Copart, Inc. (CPRT) Q4 FY2025 Earnings Call Transcript & Summary

Good day, everyone, and welcome to the Copart, Inc. Fourth Quarter Fiscal 2025 Earnings Call. Just a reminder, today's conference is being recorded. Before turning the call over to management, I will share Copart's safe harbor statement. The company's comments today include forward-looking statements within the meaning of federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in the company's markets. These forward-looking statements involve substantial risks and uncertainties. For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors and the company's annual report on Form 10-K for the year ended July 31, 2024, and each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements. I will now turn the call over to the company's CEO, Jeff Liaw.

Thank you, Owen. Welcome, and thanks for joining us for our fiscal year 2025 call. We're pleased to announce the results of another record year for Copart across a number of dimensions, including units sold, revenue and operating profit. For that, I wanted to extend our gratitude to our clients, our members and our people who enable our success. I'll begin today with some brief remarks on our insurance business and trends in the industry, followed by a discussion about Copart's auction liquidity before passing the call to Leah to discuss the results of our financial performance for the fourth quarter and the full fiscal year. We'll then take your questions. First, regarding our insurance business. For the full fiscal year 2025, Copart grew its global insurance volume by 4.5% and our U.S. insurance volume by 4.2%. During the fourth quarter itself, global insurance volumes sold decreased by 1.9% and U.S. insurance volumes declined by 2.1%. Year-over-year growth rates for the second half of our fiscal year were softer than in the first half for several reasons, including the ebbs and flows of business activity among individual auto insurance carriers themselves as they optimize for growth and profitability. We also note ebbs and flows of uninsured and underinsured motorist populations, the result of substantial increases in insurance premiums over the course of the past several years. As one specific citation, earned car years for the first calendar quarter of 2025 declined by 4.3% versus that same quarter in 2024 according to ISS, all while the vehicle car park grew at 1.3% for the same period. You might surmise that underinsurance is less relevant for vehicles that have encountered accidents severe enough to consider a total loss, but consider the scenario in which a policyholder has downgraded from collision coverage to liability only or has elected to forego insurance coverage altogether. Those vehicles may bypass the traditional insurance total loss funnel altogether. Other industry sources such as CCC have observed what they describe as a cyclical disconnect between accident activity and insurance claims frequency as well. We also track other industry indicators such as traffic fatalities, some of which are published much more episodically but which generally indicate that accident rates are declining but that they're doing so at rates consistent with long-standing historical trends. We've talked in the past before about how accident frequency has declined virtually every year since Copart's inception and almost certainly for decades preceding that. These declines have generally occurred very gradually as new safety technologies such as anti-lock brakes in the 1970s and '80s penetrate the installed base with each vintage of newly manufactured vehicles. Over those same long-term horizons, however, total loss frequency has generally increased at a rate far exceeding the decline in accident frequency itself. And in fact, for the quarter, total loss frequency has continued its long-term upward trend consistent with, again, the entire history of our company. In the United States, total loss frequency for the second calendar quarter of 2025 was 22.2%, up from 21.5% in the same quarter in 2024. As a tidbit for context, according to CCC's most recently published crash course report, calibrations occurred on 31% of DRP estimates in the first calendar quarter, up from 24% a year ago, an indication of further vehicle complexity, complexity of repairs and repair costs for vehicles that enter the repair window. We've long noted that vehicle repairs become less attractive with the passing of time. As vehicle complexity increases, parts and labor cost increase as well. We've also talked at length about how total loss itself becomes more attractive as growing economies seek more and more U.S. salvaged vehicles to satisfy their demand for more mobility. On recent earnings calls, we've talked at great length about the importance of our differentiated service offerings, including our efforts to help insurance companies mitigate their advanced charges, the decision support tools we provide to help them make calls quicker and better as well as a range of titling and loan payoff services we offer to them. But we also know that, above all else, the critical value we provide sellers at Copart is that our auction platform will find the highest and best use of every vehicle anywhere in the world. I wanted to spend a few minutes today to underscore the importance of that auction liquidity and to describe why our liquidity is a distinct advantage for Copart. First, I would note that Copart's auction is uniquely digital. We have been exclusively an online auction platform since 2003, almost 2 decades before our competitors followed suit and only when they were compelled to do so by the COVID-19 crisis. By extension, we are also uniquely global. We have some 300,000 paying registered members at Copart from virtually every non-sanctioned country around the world. The result of that is unmatched global breadth. International members account for approximately 40% of all vehicles sold at Copart's U.S. auctions, comprising almost half of auction proceeds because international buyers generally purchase vehicles that are more valuable than those acquired by domestic buyers. We invest heavily in marketing resources, in product and the member experience more generally to ensure a deep pool of demand for the vehicles we auction on behalf of our sellers. As context, the top 10 individual buyers of vehicles at Copart collectively purchase a low single-digit percentage of all the vehicles we sell at U.S. auctions. The nature of the vehicle wholesaler and rebuilder economy is the frequent disruptions, exits and new business formations, and we invest in the resource to ensure that we continue to maintain a deep pool of demand for our vehicles. The fruits of our labor are visible in the selling prices we generate for our clients in the past quarter and the past year and frankly, for the past 43 years as well. For the quarter specifically, we experienced ASP growth globally of 5.4% for all insurance vehicles sold and for our U.S. insurance clients, growth of 5.7% for the fourth quarter versus a year ago. We know from public data and from public disclosures that our ASPs grew at a rate that eclipsed that of used vehicle value indices like the Manheim Used Vehicle Value Index and grew at a rate more than fivefold that of service providers similar to ours. I wanted to spend a few minutes to talk about auction liquidity as one of the critical propositions that we deliver to our sellers, frankly, across both insurance as well as our noninsurance sellers as well. With that, I'll pass the call to Leah to talk about our fourth quarter and our full fiscal year.

Thank you, Jeff. I will begin with our 2025 sales trends. For fiscal year '25, global unit sales increased 4.8% and declined in the fourth quarter by 0.9%. Focusing on our U.S. business. For fiscal year '25, unit growth was 4.1% with fee units growing 4.1% and purchased units growing 4.7%. For the fourth quarter, unit sales declined 1.8%. This reflects fee units declining 1.2% and purchased units declining 16.7%. Over the past several months, in the U.S., we have transitioned a significant volume of low-value noninsurance units from our Copart direct channel, which are purchased units to our direct buy channel. This change has allowed Copart to more efficiently market lower ASP vehicles by directly connecting sellers and buyers and avoiding the unnecessary costs associated with transportation and storage at a Copart facility. As a result, they are not captured in our units sold metrics. Normalizing for this, U.S. units declined 0.6% for the fourth quarter. Our global and U.S. insurance volume grew 4.5% and 4.2%, respectively, for fiscal year '25 and decreased approximately 2% for the fourth quarter versus the prior year period. For the fiscal year '25, our noninsurance unit volume increased 2.8% and decreased 2.1% in the fourth quarter. The fourth quarter decline in noninsurance U.S. volume was driven by our direct buy strategy, which resulted in Copart Direct or our Cash for Cars business line unit sales to decline 5.4% in FY '25 and 32.6% in the fourth quarter. Normalizing for this, noninsurance unit volume continues to grow faster than our U.S. insurance business. Blue Car, which services our bank, rental and fleet partners, continued its strong trend with 15.3% growth in fiscal year '25 and growth of 2.8% in the fourth quarter. We continue to see double-digit growth in Blue Car across our bank and fleet partners. This was partially offset during the fourth quarter by certain rental partners who retained or repaired a greater number of vehicles than we had seen historically. Dealer sales volume consisting of Copart Dealer Services and National Powersport Auctions increased 1.4% for the fiscal year '25 and 2.1% for the fourth quarter. Low-value units, including charities and municipalities increased 4.9% year-over-year and increased 1.2% for the fiscal year '25. Our international segment units sold grew 8.1% for fiscal year '25 and for the fourth quarter, grew 3.3%. Fee units increased 9.8% for the full fiscal year and 3.6% for the quarter. Purchase units declined 1.8% for the full year and increased 1.9% for the quarter. Fee unit growth continues to benefit from the shift of insurance units primarily in Germany, transitioning from purchase contracts to consignment. Turning to Purple Wave. Their GTV grew 9.4% for the fiscal year 2025. And while we are observing an industry-wide trend across the heavy equipment and agricultural sectors of sellers taking a cautious wait-and-see approach due to uncertainties in the broader macro environment, Purple Wave's overall GTV continues to significantly outpace the industry from a growth perspective. Our global ASPs increased by 5.6% in the fourth quarter and 2.4% for the full year. Our global inventory decreased 13.1% from the year ago period. Overall, inventory levels in the U.S. decreased 14.8% year-over-year. There are 3 main drivers of the U.S. inventory decline: first, we saw low double-digit declines in assignments; second, faster cycle times overall for vehicles sold; and three, the reduction in overall aged inventory. Over the past several years, we have observed that trends in assignment volumes have proven to be a more accurate predictor of future unit sales than static inventory levels. Our inventory business ended the quarter compared to prior year with inventory levels decreasing 3.9%, which is primarily due to the sale of several cat units in the Middle East. International assignments grew just over 1% for the quarter. Turning to our financial performance. Global revenue increased to $1.13 billion for the quarter and $4.65 billion for fiscal year '25, reflecting a 5.2% and 9.7% growth, respectively. Global service revenue increased $63.1 million or 7% from the same period last year and increased approximately $407.7 million and 11.4% for the full fiscal year due primarily to increased volumes and overall higher revenue per unit. Our U.S. service revenue grew by 6.2% for the quarter and 10.4% for the year, and international service revenue grew by 13% for the fourth quarter and 18.9% for the year. Global purchased vehicle sales for the fourth quarter decreased $7 million or 4% and increased $2.5 million or about 0.4% for the fiscal year. Global purchased vehicle gross profit increased by 53.3% in the fourth quarter and 33.7% for the fiscal year. In the U.S., purchased vehicle revenue was up $4.1 million or 4.2%. However, purchased vehicle gross profit decreased $1 million or about 14.2% in the quarter. And for the fiscal year, U.S. purchased vehicle revenue increased $64.9 million or 19.2%, and purchased vehicle gross profit remained largely flat. Year-to-date, our U.S. purchased unit margins were 6.3%, a decrease of about 113 basis points compared to FY '24. Internationally, purchased vehicle revenue decreased by $11.1 million or 14.2%, and gross profit increased by $8.5 million or 127.5% in the fourth quarter. And for the full year, purchased vehicle revenue decreased $62.4 million or 18.5%, and purchased vehicle gross profit increased $18.7 million or 60%. The reduction in international purchased vehicle revenue accompanied by an increase in gross margin continues to be driven by an increase in German units being consigned, which were previously subject to a purchase contract as well as stronger purchase unit margins in the U.K. Global facility-related costs, which include facility operations, depreciation, amortization and stock-based compensation increased $14.4 million or 3.2% in the fourth quarter and $234.2 million or 13.7% for the full fiscal year. In the U.S., facility-related costs increased $13 million or 3.4% for the fourth quarter, and facility-related costs per unit increased 5.4% from the prior year period. This increase in per unit cost reflects our ongoing investments and expanded operational capacity to support our continued growth. For the full fiscal year, U.S.-related costs increased $205.5 million or 14.3% and facility-related costs per unit increased 9.7%. For the quarter, international facility-related costs were up $1.4 million, an increase of 1.9% or a decrease of 1.4% on a per unit basis. And for the full fiscal year, international facility costs increased $28.8 million, an increase of 10.7% or 2.4% on a per unit basis. During the quarter, global gross profit was $509.7 million, an increase of $56.2 million or 12.4%, and our gross margin percentage was 45.3% in the quarter. For the fiscal year, global gross profit was $2.1 billion, an increase of $192.4 million or 10.1%, and our gross margin percentage was 45.2%. In the U.S., our gross profit was $440.3 million, an increase of 8.4% for the quarter and an increase of 7% for the full fiscal year. Gross margin was 47.5% for the quarter and for the full year. Our international gross profit was $69.5 million, an increase of 47.1% for the quarter and was $268 million for fiscal year '25, an increase of 36.7%, and gross margin was 34.9% in the quarter and 33.9% for the year. Turning to general and administrative expenses. Spend in the quarter was $97.1 million, reflecting an increase of $3.1 million year-over-year. For the year, spend was $402.9 million, an increase of $67.7 million. Fourth quarter GAAP operating income increased by 14.8% to $412.6 million, and for the fiscal year, GAAP operating income increased by 8% to $1.7 billion. Finally, fourth quarter GAAP net income attributable to Copart, Inc. increased by 22.9% to $396.4 million or $0.41 per diluted common share. During the quarter, we benefited from an increase of $6.4 million from interest income as we have actively invested our cash into treasury securities. For the quarter, our tax rate was 17.4%, which reflects the impact of increased tax credits and a reduction in state tax expense. For the fiscal year, GAAP net income attributable to Copart, Inc. increased by 13.9% to $1.55 billion or $1.59 per diluted common share. Turning to our capital structure. As of the end of July, we had $6 billion of liquidity, which is comprised of $4.8 billion in cash and held-to-maturity securities and our capacity under our revolving credit facility. With that, Jeff and I would be happy to take some questions.

[Operator Instructions] Our first question today is coming from Bob Labick from CJS Securities.

Congratulations on another strong year.

Thank you.

Sure. Yes. So I wanted to start talking about AI a little bit. Technology advancements in general and not just a bucket hole to AI, but that Copart and for the industry and your partners and participants in the industry, how is advanced technologies and AI changing the industry? Is it like earlier decisions on total losses, faster cycle times, et cetera? And how is that impacting your business model now? And then the follow-up is -- because I know you guys are always looking well ahead -- how do those changes impact the industry in 5 to 10 years.

Yes. Great question, Bob. And of course, a potential multiple day conference to dive deeper into all the different arenas in which we are deploying advanced artificial intelligence and where we could as well. I think you described the general parameters very well that, in short, it is widely deployed inside Copart today, including for some of the decision support reasons you described, which is that we equip many of our sellers with tools to allow them to make instantaneous total loss decisions informed by literally millions of similar vehicles we've sold over the years. Those decision support tools are very much empowered by current generation large language model technologies. Beyond that, certainly in the obvious arenas such as customer support and also in agent support here at Copart, so even the folks who still are interacting day to day with members and buyers are equipped with better information with LLM behind the scenes and on and on. So I think we are still, like many companies, in the early stages but have many different arenas in which we have that technology deployed today. We also have it at the auction level. As I think about the products and the vehicles that we're recommending to our buyers, we are -- search results, et cetera, all of these different domains are informed by AI as it stands now. And no doubt that as the tools themselves improve and as our deployments become still more sophisticated, that it will enhance the business as it is. It will make us radically more efficient in delivering the services we deliver today, and no doubt, it will unlock future opportunities as well. But I think it's fair to say it is both allowing us to do what we do more efficiently, compressing cycle times for our clients, compressing cycle times for us. You heard Leah describe that phenomenon when it comes to inventory. One of the reasons that inventory contracts is that our Title Express offering for which we are providing this service and procuring the original titles on behalf of our insurance clients and doing so for more and more clients with each passing quarter, that is we're yielding better cycle times there, in part, because when we do the work, it's enabled by our tech stack, our LLM deployments in ways that are more efficient than the insurance carriers before they transferred that responsibility over to us. So great question, and no doubt that answer will evolve over the quarters and years to come.

Okay. Yes, super. And then just kind of sticking with thinking ahead in that regard in technology. Obviously, EVs have been in the fleet for a while, but they're still a very small percentage. I was wondering if you could maybe comment on the total loss frequency of EVs now and how that might progress or how you see that kind of progressing and impacting total loss frequency over the next 5, 10 years.

Sure. I think you're right to observe that it still remains early. I think the degree to which it is early varies by country as well. So in places like the United Kingdom, we had a greater EV penetration than we have, for example, in the U.S. or in Canada or in Brazil. The one element of your question is a little bit hard to parse is that EVs are not otherwise identical to internal combustion engine vehicles, where they tend to be very different in nature as well. So it's rarely the case that I'm talking about a car that's exactly the same as its brother or sister vehicle but simply with a combustion engine driving the drivetrain itself. In broad strokes, the returns on EVs are very strong. They total, if anything, more easily. But I think that's in part because of all the technology that tends to come with it, right? So I don't know that it's the battery necessarily or the drivetrain but electric vehicles tend to have next-gen sensors on the perimeter of the vehicle, tend to have the adaptive headlights, rear cameras, lane departure sensors, et cetera, that make the car pretty easily totaled because any kind of damage on the perimeter often requires advanced calibrations and reprogramming and so forth. So so far, the indications have been favorable in that regard when it comes to electric vehicle and total loss frequency, selling prices and so forth.

Your next question today is coming from John Healy from Northcoast Research.

Jeff, I wanted to just ask priority-wise for the new fiscal year as you roll into that. I know you guys gave us a ton of color on the quarter and the like. But was just hoping you could maybe identify, I don't know, whether it's 1 or 2 kind of key things either from an operations or a presence in the market standpoint. There might be some sort of operational milestones that we might look to where you are putting your time and effort kind of away from just the quarter-to-quarter trends.

Yes. Fair enough, John, and appreciate your questions. Tough to pin down 1 or 2 for obvious reasons. But in broad strokes, we talked about auction liquidity today and how essential it is for everything else that we do. Auction liquidity enables us to serve our incumbent insurance clients better. It allows us to win in the marketplace with insurance carriers and allows us to win among sellers beyond insurance companies as well. So we continue to invest in auction liquidity broadly speaking, and that literally can mean recruiting and retaining members. It can mean reducing friction in the member experience itself, making it easier to discover products to bid on to purchase them, to physically retreat them or have them delivered to you, to finance them, to obtain warranties and so forth. It's all about reducing the friction of being a participant at a Copart auction. So that's a broad brush answer, but we know that if we deliver on that particular dimension, the rest of it falls into place, right, meaning the vehicles, we will continue to earn the right to sell them. If we continue to generate excellent selling prices and improved -- still growing selling prices on behalf of our clients, the rest of it takes care of itself. And so I mentioned in passing the more client orientation among noninsurance sellers as well. We talked about that on prior calls. It's an interesting dynamic there in which we view it as very synergistic. Earning the right to sell more rental cars, more financed repossessioned vehicles, corporate fleets and the like is not at all at odds with our core legacy insurance business. It's very much synergistic in the sense that the more cars we sell for insurance companies, the more they look like drivable cars that are from rental car companies and vice versa. So it is about enhancing that mutual liquidity and enhancing the depth of our auction platform, which in turn brings the buyers. So those are broad stroke answers. As you might imagine, when you then slice the business up into its different component parts and we start talking about what it means to do business in the U.K. or in Germany or in Brazil, Canada U.S., we have different and more specific priorities, including Purple Wave and NPA, et cetera. But in the broadest strokes, those are the big priorities, frankly, for this fiscal year and for every fiscal year, right? It's fundamentally auction liquidity, service to our insurance clients and selling -- driving outstanding selling prices for our clients.

Great. No, that's helpful. And then just a follow-up for me. The cash is at record levels for you guys. I think Leah mentioned, what, $4.8 billion in cash. Obviously, I imagine you'll be making investments into your auction liquidity, as you mentioned. But any thoughts with rates probably coming down and that cash being at the levels that it is, if you could just kind of go over for us your appetite for capital returns, what and when or how you view M&A? Could you -- what sort of things we might see kind of in the next 24 months or so?

Sure. I think we wouldn't project precise time lines as to when we would do XYZ. What I'd tell you is that, over the long haul, say, over the course of the past 10 years or so, we have consistently returned cash to shareholders via buybacks. In some cases, we've done broader structured tenders. In other cases, we've executed open market purchases and such. And that will long term also be the mechanism likely by which we return cash to shareholders. On your question about M&A, we are always scouring the world for opportunities that help to enhance our service proposition. I think I've mentioned before, but we have a two-pronged approach to any M&A activity. One is the investments. On a stand-alone basis, it's self-compelling, meaning if John, Leah and I -- you and Leah and I were sitting here in the room, would we be willing to write our own personal checks in support of a given investment if we were to hold it as a private company? And then the second question is does it enhance fundamentally what Copart is and what we do, right, and/or can we enhance what they do by virtue of Copart's capabilities. You'll note that I didn't say in the rubric there that we have the capital for it or the available cash. That's neither here nor the there. I think we know that for the vast majority of companies we would ever entertain acquiring, we could easily finance it either with the balance sheet or by taking on debt to do so. So the cash doesn't per se inform an M&A strategy. Could some of it be used someday for an acquisition? Certainly, yes. You've heard about a couple over the course of the past 10 years in the company in its history has executed M&A initiatives in the U.K., here in North America as well that have been very productive and ultimately have enhanced our longer-term service offering. So ultimately, the answer is share buybacks without a precise time frame. That's when we would do so. But the cash doesn't cause us to change our behavior either on M&A or on operating expenses, right? It just is we recognize it belongs to our shareholders, and we'll treat it accordingly.

Next question is coming from Chris Bottiglieri from BNP Paribas.

Two for me. The first one was can you go over the low double-digit decline in the assignments number, I want to make sure I had that right. But like relatedly, do you have a sense where that number was ex cat to give us like a like for like for the strength of underlying business?

Chris, I didn't hear what you said. What decline?

The -- I think you said the assignments declined low double digits. I'm not sure I heard that right. There's a lot of numbers you gave.

Okay. Yes. So cat really didn't play into that given the fact that there were not assignments in the prior -- there weren't a material number of assignments in either period from cat.

Got you. Okay. All right. And then second question was, there was a pretty spicy comment about you had mentioned that you grew your ASPs 5x faster than similar service provider. Can you just kind of elaborate there what you're seeing, how you guys measure that? And more importantly, your ARPU and GPUs are significantly higher than your closest peer. I would imagine, on a like-for-like basis, you guys generate higher returns to your insurers. Just curious to what extent you study that, you have data on that and what your insurers tell you in that regard.

Yes. Leah, you want to talk about that?

Yes. Maybe just to clarify, Chris, the assignment decline was low single digit, not low double digits. I just want to make sure you heard that correctly.

I did not.

Okay. And then do you want to speak?

Yes. On the returns at auction, yes, we do believe we generate superior auction returns here at Copart. There are, of course, other service providers like us. Some of whom may disclose their results and their ASP changes year-over-year as well. So we understand our number. We haven't seen anything close to the, I think, 5.7% that we generated an increase in insurance returns this fourth quarter versus a year ago for the same fourth quarter. We haven't seen anything approaching that.

Your next question today is coming from Bret Jordan from Jefferies.

One long-term question sort of keeping with that, what does technology impact. Do you have any thoughts on what you're seeing around autonomous vehicle? Obviously, it's pretty much in its infancy but as far as crash rates and what urban autonomous driving might do to some of those regional crash volumes. And a quick follow-up, too.

And you mean simply true autonomous Waymo vehicles and the...

Yes, exactly. Like a Waymo, obviously, the few that we have out there, are they crashing at a lower rate than an Uber driver in the same market might be?

Right. At this point, I think our information is not better than yours, so we'll read what Waymo themselves will publish on the matter. And as you and others know, their activity still remains in fairly constrained geo-fenced areas under specific conditions. It's very difficult to measure. And they, as far as I understand it, are generally speaking, not insured by the same large national insurers that would ordinarily consign volume through Copart. So we wouldn't have first-hand visibility into the vehicle volume that is being totaled, so to speak. So I think at this point, a de minimis effect on auction activity cohort.

Okay. I just -- let's say long term if that's a population that might not crash or may crash more. And I guess, short-term cyclical question. You've talked about consumer bias to maybe underinsure or drop comprehensive. And obviously, insurance companies change around market share. Do you see any near-term either insurance company behavior changes that might change who's winning or losing share and/or any bias for consumers to add insurance back more recently?

To the second half of your question, I would say when we look at the relative relationship historically versus earned car years in comparison to the car park, we see ebbs and flows, meaning in the United States, sometimes earned car years will grow at a rate that meaningfully outpaces the car park, suggesting that folks are signing up for insurance more than they did before. We've also seen periods like now when earned car years are declining relative to the car park, which suggests they're pulling back either on deductibles on collision coverage and comprehensive in favor of liability only or foregoing it altogether. So it, over our history, appears to be a cyclical phenomenon, not a secular one.

Your next question is coming from Jeff Lick from Stephens.

Congrats on the nice quarter. I was wondering if you could just elaborate, as we get into 1Q, last year was a fairly robust hurricane season, how that will kind of manifest itself if it's not that this year, both in terms of units and then also profitability, just kind of the gives and takes there. And I had a quick follow-up.

Yes. The storm season, of course, difficult to prognosticate. I'd say, when we were looking at forecasts in March, April, May, June and planning our business accordingly, I think we expected a very busy storm season. It seems that weather patterns are growing more acute or weather volatility more acute over time. To date, that hasn't manifested itself, knock on wood, because we have not yet experienced a meaningful storm. The precise economic impact of any given storm, very difficult to predict in advance. If you're talking about the last go around, I think in the majority of cases on a true -- truly fully loaded basis over a long horizon, catastrophic events are surely not per se profitable for Copart. It's a service offering we provide for insurance industry. They know that we are the backstop, so we are the insurance provider, so to speak, for the insurance industry themselves. And we bend over backwards and acquire land that sits idle for years until a major storm arrives. And we have own trucks and employee drivers to make sure that we have the flexible capacity to address their needs at that time. So precisely year-over-year quarters, we don't tend to provide forward guidance. There's no doubt that it accounted for meaningful activity a year ago, both in the form of cost. I think to some extent in the form of revenue, though, that tends to lag the sale of the vehicles and the recognition of the revenue tends to lag. So some of that would happen in the first quarter. Much of it also would have happened in subsequent quarters as well.

And then just a quick follow-up on the insurance situation of -- as you look at the combined ratios now, they're actually below kind of pre-COVID levels and you're seeing, obviously, Progressive continuing to take share. I'm just curious, now that you have insurance companies that are kind of back to normal or better-than-average profitability, do you foresee a -- would you think that there'd be a little more price competition and that might have the effect of normalizing the insurance situation as rates could conceivably come down?

That's certainly a better question posed to them of course. What we tell you over the long haul is that, that does ebb and flow. So I think your observation is fair. The combined ratio is now -- after a lot of pressure on them over the past few years has now ameliorated somewhat. I think by virtue of both rate increases, as you know, the insurance regulations are such that the carriers can't always pass through rates when they want to and that activity often happens on a lag basis. So they've realized that benefit now. We are seeing anecdotally more aggressive behavior on the part of some insurance carriers. It's always the tension. They're managing growth and profitability, and that's a dynamic equation for sure. I think your observations about some specific carriers have definitely been true. I think we do expect to see competitive response in the industry, in a dynamic industry as it always has been.

[Operator Instructions] Our next question is coming from Jash Patwa from JPMorgan Chase.

Jeff, maybe just taking a 30,000-foot view of the salvage auction industry in the U.S., could you give us a deeper sense of the current market structure, particularly in terms of Copart's share with the larger insurance carriers and where you see incremental share growth opportunities over the next couple of years? It seems like Copart is already working with most of the top 10 carriers who collectively represent 75% of the market, and the #10 carrier has less than 3% share. So I'd just be interested to your perspective on where there's still opportunity with the larger accounts or if incremental share growth will be more about winning contracts with the long tail of smaller carriers. And I have a follow-up.

Yes. Appreciate the question. We view our opportunity and our threats much more expansively than that, right? So in terms of the clients we serve, yes, they are insurance carriers. And yes, there are banks and rental car companies and dealers and individuals, right? If we sell X cars, the actual number of auction-mediated vehicles that are sold in the United States per year is multiples of that. It's 5x or more of the volume that we sell per year. And that, frankly, remains true even for the specific sellers that you described that there are always options they can consider and even an insurance carrier can sell their cars through other intermediaries, they can have more of them repaired, right? So in many respects, we compete with the repair shops, the higher the returns we generate, the more we can win the rights to resolve that claim versus the repair industry. And the lower the returns we generate, the more we lose head-to-head against the repair shops as well. So there are a number of competitive threats that we face on any given day. I think we still have a lot of conviction that if we deliver excellent auction returns and deliver excellent service, I think you know what that means. That means expediting cycle times. We're treating cars very quickly from where they sit, especially when they accrue storage. It means interacting with policyholders very effectively, in particular on the title procurement, Title Express side of the house so that we can resolve claims amicably with their customers who otherwise may churn if experiencing a tough claims resolution process. So anyway, the long-winded answer to your question, but we view it much more expansive than that. We have many-fold opportunities to win, many-fold opportunities to lose. That's our job to do.

That's helpful. And then just maybe a question on Copart wholesale. I noticed the recent announcement about combining the select auctions and the bank repo auctions. Could you walk us through the strategy behind this move? And maybe share your perspective on what the next phase of evolution for the wholesale platform might look like.

Sure. I think you're describing a very specifical -- specific tactical experiment, which we undertake across our platform all the time in terms of the right way to separate -- segregate the volume in ways that are responsive to the right buyers at the right time. So it's not speaking necessarily of a broader strategy, except to say that, in general, we think shared liquidity is a good thing, right? The fact that Copart has X registered paying members who will buy cars, we want to expose them to the right product. And so always the question we ask is how do we expose the right buyers to the right product. And that can be text, e-mail. It can be search results. It can be notifications in-app, and it frankly can be also the architecture by which these auctions themselves are organized, whether it's select or rental or otherwise. So those are all the levers that we're pulling on an ongoing basis. So you shouldn't be surprised that, that sticks. You shouldn't be surprised that, that changes over time as well. The point of it is the objective is clear, generate the very best returns by matching the right buyers to the right cars. And as we head down that path, you expect to see lots of dials turned back and forth. I think we're in a good spot, but I think there's still room to create still more value for ourselves and for our sellers.

Got it. If I could just sneak one more in. Leah, I'm not sure if this came up before. But could you give us some more color about the PP&E sale in the quarter and whether we should incorporate any implications from a revenue or expense standpoint moving forward?

No, it was a small equipment sale related to some excess construction equipment that we held. So no, there was a slight gain in the quarter. You see that in other income and expense below EBITDA, below operating income. And so that is nonrecurring, but that wasn't really material to the overall quarter.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to Jeff Liaw for any further closing comments.

Thank you, everybody. We'll talk to you for the first quarter.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.