Q3 2025 Copart Inc Earnings Call
[music].
Please standby good day, everyone and welcome to the co part incorporated third quarter fiscal 2025 earnings call. Just a reminder, today's conference is being recorded before turning the call over to management I will share a coke parts safe.
Harbor statement.
The company's comments today include forward looking statements within the meaning of federal Securities laws.
<unk> 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 10-K for the year ended July 31, 'twenty 'twenty four.
And in 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 will now turn the call over to the company's CEO, Jeff <unk>.
Welcome and thank you for joining us I'll begin with some remarks on our insurance business.
Including comments about our preparation for the 2025% cat season before passing it to lead to describe the results of our financial performance for the quarter.
Starting with our insurance business, our global insurance volume remained relatively flat year over year with a nominal decline of 0.3% globally and unit sales and 0.9% in the United States accounting for the extra business day of Leap year 2024 Global insurance in U S insurance units sold grew.
By one, 3% and 0.6% respectively.
At the same time total loss frequency continues to rise as it has throughout the vast majority of the history of our industry.
In the United States total loss frequency reached 22, 8% in the first calendar quarter of 2025.
100 basis points or thereabouts in comparison to last year.
And while individual quarters can fluctuate and from time to time, we observed even seasonal effects. The underlying drivers of total loss frequency remained quite consistent overtime.
First the economics of vehicle repairs become less economically attractive to our client base the insurance industry with increasing vehicle complexity rising parts prices rising labor rates storage fees rental car expenses as well.
At the same time on the other side of the ledger, the economics of total loss become more attractive over time.
For emerging economies around the world. Our salvaged vehicles are an essential source of mobility for them co parts auction technology, and our ecosystem of sellers and members is uniquely well suited to finding the highest and best use for every vehicle we touch.
And anticipating a question about why nominal insurance volumes haven't kept pace with what appears to be rising total loss frequency.
We would offer a couple of notes first the precision of total loss frequency measures do vary or does vary.
The very nature of the calculation is to assess what portion of the claims in any individual quarter are ultimately resolved to be a total loss in the yen meeting some figures or even revised after the fact for historical periods.
And notably we observe that there are cyclical forces at work as well, including an increase in the rate of uninsured and underinsured drivers. According to the insurance Research Council they observed meaningful increases in both over the course of the past four years, and we would know cyclical trends over the decades.
In terms of the rate of uninsured and underinsured drivers what that means in practical in practice is that drivers with coverage of that type may never bring their vehicles into the traditional traditional insurance claim settlement pathway in the first place.
We would expect over time.
<unk> has been proven over the decades that these typical forces will reverse will reverse at some point as well.
I wanted to turn my attention to the 2025 storm season.
Meteorologists and experts.
It released a number of forecasts for holiday expected 2025 storm season to unfold, noting that 2024 with an active season itself. Most would expect based on above average oceanic temperatures that this warm season could well be an active one as well, perhaps as active as 2024.
Speaker Change: In anticipation of these types of events, we continue to invest in real estate infrastructure technology, our people and other aspects of operational readiness. Our preparation is not an AD hoc spring events, but in fact, a year round exercise for us as a company.
One tangible example is our acquisition of Hall Ranch, a property located in South, Florida, which offers nearly 400 usable acres of vehicle storage for a storm.
With this addition, we now have the physical footprint to handle the storm more than three times the size of the largest Florida storms on record and co part history.
In closing we are excited to continue to invest our time and resources and growing and enhancing our capabilities both for storms and for our day to day business, we will invest in our physical storage capacity, our technology platform, our people and our seller member ecosystem each of which is essential to delivering.
Speaker Change: <unk> superior auction outcomes to our sellers and a superior purchasing experience for our members with that I'll turn it over to our CFO Leah Stearns and we'll both take your questions thereafter.
Leah Stearns: Thank you, Jeff I'll begin with our third quarter sales trends during.
Leah Stearns: During the quarter, our global unit sales increased 1%, which reflects the modest headwind from the prior year period being weak here.
Leah Stearns: Per business day basis, our global unit sales increased over 2%.
Leah Stearns: Simon RC units continue to constitute most of our global unit volume.
Leah Stearns: And our U S segment unit sales were flat, reflecting flat fee unit growth and purchase unit growth of nearly 7%.
Leah Stearns: Our U S insurance unit volume decreased close to 1% year over year and decreased approximately 2% excluding cat.
Leah Stearns: We continue to see non insurance U S unit volume growth outpaced that of our U S insurance.
Leah Stearns: New car, which services our bank rental and fleet partners continued its strong trend with year over year growth of almost 14%.
Leah Stearns: Dealer sales volume consisting of co part dealer services and National power Sports auctions grew over 3% year over year.
Leah Stearns: Low value unit increased just over 4%.
Leah Stearns: Turning to our international segment.
Leah Stearns: Our unit sales growth of 6% in the quarter and about 5% excluding cat Yang.
Leah Stearns: With CNS, increasing 9% and purchase units decreasing 13% for the quarter.
Leah Stearns: <unk> units continued to decline as certain insurance customers shift from purchase contracts kicking back in.
Leah Stearns: On a final note we have observed softness in the heavy equipment auctions base due in part to widespread uncertainty regarding infrastructure spending in Paris, our partner in the equipment space propylene. Nevertheless maintained flat GTD year over year for the trailing 12 months ended April sorry.
Leah Stearns: Our global Asps increased by approximately 3% for the quarter compared to the year ago period.
Leah Stearns: U S insurance Asps increased over 2% over the same period and our international segment.
Leah Stearns: Insurance Asps increased approximately 5% we believe our auctions are outperforming other platform and deliver it to our salary attributable to the active participation of our global member base as well as our unique digital auction platform.
Leah Stearns: We have not observed any hesitation from our buyers, which we would attribute to proposed or enacted tariffs.
Leah Stearns: Our global inventory decreased nearly 10% from the year ago period overall inventory levels in the U S decreased approximately 11%.
Leah Stearns: Three main drivers of the inventory decline lower.
Leah Stearns: Simon faster cycle times, and the reduction in low value unit, aged inventory as.
Leah Stearns: As we've noted previously year over year changes in inventory levels can be a directional indicator of prospective unit sales trends.
Leah Stearns: Trends, we are observing in our inventory levels reflect the cyclical impacts associated with an increasing share of our non insured motoring and varian growth trajectories among insurance carriers. We continue to believe that the secular trends in favor of rising total loss frequency will drive our long term growth.
Leah Stearns: In addition, our continuous focus on reducing our operational cycle time has reduced inventory levels. For example, deploying our title express solution to a number of new carriers has reduced and yard cycle times and physical inventory.
Leah Stearns: Our international business ended the quarter with inventory levels flat from the prior year.
Leah Stearns: Turning to our financial performance Global revenue increased to $1 2 billion Global service revenue increased nearly $88 million or over 9% from the third quarter of 24.
Leah Stearns: Increased international volume and overall higher revenue per unit.
Leah Stearns: <unk> service revenue grew by 8% for the quarter and 7% when excluding cat Gannett and.
Leah Stearns: <unk> service revenue grew by about 18%.
Leah Stearns: Global purchased vehicle sales for the third quarter decreased approximately 2%, while global purchased vehicle gross profit decreased 60% in the third quarter.
Leah Stearns: In the U S purchased vehicle revenue was up about $20 million or 22%, while purchase vehicle gross profit decreased $13 million or about 187% in the quarter.
Leah Stearns: This includes the impact of a $12 million out of period adjustment, which is related to cost of vehicles sold in Q1 and Q2 of this year year to date, our U S purchase unit margins were just over 6%.
Leah Stearns: Internationally purchased vehicle revenue decreased by over $23 million or 25% and gross profit increased by over $2 million or about 22% in the third quarter. The reduction in international purchased vehicle revenue accompanied by an increase in gross margin continues to be driven by higher ASP reinsurance vehicles in Germany.
Leah Stearns: <unk>, which have transitioned from a purchase contract to a consignment model as well as stronger purchase unit margins in the U K.
Leah Stearns: Global facility related costs, which include facility operations, depreciation and amortization and stock based compensation increased $51 million or about 12% and about 10% pro formats. If you reflect cap costs.
Leah Stearns: In the U S facility related cost increased $43 million or nearly 12%.
Leah Stearns: During the quarter, we recognized $6 million of incremental costs associated with hurricane clean and Milton. This reflects the recognition of deferred expenses associated with cat units sold during the period, excluding the costs associated with the hurricane facility related cost per unit increase about 10% from the prior year. This increase on a per unit basis.
Leah Stearns: Next our ongoing investments in expanded operational capacity to support our continued growth.
Leah Stearns: International facility related costs were up almost $8 million, an increase of nearly 11% or less than 5% on a per unit basis.
Leah Stearns: During the quarter global gross profit was approximately $552 million, an increase of $27 million or about 5% and our gross profit our gross margin percentage was 46% for the quarter.
Leah Stearns: In the U S. Our gross profit was approximately $480 million, an increase of about 3% and gross margin was about 48% for the quarter.
Leah Stearns: Our international gross profit was approximately $73 million, an increase of about 26% and our gross margin was about 35% in Nevada.
Leah Stearns: Third quarter GAAP operating income increased over 3% to approximately $452 million, which reflects the growth in gross profit in our general and administrative expenditures of $101 million, which are up about $12 million year over year.
Leah Stearns: Finally third quarter GAAP net income increased by over 6% to $407 million or <unk> 42 per diluted common share during the quarter. We benefited from an increase of nearly 7 million from interest income as we have actively invested our cash into treasury securities for the quarter, our tax rate was a little over 19%.
Leah Stearns: Turning to our capital structure as of the end of April we had over $5 6 billion of liquidity, which is comprised of nearly $4 4 billion in cash and our capacity under our revolving credit facility of approximately $1 3 billion with that Jeff and I would be happy to take some questions.
Leah Stearns: Thank you.
Leah Stearns: With that we'll now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May press star two to remove yourself from the queue for participants using speaker equipment that may be necessary to pick up the handset before pressing the star keys, one moment, while we poll.
Speaker Change: All for questions.
Bob <unk>: And our first question comes from the line of Bob <unk> with CJS Securities. Please proceed with your question.
Speaker Change: Great. Good afternoon, Thanks for taking my questions Hey, Bob.
Bob <unk>: Hi.
Speaker Change: Obviously, you guys have a tremendous asset in your land and you keep purchasing warrants a clear benefit to your insurance salvage customers, which is why you keep buying it.
Speaker Change: I was hoping you could talk about how do you think about this land asset.
Speaker Change: Are there any current or future benefits from this land for your Youre growing blue car or a whole car customers, particularly with the shift of.
Speaker Change: So digital for whole car auctions going on.
Speaker Change: Thanks, Bob.
Speaker Change: Great question, we think that physical storage and logistics are essential to our value proposition for many sellers insurance companies as well as the blue collar that finance companies rental car companies corporate fleets and the like.
Speaker Change: Many instances physical storage is a necessity we of course as you know in the past and also developed products for purely virtual sales, but as it turns out physical storage certainly in the case of insurance when when.
Speaker Change: When salvage titles and <unk>.
Speaker Change: Processing through <unk> is a necessary step as well proves the central there, but also in many cases for the other types of sellers. You described so we view it as an essential portion of our service offering certainly the digital.
Speaker Change: Product platform, you described as well as equally so but it is a two pronged approach to serving that universe.
Speaker Change: Also.
Speaker Change: <unk>.
Speaker Change: Okay. Some further context would say that that storage is increasingly difficult to procure anywhere in the United States anywhere in any of the countries. We serve frankly, so we view it also as we view it as our responsibility and being stewards of the industry as well to make sure that we can continue to support insurance.
Speaker Change: And the other companies you described as well to make sure that we can continue to offer the service that we do for decades and for generations to come.
Speaker Change: Okay, Great and then you touched on this in your opening remarks, a little bit in last call, but could.
Speaker Change: Could you just maybe elaborate a little further on the shift of insured.
Speaker Change: Less collision insurance insured motorists.
Speaker Change: That's typically played out over previous cycles, and where you see it.
Speaker Change: Impacting volumes in the near or medium term.
Bob <unk>: Yes, I think Bob.
Speaker Change: Unfortunately, this exercise is necessarily imprecise. So we have to piece together a number of different sources, including the.
Speaker Change: The insurance Council, we described in the prepared remarks as well as other sources for registered vehicles for the types of covers folks have so whether it's collision liability comprehensive and so forth. We can derive the portion of the registered vehicle fleet that has or doesn't have insurance and to what extent they are under insured as well so we see cyclicality units.
Speaker Change: It won't surprise you that around the time of the global financial crisis. It away from 2009, there was a local trough.
Speaker Change: Insurance coverage I think it's not a surprise that we're experiencing that again now.
Speaker Change: You know Bob from following the insurance industry as well.
Speaker Change: The rest of the world experienced very meaningful inflation.
Speaker Change: In 2021, and 2022, and many cases insurance rates lagged that inflation because the insurance carriers in turn had to obtain regulatory approval to make modifications to their books of business and so on the tail end of inflation with an already stress.
Speaker Change: Stress consumer in some cases I think we are seeing and they are seeing folks with higher deductibles or before opting for liability on the coverage or in some cases, despite statutory requirements going up going without insurance altogether. So we think thats a cyclical phenomenon at least it has been for the past 2030 years for as long as we can see the data it does go up and down.
Speaker Change: Overtime.
Speaker Change: Great. Thank you very much thanks, Paul.
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 our question as well I wanted to ask about purple waves I think youre about a year into that partnership and I'm curious what you've learned so far and how you expect to invest in that business.
Craig Kennison: Going forward understanding that at this moment, it's not growing.
Craig Kennison: Yes, Craig I think that's a very fair question I think we were as you know the original thesis here is that peripheral wave for really for any any kind of M&A activity we pursue.
Craig Kennison: No.
Craig Kennison: Seven years ago, eight years ago, or so when we made that investment as well.
Craig Kennison: The two pronged test that we always subject any investment like this too is one do we like it fundamentally is as an investment in and of itself, meaning if this were simply a growth equity or control equity acquisition would we like the the nature of the risk adjusted expected returns from the business itself and then secondarily, we ask the question to what.
Craig Kennison: Does this help co parts core business and then you start to evaluate the strategic overlap to what extent co parts capabilities can help the business to what extent, Canada business capabilities help cohort.
Craig Kennison: It stands now.
Craig Kennison: Dave I think the logic for the <unk> transaction was very much on both fronts. It was that we affirmatively likes the investment on its own merits and we also thought it was beneficial to cohort. We are even just day to day, a huge purveyor of equipment.
Craig Kennison: Construction and agricultural equipment heavy duty trucks and the like the expertise that they brought was meaningful to us and certainly the expertise that we bring in the form of managing large physical storage facilities large liquid digital auctions and so forth.
Craig Kennison: Made for a very good fit.
Craig Kennison: So I think it's probably not quite fair to say that it's flat I think they.
Craig Kennison: They are operating in a very uncertain environment courtesy of the tariffs as you know so there are a lot of folks in a lot of these businesses, who are awaiting more certainty on both infrastructure spending as well as tariffs to decide what to do with their equipment, where the Dubai to sell et cetera. So I think they are facing some inertia, which are the public companies I think are certainly seen as well and their results in terms of the <unk>.
Craig Kennison: But the activity in the heavy equipment arena.
Craig Kennison: And you mentioned tariffs how are you thinking about the very broad implications of trade policy as it relates to your business as it currently stands knowing that it's been changing a little bit.
Craig Kennison: Yes, I think thats.
Craig Kennison: I think that's it.
Craig Kennison: Understatement Greg.
Speaker Change: It is certainly very dynamic picture and I would say that is probably first and foremost the most important observation here is that it has created meaningful uncertainty for our clients the insurance industry and otherwise.
Speaker Change: We now are facing or the industry broadly is facing tariffs on parts. The parts industry. I think 2024 data I would say the $220 billion industry or thereabouts for both new and replacement parts. The vast majority of which come from a half to half a dozen countries, Canada, Mexico, China, South Korea, Japan, Germany.
Speaker Change: Account for the vast majority of those parts virtually all of those parts as it stands now we are facing tariffs to some extent.
Speaker Change: Which increases the cost of the repair for the insurance industry. So for any given claim they are evaluating their choices considering choices, which can be to repair the car or the total. It. It is surely has made the repair path less attractive because the parts are more expensive in some cases, the parts will be delayed and delayed parts of course compromises the policyholder <unk>.
Speaker Change: <unk> and likely extends the duration of the rental as well.
Speaker Change: That side of the ledger on co par side of the ledger. When you consider the total loss I think there are offsetting considerations there on the one hand, if used car prices should rise in atvs should rise because new cars become more scarce than the cost of a total loss indemnity, maybe higher but.
Speaker Change: By the same token our salvage returns will be higher as well.
Speaker Change: So I think the best analogy, we can draw.
Speaker Change: To the 2021 or thereabouts with semiconductor crisis, Humira, certainly recall that was less about parts per se. So it wasn't all repair parts. It was a very narrow subset of the parts that go into the production of a vehicle.
Speaker Change: In that moment I would say, we experienced higher asps for the cars that we sell probably all else equal we experienced a milder suppression of demand relative to where it otherwise would have been I think today's catalyst is probably marginally more favorable to us in the stomach semiconductor shortage because it is repair parts.
Speaker Change: The vast majority of which comes from places outside of the United States.
Speaker Change: So we think the repair path will become.
Speaker Change: Relatively less attractive in comparison to the total loss path by virtue of the tariffs that said overwhelmingly the conclusion is for now that there's tremendous uncertainty right.
Speaker Change: The federal government I think.
Speaker Change: Is intending to provide guidance as to what constitutes exceptions under U S. MCA what counts as you say in the U S. MCA content for parts. So theres still much of this picture that's still left to be painted.
Leah Stearns: Great. Thank you thanks Craig.
Speaker Change: Thank you Andrew.
Speaker Change: Our next question comes from the line of Chris, particularly area with the Bnb Paribas. Please proceed with your question.
Chris: Hey, Thanks for taking my question.
Speaker Change: So first one Jeff co part has taken a lot of share over the last five years, you've been CEO when the 10 years before that.
Speaker Change: Are you currently seeing from market share perspective is there any reason why your peer it could be higher.
Speaker Change: Higher reported growth numbers like how would how would you think about that.
Speaker Change: Yes.
Speaker Change: Pardon me, Chris a very fair question.
Speaker Change: Sure.
Speaker Change: As you might imagine this is a very complicated very downstream metric. Congrats so it is affected by things like the relative growth of individual insurance carriers that we serve.
Speaker Change: So if on any given day, we happen to be serving an insurance carrier, who is growing faster or slower that can affect the overall volume trends for us relative to the rest of the industry.
Speaker Change: I think we've gained share.
Speaker Change: Frankly for many years and decades before I arrived at the company at all so that's a long standing trend and I think the drivers there won't surprise, we are committed to.
Speaker Change: Delivering the very best possible net returns to our clients by investing in the land we've already talked about by investing in the digital auction platform and by making our partners our clients faster more accurate and more efficient at what they do we've talked in previous calls I won't drag you through all of it here about advanced charges and how important they are to our insurance.
Speaker Change: Companies in the suite of tools and some cases computer vision and artificial intelligence enabled that empower them to address those opportunity sets as well we know that if we take care of those particular objectives. If we are exceptional along those dimensions.
Speaker Change: Like our stock price the stock price and market share will take care of itself right. We know what the input variables are we know where to invest our time attention and resources and we have high confidence that if we execute on those fronts that the market share dynamic will take care of itself, but I think the short answer to your question is that it is more.
Speaker Change: More of the random fluctuations in the Miss alignment of reporting period, and so forth. We don't that we don't lineup precisely.
Speaker Change: Underlying insurance carrier growth trends, all of which I think are generally cyclical by nature, but all of those kinds of variables.
Speaker Change: We'll move in both directions over time.
Speaker Change: Got you, Okay and then.
Speaker Change: Picture question, what sets prices in your end markets is it somehow derived alpha is used vehicle prices or is it to rise by the local economies of your buyers just trying to think if the tariffs primarily affect the U S vehicle prices.
Speaker Change: How does that effect with the international buyers, which you may not see new car prices rising their local market. So what does that do kind of curious what your thoughts.
Speaker Change: Chris I will take a portion of that and I'll, let Jeff jump in if there's anything you want to add but I think what we've seen historically is that the.
Speaker Change: The arbitrage that's available for our global buyer base, because the affordability of mobility solutions locally is so out of reach that they have a significant amount of ability to maximize the value of that vehicle and in emerging market relative to what a domestic buyer would be able to.
Speaker Change: That vehicle for and so if you look at simply just the relative price of a new or used vehicle and some of the markets.
Speaker Change: Eastern Europe or in Latin America, and the affordability index, if you index out to what a consumer in the U S would be able to achieve is drastically more expensive and as a result, they default to seeking Alex repairable vehicles and co part as a key source for them to go to to find them.
Speaker Change: I would say the sensitivity of price.
Speaker Change: The perfect answer to you, but we do think that the spread between the alternative is quite.
Speaker Change: Quite dramatic and therefore, we have not seen any significant impact to buyer activity and bidding activity as a result of the pending or conduct of tariff.
Chris: Hey, Chris I would add to that.
Speaker Change: Illustration with with two <unk>.
Speaker Change: This is stylize illustration of our two extremes in one case you have a very old car.
Speaker Change: Entirely destroyed for which the values entirely the middle maybe a few parts, maybe some precious metals from the catalytic converter or otherwise the value of that car is largely domestic in fact this largely local right. It's unlikely this car.
Speaker Change: A few hundred dollars will move more than 10 2030 miles even from the side of the cohort facility.
Speaker Change: That is a nearly entirely domestic even quasi local asset that is also a very very tiny fragment of the value of cohorts auction overall and of our business overall.
Speaker Change: At the other extreme consider.
Speaker Change: Lightly damaged hail car or a vehicle, we have consigned to us from a rental car company that is in debt as at the end of its rental fleet life that vehicle then is valuable to a host of different places, including locals, including folks in other states, including folks in Poland with.
Speaker Change: With the waning and otherwise that vehicle that is subject to the specific substitutes available to each of those buyers. So in the U S. Shortly those buyers are now facing cars. It will cost more on the new market courtesy of tariffs at least on a portion of the parts for our international buyers.
Speaker Change: And of course, we'll have to bid against those domestic buyers as well. So we have to compete for that vehicle. The individual circumstances has been a given country I think we've tend to find that the biggest purchasing countries for cope our vehicles are fast growing economies that don't have local domestic auto production. So there are alternatives aren't fantastic right. They can buy vehicles from others.
Speaker Change: Salvage market they can buy cars from the U K subject to the right hand left hand drive problem. They can buy cars from co part, Germany, and Spain, and there are certainly other sources of vehicles like it but.
Speaker Change: So long winded way of saying that it varies very much by car, but it's ultimately.
Speaker Change: Ultimately auction so whatever your highest and best use is whatever the highest and best usage for that given vehicle anywhere in the world will generally find it.
Speaker Change: Thank you so much for the thorough explanation thanks, Chris.
Speaker Change: Thank you and as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Star one.
Speaker Change: And our next question comes from the line of John Pitzer with Jpmorgan Chase and company. Please proceed with your question.
John Pitzer: Hi, good evening and thanks for taking my questions.
John Pitzer: Just curious about the trends in G&A spend.
John Pitzer: Typically we've seen a seasonal sequential uptick in the third quarter, but this time around the trends appear flat.
John Pitzer: Stability driven by the reduction of some onetime expenses related to projects you've alluded to previously and is the <unk> run rate a new baseline or are there additional onetime expenses that are yet to roll off thanks and have a follow up.
Josh: Sure Josh I'll take that.
John Pitzer: With respect to G&A I would say year over year. The main driver of the increase was attributable to our.
John Pitzer: Our continued investment in the sales force within <unk>.
Speaker Change: The rest was really just some minor investments across our platform services.
Speaker Change: To support our global organization.
Speaker Change: We don't necessarily look to that or provide guidance in terms of whether or not that is a steady state number we make investments from time to time.
Speaker Change: Projects and installations that we have.
Speaker Change: Zinc and believe we will drive greater operating leverage for the business in the future.
Speaker Change: Wouldn't point, you to that as being a run rate, but each individual investment that we do make into G&A, we do take an investment mindset approach to it and ensure that there are tangible.
Speaker Change: Returns that we will achieve whether it's through cost reduction efficiency.
Speaker Change: Or other opportunities for the business more generally.
Speaker Change: Understood that's helpful.
Speaker Change: Just as a follow up.
Speaker Change: Typing on a few quarters back.
Speaker Change: Based on Jeff's commentary I was under the impression that despite the increasing number of under insured and uninsured motorists on the road.
Speaker Change: These vehicles would eventually end up at cobalt auctions as it seemed to be the most economically efficient outcome.
Speaker Change: Based on your comments today. It appears that's not the case could you provide.
Speaker Change: I have some insight into the channels that are effectively facilitating the scrappage are potentially the remarketing of these vehicles.
Speaker Change: That's a fair question I think the the vehicles in many cases could or should still end up back at co part.
Speaker Change: Our cash for cars business, which purchases vehicles directly from consumers are co part dealer services business I think in some cases, the policyholders will ultimately monetize their vehicles by trading in EBIT damaged car to a local dealer independent franchise or otherwise so we do have.
Speaker Change: Multiple shots on goal so to speak to earn the right to sell that car I do and we continue to argue that we are the right liquid marketplace to dispose of that vehicle wherever it ends up but its certainly less efficient, but it wouldn't be an immediate consignment. If you Josh God forbid we're in a car accident tomorrow notified your carrier right away, we might be selling their car two weeks from now depending on the <unk>.
Speaker Change: Eight in which you live in some cases other states.
Speaker Change: Longer than that but the point is if there's an immediacy to that assignments that simply won't exist if that equals does not enter the.
Speaker Change: The traditional insurance company so to speak.
Speaker Change: Thanks, a lot for that Jeff I appreciate that if I could just sneak one more in there are seven potential legislative actions being considered in various states.
Speaker Change: That could potentially gas storage fees, which I believe would be beneficial for Cooper and on the other hand. There is also a legislative actions being considered that could raise the threshold for total losses, which might be a downside.
Speaker Change: Could you walk us through how these changes is applied on a broader basis could impact cobalts business model. Thank you.
Speaker Change: Thank.
Speaker Change: I think your observation about storage is likely accurate.
Speaker Change: I think the legislation you have in mind would cap what in Pearland facilities.
Speaker Change: Probably unaffiliated repair shops can charge insurance companies for storing vehicles.
Speaker Change: In that case, I think that benefits the insurance industry more broadly.
Speaker Change: Naturally we in some sense, we compete against all alternatives for a car we compete against it being sold elsewhere, we compete against the car being repaired.
Speaker Change: But in this case, reducing the cost of storage I think we'd affirmatively benefit insurance companies, we likely would equip them with the tools to still move quickly to resolve those claims.
Speaker Change: As possible there is a lot of value in shortening the intervals by which insurance companies manage their claims.
Speaker Change: To your second question about the total loss thresholds in general I think our belief is that our principal approach to this is that the insurance companies Shouldnt make the best total loss decisions for their business in many cases, we think they arent totaling enough vehicles right for a host of reasons that we've talked about on prior calls legislation in the past is.
Speaker Change: Generally.
Speaker Change: Such that the insurance companies are required to total a car above a certain repair threshold.
Speaker Change: What you're referring to in this case.
Speaker Change: In most cases insurance companies should economically total cars at lower thresholds and the statutorily required thresholds. So we think that left us on devices that should not have a huge distortion.
Speaker Change: On the decisions that insurance company may make if on the other hand.
Speaker Change: You had mandatory repair legislation, which by and large did not exist in the United States.
Speaker Change: Such as the insurance companies, we were required to repair a vehicle for a certain percentage threshold that could alter the picture somewhat we think the insurance industry is certainly motivated enough to want to preserve discretion to make that decision on their own as opposed to allowing the states to dictate that decision for them. So we don't think thats, a meaningful distortion, but we certainly do track that aspect.
Speaker Change: Of our business.
Jeff Co: Thanks, a lot Jeff I appreciate the answers and good luck great.
Speaker Change: Great. Thank you Josh.
Jeff Co: Thank you and with that there are no further questions at this time.
Speaker Change: I'd like to pass the call back to Jeff for closing remarks, great. Thank you everybody and we'll talk to you next quarter.
Speaker Change: Thank you.
Speaker Change: This does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.
Speaker Change: [music].
Speaker Change: Uh-huh.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.