Good morning. My name is Carol, and I will be your conference operator today. At this time, I would like to welcome everyone to the CarMax Fiscal 2019 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. I would now like to turn the call over to Kathryn Kenny, Vice President, Investor Relations.
Good morning. Thank you for joining our fiscal 2019 Q1 earnings conference call. I'm here today with Phil Nash, our President and Chief Executive Officer and Tom Reedy, our Executive Vice President and CFO. Before we begin, let me remind you that 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 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 ks for the fiscal year ended February 28, 2018, filed with the SEC. Before I turn the call over to Bill, let me thank you in advance for asking only one question and getting back in the queue for your follow ups. Bill?
Great. Thank you, Catherine. Good morning, everyone. Our used unit comps for the Q1 were negative 2.3% against another tough year over year comparison. The comps were driven by lower traffic and better conversion and represented a significant improvement from the previous quarter.
Total used units grew by 1.6%. While used vehicle valuations were still higher than in last year's Q1, the year over year change in our mix adjusted vehicle acquisition cost was more favorable in the Q1 than in Q4. Industry data indicates some signs of recovery in the used vehicle marketplace since the slowdown at the end of last year. These signs include improving supply at auction and more normalized depreciation. Our website traffic grew in Q1 by 16%, similar to the previous quarter, again, due to website and SEO enhancements.
Gross profit per used unit remained consistent at $2.15 compared to 22.12 last year. We had another strong wholesale quarter with units up 9.6% year over year. This again was due to our buy rate, which rose to a multiyear first quarter high and to the growth in our store base. As we said in the past, when used vehicle prices are higher, we can offer our customers more for their vehicles, which supports our buy rate. Our gross profit per wholesale unit was flat at $10.12 in both periods.
The decrease in other gross profit was driven by lower service profits, again negatively impacted by our lower used unit comps. Remember, as we said last quarter, at lower unit volumes, we would expect service overhead to delever. We also experienced a reduction in third party finance fees due to shift in sales by finance channel. These were partially offset by increased EPP revenue. EPP revenue grew with sales, but also benefited from provider cost decreases, which created an opportunity for some margin enhancement and $4,000,000 related to the new revenue recognition standards.
Before I turn the call over to Tom, let me cover our sales mix and SG and A expense. As a percentage of our sales, 0 to 4 year old vehicles decreased to about 77% versus over 78% in the Q1 last year. Large and medium SUV and truck sales were almost 28%, up about 0.5% from both last year's Q1 and the 4th quarter. On SG and A, expenses for the quarter increased about 9% to $438,000,000 or a year over year increase of $143 per unit. There were several factors that impacted the SG and A expense, including the opening of 18 stores since the beginning of Q1 of last year, which represents a 10% growth in our base, an increase of $9,000,000 or $43 per unit related to share based compensation expense and our continuing investment in technology platforms and digital initiatives.
Now I'll turn the call over to Tom.
Thank you, Bill, and good morning, everybody. In the Q1, our sales by finance channel were primarily a result of the mix of credit applications we received. While application volume was slightly down year over year, we did see some growth at the very high and low ends of the credit spectrum. We experienced growth in CAF and Tier 3 originations. Tier 3 and Tier 2 fell due to a combination of application volume and a change in the year over year lender behavior, which we discussed last quarter.
Tier 2 accounted for 17% of sales compared with 19 percent last year. While we experienced some tightening by Tier 2 last spring, performance has been relatively stable since that time. 3rd party Tier 3 represented 10.9 percent of eZ unit sales compared to 10% last year. And CAF penetration, net of 3 day payoffs, grew to 42.9% compared to 41.9% in last year's Q1. CAF's net loans originated in the quarter grew by 8% to $1,700,000,000 versus $1,500,000,000 last year.
This was due to growth in the average amount financed, which was in line with the increase in CarMax's average selling prices and the growth in cash penetration rate on top of the modest increase in CarMax unit sales. CAF income increased 5.7 percent to $116,000,000 This was due to a combination of the 8.7% growth in average managed receivables and the continuation of modest compression in portfolio interest margin. Total portfolio interest margin was 5.7% of average managed receivables compared to 5.8% in the Q1 of last year and 5.6% last quarter. For loans originated during the quarter, the weighted average contract rate charged to customers increased to 8.4% compared to 7.8% a year ago and 7.9% in the Q4, a reflection of our response to the current interest rate environment. Ending allowance for loan losses was $134,000,000 or 1.13 percent of ending managed receivables, up slightly sequentially from the 4th quarter but down from 1.18% in the Q1 of last year.
Moving to capital structure. During the Q1, we repurchased 3,300,000 shares for 207,000,000 dollars And now I'll turn the call back over to Bill.
Thanks. During the Q1, we opened 3 stores, 1 in Greenville, North Carolina, which was a new market for us and then 2 in existing markets, Dallas and Miami. In the Q2 of fiscal 2019, we plan to open another 3 stores. Our second store in the Albuquerque market, which is in Santa Fe, opened earlier this month. The other stores will open in Macon, Georgia, which is a new market for CarMax and in our existing Oklahoma City market.
You will note that there has been a decrease in non comp store contribution relative to recent quarters. This was due to a change in mix and the timing of store openings. As I mentioned earlier, our website traffic continues to grow, while we are improving the customer experience and growing leads through a variety of enhancements. This quarter, for example, we continue to make improvements to the speed and technical performance of the site. In addition, we expanded and improved our personalized vehicle recommendations throughout the site.
We also released the capability for customers search based on the desired monthly payment. We continue to leverage our new CRM system. We're testing new ways to communicate with customers such as text slots, text messaging and appointment alert reminders. This allows us to improve the shopping experience and connect with the customers on their terms. As you know, over the last couple of years, we placed a great deal of focus on the development and testing of new customer experiences such as finance preapproval, home delivery, online appraisals and a new expedited pickup test.
Many customers have now tested each of these products, both individually and in various combinations. These tests have allowed us to learn how to best build the features to meet their needs. In addition, we continue to improve the features as consumer behaviors and expectations change. Our next step is to combine all these pieces into a comprehensive e commerce experience that is comparable to our in store experience. Because customers are now able to do more digitally before they come to the store, we're also empowering our associates with new tools and training to leverage the customers' digital progress, making it simpler, easier and faster for them to complete their purchase.
In the next few quarters, we plan to take this comprehensive experience to new markets and learn how to best operationalize it in a scalable way. We will provide more information on these tests in future quarters. Now we will be happy to take your questions.
And our first question this morning comes from Matt Sasse from Goldman Sachs. Please go ahead.
Thanks so much and good morning. My question relates to credit. You spoke about the increase in the rates you're charging for cash at retail both year over year and sequentially. In addition to the fact that we've got kind of a firm underlying used car price, can you talk about what impact that might be having on demand to the extent that it raises the effective price of the car a bit more than the underlying type market would?
Good morning, Matt. You're talking about the impact that the interest rate rise may have on the demand for the used cars?
Exactly.
Yes. So while I think it's a factor, I believe that the bigger factors the used car consumer is interested in monthly payments and bigger factors that drive the monthly payment are the purchase price, the down payment and the term. The small movements in credit rate don't have a significant as a significant impact as those other three items.
Are you seeing given that
the average price seems like it's still rather firm and the market is still tight, are you seeing any change in the other 2? Or is it potentially impacting mix in any way?
No. We're not seeing any market change in regards to that.
Got you. Thank you so much. Sure.
Our next question comes from Brian Nagel from Oppenheimer. Please go ahead.
Hi, good morning.
Good morning, Brian.
Congratulations on a winning this quarter.
Thanks.
So my question with regard to the used car business. So clearly, there was a significant pickup acceleration here in fiscal Q1 and Q4. Bill, in your prepared comments, you talked about, I guess, less you mentioned less pricing pressure. So the question I have is, was that it? As you look at this quarter and going from a negative 8 to a negative 2, call it, was the absolute primary factor less pricing pressure?
If not, what were the other factors? And then as we think about the pricing dynamic, I guess this is maybe a similar follow-up to Matt's question, but how did that progress through the quarter? And how should we think about it so far here in fiscal Q2?
Okay, Brian, good question. So I think the best way to talk about this is to first start talking about what I talked about in the Q4. So in the Q4, we had higher acquisition prices. We talked about the spread was unfavorable between late model used and the new. We obviously had a tough comparison.
We also talked about there was a post election top from the prior year. We also saw there was a more supply the prior year on large SUVs, more affordable ones. So there was a litany of things, but certainly the higher acquisition price and that spread was a major call out. And what I would tell you is, it's still there's still a large spread year over year on acquisition, although it is trending in the right direction. I also think that if you look at the consumer price index, it looks like new cars are holding their value, have started to hold their value again better than used cars, which started in this quarter.
So I think both of those helped this quarter. And again, we're still continuing to work on a lot of our initiatives and make progress on. So we have another quarter of that, that I think helps benefit. And then there's other unknown things like what competitors are doing, how they're pricing that kind of thing. So again, I think this quarter, there's a lot of noise similar to last quarter, but some of the trends, some of the more macro trends are trending in favorable direction for us.
Got it. Thanks for all the detail. Sure.
Our next question is from Craig Kennison from Baird. Please go ahead.
Hey, good morning. Thanks for taking my question. You mentioned lower traffic and better conversion as more activity moves online. That's been the trend. I'm curious about any updates to changes in your store staffing model that you're experimenting with and whether there's any opportunity to broaden any of those experiences to or experiments to change your cost structure there?
Yes. That's a good question, Craig. In previous calls, I've talked about some of the waste initiatives that we've been looking at, and we've been focused on stuff that goes right into cost of goods sold, and we've also been focused on stuff with SG and A. And under SG and A, one of the things we've been focused on is better workforce utilization. And we've made changes over the last year on how better to leverage our workforce.
And with technology advancements, we will continue to make sure that we're taking steps to better leverage our workforce. So that's still work in progress at this point.
Our next question comes from Sharon Zackfia from William Blair. Please go ahead.
Hi, good morning. I have one quick question and then a real question. So, Catherine, forgive me. The one quick question was just on the marketing spend. It looked relatively flattish year over year.
I didn't know if that was timing or if marketing is just going to be more constrained this year in general. And then secondarily, I'm just wondering if, on the delivery pilots you're doing or anything related to e commerce, if the credit characteristics of the customer are any different than your in store customers?
Okay, Sharon. On the marketing spend, there was some timing there. So I think the way you should think about that is, it will be similar when you look at it on a year over year basis, it should be similar on a per unit basis. So there was some timing at play there. On the delivery pilot, you're asking, have we seen any different mix in our credit customers?
I'm just wondering if the credit characteristics of that customer are materially different at all from your in store customers.
Yes. In general, as we looked at this over time, Sharon, there has tended to be a little bit more skewed towards lower credit. And as you'd expect, people are less desiring to see your values face to face. But we don't have any it's not big enough break at this point to talk about anything Yes. And I think that's it's too new because this is a different
Yes. And I think that's what Tom is speaking to is more relevant to the preapproval process, not necessarily the whole delivery experience. I mean, we're seeing where customers are the customers that take us up on it are looking for convenience and or they just can't physically for whatever reason get to the stores. But as far as overall mix of customers that take that versus coming to the stores, we haven't seen any big difference at this point.
Our next question comes from Scot Ciccarelli from RBC Capital Markets. Please go ahead.
Good morning, guys. Hi. I know you guys don't do a whole lot on the forecast side, but based on everything you see, are there any reasons logical reasons in your view why used vehicle values would not assume a more normalized depreciation curve now that we're, call it, closing in on a year away from the all those lost vehicles from the flooding last year? Yes. Scott, I'd like to really speak to this.
In this Q1, like I said in my opening remarks, we did see a more normalized depreciation curve. Although it's starting at a much higher price point, just given what happened at the end of last year with the hurricanes, that kind of thing. So but as far as going forward, it's I would be expecting I don't know. I just know that in the Q1, we've seen a return to more normalized depreciation. Understood.
Okay. Scott, I do think that we would expect to continue to see the supply of vehicles from everything we understand. Supply of vehicles will still continue to roll into the auction lanes, which obviously will have an effect on acquisition prices. That makes sense. Okay.
Thanks guys. Sure.
Our next question comes from Seth Basham from Wedbush Securities. Please go ahead.
Thanks a lot and good morning. Good morning. My question is around online lead growth. As I've asked about in recent quarters, could you give us some commentary on whether or not continue to have double digit lead growth online and the quality of those leads?
Yes. So Seth, we do continue to have double digit lead growth. Our website traffic right now, the majority of the growth is being driven by SEO, which we've obviously talked about several quarters now and the improvements that we're making there. As far as the lead quality, it's similar to last quarter. The mix is similar.
So there was no real change in the mix of leads. And the leads specific types are performing like they have in the past, whether they come online or whether they come through the store.
Got it. And just as a follow-up to that then, if you're talking about similar level of lead growth and similar level of quality, what drove the improved conversion
this quarter in your view?
Well, we did have more actual traffic, web traffic this year. And then I think the stores continue I talked in our opening comments about the training and the tools that we're giving associates to better enable them to progress the customer. So I think it's a combination of store execution, but I do think it's also increased traffic coming to the website. Thank you.
Our next question comes from Mike Montani from Moffett. Please go ahead.
Hi, thanks. This is Yani Alexio on for Mike. I was wondering if you can please help us understand maybe how you think about getting the comps to accelerate with the multichannel initiative that you have in place, maybe discuss the home delivery and appraisal and what you learned from the pilot and how feasible it is to roll that out further?
Well, a lot in that question. Look, we're focused on driving comps. We're continuing to grow store base, so we'll grow the business that way. But we're really focused on continuing to leverage our existing footprint and reach customers in ways that we haven't previously been able to reach. So I think the initiatives that we've been working on will help us leverage our infrastructure in ways that we haven't, and we should be able to continue to drive mid single digit comp growth across the enterprise.
So we feel good about that.
Okay. And maybe have you considered accelerating market penetration because there's still 40% of the country where you have no presence, while maybe some of your competitors are pretty rapid at growing their footprint nationwide?
Yes. So it's going to be a combination. We are very comfortable at the pace of which we're opening new stores in this 13% to 16% range because it also allows us to focus on the execution of the business. But we also feel like we can increase market penetration just through our existing footprint for the reasons that I cited in the earlier question. So we're focused on both.
Okay. Thank you.
Thank you.
Our next question comes from John Murphy at Bank of America. Please go ahead.
Good morning, guys. Maybe kind of just to follow-up to that and just thinking about the sort of the installed base of stores and the online efforts. Just curious if you think that there may be markets above and beyond sort of the smaller markets you're getting into, in the window you're talking about that might be much larger than the 600,000 MSA. And just curious, is there kind of a strategy here to stay and go into smaller markets? Or is it just where the opportunity is right now?
And that as we go 1, 2, 3 years out, large MSAs might make sense? And also as we think about the store base, is there the potential over time to maybe call some inefficient stores and leverage our online efforts a lot more to create greater productivity in markets?
Yes, John. We're while this year, we're opening up more stores in the small MSAs. That's just a function of the property that we got. You'll see us still opening up stores in larger markets. To your point, we're only reaching about 70% of the population.
And there's a lot of large markets that we can continue to add additional stores. So while there have been more in small markets, will be more in small markets this fiscal year, it's more a factor of timing. And you'll see us going continue to put more stores in larger markets in the future as well.
And then just in the existing store base, as the base develops over time, would you ever consider in some markets shrinking the store base because you might be able to get a lot more efficient with your online efforts?
Yes. At this point, I don't see the need to do that. I mean, we obviously evaluate all our stores. We're pleased with all of our stores. We haven't never had to shut one.
The performance has been good. And keep in mind, we just opened up our 100 and 92nd store. So it's not like we have 100 and 100 and 100 of stores or 1000 of stores. I feel really good about where the stores are placed and being able to leverage those in that infrastructure, which I think is really important when you're looking to sell large volume vehicles like we do.
Great. Very helpful. Thanks.
Our next question comes from John Healy from Northcoast Research. Please go ahead.
Thank you. Bill, I want to ask a little bit about the
wholesale business. In the last few quarters, this business has done exceptionally well in terms of units. And was just trying to understand, I know you mentioned the buy rates up, but how are you guys growing that business as much as you are with the, call it, the traffic in the stores kind of down? And is there a decoupling there that's kind of more permanent? And how should we think about the wholesale business kind of growing more long term for you guys?
And I used to think it was just more related to kind of the comps measuring the traffic, but just trying to think about that business for the next couple of years?
Yes, John. The way I think about wholesale, over the long period of time, wholesale and retail should grow, I would say, roughly similarly. Now you've seen you've covered us long enough that you know that in certain quarters, one may be up, one may be down or over multiple quarters, certainly wholesale has been performing very nicely, which is a benefit to the diversified model. When retail sales may be down, wholesale may pick you up a little bit. And what I would tell you is, I think it's a factor of 1, one of the things I said in the opening remarks is, obviously, with prices at an all time high, that certainly helps us because we can continue to put more vehicle I mean, more money on the customers' vehicles, which bumps that buy rate up.
But I would also tell you, it also goes to the execution and the improvements that we've made on making sure that we can react quickly to market, making sure that we understand the market factors quickly. So there's an execution piece at the store level where I think they're doing a better job than they've ever done. So I don't think you should think that, hey, this is always going to outgrow the retail. I think I still have the long term view that over the long term, both of them will grow about the same.
Fair enough. And just along that lines, when you look at that customer that's come in, are they is there any change in converting them into purchasing car with you guys? Is it a similar ratio? Or has that evolved over the last year or 2 any different than we've seen in the past?
No, that's pretty similar.
Okay. Thank you so much and great quarter.
Thanks, John.
Our next question comes from James Alberty from Consumer Edge. Please go ahead.
Good morning. Thanks for taking my question and congratulations as well. If I may, on the EPP comments that you had earlier, just want to unpack a little bit what you think is driving the lower provider costs? And if you can shed a little bit more detail or light on the accounting adjustment. I don't recall you mentioning the same adjustment in the Q4.
I just want to understand kind of what's going on there with in terms of the recognition of revenues in that business? Thanks.
Yes, sure, Jamie. And as you might imagine, they're a bit intertwined. The reason that we are able to get some cost reductions from our providers on EPP revenue is that those plans have been exceeding their expected performance from a cost kind of benefit perspective for the last several vintages, I guess, is the way to describe it, which means that there's room to either decrease the pricing or take a little bit more margin. This quarter, we realized some cost benefits. We believe we're able to take a little bit more margin for the shareholders and not impact penetration, which turned out to be the case.
And so that's where that growth arose from. As far as the accounting, it is arising from the new revenue recognition standard, which has a very an immaterial impact on our core business accounting, but it does have some impact on extended plan revenues. So our vendor agreements that I referenced before provide for payments to CarMax if the long term performance of those plans exceed certain thresholds and certain of those plans and certain of those vintages are exceeding those thresholds. In the past, when those payments came to us, we just recorded them as when we received the check. But under the new accounting standard, we have to estimate the amount that we expect to receive, record it as a receivable and then true it up each quarter based on the circumstances at the time.
So that $4,000,000 that you see represents the true up of that receivable for what we learned during the quarter during the Q4 I mean, I'm sorry, during the Q1. Also, we put up we added a minor receivable of about $13,000,000 after tax on the balance sheet for recognition of this phenomenon, if you will. So the $4,000,000 like our loan loss reserves, we will have to evaluate this on a go forward basis. And we'll plan to disclose any material adjustments to that expected receivables so investors can discern which revenue relates to activity in the current period versus payments that were in for prior vintages. I think that will just make it a little bit more clear.
But it is real dollars. It's money that we expect to collect on a cash basis just relates to plans that are already out there and in place.
Thank you for that detail. If I may, just a clarification on the performance that you noted, it was a little bit better than the providers in your sales perhaps were expecting. Is there any mix related driver to that? Just trying to get a sense of
I don't think it's a mix related thing. I think it's just that the overall performance is better than they had priced to.
Got it. Understood. Thank you again.
Thank you.
Our next question comes from Armintas Sinkevicius from Morgan Stanley. Please go ahead.
Good morning. Thank you for taking the call.
The recent performance for Carvana has been pretty incredible. And I know you've invested quite a bit in the customer experience capabilities. So just curious if you could compare and contrast their approach versus the capabilities you have. And if that if you decided to go down that path, a similar path that they have gone down, what are some steps you'd have to do to adjust the business model or tweaks because it seems like you have many of those capabilities already in house?
Yes. Like I said in my opening remarks, we've been testing different pieces of the capability, whether it's online finance, online appraisals, and we've been doing it somewhat in isolation, somewhat in combination. And now our focus is really bringing all that together in a comprehensive e commerce package that we can roll out and continue to adapt it as the customers' expectations continue to change. So we feel really good about all that. And I think it complements our existing base and our infrastructure.
It allows us to provide certainly, it gives us an advantage to deliver exceptional customer service, whether it's online, whether it's they want to do a mix of the online versus in store or if they want to come all into the store. I don't want somebody to have to hit our website and they immediately have to decide right then, I either want home delivery or I don't want home delivery. I want the customer to progress on their terms. And if partway through this, I want home delivery, I want it to be an easy, smooth transaction. So we're going to let the customer drive the process however they want to drive it versus, okay, we've got one solution for one type of customer, and that's what we're focused on.
Got it. And what has been your experience with regards to the transportation of vehicles as far as the cost benefit there?
Well, I would tell you, we're probably one of the biggest transporters of vehicles. We probably move close to 2,000,000 cars a year. So we're very familiar with transportation. I think we have an excellent logistics system, which we are heavily focused on continuing to make that even better through investments. And I think that it's a it has been and will continue to be a big differentiator for us.
Thank you.
Thank you.
Our next question comes from Rick Nelson from Stephens. Please go ahead.
Thanks. Good morning. So I'm curious if you're seeing any difference in website traffic or store traffic in markets where you're competing with these online home delivery concepts?
Yes, Rick. So what I can tell you is if I look at the large markets where competitors are making headway, I would tell you we're also making headway. So there's no direct correlation to any type of impact. We just don't see it. So again, we feel good about where we are in those markets.
Thanks and good luck.
Thanks, Rick.
Our next question comes from David Whiston from Morningstar. Please go ahead.
Thanks. Good morning. Just want to get a little more understanding on the big picture of what went on this quarter because you're saying your comps are down due to macro pricing factors, which I assume means having new vehicle incentives, but used pricing was also up. So can you help me reconcile that? And then kind of related maybe is there high used demand in certain vehicle segments that's skewing used pricing upward?
No. I think we have a bit of carryover from the spike in prices from last fall. So you have a starting higher price. We saw normal depreciation, but you're starting from the higher price. And when I say normal depreciation cycle, the year actually starts off with some appreciation because of sales that generally happen in the tax time.
So that's different than what we saw last year's Q1 where it was more of a flat environment. You didn't really see any appreciation. So you have a little bit of a double hit on the acquisition cost in that. You still have the residual leftover from what we experienced in the fall. Added to that, you have some appreciation that we saw from the normal seasonal appreciationdepreciation.
So that acquisition price, if you mix adjust it, it is a little bit more favorable than it was the Q1. So that's trending in the right direction. The other thing that I cited was the spread between new and used, that had gotten smaller. New cars last quarter with their incentives has actually lost more value than used cars, which is kind of atypical. During this quarter, we started to see where that it looks like that's turning back to normal where new cars hold their value a little bit more.
So there's a lot of noise going on with this for the quarter.
Is it fair to say you're expecting pretty sharp falloffs as soon as this quarter, though, due to the hurricane tailwind going away?
Well, it's hard to say. I mean, I would have thought that it would have happened a little bit quicker. But considering that we had a normalized appreciation and depreciation cycle, it's really hard to say. I would say that to my comment earlier, we think supply is going to continue to increase. If supply continues to increase, then that will continue to lower the prices of used vehicles.
Our next question comes from Brian Nagel from Oppenheimer. Please go ahead.
Hi, good morning again. So my follow-up question also on the used car business. We noticed a continued decline in that Tier 2 penetration, recognizing that some of this is out of your hands and it's reflective of market conditions. But you have recently made changes to your lending group within that bucket. So how should we think about that co order sales going forward?
Are you referring to Tier 2?
That's correct.
Yes. I think we're always looking at that group. We think we believe that there's a value in having a portfolio of lenders. And some of the experience we had last year and into the Q1 of last year is evidence of why it's important to have a group of lenders. But as I mentioned in my prepared comments, we did see a deterioration in performance.
We define performance as sales volume to the applications that, that group sees or that those lenders see. And so we did see a deterioration in performance after the Q1 of last year. Since that time, it's been pretty consistent. In fact, modestly better than it was in recent quarters. But so on a go forward basis, I can't tell you how our partners are going to behave.
It's going to be dependent on the marketplace and what they're seeing in their portfolios. Obviously, we'll continue to pay attention to it. We'll continue to try to manage and optimize it, but things have been pretty stable in the last three quarters.
Brian, are you still there? I think we lost Brian. Operator, are there any more questions?
We have no one in queue at this time. I'll turn the call back over for any closing remarks.
All right. Well, listen, before I close, I do want to take a moment to recognize Cliff Wood, who's been our Chief Operations Officer. He's retiring next month. He has been with CarMax for more than 24 years. I've had the privilege to work with him for 21 of those years.
He's been instrumental in building our industry leading operations. He's been a key champion for our social focused culture, and we all wish him the best in the future. As always, I also want to thank our 25,000 associates that are out there for what they do every single day, how they take care of each other, our customers and their communities. And I want to thank you all for joining the call today and for your interest in CarMax, and we will talk again next quarter. Thank you.