CarMax Inc

Ladies and gentlemen, thank you for standing by and welcome to the Q1 FY22 KMX earnings release conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Stacey Frohli. Thank you. Please go ahead.

Thank you, Shelby. Good morning. Thank you for joining our fiscal 2022 first quarter earnings conference call. I'm here today with Bill Nash, our president and CEO, Enrique Mayamora, our senior vice president and CFO, and John Daniels, our senior vice president, CAP Operations. 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 28, 2021, filed with the FCC. Should you have any follow-up questions after the call, please feel free to contact our Investor Relations Department at 804-747-0422, extension 7865. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-ups.

Phil? Great. Thank you, Stacey. Good morning, everyone, and thanks for joining us. As you read in our earnings release this morning, we delivered exceptional performance in the first quarter with record results across all aspects of our business, retail, wholesale, and auto finance, and a solid flow through to EPS. Our success reflects the continued progress we are making in our digital transformation and online experience, along with solid execution and our ongoing commitment to discipline cost management. In addition, we've benefited from the backdrop of a strong demand environment, enhanced by the impact of the most recent round of government stimulus payments. For the first quarter of FY22, our diversified business model delivered sales of $7.7 billion, up 138%, compared with the first quarter of FY21, and net earnings for diluted share of $2.63, up $2.60 from a year ago. This also represents increases of 43% and 65%, respectively, from the previous record set in the first quarter of FY20. Across our retail and wholesale channels, we sold approximately 452,000 cars, up 128% versus the first quarter last year, and a 31% increase on a two-year basis from the first quarter of FY20. We also bought 236% more cars in the first quarter this year versus last year, and 77% more compared with two years ago. As many of you know, for the past several years, our priorities and investments have focused on building an unmatched experience with a leading e-commerce platform that integrates seamlessly with our best in-class in-store experience. The result has been a massive organizational transformation that includes building a comprehensive set of digital and hybrid processes to accommodate our customers in whatever way they want to interact with us. Our progress in executing this strategy has given us a very solid start to FY22, and we remain confident in our long-term targets announced at our recent analyst day of 2 million retail and wholesale combined units sold per year and $33 billion of revenue by FY26. In our retail business, total unit sales in the first quarter were up 101%, and used unit comps were up 99% versus the first quarter last year. Compared with the first quarter of FY20, total retail unit sales were up 21%, and same-store comps were up 16%. In addition to strong unit sales, we reported $2,205 of retail gross profit per used unit for the quarter, up $268 versus a year ago, and in line with the first quarter of FY20. Given the strong demand environment for used autos and inventory constraints throughout the automotive industry, we pulled back on the expanded pricing test we introduced in the fourth quarter. We'll continue to monitor macro factors and pricing elasticity, and we'll adjust our pricing accordingly to maximize unit sales and profitability. For wholesale, Our units sold were up 187% compared with last year's first quarter and were up 50% when compared with the first quarter of FY20. Wholesale gross profit per unit increased to $1,025 compared with $978 for the same period last year and was in line with the first quarter of FY20. The strength in wholesale was primarily driven by the introduction of our instant online appraisal offering, which we rolled out nationwide on CarMax.com in February after launching on Edmunds.com last year. We also benefited from significant appreciation of used autos in the broader market. CarMax Auto Finance, or CAF, continued to deliver solid results with income of $242 million. In addition, CAF and our partner lenders delivered strong conversion in all credit tiers. john will give you some more details on that coming up here shortly overall we're extremely pleased with our performance but we know there are opportunities to be even better for example on the operational front inventory available for sale was below targeted levels throughout the entire first quarter these lower levels are the result of recent demand and the temporary covet and weather impacted production slowdown we experienced in the fourth quarter remember The fourth quarter is a time when we are ramping production ahead of the peak demand tax refund season. Our teams have done an amazing job producing inventory in the first quarter, and we expect inventory to continue to increase as we add additional production capacity at existing locations. Now, I'll turn the call over to Enrique, who will provide more information on our first quarter financial performance, and then John will share additional detail around customer financing. So, Enrique.