Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to the Copart, Incorporated Second 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 Jeff Liaw, Co-CEO of Copart Incorporated. Please go ahead, sir.

Jeff Liaw

Thank you, Maria. welcome us. second and thanks call everyone, joining for morning, to quarter our and Good start with actually I’ll briefly the Safe Harbor.

Good morning.

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

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

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

in capabilities customers, and certainly environments, right. has skills well, the estate here brings at public very two new We're to excited today experience, well. wanted minutes context to Copart leaders and CBRE leadership I Leah will own both and her an as that, exceptional at and She With provide her companies data after Tower, We of institutional well. industry hired real Officer, by complex as have Chief the analytical introducing start prior with Leah our Financial additional who expansive few for team leadership American Stearns, and in and as experience regulatory search. join richness relevance a their

So quite on board. her very we're have excited to

customer-centric a our foremost. I'll customers. organization business. starting start And be We insurance start with aspire to comments with today our first my I'll and

now Our insurance patterns years cases customers inflation. certainly with remote expected and that have and experienced we many and more environment have business volatility They've initially board made driving durable proven of the work across than think adaptations the in personnel cost changing now for three industry number persist a process they’ve may rapidly forever. and

have navigate this including providing We to payoff them virtual title business more like. inspection, our likewise adapted and services help processes and the loan environment,

CCC, XX.X% was frequency to years. the XX.X% past to half approximately from experienced uninterrupted the increase most We volume loss almost attributable been the attributable According think for volume, X% has from loss we third increased vehicles achieved the in XX sell-through the quarter growth of of for our unit to volume total insurance For in from U.S. you as rising fourth large in Ian. quarter to of calendar we Hurricane in and frequency reversal The trend customers completely that this terms of part the had of flood Hurricane insurance most total Ian. of year-over-year, single of suspension XXXX know quarter. change the unexpected

total nearly rising due combination always loss two true, forces. a Today, as has to been frequency of is

the car mobility the Eastern fastest increasing expensive and Europe on America, more because vehicle South economies attractive world they our vehicles secondly, Africa provide to labor are need. the damaged less Central more attractive costs. are accident and costs due in and economics severity, and to complexity, repairs salvage rental growing First, in lean And

insurance our been today. that unfold at loss offset prices quarter, had have volumes volume. higher if but happen calls frequency what prior was. second of and would fiscal by were would may somewhat, total XX% to think We're if decline. we increasing prices when In on our used that beginnings be to phenomenon would we vehicle historical sold discussed it selling than And XX% said think the We've we've been our compress seeing levels,

customers the Now our rental still with technology grow Car. of segments, collectively XX% turning finance the our outperformed a auction auction in and believe us to attention The Car year, the service fleet we've and enable grown support to despite and quarter has We first us Blu the prior non-insurance we bank them. offerings car invested industry. for have enabled space. capabilities proactive to a a to group meaningfully We've we've returns the to wholesale grow these to and in sellers supply year call these and vehicle the business versus and our made constrained Blu is the overall different, volume required half our environment. serve effort approximately

Finally, per fewest damaged capita. the economies I global turn valuable generally in in staff, our constrained world mention members. traditional returns, our to our base. which wanted certainly growing sellers more our enables remain digital the to In And the inflationary of network expand a marketing We in through whole in newer, environment, have and empowering We significantly lower and member committed buyers more and supply in invest vehicles us. buyers consign have as increasingly to that seen auction our still vehicles lounge driving we've noted our to often fastest a source Copart cars.

guided both success. us wanted our about that them. of have bedrock the me, certainly particularly magical principles and and nothing In Leah there's closing, These and foundation long are to I principles note the predate

and for XX-year decisions the make our to continue customers prosperity shareholders. our of We

invest the our technology serve tomorrow We to today members us and of will our in to and enable sellers. both

to of engage buyer to marketplace universe. to them them the continue recruit invest expand We members to available the services and to to expand will

best world. are will use sell, to finding the vehicle in we of we and land. For highest vehicle committed in every invest finally, we the that anywhere And

landlords. our own will never is third land compromised serve our possible the economic to our that ensure or ability of whenever wins We optimizations by to customers party

walk statistics. And to Leah our turn it commentary data we'll up CFO, over or over Stearns, Q&A. for through to turn and key additional some I'll With it open it some provide then that, to and

Leah Stearns

how by I saying Jeff, like you, join morning, Thank to start excited good and to am I'd Copart. everyone.

the solid create that For me, our a to focus to shareholders for term. best-in-class with positioned our as business' for the for believe exceptional our delivering I enduring forward. the reasons, these energized I at to of and collaborative circular customers enduring economy customers, including factors, help foundation. financial couldn't results natural entrepreneurial service opportunity Copart is position be over these more And the objectives and deliver on long compelling value drive automotive, the well center the number culture, our was Copart's as in of

sales to X%, increase an X% over fee XX% nearly Global due the the unit and increased purchased and the grew increased X.X% about to internationally. purchased In declined over units, and in growth Turning XX%, including X% fee our which our business insurance across Internationally, units growth primarily our unit units year-over-year, of mix XX%. quarter. nearly came U.S., of and respectively. a our U.S. from

increasing total share relative quarter, comp X% During gains. activity, and the its was the grew driving and to loss recovery two-year and insurance XX%, U.S. of one to continued frequency in frequency our business and This severity, accident primarily respectively. due

invest in and recruitment, returns auction continue member growing our registration base retention. we by as Our driving remain to global buyer strong

by more Copart more to providing growing a insurance to liquidity claims cost-effective a way costs it As total auctions deem cost-effective manage making our provide customers best-in-class way with loss. and result, a a vehicles returns, ultimately

to financial results. Turning our

unit XX XX%, second or with average service nearly for higher and XXX.X. to global nearly compared quarter, quarter. the to U.S. Index XX% over ASPs the Global ending for up For U.S. revenue nearly X% over $XX January currency. increased $XX million due to million X%, ASPs and a increased or per due a quarter, million service increased the flat X% decline at revenue and quarter, were grew revenue the just for including or second XX% the year-over-year volume. XX% international in revenue a headwind nearly Manheim primarily respectively,

U.S. the and vehicle Purchased revenue up vehicle nearly for down sales or $XX the quarter increased quarter with purchased for X%, for XX% XX% quarter. international the million

during pricing was unit result quarter exposure the the mitigate softening unit reduced of environment. principal a a activity Our our in a approach proactive vehicle purchased U.S. to in

growth an asset future and important believe in adjacent classes business to us of continue an new for enabler We for portion provides that our geographies. this is and opportunity

Purchased more vehicle million or of in than grew XX sales quarter. cost XX% the second

X cost U.S. labor year-over-year to decline margin basis a decreased primarily of XX.X%. points. margins consolidated X.X% by approximately was a driven XXX towing to gross by XXX profit decreased The the As inflation to basis margins XX% gross international XX.X%. and profit million decreased gross approximately percentage XX increased or Global million margin purchased second the by more quarter result, decreased while our XXX points and quarter. basis XX.X% during vehicle in on and than or about by to

pressures direct to and from costs Over primarily inflation, years, two the seen last our related labor have fuel.

costs the and will into perspective. operational to with long-term We people, We costs through optimize investment labor best-in-class will which continue a manage to automation. for constantly view our our seek increase service a customers. translate as in direct We our processes in technology these

our logistics and our we to to demand time. ensure committed scale positioned we margins over meet are on we Finally, appropriately are the approach, technology real to can customers. investing this believe of with estate, We in capital and returns to assets increase

or spend in XX%. stock-based depreciation. $X general expenses, G&A to administrative increased and excluding Turning compensation and million quarter the

longer the percentage we While infrastructure. the from G&A of volatile a term corporate as our revenue, to to over scale anticipate we period, of G&A can as decline benefit from be period

growth, our than increases more As quarter. GAAP a result of our strong our cost to XXX business, the by experienced increased the million offset operating income by X% for in second revenue

tax to expense common Our per a quarter million or net reflects And increased effective share. which million, finally, income XX about GAAP tax diluted second rate. $X.XX X% second quarter was income XXX XX.X%

is when inventory. than units and global inventory of year-over-year from for decrease January X% global an units end decreased X%. wholesalers of U.S. excluding at And of X% low low our is increased by value and less last a like inventory Our when the for XX% increase inventory, actually which compromised X% value That excluding down year. of charities, international

and our X.X capacity in of to cash liquidity, is position as quarter, position. at billion end We to the an with of which solid and over credit in billion equivalents liquidity comprised of X.X remain revolving X.X stands of billion. and a with cash undrawn Turning which respect facility financial the

Year-to-date, nearly operating XXX cash we of of period. year flow XX% million is an prior which from have the generated increase

million of invested expansion. this our amount to In XX% in addition, with capital we capacity primarily attributable physical infrastructure, expenditures over have nearly XXX

than Finally, year-to-date, we've more million XXX free operating flow if you of cash generated take less our cash CapEx, flow.

have investments financial yard new believe our acquisition, include expansion, Copart business on our a our needs. while customers' growth. these that invest serve yard and industry's types have of position, that strong to historical platform. ensuring the investments the meet we continuing we to logistics in capacity differentiated We to our intend Given technology as provider, service These necessary future

concluded turn my happy prepared your we're I'll to With over and that, call the Maria, questions. And I've to remarks. take

Operator

At this session. will question-and-answer [Operator we be conducting a Instructions]. time,

Our question. Securities. first question Please proceed with Labick your Bob with from CJS comes

Stefanos Crist

for questions. Crist for Stefanos is This taking morning. calling Good in Bob. our Thanks

Jeff Liaw

Good morning.

Stefanos Crist

touched changed how since pre-COVID this structure on provide could but changes cost temporary? versus the more yards, those call, You of and you little maybe of detail it's the during the much are on permanent a how

Leah Stearns

Sure. I can one. that take

our with labor haul as as comes costs towing. and of that our of expenses, terms In majority associated the from yard the sub cost our well

COVID, see that the a and to from us or on and and overall that we item. of technology costs, processes although something do time as our a a don't make help either growth abate, those costs that in are economic over sub costs And hopefully certainly is investments, line labor permanent as have we those think increased portion expect we directly that do which how attributable to mitigate we will of efficient certainly temporarily on focus So to haul more is perspective, result post fuel about future environment fluctuate. impacted

couple increase So a expense account of the seen the last years. temporary over that for phenomenon. from could be more that a And ops majority really we've of yard those of the

Stefanos Crist

That's great. Thank you.

you non-salvage in of next cars just you if spot what see Can and over for evolving age the up. sweet and years? that is five follow talk any a Just Copart's about miles terms direction driven,

Jeff Liaw

Yes.

company's think evolved very fair it the say to steadily since I it's has so inception. and

markedly cars, could there they the and different you you look for if was look website five later at later, five that the in available cars a the somehow had cars years So see were all sale, we and XXXX five later, so years from on. would years if

are it includes today, lot. so that And whole very sweet much it's safe to off has at expanded. you the would So over and that time, see vehicles cars the for dealerships I us spot say drivable think are forth customarily

move that and spot think does over time. sweet I So shift

So It It's expansion. I progressively right? think expands over continued view, expect definitely we'll a not the static time.

Stefanos Crist

so much. Great. Thanks

Operator

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

Craig Kennison

Hi. taking my first. and question Good housekeeping Leah. morning. Thanks questions a had for congratulations I

was the what U.S. Just growth insurance volume ex-Ian?

Jeff Liaw

-- or thereabout thereabout, flat flat Approximately Craig. or

Craig Kennison

think you the XX,XXX you last Ian get but mentioned quarter cars, more I was post cars did time?

Jeff Liaw

In mean? quarter you terms this -- post

Craig Kennison

conference when your said car had call you Post you XX,XXX about last assignments.

Jeff Liaw

A few more. the that it. was majority of strong But

Craig Kennison

many And picture in guys how sort impacting I'm Copart since then big just question on headlines to Perfect. AI curious AI you industries. your think of across a decades? you in you for like world, making see

Jeff Liaw

Yes.

you're and valuation in AI closely and some specifically machine notably so our of carriers the insurance We of some technology to I vehicle vehicles. forth. and ProQuote, about of following all are decisions when tools deploy which if in those chat think we to of But certainly AI today, evolution, referring and collectively most do total for future -- go. viewing the so FAQs make of is neural guide think forth. think as it when And I course, learning you're be and optimal not that will eventually systems the where that helps respects, automated and our total well, think I notion computing the losses, the real-time deployed

say questions today, us some with and for get solution you forth it's our space. specific but informed are up often to follow at with enough the I'd members, not smarter purchased of more lots questions so today, here sellers end Copart. answers You nuanced individual we enough, frequently circumstances, a the most and the ready on that and

tech the students avid Our well. space teams certainly as of are

when will much and business relevant do broadly, so. we certainly if deploy to our So for more

Craig Kennison

Great. Thank you.

Operator

proceed from with comes BNP Chris Our Paribas. Bottiglieri your question next Please question. with

Chris Bottiglieri

Thanks for taking the questions.

you give a the legacy to kind what historical up non maybe little first of kind shared as I channels. of like sounds on actor bad bifurcate bifurcation is right, a Copart us Blu, First and price defined If be your what's of growth. heard XX% commercial follow for a said of your a the you two just would I combination all, the there the now dealer can consignment non-insurance wanted which further? I bit you -- you've being it you assume of sense of might offsetting there's question? some municipalities, that that the like Can the be

Jeff Liaw

business are we institutions what which well includes of Car cars, specifically non-insurance difficult as portion volume. the and Copart about didn't financial meaningful are talk Directionally That's Services, growing and our speaking, our we today. of characterize those a non-insurance Blu like. business. of non-insurance That's rent portion Dealer and a sales, sizable companies also performing the fleets also environment. challenging in They and a banks rental our

is business them in we cash Copart of our auction. our sell business for The Direct, consumers cars at throughout which different buy which and include elements other non-insurance cars

mentioned as her foregone successful business wholesalers Here “principal to vehicles, we business relatively Car, our buying have that in have the Blu in as insurance And lower Dealer how well you like volatile one and charities some serve in volume we us Copart the the we segments. elements of cases in price optimized Copart be the over are portion aggressive about cars those lower mentioned which the some Direct, Services Leah and well, proven companies, is the value value business” environment. and our at to that also thoughtful then of but as for years, comments very of want a had Copart,

Chris Bottiglieri

you. Got

Okay, picture And a then question. just bigger that's helpful.

machinery, peers Just in One how expansion of those business? auctioneer rethink there merge of you about expansion synergistic? curious TAM businesses your an to to closest these of having of at types the with opportunity this think that's markets? heavy Copart for has in place for you think Is TAM Do end you led speaking? are a kind generally your all

Jeff Liaw

catalyst first I facilities to it's then our it, existing of buyers when the our a of question, fair those us and facilities think the our of have ones we national complex I topic we volumes physical And opportunities and we wrestled think we that We physical for with high Chris. third own evaluating but the core them. the development environments. is Yes, consider and it's stock specifically online I are of logistics high both ourselves. greenfield we for think don't a arenas, and take capability and at and to volume we and ours strategy to regulatory the strengths. sellers new volumes excel to recruiting of the think of at managing high into -- of managing -- physical expand auctions acquisition excel We our vehicles navigate infrastructure, from And historically. equipment ability it's characterize

year and effort without have at our equipment, We expand and within number equipped And that as we DMVs otherwise, think there. as tax and U.S. relative many per a of regulatory and specialty Powersports alone we spaces dollars years you frankly, so ourselves in those selectively car millions other of of the the in se Iron And we've NPA capabilities or certainly five as adjacent acquisition expanded know. expanding like business different are arena. with ago question today and and trucks every Iron hundreds address. have We and looked to well. sell our into Blu worldwide layers initiative thereabouts XX here dedicated trailers the to this a as well We've whole into the over can deploy Yellow just Yellow inquired, time, are within and to equipment those a the very into asked taken half we the uniquely we Car done you as where space [ph], conservatively grow business and already of of of

So it's ongoing something that we an basis. revisit on

transaction this in per affect interest the doesn't think our space. us in or positively of I se terms negatively

Chris Bottiglieri

Okay, very helpful. Thanks, Jeff.

Operator

Jordan Please next with proceed Jefferies. question. Our comes from question Bret your with

Bret Jordan

Hi. Good guys. morning,

Jeff Liaw

Bret. Hi,

Bret Jordan

to On that side. could services salvage of a revenue the buyer that add making pitch be sort transaction, another would are quick in offered the that is that discussion space of them see -- that cars on it's the you as want opportunity? you selling company's that? other lever or ancillary Do there certainly an don't things first. they Dealer Is be whether Obviously, you there But you there could doing Services scrap you're if attach LKQ, Blu could are where waxed services?

Jeff Liaw

short, We be In things And relevant those themselves. on to find length our answer earnings like. yes, And today. services marketplace, in I delivery, discussions include and calls. And the of are buyers about is talked think them there like financing, that services those sellers we the offered our expanding more is members sides great at time. that are certainly to that real And -- and to the title with doing and both haven't services additional that yes. the we universe

XX noted, I services leaders they're in ago mix or dismantlers if in universe in damaged the industry vehicles, over the of relevant our that and so time. more I'd becomes terms offer more cars, that went argue you regard years we expand we you direction. interested think the are to As we other in the as back as forth, that that buyers into lighter cars otherwise. have -- Today and are that waxing not largely drivable

else And industry. for a anyone relevant bit so is is loosely our it than more that is for us in who thesis

Bret Jordan

then on Okay. that. quick And a question

most side, sellers an you Services, obviously, supply to consigning? those Blu are is opposed own most you but dependent the that probably as Dealer just are to sellers the most, -- upon agent? which the Cars to Does expecting versus Direct car the as opposed being On impact purchaser

Jeff Liaw

in in they cars not. at residual the which No, The largely Direct, some from principal buy volume UK. are business Copart is consumers modest we

reversed entered or and then cars Today, of think that we some. know on principal that's five business four was think probably I a that I managed in when you thereabouts XXXX, out basis.

volume for Copart, Direct. So we you're about talking when largely at you're are looking Copart principal

Bret Jordan

-- or really still is Germany And not agent mostly is Germany --?

Jeff Liaw

mix insurance a and and selling Germany, also residual on behalf In fair. we does of directly from consignment Germany cars both, on are of that's value buying companies consumers platforms. cars both. we both We're doing are

Bret Jordan

does meaningful the on term, cutting temporary back guess Germany move purchased enough I needle? from it vehicles in So maybe the not away or impact is move the short to or really

Jeff Liaw

car The No, that's U.S. here principal principally principal. principal in car, volume of the moderation the is

Bret Jordan

you. Thank great. Okay,

Jeff Liaw

Bret. Thanks,

Operator

[Operator Instructions].

Our Inc. with next Joseph with question. Stephens your from question Please comes Enderlin proceed

Joseph Enderlin

guys. for This on the Thanks Enderlin taking for question. Joe is Hi, Daniel.

Jeff Liaw

No problem.

Joseph Enderlin

from higher with industry So the loss quarter and historically growth rates to bottlenecks expect to this again do total unit normal rate improving, moving inventory return you here?

Jeff Liaw

From and European of it, of pre-accident to when, variables is the harder here, ACV an and accident, think cars costs and value is worth it's about, talked yes. function in we rental That's call value I therefore as the which what Precisely used and car it's car costs forecast. the the or before happens like. the to repair a what

trend So of think conviction, to The revert levels to have or loss the today with But the total I we historical difficult to think from unabated is continue precise XX-year an months. point to XX from exception forecast. is the frequency that grow XX until past total more trajectory this and there. I XX

will so that I we revert. it think believe And do

Joseph Enderlin

you. That's helpful. Thank

was follow we increase a during or see a quarter. As with Did wanted more to about consistent ASP there we along trends then Manheim, and the trend? ask up, decline ASPs

Jeff Liaw

you the quarter? within Do mean

Joseph Enderlin

Within the quarter, yes.

Jeff Liaw

offhand. I know we even don't know

was meaningful prices numbers I cohort. any at volatility at I have aware Copart of we're that used for I think intra-quarter don't Manheim Index. the headline of know vehicle quite and strong the value the think least there meaningfully outperformed remained

Joseph Enderlin

you, Thank helpful. guys. Super

Jeff Liaw

you. Thank

Operator

comes Our proceed Barrington with Research. your Prestopino Please from Gary with question next question.

Gary Prestopino

get couple Is over were I morning, globally. Units go Hi. up of processed, want X% to just correctly. statistics a everyone. correct? Good that Leah,

Leah Stearns

Total units were up, yes, about X%.

Gary Prestopino

numbers. as all have ASPs, up and Do these year-over-year to get you were that? sequentially? I you said went didn't okay. getting you What on And then ASPs back quite ASPs X%, through what

Leah Stearns

Yes.

down X%. So year-over-year. total were sequentially, And basically were ASPs in they flat about

Gary Prestopino

Okay.

So we're move starting down to X%.

you they were in with And Okay. ratios, Jeff, XX.X% then lastly, loss total said, QX?

Jeff Liaw

Correct.

Gary Prestopino

vehicles, a that Versus right, XX.X, led flood that lot sequential was that to but increase? of

Jeff Liaw

we Yes, there total related. cars the when And is natural are or now half was of companies processed process the I off some noted both sold. is us, that are and thereabouts will I lag a loss when, loans of should between title deemed that course, like and have think that flood then car they paid and by

Gary Prestopino

Okay.

what for have ratios Just purposes, in handy? were losses, that running total the comparative QX of you 'XX? Do

Jeff Liaw

is We but the do. This a all XX.X CCC straight ago. quarter, in fourth here, from year

Gary Prestopino

then is Okay. that with has -- it's How non-insurance XX% time you've of XX%, at of always that been business And the over vehicles. this much moved there percentage grown you're as doing, business? about up kind

Jeff Liaw

to There's some it. seasonality

and grown XX% past years, fair over it's be just I from the to think fair, long to insurance be so over But XX% say quarter-to-quarter. well. And term. to few very -- it as we've memory would our I going grown between has business the

grown. both they've So

think we So the like. Blu We generally Car, mixed terms. don't growing and growing Direct terms Dealer growing Copart of in Copart Services, think in

is So the past that mix of grown course, Both number years. focus particularly five the on. one over not meaningfully, we have

Gary Prestopino

you. Okay. Thank

Jeff Liaw

Gary. Thanks,

Operator

closing turn no Liaw questions time. at further over now for floor to I the are Jeff There comments. back like would to this

Jeff Liaw

us, next joining for Great. to you talk quarter. Thanks Bye. we'll everybody and

Operator

today's This teleconference. concludes

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

Copart (CPRT) 21 Feb 232023 Q2 Earnings call transcript