- Earnings call transcript Q1 2023

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Operator

Good day everyone, and welcome to the Copart Incorporated First Quarter Fiscal 2023 Earnings Call.

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

For opening remarks, I would like to turn the call over to Gavin Renfrew, Vice President of Global Accounting of Copart Incorporated. Please go ahead, sir.

Gavin Renfrew

Thank you, and good morning.

discuss related measures, to we'll income adjustments call, benefits tax stock-based today's certain including non-GAAP to During compensation. Investor GAAP We non-GAAP provided yesterday. on comparable release financial these and our measures measures to our a the most issued reconciliation press Relations website of in directly relevant business these believe trends are and together our results corresponding GAAP with performance. We analyzing the and measures, measures, non-GAAP in assessing our

with including substantial respect forward-looking within our trends, the forward-looking meaning management's comments current securities federal statements uncertainties. addition, uncertainties views In and statements laws, to These opportunities in risks today of markets. include our and involve

year call reports For have any quarterly and to statements. I'll July today, statements Form each and associated our or the more with forward-looking XX, Jeff our subsequent revise update risks Risk the of Any you to titled on the refer as in Factors that, forward-looking we are of Form made ended Liaw. detail section XX-Q. on the annual over no XXXX, our With on our report business, to for co-CEO, XX-K obligation we turn

Jeff Liaw

results described I published data context our today. Many start you, the fiscal a and ESG detail our the shortages, Good I backdrop everybody inflationary though strong to to of on conditions and Gavin. today, points significant highlighting used environment. persist calls apparent customary describe first inaugural first in by recently call. of others, themes the including We're and weather to call on provide vehicle report XXXX previous report. economic we've some Thank broadly quarter our throughout quarter in a will but these complex of high a our wanted stabilization, new car welcome and prices with shipments Gavin will more in that pleased our morning for global event unusual

across Events report, underscored of the the take few address pillars. you already, first recovery. do and the briefly particular But community so. haven't past that to commitment have sustainability I'd to and economic to moment in a the different empowerment, sustainability, weeks sustainability dimensions, summarize a it of you three. environmental number sustainability, In we fourth of I'll global If read these of our topic encourage enterprise

the circular sustainability. is these of On first Copart keystone subjects, a of environmental enabler economy. the

Our components and substantially reducing business of the their would footprint enables what sector. otherwise reuse and the the of vehicles, recycling carbon transportation be materials

as that by and carbon X fact, we marketplace, upon as estimate Scope emit in X our well as In tabulating we emissions, as carbon are that a Scope save hundred business. our averted the our dioxide emissions times equivalents we in much

aspect global sustainability, second empowerment. the of On economic

of members is of countries residents Our quarter as emerging access instrumental XXX defined economies by we economies. volume our sold In alone, in in business XXXX to one United fiscal vehicles developing improving to Nations. by approximately with purchased for mobility in the members

worldwide. And increasing role While undoubtedly leisure to us those an for for access healthcare, like we're take on is people mobility this its proud enabler granted, it to we world. economic advancement, important education, for call today, availability a around in phone physical the critical of and play

with sustainability, subject horizon. decisions enterprise On make a strategic XX-year of the we

hour balance weather our we for response sustainability have real to health regardless customers' at ensuring Ian will business single in we in invest in that of the estate, landfall availability events. of Copart's committed the winds And time. included business Hurricane volume and largest generations. basis, vast and event the year, XX-year rainfall rapid sheet in history. As customers to this storm most Florida. to a in and category storm a of be heavy This of role notably communities ensure In made for the Ian we are our September and majority unit the economic late own response seeds of major conditions the success flexibility in On through of for robustness miles serve, path finally, proportions. result, Ian we've our XXX of of maintain cut the we and historic excess of a was to We our the proved per The been fruit our be to for our our ensuring heart strong the its a planting years. our a storm state.

the unprecedented leveraged owned efforts of loaders, as as Copart third-party the another purpose in end this own storage provider frequency anticipation the major the in heavy days As substantially investments catastrophic acres most capacity XX for employed to importantly, provide acute of as an From only form efficiency, who nearly cat yes, and expediting the clients alone storage auction state. through within day inventory, you've we our technology, X,XXX severity, Copart their event, receive the the from while the subhauler storage we to total. in owns lingered settlement quickly length region, we dedicated of articulate the In the most perhaps XXX enhancing team. services can land customers insurance much XXX enabled and we off event, over in prior personnel put retrieved cat over economic proactive trucks, hurricane of that the policyholders XX,XXX our dedicated In us on in storm as of both instance, of affected many our turn, transporters, first XX,XXX owned allowing units network, eager the made and the in country us of just this and process response for are we've the of company represents for heard of more and need. nearly at We tow of land, Copart our times deployed paid In of first units still in service but land around their equipment, calls the capacity in affected our by increasing well investments drivers, To areas, relief. course, acres catastrophic than quarter. context, our drivers. trucks, economic employees

noted Hurricane period. by past, we've storms and in enjoy operating We Ian we response the the quarter major first as insurance the incurred robust weather major losses by in revenue investments following our exception pre-storm the tend million in experience with in cost we to partnerships events. in extra our our offset in of durable preparations sellers. million is $XX strong and our view no business, with $X As

premiums lodging, expenses labor cat elevated include and paid Our for increased expenses for overtime and and and team. logistics, travel related transport, towing our

Hurricane quarter, basis XXX was gross points compression. approximately XXX margin of rate Ian and the As such, in to of the operating impact

this VP two split in one improve our Finally, an November split We six of And that, split, results. Gavin some to we retail fourth it for liquidity completed statistics the our quarter and Global and our of employees our XXXX. to to turn investors. Renfrew, to making walk opportunity since through financial as our stock I'll it stock, with over accessible and Accounting, a key such operating more view industry

Gavin Renfrew

of unit each of that good for the quarter provide year-on-year and key morning. statistics we Jeff you, increase will US start X.X%. increased the X.X% sales X.X% increase Global with I quarter. with international and Thank

activity due used business frequency this insurance year and and X.X%. past for impacted severity. and vehicle frequency and growth. loss recovery have the continued several overall and accident negatively prices Notably, have driving volume the and record quarters high for total tempered periods grew both two-year the to comparison share US from sales to one grew quarter, first year relative unit and last events gains catastrophic Insurance Excluding by

of be. industry otherwise volume For vehicles would've XX the same as If vehicle the volumes car ASPs frequency continue first down environments same we've returns relative on total time a to percentage totaled increase in Elevated total higher. remain in points, the year-on-year, nearly loss XXX calendar loss and loss basis to auction strong while in sequentially, price XX% versus the a sequential small to by basis. the loss prior time near and all slightly observed total third reduce to two in basis for what points rate years, ACVs frequency Though were we therefore, total outpace continue highs insurance used period values years, was observed up in XXXX. used the it XX% at XXXX quarter falling would

two appear it to will We frequency the over of loss declined the total scenario. believe total course view revert significant resource to and inevitably and stabilization retention, quarters. base the historical observing still two XX-year Regardless, Accident costs market repair last we that into severity, will this its short-term some has years, the et be in past While recruitment, a is steadily and member buyer costs our based car by complexity, Copart's relatively cetera. duration said sequential repair be on frequency to continue loss best-in-class frequency. norm as we reversion with boys global to liquidity total rental rising labor contribute registration, auction investment of loss

chain experiencing bottlenecks these today, of in the moderation supply index that lead volume observed these availability We points reverse offsetting eventual now auction the used as do values, unwinding While persist would conditions lower but at decline certainly a ultimately used loss We anticipate levels to ACBs short-term trend in vehicle noted. moderation back anticipate values vehicle a that forces frequency cause almost A will vehicle well. future. reduction to of since increased wholesale lower to with XXXX. Manheim's trending appear we be now previously lowest and ASPs, of in increases August, total our inevitably its volume coincide may the and with will

sources wholesalers relatively believe channels, and quarter, X.X% substantially outperforming While is non-insurance from are digital. overall, unit and charities, the cards physical US in auction as wholesale other flat approximately such volume we both excluding value we lower up

Next onto financial our results.

international with purchased $XX.X vehicle first for our the comprise quarter first cash our overall or revenue volume, strong particularly sales in a Purchased expansion. the mix, of for X.X% vehicles at Purchased ending for average $XX.X Manheim $XX.X international primarily quarter percentage prices X.X%. grew in record cars declined vehicle October and revenue cost increased US international to and for Purchased sales We service due the decrease January or of from million US million the first strength increasing million for due increased to for experience the revenue headwind grew of XX.X%, $XX quarter, up selling X.X%. Global ASPs and million continued historically US for ASPs, increased with service from revenue and the saw $XX.X grew higher or global the volume. quarter, which or growth including XXX, the in and by continued remains but driven vehicle up For XX.X% US million in to the decrease values car X% first business currency. increased the used The quarter XX%, of indexes and levels, year-over-year a quarter. XX.X% XX% XX.X% an year-over-year. up by elevated quarter, both XX.X% revenue quarter.

As growth. of balance due XXX gross costs gross percentage from a result, or the quarter. million of vehicle quarter XX.X% two shift points Hurricane $X.X A offset from The volume purchased million profits inflation modest decreased in during by by XX.X% our decreased margin the to vehicle to to revenue approximately quarter. higher Ian slightly points quarter in partially attributable to towing to basis elevated by in was by mixed margin to margins Global contraction in factors. reduction margin or unit $XX.X XX.X%. labor profits decreased a and first directly basis gross to our is being X%, attributable both the X.X% was US XXX and XXX per and decline expensed XX.X% primarily cost to margins and margins year-over-year decreased international purchase decline XX.X%. purchase The and decreased the vehicles.

to believe time technology a of on G&A margin However, through and to expenditures, stock continue I scale now further depreciation and $X.X million spend G&A will over in and quarter benefit efficiencies expenses. increase we the and compensation we as increased can find we excluding X.X%. capital operational innovation. move from discussion returns or

and business to G&A the as revenue While as to additional percentage grow term, we period over longer anticipate decline be a G&A period volatile create we can leverage. from our of

income decreased million million a $XXX.X operating GAAP for first headwind million the from to currency. including by $X.X to due Our X.X% $XXX.X quarter,

Excluding periods, from catastrophic decreased events operating both income X.X%. by

$XX.X options employee exercise was effective a effective rate XX.X% tax tax Adjusting XX.X%. rate. million, stock would've our the the takes quarter been tax benefits with First tax for it on non-GAAP of associated expense basis, income

in million the last $XXX.X X.X% quarter to million million net release, our million income X.X% $XXX.X from this First to our income XXXX. detailed items decreased $XXX.X $XXX.X pro first reconciliation FY year to year GAAP in forma decreased included remove Adjusted year. in quarter non-GAAP from last the net press of

comprised low at and XX.X% was excluding X.X% flat year-over-year end excluding of charities. X.X% last increase value and like Our when for global and units down a value the year That when inventory is inventory. inventory, US October decreased units of X.X% of for wholesalers international from decrease an of low

For time a been has as recent losses of total overall first number the accidents in history, percentage the declining. of

As ago, quarter lower attributable a levels during were up are from result, Hurricane our picked to they Ian. unsold year than the inventory inventory incremental despite a vehicles

our Now to liquidity briefly update cash highlights. and flow

Ian. been, from of October As are happy by in quarter $X.X capital capacity the investments credit continuing this invest earnings quarter, the Despite near-term cash billion million due physical amount flow additional our to an $X.X will as customers infrastructure. invested we to XXXX, lower $XXX.X undrawn our with that where million and to million in concludes take billion. sales we in of Hurricane XX% cash prioritize some [ph] would've $XXX.X of Operating attributable quarter Session forces incurred to we prepared for equivalents revolving suppressed comprised billion need continue facility $X and decreased driven liquidity and unusual and with to unit the had expenditures expenses they the relative to capacity expansion it. remarks, XXst, cash by We in the of questions. in year-over-year that to of conviction with over in we That we $X.X Question-and-Answer capacity are have over

Operator

conducting [Operator Thank session. Instructions] be a this question-and-answer you. Thank you. time, we'll At

Our coming the questions. Securities. line Please with first proceed Labick CJS with will question from Bob be your of

Bob Labick

congratulations on morning and Good strong performance. operating

Jeff Liaw

morning. Bob. Thanks Good

Bob Labick

questions for two it as I wanted around and to the the all well. thanks start -- quick related to hurricane

Is fuel, just quarter. costs trying the the Just costs, unit noise and excluding we're et in it the a Is Just been of declining? of rising. the elevated seeing given sense a it to obviously, you get Has rising? towing, cetera? sequential a are changes it hurricane begun trends the to to process It's, labor, of impact get maybe flatten to still sense How the cost in out? the unit of trying hurricane.

Jeff Liaw

Yeah.

terms, a think broad certainly the to so, Bob, And hurricane, are I ago. excluding in costs year elevated relative

I many your on think specifically in I trends, think we're seeing question cases. sequential stabilization

we've prices in But gasoline. some remain certainly of course, those proxy costs. Of a seen trackable gasoline relative stabilization is those variables. underlying an to easily for elevated, conventional Diesel underlying broadly speaking,

Bob Labick

on then you cats. gave some And Great. how we stand and of your that last spent of here estimate in even current more a -- the where stats expectations I'll to and about you you too, of hundreds given do land, greater or the And us of you've forecast regard? Okay. land few know there dollars and whatnot, to lot I don't feel know, incremental millions continue Are severity do in for that hurricane add years, capacity?

Jeff Liaw

Yes.

for as well very for to readiness. continue day catastrophic -- to land day we investing as both substantially, are we in So, expect operations

of the our that, the address -- aggressively to as And the profile we context to support core pursue as events. to that land seen well since catastrophic quote course, support elevated XXXX. business to spring of You've in occur investment spikes of continue

Bob Labick

Okay. more for Great. back I'll One queue. me, in jump

Jeff Liaw

Yeah.

Bob Labick

related Or also bid website? may potentially the switching And a they Germany on is US they Germany. just that are future cars they of did buy Could kind Meaning opportunity? buyers on also on that cars can site become site and meaningful? us alerts that US international volumes, can the is on When to in seamlessly then, like? give Just quantitatively into you growing? integrated update over an to Germany,

Jeff Liaw

generalize step Western question in and period. back Fair broadly more it. take a Europe and Got I'll

Germany together, and and the and lot loss and US leave but I'll more aside, a has Finland looks , that an insurance Finland Spain So, Canada total UK. model the and like

basis, multi-year So Spain a on Germany, a very continue a in In insurance basis volume certainly as settlement significantly and our gross sellers year-over-year with well. model. grow we to and

progress strong. So, is the

with have insurance different a number traction We carriers. of

gross is across and model noted markets. policyholders As to agreements calls, to settlement in a prior all ultimate on we've default nationwide to the objective secure those

one in member and frankly, participation German continue by such, today. auctions The advance and the yard some even, yard registration online question consolidate in auction efforts. the overlap. auctions the are bases It We and have opportunity of have separate is On do meaningful into that to regard. still crossover we There marketing perhaps day platform some distinct US entire are to overlapped. The ball crossover an member In channels. events. cases, your

Bob Labick

Thank you Got much. it. Okay. very

Jeff Liaw

Bob. Thanks

Operator

Please from with question Kennison the question. comes Our proceed of line Baird. Craig your with next

Craig Kennison

for you be the thank the or Hurricane you as and up end Ian. XX,XXX my I more assignments that be follow I there mentioned well. will morning total, could you the on on to taking Do of October. good Hey, think wanted questions believe through way?

Jeff Liaw

so. modestly but More,

Craig Kennison

Got it. you of this And Or such overall sometimes the kind then around? quarters they're would expensive, like the could Is that expectation when the revenue this catastrophes be past, time you in in I that like take know this. to losses costs closer something particularly on coming breakeven? offset see

Jeff Liaw

A fair question, Craig.

transporters, catastrophic think, take certainly of truly bird's people, and the surely if they build that catastrophic we've to our that of cat you buy capabilities for of others specifically many believe us catastrophic employ deployed to the in in we've to industry the and draw capital aggregate, likely and eye of stress. the root those technology, greater the the events for taking do millions a and consider don't the the also the In in costs, to hundreds necessary train but view us, the between terms are one. a facilities the endeavor times millions, we aggregate, but equipment, you well. were into events, as loaders the catastrophic profitable trucks, of developed still time events, the in We weather I account the contrast for those by so not the a

So, for the profitable us. in are aggregates, not events no, they

Craig Kennison

Thank feel Index you ASPs us and look correlated it your share the used you. understand of And trying are car get Is declines to are as then -- of as to November, with they just there the impact maybe Manheim the trying what ASPs model? a to might can relates with to year-over-year in the like respect with month data values. we any for

Jeff Liaw

as we quarter. you You'll first meaningfully don't, of X% of ASPs that in the the find if comment say my here. somewhat the still head year-over-year. end the through quarter, I I current would number about But know, number, intra-quarter of were the have correct top off the up

year-over-year. and we rising period, shortages. over never there variables. between speaking, so us regression There a lags so such some the I Manheim broadly see were same certainly still market, and other leads observe ASPs So, that think perfect and are correlated. down we are But you'll third-party vehicle

If today, if down or you new for wanted car two or four not not road. you it a the three have to might come you your go months buy or did, pick might

Craig Kennison

ask to be decades, that acquire Thanks. inclined Would got to have urgent of advantage over in Europe you land on currency? suppose. in got And I today land an more that maybe there. to momentum need the an you've land you've now and be We've business Europe aggressive your dollar course a appetite for about strong wanted and you I lastly, and US got certainly to

Jeff Liaw

use. incumbent for support it's more a buying direction, and but The meaning major for in meaningful land -- XX our in as in not Europe. well meaningful We're it's is, have businesses investments near-term XX, businesses in Europe nudge growing an currency to that Not a we this land influence. as XX-year our so, appetite

calculus. So, don't that variations even, X%, XX% XX%, necessarily affect of XX%,

Craig Kennison

you. it. Thank Got

Jeff Liaw

Craig. Thanks

Operator

proceed your Our Jordan of Please question. next from with question line the with Bret is Jefferies.

Unidentified Analyst

Bret questions. This is thanks Patrick on for Jordan for [indiscernible] and taking our

of a recent talk little signs drop could of as share up trends. recent volumes signs or market volume more you about If bit gains? there Are picking any volumes any

Jeff Liaw

its there question volume and into many with slice parts question, component to sellers. are insurance different the On ways our this

than a in reverse believe we very we loss I a will As observing eventually literally suppression some and which once we has up where in noted, picked of the talking Gavin country abate meaningfully. lifetime has it's would think stabilized. meaningful total detail, are say, frequency, about, activity year That, the suppressed lot US. Driving Depending Europe a you're picked ago a driving in it has more up. was in been on the

times, driving is equation frequency volume frequency total minus plus that times, a frequency, accident posted loss share plus you ago. question or the the So market moment

seeing up still we're picking think as loss an I stabilization decline, well. certainly aggregate, seeing and increase year-over-year driving a the we're in accident frequency in and frequency are total on So, but

we On individual share, on we the question accounts. comment market aren't in general, of position. a In don't

have and arc years market insurance. If in outside of say generally you earned of speaking look long-term the share history, we at I'd more insurance over both

share So, which believe rental in other providers others, dealers, fleets, our continue serve in we institutions, to space. financial automotive we non-insurance among we relative gain car that businesses to in

Unidentified Analyst

you you. see do with any guys that the landscape it. Got Are you deal Thank then with synergies IIA? competitive see? the guys changing And RBA there how

Jeff Liaw

say our step I'd and very We competitors expansively. generalize our a I'll we set take here. seriously, -- view competition half

the So, other sell every behalf in our path on clients, right can compete earning against take. vehicles we of those to vehicles

of question in we auction particularly affects other are we comparison constantly to hand of so returns whether certainly that auction selling, as a don't insurance against and standards it's services in alternatives highest set eclipse how well. ourselves deliver those and we change we rising the corporate consignment innovating so repairs for in address each investing and about us provider So, marketplace. win the space, to wholesale specifically another your the of through the competes to more the platforms, retailing, But think head-to-head possible ownership

accumulating with base advantage platform, global practice, a In equity corporate business a led of in distinctive turn are fund land, controlled investment or think our building our another, creates activist buyer represents technology an team. hedge holding owning own by company we as a independent and one horizon, we manage or advantage. a durable company So, stability long-term the competitive our founder which whether or they our in private our

Unidentified Analyst

helpful. That’s it. Got

Jeff Liaw

that of and questions Specifically, posed to of better those the course, are transaction. seller specific buyer

Unidentified Analyst

Thanks enough. guys. Fair

Operator

your next [Operator Please with question. The JPMorgan. with Instructions] question proceed is [indiscernible] from

Unidentified Analyst

Hi, on do [Indiscernible] compression with vehicle -- are by Ryan like retention there given adjustment guys. you anything how at that? on a is commodities. Brinkman. looking And -- just rate, question change I declining had can that used for guys margin you affect values

Jeff Liaw

What rate?

Unidentified Analyst

retention offset Your do guys to rate or you like anything margin compression? can

Jeff Liaw

you I Do just your rephrasing question. sure mind not that? I'm understand

Unidentified Analyst

Yeah.

lower like, do vehicle So, to looking given -- offset are that values your there going commodities how that? on used is values you at along with are rate used side normalizing your anything can retention you guys adjusting guys forward? Or by that

Jeff Liaw

Retention rate? Got it.

a So, dilutive. self in with we margin see vehicle used prices soften, cars, of we is as eventually perhaps will a -- our selling -- see will which the prices softening

big at is We because an used increase vehicle of in loss time, suppression the part of prices. total same a those will, see the volume volume today high

margin is volume when that system, see the through flow additional that So, accretive. we

available automation us can as certainly forth for basis, our we take, deploying we other a more including explore to have among actions and recurring business things. in technology in we business, and that, so other which Beyond levers the still on

recover that delivers and and to ultimately capital. to know schedules how enough and business But members long-term. comment we on I don't fee our say, return to generate it a think suffice sellers good on you we the manage value our

Unidentified Analyst

would out? we that And in keep of Gotcha. this looking should there are that of are terms that any you track Yeah. help points at data guys

Jeff Liaw

being In prices? car used this,

Unidentified Analyst

Yeah.

keeping eye that also are we on particularly guys you like anything look So, should at?

Jeff Liaw

insightful. nothing Probably

Manheim index broadly ADA. the used track track the auto in what's like. anecdotally we and So, We the space, retailers auction vehicle and happening

in we So, nothing what available track. that's not broadly

Unidentified Analyst

you. Thank Helpful. Gotcha.

Operator

proceed Ali The with line question. is the Faghri your you. question Partners. Please from Thank of next Guggenheim with

Ali Faghri

taking Thanks Hi. storm that October. to through quicker in I allows mid you response there this to for my already question. Was were different guess selling that to was in than historically? I cat the process surprised think your late see inventory I with these than Good September, morning. anything cars you

cat especially at taken it's historically, events. think days, XX for I least

Jeff Liaw

it's technology. think, over in evolution we've invested of have severity these capabilities, certainly, I our have invested frequency But of the an recognition that storms, but years. in rising of we

platform, of details do, process physical of by in absorbing to work levers processing haven't that the many our technology titles, the in behalf cars, the helping gotten We there the different companies they of are the pulled on in means. But sellers. in collectively insurance much to that receiving used what expedite individual to

Ali Faghri

Okay. Great. a up here They sequentially. were rates. on total hit higher we total the follow-up on now loss just rates, trough from to then we've you them modestly climb loss there should here? Do And start see think and

Jeff Liaw

belief because -- is A that underlying I'll then leave vehicle difficult forecast, that your in used about prices, particular.

one today car than costs The is off other continue which of having the years repair itself a for I rise because to over in, complex tide is five a I think vehicle a ago. years decades electric Every of meaningfully having XXX that conviction probably a rising will X,XXX we've that forces, rolls recent eventual I the and come. will them line more microprocessors year got fair anecdotally complexity. ago, Ford out and it in is think that description focus one, say and saw bit to the will rise play of to vehicle Ford example. and of And a

So, six those and will XX to out rise. difficult the to happens Copart next will is forces, the think, I Repair well demand what for rise. are International is car used near-term forecast variable that costs The known. us that's vehicles But play as for for to will isolation. be say. over that does to somewhat. to appear months, harder how make in softening It prices,

Ali Faghri

Great. Thanks Jeff.

Jeff Liaw

Ali. Thanks

Operator

question-and-answer remarks. Liaw Jeff for end the this conference session. we've Thank the closing to I'll of time, you. of At our hand back Q&A reached End

Jeff Liaw

and Have good a everyone, talk day. quarter. Thanks next we'll to Great. you

Operator

This conference. concludes today's

lines for may time. You this disconnect your Thank at participation. you your

Copart (CPRT) 17 Nov 222023 Q1 Earnings call transcript