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Earnings Highlights and Summary

For the first quarter of the fiscal year 2019, CarMax's net sales and operating revenues increased 5.5% to $4.79 billion compared to $4.54 billion in Q1 FY18. The Company's revenue numbers beat analysts' estimates of $4.63 billion.

CarMax's other sales and revenues increased 5.7% on a y-o-y basis, while its extended protection plan (EPP) revenues rose 8.9%, reflecting both cost decreases from plan providers and a $4.0 million benefit associated with the accelerated recognition of revenue related to extended service plans. The accelerated recognition resulted from the Company's adoption of the new revenue recognition accounting standard in Q1 FY19.

During Q1 FY19, CarMax's total gross profit increased 1.9% to $661.3 million on a y-o-y basis. CarMax's selling, general, and administrative expenses (SG&A) increased 8.6% to $438.2 million in Q1 FY19. The factors contributing to the increase included an increase of 10% in the Company's store base since the beginning of Q1 FY18, representing the addition of 18 stores; and an increase in stock-based compensation expenses of $8.9 million.

For Q1 FY19, the Company's CarMax Auto Finance (CAF) income increased 5.7% to $115.6 million. The increase reflected the combined effects of an increase in average managed receivables of 8.7% and a slightly lower total interest margin percentage. The total interest margin percentage was 5.7% of average managed receivables in the reported quarter compared to 5.8% in the year earlier same quarter.

CarMax's net earnings increased to $238.7 million, or $1.33 per diluted share, in Q1 FY19 compared to $211.7 million, or $1.13 per diluted share, in Q1 FY18. The Company's earnings surpassed Wall Street's estimates of $1.24 per share.

Operating Results

During Q1 FY19, CarMax's total used vehicle unit sales increased 1.6% to 198,398, while its comparable store used unit sales fell 2.3% on a y-o-y basis. The comparable store sales performance primarily reflected a lower store traffic, partially offset by an improved conversion.

The Company's used vehicle gross profit rose 1.7% to $439.4 million, reflecting an increase in total used unit sales of 1.6%. The Company's used vehicle gross profit per unit remained stable at $2,215 in Q1 FY19 versus $2,212 in the prior year?s comparable period.

For Q1 FY19, CarMax's total wholesale vehicle unit sales increased 9.6% to 198,398 compared to 195,273 units in Q1 FY18, primarily driven by an increase in the Company's appraisal buy rate and the growth in store base.

For Q1 FY18, CarMax's wholesale vehicle gross profit increased 9.6% to $114.7 million on a y-o-y basis, driven by the increase in wholesale unit sales of 9.6%. The Company's wholesale vehicle gross profit per unit was also stable at $1,012 in both periods. The Company's Other gross profit declined 4.6%, reflecting decreases in service profits and net third-party finance fees, partially offset by the increase in EPP revenues.

Store Update

During Q1 FY19, CarMax opened three stores. The Company added two stores in existing television markets (Dallas, Texas, and Miami, Florida), and also entered the Greenville, North Carolina television market. Subsequent to the end of the reported quarter, CarMax opened a store in Santa Fe, New Mexico, representing its second store in the Albuquerque television market.

Share Repurchase

During Q1 FY19, CarMax repurchased 3.3 million shares of its common stock for $207.4 million, pursuant to its share repurchase program. As of May 31, 2018, the Company had $809.5 million remaining available for repurchase under the current authorization.

Stock Performance Snapshot

July 11, 2018 - At Wednesday's closing bell, CarMax's stock fell 1.07%, ending the trading session at $75.72.

Volume traded for the day: 1.05 million shares.

Stock performance in the last month - up 2.57%; previous three-month period - up 25.16%; past twelve-month period - up 18.93%; and year-to-date - up 18.07%

After yesterday's close, CarMax's market cap was at $13.49 billion.

Price to Earnings (P/E) ratio was at 19.63.

The stock is part of the Services sector, categorized under the Auto Dealerships industry.

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