Copart Inc (CPRT) 2020 Q1 法說會逐字稿

Excuse me, everyone. We now have all of our speakers in conference. (Operator Instructions)

I would now like to turn the conference over to President and CFO, Jeff Liaw. Please go ahead, sir.

Thank you, Dan, and welcome to Copart's Fiscal 2020 First Quarter Earnings Call. I'll ask Darren Hart, our VP of Finance, to start with the safe harbor.

Thanks, Jeff. During today's call, we'll discuss certain non-GAAP measures, including non-GAAP net income per diluted common share, which includes adjustments to reverse the effect of certain discrete income tax items, foreign currency related gains, certain income tax benefits and payroll taxes related to accounting for stock option exercises and the effect on common equivalent shares from ASU 2016-09.

We provide a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures on our website under the Investor Relations link and in our press release issued yesterday. We believe the presentation of these non-GAAP measures, together with the corresponding GAAP measures, is relevant in assessing Copart's business trends and financial performance. We analyze our results on both a GAAP and non-GAAP basis described above.

In addition, this call contains forward-looking statements within the meaning of federal securities laws, which are subject to substantial risks and uncertainties that could cause actual results to differ materially from those projected or implied by our statements and comments. We do not undertake to update any forward-looking statements and may -- that may be made from time to time on our behalf. For a more complete discussion of the risks that could affect our business, please review the management's discussion and analysis portions of our related periodic reports filed with the SEC.

Thanks, Darren. We are certainly pleased with our results for the quarter. Darren, in a moment, will walk through details of those results with the metrics that we traditionally disclose. Wanted to pause for a few minutes also to talk about some of the bigger themes in our business as those themes, I think, will help explain and draw out the results of the past quarter, the past year and frankly shed light also on our strategic approach to the business.

First, we wanted to talk about the evolution of the total loss universe. I think historically, we've been good and the industry has been good about talking about repair costs and why rising repair costs due to vehicle complexity and age and labor rates and the like, we're driving increased total loss frequency. Needless to say, those trends continue unabated and are accelerating due to rising complexity and the proliferation of accident detection and avoidance system. It's well understood among customers, investors and other stakeholders that repairing cars has become progressively less attractive economically for many, many years. I think where we've been less effective is in communicating the other side of the salvage equation, and to be precise, I mean the values that we can generate for these cars at auction. The total loss industry has changed very dramatically over Copart's 37 years and even fairly significantly over the past 5.

In our early days, of course, salvaged vehicles will literally worth their weight in metals. You see even vestiges of this in earnings calls as recently as a year ago, when we were disclosing scrap prices and how they changed year-over-year. I've been the CFO of Copart for 4 years. Outside of this earnings call, we have literally never once talked about scrap prices. Why? Because the cars that we sell increasingly instead became valuable for their parts composition. As the dismantling industry evolves and the OEMs leverage their aftermarket parts businesses for profit through higher prices, the dismantling industry helps to drive salvage values upwards. Since then, however, there's been a still more significant shift in our industry, which is that today these cars are not worth their weight in metals, not worth per se their value as parts, but instead, their value as drivable rebuildable vehicles, which has forever altered the salvage equation for ourselves and for our insurance company partners.

The punchline then there is that the -- that rising total loss frequency isn't just a function of repairing cars becoming more expensive, it's that totaling them and selling them has become more attractive over time as well. We have a number of initiatives underway with our insurance carrier partners for whom this reality is becoming more and more apparent. We intend to help them further optimize their claims processes, yielding more totals than earlier ones as well. But how? How have we been able to drive those volume increases with price increases at the same time? It's in part by becoming a still more global business, our physical reach, our brand reputation and of course the auction platform liquidity we offer has expanded the buyer universe for our cars and lifted the prices we can achieve at auction.

You can see it firsthand that our unit growth rates have certainly eclipsed that of the industry in general and certainly that of the dismantling industry as well, while our prices at auction have actually increased. And that's because the fastest-growing economies in the world, in Eastern Europe, in Africa and Central and South America are also the lowest automotive penetration markets in the world. So while we have grown our supply very substantially over the past few years, we've grown our demand much more still through our proactive marketing efforts. And that's the second thing I wanted to briefly tackle, and that's Copart's auction liquidity being the flywheel that generates differentiated value for ourselves and for our customers.

I'm sure we'll get questions in Q&A about certain market share wins in insurance. You already know that we don't comment on specific accounts on an individual basis, but I think we emphasize that, over time, we have grown market share very steadily over the years. We just haven't talked about them on an individual account basis. Why? Ultimately because auction results are the most important. We generate better values at auction than the rest of the industry, and service levels as well, which we believe we deliver better than others.

Our growth -- the growth of our auction liquidity has further been enhanced by organic industry growth, of course, the same total loss frequency phenomena we described a moment ago. And then growth in our noninsurance business, which is fueled by but also helps contribute to our insurance business. Every car we earn the right to sell from an automotive dealer also increases the value proposition of our auction and ultimately raises the prices we can achieve on our insurance cars as well. We've made the investments in land and technology, process and people for decades. They've enabled us to grow this platform, making it more valuable with each passing year to our customers and to us and so the virtuous cycle of auction liquidity continues.

The last theme I wanted to tackle is our international expansion efforts, which you already know has been an important driver of our past, but likewise will be an important driver of our future growth as well. We described in great detail during our fourth quarter 2018 earnings call our expansion efforts in Germany. Our strategy there remains consistent: Build the physical infrastructure necessary to effectively serve a nationwide footprint, build logistics capabilities to enable rapid vehicle pickups, use purchased cars to seed our German auctions, leverage the Copart buyer -- global buyer network and bring our value proposition to overhaul the claims process for the German insurance industry.

As you know already, from Germany, our intentions are to expand elsewhere in Western Europe as well. Our year-over-year and sequential trends in Germany are encouraged with substantial growth in unit volumes, revenue and trading profits, providing very clear indications that our consignment model will be an economically superior proposition for the insurance carriers and the German market in general.

With that, why don't we dive into the specifics of the quarter, and I'll turn it back over to our Vice President, Darren Hart.

Thanks, Jeff. We delivered another strong quarter, with record first quarter revenues, gross profits and operating profits. Global revenues grew by 20.2% or $93.1 million despite $3.9 million in foreign currency headwinds, primarily due to relative strength of the U.S. dollar against the British pound. Global service revenue grew by 23.6%, while purchased vehicle sales were flat as we converted a substantial U.K. customer from a purchase-based sales contract to a fee-based sales contract.

First quarter global unit sales volumes increased by 12.4% and vehicle inventories grew by 14.1% versus Q1 of last year. U.S. revenues grew by 25%, fueled by higher average selling prices and a 13.2% volume increase, driven by organic growth from our existing insurance and noninsurance customers and market share gains.

Our noninsurance business represents approximately 24% of total U.S. sales volumes and includes franchises, independent dealers, finance and leasing companies, fleets, charities, equipment dealers and wholesalers. Excluding charities, our noninsurance unit sales volume increased by 13%. We attribute the growth across noninsurance to our increased marketing sales and operational focus and our auction liquidity.

First quarter U.S. average selling prices grew 4.2% year-over-year. ASPs continue improving as a result of more bidders; more international bidders, and therefore auction liquidity; as well as an increasing mix of newer, less damaged cars. International bidding and buying activity reflects our proactive marketing efforts as well as the effectiveness of our all-digital auction platform, VB3. Year-over-year, we increased unique international bidders and unique domestic bidders by over 20%. The outcome is higher bids per unit and therefore better selling prices for our customers.

Our selling prices continue to significantly outpace various used car indices, such as the Manheim used car price index, which was roughly flat this quarter versus last year. Increasing ASPs then cycle back to our unit growth drivers. U.S. vehicle inventories grew by 15% due to these continued strong industry tailwinds, as well as market share gains. International revenues were flat due to the aforementioned customer contract shift from purchase- to fee-based revenue and unfavorable foreign currencies.

International service revenues grew by 11.4%, while international volumes grew 8.4% and international vehicle inventories grew 8.1%. Globally, purchased vehicle sales were flat as U.S. and Germany purchased vehicle growth was offset by U.K. customer contract shift. Globally, gross profit grew from $195.9 million to $254.9 million or 30.1%, and gross margin percentage grew from 42.5% to 46%, an expansion of 350 basis points. U.S. gross margins grew from 45.2% to 49.2%, driven by rising ASPs and operational efficiencies. International gross margins declined from 31.4% to 29.5%, in part due to the increasing mix of our German business. In the U.S. and globally, we do note rising labor, health insurance and towing costs. However, these rising costs have been offset in part by rising ASPs and operational efficiencies.

General and administrative expenses, excluding stock compensation and depreciation, increased from $34.8 million a year ago to $38.8 million, primarily driven by a $3.7 million pretax charge related to the employer portion of payroll taxes on certain executive stock compensation. This onetime charge has been reflected as such on an after-tax basis and the non-GAAP earnings included in our earnings release. Beyond this item, international G&A growth in support of the expansion of our European businesses was offset by lower U.S. G&A due to decreased legal costs and higher capitalized software development. While our G&A may fluctuate modestly in any given quarter, we continue to generally expect G&A expenses will grow but provide operating leverage over time.

Operating income grew from $151.4 million to $205.4 million or 35.6%, which represents a 420 basis point operating margin expansion, inclusive of an unfavorable $800,000 year-over-year foreign currency impact. Net interest expense was up year-over-year from $3.7 million to $4 million, primarily due to reduced offsetting interest income, given our lower average cash balances.

The Q1 income tax benefit of $16.1 million reflects a $62.4 million tax benefit on the exercise of employee stock options and a $3 million tax benefit from other discrete income tax items. The onetime benefit from the exercise of employee stock options, as well as the discrete income tax benefits have been included and reflected as such in the non-GAAP earnings included in our earnings release.

GAAP net income increased from $114.1 million to $218.2 million or 91.2% year-over-year. Non-GAAP net income increased 36.9% from $113.3 million to $155.4 million. GAAP diluted earnings per share grew from $0.47 to $0.91 and non-GAAP diluted earnings per share grew from $0.47 to $0.65 or 38.3%.

Now turning to the balance sheet and cash flows. We adopted the new lease standard ASC 842 this quarter and now show a $136.4 million operating lease right-of-use assets and $140.3 million of operating lease liabilities on the balance sheet. We finished the quarter with $181.1 million in cash and $219.5 million in net debt. Operating cash flows for the quarter were $212.5 million, an increase of $105 million, driven by higher earnings, due in part to the large income tax benefit.

We invested $131.5 million in CapEx during the quarter, with over 85% attributable to capacity expansion. Given the sustained industry-wide volume fueled growth by higher -- due to higher total loss frequency, we remain focused on purchasing and developing land to meet current and prospective demand. We currently have 39 new yard and expansion projects in the engineering phase and 33 projects in the development phase. During the quarter, we also collected $12.6 million in proceeds from stock option exercises and paid $101.4 million for employee stock-based withholdings.

We thank you for your continued interest in Copart. Dan, if you'd open it up to questions, that would be appreciated.

(Operator Instructions) Our first question in the queue comes from Bob Labick with CJS Securities.

Congratulations on another nice quarter. I wanted to start -- you've talked a lot about your strong international buyer base. You brought it up today obviously, and how it benefits your insurance customers, I guess -- actually, like all your customers that are selling. Can you give us a little more color on the types of cars the international buyers are most focused on? Is it the same as the general pattern in the U.S.? Or are they more focused on insurance or non, newer or older cars, just a little color into what they're buying?

Bob, thanks for the question, and a good one. I think in general, they are -- demand is similar, with the one nuance being that they will -- their interest is typically on higher-value vehicles, which makes logical sense because a car which is a very old [backdates], which is largely just metal value, you would never bother to ship overseas. So they tend to focus on rebuildable, drivable vehicles in particular, and those -- so they overlap very heavily. I would say that we talked about how international bidders are purchasing approximately half the value of our U.S. auctions, plus or minus. They did, of course, on many, many more cars still than that, right? So the point being that it is similar in the aggregate with the nudged higher-value cars.

Got it. Okay. Great. That's helpful. And then just related to that, roughly half the value of cars purchased, I know you don't target numbers like that at all, but -- so where do you think the percentage goes, given the trends in the industry right now over the next 3 to 5 years? Again, I know you're just focusing on servicing your customers and things and you're not targeting any number, but where do you think it might go?

Don't have an insight in mind, Bob. I think that it has grown steadily over time. There are a number of important secular tailwinds there that -- we mentioned a few moments ago about economic growth in those markets, low automotive penetration. I think we take for granted here in the U.S. that mobility is essential for our economic well-being for education, for health care and the like, and those economies likewise have demand for that same mobility. So over time, I think there will be still more demand for U.S. vehicles, wrecked cars that can become drivable cars there, but we don't have an end state in mind per se, Bob.

Got it. Okay. And then looking at dealer cars, there's obviously been a lot of growth from franchise and dealer sales on Copart over the past couple of years. Can you talk a little bit about the typical car they're consigning to you and who the buyers are? Is that international? Or is that other dealers? Or just a little more info on dealer cars.

Both. I think the dealer-sourced cars, I think you know, have been an area of emphasis for us for years with meaningful growth really over a number of quarters now year-over-year. And that's because our value proposition -- again, it's the same one as it is for the insurance carriers. It has delivered auction values which matter the most to them, and that is a function of the phenomenon we talked about a moment ago. That is liquidity, that is marketing efforts, that is international buyers and domestic alike. So it is, again, a fairly representative sample of buyers on the other side of that equation.

Our next question in the queue comes from Craig Kennison with Baird.

I wanted to start with the U.K. conversion. With that conversion to a consignment model, should we anticipate 3 more quarters of pressure on vehicle sales from that customer?

In a word, the word pressure, I probably hesitate. The math, yes, will persist for a few quarters, if that's what you mean. I think for us, it's not pressure per se because I think we think about cars, our economics on a unit economics basis [occur] unit basis more so than we do the actual gross revenue number. So it's not that meaningful to us managerially. But in terms of the math you described, yes.

Got it. And then I have another math question where we don't get to use numbers. But clearly, you earned significant business from an insurer that previously committed nearly all of its volume to a competitor. First, why do you think Copart won that business? And second, this was described as a 30% volume customer that's going to happen, most of which by the end of this year. Does all of that math jibe with how you understand the relationship?

Craig, you'll find this unsatisfying, but we've been very consistent about not commenting on individual customers. More generically, we have earned very significant market share for years and for decades, often organically. And the reasons in general, so not commenting on the specific accounts, are that we deliver superior auction results, that is first and foremost. Certainly depending on where we are in the historical cycle, there are other considerations like catastrophic events and the like can also factor the decisions, but ultimately it's about the economic value we deliver to our customers [in the long].

Number two, related but somewhat (inaudible), is service levels. And that, in turn, is a function of our yard network, our people, our technology, our process, how well do we service an account day-to-day, week-to-week, year-to-year. And then, of course, as I noted a moment ago, we service them in times of crisis as well. That's how every insurance carrier considers their salvage partner decision. And depending on who the partner is and when you -- where we are in history, they'll prioritize differently. But those are the criteria that anyone would make that decision on.

And then my last question is just around innovation and what you might be doing to innovate your services or your auction platform? There's been talk lately among your competitors about improving cycle times through a platform that would connect banks and insurers or better video and camera views such that you have a better look of the interior or exterior of the car if you're bidding from all the way across the ocean.

Yes, good question. And I think perhaps we've been remiss in not describing them robustly enough on our earnings calls. But in general, we take those services -- those types of services very seriously. So I'll comment just on one, for example, the loan payoff question, I think you just raised. And for those who aren't already in the know, one complication in the resolution of a total loss claim can be that a policyholder has an outstanding loan on his or her car. So before the salvage claim can be resolved altogether, the loan payoff balance, the per diem owed on that loan needs to be obtained by the carrier and the policyholder so that the lender can first be paid off.

As I understand it, others in the industry are in alpha or beta testing for a [broad] product they intend to launch at some point. We launched ours in May of 2019. So a whole 6 months ago, we had an automated loan payoff offering already delivered to our customers. We didn't talk about it on our earnings calls, per se, but we recognized that as an important consideration for an insurance carrier and wanting to resolve those claims. We love the claims process. We are meticulous students of it. So we've appreciated for a while now that this is a sticking point and a bottleneck, and we developed and delivered the service accordingly 6 months ago.

Yes. I'm sorry to follow-up. But is there any way you can describe the cycle time improvement from that loan payoff tool?

Hard to do, Craig, because it's very hard to isolate variables. As you might imagine, that is on a portion of the cars that have loans outstanding and a portion still for which those financial institutions are connected to the various intermediaries that we have partnered with. So it is not always quite so black and white, but it's certainly a tangible improvement that both we and our insurance partners appreciate.

And our next question in the queue comes from John Healy with Northcoast Research.

I wanted to ask a question about the market share gains, Jeff. You alluded to that -- the economics and the dollar returns in the business that you get the insurers that was, I think, that your lead off point into why the company has been successful over the years in terms of gaining share. Is there any way you could kind of peel back the onion a little bit on that topic for us a little bit, potentially over the last few years, how that dollar return number to the insurer maybe has changed? If you think the gap has widened? And then also, what do you contribute the gap to? Is it just purely the build-out of the international buyer base and just scale? Like I'd just love to know a little bit more on that topic.

Sure. So the delivered values at auction, you've heard us describe at length on this call, the international buyers and how important they are. And I think that sometimes may be underappreciated, that -- how relevant they are, both for the units that are ultimately acquired by international buyers but also on all the other units they bid on, right? They just help provide value disclosure, full and fair value realization across virtually all the units that Copart offers.

Beyond that, there are a number of other considerations, too. VB3. If you haven't already, you should "attend" an online option to Copart and do so for others in the industry and render your own judgments. But we have what we think is the best-in-class technology for sellers and buyers alike, which yields -- which has, for us anyway, yielded increasing bidders. So bidders and bids well in excess even of our unit growth, right? Meaning bids per unit, domestic bids per unit, international bids per unit have very consistently increased for a long time. So it's mostly about the auction liquidity phenomenon we just described, John.

Great. And then just wanted to ask about the land investment in the quarter. It kind of jumped up a little bit. And I was curious to know if you could help us think about what we should be thinking about in terms of normalized land spend over the next couple of years? And should we look at Q1 as kind of an anomaly or a sign of things to come here?

I think it's -- capital expenditures in particular, I think are hard to extrapolate from a given quarter, but we're talking about parcels of land and in some cases costs, multiple tens of millions of dollars. So reading into one quarter's numbers, I think, is [faulty]. I would say that if you consider the past 4 years to be "elevated capital expenditure levels for Copart," that those investments will continue for years to come, both as necessary for the business that we have today as well as the growth we anticipate.

Our next question comes from Bret Jordan with Jefferies.

Jeff, if you could put it in perspective, maybe give us a feeling for what the yield spread does look like versus the average competitor? Obviously, you've done a good job building out the buyer base and the frequency of their bidding. But could you sort of quantify how much the yield does benefit your auction?

Tough to quantify, Bret. We know -- we believe it's significant. We believe that the industry has generally voted with its feet, but literally an individual car, of course, would not be sold on both auctions. You would never have an all else equal auction comparison like-for-like. But we believe that simply the international composition of our bids, the increasing number of bids per unit over time, is pretty compelling evidence. That's true.

Do you think it's single-digit percentage points or double-digit percentage points? I mean sort of ballpark?

Bret, I don't know. I would -- I can't. We literally don't have the data to do that. But literally, no cars ever sold on both -- on multiple auctions. So it's -- you can't [point] above it.

Okay. All right. And then a question, I guess you talked about mix and maybe 50% of the volume is now being rebuilt. Could you compare that to where we were 5 years ago? You sound like we've had a big change recently, but what percent was scrap? What percent was dismantled? And what percent was built 5 years ago versus today?

We won't be able to give you point-to-point comparisons, in part because we don't have perfect visibility either, right? So a buyer who buys 400 units from us may have different intentions for different of those units. We can surmise that if they're based in the Ukraine, that they intend to drive them again versus if it's a buyer who is 6 miles away and also owns a scrapyard, we can guess -- we can render a different judgment. But those would be estimates in the aggregate. I think, directionally, very clearly, all have been -- it's been a very significant shift from scrap and dismantling in favor of rebuildable, drivable cars.

You can see that in part also in the -- in literally, the physical appearances of the cars we've been selling. If you attended the Copart auction in the 1980s and saw what was "a 50% damaged car," you would see one that is obliterated, that very clearly will never be returned to the road. If you looked at a car today with 50% damage, it looks like a car, right? It probably has technology (inaudible) if you even were willing to temporarily forego, you could drive the car right away. So the very nature of the car has changed as well.

Okay. And I guess, do you have any new thoughts as far as the upper boundary of total loss rates? If we're in the high teens now, what that number could go to?

No. No. No new thoughts. And perhaps, I'll rehash old ones then. And that is to say the total loss frequency, I think, folks who see 20% or whatever it is today wonder could it someday be capped at 25%. And I think if you take then the 40-year view and look back to 1980, you'll see the total loss frequency then is 4%. So if it went from 4% to 20%, I don't see the logic in believing that it will ultimately top out at 25% instead. If we're having this conversation at any point over the past 40 years, I think we would have foreseen ceilings that are quite a bit less than reality ended up being. So our view is that, so long as there is a natural outlet for these cars in the form of international buyers, in particular in higher growth economies who need cars, then that -- there's no particular -- there's no ceiling. There's no gate on -- where total loss frequency can go.

Our next question in the queue comes from Chris Bottiglieri with Wolfe Research.

The first one is on the -- the first one's on the ASP growth. I mean, pretty demonstrable growth there last year. I mean, 4% is still really impressive. But want to get your sense if you're lapping anything? Or kind of how do you think about the decelerate here on ASP growth?

I think there's enough noise in any given quarter that I think it's all -- you hear me talk about this in -- with respect to many variables in our business, this one included. I'd look over a longer period of time that, that selling price improvement is a good, solid quarter for us, and it's been consistent now that we've been up consecutively for 12 quarters or so. As you know, there are secular and cyclical forces here. The secular ones being the total loss frequencies that, as we total more cars, those are generally better ones. Second, the drivers being (inaudible) to improve more of them, they would drive ASPs upward as well. There are cyclical forces here as well, including currency and things of that sort that can cause fluctuations in both directions. So I think we are happy to continue delivering better values for our customers.

Got you. And then kind of re-ask a question [differently] that was asked earlier. But when I look at your CapEx on an LTM basis, about $440 million. It's roughly double what it was a few years ago, yet the yard ops and depreciation have kind of barely bunched recently. So I guess, this would imply that you probably have more land in the development phase right now. And I'll track the number. I can go back and see if you disclosed that. But I just want to get a sense for what's behind this sudden urgency of land expansion? Is there any way to kind of thematically bifurcate where you're kind of adding capacity? Or is it internationally, domestically? Is it yard expansion, existing yards? Are you trying to -- is the [biggest customer win]? So anything you can do to provide clarity on the capacity additions there would be helpful.

The strong majority of these expenditures are for our "traditional markets," so ones in which we've been doing business in for a long time, and they are a reflection of demand, demand today, meaning if you had perfect visibility into every Copart yard, you'd be able to see that plenty of them could use more space now. Therefore, a good portion of this CapEx is for expansions. Whenever we can expand into contiguous space, we of course would love to for the operating efficiencies that, that affords us and when necessary we'll expand it. We will instead build new facilities elsewhere. So you're right to guess that we have many facilities in development. What's driving that is simply demand today and demand growth in the future.

(Operator Instructions) Our last question in the queue comes from Derek Glynn with Consumer Edge Research.

Just a follow-up on yard ops. You've gained some leverage on that line item over time, probably helped in part by higher pricing. But I'm wondering if you see any areas of inefficiencies there that you guys can tackle or any initiatives for that cost item, in particular, to drive further margin improvement?

It's a fair question, and the answer is somehow both yes and no. So this is an area of relentless focus for us, is how we optimize the efficiency of our yard operations. And therefore, we are -- we deployed initiatives all the time, including, for example, a self-help driver app last year, which reduces wasteful unnecessary trips that our drivers make to our yards. So that times hundreds, we have a number of initiatives underway. I don't know that any of them would yield a step function change. In some cases, they help to offset natural inflation we see in our business from fuel and health care and the other factors I'm sure you know quite well. So yes, it is an area of ongoing emphasis for us, and it has been (inaudible)

Got it. And then just secondly, it's been a couple of years since you announced the acquisition of NPA. Just wanted to get an update there. Can you give us a sense of how the powersports business is progressing? What its contribution or growth has looked like? And broadly, if it's met your expectations?

Got it. NPA has been a great acquisition for us. We're thrilled that they are part of the Copart family to date. I think you may remember from the time we did the deal that our logic was twofold. We needed to like the transaction on a stand-alone basis, and we needed also to believe that it would add -- it would contribute strategic value to Copart and our insurance and noninsurance business as well. I think it's delivered on both fronts. The business has grown organically on its own, meaning the powersports business. The auction that we run through NPA have grown on their own and likewise has contributed to our expertise when it comes to the powersports space, which you may remember we noted is a nuanced and different market in many respects as well. So now having that expertise in-house has contributed to our capabilities in our traditional business as well. So yes on both accounts.

And speakers, there are no more questions in the queue.

Great. Thank you for joining us for the call. We look forward to talking to you next quarter.

Thank you, everyone.

Thank you, ladies and gentlemen. This concludes today's presentation.

You may now disconnect.