Copart Inc (CPRT) 2014 Q3 法說會逐字稿

Good day, everyone, and welcome to the Copart Incorporated Q2 FY14 earnings call. Just a reminder: Today's conference is being recorded.

(Operator Instructions)

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

Thank you, Chantel. Good morning, everyone, and again, welcome to the third-quarter conference call for FY14. I'm going to go ahead and turn it over to Will Franklin, our CFO, who will give you an update on the financial performance for the quarter, and then I will go through some brief remarks, and then we will open it up for question-and-answer. Thank you, and Will?

Thank you, Jay.

Before we begin our comments, I'd like to remind everyone on the call that our remarks will contain forward-looking statements, including statements concerning our views of trends in our Business. These statements are neither promises nor guarantees, and are subject to certain risk and uncertainties that could cause the final results to differ substantially from those projected or implied by our statements and comments. The Company expressly disclaims any obligation to update or revise these statements and comments. For a more complete discussion of the risks that could affect our Business, please review the management's discussion and analysis, and the risk factors, contained in our 10-Q, 10-K and other SEC filings.

Also, during the call, we will be referencing both GAAP and non-GAAP financial measures. In particular, non-GAAP revenue, gross margin, net income, and net income per share. These non-GAAP measures include the impact of hurricane Sandy, and an impairment charge that we announced yesterday. Reconciliations of the non-GAAP financial measures can be found in the press release issued yesterday, which is also available on our website.

With that, I'll begin with a few brief comments about the financial results of our third quarter. Total revenue grew by $32.1 million, or 11.6%. In the third quarter of last fiscal year, we had additional extraordinary revenue, as a result of hurricane Sandy, of approximately $12.7 million. Excluding the Sandy impact, total revenue increased $44.8 million, or 16.9%. Purchased car revenue grew by $1 million or approximately 2%.

Service revenue increased by $31.1 million. The increase resulted from growth in our international operations, which included acquisitions in Germany, Spain, United Arab Emirates and Brazil, of approximately $2.1 million; growth in the UK of $9.4 million, which was tied to recent market share gains, and growth in North America of $19.6 million. Excluding the Sandy impact, North America service revenue grew by $32.4 million, or 17.2%.

Total worldwide unit volume increased 11.9%. In North America, total volume increased 11.1%. Excluding the Sandy impact, total North America unit volume grew by 12.2%. In the UK, volume increased by 21%.

In North America, on a same-store sales basis and excluding the impact of hurricane Sandy, volume grew by over 7%, as we are seeing growth in both our market share, as well as growth in the overall market size, as salvage frequency, we believe, is increasing. In the UK, our same-store sales volume growth was 21%, as all growth came from market wins.

In North America, non-insurance car volume grew by over 16%, and represented 18% of our total volume. On a year-over-year basis, our North America inventory grew by 19.2%. Excluding the Sandy impact, it grew by 21.9%.

In North America, on a same-store sales basis, and excluding Sandy, inventory grew by 12.1%. In the UK, our inventory grew by 16%.

Yard operations expenses increased by $17.4 million. The growth was driven by increased volume, and an increase in average cost to process each car. The growth in processing costs were driven by growth in our international activity outside of the UK, as these operations are in their developmental stages, and without the benefit of scale; additional cost associated with the QCSA migration and its inefficiencies, and which included lease termination, severance, and relocation costs of $800,000; and the general increase in our self-haul, employee costs, and pass through costs, like vehicle titling cost.

The growth in employee costs were led primarily by increased medical insurance costs. We expect to continue to rationalize existing QCSA cost as we adopt the most efficient plan for processing its volume. We expect lease termination, relocation and severance cost to continue into our fourth quarter.

General and administrative costs grew by $7.1 million over the same quarter last year. The increase was due primarily to additional costs tied to our international expansion, which totaled $1 million, and which will continue; a $1.6-million increase in cost associated with the QCSA acquisition; approximately $600,000 in relocation and severance cost associated with the relocation of our technology group from California to Texas; increased non-cash equity compensation of approximately $800,000; and increased expenditures on technology, including normal operating cost, maintenance and development. We expect these costs to decline with the recent change in our approach to our international operating system development.

Also during the quarter, there was a significant reduction in the amount of the developmental cost that we capitalized. We ended the quarter with over $132 million in cash. We expended approximately $11.5 million for capital assets, including the buyout of one lease.

During the quarter, we had no open market share repurchases. We have almost 48 million shares remaining in our current repurchase authorization.

With that, I'll turn the call back over to Jay Adair for further comments on our third-quarter performance.

Thanks, Will. Again, good morning, everyone. Will gave you a pretty extensive update on the growth in revenue for the quarter. I'll talk a little bit about inventory -- a little more color on that. And we've tried to explain the growth that's taken place in the last year with hurricane Sandy, as well as some of the costs we have got associated with technology and QCSA.

I'm going to go ahead and start with QCSA, since we have completely integrated that piece of the Company. We will have some changes going forward that will be insignificant; we won't be talking about them. So, it really is -- that piece of the Business is integrated. DVAA is planned for the fourth quarter to be integrated, and there should be some costs that will go into the first quarter of FY15 associated with that. Those two primary businesses are integrated.

Our Crashed Toys division is already integrated, and a new website is out. As we begin FY15, that should be completed and done, and all integrations behind us, from that standpoint.

So, where are we at on stand-alone sites? We've currently got 6 Desert View Auto Auction sites, 149 US sites, 15 UK sites, 5 locations in Canada, 1 location in the UAE, 5 locations in Brazil, 1 location in Germany, and 1 location in Spain; so, we have 183 locations.

We began, three years ago, a process of building new systems as we entered a project we called overdrive, that comes to a close at the end of this fiscal year. The reason we have beginnings and endings to our projects is so that we can rationalize whether or not they make sense. We believe, going into this, that building a new system that would allow the integration of our international operations, as well as our domestic operations, made sense, since they are on separate systems.

After working on SAP, and trying to implement that product, we found that to be very difficult. We found the development costs to be higher than expected, the maintenance costs to be higher than expected, and it's caused our G&A to go up.

Part of the rationalization of any project that we began and that has a close date is to make a decision on whether or not this is the right thing for the Company. We came to the conclusion that it's not the right thing for the Company, and that, at this point, we would be going down a much simpler path. So, we have international systems that we are going to continue to improve, so that we can bring all of the international under one system, because they are under multiple systems.

We have a rock-solid system that runs the US. It's capable of doing everything that our customers want. In fact, it will do a lot of things that they don't ask for.

So, we have a very rock-solid system there, but the concept was that we would have one instance, so that you could go in and take a look at inventory from Brazil to the UK to the US. We have departed from that, and we are going to have multiple instances, but we are going to have one data warehouse that we'll be able to go to, to see information, and get reporting, and that kind of stuff. So, it's a much simpler approach. It's the right approach; and hence, that's the reason for the write-down in the quarter, as we have decided to not go with SAP as an enterprise-wide system, for all of the points that I just mentioned.

I'm happy to answer any questions on it, if there are more questions on it, but it's pretty simple. We went in with our eyes wide open, feeling that this was the right thing to do. And came to the conclusion that, for cost and other challenges, it was the wrong thing to do. So, we are course-correcting at this time.

Inventory, as Will mentioned, from Q3 2013 to Q3 2014 was up 19%. Excluding QCSA and DVAA, it was up 10%; and excluding Sandy, it was up 12%. So, we've seen a nice increase every single quarter for the last four quarters, in inventories. That's translated to increased revenues.

And at this point, I would say that the only things that we're not happy with right now internally are G&A costs. So, we've got increased G&A costs associated with some of what I just talked about with our technology modifications. Some of it being associated with one-time costs moving out of California, integrating DVAA, integrating QCSA, et cetera. And that's all going to be rationalized in the next four quarters.

We are very focused on identifying every single asset that we have in our G&A, and making sure that it provides value, and that we realize the return on that. And if we have got costs that don't belong, or that we don't need, then we are going to go through that process of rationalizing that. I fully expect that G&A costs -- I can't give you predictions right now -- but I fully expect, over the next four quarters, that we'll see those costs coming down as we go through a process of identifying some existing strategy that needs to be changed, or some existing cost that needs to be changed, and then that comes out in the future quarters.

So, that's where our focus is at. We expect to see good growth in revenues; we've got good growth in inventories, and that's a leading indicator of how we're going to do. As Will stated, we have seen frequency up. We continue to believe that that's going to be the case going forward.

We've got a good plan on how we're going to deal with our technology internationally; and we've got great systems, both in the UK and in the US. We will continue to run that from an operational standpoint, and then implement on our strategy internationally, and control costs at the G&A level. That's really the goals that we have got set right now.

So, with that, I'm happy to open it up for questions. Chantel?

(Operator Instructions)

John Lovallo, Merrill Lynch.

First question would be just on the SAP system. In your SEC filings, it's clearly stated as a risk that if you're not able to implement this new system efficiently and effectively, that it could hurt the financial performance. I guess, I understand keeping the same system in place maybe might have less cost. But are there strategic risks involved to not getting that in place?

And then I guess the second part of that would be, is there additional investment that's needed in the current system to bolster the connection with the international operations?

We've got a great domestic system. The purpose in coming up with the new system was to implement our international strategy. And then, our attitude was, well if we're going to do this, we're going to go through the work of building a new system, let's make it robust enough that eventually it can replace the UK and the US systems.

The way I explained it is -- the $29 million write-off is a prime example. You're putting a huge number of resources on something. I don't believe that SAP is the right tool for us on the enterprise system. That was something that we went into, thinking that it was. And it takes time to do these things, to find out and get visibility to realize if they're the right thing or the wrong thing.

We've got great systems domestically. In five years, would I'd like to see those systems integrated worldwide with one instance? Sure, I would, and I think that's something we can do. We can do that in a much more pragmatic approach, module by module, application by application.

The systems that we have today are very functional. It was never about replacing them because they don't get the job done. Look at the growth that we've seen in our revenue growth in the last two years, and those systems are very strong, very stable, capable of servicing our clients. Everything is good there.

That wasn't the intent. The intent was, hey let's take advantage of new technology that's coming out five years ago, iPhones were kind of new -- let's take advantage of new technology where we're doing a lot of the work at the yard with iPhones and iPads and that kind of thing, and let's build in and a business warehouse, database warehouse.

So there's a big, big, big scope that at the end of the day, I'm convinced that's the wrong approach. The right approach is to go module by module, application by application, improve it, release it, do it in an agile scrum approach, so that you've always got releases coming out, and not try to do some massive enterprise system interface. And I'm sure you've heard before some of the challenges with companies taking this approach. And we had our reservations about it when we got into this, but we thought we were going to be able to do it.

And we've been really successful on technology as a company. Sometimes that makes you think you can get stuff done that is maybe a little harder to do. I'm convinced now that the approach that we're on is the right approach. We're going to be cutting back our spend. This quarter has spend in it that would have been capitalized in the past. You heard Will comment on that.

As we were building this new system, we've got certain expenses that were being capitalized. We're now expensing those through. And we're going to be just taking a much more pragmatic and focused approach to getting the international systems integrated, so that they are on one instance, and then eventually bringing that into the US and the UK, so that those systems are replaced over time.

But it's not going to be something we are going to do in a big capital plan project. It's going to be much more improvement quarter to quarter to quarter, month to month to month, and eventually the systems we got get smaller and smaller, until they are replaced.

That's very helpful. If I could just follow with one quick follow-up here. It was my understanding that in this new ERP system, there was the financial reporting component, which was already integrated. What happens with that now? Is there a risk to that part of the system?

No, we are going to keep that component of the system. We'll be keeping the actual financial reporting tools, and replacing the tools that we've got now. That we're not switching from. It's the enterprise system piece that we're not point to go down the path of trying to integrate.

Great. Thanks very much.

Ryan Brinkman, JPMorgan.

This is Samik here on behalf of Ryan. Just want to follow up on John's question here. In terms of the ERP implementation, does this change at all your strategy, sort of delay in terms of strategy, your view on the expansion in the international markets, in terms of expanding sites? Does it push out anything in terms of your strategic expansion plans regarding those markets?

It doesn't really change the strategy in terms of where we want to go, and what we want to do, but it does so it down a bit. We've got another system that we have built that we'll be improving, and doing one location at a time, and integrating them. It's going to delay the integration. It will delay some of the international expansion, but it doesn't change the strategy. We're still going to be going after the same markets that we've identified and continuing that growth strategy.

Okay. On the G&A costs front, I was just wondering what the underlying rate looks like that you had called out, the ongoing QCSA G&A will roughly 1.5? When I look at some clean numbers, it fairly adds up to somewhere close to $30 million as an ongoing basis for G&A costs in a stable state. Is that sort of the way to think about it, or are there any more incremental costs to be added on?

No, we would think, on a run rate basis, we will eventually arrive at a number that is lower than what we have now. It will take a number of quarters to get to that level and to rationalize the costs that are currently embedded in our system, particularly on the technology side. And like Jay said earlier, we can't give guidance on when those costs will leave our system.

Great. If I could just quickly ask on the vehicle sales to revenue change year-over-year, there was a $1 million increase. Can you talk about the big puts and takes? What was a tailwind, what was a headwind? Because the growth looked smaller than usual.

It was, primarily we had a little growth in Europe, but like I said, the change was insignificant, it was $1 million. So we had some growth in Europe, we had a decline in North America as we changed our focus to fewer cars and more profitable cars. So the margin was enhanced, total revenue number was down. Primarily was no significant change.

Okay. Thanks. Thanks for taking my questions.

Robert Majek, CJS Securities.

This is Robert Majek filling in for Bob. You've discussed that in 2013 you had a pickup in RFPs, which brought consolidation to the two largest players, yourself and a competitor. Are there any more ways of RFPs likely? Meaning is there more share to gain from the small players are you beholden to industry volumes for growth domestically?

We're always -- I'd argue that there's always an RFP that's out there. So that was a very unique scenario, where there were two very large players that went through a process, that's not happening right now. But there's always business that we are tendering and trying to bring on board.

That's helpful. Thank you.

Bret Jordan, BB&T Capital Markets.

Just a follow-up on the ERP issue, and just sort of trying to figure out the forward impact on margins. It sounds like you're going to be spending less on an absolute dollar basis, but expensing, as opposed to capitalizing it. Is that how to think about it?

No, that's not entirely correct. You want me to comment or did you want cover it?

I think there will be an impact on the portion of the total spend that will be capitalize. I think in the short-term we are going to capitalize less. I think over the long-term -- I say long-term and I mean six or eight quarters, you'll see an overall reduction in our spend in technology, and a measured approach to the rollout of different applications, as Jay said.

So having a big thing approach to deploying a system that cost tens of millions of dollars, we will pick one application, for example, assignment entry or dispatch, we'll develop that application such that it can accommodate North America requirements. Roll that out internationally, and over the course of time, we'll have a system that addresses our international operations, as well as our domestic operations.

At that point, our current system will be sunset. That can take years. In terms of total spend, it will be at a lower level and a more measured approach.

Less capitalized and less spend.

Thank you. One question around the core business and inventory growth, it's been four quarters of pretty significant expansion. As we saw the quarter progress, did the pace of inventory expansion decelerate out of the winter crash season?

And I guess as we look sequentially, is the processing time coming down? Is the ability to clear this inventory improving as we've gotten into the early part of fourth quarter?

That the answer to both those is yes, marginally. The pace of growth subsided somewhat this quarter, and on a sequential basis, the processing time also reduced. On a year-over-year basis, it was up, nevertheless. When I say year-over-year, I'm talking about the processing time.

When do you think we're back to a normalized processing time?

That's hard to predict. It's going to be several quarters. I think this increase in volume has to be absorb by the insurance industry itself, in terms of their ability to clear these cars. We've done our calculations, and we try to estimate in that 12% same-store inventory growth, we estimate about 4% to 5% is due to processing time, which gets us back to an inventory growth excluding that of 7% to 8%, which is pretty much in line with our same-store sales growth rate. So we're starting to triangulate to a number that appears to be 0.2 of about a 7% growth.

Okay, great. Thank you.

Craig Kennison, Robert W. Baird & Company.

I think you mentioned that your plan is to get G&A down. I just want to clarify that is in dollars or as a percentage in revenue?

In dollars. In absolute terms. Dollars.

That's helpful. Given your ability maybe to slow your investments internationally, and spend less on key -- what is -- does that cause you to rethink at all your capital allocation plan?

We review that every board meeting. We're always thinking about it, and looking at our options, Craig.

Capital allocation considerations permeate our business. It's not just in things that we capitalize, it's in almost every dollar that goes out the door. Anyway, I just want to make that point, as you discuss our allocation if capital.

That's fair. I'm getting lots of questions on whether you're going to buy back stock and trying to find a way to ask that question.

Without actually asking it? (Laughter)

Exactly. How about an update on the CFO search?

We're progressing. We have unique needs, and we're looking for just the right person that fits, not only in terms of experience, but in terms of personality and culture. Copart has the unique culture, and for someone to thrive here, they have to be part of that. So all I can say is that we're proceeding full speed ahead.

Great. Thank you.

Gary Prestopino, Barrington Research.

Most questions have been answered, but I just want to clarify expenses related to the California shift of employees to Texas, that's basically over, right, Jay?

We can have some in our next quarter, but primarily it's over. Yes, I'd say, materially you are correct.

We got -- the only expenses that are really left, Gary, are some of the moving package expense, and stuff like that has a longer tail on it. Everybody has moved.

Right.

You have got some hiring that we got to do, there's some costs associated with bringing new people in, headhunting fees, that type of thing, you've got some lagging costs associated with moving. We're almost there.

So 2015 -- I'm looking forward to it being our most normalized year, barring another hurricane Sandy, which we don't want. Assuming that we just have weather and hailstorms, and the things that are normal that happen across the country -- I don't foresee anything that's going to be out there and this allows us to get G&A normalized.

Right, and that also goes for with QCSA, right? By the beginning of FY15, you'll be where you need to be, in terms of the integration?

That's right.

It's a clean slate. So really assist issue revolving around technology spend, IT spend?

That's right.

Work on? And let me just ask, because I have a simple mind here. Why would it take you four quarters to get that rationalized to where you want it to be? If you're stopping developing on this ERP system that you thought you were going to get in place, why would it take so long for that to get rationalized as we go into FY15?

I don't think it'll take all four quarters, but it will be something that we're working on now, and you'll see the effects of that in Q4, Q1, Q2. But it should happen very quickly. But I don't like to say two quarters, and it's three.

So by saying FY15, that gives us a nice area to work on and get that all taken care. And some of the stuff that we're doing, we'll take six months to implement. There's some changes that we will be making that don't happen right away. But nothing there we can see today as more than a year to implement, and that was the reason behind it.

All right. So again, I don't want to get too much into modeling questions here, but I think a lot of people are focusing on what's going to happen when all is completed, in terms of expenses related to all of the initiatives that you have. We should expect that as a percentage of sales, the expenses, G&A expenses, will on a year-over-year basis, will be trending down. Is that a proper assumption?

Yes.

Yes it is.

Okay. Thank you.

Bill Armstrong, CL King & Associates.

So to clarify, the internally developed system that you're going to use instead of SAP, sounds like some of that's already in place, and you just need to roll it out internationally? But then there are other modules that still have yet to be developed? Is that accurate?

Yes.

Quite frankly yes, and in fact, that allowed us to make the decision. We knew that SAP was at least a year, and perhaps two years away, and we needed to develop something in the interim to allow us to open up some of these international markets. So we embarked on developing that. What we saw as an interim solution we liked so much, we thought that we could build upon that. And that gave us the leeway to make the decision that we made.

It really boils down to the system that we use today, we built ourselves. The system that we're going to use internationally, we have built ourselves, and when you try to modify a system like SAP, it becomes a time and cost issue. We just weren't willing to stay married to that decision.

Okay. I see. And to change topics, could you talk about automotive or vehicle pricing trends at the auctions right now? Are we going up, down, holding steady?

Pricing in the third quarter is what we would expect pricing to be in the third quarter. It tends to peak in the second or third quarter, and then it comes off, as you enter in the summer, and that's what we've seen. We've had -- we've had -- I'd say no question a peak in the second quarter, and it's been relative to that number. One month it will be up a little, one month down a little bit. The returns look strong. We talked to our customers, and right now, returns look good, and they're very happy with what we're seeing in percentage of ACV and in whole dollar ASP.

Okay. It sounds like we're seeing a normal seasonal pattern. What about on the year-over-year basis? Are we higher or lower?

A year ago we were selling hurricane Sandy cars, and they sold for more money. You really can't compare that. Those were cars that didn't have collision damage, and so those are vehicles that are going to bring more money at auction. You just can't compare year-over-year with Sandy involved.

Got it. Okay. Thank you.

John Lawrence, Stephens.

Just real quick, Will, might have provided a little of this in your detail, but can you separate for me just a little bit, sort of gross margin, if you will, from the North America business from the investment overseas, and how that's impacting that operating margin domestically versus foreign?

Sure. I can talk about it directionally. I can tell you that North America gross margins are almost as strong as they've ever been. We're very happy with that.

If you look at UK margins -- so their EBITDA contribution on a per car basis is what we look at, is almost what it is in the United States, but the margins are much lower. Their margins are about 45% lower than that in the United States, simply because the composition of their revenue. They have much more purchase car revenue.

As we grow UK revenue as percentage of our total revenue, as we grow international revenue at a percentage of our total revenue, it has a suppressive impact on our gross margins. It's hard to really analyze our business at the gross margin level because of that, because it's tied so closely to a percentage of our total revenue that comes from purchase activity. So we internally look at EBITDA per car as a metric that we should be focusing on.

So overall, as you look at the overall model, nothing changes in the base model to get back to where we were, say in 2012, with that overall operating margin of closer to 31%, 32%?

I can't predict it on an overall basis. I can speak to each segment individually, because they're all so unique in their characteristics. Like I said, North America has had a very strong gross margin quarter.

Right. Last question not to beat a dead horse on the system, but can you quantify at all, remove all the starting and stopping -- can you give us a pro forma when you looked at, to make this decision, on an annual variable cost, from what you're doing to what the SAP was going to cost -- can you give us a delta of what those dollars are?

No. I'm sorry. It would be based on some assumptions I do in my head right now, and I just don't want to give that number.

Great. Thanks, good luck.

(Operator Instructions)

John Healy, Northcoast Research.

Jay, I wanted to ask about one of the positive comments you made about the salvage frequency moving higher, as a percentage of accidents. Let me get more color on where you think that metric is, what the conversations with your insurance customers have been like recently, and where they think that metric can go, and maybe some of the cross currents that drive that higher or drive that lower over the next couple years?

I think the biggest thing right now is vehicle age. You've got an aging population of vehicles, and that's obviously going to cause more of those vehicles to become a total loss. We're just seeing a lot of weather. It's been a year of significant weather events. We were dealing with a call yesterday on some activity that we've got in the Northeast again.

I intend that the trend will continue. Mainly because of the age of the mix again, because vehicles are getting older. Cost to repair continually goes up, value of the vehicles continues to go down as they get older, just means more vehicles are going to be totaled, it's basic math.

Great. And I wanted to ask, you made a comment about a competitive win in the UK. Is there much going on and changing over there, and I was just hoping to get a little more color on how the competitive landscape feels in the UK, and maybe how you're winning some share there?

We built -- it's a very competitive market, and I would say, a market that changes quicker than the US. It's obviously a smaller market. The number of players is a much smaller number of players. The players tend to be larger accounts, meaning that they -- the top 10 players in the UK control a larger share of the market than the top 10 players in the US. It's a market where it's very quick to change, very progressive in terms of wanting the latest and the greatest products and services that are out there, and very competitive.

We've got -- now I'm going to be getting on a soapbox if I tell you the great things about us, so I obviously think we got the best product, and the best network of facilities, and the lowest pickup times and the highest returns. So we as a team spend a considerable amount of time demonstrating our results, both from a quantitative standpoint being objective and showing the numbers, and then also, more interacting with other customers, and having them make testimonies on why they like doing business with Copart. Very aggressive.

We had a great win. The team in the UK made that happen. They are just on it, they do a wonderful job for the company and for our customers out there. I'd love to see that happen again last year, but who knows? That's something we'll be shooting for.

Okay. Thank you.

Bret Jordan, BB&T Capital Markets.

This is a follow-up to earlier in your prepared remarks, you said that the international business, given their lack of scale to date has been a drag. What's the difference, I guess, if we look at the delta between per unit EBITDA in established markets?

I'm glad you brought up that comment. Let me clarify it. It's international excluding the UK. So the UK, like Jay said, they've got a model that's very similar to ours in terms of contribution. But the other countries, Brazil, GCC, Spain, Germany, they're just not there yet. They don't have -- there's so much value to scale that's it's hard to modify.

When you less than 30% of the market you can't do the things that you can when you exceed that number. In the US and the UK have done so, and you can see the results. The others are in the process of growing their market share. But until they do so, the contributions just aren't close to what they are otherwise.

I'll just add to that a little bit. We have the teams built in the international markets, excluding the UK, that we have in the US and the UK. So we have all the support from the analytic standpoint, we have all the support from a technology IT standpoint, the marketing teams, and you can go on and on and on, and yet you don't have the vehicle flow going through yet, you don't have the vehicles to offset the costs, but you've got -- so it's much more front-end loaded with costs, and as the vehicles come in, those will create a market that's more like the US and the UK.

I guess to get a sense of what the delta might be, are they half as productive? So the incremental unit takes up margin pretty quickly, because you're leveraging the fixed overhead. What's the starting point? How much less productive is international now?

I'll just tell you it's much less than half.

Okay. Thank you.

All right. Chantel?

Thank you. Speakers, at this time, we have no further questions.

Okay, thank you. I appreciate everybody coming on the call. Thanks for the questions, and it was a pleasure for us to be able to give you some flavor on how the quarter came and how it looks, and we look forward to reporting in Q4. Thank you.

Thank you for your participation. This does conclude today's conference. Have a great rest of your day, and you may disconnect.