Good day, everyone, and welcome to the Copart Incorporated First Quarter Fiscal 2018 Earnings Call. Just a reminder, today's conference is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Jay Adair, Chief Executive Officer of Copart Incorporated. Please go ahead, sir.
Thank you, Chantal. Good morning, everyone, and welcome to the Q1 earnings release conference call for 2018. With me in the room today is Jeff Liao, CFO and Will Franklin, Executive Vice President for Copart. With that, I will turn it over to Jeff Liao, who will give you some color commentary and then over to Will Franklin, and then we'll open it up for questions. So it's my pleasure to introduce Jeff Liao.
Thanks, Jay. I'll start with the Safe Harbor. During today's call, we'll discuss certain non GAAP measures, including non GAAP net income per diluted share, which includes adjustments to reverse the effect of foreign currency related gains and losses, impairment of long lived assets, certain income tax benefits, foreign income tax credit limitations and payroll taxes related to accounting for stock option exercises. We've provided a reconciliation of these non GAAP financial measures to the most directly comparable GAAP measures on our website under the Investor Relations link and in our press release issued yesterday. We believe the presentation of these non GAAP measures together with our corresponding GAAP measures is relevant in assessing Copart's business trends and financial performance.
We analyze our results on both GAAP and non GAAP bases described above. In addition, this call may contain forward looking statements within the meaning of federal securities laws, which are subject to substantial risks and uncertainties that could cause actual results to differ materially from those projected or implied by our statements and comments. For a more complete discussion of these risks that could affect our business, please review the management's discussion and analysis portions in our related periodic reports filed with the SEC. We do not undertake to update any forward looking statements that may be made from time to time on our behalf. Now turning to the Q1, Copart enjoyed another record Q1 in unit sales, revenue, gross profit and operating income.
As you can see in the press release, we grew global revenue by 21% year over year for the Q1. Underlying factors here are slightly beneficial year over year currency effect of $1,700,000 on foreign operations, primarily due to relative strength in the British pound after lapping the Brexit event in June of last year 2016. Excluding the effect of Hurricane Harvey, revenue grew by 15.8%. A little color on this front. Under current revenue recognition guidelines, we do recognize revenue for certain pre auction services we provide including for example towing and flood cleanup services.
As a result, we booked the revenue for some cars not yet sold through our auctions. We enjoyed global unit sales growth of 10% with U. S. Growth of 11% and international growth of 5%. U.
S. Unit growth was driven primarily by market growth, territory wins, new customer wins as well as the effects of events and acquisitions. If we exclude catastrophic events from both periods last year and this year for the Q1, U. S. Unit sales grew by 10.6% year over year.
Excluding acquisitions, U. S. Unit sales grew at 8.3%. Turning to inventory, this is again the non GAAP inventory measure. These are literally the cars in Copart facilities.
Global inventory grew by 17.5 percent excluding cat inventory from both periods inventory growth would have been approximately 7% for the period with less than 1% of the inventory growth attributable to acquisitions. Our service revenue grew $67,000,000 year over year or 21.8 percent, our purchased car revenue growth of $6,000,000 $6,100,000 or 15.8 percent continuing the trend you've seen in recent quarters as we've migrated business from principal to agency arrangements. Our gross profit grew from $145,300,000 to 163,300,000 dollars with a decrease in gross margins from 42.0 percent to 38.9 percent, which is a mix of offsetting factors. I'll start first with the favorable gross margin and gross profit driver of an increase in average selling prices for our cars. In the U.
S, we experienced an increase year over year of 13%, almost 14% in average selling prices, largely due to increased selling prices for our insurance carrier sourced cars due to a combination of factors, which Will will expound upon further along in this call. But a few things of note. The first is that we are observing newer cars being totaled. We're also seeing less severely damaged cars being totaled. For our auctions, despite seeing substantial unit growth year over year, we're seeing heightened bidding activity in excess of the unit growth, meaning we have more bidders and more bids per car that we are listing.
We are also benefiting from what appears to be a strong used car price environment. The Manheim Index is up almost 6% year over year with 6 consecutive record months. And lastly, we are experiencing a reasonably sound scrap environment of 11% year over year. The unfavorable driver of gross margin rate and gross profit for the period of course is the catastrophic expenses we incurred in the period of approximately $36,000,000 In a catastrophic event, we incurred 2 types costs, including 1st unit related expenses, such as sub haul expenses and flood cleanup services, as well as period expenses such as rent for temporary facilities, personnel and travel related expenses. In this period, we incurred substantial expenses on both fronts.
Per our prior discussion about revenue, because we incurred a majority of our sub haul and flood cleanup expenses in this period, our future mix of catastrophic costs will shift more towards ongoing period expenses, including rent, people and travel. The net effect for us in this quarter of Hurricane Harvey was an approximately $17,000,000 pre tax loss. Over the full lifetime of Hurricane Harvey, we expect to incur a net loss to serve our customers. Turning to general and administrative expenses, we were down from 35 $200,000 last year to $34,000,000 this year ex D and A. This is largely the result of lapping $5,200,000 in payroll tax from a year ago in connection with certain executive stock options exercises.
Excluding this change, G and A increased by $4,000,000 approximately half of which is attributable to acquisitions and the balance organic. Our GAAP operating income grew from $104,800,000 to 123.9 dollars or 18%. If we normalize simply for the payroll expenses incurred last year, operating income was up 13%. As noted previously, our net catastrophic losses this quarter of $17,000,000 so excluding this event and also normalized for payroll expenses, operating income grew by some 28% year over year. Our net interest expense for the quarter was down from 5 point $6,000,000 to $5,400,000 due largely to a lower funded debt balance.
Last note on the P and L. On GAAP net income, we non GAAP, pardon me, net income, we grew from $66,300,000 to $77,100,000 growth of 16%. This excludes the book tax benefit of our early adoption of ASU 20 sixteen-nine regarding tax treatment certain stock option exercises. This also excludes $3,000,000 as a loss on the disposal of certain non operating assets. A tidbit here worth noting, when we acquire real estate, we allocate purchase price based on market values to land, buildings and improvements.
In this case, we demolished certain buildings acquired almost 10 years ago because we had a higher and better use of that capacity, which is for storage capacity for our vehicles. After adjusting for the stock split year over year non GAAP share count up slightly from 234,700,000 to 236,800,000 dollars with the majority of this increase attributable to the effect of a higher stock price. The bottom line is a 15% increase in non GAAP fully diluted earnings per share. One last note on cash flow and I'll turn it over to Will. Operating cash flow for the quarter of $93,300,000 compared to $74,300,000 a year ago.
Due to a combination of factors including increased cash earnings, Our capital expenditures for the quarter were approximately $41,500,000 of which approximately 70% is for land and development, continuing the theme you've heard us talk about in prior calls, our 2020 program to grow capacity to serve our customers. With that, I'll turn it to our EVP, Will Franklin.
Thank you, Jeff. Let me add a few comments, provide some color on our performance for the quarter as well as some color on what's going on in the industry. Copart delivered another strong quarter. This quarter, we grew our worldwide revenue and EBIT by $73,200,000 $19,100,000 respectively. Excluding the impact of Hurricane Harvey, our revenue and EBIT growth would have been 54,700,000 dollars $36,500,000 respectively.
And the growth rate in revenue and EBIT would have been 15.8% and 34.8%, respectively. In North America, our revenue growth, excluding the impact of Harvey, was $49,900,000 or 17.3%. In North America, non Harvey unit volume was up 9.6% and was driven by organic growth and market wins in the insurance car market, the continued growth in our non insurance business and our recent MPA acquisition. We continue to experience growth in the overall salvage car market, Despite the introduction of accident avoidance technology and its propagation throughout the car park, accident frequency continues to grow. According to Independent Systems Services, the average quarterly growth in the number of paid collision claims for
the last
18 quarters has been 4.7%. And at the last quarter reported, the growth was 0.3%. However, even more impactful than the increase in claims frequency is the increase in the total loss frequency, which over the last 7 quarters has grown at an average rate of 6.7%. Total loss frequency is the percentage of time that a car involved in a claim is totaled rather than repaired or restored. It is important to note that the growth in total loss frequency has incurred
in an
environment of increasing used car values. We see nothing in the near future to suggest an abatement in the growth in either claim frequency or total loss frequency. In North America, our quarterly insurance volume has grown in absolute unit terms at an average rate of 12% since the beginning of our fiscal 2015. We also continue to see growth in volume from our non insurance suppliers. These suppliers include franchise and independent dealers, finance companies who give us the repossession and off lease vehicles, charities, municipalities, equipment dealers and brokers.
On a quarter over basis, volume for franchise and independent dealers grew by 23%. These cars are typically run and drive cars, yielding higher ASPs with higher profitability and varying a shorter cycle time. Overall growth excluding NPA and our non insurance volume was 13%. In North America and excluding the impact of Harvey, our revenue per car on a quarter over basis was up approximately 7%. Revenue increased due primarily to higher ASPs.
Used car pricing was up almost 5.9% and we saw beneficial change in the mix of vehicles sold at auction as we saw a meaningful decrease in the number of charity cars and a significant increase in dealer cars. And we added to our mix the motorcycles from MPA, which carry a higher ASP and a higher revenue per transaction. We are also seeing what we believe to be a less severely damaged car being totaled by the insurance companies. Finally, we saw an increase in revenue from sellers as we adjusted our pricing to certain sellers to more accurately reflect the value of the land utilized in our operations. We are also seeing the benefit of our marketing efforts to our international buyers and the impact it's having on our ASPs.
Total bids from our international buyers were over 35% higher than the same quarter last year and included for the first time bids from Albania, Turkmenistan and Gibraltar. In North America, the value of products sold to international buyers increased to 21.9% from 19.8% for the same quarter last year. Turning to the UK, we saw marginal decline in units sold resulting in part from our decision to eliminate less profitable programs. Nevertheless, expressed in GBP, revenue grew by 1.1% and gross margin grew by 6.8% as we continue to focus on the more profitable markets. We continue to see meaningful progress in Germany.
We hold biweekly auctions for 3 insurance suppliers and 2 major rental car companies. Auction buyer participation is exceeding our expectation as the number of participants and the number of unique bidders per auction are higher than those same metrics for the U. S. Returns achieved through our Copart auctions in Germany significantly exceed those achieved through the existing remarketing convention in which vehicles are placed on listing board for a period of 2 days and the high bidder is subject to a 21 day contingency period in which the seller may withdraw the offer. Key to our growth in Germany is expansion of our network of facilities.
In addition to the sole operational facility, which is located near Hanover, we have purchased or in the process of developing 2 new facilities in Northern Germany, one near Berlin and the other near Leipzig. We expect to begin phasing in operations at these locations within 6 months. We continue our efforts to open at least 3 other facilities in Germany, 1 in the Western and 2 in the Southern areas of the country. We are also seeing meaningful progress in Brazil, where volume was up 21% and EBIT contribution was up 140%. Nevertheless, on an overall basis, for the quarter, our operations outside of North America and the UK, while profitable, remained immaterial in both revenue and EBIT.
At the end of the quarter, our North America revenue was up approximately 20%. Excluding cats, North America inventory was up more than 8%. Inventory outside of North America remained relatively flat. On a consolidated basis and excluding the abnormal operating costs associated with Hurricane Harvey, our average cost to process each car remained relatively consistent with the same quarter last year. We remain focused on controlling our G and A expense and we are pleased with our efforts to gain leverage by limiting its growth.
Total G and A expense for the quarter was $34,000,000 and included $1,800,000 of additional G and A expense associated with the MPA operations. Excluding the additional MPA cost, G and A remained very consistent with the prior three quarters despite increases in both unit volume and the number of yards. It should be noted that extreme weather events as cited by CCC are occurring more frequently and are impactful to our volumes and our operations. In 2016, the insurance industry experienced 750 extreme weather events. In 2015, that number was 7.30.
During the 10 year period ending in 2015, the average number of events per year was 5.90. Cats and our ability to address them on behalf of our insurance customers are becoming an increasingly important part of our service offering. Our goal of providing immediate land capacity to our insurance customers during a CAD, along with the continuing organic growth in the insurance market and our growth in the non insurance business is driving our need for more land. During the last fiscal year, we opened 12 new yards and we expanded 15 existing locations. In total, we added almost 700 acres of capacity.
Our expansion activities continued into this quarter and will continue throughout the year. During the quarter, we opened 2 new yards, 1 in Exeter, Rhode Island and 1 in Andrews, Texas. In addition, we expanded 7 existing locations and opened 1 sub lot. In total, we added approximately 226 acres of new capacity. With the new yards and the new expansions already in the construction phase, including mega cat yards in Houston, North Carolina, New Jersey and Alabama, we could add another 1,000 acres during the remainder of this fiscal year.
So that concludes my comments on the quarter. Chantal, we'll turn the call back over to you for the Q and A session.
Shantel?
Thank you very much. Our first question will come from Bob Labick, CJS Securities.
Good morning and congratulations on a nice start to fiscal 2018.
Thank you, Mohave.
I wanted to start with the NPA, the National Powersports. What have you learned since you've had it in the fold? How is it going versus your expectations? And are you looking at additional adjacent growth opportunities? Are there any on the radar now?
Or how should we think about that part of it?
Thanks, Bob. So the NASH Powersports acquisition, I think you know we completed in June this year and it has performed according to our expectations. We acquired the business believing, as you may recall from our prior discussion, that it was both an excellent standalone investment as a company well positioned in an attractive marketplace with room to grow ahead of it. And then it was also very strategically relevant to us given our recent focus on the powersports arena with Crash Toys and otherwise that it would ultimately help us serve our existing customers as well. That thesis remains very much intact.
The company is performing well. The team is excited to be part of the Copart family as well. So no surprises there. Okay, super. And then as your question about other, not particularly, I think, we wouldn't speculate on any forward looking M and A activity, But no, it's not per se part of the systemic program.
Okay, great. And then congratulations on the progress in Germany. You answered many of my questions there. So I'll just shift to I think the other news on the call, which was really interesting, was the positive pricing on U. S.
Insurance cars. Can you talk a little bit about how we should think about how much of this is perhaps temporary as a result of used car prices being up because of the hurricanes? How much is a structural shift? And what are the drivers behind that shift of newer cars being totaled?
I think that what we're seeing is not a one time event. I think we're seeing a trend. I think what's happening is we're seeing the increase in repair cost driven by a number of different factors. And we've talked about this very extensively, the complexities of the cars, the exotic metals. We're also seeing consolidation in the repair industry, where as predicted by the year 2020, 45% of all repairs will be handled by MSOs.
All these are leading to an increase in repair costs, which internally are leading to a higher salvage frequency in the newer and the more complex cars.
Got it.
Okay, super. Well, thank you very much.
Thanks, Bob.
Our next question will come from Craig Kennison, Baird.
I Wanted to ask about Harvey, first of all. I think in the last call you said you were assigned 85,000 vehicles. I'm wondering how many of those have you actually sold and how many remain to be sold?
So the sales of the units in this quarter, approximately 12,000 or thereabouts and the pickup activity, there are still some stragglers. We've by and large completed the pickups in this quarter.
Got it. And I think
Just to point out again what Jeff said previously, the majority of the expenses associated with processing these cars, the recovery and the storage, the placement of land occurs at the very beginning of the process right after the assignment. And that's why you see the loss generated in this quarter. So you see some choppiness in the impact of this storm on our financial results for the next couple of quarters. But on overall basis, we expect to have a loss.
Yes, that's very helpful as you frame it. And maybe following up on that Will, of the $36,000,000 of cost reported associated with Harvey, does that include all the cost to process the cars or just the abnormal costs above and beyond what it would normally take to process the vehicle?
That's just that's the abnormal cost and primarily is due to the extra storage, the extra labor cost and primarily the extra tolling cost.
Thank you. And then shifting gears, the incremental margin in the quarter looked to be fantastic. I mean, your EBIT margin on a core basis appeared to be up almost 500 basis points based on our math. I mean, how sustainable is that trend? What is really driving that incremental profitability?
And again, how sustainable is it?
Well, we don't provide any forward looking guidance. As you know, Craig, there's nothing particularly distorting the quarter, I'd say, meaning besides the cat, obviously, which we helped normalize for you. So you're seeing the benefit in some cases of some operating leverage, the strong unit growth, leveraging our existing facilities and infrastructure. You're seeing of course G and A that's not growing anywhere near the rate that our revenue and gross profit is. So I think it's largely operating leverage on the G and A level.
And then of course the selling price phenomenon you heard Will and me both talk about.
Yes, makes sense. Big congratulations. Thank you.
Thank you.
Our next question will come from John Healy, Northcoast Research.
Thank you. I wanted to follow-up
on the comment you guys made about the cars that you're seeing come through the yard being a little bit younger. Is there any way to think about that by kind of bucketing the age of vehicles? I know a lot of the industry data sometimes looks at cars less than 3 years old or 3 to 8 years old and maybe older than 8 years old. Is there a way to think about kind of what you're seeing today in terms of your mix and maybe that 0 to 3 or 3 to 8 year old car population?
So John, I think we don't intend to provide any further data publicly, but the logic is what you just described. So we look at it on a histogram basis, how many cars are 0 to 1, 0 to 5, 6 to 10, etcetera. And that's what yielded the commentary you heard today, which is that we are seeing a newer mix of cars in the Q1 of this year as compared to the Q1 of last year.
I might add another comment to that. There's another metric that we look at and that's the estimated repair value to the ACV of the car. And we're seeing what we hope or would think is a trend of cars being tolled at a lower repair to ACV ratio.
Okay. Okay.
And then I wanted to ask about the cost associated with Harvey a bit. On the kind of processing side,
how much of
that processing cost do you think would stay in until those vehicles are absolutely sold? How much of that kind of what I would say variable expense line item should we see in 2Q and 3Q do you think?
John, I think we're not prepared to be more specific on that front except to say that as you heard from Will, a good chunk of the costs for us are the towing expense and then also the flood cleanup. Those expenses largely incurred in the Q1. That said, there are ongoing period costs, processing costs as you might call them, including the rent for temporary facilities, including personnel. So we still have a lot of extra folks who are on the ground there in person managing the volume we've got as well as the travel and corresponding expenses that comes from having extra personnel deployed there. So those expenses will continue in subsequent quarters.
Okay, great. Have a great Thanksgiving, guys. Thank you.
Thank you. Our next question will come from Bret Jordan, Jefferies.
Hi, good morning guys.
Hi Bret.
What are
you seeing on the title transfer times down in Harvey? Is that is the product moving pretty quickly? I mean it seems like you've got, is it 70 odd 1,000 cars left to clear?
Yes. No, we don't have 70,000 left to clear. But yes, we have seen a slowdown and it's just the capacity of the state to process these titles. We're doing everything that we can on our end. And initially, we saw times that were consistent with what we would expect in normal operations.
But more recently, we've seen the slowdown.
Okay. Okay. I thought you said you had 85,000 assignments on the last quarter conference call and you said you'd done 12 on the Q1. So are there fewer than 70 remaining?
No, we've got more than that. But what we're dealing with right now, Brett, is we've already sold more cars in November than we sold in the last quarter. So trying to do the math when we're selling at such a fast rate. With the majority, I'd say 2 things from listening to the questions. The majority of the vehicles will be sold in this queue.
So in Q2, the quarter we're in now, we're going to unload the majority of those vehicles. We'll be selling the remainder of Q3 and Q4. But the majority will go in Q2. The second thing I would say is because we've incurred, what was it, Jeff, dollars 17,000,000 of expense.
$36,000,000 of expense, dollars 19,000,000 of revenues, dollars 17,000,000 net loss.
Dollars
17,000,000 net in the last quarter, it will be profitable going forward, meaning they're going to benefit Q2, they're going to benefit Q3 and benefit Q4. But overall, we will lose, as Will explained earlier.
Okay, great. And I think a couple of times in the prepared remarks, you mentioned account wins. Is there anything meaningful shifting on the insurance side?
Nothing that we would identify specifically. We're always competing for business and it's a competitive market, but we're also always trying to improve our service offerings and our products. I think we're doing a very good job in doing that.
Okay, great. And then you said 1,000 acres possible in the balance of fiscal 2018. Is that would that get us to sort of where you need to be from a real estate standpoint? Or is this are we looking to get 2019 growing real estate beyond that level?
If the trends continue, if we're seeing 10% growth in the just the insurance salvage market, that means we'd have to add 700 or 800 acres a year to keep pegs. And in addition to that, we've employed a new approach to cats to where we want to be able to land bank large cat capacity in high risk areas. And that also is adding to our need for land. So, I don't see the need for land abating for the next couple of years.
Okay, great. Thank you.
Thanks, Brett.
Thank you. Our next question will come from Ben Bienvenu, Stephens Inc.
Yes. Thanks, guys. It's actually Daniel Limbro on for Ben. Congrats on the nice quarter. Thank you.
I wanted to start on G and A. So G and A was actually down year over year. And Jeff, I think you called out that we were a big driver was lagging over a step up in payroll taxes from options. Going forward, do you guys still expect this to grow on a dollar basis, but leverage as a percentage of sales? And is there a certain revenue growth that you need to get that leverage?
Well, to answer your question, yes, we expect it to grow. And I don't think there's any way to avoid that with the increase of products and technology and volume and land capacity, but we also don't expect it to grow as fast as our revenue. So we think that while it grows, it's still leverageable.
Okay. Can you maybe talk about what's driving the improvement in that margin? Are there any big callouts you guys are doing or is it a lot of smaller things that are driving these efficiencies?
If but so for an earlier question, I think our margins are driven by unit volume leverage. So the benefits of selling additional units through a fixed facility, so to speak, though that obviously grows over time as well. The selling prices of our vehicles have been strong. You've heard a fair bit of commentary on that today as well. And then lastly, I think the point you raised at the outset of your here, which is G and A, which grows, but typically not at rates anywhere close to the kind of revenue growth rates we're experiencing today.
Okay. Thanks. And then moving over to Europe, I know you guys have commented that the German market is really representative of the EU. You guys talked about the progress in Germany, but are there any other specific European countries you guys are looking to expand into in the near intermediate term?
Well, we're currently in Spain and we think we have the same opportunity in Spain. We have one existing facility in Madrid and we're currently looking at expanding into areas of Barcelona and Magala. So I think that would be the next area that we'd probably be focusing our efforts.
Okay. Well, that's it
for me guys. Thanks so much.
Thank you.
Thank you. Our next question will come from Matthew Page, Gabelli.
Good morning. Congrats on a nice quarter. Just one question for me today. I know they make up a very small portion of the car park, but do you have any color as to how claim or totaling frequency on electric vehicles compares to their traditional counterparts?
I think your question your premise is the right one, which is that the sample size remains so small that it's in most respects too early to tell. The combination of factors here, these electric vehicles are often made out of more complex substrates. So the panels are more difficult to repair. They also often come with additional safety technologies or cameras on the perimeter, which again also further escalate repair costs and could or should lead to total loss rates being higher. But those are it's too early to render a definitive conclusion on that front.
All right, great. Appreciate the color. Happy Thanksgiving.
Thank you. Thank you. Thank you.
Thank you.
Our next question will come from Gary Prestopino, Barrington Research.
Hey, good morning, everyone.
Hi, Gary. Good
morning. Couple of questions here. Can you maybe just because a lot of these cars that you're getting in Hurricane Harvey are freshwater cars versus saltwater. I know you said you've only auctioned off a couple of or $12,000 small amount relative to what you've been assigned. But can you give me give us some idea relative to other hurricanes where there have been saltwater damage?
Are you seeing a lift in price of the cars because they're freshwater damaged or that doesn't really matter at all?
We are, Gary. And I think it goes beyond the nature of the damage. I think that the insurance companies and the repair shops are completely overwhelmed by the magnitude of volume in those areas. And I think we're getting better cars than you might in a different environment. So the ASPs on the Harvey cars are higher than in other cats and overall company averages.
Okay. That's helpful. And then did you guys call out what Cycle Express added in revenues this quarter? Or can you do that for us?
We didn't. We just provided the color that the U. S. Unit sales growth would have been 8.3%, excluding NPA.
Okay. So you don't call that out. That's fine. And then lastly, you mentioned that you're seeing strong growth on the non insurance vehicles, particularly on the franchise and independent dealer side. A couple of questions here.
What has there been any shift in the amount of cars that are non insurance? I believe it's kind of hovering around 20%. Are you seeing a shift higher now as a percentage of total?
Yes. Non insurance cards are growing as a percentage, excluding Harvey, of course. And that's been driven primarily by cars from franchise and independent dealerships, but there's other segments that have been growing as well.
I mean, has the shift been I mean, if it was 20%, has the shift been now to 22%, 23% or that's something you just don't call out?
Something we haven't called out. We talked about the growth in that market itself, which was 13% last quarter.
Right.
Okay. And then in terms of these non insurance vehicles, do they on an overall basis, especially the ones that are trade ins, are they lifting your average your cumulative average selling price? Are you still looking at maybe the 10 to 12 year old car that's going to get $2,000 at auction?
No. Are you getting
a younger vehicle?
Yes. 6 quarters ago where much of our lives in non insurance cars came from charity, it was actually detrimental to our average ASPs, but that's no longer the case. So we've made some adjustment to our approach to charities and we've reduced the number of cars coming from that market. At the same time, we've expanded significantly our efforts in the areas of franchise and infant dealerships. We have new programs in place.
We have new resources focused on it, but probably more importantly, we're getting higher returns than we have been in the past on these types of cars. And that's all leading to more volume. Those cars have a higher ASP and are creating uplift to our overall ASPs.
Thank you. Have a great Thanksgiving.
Thanks, Jerry. Thank you.
Thank you very much. Our next question will come from Ryan Brinkman, JPMorgan.
Hi, good morning. This is Samik on for Ryan Brinkman. I just wanted to get your outlook first on pricing. You had strong momentum when it comes to ASPs this quarter. But as you sort of go through the processing of the vehicles related to the hurricanes in the coming quarters, do you see it having sort of a more depressing or a bit of pressure on pricing going forward, just given the volumes you'll be processing?
Or do you think the mix is strong enough here to offset that?
The mix effect of the hurricane would more than offset the supply factors you just described. So the typical hurricane car sells for more than our standard insurance sourced vehicle.
Okay, okay. Got it. And then when I look at the cost headwinds you had of $36,000,000 in the quarter and when I compare that to the close your closest competitor, they had roughly $5,000,000 of costs. And I was wondering if you had any thoughts, I know you can't sort you don't have visibility in the exact nature of their costs, but if there are any thoughts you have, what's driving that big difference between you and your closest competitor in the abnormal costs related to the hurricanes?
As you noted, we don't, of course, have any internal visibility as to how they account for the catastrophic event. I'll note, of course, that our quarter doesn't end at precisely the same time that theirs does. So that may be a driver. We just know that $36,000,000 is what it took for us to provide excellent service to our customers in connection with these catastrophic events, hard for me to comment on theirs.
Okay, great. Thank you for taking
the Cornell. Let me just point out one area in which I think we exceeded, I think, the expectations of our insurance company. We've actually obtained an extra 800 acres of storage capacity at a cost of about $15,000,000 And I think those types of efforts generate costs in excess of what otherwise would be expected in these situations.
Got it. Okay. Okay, great. Thank you. Thanks for taking our questions.
At this time, we have no further questions in the queue.
Thank you, Chantal. Thank you, everyone, for attending the Q1 call for Copart. Happy Thanksgiving and we look forward to reporting on Q2 next year.
You very much. Ladies and gentlemen, at this time, this conference has now concluded. You may disconnect your phone lines and have a great rest of the week. Thank