車美仕 (KMX) 2015 Q1 法說會逐字稿

Good morning. My name is Beth and I will be your conference operator. At this time I would like to welcome everyone to our FY15 first-quarter conference call. (Operator Instructions). Katharine Kenny, you may begin your conference.

Thank you, Beth. Good morning and thank you all for joining our fiscal 2015 first-quarter earnings conference call.

On the call with me today are Tom Folliard, our President and Chief Executive Officer, and Tom Reedy, our Executive Vice President and CFO.

Before we begin, let me as usual remind you that our statements today regarding the Company's future business plans, prospects, financial performance are forward-looking statements that 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 annual report on Form 10-K for the fiscal year ended February 28, 2014, which is filed with the SEC.

Before I turn the call over to Tom, let me mention a new addition to CarMax's Investor Relations website. As of today we have added a significant amount of historical quarterly information to the financial reports section of the website that we hope will assist you in your understanding of the Company and in developing your models. We will update that with also some information about CAF on a quarterly basis sometime in the next two weeks. We would welcome any feedback on this additional information. Tom?

Thank you, Katharine. Good morning, everyone. Thanks for joining us today. The first quarter was a terrific one for CarMax. Total revenues grew 13% to nearly $4 billion, net earnings up 16% to $169 million and earnings per share up 19% to $0.76.

Key drivers for the quarter, used unit comps increased by a little over 3% and total used units rose by nearly 10%. Our ASP was a little over 20,000 for the first time ever largely due to stronger prices we observed in the wholesale market and as evidenced by our relatively flat per unit margins.

Total wholesale units grew by 10% and gross profit per vehicle unit -- gross profit per wholesale unit grew by 7% or $67. Other sales and revenues increased 13% year-over-year due to a $9 million improvement in third-party finance fees, CAF income up 9% to approximately $95 million.

I will now turn the call over to Tom Reedy to talk about finance. Tom?

Thanks, Tom. Good morning, everybody. In the first quarter, CAF income grew 9% compared to the first quarter of fiscal 2014 and average managed receivables grew 20% to $7.4 billion. CAF's weighted average contract rate, the rate charged to customers, was 7.2% versus 7.0% in last year's first quarter. This rate continues to be relatively stable at around 7% for the past six quarters.

The allowance for loan losses grew to $75 million. This represents 1% of managed receivables which is consistent with last year. Credit losses for the quarter were moderately better than our expectations and CAF net penetration at 41% was relatively flat compared with last year's first quarter.

Net loans originated in the quarter rose 10% to $1.2 billion in line with the growth in the total used unit sales. Customers funded in the subprime space, those for which we have historically paid a discount, represented about 16% of our sales in the first quarter compared with 21% of our sales in last year's first quarter and approximately 1 point of this was related to CAF's test. Tom?

Thank you. SG&A for the quarter increased approximately 8% to $313 million. On a per unit basis, SG&A decline $39 to $2,047 per unit compared to $2,086 in the first quarter of fiscal 2014. SG&A on a per unit basis benefited from a decrease in stock-based compensation expense of $56.

During the first quarter we opened up four new stores, three in new markets for CarMax in Rochester, Dothan, Alabama and Spokane, Washington, our first store in the Pacific Northwest and one in our Harrisburg, Pennsylvania market. After the first quarter ended, we also opened a store in Madison, Wisconsin, another new market for CarMax. It is the first of four stores we plan to open in the second quarter this year.

Our comps for the quarter were driven by our growth in store traffic. Our web traffic also continued to expand significantly. For the quarter, average monthly web visits grew to over 14 million, up 25% compared to the same period last year. Visits to our mobile site represented approximately 30% of total visits while visits utilizing our mobile app represented another 13% of the total.

And with that, operator, we will open it up for questions.

(Operator Instructions). Brian Nagel, Oppenheimer.

Hi, it's Brian Nagel from Oppenheimer. Good morning. Congratulations on a real nice quarter.

Thank you.

So I thought -- I want to start with a he bigger picture question for Tom Folliard then I have a couple of smaller kind of detail questions. But the bigger picture question I have, Tom, is if I look at these results today and they were really good, as you look at the business and the environment you are operating, did something shift positively here in the first quarter fiscal of 2014 that maybe wasn't in place through last year? And maybe another way to ask the question is we think about our models and what we see here in the first quarter, how sustainable are the trends that we saw really throughout the P&L and throughout the division of this business?

First off, Brian, we didn't do anything different in the quarter. We are just trying to run a great business and execute better every day and control costs and provide a great customer experience. And I apologize that our business isn't that predictable and it's a little difficult to model because we have what I think is a terrific source of profits that are quite diversified and you see our comps are only up 3 or 4 points but over two years, they are up 20. Our wholesale has been a little behind retail for a while but that was up 10 in the quarter. CAF continues to deliver good results but there is nothing structurally different in what we did.

Our stores continue to provide a great experience for our customers and they continue to grow. And then we are opening up stores at a pace that is the fastest pace we have ever done before, opening 13 stores this year and another 13 -- I mean 13 last year and another 13 scheduled for this year. So I'd say we are just doing the things that we've said we are going to do.

Got it. And then on some of these more detailed questions, if we look at the subprime penetration which is something around 16% this year -- or I'm sorry this quarter -- down from over 20% the same quarter last year. And I know you don't manage towards this but how should we think about subprime penetration going forward?

We don't know how to think about it going forward. It's largely the result of the credit flow through our stores. We have always talked about the fact that we want to make sure our customers have access to credit at all kinds of different scales of credit. And if you look at our applicant flow, we are still at 90% of our applicants are getting an approval of some kind.

We told you last year at this time that our subprime providers had gotten a little more aggressive. We told you in the third quarter that they had pulled back a little bit and so it makes sense. It was 21% last year when we thought people were being a little more aggressive and we saw a little pull back. We were flat in the fourth quarter, we are slightly down in this quarter. It is not that surprising based on what we have told everybody. But in terms of where it comes out long-term, it is not really within our control.

Got it. And then the final question on the wholesale gross profit per wholesale vehicle, that popped up more. Was there something funny there or is that more reflective of the overall environment too?

I think that there has been there some -- if you look at all the external data on appreciation, there was some slightly higher appreciation during the quarter. That is always going to benefit our buy rate a little bit and it is always going to benefit our margins. So that is the one that I think it is only the second time we have ever been over $1,000. I didn't think it was sustainable before and I don't think it is now.

Well thanks and congrats.

Thank you, Brian.

Sharon Zackfia, William Blair.

Hi, good morning. So just two questions I guess first on the wholesale business because it was a really big surprise in the quarter how well that business did. I think it was the best quarter in a year or two in that business. Was it just external dynamics that really contributed to that? It wasn't anything different internally that you were doing that was helping kind of raise that traffic or that buy rate?

No, not a thing. You know what I have been saying and I'm glad I finally right is that I believe over time wholesale and retail will grow at a similar pace. I don't think -- they seem to almost never to be connected in the quarter. They happen to be this quarter both groups, total sales -- total retail sales grew at 10%, total wholesale sales grew at 10%. But if you remember just two or three years ago, we had wholesale sales grew 30% in the first quarter on top of 50% in the first quarter prior. So there is a lot of volatility in that business as well but I still believe over time that retail and wholesale will grow similarly over a long period of time. This quarter they happen to match up.

Are you still seeing as the market ages the wholesale business pick up as people become more familiar with that option at CarMax? And I was wondering I guess if the national advertising that you do now if you focus at all about we will buy your car and if that might help around the edges?

We have always had a piece of our advertising around we will buy your car. We did not change it in the quarter. So there is nothing different about the way we advertised or approached the business this quarter.

Okay, thank you.

So you know it came out the way it did.

All right. Thanks.

Thanks, Sharon.

John Murphy, Bank of America.

Good morning, this is Liz Suzuki on for John. The $39 per vehicle reduction in SG&A this quarter was pretty impressive. What were the major components of the cost reduction and can we expect that kind of improvement going forward?

Well, 56 of the $39 came from stock-based compensation expense so that is not necessarily a good guy. And I think at 3%-ish comps we wouldn't expect to get leverage like this. So if not for stock-based compensation expense change, I mean reduction of $56, we would not have leveraged.

Got it. Okay.

We need mid to high single digits if we are in a growth phase to leverage and we still believe that.

Got it. And would you categorize the lower subprime penetration rate this quarter as being driven more from the supply side or the demand side? In other words, are your lenders pulling back a little bit or are you seeing fewer subprime customers coming in?

Was the question on Tier 3 or on CAF? I'm sorry.

It was on subprime.

No, you need to take a step back and think about our subprime penetration is going to be a combination of factors driving it. One is the credit coming through the door and then another is the behavior of the other lenders in the system. And over time we have worked to try to build as Tom mentioned a broad spectrum of lenders so that customers have access to credit and I think we are very happy with the partners we have today. We have got nothing but praise for them.

You look at CAF penetration was flat, subprime was down a little bit. We did see a lift in sales that were funded by sources outside of our system. We did see a lift in sales funded by our Tier 2 partners which means they stepped up and took some customers that they may have declined in the past. So Tier 3 behavior is going to be a combination of what is coming through the door and what makes it down to them and finally, their behavior and their credit appetite.

And then our stores' ability to convert once we have approvals to work with and the higher -- the better the quality of the approval, in other words the lower the down payment, the better the rate, the better the chance we have of conversion. So I would expect over time those things are going to be constantly moving as lenders continue to tweak their scorecard and make adjustments based on the performance of the portfolio that they have originated just like it has been going on for the last -- the whole time we have been in business.

Yes, okay, thanks guys.

Scot Ciccarelli, RBC.

So she got Ciccarelli but missed Nagel. Interesting. A couple of questions, guys. First of all, Tom Reedy, can you give a little bit more color about your commentary regarding vehicles funded outside your system? Do you have any feel for kind of what kind of credit tiering that is on or is that just you just suspect that you are still 90% plus that your subprime penetration was down?

No, Scot, we have historically said you know 20% to 25% of our business is going to get done outside of the system. That typically means credit unions or customers who have good access to financing elsewhere or cash. And then we have said that CAF is going to run somewhere in the low 40s and that the remainder would be split between our Tier 2 and Tier 3 partners. That has moved around. This year Tier 2 -- this quarter Tier 2 was a bit higher than Tier 3. Last year Tier 3 was higher but the year before Tier 2 was higher.

So it just depends on what is coming through the door and what is going on with the individual lenders and their credit appetite at the time.

Okay, understood. And then since I have you on the line here, with the latest securitization, Tom, it looked like losses per receivable were up quite a bit in the last three months and it basically looked like recoveries had declined but that seems odd given the fact that wholesale pricing was so strong. Do you have any more detail or reasoning as to why the numbers will have shaken out the way that they did?

Not at this point, Scot. I mean it is early into that deal so I think you need to let it incubate for a little while but we can follow up with you afterwards on it if you want more -- dig into more detail.

Understood. And the last question for Tom Folliard. Tom, why do think wholesale pricing was so strong? Should we be on more of a normal depreciation curve at this point as that lack of supply has been filled in over the last couple of years? I just find it surprising that even at the Manheim level we have seen prices rising which just seems counterintuitive.

Well you know in the spring -- if this was what we would say a normal year, we would see some appreciation in the spring and then kind of a steady decline throughout the rest of the year. And this year we saw more appreciation in the spring than we are used to and lots of people attribute it to weather and pent-up demand for inventory. So we will go with that.

Understood. Thanks, guys.

Craig Kennison, Baird.

Good morning. Thanks for taking my question. I wanted to focus on your web traffic. I think you said it was up 25%. I would love to hear what is driving the strong growth in that metric?

That is a measure of traffic that has continued to grow kind of around that pace for several years now. I think there are a number of different factors. First and foremost I think we have a great website. I think we have a great search engine. I think we have done a really nice job of making sure that when customers are on our site whether it is through mobile or a desktop or a touchscreen that they have a good experience. So I think there is that.

Clearly the Internet is becoming bigger and bigger every single year as a source of information so I think customers just naturally are going to go to the web first. We continue to expand our geographic footprint so we are in more markets so we are going to get some growth there as well. Remember that is not comp; that is just total traffic.

So as we grow the Company and we add more stores and we sell more cars and we get more CarMax spokespeople on the road I would expect that number to continue to rise as well. So I don't think it is any one thing. I think it is a number of different things.

I'm curious whether you can analyze any of the traffic you are getting to improve where you choose to locate stores for example if you get a lot of traffic in Madison, Wisconsin, is that a helpful metric as you decide on your next store?

At this point we think the CarMax consumer offer works in just about any market in the US and we are very excited to go to the places that we are not but we are also very excited to continue to add stores in the places where we are. And we haven't seen that web traffic by a particular locale is indicative of where we should build the next store. We really want to go build our stores where people are. Because then they need cars and then they buy them from us.

Perfect. Thank you.

Matt Fassler, Goldman Sachs.

Thanks a lot and good morning. My first question -- thinking about wholesale and the upside that you showed there, the pricing would explain the profitability. The units in a sense were really what took off most dramatically from trend whether you compare it to the prior couple of quarters or you look at it as a percent relative to the sales of used cars.

What kind of visibility do you think you have given the trends that we saw to wholesale volumes going forward? Do you think the volume piece of this could be sustainable?

Like I said earlier, Matt, I think that wholesale volumes and retail volumes over a very long period of time will grow about the same. They seem to never be connected. They happen to be connected this time. If you think about the variables that go into -- that deliver a wholesale volume for us, it is how many customers show up at the store; of those customers how many get their car appraised; of the ones who get their car appraised, how many sell us a car? If all of those things were flat year-over-year, we should have gone up 10% because our sales went up 10%.

But they are never always flat. You know there is always movement in some of those variables. We had a strong buy rate, a little over 30% slightly up compared to the year prior and with total sales being up 10% and that being driven by foot traffic, it kind of came out the way you would think it would come out. But as I've said just on a quarter-by-quarter basis, these two things are never exactly connected.

Got it. A quick follow-up. The stock-based comp piece, can you talk about how chunky that tends to be? In other words, is that an item that is more typical for Q1 based on options timing or is it something that can be volatile as it was here in Q1 and throughout the year?

Hey Matt, it is really going to be driven off stock price. Last year in Q1 we saw the stock price appreciate. This year it didn't do so well. We have outstanding equity grants to folks that we have to account for based on changes in stock price and that is really what is going to drive it.

But you would view this as sort of an outlier move in one direction or the other it sounds like?

It is just something we are going to adjust on a regular basis based on the stock price. It is pretty much straight math.

Understood. But is this one of the bigger moves you have seen in that number to the extent that you called it out?

No, I mean we have seen it go the other direction as well.

Matt, we called it out mostly because it was a little distortive of our ability to leverage SG&A.

Got it. (multiple speakers)

We didn't want to get credit for leverage on SG&A on something that is not really under our control.

Understood. And then finally, if you think about the supply of vehicles at auction and the sources thereof, are you seeing the newer vehicles hit in a way that you can get access to them?

We have seen a few movements in our percent of sales in the first quarter by a few points over to 0 to 4 from 5 to 10 but only by 2 or 3 points so it wasn't significant. I have been saying all along I expect that supply to come back. We have historically done really well in that segment of the inventory and I expect us to do well again. But overall, there wasn't a ton of movement.

But is that the biggest move you have seen in this cycle so far, that incremental creep?

Yes, 2 or 3 points I think over the last several quarters it has been pretty flat, so yes.

Got it. Thank you so much, guys.

Seth Basham, Wedbush Securities.

Good morning. It's Seth Basham. First question for you is on third-party subprime penetration. You guys have talked about one lender pulling back in the past. Have you seen any of your other lending partners start to pull back?

I don't recall talking about one lender specific in the past and I would say that we have observed across the board in our portfolio a bit of a tightening in terms from our lenders. We look at the sales applications rate of ourselves of all of our partners and we have seen that dial back a little bit over the quarter.

Got you. Okay. And as it relates to your own subprime test, it seems to be ramping a little bit more quickly than I had anticipated. You guys still planning to complete that at the end of the year or is that ahead of schedule?

I'd say it is on track. As we said, we have done about $30 million to date and really nothing specific to report yet. It is going to take us getting a critical mass of receivables and watching those incubate for awhile before we have anything to start reporting on them. But I wouldn't read anything into the volume today.

And was there any impact at all on your CAF results from the additional subprime loans that you guys issued?

Not on the results -- I mean at this point since we are early in the process with the subprime and the expected losses are so high, it's actually a little bit of a drag on CAF earnings but it is nothing material. We have to reserve 12 months of losses out the gate as we originate those loans. And with those loans having a higher expected loss rate then our regular portfolio until we start building up a critical mass it is actually going to be a little bit of a drag on earnings but very minimal and nothing to report.

As we go forward it may have some impact on the loss provision, our average contract rate, and the overall allowance and to the extent it does become something that merits calling out we will give you that color.

Are you being extra conservative in terms of your loss provisions on the new subprime loans without the history yet?

We are being we believe appropriately conservative.

And then on wholesale, buy rate being up that is good but what about the mix of cars that you guys are buying? Have you seen the mix shift back towards older cars or are you still seeing that mix shift towards newer late-model cars?

Well wholesale is all stuff that doesn't meet our retail standards. So the mix of that product has been pretty much the same and the mix of retail I talked about earlier, a couple of points of movement but not really too much.

No, I'm just thinking about the cars you are buying from the appraisal lanes. Are you seeing a mix shift between newer used cars and older used cars?

No. And remember the cars we buy in the appraisal lane a whole bunch of them we sell at retail and then the rest go to wholesale.

Okay. And then lastly on the ASPs, obviously very strong this quarter. Were you guys anticipating the strength in the ASPs wholesale car prices this quarter to be as strong as they were? And if not, how did that benefit your retail business?

No and I never like prices going up. I'd rather have prices go down although I don't think they will. So it is the first time we have ever been over $20,000 average retail since we started the business but our margins per car were flat. So it was clearly a reflection of what the market was doing and we talked about wholesale pricing being up during the quarter and it was simply that.

And there really is -- the only benefit from a higher ASP is we get a little more on the spread when we do a CAF loan. But other than that I'd rather see us provide lower prices to customers.

Right. Okay. If I could sneak one last one in, the recovery rate --

We have got to move on there, Seth.

Okay, no problem. Thank you.

Thank you.

James Albertine, Stifel.

Great, thanks for taking the question. Congratulations on a solid quarter. So real quickly on just the small store formats just a quick update there, are there any plans within the store count openings that you suggested to incrementally add some small store formats?

And then separately I guess related, anything that you are learning from those initiatives that maybe helped glean to a more efficient superstore model?

So we have three small format stores open; only one has been open for more than a year so there is very little if anything to report other than we have some processes that needed to take place in order for those stores to work just from an operational standpoint and they are working very well. They have very small inventory. We have to move cars a little bit quicker. We have to cross train lots of our employees in those stores to be able to do multiple tasks and that stuff is all working really great.

We don't really have any results to report because we just don't have enough time under our belts with only three stores open. In this year's growth plan, we have two more of those planned, one in Lynchburg, Virginia, one in Tupelo, Mississippi. We have said we are going to get five of these open and read the results for a little while. So that is kind of where we stand.

I think there will be some learnings over time with some of the stuff I just mentioned, cross training of people and maybe the ability to run a store a little bit more efficiently but we are a long ways away from that.

Great, thank you very much. And then a quick clarification on the website, the benefits of the increase in web traffic over time, are there any transactional benefits or are you precluded from transacting still online to a degree based on state-by-state regulations?

We don't fully transact online. There isn't really a preclusion. If we wanted to really press down that path we could. We have found that customers want to test drive cars, they want to -- particularly our average car is almost four years old with almost 40,000 miles on it. We have been adding more and more capabilities for customers to do from home and they have been taking advantage of that and we are very pleased with that so far. But in the last six months we have now allowed customers to put cars on hold and make appointments online without speaking to anybody.

We still have the capability in a number of stores for customers to transfer cars, even a paid transfer by giving them a credit card online without speaking to anybody and having that car delivered. They can actually start their paperwork online, make an appointment for the sales consultant and show up with a lot of the work already done. But in terms of fully consummating the deal online, we are not doing that yet.

Great, thanks and good luck in the second quarter.

Thank you.

Rick Nelson, Stephens.

Thanks and good morning. Stephens. Tom, can you comment on store traffic? Did you see a meaningful acceleration there this quarter?

Well, we said our comps were due to store traffic. Our comps were a little over 3. I think of traffic and conversion like I mentioned wholesale earlier. I think over time that our comps will be driven partly by traffic and partly by execution increases or conversion increases. What happened over the last several years is we have had a few quarters where all of our sales increase was driven by conversion and we have had sometimes where all of it has been driven by traffic. There were times when it was about a 50-50 split and I think over a long period of time that is kind of what we expect.

It just so happened this quarter that our conversion was relatively flat and our comps were driven by traffic.

And do you think you are getting any benefit from the snowstorms that the business shifting from the fourth quarter to that March-May timeframe?

You know, that is a real difficult thing for us to measure. We have never really made a big deal out of weather. I think because we are an infrequent purchase that we don't view that we lose -- we are not like a grocery business where if you don't sell milk then you never get to sell that milk. We sell a car, people buy it once every five years and what we've seen in our history is if we miss some sales then we kind of get them back over time. But it is really hard to measure. So I wouldn't attribute anything -- we didn't attribute anything in the fourth quarter to it and we don't attribute anything in this quarter to it.

And I know you don't like to discuss weather as an issue but thanks very much and good luck.

Thank you.

David Whiston, Morningstar.

Thanks, good morning. I just wanted to -- I guess two longer-term questions. Can you give any color on -- with your cash continuing to grow so well and you are doing the share buybacks, can you disclose a minimum cash levels around the business either in dollar terms or as a percentage of revenue?

I don't think we are going to talk about it in dollar terms as a percent of revenue but we look at it more as a minimum amount of liquidity to make sure that we have ample liquidity to keep inventory in our stores, to keep CAF funded in a short-term period between securitizations etc.. We are very comfortable with our levels today --

And to build stores.

And obviously to build stores. I don't think there is anything we can really talk about as far as minimums. I would say that we are comfortable moving to a position of more leverage than we have today in the current capital structure and you see what we are doing with the stock buyback program and I won't extrapolate from there. But you've seen us before having significantly more debt than we have today and we are not uncomfortable with a level that is higher than today.

And then what hopefully is a very long-term question is what are you doing over the next year or so and today strategically in your planning to protect profits for the inevitable next recession?

I mean we are just running the business and trying to get more and more efficient each and every day. I think we learned a lot during the last recession. We significantly improved our profitability and our execution and because of those learnings we have been hyper focused on not losing that momentum. So I think our store teams are doing a fantastic job of controlling costs and trying to be more and more efficient with the customer.

We have proven to be pretty good at managing inventory across a very short timeframe and I feel very confident that we are not just sitting still in that regard, we are actually better at it than we were a couple of years ago. So I feel like working on what we do every day and trying to get better at each of those things is the best defense against a recession.

Okay, that's very helpful. Thank you.

Alex Knight, Tiger Man Management.

Hey guys, thank you for taking my questions and congratulations on a great quarter. You have said in the past that one of the main limitations on your expansion is the number of associates you can train. Can you give us some color of the ease of finding and training associates for the new stores and any progress you are making there?

Sure. We feel pretty good about where we are right now as I mentioned. Although our pace of store growth, 13 stores last year and 13 stores this year is the most number of stores we have opened as a percentage of our total store base, we have been much more aggressive at two different periods in the past. And I think we learned that those were a little bit too fast in terms of being able to hire, train, develop and have people ready to not just open new stores but to replace people in stores that they vacated.

So at this pace right now we are very analytical about how we do it. We look at each position in the store. We factor in turnover levels. We try to hire people in advance. We try to hire people regionally. If we know we have store openings coming for example in California, we are going to try to staff up in stores that are close. And I feel like we have a great group of people working on that and a pretty good training program. But again, it is something we are not satisfied with and we want to get better at every day and we are focused on that. But right now we feel in very good shape to open up the stores that we have planned.

All right. Thank you very much.

Bill Armstrong, CL King and Associates.

Good morning. Just getting back to the average selling price, I know you talked about higher overall levels of pricing but also to what extend might that have been influenced by mix particularly since you had a lower subprime penetration in the sales mix during the quarter?

Yes, I never think about mix of inventory based on levels of credit. I think of mix of inventory based on the actual cars that we sold and I mentioned there was a slight movement towards -- we said 0- to 4-year-old cars for a while now have been 70% of sales and 5- to 10-year-old cars have been 30% of sales. And remember that number -- I'm sorry -- 5- to 10-year-old cars used to be 15% a long time ago and it doubled. And then we have seen that stay relatively flat for a number of years and then this quarter we saw a couple of points movement.

So I'd say that had a little impact on the ASP but I am not sure to what extent. And I don't know what our ASP was the quarter before -- was it 19.5 -- does somebody know? 19.4 or 19.5. So it is up a few hundred dollars.

Yes, and at the auctions we are hearing a lot of off lease vehicles coming into the auctions that obviously are relatively new cars, three years old on average. Are you seeing more availability of those types of cars when you are looking for inventory at auction whether it is Manheim, Odessa, etc.?

Depending on what the lease rate was two years ago and three years ago and we have a very high lease rate right now, then you see those cars back at the auction. The truth is you always see those cars back at the auction in some shape or form but if they were leased then they come back in more of an organized lane. But it is largely driven by consumer behavior not just people who lease cars but people who buy cars and how quickly do they then trade those cars in.

And we have seen this -- we have kind of seen this act before with leases as a percent of total retail sales, I'd say being as low as 12% or 13% and as high as 30%. But that is a cycle. That happens, that goes up and down over the last 20 years multiple times. And we have never had a problem accessing inventory.

Got it, okay. And then just finally you mentioned a modest reduction in ASP penetration rate. Anything to call out there?

No, nothing really. We mentioned last quarter that our partners were making some pricing adjustments. We make pricing adjustments on that product all the time based on the performance of their portfolio. Remember that is two different third parties that do our extended service plans and they manage their business to be profitable. So we had some price changes. We saw a little decline in penetration.

Okay, great. Thank you.

(Operator Instructions). Matt Fassler, Goldman Sachs.

Thanks, I'm back. Two very quick follow-ups. First of all, could you talk about your self-sufficiency ratio just year-on-year your how it looked?

I didn't but it was around 46%, 47%. It was flattish year-over-year.

46%, 47%. Thank you. And then secondly, obviously we recently saw an IPO from a Company called TrueCar that I know has focused on being price transparency to the new dealer to the new car channel working hand-in-hand with dealers it seems but also has a product for used cars. Interested on your perspective on some of these tools. I guess this one in particular because of its profile whether you see this as an emerging trend and what your best sense is of how to deal with it?

Nobody is more transparent than us with pricing and we've never really had to use a third-party to show customers what a great offer we have at CarMax.

And is it putting any pressure on the market that you see or really no impact?

Nothing that we have seen.

Thank you.

Thank you, Matt.

There are no further questions at this time. I'll turn the call back to our presenters.

All right, thank you very much. Thanks everyone for joining us and most of all thanks to all of our associates for all you do every day and we will see you again next quarter. Thank you.

This concludes today's conference call. You may now disconnect. Thank you.