Copart, Inc.
Q3 2020 Earnings Call Transcript

Published: 21 May 2020

[Operator:]

Good day, and welcome to the Copart Conference Call. At this time. I would like to turn the conference over to Jeff Liaw, President of Copart. Please go ahead, sir.

[Jeffrey Liaw:]

Thank you, Dan. I'll start today's call with the safe harbor before turning it over to Jay for opening remarks. During today's call, we'll discuss certain non-GAAP measures, which include adjustments to reverse the certain discrete income tax items, disposal of nonoperating assets, foreign currency-related gains and losses, certain tax benefits and payroll taxes related to accounting for stock option exercises. And the effect on common equipment from ASU 2016-09. We've provided a reconciliation of these non-GAAP financial measures to their 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.

[Jayson Adair:]

Thanks, Jeff. You're breaking up just a little bit on that. So maybe we should dial in.

[Jeffrey Liaw:]

Yes.

[Jayson Adair:]

I'll go ahead and kick off. Yes. Perfect. Again, welcome, everyone. Thanks for coming to the third quarter call. If I were to describe Copart, at the beginning of the quarter, I would say, full speed ahead. We were acquiring land, developing that property, winning business, selling record units, record number of units company-wide. And if I were to fast forward a month later to the beginning of March, the best way I could describe us would be unpredicted but prepared. Clearly, looking at COVID, and it was all day, every day COVID in the first week of March, by the time we got to the second week of March, I had reached out to some friends of mine that are in the service industry, people that own hair salons, people that own restaurants. And the government had not yet told anyone to specifically not go to work or to specifically not open up their business, but just the rhetoric that was coming out of the news and out of Washington was enough to keep people from going out to dinner and to keep people from traveling, and so we saw that company-wide. We saw, overnight, our customers couldn't travel. Overnight, we had to cancel conferences and cancel events that we had planned. And this was -- we had, at this point, gone from what I would say, unpredictable to a position where who could anticipate that the government would actually be thinking of shutting down business.

[Operator:]

Yes, sir. Please proceed.

[Jayson Adair:]

We've got issues there, then Jeff will come in here. Okay. All right. So I'll continue. We just -- we've got some -- Jeff and I are in 2 different locations, obviously, because of COVID. They can hear me fine. You can all hear me, but apparently Jeff's having trouble. So he's going to get on and he'll continue. But just to continue on that note, we made it very clear that Copart had a significant amount of cash on the balance sheet. We could operate for months or we could survive for months without operating, without being able to pick up cars, without being able to sell cars. Now clearly, that's going to be a problem for the nation. That's going to be a problem for the U.S., the U.K. and other markets we work, and I'll get into that. But the initial messaging to our company was that we are strong, that there will be no furloughs for 90 days, that there will be no reduction of hours and that this is about continuity. This is about Copart making sure that we can provide the services for our customers. And the way to do that is to give the people at Copart confidence so that they can deliver on that promise, and that's exactly what we did.

[Jeffrey Liaw:]

Thanks. Thank you, Jay. We'll start the remarks with a deviation from our usual script and offer some comments on the COVID-19 crisis following Jay's narrative and its effect on our business, specifically how the coronavirus has affected our operations, our priorities and our financial results. On operations, as Jay noted, beginning in March of 2020, our business and operations began to experience the interruption worldwide, first, within our European operations and as the month progressed and the quarter progressed throughout the balance of our global operations. As Jay noted, in materially all of our jurisdictions, we've been deemed by local authorities an essential business because we helped to ensure the removal of vehicles from repair shops and impound yards, streets and highways, enabling the critical function of our world's road infrastructure. We're proud of the role our people play in serving the communities in which we do business, and the work we do will enable the smooth functioning of our societies during the crisis and certainly support our eventual recovery from it as well. We've taken great care to follow appropriate health and safety protocols in all of our facilities to ensure safe working conditions for our employees as well as for our sellers, buyers and other business partners with whom we come into contact. We've also adapted, in many cases, to remote work arrangements and have experienced no material disruptions to our business. We frequently and proactively communicate with our customers as well. And in many respects, we're simply continuing business as usual. For example, our facilities remain fully operational as well as the online-only auctions Jay noted a moment ago. Because we've operated exclusively online auctions now for 17 years and have made iterative refinements and more transformative overhauls over the years, we've not experienced any disruptions in any way in terms of how we sell cars. And we continue to believe that our auction technology drives the best-in-class experience for our members and best-in-class returns for our sellers as well. Turning to our priorities. It won't surprise you that our near-term priorities are on our customers, in many cases, adapting real-time to their own workflow modifications and accommodating their remote work arrangements. We've deployed new technologies in support of those accommodations as well. Our long-term focus is, again, on investing in international member recruitment and retention. Our auction liquidity is sacrosanct and enables our business to grow. We are focused keenly on extending our technology advantage in every respect, both in terms of our auctions as well as the many ways we interact with our sellers, our members and the various aspects of our ecosystem.

[Operator:]

. We'll take our first question in queue. This one comes from Bob Labick with CJS Securities.

[Robert Labick:]

I just want to start off where you kind of finished the prepared remarks as it relates to the land. You talked about, earlier in the remarks, the 2 potential impacts on longer term on miles driven. Could be more work from home could reduce miles driven or if fewer people are taking mass transit or flying, there could be an increase. So how do you -- obviously, I don't expect you to know the answer to what the outcome will be in that regard. How does that impact your land strategy right now? And then just as it relates to that, too, is there enough activity going on that you can find more land? Is that -- is it easier or harder now as a result of the economy to purchase land, if you wanted?

[Jeffrey Liaw:]

Very good question, Bob. In short, I think you're right that those big societal questions, I think, will remain to be resolved over the months, quarters and years ahead. On land investments, the lead times for acquiring and developing land are quite long. Our expectation is that we will use that land to accommodate our customers' growth and our own for a multiple-year horizon. So it's not a 1-month, 18-month, even a 3-year decision. We acquire land because it makes sense over a 5- to 20-year horizon. We continue our activity. I think your intuition is fair in that in some respects, our ability to do so has been perhaps limited in some cases where economic activity or regulatory approvals have stalled because of the virus impact. In other cases, though, the crisis may unlock opportunities for us to move forward because land is now available at more reasonable values where local jurisdictions are still more excited about having the jobs that a new Copart facility brings with it. So I think in short, we have not meaningfully disrupted or changed our strategic approach to land acquisitions, and we wouldn't do so based on anything that happens over a 6- to 10-week horizon. As we noted in the opening remarks, if the facts unfold differently going forward, we'll, of course, revisit. But for now, no change in our course.

[Robert Labick:]

Got it. Great. And then we've talked a little bit on previous calls about your work with carriers on optimizing the total loss process, and you noted total loss frequency seems to have ticked up recently as well, and we've seen that in some publications as well. Can you just expand on what value you can add to the carriers now in the total loss process, given your increased data that you've been collecting for so many years?

[Jeffrey Liaw:]

Yes. And good question, Bob. I think we talked about that a couple of quarters ago, and I misunderstood your question last quarter. But in short, we believe that providing more data to our insurance carrier partners and earlier in their own loss claims process will help them make more informed decisions and, in many cases, will empower them to total cars more quickly, which saves them the processing burden, storage costs and repair shops, uncertainty regarding the loss claims resolution with our own policyholders. So for us, it is amassing the data that comes from having sold tens of millions of vehicles over the years and being able to value them efficiently and quickly based on limited data sets available to us at that moment in time and sharing that data in ways that empower those carriers to make the decisions more quickly. That's what we meant a couple of quarters ago, and that work certainly continues to pace.

[Robert Labick:]

Okay. Super. And then last one for me, I'll jump back in queue. And just shifting gears a little bit. Can you give us an update on Germany? Has the economic impact over there or anything else impacted insurance carriers' decisions to convert to the U.S.-style auction? How are things going? And just a general update.

[Jeffrey Liaw:]

I think in broad strokes, we continue to move forward there as well. So we've invested and continue to invest in land and in people and technologies. Our dialogues with the insurance carriers continue to be very productive. I think we noted on the last call that we had begun selling consignment vehicles on behalf of insurance carriers there. This kind of disruption, I think, cuts -- the coronavirus cuts both ways. On the one hand, it's difficult nowadays to meet face-to-face, either among ourselves or with our customers or prospective customers. On the other hand, radical shifts like this also tend to open the mind to considering alternatives where the status quo is no longer the glide path that it once was. So I think it hasn't changed. Either way, I think our conviction that our long-term prosperity in Germany is there for us to pursue.

[Operator:]

We'll take our next question in queue comes from Craig Kennison with Baird.

[Craig Kennison:]

I wanted to ask, to what extent did the pandemic reduce revenue in the quarter, knowing that revenue recognition can be something like 50 days after the loss event? So we would expect, I guess, the pandemic impact to be much more severe in the current quarter.

[Jeffrey Liaw:]

Yes. I think that observation's fair, and your question is difficult to answer. Your directional observation is fair. And the reason the question is difficult to answer is, you start to cut the data very, very finely, right? Where -- when do you consider the coronavirus start date to have happened in Oklahoma versus Louisiana versus So Paulo versus Toronto, right? So I think the directional impact is very hard to assess. And that's why we didn't get into very elaborate, pre- and post-metrics. It didn't -- it just wasn't worthwhile or clean enough to do so pre- and post. But yes, you're correct that given the leads and lags in our business, several weeks from when the accident happens to when the car's assigned to us and then a number of weeks again before we had the title processed and the car available for auction, that there is a lagging effect on our volume, yes.

[Craig Kennison:]

And then maybe -- I know you don't like to comment on the current quarter so much, but maybe just give a sense for what the last couple of weeks have looked like in terms of assignments versus last year. Are we meaningfully better as driving activity normalizes? Or still far below last year?

[Jeffrey Liaw:]

I think, Craig, I think we tend not to comment, as you know, on the current quarter. As I noted a few moments ago, we have seen assignment volumes, ASPs and so forth have certainly rebounded very meaningfully from the troughs. The year-over-year comparisons, we'll leave will be for when we talk about the quarter.

[Craig Kennison:]

Okay. And then just on inventory, that was a helpful metric that you always share, maybe not down as much as I had feared and actually up internationally. What's driving the international increase? Is that purely just internal secular trends that you've created through your growth initiatives? Or is that market kind of coming back sooner than maybe I had feared?

[Jeffrey Liaw:]

It's a fair question. I think there, yes, are secular forces that we talk about every quarter. In some cases, also, there have been interruptions outside the U.S. in DMV processing of titles. So you noted that the international unit sales were also down more than they were in the U.S. In some cases, that's because of inventory that's been hung outside U.S. as well.

[Operator:]

We'll take our next question in queue, comes from Bret Jordan with Jefferies.

[Bret Jordan:]

On the inventory question, and when you think about the trough in driving being the beginning of April and your month-end inventory being down around 11, would that, in theory, be maybe trough inventory in the sense that maybe an assignment takes a couple of weeks post-crash? And if driving has picked up, we'll be seeing inventory sequentially higher, do you think?

[Jeffrey Liaw:]

No. Not inventory, Bret. Trough assignments maybe, right? We are several weeks out from trough driving activity, but inventory itself is the accumulation of many weeks, months and, in some cases, years-old stuff. So that's a bigger layer cake, so to speak, that includes driving activity absent volume for loss frequency from a much longer period of time.

[Bret Jordan:]

Okay. And then on recent selling prices rebounding, is that on the back of domestic bids? Or is the foreign buyer back in the market pretty aggressively?

[Jeffrey Liaw:]

Both. There's meaningfully increased unique bidders and bids, both domestically and internationally.

[Bret Jordan:]

Okay. And then a housekeeping question. I think Jay had mentioned that some of the costs associated with moving vehicles around logistically are due to DMV activity. Could you give us an idea how much expense was in the quarter around that?

[Jeffrey Liaw:]

I don't have a precise number to provide, Bret. I think it's -- I think in short, the moving of vehicles on logistics, in part, it was in fear, frankly, of us having vehicle stranded. So we wanted to make sure that our most congested yards would be able to continue to serve our customers. And so we move some cars at our expense within our own network. So I think that's what Jay was alluding to. But no, don't have a precise number to provide.

[Operator:]

We'll take our next question in queue, comes from Stephanie Benjamin, Robinson Humphrey.

[Stephanie Benjamin:]

I wanted to comment on some of the land acquisitions and the continued aggressive CapEx plans. Maybe if you could talk a little bit about the geographic location or if you're targeting specific areas. Is this more domestic focused? International focused? What's the kind of general theme or geographies that you're looking at in terms of some of these expansions would be helpful.

[Jeffrey Liaw:]

Thanks, Stephanie. A healthy mix of both is the answer. So a fair bit within perhaps our long-standing traditional markets in the U.S., Canada and the U.K., but also investments in Brazil, in Germany and elsewhere, so all of the above. And it's in pursuit of -- in support of our long-term growth, right, we can't stop the ship to wait for crystal clear certainty on what happens with driving activity and so forth. I think we fundamentally believe that we'll continue to drive auction liquidity. But the 50-year trends on total loss frequency will not abate on society's demand for mobility in general. Mobility isn't just commuting to work. It's also necessary for leisure, for health care, for education and that those 100-year trends really will continue perhaps with a meaningful interruption as it stands today. So believing those underlying principles, I think, leads us to want to invest to support our own growth and that of our customers. So I think it'd be irresponsible for us to arrest that process mid-course.

[Stephanie Benjamin:]

Absolutely. And then in terms of some of the comments you've made about certainly seeing some improvement across metrics from trough levels, is that true in terms of both the -- obviously, the U.S.? But internationally, are you seeing some of the same levels of trends?

[Jeffrey Liaw:]

In short, yes, with a fair bit of variability and a fair bit of uncertainty, right? So we track those metrics very carefully, but we also -- we'd be at risk of pretty meaningfully oversteering the business if we responded to daily traffic reports in the U.K. from Friday, right? That's not a good way to operate a business or make strategic decisions either. So we track those metrics. We have seen recovery in some cases. Certainly, some countries were later to shut down, and therefore, it will be later to reopen somewhere earlier and therefore, earlier, seeing the full gamut of activity, as you just described. Some folks are recovering more quickly and others more slowly.

[Operator:]

We'll take our next question in queue, comes from Daniel Imbro with Stephens, Inc.

[Daniel Imbro:]

I just wanted to start on something you talked about on the dealer consignment side. You said it was stronger pre-crisis, obviously, probably slowed meaningfully given what you've heard from the channel during the crisis. How do you think that channel progresses and the health of that channel progresses from here just given the declines and reduction we've seen in used vehicle sales, both in the U.S. and globally?

[Jeffrey Liaw:]

A fair question. I think if the question is over the next 2 to 3 quarters, harder for me to answer. I think, over the long haul, I think we remain quite bullish about our ability to serve that market. The volumes in the near term, of course, impaired by reduced activity. Sure, folks are taking fewer trade-ins. They're trafficking less in vehicles, period. So there are fewer that makes sense to route -- to consign in Copart. Over the long haul, though, our auction liquidity, our international buyer base, the buying and selling of new and used cars, I think, will continue to capture a growing portion of that ecosystem. So our outlook, long term, certainly has not changed. As I noted a moment ago, I do think we have somewhat meaningfully outperformed other such auto auction platforms during the period, in part because we were never dependent on folks coming and having lunch at the auction facility and bidding live on cars. We have been natively digital for a long time, and I think it showed in the quarter.

[Daniel Imbro:]

Helpful. And then maybe a related question. Just on the impact used vehicle pricing, there is the positive dynamic as that falls to units with total loss rate going higher. There's a negative to that on revenue per unit. Can you help us just think through the puts and takes and kind of -- is it a net positive or net negative as we think about the changes in used vehicle prices? And then how that impacts maybe the next 12 to 24 months?

[Jeffrey Liaw:]

That's a fair and difficult question and one I've wrestled with now for 5 years. And you're correct, directionally speaking, that with softer used car prices, cars will total more easily, and we would see a unit volume improvement. With lower used car prices, however, all else equal, the selling prices for our cars would be reduced as well. And we would, therefore, all else equal, make less per car than we otherwise would. How those nets, I think we've struggled over the years to know what we, "root for." I think as a CFO and as a financially oriented person, I know that we have hundreds of thousands of cars in inventory already, and I want to achieve the best possible selling price for those cars. So it's probably intuitively hard to read for declining asset values when you already have many of them. But that said, the unit volume effect would be real. If you saw a substantial decline in used car prices, our unit volumes would increase very meaningfully. And even over the past, say, 4 or 5 years, Dan, used car prices have remained robust and very robust relative to where industry analysts have forecasted that they would be 5 years ago. That has, no doubt, suppressed unit volume that otherwise would have come to Copart, which has been masked by other forces, total loss frequency, market share gains, let in by other forces that have made that somewhat invisible. But there's no doubt that robust prices have suppressed unit demand for our services.

[Daniel Imbro:]

Got it. Really helpful. And then if I can squeeze the last one in. Jeff, over the last 12 months, we've heard a lot more talk around the industry just about ancillary services, providing more for the insurance companies. Are there any services today that your customers are requesting that you don't provide? Or do you guys have a robust suite today that you think covers most of your insurance companies' needs?

[Jeffrey Liaw:]

I think tough to talk about customers in monolithic entities. Some of them certainly have an appetite for us to do more and to vertically integrate still more into what they do day to day, and we certainly have expanded our service offerings over the past year, 5 years, 10 years, 20 years, and we do more and more for our insurance carrier partners. So yes, there are additional services that we offer and more services that we'll offer over time as well.

[Operator:]

We'll take our next question in queue comes from Derek Glynn with Consumer Edge Research.

[Derek Glynn:]

In this call and in the past, you've discussed some positive tailwinds driving higher total loss frequency. At the same time, we're seeing higher ADAS attach rates on vehicles, which may reduce frequency at some point, and you've also increased exposure to noninsurance segments. I'm wondering if growing volumes in those noninsurance channels is a conscious effort perhaps to hedge yourself from an eventual decline in accident frequency. Is there any urgency to diversify the business?

[Jeffrey Liaw:]

A lot of different embedded questions in what you just posed. So I'll try to dissect them one by one. First, in terms of ADAS effect on frequency, I'd note a couple of things. One is that I think the working hypothesis is that it will eventually reduce accident frequency, and I think that's a reasonable hypothesis because safety technologies, for the past 50 years, have generally reduced accident frequency. That's been true for as long as Copart's been around with one short-term blip, I would say, between 2011 and '16 when accident frequency actually went up year-over-year. That was a function of the iPhone proliferating across society. So generally speaking, accident frequency does decline. ADAS, on the other hand, we think, will drive increases in total loss frequency, and those forces will offset one another. Over the course of history, total loss frequency has generally increased much more than accident frequency has decreased. ADAS, I think there's a very logical thread to walk from ADAS proliferation to total loss frequency because what makes cars safer tend to be the sensors on the perimeter of cars that are easily damaged, difficult and expensive to calibrate and will drive still more cars to be totaled. Specifically, on your question of our diversification into other segments, I wouldn't characterize it that way. It's not a risk mitigation measure so much as it is the byproduct of auction liquidity. As we have cultivated an international and domestic member base that increasingly is purchasing vehicles that have lighter and lighter damage, it begins to more heavily overlap the whole car universe as well, and therefore, the cars that dealers receive on trade-ins become more and more attractive at Copart. We immediately expose that car to buyers in Nigeria, in Honduras, in Poland, Lithuania, in Oklahoma, in Maine, and it is that liquidity which has enabled us to grow within the dealer segment. So it's not per se a desire to mitigate risk. It's a desire to grow the business, and ultimately, that incremental dealer car also then helps our insurance companies as well. Auction liquidity begets more liquidity and begets better option returns.

[Derek Glynn:]

Okay. Great. Appreciate that. And can you elaborate on what was your original intent and drawn down that amount of capital on the credit line. Was that solely a precautionary measure given the uncertain economic climate? Or was there anything perhaps more opportunistic you were thinking about doing in terms of other capital allocation priorities? I would appreciate some clarity there.

[Jeffrey Liaw:]

Sure. Fair question. That was more just a risk mitigation measure we took at a moment when the global economy and the financial system, there was enough uncertainty, and a low enough cost that it made sense for us to draw on the revolver. Know that we had the cash available to us should we have needed it. We still do, of course. Our revolving credit facility remains quite intact with first-tier banks funding. So we have conviction now that it is there when we need it, and that was all there was to it.

[Operator:]

We'll take our next question in queue. This comes from Gary Prestopino with Barrington.

[Gary Prestopino:]

A couple of questions here. I was writing real fast. I'm trying to keep up. You said your noninsurance were down. Vehicles were down 13.4%. Is that correct?

[Jeffrey Liaw:]

Let me give you the precise decimal, but keep going.

[Gary Prestopino:]

Well, what I was trying to get at is, if you back out the charity cars, what were they? Down or up? Do you have that?

[Jeffrey Liaw:]

If you back out the -- as said the charities and wholesalers, we would have been positive, slightly positive, just north of 1% for the quarter.

[Gary Prestopino:]

Okay. That's fine. And then just kind of a hypothetical question here. Given how long it takes for the whole cycle of -- from accidents to assignments, et cetera, if hypothetically, the country opens up by, say, the middle of June, all right, obviously, Q4 is going to be challenged, and no fault of yours. It's just that's the way it is. But when do you think if the -- if the country were to open up by the end of June, when do you think things start to normalize? Is there -- does it take a quarter, two quarters, three quarters to get you back to where the growth level you were at before?

[Jeffrey Liaw:]

And you mean, Gary, in terms of our unit sales or revenue?

[Gary Prestopino:]

Yes. Just in general, yes. Exactly. And what I'm trying to get at is from the time the country starts opening up and you assume that every people are going to be driving, you're going to have the same level of accident, same level of total losses, how long does that take to flush through to your system where you start -- there is no real impact from the COVID situation in any given quarter?

[Jeffrey Liaw:]

The reason I paused, Gary, any given quarter, we sell cars that we were assigned that same quarter. So in the third quarter of 2020, we sold cars that we picked up in February, March and April. We also saw cars from the last -- a quarter before and the quarter before and the quarter before and 5 years before, literally, that layer cake that I described a few moments ago. So in terms of -- no quarter -- every quarter has some memory going forward. But I think it's several quarters really before you've got the meaningful burden because it's based on average several months for us to sell a car.

[Operator:]

Our next question in queue comes from Ali Faghri with Guggenheim Partners.

[Ali Faghri:]

A couple here. I guess, first, can you remind us about your cost structure, fixed versus variable and how we should think about decremental margins in a backdrop like the near term where volumes are declining meaningfully? It sounds like you aren't proactively taking costs out of the business, specifically in response to COVID, but I may be wrong.

[Jeffrey Liaw:]

Yes. A handful of questions, what you described there, too. In terms of the fixed and variable mix, that question always boils down to what your time horizon is, and over the long haul, all costs are variable. In the near term, the majority of costs are for semi-fixed, with the exception, for example, of selling costs. Selling costs tend to -- we incur them when we tow a vehicle and we don't when we don't. So I think in the near term, and as you heard us describe a few minutes ago, if we conclude that this is a structural shift, then we would consider meaningful changes. But otherwise, we will operate the business as is with the intent to serve our customers well through storm season and for the next 3, 5, 10 years as well.

[Ali Faghri:]

Got it. That's helpful. And then as a quick follow-up here. You mentioned ASPs are above pre-COVID levels. Is that due to a supply-demand mismatch currently as buyers are returning to the market, but the supply of vehicles is still relatively limited, so perhaps it's more of a temporary trend?

[Jeffrey Liaw:]

It could be. I think that remains to be seen. I think there is -- that's what you -- the forces you just described a moment ago. Also if the economies recover, if folks had themselves -- chosen to sit it out a week or 2, they suddenly find themselves short in inventory or parts or cars rebuild or what have you, right? So there may be something of a catch-up effect, so to speak. But I think the long, long-term trends before this quarter, our ASPs had been up 13 consecutive quarters, and they won't go up every quarter for the rest of our lives, of course, but that general tailwind of auction liquidity, higher total loss frequency, better, younger cars, less damaged cars, those forces aren't going away anytime soon. Now what that means over a two week, four week, even a three quarter horizon, we don't concern ourselves with too much. What we focus on, of course, is how to drive those returns up on a multiyear basis.

[Operator:]

. Our next question in queue comes from Stephanie Benjamin, Robinson Humphrey.

[Stephanie Benjamin:]

I just had one quick follow-up. I was hoping maybe you could speak to if you felt, really broadly speaking, if your insurance customers have looked to diversify their auction providers or have restructured some of their relationships or how they interact with their auction providers. Just any high-level comment would be helpful, just looking back the last year or several years.

[Jeffrey Liaw:]

No. I appreciate the question, Stephanie. And again, tough to generalize about our customers who are -- have many different ways of approaching the business. But in general, we focus all of our efforts on serving them well and generating the best possible auction returns and providing the best possible service in ordinary times and in crazy times like the ones we're in today. So over time, I think we have generally continued to earn and win the trust of our customers and have gained market share as a result. So I wouldn't say that I've heard that theme in general. I think the question is can we serve our customers well and can we persuade our prospective customers that we can serve them well. How the chess match works between sole sourcing multiple providers and so forth, I haven't heard any particular trends in one direction or the other. So long as we deliver Copart level service and Copart level auction returns to our customers, we'll let the chips fall where they may. And I think history has proven that, that has been a productive approach.

[Operator:]

Our next question in queue comes from Ryan Brinkman with JPMorgan.

[Ryan Brinkman:]

I know you have historically provided investors with the split of insurance versus noninsurance cars. Are you also able to break out the percentage of salvaged versus non-salvaged or whole cars? I think the whole car split is materially lower than the noninsurance split. But I'm just wondering if -- given the decline in miles driven and accidents, if there is any ability to absorb yard capacity by taking on more whole cars, whether sold by dealers or other sources.

[Jeffrey Liaw:]

I think the second question is probably easier than the first. To your -- the second question, in part because we have invested so aggressively in capacity, we, by and large, can serve customers, can serve our dealer customers and our insurance customers wherever they want to do business with us. I think Jay talked about that at some length on our last earnings call as well. We have invested and we continue to invest so that we can always say yes when those opportunities present themselves. So no, it's not that -- it's not the reduced driving activity and declines in insurance assignments would per se enable us to win more dealer business. It is that we drive excellent returns and service to them that allows us to do so, and the land is our problem. We'll figure that out in the background so that we can serve them flawlessly.

[Operator:]

Speakers, there are no more questions in queue at this time.

[Jayson Adair:]

All right. Appreciate everyone coming on the call, and we look forward to reporting on Q4 in the fiscal year 2020, and wish everybody stay safe, and we'll talk to you then. Thank you.

[Operator:]

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.