Strategy And Responsibility Overview
Strategy and Responsibility Overview 2021
Forward-Looking Statements Our statements today regarding the company’s future business plans, prospects, and 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 our 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, 2021 filed with the SEC. Ca rMa x Confidential
Company Overview Strategy Corporate Governance ESG Focus Compensation & Risk Management Ca rMa x Confidential
CarMax is Positioned for Growth 1 Leader in massive, highly fragmented market, with ongoing opportunity to gain share 2 Differentiated scale, technology, data and talent drive significant competitive advantage 3 Omni-channel strategy enhances most customer-centric offering in used auto industry 4 Expanding reach in the used auto ecosystem through investments, acquisitions, and strategic partnerships to drive growth and widen our competitive moat 5 Strong, diversified operating and financial model delivers sustainable shareholder value 4
CarMax is the Largest Buyer and Seller of Used Autos from and to Consumers in the U.S. Retail Used Auto Sales CarMax 752K Technology & Data Advantages Key Statistics 300M 19bn Peer 1 Digital Interactions Annually FY ’21 Net Sales Peer 2 1M 27,000 8M 11% Peer 3 Credit Applications Annually Peer 4 Peer 5 Peer 6 Peer 7 CarMax FY21 vs Public Peers in CY2020 Associates Vehicles Valued Annually FY’10 – FY ’20 Revenue CAGR 2M 16% Vehicles Transported Annually FY’10 – FY ’20 EPS CAGR The powerful integration of our online and in-person experiences gives us access to the largest addressable market in the used auto industry 5
Unmatched National Footprint and Infrastructure 220 Locations Nationwide Scale of physical footprint, inventory and logistics provide speed and cost advantages 6
Long-Term Nationwide Market Share Growth 0- to 10-Year-Old Vehicles Expected market share growth driven by leading position and opportunity to capture the largest total addressable market for buying and selling used autos, due to the breadth of our capabilities, our footprint and our brand 50% increase from CY20 3.1% 3.4% 3.4% 5.0% 3.7% 3.5% CY16 CY17 CY18 CY19 CY20 CY25E Growth through penetration in current markets, new stores, geographic expansion and online innovation 7
Company Overview Strategy Corporate Governance ESG Focus Compensation & Risk Management Ca rMa x Confidential
Enhancing the Most Customer-Centric Offering on the Market Independent Allows customers to engage with us how, where & when they want, giving us the largest total addressable market Customers’ data is secure and comes with them as they transition across channels Omni-channel transactions (a ) represented 55% of sales in latest quarter, up 600bps from prior year quarter Online retail sales (a ) accounted for 9% of retail unit sales in the latest quarter, compared to 3% in the prior year quarter Revenue from online transactions (b), including retail and wholesale unit sales, was 2.2B, or approximately 28% of net revenues in the latest quarter, compared to 18% of net revenues in the prior year quarter Omnichannel Up Close Remote Omni-Channel Strategy With Help Ability to offer a seamless, personalized experience in-person and online is a key differentiator (a) An onl ine retail unit sale is defined as a sale where the customer completes all four of these major tra nsactional a ctivi ties remotely: reservi ng the vehicle; financing the vehicle, i f needed; tra ding-in or opting out of a tra de i n; and, creating a remote sales order. An omni-channel sale is defined as a sale where a customer completes one or more of these major tra nsactional items. (b) Revenue from online tra nsactions is defined as revenue from retail sales that qualify for a n online retail sale, as well as any EPP a nd third-party fi nance contribution, wholesale sales where the winning bid was a n onl ine bid and all revenue earned by Edmunds. 9
History of Solid Execution with Meaningful Growth Ahead Retail Wholesale CAF Edmunds Continued penetration of largest addressable market within the used auto industry Continued enhancements of digital offerings and use of data, machine learning and AI to be more efficient and more accessible Industry-leading efficiency in vehicle sourcing makes each sale more profitable Rapid digitization of entire experience for customers and dealers Growth of online instant appraisal offer increasing retail self-sufficiency and wholesale unit sales Auctions allow us to make a profit on any car, not just those that we can retail Continued improvements in the online approval and flow process Recent renegotiation of third-party participation fees Flexibility to optimize penetration across the credit spectrum Edmunds further expands our digital footprint and brings us closer to a broader set of consumers We have had early wins in content deployment and online vehicle acquisition Significant investments in technology and talent will accelerate our omni-channel strategy 10
Expanding Our Reach in the Used Auto Ecosystem A driver of long-term growth will come from our position and unique strengths to create new products that better address needs, bridge gaps or define and claim adjacencies to our existing service offerings Service Titling Warranty Valuation Dealers Logistics Retail Merchandising Selling Customer Service Wholesale Listings Buying Financing Marketing Technology Data Customer Acquisition Processes Parts Auctions CarMax is well-positioned to create value and derive profits across the expansive used auto ecosystem 11
Driving Long-Term Growth and Shareholder Value 2 Million Combined retail and wholesale units by Fiscal Year 2026 5% Expected U.S. used auto market share in Calendar Year 2025(a) 33 Billion We expect a double-digit revenue and unit CAGR over the next 5 years, with industryleading profitability & shareholder value creation through growth and return of capital Expected revenue in Fiscal Year 2026 (a) National market share of 0- to 10-year-old used vehicles 12
Company Overview Strategy Corporate Governance ESG Focus Compensation & Risk Management
Best-in-Class Board of Directors Highly Talented and Experienced Board Possess the Key Competencies for CarMax’s Long-Term Strategy Thomas Folliard Former President and CEO of CarMax; Chairman of the Board Mr. Folliard joined CarMax in 1993 as a Senior Buyer, working his way up to CEO of the Company in 2006. During his ten years as CEO, he successfully led CarMax through the company’s establishment as a national brand. Sona Chawla Chief Growth and Innovation Officer of CDW Ms. Chawla is responsible for strategy, ecommerce, technology, operations, marketing, and product partners management. Bill Nash President and CEO of CarMax Mr. Nash oversees all aspects of the business including strategy, finance, operations, technology, marketing, and human resources. Mitchell Steenrod Former Senior VP and CFO of Pilot Travel Centers; Lead Independent Director During Mr. Steenrod’s tenure as CFO, he oversaw the technology, business development, supply chain, and legal departments. Shira Goodman Former CEO of Staples Ms. Goodman joined Staples in 1992 and held a variety of positions of increasing responsibility across management, marketing, and human resources. Mark O’Neil Former COO of Cox Automotive At Cox, Mr. O’Neil led the rebuild of the Autotrader website to be more interactive with consumers. He previously founded DealerTrack, a publicly traded provider of software, marketing and e-commerce services for automotive retailers. Peter Bensen Former CAO and CFO of McDonald’s An audit committee financial expert, at McDonald’s Mr. Bensen also oversaw the information technology, supply chain, and other support departments. Robert Hombach Former CFO and COO of Baxalta Mr. Hombach has served in a variety of roles across global healthcare companies and is an audit committee financial expert. Pietro Satriano CEO of US Foods Mr. Satriano previously served as Chief Merchandising Officer at US Foods and the President of LoyaltyOne Canada. Ronald Blaylock Founder and Managing Partner of GenNx360 Capital Partners Mr. Blaylock was previously CEO of Blaylock & Company, a full-service investment bank with considerable capital markets and finance experience. David McCreight CEO of Lulu’s Fashion Lounge Mr. McCreight is the former President of Urban Outfitters where he served as CEO of its Anthropologie Group. He focused on consumer brand distribution through digital, retail, and wholesale channels. Marcella Shinder Former Global Head of Partnerships at WeWork In her roles at WeWork, Ms. Shinder was responsible for leading a global, integrated, omni-channel marketing agenda. Previously, as Chief Marketing Officer at Nielsen Holdings, she transformed the company’s digital properties and positioned it for success as a leader in digital measurement. 14
Our Board of Directors Possesses Deep Experience Summary of Skills / Expertise Public Company Leadership (CEO, CFO or Public Directorships) Relevant Industry Experience Accounting & Finance Innovation and Disruption 9 of 12 directors Data Analytics 9 of 12 directors E-commerce 9 of 12 directors Technology & Cybersecurity Product Marketing & Media Regulatory Human Capital Management Risk Oversight Strategic Planning 11 of 12 directors 8 of 12 directors 5 of 12 directors 7 of 12 directors 8 of 12 directors 5 of 12 directors 10 of 12 directors 8 of 12 directors 12 of 12 directors 15
Key Corporate Governance Practices 2021 Governance Developments Technology and Innovation Board Committee Net Zero Emission Commitments Annual ESG Responsibility Report Published 6 17% New Independent Directors since 2017 Racial / Ethnic Diversity 83% 25% Independent Directors Women Directors 16
Management Team Dedicated to All Stakeholders Experienced and Diverse Management are Delivering on CarMax’s Long-Term Strategy Bill Nash President and Chief Executive Officer Under Mr. Na sh, CarMax has invested i n technology and digital i ni tiatives, tra nsforming itself i nto a n omni-channel l eader in the auto s pa ce. Shamim Mohammad EVP and CITO Mr. Moha mmad oversees the strategic use of technology across the compa ny to deliver revenue-generating products a nd s olutions that dri ve competitive advantages. Enrique Mayor-Mora SVP and Chief Financial Officer Mr. Ma yor-Mora is responsible for l eading the financial planning, a ccounting, treasury, i nternal a udit, i nvestor relations, ta x, real estate, procurement, a nd facilities functions for Ca rMax. Ed Hill EVP and Chief Operating Officer Mr. Hi l l oversees significant large-scale i nitiatives and productivity enhancements. Mr. Hi ll will be retiring i n January 2022. Diane Cafritz SVP, General Counsel, Chief Human Resources Officer, and Chief Compliance Officer Ms . Ca fri tz leads all of legal/compliance, human resources and asset protecti on functions, as well as corporate social responsibility. Darren Newberry SVP of Store Operations Mr. Newberry l eads execution of field operations including the sales, s ervi ce, merchandising, and customer experience center organizations. Jim Lyski EVP and Chief Marketing Officer Mr. Lys ki oversees CarMax's corporate strategy, a s well as our ma rketing and product organizations, i nnovating new ways to deliver exceptional experiences to customers and associates. He a lso oversees our Edmunds business. Jon Daniels SVP of CarMax Auto Finance Mr. Da niels is responsible for all strategic and managerial aspects of the 15bn ca ptive finance company, a s well as relationships with a ll l ending a nd a ncillary product partners. Joe Wilson SVP of Store Strategy and Logistics Mr. Wi l son leads field s trategy, i ncluding CarMa x’s a uction business and l ogistics servi ces, a nd s erves as a key l eader i n a people-first culture a cross the Company’s 225 s tores driving forward enterprise-wide, tra ns formational changes. 17
Company Overview Strategy Corporate Governance ESG Focus Compensation & Risk Management
CarMax’s Commitment to ESG When CarMax first opened its doors in 1993, we made a commitment to conduct business in an ethical, honest, and transparent way Three working groups support the strategy set by our internal ESG Leadership team: Social Responsible for overseeing efforts to ensure an inclusive workplace and strong community relations Led by our Vice President, Corporate Social Responsibility, and includes our Chief Diversity and Inclusion Officer and our Director of Community Relations Environmental We organize our approach to responsibility and sustainability around four main pillars: Putting People First Caring for Our Communities Responsible for overseeing activities illustrative of our commitment to environmental stewardship Led by our Vice President, Store Delivery and Support Services Protecting the Environment Responsible Governance and Ethics Responsible for overseeing activities related to governance and ethics Led by our General Counsel and Corporate Secretary and includes leaders from our legal and investor relations teams Ensuring Responsible Governance and Ethics 19
Putting People First Our diversity and inclusion vision is for everyone, everywhere, to have the same opportunity to reach their full potential 14 Years We hired our first Chief Diversity & Inclusion Officer in 2020 and along with our D&I Council, CarMax Diversity and Inclusion Team and Executive Steering Committee, they are responsible for fostering diversity and inclusion for our Associates, customers, and communities For FY22, we are also focused on foundational education for all associates and board members - topics covered include Empathy, Allyship, Unconscious Bias and Meaningful Actions (micro-aggressions and micro-support) IN A ROW Our CEO has also signed the CEO Action Pledge, which aims to rally the business community to advance diversity and inclusion within the workplace 5 Years 17 Years IN A ROW IN A ROW We have earned a top score of 100 on the Corporate Equality Index and are designated as a “Best Place to Work for LGBTQ Equality.” 20
Putting People First in Action: Caring for People Throughout the Pandemic When the COVID-19 crisis emerged in 2020, our approach and core values ensured we were doing the right thing to support our people and our business CarMax Caregivers Initiative Helped associates balance their work with caring for family members, particularly as schools reopened CarMax Support Pay Program Ensured associates were paid for COVID-related absences We formed a cross-functional team to manage our pandemic efforts and went the extra mile to support our associates Enhanced Medical Benefits Covered 100% of medical premiums and maintained benefit eligibility for furloughed associates Our Appreciation Program For stores that remained open in the early weeks of the pandemic, we paid a thank you bonus to those who worked 21
Caring for Our Communities CarMax and the CarMax Foundation are committed to investing in philanthropic organizations that ensure access to opportunity for everyone 75 million Allocated since 2003 given to help our communities thrive 1 million Pledge to promote equality, social justice and inclusion in FY21 68% Employee participation in virtual community programs in FY21 Our associates are the heart of The CarMax Foundation, giving their time & talents to the causes most important to them. Our matching gifts, volunteer team-builders, & board service programs provide meaningful ways for associates to make an impact 22
Protecting the Environment Our Environmental Strategy Avoid and reduce emissions through energy conservation measures Apply on and off-site renewable energy generation Implement renewable energy procurement strategies, including renewable supply contracts and power purchase agreements Purchase verified and socially beneficial offsets, as needed Significant recycling programs for tires, batteries and oil Open new stores designed to reduce electricity usage We actively look for more efficient ways to use resources and reduce our environmental impact As a result, we recently announced our commitment to achieving net zero greenhouse gas emissions (GHG) by 2050 and a 50% reduction in GHG emissions by 2025, compared with our 2018 baseline 23
Ensuring Responsible Governance and Ethics Our Board and management have adopted a commitment to sound corporate governance that seeks to further our commitment to integrity while ensuring effective enterprise risk management Data Security & Privacy As an auto retailer and financial institution, we are required to collect a significant amount of sensitive information Our fundamental principle of integrity is reflected in the way we serve our customers, treat each other, and deliver our products We take the responsibility to protect sensitive data seriously and maintain a comprehensive program staffed by welltrained and experienced cybersecurity and privacy professionals We rely on our fair and responsible business practices, our annual code of business conduct training, and regular benchmarking and improvements to our compliance and ethics program to maintain our culture of integrity To our knowledge no information security breach has resulted in a material compromise of our customers’ sensitive information 24
Responsibility Reporting & ESG Governance We publish our Responsibility Report annually, which is available at socialresponsibility.carmax.com Our Responsibility Report includes a comprehensive discussion of the initiatives and programs we have implemented to support our commitment to having a positive impact on our people, communities, and the environment Several of the metrics and narrative disclosures in the report align with the guidance provided by the Sustainability Accounting Standards Board (“SASB”) for the Consumer Goods Sector 25
Company Overview Strategy Corporate Governance ESG Focus Compensation & Risk Management Ca rMa x Confidential
CarMax Maintains a Pay-for-Performance Philosophy 96% Say-on-Pay Approval in 2021 84% of Target Total Direct Compensation of Management was Tied to CarMax Performance Pay-for-performance philosophy ties a significant portion of executives’ total direct compensation to attainment of strategic goals and multi-year stock price appreciation The Compensation & Personnel Committee engages an independent, third-party compensation consultant to obtain unbiased data, analysis and advice Compensation is designed to attract, retain and motivate executives to drive our long-term success 27
The Board’s Oversight of Risk Management Our Board Leadership Structure Supports CarMax’s Risk Oversight Function Board Economy, competition, shareholder relations, finance and strategy Audit Financial reporting, compliance and ethics, legal and regulatory issues Nominating & Governance Corporate social responsibility, environmental and sustainability matters, government affairs and reputation Technology & Innovation Information technology, cybersecurity, business continuity Compensation & Personnel Human capital management and compensation practices 28
“Our purpose is to drive integrity by being honest and transparent in every interaction.” Bill Nash, Chief Executive Officer Ca rMa x Confidential
CarMax is the Largest Buyer and Seller of Used Autos from and to Consumers in the U.S. 5. The powerful integration of our online and in -person experiences gives us access to the. largest addressable market . in the used auto industry. CarMax. Peer 1. Peer 2. Peer 3. Peer 4. Peer 5. Peer 6. Peer 7. 752K CarMax FY21 vs Public Peers in CY2020. 11%
Unit-V Generic competitive strategy:- Generic vs. competitive strategy, the five generic competitive strategy, competitive marketing strategy option, offensive vs. defensive strategy, Corporate strategy:- Concept of corporate strategy , offensive strategy, defensive strategy, scope and significance of corporate strategy
2 Walmart 2013 Global Responsibility Report 2 Executive summary 20 Social responsibility 50 Environmental responsibility 70 Company responsibility 94 Local responsibility Message from Mike Duke Michael T. Duke, President and Chief Executive Officer Together, we are doing big things. I am proud to share our 2013 Global Responsibility Report with you because of what
2 Walmart 2013 Global Responsibility Report 2 Executive summary 20 Social responsibility 50 Environmental responsibility 70 Company responsibility 94 Local responsibility Message from Mike Duke Michael T. Duke, President and Chief Executive Officer Together, we are doing big things. I am proud to share our 2013 Global Responsibility Report with you because of what
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Good Strategy Good Strategy Execution Good Management 17 Illustration Capsules 1.1. Starbucks' Strategy in the Specialty Coffee Industry 8 1.2. Microsoft and Red Hat: Two Contrasting Business Models 16 2. Leading the Process of Crafting and Executing Strategy 22 What Does the Strategy-Making, Strategy-Executing Process Entail? 24
