The Copart Incorporated Third Quarter Fiscal 2024 Earnings Call has begun with a reminder that the conference is being recorded. The company's CEO, Jeff Liaw, will be providing brief comments about the business before handing the call over to Leah to review the financial results. The company has recently concluded their 24th Annual U.S. Insurance Advisory Board Meeting, where they gathered feedback from clients to inform their service offerings, tech deployments, and capital investment programs. Some of the priorities discussed included addressing escalating claims cycle times and advance charges.

The company discussed their successful online auction marketplace and their global buyer base. They also celebrated their 30th anniversary as a public company and rang the NASDAQ opening bell. They continue to work with their insurance clients and have observed a decline in used vehicle prices and an increase in repair costs, leading to a recovery in total loss frequency. They believe that this trend will continue in the long run, making totaling vehicles more economically attractive to insurance carriers.

The insurance company has seen a 6.8% increase in insurance volumes, but is hesitant to provide normalized growth trends due to the effects of storms. They have responded efficiently to smaller weather events and are prepared for a potentially severe storm season ahead. They are also leveraging their catastrophic response capabilities to support clients in areas affected by flooding. The company is also seeing growth in their non-insurance business, particularly in their blue car business.

In the third fiscal quarter, Copart observed a year-over-year growth of 23-24% in sales and a 19% increase in volume sold. This growth is attributed to their commitment to customer service and auction liquidity. As they celebrate their 30th anniversary as a publicly traded company, Copart remains focused on investing in their people, technology, and real estate for future success. In the third quarter, their global unit sales increased by 11%, with a 9% growth in the U.S. business unit. Consignment units continue to make up the majority of their volume, while insurance units saw a 7% increase.

In the third quarter, the non-insurance unit volume growth outpaced the insurance business, with significant increases in dealer and fleet rental units. International business also saw growth in fee and purchase units. Global average selling prices declined slightly, but were more resilient compared to the Manheim Used Vehicle price index. Revenue and service revenue increased, driven by volume growth. U.S. purchased vehicle revenue and gross profit increased, while international results were mixed. Higher margins on purchase units in Germany contributed to overall gross profit growth.

In the third quarter, the company saw a global gross profit increase of $42 million, with a decrease in gross margin percentage due to investments in infrastructure and technology. General and administrative expenses also increased due to investments in various functions and the consolidation of Purple Wave. Operating income and net income also saw increases, with a significant boost from interest income and a lower effective tax rate. The company's capital structure includes $4.3 billion in liquidity, with a significant amount in cash and investments.

The company believes that their conservative capitalization is a competitive advantage and has generated strong operating cash flow and free cash flow. They have invested in expanding their real estate and physical infrastructure, which has reduced transportation costs and fuel consumption. This strategy allows them to focus on delivering excellent products and services. They have also seen success in the dealer car market, and while used car values have dropped, their salvage ASPs have held up due to the higher end cars being totaled. The relationship between used car values and dealer car ASPs for the company is unclear.

The speaker believes that there are some natural effects and conversion implications that every auto auction business will encounter. They have seen a rise in used vehicle prices in 2021 and 2022, but this is not the long-term trend. There may be some modest effects in the near-term, but they are overwhelmed by the volume of units sold. The selling prices for dealer cars may be lower compared to a year ago, but as they deliver good results, their ability to address total loss frequency expands. This may also have some secondary effects on dealer cars. Manheim is down about 14% year-over-year, while their dealer units are down just over 5%. This is due to a mixed shift within the population, as they are adding higher value units.

Jeff Liaw and Bob Labick discuss the Manheim used Vehicle index and its relationship to Copart's ASP performance. Liaw explains that while Copart's prices have generally outpaced Manheim's over the long haul, there has always been a misalignment between the two metrics. Labick asks about Copart's growth in the dealer car market, and Liaw explains that they are taking share from other outlets such as physical auctions, online channels, and wholesalers. Financial institutions and rental car companies also have different options for selling their vehicles.

The competitive landscape for non-insurance cars is multidimensional, with some using other major auction houses. The company is effectively competing with different types of sellers. The CEO has previously discussed the potential for higher total loss rates if insurers had full access to data, and the company is making progress towards better monetizing that data. Total loss frequency has been increasing over time, and there is a wide range of practices among insurance companies. The company offers tools to help expedite and improve total loss decisions for insurers.

The author discusses the potential for insurance companies to make better and faster decisions regarding total loss vehicles, and mentions that international buyers are becoming increasingly important in the Copart market.

The speaker discusses the impact of international buyers on car auction activities, highlighting their increasing importance over time. They also address the potential effects of inflation in the insurance industry, particularly on uninsured motorist ratios, but do not believe it will have a significant impact in the United States.

The speaker discusses potential trends in insurance coverage and the economic decision to total a car after an accident. They also explain their company's success in gaining share with insurance carriers, attributing it to their ability to drive better auction outcomes and manage cars quickly.

In paragraph 14, the speaker discusses how the company helps insurance companies reduce front-end cycle times and support them during catastrophic events. They also talk about the durability of their relationships with clients and their commitment to earning their trust. The speaker also mentions an update on their partnership with Purple Wave.

Jeff Liaw discusses the growth opportunities for Purple Wave, noting their success in expanding their geographic footprint and building a community of buyers and sellers. The company still has room for growth in bringing on new sellers and expanding its capabilities. Liaw also mentions the challenge of prioritizing growth levers. He also addresses the question of whether foreign buyers are interested in purchasing the commercial equipment sold by Copart, and notes that the company primarily serves insurance companies in this area.

Purple Wave has a portfolio of assets that they sell on behalf of clients, with a focus on domestic sales in the past. However, they are seeing growth in international markets, particularly in Canada, Brazil, the UK, the Middle East, Germany, and Spain. This growth is driven by factors such as total loss frequency and market penetration. There has not been a significant change, but the growth is significant.

Jeff Liaw, the CEO of Copart, discusses the company's focus on serving the dealer segment and expanding their range of services to better meet their needs. He mentions the natural tailwind of increased total loss frequency and the company's efforts to provide services such as loan settlement and title procurement to different types of sellers. Liaw also notes that this is a priority for the company and they will continue to evaluate and test different services. A question about OpEx cadence over the next 12 to 18 months is also raised.

The speaker is asking about the company's investments and whether there will be an increase in operating expenses in the future. The other person clarifies which expenses they are referring to and mentions the company's goal of achieving operating leverage. They also mention their responsibility as stewards of capital and their willingness to invest when it makes sense for long-term returns. The operator then concludes the call.

This summary was generated with AI and may contain some inaccuracies.