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Copart Inc CPRT
Q3 2013 Earnings Call Transcript

Transcript Call Date 05/31/2013

Operator: Good day, everyone, and welcome to the Copart Incorporated Third Quarter Fiscal 2013 Earnings Conference Call. As a reminder, today's call is being recorded.

For opening remarks and introductions, I'd like to turn the call over to Mr. Jay Adair, Chief Executive Officer of Copart Incorporated. Please go ahead, sir.

A. Jayson Adair - CEO: Good morning. As you can tell, I'm a little hoarse from a pretty heavy week of talking a little too much. So, this morning I'm going to turn it over to Will Franklin who'll go through his prepared remarks. And then, he'll turn it back over to me. I'll go through some of the stuff on our deal, and then, I want to point as well that Vinnie Mitz, who is our President on the call today to answer some of the questions, because, as you can tell, I need to let my voice rest a little bit.

So, with that, I'm going to turn it over to Will. Thank you.

William E. Franklin - SVP and CFO: Thank you Jay, and good morning, everyone. Before we begin our comments, I'd like to remind everyone on the call that our remarks will contain forward-looking statements, including statements concerning our views or trends in our business. These statements are neither promises nor guarantees and are subject to certain risks and uncertainties that could cause final results to differ substantially from those projected or implied by our statements and comments. The Company expressly disclaims any obligation to update or revise these statements and comments. For a more complete discussion of the risks that could affect our business, please review Management's Discussion and Analysis, and the risk factors contained in our 10-Q, 10-K and other SEC filings.

With that, I'll begin to give some comments about our financial results for the quarter. Total revenue grew by $33.5 million. Vehicle sales revenue grew by $9.7 million. About half of the increase came from growth in purchase case activity in North America. The balance came from changes in mix in the U.K.

Service revenue increased by $23.8 million. We estimate incremental Sandy volume represented $12.8 million of that increase. The balance came primarily from the increased volume, from market wins and volume from growth in the overall salvage market. In North America, volume grew by over 13%. Approximately half of that came from Sandy. We estimate that approximately 90% of the incremental Sandy volume was sold by the end of the quarter.

Despite the continued growth in our dealer program, total non-insurance volume declined as a percentage of total volume due to the significant growth in the insurance cars from Sandy and market wins. Revenue per car was down marginally from the same quarter last year due primarily to the decline in used car pricing and commodity pricing. The impact was offset by significant growth in inventory as we recognized total (toe in) revenue and titling revenue around the time of the assignment usually 50 to 60 days before the car is sold.

In the U.K., volume grew by almost 4%. We had a change in mix between cars sold on a principal basis and cars sold on an agency basis due to the normal fluctuations in volume supplied by the insurance companies and due to a direct purchase program initiated in the U.K. this year. Purchase car volume grew from 30% to 34% of total U.K. volume. Both net revenue per purchased car and average service revenue per agency car remain relatively consistent with the same quarter last year. Yard and fleet costs grew significantly due primarily to the incremental costs associated with Sandy as the direct and indirect cost of processing the Sandy volume virtually absorbed the incremental revenue. In addition, we added the incremental cost of the international operations and we added resources to continue to the growth in our dealer and direct purchase programs. Further, due to recent seller contract activity, volume was redistributed between yards in our national network requiring additional transitional cost.

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