CarMax Inc

Good morning. My name is Carol, and I will be your conference operator today. At this time, I would like to welcome everyone to the CarMax fiscal 2021 first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to Stacey Froehle, Vice President, Investor Relations.

Thank you, Carol. Good morning. Thank you for joining our fiscal 2021 first quarter earnings conference call. I'm here today with Bill Nash, our president and CEO, Tom Reedy, our executive vice president of finance, and Enrique Mayamora, our senior vice president and CFO. Let me remind you, our statements today regarding the company's future business plans, prospects, and financial performance are forward-looking statements we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current knowledge and assumptions about future events that involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see the company's Form 8-K issued this morning and its annual report on Form 10-K for the fiscal year ended February 29, 2020, filed with the SEC. Should you have any follow-up questions after the call, please feel free to contact our Investor Relations Department at 804-747-7000. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-up. Bill?

Great. Thank you, Stacey. Good morning, everyone, and thanks for joining us. Before I get started, I wanted to comment on the significant social challenges we are facing as a country. At CARMACS, we stand united against racial injustice, hatred, and violence. I'm proud that our values have always been focused on doing the right thing and treating everyone with respect, regardless of race, ethnicity, or background. But we need to do better as a company and as a country. I want our associates, communities, and shareholders to know that we are committed to doing more. Change must start at the top and that's why I'm personally championing this to ensure we make a positive difference for the future. Now, moving to the highlights for the quarter. As you read in earnings relief this morning, our first quarter performance was significantly impacted by the coronavirus. At the peak in early April, sales were down more than 75%. During this time, 95% of the country was under shelter in place orders and approximately half of our stores were closed or under limited operations due to the mandate of public health officials and government agencies. Limited operations means the stores could sell cars, but were limited to appointment-only, curbside pickup, home delivery, or some combination of all three. Social distancing guidelines and occupancy restrictions also limited operating capacity at our open stores, including our largest stores, which prior to the virus routinely saw more than 100 customers shopping in a store on any given day. To put this further into perspective, More than 80% of the days in the first quarter were impacted by stores that were closed and or under limited operations. As of May 31st, all of our stores were open, but we still had more than 50% of our stores running with occupancy restrictions and more than 10% with limited operations as I described earlier. Since we believe our first quarter results are not indicative of future trends, we will not spend a lot of time on commentary that was included within this morning's release. However, we will provide insight into how we navigated the crisis, recent trends, and near-term strategic priorities we believe create opportunities to further distance ourselves from other used car retailers and thrive in this new environment. Let me start by saying how proud I am of our associates' response to this challenging and rapidly changing environment. They continue to live our core values every day by taking care of each other, taking care of our customers, and giving back to help our communities. At the start of the pandemic, we had to make an extremely tough decision to furlough more than 15,000 associates due to store closures and lower demand. I'm pleased to say that as of today, we've called back more than 85% of these associates, and we expect to return to normal operating levels in the very near future. We've accomplished a lot this quarter. Our teams were quick to react at the start of the pandemic implementing robust plans to reduce the risk of exposure and further spread of the virus in our stores, as well as following the mandates of public health officials and government agencies, which were changing daily. We introduced social distancing and sanitation procedures to reduce the risk for our customers and associates. We also launched new initiatives such as contactless curbside pickup, a temporary extension of our 90-day warranty, and cash payment assistance to meet the near-term needs of our customers. We quickly shifted our entire wholesale business from in-person to online auctions, and we continued to keep our appraisal lane open where possible for customers who wanted to or needed to sell their cars. In addition to keeping our stores open and selling cars to customers, we were very pleased with our margin and inventory management for both retail and wholesale in the steepest depreciation environment we've ever experienced. We also exited the quarter in an even stronger liquidity position than we had entered. Since hitting a trough in early April, we have seen our sales progressively improve as stores reopen, occupancy restrictions start to ease, and customers begin to reengage in car buying. Looking at more recent performance, we are encouraged by the trends we experienced in late May and early June. Web traffic is up year over year and reaching new highs, a reflection of the great work our marketing team is doing to capture demand in pay channels and strength in non-brand SEO performance. In addition, leads coming into our customer experience centers, or CECs, continue to increase week over week. Although we have four stores still on limited operations and more than 50% with occupancy restrictions, for the first two weeks of June, our comp unit sales have been within 10% of last year's sales, with many stores comping positively. We recognize the current environment has accelerated the shift in consumer buying behavior. Customers are seeking safety, personalization, and convenience now more than ever in how they shop for and buy a vehicle. For us, this reaffirms that our strategy is the right path forward, and the current environment creates a unique opportunity for us to accelerate our omnichannel experience and other digitally driven investments. Before the crisis, we were already making significant investments in digital merchandising, online financing, and customer lead management tools as we rolled out our new omnichannel experience. It's an experience that gives customers the opportunity to buy online, in-store, or a seamless combination of both. We expect to complete our omnichannel rollout in the second quarter and are focusing our efforts on optimizing this customer experience with new enhancements. Our proven business model and ability to act quickly allowed us to meet consumer expectations while remaining financially strong. This, in turn, enables us to continue to aggressively invest in our core business and pursue new opportunities for growth, which I'll speak to shortly. Right now, I'd like to turn the call over to Enrique, who will provide a financial update, and then Tom will provide additional detail around customer financing.