Thanks, Judith. Good morning, everyone, and thanks for joining us today for IAA's Third Quarter Fiscal 2021 Earnings Conference Call. Speaking today are John Kett, Chief Executive Officer and President; and Susan Healy, our Chief Financial Officer. After John and Susan have made their formal remarks, we will open the call to questions. Before we begin, I would like to remind you that certain comments made during this call regarding our plans, strategies and goals and our anticipated financial performance constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to differ materially from such statements. Those important factors are referred to in IAA's press release issued today and in the Risk Factors section included in our annual report on Form 10-K for the year ended December 27, 2020, filed with the SEC on February 22, 2021. The forward-looking statements made today are as of the date of this call, and IAA does not undertake any obligation to update these forward-looking statements. Finally, the speakers will refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation schedule of the non-GAAP financial measures to the most directly comparable GAAP measures is available in IAA's press release issued today. A copy of today's press release may be obtained by visiting the Investor Relations page of the website at www.iaai.com. I will now turn the call over to John.

Thanks, Arif. Good morning, everyone, and thank you all for joining us for our third quarter earnings call. Today, I'm just going to make my comments around a few key items. First, I want to recognize the tremendous efforts of the IAA team supporting Hurricane Ida and its remnants in the Northeast U.S. The results delivered by our dedicated CAT response team are directly connected to our efforts to strengthen our market position. Second, I'll highlight our strong performance for the quarter. And then finally, I'll discuss our continued progress on our strategic initiatives, including our acquisition of SYNETIQ, which will greatly increase our presence in the U.K. So starting with the CAT. I want to thank the amazing IAA team for their efforts in response to Hurricane Ida. This storm initially hit Louisiana but then really hammered the Northeast U.S., causing significant flooding in New York, New Jersey and Pennsylvania. To put it in some perspective, Ida has been the largest auto CAT event since Hurricane Harvey. So if you think about our normal operation, every day, we pick up clean, title, market and sell vehicles to our marketplace. So to illustrate how an event like Ida affects our operation, imagine taking our daily average volume and multiplying it by 10 in one of the country's most densely populated areas. While that would place a tremendous strain on any operation, IAA's Catastrophe response strategy, which is based on continuous preparation, allowed us to be exceptionally responsive and nimble when our customers needed us most. Let me share just a few highlights of our specific efforts in the Northeast. We mobilized our people quickly and had teams ready on the ground, and we had hundreds of additional employees triaged and ready to enter as we needed them. Within 24 hours of the storm hitting, we had either exercised options on or secured an additional 100 acres of capacity in the affected markets of New York and New Jersey, which was more than ample to service our customer needs. Within 48 hours, we had implemented a hub-and-spoke tolling model to ensure that we are efficiently and effectively leveraging our transport resources across these affected areas. Within just a few days of the storm, we were picking up more than 90% of the released vehicles on a daily basis. And finally, within 11 days of the storm, we were already selling flood vehicles to our marketplace. While serving the customer is something we strive to do exceptionally well every day, during this event, IAA's performance was better than ever. And this has really been validated by our insurance customers. Many of them have actually reached out to us to thank us for our efforts and let us know that they were hearing overwhelmingly positive feedback from both their adjusters and their policyholders on our efforts. Knowing that we're helping our insurance customers best serve their own policyholders when it's needed most is a great achievement, and it's a validation of our revamped CAT response strategy. Our readiness, response, and overall execution was the strongest that I've seen in my 20 years with the company, and I could not be prouder of our team's performance. Our ability to deliver for our customers during this difficult time is paramount to us strengthening our insurance relationships longer term. Our performance during this CAT has reinforced an already strong measure of trust and confidence from several of our largest providers. And given the longer sales cycle, we believe that the work and investments that we make today for our clients will pay off in the future and strengthen our position in the market. We do incur additional costs related to servicing these events, and the full financial impact of this event will not be evident until next quarter. But in aggregate, we believe the impact is expected to be minor. Now let me discuss our strong third quarter performance. For the period, we delivered growth in sales of approximately 25% and growth in adjusted EBITDA of nearly 17% compared to the third quarter of last year. Our results were driven by continued higher revenue per unit as well as the continued strengthening of the economy, which impacted miles driven and volume. Our average selling price and revenue per unit both achieved record levels as demand has remained strong during the period, in part due to the impact of supply chain disruptions affecting new car production. Also, as we noted in our last call, we had expected the previously announced share shifts to be completed in the third quarter. However, in a couple of markets, we continue to receive volume for longer than anticipated, and we now expect that portion, which represents less than 10% of the overall share shift from that customer, to begin transitioning in Q4. We also had some net share wins from other insurance customers that are expected to benefit us in the fourth quarter. If you put it all together, the strong trends in our business more than offset the impact of the share shifts as well as the cost pressures, particularly related to tolling. Now let me turn to our strategic initiatives. With respect to strengthening our service offerings, we've continued to grow our loan payoff tool. We now have nearly 1,800 lenders on the platform, and year-to-date, our volume is over 3.5 times more than last year. We also hit a significant milestone for this product. Year-to-date, we have processed over $1 billion in transactions on the portal. This further evidence that loan payoff is the most comprehensive solution in the industry. Our progress here continues to demonstrate how we can create meaningful cycle time reductions, build deeper customer relationships, expand wallet share, and create additional value for our sellers. Another development during the quarter was the launch of IAA Transport, a tool that enables buyers to digitally order transportation for vehicles they purchased. Buyers can now schedule door-to-door vehicle delivery completely online and receive real-time status updates. Additionally, the IAA transport product makes the process seamless for international buyers by procuring all the required export and import documentation. Inventory capacity is another area critical to our growth strategy. During the quarter, we broke ground on new branches across five states. We also have several capacity expansion projects in process at existing locations that we expect to complete by the end of the year. In addition to service offerings and growth in capacity, we've also continued to expand our international buyer network, growing it by 41% in the third quarter year-over-year. Our continued focus on digital marketing efforts, process efficiency, improved transparency, and best-in-class service are all driving this continued buyer base growth and increased engagement. Next, let me talk about our data and analytics practice. This is foundational for all of our service offerings. Our data gives us and our customers the insight to make better decisions and allows us to operate in a more efficient and effective manner. Our practice and our data ecosystem are focused on three things: number one is about accelerating process automation and digitization; secondly, delivering insightful and transparent reporting to our clients; and third, improving vehicle condition transparency for our buyers. We also continue to make progress on our margin expansion plan. As you may recall, there are three areas of focus: pricing optimization, branch process efficiency improvements, and towing. I'd tell you that we're tracking well on pricing optimization and making progress on branch process efficiency. But in regards to towing, we are experiencing cost pressures given the broader issues in the labor market and the impact of the CAT. As a result, we have paused or delayed some of our activities in this area, but we will continue to execute on our plan where we can this quarter and into 2022. My final item of strategic initiatives is regarding our international expansion. Just last week, we closed on the acquisition of SYNETIQ. This is an important strategic transaction for IAA in the United Kingdom. The SYNETIQ business has strong customer relationships, 14 locations throughout the country, and a high-quality energetic management team. In terms of SYNETIQ's revenue mix, approximately 80% is from auction-related sales with the remainder from the sale of reusable parts and scrap. We believe this ability to sell reusable parts is a true differentiator as insurance customers in the U.K. market are increasingly requesting this capability. The company also has a strong focus on sustainability and on maximizing the value of electric vehicles. For the 12 months ended September 30, SYNETIQ generated revenue of GBP 154 million and adjusted EBITDA of GBP 17 million. As we noted in our press release, SYNETIQ will operate independently from IAA U.K. until the completion of a regulatory review process. At this point, we don't know the exact timing of the review, but we are truly excited about this combination and the long-term opportunity for growth and innovation. So to close out, let me talk about our 2021 outlook. As we enter the final months of the year, we are again increasing our 2021 guidance. We now expect organic revenue growth of 25% to 27% and organic adjusted EBITDA growth in the range of 35% to 37%. I'll tell you that the fourth quarter is off to a good start, and our level of responsiveness and service around Hurricane Ida continues to be excellent.

Thank you, John. I'm really glad to be part of the IAA team. This is an extraordinary company with a strong business model, and I look forward to helping you navigate the next phase of growth. During my first two months here, I've been impressed by the capability and incredible dedication of our employees. This is particularly evident during a visit to New York and New Jersey, where I met many employees who have packed up and relocated to the East Coast for more than a month to assist our customers impacted by Hurricane Ida. It's great to see so many IAA employees willing to go above and beyond for our customers. I've also been greatly impressed by the level of innovation. The team's focus on developing new products and quickly bringing them to market is a true differentiator and a key to our continued success. My discussion today will focus on our adjusted non-GAAP results. Please see today's press release for more details on our financial performance and our methodology when calculating non-GAAP results. For the third quarter, consolidated revenues increased 24.5% compared to the prior year to $420.7 million. Organic consolidated revenue, which excludes the impact of foreign currency and the revenue from Auto Exchange, increased 23.1% to $416.2 million. The drivers of this organic growth were an increase in volume of 9%, primarily due to higher vehicle miles traveled against the pandemic impact in Q3 last year that more than offset the net impact of market share movements we have discussed in the past, as well as higher revenue per unit of 13%. Service revenues increased 19.1% compared to the third quarter of fiscal 2020 to $359 million, and vehicle sales increased 69% to $61.7 million. The increases in both service revenues and vehicle sales were primarily due to higher revenue per unit and higher volumes, and vehicle sales were also positively impacted by an international provider switching from a consignment model to a purchased vehicle model in the fourth quarter of 2020. It's worth noting that all buyer fees, including those for purchased vehicles, are included in service revenues. The total loss ratio for the quarter was 18.9% compared to 21% in the third quarter of fiscal 2020. Looking at our geographic performance, revenue increases in both our U.S. and international segments were driven by higher revenue per unit and a higher mix of vehicle sales. Volume increased in the U.S., but was slightly lower in our international segment, driven primarily by lower volume in Canada, where miles driven and traffic congestion have not recovered to the same extent as in the U.S. Turning now to gross profit. Gross profit increased to $167.8 million from $138.3 million in the third quarter of 2020. This was primarily due to higher revenue per unit, higher volume, and the benefits from our margin expansion plan. Overall, gross margin declined 100 basis points to 39.9% from 40.9% in the prior year, which is driven by the mix of vehicle sales as a proportion of total revenues. Vehicle sales accounted for 14.7% of total revenue this quarter compared to 10.8% in the prior year. However, gross margin as measured on a net revenue basis, netting out purchased vehicle costs from vehicle sales, was 110 basis points higher than the prior year, driven by leverage in indirect costs such as occupancy and yard overhead. Partially offsetting these benefits, towing costs increased due to higher demand for towers across all regions. SG&A expenses for the quarter were $49.8 million compared to $34.9 million in the prior year. Adjusted SG&A was $46.8 million, an increase of 35.7% compared to the prior year. In 2020, given the uncertainty around COVID-19, we managed our discretionary SG&A in terms of headcount additions, salaries, IT, and travel as incentive compensation was lower due to the impact of COVID-19 on volumes. As a result of all of that, last year's adjusted SG&A was actually 6.8% lower than the third quarter of 2019. 2021 represents a more normalized level of SG&A spend as we have resumed normal levels of staffing and spending in IT that had been deferred and have begun to travel to service our customers. In addition, higher incentive compensation costs this year are a function of our strong performance versus plan. While this was the first quarter where we didn't have any TSA costs, the costs were minimal in last year's third quarter as well and didn't have an impact on year-over-year results. Adjusted EBITDA in the quarter increased by 16.7% to $121.1 million from $103.8 million in the third quarter of 2020. Excluding the impact of foreign currency as well as the acquisition of Auto Exchange, organic adjusted EBITDA increased by 15.3% to $119.7 million for the third quarter of 2021. Interest expense was $11.1 million compared to $13.3 million in the third quarter of 2020. The decrease in interest expense was primarily due to a lower level of debt and lower interest rates as a result of the refinancing completed in the second quarter of 2021. The effective tax rate in the quarter was 23.2% versus 25.5% last year. We benefited from the impact of our tax optimization initiatives this quarter. Net income increased by 24.4% to $65.7 million from $52.8 million in the prior year, and adjusted net income increased by 25.3% to $69.8 million or $0.52 per diluted share compared to $55.7 million or $0.41 per diluted share in the third quarter of fiscal 2020. Now turning to our balance sheet and cash flows. Net cash provided by operating activities for the quarter was $32.7 million, which was down 31.7% from the prior year. During a CAT event, our cash requirements are elevated as our level of vehicle assignments and therefore, advanced charge payments are increasing. Also, advanced charges tend to be higher in New York and New Jersey. This also impacted our cash flow during the month of September, as almost all of the CAT vehicles assigned in September were not yet sold by quarter end. Capital expenditures for the quarter were $22.2 million compared to $19.8 million in the prior year, primarily due to higher spending on IT. We did not purchase any land during the quarter. We ended the quarter with net debt of $890.4 million and a leverage ratio of 1.7 times. Total liquidity was $805.5 million. When you look at leverage pro forma for the acquisition of SYNETIQ, net debt would have been approximately $1.2 billion, and our net leverage ratio would have been 2.2 times. We used $100 million of our revolving credit facility to finance the acquisition, with the remainder from cash on our balance sheet. For the first nine months of 2021, we generated free cash flow of $203.4 million compared to $223.3 million in the prior year, with the lower cash flow primarily due to the incremental cash deployed in the CAT responses quarter as well as higher capital spending, including for land purchases and for IT. So now turning to our outlook for fiscal 2021. We are again raising our outlook, primarily reflecting continued strength in revenue per unit relative to what we had forecasted last quarter. As you know, the Manheim used car index increased by over 5% in September versus August and approximately 27% on a year-over-year basis to a new record high and then increased again in the first half of October compared to September. On the cost side, like most companies, we are experiencing some higher costs, and we do expect these to continue this quarter, particularly in towing and labor. We also expect Hurricane Ida to be a tailwind to volume and revenue, but a headwind to gross margin and adjusted EBITDA for the quarter. Just a couple of points before I walk through the guidance. As a reminder, fiscal 2021 is a 53-week year with the extra week coming in the fourth quarter. This 53rd week is included in our organic growth and dollar range guidance. For the 53rd week, the revenue is expected to be in the range of $20 million to $24 million, and adjusted EBITDA is expected to be in the range of $10 million to $12 million. We're providing in our guidance both organic percentage growth percentages and dollar ranges. When it comes to the impact of currency and the auto exchange and SYNETIQ acquisitions, they are included in the dollar guidance but excluded from the organic growth percentages. So now for the guidance for the year, we now expect organic revenue growth of 25% to 27% and total revenues of $1.78 billion to $1.81 billion. We're expecting organic adjusted EBITDA growth of 35% to 37% and total adjusted EBITDA of $545 million to $553 million. Interest expense will be between $57.5 million and $58 million, and this includes the $10.3 million write-off of deferred financing fees that we incurred in the second quarter. The effective tax rate is expected to be in the range of 24.5% to 25%. Depreciation and amortization is expected to be $83 million to $85 million, and that's before any impact from purchase accounting. We are still in the early stages of assessing the potential impact of purchase accounting from SYNETIQ on our depreciation and amortization, but we do expect this analysis to be done prior to the issuance of our fourth quarter results. In summary, we delivered a strong quarter with continued outperformance in revenue per unit, partially offset by higher costs. We stepped up and delivered for our provider customers before, during, and in the aftermath of Hurricane Ida, and we're very excited about the opportunities we have to grow in the U.K. with our acquisition of SYNETIQ. With that, I'll turn it back to the operator for questions.

The first question is from Stephanie Moore with Truist.

Susan, congrats on your first call here. I would love to hear what your initial thoughts are on capital allocation moving forward, if this is maybe taking a different approach, or how you would view just the opportunities as we look ahead?

On capital allocation, I think the first and foremost priority is investing in the business, whether it's organic investments such as we've done in IT and land and other areas or acquisitions opportunistically like SYNETIQ that are going to be very complementary to our business. So we are going to take any and all of those internal growth opportunities. And then I think we've got the right strategy in terms of share repurchase. It's a great way for us to return capital to shareholders and still leave opportunity for those organic investments I mentioned.

And then on the margin initiative program, I believe you called out that some of the branch optimization initiatives are on schedule but seeing some pressure, as you would all expect, on the towing side. When this mission was first rolled out last year, I believe that there were some actual EBITDA contribution dollars that were provided. Of course, this was all pre-COVID, and the world was very different at that time. I think we all understand that. But as we look today and there is the recovery going on, are those dollar contributions still a rough ballpark that we can look at? Or should we kind of view this as some changes to those amounts?

No, we still believe in the numbers that we provided. As you mentioned, COVID was a bit of a setback. We are confident we will navigate through the towing challenges. Additionally, in terms of pricing and branch operations, we still feel positive about our estimates and the steps we are taking to improve margins. However, the towing aspect will take a bit longer due to the current market conditions.

The next question is from Craig Kennison with Baird.

I wanted to start with ARPU trends. Again, remained positive here. You mentioned positive trends in the Manheim Index as well. But I'm wondering if you could just deconstruct ARPU going forward? And to what extent you think these levels are sustainable? And to what extent they're purely tied to used car prices, which may peak at some point?

Right. Yes, as we've talked about, there are so many drivers of ARPU. Used car prices is a big one, the scrap market at the low end, what's happening with part prices, what's happening with the dollar, I mean, all those things are relevant to proceeds. And so that's a driver of ARPU. There's also the things that we're doing what we've done around our digital transformation, what we're continuing to do with growing our product suite. I talked about the transport tool, which we believe is going to be really favorable for us. So there's a lot of things that go into ARPU besides used car. Used car is a good indicator just to understand at a very high level what's going on, but there are so many other factors that drive our ARPU. And again, we're on this journey with using our data and with digitizing our business. We still see opportunities to continue to grow and influence what we generate in ARPU irrespective of what happens in the used car market.

Regarding SYNETIQ and that transaction, could you clarify whether the 80% of sales from auction results refer to purchased vehicles or if they are all on consignment? If there is a mix, it would be helpful if you could share that information with us.

They primarily acquire vehicles. SYNETIQ has contracts with insurance companies to purchase inventory and then determine the best way to sell it. In some cases, they auction the vehicles, while in others, they remove parts and distribute them. A very small portion is sent to scrap. So, it mainly consists of purchased vehicles from insurance companies.

So the vertical integration, if you will, in Europe, having parts plus the auction, it's different than what you do in the U.S. Do you see this as the model in Europe as maybe European catch up on the use of recycled parts?

Well, right now, the focus obviously is on the U.K., and what we're seeing happen in the U.K. is that there is increasing demand for what they call green parts, which in the U.S. we might call recycled parts or used parts. But we certainly are seeing the increase in demand there, and that's really solving that problem and how to focus on delivering that. So we're interested in, again, innovating with them in the U.K. to really see if we can drive even higher levels of performance. What happens beyond that remains to be seen if that model can be deployed in other markets.

The next question is from Chris Bottiglieri with Exane BNP Paribas.

So the first one's on hurricanes. I know it's difficult, but can you help parse out the impact of the hurricane in Q3 and Q4? It sounds like you incurred a lot of costs to ensure the customer service sounds like you executed there. But obviously, stuff is complicated, you incur costs upfront when you sell the units. So just any sense of how much volumes helped in Q3 versus Q4, then cost would be really helpful?

Yes. So I'll start, Chris, and then Susan can certainly jump in. We sold very few cars in the third quarter related to the CAT. A lot of the expenses or a lot of the costs we incur are really around towing. So those costs could capitalize, and then we recognize them when we sell the vehicle later on. The costs that were incurred in the third quarter mainly revolved around travel, a little bit of rent, and some true fixed expenses that were incurred to get this event started up. So Susan, go ahead.

And just to provide a little bit of quantification, as John said, there's a fairly small impact in the third quarter, just over $1 million of a negative impact on EBITDA from the CAT. As you said, it's pretty tough to estimate what the impact is going to be in the fourth quarter. That's when we'll be selling most of the cars, and the impact depends on proceeds. So we're not calling that out separately, but it is embedded in our guidance.

Got it. That's really helpful. I have a follow-up regarding the selling environment. Excluding the hurricane, are the pressures you're experiencing there apparent? I understand it's systemic and market-driven, but on a per-unit basis, would you say those conditions have worsened in Q3 compared to Q2, or are they fairly similar? Moreover, considering the longer-term opportunity, is the reason for the current pause solely because the market has tightened due to supply constraints? It seems that you need as many sources as possible, so does it not make sense to use fewer providers, or is there another reason for the pause that would be helpful to understand?

Yes. I mean the second part of your question, yes, there is constrained supply in the tow market. Some of the changes we talked about making shifts from the sources and the types of towers are because of the shortage, and we're slowing down some costs of that. Then really, the CAT required us to draw on tow resources from all over the country to help support that event, which again compounded the pressures we’re already feeling in the local market. The combination of those two is really why we’re having to slow down some of the initiatives around towing. But we still believe in the plans that we put in place regarding redistricting and moving from anchor tower. We still think those have a long-term favorable outlook on our tow costs. So we’re going to continue to execute against them. As we proceed, we believe that the market will normalize.

The next question is from Bob Labick with CJS Securities.

Welcome and congratulations to Susan. I'm trying to understand the impact on gross margins. The main factors in the quarter were towing and Ida. It seems you mentioned a $1 million negative EBITDA to CAT, but could you clarify the impact of Ida on the gross margin in Q3? I'm analyzing gross margins and cost of goods sold per unit, which appear to have increased about 7% sequentially or $25 per car. I'm interested in how much of that increase was related to Ida versus towing, and how long these effects might continue.

Yes, Bob, I can respond to that. When I referred to a little over $1 million impact, it was entirely in gross margin. If you do the math, that would represent a portion of the gross margin impact, countered by the leverage we gained from indirect costs. Therefore, not all of the towing is connected to Ida.

The towing is generally applicable across the nation. That's helpful. You mentioned the adjusted SG&A of about $46 million in the quarter is the normalized level. I wanted to confirm that and ask how much SG&A should be expected from SYNETIQ going forward for our modeling purposes.

Yes. I would say that the $46.8 million, most of that is the normalized go forward amount. A part of that is incentive compensation, which we don't expect to continue. There are some factors to consider. In 2020, incentive compensation was significantly lower than a normalized level due to our performance compared to our plans. This year, it is above a normalized level, so some of that increase is attributable to incentive compensation, which will not be part of future evaluations. It would be useful if we could break it down dollar for dollar, but we can't do that. However, this should at least provide you with some directional guidance.

Okay. Great. And then one last one for me. Obviously, with the continued rise in used car prices, there may be an impact on total loss frequency. I want to know if you have any update on the most recent total loss frequency information? And if you're seeing that as a headwind to industry volumes yet?

We’re not concerned, Bob. When we examine the long-term fundamentals affecting total loss frequency, we notice that the key factors—repair costs, the age of the fleet, and vehicle complexity—remain constant. We believe these factors are not going to change. Therefore, while the numbers may fluctuate slightly, we’re not worried about a single quarter's change. We maintain that the fundamentals are intact. According to our carrier customers, they do not foresee the numbers varying significantly from current trends.

The next question is from Daniel Imbro with Stephens.

I want to start on the comment you made on share shifts, John. Obviously, continuing here into the fourth quarter, maybe longer than you guys thought it would. I guess, when you're having those conversations with insurance customers, what are the reasons in some markets they're telling you you're losing share conversely when you're winning share unexpectedly or continuing to? Why are you winning share? And do you think your performance in this storm, Hurricane Ida, it feels like it was much better than Hurricane Harvey was a few years ago? Is that going to help you from a competitive standpoint? Is that helping your conversations with the shares companies? Just trying to weigh those multiple factors as you think about share into the next couple of years.

To clarify, the decision we discussed was made earlier this year, and while we expected it to be completed in the third quarter, it's extending into the fourth quarter. This isn't a new decision; it's just a matter of timing regarding what was previously announced. I want to be very clear on that. Despite the delay, we have been performing reasonably well in the market. We are showcasing our analytics to help carriers make informed decisions, and this approach is resonating with them. We believe that our loan payoff is a key differentiator as well. All of these elements are appealing to carriers, which we believe will strengthen our position in the long term. The CAT is a clear way to demonstrate our capabilities to customers. In between events, it's challenging to show what you have planned, as it often remains hypothetical until implemented. This year, we successfully applied lessons learned from past events, and we were able to demonstrate this effectively at the recent event in New York and New Jersey. Almost all of our customers acknowledged our efforts and recognized that we delivered for them. I believe this will benefit us in the long run, in addition to the various other initiatives we are pursuing. It's not just about the CAT; it's about the CAT alongside everything else we offer. I am very optimistic about our approach to the market and our capabilities moving forward.

Got it. That's helpful. I want to follow up on Bob's question about loss rate. Higher used values, all else equal, are likely problematic. However, it seems we are currently experiencing higher parts inflation compared to labor inflation in the repair market, and there is a shortage of rental cars. Are these factors driving up the total loss rate in the near term? Do you believe this could result in another significant increase? I'm also curious how your insurance companies or insurance customers are perceiving these factors. Does it make it more economical to send more vehicles to auction, especially with higher auction returns?

Yes, that's certainly one line of thinking is that actually the higher recoveries as they're making that total loss decision, again, all of the things being equal, they might total more because they begin to recognize the level of recovery. Back to the earlier comment around us using our data analytics, that's actually a really important element of what we're helping our customers do now is using our data to help them make better decisions upfront. So it's tough to predict the future. We don't really know what's going to happen. But I think you're thinking about the right elements as you consider what might happen near term and longer term with total loss frequency.

The next question is from Bret Jordan with Jefferies.

Could you talk about the quarter-end inventory? How much of that is associated with Hurricane Ida product that has not been sold through yet?

Yes. I could provide a specific dollar amount, but most of the increase you see on the balance sheet, whether it's in accounts receivable or in the inventory line, is related to Hurricane Ida.

Okay. And then on cycle times, the loan payoff, you talked about in the prepared remarks. Could you quantify maybe what you’re seeing in a year-over-year improvement in cycle times?

It's really different depending on the carrier. For those that were already efficient with cycle times, the savings are not as noticeable. However, for those that are less efficient, the improvements are more significant. Carriers are experiencing meaningful reductions, with savings of several days when using the product. This clearly demonstrates the strong demand we are seeing across numerous carriers. Overall, it's a substantial decrease in cycle time that I've mentioned in the past.

The next question is from Gary Prestopino with Barrington Research.

Just a couple of quick questions here. You said volumes were up 9% organically. Did the Auto Exchange acquisition contribute anything to volumes in a way that it would move that number higher by a couple of basis points?

It would have been really modest, Gary. I don't know that we have an exact number in the room here, but no, it would not have been a meaningful contributor to that volume growth.

Okay. And then lastly, John, from years ago, I remember there was a lot of pushback in the U.K. on using recycled parts. I think the penetration was rather de minimis. How has that changed over the years? And can you give us some idea of what percentage of repairs, be it collision or mechanical, are now being satisfied by recycled parts in the U.K.?

Yes, Gary, you're correct. One of the notable changes has been the emphasis on sustainability. Insurance companies are examining their operations and considering ways to enhance sustainability, and reusing parts is a clear strategy for achieving that. This shift has influenced their perspectives. While we don't have specific percentages to share, it's evident that this trend is growing, and we see it as an opportunity to utilize what SYNETIQ has accomplished in this area to promote growth in that segment and across our overall capabilities. This approach is similar to what we're doing in the U.S., where we're expanding our service offerings to include loan payoff, inspection services, and providing a broader range of services to carriers. SYNETIQ is similarly advancing its green parts initiative.

So this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Arif Ahmed for any closing remarks.

John, anything you’d like to say?

Yes. Just again, thank you all for your participation today and for your interest in IAA, and we look forward to continuing to update you on our progress in the future. Thank you, and have a great day.

The conference has now concluded. Thank you for attending today's presentation; you may now disconnect.