The operator introduces the Copart Incorporated Fourth Quarter Fiscal 2024 Earnings Call and reminds listeners that the call is being recorded. The CEO, Jeff Liaw, discusses the company's success in the fourth quarter and the growth in their business with insurance sellers. He also mentions the recent decline in used vehicle values and its impact on total loss frequency. The CFO, Leah, will provide more details on the financial results before opening the call for questions.

The insurance company's selling prices are higher than the broader used vehicle market due to increasing vehicle complexity and rising labor rates, resulting in a higher total loss frequency. The company offers tools to assist insurance clients with optimizing decisions to total or repair vehicles. They have also deepened their relationships with insurance clients through their Title Express service, which obtains original titles from policyholders and lenders on their behalf. This service has gained significant traction in the industry.

Each state and lender has its own specific requirements for documentation and processes related to title procurement. The company has a strong track record of obtaining titles for insurance clients, especially during the active 2024 storm season. They have also seen growth with non-insurance sellers, particularly in their blue car business, which saw a 20.4% increase in volume compared to the previous year.

In the fourth quarter and fiscal year '24, Copart's dealer sales volume and total global unit sales increased by 9.5% and 10% respectively. This growth was driven by an increase in total loss frequency and share gain. The company also saw growth in their non-insurance automotive volume, which they view as critical in sustaining and extending their liquidity advantage. Additionally, their partnership with Purple Wave resulted in a 17% year-over-year growth in the equipment auction market.

In the U.S, unit growth was over 6% with fee units growing over 6% and purchase unit growth of over 13%. For fiscal year '24, unit growth was almost 8% with fee units growing over 7% and purchase unit growth of almost 14%. Non-insurance unit volume growth outpaced insurance business growth, mainly from fleet rental and finance units and dealer units. Inventory levels in the U.S increased over 6%. In the international market, unit growth was almost 17% in the quarter and 21% for fiscal year '24, with fee units increasing over 17% and purchase units increasing by nearly 13%. Global ASPs declined by approximately 5% for the quarter and 3% for the full year. U.S ASPs showed resilience and outperformed the used vehicle market. Global revenue in the quarter increased to nearly $1.1 billion, representing a growth of over $71 million or 7%.

Global revenue for the year increased by $367 million or nearly 10%, driven by a 7% increase in global service revenue and a 12% increase in global purchase vehicle sales. However, global purchase vehicle gross profit decreased by 1%. In the U.S., purchase vehicle revenue and gross profit increased, while internationally, they decreased. Global yard operations cost increased by 17%, primarily due to increased unit volume and non-recurring expenses. Additionally, the active storm season resulted in higher costs for the CAT storm response teams.

During the storm season, we faced unexpected costs but still maintained a global growth profit of $453 million, with a gross margin percentage of 42.4%. For the fiscal year, our global gross profit increased by $170 million and our gross margin percentage increased by 10 basis points. In the U.S., our gross profit margin decreased in the quarter but increased for the year. Our international gross profit margin increased for both the quarter and the year. Our general and administrative expenses increased due to investments in product development, platform functions, and third-party costs for system implementations. We are also investing in expanding our sales functions and implementing emerging technologies to improve our business processes and increase operating leverage in the long-term.

GAAP operating income for the quarter decreased by 8% to $359 million, but for the fiscal year it increased by 6% to $85 million. GAAP net income also decreased for the quarter by 7% to $322 million, but for the fiscal year it increased by 10% to $1.4 billion. The company has over $4.6 billion in liquidity, with a focus on conservative capitalization. They generated free cash flow of $962 million and plan to continue investing in assets that drive success for their customers.

The company's approach to yard infrastructure investments is focused on long-term value creation for shareholders. The business financial model is impacted by the growth of whole car, dealer, and blue car categories, with higher fees and upfront investments being key factors. The unit economics of these vehicles are expected to be at parity or better than traditional cars sold by the company in the long-term.

The speaker acknowledges that there will be some upfront investments to support growth in the near-term, including infrastructure spending. They also discuss the growth of Purple Wave, a virtual auction platform, and their plans for national expansion. The impact of lower interest rates on Purple Wave's business model is uncertain, but it could potentially lead to higher activity in the industries they serve. However, the speaker notes that their customers and sellers are not a monolithic group and there are many nuances to consider.

In this paragraph, Jeff Liaw and Bob Labick discuss the impact of low interest rates on intermediaries like Purple Wave. They also address a question from John Healy about the top of the business on the accident side, specifically in regards to accident frequency. Jeff Liaw notes that while there has been a 200 basis point increase in total loss rates, this does not necessarily indicate a decline in accident frequency. He explains that these measures are not precise enough and can fluctuate. He also mentions that accident frequency has generally been declining over the past 50 years.

The frequency of car accidents has been decreasing over time due to advancements in safety technology, but total loss frequency has still outpaced this decline. The only anomaly was a brief period in the early 2010s when accident frequency actually increased, potentially due to the rise of smartphones and distracted driving. The new Express Titling product is seen as a way for insurance companies to alleviate internal costs and for Copart to strengthen its relationship with sellers beyond just fees and turn times.

Jeff Liaw explains that Copart's Title Express service will save time and money for insurance companies by handling the title processing function more efficiently than they could on their own. This specialized service is a better option for insurance companies than trying to staff and manage their own title processing departments.

The speaker discusses the core functions of an insurance company, including investing the float and title procurement. They mention that title procurement is not typically seen as the company's main focus, but it has become a driver of market share gains. The speaker also mentions a $12 million out-of-period expense in the U.S. segment, which includes property taxes and out-of-period invoicing for vendors.

The speaker is asking a question about the impact of potential increases in auto and home insurance rates on the company's business. They mention past cycles and how consumers may cancel or reduce their insurance coverage, and ask if the company has heard anything from insurers about this.

The speaker believes that history suggests that not having insurance or only having liability coverage may lead people to try to fix their cars instead of totaling them. The financial crisis in 2009 had a minimal effect on this trend. The U.S. segment is up 6%, but there is an offset due to the shrinking low value bucket. This is due to competition and the company's focus on allocating resources. The speaker believes this is a combination of competitive tension and institutional prioritization. The next question is from Bret Jordan with Jefferies.

Bret Jordan asks about Copart's 6% insurance unit growth in the fourth quarter and whether it was due to organic growth or share capture. Jeff Liaw states that it was both. Jordan also asks about the number of cars that came from catastrophic events in the fourth quarter compared to the previous year, and Liaw says it was a very modest amount. Jordan's final question is about the increase in yard operating expenses and whether it is due to the company's recent expansion in real estate. Liaw mentions the increased property tax bills due to the larger footprint and rising property values.

The non-insurance business at Copart is made up of three main components: blue car volume, Copart dealer services, and cash for cars. These three areas are all significant, but the exact breakdown of revenue between them is not disclosed. The company is also not focused on building a dedicated buyer base, but rather on attracting a diverse range of buyers.

The company views its buyer base as integrated, with crossover buyers being important. They often have buyers looking at both rental cars and insurance cars. International buyers are also relevant and tend to buy more valuable cars. The company does not discuss its fee hike strategy in public forums.

The company's main focus is on delivering value to sellers and buyers, with the belief that they will eventually receive their share of profits. They do not discuss fee schedules and suggest seeking information from third parties. The call has ended and the company will provide updates in a few months.

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