Please standby. Good day everyone, and welcome to the Copart Incorporated First Quarter Fiscal 2021 Earnings Call. For opening remarks and introductions, I would like to turn the call over to Mr. John North, Chief Financial Officer of Copart Incorporated. Please go ahead, sir.

Thanks and good morning. During today's call, we'll discuss certain non-GAAP measures, which include 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'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 31st, 2020 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. And with that out of the way, I will turn the call over to Jay.

Thanks, John. I appreciate it. While fiscal 2020 was a record year despite the pandemic, and as we talked about in the last quarter, our people performed across the organization through what was really a year of not just challenges, but a year of unknowns. We met daily, course-corrected daily, and I'm happy and proud to say that we had an amazing - not only record year in terms of results, but in terms of accomplishments. And Q1 of this year is starting strong and I believe it's indicative of the year ahead. I was talking to Jeff this morning, 26 years ago, Willis and I went to New York and Copart became a public company. As I stepped on the streets of New York and saw it for the first time, I was amazed when we eventually went public and I saw the inner workings of Wall Street, I was amazed and confused. Today, 26 years later, I can't say I understand Wall Street any better, but I know a great company when I see it, and Copart is a great company. Jeff and John are going to give you guys details today on the quarter, but at the highest level, when we look at Q1 we saw record results, record sale prices, and record returns for our customers, which bodes well for our future. Copart has continued to grow over the years through prepared processes, excellent technology, the best systems, and the best people delivering the best service in the industry. I see no reason why that's going to change. Just three years ago, the entire EBITDA for Copart for the year was nearly $538 million, and then this quarter, we generated over $275 million of EBITDA. We knew this was going to happen, we started a campaign 3.5, four years ago called 20/20/20 where we aggressively started adding land to our existing locations and opening additional new locations. We've opened mega sites for catastrophes along the Eastern Seaboard and across the Gulf into Houston. We have continued to be prepared and invest in land and that means that we have the capacity for not just the market as it grows, but as we continue to win new business. I view our continued investment in land as a continued investment in our future. We're excited about the team upgrades we made in the last six months. We've modernized our executive team, and I feel good about our future for the next 10-year horizon. So now for more details on the quarter, I'd like to turn it over to Jeff, our President.

Thank you, Jay. It's been just two short months since our last earnings call, but sometimes it feels like years' worth of world events have transpired. First, like Jay, I wanted to express how proud I am of the Copart team. It has been immensely gratifying to provide an essential service to the communities we work in around the world. We've taken the importance of adapting our procedures to keep our employees, members, and customers safe very seriously. The disruption and adaptation have been substantial and continuous, and we're profoundly grateful for the commitment of our people to a job well done. Our aspiration throughout the crisis has been to deliver much more than business stabilization. We've been committed to playing offense, improving our practices, and investing in our long-term future. We've deployed new products and features for both internal and customer-facing applications. We've enhanced ProQuote, our best-in-class machine learning-powered price estimation tool for our insurance carrier partners. We've grown our first to market digital loan payoff product, deployed electronic signature processes, and updated our communications technology among many other achievements. Under Willis, Jay, and many other senior Copart leaders who predate John and me, we had the foresight to build our business as a natively digital one. We have been operating exclusively online auctions since 2003, allowing us to adapt our workflow smoothly to the pandemic. Over the past quarters, we've observed lower than baseline driving activity but a steady increase from the pandemic trough with the U.S. recovering more quickly than some of our international markets. We've tracked many sources like Google and Apple. Much of the data indicates relative to pre-pandemic baselines, we're seeing less commuting traffic, though we note a meaningful sequential improvement from the COVID-19 trough. We've seen evidence that during the pandemic, the opposite is true regarding accident frequency as our roads have become less crowded. In terms of unit sales trends, we experienced a global unit sales decrease of 13% for the quarter with a U.S. unit decrease of 13% and an international unit decline of 11%. Within our non-insurance business, charities and wholesalers have been significantly affected by COVID-19. Excluding these, our non-insurance volume has grown year-over-year. Our unit sales for the dealer business in particular were up 11% year-over-year compared to declines for other whole car auction platforms. Hence this validates our business model. ASPs at our auctions grew 37.3% year-over-year for the quarter, reflecting market dynamics and member recruitment efforts. This year was the most active Atlantic storm season on record, with property damage less severe than previous seasons, and we're grateful for our Copart CAT team and their mobilizations in support of our customers. It certainly feels like one of the most tumultuous windows in my career with more uncertainty ahead. Our experience in 2020 has given us great conviction that we're ready for anything. With that, I'll turn it over to our new CFO, John North, to walk through our financial highlights.

Great. Thanks, Jeff. First, I just want to say thanks to Jay for the warm welcome and to reiterate how happy I am to be at Copart. It's obviously a phenomenal organization, and I'm proud to be here. With that said, I'll make a few brief comments on our operational results to provide more color around the earlier remarks, and then we'll open it up for some questions. Global revenue increased $38.5 million or 6.9%, including a $2.5 million currency benefit. Global service revenue increased $27.5 million or 5.6%, primarily due to higher ASPs. U.S. business grew 4.5% and international increased by 14.2%. Purchased vehicle sales increased $11 million or 16.5%, driven by growth in the U.S.; this was partially offset by international declines due to COVID-19 volume. Purchased vehicle profits increased by $5.4 million as modest volume declines were offset by higher ASPs. Gross profit increased by $41.9 million or 16.4%, and our gross margin rate improved by approximately 400 basis points to 50.1%. Our GAAP operating income increased by 21% from $205.4 million to $248.6 million. We delivered approximately 500 basis points of operating margin improvement due to revenue growth driven by strong ASPs. Our liquidity is strong with $1.6 billion comprised of cash and cash equivalents. Operating cash flow for the quarter increased $46.1 million year-over-year to $258.5 million, driven by working capital benefits. We invested $147.1 million in capital expenditures for capacity expansion and lease buyouts. In conclusion, our conservative capitalization and strong cash flow enable us to continue making decisions for the long-term interest of both our customers and our shareholders. That completes my remarks, and we're happy to take some questions.

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

So obviously another terrific quarter and it looks like maybe both ASPs and volumes were up sequentially from the July quarter, but ASPs rose faster. Do you think there's been an increase in demand from the pandemic as you brought in new people, new buyers, etc. so that demand could continue to outstrip supply even when volumes do return to pre-pandemic levels?

Yes, it's a fair and complex question and answer. I think in short, the prices are high, and it's assuredly not just the supply and demand. If volumes were down 13%, but ASPs are up 37%, we are seeing many more actual dollars purchasing cars at Copart. Today’s ASP increase is a function of supply and demand, yes, but it’s certainly not all of it. A favorable, virtuous cycle effect is emerging as more and more total loss frequency increases, driving ASPs upward and recruiting new buyers. Yes, our relationship with the dealers is a crucial driver of our performance.

How has COVID impacted your international plans? I think in the past you talked about Germany starting to sell on an agency basis, so maybe an update on Germany and the overall international opportunities?

I think the short answer is that countries have been affected by COVID-19, generally more severely than in the U.S. Our plans and execution have not changed as a result of the pandemic. We continue to invest in Germany and technology, and we are seeing excellent results selling cars on an agency basis for carriers in Germany. Our emphasis remains on core markets where we already conduct business today, as well as emerging international opportunities in due time.

Congratulations to John and the other new hires. How do your roles change with the expanded executive team?

The senior leadership approach at Copart has always been quite fluid. John will take on much more of the day-to-day leadership of traditional finance functions including accounting, helping us evaluate returns on investments and approaches to our strategic future.

Our next question comes from Stephanie Benjamin with Truist Securities. Please state your question.

On the non-insurance side of your business, it saw pretty strong growth particularly in the dealer side. Do you think this continued performance is sticky, and these gains will continue long-term?

Yes, a meaningful portion of the vehicles we auction on behalf of our dealers are exported. Our performance trajectory in the non-insurance business long predates the pandemic and our platform's liquidity is key in achieving solid returns for our sellers.

Has there been any internal plans or investments to expand even further internationally?

Yes. Germany and Spain have always been viewed as gateways to Western Europe. We expect our success in these markets will extend to others as we recognize our long-term priorities in the international arena.

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

Wondering about government lockdown scenarios. Are there geographies that are more at risk now based on your experience?

It's a function of both the virus trends and government response. We've had sufficient experience to adapt operations effectively to serving our communities and customers. Volume effects remain to be seen.

What would be the benefits for an insurer that commits to an exclusive agreement with Copart?

Exclusive agreements reflect the trust we've earned through excellent returns and service. This simplifies operations for insurers, reducing complexity in managing multiple vendors, enhancing the experience.

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

On dealer volumes, is there an explanation for the growth against a declining backdrop? Are you exporting more volumes than a year ago?

Yes, a meaningful portion of the cars auctioned on behalf of dealers are exported. While it's difficult to determine the overall direction, our international buyer base is essential for our long-term growth.

There are no further questions at this time, I'll turn it back to Jeff Liaw for closing remarks. Thank you.

Thank you for the thoughtful questions, and we look forward to talking to everyone on the next call. Have a good day.

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