Q1 2021 Copart Inc Earnings Call
[music].
Please standby.
Good day, everyone and welcome to the Copart incorporated first quarter fiscal 2021 earnings call.
Just a reminder, today's conference is being recorded.
For opening remarks, and introductions I would like to turn the call over to Mr., John North Chief Financial Officer of Copart incorporated. Please go ahead Sir.
Thanks, and good morning.
During today's call will discuss certain non-GAAP measures, which include adjustments to reverse the effect and certain discrete income tax items foreign currency related gains. So net income taxes [laughter] they will.
Ladies accounts for stock option exercises.
A second Oncolytic a lot shares from a S U 2016, daschle or a non <unk>.
Provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures on our website under the Investor Relations line and in our press release issued yesterday the.
We believe these non-GAAP measures together with our corresponding GAAP measures, a relevant and assessing our business trends and performance.
As a result from both GAAP and non-GAAP basis.
In addition, our comments today include forward looking statements will emanating a federal securities laws, including management's current views with respect to trends opportunities uncertainties in our markets.
Including with respect to the COVID-19 pandemic.
These forward looking statements involve substantial risks and uncertainties a more to say on the risks associated with our business will refer you to the section titled risk factors in our annual report on form 10-K for the year ended July 30, Onest 2020, and he took a subsequent quarterly reports on form 10-Q any forward looking statements are made as of today and Copart has no obligation to update.
They will revise any forward looking statements.
Without all the way I will turn the call a but Jay.
Thanks, John appreciate it.
Well fiscal 2020 was a record year. Despite a pandemic as we talked a lot in the last quarter. Our people performed across the organization true what was really a year of noxious challenges but.
But a year of unknowns and we net daily we course corrected daily and I'm.
I'm happy and proud to say a.
Yeah, we had an amazing not only a record.
Year in terms of results, but in terms of accomplishments.
And Q1 of this year, a is starting strong and I believe it's indicative.
The or a head.
I was talking to a Jeff This morning, 26 years ago a.
A little so I went to New York.
And a copart became a public company and as I.
Stepped on the Street from New York and Salt for the first time, a I was amazed and when we eventually went public and I saw the inner workings a wall Street.
I was a.
Amazing I was confused and today 26 years later I can't say I understand wall Street, any better I think that's probably a good thing.
A what I do know is a great company when I see a and Copart is a great company.
Just a John are Gonna give you guys details today on the quarter, but at the highest level.
When we look at Q1, we saw a record results we saw a record sales prices and we saw a record returns for our customers.
And that bodes well for a future Copart has continued to grow over the years, a we've done that through a process of being prepared.
We've done that true excellent technology. The best system is the best technology in the industry and the best people delivering the best service in the industry and I see no reason why that's going to change.
A just three years ago.
The entire EBITDA per copart.
But a year is nearly $538 million and then this quarter, we generated over 275 million.
EBITDA and.
And we knew this is going to happen we started a campaign three and a half four years ago called 20, 2020, well, we went out and aggressively started adding land to our existing locations and opening additional new locations and then in addition to that we went out and opened up a.
A mega sites for catastrophes, all along the eastern Seaboard, and all the way over to to a across the Gulf into India Houston.
And so we've continued to be prepared we've continued to spend a big on land and we did that again not only in 2020, but in the first quarter of this year. We now have a record number of acres available to us to store cars.
And that means that we have a capacity for not just the market as it grows and will continue to do so a technology and cars, but as we continue to win a new business.
I view, our continued investment in land as a continued investment in our future.
Looking forward, we still have a large a list of acquisitions that we would like to make we won't be able to make them all a week.
I won't be able to get the zoning, we won't be able to get the deal done on the land and as many of you know on the call. Some of these a acquisitions.
Acquisitions can take three four or five years to come to fruition a but.
But we have a big pipeline and will continue to work on that as we continue to believe in our growth.
I'm happy that I'm happy to say that volume a signed is starting to return to free cobot levels actually had a little bit a traffic on the way to work. This morning, and we haven't really seen that a in six months.
So volume is is almost back to where it was part of total but not quite there yet we still don't have everybody driving a as frequently as there were a before kogan, but clearly we are starting to see a lot more miles driven.
A across the country sales still lag volume and this is obvious that back when a cold and started we were selling off inventory, even though we weren't getting bigger Simon volume now were getting larger Simon volume and a not selling out the inventory yet so in the next quarter or two I suspect will be selling.
Those vehicles often.
Could be more or less back to normal in terms of a sign that volume and sales volume in about six months.
I'm excited about some of the new changes we've made in our senior management team you heard John This morning, John has a two decade plus a experience in the automotive industry a working in automotive companies and so very excited a having him on our team I know he's excited about our future and to be part of Copart.
And a we're excited to have him a in our leadership team as CFO of Copart.
I've said this before our people and our systems have never been stronger.
And as you know, we don't think about copart in a quarter or into next year, we think about it in the next five to 10 years and I'm excited about a team that we have upgraded and build a in washed a.
Six months, our CFO, our chief marketing officer, our COO, a and Jeff leading a team I feel very good about our executive leadership team and our future for the next 10 year horizon.
So now for more details on a quarter.
I'd like to turn it over to Jeff our President.
Excellent. Thank you Jay a it's.
It's been a just a true short months since our last earnings call, but it sometimes do a word multiple years worth of a world events a transpired since then.
First line as Jay did I wanted to express how proud I am a day copart team.
It's been a mentally gratifying as an organization to be able to do our part to provide essential service to the communities. We work in around the world. We've taken very seriously the importance of adapting our procedures to keep our employees members and customers safe at the same time.
A disruption in adaptation had been substantial and continuous and will profoundly grateful for the commitment of our people to a job will about.
Our aspiration throughout the crisis has been to deliver a much more the business stabilization or business as usual, we've been committed to playing offense to improving the way, we do business and to investing in our long term future and we've done so we deployed new products and features for both internal and customer facing applications we've enhanced.
Pro quote our best in class a machine learning powered price estimation tool for our insurance carrier partners. We've grown our first to market the digital loan pay off product, we've deployed electronic signature processes and we've updated our communications technology. Among many other achievements over the course dependent.
Under will it's Jay and many other senior Copart leaders, who pre day drawn and me we had to force starts to build our business as a native digital one we've been operating exclusively online auctions since 2003 and have therefore adapted our work flow smoothly to the pandemic.
I wanted to draw out a few industry theme, we've observed over the past quarter rude about two quarters, a maybe a continuation of that means you talked about on the last call.
We continue to observe lower than baseline driving activity, but with a steady increase from the pandemic trough with a U.S. generally a recovering more quickly than some of our international markets.
The data on miles driven a is noisy depending on the source we truck. Many divorces you do Google Apple Inrix among others most of that data indicates that still relative to pre pandemic baselines. We did we are seeing a.
Much less computing traffic and retail and recreation related driving nonetheless, a meaningful sequential improvement from the from the coconut King trough.
As another guideposts, we note that the U.S. energy information administration has recently published data, indicating a GAAP consumption is down plus or minus 10% versus a year ago.
We have also seen relative increases in driving activity relative to other forms of transportation, including mass transit and ride share and ride sharing where we've seen activity down from 50%.
As for the other important drivers of our business accident frequency a cut.
You mentioned, a wisdom has held the accident frequency is positively correlated with miles driven because congestion contributes to accident frequency during the pandemic. We continue to see evidence that in some scenarios anyway. The opposite is true one industry sources indicate a substantial double double digit increases in speeding phone usage.
And heartbreaking with our roads less crowded speeding a distracted driving a both increased contributing to increased accident frequency per miles driven.
And then of course on total loss frequency in accident severity, which we have a emphasize is the most important long term driver of our business. The long term trend of rising total loss frequency has very much continued during the pandemic. There's some indications that it may have accelerated during the pandemic in part due to the high returns we're generating at auction.
Turning to our unit sales trends, we experienced a global unit sales decrease of 13% for the quarter with a U.S. unit decrease a 13% in an international unit decline of a 11%.
You had a decline of course has been driven by the COVID-19 impact on a miles driven and therefore, the absolute number of accidents and total vehicles.
Our non insurance business within that non insurance business charities and wholesalers have been the most significantly affected by COVID-19, excluding those two categories. Our non insurance volume has grown a year over year, including those two categories, we were down 11%.
Within that non insurance group, our dealer business in particular was up 11% in units sold year over year compared to what we believe were significant declines for other a whole car auction platforms for dealers, a continuing validation of our business model.
Our global inventory decreased 3.6% versus a year ago that.
Is comprised of a U.S. inventory declined a 3.3% year over year in a international inventory decline of 5.3%.
Turning then to selling price is for vehicles at our auctions. Despite some natural headwinds and the economic disruption of the depend on a crisis, we've experienced a asps for our vehicles at all time highs a reflection both of market dynamics as well as our own member recruitment and retention efforts a asps worldwide.
<unk> grew 37.3% year over year for the quarter with you with USA a is fees up a 39%.
Used car prices I have no doubt helped to contribute to that a high is p. environment for us. They are however, only up 15% or thereabouts a year over year based on some of the industry indices, we track with our selling price is meaningfully exceeding the used car price environment. We believe that's a reflection in part of our marketing.
A efforts a number recruitment.
Turning in a.
True could last theme, we've closed out an unusually busy hurricane season, and we are very proud of our cat teams as always we stand ready to respond to catastrophic events land equipment and people that are second to none in the industry. This year was in some respects. The most active Atlantic storm season on record with 30 name storms and.
13 Hurricanes the.
The property damage effect, however was a less severe than we've experienced a prior seasons, but will nonetheless grateful for the Copart cat team and their multiple mobilizations in support of our customers and communities. This season.
Before I hand, it off to John to walk through our financial highlights. It certainly feels like one of the most tumultuous windows and my own career with no doubt still a more uncertainty and change ahead. Our experience. So far in 2020 has given us great conviction that we are ready for anything.
Just a few days short of Thanksgiving, we are grateful for our people grateful for our customers will empower us to continue investing in their long term prosperity in our own.
And with that I'll turn it over to our new CFO, John North to walk through the first quarter financial results.
Great. Thanks, Jeff.
First I just want to say thanks to Jay for the warm welcome.
And to just reiterate how happy I am to be a at Copart. It's obviously, a phenomenal organization and team and I am sure a proud to be to be here.
With that said I'll make a few brief comments on our operational results provide more color around the early remarks, and then we'll open it up for some questions.
Global revenue increased 38.5 million or a 6.9%, including a 2.5 million benefited a currency.
Global service revenue increased $27.5 million or a 5.6% a more accurate reflection of the underlying activity in our business and.
And primarily due to higher ASP.
The U.S. business grew 4.5% and international experience an increase a 14.2%.
Vs vehicle sales increased 11 million or a 16.5% as growth in the U.S. was partially offset by international decline.
Im really driven by COVID-19 volume impact and a UK customer shift to a fee based sales contract.
Purchase vehicle profit to define as vehicle sales less cost a vehicle sales increased by 5.4 million.
As modest volume declines from more than offset by higher ASP.
Gross profit increased by 41.9 million or a 16.4% and our gross margin rate improved by approximately 400 basis points to 50.1%.
U.S. margin improved from 49.2% to 52.6% predominantly due to increased a asps, partially offset by negative yard operating leverage due to reduce cost absorption across your vehicle sold.
International margins increased from 29.5%, a 37% driven primarily by rising ASP, but similar to the U.S. was affected by higher cost free in a process.
I will now move to a discussion of DNA expenditures, excluding stock stock compensation and depreciation expenses.
In general DNA expenditures will fluctuate and grow over time, but we continue to believe we can achieve additional operating leverage over a long term as.
As with all trying to a data in our business gross margin DNA unit sales and inventory changes. We encourage you to review longer dated headlines rather than a single quarter a metric for a more and more accurate view of a business, particularly given the recent covet impact with that said our DNA costs were down slightly a decrease of 0.8 million from 43 point.
3 million a year ago to 42.5 million and 2021.
As a result, our GAAP operating income increased by 21% from $205.4 million, a 248.6 million. We delivered approximately 500 basis points of operating margin improvement due to revenue growth from strong ASP is partially offset by negative operating leverage from a lower absolute volume of vehicles.
Net interest expense increased $1 million or 25% year over year due to reduced interest income on collecting cash balances given the current interest rate environment and an increase in debt issuance cost and unused line of credit fees did the July 2020, a revolver upsizing in amendment.
You want to income tax expense was 46.5 million at an 18.9% effective tax rate, reflecting an 11.8 million tax benefit on the exercise of employee stock options.
Which has been adjusted out for purposes of a non-GAAP earnings included on our earnings release.
On a non-GAAP basis, our effective tax rate would have been 23.7%.
In summary, GAAP net income decreased 8.2% from 218.2 million last year at a 200.3 million this year due to a prior year tax rate reduction per stock option exercises.
Adjusted to remove these items non-GAAP net income increased 21.2% from a 155.4 million last year to a $188.3 million in the first quarter of 2021.
Not a briefly update our liquidity and cash flow highlights as of October 31, 2020, we had $1.6 billion a liquidity comprised of $605.7 million in cash and cash equivalents, an increase of 424.6 million over October 30, Onest 2019, and a 1.05 billion capacity on a revolve.
The credit facility, which is undrawn.
Operating cash flow from the quarter increased 46.1 million year over year to 258.5 million, primarily driven by working capital benefits sequentially operating cash flow decreased 8.4 million from the fourth quarter of 2020 as assignments have ramp backup continuing working capital and due to income tax effects.
We invested $147.1 million in capital expenditures in the quarter and over 90% of this amount was attributable to capacity expansion and lease buyouts.
In conclusion, our conservative capitalization and strong cash flow enable us to continue to make decisions for the long term interest of both our customers and our shareholders.
That concludes our remarks were happy to take some questions Diego.
Thank you at.
At this time, we will conduct a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad. That's a star key followed by the number one key on your telephone keypad a confirmation total indicate your line is in a question Q you May press the star key followed by the number two if you'd like to remove your question from the queue from.
For participants do you think speaker equipment, it may be necessary to pick a perhaps at a four press star keys. One moment. Please while we poll for questions. Thank you.
Our first question comes from Bob Labick with CJS Securities. Please state your question.
Good morning.
Hi, Bob Hi.
Morning.
So.
Obviously, another terrific quarter and it looks like you know maybe both asps and volumes were up sequentially from a july quarter, but ASP growth grows faster and I say this because service revenue grew faster than yard costs, and so I'm trying to understand that you know the dynamic here between a sps and supply and demand and see what other factors maybe a play.
And so do you think there's been an increase in demand from the pandemic that you've brought a new people new buyers et cetera, so that a.
Demand could even continue to outstrip supply even when volumes do return to pre pandemic levels or how do you see kind of a S.P.s bearing.
As volumes recover I guess just a question.
Yes, it's a it's a very fair a.
In certain complex answer complex question and answer I think in short the prices are high and it is a surely not just a supply and demand and I say that with some conviction ball because a volumes are down 13%.
But a asps are up 37% from there were literally many many many more actual dollars purchasing cars a cohort price. So on fewer units, we're seeing more absolute dollars. So I think that lead you to conclude that a at least in part from we are continuing to grow the demand base from vehicles. A you may recall, we had grown expanded a mark.
Moving efforts, we hired a new a SVP of marketing will open new lounges. So that's been an ongoing multiple decades theme frankly, Bob but that's certainly borne fruit in a pandemic and we will continue to invest in that going forward. So how much of two days a ASP increase is a function of supply and demand it's hard to say I'm sure. It's part of it but it's certainly not a.
With that I think a equally important perhaps is a growth of the buyer base and also frankly, a total wall Street was a.
Those are interrelated as well on a total loss frequency increases and more and more marginal totals. Our total those a course further drive a ASP upwards a further recruit new buyers because those cars are closer to a meeting will be drivable. So there certainly is a favorable a virtuous flywheel effect, which we think is a we're seeing independents as well.
Got it that's helpful. Great. Thank you and then a question on international International didn't talk too much about it yet.
Yeah, Oh, how is kobin impact your plans I think of a pass you talked about Germany now starting to sell on an agency basis from maybe an update on Germany, where it's going and the overall international.
A emerging opportunities and where they affected by a co bid and how do you see those over the next three to five years.
Fair enough. So I think the short answer to your question is that the country's a very much been affected by Coca 19 a.
I think a made a brief comment in passing there the two to varying degrees and in general more severely than than in the U.S. a.
Our plans and our intentions and our execution I don't think have varied as a result from pandemic, so investing in Germany, which you called out specifically a continues to be a key theme for US we continue to invest in the land and the technology and the people and we are selling cars. As you noted on an agency basis for carriers in Germany today, and so far demonstrate.
In a excellent results in doing so the growth path and remains the same with all of the opportunities and challenges you've heard us talk about on prior calls for a including changing the way the industry. A managed total the total loss process in general to the benefit of both insurance carriers in the policyholders. So that of course is a a much longer a discussion but.
No the a perspective on it certainly hasn't changed.
Okay, Great and last one from me just a congratulations to John and the other new hires so.
So Jeff for you and maybe Jay but how do your rules change now with the new hires in the kind of expanded.
<unk> executive team.
Yeah.
I think the I'd say, a senior leadership approach a copart has always been quite fluid right. So I think the walls a copart a between functions and countries are quite a bit lower than what you would generally observe a.
In public companies of our size and stature. So I think it's fluid, but certainly a join will take on a much more of a day to day leadership or what are traditionally considered finance and accounting functions, including a accounting, including a investor relations and so forth a but also helped to help us navigate the strategic future for Copart.
In evaluating a return on investments.
And our approach to evaluating ROI see for the various initiatives we undertake a.
Our new SVP of marketing Scott broker comes from the online travel industry, which a I'm sure. You will know is one of the more challenging competitive and difficult arenas when it comes to the a online marketplace a universe.
Universe, and so he will spearhead our efforts in continuing to grow that buyer base and continuing to a.
Build the demand for the supply that we bring to market. So think day to day, a it's hard to answer because no individual day it looks like the other but I think they will they will certainly take very meaningful leadership roles in there and there's just a specific assumptions.
Super all right. Thanks, so much.
Thanks, Bob.
Our next question comes from Stephanie Benjamin with true a securities. Please state your question.
Hi, good afternoon everybody.
It doesn't.
I want a pack a bit on the non insurance side of your business its a.
Pretty pretty strong growth as you said a dealer side as well as a feeling from that charity wholesale business people about Jack you know it really interesting I think it needs and I will just give any additional platform from the strong outperformance, we file last quarter, but clearly that continued income this quarter. Despite you know some.
Some of the other traditional non insurance auction.
A lot more stuff. So maybe you could speak a little bit about what you're saying.
Segment sales.
From share gains just from an opportunity, where it's actually sticky pretty sticky and these games had a continue going forward it really wasn't a pandemic gentlemen.
Any color there would be helpful.
Yeah, I think it's a it's a fair question Stephanie I think if you go back a in and you've been following us for years now.
Track, the individual quarter by quarter trends for Copart dealer services and I could see this growth trajectory a low.
Long predated the pandemic by many years. So it's a business we have steadily grown over the years and we've grown it today independent make a while other wholesale auction platforms. We think have not grown nearly to the same extent in many cases may have shrunk.
That's a.
Largely a product of auction returns from the what we generate for our sellers at auction is ultimately a what matters I'm sure. We are a I'd like to think we're very likable people and charming, but ultimately the dealers a key priorities achieving an excellent return in doing so quickly and the liquidity of our online marketplace. I think is what his distinguished US we haven't had to a.
Adapt real time, we haven't had to invent a truly digital auction after having become accustomed to physical auctions instead a.
So I think there is something about being made will be digital which perhaps is helped to enhance a relative performance during the pandemic, but more broadly that is a important.
Important profit driver for us important long from revenue growth driver for us as well and we we are achieving good returns for our dealers and aspire to do a more and better still.
Got it and a.
I wanted to touch a little bit.
International side of your business.
It's a little bit on a Germany.
There has there been any kind.
Kind of internal plans or an investment Inc.
And even further internationally maybe in from other new markets.
In short, yes, I think a Germany, and Spain, where we have a footprint as will have always been viewed as the gateway to western Europe more broadly a western Europe share as many of the characteristics many the macroeconomic and social characteristics that make a.
Total loss, such a compelling economic proposition to the U.S. and standard in the UK and elsewhere and that is a a high repair costs high regulatory burdens and so forth and good cars that could have intrinsic value both in those major markets and elsewhere in emerging markets, where demand for cars and repairable drivable.
Cars and mobility continues to expand over time as well so western Europe, certainly is a a it's our expectation that a our success in Germany, and Spain will eventually extend elsewhere there are there.
Other international markets long term that certainly will emerge.
As priorities for us as well, but I'd say for the relevant X year horizon. Our emphasis is on our core markets, where we already do business today, Germany, and Spain and Western Europe.
Thank you for a much thanks.
Thanks Evan.
Thank you for a next question comes from Craig Kennison with Baird. Please state your question.
Hey, good morning, Thanks for taking my questions wanted to start with a.
Government Lockdown scenarios I know the government in various geographies or are considering different.
Lockdown options here and I'm just wondering if you see geographies that are more at risk or if you're approaching a.
The spike in cases, we've seen across the globe in a different manner now that you've learned.
But you have true early the early a portion of the pandemic.
Hi, Craig.
Good question and one I'm not sure we have a more enlightened perspective than you do right. So it's a function of both a of.
The book the virus trends themselves and then you expected government social response to them and I think we've now have six months of experience all of US do a in understanding now eight months understanding how.
How that unfolds. So we are prepared for a really any scenario, including a very extreme lockdowns I'd argue that the April may June time frame was among the more severe windows and we we could adapt we're able to a better operations able to prove.
That our operations are in a central service to the communities, we do business and so I expect to continue to be able to serve our customers and our communities a the volume effects I think remains to be seen I think it's fair to say, we don't know.
And my second question has more to do just big picture with your relationships with your insurance Consigners.
We know that you have some exclusive relationships where a.
Your insurance partner contains 100% of their volume to Copart, you have others, where you get a fraction of that volume I guess I can see how and ensure might want to have more than one vendor for that service, but what would be the benefits for and ensure that commits to an exclusive agreement with Copart is it is a key.
Cost are there is.
He's their data a that is a unique when you have an exclusive relationship is there a priority access I'm just curious why.
You're able to win those exclusive deals.
Thank you Susan deals are a reflection of a.
Oh, a strong relationship with those customers, it's not per se that we have.
American Airlines platinum status with warm nuts, so that a fund required per se. It's more just a reflection of the excellent returns a generates there from a service will provide to them. So if there was no. There's there's no secret ring per se growth, but we work like Hell to earn that trust from our customers. We earn it in a good day to day in the pickup and towing a vehicles in the <unk>.
Auction management, a return to generate in a title work, we do for them and certainly we work like Hell on catastrophic events to make sure that we are the most responsive, but we have a the most people and process and technology on the ground to serve them in those critical moments. So those exclusive agreements or a badge of honor for us that we work like hell to earn a.
And for the carriers the the benefit to them is that they get the copart experience and and it certainly does reduce the complexity for them and in not having to manage a as many providers across their own platforms. So there is one counterparty with whom to integrate technologically there's one counterparty with whom to discuss.
Inventory trends and X y Z markets or processing older dated units and so forth. So the simplicity I think is worthwhile for many carriers as well, but in general I think it's a reflection of a of good service and good returns.
Great. Thanks, and Jay if you figure out Wall Street. Please let me know.
[laughter], Yeah, [laughter] I I I love it when a you.
You know you knocked the cover off the ball in the market news a.
The opposite direction, you think agenda, so it's something I've I've, yet to figure out I'll, let you know.
[laughter].
Correct.
Our next question comes from Bret Jordan with Jefferies. Please state your question.
Hey, good morning, guys.
Right.
On the a dealer volume as you know that that growth against a declining backdrop. I guess is there an explanation and are there more cars that youre selling in the non insurance that are going to export are you getting a higher bid in north Africa, or eastern Europe, and that's driving incremental units to you and I guess when you think about across the.
Aboard units do you have a feeling for the direction of how many cars go to export now exporting more of your volume is anywhere maybe a year ago.
Yes, so the answer to your from the first what your question is yes, a a meaningful portion of those cars, we auction on behalf of our dealers are ultimately export it and it's therefore that more extensive buyer universe with access to the cars that helped drive a differential returns the per se. The more precise question you ask afterwards about whether.
For the international buyer mix is higher year over year over that time horizon, it's harder to say I think it's probably flat and may even be down slightly in part because the currencies of the relevant buyer countries for us has been weekend, a independent currencies, if you've been tracking throughout a there's been a lot a noise from currency depreciated a lot.
Versus the dollar and others, a deep depreciated a loss for the buying countries. There's their current just a general the weekend. So they are actually paying a way way more in their own local currencies and our international demand in absolute terms then has grown.
But their relative purchasing advantage is a is more near term impaired so over the kind of time horizon, you're describing it's closer to breakeven in terms of the volume changes year over year, but certainly over a 10 and 20 year horizon a the international buyer is much more important today than it was 10 years ago, and we will be much more important in 10 years than they are today.
Okay, Great and then I have a question on a catastrophic you talked about multiple mobilization, but limited property damage was catastrophic a negative in the quarter in a sense that you have the cost of showing up to storms, but not enough volume created by them.
It is but but not enough to not enough to call out in part because if we've we've seen enough seasons to know that it's always a joint theres always going to be some noise in it and trying to adjust for.
I don't see a whole lot a value and trying to reported no storm EBITDA right because I'm not sure there or no storm operating profit I'm not sure there's any scenario in which that no storms whatsoever. So suffice it to say that when there are very severe events like hurricane Harvey a they.
The call is a meaningful net effect on our piano, you'll hear us describe it but we generally try to accept as good and bad it's been noise becomes in the business and this year a storm activity I would characterize a subject.
Okay, great. Thank you.
Extra.
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Our next question comes from Ryan Brinkman with JP Morgan. Please state your question.
Hi, a congrats on another strong quarter. Thanks for taking my question, which is about net a second straight quarter of this 26 or a 27% a year over year growth in average selling prices. Firstly, our these record price increase I cannot recall them previously growing this fast and then also can you just talk about a big.
The biggest factors that are driving the increase and maybe a rate the sustainability your outlook for those different factors such as a whole car price as maybe metals or maybe precious metals I don't know a in.
And what has also been the impact of mix such as for example, if you're selling these new where higher quality or more drivable vehicles or do you think we could see these types of increases for another quarter or two before you start to lapped a difficult compares or a maybe should we think about some sort of moderation beforehand, Don on hold higher prices or something like that.
Yes.
Got it first as a clarifying point to make sure I did I did misspeak, but our I think our as these last quarter were up 26% year over year and this quarter, we're up 37, so a.
The increase is more meaningful this quarter than it was last quarter. Yes. We are at all time highs and yes. I believe these are all time year over year changes as well and selling prices.
You may have been a way for a moment, we did comment a little earlier on the selling price trends in a business and what portion of it is quote durable and not and I think there's likely some supply and demand characteristics here, but overall when we've seen volumes declined 13%, but average selling prices increased 37%, we conclude that the absolute.
Dollars flowing to covert auctions are meaningfully up year over a year. So it's not just supply and demand. It's not just a fixed number of dollars pursuing a a certain number of units it's much more than that.
To your question about mix I think it is fair to say that.
As we are seeing total loss frequency increase did that benefits us in the form a base fees because marginal totals generally generate higher selling prices at auction I will note that that's also been a multiple year trend total loss frequency. A 1980 was 4% today, it's probably north of 20. So its not something has happened during a pandemic per se, but it arguably has it.
Celebrated to some extent on the pandemic, but it's been a true phenomenon from many years, which is one reason why until a if memory serves until the third quarter of 2020, which was right when the pandemic. It until then we'd experienced a is the increases for 13 straight quarters or thereabouts and that is a reflection of our marketing efforts fire Recruitments total loss frequency and a low.
So some of the so no doubt some portion of the or a secular drivers then.
That will lead a ASP is up over the very long haul to what extent today's 37% increase is purely a pandemic related a phenomenon very difficult to say, it's certainly not all of it okay.
Okay. Thanks, and then just last question is if you could weigh in on a sort of a whole inflation versus deflation debate. That's taking place may come in we're seeing a lot of inflation and used car prices, but there's deflation in other areas like commercial real estate et cetera. I was just thinking that if one was a view that there is going to be sick.
Surely higher inflation over the long run because of what's happening with you know that day.
Money supply and federal reserve or whatnot on a you own all of your land a so that appreciate some value won't face higher rents price and then you get compensated as a percentage of transaction price. How is the company positions to a benefit or not from from inflation and is that part of appetite is that potentially part.
The investment thesis here.
I'd say on will only indirectly. So so as you know for example, you cited one of the more important strategic decisions. We have made and continue to make which is a owning our land is the is a more correct approach to a snappy getting to our balance sheet, even though a on paper a anyway, you could arguably turbocharge.
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Return on equity by by selling that land and leasing a back we've included a strategic importance of controlling our own destiny owning our land knowing that we can assure its use for our customers for the next 50 years outweighs the the leverage benefits of a a purpose a potentially more balance sheet efficient approach one byproduct of that I think is from waste.
Larry Protection, if we do find ourselves in an inflationary environment. We are both landlord and tenant so we are not subject a.
To the potential risk you described when it comes from inflation in general inflation is certainly a a fraught expression and certain indices include or exclude durable goods like automobiles and real estate and the like some exclude a fuel so it's harder to comment on isolation I would say in general inflation does not.
It doesn't enter our decision calculus very frequently when it comes to be strategic and operational decisions. We make so hard for a hard for me to know whether you a you and be in Wall Street will certainly have a better perspective on this than we will but it's not a not top of mind when it comes with a decisions we make a.
Appreciate it thank you.
Thanks, Ron.
Thank you there no further questions at this time I will turn it back to Jeffrey off for closing remarks. Thank you.
Well, thank you for a thoughtful questions and we look forward to talking to everyone on the next call have a good day.
Thank you ladies and gentlemen, just a thank you for your participation. This does conclude today's conference have a great rest of your day. Thank you.