MANAGEMENT REPORT AND ANALYSIS OF THE FINANCIAL SITUATION AND OPERATING RESULTS

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is provided as a supplement to, and should be
read in conjunction with, our audited consolidated financial statements, the
accompanying notes and the MD&A included in our Annual Report on Form 10-K for
the fiscal year ended February 28, 2022 ("fiscal 2022"), as well as our
consolidated financial statements and the accompanying notes included in Item 1
of this Form 10-Q. Note references are to the notes to consolidated financial
statements included in Item 1. All references to net earnings per share are to
diluted net earnings per share.  Certain prior year amounts have been
reclassified to conform to the current year's presentation.  Amounts and
percentages may not total due to rounding.

OVERVIEW

CarMax is the nation's largest retailer of used vehicles. We operate in two
reportable segments: CarMax Sales Operations and CarMax Auto Finance
("CAF"). Our CarMax Sales Operations segment consists of all aspects of our auto
merchandising and service operations, excluding financing provided by CAF. Our
CAF segment consists solely of our own finance operation that provides financing
to customers buying retail vehicles from CarMax. Our consolidated financial
statements include the financial results related to our Edmunds Holding Company
("Edmunds") business, which does not meet the definition of a reportable
segment. For purposes of our MD&A discussion, amounts related to that business
are discussed in combination with our CarMax Sales Operations segment. Separate
discussion of these amounts is not considered meaningful for the purpose of
gaining an understanding of our business, as the significant drivers of these
operations in total are consistent with those of our CarMax Sales Operations
segment. Where appropriate, specific amounts related to non-reportable segments
have been disclosed for informational purposes.

CarMax Sales Operations
Our sales operations segment consists of retail sales of used vehicles and
related products and services, such as wholesale vehicle sales; the sale of
extended protection plan ("EPP") products, which include extended service plans
("ESPs") and guaranteed asset protection ("GAP"); and vehicle repair service. We
offer competitive, no-haggle prices; a broad selection of CarMax Quality
Certified used vehicles; value-added EPP products; and superior customer
service. Our omni-channel platform, which gives us the largest addressable
market in the used car industry, empowers our retail customers to buy a car on
their terms - online, in-store or an integrated combination of both. Customers
can choose to complete the car-buying experience in-person at one of our stores;
or buy the car online and receive delivery through express pickup, available
nationwide, or home delivery, available to most customers.

Our customers finance the majority of the retail vehicles purchased from us, and
availability of on-the-spot financing is a critical component of the sales
process. We provide financing to qualified retail customers through CAF and our
arrangements with industry-leading third-party finance providers. All of the
finance offers, whether by CAF or our third-party providers, are backed by a
3-day payoff option.

From May 31, 2022, we operated 231 used car stores in 108 U.S. TV markets. As of this date, the wholesale auctions that were previously held at many of our used car stores were taking place virtually.

CarMax Auto Finance
In addition to third-party finance providers, we provide vehicle financing
through CAF, which offers financing solely to customers buying retail vehicles
from CarMax. CAF allows us to manage our reliance on third-party finance
providers and to leverage knowledge of our business to provide qualifying
customers a competitive financing option. As a result, we believe CAF enables us
to capture additional profits, cash flows and sales. CAF income primarily
reflects the interest and fee income generated by the auto loans receivable less
the interest expense associated with the debt issued to fund these receivables,
a provision for estimated loan losses and direct expenses. CAF income does not
include any allocation of indirect costs.  After the effect of 3-day payoffs and
vehicle returns, CAF financed 39.3% of our retail used vehicle unit sales in the
first three months of fiscal 2023. As of May 31, 2022, CAF serviced
approximately 1.1 million customer accounts in its $16.05 billion portfolio of
managed receivables.

Management regularly analyzes CAF's operating results by assessing the
competitiveness of our consumer offer, profitability, the performance of the
auto loans receivable, including trends in credit losses and delinquencies, and
CAF direct expenses.

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Revenues and Profitability
The sources of revenue and gross profit from the CarMax Sales Operations segment
and other non-reportable segments for the first three months of fiscal 2023 are
as follows:

      Net Sales and      Gross Profit
    Operating Revenues


[[Image Removed: kmx-20220531_g1.jpg]][[Image Removed: kmx-20220531_g2.jpg]]
A high-level summary of our financial results for the first quarter of fiscal
2023 as compared to the first quarter of fiscal 2022 is as follows (1):

                                                                                            Change from Three
                                                                 Three Months Ended         Months Ended May
(Dollars in millions except per share or per unit data)             May 31, 2022                31, 2021

Income statement information

 Net sales and operating revenues                               $      9,311.6                         21.0  %
 Gross profit                                                   $        875.4                         (5.3) %
 CAF income                                                     $        204.5                        (15.4) %
 Selling, general and administrative expenses                   $        656.7                         18.5  %
 Net earnings                                                   $        252.3                        (42.2) %
Unit sales information
 Used unit sales                                                       240,950                        (11.0) %
 Change in used unit sales in comparable stores                          (12.7)    %                       N/A
 Wholesale unit sales                                                  186,307                          2.7  %

Information per unit

 Used gross profit per unit                                     $        2,339                          6.1  %
 Wholesale gross profit per unit                                $        1,029                          0.4  %
 SG&A as a % of gross profit                                              75.0     %                   15.1  %

Information per share

 Net earnings per diluted share                                 $         1.56                        (40.7) %
Online sales metrics
Online retail sales (2)                                                     11     %                      3  %
Omni sales (3)                                                              54     %                     (2) %
Revenue from online transactions (4)                                        31     %                      7  %


(1)  Where applicable, amounts are net of intercompany eliminations.
(2)  An online retail sale is defined as a sale where the customer completes all
four of the following activities remotely: reserving the vehicle; financing the
vehicle, if needed; trading-in or opting out of a trade-in; and creating an
online sales order.
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(3)  An omni sale is defined as a sale where customers complete at least one of
the four activities listed above online.
(4)  Where applicable, amounts are net of intercompany eliminations. Revenue
from online transactions is defined as revenue from retail sales that qualify as
an online retail sale, as well as any related EPP and third-party finance
contribution, wholesale sales where the winning bid was taken from an online bid
and all revenue earned by Edmunds.

Refer to the “Operating results” section for more details on our revenues and profitability.

Liquidity

Our primary ongoing sources of liquidity include funds provided by operations,
proceeds from non-recourse funding vehicles, and borrowings under our revolving
credit facility or through other financing sources. In addition to funding our
operations, this liquidity was used to fund the repurchase of common stock under
our share repurchase program, our store growth and the Edmunds acquisition,
which was completed during the second quarter of fiscal 2022.

Our current capital allocation strategy is to focus on our core business,
including investing in digital capabilities and the strategic expansion of our
store footprint, pursue new growth opportunities through investments,
partnerships and acquisitions and return excess capital to shareholders. Given
our continued strong business results, the strength of the credit markets and
our solid balance sheet, we believe we have the appropriate liquidity, access to
capital and financial strength to support our operations and continue investing
in our strategic initiatives for the foreseeable future.

Strategic Update and Future Outlook
Our omni-channel experience provides a common platform across all of CarMax that
leverages our scale, nationwide footprint and infrastructure and empowers our
customers to buy a vehicle on their terms. We recognize that there has been an
accelerated shift in consumer buying behavior. Customers are seeking
personalization, convenience and safety in how they shop for and buy a vehicle
more than ever. Our omni-channel platform empowers customers to buy a car on
their own terms, whether completely from home, in-store or through an integrated
combination of online and in-store experiences. Our diversified business model,
combined with our omni-channel experience, is a unique advantage in the used car
industry that firmly positions us to continue growing our market share while
creating shareholder value over the long-term.

We continue to focus our efforts on optimizing and enhancing the customer
experience. During the first quarter of fiscal 2023, we enabled online
self-progression for all of our retail customers. All customers are now eligible
to complete an online retail sale independently if they choose. In the first
quarter of fiscal 2023, online retail sales accounted for 11% of retail unit
sales, consistent with the previous quarter and up from 8% in the prior year
quarter. Omni sales represented approximately 54% of retail sales, down slightly
from 55% in the previous quarter and 56% in the prior year quarter. Online, omni
and in-person sales can vary from quarter to quarter depending on consumer
preferences and how they choose to interact with us. While we expect our online
and omni sales to grow over time, our goal is to provide the best experience
whether in-store, online or a combination of the two.

Revenues from online transactions were $2.9 billionor approximately 31% of net revenue in the first quarter of fiscal 2023, which is in line with the prior quarter and up from 24% in the prior year quarter.

We purchased approximately 362,000 vehicles from consumers and dealers during
the first quarter of fiscal 2023, up 6% from the prior year quarter. This
includes approximately 17,000 vehicles through MaxOffer, our digital appraisal
product for dealers. We leverage the Edmunds sales team to open new markets and
sign up new dealers for MaxOffer. For the first quarter of fiscal 2023, our
self-sufficiency rate remained above 70%. The success of our online instant
appraisal offer continues to strengthen our leadership position as the largest
used vehicle buyer from consumers.

Nearly two-thirds of our finance customers start their financing process online.
With our financing offer product in our online checkout process, eligible
customers can apply and accept finance offers without needing the assistance of
an associate to submit a credit application over the phone or in store. In
addition, our finance based shopping capability, available to most customers,
enables our customers to see personalized finance terms from multiple lenders
across the full inventory of vehicles on our website. During the first quarter
of fiscal 2023, we further enhanced this experience by testing additional
capabilities, including enabling real-time decisioning as well as the ability
for a customer to pre-qualify for financing with no impact to their credit
score. These enhancements are currently available to approximately 25% of our
online customers, and we anticipate scaling nationwide during the rest of the
year.

Our investments in the near term will focus on our customer experience, vehicle
acquisition and marketing. Our plans to grow vehicle acquisition include
attracting new customers and pursuing partnerships as we expand our appraisal
offerings to dealers. As we continue enhancing our online experience and
offerings, we believe it is important to educate customers about our
omni-channel platform and to differentiate and elevate our brand. For fiscal
2023, we expect our marketing spend per unit to be at least as much as fiscal
2022. We believe we are well positioned to continue gaining market share through
our marketing
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strategies, which aim to drive customer growth by building brand awareness and affinity and acquiring buyers and sellers in the marketplace.

In order to execute our long-term strategy, we plan to continue investing in
various strategic initiatives to increase innovation, specifically with regards
to customer-facing and customer-enabling technologies, as well as marketing. We
are also focused on ensuring we are efficient in our spend, targeting specific
areas where we expect to achieve more efficiencies and leverage, such as our
CECs and stores. Our use of data is a core component of these initiatives and
continues to be a strategic asset for us as we leverage data to enhance the
customer experience and increase operational efficiencies.

For fiscal 2023, we would expect to require an increase beyond the 5% to 8%
range of gross profit growth to lever SG&A as a percentage of gross profit. This
is primarily driven by the timing of strategic investments and growth-related
costs, as well as heightened inflationary pressures. While we expect to remain
in investment mode over the next few years, we expect our leverage point to be
lower after fiscal 2023.

We expect our diversified model, the scale of our operations, our investments
and omni-channel strategy to provide a solid foundation for further growth. As a
result, we have set the following long-term targets, which were disclosed in our
Annual Report on Form 10-K for fiscal 2022:

•Sell between 2 million and 2.4 million vehicles through our combined retail and
wholesale channels by fiscal 2026.
•Generate between $33 billion and $45 billion in revenue by fiscal 2026.
•Grow our nationwide share of the age 0- to 10 used vehicle market to more than
5% by the end of calendar 2025.

These ranges include our assessment of macroeconomic factors that could cause continued volatility in consumer demand.

In calendar 2021, we estimate we sold approximately 4.0% of the age 0- to
10-year old vehicles sold on a nationwide basis, an increase from 3.5% in
calendar 2020. We estimate we sold approximately 4.9% of the age 0- to 10-year
old vehicles sold in the current comparable store markets in which we operate in
calendar 2021, an increase from 4.3% in 2020. Based on external data, we gained
market share from January through April, the latest period for which title data
is available. We believe we are well positioned to deliver profitable market
share gains in any environment. Our strategy to increase our market share
includes focusing on:

•Delivering a customer-driven, omni-channel buying and selling experience that
is a unique and powerful integration of our in-store and online capabilities.
•Opening stores in new markets and expanding our presence in existing markets.
•Hiring, developing and retaining an engaged and skilled workforce.
•Improving efficiency in our stores and CECs and our logistics operations to
reduce waste.
•Leveraging data and advanced analytics to continuously improve the customer
experience as well as our processes and systems.
•Utilizing advertising to drive customer growth, educate customers about our
omni-channel platform and to differentiate and elevate our brand.

As of May 31, 2022, we had used car stores located in 108 U.S. television
markets, which covered approximately 86% of the U.S. population. The format and
operating models utilized in our stores are continuously evaluated and may
change or evolve over time based upon market and consumer expectations. During
the first three months of fiscal 2023, we opened one store, and during the
remainder of the fiscal year we plan to open nine stores.

While we execute both our short- and long-term strategy, there are trends and
factors that could impact our strategic approach or our results in the short and
medium term. For additional information about risks and uncertainties facing our
company, see "Risk Factors," included in Part I. Item 1A of the Annual Report on
Form 10-K for the fiscal year ended February 28, 2022.

CRITICAL ACCOUNTING ESTIMATES

For more information on critical accounting policies, see “Critical Accounting Estimates” in the MD&A included in Item 7 of the Annual Report on Form 10-K for the year ended. February 28, 2022.


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RESULTS OF TRANSACTIONS – CARMAX SALES TRANSACTIONS AND OTHER NON-REPORTABLE SEGMENTS

TURNOVER AND OPERATING REVENUES

                                                      Three Months Ended May 31
(In millions)                                     2022                2021         Change
Used vehicle sales                        $     7,014.5            $ 6,157.3        13.9  %
Wholesale vehicle sales                         2,116.5              1,374.4        54.0  %
Other sales and revenues:
Extended protection plan revenues                 116.5                134.2       (13.2) %
Third-party finance income/(fees), net              3.4                 (4.6)      173.9  %
Advertising & subscription revenues (1)            34.4                    -       100.0  %
Other                                              26.3                 36.3       (27.3) %
Total other sales and revenues                    180.6                165.9         8.9  %
Total net sales and operating revenues    $     9,311.6            $ 

7,697.6 21.0%

(1) Excludes intersegment sales and operating income which has been eliminated on consolidation. See note 17 for more details.

UNIT SALES

                                   Three Months Ended May 31
                                2022                  2021        Change
Used vehicles                         240,950       270,799       (11.0) %
Wholesale vehicles                    186,307       181,389         2.7  %



AVERAGE SELLING PRICES

                                 Three Months Ended May 31
                              2022                 2021        Change
Used vehicles        $      28,844              $ 22,533       28.0  %
Wholesale vehicles   $      10,996              $  7,266       51.3  %


CHANGES IN USED VEHICLE SALES IN COMPARABLE STORE

                               Three Months Ended May 31 (1)
                                     2022                   2021
Used vehicle units                            (12.7) %      99.1  %
Used vehicle revenues                          11.6  %     120.6  %



(1)  Stores are added to the comparable store base beginning in their fourteenth
full month of operation. We do not remove renovated stores from our comparable
store base. Comparable store calculations include results for a set of stores
that were included in our comparable store base in both the current and
corresponding prior year periods.

VEHICLE SALES CHANGES

                                    Three Months Ended May 31
                                        2022                 2021
Used vehicle units                             (11.0) %     100.6  %
Used vehicle revenues                           13.9  %     121.0  %

Wholesale vehicle units                          2.7  %     186.6  %
Wholesale vehicle revenues                      54.0  %     300.9  %



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USED VEHICLE FINANCING PENETRATION BY CHANNEL (BEFORE THE IMPACT OF 3-DAY
PAYOFFS)

                    Three Months Ended May 31 (1)
                          2022                   2021
CAF (2)                             43.3  %      46.7  %
Tier 2 (3)                          25.2  %      22.8  %
Tier 3 (4)                           7.1  %      10.0  %
Other (5)                           24.4  %      20.5  %
Total                              100.0  %     100.0  %



(1)   Calculated as used vehicle units financed for respective channel as a
percentage of total used units sold.
(2)  Includes CAF's Tier 2 and Tier 3 loan originations, which represent
approximately 1% of total used units sold.
(3)   Third-party finance providers who generally pay us a fee or to whom no fee
is paid.
(4)   Third-party finance providers to whom we pay a fee.
(5)   Represents customers arranging their own financing and customers that do
not require financing.

EVOLUTION OF THE USED CAR SHOP PARK

                                            Three Months Ended May 31
                                          2022                    2021
Used car stores, beginning of period      230                     220
Store openings                              1                       2
Used car stores, end of period            231                     222



In the first three months of fiscal 2023, we opened a store, which represents our entry into the New York metro market (Edison, New Jersey).

Used Vehicle Sales.  The 13.9% increase in used vehicle revenues in the first
quarter of fiscal 2023 was primarily driven by a 28.0% increase in average
retail selling price, partially offset by an 11.0% decrease in used unit sales.
The decrease in used units included a 12.7% decrease in comparable store used
unit sales. Online retail sales, as defined previously, accounted for 11% of
used unit sales for the first quarter of fiscal 2023, compared with 8% for the
first quarter of fiscal 2022.

During the first quarter of fiscal 2023, we believe a number of macroeconomic
factors impacted our used unit sales performance, including the lapping of
stimulus benefits paid in the prior year period, widespread inflationary
pressures, including challenges to vehicle affordability, and declining consumer
confidence. Comparable store used unit sales improved sequentially during the
quarter from a double-digit decline in March to a low single-digit decline in
May.

The increase in the average retail price in the first quarter of fiscal 2023 reflects higher vehicle acquisition costs resulting from strong valuations in the wholesale sector.

Wholesale Vehicle Sales. Vehicles sold at our wholesale auctions are, on
average, approximately 10 years old with more than 100,000 miles and are
primarily comprised of vehicles purchased through our appraisal process that do
not meet our retail standards. Our wholesale auction prices usually reflect
trends in the general wholesale market for the types of vehicles we sell,
although they can also be affected by changes in vehicle mix or the average age,
mileage or condition of the vehicles being sold. During fiscal 2021, our
wholesale auctions were moved to an online format in response to COVID-19 and
continue to operate completely online.

The 54.0% increase in wholesale vehicle revenues in the first quarter of fiscal
2023 was primarily due to a 51.3% increase in average selling price as well as a
2.7% increase in unit sales. Wholesale volume was impacted by an unfavorable
calendar shift in the quarter compared to the prior year quarter as well as our
decision to shift units from wholesale to retail to meet consumer demand for
lower priced vehicles. We estimate that without these two factors, our wholesale
unit growth would have been above 10%. The increase in average selling price in
the first quarter of fiscal 2023 was primarily due to increased acquisition
costs resulting from continued strong industry valuations.

Other Sales and Revenues.  Other sales and revenues include revenue from the
sale of ESPs and GAP (collectively reported in EPP revenues, net of a reserve
for estimated contract cancellations), net third-party finance income/(fees),
advertising and subscription revenues earned by our Edmunds business, and other
revenues, which are predominantly comprised of service
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department sales. The fees we pay to the Tier 3 providers are reflected as an
offset to finance fee revenues received from the Tier 2 providers. The mix of
our retail vehicles financed by CAF, Tier 2 and Tier 3 providers, or customers
that arrange their own financing, may vary from quarter to quarter depending on
several factors, including the credit quality of applicants, changes in
providers' credit decisioning and external market conditions. Changes in
originations by one tier of credit providers may also affect the originations
made by providers in other tiers.

Other sales and revenues increased 8.9% in the first quarter of fiscal 2023,
reflecting the addition of Edmunds' revenue and an improvement in net
third-party finance income, partially offset by a decrease in EPP revenue and a
decline in new vehicle sales. Net third-party finance income improved as a
result of lower Tier 3 originations. The decline in new car sales was driven by
the divestiture of our remaining new car franchise in fiscal 2022. EPP revenues
decreased 13.2%, reflecting the decline in our retail unit volume.

Seasonality.  Historically, our business has been seasonal.  Our stores
typically experience their strongest traffic and sales in the spring and summer,
with an increase in traffic and sales in February and March, coinciding with
federal income tax refund season. Sales are typically slowest in the fall.

GROSS PROFIT

                                              Three Months Ended May 31 (1)
(In millions)                                 2022                   2021        Change
Used vehicle gross profit        $        563.5                    $ 597.0        (5.6) %
Wholesale vehicle gross profit            191.7                      185.8         3.1  %
Other gross profit                        120.2                      141.7       (15.1) %
Total                            $        875.4                    $ 924.5        (5.3) %



(1)   Amounts are net of intercompany eliminations.

GROSS PROFIT PER UNIT

                                                                          Three Months Ended May 31 (1)
                                                                     2022                                2021
                                                            $ per                               $ per
                                                           unit(2)                %(3)         unit(2)               %(3)
Used vehicle gross profit                                $   2,339              8.0          $  2,205              9.7
Wholesale vehicle gross profit                           $   1,029              9.1          $  1,025             13.5
Other gross profit                                       $     499             66.6          $    523             85.4



(1)   Amounts are net of intercompany eliminations. Those eliminations had the
effect of increasing used vehicle gross profit per unit and wholesale vehicle
gross profit per unit and decreasing other gross profit per unit by immaterial
amounts.
(2)   Calculated as category gross profit divided by its respective units sold,
except the other category, which is divided by total used units sold.
(3)   Calculated as a percentage of its respective sales or revenue.

Used Vehicle Gross Profit.  We target a dollar range of gross profit per used
unit sold. The gross profit dollar target for an individual vehicle is based on
a variety of factors, including its probability of sale and its mileage relative
to its age; however, it is not primarily based on the vehicle's selling
price. Our ability to quickly adjust appraisal offers to be consistent with the
broader market trade-in trends and the pace of our inventory turns reduce our
exposure to the inherent continual fluctuation in used vehicle values and
contribute to our ability to manage gross profit dollars per unit. Gross profit
per used unit is consistent across our omni-channel platform.

We systematically adjust individual vehicle prices based on proprietary pricing
algorithms in order to appropriately balance sales trends, inventory turns and
gross profit achievement. Other factors that may influence gross profit include
the wholesale and retail vehicle pricing environments, vehicle reconditioning
and logistics costs, and the percentage of vehicles sourced directly from
consumers through our appraisal process. Vehicles purchased directly from
consumers generally have a lower cost per unit compared with vehicles purchased
at auction or through other channels, which may generate more gross profit per
unit. In any given period, our gross profit may also be impacted by the age mix
of vehicles sold, as older vehicles are generally more profitable. We monitor
macroeconomic factors and pricing elasticity and adjust our pricing accordingly
to optimize unit sales and profitability while also maintaining a competitively
priced inventory.
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Used vehicle gross profit decreased 5.6% in the first quarter of fiscal 2023,
driven by the 11.0% decrease in total used unit sales, partially offset by the
$134 increase in used vehicle gross profit per unit. We continue to focus on
striking the right balance between covering cost increases, maintaining margin
and passing along efficiencies to consumers to support vehicle affordability.

Wholesale Vehicle Gross Profit. Our wholesale gross profit per unit reflects the
demand for older, higher mileage vehicles, which are the mainstay of our
auctions, as well as strong dealer attendance and resulting high dealer-to-car
ratios at our auctions. The frequency of our auctions, which are generally held
weekly or bi-weekly, minimizes the depreciation risk on these vehicles. Our
ability to adjust appraisal offers in response to the wholesale pricing
environment is a key factor that influences wholesale gross profit.

Gross margin for wholesale vehicles increased by 3.1% in the first quarter of fiscal 2023, mainly due to the 2.7% increase in wholesale unit sales.

Other Gross Profit.  Other gross profit includes profits related to EPP
revenues, net third-party finance income/(fees), advertising and subscription
profits earned by our Edmunds business, and other revenues. Other revenues are
predominantly comprised of service department operations, including used vehicle
reconditioning. We have no cost of sales related to EPP revenues or net
third-party finance income/(fees), as these represent revenues paid to us by
certain third-party providers. Third-party finance income is reported net of the
fees we pay to third-party Tier 3 finance providers. Accordingly, changes in the
relative mix of the components of other gross profit can affect the composition
and amount of other gross profit.

Other gross profit decreased 15.1% in the first quarter of fiscal 2023,
primarily driven by a decline in service department margins as well as a
decrease in EPP revenues, as discussed above, partially offset by the addition
of Edmunds' gross profit of $20.0 million and improvement in net third-party
finance income, as discussed above. The $30.9 million decline in service
department profits was driven by deleverage resulting from the decline in retail
unit sales as well as inflationary pressure.


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General and administrative costs

COMPONENTS OF SG&A FEES AS A PERCENTAGE OF TOTAL SG&A FEES

                        Three Months Ended May 31, 2022
                     [[Image Removed: kmx-20220531_g3.jpg]]

COMPONENTS OF SG&A EXPENSES COMPARED TO PREVIOUS PERIOD (1)

                                                                               Three Months Ended May 31
(In millions except per unit data)                                   2022                2021               Change

Compensation and benefits: Compensation and benefits, excluding share-based compensation expense

                                                         $     345.3           $  284.2                  21.5  %
Share-based compensation expense                                       22.2               38.4                 (42.1) %
Total compensation and benefits (2)                             $     367.5           $  322.6                  13.9  %
Occupancy costs                                                        65.8               50.6                  30.2  %
Advertising expense                                                    88.9               72.5                  22.7  %
Other overhead costs (3)                                              134.5              108.4                  24.0  %
Total SG&A expenses                                             $     656.7           $  554.1                  18.5  %
SG&A as % of gross profit                                              75.0   %           59.9  %               15.1  %



(1)   Amounts are net of intercompany eliminations.
(2)   Excludes compensation and benefits related to reconditioning and vehicle
repair service, which are included in cost of sales. See Note 11 for details of
share-based compensation expense by grant type.
(3) Includes IT expenses, non-CAF bad debt, insurance, preopening and relocation
costs, charitable contributions, travel and other administrative expenses.

SG&A expenses increased 18.5% in the first quarter of fiscal 2023. Factors
contributing to the net increase include the following:
•$61.1 million increase in compensation and benefits expense, excluding
share-based compensation expense, driven by increased staffing and wage
pressures as well as the inclusion of Edmunds in the current quarter.
•$26.1 million increase in other overhead costs, driven by investments to
advance our technology platforms and support our strategic initiatives, as well
as growth related costs.
•$16.4 million increase in advertising expense driven by our previously
communicated investment in advertising spend as well as last year's lower level
of spend in the first quarter given our tight inventory position and robust
consumer demand.
•$16.2 million decrease in stock-based compensation expense, primarily related
to cash-settled restricted stock units, as the expense associated with these
units was primarily driven by the change in the company's stock price during the
relevant periods.

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Interest Expense.  Interest expense includes the interest related to short- and
long-term debt, financing obligations and finance lease obligations. It does not
include interest on the non-recourse notes payable, which is reflected within
CAF income.

Interest expense increased to $28.8 million in the first quarter of fiscal 2023
compared with $20.5 million in the first quarter of fiscal 2022. The increase
primarily reflected higher outstanding debt balances in the current quarter,
including the $700 million term loan issued in October 2021 and a higher
outstanding revolver balance, as well as higher interest rates.

Other Expense (Income). Other expense was $2.1 million in the first quarter of
fiscal 2023 compared with income of $25.6 million in the first quarter of fiscal
2022. The decrease was primarily due to net gains on an equity investment
recorded during fiscal 2022.

Income Taxes.  The effective income tax rate was 25.1% in the first quarter of
fiscal 2023 versus 23.0% in the first quarter of fiscal 2022. The increase in
the effective income tax rate was primarily driven by the difference in excess
tax benefit related to settlements of share-based awards.

RESULTS OF OPERATIONS – CARMAX AUTO FINANCE

CAF income primarily reflects interest and fee income generated
by CAF's portfolio of auto loans receivable less the interest expense associated
with the debt issued to fund these receivables, a provision for estimated loan
losses and direct CAF expenses. Total interest margin reflects the spread
between interest and fees charged to consumers and our funding costs. Changes in
the interest margin on new originations affect CAF income over time. Increases
in interest rates, which affect CAF's funding costs, or other competitive
pressures on consumer rates, could result in compression in the interest margin
on new originations. Changes in the allowance for loan losses as a percentage of
ending managed receivables reflect the effect of changes in loss and delinquency
experience and economic factors on our outlook for net losses expected to occur
over the remaining contractual life of the loans receivable.

CAF's managed portfolio is composed primarily of loans originated over the past
several years. Trends in receivable growth and interest margins primarily
reflect the cumulative effect of changes in the business over a multi-year
period. Historically, we have sought to originate loans in our core portfolio,
which excludes Tier 2 and Tier 3 origination, with an underlying risk profile
that we believe will, in the aggregate result in cumulative net losses in the 2%
to 2.5% range (excluding CECL-required recovery costs) over the life of the
loans. Actual loss performance of the loans may fall outside of this range based
on various factors, including intentional changes in the risk profile of
originations, economic conditions (including the effects of COVID-19) and
wholesale recovery rates. Current period originations reflect current trends in
both our retail sales and the CAF business, including the volume of loans
originated, current interest rates charged to consumers, loan terms and average
credit scores. Loans originated in a given fiscal period impact CAF income over
time, as we recognize income over the life of the underlying auto loan.

CAF also originates a small portion of auto loans to customers who typically
would be financed by our Tier 3 finance providers, in order to better understand
the performance of these loans, mitigate risk and add incremental profits.
Historically, CAF targeted originating approximately 5% of the total Tier 3 loan
volume. During the first quarter of fiscal 2022, we increased our Tier 3 loan
volume beyond our target of 5% of total Tier 3 loan volume to 10% by the end of
the first quarter of fiscal 2022. Additionally, in the second quarter of fiscal
2022, CAF began to originate loans in the Tier 2 space on a test basis. Any
future adjustments in Tier 2 and Tier 3 will consider the broader lending
environment along with the long-term sustainability of the change. These loans
have higher loss and delinquency rates than the remainder of the CAF portfolio,
as well as higher contract rates.

CAF income does not include any allocation of indirect costs. Although CAF benefits from some indirect expenses, we have not allocated any indirect costs to CAF to avoid making subjective allocation decisions. Examples of indirect costs not allocated to CAF include retail store expenses and corporate expenses.

See note 4 for additional information on CAF revenues and note 5 for information on automobile loans receivable, including credit quality.

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SELECTED CAF FINANCIAL INFORMATION

                                                 Three Months Ended May 31
(In millions)                           2022                   % (1)      2021           % (1)
Interest margin:
Interest and fee income      $       346.7                   8.8        $ 310.3        8.8
Interest expense                     (48.8)                 (1.2)         (65.8)      (1.9)
Total interest margin        $       297.9                   7.5        $ 244.5        6.9
Provision for loan losses    $       (57.8)                 (1.5)       $  24.4        0.7
CarMax Auto Finance income   $       204.5                   5.2        $ 

241.7 6.8

(1) Annualized percentage of average total managed receivables.

CAF ORIGINATION INFO (AFTER IMPACT OF 3 DAY REFUNDS)

                                                 Three Months Ended May 31
                                                 2022                   

2021

Net loans originated (in millions)         $    2,446.8             $ 2,483.4
Vehicle units financed                           94,663               118,363
Net penetration rate (1)                           39.3   %              43.7  %
Weighted average contract rate                      9.0   %               9.0  %
Weighted average credit score (2)                   704                   

695

Weighted average loan-to-value (LTV) (3)           87.6   %              90.2  %
Weighted average term (in months)                  66.3                  66.3



(1)   Vehicle units financed as a percentage of total used units sold.
(2)   The credit scores represent FICO® scores and reflect only receivables with
obligors that have a FICO® score at the time of application. The FICO® score
with respect to any receivable with co-obligors is calculated as the average of
each obligor's FICO® score at the time of application. FICO® scores are not a
significant factor in our primary scoring model, which relies on information
from credit bureaus and other application information as discussed in Note
5. FICO® is a federally registered servicemark of Fair Isaac Corporation.
(3) LTV represents the ratio of the amount financed to the total collateral
value, which is measured as the vehicle selling price plus applicable taxes,
title and fees.

LOAN PERFORMANCE INFORMATION

                                                                 As of and for the Three Months Ended
                                                                                May 31
(In millions)                                                         2022                   2021
Total ending managed receivables                                $    16,052.0           $   14,465.9
Total average managed receivables                               $    15,817.0           $   14,148.7
Allowance for loan losses                                       $       458.2           $      379.5

Provision for loan losses as a percentage of receivables managed at the end

                                                              2.85   %               2.62  %
Net credit losses on managed receivables                        $        32.6           $        7.2

Annualized net credit losses as a percentage of average total receivables under management

                                                      0.83   %               0.21  %
Past due accounts as a percentage of ending managed receivables          4.06   %               2.10  %
Average recovery rate (1)                                                73.7   %               64.7  %



(1)  The average recovery rate represents the average percentage of the
outstanding principal balance we receive when a vehicle is repossessed and
liquidated, generally at our wholesale auctions. While in any individual period
conditions may vary, over the past 10 fiscal years, the annual recovery rate has
ranged from a low of 46% to a high of 71%, and it is primarily affected by the
wholesale market environment.
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•CAF Income (Decrease of $37.3 million, or 15.4% in the first quarter of fiscal
2023)
•The decrease in CAF income for the first quarter of fiscal 2023 reflects a
year-over-year swing in the provision for loan losses as discussed below.
•The increase in the provision for loan losses was partially offset by increases
in the total interest margin and average managed receivables.

•Provision for Loan Losses
•The provision for loan losses resulted in expense of $57.8 million in the first
quarter of fiscal 2023 compared with income of $24.4 million in the first
quarter of fiscal 2022.
•The current quarter provision primarily reflected the expected lifetime losses
on loans originated during the quarter, while the prior year quarter provision
reflected the continued reduction of the reserve that was established at the
start of the COVID-19 pandemic, reflecting favorable loan loss performance.
•The allowance for loan losses as a percentage of ending managed receivables was
2.85% as of May 31, 2022, compared with 2.62% as of May 31, 2021 and 2.77% as of
February 28, 2022. The increase in the allowance percentage from February
primarily reflected the effect of the previously disclosed expansion of Tier 2
and Tier 3 originations within CAF's portfolio.

•Total Interest Margin (Increased to 7.5% in the first quarter of fiscal 2023
from 6.9% in the first quarter of fiscal 2022)
•The increase in the total interest margin percentage was primarily the result
of lower funding costs as well as a $9.2 million benefit related to swaps not
designated as hedges for accounting purposes.

•Loan Origination and Performance
•The decrease in net loan originations in the first quarter of fiscal 2023
resulted from a decrease in used unit sales and the net penetration rate,
partially offset by an increase in the average amount financed.
•CAF net penetration in the first quarter of fiscal 2023 declined from the prior
year period, largely reflecting an increase in the mix of customers utilizing
outside financing.
•The weighted average contract rate for the first quarter of fiscal 2023 was
consistent with the prior year at 9.0% but increased significantly from 8.2% in
the prior quarter. This increase was primarily due to higher rates charged to
customers in response to the current interest rate environment.
•The increase in past due accounts as a percentage of ending managed receivables
for fiscal 2023 primarily reflected a return to pre-pandemic delinquency levels
as well as impacts from our new system implementation in the prior year, which
are expected to normalize during the current fiscal year.
•The recovery rate in the first quarter of fiscal 2023 was above our historical
range due to market appreciation.

PLANNED FUTURE ACTIVITIES

We anticipate opening a total of ten stores in fiscal 2023. During the first
quarter of fiscal 2023, we entered the New York City metro market. We anticipate
opening two more stores in this market in the second quarter, as well as in the
next fiscal year. We currently estimate capital expenditures will total
approximately $500 million in fiscal 2023, an increase from $308.5 million in
fiscal 2022. The increase in planned capital spending in fiscal 2023 largely
reflects long-term growth capacity initiatives for our auction, sales and
production facilities in addition to continued investments in technology. We
expect approximately 30% of our capital expenditures in fiscal 2023 will be
focused on investments in technology.

FINANCIAL CONDITION

Liquidity and Capital Resources
Our primary ongoing cash requirements are to fund our existing operations, store
expansion and improvement, CAF and strategic growth initiatives. Since fiscal
2013, we have also elected to use cash for our share repurchase program.  Our
primary ongoing sources of liquidity include funds provided by operations,
proceeds from non-recourse funding vehicles and borrowings under our revolving
credit facility or through other financing sources.

Our current capital allocation strategy is to focus on our core business,
including investing in digital capabilities and the strategic expansion of our
store footprint, pursue new growth opportunities through investments,
partnerships and acquisitions and return excess capital to shareholders. Given
our continued strong business results, the strength of the credit markets and
our solid balance sheet, we believe we have the appropriate liquidity, access to
capital and financial strength to support our operations and continue investing
in our strategic initiatives for the foreseeable future.

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We currently target an adjusted debt-to-total capital ratio in a range of 35% to
45%. Our adjusted debt to capital ratio, net of cash on hand, was at the middle
of our targeted range for the first quarter of fiscal 2023. In calculating this
ratio, we utilize total debt excluding non-recourse notes payable, finance lease
liabilities, a multiple of eight times rent expense and total shareholders'
equity. Generally, we expect to use our revolving credit facility and other
financing sources, together with stock repurchases, to maintain this targeted
ratio; however, in any period, we may be outside this range due to seasonal,
market, strategic or other factors.

Operating Activities.  During the first three months of fiscal 2023, net cash
provided by operating activities totaled $531.0 million, compared with cash used
in operating activities of $111.9 million in the prior year period. Our
operating cash flows are significantly impacted by changes in auto loans
receivable, which increased $440.7 million in the current year period compared
with $644.9 million in the prior year period.

The majority of the changes in auto loans receivable are accompanied by changes
in non-recourse notes payable, which are issued to fund auto loans originated by
CAF. Net issuances of non-recourse notes payable were $297.4 million in the
current year period compared with $596.7 million in the prior year period and
are separately reflected as cash from financing activities. Due to the
presentation differences between auto loans receivable and non-recourse notes
payable on the consolidated statements of cash flows, fluctuations in these
amounts can have a significant impact on our operating and financing cash flows
without affecting our overall liquidity, working capital or cash flows.

As of May 31, 2022, total inventory was $4.69 billion, representing a decrease
of $433.5 million compared with the balance as of the start of the fiscal
year. The decrease was primarily due to a decrease in vehicle units as well as a
decrease in the average carrying cost of inventory as a result of a decline in
acquisition costs.

The change in net cash provided by (used in) operating activities for the first
three months of the current fiscal year compared with the prior year period
reflected the changes in inventory and auto loans receivable, as discussed
above, as well as changes in accounts receivable, partially offset by changes in
accounts payable as well as a decrease in net earnings when excluding non-cash
expenses, which include depreciation and amortization, share-based compensation
expense and the provisions for loan losses and cancellation reserves.

Investing Activities. During the first three months of fiscal 2023, net cash
used in investing activities totaled $99.0 million compared with $63.1 million
in fiscal 2022. Capital expenditures were $94.8 million in the current year
period versus $59.1 million in the prior year period. Capital expenditures
primarily included store construction costs and store remodeling expenses as
well as investments in technology. We maintain a multi-year pipeline of sites to
support our store growth, so portions of capital spending in one year may relate
to stores that we open in subsequent fiscal years.

As of May 31, 2022, 151 of our 231 used car stores were located on owned sites
and 80 were located on leased sites, including 24 land-only leases and 56 land
and building leases.

Financing Activities.  During the first three months of fiscal 2023, net cash
used in financing activities totaled $455.0 million compared with net cash
provided by financing activities of $475.1 million in the prior year
period. Included in these amounts were net issuances of non-recourse notes
payable of $297.4 million compared with $596.7 million in the prior year period.
Non-recourse notes payable are typically used to fund changes in auto loans
receivable (see "Operating Activities").

During the first three months of fiscal 2023, cash used in financing activities
was impacted by stock repurchases of $163.0 million as well as net payments on
our long-term debt of $585.9 million. During the first three months of fiscal
2022, cash provided by financing activities was impacted by stock repurchases of
$133.8 million as well as net payments on our long-term debt of $2.6 million.

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TOTAL DEBT AND CASH AND CASH EQUIVALENTS

(In thousands)                                                       As of May 31      As of February 28
      Debt Description (1)                 Maturity Date                 2022                2022
Revolving credit facility (2)     June 2024                        $      660,500    $        1,243,500
Term loan (2)                     June 2024                               300,000               300,000
Term loan (2)                     October 2026                            699,388               699,352
3.86% Senior notes                April 2023                              100,000               100,000
4.17% Senior notes                April 2026                              200,000               200,000
4.27% Senior notes                April 2028                              200,000               200,000
                                  Various dates through February
Financing obligations             2059                                    522,414               524,766
                                  Various dates through October
Non-recourse notes payable        2028                                 15,764,161            15,466,799
Total debt (3)                                                     $   18,446,463    $       18,734,417
Cash and cash equivalents                                          $       95,313    $          102,716


(1) Interest is payable monthly, except for our Senior Notes, which are payable semi-annually.

 (2)  Borrowings accrue interest at variable rates based on the Eurodollar rate
(LIBOR), or successor benchmark rate, the federal funds rate, or the prime rate,
depending on the type of borrowing.
(3)  Total debt excludes unamortized debt issuance costs. See Note 10 for
additional information.

Borrowings under our $2.00 billion unsecured revolving credit facility are
available for working capital and general corporate purposes, and the unused
portion is fully available to us.  The credit facility, term loans and senior
note agreements contain representations and warranties, conditions and
covenants.  If these requirements are not met, all amounts outstanding or
otherwise owed could become due and payable immediately and other limitations
could be placed on our ability to use any available borrowing capacity.  As of
May 31, 2022, we were in compliance with these financial covenants.

See Note 10 for more information on our revolving credit facility, term loans, senior notes and funding obligations.

CAF auto loans receivable are primarily funded through our warehouse facilities
and asset-backed term funding transactions. These non-recourse funding vehicles
are structured to legally isolate the auto loans receivable, and we would not
expect to be able to access the assets of our non-recourse funding vehicles,
even in insolvency, receivership or conservatorship proceedings. Similarly, the
investors in the non-recourse notes payable have no recourse to our assets
beyond the related receivables, the amounts on deposit in reserve accounts and
the restricted cash from collections on auto loans receivable. We do, however,
continue to have the rights associated with the interest we retain in these
non-recourse funding vehicles.

As of May 31, 2022, $12.13 billion and $3.63 billion of non-recourse notes
payable were outstanding related to asset-backed term funding transactions and
our warehouse facilities, respectively. During the first three months of fiscal
2023, we funded a total of $1.75 billion in asset-backed term funding
transactions.  As of May 31, 2022, we had $1.77 billion of unused capacity in
our warehouse facilities.

We have periodically increased the limit of our storage facilities over time as our store base, sales and CAF loans have grown. See note 10 for more information on warehouses.

We generally repurchase the receivables funded through our warehouse facilities
when we enter into an asset-backed term funding transaction. If our
counterparties were to refuse to permit these repurchases it could impact our
ability to execute on our funding program. Additionally, the agreements related
to the warehouse facilities include various representations and warranties,
covenants and performance triggers.  If these requirements are not met, we could
be unable to continue to fund receivables through the warehouse facilities. In
addition, warehouse facility investors could charge us a higher rate of interest
and could have us replaced as servicer. Further, we could be required to deposit
collections on the related receivables with the warehouse facility agents on a
daily basis and deliver executed lockbox agreements to the warehouse facility
agents.

The timing and amount of stock repurchases are determined based on stock price,
market conditions, legal requirements and other factors. Shares repurchased are
deemed authorized but unissued shares of common stock. In April 2022, our board
of directors increased our share repurchase authorization by $2 billion. As of
May 31, 2022, a total of $4 billion of board authorizations for repurchases was
outstanding, with no expiration date, of which $2.62 billion remained available
for repurchase. See Note 11 for more information on share repurchase activity.

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Fair Value Measurements
We recognize money market securities, mutual fund investments, certain equity
investments and derivative instruments at fair value. See Note 7 for more
information on fair value measurements.

FORWARD-LOOKING STATEMENTS

We caution readers that the statements contained in this report that are not
statements of historical fact, including statements about our future business
plans, operations, capital structure, opportunities, or prospects, including
without limitation any statements or factors regarding expected operating
capacity, sales, inventory, market share, online purchases of vehicles from
consumers, gross profit per used unit, revenue, margins, expenditures,
liquidity, loan originations, CAF income, stock repurchases, indebtedness,
earnings, market conditions or expectations with regards to the continued impact
of the COVID-19 pandemic, are forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
You can identify these forward-looking statements by the use of words such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"outlook," "plan," "positioned," "predict," "target," "should," "will" and other
similar expressions, whether in the negative or affirmative.  Such
forward-looking statements are based upon management's current knowledge,
expectations and assumptions and involve risks and uncertainties and assumptions
about future events and involve risks and uncertainties that could cause actual
results to differ materially from anticipated results. We disclaim any intent or
obligation to update these statements. Among the factors that could cause actual
results and outcomes to differ materially from those contained in the
forward-looking statements are the following:

•The effect and consequences of the Coronavirus public health crisis on matters
including U.S. and local economies; our business operations and continuity; the
availability of corporate and consumer financing; the health and productivity of
our associates; the ability of third-party providers to continue uninterrupted
service; and the regulatory environment in which we operate.

• General or regional changes WE economic conditions, including the potential impact of Russia invasion of Ukraine.

•Changes in the availability or cost of capital and working capital funding, including changes related to the asset-backed securitization market.

• Changes in the competitive landscape and/or our inability to successfully adapt to those changes.

•Events that damage our reputation or damage the perception of the quality of our brand.

•Our inability to realize the benefits associated with our omnichannel initiatives and strategic investments.

•Our inability to recruit, develop and retain associates and maintain positive associate relationships.

•The loss of key associates from our store, regional or corporate management teams or a significant increase in labor costs.

•Security breaches or other events that result in the misappropriation, loss or
other unauthorized disclosure of confidential customer, associate or corporate
information.

• Significant changes in the prices of new and used vehicles.

•Changes in economic conditions or other factors that result in greater than expected credit losses for CAF’s auto loan portfolio.

• Reduced availability or access to inventory sources or failure to quickly liquidate inventory.

• Changes in the availability of consumer credit provided by our third-party financing providers.

• Changes in the availability of Extended Protection Plan products from third-party vendors.

•Factors relating to the regulatory and legislative environment in which we operate.

•Factors relating to geographic and business growth, including the inability to manage our growth effectively.

• Failure or inability to sufficiently improve key information systems.

•The performance of third-party suppliers we rely on for key components of our business.

•The effect of various litigation.

•Adverse conditions affecting one or more automakers and automaker recalls.

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•Failure or inability to realize the benefits associated with our strategic transactions.

•The inaccuracy of estimates and assumptions used in the preparation of our
financial statements, or the effect of new accounting requirements or changes to
U.S. generally accepted accounting principles.

•The volatility of the market price of our common shares.

•Failure or inability to adequately protect our intellectual property.

•The occurrence of severe weather events.

•Factors related to the geographic concentration of our stores.


For more details on factors that could affect expectations, see Part II, Item
1A, "Risk Factors" on Page   50   of this report, our Annual Report on Form 10-K
for the fiscal year ended February 28, 2022, and our quarterly or current
reports as filed with or furnished to the U.S. Securities and Exchange
Commission ("SEC"). Our filings are publicly available on our investor
information home page at investors.carmax.com. Requests for information may also
be made to our Investor Relations Department by email to
[email protected] or by calling 1-804-747-0422, ext. 7865.  We
undertake no obligation to update or revise any forward-looking statements after
the date they are made, whether as a result of new information, future events or
otherwise.

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