Q2 2024 Copart Inc Earnings Call

Operator: Please stand by. Good day, everyone, and welcome to the Copart Incorporated second quarter fiscal 2024 earnings call. Just a reminder, today's conference is being recorded. Before turning the call over to management, I will share a Copart Safe Harbor statement.

Please standby good.

Speaker Change: Day, everyone and welcome to the co parts incorporated second quarter fiscal 'twenty 'twenty four earnings call.

Just a reminder, today's conference is being recorded.

Speaker Change: Before turning the call over to management I will share a co part safe Harbor statement.

Operator: The company's comments today include forward-looking statements within the meaning of federal securities laws, including management's current views with respect to trends, opportunities, and uncertainties in the company's market. Such forward-looking statements involve substantial risk and uncertainty. For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors in the Company's Annual Report on Form 10-K for the year ended July 31, 2023, 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 Liaw. Thank you, good evening, and thank you for joining us.

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

Speaker Change: These forward looking statements involve substantial risks and uncertainties for more detail on the rest of associated with the company's business we.

We refer you to the section titled Risk factors in the company's annual report on Form 10-K for the year ended July 31, 2023, 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 Companys co CEO Castle Hill.

Castle Hill: Thank you good evening and thank you for joining US we're pleased to report our results for the second quarter of fiscal 2024.

Jeffrey Liaw: We're pleased to report our results for the second quarter of fiscal 2024. I'll start my comments today with commentary about our business. I'll then talk about a few recent additions to our senior leadership team before handing the call to Leah to review our financial results and then she and I will take your questions.

Castle Hill: I'll start my comments today with the with commentary about our business. I'll then talk about a few recent additions to our senior leadership team before handing the call to Leah to review our financial results and then she and I will take your questions.

Jeffrey Liaw: First, on our insurance business for the quarter, we're pleased with our ongoing profitable growth with our insurance sellers, albeit with the year-over-year noise of a significant catastrophic event in the first and second quarters of last year in the form of Hurricane Ian, which I'll comment on in a moment. As anticipated, new and used vehicle prices have decreased somewhat steeply in the past few quarters, while repair costs continue to increase. Those factors have driven a strong and continued recovery in total loss frequency for the months that comprise our second fiscal quarter. However, we noted a 7% year-over-year decline in the Mannheim Used Vehicle Value Index.

Castle Hill: First on our insurance business for the quarter were pleased with our ongoing profitable growth with our insurance sellers, albeit with a year over year noise of a significant significant catastrophic event in the first and second quarters of last year in the form of hurricane in which I'll comment on in a moment.

Castle Hill: As anticipated new and used vehicle prices have decreased somewhat steeply in the past few quarters, while repair costs continue to increase those factors have driven a strong and continued recovery in total loss frequency.

Castle Hill: For the months that comprise our second fiscal quarter.

Castle Hill: We noted a 7% year over year decline in the Manheim used vehicle value index at the same time accident severity as measured in cost to repair increased one 7% over that same period or pardon me during the third calendar quarter of 2023, the most recently available.

Jeffrey Liaw: At the same time, accident severity, as measured in cost of repair, increased 1.7% over that same period, or, to put it another way, during the third calendar quarter of 2023, the most recently available measurement period, as reported by ISS Fast Track. Despite the decrease of 7% in the Manhattan Used Vehicle Value Index. U.S. insurance selling prices, by comparison, have remained flat year over year.

Castle Hill: Measurement period as reported by ISS fast track.

Castle Hill: Despite the decrease of 7% and the manheim used vehicle value index.

Castle Hill: Our U S insurance selling prices by comparison have remained flat year over year.

Jeffrey Liaw: This was a reflection of our auction liquidity and buyer activity after adjusting for the removal of Hurricane Ian from the prior year. As I noted, the combination of these forces, decreasing used vehicle values and increasing repair costs..., has driven a recovery in total loss frequency. According to CCC, total loss frequency for the fourth calendar quarter of 2023 was 20.9% across all loss categories.

Castle Hill: A reflection of our auction liquidity in buyer activity after adjusting for the removal of hurricane in from the prior year.

Castle Hill: As I noted the combination of these forces decreasing used vehicle values and increasing repair costs.

Castle Hill: Has driven a recovery in total loss frequency.

Castle Hill: According to CCC total loss frequency for the fourth calendar quarter.

Castle Hill: 2023 was 29% across all loss categories. This is up almost a full percentage point year over year and up one 5% sequentially.

Jeffrey Liaw: This is up almost a full percentage point year over year and up 1.5% sequentially. As always, we continue to believe that long-run trends continue to make repairing vehicles less economically attractive to insurance carriers and totaling vehicles more economically attractive to them at the same time. Our nominal U.S. insurance volumes increased just 0.3% year-over-year, though largely again due to the effect of the sell-through of units from Hurricane Ian a year ago. While we responded to multiple smaller weather events this year, they did not, in aggregate, approach the magnitude of Hurricane Ian.

Castle Hill: As always we continue to believe that long run trends continued to make repairing vehicles.

Castle Hill: Less economically attractive to insurance carriers and totaling vehicles more economically attractive to them at the same time.

Castle Hill: Our nominal U S insurance volumes increased just 0.3% year over year, largely again due to the due to the effect of the sell through of units from hurricane even a year ago.

Castle Hill: While we responded to multiple smaller weather events. This year. They did not in the aggregate approached the magnitude of hurricane year normalized for <unk> impact, we estimate our U S insurance volume increased nine 2% for the period, a reflection again of total loss trends and market share growth.

Jeffrey Liaw: Normalized for Ian's impact, we estimate our U.S. insurance volume to have increased 9.2% for the period, a reflection, again, of total loss trends and market share growth. Turning to our non-insurance business, First, we continue to grow our blue car business, which serves our bank and finance, fleet, and rental partners. In the second fiscal quarter of 2024, pardon me, 2024, we observed year-over-year growth of north of 30 percent.

Castle Hill: Turning to our non insurance business first we continue to grow our blue card business, which serves our bank and finance fleet and rental partners in the second fiscal quarter of 2024 pardon me 2024, we observed year over year growth of north of 30% like.

Jeffrey Liaw: Likewise, our dealer sales volume, a combination of our CDS business unit and MPA, our power sports auction platform, increased by 21% year-over-year as well. All told, our U.S. non-insurance automotive volume, excluding low-value and wholesale units, increased north of 30% year-over-year.

Castle Hill: Likewise, our dealer sales volume a combination of our Cds business unit, and NPA or power sports auction platform.

Castle Hill: Our volume increased by 21% year over year as well.

Castle Hill: All told our U S. Non insurance automotive volume, excluding low value at wholesale units increased north of 30% year over year.

Jeffrey Liaw: Our growth is the result of our commitment to customer service and our auction liquidity. With each additional vehicle we earn the right to sell, we increase the attractiveness of our auction platform to the world's automotive buyers, drawing still more buyers to our auctions to the benefit of all of our sellers, new and old. I'll conclude my comments with a brief welcome and introduction to three new members of the Copart executive team who joined us this quarter. First, David Kang, David Kong, pardon me, our new chief marketing officer, and Neil Madbani, our new chief product officer. Dave and Neil bring with them the experience and expertise of global marketing, brand communications, and member and product development on behalf of world-class digital businesses. Dave's previous roles included serving as the SVP of Data Insights and as Chief Marketing Officer for Consumer Auto Finance at Capital One, as well as various roles with McKinsey & Company. Neil Serbs, most recently as VP of Product at Chewy, and held various strategy roles at Boxed and Staple.

Castle Hill: Our growth is the result of our commitment to customer service and our auction liquidity.

Castle Hill: With each additional vehicle, we earn the right to sell we increased the attractiveness of our auction platform to the world's automotive buyers drawing still more buyers to our auctions to the benefit of all of our sellers new and old.

Castle Hill: I'll conclude my comments with a brief welcome and introduction to three new members of the <unk> executive team, who joined US this quarter.

Castle Hill: First David King David Kang Pardon me, our new Chief Marketing Officer, and Neil My body, our new Chief product Officer.

Castle Hill: Dave and Neil bring with them the experience and expertise of global marketing brand communications and remember in product development on behalf of World class digital businesses Daves.

Castle Hill: <unk> previous roles, including serving as the SVP of data insights and as Chief marketing officer for consumer Auto finance at capital one as well as various roles with Mckinsey and company previously.

Castle Hill: Neil served most recently as VP of product at Chewy and held various strategy roles at boxed in staples together, they bring a data centric approach to strategy leadership and customer experience that aligns well with our business objectives.

Jeffrey Liaw: Together they bring a data-centric approach to strategy, leadership, and customer experience that aligns well with our business objectives. I'll take a moment to thank Steve Powers, our long-time Chief Operating Officer, who is transitioning to his new role as Chief Business Development Officer. He and his team have navigated our business through years now of pandemic response, abundant storm activity, and various disruptive forces in our industry. We extend a warm welcome to Hessel Verhage, his successor as COO. Hessel was the supply chain leader for DB Schenker, one of the world's largest and most complex logistics providers for a litany of demanding clients such as Procter & Gamble, BMW, Apple, and many, many others.

Castle Hill: I'll take a moment to thank Steve powers, our longtime Chief operating officer, who is transitioning to his new role as Chief business Development officer, He and his team have navigated our business through years now of pandemic response abundant storm activity and various disruptive forces in our industry, we extend a warm welcome to hertz over Hajj his successor as CFO.

Castle Hill: Hassle with the supply chain leader for DB Schenker, one of the world's largest and most complex logistics providers for a litany of demanding clients such as Procter and Gamble BMW Apple and many many others have thought will spearhead our efforts to sustain and extend what we believe to be a substantial competitive advantage and our physical operations.

Jeffrey Liaw: HESL will spearhead our efforts to sustain and extend what we believe to be a substantial competitive advantage in our physical operation. With a mix of new and experienced leadership, we believe we are well equipped to continue our profitable growth. Our bedrock operating principles, of course, remain the same.

Castle Hill: With a mix of new and experienced leadership. We believe we are well equipped to continue our profitable growth our bedrock operating principles of course remain the same.

Leah C. Stearns: We emphasize providing outstanding economic outcomes to our sellers through excellent service and auction results and to provide the best auction liquidity and experience to our members. With that, I'll turn it over to our CFO, Leah Stearns. Thanks, Jeff.

Castle Hill: We emphasize providing outstanding economic outcomes to our sellers through excellent service and auction results and to provide the best auction liquidity and experience to our members.

Castle Hill: With that I'll turn it over to our CFO Leah Stearns. Thanks.

Leah C. Stearns: Thanks, Jeff I'll begin with our second quarter sales trends during the quarter, our global unit sales and inventory increased over 7% and 6% respectively from the year ago period.

Leah C. Stearns: I'll begin with our second quarter sales trend. During the quarter, our global unit sales and inventory increased over 7% and 6%, respectively, from the year ago. Given the relatively quiet 2023 hurricane season, this growth was a function of partial recovery, total loss, frequency, and shared cost. Focusing on our U.S. business, unit growth was nearly 5%, which reflected fee unit growth of over 4% and purchase unit growth of over 10%. Consignment or fee units continue to constitute the vast majority of our U.S. unit volume.

Leah C. Stearns: Given the relatively quiet 2023 hurricane season. This growth was a function of a partial recovery total loss frequency.

Leah C. Stearns: <unk> on our U S business unit growth with nearly 5%, which reflected fee unit growth over 4% and purchase unit growth of over 10% consignment or Phoenix continue to constitute the vast majority of our USPS volume.

Leah C. Stearns: Our insurance unit volume was flat year over year and up 9% when excluding hurricane and units from a year ago and as Matt as Jeff mentioned, our non insurance unit volume growth has continued to outpace that of our insurance.

Leah C. Stearns: Our insurance unit volume was flat year over year and up 9% when excluding Hurricane Ian units from a year ago. And, as Jeff mentioned, our non-insurance unit volume growth has continued to outpace that of our insurance business. This volume growth substantially came from dealer units, which increased over 21%, and fleet, rental, and financing, which increased 35%. Inventory levels in the U.S. increased over 4% and over 6% when excluding low-value and cash.

Leah C. Stearns: This volume growth substantially came from dealer units, which increased over 21% and fleet rental and finance units, which increased 35%.

Leah C. Stearns: Tori levels in the U S increased over 4% and over 6% when excluding low value and cat unit.

Leah C. Stearns: Turning to our international business, we saw unit growth of over 21% with fee units increasing 22% and purchase units increasing by over. Our international business ended the quarter with inventory levels over 16% ahead of prior. For the quarter, global ASPs and U.S. insurance ASPs declined by nearly 5% from the year-ago period, and U.S. insurance ASPs excluding Hurricane Ian's units were flat. In addition, international ASPs were up about 1%. Overall, our ASPs continue to show resilience compared to the more than 7% year-over-year decrease in the Mannheim Used Vehicle Price Index for the quarter. Turning to our financial results for the second quarter, global revenue increased to $1.02 billion, representing growth of over $63 million, or about 7%, including a 0.7% tailwind due to current. Global service revenue increased nearly $72 million, or over 9% for the second quarter, primarily due to higher average revenue per unit and increased volume.

Leah C. Stearns: Turning to our international business, we saw unit growth of over 21% with units, increasing 22% and purchase units increasing by over 19% or.

Castle Hill: Our international business ended the quarter with inventory levels over 16% ahead of prior year.

Castle Hill: For the quarter Global Asps.

Castle Hill: U S insurance Asps declined by nearly 5% from the year ago period, and U S insurance ASP, excluding hurricane yen units were flat and.

Castle Hill: In addition international Asps were up about 1% overall, our asp's continue to show resilience compared to more than 7% year over year decrease in the manheim used vehicle price index for the quarter.

Castle Hill: Turning to our.

Castle Hill: Financial results for the second quarter.

Castle Hill: Global revenue increased to one 2 billion representing growth of over $63 million or about 7%, including a 7% tailwind due to currency.

Castle Hill: Global service revenue increased nearly $72 million or over 9% for the second quarter, primarily due to higher average revenue per unit and increase volume.

Leah C. Stearns: Our U.S. service revenue grew by over 7%, and international service revenue grew by nearly 26% for the quarter. Global Purchase Vehicle sales for the second quarter decreased by about 8 million, or 5%, and Global Purchase Vehicle gross profit decreased by less than 1 million. In the U.S., purchased vehicle revenue was down over $7 million, or about 9%, which was primarily due to a mixed shift towards lower ASP units, while gross profit increased over $1 million. Internationally, purchased vehicle revenue decreased by 1 million, or about 1%, and gross profit decreased by 2%.

Castle Hill: Our U S service revenue grew by over 7% and International service revenue grew by nearly 26% for the quarter Global purchased vehicle sales for the second quarter decreased about $8 million or 5% and global purchase vehicle gross profit decreased by less than $1 million.

Castle Hill: In the U S purchased vehicle revenue was down over $7 million or about 9%, which was primarily due to a mix shift towards lower ASP unit, while gross profit increased over $1 million.

Castle Hill: Internationally purchased vehicle revenue decreased by $1 million or about 1% and gross profit decreased by $2 million.

Leah C. Stearns: Global gross profit increased to more than $464 million, an increase of nearly $38 million, or about 9%, and our gross profit margin percentage increased by approximately 100 basis points to 45.5%. In the U.S., our gross profit margin increased to 50.2%, and our international gross profit margin increased to 24.5%. The year-over-year margin increase, on a consolidated basis, was driven primarily by a revenue mix shift resulting from strong growth in fee units, which generate higher margins, and a decline in direct cost per unit. On the cost front, during the first and second quarter of last year, we incurred CAT expenses, specifically related to Hurricane Ian, which did not.

Castle Hill: Gross profit increased to more than $464 million, an increase of nearly $38 million or about 9% and our gross profit margin percentage increased by approximately 100 basis points to 45, 5%.

Castle Hill: In the U S. Our gross profit margin increased to 52% and our international gross profit margin increased to 24, 9%.

Castle Hill: The year over year margin increase on a consolidated basis was driven primarily by a revenue mix shift, resulting from strong growth in fee units, which generate higher margins.

Castle Hill: And a decline in direct cost per unit salt on.

Castle Hill: On the cost front during the first and second quarter of last year, we incurred CAD expenses, specifically related to hurricane in which did not recur.

Leah C. Stearns: Turning to general and administrative expenditures, excluding stock-based compensation and depreciation, GNA spent over $72 million in the quarter, reflecting an increase of over $24 million. The increase in GNA includes over $3 million in one-time costs associated with the conclusion of our CMA process in the UK. The remainder reflects the financial consolidation of Purple Wave into our results, third-party project-related costs, and the impact of investments in our technology and sales organizations. We expect that the investments we are making in our people, processes, and systems... will provide us with greater operating leverage over the long run. As a result, GAAP operating income increased by nearly 4% to $380 million. Finally, second quarter net income increased by nearly 11% to over $325 million, or $0.33 per diluted common share.

Castle Hill: Turning to general and administrative expenditures, excluding stock based compensation and depreciation expenses.

Castle Hill: G&A spend in the quarter with over $72 million, reflecting an increase of over $24 million.

Castle Hill: The increase in G&A includes over $3 million in one time costs associated with the conclusion of our CMA process in the U K the remainder.

Castle Hill: It reflects the financial consolidation of <unk> into our results third party project related costs and the impact of investments in our technology and sales organizations to support co parts business growth, we expect that the investments, we're making in our people processes and systems will provide us with greater operating leverage over the long.

Castle Hill: Right.

Castle Hill: As a result, GAAP operating income increased by nearly 4% to $380 million.

Finally second quarter GAAP net income increased by nearly 11% to over $325 million or <unk> 33 per diluted common share.

Leah C. Stearns: During the quarter, we benefited from nearly $20 million of incremental interest income as we actively invested our cash into Treasury securities, as well as a lower tax rate of $20.7. Turning to our liquidity and financial position, our liquidity was $3.9 billion as of the end of January, which was comprised of nearly $2.7 billion in cash and investments in health maturity securities, and our capacity under a revolving credit facility of over $1.9 billion. For the quarter, we generated operating cash flow of nearly $162 million, which is a decrease of 14% from the prior year.

Leah C. Stearns: During the quarter, we benefited from nearly $20 million of incremental interest income as we have actively invested our cash into treasury securities as well as a lower tax rate of 27%.

Castle Hill: Turning to our liquidity and financial position liquidity with $3 9 billion as of the end of January which is comprised of nearly $2 7 billion in cash and investments and held to maturity securities and our capacity under our revolving credit facility of over $1 2 billion.

Castle Hill: For the quarter, we generated operating cash flow of nearly $162 million, which is a decrease of 14% from the prior year.

Leah C. Stearns: In addition, we invested about $123 million in capital expenditures, with nearly all of this amount attributable to our real estate and physical infrastructure to support capacity expansion, which contributes to our ability to serve our customers while simultaneously reducing our transportation costs and corresponding fuel costs. Finally, for the quarter, if you take our operating cash flow, less CapEx, we generated about $39 million of free cash. As I've highlighted in the past, our top priority is to invest to grow our core business. To achieve this, over the last 12 months, we have deployed over $540 million in our real estate portfolio, suites, and technology to provide best-in-class products and services to our customers. And with that, Jeff and I would be happy to take some questions. Thank you.

Leah C. Stearns: In addition, we invested about $123 million in capital expenditures with nearly all of this amount attributable to our real estate and physical infrastructure to support capacity expansion, which contributes to our ability to serve our customers, while simultaneously, reducing our transportation costs and corresponding fuel consumption.

Leah C. Stearns: Finally for the quarter and if you take our operating cash flow less capex, we generated about $39 million of free cash flow.

Castle Hill: As I've highlighted in the past our top priority is to invest to grow our core business to achieve this over the last 12 months, we have deployed over $540 million into our real estate portfolio fleet and technology to provide best in class products and services to our customers and with that Jeff and I will be happy to take some questions.

Jeff: Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Operator: We'll 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 has been placed in the question queue.

Speaker Change: Total loan vacate your line is in the question queue.

Operator: You may press star 2 if you'd like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 2. One moment, please, while we poll for questions. Thank you. Our first question is from Bob Labick with CJS Securities. Please proceed with your question.

Speaker Change: Press Star two if you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset or quick question, let's start with <unk>.

Castle Hill: One moment, please pull for questions.

Castle Hill: Okay.

Castle Hill: Thank you. Our first question is from Bob <unk> with CJS Securities. Please proceed with your question.

Castle Hill: Yes, hi, good afternoon, it's Pete Lucas for Bob.

Jeffrey Liaw: First, just a general question. Can international buyers on your US platform easily buy at other auctions, say German, Finland, etc.? Or do they have different logins and different interfaces?

Peter Kirk Lukas: First just a general question I was just wondering Ken International buyers on your U S platform.

Peter Kirk Lukas: <unk> bye at other auctions say, German, Finland, et cetera, or do they have different logins and different interfaces basically just trying to understand if all your buyers are you seeing global auctions equally and getting alerts on the cars. They are looking for regardless of point of origin.

Jeffrey Liaw: Basically, just trying to understand if all your buyers are seeing global auctions equally and getting alerts on the cars they're looking for regardless of point of origin. Pete, good to hear from you. Thanks for your question. In short, Copart.com is certainly a unified platform, period. We do have, by virtue in some cases, of different regulatory and licensing requirements and so forth, separate registration paths for that reason.

Speaker Change: Got it got it good to hear from you and thanks for your question in short co part Dot Com is certainly a unified platform period, we do have by virtue in some cases of different regulatory and licensing requirements and so forth.

Jeffrey Liaw: Registration paths for that reason, but ultimately we are one global auction platform with buyers many buyers.

Jeffrey Liaw: But ultimately, we are one global auction platform with buyers, many buyers, purchasing vehicles on multiple of our sites from multiple of our countries. Helpful, thanks. And then just one more, I guess on the whole car side, given the relatively recent additions of arbitration and outsourced inspections in the industry, how would you describe Copart's role in the non-salvage market versus other industry participants? I think the market, as you note, is a dynamic one and looks different today, even from what you might have seen five years ago and certainly a decade ago. And I think even our offering, at the same time, continues to evolve as we better understand and respond to the needs of our very different types of sellers. So even though we talk about non-insurance as though it is one monolithic entity, as you understand, I'm sure, a bank with a repossession acts very differently from a rental car fleet and acts very differently from a dealer as well.

Jeffrey Liaw: Some vehicles on multiple of our from multiple of our countries.

Jeffrey Liaw: Helpful. Thanks, and then just one more I guess in terms of the whole car.

Jeffrey Liaw: S side, given the relatively recent additions of arbitration and outsourced inspections in the industry. How would you describe co part as well.

Jeffrey Liaw: And in the non salvage market versus other industry participants.

Jeffrey Liaw: Okay.

Peter Kirk Lukas: I think.

Jeffrey Liaw: The market as you note is a dynamic one and looks different today, even from what you.

Peter Kirk Lukas: You might have seen five years ago, and certainly a decade ago and I think even our offering at the same time continues to evolve as well as we better understand and respond to the needs of our very different types of sellers. So even though we talk about non insurance as though it is one monolithic entity as you understand I'm sure a bank with a repossession acts very differently differently from.

Jeffrey Liaw: A rental car fleet expert differently from a dealer as well.

Jeffrey Liaw: And they, in turn, have a variety of different service needs and requests in terms of the degree, in terms of compliance, certainly, but also the degree to which we are assessing and altering the vehicles themselves. So our offering has evolved even over the past few years and will continue to evolve in response to those sellers' needs for years to come. So we are quite a bit more sophisticated today, even than we were a decade ago, but those offerings will continue to expand in the years ahead. Great, thanks. I'll jump back in the queue.

Jeffrey Liaw: They in turn have a variety of different service needs and requests in terms of the degree in terms of compliance certainly, but also the degree to which we are assessing and altering the vehicles themselves. So our offering has evolved even over the past few years and we will continue to evolve in response to those other needs for years to come.

Jeffrey Liaw: So we are quite a bit more sophisticated today, even than we were a decade ago, but that those offerings will continue to expand in the years ahead.

Speaker Change: Great. Thanks, I'll jump back in the queue.

Jeffrey Liaw: Our next question is from Daniel Imbro with Stephen Zink. Please proceed with your question. Yeah, hey, good evening, everybody.

Jeffrey Liaw: Our next question is from Daniel Umbro with Stephens, Inc. Please proceed with your question.

Daniel Imbro: Yeah, Hey, good evening, everybody good to catch up and take your questions.

Jeffrey Liaw: Good to catch up. Thanks for your questions. Jeff, I want to start on a longer term one on the top line. The total loss rate, I think you said it was 20.9 percent. I believe that it exceeds prior highs, as we saw last time before this kind of near-term dip. If we dig into that data, how divergent are different carriers on your platform? Are you seeing some that are already in maybe the high 20s?

Daniel Imbro: Jeff I wanted to start on a longer term one on the top line for the total loss rate I think you said, 29% I believe theyre exceeds prior high as we saw last time before this kind of near term dip if we dig into that data how divergent or different carriers on your platform are you seeing some that are already in maybe the high <unk> and I think in the past you've said you thought total loss rate good.

Jeffrey Liaw: And I think in the past you've said you thought the total loss rate could exceed 30 percent over the very long term. Is that still an applicable long-term goal, I guess, as you see the data today? First, at least from memory, I thought total loss frequency had approached 22. Yeah, 21.7 at one point before the pandemic. So we're not all the way back, though.

Jeffrey Liaw: 30% over the very long term is that still an applicable long term.

Jeffrey Liaw: Goal I guess as you see the data today.

Speaker Change: I appreciate the question first at least from memory I thought the total loss frequency had approached to 'twenty to 'twenty one seven.

Jeffrey Liaw: At one point before the pandemic. So we're not all the way back, though I think thats a matter of time.

Jeffrey Liaw: I think that's a matter of time. To the second part of your question, there continues to be a wide dispersion of total loss practices across our insurance carrier base. In some cases, because of our own customers' perceived differences in their policyholder preferences, so I think there is long-standing conventional wisdom among some folks that drivers and owners prefer to have their cars back, and insurance companies will sponsor repairs of cars that they economically should not. So that behavior does continue in the industry, and as a result, we see a pretty wide dispersion of total loss practices across all carriers, though virtually all of them have increased total loss frequency over the long haul. As for your question about where total loss frequency would exceed 30%, can it?

Jeffrey Liaw: To the second part of your question there continues to be a wide.

Jeffrey Liaw: Version of total loss practices across our insurance carrier base in some cases because of.

Jeffrey Liaw: Our our own customers' perceived differences of their policyholder preferences. So I think there is.

Jeffrey Liaw: Long standing conventional wisdom, among some folks.

Jeffrey Liaw: Net drivers and owners prefer to have their cars back and they will repair the insurance companies will sponsor repairs of cars.

Jeffrey Liaw: Economically should not so that behavior does continue in the industry and as a result, we see a pretty wide dispersion of total loss practices across all carriers, though virtually all of them have increased total loss frequency over the long haul as for your question about where total loss frequency would.

Speaker Change: Ken It exceed 30% I think the answer is affirmatively, yes.

Jeffrey Liaw: I think the answer is affirmatively yes. The economic value, meaning some carriers are there today and others as used car values will, even as used car values stabilize, repair costs divided by the value of cars have increased monotonically forever, and we expect that to continue as well. So total loss will increase in relative attractiveness because our auction liquidity, our global buyer base, keeps driving the values of the damaged cars up while repair costs also rise. That makes a lot of sense. I appreciate all that color, Jeff.

Jeffrey Liaw: The economic value, meaning some carriers are there today.

Speaker Change: Others as used car values.

Jeffrey Liaw: No.

Jeffrey Liaw: Even as used car values stabilized repair costs divided by the value of cars has increased.

Jeffrey Liaw: Monotonically forever and we expect that to continue as well. So total loss will increase in relative attractiveness attractiveness, because our auction liquidity, our global buyer base keeps driving the values of the damaged cars up while repair costs also rise so the relative attractiveness attractiveness of total loss will increase over.

Jeffrey Liaw: Todd.

Speaker Change: That makes a lot of sense I appreciate all that color, Jeff and then maybe one on the financials, Jeff I know, we shouldn't extrapolate any one quarter is probably the answer but it has been a multi quarter trend maybe accelerating G&A spend so if we look back in that line item can you maybe parse out what has been accelerating and given that the multi quarter trend here is it kind of a fair thing to extrapolate then.

Jeffrey Liaw: And then maybe one on the financials. Jeff, I know we shouldn't extrapolate from any one quarter, that's probably the answer, but there has been a multi-quarter trend of maybe accelerating G&A spend. So if we look back at that line item, can you maybe parse out what has been accelerating, and given it's a multi-quarter trend here, is it kind of a fair thing to extrapolate that maybe something's changed, and that line item needs to keep growing at a faster rate? I don't think the growth rate, and Leah can comment here as well, certainly we are growing our capabilities, so the bringing These all require new capabilities, and we are delighted to invest in them.

Jeffrey Liaw: Something has changed in that line item needs to keep growing at a faster rate.

Jeffrey Liaw: I don't think the growth rate that you could comment here as well.

Speaker Change: Certainly we are.

Jeffrey Liaw: Growing our capabilities, so it would be bringing on a new senior talent.

Jeffrey Liaw: And the expansion of our offering in the whole car universe, and frankly, our sophistication in the insurance world as well those all require new capabilities and we are.

Jeffrey Liaw: Delighted to invest in them. So that reflects some of the G&A growth overtime that said, we continue to expect operating leverage over the medium long term.

Jeffrey Liaw: So that reflects some of the SG&A growth over time. That said, we continue to expect operating leverage over the medium-long term. But I think we always say, look over multiple quarters, look over even multiple years for the right long-term trend, and I think the trend over time is that we invariably grow unit volume and revenue faster, and in many cases, meaningfully faster than we'd grow a genome.

Jeffrey Liaw: I think we always say look over multiple quarters, but Google over even multiple years for the right long term trend and I think the trend over time is that we invariably grow unit volume and revenue.

Jeffrey Liaw: Over the long haul faster in many cases meaningfully faster than we grow G&A.

Leah C. Stearns: And from just an inclusion of Purple Wave, we did have a little over $7.5 million related to the incremental consolidation of that business in the quarter, which was obviously not in the prior year period. That's true. That's permanent.

Jeffrey Liaw: And from just an inclusion of or believe we did have about a little over $7 5 million related to the incremental.

Leah C. Stearns: Consolidation of that business in the quarter, which was obviously not in the prior year investor that's permanent and that is permanent.

Leah C. Stearns: So that is permanent. But other than that, I would say everything else we're focused on is really to drive incremental operating leverage. Got it. Seven and a half.

Leah C. Stearns: And that I would say everything else were focused on is really to drive incremental operating leverage in the future.

Leah C. Stearns: That's helpful. Thanks, guys. Have a great night.

Speaker Change: Got it that's helpful. Thanks, guys have a good night.

Jeffrey Liaw: Our next question is from Chris Bottiglieri with BNP Paribas Exane. Please proceed with your question. Hey, this is Ian Davison on behalf of Chris.

Leah C. Stearns: Our next question is from Chris, Let's segue Aerie with BNP Paribas Exane. Please proceed with your question.

Ian Davison: Hey, This is Ian Davis on for Chris. Thanks, a lot for taking our questions. This evening.

Jeffrey Liaw: Thanks a lot for taking our questions this evening. First, it seems you have won business with a few larger accounts in the past year. How do you think about the cadence of market share wins from here? Do you feel you have the operational capacity to onboard more accounts if insurers want to make the switch, or would this likely happen after the recent wins are fully transferred over with the business?

Jeffrey Liaw: First it seems you won business with a few larger accounts in the past year, how do you think about the cadence of market share wins from here.

Jeffrey Liaw: You feel you have the operational capacity to onboard more accounts, if insurers want to make the switch or with this like we have been at.

Jeffrey Liaw: After the recent wins are fully transferred over with the business.

Speaker Change: Got it.

Jeffrey Liaw: We don't comment on individual accounts, but to your broader question about our capacity to handle additional volume, we invest years ahead of the curve, as reflected, of course, in capital expenditures over the course of the past seven or eight years. We invest ahead of the curve in the various geographies in which we do business, and so we would be delighted to serve new volume and certainly have the capacity to do so. As you know, it's not just the storage capacity itself; it's also the logistics capabilities, trucking, both owned trucking assets as well as third-party assets, people, and the scalable technology auction platform and buyer base. And so, the answer more generically across all of those dimensions is absolutely yes.

Speaker Change: We don't comment on individual.

Jeffrey Liaw: Individual accounts, but to your to your broader question about our capacity to handle additional volume. We invest years ahead of the curve is reflected of course in capital expenditures over the course of the past seven or eight years, we invest ahead of the curve.

Jeffrey Liaw: The various geographies in which we do business and so we would be delighted to serve new volume and certainly have the capacity to do so.

Jeffrey Liaw: As you know, it's not even just the storage capacity itself. It's also.

Jeffrey Liaw: The logistics capabilities trucking, both owned trucking assets as well as third party assets.

Jeffrey Liaw: People and its scalable technology auction platform and buyer base and so to the answer more generically across all of those dimensions, it's absolutely, yes, and a flywheel effect frankly applies to some of those dimensions not just the auction dimension as well for example, the stronger we become larger we become as a logistics company.

Jeffrey Liaw: And the flywheel effect frankly applies to some of those dimensions, not just the auction dimension as well. The Stronger We Become and the Larger We Become as a Logistics Company. The better access we have to both third-party and first-party transport capabilities, the better we are about deploying people to a storm, and so on and so forth. So the answer is affirmatively yes. Got it. That's helpful. And just one more, if I may.

Jeffrey Liaw: The better access we have to both third party and first party transport capabilities.

Jeffrey Liaw: Better we are about deploying people to a store and so on and so forth. So the answer is affirmatively, yes.

Jeffrey Liaw: Got it that's helpful and just one more if I may ocean freight seem to be rising due to the conflicts in the middle East could you help us understand how rising ocean freight rates impact your business, we would presume that international buyers in these markets with just a bit less for the vehicles is that the right way to think about it or are there any other impacts to consider.

Jeffrey Liaw: Ocean freight seems to be rising due to the conflicts in the Middle East. Could you help us understand how rising ocean freight rates impact your business? We'd presume that international buyers in these markets would just bid less for the vehicles. But is that the right way to think about it? Are there any other impacts to consider? In a word, yes, though, I think it's always worth commenting on what the relevant substitutes might be, right? So, insofar as you're talking about ocean freight, the demand for mobility in these various countries, the countries that we sell vehicles to, which is effectively every country in the world, but the growth tends to come from what we would characterize as developing economies, and their demand for mobility is real and sustained, and the growth is real and sustained.

Jeffrey Liaw: In a word yes, though.

Jeffrey Liaw: It's always worth commenting on what the relevant substitutes might be right. So in so far as you are talking about ocean freight.

Jeffrey Liaw: The demand for mobility in these various countries the countries that we sell vehicles to which is effectively every country in the world, but the growth tends to come from.

Jeffrey Liaw: What we would characterize as developing economies and their demand for mobility is real and sustained and the growth is real and sustained.

Jeffrey Liaw: So, the question becomes what their natural alternatives might be, and in many cases, they will still ultimately turn to Copart cars as a result. And then the last comment I'd make on that front is that while ocean rates can rise, I think it's still systemically and naturally the case that ships mostly come to the U.S. or to the U.K., for example, to our dominant, home markets. They come here filled, and they leave empty.

Jeffrey Liaw: The question becomes what their natural alternatives might be and in many cases, they will still ultimately turned to cope our cars as a result.

Jeffrey Liaw: And then the last comment I'd make on that front is that while ocean freight rates can rise I think it's still natural systemically naturally the case that ships, mostly come to the U S or to the UK for example to our dominant.

Jeffrey Liaw: Origin markets they come here full and they leave empty. So its often the case that the backhaul legs are considerably cheaper. So the headline numbers may or may not be representative of our buyers lived experience.

Jeffrey Liaw: So it's often the case that the backhaul legs are considerably cheaper. So the headline numbers may or may not be representative of our buyers' real experience. Got it. That's really helpful. Thanks a lot.

Jeffrey Liaw: That's really helpful. Thanks, a lot. Thank you.

Jeffrey Liaw: Our next question is from Craig Kennison with Baird. Please continue with your question. Hey, good afternoon.

Jeffrey Liaw: Our next question is from Craig Kennison with Baird. Please proceed with your question.

Craig Kennison: Hey, good afternoon. Thanks for taking my questions just on that shipping topic did you have any issues in the red sea due to the conflicts there.

Jeffrey Liaw: Thanks for taking my questions. Just on that shipping topic, did you have any issues in the Red Sea due to the conflicts there? No, not a preacher.

Craig Kennison: No not not.

Craig Kennison: Sure Lisa.

Craig Kennison: Thanks, and Lee I Wonder if you would expand on factors behind the resilience and your average selling price given the commentary relative to the Manheim index.

Leah C. Stearns: Thanks. And Leah, I wonder if you could expand on factors behind the resilience of your average selling price, given, you know, the commentary relative to the Mannheim Index. Sure, absolutely. So just as our overall mix shifts within the underlying unit makeup of our business and what's selling through the Copart platform, that is one driver. So as you think about the increase in our unit volume coming from our blue car sellers, our dealer units, those are higher ASP units. But also, as you think about used car prices coming down and total loss frequency increasing, the incremental unit that is totaled by an insurance company is inherently a higher value. And that's because when total loss frequency came down as a result of rising used car prices, that resulted in the underlying borderline units falling out of the mix, and those are now coming back.

Leah C. Stearns: Sure absolutely so just as our overall mix shift.

Leah C. Stearns: Within the underlying unit makeup of our business and what's going to recoup our platform that is one driver.

Leah C. Stearns: Do you think about the increase in our unit volume coming from our Blue car sellers are dealer unit.

Leah C. Stearns: They are higher ASP.

Leah C. Stearns: But also as you think about used car pricing coming down and.

Leah C. Stearns: Total loss frequency, increasing the incremental unit that is totally by an insurance company is inherently a higher value unit and thats because when total loss frequency came down.

Leah C. Stearns: As a result of rising used car prices that resulted in the.

Leah C. Stearns: The underlying borderline units falling out of the mix and those are now coming back.

Jeffrey Liaw: So as insurance companies are facing elevated repair costs, they're incrementally totaling the higher-value vehicles more frequently, and that's driving additional resilience within our agency. And then I also would add that this is the auction liquidity you've heard us speak about on a few occasions today as well. That as we, as the platform grows, as we earn more blue cars, as the total volume of activity on the website grows, that attracts more buyers, which has helped to sustain prices at levels well beyond what the Mannheim Used Vehicle Index might reflect. And if I could sneak in one more, Jeff, on PurpleWave.

Leah C. Stearns: <unk> companies are facing elevated repair costs, they're incrementally totaling the higher value vehicles, more frequently and thats driving additional resilience within our ASD.

Jeffrey Liaw: Okay.

Speaker Change: I'd offer also debt.

Jeffrey Liaw: It is the auction liquidity, you've heard us speak about on a few occasions today as well.

Jeffrey Liaw: As we as the platform grows as we earn more blue cars.

Jeffrey Liaw: As the total volume of activity on the website grows that draws more buyers, which has helped to sustain prices at levels well beyond what the manheim used vehicle index might reflect.

Speaker Change: That helps and if I could sneak in one more Jeff on Purple wave just curious if you've made any.

Jeffrey Liaw: Just curious if you've made any and taken any initiatives since you acquired a stake in that business and maybe highlight what those might be. So, fair question. We're very excited to have them as our partners in their arena. The leadership team there, Aaron, Susan McKee, and others are terrific. And so, by and large, I think I'd describe them as leading the charge with their customers, their community, and so forth, and doing a terrific job of it. So, yes, we are finding ways to support one another efficiently, but it's principally about backing what we think is one of the very best teams in India. Great, thank you.

Jeff: And you've taken any initiatives since you've acquired a stake in that business and maybe highlight what those might be.

Speaker Change: Fair question.

Jeffrey Liaw: We're very excited to have them as our partners in their arena. The leadership team there Aaron's Susan Mcgee and others are terrific and so by and large I think I would describe them is leading the charge.

Jeffrey Liaw: With their customers their community and so forth and doing a terrific job of it. So yes, we are finding ways to support one another efficiently, but it's principally about backing what we think is one of the very best teams and industry.

Speaker Change: Great. Thank you.

Jeffrey Liaw: Our next question is from Bret Jordan with Jeffrey. Please proceed with your question. Hey, good evening, guys.

Jeffrey Liaw: Our next question is from Bret Jordan with Jefferies. Please proceed with your question Hey, Good evening guys.

Jeffrey Liaw: Could you talk a bit more about the international market as far as various country performance is concerned? Uh, yeah, I think we've seen a strong unit volume, really, across all of our geographies. As you know, Bret, they are in various stages of, quote, maturity. The UK, as a business, of course, looks a lot like ours. And they're like ours here in the US, and as a result, would see the same total loss trends and with the results being driven, in large part, by the same factors we see here. In places like Germany and Spain, those, of course, are newer businesses for us, and so changes there are driven also by market share wins and conversions and so forth, so they're more local dynamics specific to those countries.

Bret Jordan: Could you talk a bit more about the international market as.

Jeffrey Liaw: As far as various country performance.

Speaker Change: Yes, I think.

Jeffrey Liaw: We have seen.

Jeffrey Liaw: Strong unit volume really across across all of our geographies.

Jeffrey Liaw: As you know Brett they are in very various stages of quote maturity. The U K is a business of course looks a lot like ours.

Jeffrey Liaw: They're like ours here in the U S and as a result would see the same total loss trends and with the results being driven in large part by the same factors we see here.

Jeffrey Liaw: In places like Germany, and Spain. Those of course are newer businesses for us and so changes there are driven also by.

Jeffrey Liaw: Market share wins and conversions and so forth. So there are there more local dynamics specific to those countries, but I think performance across the board has improved year over year.

Jeffrey Liaw: But I think performance across the board has improved year over year. Okay, great. And I guess in the blue car business, or just the non-insurance business in general, could you talk about the unit economics? Are you getting a better seller fee because you're not negotiating with a very large insurance company for high volume? Or as you're growing that business, do you charge a lower seller fee to get the volume?

Jeffrey Liaw: Okay, Great and then I guess in the Blue car or just the non insurance business in general could you talk about the unit economics are you are you getting a better seller fee because youre not negotiating of the very large insurance company for high volume or as you're growing that business do you charge, a lower silver fee to get the volume.

Jeffrey Liaw: Yeah, I think for a host of reasons, Bret, we don't we don't talk about the seller fees that we charge. We certainly do endeavor to provide the specific type of value as requested by a given seller, and the range of service varies tremendously, even among sellers within a specific seller type. Even among insurance companies, we provide a very wide range of services for folks and different portfolios for each, and the same is true on the non-insurance side as well. As for the unit economics, we tend to do well in those domains because the ASPs are high, but they're also, in some cases, higher touch and more transactional by nature, as you've heard us comment on in the past. There's something very scalable about a large insurance company with whom we have elegant B2B integrations and so forth that tends to be less true among smaller sellers. Great, thank you.

Speaker Change: Yes, I think.

Speaker Change: For a host of reasons, Brett we don't we don't talk about the seller fees that we charge we certainly.

Jeffrey Liaw: Endeavored to provide the specific type of value is requested by a given seller in the range of service varies tremendously even among them.

Jeffrey Liaw: Sellers within a specific seller types, even among insurance companies, we performed a very wide range of services for folks in different portfolios for each at the same is true on the non insurance side as well as for the unit economics.

Jeffrey Liaw: We tend to do well in those domains because the asps are high but they're also in some cases higher touch and more more transactional by nature as you've heard us comment on in the past.

Jeffrey Liaw: There's something very scalable about a large insurance company.

Jeffrey Liaw: With whom we have elegant BTB integrations, and so forth tends to be less true among the smaller sellers. Okay. Great. Thank you. Thanks Craig.

Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question is from Ryan Brinkman with JPMorgan. Please proceed with your question. Hi, good evening and good afternoon. This is Josh on for Ryan Brinkman.

Jeffrey Liaw: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Josh: Our next question is from Ryan Brinkman with Jpmorgan. Please proceed with your question.

Operator: Hi, Good evening. Good afternoon. This is Josh on for Ryan Brinkman.

Leah C. Stearns: Thanks for taking our question. You know, just maybe the first question on capital allocation. Could you maybe, you know, share your latest thoughts around capital allocation and how you are thinking about capacity expansion and subcategory diversification into 2024? Another follow-up.

Josh: Thanks for taking the question.

Leah C. Stearns: Just maybe the first question on capital allocation.

Josh: Could you maybe say on it.

Leah C. Stearns: Latest thoughts around capital allocation and how you were thinking about.

Leah C. Stearns: <unk> expansion and category diversification into 2024.

Speaker Change: Thanks, and have a follow up.

Leah C. Stearns: Sure, I'll touch on capital allocation, and Jeff can jump in. Just from an overall allocation perspective, we do focus our priority on the top of the list for our core business. So we are constantly focused on adding capacity, the ability to serve cats. From a cost perspective, we're managing our yard distribution to ensure that we have optimal positioning from a cost perspective for subculto.

Speaker Change: Sure I'll touch on capital allocation and Jeff can jump in.

Leah C. Stearns: Just from an overall allocation perspective, we do focus our priority from the top of the list for our core business. So we are constantly focused on adding capacity and the ability to serve cat.

Leah C. Stearns: From a cost perspective, we are managing our.

Leah C. Stearns: Yard distribution to ensure that we have optimal positioning from a cost perspective for sub holdco.

Leah C. Stearns: So investing in real estate, investing in our logistics capabilities, and ultimately our technology platform to serve our customers is our number one priority. A Capital Allocation Perspective Beyond that, we do look at expanding geographically, and we look at complementary adjacencies as we expanded with PurpleWave earlier this year. And so from an overall corporate development perspective, we do find ourselves with lots of opportunities to assess potential targets. However, we have a very high threshold for how we think about generating returns in the long term.

Jeff: So investing in real estate investing in our logistics capabilities and ultimately our technology platform to serve our customers as our number one priority from a capital allocation perspective beyond that we do look at expanding geographically relocate complementary adjacencies as we expanded with <unk> earlier this year.

Leah C. Stearns: And.

Leah C. Stearns: So from an overall corporate development perspective, we.

Leah C. Stearns: We do find ourselves with lots of opportunities to assess potential targets. However, we have a very high threshold for how we think about.

Leah C. Stearns: Generating returns long term and we have an incredible track record and we endeavor to continue to perform along those lines and so for US we remain incredibly patients.

Jeffrey Liaw: We have an incredible track record, and we strive to... For us, we remain incredibly patient on the capital allocation front as it relates to deploying capital through M&A and through investments. We do seek to enter into partnerships with complementary developments, companies that can serve our customers alongside us in a very efficient fashion, and so we've done that with folks at companies like Highmarley, where we've endeavored to solve problems for our customers that, collectively, we can do more efficiently together than we can do alone. And then, ultimately, historically, to the extent we had access to cash, we have leveraged the share purchase program, but we have So, going back to my prior comments, I would just point you to that we remain incredibly disciplined and very patient. Tremendous value to create.

Jeffrey Liaw: On the capital allocation front as it relates to deploying capital through M&A and through investments.

Jeffrey Liaw: We do seek to enter into partnerships with complementary.

Jeffrey Liaw: Companies that can serve our customers alongside us in a very efficient fashion and so we've done that with folks at companies like Hey, Marley, where we've endeavored to solve problems for our customers that collectively we can do more efficiently together.

Jeffrey Liaw: And then we can do alone and then ultimately historically to the extent we had excess cash we have leverage to share repurchase program, but have done so very opportunistically and so going back to my prior comments I would just point you to we remain incredibly disciplined and very patient and we will act and we see tremendous value to create on behalf of shareholders.

Jeffrey Liaw: The one afterthought I'd offer is that our capitalization, with our clients, is a distinctive competitive advantage. Our conservative balance sheet, our net cash balance, equips us such that we can be patient even through a crisis. So in the midst of a pandemic when nobody knew for how long driving and economic activity would be shut down, we were able to continue our business as it stands today. We didn't lay off folks, we didn't suspend capital expenditures, etc. Our insurance clients have a long memory, and they know those things. They know that when land is available for us to acquire so that we can preserve it for the industry's use for the next 50 years, they will do so gladly and proudly, despite it, of course, coming with big ticket prices as well. So the point there is, Capital allocation is not a subject in isolation; it's also a commercial matter that affects how we interact with our customers as well.

Jeffrey Liaw: The one after thoughts if I'd offer is that our capitalization.

Jeffrey Liaw: With our clients as a distinctive competitive advantage.

Jeffrey Liaw: Our conservative balance sheet, our net cash balance equipped.

Jeffrey Liaw: Equips us such that we can be patient even through a crisis. So in the midst of a pandemic when nobody knew for how long driving an economic activity would be shut down we were able to continue our business as it stands today, we didn't lay off folks, we didnt suspend capex et cetera or insurance.

Jeffrey Liaw: Clients have a long memory and they know those things they know that when land is available for us to acquire so that we can preserve it for the industry's use for the next 50 years that we'll do so gladly and proudly. Despite it of course coming with big ticket prices as well. So the point there is that.

Jeffrey Liaw: Capital allocation is not a subject in isolation. It's also a commercial matter that effects, how we interact with our customers as well.

Jeffrey Liaw: I'm sure that's very helpful color as a follow-up, you know. Maybe you could share any on the ground trends that you are seeing from the recent floods in California and if you could just give us any color on the potential profitability impact that it could have, you know, in the third quarter. Thank you. Yes, I think we were all struck, of course, by unusual weather patterns in California relative to, I think, what we would all agree is a long-standing history in the state. We are well equipped there with, again, land, trucks, personnel, technology, etc., to respond to events as they emerge. To date, we haven't yet observed events of anything near the magnitude of Ian, Ida, etc., as we have experienced in the Northeast, in Florida, in Texas, Louisiana, etc.

Speaker Change: Understood that's very helpful color.

Speaker Change: A follow up.

Jeffrey Liaw: Maybe would you be able to share any on ground trends that you are seeing from the recent slots in California, and if you could just give us any color on the potential profitability impact that it could have in the third quarter.

Jeffrey Liaw: Yes, I think we were all struck of course by unusual weather patterns in California relative to I think what we would all agree as long standing history in the state. We are well equipped there with again land trucks personnel technology et cetera to respond to events as they emerge.

Jeffrey Liaw: To date, we havent, yet observed events or anything near the magnitude of Ian Ida et cetera, as we experienced in the northeast and Florida, and Texas, Louisiana et cetera, we're ready for it and should the weather evolve in a manner that the activity becomes very elevated and on a sustained basis youll see us continue to invest in that is.

Jeffrey Liaw: We're ready for it, and should the weather evolve in a manner that the activity becomes very elevated and on a sustained basis, you'll see us continue to invest in that. Thanks for taking my questions and good luck. Great, thank you. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Jeff Leal for closing comments. All right. Thank you for joining us, and we'll talk later.

Jeffrey Liaw: Well.

Jeffrey Liaw: Understood. Thanks for taking my questions and good luck great. Thank you.

Jeff Leal: Thank you there are no further questions at this time I'd like to hand, the floor back over to Jeff for closing comments, great. Thank you for joining us and we'll talk.