CPRT - Earnings call transcript Q1 2019

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Operator

Good day, everyone, and welcome to the Copart, Inc.

First Quarter Fiscal 2019 Earnings Call.

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

For opening remarks and introductions, I would like to turn the call over to Mr. Jay Adair, Chief Executive Officer of Copart, Inc. sir. ahead, go Please

Jayson Adair

who there, Good since call and It's on changes who for to an to to this Chantelle. We'll the first come then is what update my to update international. quarter morning back Jeff, over pass there it conference Copart a turn go then, morning, you, through of U.S. welcome and Germany, financials. lot everyone, Will, the pleasure are will Thank fiscal give on Jeff will an I to And going on happening and you as will you back in give well. XXXX.

over with I'll So to turn it that, Jeff.

Jeffrey Liaw

a Jay. harbor. start call Thanks, I'll with safe today's

share, measures, Copart's on release financial results which our press Relations adjustments relevant We and the with Investor call, above. link of website of assets, for of these non-GAAP measures, benefits presentation both reverse we'll nonoperating provided corresponding directly the includes disposals on assessing measures and GAAP analyze these under our together certain exercises. our GAAP measures bases effect a believe in described the accounting to reconciliation non-GAAP today's yesterday. tax gains stock certain in of including income discuss option business most We and diluted We've to and issued non-GAAP trends GAAP non-GAAP the related our is performance. losses comparable foreign-currency-related measures, and to During per non-GAAP net financial income a

and materially and by projected could actual statements statements comments. implied meaning substantial which within subject of that the federal our In cause risks laws, addition, are differ or this from contains securities to results to those forward-looking call uncertainties

our risks in be undertake statements related We complete business, on more not could behalf. do SEC. from the portions reports management's to For discussion our made the forward-looking that update discussion periodic our may filed a the analysis and with affect of time-to-time please review that any

given Turning We revenue, first first quarter of in somewhat The the XXXX. unit of Florence events at our with We'll you sales events Starting Harvey during profit to comparison year. Michael metrics attention provide gross operating and and last and a fiscal a call this cleaner the year record income. this a noisy without in year line. to presents last Hurricane the the comparison achieved those and first first quarter of to quarter provide top period comparison.

XX.X% grew Our revenue year-over-year. global

of would XX.X% comparison effect Excluding in We those currency three revenue the hurricanes on the of unfavorable foreign strength operations due were primarily year-over-year mentioned, on real. just X.X revenue instead. have and pound dollar been the relative Brazilian by U.S. million an I burdened the strength - to to

absolute growth and in was the was the growth and The Copart NPA Internationally, XX% a by also driven our growth. XX%, global mix driven have revenue at equally in was service terms revenue Again, approximately excluding global service grown Our Purchased those growth U.S. of would between split of including by U.K. car hurricanes, Germany. grew things, three X.X%. by instead. Direct. the U.S. internationally and

only the know Copart, overall our with context still since owned actual you million reflects car As $XX.X business revenue is net. Copart purchased quarter the the of small from our our revenue inventory following in value end, relatively at reflects while service modest, gross

unit with XX.X%. year-over-year, unit U.S. growth and of Our unit global sales international of growth X.X% grew X.X%

of global course, hurricanes, the would unchanged. international X.X%, unit our X.X% growth, those have U.S. Excluding three been of growth growth with and sales

ending balance year X.X%, year-over-year in versus those decreased inventory of three inventory global hurricanes, global the a October but nominal excluding balance October the comparing was year-over-year up ago. our ending Our XX%

XX% growth. gross a ago this year million profit to year our $XXX.X Turning million profit. from $XXX.X or to Gross grew

Hurricane a gross Harvey, profit by As you net quarter $XX.X was at on the drag may recall, which the of the 'XX represented line. burdened first million quarter

Hurricanes related Michael, The which burdened expenses likewise of collectively Florence quarter. and by represented loss is of first gross 'XX profit the quarter in to $X million

this believe substantially. treated essential unprofitable an the and as not and tend have provide to responses catastrophic our in of event". readiness We "extraordinary storms case major storm we for in and although events event service We Copart, for customers, be that [indiscernible] the

service So we believe our from the these Copart competition. events commitment in to exceptional distinguishes

growth gross meaningful of X.X%. three on a profit our would leverage events, unit a yielded in profit our both these Excluding periods of have gross growth XX%,

basis Harvey rate the Florence Our increased year. of includes year points. Michael to of gross and margin as XX% course, from XXX ago as this Hurricane increase a burden That, of an for XX.X% well

slightly Excluding just a quick all headline a declined approximately three with I'll attributable XXX of to that mix events, purchased ASPs, have shift strong would margin basis cars. color Will in provide more thereafter. points, gross majority provide the rate On much of to decline those with

in lapping ago year first of a growth of ASP despite XX% U.S. thereabouts. the quarter in XX.X% 'XX grew strong ASPs the or also quarter Our a

to costs, a respect our $XX.X general initiatives, million internationally $XX.X business. to is and of well grew to costs related our largely year of the and Stock increase with compensation European expansion $X.X our million Turning as million. growth supporting the administrative largely U.S. associated to million ago certain depreciation and growth expenses. related as from in $X.X litigation this

we expenses As and repeatedly operating leverage given have grow administrative time we strong the believe our top to with over but general complexity, said, and time can growth. will over achieve continue line inflation we

Our $XXX.X income from growth operating grew to $XXX.X million million or GAAP of XX%.

year-over-year. grown have operating Excluding at the XX% hurricanes, income approximately would

down due Our net was to debt balance. interest net a lower expense

prior the you heard U.S. rate of XX.X% talk calls. us about first reflection tax income federal is quarter on lower tax a of rate Our

year at now the are for We rate tax XX% U.S. a federal full 'XX. fiscal

a XX% year net this of ago GAAP growth $XX.X increased Our year $XXX.X to income million or from year-over-year. million

sure we quarter in a recall, quarter. the you I'm As experienced complex somewhat fourth

here to talk attention a non-GAAP net or adjustments first net accounted turning to year XXXX. principles, this those year in to the And XXX pause XXX implementation in recognition million of One reflects very its is the is the our therefore, in similar is ago a accounting reversion year-over-year. XX% for sheet we've $XXX.X the the rev new XXX with comparison quarter to This revenue million limited The cash largely standard. of I'll how revenue balance previously which and implemented flow first relatively comparison with about last growth quarter recognition $XX.X straightforward which income. in revenue topic, of rev to statement. prior Copart fiscal to new income

in are terms are was beyond, metrics. standards the the net or Certain affect particular processing. retained of would deferred now effect balance adjustment had while recognition accounting revenue previously we non-cash in and not in onetime will for P&L instead to title new we The standards have The of and of QX and costs sheet ways. to So previously recognized recognized recognize beyond. long new under our QX and The connection to reduction QX vehicle corresponding revenue been is a the in and that is auction, including, it services accounting time QX costs with of corresponding short its material respect been oversimplify, at towing revenue recognized revenue under $XX to and cumulative largely in provide prior million. that earnings either example, the with standard, also on revenue and in profit our a in our QX inbound

booked we For QX would receivables example, in auction will we earned of a certain as that the of in not because accounts will have previously general revenue until time instead recognize matter, booked now be as our QX.

accounts of the AR a see a AR cash accurate reflect pooling on on more million decrease is but sheet, costs. year-over-year. in the balance statement So reflection from balance the change would of $XX you'll $XX.X vehicle to like-for-like million, logic The applies of our same nominally growth cash flow receivable

costs our We that from subsequent will now "deferred" in periods. now have costs and we've QX defer into in QX more QX recognized of

call operating As for like-for-like our million a of growth flow flow of million result, with of reflected million, buyouts, of lease others. million business. quarter at and equipment, growth turn itself, $XX VPC we expansion generated balance $XX with attributable over cash to as the yard to cash it I'll capacity color was IT to And sheet VPC half A $XX.X On balance outpaces that, attributable our little change. the the it significantly and statement. on Will over more CapEx CapEx in flow with XX% cash our on $XXX.X of for

William Franklin

and we year. grew includes by you, comments And U.S., and Hurricane very Hurricanes X.X% provide a activity, the performance In again our CAT Harvey all Thank where once when quarter, a delivered strong operational Florence this adjusted the volume I'll for which year our Michael few quarter. for last about Jeff.

Organic the driven we market leading and growth loss. continued Our continues insurance growth total of volume an salvage costs by and into continues the loss a repair accidents resulting organic high by, economic market an to markets. in to market total in expansion be to higher a are driven be frequency in the as increase within growth percentage wins believe, noninsurance

municipalities broadly We business, in equipment was we franchise dealers, and industrial continue XX%, segments. The as from charities only to aggressively municipalities, was profit wholesalers, experienced intentionally marketing activities seller and in companies fleets, leasing up low XX%, growth XX%. include companies, and wholesalers. dealers spread and our and which across XX%, independent up sales develop and dealers noninsurance volume our fleet in car which finance were equipment, XX%; Volume segments. companies, multiple The finance companies, and restricted rental we charities, segments declines these

our increase over U.S. we're sellers. continue two grown dealership systems to developed and same individual focused systems, successfully the and XX% specific the quarter and the we years as [ph] our a internal last as noninsurance have operating that grew ago. and delivering volume and our of we year In returns to better needs developed operational noninsurance We targeting same [de-fleet] by XX% programs quarter segments noninsurance bank volume integration total, more

X.X% total The was and In increase the selling tied higher of primarily The as to which basis of the is totaling However, vehicle. car, our value of crushed ASPs ASPs, reached almost car volume a the XX.X% on U.S., increase for ultimate our the total, in for by XXX% Index, measured bodies; excluding companies X%. Manheim quarter in noninsurance per than car your number vehicles of per cars and and same revenue and of were the mix our of running are of increase selling of value per price, XX% grew volume. the our more higher the beneficial municipalities, a as Harvey, newer, in U.S. approximately as to cars near vehicles. time, noninsurance of October, severely in represented the the valuable which, due generally cars and increase marketing revenue In more noninsurance grew price up half service of in factors, quarters. XX.X% continuing was damaged by and trend the driven XX% total by [ph] business by sold car charities a excluding impact revenue insurance activity, the first digital a powersports used dry increase XXX-mark our less

We increase in bids the enhance was continue activities bidders a to quarter was the expand unique On lot XX% our over up number to of of platform. X%. per auction the our marketing almost almost received number up and basis, and

outreach to continues. buyers Our international

to quarter international XXX now from translated caused Despite buyers is stronger Total countries. was U.S. U.S. over domestic by countries. believe units our percentages. These export, ASPs basis the auction a we languages. dollar, to addresses sold. When including XXX languages sales native return We from headwinds website who these U.S. cars export international and to We on XX%. with activity, of sell our into now increased. yards buyers the the international only buying represents are all Our over XX% buyers contributed all market include activity X record activities to over

operations. international our to turning Now

revenue $XX.X million commitments worldwide X.X% health was only XX.X%. lower Germany grew provide by U.K., revenue million In revenue for incremental and U.S. grew associated $XX.X with by costs. total, with the the this or before inherently to worst CAT or Michael Harvey XX.X% support sub-haul Brazil. Florence million this prices, from Our the obtain in scale X.X% per and customers later rising the are costs XX.X%, associated XX% while hits, in purchased Hurricane we Florence grew revenues expect, the service and additional to must grew and early as a come and Hurricanes on million. We the EBIT fuel and $XX.X in do CAT each or from Jay diesel $XX.X for million purchased approximately grew to possible car million vehicle. driven to for we our average we land we storm to capacity process $X.X yields stage and year last last far provide the primarily International we more and $XX.X additional to seeing million make million labor financial scenario. XX.X%. or in adjusting year, car million Hurricanes from Jeff appropriate people. We insurance Michael year. over and this and margin grew from quarter capacity. the costs in comments Globally, car equipment process. the $XX a $XX.X abnormal the will detailed quarter growth progress our Accordingly, cost obtain Nevertheless, same To arrange when call. on Volume by insurance Germany $XX.X our

Michael, for to and temporary we sub-haul teams and reinforce like CAT CAT work we trucks during XX XXX Florence We'd additional outstanding our customers for supporting people, XXX of insurance We relocated property continued XX new our commitment to all an acknowledge loaders. activity. and the committed arranged to Hurricanes capacity, leases. For Copart's

XX.X%, the support our up yard active CAT quarterly the XX.X% in internationally at regions. Accordingly, we worldwide XX.X%, provide program suggests inventories a growth our and to in Our of continuation of extremely U.S. remain and The U.S., double-digit expectations. accommodate expansion in respectively. effort CAT-adjusted inventory our was growth to growth CAT and permanent capacity in volume by

on we XX of That representing North projects, my In XX lease We over brief capacity. quarter, we entered currently America, acres development are contracts. and engaged During contracts. at XX the closed purchase land last comments. land X,XXX into concludes

Jay comments. turn Now for I CEO, our over will the further call Adair, back to

Jayson Adair

Good everyone. again, Will. you, Thank morning

we locations U.K. a U.K. grew some the entered we in needed and economically ago future that, we up Before of Century network us business, we global We XX I'd acquisition had us Salvage, by locations pick that X across allow Today, overview be a We a business need company XXXX opening that additional quickly To Universal across We winning small of business win. knew giving the have like win, the new discuss acquisitions. called after give Germany, through locations X and to purchased the knew XX we to organically to an by U.K. an the June yards you of Shortly locations. to of that with U.K. Salvage. we years

majority of process. side to better For cars partner you we followed the we model those the didn't that vehicles. us. track in is and to on our We beginning, happy instead At purchasing in their we that this have because the to carriers you selling U.K. customers principle buy the generating U.S., that so as of do have sold us the in simply that over cars consignment the U.K. years, know they that we shifted the to were insurance have record on to vast money the had than this to in be Over we we were on obviously of the we used it showed trades. the a of time, in our vendor favorable rather a that, as doing And a spreads vehicles make

the a units XXX,XXX running go marketplace, we the this of Jeff get U.K. well network To the place that to Copart to of vehicle market. returns in And able the is on I'm deliver a to a the that in the to highest today U.K., on on need Because working a Copart over selling Now generating and has buy technology promise, Germany. focused say been lot we're a yards, #X salvaged U.S., deliver Will year Germany, Germany to time there us the on point. happy in to and spend promise. is people in

to that all in So of to it that Copart. on the Jeff thank success German you Jeff? I'd like on an those in turn last over months to give Germany like operations, the I'd happen seen now involved for X making update and we've the were to

Jeffrey Liaw

Jay. Thanks,

the auto is operates a market, invisible. piecemeal car, and of total call, your more opportunity insurance this first market, with our happens course, start and status to covered you the insurance to from what U.S., On to claims. effectively thereafter Germany, broadly. I'll and insurance on first German greater The from example, In the description company in differently you, detail. the of want And us, very years. when as respect opportunity U.K. from of U.S. take over the promised German as quarter a the we buys heard with the policyholder the car you've topic describe total the industry loss the for

consigns a As car is you the car accident, retained. company in the mangled then know, by In an every proceeds and keeps the one, the Germany, nearly of contrast, insurance through auction. Copart even owner

So when much the post-accident an of policyholder how value. pays accident value comparing pre-accident value, with the the the by company policyholder lost estimates residual vehicle insurance of occurs, car PAV, value the of the loss or the has that and

auction payment a just and to a really has The period listing tough established. the "winner" a themselves. the to the are for As value experience is at catch: the buyers the be indemnity chooses buyers listing insurance that effect, services value, company car post-accident generally which highest listing multiple registers value" services, bid vehicles. on miniature the of bid the the insurance to option the calculated vehicle the to assess auctions The service paid there's all "residual these But on the XX-day then sell residual across from then carrier services then policyholder. for these company which policyholder from in listing

honor full their capital. up days are tying XX bids after obligated a their for bidding, buyers to First,

in and XX the rebuilding the the not win. car, largely than fewer business, thirdly, vehicles close obligation on on sell a for to fairly "winning listing dismantling owner it you up ultimately buyers of does and perhaps to problem. bidder" X have own plan it on importantly, an And -- further obligation won't cars which they to service. That have they the a impossible adverse vehicle of the buy tying capital on are plan to them, creating Second, to makes the but course, selection complicates severe the will their most

given can the So are their that punchline depressed vehicles capital values they many cars. bid and, constrained for on is buyers selection, by on will bid how adverse

Copart about them That in establishing their Insurance losses parallel in firsthand, loses this opened indemnity in our well. Then Marketplace, to process? their based in store in follows: The mature and carriers includes we as In it needed in geographic physical volume ultimately cars. ultimately in pursue last Online German leading to more then auction past, have It infrastructure about markets, the Germany's essential Germany company cars quickly XXXX; and Germany. to build or cars to on entire far, our talk we enables is footprint fast [ph] for buyers of established efficiently sellers paid We'll tow pickups. Fallingbostel in premiums. evolution. services evolving new to that market U.K., We next moment; the mature in the that our on their That a XXXX, consignments land lost what Wreck trucks us so in have strategy to acquired attracts payments claims with I'll intend excess for is land location announced across pickup turn residual and inefficient move -- first advantages listing insurance attention have our our is we've in Germany artificially evolution are to service. X cars economically; competitive a with as market. the and business when short who first. by In XXXX, we in In by our as the very call, the in in U.S., the enables marketplace the intend described, buying us cover auction that our one we value. cost financial Bad country more Hanover. critical enables to recognizing we listing XXXX, just our cars enables we example, Jay by to talked earnings a locations. is near because capability That efforts on sometimes presence we entered vehicle purchased a understand policyholders, who and So depressed in alike. that in cost-efficient an costs Copart In footprint

buyer described noting worth closer yard and vehicles heard Germany, pick Copart our network to past, is every And in importance some cars in times auctions worth be. in Germany because the knowing costs pickup the -- enables Because current yards cars them every U.S. buyers buyers As yard larger by purchased of of than through are we and of lastly, convenience. them to -- improves the you've outside foreign reduces us of the having the efficiently towing the majority it's that our would the accumulate enables batches. more sell up

our in and knowledge purchasing Regarding meaningful at car. to selling subsequent our auction car and ability land, base at our we adds beyond the positive to sell Copart sell vehicles and Every and buy a next our locations. progress we improves buy spread Germany are

the with in our in finish well. the there as Europe. well. and next-generation broadly buyer at our each have in staff combination applicable, logistics let's local sub-haulers Ultimately, with pursuing as to owned our strategy auctions Germany announced to the Germany more large for biweekly we economies of we run as build to drivers well we refinements call is network. for that out a our hiring we're use network. and We started Germany system, some in of We sites which the IT come. intention [Cobalt] Western third-party trucking with We've as Our yards other deployed believe We're is to trucks

will benefit, highest store multiple the who buyer will and For benefit a now bid bids a until car. ultimately have own the vehicle for the Germany model deliver a on the locations of they Germany, logistics the first Copart time can cars them an at which buyer's buyer process, the actual We, up. provides the pick car on in auction certain efficiently

in, practice past opposed to promising We'll for and forward as we'll to general, us. general Germany that in or have but for we it recognize you size in what tell warrant of Western Germany approach growing come. enough Europe our years the look substantial ahead opportunities we the the we've and of XX Q&A. As provided in We many a today. energized over to to that, a the are the after by it honor We're business in years fact tend excited thus Germany With done we as more the by check continue progress far advance. are back and so, to moderator opportunities to turn to substantial momentum that

Operator

first very Instructions] question Kennison, come will you Thank much. from Our [Operator Baird. Craig

Craig Kennison

Thanks promote experience ways Copart Germany. for Germany. about there the on thanks on German morning. listing have I Good taking your a in need out consumer does a consumer my for service in to the U.S.? had service? you to promote to anything it in and or you the How terrific question do that is question summary don't find And the

Jeffrey Liaw

responsibility consumer's hands the is provides service. insurance process, would sale from winning their just listing an bidder the The car you that then argue, carrier third of of The details loss payment a consumer, with them It's to the that as participant by the subsequent offer total Craig, orchestrate them to provided for the heard the then in today a I party. us loss indemnification describe.

arguably So if anything, in process. today, consumer the in involved too is Germany that

the sale in the you repair from don't from or known Germany. a You and home again is branding past vehicle endeavor. a in may can to to country, in even a imagine consumers foreign you're car an up never individual that fact shop think a in one-off the trying future, among see a picking is Copart's of I complicated never your be have essential will orchestrate from

international insurance and that's certainly the I know our winning consumers companies with building and minds more of you building and important tremendous already much with with have I our base, which than hearts the network buyers, think credibility we credibility individually. think buyer

Craig Kennison

if of totaled of in the in will, your Germany, what cars Germany? of opportunities, think What's share listing all cars? So on a those opportunity are you extent you listing market if getting you to

Jeffrey Liaw

severe will WOM That's quantify, for frankly speaking, clear ago, hard that is the like list car the few a market does every handful on of a part accident, or because the services, I one leaders. Marketplace, business car generally Online of moments to experience Wreck described carriers, it multiple Craig, certainly in the

strong quantify So share market position without described is being I to our able it.

Craig Kennison

question final the then, And here. on Germany

that? you car, higher obviously, quickly Can you. that Just of does dollars how turn a to the are thousand quickly car purchasing how you cars Thank a in a can And a over? kickstart invest liquidity. a more less there for or if economics us feel percentage you of give few you turn car? So

Jeffrey Liaw

the se. the been isn't than turn that then punchline the described have cars It process in Germany and doing adverse just I the them turnover so we so. same the these I marketplace turns the process it example, per There a and is U.S., -- the not think earn sell is subject over broadly, is for economics services problems The quickly. titling to selection the complicated buy to certainly listing reasonably more challenge positive to of able Copart profits on in for

inefficient punchline we model size are and unit able the It's provide is a and carriers The not policyholders very picture. detailed deeper that evidence to to costing should. is sample a point more this then P&L enough listing I is it -- economic money. large think service make than probably at the current

Craig Kennison

detailed the for overview. Thanks

Jeffrey Liaw

Craig. Thanks,

Operator

much. very you Thank

will Securities. question next Our come CJS Bob from Labick,

Lee Jagoda

Lee for Bob. Jagoda Good morning.

on just Germany. up So following

And to built that you Germany that what in? do do take multiple fully think be insurers the XX see that, today. do out we have how think guys - long Germany? yards actually think What think need you buy in could I you you you about in process before

Jayson Adair

you Will me? let

Jeffrey Liaw

Yes.

Jayson Adair

correct? eight we've date Well, announced to Okay. locations,

Jeffrey Liaw

Seven.

Jayson Adair

time the will done. locations, XX okay. argue, we we're We've now, handle network would we and of X can we've Seven, enough end cars. got announced by up announcing a I

marketplace. up soon. enough up say we've that not The economic picking next happy with there So We a be step very be get vehicles I'd it's more can than them capacity. we'll to we'll got within the days, is have yet, we're right, but picked costing what economically the up. pick vehicle we'll quickly, and XX

So and competitive, more by a so those as vehicles even for feel acquiring buying making on all vehicles. they're getting worth, can these Jeff said, more we're strong we a what vehicles, be spread

submit important getting what's to a bidder, So else of than I up come X high selection. And it I'm to the car. of end creating but because that time the through spread is outbid, know more where car XXX somebody marketplace This on that guaranteed the and they adverse the I am me really because making insured our don't out most about a when it decides times it. a and Copart, they're I buying platform, improve, to flip to dealer not then I sell bid, when a through they will get we're isn't a to customers, that vehicles going

Copart, car. on sure will So thing, I get the I guaranteeing bid that this a is when

there cars should the so of that I at reserve All reserve, say, the selling our or are of no on auction not auctions, we're majority are auctions.

own So you it. bid, if you

So that focus. has been our

logistics, because comments it's them and not we're making finding processing aren't through me, they'll Jeff show marketplace coming that, very -- get that the three going table on of technology, parts spreads about been biggest yet this there Our and my in And major I major product. platforms? similar the efficient say, bids the and day not we spreads, being money it's the only we're single every the to why to because we'll having the is what and there's buying doing it's about marketplace, them and on list think platforms. said opening getting instead on you all doing network, left it insurers way product building companies through focus of one list go as board why about people an] the Additionally, just this different for companies it and are insurance the where platforms that's by insurance said, then to that they come through of and show [ph] building the has that that buyers literally, [joining it's are our on to our the all our

a me, the So is your you're that is insured that it's that are prior buyer in they to you're the €XX,XXX now Germany, have And vehicle what no what's dispose to giving them is. accident, important. €XX,XXX a with €XX,XXX of the after and them and worth process telling piece that through vehicle check you But more is telling the important worth idea accident. to -- the

that with but only vehicle not of deal end all is have and they've to or a to to who then home, adjustor them and someone out is do talking working to got option So the vehicle the shop selling that's they've they're they're I the and to at maybe in their the buyer, have got the at an that they figure that. appraiser and these should sell

clearly €XX,XXX picked customer from check with is far it and that the and for our perspective they're up deal given and experience have vehicle a perspective. they and superior belief the company's insurance it, insured's So if it's a disposed never from is the of, to

Lee Jagoda

all in All right. the That makes sense the world.

many, And be your next on participating if companies I'm any, outsiders, as today? though, are how clear, currently platform milestones we Just for? the insurance are should looking what so

Jayson Adair

Yes.

numbers the to to vehicle to the those Copart their that now really of forward. they're that the to the can't the to try months Jeff insured plus And you take they the that inventory those see insurers dealing team a where switching the can't starting customers making amount see getting dispose stuck not there's vehicles. for platform, maybe six in place vehicles, are the tell can't et this model. to I [bad] damaged, that hail few, to cetera, next confident again, I It's of to the actually vehicles, how the months, other the -- a [ph], converting the in vehicles, material times am that you recover switch and a wanting experience They're the more the say have vehicles three, and bad process. that returns of the that going to process in you're yet. combined than on we're Germany and somewhere And enough, When at say, of way to of Copart will just sells has I X process they're been is with we're think transformation but some but I some going rest hail-damaged it's number website don't two and customer, with in I recovering I let's -- it We just customers you really state going and see the their not that have and sense any utilize four last lie. trips look sell

Lee Jagoda

much That for Thank sounds the you color. great. very

Jayson Adair

You’re welcome.

Operator

much. Thank you very

Suntrust. question Stephanie Our next come from will Benjamin,

Stephanie Benjamin

the Thank and Germany lot that lot the know, investments initiative. last there's the afternoon. from system kind a there here, in infrastructure, whole obviously of assuming on back what good a IT – Hi, again to questions. and of and I just in year done for thinking you the that's want through I'm building go of just been kind lot you

standpoint? we this trying rate run if be of forward, of any them, have Or thinking lastly, I to just just companies wanted So again. far, where show forward? of it, the that or just at or a or and think just on from question last we going can get why an are they're investment you about kind expecting then getting going for more kind kind any significantly pushback to received just Thanks to insurance And should just considering up this be they not switch on point immediately -- just is if we it reasons the you and of at kind maybe great? returns wouldn't kind the follow gauge so investments look of would

Jeffrey Liaw

Thanks, Stephanie.

still any we costs or well. on can I as description made real short, in forward-looking guidance tend any you from revenue to in know, from grant strides not you aspirations meaningful have think have I that think as this aspect growth but today of Germany here we But our otherwise. tell P&L,

prepared the hope are we're a point investing we then business. much more of any that our capital that's certainly, I to ongoing there. don't reflection or is think So that quantify growth in because

there As don't to lack your second question carriers, interest. or about think any insurance from is willingness of a I resistance

has to practices are I rather and tax time for but think to have will long-standing This very and reason. been is a prove clearly And them. Germany, model, in like take Germany. a I the commercial model, our one the in that there regulatory different superior, point certainly that evolved is think, it

the Jay was describing, for but are [indiscernible] unit car economics purchase price As overwhelming.

strong resistance curiosity no so our there's I'd se. And model. say in per strong interest,

Stephanie Benjamin

the Appreciate again. color. Thanks, Great.

Operator

much. Thank you very

Our next Inc. question will come Stephens from Daniel Imbro,

Daniel Imbro

one Thanks I questions. my a good follow Germany. taking Thanks, morning. wanted for to up quick on

in you think three change you are your platforms German or market. as desire major incumbent any the does the guys guys succeeding you're players ability generating I given higher that to of are the in the that mentioned, But have there strategy with market? model, returns

Jeffrey Liaw

have regardless. they We we strong a wouldn't belief the have fairly have they ability seen they the indication that desire. are, And haven't think I that that any

are scratch base. the today of a I reputation, recall of would established to purposes a a somebody having already solely think active of Germany order. buyers that's in the that back international replicate service Germany, on tall the tried So more that majority global Copart's Copart's If international, be at Copart from listing so that back the on for of buyer

[indiscernible]. So that do to so no have no, there's and indication they endeavored

Daniel Imbro

business? With to Okay. for what business of can And is disrupt percentage play the now, U.K. U.K. Continental Europe could or you exported talk then Brexit outcome guys staying and maybe through over in could one, change Brexit outcomes in U.K potential think different you your Europe. Or there right your the operations? how how out in

Jeffrey Liaw

as saw - our in a ago, certainly ago couple of year think from I years multiple we and that you business, currency ways. disruption fluctuations, know, affects the a you

are the remains That I portion of P&L pound very cars so And that a U.K. dollar sold TBD think the our [indiscernible]. reflect of weaker, lower when of said, at Brexit are outside much the the much rate. earnings as U.S. clearly is disposed

U.K. the well. Europe to within in cars places are that beyond go probably there Europe So as other and

under We expect cars. emerge, I ultimately to to those be seen. will Under remains regime continue tariffs trade think, what what precisely of and

Daniel Imbro

a the but CAT U.S. salvage so outlook in shaking growth, is to today? industry And from of seen part bit. Okay. changed business. Great. We seem even little has back are that of events And then that high of volume seeing at one to last one, out the have range. the the single slowing moving indicated growth sort U.S. you What noise industry And guys previously your all? Thanks. digit industry of you've mid-single-digit kind that has

William Franklin

run try And But Not trends, we difficulty We given in in quarterly the we of to fall. haven't changes cars, in all for long post-repair conclusion dynamics really. efforts intuitively cars leads to meaningful slightly. to that trends. and It may have to and and that us getting that or moderated see all not really expansion react complex manner. land, the in think we're in total these any the reduced our loss expansions continue pre you all increases just heard will of in frequency that total because scans frequency about, loss younger -- the that going

Daniel Imbro

Thanks a lot.

Operator

you. Thank

will Bottiglieri, from question Research. Wolfe Our Chris next come

Chris Bottiglieri

taking the for Thanks questions.

the and one, that else you inventory ex how attribute growth First was or And so let me the up points hurricanes, global it accelerate up XX% of CAT what would many guess, from? call ex was X%. that was I from international? like volume inventory then way,

William Franklin

was U.S. XX.X%, gave up up there of and so internationally. I is that. kind mean, international We is growth XX%

Chris Bottiglieri

strong such then you U.S. forward? growth say that's inventory What looking growth And do Okay. in in driving the why that?

William Franklin

been growth think backwards average influences that over And the that XX%. Well, really be going quarter-to-quarter. far, so predict. range. significantly say we have it's has natural will don't see rate there change don't our volume then, thus been and that We We've XX in quarters we that last to be driven looking fluctuations

Chris Bottiglieri

Got you.

sourcing were you're ones? from better At But own this side. is purchases of European third then not your the your insurers, supply services? majority I'm both point, listing market like it little the mix demand service the And side understand if wreck coming of party and to super Okay. listing what the versus from the trying on a bit

Jeffrey Liaw

handful Copart who today - us, of in the cars are service. Germany are consigning listing cars strong a mean, purchased sold the to on still, Well, majority our customers of cars I but

Chris Bottiglieri

you. Got

demand very And U.S.? then a And Okay. give what from yet side, differ talk don't in might can mix, there's in us that big a today. industry - about think sense Europe see customer the the you I of how part you salvaged

So if of see it the buyers to remain this you you in do, kind different about how market? you and evolving, just talk how maybe can are

Jeffrey Liaw

from buyers the of similar ultimately think Germany. are somewhat because outside they are I

the of as meaningful So some of are the they put portion Germany road the even countries a cars a for well. that number no buyers, well. of dismantling U.S. are doubt parts rebuilding Copart of the become and buyers of Copart them today as They vehicles as doubt are have no back on cars good

Chris Bottiglieri

help. for Thanks Okay. the

Jeffrey Liaw

you. Thank

Operator

much. Thank you very

Our come next question Barrington will Prestopino, from Research. Gary

Gary Prestopino

you Morning, me dealers various thought was everyone. up the of categories XX%. Will, segments there? side. the other that we and give growth saw the were I noninsurance Could it growth in cited you

William Franklin

Sure.

companies finance Wholesalers, industrial were XX%. equipment and banks companies, was X%. And XX%. XX%. up was leasing which up companies, Rental and car includes companies Our up up fleet

Gary Prestopino

handy? in And Okay. percentage What had this quarter your total have was you you. Do the then last year? that you volume was U.S. noninsurance. of XX% Thank

William Franklin

do. I a was It little XX%. over

Gary Prestopino

that Okay. than salvaged get would these hell I Jeff, lot assume faster with of the And then, vehicles. sold noninsurance a cars, they a

an sold, You that kind does somewhat growth title versus a these inventory cars? your out distort a sense of on your flushing don't these percentage lot salvage have of that U.S. that with settle in as grow Does cars and quicker are - of as company put a the cars to insurance that. a

Jeffrey Liaw

can. It

its has talked own characteristics. own we profile, about its So each segment that

the quicker actually of make you has some might time, slower utility the as a - quicker while yards, So It in increases of our But about sense group, are and therefore, general, segments right. improves time a a velocity time. a a overall, you're a cycle cycle our cycle land.

Gary Prestopino

the still the I not insurance and the retaining going And just understanding car so company Germany, what is if not you're owner built? make Germany. to retained, sure an the car, correct? I'm owner you've Okay. then -- buying You're actually in

Jayson Adair

Correct.

Gary Prestopino

in that from there basis? and - mentioned this are Do know, the All and obviously going you you -- over Jay, a and same you U.K. could German try towards but time, you're to lead do be used maybe agency going move are I that budging insurance any Okay. principal to this U.K. right in strategy that companies that the to contingent you're right. Germany of now insurers take writing the kind the start in

Jayson Adair

Gary, right share it. Yes. of to now we're in the the just process preparing data

at and and north our So tow have the approach couldn't very Hanover. we hours service to X the has without been our simple. offer felt an marketplace insurer it a unit and network, We vehicle without a then

the given we see that So one you a we've yes, that's of sharing company taking to they're But that's -- uses. insurance parts now. That's got secondary days. that is the can it share. is doesn't of data making And and platforms, to next bidder platforms, place. about the of compelling a number most insured platform majority price of the XX buyer bidder that this the that high the to whole insured, a that our and on fact auction the it's the network me of And auctions the a really one got high And problem. of bidder when the a on the one one is, parts of is in results the time, spread, compelling the most there's when great. the the we're that's high the can them. that, the But We've sell

car is before that number they're It XX worth the that's your was So saying, the okay, accident. grand. XX

they it's Germany, And to buyer not than not is this too hard a figure it's out. that When you out figure hard through Ferrari example. Dallas. to to that to There will the work go give secondary other going out sell Germany Instead, into then you you damaged in figured we in people because them. out the sources. you. majority the too It's the at you the came not it obviously, that's And not where into out Here's and off or buying and to the hard the through the doing walk a insurance it a bid. of Mercedes time, out product buyer. is them check figure does route so make hard for It's out we -- market at dealerships not insured the I repair, buy them, They're that where and even XX, a to many too in platform dealerships. you're look BMW with more dealership for Munich, you touch talk can that salvaged you Germany, the damaged and not a of or the in BMW the a is they have and calls that just into phone damaged off that and in where in get where U.S., put

majority don't for that store the they they know vehicle run to parts, they've a send up at buyer weeks repair. If they and love the is XXX% parts. they've haul they car. to on cars this of they're going going car. secondary And it's while two Poland. build back the for that rebuild. and auction, the a do to inefficient and this the showing them And got got then, X the of Copart out rebuild, why they get on get talked can an guy insurance biggest much, And time, Copart bid the buyers, the a the whole there's about marketplace. frustration, platforms bid biggest to service about insured, showing it's they the the frustration If truck it to need to do they're we pick our what better a So so Copart, allows They them exactly really they to is next the but the not it's for time, only

days articulating customers. that and -- it's benefits So obvious, XX there next that to us the are the just now in about really really

Gary Prestopino

you much. very Thank Okay.

Jayson Adair

You’re welcome.

Operator

[Operator Edge. come from very James question you Our Thank Albertine, Instructions] will Consumer next much.

James Albertine

and much good of Great to Germany. on details you so Thank guidance. you give morning don't A I everybody. obviously, and know questions, lot already,

sellers - us, wanted to you the reason and you'd understand in sort want the rest the you're in being you're And the you you're radical as a a that can if for your potentially rather, buyers consolidates tax may tell ahead if with the faster think and time? here to of if plan of the what a Europe ask and what we over market it's could been, I real-world-looking you, on consolidation bit. given bit have Germany? of budgeted bringing that or regulatory question Germany, about plan whether setup. respect I accelerated may or there investment to to So -- what have of have ask, change market growth Are impetus little I or the slightly little

Jayson Adair

two have the to years last spent we is the change process. Well, learning Okay. a marketplace single location, the understand a trying that I and think big with it's

say on you and why it's conclusion this first replicate a to eventually the and that about and make a and out sure can that opened trying our market the you've there why I'd would in to investment The got then, us that to you takes the in time we over many it's insured decipher to in up - how it's other kind And to network that's process you that our the cars the okay, we we our locations people, is so big out quickly, we've say, over. up we know auction the and find we And want dollars, and and learn them, to And come the lot of and and car? would buyer a of calls auction over that you how and them high there's model now and make store talk that part of figure don't pick of marketplace the at bunch big came works. marketplace. investment facts facilities, realize to is liquidate that secondary out, why conclusion bidder our build a that's a as reach we minds where platform and And year, place I they works, get phone how knew work. been that

and we've the the customer standpoint, see that it with approach to market to quick simple happier a now prudent years insurer vehicle auction. they coming Score through last really and and was is be to to so because and don't money So Promoter in pocket increases have a the at accelerate our to in in up, auction in the of not getting vehicle convert, to accelerate very we're and now buyer deal Copart And they're the at service that's spent upfront going two going to to that. pick about right? Net being convert night in X:XX from learning, doing losing And math, to see a is units market in win. They're their going a secondary They're the the and going the more they're of terms going clients this model. terms pace

want so the and to insurance our benefit should Did far you to research case. And be the company. that to benefit this add the insured So that? proves

Jeffrey Liaw

No.

James Albertine

if as may. quick a follow-up, Maybe Jay, I

you made, go lower did Jeff. I then, having does other of similar the markets? you will difficulty can Germany in Germany, Europe? breakthrough you're kind across ask you and it learnings seems progress were in that over Given the you've to laterally in or start you the have to degree one, effectively a shift way as had Or the And if to of into if that

economics. the about talked You

and Is your profitable of there's get This sense. You would a economically. no fair very a from EBITDA corporate it's market? over I be sort is term, guess margin maturing while your I time. in that but that modeling ROIC wanted assessment coming with would near as a dilutive on guidance I compelling must imagine. you're to opportunity But here, perspective, to a said this

Jeffrey Liaw

tackle individually. me questions let So those

Germany understand your will is First muscle in question a approaches with out some to Western the the Certainly, roll market It's to own in refinements. case rest countries. and ability Europe. the our how as certainly our to its other that in building of the to succeed memory of nuances we're inform now

and so lower -- our replicating in I the we will and the approach. be So next to morning enhanced there's -- done, we our reputation, be have there and this be it's the simply or additional work have should will enhance staying capabilities friction next not for iterations think otherwise. France But of

the As gross because want are line you it, line. of about for of on to the clearly the a talk nature profit model, cars, principal profitability to they're the the first the suppose, operating and I'd if I given rates margin math that note they on both -- dilutive the principal literally

I forecast. time, we As a the for We're balance how to in of will in to be see just think it future have not patient evolve over quarters. and a provide position

James Albertine

appreciate Understood And luck. it. of and best

Jeffrey Liaw

Thank you.

Operator

you. Thank

Jordan, question from final Jefferies. will Bret Our come

Bret Jordan

guys. Good morning,

Jeffrey Liaw

morning. Good

Bret Jordan

size missed annually? many how broken. was the market, have this. there quick might - German I one total A star you Did My cars

Jeffrey Liaw

larger market. characterize We haven't. than We it substantially the U.K. as

if For than or example, larger GDP, by larger capita, metrics, I at we the than GDP European you the believe think view it's U.K. meaningfully population, whether market collectively I the et And as comparison, just it's per think being cetera, we look similar the U.S. Western

Bret Jordan

in on a percentage And shifting Great. it's around is export the shifts? there's condition concern that go essentially your noninsurance whether Do a export to Okay. car, whole then that those the report, mix higher U.S. a a less as of vehicle. question sense

William Franklin

materially different it'd looking -- wouldn't some without too I I say without knowing be percentages. -- for think are exactly our would it the export appropriate market, export that but normal up, than Certainly, the

expectation. an is appropriate XX% So probably

Jeffrey Liaw

because little Right. bit States. are -- the in probably cars scrap a simply higher sold Directionally, the because

local a that's pretty going So location melted of the car to pretty a right sold radius narrow be down be much will within away yard.

I And cars don't go would export, by there's of think not that in dramatic. virtue dealer probably generally being higher be so mix difference melted but the simply down, a

Bret Jordan

you. Thank great. Okay,

Jeffrey Liaw

you. Thank

Operator

at no like in conference back the turn closing have management the queue, Thank any over further we much. gentlemen, I'd to time, very you remarks. so Ladies questions and this to for

Jayson Adair

on All forward wish right. you reporting Copart, next first Thanks, the and everyone, Chantelle. Thank we for year, attending to and for Thanksgiving. you, look quarter call all happy a

Operator

at Ladies concluded. much. Thank you this now very has and gentlemen, conference this time,

great you. lines, have your may phone the You disconnect of a and week. rest Thank

Copart (CPRT) 21 Nov 182019 Q1 Earnings call transcript