Q4 2024 Copart Inc Earnings Call
Please standby good.
Speaker Change: Good day, everyone and welcome to the co part incorporated fourth quarter fiscal 2024 earnings call. Just a reminder, today's conference is being recorded.
Speaker Change: Before turning the call over to management I will share co parts Safe Harbor statement. The Companys 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. These.
Speaker Change: Forward looking statements involve substantial risks and uncertainties for more detail on the risks associated with the Companys 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.
Speaker Change: Companies 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 will now turn the call over to the company's CEO, Jeff Liao.
Jeff Liao: Thank you Owen and good evening, we are pleased to report our results for the fourth quarter of fiscal 'twenty four and the conclusion of another successful fiscal year for our customers and for cohort.
Jeff Liao: I will begin with a few comments on our business before handing the call to lead you to review our financial results in greater detail and then I will.
Speaker Change: Take your questions.
Speaker Change: Turning first to the insurance industry.
Speaker Change: We continue to grow our business with insurance sellers up 6% year over year.
Speaker Change: <unk> of our compelling and growing service offerings and industry, leading auction liquidity there.
Speaker Change: The recent decline in used vehicle values in particular has driven total loss frequency upwards back in line with pre pandemic historical norms.
Speaker Change: Our fourth fiscal quarter of 2024, we observed a an eight 6% year over year decline in <unk>.
Speaker Change: Manheim used vehicle value index.
Speaker Change: We are more fully described later in her comments, our insurance company selling prices significantly outpaced those of the broader used vehicle market.
Speaker Change: All indications are that the long term trends in the repair industry towards increasing vehicle complexity as measured for example by the average number of parts to repair a vehicle as.
Speaker Change: As well as rising labor rates continue to tip the scales in favor of totaling vehicles rather than repairing them.
Speaker Change: In fact, that's 21, 4% for the second calendar quarter of 2024 total loss frequency is some 200 basis points higher than for the same three month period, a year ago. This of course is itself a blended average some of our customers total vehicles at rates significantly higher still.
Speaker Change: We continue to observe an ever increasing economic incentive for insurance carriers to total vehicles, rather than repair them a long term trend we firmly believe will continue today.
Today, we offer a range of sophisticated tools to our insurance clients to assist them with optimizing these decisions.
Speaker Change: Another theme I'd like to highlight is the deepening of our relationships with our insurance company clients as reflected recently and the ongoing expansion of our title Express service offering.
Speaker Change: Historically auction houses like ours have obtained selfish certificates from the states in which we do business. After the insurance companies have first obtained the original title either directly from policyholders, if they own their cars outright or from lenders if the vehicles have bids outstanding.
Speaker Change: Insurance companies have always reason that for a pivotal touch point with their own customers typically after a claims event it would be it would be best to keep this function in house today. However, our offer of an integrated one stop solution for title procurement, which we call titled Express has achieved a substantial traction in the industry.
Speaker Change: On behalf of our carrier clients, we obtain original titles from policyholders and from lenders. Each state has its specific nuances and what it requires is documentation signatures secured forms powers of attorney and so forth.
Speaker Change: And each lender too has its own requirements for the provision of payoff balances and per Dms and the releasing of beans entitles.
Please stand by.
Owen Sweetenberg: Good day everyone and welcome to the Copart Inc. 4th quarter fiscal 2024 earnings call. Just a reminder, today's conference is being recorded.
Speaker Change: The lender universe in particular is an especially fragmented constituency.
Speaker Change: Our online lender portal AI powered outbound calling systems and access to other intermediaries. We believe we offer a substantially more efficient title procurement process in our insurance customers can otherwise achieve.
Owen Sweetenberg: Before turning the call over to management, I will share Copart's safe harbor statement. The company's comments today include forward-looking statements within the meaning of federal security 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 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 10K for the year ended July 31st, 2023, and each of the company's subsequent quarterly reports on Form 10Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements.
Speaker Change: Today, we're pleased to note that we are approaching a run rate of 1 million titles obtained per year on behalf of our insurance clients a testament to their trust in us to provide excellent service to them and importantly to their own customers as well.
Speaker Change: One additional note on the insurance.
Speaker Change: The insurance industry regarding the storm season of 2024.
Speaker Change: As anticipated by many of the 2024 storm season is off to an active start relative to other seasons in recent years Hurricane barrel. The earliest cat five Atlantic Hurricane on record caused widespread damage across Texas, Louisiana and neighboring states, though the storm's path fortuitous, we bypass the major population centers.
Speaker Change: Other named storms of this season, including Hurricane Debbie Internet, though have required significant mobilization of resources on our part, which we are happy to undertake on behalf of our insurance clients.
Jeffrey Liaw: I'll now turn the call over to the company's CEO, Jeff Lial. Thank you, Owen, and good evening. We're pleased to report our results for the fourth quarter fiscal 2024 and the conclusion of another successful fiscal year for our customers and for Copart.
Speaker Change: I will turn our attention to our non insurance sellers as well we've continued to grow our volume with them leveraging our core capabilities and having physical storage capacity via our real estate portfolio, a strong network of logistics solutions in a global liquid buyer base, we continue to grow our blue card business, which serves our <unk>.
Jeffrey Liaw: I'll begin with a few comments on our business before handing the call to Leah to review our financial results in greater detail, and then she and I will take your questions. Turning first to the insurance industry, we continue to grow our business with insurance sellers of 6% year over year, a reflection of our compelling and growing service offerings and industry-leading auction liquidity. The recent decline in used vehicle values in particular has driven total loss frequency upwards back in line with pre-pandemic historical norms.
Speaker Change: <unk> Finance fleet and rental segment partners in the fourth quarter, we observed year over year volume growth of 24% and compares to a year of growth.
Jeffrey Liaw: During our fourth fiscal quarter 2024, we observed an 8.6% year over year decline in the man-hime used vehicle value index. As Leah will more fully describe later in her comments, our insurance company selling prices significantly outpaced those of the broader used vehicle market. All indications are that the long-term trends in the repair industry towards increasing vehicle complexity as measured, for example, by the average number of parts to repair a vehicle, as well as rising labor rates continue to tip the scales in favor of totaling vehicles rather than repairing them.
Speaker Change: <unk>, our dealer sales volume the combination of our co part dealer services business, an NPA or power sports auction platform increased volumes sold by nine 5% year over year as well.
Speaker Change: Excluding our low value at wholesale units customary measure we provide our U S. Non insurance automotive volume increased 12, 6% year over year.
Speaker Change: We view our growth among these non insurance sellers at attractive not only for the economic benefit that these incremental units provide to our business, but also as a critical factor in sustaining and extending the liquidity advantage of our auctions. We have seen abundant examples of first time buyers attended co part auctions and <unk>.
Speaker Change: Of a vehicle we sell on behalf of a rental car company or a financial institution.
Speaker Change: Only to then begin purchasing vehicles from insurance companies thereafter.
Jeffrey Liaw: In fact, at 21.4% for the second calendar quarter of 2024, total loss frequency is some 200 base points higher than for the same three-month period a year ago. This, of course, is itself a blended average. Some of our customers total vehicles at rates significantly higher still. We continue to observe an ever-increasing economic incentive for insurance carriers to total vehicles rather than repair them, a long-term trend we firmly believe will continue. Today, we offer a range of sophisticated tools to our insurance clients to assist them with optimizing these decisions.
Speaker Change: At total loss frequency rises in insurance companies elect to total ever more drivable vehicles.
Speaker Change: Of the crossover buyer will only grow we're committed to investing our time and our resources to cultivate this aspect of our business in industrial with a flywheel effect, you've heard us talk about at length in the past.
Speaker Change: Finally, as an additional note our partner in the equipment Arena Purple wave led by Aaron and Susie Mckee and their team based in Manhattan, Kansas drove 17% year over year growth for the full year for the full fiscal year outpacing industry growth in equipment auction markets. They serve we're excited about what the future holds for our partnership with them.
Jeffrey Liaw: Another theme I'd like to highlight is the deepening of our relationships with our insurance company clients, as reflected recently in the ongoing expansion of our Title Express service offering. Historically, auction houses like ours have obtained salvaged certificates from the states in which we do business after the insurance companies have first obtained the original title. Either directly from policyholders if they own their cars outright, or from lenders if the vehicles have leans outstanding.
Speaker Change: With that I'll turn it over to Leah for her comments on the financials.
Leah: Thanks, Jeff.
Leah: I'll begin with our fourth quarter and fiscal year 'twenty for sales trends.
Leah: During the quarter, our global unit sales in inventory increased 8% and about 7% respectively from the year ago period.
Jeffrey Liaw: Today, insurance companies have always reasoned that for a pivotal touch point with their own customers, typically after a claims event, it would be best to keep this function in-house. It requires as documentation, signatures, secure forms, powers of attorney, and so forth. In each lender, too, has its own requirements for the provision of payoff, balances, and redeems, and the releasing of leans and titles. The lender universe, in particular, isn't especially pregnant as constituency.
Speaker Change: For fiscal year 'twenty four global unit sales increased nearly 10%.
Speaker Change: This growth was a function of an increase in total loss frequency and share gain.
Speaker Change: Focusing on our U S business unit growth was over 6%, which reflected fee unit growth of over 6% and purchase unit growth of over 13%.
Speaker Change: For fiscal year 'twenty for unit growth with nearly 8% with b units growing over 7% and purchase unit growth of almost 14%.
Speaker Change: Consignment or fee units continue to constitute the vast majority of our U S unit volume.
Speaker Change: Our U S unit.
Speaker Change: <unk> increased our U S insurance unit volume increased 6% year over year and about 7% for fiscal year 'twenty four.
Jeffrey Liaw: Between our online lender portal, AI-powered, outbound, calling systems, and access to other intermediaries, we believe we offer a substantially more efficient title procurement process than our insurance customers can otherwise achieve. Today, we're pleased to note that we are approaching a run rate of 1 million titles obtained per year on behalf of our insurance clients. It testament to their trust in us to provide excellent service to them and importantly to their own customers as well.
Speaker Change: As Jeff mentioned, our non insurance unit volume growth has continued to outpace that of our insurance business.
Jeff Liao: This volume growth substantially came from fleet rental and finance units, which increased over 20% in Q4, and nearly 28% for the year and dealer units, which increased nearly 10% for the quarter and over 15% for the fiscal year 'twenty four.
Jeff Liao: Inventory levels in the U S increased over 6% and nearly 9% when excluding low value and cat units.
Jeffrey Liaw: One additional note on the insurance industry regarding the storm season of 2024. As anticipated by many, the 2024 storm season is off to an active start relative to other seasons in recent years. Hurricane Barrel, the earliest CAT-5 Atlantic Hurricane on record, caused widespread damage across Texas, Louisiana, and neighboring states, though the storm's path were toodously bypassed to major population centers. Other names, storms of this season, including Hurricane Debi, Internet, though have required significant mobilization of resources on our part, which we are happy to undertake on behalf of our insurance clients.
Jeff Liao: Turning to our international business, we saw unit growth of almost 17% in the quarter and 21% for fiscal year 'twenty four with the units increasing over 17% in Q4 and 22% for the year.
Jeff Liao: Purchased units increased by nearly 13% for the quarter and almost 16% for the fiscal year.
Jeff Liao: Our international business ended the quarter with inventory levels over 9% ahead of the prior year.
Yes.
Global Asps declined by approximately 5% for the quarter relative to a year ago period, and about 3% for the full year.
Our U S. Asps continue to show resilience and are significantly outperforming the used vehicle market more broadly.
Jeffrey Liaw: I'll turn our attention to our non-insurance sellers as well. We continue to grow our volume with them, leveraging our poor capabilities in having physical storage capacity via our real estate portfolio, a strong network of logistics solutions and a global liquid fire base. We continue to grow our blue car business, which serves our bank and finance fleet and rental segment partners.
Jeff Liao: While the Manheim used vehicle price index declined by nearly 9% from the year ago quarter, and almost 2% sequentially. Our U S insurance asps declined less than 4% from a year ago.
Jeff Liao: For the quarter and increased over 2% sequentially.
Jeff Liao: Turning to our financial results global revenue in the quarter increased to nearly $1 1 billion representing growth of over $71 million or about 7%.
Jeffrey Liaw: In the fourth quarter, we observe year-over-year volume growth of 20.4% compared to a year-of-growth. Likewise, our dealer sales volume, the combination of our co-part dealer services business and MPA, our power sports auction platform, increased volume sold by 9.5% year-over-year as well. Excluding our low value and wholesale units, customary measure we provide, our US non-insurance automotive volume increased 12.6% year-over-year. We view our growth among these non-insurance sellers as attractive, not only for the economic benefit that these incremental units provide to our business, but also as a critical factor in sustaining and extending the liquidity advantage of our auctions.
Jeff Liao: For the year global revenue increased to more than $4 2 billion representing growth of over $367 million or nearly 10%.
Jeff Liao: Global service revenue increased nearly $59 million or over 7% for the fourth quarter, and almost $363 million or over 11% for the fiscal year, primarily due to increased volume.
Jeff Liao: Our U S service revenue grew by over 6% for the quarter and 10% for the year and International service revenue grew by nearly 14% for the fourth quarter and 22% for the year.
Jeff Liao: Global purchased vehicle sales for the fourth quarter increased over $12 million or 8% and over $4 million or about 1% for the fiscal year.
Jeffrey Liaw: We have seen abundant examples of first-time buyers attending co-part auctions in pursuit of a vehicle we sell on behalf of a rental car company or a financial institution. Only to then begin purchasing vehicles from insurance companies thereafter. As total loss frequency rises and insurance companies elected to total ever more drivable vehicles, the power of the crossover buyer will only grow. We're committed to investing our time and our resources to cultivate this aspect of our business. This, in a nutshell, is the flywheel effect you've heard us talk about at length in the past.
Jeff Liao: Global purchase vehicle gross profit decreased by about 1% in the fourth quarter and for the fiscal year.
Jeff Liao: In the U S purchased vehicle revenue was up over $10 million or 12%, while purchased vehicle gross profit increased less than $1 million or about 11% in the quarter and for the fiscal year purchased vehicle revenue decreased about $9 million or almost 3% and purchase vehicle gross profit increased about $4 million or over 18%.
Jeff Liao: Sure.
Jeffrey Liaw: Finally, as an additional note, our partner in the Equipment Arena Purple Wave, led by Aaron and Suzy McKee and their team based in Manhattan, Kansas, drove 17% year-over-year growth for the full year, for the full fiscal year, outfacing industry growth and equipment auction markets they serve. We're excited about the future holds for our partnership with them.
Internationally purchased vehicle revenue increased by over $2 million or about 3% and gross profit decreased by almost $1 million or about 11% in the fourth quarter and for the full year purchased vehicle revenue increased almost $14 million or over 4%.
Jeff Liao: And purchase vehicle gross profit decreased about $4 million.
Leah Stearns: With that, I'll turn it over to Leah for her comments on the financials. Thanks, Jeff. I'll begin with our fourth quarter.
Jeff Liao: Over 12%.
Jeff Liao: Global yard operations cost, excluding stock based compensation and depreciation expense increased about $59 million or about 17% from the prior year period.
Leah Stearns: Here in fiscal year, 24 sales trim. During the quarter, our global unit sales and inventory increased 8%, and about 7% respectively from the year ago period. For fiscal year, 24, global unit sales increased nearly 10%. This growth was a function of an increase in total loss frequency and share gain. Focusing on our US business, unit growth was over 6%, which reflected fee unit growth of over 6%, and purchase unit growth of over 13%.
Jeff Liao: This growth reflects the increase in unit volume as well as approximately $16 million of nonrecurring expenses, primarily related to operating taxes.
Jeff Liao: In addition, as Jeff noted given the active an early start to the storm season in 2020 for our Cat Storm response teams incurred seasonally higher cost preparing and positioning resources for several storms, which did not produce significant unit volume.
Jeff Liao: Given the unpredictable nature of catastrophic events during storm season, we absorb these costs as part of our normal course of serving our customers and their policyholders.
Leah Stearns: For fiscal year, 24, unit growth was nearly 8%, with fee units growing over 7%, and purchase unit growth of almost 14%. Consignment or fee units continued to constitute the vast majority of our US unit volume. Our US unit volume increased, our US insurance unit volume increased 6%, year-over-year, and about 7% for fiscal year 24. As Jeff mentioned, our non-insurance unit volume growth has continued to outpace that of our insurance business. This volume growth substantially came from fleet rental and finance units, which increased over 20% in Q4, and nearly 28% for the year, and dealer units, which increased nearly 10% for the quarter and over 15% for the fiscal year 24. Inventory levels in the US increased over 6% and nearly 9% when excluding low value and cat units.
Speaker Change: During the quarter global gross profit with over $453 million, a decrease of $4 million or about 1% and our gross margin percentage decreased by approximately 340 basis points to 42, 4% in the fourth quarter.
Speaker Change: For the fiscal year global gross profit with over $1 9 billion, an increase of over $170 million or about 10% and gross margin percentage was 45% an increase of about 10 basis points.
Speaker Change: In the U S. Our gross profit margin decreased to 46, 5% for the quarter and increased to $49 four for the year.
The key drivers of margin compression during the quarter included the impact of nearly $12 million of out of period expenses as well as increased salary and benefits expense associated with our yard operations personnel.
Leah Stearns: Turning to our international business, we saw unit growth of almost 17% in the quarter and 21% for fiscal year 24. With fee units increasing over 17% in Q4 and 22% for the year, purchase units increased by nearly 13% for the quarter and almost 16% for the fiscal year. Our international business ended the quarter with inventory levels over 9% ahead of the prior year. Global ASPs declined by approximately 5% for the quarter relative to a year-go period and about 3% for the full year.
Speaker Change: Our international growth gross profit margin increased to 24, 2% in the quarter and 25, 5% for the year.
Speaker Change: Turning to general and administrative expenses.
Speaker Change: <unk> stock based compensation and depreciation expense spend in the quarter was about $81 million, reflecting an increase of $26 million over the prior year and about $5 million on a sequential basis for.
For the year spend was about $288 million, an increase of about $88 million.
Speaker Change: As we highlighted last quarter, our year over year G&A increase continues to reflect our investments in organic product development.
Leah Stearns: Our US ASPs continue to show resilience and are significantly outperforming the used vehicle market more broadly. While the manheim used vehicle price index declined by nearly 9% from the year-go quarter and almost 2% sequentially, our US insurance ASPs declined less than 4% from a year-go for the quarter and increased over 2% sequentially.
Speaker Change: At form function, the financial consolidation of purple weighs into our results as well as an increase in third party project related costs associated with system implementations.
Speaker Change: Across our organization and as we are investing in.
Speaker Change: And expanding our whole card heavy equipment sales functions. Our teams are simultaneously focused on deploying emerging technologies to enhance our business processes and systems and pursuit of scalability and operating leverage over the long term.
Leah Stearns: Turning to our financial results, global revenue in the quarter increased to nearly 1.1 billion, representing growth of over 71 million or about 7%. For the year, global revenue increased to more than 4.2 billion, representing growth of over 367 million or nearly 10%. Global service revenue increased nearly 59 million or over 7% for the fourth quarter and almost 363 million or over 11% for the fiscal year. Primarily due to increased volume.
Speaker Change: GAAP operating income for the quarter decreased by 8% to over $359 million and for the fiscal year GAAP operating income decreased GAAP operating income increased by over $85 million for nearly 6%.
Speaker Change: Finally fourth quarter GAAP net income decreased by over 7% to over.
Leah Stearns: James. Our U.S. Service Revenue Group by over 6% for the quarter and 10% for the year, an International Service Revenue Group by nearly 14% for the fourth quarter and 22% for the year. Global Purchase Vehicle Sales for the fourth quarter increased over 12 million or 8% and over 4 million or about 1% for the fiscal year. Global Purchase Vehicle Group's profit decreased by about 1% in the fourth quarter and for the fiscal year.
322 million or <unk> 33 per diluted common share for the fiscal year GAAP net income increased by over 10% to over one 4 billion.
Speaker Change: During the quarter, we benefited from over $14 million of incremental interest income as we have actively invested our cash into treasury securities and for the quarter. Our tax rate was 21, 1% and for the fiscal year. It was 25.
Speaker Change: Turning to our capital structure as of the end of July we had over $4 6 billion of liquidity, which is compromised of nearly $3 4 billion in cash and investments and held to maturity securities and our capacity under our revolving credit facility of over $1 2 billion. We believe that our conservative capitalization is a distinct competitive advantage.
Leah Stearns: In the U.S., Purchase Vehicle Revenue was up over 10 million or 12% while Purchase Vehicle Group's profit increased less than 1 million or about 11% in the quarter. And for the fiscal year, Purchase Vehicle Revenue decreased about 9 million or almost 3%. And Purchase Vehicle Group's profit increased about 4 million or over 18%. International Service Revenue increased by over 2 million or about 3% and gross profit decreased by almost 1 million or about 11% in the fourth quarter.
Speaker Change: Our industry, enabling us to operate our business with a horizon that prioritizes ours, and our clients' long term success.
Speaker Change: For the year, we generated free cash flow of $962 million, reflecting our operating cash flow generation of $1 billion $473 million.
Leah Stearns: And for the full year, Purchase Vehicle Revenue increased almost 14 million or over 4% and Purchase Vehicle Group's profit decreased about 4 million or over 12%. Global Yard Operations Cost Exploding Stock Based Compensation and Depreciation Expense increased about 59 million or about 17% in the prior year period. This growth reflects the increase in unit volume as well as approximately 16 million of non-recurring expenses primarily related to operating taxes. In addition, as Jeff noted, given the active and early start to the storm season in 2024, our CAT storm response teams incurred seasonally higher costs preparing and positioning resources for several storms which did not produce significant unit volumes.
Speaker Change: Capital investments of about $511 million.
Speaker Change: Our investment our investment focus in 2024 remained steadfast with nearly all of our capital being deployed.
Speaker Change: And two assets, which drive best in class outcomes for our customers, including more than 11 100 acres of land acquired and 370 transportation assets as well as enhanced physical infrastructure.
Speaker Change: With the new year upon us I wanted to reiterate that our multi decade investment horizon and long standing approach to capital allocation is unwavering, we continue to prioritize investments that growth and diversify our existing marketplace businesses, including differentiated products and service capabilities.
Speaker Change: This includes our approach to yard infrastructure investments, which are critical to ensuring that we are positioned to serve our customers' needs for the long term.
Leah Stearns: Given the unpredictable nature of catastrophic events during storm season, we absorbed these costs as part of our normal courts of serving our customers and their policy holders. During the quarter, global growth profit was over 453 million, a decrease of 4 million or about 1% and our growth margin percentage decreased by approximately 340 basis points to 42.4% in the fourth quarter. For the fiscal year, global growth profit was over 1.9 billion and increase of over 170 million or about 10% and gross margin percentage was 45% and increase of about 10 basis points.
Speaker Change: We remain focused and disciplined on deploying capital through M&A and strategic partnerships with valuation <unk> strategic fit being the major hurdles that opportunistic transactions typically sale to clear.
Speaker Change: This consistent approach has positioned us to deliver outstanding business outcomes, while generating long term value creation for our shareholders.
Speaker Change: And with that Jeff and I will be happy to take some questions.
Speaker Change: Sure.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Leah Stearns: In the US, our gross profit margin decreased to 46.5% for the quarter and increased to 49.4% for the year. The key drivers of margin compression during the quarter included the impact of nearly 12 million of out of period expenses as well as increased salary and benefits expense associated with our yard operations personnel. Our international growth gross profit margin increased to 24.2% in the quarter and 25.5% for the year.
Speaker Change: Information tone will indicate your line is in the question queue you.
Speaker Change: You May press Star two if you would 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 keys, one moment, please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Bob Lubbock with CGS Securities. Please proceed with your question.
Leah Stearns: Turning to general and administrative expenses, excluding stock based compensation and depreciation expense, spend in the quarter was about 81 million, reflecting an increase of 26 million over the prior year and about 5 million on a sequential basis. For the year, spend was about 288 million and increase of about 88 million. As we highlighted last quarter, our year over year, G&A increased, continues to reflect our investments in organic product development, our platform functions, the financial consolidation of purple ways into our results, as well as an increase in third party project related costs associated with system.
Speaker Change: Good afternoon, and thanks for taking my questions Hey, Bob.
Speaker Change: Hi.
Speaker Change: Wanted to start with.
Speaker Change: This financial model with all the moving parts in the various growth rates are growing all of your different subcategories and stuff. So as you build a whole car dealer.
Speaker Change: Dealer and Blue car.
Speaker Change: I'm wondering maybe discuss the impact on the financial model in for Mark.
Speaker Change: We can see that there is less customer for <unk>.
Speaker Change: Seller concentration and maybe you get higher fees at some point on those but there is also no.
Speaker Change: A lot more upfront and investment there is hiring and sales infrastructure to get that ready is so is that the correct way to think about it you're investing upfront now and then maybe over time the margins on those businesses will mature and grow or how should we think about that and where are we in the process of investment for those growth initiatives.
Leah Stearns: We are investing in expanding our whole card heavy equipment sales functions, our teams are simultaneously focused on deploying emerging technologies to enhance our business processes and systems and pursuit of scalability and operating leverage over the long term. Gap operating income for the quarter decreased by 8% to over 359 million, and for the fiscal year gap operating income increased by over 85 million or nearly 6%. Finally, fourth quarter gap net income decreased by over 7% to over 322 million or 33 cents per diluted common share, for the fiscal year gap net income increased by over 10% to over 1.4 billion.
Speaker Change: Yes, I think Thats, a fair question, Rob I would say long term the unit economics of those vehicles should be at parity or better.
Speaker Change: Traditional cars cohort is sold.
Speaker Change: Average selling prices tend to be higher as well.
Speaker Change: And so I think that's the long term answer near term of course, there is some upfront investments to support the growth there are some more infrastructure spending.
Speaker Change: Build the platform in the first place. So I think that question is fair that observation is fair.
Leah Stearns: During the quarter we benefited from over 14 million of incremental interest income as we have actively invested our cash into treasury securities, and for the quarter our tax rate was 21.1%, and for the fiscal year it was 20.5.
Speaker Change: Okay Super and then just.
Speaker Change: As it relates to peripheral wave, obviously nice growth for the year for them and new.
Speaker Change: Where are you in terms of kind of building out nationally how should we think about that that timeline.
Leah Stearns: Turning to our capital structure, as of the end of July we had over 4.6 billion of liquidity, which is compromised of nearly 3.4 billion in cash and investments and helps maturity securities, and our capacity under a revolving credit facility of over 1.2 billion. We believe that our conservative capitalization is a distinct competitive advantage in our industry, enabling us to operate our business with a horizon that prioritizes ours and our clients long term success.
Speaker Change: For them.
Speaker Change: I think there are I think I would describe themselves as still being in a transitional stage. They started as a more regional company focused in particular on the central time zone and are expanding their footprint from there as you know.
Speaker Change: It was primarily a virtual business or historically was exclusive your virtual business. So they built an incredible.
Speaker Change: Pure auction platform in their arena.
Leah Stearns: For the year we generated free cash flow of 962 million, reflecting our operating cash flow generation of 1 billion, 473 million, and capital investments of about 511 million. Our investment focus in 2024 remains steadfast with nearly all of our capital being deployed into assets which drives best in class outcomes for our customers, including more than 1100 acres of land acquired in 370 transportation assets, as well as enhanced physical infrastructure. With a new year upon us, I wanted to reiterate that our multi decade investment horizon and longstanding approach to capital allocation is unwavering.
Speaker Change: And build the <unk> brand to become a meaningful presence.
Speaker Change: In that space. So they are they are expanding geographically as we speak.
Speaker Change: Okay, Great and last one from me on peripheral wave two if we are indeed moving into a lower interest rate environment like I think everyone believes.
Speaker Change: Just given the portfolio is obviously new to you and to us.
Speaker Change: How does how does lower rates impact the portfolio business model as we look out the next 135 years.
Speaker Change: Probably the candid answer is we don't know.
Speaker Change: Just.
Speaker Change: Conjecture, but I would I think lower interest rates generally.
Speaker Change: Probably get more business activity period, you're right the more purchase of new equipment, perhaps the trading into old equipment. So I think lower interest rates will just lead to more just higher velocity activity period in the in the various spaces. They serve.
Leah Stearns: We continue to prioritize investments that grows and diversify our existing marketplace businesses, including differentiated products and service capabilities. This includes our approach to yard infrastructure investments which are critical to ensuring that we are positioned to serve our customers needs for the long term. We remain focused and disciplined on deploying capital through M&A and strategic partnerships, with valuation and or strategic being the major hurdles that opportunistic transactions typically fail to clear. This consistent approach has positioned us to deliver outstanding business outcomes while generating long term value creation for our shareholders.
Bob Lubbock: Well, Bob even to characterize their customers their sellers sellers as a single model with the notion is not quite accurate this construction and agriculture and commercial construction versus residential there's many many nuances to all of the above but in general I think of low interest rates as being a catalyst for activity and activity generally speaking being a good thing.
Speaker Change: For intermediaries like per board.
Speaker Change: Alright, thanks, so much thanks Paul.
Jeffrey Liaw: And with that, Jeff and I would be happy to take some questions. Thank you.
Speaker Change: Thank you. Our next question comes from the line of John Healy with Northcoast Research. Please proceed with your question.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation home will indicate your line is in the question queue. You may press star two if you would 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. One moment, please while we pull for questions.
John Healy: Thank you.
Thank you.
John Healy: Definitely I just wanted to ask a little bit about the kind of top of the business on the accident side.
John Healy: Kind of a variety of data points year to date, just kind of help miles driven is trending how repairable claims that are funding and.
Speaker Change: You guys talked I believe the 6%.
Speaker Change: <unk> growth on the insurance business and I believe you said that total loss rates are up about 200 basis points.
Speaker Change: Crude math, I mean, I would think that implies a level of accident frequency declines.
Robert Labick: Our first question comes from the line of Bob Labick with CGS Securities. Please proceed with your question. Good afternoon. Thanks for taking our questions. So long to start with the business financial model with all the moving parts and the various growth rates all growing of your different subcategories and stuff. So as you build out a whole car, particularly dealer and blue car, I want to maybe discuss the impact on the financial model.
Speaker Change: And I was curious if you agree with that that is a new trend do you think we're at the beginning of seeing a different rhythm to how accidents play out and the impact of the model.
Speaker Change: Would just love to get your thoughts just on the frequency side.
Speaker Change: Specifically and I know people, sometimes use repairable claims, but I think frequency is the area that I think a lot of investors would like to get more on thanks.
Speaker Change: Got it and a good question and very nuanced one.
Speaker Change: What I would offer first is I think if you are simply doing the arithmetic, you're saying, it's 200 basis points divided by the starting point of 20% plus 10% growth I think for better for worse those measures are precise enough.
Robert Labick: And from our seat, we can see that there's less customer or seller concentration and maybe you can hire fees at some point on those. But there's also a lot more upfront investment, there's hiring in sales and infrastructure to get that ready. So is that the correct way to think about it?
Speaker Change: Youll see that the third party report then we'll even sometimes adjust those numbers in arrears right. So they move around a fair bit and they don't match perfectly.
Jeffrey Liaw: You're investing upfront now and then maybe over time the margins on those businesses will mature and grow or how should we think about that and where are we in the process of investment for those growth initiatives? Yeah, I think that's a fair question, Bob. I'd say long-term, the unit economics of those vehicles should be at parry or better than the traditional cars co-partisol. The after-selling prices tend to be higher as well. And so I think that's the long-term answer. Near-term, of course, there is some upfront investment to support the growth there, some more infrastructure like spending to build the platform in the first place.
Speaker Change: With with a total loss volumes either if you just went back and did this exercise for 10 years.
Speaker Change: As to your observation about accident frequency, perhaps declining I think I would characterize that as have broadly been true for the past 50 years period accident frequency is always declined certainly if you adjust for miles driven.
Speaker Change: A reflection of an ever safer car park. So you can imagine the big waves of innovation in the automotive space in the mid 19 seventies, you saw antilock brakes arrived for the first time, which reduce crashes in particular wintertime and with high precipitation conditions, then the arrival of traction control and so forth and the years there.
So I think that that question is fair, that observation is fair.
Speaker Change: After nowadays autonomous braking.
Jeffrey Liaw: Okay, sugar. And then just as it relates to purple wave, obviously, next growth for the year for them and you, where are you in terms of kind of building out nationally, how should we think about that timeline for them? I think they're, I think we described themselves as still being in the transitional stage, they started as a more regional company focused in particular on the central time zone and or expanding their footprint from there.
Speaker Change: Lane departure warning sensors are also reducing accident frequency. That's a long standing trend has always been dwarfed on the other side by total loss frequency of accidents are down a little bit total loss frequency is almost always outpaced that over any reasonable historical period.
Speaker Change: The one anomaly to that that I can remember because I remember studying a couple of years ago. When we were talking about this topic that was I want to say from memory.
Speaker Change: 2013, 2014, there was a 323 or four year period, and which accident frequency per miles driven actually increased.
Jeffrey Liaw: As you know, it is primarily a virtual business, or historically it was exclusive to virtual business, so they built an incredible pure auction platform in their arena and have built the purple wave brand to become a meaningful presence in that space. So they are expanding geographically as we speak.
Speaker Change: With the adoption of smartphones and.
Speaker Change: Social media from while folks are driving or God forbid, but if it goes to catalyst that.
Speaker Change: That has now been absorbed into the numbers. So I think we now see gradually declining accident frequency would not not a precipitous change not exotic not.
Speaker Change: Not a disruptive change of any kind we would note.
Jeffrey Liaw: Okay, great. Last one for me, I'm purple wave two. If we are indeed moving into a lower interest rate environment, like I think everyone, you know, believes just given that purport is obviously new to you and then to us. How does, how does lower rates impact the purport business model as we look out for next, you know, once or five years? Probably the candid answer is we don't know conjecture, but I think lower interest rates generally propagate more business activity period and you write the more purchase of new equipment perhaps the trading interval of equipment.
Speaker Change: Got it makes sense and then I just wanted to hear more about the express titling product you guys wanted to great detail on that.
We're just trying to make sure I understand kind of what the takeaway is there Mike.
Mike: Observation was that as something that insurance companies can alleviate internal functions costs.
Speaker Change: Head count.
Speaker Change: You take that responsibility on are we interpreting it the right way is that this is co part taking service levels to a higher degree.
Mike: It's something that allows you to drive the relationship further beyond just what the.
Jeffrey Liaw: So I think lower interest rates will just lead to more just higher velocity activity period in the in the various spaces they serve. But as you know, well, Bob even to characterize their customers, there are sell-out sellers, as a single model of the notion is not quite accurate. There's construction and agriculture and commercial construction versus residential. There's many, many nuances to all of the above. But in general, I think employment should be just being a catalyst for activity and activity, generally speaking, being a good thing for intermediaries like for boys.
Speaker Change: The seller fee is.
Speaker Change: The turn time is that the right way to think about it I think you said.
Thanks so much.
Speaker Change: Right well, it's us forward integrating so to speak into functions historically led by the insurance industry and they kept it because the touch points with their own policyholders their own customers was viewed as a critical matter, but they trust us enough to handle that for them and they know that with the scale of the millions of vehicles we sell.
Operator: Thank you.
Speaker Change: Titles, we're processing that we all Fisher is we have the more efficient business processes and software and bespoke software for this very narrow business case in any of them could have individually.
John Healy: Our next question comes from the line of John Healy with North Coast research. Please proceed with your question. Thank you. Definitely, I just wanted to ask a little bit about the kind of top of the business on the accident side. Kind of a variety of data points here today, just kind of how miles driven is trending, how repairable claims are trending. And, you know, you guys talked, I believe, to 6% volume growth on the insurance business.
Speaker Change: Got it thank you.
Ron: Thanks, Ron.
Speaker Change: Thank you. Our next question comes from the line of Craig Kennison with Baird. Please proceed with your question.
Craig Kennison: Hey, good afternoon. Thanks for taking my questions John had some really good ones there and I wanted to follow up on title Express are you, saying just that.
John Healy: And I believe you said that total loss rates are up about 200 basis points. Just proved math. I mean, I would think that implies a level of accident frequency declines. And I was curious if you agree with that. If that is a new trend, do you think we're at the beginning of seeing a different rhythm to how accidents play out and impact the model. We're just love to get your thoughts just on the frequency side. Specifically, and I know people sometimes use repairable claims, but I think frequencies, the area that I think a lot of investors would like to get more on. Thanks.
Speaker Change: Well this is actually save.
Speaker Change: Time in terms of the time it takes to cycle through a full sales and that it'll save money for the insurance companies in the form of time.
Speaker Change: Correct.
Speaker Change: Yes time as well as fully burdened.
Speaker Change: Fully burden cost forward theyre performing the function themselves.
Speaker Change: Imagine that cohort has a specialized department and we do bye bye.
Speaker Change: Very capable very longstanding leader here at cohort.
Speaker Change: And we do this and that group of folks does this full time for a living and knows it cold. It's just easier to do that at the scale that we just talked about and it is for any individual insurance carriers, certainly the smaller ones, but also increasingly increasingly larger carriers as well that for them to staff.
Jeffrey Liaw: And a good question and a very nuanced one. What I'd all for first is, I think if you're simply doing the arithmetic of saying it's 200 basis points divided by starting point of 20% of 10% growth. I think for better or worse, those measures just aren't precise enough. You'll see the third party to report them. We'll even sometimes adjust those numbers in a rear. So they move around a fair bit and they don't match perfectly with with a total loss volume either if you just went back and did this exercise.
Speaker Change: So the dysfunction on their own if you asked any if you're at the top 20 customers of cohort. What do you do best is an insurance company, you'll get answers ranging from underwriting to claims management too.
Consumer advertising and marketing or would have to grow those are.
Jeffrey Liaw: For 10 years, as to your observation about accident frequency perhaps declining, I think I would characterize that it hadn't broadly been true for the past 50 years. Accident frequency is always declined. Certainly, if you adjust for miles driven, a reflection of an ever safer car park. So you can imagine the big waves of innovation in the automotive space in the mid 1970s. So anti-lock brakes arrived at the first time, which reduced crashes in particular winter time and with high precipitation conditions, then the arrival of traction control and so forth in the years thereafter.
Speaker Change: Frankly investing investing the float to those are the core functions of an insurance company.
Speaker Change: <unk> be pretty far down the list with any of them before they said title procurement is our bread and butter right, that's where we distinguish ourselves I think you hear that very rarely.
Speaker Change: So I'm curious you've had that long enough to generate $1 million title transfers this year to.
Speaker Change: To what extent is this the driver to your market share gains overall does this make the front page of your pitch book.
Speaker Change: It is certainly in the pitch book it as procedures.
Jeffrey Liaw: Nowadays autonomous braking lane departure warning sensors are also reducing active frequency. That's a long standing trend. It has always been dwarfed on the other side by total loss frequency. So vaccines are down a little bit, total loss frequency is almost always outpaced that over any reasonable historical period. The one anomaly to that is I can remember studying this a couple of years ago when we were talking about this topic then was I want to say from memory 2013-14, there was a 3-2-3-4 year period in which accident frequency per miles driven actually increased.
So it had been again there are good reasons for insurance companies to want to want to keep this function in house I think the catalyst for change in recent years started with COVID-19, and park when insurance companies realize that hiring and retaining folks and managing them remotely and deploying laptops.
Speaker Change: Remote call centers et cetera was increasingly complex increasingly increasingly problematic and not worth the squeeze so they trusted us trial with the trial of the product with US I think we've delivered over and over again I think it's a reflection.
Speaker Change: Their trust in us in that regard.
Jeffrey Liaw: And that I think was the adoption of smartphones and social media from wall folks were driving. But I think that was a catalyst then that has now been absorbed into the numbers. I think we now see gradually declining accident frequency would not have precipitous change, not a disruptive change of any kind.
Speaker Change: Great. Thanks, and Lee if I could ask you you mentioned the $12 million out of period expense can you shed more light on that expense in which period.
Speaker Change: Did it normally occur.
Lee: Sure in total for yard ops, we had $16 million in the.
Speaker Change: <unk> fourth quarter of nonrecurring expense 12 of that was related to our U S segment, a little over $4 million was related to our international segment.
John Healy: And then I would just want to hear more about the Express Titling product. You guys wanted a great detail on that. So I would just try to make sure I understand kind of what the takeaway is there. My observation was, you know, that is something that insurance companies can alleviate internal functions, cost, headcount, you know, you take that responsibility on, are we interpreting it the right way is that, you know, this is Copart taking service levels to a higher degree and, you know, it's something that allows you to drive the relationship further beyond just what the, you know, the, the cellar fee is and the, you know, the turn time.
Lee: Okay.
Lee: So I would consider it to be really nonrecurring a portion of it was related in the U S to property taxes that are.
Lee: Related to prior periods and also grossing up our accruals to levels. We expect for here to go forward and then some.
Lee: The other related items are related to that.
Lee: Out of period invoicing for some of our vendors that we received in the fourth quarter.
Lee: Yes.
Speaker Change: Okay. Thanks, and just one on peripheral wave I'm curious.
John Healy: Is that the right way to think about it? I think you summarize the well, it's us forward integrating, so to speak, into functions historically led by the insurance industry. And they, they kept it because the touch points with their own policy holders, their own customers who's viewed as a critical matter, but they trust us enough to handle that for them. They know that with the scale of the millions of vehicles we sell and millions of titles were processing that we all, but sure as we have the more efficient business processes and software and bespoke software for this very narrow business case and any of them could have individually. Thank you.
Speaker Change: How many territory managers did you add if that's the right metric I'm trying to get a feel for whether that 17% is driven by you know.
Speaker Change: Uh huh.
Speaker Change: External matters or really driven by your expansion plans.
Speaker Change: They both are drivers as both expansion territory, but also life territory growth in territory growth so to speak.
Speaker Change: Remember this is a virtual business of course, they do have the team and me.
Speaker Change: The sales force so to speak to reach out to potential sellers of the business and customers support agents and alike, but.
Speaker Change: But as versus what is not quite like opening a new Starbucks.
Speaker Change: On the street corner.
Jeffrey Liaw: Our next question comes from the line of Greg Kenison with Beard. Please proceed with your questions. Very good afternoon. Thanks for taking my questions. John handsome really good ones there. And I wanted to follow up on title express. Are you saying Jeff that will this actually save time in terms of the time it takes to cycle through full sale in that it will save money for the insurance companies in the form of time.
Speaker Change: It's more.
Speaker Change: Adding the institutional sales force to go to pursue wanted to pursue the clients in the first place.
Speaker Change: Got it hey, thank you.
Speaker Change: Greg.
Speaker Change: Thank you at this time.
Speaker Change: Your question. Please press star one.
Chris <unk>: Our next question comes from the line of Chris <unk>.
Chris <unk>: With BNP Paribas. Please proceed with your question.
Chris <unk>: Hey, guys first of all Hi, Greg.
Jeffrey Liaw: Correct. Yes, time as well as fully burdened fully burdened cost for their performing the function themselves. Imagine that co part has a specialized department and we do led by a very capable, very long standing leader here at co part. And we do this in that group of folks does this full time for a living and knows it cold. It's just easier to do that at the scale that we just talked about.
Speaker Change: Questions for you kept the volume question little bit differently.
Speaker Change: And then press reports that would suggest the auto and home insurance rates can you skyrocket consumers are canceling auto insurance, reducing coverage just curious we hear this from insurers how does the lower insurance rates impact your business.
Speaker Change: Cash cycle is obviously has different drivers now with climate change and Thats, what all of that hopefully normalizes, but.
Jeffrey Liaw: And it is for any individual insurance carriers, certainly the smaller ones, but also increasing increasingly larger carriers as well. And then for them to staff equal department will leave this function on their own. If you ask any, if you ask top 20 customers of co part, what do you do best as an insurance company? You'll get answers ranging from underwriting to claims management to consumer advertising and marketing or what have you read.
Speaker Change: I live in past cycles, we've seen people club.
Speaker Change: Auto insurance and dropped the penetration and could you just tell us what's happened historically you've seen this before.
Speaker Change: The truth of the matter.
Speaker Change: Got it.
Speaker Change: Fair question and I think if history is any guide I would say it is.
Speaker Change: Modestly negative in the sense that if folks either our uninsured altogether or perhaps they have liability only a liability only coverage to save money and they have.
Jeffrey Liaw: Those are frankly investing investment to those are the core functions of an insurance company. I think you can pretty far down the list with any where they said, final procurement is our bread butter, but that's where we distinguish ourselves. I think you hear that very rarely. So I'm curious you've had that long enough to generate a million title transfers this year. So what extent is this a driver to your market share gains overall?
Speaker Change: They abandon collision and comprehensive then there may be claims that previously their insurance carrier would have handled and therefore would have totaled mcarthur cohort that may leave them on the margin to try to fix it or trying to patch together, we're trying to drive a car.
Tony: <unk> would've been Tony I think the financial crisis.
Speaker Change: This is from memory or from research frankly.
Speaker Change: Turning to <unk> and since <unk> has shown very modest effects of this almost immeasurable, one, but I think directionally speaking, that's what would happen.
Jeffrey Liaw: Does this make the front page of your pitch book? It is certainly in the pitch book if it is perceived. And so it had been, again, there are good reasons for insurance companies to want to keep this function in house. I think the catalyst for change in recent years started with COVID-19 in part when insurance companies realize that hiring and retaining folks and managing them remotely and deploying laptops. Austin, remote call centers, et cetera, was increasingly complex, increasingly problematic and not worth the squeeze. So they trusted us, they'll trial the product with us, and I think we've delivered over and over again. I think it's a reflection of their trust in us in that regard.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: And I think we gave a ton of metrics here, so I might as well.
Speaker Change: So it sounded like you asked it's up six U S insurance is up six but then dealer fleets on its 2000 and.
Speaker Change: Im sorry fleet.
Speaker Change: <unk> 20th dealer plus 10, so it seems like there's an offset somewhere or is that just low value charity cars and then is there.
Speaker Change: The competitive thats being irrational, there, that's causing a drag in that segment or is it something more systemic.
Speaker Change: No. It's just that low value bucket continues to shrink.
Speaker Change: And what's causing them to shrink is it competition or is it just something that the market is changing.
Speaker Change: It's really just our focus in terms of where we're allocating our efforts.
Greg Kenison: Great. Thanks. And Leah, if I could ask you, you mentioned a $12 million out of period expense. Can you shed more light on that expense in which period did it normally occur? [inaudible] And then some of the other related items are related to out of period invoicing for some of our vendors that we received in the fourth quarter. Okay. Thanks.
Speaker Change: A combination of the <unk> synergies.
Speaker Change: Competitive pension as well as institutional prioritization right.
Speaker Change: We will always have scarce resources.
Speaker Change: That is those are the units that we are most willing to forego.
Speaker Change #100: Okay. Thank you.
Craig Kennison: Thanks, Craig.
Craig Kennison: Okay.
Speaker Change #101: Thank you. Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question.
Bret Jordan: Hey, good afternoon guys.
Speaker Change #103: On the 6% insurance units.
Bret Jordan: You guys were still taking share in the fourth quarter from a peer in the space could you sort of carve out what was organic growth versus share gain year over year in that quarter.
Greg Kenison: And just one on purple wave. I'm curious how many territory managers did you add? If that's the right metric, I'm trying to get a feel for whether that 17% is driven by external matters or really driven by yours.
Speaker Change #104: Brett we don't we don't have that off the top of head, but youre right. It is both though it is both organic growth as well as share capture.
Speaker Change #105: And then I guess sort of a similar question on a year over year Cat basis. Obviously, you spent money prepping for storms that didn't result in a lot of cars do you have a year over year number on how many cars came from catastrophic events in the fourth quarter versus the prior year.
What is your expansion plan? I say both are drivers. It is both expansion territory but also like territory growth in territory growth. So to speak. And remember, this is a virtual business. Of course, they do have the team and the sales force. So to speak to reach out to potential sellers of the business and customers support agents and the like. But it's virtual. So it's not quite like opening a new Starbucks on the street corner. It's more adding the institutional sales force to go to pursue to pursue the clients in the first place. Got it. Hey, thank you. Thanks, Greg. Thank you.
Speaker Change #106: Very modest so in the Grand scheme of cohorts relatively speaking a rounding error.
Said, the mobilizations Werent trivial right. So this year with multiple storms multiple named storms, we do mobilize trucks and people and such in anticipation of those storms. We don't have the luxury of waiting to see if it's real.
Speaker Change #106: Mobilize in advance because that's what we owe our customers. So we did have multiple mobilizations this year with a with trivial volume to show for it.
Speaker Change #107: Okay, and then I guess I have a question on the yard operation expense growth.
Operator: At this time, to ask a question, please press star one.
Speaker Change #108: It is part of that the investments <unk> been making in recent years and expanding our real estate portfolio do you have to staff yards that arent at full capacity, yet or is that our deleveraging around some of this.
Chris Bottiglieri: Our next question comes from the line of Chris Buddha dairy with BNT Parabas. Please proceed with your question. [inaudible] I'm going to ask a question. I'm going to ask a question, and Total. I think if the financial crisis in 2009, this is from memory or from research, frankly, but the downturn to 2009, and since it has shown very modest effects of this almost in the immeasurable one, but I think direction is speaking, that's what would happen.
Speaker Change #109: Capital investment or is it really just sort of a spike in labor in some of these nonrecurring costs is there something more structural as you've expanded so much acreage recently that builds in a higher yard operating expense for one very narrow example of the <unk>.
Speaker Change #110: Kris footprint also brought a higher property tax bills, both literally with more acreage as well as rising property values around the country.
Speaker Change #111: That's definitely in the P&L as well as for the deleveraging I think that largely is smooth smoothed out over time, but we don't have a.
Speaker Change #111: A huge bolus of yards opening at one moment in time, so as those as we encountered those facilities that have new management, new staff for which we don't yet have the volume to fully absorb it. We also have volume coming in the yards that are more mature more fully mature for which we get the operating leverage so if thats the distortion into small.
Yeah.
Speaker Change #112: Great. Thank you.
Brett: Thanks, Brett.
Thank you. Our next question comes from the line of Josh Beck.
Josh Beck: <unk> with J P. Morgan. Please proceed with your question.
Josh Beck: Hi, good evening and thanks for taking my question.
Speaker Change #115: Just one on the non insurance business, if you could give us an update on the business mix in terms of the <unk>.
Speaker Change #115: <unk> of revenue and any color around the demographics of the non insurance customers. I believe you have been investing towards building out a dedicated <unk> on the <unk> side for a few quarters now.
Chris Bottiglieri: Yes, okay. Then I think we gave a ton of metrics here, so I might have watched these, but it's kind of like U.S, is up six, U.S, insurance is up six, but then dealer fleet finance 20 and, I sorry, fleet retail finance of 20 and dealer plus 10. So it seems like there's an offset somewhere. Is that just low value charity cars? Is there a competitive that's being irrational there that's causing a drag in that segment?
Speaker Change #116: It would be great if you could share some.
Speaker Change #117: With us on this front and I have a follow up Greg.
Great.
Speaker Change #118: So as for those non insurance sellers.
Speaker Change #119: The key dimensions would be our blue car volume and we think of that as institutional sellers like banks and rental car companies corporate fleets and dealers. So that's cool part D with services and number two number three cash cars. So this is our consumer facing business at cohorts through which we buy cars from consumers.
Chris Bottiglieri: Or is it something more systemic? No, it's just that low value bucket continues to shrink. And what's causing that to shrink as a competition, or is it just something like the market and staging? It's really just our focus in terms of where we're allocating our efforts. Yeah, I think it's a combination of the four-stage product. It's competitive pension as well as institutional prioritization, or that we will always have scarce resources, and that is those are the units that we are most willing to work out.
Excellent. Thank you.
Speaker Change #119: For example of those liability coverage only consumers, who end up with a wrecked car looking for ways to dispose of them all three are meaningful.
Speaker Change #119: Disclose precisely how much is each but all three years are substantial in the scheme of our non insurance business.
Speaker Change #120: The one correction or one clarification I would make to your inquiry about the buyer base is that we definitely don't think of it as a dedicated borrower base for and we think of the buyer base as being very much an integrated one and the importance of the crossover buyer underscores that point. So we often will have buyers arrived for the first time to look at our rental car at six years.
Bret Jordan: Our next question comes from the line of Brett Jordan with Jeff Reese. Please proceed with your question. Good afternoon, guys. Right. On the six percent insurance units, I think you guys were still taking share in the fourth quarter from up here in the space. Could you sort of carve out what was organic growth versus share-dain year-over-year in that quarter? Brett, we don't have that all the top of our heads, but you're right that it is both organic growth as well as share capture.
Speaker Change #120: And perfectly drivable vehicles.
Speaker Change #120: Who then discovers that insurance cars nearby or perhaps not nearby fit that bill as well because they were hailed cars for their otherwise driving what would they have damage that doesn't affect at all the fundamentals of the vehicle edges. So those buyers end up buying cars from both sides, we find that to be the case far more than we find the the case of a dedicated virus.
Speaker Change #121: I would say the shared characteristics across all of the sellers is the international buyer for co part are very relevant.
Speaker Change #122: The international buyers as you know probably from having followed us for a while generally buy cars that are more valuable in fact, much more valuable than the average car sold at cohort.
Bret Jordan: Okay. And then I guess sort of similar question on a year-over-year cat basis. I've usually spent money prepping for storms that didn't result in a lot of cars. Do you have a year-over-year number on how many cars came from catastrophic events in the fourth quarter versus the prior year? Very modest. So in the grand scheme of co-parts and your relatives speaking of rounding error, that set the mobilizations weren't trivial. So this year with multiple storms, multiple named storms, we do mobilize trucks and people and such in anticipation of those storms.
Speaker Change #122: Is true too of the non insurance vehicles. They are active participants both as buyers and bidders, which of course drives liquidity and drives selling prices for cohort as well.
Understood that's very helpful color.
Bret Jordan: We don't have the luxury of waiting to see if it's real. We mobilize in advance because that's what we owe our customers. So we didn't have multiple databases this year with trivial volume to show for it. Okay.
Speaker Change #123: Just one one more for me on the fee side.
Speaker Change #124: It's been a couple of years since you have implemented any major fee hikes on the buy side.
Speaker Change #125: Curious if you could share any color around the historical same framework for fee increases.
Speaker Change #126: With pricing moderating on the salvaged car side as well as on the whole car side.
And then I guess final question on the yard operation expense growth. Is part of that the investment you've been making in recent years in expanding the real-state portfolio? Do you have to staff yards that aren't at full capacity yet? So is there a de-leveraging around some of this capital investment? Or is it really just sort of a spike in labor and some of these non-recurring costs? Is there something more structural as you've expanded so much acreage recently that builds in a higher yard operating expense?
Speaker Change #127: And wondering if there's any changes in the competitive environment have always told you our approach to fee hikes.
Speaker Change #128: In recent in recent dose.
Speaker Change #129: I'll, just say a good and reasonable substantive question is when we don't address on in forums like this one right.
Speaker Change #129: You ourselves as a responsible long term stewards of this business.
Speaker Change #129: We focus first and foremost on delivering value to our sellers to our buyers and we trusted in the long run will also capture our appropriate share thereof. So we don't talk about fee schedules would encourage you to pursue that research through third parties.
Well, one very narrow example of red is the increased footprint also has brought higher property tax bills, you know, both literally with more acreage as well as rising property values around the country. So that's definitely in the P&L as well. As for the de-leveraging, I think that largely has smoothed out over time, but we don't have a huge bolus of yards opening at one moment in time. So as we encounter those.., and those facilities that have new management, new staff for which we don't yet have the volume to fully absorb it. We also have volume coming into yards that are more fully mature for which we get the operating leverage. So if that's the distortion, it's a small one. Great, thank you. Thanks, Bret. Thank you.
Speaker Change #130: I appreciate it thank you.
Speaker Change #130: Thank you there are no further questions at this time I'd like to pass the call back over to Jeff for closing comments.
Jeff Liao: Thanks. Thank you for joining US we will talk to you in a couple of months.
Speaker Change #131: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change #131: Okay.
Speaker Change #131: [music].
Jash Patwa: Our next question comes from the line of Jash Patwa with J.P. Morgan. Please proceed with your question. Hi, good evening, and thanks for taking my question. Just one of the non-insurance business, if you could give us an update on the business mix in terms of the proportion of revenue and any color around the demographics of the non-insurance customers. I believe you have been, you know, investing towards building out a dedicated biobase on the whole card side for a few quarters now, and would be great if you could share some early in English results on this front.
Speaker Change #131: Uh-huh.
Speaker Change #131: Yes.
Speaker Change #131: [music].
Jash Patwa: Thanks, and I will follow up. Great. So as for those non-insurance sellers, the key dimensions would be our blue car volume. We think about institutional sellers like banks and rental car companies, corporate fleets, and dealers. That's Copart Deva Services at number two. Number three, cash cars. So this is our consumer-facing business at Copart through which we buy cars from consumers. For example, those liability coverage only consumers who end up with a direct car looking for ways to dispose of them. All three are meaningful. We don't have to disclose precisely how much is each but all three are substantial in the scheme of our non-insurance business.
Speaker Change #131: Okay.
Speaker Change #131: Okay.
Speaker Change #131: [music].
The one question or one clarification I'd make to your inquiry about the biobases is that we definitely don't think of it as a dedicated biobase. I would think of the biobases being very much an integrated one and the importance of the crossover buyer underscores that point. So we often have buyers arrive for the first time to look at a rental car that's six years old and perfectly drivable vehicle who then discovers that insurance cars nearby or perhaps not nearby fit the bill as well because they were hailed cars or they're otherwise drivable.
Speaker Change #131: Okay.
Speaker Change #131: [music].
They have damage that doesn't affect at all the fundamentals of the vehicle as is. So those buyers end up buying cars from both sides. We find that to be the case form where we find the case of the dedicated buyers you describe. I would say the shared characteristics across all of these sellers is that the international buyers for Copart are very relevant. The international buyers, as you know, probably from having followed us for a while, generally by cars that are more valuable in fact much more valuable than the average car sold at Copart. And that is true to a non insurance vehicle. They are active participants both as buyers and as bidders which are forced drives liquidity and drives selling prices for Copart as well.
Jash Patwa: I understand that that's very helpful color. Just one more for me on the fee side. I think it's been a couple of years since you have implemented any major fee hikes on the buy side. Curious if you could share any color around the historical framework for fee increases with pricing, moderating on the salvage car side as well as on the whole car side. And you know, wondering if any changes in the competitive environment have altered your approach to fee hikes in recent years.
Jash Patwa: I'll acknowledge that's a good and reasonable substantive question. It's when we don't address on informs like this one, but we view ourselves as responsible long-term stewards of this business. We focus first and foremost on delivering value to our sellers, to our buyers, and we trust it in the long run, we'll also capture our appropriate share thereof. So we don't talk about these schedules, I would encourage you to pursue that resource through their parties. I appreciate it. Thank you.
Operator: There are no further questions at this time.
Jeffrey Liaw: I'd like to pass the call back over to Jeff for closing comments. Thank you for joining us.
Jeffrey Liaw: We'll talk to you in a couple months.
Operator: This concludes today's teleconference. You about it.