Craig Kennison: Perfect. And then sort of a big picture question for you on AI making headlines across many industries. I’m just curious in your world, how you see AI impacting Copart since you guys like to think in decades?
Jeff Liaw: Yes. I think we are certainly following it closely and think that AI will be deployed — well, in some respects, if you’re viewing the AI and machine learning all collectively as the future of technology and neural computing and so forth. We do deploy some of those tools in our systems today, most notably for our vehicle valuation guide ProQuote, which helps insurance carriers make the optimal real-time decisions about total losses, when and when not to total vehicles. But I think you’re referring specifically to I think the notion of automated chat and so forth. And that is the evolution, of course, of where FAQs eventually go. You end up with smarter and more informed answers on some of the questions you most frequently get here at Copart.
I’d say today, with our sellers and members, the questions are often nuanced enough, specific enough to individual circumstances, lots purchased and so forth that it’s not a ready solution for us today, but we follow the space. Our tech teams certainly are avid students of the space as well. So if and when relevant for our business to deploy much more broadly, we will certainly do so.
Craig Kennison: Great. Thank you.
Operator: Our next question comes from Chris Bottiglieri with BNP Paribas. Please proceed with your question.
Chris Bottiglieri: Thanks for taking the questions. First of all, I wanted to follow up on kind of what’s the non — can you maybe bifurcate the non-insurance a little bit further? If I heard you right, you said 20% what you’ve now defined as Copart Blu, which is a combination of your dealer consignment and the commercial channels. I assume your kind of historical legacy shared municipalities, it sounds like there’s a bad actor being price there that might be offsetting some of that growth. Can you just give us a sense for like the bifurcation of the two would be the first question?
Jeff Liaw: Directionally speaking, what we characterize as non-insurance includes those Blu Car sales, which are rental cars, banks and financial institutions fleets rent of our companies and the like. That’s a meaningful portion of our non-insurance volume. Copart Dealer Services, we didn’t talk about specifically today. That’s also a sizable portion of our non-insurance business. They are also performing well and growing the business in a difficult and challenging environment. The other elements of our non-insurance business include Copart Direct, which is our cash for cars business in which we buy cars throughout different consumers and sell them at auction. Here at Copart, Leah mentioned that in her comments as well as one of the elements of our €œprincipal business€ that had proven very successful for us over the years, but we also want to be thoughtful about how aggressive we are buying cars in a volatile price environment.
And then the portion you mentioned as well, which is the charities and wholesalers business relatively lower value vehicles, we have in some cases optimized our business to serve insurance companies, Blu Car, Copart Direct, Copart Dealer Services and the like and have foregone some of the volume in those lower value segments.
Chris Bottiglieri: Got you. Okay, that’s helpful. And then just a bigger picture question. One of your closest peers that’s having to merge with an auctioneer of heavy machinery, has this led you to rethink the opportunity at all for TAM expansion in your business? Do you think these businesses are synergistic? Is there a place for Copart in those types of end markets? Just kind of curious how you think about TAM expansion generally speaking?
Jeff Liaw: Yes, I think it’s a fair question, Chris. I don’t think it’s specifically the catalyst for us to consider it, but it’s a topic we have wrestled with ourselves. And when evaluating our own strategy and our opportunities to expand into new arenas, we take stock first of our core strengths. We think we are — we excel at managing high volume online auctions and recruiting the sellers and buyers for them. We think we excel at physical infrastructure, both the development of greenfield facilities and the acquisition of existing ones and then managing the physical logistics to and from those facilities of high volumes of physical equipment and high volumes of vehicles historically. And we — the third national capability of ours that I characterize is our ability to navigate complex regulatory environments.
We have 50 different DMVs in the U.S. alone as well as a number of other relative regulatory layers here and certainly worldwide tax and otherwise, we think we are uniquely equipped to address. And we’ve taken and looked at those capabilities and asked ourselves the question of where can we deploy those into adjacent spaces to grow the business over time, and have done so selectively and very conservatively as you know. We’ve expanded with our acquisition of NPA five and a half years ago or thereabouts into the Powersports arena. We today are expanding this Blu Car initiative into the whole car space as well. And frankly, within Yellow Iron , as you just inquired, we already sell within Yellow Iron specialty equipment, trucks and trailers and the like in many hundreds of millions of dollars of that equipment every year without per se a dedicated effort to expand our business there.
So it’s something that we revisit on an ongoing basis. I think this transaction doesn’t per se affect us negatively or positively in terms of our interest in the space.
Chris Bottiglieri: Okay, very helpful. Thanks, Jeff.
Operator: Our next question comes from Bret Jordan with Jefferies. Please proceed with your question.
Bret Jordan: Hi. Good morning, guys.
Jeff Liaw: Hi, Bret.
Bret Jordan: On that quick discussion of that other company’s transaction, the buyer is certainly making a pitch that there are services that could be offered in the salvage space that would sort of add another lever on the revenue side. Do you see that? Is there an opportunity? Obviously, if you’re selling scrap cars to LKQ, they don’t want them waxed first. But are there things you could be doing as you — whether it’s Blu or Dealer Services where you could attach ancillary services?
Jeff Liaw: In short, I think the answer to that is yes. And yes, that there are additional services to be offered to both sides of the marketplace, and we are doing that today. And we haven’t talked about them at great length on earnings calls. We find those more relevant in discussions with our sellers and our members themselves. And those services certainly include things like delivery, financing, title services and the like. And the buyers — that universe is expanding real time. As you noted, if you went back 30 years ago and the buyers are largely dismantlers and so forth, they’re not that interested in other services we have to offer waxing or otherwise. Today as the cars — as we expand our universe into more drivable vehicles, lighter damaged cars, I think that becomes more relevant over time.
I’d argue that we are the industry leaders in that regard in terms of the mix in that direction. And so that thesis is a bit more relevant for us than it is for anyone else who is loosely in our industry.
Bret Jordan: Okay. And then a quick question on that. On the supply side, which sellers most dependent upon you being the purchaser as opposed to an agent? Does that most impact — obviously, Cars Direct is probably the most, but are Blu versus Dealer Services, are those sellers expecting you to own the car as opposed to just consigning?
Jeff Liaw: No, they are not. The principal business is largely Copart Direct, in which we buy cars from consumers at some modest residual volume in the UK. I think you know that when we entered that business in 2007, probably four out of five cars or thereabouts was managed on a principal basis. Today, I think that’s reversed and then some. So we are largely when you’re looking at principal volume for Copart, you’re talking about Copart Direct.
Bret Jordan: And Germany is really not — is Germany still mostly agent or –?
Jeff Liaw: Germany does a mix of both, that’s fair. In Germany, we are doing both. We’re selling consignment cars on behalf of insurance companies and we are also buying cars both directly from consumers and on residual value platforms.
Bret Jordan: So I guess does the temporary move away from or maybe cutting back on purchased vehicles impact Germany in the short term, or is it not meaningful enough to really move the needle?
Jeff Liaw: No, that’s principal. The principal car, the moderation of principal car volume is principally here in the U.S.
Bret Jordan: Okay, great. Thank you.
Jeff Liaw: Thanks, Bret.
Operator: . Our next question comes from Joseph Enderlin with Stephens Inc. Please proceed with your question.
Joseph Enderlin: Hi, guys. This is Joe Enderlin on for Daniel. Thanks for taking the question.
Jeff Liaw: No problem.
Joseph Enderlin: So with total loss rate moving higher again this quarter and inventory bottlenecks improving, do you expect the industry to return to historically normal unit growth rates from here?
Jeff Liaw: From here, yes. Precisely when, I think it’s harder to forecast. That’s a function of the variables we talked about, which is the value of used cars and therefore ACV or pre-accident value as the European call it, and what the car is worth before it’s in an accident, what happens to repair costs and rental car costs and the like. So I think we have total conviction, the total loss frequency revert to historical levels and continue to grow from there. The precise trajectory from today until that point I think is more difficult to forecast. But this is an unabated 40 or 50-year trend with the exception of the past 18 to 24 months. And so I think we do believe that it will revert.
Joseph Enderlin: That’s helpful. Thank you. As a follow up, we wanted to ask about ASP trends during the quarter. Did we see ASPs decline and then increase along with Manheim, or was there a more consistent trend?
Jeff Liaw: Do you mean within the quarter?
Joseph Enderlin: Within the quarter, yes.
