Good day, everyone, and welcome to Copart Incorporated Fourth Quarter Fiscal 2023 Earnings Call. Just a reminder, today's conference is being recorded. Before turning the call over to management, I will share Copart's statement on Safe Harbor and non-GAAP financial measures. During today's call, the company will discuss certain non-GAAP measures, including discrete income tax items, the effect of extinguished debt and adjustments to income tax benefits related to stock-based compensation. The company has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures on its Investor Relations website and in its press release issued at approximately 3:00 PM central time today. The company believes these non-GAAP measures together with the corresponding GAAP measures are relevant in analyzing the company's results and assessing its business trends and performance. In addition, the company's comments today include forward-looking statements within the meaning of the 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 details on the risks associated with the company's business, we refer you to the section titled Risk Factors in the company's annual report on Form 10-K for the year ended July 31st, 2023, 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'll now turn the call over to the company's Co-CEO, Jeff Liaw.

Great. Thank you, and good evening, and thank you, everyone, for joining us today. We're pleased to report our results for the fourth quarter of fiscal 2023 and the conclusion of a strong fiscal year. We continue our trend of generating excellent results for new and existing customers, of growing our business profitably, and of reinvesting in the future prosperity of our customers and ourselves. Today, I'll keep my comments brief focusing on some of the recurring themes that are most relevant to our business and to our customers. A year ago on this same call, we talked about the various dimensions of enterprise sustainability that we consider here at Copart, including environmental sustainability, given our critical role in the circular automotive economy. Our financial sustainability in the form of our conservative capitalization, operational sustainability through our land stewardship and ownership strategy, and global socioeconomic sustainability through our provision of mobility to developing economies around the world. Today, I'll spend just a few minutes elaborating on a fifth dimension, which is the proactive role Copart plays in assisting communities in their recovery from catastrophic weather events. The 2023 hurricane season has been forecast to be above normal according to the National Oceanic and Atmospheric Administration, a division of the Department of Commerce. That forecast feels evergreen year-to-year. So far in 2023, we've experienced 12 named storms, more than double the number we encountered last year. Thankfully, for our insurance clients and their policyholders, the insurance loss impacts of the first hurricane to make landfall this year, Hurricane Idalia, were relatively modest in comparison to major storms in prior years. The threat of a more substantial event nonetheless remains in 2023 as many of the most significant storms in the past 20 years have occurred late in the season. Hurricane Ian, for example, the largest ever catastrophic event in our history, as measured by unit volume, did not itself make landfall until the 23rd of September last year. For any substantial storm likely to affect our insurance clients and their policyholders, we don't have the luxury of perfect visibility before we deploy resources, both in the moment and in the years prior. Our response to Hurricane Idalia illustrates this reality. Though the landfall of the hurricane's eye was projected to be in the Big Bend area of Florida, prevailing weather models showed a wide range of possible outcomes, including a potential initial landfall in the Tampa area and eastward progression thereafter through Florida, Georgia, and the Carolinas. Well before landfall, we deployed hundreds of team members, Copart-owned and third-party-owned tow trucks and Copart-owned loaders, telecommunications equipment, and generators from around the country to the region. We were prepared to immediately retrieve inventory, store, process titles for, and sell many thousands of vehicles in the affected areas. And of course, our real estate investment and planning had begun years in advance, yielding more than 600 available acres of dedicated catastrophe storage in Florida alone. For any given storm quarter or year, our investments in catastrophic readiness may appear to be overkill, but we recognize the responsibility we have to our customers and to the communities we serve together to optimize our readiness for such severe weather events. I'll touch on a few additional themes for both our insurance and non-insurance businesses. But first on the insurance universe. According to CCC, total loss frequency troughed at 17.1% in the second calendar quarter of 2022 and has subsequently rebounded to 18.8% in the second calendar quarter of 2023. This is down a bit sequentially from calendar quarter one to calendar quarter two, though this is the result of seasonality. We've observed that same modest reduction in total loss frequency from the first quarter to the second quarter in each of the past eight years of CCC's data. Our expectation is that new and used vehicle prices are likely to stabilize or decrease more swiftly than repair costs will. We believe this, in turn, should lead to a recovery in total loss frequency eventually surpassing pre-COVID levels as well. In March 2023, Kelley Blue Book data indicated that average retail transaction values for new vehicles were below MSRP for the first time in nearly two years. In April 2023, this average transaction price was nearly $400 below MSRP compared to being $600 above just one year prior. The long-term drivers of total loss frequency, of course, remain unchanged. First, repairs are more expensive and less attractive due to increasing accident severity, vehicle complexity, labor costs, and rental car costs; and two, salvage economics are more attractive because the growing economies in Central and South America, Africa, and Eastern Europe depend on our damaged vehicles to provide the mobility they need. Although our US insurance volumes continue to increase, up some 9% year-over-year, we estimate the total loss volumes continue to be relatively suppressed when compared to historical total loss frequency norms. As this inflationary environment persists, our insurance clients continue to experience hiring and retention challenges. And we, therefore, believe they'll lean still more heavily on trusted partners like Copart to provide additional services, including virtual inspection, loan payoff, and title procurement services, among many others. Our insurance company clients continue to leverage and incorporate our image recognition tools and machine learning algorithms to enable better decision-making on total losses and, importantly, faster decision-making. As we've noted in the past, for a vehicle that will ultimately be totaled, insurance companies often nevertheless incur literally thousands of dollars in towing, storage estimating teardown costs, and appraiser labor, much of which could have been mitigated with streamlined decision-making. Our insurance companies continue to benefit from and appreciate the importance of our global marketplace in providing superior salvage returns to the insurance industry and minimizing their claims expense as a result. Finally, a few comments on the non-insurance world as well. In the fourth quarter, we observed year-over-year growth of 13.8% in our Blue Car division, underscoring the realization of the benefits of our auction platform and our global member base as we serve the bank and finance fleet and rental segments as well. We likewise increased our dealer volume year-over-year by 5%. These dealers are unique as they serve, in some cases, as both sellers and buyers on our platform. In both cases, for the Blue Car and dealer sources of vehicles for Copart, we believe we are outperforming other wholesale channels for vehicles. Lastly, in July of 2023, we received approval from the competition authorities in the UK to complete the merger of our acquisition of Hills Motor Company, which we had completed in financial terms a year prior. Hills Motor Company is a leading vehicle dismantling business in the UK; our insurance customers in the region have made clear to us that they prefer us to be partially vertically integrated in auction vehicles on their behalf while also directly satisfying some of their needs for recycled parts. With that, I'll turn it over to our CFO, Leah Stearns, to provide additional commentary and to walk through some key statistics in our fourth quarter financial results before we open it up for questions.

Thank you, Jeff. Looking at the quarter, we saw a nearly 10% increase in global unit sales year-over-year, with an almost 8% rise in the US and over 22% internationally. For fiscal year 2023, global unit sales were up by more than 5%, including more than a 4% increase in the US and over 12% internationally. In the US, our fee units rose by approximately 8% for the quarter and 5% for the year, mainly due to growth in insurance units. However, our purchase units fell by 3% for the quarter and about 14% for the year. Internationally, our unit growth stemmed from a combination of fee and purchased units, with fee units climbing over 22% in the fourth quarter and over 11% for the year, while purchased units grew nearly 21% for the quarter and 20% for the year. Our US insurance business saw growth compared to its one and two-year comparisons of 9% and 19% during the quarter and 7% and 28% for the year, respectively, driven mainly by the ongoing recovery in driving activity, which increased accident frequency and severity, as well as total loss frequency and market share gains. Our auction returns remain robust as we continue to focus on expanding our global buyer base through member recruitment, registration, and activation. Consequently, our auctions deliver best-in-class liquidity and returns for insurance customers, offering a cost-effective solution to managing rising claims costs, particularly for damaged vehicles categorized as total loss. Moving on to our financial results, for the fourth quarter, global revenue grew by $114 million or nearly 13%, which included a 1% or $6 million benefit from currency impacts. During fiscal year 2023, global revenue rose by $369 million or over 10%, including a 1% or $44 million negative impact from currency. Global service revenue increased by $126 million or nearly 18% for the fourth quarter and $345 million or 12% for the year, predominantly due to higher average revenue per unit and increased volume. US service revenue jumped nearly 16% for the quarter and over 12% for the year, while international service revenue surged over 36% for the quarter and over 11% for the year. Average selling prices experienced a slight year-over-year increase for the quarter, with US prices rising about 2%, contrasted with an over 11% drop in the Manheim Index, which concluded July at 211.7. Purchased vehicle sales for the fourth quarter saw a decrease of $12 million or 7%, with US purchased vehicle revenue down 25% and international sales up 29%. For fiscal year 2023, purchased vehicle sales increased by $23 million or around 4%, with the US down 15% and international sales up about 37%. The cost of sales for purchased vehicles decreased by $12 million or 7.5% for the fourth quarter, while gross profit for purchased vehicles fell by approximately 1%. For the fiscal year, purchased vehicle cost of sales rose by $29 million or 5%, and gross profit decreased by $6 million or 9%. Global gross profit for the fourth quarter rose by $76 million or about 20%, with our gross margin percentage increasing by about 270 basis points to 45.9%. US margins increased to 51.2%, while international margins decreased to 21.4%. For fiscal year 2023, global gross profit rose by about $131 million or 8%, and our gross margin percentage fell by approximately 100 basis points to 44.9%. US margins for the year reached 49.2%, whereas international margins dropped to 24.5%. It is important to note that the decline in our international gross margin reflects around $6 million of prior period non-cash expenses mainly related to depreciation and amortization, as well as adjustments to fair market value for our acquired inventory linked to the completion of the final purchase price accounting for Hills' acquisition in the UK. The increase in year-over-year margin on a consolidated basis was primarily driven by a shift in mix in the US, partly offset by inflationary impacts on labor and fuel costs and a slight decline in purchase unit margins internationally. Regarding costs, our teams remain dedicated to optimizing our operational processes by utilizing technology and automation to alleviate the inflationary pressures we have encountered in labor and transportation costs. We have also recently noticed some easing in certain expenses, particularly transportation, which has benefited from a 29% year-over-year reduction in diesel costs. Furthermore, we continuously strive to enhance our operational processes using technology and automation, which we anticipate will boost scalability and efficiency across the organization to help counter longer-term cost pressures. Shifting to general and administrative expenses, excluding stock-based compensation and depreciation costs, G&A expenses rose by $12 million for the quarter and $23 million for the fiscal year, with G&A as a percentage of revenue standing at 5.6% for Q4 and 5.1% for the fiscal year 2023. Due to our strong revenue growth and moderate cost increases, GAAP operating income surged by over 20% to more than $390 million for the quarter and approximately 8% to nearly $1.5 billion for the year. The income tax expense for the fourth quarter was close to $72 million, reflecting an 18% effective tax rate, and for the year, the expense reached nearly $317 million, translating to a 20% effective tax rate. Lastly, for the fourth quarter, GAAP net income climbed about 32% to nearly $348 million or $0.36 per diluted common share, while annual GAAP net income increased 13.5% to over $1.2 billion or $1.28 per diluted common share. Our global inventory at the end of July was up 9.5% compared to last year, and when excluding low-value units like wholesalers and charities, global inventory rose by 11%. This includes a year-over-year increase of over 8% for US inventory or over 10% when excluding low-value units, and nearly 16% for international inventory. Turning to our liquidity and financial position, as of year-end, liquidity stood at $3.6 billion, consisting of $1.4 billion in investments and held-to-maturity securities, $1 billion in cash and cash equivalents, and over $1.2 billion of availability under our revolving credit facility. For the year, we generated operating cash flow of nearly $1.4 billion, reflecting an increase of almost 16% from the previous year. Additionally, during 2023, we invested nearly $517 million in capital expenditures, with more than 80% of this amount focused on enhancing our physical infrastructure and expanding capacity, which supports our ability to serve customers while reducing transportation costs and associated fuel consumption. Year-to-date, if we subtract our capital expenditures from operating cash flow, we've generated over $847 million in free cash flow. Given our strong financial position, we plan to continue investing in our business to meet customer needs, which includes yard expansion, new yard acquisitions, logistics, and improvements to our technology platform. As Jeff mentioned, we believe that these historical investments have set Copart apart as a service provider and ensured we have the necessary capacity to accommodate the future growth of our industry. With that, we conclude our prepared remarks and are happy to take any questions.

Thank you. We will now start the question-and-answer session. Our first question comes from Bob Labick with CJS Securities. Please go ahead with your question.

Good afternoon. Congratulations on continued strong performance.

Thanks, Bob.

First question, I have a related follow-up as well. But could you talk a little bit about the recent announcement of, I guess, a partnership with Hi Marley tech-enabled services in general to help your insurance customers? Maybe talk about what you'll do with that company and if there's other areas of interest where you might be partnering to help your insurance customers?

Sure. Happy to address that, Bob. So Hi Marley is a service provider in the insurance ecosystem broadly speaking. They started in the messaging space in particular but they're committed to improving workflow efficiency as well as the interface between policyholders and companies within the insurance industry. Well I think we share that objective to improve insurance outcomes, to streamline processes, and automate them on behalf of all the participants in the industry, so we're delighted to partner with them. We see that they have achieved some traction with some of the leading carriers in the space, and we think that we can develop product offerings together that will achieve those objectives, reduce cycle times, reduce waste, and increase policyholder satisfaction in total loss scenarios.

Okay. Super. And then kind of as a related follow-up, we're increasingly seeing AI-based programs just using smartphones for enhanced inspections or valuations of autos, other damage, or valuation of the car. Do you see this as an area that you're interested in investing in? And is this a buy, build, or potential partnership opportunity for you?

I think it's likely a mix of the above. So we have developed and continue to refine our own image-based tools. And the more precise the exercise is, certainly the more difficult the development challenge. But to assess a vehicle as a total loss, I think, for a healthy portion of them, the AI required is not too sophisticated, right? A car that has multiple airbags deployed and collided at 35 miles an hour that is five years old is highly probable to be a total loss, and the image recognition will only enhance the conviction of that call. Where I think the image recognition becomes a more complicated endeavor is when there is slight damage and to estimate the actual repair cost and to try to forecast from deflection in a given panel, how much damage has been done to the underlying drivetrain or computing capabilities of the car, that's harder to do. But for the total loss application, we have a robust product ready to be deployed and deployed in some cases with insurance companies. But likewise, if there are other service providers that insurance companies prefer, we're happy to plug in with them as well. Ultimately, we share the same objective: maximum efficiency, maximum speed on behalf of our clients. If that happens through our natively developed products, great. If there is a product they prefer instead, that's great too.

Thank you for that. I have one more question before I return to the queue. You mentioned that this year’s capital expenditures are projected at $500 million, with approximately 80% allocated for capacity expansions. Can you share your current status regarding yard capacity and efficiency based on that capacity? You've reported record volumes and continue to grow, and as you noted today, there’s still significant potential to improve total loss frequency. I understand you've invested $400 million in the past year along with substantial capital. How do you assess the current efficiency of the yards, and what are your capacity requirements moving forward?

Yes, that's a great question and it's difficult to summarize in one paragraph because the answer can vary widely depending on geography, region, and even specific areas within a city. Generally, we are in a strong position regarding our capacity and our ability to serve our customers currently. We plan for the long term, spanning 5, 10, and 20 years, and we are ready to invest significantly more in land and capacity to support the growth we are seeing. Across our system, there are certain areas where we need land soon, while others are secure for the next several years. We will continue to invest to support our growth. Looking back over the past 40 years, the land we’ve acquired has generally proven to be a solid financial investment. This doesn’t mean we’ll be wasteful, but land is fundamentally an investment in a lasting asset that tends to appreciate over time.

Okay. Super. Thanks so much.

Thank you. Our next question comes from the line of Daniel Imbro with Stephens. Please proceed with your question.

Yeah, good evening, everybody. Thanks for taking our questions. Jeff, I want to start on the demand side, maybe the equation. You mentioned these emerging markets need Copart to provide affordable transportation. I'm curious where else can those markets supply vehicles from at scale? There have been some headlines around maybe Asian manufacturers, especially China, exporting more cheap cars. But are you seeing any change in the need for those cars or the availability maybe from outside of your channel that you would compete with in the buyer side?

In a word, no, but that doesn't mean the situation won't change in the coming years. International demand for cars from Copart has grown significantly over the past year, five years, and ten years. While demand in any specific country can fluctuate due to economic factors like inflation and unemployment, developing economies generally have an increasing need for our cars. It's possible that other providers could meet this demand, but it appears that high-quality vehicles from the US, UK, and Canada that can be repaired are better suited to fulfill that need. This has been the case for the past 20 years, and we don't anticipate that changing.

Great. And then maybe more near term, looking at the quarter, Leah, I think you mentioned US vehicle sales maybe units were down a few percent, but there was a nice pickup sequentially in the service vehicles. Was that just a customer shifting maybe from principal to agency? And is that still something you see in your new markets? I'm curious, internationally, vehicle sales units were up a lot. Is that just the onboarding of customers that still want you to take principal risk, but the long-term strategy to convert them to agency?

So in terms of US purchased vehicle sales, we were actually up sequentially. But year-over-year, that was down slightly. So that does appear. And we do believe that the reduction in purchased vehicle sales earlier in 2023 was really a temporary phenomenon for the business. So we would expect to see that continue to grow going forward on a sequential basis as the market becomes more stable from an ASP perspective and more of the whole car space. And then as it relates to the second part of your question, can you repeat that?

Just internationally, that continues to grow very quickly. I'm curious if that is more of the long-term strategy or if that is helping onboard new customers to remove the risk from the seller, but ultimately shift them to agency as the strategy?

It's really the latter initially. And to the extent that we find opportunities to continue to expand in international markets, we may use that. But I don't think you'll see us grow significantly on the international side, particularly for the insurance business. We may increase our full car cash for cars business internationally, but that is a separate endeavor.

Yes. The purchasing approach is essential. I believe that was what you were suggesting regarding our institutional clients. In the US, a significant portion of our purchase volume comes from our direct-to-consumer business, which includes Cash For Cars where we buy vehicles from customers. So far, this has not proven to be a scalable solution for establishing a consumer-branded Copart. The better option for individual vehicle owners is to sell us their cars for a specific value, allowing us to resell them at a profit. If we could sell those vehicles solely on a consignment basis, we would likely prefer that. This preference extends to our institutional clients in both the US and other regions. When we entered the UK market in 2007, nearly 16 years ago, the sales model for insurance clients was predominantly principal-based. Today, however, we have shifted to a model where a strong majority of cars are sold on a consignment basis. This is our preferred strategy, not necessarily because it generates more profit, but because it fosters a better alignment of interests with our customers. When we purchase cars from them, they aim to receive the lowest value, while we strive to achieve the highest. This creates opposing goals. When we sell vehicles on their behalf, we are both invested in achieving the best possible result and working together towards that outcome. This alignment of interests is more conducive to maintaining a constructive 20-year relationship rather than simply acting as principal trading counterparties.

Yeah, that makes a ton of sense. I appreciate all the color and best of luck, guys.

Thank you.

Thank you. Our next question comes from Craig Kennison with Robert W. Baird. Please proceed with your question.

Hey, good afternoon, and thank you for taking my question. I wanted to circle back on ASPs. I think the surprise for me this year is how strong your ASP has been, despite the drop in used car prices as measured by the Manheim index or other sources. I think you've explained that in part as a function of mix. And I'm wondering if you can help us understand how wide the gap is between your insurance ASPs and your non-insurance ASPs and whether that's the fundamental driver to that outperformance?

In this case, Craig, it's not the main factor affecting the performance this quarter. It's fair to note that if you compare Copart's average selling prices with Manheim’s over the years, they tend to move together, with some variations in timing. Our prices surged much earlier than Manheim's after the initial downturn in the spring of 2020. In late 2021, the wholesale market, as shown by the Manheim Index, rose sharply, and although we continued to grow, it was not at the same pace since we had already increased our prices. Currently, while Manheim's prices have decreased significantly year-over-year, our prices have remained stable or even risen for both insurance and non-insurance units. This outperformance isn't mainly due to a transition from insurance to non-insurance. However, it is true that with used vehicle prices softening, we are seeing an increase in total loss frequency. When total loss frequency rises, Copart has the opportunity to sell marginal vehicles, which tend to sell for more than the average vehicle sold before. This partly explains the strong performance in pricing on the insurance side, as well as the overall auction performance. We are witnessing more bidders and more bids per vehicle, and in general, all the traditional metrics we used to highlight from quarter to quarter show that auction liquidity per unit sold is better now than it was a year ago or even five years ago. This also contributes to our performance.

And as a follow-up, within your, let's say, dealer service cars or Copart Blue, are you continuing to mix up, in other words, earn the right to sell a more expensive car? And is that in any way a driver to ASP?

Less so in this, yes, but less so in this case. In terms of the pure arithmetic for the quarter, that's not the principal driver of our outperformance relative to the Manheim Used Vehicle Index.

Got it. Thank you.

Thanks, Craig.

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

Hey, good afternoon, guys. When you look at the Blue Car and the dealer cars that you're selling, is the mix of foreign buyers higher in that space? Or do they prefer the salvage cars because they have the arbitrage of low repair costs?

I think it's similar, Bret. Yes, they appreciate the arbitrage or repair costs, and we will verify this in real time. However, I believe the trends are generally similar. Also, as these cars enter the marketplace, it relates to our previous point about the liquidity flywheel. We connect vehicles with buyers, which generates further interest in the cars we gradually bring to the auction.

Okay. You mentioned Hurricane Idalia in the prepared remarks. That was an event in Q1. Was the cost associated with preparing for it, compared to the limited cars delivered, a negative impact for the quarter, or was it essentially balanced out?

That Idalia happened in the first quarter of '24 and so that's not reflected in these numbers.

No, no, I was asking whether that's an impact in the quarter that we are currently in or?

Yes. Any costs associated with servicing the hurricanes that occurred in this quarter would impact the quarter.

Okay. My question was more like was that a very high-cost prep event that didn't generate the return? I guess, is it a negative for the first quarter?

It is, but also to what extent that's just the cost of doing business in 2023 and beyond, right? So we'll talk about next quarter next quarter. We definitely incurred some mobilization costs in preparation for a storm that didn't ultimately materialize. Now I think to be fair, if you look back to major storms like Harvey back in 2017, a lot of the massive expenses would be towing costs, temporary leases, short-term leases of racetracks, and so forth. In this case, we haven't incurred those kinds of costs in part because we deployed the capital to own the land to be ready for it. So we would likely not have entered into meaningful emergency leases in this case, even had the storm arrived. And as for the towing, the towing largely never materialized at all because the cars weren't there.

Okay. And then just a quick question on sort of thoughts around the cash balance. Obviously, you guys are still piling it up despite buying a fair amount of real estate every year. Do you have any, I guess, is it just interest income off of that or are there longer-term strategies around what you do with $2-plus billion?

Sure. With respect to the current investment strategy, given the fact that we are earning in excess of 5.25 on government T-bills that are short duration and tenure, we are currently comfortable using that until we find a higher and better use, and we continue to look at opportunities to invest. Everything across the spectrum of additional technology, land, logistic opportunities to bring down cost, and obviously looking at ways to enhance the broader business that we have. So I don't know, Jeff, do you want to add?

Yes. Bret, over the very long haul, as you know, we've returned capital to shareholders via stock buybacks. And no doubt, we will do that again. It's a question of when and how. And historically, we've done so both via open market purchases as well as through more structured Dutch tender offerings and so forth. So that is the long-term answer. In the near term, yes, we are investing that cash in treasuries, which are certainly yielding better returns than they would have historically. And we think the fortress balance sheet is of value to ourselves and to our clients. I think it positions us to act very aggressively when we see land purchase opportunities, for example. It equips us to respond to a pandemic in a way that a lesser capitalized company could not, right? The pandemic arrived. I know it feels like a distant memory now, but there was a moment when we wondered if we'd be able to sell a car or if every DMV would shut down. And knowing that we have the capitalization we do, we were able to operate without furloughing employees, without suspending CapEx, and we continued our business as is, and we will bend so that our insurance companies can rely upon us. That balance sheet is part of what enables us to be that resilient in that environment.

Right. Thank you.

Thanks, Bret.

Thank you. Our next question comes from the line of Ryan Brinkman with JPMorgan. Please proceed with your question.

Hi. Thanks for taking my question. I thought to ask on the Hills Motors acquisition that's gone through with the regulatory approval now. And I heard you say that it was driven by customer preferences in that region. But just curious about maybe gauge your interest in as we think about what you could potentially do with your cash, etc. Your desire inclination to participate in these other sort of adjacencies that might, in some cases, maybe be, I think, competing with buyers of vehicles at your auctions, although not sellers. And is it somehow more restricted to the UK or is there maybe opportunity in the US or are there other potential vertical integrations or adjacencies that maybe we're not thinking of that could potentially be attractive to expand into inorganically?

Yes, that's a valid question. When we consider strategic expansion, we always begin by assessing our strengths and determining where we can apply those capabilities for maximum profitability. We have extensive experience in managing a high-volume digital auction platform, which we’ve been refining for 20 years since 2003, resulting in a leading online real-time auction system. Additionally, we excel at handling the complex logistics involved in moving millions of vehicles from various sources, including homeowners, dealers, and repair shops, along with managing our teams and subcontractors for these operations. We are also adept at navigating complex regulatory landscapes, dealing with different title processes across numerous DMVs and countries. Bearing all this in mind, we strategically assess how to leverage our capabilities. As you are aware, we are cautious in our approach. We acquired National Powersport Auctions in 2017, specializing in wholesale motorcycle sales, and since then, we have primarily focused on expanding into new countries rather than diversifying beyond Copart. Any investment opportunity we consider would have to meet a very high threshold. In the markets where we currently operate, like the US, the dismantling industry and usage of alternative parts are well-established, with many companies, including public entities, already in that space. Therefore, it seems unlikely that we would enter that market ourselves, especially as we position ourselves as a neutral party focused on maximizing auction proceeds for our clients. If dismantling leads to the best financial outcome for a vehicle, then the dismantler will acquire it. Conversely, if the best outcome is for the car to be on the road again in places like the US, Poland, or Nigeria, our auction will find that buyer as well. In the UK and perhaps other parts of Europe, the adoption of alternative parts has been slower. Some of our customers have specifically requested assistance in enhancing that market, but I don’t believe they expect us to dismantle a significant portion of vehicles. Our role is to facilitate auctions and sell cars to third parties, regardless of location. In this instance, we are responsive to our customers' requests and are willing to take on this task to meet their needs.

That's very helpful. Lastly, I would like to hear your updated thoughts on the overall car market. I'm curious about what portion of Copart Blue is represented by the traditional whole car market. Do you have any insights, since you still participate there through physical auctions, even though the sales are conducted virtually? Does this approach satisfy the requirements for selling repossession vehicles, which I understand cannot be sold solely online? Additionally, what are your thoughts on the online-only whole car segment? Is that something you might consider expanding into?

It's possible. I misunderstand your question, but we certainly have expanded into and or?

Like what Openlane and ACV might do, for example, online-only.

We do compete with some of these entities currently. We are working to gain the opportunity to sell vehicles from financial institutions, corporate fleets, rental car fleets, and similar sources. Therefore, we are in competition with many players in the industry, including traditional physical auction houses. This has been a reality for quite some time, where about three-quarters of our business is related to insurance and the rest is not. If we were to consider separating the businesses—which for the reasons discussed on this call, we would not do—our non-insurance business alone could operate as a substantial auction house without insurance involvement. However, combining both insurance and non-insurance aspects significantly enhances the value proposition for both segments.

Great. Thank you.

Okay. Thanks, Craig.

Our next question comes from Craig Kennison with Robert W. Baird. Please proceed with your question.

Hey, thanks for letting me back in the queue. I just wanted to follow up on the UK business. You mentioned, Jeff, that insurers want you to be more vertically integrated there and you're going to meet them where they're at, which I understand. But is there some future state of the world where you could divest that dismantling business piece, or is there a fundamental need for that to be connected in the UK, and I just don't understand it?

There is no plan for us to divest that part of the business. We typically don't engage in initiatives with the idea that they will be short-term. The difficulty you're experiencing, Craig, may stem from your background as a US analyst, where the auction houses, dismantlers, and repair shops function as separate entities within the industry. This separation has been our model for over 40 years. We have consistently favored a position of pure neutrality, selling cars to whomever values them the most, regardless of their intended use. In the UK, we have received clear feedback, highlighting a widespread industry perspective that the salvage auction provider should also offer access to dismantling parts. We are committed to addressing this issue directly. Ultimately, we prioritize the preferences of our customers. While we can explain our viewpoint on how the circular economy can function well with third-party dismantlers, we are willing to take on that role if that's what our customers prefer.

And is that unique to the UK, or are there other markets in Europe, for example, that have that same request?

I think it remains the same. There are a lot of different forces at work here, including divergent views about alternative parts utilization. So there are some countries you can imagine in which the OEMs are very influential and they're able to preference insurance companies and repair shops to use first-fit parts. There are other countries in which the carbon reduction initiative is more critical, and therefore, the use of recycled parts is more important. So I don't think it's the UK alone, but it was certainly the UK most acutely, but this is also a dynamic game, right? There's no question that preferences will change over the course of the next year, three, and five in many of the countries in which we do business.

Great. Thank you.

Okay. Thanks, Craig.

Thank you. There are no further questions at this time. I would now like to turn the floor back over to Jeff for closing comments.

Great. Thanks, everybody, for joining us for the fourth quarter and we'll talk to you after Q1. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.