Good day, everyone, and welcome to the Copart Incorporated Fourth Quarter Fiscal 2020 Earnings Call. Just a reminder, today's conference is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Jay Adair, Chief Executive Officer of Copart Incorporated. Please, go ahead, sir.

Thank you, Casey. Good morning, everyone, and welcome to our fourth quarter call. I'd like to pass over to Jeff Liaw, our President, to do the safe harbor and then we'll go ahead and give you an update on the quarter. Jeff?

Thanks, Jay. During today's call, we'll discuss certain non-GAAP measures, which include adjustments to reverse the effect of certain discrete income tax items, disposal of non-operating assets, foreign currency-related gains and losses, 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've provided 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 these non-GAAP measures, together with our corresponding GAAP measures, are relevant in assessing our business trends and performance. We analyze our results on both GAAP and non-GAAP basis. In addition, our 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 our markets, including with respect to the COVID-19 pandemic. These forward-looking statements involve substantial risks and uncertainties. For more detail on the risks associated with our business, we refer you to the section titled Risk Factors in our Annual Report on Form 10-K for the year ended July 31, 2019, and each of our subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and Copart has no obligation to update or revise any forward-looking statements. Jay?

Thank you, Jeff. Well, recently I was discussing with Willis the accomplishments achieved in 2020, and to say it was a unique year would be an understatement on so many fronts. The year started very strong, no question about that. August was ahead of the prior year, both in assignments, in units sold, and in per car yield. The great people that make Copart perform across the organization worked executing both internationally and domestically in existing operations from picking up vehicles, imaging those vehicles, receiving inventory, processing title, and eventually auctioning and selling off those vehicles. But also, we were executing on future opportunities like finding land for capacity, making technological improvements to our internal platforms and our website, creating pipeline supply both through our marketing efforts and our sales team, and really the list of accomplishments goes on and on. We had no reason to see 2020 as anything other than being our best year yet where Copart would achieve record financial performance in an over 26-year history of filing Ks as a public company. By mid-year, we didn't believe that was going to be the case. The world was changing by the hour, and the government was actually contemplating and eventually would implement a policy of shutting down nonessential businesses and restricting how frequently and where people drive. This was not just in the U.S., but we were seeing this globally in markets where Copart does business. Today, we have the benefit of hindsight, and despite all the challenges of 2020, it was a year where we actually did put down record performance both from an operational standpoint, but also record financial performance that outdid every year prior to 2020. And I will tell you in the past, we have had many great years where we questioned whether we could raise the bar again after such performance. As you know from history, we have continued to grow Copart, and we've done that again in 2020, even in the face of such an unprecedented and challenging environment. So how do we do this, you might ask. Well, it's a cultural thing, and culture starts with people. We at Copart have the best people in the industry. We talk about people, process, and technology. And while technology and process have driven our business for over two decades, it is the people that not only do day-to-day execution but also that can pivot and, if necessary, course correct on a dime when things get challenging, and that's exactly what happened in fiscal 2020. We didn't let the pandemic control us or change our long-term goals, but we did course correct in the short term to address head-on the safety of our customers and our employees. Throughout this period, we never dropped the ball on executing inside the organization for our members, our sellers, and our fellow employees. While August, the first month of fiscal 2020 was a record month, April was not. April was off 37% in assignments and 16% in units sold. In terms of assignment volume, it was the worst month of the fiscal year with people not just social distancing, but staying home from school and work, failing to eat out at restaurants, seeing their hair salons and movie theaters closed, and the list goes on. Our immediate response was to communicate to all of our employees to stay focused on the job at hand, and that's exactly what our people did. And while they committed to our customers, we committed to them promising no furloughs and no reduced hours. We wanted them to know that while they had our customers' back, we had their back. We could have reacted to the environment we faced in two ways: positively or negatively. The fact is, we chose the prior, not the latter, and viewed this lull in volume as an opportunity, an opportunity to straighten up yards and office space, work old inventory, get zoning approved on land that might have otherwise not been approved prior to COVID, and implement efficiencies in our process, all while utilizing new technologies developed during the year. In 2020, we spent over $500 million in CapEx and added over 2,000 acres to our capacity. And I might add, the team never slowed down during the worst of the COVID pandemic. 2020 is a great example of Copart's performance in challenging times. We did this in 2008 during the financial crisis, and we have now done this again during the COVID-19 pandemic. Life is unpredictable, always has been, always will be, but at Copart we will always take the position of having a long-term view, and that will always include having a conservative balance sheet. We are owners and thus behave like owners. We challenged the norm every day; we get results; and in the process, it all comes down to our people. People who we celebrate with passion and people who act with integrity in every decision and every action that they make. I used to say before 2008 that we were a recession-resistant company. After 2008, I started saying that we were recession-proof. And now, after 2020, I can confidently say we are a pandemic-proof company. When Willis and I ended our call, I reflected on all that we'd achieved in the year and all that I'm thankful for. And when talking specifically about Copart, it's our people. I couldn't be prouder of the year and all their achievements. I'd now like to introduce our President, Jeff Liaw.

Thank you, Jay. Before turning to our financial performance for the quarter, which will provide the metrics we do customarily, a handful of observations about the COVID-19 crisis specifically. We anticipate many questions about recent trends, for which we'll provide you our most informed perspectives of course. We also want to draw you back, as Jay just did, to the strategic and operational principles that guide our decision-making and have guided us through the pandemic, including investing in people, technology, and process, as Jay just articulated. We are immensely proud of our people for delivering our essential service to the communities we work in around the world. We elaborated in more detail on our last call about how important it is that we do what we do to enable the roads and our society's infrastructure to function as it does. We've done so while adapting on the fly to keep our employees, members, and customers safe. History has shown that we distinguish ourselves in a time of crisis and investing in our people, processes, technology, and land against the backdrop of arguably the biggest economic disruption of our lifetimes. We think we've done so again. Our aspiration throughout the crisis has been to deliver much more than business as usual. We have adapted to our customers' workflow modifications and their process changes in real-time. We've deployed new technology that has enhanced what we do. And what they do as well. I wanted to make a handful of observations about some of the key industry drivers that we talk about regularly, including miles driven, accident frequency, total loss frequency, and matters like that before talking about the details of the quarter. As we noted on our last call, and in Jay's overview, we'd observed substantial declines in driving activity in March and April. And therefore, assignments and inventory as well. Since June, we've seen a gradual and steady improvement in activity levels, with the United States generally recovering more quickly than some of our international markets. Miles driven in the U.S. appears to have bottomed out in April, with data sources showing a substantial recovery since then, but very mixed on the magnitude of the recovery. We track sources, many of which I'm sure you do as well, including Google, Apple, INRIX, and the University of Washington's Institute for Health Metrics and Evaluation, all of which or most of which show substantial declines still in comparison to last year. As another guidepost, we track data published on gasoline consumption by the United States Government's Energy Information Administration, which shows that at least for recent weeks gasoline consumption down mid-to-high single digits year-over-year. We do believe we've seen evidence of relative increases in driving activity, as a substitute for mass transit and ride-sharing, with good evidence that either or both of those channels of transportation have declined over 50% year-over-year during the course of the pandemic. On accident frequency, the conventional wisdom has been that accident frequency is positively correlated with miles driven, because congestion naturally contributes to accident frequency. During the pandemic, we've seen very strong evidence that the opposite has proven true, with our roads less crowded, speeding, and distracted driving had both increased substantially, contributing at least in the near-term to increased accident frequency per miles driven. Over the very long haul, over Copart's near 40-year existence, we have generally seen accident frequency decline as cars get safer. The overwhelming offsets to that, of course, has been total loss frequency. And on total loss frequency itself, we have seen evidence of increasing total loss frequency during the pandemic. There are some near-term catalysts, including repair shop interruptions, supply chain interruptions for repair parts and the like, but there are also key critical long-term durable drivers of the same, including our improving auction returns, which I'll address next. Turning to average selling prices, we experienced a 26.4% increase in global average selling prices year-over-year for the quarter. That is a record change for Copart and occurred despite some natural headwinds in the business. We've talked at length in the past about the importance of cultivating our international buyer base in particular. And in this quarter, and really for the past five years and more, it has paid dividends to the business and has done so very much during the pandemic as well. Our member recruitment and retention efforts, when married with our auction technology, as a reminder, we have been natively and exclusively a digital auction platform since 2003. Together, those have contributed and caused substantial ASP outperformance year-over-year. There are no doubts, some near-term technical factors worth commenting on as well, including strong used car prices against a scarce new car environment, given production constraints, there are some supply chain issues regarding automotive parts replacements and forward repair network as well. But nonetheless, despite very substantial currency headwinds on a year-over-year basis, we have experienced average selling prices for Copart vehicles at all-time highs. With that, I'll turn to the actual fourth quarter financial results. We're pleased with the results of the quarter. We experienced a global revenue decline of 3% or just shy of $17 million year-over-year, including an unfavorable year-over-year currency effect of $2.2 million from foreign operations, primarily due to the strengthening of the U.S. dollar, but also partially due to a shift of a customer from a purchase arrangement to a consignment engagement instead. Our global service revenue, which we have generally informed you is a better barometer for business activity, declined 2.7% year-over-year with the U.S. down 2.5% and our international business down 4.5%. We experienced purchase vehicle decline in revenue of $4.2 million or just shy of 6% year-over-year, as growth in the U.S. was more than offset by decline internationally, including that customer shift to a fee-based sales arrangement in the United Kingdom. Our global unit sales decreased by 18% year-over-year, with U.S. unit decreases of 16.3% for the quarter and international declines of 27.1%. I'll elaborate on that separation momentarily. Our U.S. unit decline was of course driven primarily by COVID-19 and its impact on miles driven and therefore consignment volume to Copart. Our non-insurance volume declined 16%, though there is a significant divergence of the underlying sources of automobiles within that segment, I'll comment on momentarily as well. Our international markets encountered, in some cases, more aggressive responses to COVID-19, affecting driving activity but also title processing and therefore units sold. Within our non-insurance business, our charities and wholesalers business were the most significantly impacted by COVID-19. Excluding those two portions, our non-insurance volume actually grew year-over-year. Our dealer platform, in particular, serving automotive dealers who consigned their non-damaged vehicles through Copart, increased year-over-year. We continued to attribute our strong non-insurance and dealer performance to our mature, natively digital auction platform. We've seen persuasive evidence that otherwise dealer consigned wholesale auction volumes have declined industry-wide, but we experienced year-over-year growth as a result of the liquidity and service that we can provide. On global inventory, we decreased 10.8% compared to the same moment July 31, 2019. In the U.S., we experienced inventory decline of 12.3%, and international inventory declined 1.1%. You'll note that our international unit sales declined more significantly than U.S. sales, but international inventory did not decline as much. That's a reflection in part of some of the title processing issues I mentioned a moment ago, which have challenged our ability to move cars through the pipeline in certain of our international markets. We don't believe this will have any long-standing or long-lasting effects on the business. It's merely a reflection of near-term technical considerations in light of COVID-19. Our gross profit increased 3.2% from $242.6 million to $250.4 million. Our gross margin rate increased from 44.7% to 47.6%. In the U.S., our increase from 48.8% to 50.1% is a reflection of a number of offsetting forces, including increased average selling prices, which we've talked about at length already, but offset by yard efficiencies or relative inefficiencies due to cost absorption of fewer than expected volumes. Our international gross margins increased substantially due in part to the shift of the customer from a purchase arrangement to a consignment agreement instead. Turning to general and administrative expenditures for the quarter. We have always said that G&A expenditures will fluctuate and grow over time. We will continue to leverage G&A over the long haul. But that's taking a perspective across multiple quarters. Really for G&A and other drivers as well is the best measure of our actual investments in general and administrative costs. On a year-over-year basis, we're down from $39.8 million a year ago to $34.6 million in the fourth quarter of 2020, including reductions in travel expenditures and other such changes that would be attributable to COVID-19. Our GAAP operating income increased from $192.8 to $205.7 million for the quarter, an increase of 6.7%. Our net interest expense was up 12.9% year-over-year due in part to our upsized revolver and fees incurred as a result, as well as lower interest earned on our cash balances. On our fourth quarter income tax, we incurred expenses of $36.3 million, which reflects the $6.6 million tax benefit on the exercise of employee stock options offset by a $4.7 million impact from discrete income tax items, all of which have been reflected in the non-GAAP earnings reconciliation you've seen. GAAP net income increased from the fourth quarter of 2019 of $153.5 million to $165 million; pardon me, increased from $153.5 million to $165.5 million or an increase of 7.8% year-over-year. Non-GAAP income increased by 14.7% from $142.5 million to $163.4 million year-over-year. Last few comments on the balance sheet and our cash flow. On July 21, we increased or upsized our revolver from $850 million to $1.050 billion and extended the maturity through July 21, 2023. It's a reflection of our conservative capitalization and strong credit profile that we were able to achieve that extension and upsizing in a financial or in an economic crisis. As of July 31, we had $1.5 billion of liquidity, which we continue to use to invest in our business. Operating cash flow for the quarter was $267 million, an increase of $74 million relative to the fourth quarter of 2019 driven by a combination of higher earnings as well as working capital. As noted previously, we continued to invest in our business long-term with land as one critical dimension, but certainly not the exclusive one. We invested $112.7 million of CapEx in the fourth quarter alone, 90% of which was attributable to capacity expansion alone. We finished the quarter with just shy of $0.5 billion worth of cash on the balance sheet, $477.7 million of cash. We remain well equipped then to invest in our business for the long-term. We're pleased with our fourth quarter. And at this point, Casey will open it up to questions.

Thank you. We'll take our first question from Robert Labick with CJS Securities.

Morning. Congratulations on strong operating performance in a uniquely difficult environment.

Thank you, Bob.

I wanted to start by noting that used car pricing is at all-time highs according to Manheim, pretty much anywhere you look. So, I have two questions related to that. I'm trying to understand the drivers behind your strong average selling prices, your record average selling prices. Can you discuss whether this is more influenced by dealers or drivable cars, or is it more about insurance cars being purchased by dismantlers? Which has had a greater impact on the growth of the average selling price?

Just the sheer volume of the cars, Bob would just mathematically make it so that it has to be the insurance volume driving the 26% increases year-over-year. As you know, the non-insurance cars in the aggregate only comprise about a quarter of our units sold. So it is like-for-like insurance vehicles.

Got it. Okay. And those were generally speaking, close to the 26%, I guess it probably would have been a better way to ask it in terms of the overall ASPs being 26%, were insurance close to that as well?

Yes. Correct. Yes.

Okay. Got it. Great. Generally speaking, as used car prices increase, there may be a counterbalancing effect on the frequency of total losses. However, we are in a unique situation for a short period. Has there been any decrease in total losses, and how is that dynamic unfolding in the current environment?

The key factor is the relative value of intact cars compared to wrecked cars, which influences the total loss frequency. While used car prices are indeed high, these robust prices can limit the volume that would typically come to us, ultimately affecting salvage returns. If salvage returns increased by 25% while used car prices remained flat or decreased, we would see more volume. For this quarter, used car prices were strong, but salvage returns were likely even stronger.

Got it. Okay. Great. And then has there been any change in the supply dynamics because of the higher proceeds you're receiving? Meaning, are you getting different sellers coming into the market that before maybe weren't interested in using Copart, but seeing the record proceeds are starting to either give you more cars or any kind of change in supply?

That's been true within the non-insurance space for years, Bob, that as our cars gravitate more from back in the day 40 years ago, 35 years ago selling metal by the pound to selling parts 20 years ago to selling intact drivable cars today, even within our insurance cars themselves, that liquidity has naturally invited more and more participants to the auction, and that's certainly been true over the past quarter and the past year and the past five years as well. So yes, in short, but not disruptively so in the last 90 days.

I understand. Just one last question from me, I promise. I'm curious about the auction of cars with audio disturbances. In the past, these vehicles that went to auction were primarily insurance cars, and I know you've seen an increase in dealer or non-insurance vehicles. While your conversion rates are generally high, has there been any change in these rates due to the limited availability of vehicles in the recent quarter? Did this perhaps lead to even higher conversion rates than what you've experienced recently?

Not unusually so, Bob. I think conversion rates are very robust and we track and manage carefully, but I would again wouldn't say there was an unusual disruption in the quarter.

Got it. Okay, super. Thanks so much.

And our next question comes from Craig Kennison with Robert W. Baird & Company.

Thanks. Thanks for taking my questions. Congratulations. Wanted to follow-up on the non-insurance market. I mean you've got this all digital platform. You've had it for a long time now. That should have been an ideal platform for you during the pandemic when a lot of the physical competitors were closed. I'm curious to what extent Copart was able to capitalize on this opportunity specifically to grow in the used car market?

Fair question, Craig. I think the math we do isn't any different what you would. So when you track the other publicly traded auction houses for whole cars, I think you can see what relative performance would have been. I think we've noted that others have experienced declines in a period and meaningful declines in a period where we actually experienced growth. So, I think that's about all we know directionally, so we don't have any insider perspective in particular on those other companies, but we do believe against a backdrop of generally declining wholesale dealer volume that we have increased year-over-year.

Am I right that this was a unique opportunity for you to really pitch the service to potential sellers and maybe you’ve got a better look this time than in past pitches?

I'd say yes and no. COVID-19 certainly has underscored how powerful Copart's natively digital platform, which has been exclusively digital since 2003. And having lived that way for 17 years means that we have honed that platform and understand it well. And other competitors had to do so at the tip of the spear had to virtualize overnight. And yes, I think Copart is distinct in that regard. So, on the margin, surely, it has enhanced our value proposition. In COVID-19, of course, it's also across any walk of life difficult to meet new people. So, it has reduced what otherwise might be the natural selling cadence as you get to know new parties, dealers, and otherwise, but I think on balance it has been a very positive force for Copart.

And then circling back on the ASP commentary, I mean it's just an incredible number. To what extent do you think that reverses over time knowing that the pandemic was a factor? I know the long-term trend has been up, but for those of us who have to build a model should we bake in some year-over-year decline as we lap that next year?

The short answer, Craig, is that I don't know. There are certainly some near-term technical factors to consider, as I mentioned earlier. However, the underlying drivers remain very favorable in the long term. Predicting what will happen next quarter or next year is still challenging. One observation I can share is that when we look at non-U.S. buyers of Copart cars at U.S. auctions, we see that currencies have significantly declined year-over-year. This greatly compromised their purchasing power compared to last year. Nevertheless, the value of the cars they bought still increased substantially, in proportion with our overall average selling price rise, meaning they spent even more in their local currency. The strength of that liquidity isn't going away. There is a flywheel effect now, driving more total loss frequency and yielding outstanding returns. This brings in more buyers, and we believe this is a productive time for us to continue spinning that flywheel. As for the exact year-over-year comparison, we don't have clarity on that yet, Craig.

Great. Thank you so much.

Thanks Craig.

We'll take our next question from Daniel Imbro with Stephens Inc.

Good morning, guys. I wanted to start on the G&A side, really impressive control. I think probably one of the biggest surprises in the composition of the quarter to us. You mentioned travel being down. But can you provide any more color on kind of where you did remove costs? You mentioned, I think there wasn't any furlough employee removal. So, how do you think about the sustainability of the cost cuts? Has anything changed there in your thinking?

No. Nothing has changed in our thinking. We did not furlough employees and continued to invest in our people. We continued to hire, to train, to promote, because that's what it takes to build a successful business over the next 20 years, hard stop. On G&A, I'll be militantly consistent right in quarters where it's up a couple of million or down a couple of million. I'll ask you to use many quarters to draw your trend lines. No individual quarter is the right predictive model for future trends.

That's helpful. And then, maybe a follow-up on Craig's dealer question. You clearly gained share in the quarter. When you talk to the dealers on your platform, are you seeing them stay on Copart as some of the competitors reopen? And if they are, does that change you guys' long-term strategy around how much of your business could be dealer or should be dealer? I think in the past you've mentioned, you don't want that to be a majority of your business. But yes, how has the success in that during the pandemic maybe impacted those long-term thoughts?

We have steadily and consistently grown our dealer business over the years. Therefore, we don't view this as a temporary increase. We invest in this business because it provides excellent profitability and adds valuable auction liquidity, benefiting our insurance customers and attracting more buyers to our platform. This will also enhance salvage returns. Even before the COVID-19 pandemic, the entire car auction market was highly competitive, with strong established players and new venture-backed entrants. Despite this competitive landscape, we have continued to grow our volume almost every quarter during my time here, and we expect that trend to continue. We believe our competitive advantage lies in our auction liquidity, which we anticipate will improve as a result of COVID-19.

Got it. That's helpful. And then my last question is about the balance sheet. As we consider how to use our cash, I'd like to hear your thoughts on capacity. To handle more volume and ongoing growth, we essentially have two options: increase capacity or enhance throughput, which can be quite challenging. Is there a significant opportunity to improve throughput from this point? Or when we think about long-term capital expenditures, should that continue to rise to support future volume growth? Thanks.

Thanks, Daniel. We will do both and have to do both. So we focus very much on improving cycle times and turning cars more quickly, both because it is capital-efficient for us, but also because it is a better outcome for our customers, who can settle claims and close files more quickly who can achieve better auction returns with less depreciation with the cars sitting on our properties. So, that is an evergreen initiative on the part of Copart and has been forever. So yes, we will invest in reducing cycle times and can improve. But also, yes, we will continue to invest in our land and capacity, because it is absolutely necessary to serve our customers well, both in the ordinary course and in catastrophic times. We have to be prepared to absorb volatility. So, we are happily investing and have invested through the pandemic in additional capacity and expect to do so for years to come.

Great. Thanks so much guys, and best of luck.

Thank you.

We'll take our next question from Bret Jordan with Jefferies.

Hi. Good morning, guys.

Good morning.

I got cut off for a second. So hopefully, I'm not going to ask this question twice. But, I guess, if you think about pricing and its role in the quarter, could you talk year-over-year about maybe what you've seen from a pricing increase? And as you look at the whole cars, as you get into the dealer space and you're competing with some legacy players, is there any bias to move prices lower as people will compete for share in that space?

I want to ensure I fully understand your question, Bret. Are you asking about the prices we achieved at auction for the vehicles or the fees?

Could you discuss the year-over-year changes in buyer fees in the insurance sector and whether there is a tendency to be more competitive with the fees charged as you enter the dealer car market?

On fees, we don't comment, Bret. Publicly available, of course, on our website is a fee schedule that our members incur when they purchase cars at Copart and for other services that we provide.

Okay. Anything that you're seeing as far as dealer volumes and pricing?

We have seen year-over-year increases in dealer volumes for the quarter, contrasting with our competitors who have experienced significant declines in dealer consigned volumes. This indicates that we are growing our dealer business at a faster rate than the rest of the industry. Our competitive offering allows us to deliver the best possible returns to our dealers. We believe the consistent growth in our Copart dealer services volume reflects the reality of our performance.

Okay. And I guess did you comment on capacity utilization? I think you said, you've added over 2000 acres. Did you talk about what your average utilization is?

Average utilization isn't particularly meaningful since the land isn't interchangeable and each yard operates independently. Each metropolitan area functions as its own distinct entity. Even though Dallas and Houston are within the same state, the facilities in one city cannot substitute for those in another. We closely monitor our metropolitan areas and make investments based on our long-term expectations. Capacity utilization is indeed lower during the pandemic due to various factors like inventory and driving activity. However, we view capacity utilization as a microeconomic factor that informs our investment decisions on a detailed level. Nonetheless, we will continue to invest in land for many years ahead.

Okay. Thank you.

Thanks, Bret.

Our next question comes from Ryan Brinkman with JPMorgan.

Hey, great. Thanks for taking my question. I think it's really incredible the increase in average selling prices that you reported. Can you just help us think about the ways that that helps Copart? Is it the case that you generally charge buyers a fixed percentage of the transaction price in agency model transactions anyway such that the revenue from higher prices falls just pretty well through to profit? And then also it'd be great if you could comment on the reasons for such a large increase in prices and the sustainability of the various factors driving prices higher?

Got it. On your former question, Ryan, that member fee schedule is readily available online. So we encourage you to look there, and you can see what happens to the fees that our buyers incur based on changes in the selling prices of vehicles. As for the pricing changes and the actual pricing at our auction or the selling prices for cars that are auctioned, they are high for a combination of technical but also fundamental reasons. The technical reasons you heard us comment on are the used car prices are robust against the supply-constrained new car environment. But the fundamental reasons are rising total loss frequency, new or less damaged cars being totaled, better auction liquidity; we have driven more bids per vehicle by far than we did a year ago in the fourth quarter of 2020 than 2019. So those are the fundamental drivers, which we think ultimately are the most important ones. There will be near-term technical changes certainly, some of which we are benefiting from today, but others of which are unfavorable including volumes, for example. But over the long haul, the flywheel of auction liquidity, the recruitment of international buyers, retention and cultivation of international buyers we think will continue to drive selling prices upwards, total loss frequency upwards which in turn of course is self-reinforcing, self-reinforcing bringing ASPs up as well.

Okay, thanks. And then just finally are you able to comment on the trend in assignments here in 1Q? Do you have a timeframe in mind for when miles driven or assignments will return to pre-pandemic levels? Thanks.

Appreciate the question. That remains I think largely unknowable. We have generally seen a continuation of the trends that we were marked on in the fourth quarter and the first quarter, but we'll talk much more about the first quarter of course including storms and so forth on our first quarter call. But we've generally seen a continuation as for when society returns to normal practices we'll leave that to the experts.

Our next question comes from Gary Prestopino with Barrington Research.

Good morning, everyone. I noticed the change in the purchase margin. You mentioned that the sequential and year-over-year gross margin increase was due to shifting from a purchase to a consignment agreement. Should we conclude that the previous purchase agreement negatively impacted the overall margins and that removing it significantly boosted the vehicle sales margins? Also, can we expect this gross margin to be sustainable?

The answer to your first question is no. The vehicles purchased by that specific customer were not significantly unprofitable, which led us to remove them. We currently prefer consignment arrangements because they generally align our interests better with those of our customers, but this is not strictly a decision based on profitability. The shift from purchased vehicle sales to consignment has contributed to the decline in revenue, as it now reflects as service fees rather than purchased vehicle sales and costs. However, that was not a major factor impacting the change in purchased vehicle profitability.

Well was it ASPs? And...

Yes. In short, yes.

Okay. And then could you give us some idea. I know you said your dealer business was up, but could you put a number on that in terms of the growth in units year-over-year?

It has increased significantly. Historically, we've stated that we have been up in the double digits. In this instance, it wasn't in the double digits but was still a significant increase.

Okay. And then just getting back to my other question, I'm sorry about the sustainability of that gross margin. Is that something that again that's going to really be driven by what the ASPs do in the future?

Yes, I also omitted the third part of your previous question. We don't specifically manage the business by gross margin rate; instead, we focus on optimizing service, returns, and profitability. The margin rate is more of a tracking metric that we review at the end of each month and quarter for visibility, but our primary consideration is the profit and contribution we earn on a per-car basis. So, the rate isn't a key focus for us. Regarding your point on average selling prices, we experienced strong performance in that area, which positively impacts our profitability. Concerning consignments, our goal is to collaborate with our customers to achieve the highest possible returns that benefit both them and us.

Okay. And then last question just on your dealer business. I would assume that most of your dealer customers are independent. So is that correct?

Yes.

So, is the assignment from the independent dealers of a car, is that driving a lot of the growth? Or are you finding a lot of the independents are also buying cars from you?

Well, they certainly participate on both sides. So, yes, we are growing the consignment volume. And yes, we are also a viable purchase channel for dealers as well.

Okay. But you have very few franchise dealers that are using your platform right now.

We have a good variety of non-insurance consignment sources including dealers of all types.

Our next question comes from Joseph Hafling with Truist Securities.

This is Joe on for Stephanie. How are you guys doing?

Good. How are you Joe?

I just had a couple of quick questions, maybe quickly shifting back to the non-insurance business. I was wondering if everything which is going on with rental, if you guys could talk about maybe how that was going, if you had any opportunities on the rental side of non-insurance?

In short, that's a relevant target segment for us. We have served that segment of the market for some time. Plenty of disruptions, as you know, Joe in that corner of the universe given what's happened to travel trends over time. So, for all the same reasons that we are increasingly a compelling offering to the dealer universe, we think that's also true for the rentals and financial institutions and otherwise.

Okay. Great. And then maybe just another one from me. I was wondering if you can give an update on Germany, particularly with maybe some of the problems with some pandemic maybe causing that to accelerate the insurance company there?

Yes. We remain very excited about our long-term prospects in Germany and continue to invest in our business there, including all the dimensions we've talked about before which is in people and technology, and land capacity, trucks, and equipment, and certainly in customer relationship building as well. I think we noted a couple of calls ago that we are selling cars for insurance carriers on a consignment basis. We're delivering some very strong returns and remain very optimistic about Germany and frankly about Western Europe in general.

Okay. But you haven't observed any increase in the productivity of this conversation due to the disruptions caused by the pandemic over there?

I think it's too early to tell. Your intuition may be accurate in that if there is a shift, we have shown that the Copart Germany model is economically and experientially better for policyholders than the previous model. We have discussed this in detail before, so I won't go over that again. However, one of the main obstacles to changing the market is inertia. Yes, COVID-19 has forced us to address inertia and has disrupted what we typically consider normal operations. In that sense, it could lead customers to consider significant changes in their business.

Okay. Great. Thank you. That was everything I had. Congrats on the quarter.

Thank you.

At this time, there are no further questions. I'll now turn it back to today's speakers for closing remarks.

All right. We appreciate everyone showing up for the call and we look forward to reporting Q1 in the future. Thanks again. Bye-bye.

Thanks everyone.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference. Have a great rest of your day.