Q3 2023 Copart Inc Earnings Call

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Greetings and welcome to the COPAR Incorporated 3rd Quarter Fiscal 2023 Earnings Call. Just a reminder, today's conference is being recorded. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad.

Before turning the call over to management, I will share a COPAR statement on safe harbor and non-GAAP financial measures. During today's call, the company will discuss certain non-GAAP measures, including adjustments to income tax benefits related to stock-based compensation. The company has provided a reconciliation of these non-GAAP financial measures..

to the most directly comparable GAAP measures on its investor relations website and in its press release issued at approximately 3 p.m. Central Time today. The company believes these non- GAAP measures , together with corresponding GAAP measures , are relevant in analyzing the company's results and assessing its business trends and performance.

In addition, the company's comments today include forward-looking statements within the meaning of the federal securities laws, including management's current views with respect to trends, opportunities, and uncertainties in the company's markets.

These forward-looking statements involve substantial risks and uncertainties. For more details on the risks associated with the company's business, we refer you to the section titled Risk Factors and the company's annual report on Form 10-K for the year ended July 31, 2022.

and each of the company's subsequent quarterly reports on Form 10-Q . Any forward-looking statements are made as of today and the company has no obligation to update or revise any forward-looking statements.

I'll now turn the call over to the company's co-CEO, Jeff Leal.

Great, thank you Paul. Good afternoon and welcome everyone to our quarterly earnings call. We're pleased to report good results for the third quarter of fiscal 2023.

We take pride in being the most customer-centric organization in our industry, and so I'll orient my introductory comments today around our clients.

Leah will follow thereafter with details on our financial results.

We recently concluded our 23rd annual advisory board meeting with our key insurance clients. In honor of our 40th anniversary as a company, we hosted this event in Northern California, close to our headquarters, from which we moved about 10 years ago. It was something of a homecoming for all of us.

Every year, we gather in person to solicit feedback from our clients about the opportunities and challenges they face, which in turn informs our service offerings, tech deployments, and capital investment programs.

I thought I'd start with some of the key themes that emerged from those discussions this year.

The insurance industry continues to experience radical change across a multitude of dimensions, including across-the-board inflation, as reflected in their rising combined ratios.

they and we are observing an apparent reversion to increasing total loss frequency trends.

According to CCC, total loss frequency bottomed at 17 percent or thereabouts in the second calendar quarter of 2022 and has subsequently rebounded to 19 percent in the first calendar quarter of 2023, the third consecutive sequential quarterly increase.

We anticipate the vehicle prices will likely stabilize or soften faster than repair costs will, which will drive total loss frequency to pre-COVID levels and beyond.

We see new vehicle prices as a leading indicator for the used vehicle market. Kelly Blue Book data in particular indicates that average retail transaction prices for new vehicles in March of 2023 were below MSRP for the first time in nearly two years.

The long-term drivers of total loss frequency, of course, remain unchanged.

First, repairs are more expensive and less attractive over time due to increasing accident severity, vehicle complexity, labor costs, and rental car costs.

And two, salvage economics are more attractive because the fastest growing economies in the world in Central and South America, Africa, and Eastern Europe lean on our damaged vehicles to provide the mobility they need.

Although our US insurance volumes increased 6% or so year over year, we estimate the total loss volumes remain suppressed when compared to historical total loss frequency norms.

In the first calendar quarter of 2023 alone, pardon me, in this past quarter alone, the total loss frequency had been at their pre-COVID levels. Our insurance volumes could have been 10% more than they were.

Another theme that emerged is that our insurance clients continue to experience hiring and retention challenges for their own workforces.

which we believe will have them leaning more heavily on trusted partners like us to provide additional services, including virtual inspection, loan payoff, title procurement services, among others.

Our clients also expressed strong interest engaging with our image recognition tools and machine learning algorithms to enable better decision making and importantly faster decision making.

For a vehicle that will ultimately be totaled, insurance companies often incur literally thousands of dollars in towing, storage, estimating teardown costs, and appraiser labor.

much of which could have been mitigated with streamlined decision making.

Our meetings with our clients also underscore the importance of our global marketplace in providing superior salvage returns to the insurance industry.

I'll turn next to our non-insurance business. For several quarters now, we've reported on our progress with our non-insurance customers.

particularly in the bank and finance fleet and rental segments, which we collectively call Blue Car.

We drove ongoing growth in our third quarter of approximately 7% year-over-year, despite a still constrained supply base. Likewise, we grew our dealer volume by nearly 5% year-over-year as well.

We view these additional customer segments.

as examples of our ability to leverage our existing infrastructure to add both mass and velocity to the flywheel of our auction marketplace. Last comment, we've fielded a number of questions already from some of our analysts and investors about our growing cash balance, and I thought I'd address that question proactively here.

I'll start with our long-standing position and follow with a more nuanced current view.

Our evergreen position is that we take our responsibility as stewards of capital seriously and evaluate prospective investments with an owner's mindset because we are owners, from Willis Johnson, our founder, to our newest employees who elect to participate in our employee stock ownership program.

We prioritize investing in our core business, land, and technology in particular. Secondly, we consider strategic extensions that leverage our key capabilities. As is evident from our conservative M&A track record, these opportunities generally must meet a very high bar.

And as we have done episodically but very substantially over the years, we ultimately return excess cash flow to our investors.

and subject to how the tax code evolves, generally in the form of share buybacks.

Regarding where we stand specifically today, I do want to emphasize how the strength of our balance sheet empowers and differentiates COPART. In comparison to other participants in our industry, we do not prioritize interest payments, debt pay down, dividends, or massive cost reduction initiatives.

we can deploy our resources, specifically our capital and our management bandwidth.

to prioritizing the long-term prosperity and satisfaction of our clients.

long-term prosperity and satisfaction of our clients. Three simple examples. First,

we can continue investing in our owned real estate portfolio.

which provides strong durable protection against an inflationary environment and also ensures the sustainability of our service model for the next 50 years.

Second, we can provide superior service to our clients in catastrophic events, even when doing so requires substantial capital investments in technology, trucks, land, and people. And third, we can invest in the tech platform and marketing resources that create and sustain our global buyer base. In short, we believe our long-term orientation.

is in itself a distinct competitive advantage.

I'll turn it over to Leah.

Thank you, Jeff. Turning to the quarter, global unit sales increase more than 5% year over year, including an increase of over 4% in the US and nearly 12% internationally.

In the U.S., our fee units grew about 5%, primarily due to growth across our insurance business, and our purchase units declined 21%.

Internationally, our unit growth came from a mix of fee and purchase units, which increased over 11 and 14 percent, respectively. During the quarter, our U.S. insurance business grew relative to its one- and two-year comps of 6 percent and 25 percent, respectively.

This was primarily due to the continued recovery and driving activity, increasing accident frequency and severity, total loss frequency, and share gain.

Our auction returns remain strong as we continue to invest in growing our global buyer base by driving member recruitment, registration, and retention.

As a result, Co-Parts auctions provide our insurance customers with best-in-class liquidity and returns, ultimately providing a more cost-effective way to manage growing claims costs by making it more cost-effective to deem damaged vehicles a total loss.

Turning to our financial results.

For the third quarter, global revenue increased 82 million, or nearly 9%, including a 1% or $11 million headwind due to currency.

Global service revenue increased 81 million, or nearly 11 percent for the third quarter, primarily due to higher average revenue per unit and increased volumes.

US and international service revenue grew nearly 11% and 9% respectively for the quarter.

ASPs were down slightly year over year with US average sale prices down about 1%, compared to over 4% decline in the Mannheim Index, which ended April at 230.8%.

Purchase vehicle sales for the third quarter increased 1 million, or nearly 1%, with U.S. purchase vehicle revenue for the quarter down 27%, and international up 49% for the quarter.

During the quarter, our purchased unit activity in the U.S. remained low as we managed our principal unit exposure in a softening vehicle pricing environment.

We continue to believe that this portion of our business provides an opportunity for our future growth and is an important enabler for us in new adjacent asset classes and geographies.

Purchased vehicle cost of sales grew more than 2 million or 1.4 percent in the third quarter.

As a result, purchased vehicle gross profit decreased by $1 million, or approximately 8% during the quarter.

Global gross profit in the third quarter increased by about 47 million, or 11%. Meanwhile, our gross profit...

margin percentage increased by approximately 100 basis points to 47.3%.

U.S. margins increased to 52.2 percent and international margins decreased to 25.5 percent.

The year-over-year margin increase on a consolidated basis was driven primarily by vehicle mix shifts in the U.S. towards higher margin consignment units.

and was partially upset by inflationary impacts to labor and fuel costs.

and vehicle mix shifts internationally where we had a greater percentage of revenue coming from lower margin purchase units.

As noted previously, over the last three years, we have seen pressures from inflation primarily across labor and transportation costs.

More recently, we have observed some attenuation in these expenses, particularly around transportation, which was partially driven by reductions to the cost of diesel, which has experienced a 20% decline year over year.

in technology and automation, which we expect will drive efficiency across the organization and help mitigate longer-term cost pressures.

of this as a direct investment in our employees and as an investment to support best in class service for our customers.

We believe we can continue to increase margins and return on capital over time as we pursue our consistent investment disciplines, focusing on our real estate, logistics, and technology assets.

to ensure we are positioned to scale appropriately to meet the demand of our customers. Turning to general and administrative expenses excluding stock-based compensation and depreciation.

GNA spend in the quarter increased $2 million.

I'd like to highlight that last year we mentioned a non-recurring legal expense in Q3. Excluding the impact of this, GNA would have been up $9 million.

While GNA can be volatile from period to period, the longer term trends show that we are benefiting from the scale of our corporate infrastructure.

Its effect can be observed on the downward trend of our GNA as a percent of revenue, which was 5.1% in Q3. The combination of our strong revenue growth and moderate cost increases drove an increase in GAAP operating income.

by more than 12% to $419 million for the quarter.

Third quarter income tax expense was $90 million, which reflects a 20% effective tax rate.

Finally, third quarter GAAP net income increased about 26% to $350 million, or 72 cents per diluted common share.

Our global inventory at the end of April increased 4% from last year and when excluding low-value units like wholesalers and charities global inventory increased by 7%.

That is comprised of a year-over-year increase of over 2% for U.S. inventory, or 5% when excluding low-value units, and nearly 15% for international inventory.

Turning to our liquidity and financial position, our liquidity stood at $3.3 billion as of quarter-end, which is comprised of $2.1 billion in cash and cash equivalents, and our capacity under our revolving credit facility of over $1.2 billion.

Year to date, we have generated operating cash flow of $1 billion, which is an increase of over 16% from the prior year period.

In addition, we have invested nearly $347 million in capital expenditures, with over 71% of this amount attributable to our physical infrastructure, primarily capacity expansion.

Finally, year to date, if you take our operating cash flow, LesCapX, we've generated nearly $660 million of free cash flow.

These investments include yard expansion, new yard acquisition, logistics, and our technology platform.

And as Jeff outlined in detail, we believe that these types of historical investments have differentiated CoPart as a service provider, while ensuring that we have the capacity necessary to serve our industry's future growth.

And that concludes our prepared remarks. We'd be happy to take some questions.

Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star cues.

One moment please while we pull for questions. Thank you. Our first question is from Bob Labic with CJS. Please proceed with your question.

Good afternoon, congratulations on another great quarter. Thanks, Bob.

I just wanted to start, you touched on this a little bit, but as you successfully keep expanding into whole car, particularly dealer, and then the blue car, the commercial areas, are there new features or new products that you're focused on adding? And then is there an opportunity there via M&A or is this generally something, generally build these things out organically? And how are you thinking about those two things given the cash balance you've seen?

you've touched on and kind of the new adjacent area that you're rapidly expanding into? Are there you know opportunities for M&A or how are you thinking about it? Got it. Appreciate the question Bob. As for the cash balance I'd separate that question.

we haven't been per se capital constrained in the sense that we've been effectively an unlevered company for a long time. So we've had the financial wherewithal to acquire companies and in fact have done so, including the acquisition of MPA now five almost six years ago.

to expand into the power sports arena. I think we think our organic growth prospects are compelling and it does require investments on our part in the form of technology. Serving a bank does have some nuanced distinctions. There are nuanced products and approaches we have to take with financial institutions that are different from what we do for our insurance clients, that's for sure.

Ultimately though, the benefit to both is apparent because the liquidity is enhanced for both parties and the buyer base just grows as a result.

So I think we are investing organically on that front. I think if the right acquisition opportunity were to present itself at a compelling valuation that enhances those capabilities and accelerates our growth, we'd evaluate it to consider it. But it would have to meet the same very high bar that we've always applied. Okay, great. And then just kind of sticking with the...

you know, kind of growing the buyer base, which I know obviously benefits everyone as you go, but how is it coming about? Is it organic? Are you getting them or are they coming to you?

Very much both. So I think we are at this point a well-known liquid marketplace. So folks come to us, but certainly we proactively approach folks who may be aware of us, but think of us in one specific context, and we inform them now of...

the newer and emerging portfolio of vehicles available at Copar, so it is very much both. Got it, super. Okay, I'll jump back into you, thanks. Thanks, Bob.

Thank you. Our next question is from Daniel Embro with Stevens. Please proceed with your question. Hey, good morning. Good evening, everybody. Maybe to start, I want to follow up on Bob's question a little bit around customer acquisition. More focused on the international buyer. You know, Jeff, for a couple years, you've been talking about growing into these new markets and kind of growing this international buyer base.

I'm curious from here, I mean, how much of the low-hanging fruit on SEO has been captured? Maybe kind of what inning are we in? And then the deeper question there is, I guess when you look at these new customers you've brought in, in these new markets, like how deep are the moats that you've built to keep them on CoPart's platform versus, you know, long-term the risk of competition coming in and maybe taking some of those customers?

Thank you.

And Daniel, I think you're you mean our members and buyers specifically

And to them, there are of course other places to buy vehicles, including some of the other well-known auction platforms. Our liquidity, I think, has grown over time. We've become a more compelling company.

platform for them to enroll in and pursue vehicles at than we were 10 years ago. The one correction or modification I'd make to your comments is the expansion into the international arena has not just been in the past couple of years, that's been a decade-long endeavor. It also happens that the evolving mix of vehicles driven in part by total rising total loss frequency.

they will continue to outpace growth in Western Europe , the US, Japan, Canada, etc. the established economies where people have vehicles.

will increasingly provide those vehicles, perhaps older, perhaps damaged, perhaps neither, to the economies that demand more mobility. Cars divided by population remains very high in the origin countries where we operate our auctions and remains very low in the destination countries divided by them.

That's helpful. And I think about maybe one follow up on that. How capital intensive is it to enter a new country? I know in some countries you've done copilot lounges, I guess like, is there a big capital investment to doing this? What is the cost of growth as you continue on this journey if we're still early ending?

Yeah, I draw a distinction there between expanding internationally in the sense that we are operating auctions in a new country. So now, 16 years ago, if I have my date straight, we entered the UK and our investment there has been very capital intensive in the sense that we've had to acquire land and build systems and hire people.

is not per se capital intensive. It does require meaningful investment and resources in the form of our internal bandwidth. It also requires spending on SEO and SEM and third party expenditures of that sort, but not capital in the sense that you're describing it.

Great. That's super helpful. I'm going to put one more in for Leah. You mentioned at the end there the falling transportation costs. I think about maybe last year that was a big headwind on the industry. As those prices come down, I'm curious how you guys view that. Does that become a tailwind to gross margin? I know you own some of your own transportation, so maybe it's less directly flowing through. How should we think about that impacting?

gross margins during this past quarter when we look at the service gross margin expansion? Yeah that definitely was a benefit on the sequential margin improvement. So I would continue to expect that as you know diesel prices remain low and then we get the benefit of some of our investments around our logistics and transportation capabilities that we would continue to see that be a benefit.

Certainly the labor and inflationary pressures on towing costs around labor availability, that was a big pressure about a year ago. So we're beginning to see the other element of the cost of transportation come down, which is nice to see and that should flow through from a margin perspective.

Daniel, broadly I'd characterize transportation costs as having stabilized as opposed to reverted to anything resembling pre-COVID norms. And so the inflationary pressure I think is abating or stabilizing, but it certainly is not reverted.

Great. I appreciate all the color tonight guys. Best of luck going forward. Thank you.

Thank you. Our next question is from Craig Kennison with Baird. Please proceed with your question. Hey, good afternoon. Thank you for taking my question, and I appreciate the new conference call time, for what it's worth. I wanted to dig into ASP. Leah, I think you said that ASP was down a little bit.

versus the Mannheim index down maybe 3%. Last quarter, if I recall, you were flat on ASP in a Mannheim.

I'm wondering why that gap closed if it was a function of mix or another dynamic.

Yeah, no, so we saw ASPs down across the board at about 1.4%. In the U.S. that was down 1.1% and that was compared to a 4% decline on the Mannheim Index. And again, most of that is driven by MIX. It's hard to obviously pinpoint the exact drivers of it, but I think what's important to appreciate is that we certainly have an evolving mix of vehicles.

and National Power Sports Auction or MPA, are you seeing an uptick in volume from repossessions in that power sports business? And then to what extent are new, I'll call it captive marketplaces from Harley Davidson or from Polaris impacting your volume opportunity?

I'd say in terms of the repo question, I think modest, a modest increase, not yet step function changes in that regard. I think though vehicle values in power sports and light vehicles in general have softened, I think for the most part loans.

remain in the money, though that trend can change over time as well.

that trend can change over time as well.

What was your next question? Oh, the Harley question. This Captain Marketplace is not having per se affected us................

I think the business continues to perform well and the sources of bikes and other related power sports continues.

All right, thank you. Thanks, Greg. Thank you. Our next question is from Chris Battigliere with BNP Powerbus. Please proceed with your question. Hey, thanks for taking the questions. First of all, I want to kind of follow up with your comment from your trade show that you did with the insurers.

I want to think through the application of the several thousand dollars that are being spent on cars that are totaled anyway. Not sure what percentage of time this happens, but it sounds like that's nearly half the proceeds.

So I guess if the insurance companies did kind of use your advanced data and make decisions quicker Like what would the impact on total loss rates be? Like what's the elasticity of getting 50% lower cost on...

I guess that the insurance companies did kind of use your advanced data and make decisions quicker. Like what would the impact on total loss rates be? Like what's the elasticity of getting 50% lower cost on relative revenue? What would that mean?

Yeah, I think it's a fair question. Of course, that was the multiple thousands of dollars is an illustration. I would say that the strong majority of cars that Co-part sells on behalf of insurance companies have advanced charges on them in the many hundreds of dollars.

So it is serious money that the insurance companies are paying to towing companies, repair shops, and that, and frankly, their own employees as well to touch and see vehicles that arguably did not require any of that intervention. The cars could have been towed directly to Copart and been sold and had the title processed without anyone ever having touched.

I would say that there is a longstanding industry bias, which I think is now evolving, to repair cars when possible. I think there's a long held view that people grow attached to their vehicles, policyholders grow attached to their cars and want them back. And I think that line of thinking has changed a lot, even over the course of the past eight years, and we think will change over the next.

loss frequency up yes in terms of the elasticity, I think harder to comment on except to say that the economics we're talking about here are very substantial. It is a good portion of the, it's a robust portion of the ultimate claims cost for a totaled car for an insurance company.

Gosh, okay, thanks.

I just want to ask about, um, the used car prices have been volatile more recently. I mean, it seems like you've got to hit this inflection point where total loss rates were starting to pick back up again as car prices softened.

I think we went through like a multi-month period where car prices actually started appreciating again, now we're depreciating, but what's the net of all that? Like, do you think we've just kind of hit a corner now with total loss rates kind of just keep sequentially building, or is there any risk that you see as like a small air pocket, just given the appreciation we saw?

I think to be fair, Chris, we don't know, right? I don't think we don't make management.

for operational decisions on months to months or quarter to quarter blips like that. I think the five year trend, I bet a lot of money that in five years the total loss frequency rate will be meaningfully higher. But as for what happens in the next quarter or two or three, I think the volatility you cite is unprecedented in your career and mine in terms of what we've observed over the past three years. So forecasting that and.

and it's then derivative effects on our assignment volume. Tough to do from where we sit, but I think we generally expect total loss frequency to rise over the next forever, but certainly over any appreciable horizon. Gotcha, okay, thank you. Thank you, our next question is from Brett Jordan with Jefferies. Please proceed with your question.

Hey, good afternoon guys. Quick question. I think you guys called out some of your services, including loan pay off and just on the loan pay off product. I think your peer was having something that sort of automated and integrated into the insurance and bank systems that didn't. Involve human interaction. Is that something that is the same as what you're offering or is that something you're developing that's automated?

In a word, yes, Brett, and I think the financial institution universe, as I think you appreciate, is the serve of theScavenger. Age 17

very fragmented. So there are literally thousands of lenders who participate in auto lending.

some of which are technologically advanced, and some of which are tiny credit unions that no matter what you do, require faxes and phone calls and so forth to settle claims. I think we are at the forefront of the digital integration and in fact, although others in the industry may have announced partnerships with certain integrators, we'd actually started with them.

of guarantee and the other ancillary services and offerings that come with it. So I think as much as you can be, given the fragmented nature and highly varying degrees of technological sophistication among financial institutions, I'd say we're at the forefront of that. Right. And then a quick question on international. I think you saw what 12 percent growth.

Could you talk about what markets, is Germany gaining traction? Is it the addition of Finland and Spain? Maybe give us some puts and takes on the international volumes. Yeah, I'd say without getting into the nitty-gritty, we're experiencing growth consistently across.

the countries including our long time incumbent markets like the UK and Brazil, for example, where we're experiencing growth due to both market trends as well as share capture and the like. And then in our emerging markets, so to speak, or our new more newly entered markets like Germany and Spain and Finland.

we are experiencing growth. They are by their nature still small enough that they don't affect the overall growth equation that much. Okay, great. Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad.

Our next question is from John Healy with North Coast Research. Please proceed with your question.

Thanks for taking my question. Just wanted to talk a little bit about the Blue Car opportunity. As you look at that business, do you see it running complementary, kind of side by side with the legacy insurance business? Or do you run it as one business?

technology standpoint or just from a day of auction standpoint, how are you thinking about the actual auction event with dealers engaging? Is there any sort of thought process about what the increment will spend in terms of technology or platforming that we might think about just over the next few years? Thanks. Got it. I appreciate the question, John .

And those are good questions and as you might imagine we do A-B test those specific notions. So are certain cars or certain products better off in their own stand-alone auctions virtually across the country or in a region or appended to the existing copart.

auctions that are increasingly twice weekly at each of our facilities. So we test those things and ultimately we'll do what is best for returns. The question would be how we drive the superior economic outcomes for our sellers. So I don't think we have a definitive rule of thumb that it must be one giant auction or that it must be highly specialized. I would say we have examples of both. So our MPA auctions continue to operate.

on a standalone basis. Our big auctions at, for example, our Grand Prairie yard in Dallas continue to run, I think, twice weekly. Big auctions that include most of the products, product types that we might sell out of that facility. So we see both, and I think we could very well evolve over time. That's just a function of observed behavior and observed health.

Sure, no that makes sense. And then just one kind of question on Holcar as well. You know, we're roughly 12 months out since the Odessa deal with Carvana closed. I always thought of those guys as the big repo house in the auction world. Curious to know if you're seeing any

I don't know, RFP upticks or opportunities that could be sizable on that front. Because when I think about where everyone's going with their platforms in real estate, it seems like you guys might be in a position to have a high value added mousetrap there. Thanks.

No, a pretty good question. I think we see opportunity to win the right to sell cars on behalf of financial institutions, including ones handled by ADESA and including cars handled by other folks as well. So perhaps not uniquely so, but of course there is obviously Sec.

some press, some noise in that specific circumstance that has given rise to discussions and our conversations with prospective sellers.

Great Thank you.

Thanks John . Thank you. This question is from Gary Prespatino with...

Prestapino with Barrington Research. Please proceed with your question. Hey Jeff, how are you doing? Good.

I couldn't write this down fast enough, but Leah, did you say units were up 4% in the U.S. and 12% internationally? Yes, units were up 4% and they were up, I believe, 7% excluding low value and they were up 15% internationally.

I'm sorry, 12% internationally. Okay, 12% internationally. On a combined basis, what were the units up? Sorry, can you repeat that, Gary? On a combined basis between U.S. and international, what were the units up here over here?

Combined with a five. Okay. And then, Jeff, in the meetings that you had with your insurance customers, was there any really new issues that kind of cropped up that you had with your insurance customers?

is at five. Okay and then Jeff in the in the meetings that you had with with your insurance customers was there any any really new issues that kind of cropped up that the insurance companies

you know want you to maybe start addressing or is it still really you know decreased cycle times Increased salvage returns. You just want to get a feel for what they're thinking I think it's more more evolutionary than not in the sense Gary that we talk to our customers literally every day so it

there aren't going to be any new bombs dropped at an event like that. But I think it's a nice opportunity to crystallize some of that thinking and to gather more consensus views on what the priorities are. And so for sure cycle times, for sure salvage returns, and I think as I noted in the introductory remarks, people pressure on their front that leads them to want to

to lay more of the work on Copark to have us perform more services for them. That's probably the biggest emerging theme we've seen over the past couple of years. We have virtual inspection services that we've seen a very dramatic uptick in the adoption across many of our customers.

to lay more of the work on COPART, to have us perform more services for them. That's probably the biggest emerging theme we've seen over the past couple of years. So we have virtual inspection services that we've seen a very dramatic uptick in the adoption across many of our customers. Thank you.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Jeff Leal to close. Great. Well, thank you, everyone, for joining us, and we'll talk to you next quarter. Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's conference. Have a great rest of your day. Thank you.