,333

 

 

$

570,174

 

 

Accrued expenses and other current liabilities

530,592

 

 

415,465

 

 

372,429

 

 

Accrued income taxes

518

 

 

218

 

 

18,322

 

 

Current portion of operating lease liabilities

43,151

 

 

30,953

 

 

30,726

 

 

Short-term debt

 

 

 

 

1,008

 

 

Current portion of long-term debt

10,889

 

 

9,927

 

 

10,228

 

 

Current portion of non-recourse notes payable

535,146

 

 

442,652

 

 

434,900

 

 

TOTAL CURRENT LIABILITIES

2,056,852

 

 

1,698,548

 

 

1,437,787

 

 

Long-term debt, excluding current portion

2,602,598

 

 

1,322,415

 

 

1,319,496

 

 

Non-recourse notes payable, excluding current portion

14,856,266

 

 

13,297,504

 

 

13,161,504

 

 

Operating lease liabilities, excluding current portion

529,821

 

 

423,618

 

 

431,068

 

 

Other liabilities

419,886

 

 

434,843

 

 

454,517

 

 

TOTAL LIABILITIES

20,465,423

 

 

17,176,928

 

 

16,804,372

 

 

 

 

 

 

 

 

 

Commitments and contingent liabilities

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

Common stock, $0.50 par value; 350,000,000 shares authorized; 161,871,923 and 163,172,333 shares issued and outstanding as of November 30, 2021 and February 28, 2021, respectively

80,936

 

 

81,586

 

 

81,517

 

 

Capital in excess of par value

1,672,728

 

 

1,513,821

 

 

1,462,130

 

 

Accumulated other comprehensive loss

(100,301)

 

 

(118,691)

 

 

(152,924)

 

 

Retained earnings

3,456,433

 

 

2,887,897

 

 

2,737,753

 

 

TOTAL SHAREHOLDERS’ EQUITY

5,109,796

 

 

4,364,613

 

 

4,128,476

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

25,575,219

 

 

$

21,541,541

 

 

$

20,932,848

 

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

Nine Months Ended November 30

(In thousands)

2021

 

2020

OPERATING ACTIVITIES:

 

 

 

Net earnings

$

991,461

 

 

$

536,974

 

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

 

 

 

Depreciation and amortization

200,819

 

 

180,495

 

Share-based compensation expense

108,962

 

 

73,946

 

Provision for loan losses

87,342

 

 

156,147

 

Provision for cancellation reserves

91,607

 

 

53,511

 

Deferred income tax provision (benefit)

19,564

 

 

(19,529)

 

Other

(26,808)

 

 

5,966

 

Net (increase) decrease in:

 

 

 

Accounts receivable, net

(290,346)

 

 

22,111

 

Inventory

(1,502,323)

 

 

66,211

 

Other current assets

(13,615)

 

 

29,478

 

Auto loans receivable, net

(1,764,693)

 

 

(73,827)

 

Other assets

(18,309)

 

 

(8,151)

 

Net increase (decrease) in:

 

 

 

Accounts payable, accrued expenses and other

 

 

 

current liabilities and accrued income taxes

170,474

 

 

(124,092)

 

Other liabilities

(136,780)

 

 

(30,854)

 

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

(2,082,645)

 

 

868,386

 

INVESTING ACTIVITIES:

 

 

 

Capital expenditures

(226,903)

 

 

(123,952)

 

Proceeds from disposal of property and equipment

260

 

 

1,846

 

Proceeds from sale of business

12,284

 

 

 

Purchases of investments

(13,676)

 

 

(2,709)

 

Sales and returns of investments

36,915

 

 

2,739

 

Business acquisition, net of cash acquired

(241,563)

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

(432,683)

 

 

(122,076)

 

FINANCING ACTIVITIES:

 

 

 

Increase in short-term debt, net

 

 

968

 

Proceeds from issuances of long-term debt

5,804,200

 

 

1,562,300

 

Payments on long-term debt

(4,524,973)

 

 

(2,022,586)

 

Cash for debt issuance costs

(14,473)

 

 

(12,797)

 

Payments on finance lease obligations

(8,822)

 

 

(4,871)

 

Issuances of non-recourse notes payable

11,217,298

 

 

7,947,313

 

Payments on non-recourse notes payable

(9,565,649)

 

 

(7,940,254)

 

Repurchase and retirement of common stock

(475,950)

 

 

(158,625)

 

Equity issuances

76,310

 

 

94,295

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

2,507,941

 

 

(534,257)

 

(Decrease) increase in cash, cash equivalents, and restricted cash

(7,387)

 

 

212,053

 

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

771,947

 

 

656,390

 

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

$

764,560

 

 

$

868,443

 

 

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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Contact Information

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

Customer Relations
(800) 519-1511(800) 519-1511

Marketing Inquiries
marketing_carmax@carmax.com