Good day, everyone, and welcome to the Copart, Inc f ourth quarter fiscal 2010 Earnings 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, CEO of Copart, Inc. Please go ahead, sir.
Thank you. Well, good morning. It's my pleasure to welcome you all to the fourth quarter call and fiscal call for 2010. Before we start, I'll be turning it over to William Franklin for brief remarks, and then we'll give you a quick update and open it up for questions and answers. Thank you.
Thank you, Jay. Before we begin our comments, I would like to remind everyone on this call that our remarks will contain forward-looking statements. These statements are neither promises nor guarantees and are subject to certain risks, trends, and uncertainties that could cause actual results to differ substantially from those projected or implied by our statements and comments. For a more complete discussion of the risks that could affect our business, please refer to the management's discussion and analysis and the factors affecting future results contained in our 10-Q, 10-K, and other SEC filings. With that, I'll turn the call back over to you, Jay, to begin the discussion of our quarterly results.
Thanks, Will. For the year 2010, we added 278,000 members to Copart. As many of you will recall, we initiated a strong marketing campaign in 2009, pushed that into 2010, so we're extremely happy with the results of that one to give you some feedback on that. International bidding in 2009 was at 21.5% for the year. For 2010, that number moved to 22.7%. Actually, that surprises us that that has happened because of the amount of domestic bidding that has taken place. We have expanded both international and domestic members, but more so by far on the domestic front. That's good.
In addition to that, returns have leveled off in the quarter, which is great because they were very strong in Q3, Q4, and so far for the first month in the quarter that we're in now that starts August. Looking at all three quarters, all of Q3, Q4, and a piece of Q1 2011, we can tell you today that returns are strong and that they have leveled off in a strong position, which bodes well for the year. Looking at G&A, in 2010, total G&A spend was $100.6 million. Of that, $17.6 million was non-cash expense, so total cash expense of $83 million. Looking at 2009, same numbers. Total G&A was $77.9 million.
Non-cash expense in 2009 was $8.8 million. So total spend, net of non-cash was $69.1. We saw quite an increase in total cash expense between 2009, 2010. The majority of that was in development, systems development and in marketing. We will be tailoring that back a little in 2011. We expect G&A to actually reduce year-over-year from 10- 11 as we get more precise in some of the things we're doing both on the IT and marketing fronts. Let's talk about inventory builds for a moment in Q4. Typically, what happens is that inventory builds in Q2. We sell off that inventory in Q3, and we continue to sell that inventory off in Q4, ending July 31.
We had some significant gains in business in 2010. The majority of that business didn't come on until the fourth quarter. What that causes is an effect where we have to build inventories. We have the cost associated with getting those vehicles and none of the revenue associated with selling them because it typically takes 90 days to sell off inventory. Looking at Q4, we consumed approximately $3.6 million in cash, and that's evident and due to vehicle pooling costs. Will can talk more on that. I'm trying to give you more of an overview of the year, but specifically, I'm referring to Q4 in that just because it was such a build. Typically, we generate cash in Q4 from vehicle pooling.
In this quarter, we actually burned $3.6 million in cash. We had quite an inventory build. There's a little bit of timing going on here, in terms of what vehicles are sold, what vehicles were sold in Q4 versus what will be sold in Q1. We expect selling off a substantial amount of that inventory in Q1, the current quarter we're in. We finished the year with $268 million in cash, no debt, and a $150 million line. Let's talk about capital spending for a moment. In the year, excluding acquisitions, we spent approximately $76 million, of which $19.2 was for lease buyouts. Total CapEx, including acquisitions, was $96.8 million.
We had four locations in the U.K., one location in the U.S., giving us a total of 153 locations today. As you probably saw in the recent press release, Homestead, Florida, coming on this week, servicing the southern tip of Miami and southern Florida. Moving over to 2011, just to give you a feel for what we think will be on CapEx. We estimate approximately $70 million in capital spending for 2011. That is excluding acquisitions. It is just too difficult to determine what acquisitions will come up. Excluding acquisitions, approximately $70 million, that is including software development and lease buyouts. Let's talk about mix for a moment. In 2009, 83% of the vehicles sold in the fiscal year were from insurance companies, sourced from the insurance industry.
That number in 2010 has moved to 79.7% for the fiscal year. Will give you the quarterly numbers. Non-insurance was 17% in 2009, moving to 20.3% in 2010. We've seen double-digit growth in non-insurance volume. The insurance volume is slightly down specifically because of the economy. Unemployment leads to uninsured motorists. In addition to that, we've also seen higher used car pricing. Higher used car pricing leads to less total loss frequency. A couple of factors there. Not a big deal. I say slightly down, practically flat, so not a big deal there, but not typical growth that you're accustomed to or that we're accustomed to seeing.
As more population, more drivers, you just expect to see growth in units that are totaled, and that hasn't been the case in the last year. In 2011, we expect that mix to go above 80% again, as some recent wins in the last fiscal year will be selling off and coming through in 2011. I gave some estimates in FY 2010 on the second-largest carrier in the U.S., Allstate. That business that we have recently announced that it would take somewhere between 12 and 18 months for that business to fully integrate in with Copart. I'm happy to say that that process is completed now, and we will be on almost a normalized run rate for sales in Q1. Not quite, but almost.
A lot of the inventory builds associated with Q4 were due to that count, but not 100%. Obviously, we've had some other wins that recently came on in Q3 as well, and that inventory started to build in Q4. Q4 is has been a nice indicator of how the year is shaping up. You know, again, due to large volumes in inventory, I'm looking forward to seeing how Q1 will be. With that, I'll turn it over to Will for a little sharper look at the quarter, and then we'll open it up for questions.
Thank you, Jay. I'll make a few brief comments, and then we'll turn it over for Q&A. Yesterday, we reported our financial results for the fourth quarter of our 2010 fiscal year. Consolidated revenue was $190.5 million, compared to $184.3 million for the same quarter last year. The growth in revenue was driven by increased yield per transaction as higher commodity pricing in both North America and the U.K., higher used car pricing primarily in North America, and the continued impact of VB2, and our recent marketing efforts that have led to an increase in the number of unique bidders that participate in our online auctions.
Total unit volume was relatively flat as we continue to see the effects of the high rate of uninsured motorist, which was almost 18%, and the impact on salvage frequency from the high used car values and the higher payoff amounts. However, this decline in the salvage market was offset by the growth in units from non-insurance sources, which in North America grew by almost 17%. Cars supplied by insurance companies were slightly over 78% for the quarter, compared to over 82% for the same quarter last year. In North America, revenue grew from $145.7 million- $149.2 million.
In the U.K., revenue grew from $38.7 million- $41.3 million, despite the negative impact on revenue of the continued migration of seller contracts from the principal model to the agency model, and the movement in the pound-to-dollar exchange rate, which we estimate to be $10.8 million and $3.1 million, respectively. During the quarter, 44% of the units sold were sold as principal, while that number same quarter last year was 67%. Same store sales declined by 3%. Excluding the impact of the migration of seller contracts in the U.K. from principal to agency and the impact of the change in the dollar to pound exchange rate, same-store sales would have increased approximately 4.6%.
While it would appear to be a modest growth in revenue, consolidated gross margin grew by 7.9% from $79.9 million- $86.2 million, and the gross margin percentage grew by 190 basis points to 45.3%. The growth in gross margin and gross margin percentage reflects the migration of contracts in the U.K. from principal to agency, as well as the overall growth in revenue yield. General and administrative costs, excluding depreciation, were $27 million, compared to $22.4 million for the same quarter last year. The growth was driven primarily by increased investment in marketing to buyers, which has resulted in the growth of registered buyers of almost 278,000 during the year.
Our operating income increased from $55.4 million- $57.2 million. Our tax rate was 37.2% for the quarter. Diluted EPS from continuing operations was $0.43 compared to $0.41 for the same quarter last year. We ended the quarter with over $268 million in cash. Accounts receivable and vehicle pooling costs both grew as inventory increased. In the quarter, we generated approximately $25.4 million in operating cash flow. Net income plus non-cash expenses like depreciation and equity compensation generated approximately $52 million, while movement in the balance sheet consumed $26.6 million as accounts receivable and vehicle pooling costs grew. Net capital expenditures for the quarter were $16.9 million and included the buyout of one facility's lease. That concludes my comments.
I will turn the call back over to you, James, to moderate the question-and-answer portion of the call.
Thank you. Today’s question and answer session will be conducted electronically. If you would like to ask a question, you may do so by pressing the star key, followed by the digit one on your touchtone telephone. If you’re using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that’s star one if you have a question. We'll take our first question today from Bob Labick with CJS Securities.
Good morning.
Morning.
Hi, Bob Labick.
Hi. I think probably a year ago on the call, you mentioned that, you know, marketing for the year would probably be an increase of $15 million-$20 million, somewhere in that range. You gave us those numbers that, you know, support that. Could you just expand on your comments a little bit and tell us the impact of that spending versus your expectations and, you know, maybe, you know, maybe the return on investment or any color you want to give there.
Sure.
Sure. Sure, please.
Yeah. Well, I can just comment right out the gate by saying that, you know, when you're trying something new like that, you're going to have varied positive impacts, some more positive than others. There's no negative impact. They'll only be, you know, areas where you get greater return. What we've done is we've looked at that now and said, okay, we're gonna be honing in on the areas that are more effective than other areas. Because of that, you know, obviously, two things really are happening.
One is we got out to a very large audience, we brought in 278,000 members that we're now working with to become aware of the process in Copart, they're buying cars, we've got some very, very positive numbers with that. We're happy. Now it's a process of trying other markets, trying existing markets that you're using seeing if you can hone in a little better. I think the analogy I give people is we took much more of a shotgun approach in 2010, we're gonna be taking much more of a rifled approach in 2011. I can't give you a number, Bob Labick, as far as where we'll end up with our marketing budget for the year.
I can just tell you it's gonna be coming down along with some other G&A expenses. Overall, G&A will be coming down, which I believe is the first time that's happened, if ever, but definitely the first time it's happened in the last, you know, seven years, just looking back, since we initiated online auctions and went to VB2 in 2003. G&A has had to grow every year since then, just trying to manage the software costs associated with being an all online company. This will be the first year that we'll actually see a drop in G&A expense.
Great. Thanks for that color. Then just expanding on.
Bob,
Sure.
Let me add just a little color to that. It's not only a matter of adding registered buyers. It's trying to add buyers that are looking for the higher-end cars. As an example, if you look at the buyers that registered during our fourth quarter for fiscal year, of all the purchases they made, 27% of those purchases were clean title cars, as opposed to an overall clean title sales percentage of about 17%. We're looking for buyers that have an appetite for the higher-end cars to help us in our strategy to attract the sellers of non-salvage cars.
Okay, great. Now, that's, you know, exactly where I was going with my next question. Can you discuss a little bit more the drivers of the non-insurance business, I guess, both from the buyer and seller perspective and how that, you know, all ties in? Obviously, that, you know, that's a big part of it right there with the, with the new people coming in.
Well, sure. I mean, what we bring to the table is a platform that will allow them to generate higher returns. If they're not gonna get a higher return than what they're currently getting, they wouldn't use this, of course. Again, you know, you go back to we've had the double-digit growth in the year in the non-insurance segment, and that's because we're demonstrating a higher return. We give them the ability. We've got a network of 137 locations domestically. When you think just from a domestic standpoint, we've got over 6,000 acres and a lot of capacity, we can go out there, pick that vehicle up, get it off their lot. It's all of those pieces from high return to quick pickup to great service.
All of that put together that they're the compelling points as to why switch from whatever, you know, method they're currently using. Those are the drivers. You know, we go out, we push that. We'll continue to market because it's working. We'll just get a little bit more refined in how we do it. Then again, as I said, you know, some of the costs will be coming down just because we took a much more broad approach, and some of our projects are completed. Some of the things that we're doing today, we think we can change and become a little more efficient in the process. Overall, I can't tell you how much cost will come down, but they will come down a bit.
Okay, great. Looking at the U.K., you know, discussed the change to agency from principal. It appeared, you know, faster in this quarter than we had expected. Could you just give us a little sense of where you think it's gonna go through fiscal 2011?
I don't know where we're going to end up. I mean, the fundamental concept of why buy cars versus not buying cars. In that market, they use the purchasing of cars to determine whether or not to total loss the vehicle. Now you're taking averages and saying, "Well, for these model years, we're going to give you X%." That means you're totaling some cars you should have fixed, and you're fixing some cars you should have totaled. What we want to do is give them the accurate valuation on the car, what the car is really worth at auction. An Audi is going to bring more than a Vauxhall at auction. We want to be able to demonstrate those numbers to them.
In essence, by doing that, they're going to total the right product and fix the right product, and, you know, they're going to be getting the right returns. We sell the car the same way, whether we buy the car or whether we don't. We sit down with them and say, "Look, here's the fundamental change that we think should exist in the way that you do your process.
Because of that, if you change, then you're going to generate the same return, except that we're going to pass on, you know, all of the sales price minus a fee versus today, if there's any upside, like we've seen in the last year, we get the gain of that." The last piece I'll mention about it is you are aligning your interests. The last thing we want to do is be in a situation where we are trying to work them down on the price of what we pay for the product so that we can turn around and sell it for a higher price, and get the gain.
We would just assume do everything from a marketing perspective, a sales perspective to get the most we can for the car and then show that to them and demonstrate the value there. That builds a much longer lasting relationship between two business partners. Fundamentally, I think you know, if you look at it, you can see why doing it under the purchase model isn't as good of a method as doing it under a fee-based model. Clients get that. That's why it's converting. My, I, you know, I don't know where it'll end up because I don't have commitments right now to say guaranteed we're going to do it this year. From what we've seen in the last three years, I can only anticipate that we're going to see further conversion in 2011 as customers move from principal to agency.
Okay, great. Last one I'll get in queue. You obviously have built a lot of cash on the balance sheet, no debt. Can you discuss if there are acquisition opportunities out there for you? If not, what are your thoughts with the cash?
Yeah. There are definitely acquisition opportunities out there. You know, I, I try to give, I actually did give numbers on what our capital spending will be excluding acquisition. I can't put the acquisition, you know, estimates out there because you just never know till the deal's done, till it's signed on the dotted line. They're out there. There will be the odds are there will be some acquisitions that are done this year, and, you know, we'll report on them as each quarter comes up and explain why, you know, why we thought it made sense.
Great. Thanks very much. I will get back to you.
Thanks, Bob.
Next, we'll hear from Tony Costello with BB&T Capital Markets.
Thank you. Good morning.
Morning.
Hi, Tony.
One question I want to ask, and if you talked about the volume side of the business and, you know, some of the factors that are perhaps negatively impacting what we're seeing on that side. Conversely, I wanted to talk a little bit about the pricing side or the earned revenue per unit. I guess intuitively, you would think if the auction environment tightens up from a supply standpoint, and we've heard this from some of the large bidders or dismantlers that are out there, you tend to pay a lot more for that vehicle at auction. As the average selling price goes up, then the tiering on that buyer fee continues to rise.
If we look at what is sort of the earned revenue per unit on your vehicles, it seems like you might not perhaps be benefiting as much from what we're seeing in the industry in general. I just wanted to kind of have you help me understand a little bit about some of the dynamics that might be going on right now with respect to that.
Sure. Well, you know, it's from a, from a revenue, on a per car basis versus just looking at revenue, for the whole quarter. When you get quarterly, you have a lot of factors that are in play, and you start to look at what events took place, weather and how many calendar days, actual sale days were in the quarter. There's a number of things from a quarterly perspective. When you just look at the actual per car, you know, we're definitely not getting the percentage of yield that we've gotten in the past, as sale prices have come up. That's simply because, you know, we've pushed the average sale price from, you know, X to, over the last seven, eight years over, you know, 50% higher than X.
There's been just a massive movement. I mean, I think about 1998- 2003, and it was, you know, relatively flat to down in terms of sale price. What has happened in 2003- 2010, excluding the blip of 2008 and 2009. If I look at that from 2003-20 10, we've seen this big ramping up, and, you know, as the sale price has gone up, we haven't gotten as much of that sale price because we passed the majority of it on to our clients. In addition, we're bringing in cars that are non-insurance. You know, insurance cars are damaged, a lot of clients want the vehicle shrink-wrapped. They want the vehicle cleaned before auction.
When you're taking in a vehicle that is non-insurance, it's just the opposite. There's clean title, no damage. It's already washed when it comes in. They just want it run through. Those cars are selling and, you know, cycle time on those vehicles is a couple of weeks versus in excess of a couple of months. The yield on those is different. You tend to get a percentage when you're selling a damaged vehicle. You tend not to when you're selling a non-insurance vehicle. There's, you know, based on the mix, the fact that we've gone from, you know, 83% fiscally to 79.7% in this fiscal year, it's even more so for the quarter, that's gonna have an impact on, you know, what piece of the, of the increased sale price we get.
Okay. No, that's very helpful. Maybe, Will, you talked a little bit about the, I think around a $10.8 million difference on the agency principal in the U.K., I think for the quarter. What I'm wondering is the first 66%, how will that differ for the last 44% in terms of our thinking, from a revenue conversion to a, to a, you know, from principal to agency? Will it look any different, in terms of how we should prepare or model, going out? I mean, in terms of what vehicles are left to sort of convert from principal to agency?
Yeah. I think it's important to understand this is another element of mix that has an impact on our revenue yield. We actually have a higher yield on the principal model than we do on the agency model, as you would expect, as we're eliminating risk. Despite the fact that both types of contracts increased in revenue per transaction, because of the change in mix, the overall revenue per transaction did not increase correspondingly. As you see that going forward, that'll have a negative impact on our yield per transaction.
Okay. Is it harder then to get the last, you know, 25% or 30% converted than it was the first 35% or 40% converted?
Sure it is. Sure it is. The last 15%, 20% will be very difficult.
Okay. From a run rate standpoint, you make more progress, as we get you know, the last, you know, 15%, 20% , you may be there for a while.
We may be there forever, in fact, because at the end of the day, we're, you know, we want to make sure we do what the customer wants. Again, it was kind of the fundamental layout I gave Bob. It really boils down to, you know, you should be fixing and totaling the right cars, and we're gonna sell it the same way anyway, so why not give you the upsell? If a customer's perspective is, "I don't care, I wanna do it the way I wanna do it," we'll do just that. We're not going to make them go down this path, of course.
Okay. All right. Very helpful. Thanks, guys.
Next, we'll hear from Scot Ciccarelli with RBC Capital Markets.
Hey, guys. Scot Ciccarelli.
Hi, Scot.
You know what? I'm still a little confused. Can you help us understand the volume versus pricing a little bit? What I guess I'm struggling with is: how could units be flat? 'Cause I would think that ASPs returns would have been up a lot year-over-year. You know, I'm guessing kind of at the double-digit range, which is kind of what you guys talked about last quarter. It's what your biggest competitor just talked about. I'm a little confused why, you know, we wouldn't see a big improvement in returns, in which case, how could units be flat?
We are seeing a big improvement in returns. Returns year-over-year are definitely up. They're up a lot. That has nothing to do with units in terms of, you know, just because returns are up doesn't mean units are gonna be up. Used car pricing is up. I mean, let's just do the extremes. I think it helps people understand. If used car pricing, if the average car was worth $1 million, we're not going to total anything. We're gonna fix everything. As used car pricing moves up, you're gonna see less frequency of total loss. You're gonna see more vehicles being repaired. The other thing we've got is there's just less insured vehicles out there. The insurance industry as a whole, we've got additional cars.
We're processing more cars, you know, as compared to what we were in prior quarters. What we've got, though, is a situation where the insurance industry as a whole is shrinking right now, and it's shrinking because of all those factors. More unemployment leads to more uninsured motorists. We are finally seeing miles driven coming up again. That looks like the trend, but in the past, we've seen miles driven down. That's going to obviously impact number of total accidents. Severity, or total loss frequency, rather, is down because of used car pricing being up. Across the board, the average returns up, the average sale price is up, but the total number of units coming from the insurance industry is down. That volume is being offset by total number of units coming from non-insurance being up.
The other piece you've got is we had a lot of volume that came in that committed in Q3. That volume was picked up but not sold in Q4. We've got the cost associated with that business across the board, yet we don't have any of the revenue associated with it.
You talked last quarter, if I remember right, about bringing in a lot of inventory from Allstate that you were going to sell through in the fourth quarter. Did that not actually transpire?
No. We haven't seen the sell through of, you know, significant inventory in Q4. That's exactly what we're talking about. You know, my anticipation today is that that'll happen in Q1.
Just to follow up one more time on the first question, I think this kind of relates to what I think Tony was trying to get to. You know, when we're talking returns, just so we're all clear, maybe I'm misunderstanding it, you know, are we talking about just the what I would think of as ASP, or is it also, you know, the revenue you capture? I'm assuming that your fees would be up, you know, kind of double digits on a per unit basis, and maybe I'm just way off base on that assumption.
No, they're not up double digits. It on an absolute basis, they're up mid-single digits. When you add back in the impact of the transition and the contracts in the U.K. and FX, it would be up high single digits.
Okay, got it. All right. Thanks a lot, guys.
You're welcome.
We'll move on to Scott Stember with Sidoti & Company.
Good morning.
Good morning.
Morning.
Jay, so you were saying that basically you last quarter when we were talking about Allstate, you were building, I guess, inventory and cost without the associated revenues. We have two quarters in a row, so we should see in the first quarter at least, a pretty big, you know, shift of sales. Can you maybe just talk about the magnitude of some of those sales that will get shifted over?
Well, we're almost I'll just say it this way, we're almost at a complete run rate. From what I can see from August, it looks like August, September, October will be nearly a full run rate, but not completely. We've got some other clients that, you know, committed in Q3 as well, and Q4 that will not be at a full run rate. Q1 will be a quarter that's gonna be selling off a big piece of that, but it's not going to be the full run rate. I, you know, let's face it, we're never at a full run rate. There's always an account coming in here or there. You know, where do I think it's stabilizing? I think we're gonna be seeing it pretty stable in about Q2.
The first half of the year should definitely benefit from what might have left the fourth quarter or was left on the table in the fourth quarter.
For sure.
Okay. Back to the G&A question. Did you give the exact amount on NASCAR that was spent this year?
No, we did not. We just, I can just tell you that, you know, we gave estimates of $15 million- $20 million in terms of total marketing budget. That's everything from websites to ESPN to, you know, activation at the track to Speed TV, every single thing we did. I don't like to break it out just because there's a lot of moving components there as to, you know, where we're putting our dollars.
But you were within-
It was low end of that range.
Low end? Okay. Back to G&A. When you were talking about that G&A would be down year-over-year, are you talking in absolute terms for the full year in absolute dollars or on a percentage basis of sales?
Absolute.
Okay. Okay, and as far as market share goes, could you just talk about, I mean, obviously, you've gained a lot of businesses last year that we should see in the first half of 2011. At the same time, I'm sure there is a fair amount of business that gets lost. Net for the full year, can you basically comment on where you stood from a overall market share basis or just quantitatively?
Well, you know, I don't have the numbers in front of me, but if I did, we don't give them out anyway. I mean, at the end of the day, you know, we don't disclose unit sales. We start to get into that, you know, these questions start to go down a path of information that we don't give out. I, you know, I feel like I've given a lot of color commentary on it. You know, at this point, I'm just gonna finish it with that one because we really have given you guys a good feel for where we're gonna be in the next couple of quarters.
Okay. I was just trying to get at, obviously, you guys are on the upswing here with share.
We are.
Good. That's all I have right now. Thank you.
Thanks, Scott.
Thanks, Scott.
Next, we have William Armstrong with CL King & Associates.
Good morning. Not to beat a dead horse, I just wanted to clarify then. You're seeing a higher percentage of non-insurance vehicles. In general, do you get a lower yield per vehicle on non-insurance versus insurance vehicles?
That depends, and that's why we're not both answering quickly, because it depends on where that volume comes from. There are times where we get a lower yield, and there's times where we get a higher yield. Just depends on what segment that volume is coming from.
Okay. That mix shift won't necessarily push your blended average yield per unit in one direction or another.
Well, it just depends where the volume's coming from. If we were to bring in a low value account, and I could use a dealership as an example, some of the dealerships have very low value cars, some of the dealerships have very high value cars. Just depending on where that volume comes in is gonna change the yield. Off the top of my head, I don't know for the year or the quarter, you know, where we ended up with that segment of business.
If you strip out the clunker vehicles from a year ago, what would the trend have been in yield per vehicle year-over-year?
You know, I don't know because we didn't do a lot of clunker vehicles. I mean, Yeah, right. 3,000, 2,500, 3,000 cars. It was not a book of business we went after. The reason for that, there's a couple reasons. One, it's low return volume, number one. Number two, it's volume that's not recurring, and we're very much focused on business that we can create that's recurring. We're not big on going after business that's a one-time thing. I really don't know what, you know, I don't think the clunker volume is really enough to even talk about in terms of volume.
Got it. Okay. Then, one final point of clarification on the G&A. It's gonna be lower on a dollar basis year-over-year. Is that mostly coming from lower marketing, or are there other areas where you'll be lowering expenses?
We're lowering G&A across the board, so it's not just a factor of marketing, but marketing will be a very large component of it, obviously.
I see. Okay, thank you.
You're welcome.
Our next question comes from Craig Kennison with Robert W. Baird.
Taking my question. It appears that the Allstate volume simply didn't process as quickly as you might have thought in the third quarter conference call. Why would that be?
There's a number of factors when you're handling insurance volume. It could be, you know, lien payoffs. It could be the type of volume. There's a number of reasons for it. You're told, we think we're going to do, you know, our team looks at it and thinks we're gonna do X number of volume coming in, and we think it'll sell by a certain amount of time. Some of that volume didn't come in in Q3, it came in in Q4. There's just a lag. Takes 90 days roughly to sell inventory off. It's a number of reasons across the board. It's not a big deal to us. We don't look at the company quarter- to- quarter.
We look at the company over a long, you know, not even year- to- year. We look at over a five year horizon. You know, they're a great business partner. They're happy with what we're doing. Everything that we're hearing is positive, and that is what we're concerned with. We're concerned with that we're doing everything that they want and that we're meeting their goals. Whether the cars came in in Q3 and sold in Q4 or come in in Q4 and sell in Q1 is definitely not our big concern.
Thank you. I want to get back to that five-year plan in just a second. In terms of the competitive response to your Allstate win, have you seen any discounting or any other indicators that your competitors are struggling to get some volume back?
Well, I mean, we're in a very competitive market, you know, we respect that. We respect our competitors, and we feel they feel the same way about us. I can't say that I've, you know, seen anything that's out of the norm. Quite frankly, we don't get into, you know, pricing discussions on conference calls anyway, just for competitive reasons. They don't do it. We don't do it. You know, as far as I'm sitting here today, we're both out there, you know, trying to compel customers, we'll continue to do that.
Good. Then you mentioned sort of the five-year plan, and I'd love to talk about that. What would, Jay, what would your goals be for the next three to five years, whether it's, you know, revenue growth, EPS growth or, you know, just the, your share of the non-salvage market, for example?
Well, I mean, we don't give out, you know, that's like asking me for, you know, earnings guidance. You know, we don't give guidance in terms of revenue or units or any of that. I really can't comment on that. I mean, I can tell you that we believe that we'll be opening up additional facilities both internationally and domestically. You know, we know for a fact that what we're doing on the marketing front works, we'll continue to market. That will increase returns across the board on all vehicles. You know, again, it gives us a very compelling reason to go out and handle additional non-insurance volume.
You know, when I, when I look out, three to five years, just like the decisions we made in 2009 and 2010 to make some significant investments, both in IT and in marketing, we feel those were really, really good decisions, long term. There's a cost to doing that. That cost has been bared. You can see that in the G&A. But there's gonna be a payoff associated with that that goes out beyond five years in our view. Copart is a very unique company because as large as we are, as many cars as we sell, the majority of people have never heard of the company. As we get more awareness, more awareness, it creates an environment where we get to sell more cars, where we get higher returns.
Higher returns create a more, a larger market because, you know, obviously we gave the $1 million payoff example, but if tomorrow we were selling cars for $1 million, they'd total everything. As we can generate a higher return, it creates a larger market as well out of the vehicles that have accidents. three to five years, we're looking at a company that is obviously processing more units, has a larger footprint, is processing more insurance, but also more non-insurance product. The two benefit each other. I mean, you're talking about cross-pollination of buyers. You bring dealers in and sell their product, they start buying from you as well. There's a lot of benefits to what we're doing, and there's a quite a long term.
You know, there's a payoff that's coming in the next couple of years, but there's quite a long-term payoff, that is compounded, and it's hard to quantify. I can just leave you with, you know, in a finishing comment on this, is that we're very happy with how 2010 finished up. We're excited about how we're gonna look in 2011, and we think we're gonna be growing across all those segments.
You would not consider paying a dividend because your growth plans are substantial enough that you need that cash?
You know, we don't rule out anything. Whether it's a dividend or buying stock back or, you know, buying additional companies, those are all options that we look out. I'm not gonna say we wouldn't do it. I'm not saying that we would do it. It's something that we look at as an option.
Terrific. Thanks for taking my question.
Thank you.
As a reminder, if you have a question, press star one at this time. We'll now hear from Gary Prestopino with Barrington Research.
Good morning, guys.
Good morning, Gary.
Jay, could you possibly you started the call off saying you added 278,000 members. Could you just tell us what constitutes a member? Is that someone that just signs on to the website and establishes an account and does no activity, or is that someone that actually bids?
That's someone that signs up, gives us an email, gives us contact information, and then from there, they can bid, they can search, they can buy, they can, you know, do all those functions. It doesn't necessarily mean that they have to. We differentiate members from bidders from buyers or second high bidders, second high bidders from buyers.
Okay. That 278,000 is just people that have visited and registered. The obvious question is, can you tell us what the conversion rate is on these new members as to whether they actually are bidding or maybe even becoming a supplier of vehicle to you?
They are doing both. I'm trying to think off the top of my head, which is always a little spooky.
That's dangerous.
It can be real dangerous, but I believe members since we started the marketing campaign have bought over 10% of our product. I'll say that. If that's not the case, I'll retract the comment later. I believe that is correct, that members since we started the marketing campaign in 2009 have bought over 10% of the product that we sell.
Do you off the top of your head, do you know how many members have been suppliers too, or is that not applicable?
No, I mean, it is. I don't know the number off the top of my head. No, once we've got you signed up with us. Now, look, we're doing millions of unique hits to the website. Most people are coming into the website, they look around, they see stuff, and they don't do anything. The next step is to become a member and to sign up. That allows us to communicate with you, to work with you, to get you to supply cars or to buy cars. Typically, it's buy, much more buy than supply. You know, we're working every angle we can, obviously.
Okay. Are you starting to see a lot of repeat users within these members that have come in and actually purchased the product?
Well, that's the-
Do you have any idea of what the?
We are, but that's nothing new.
current usage is?
Yeah, we are, but that's nothing new. A member that bids eventually will buy, and a member who buys ends up becoming a return customer. Again, it's part of it is the experience, part of it is the unique nature of the product that we've got for sale, the fact that it's not a, you know, household name, though we'd love it to be. It's one of these experience where as a member comes in and becomes a buyer of product, they do return and become return buyers. That's pretty common.
Okay. Are you able to differentiate with these individuals whether they are you know, represent a business, represent, you know, just a private buyer? I guess what I'm trying to get at is how, you know, are you starting to penetrate maybe that dealer market in a deeper way where there's, you know, allegedly, you know, triple the size of the salvage business where there's cars that are applicable for you to sell?
Well, I mean, yes, we do. We have the information on how they come in and what type of a member they are if they supply that. They don't always have to. You can come in as a dealer and sign up and not supply that information. In a lot of states, it wouldn't matter. There is no difference. We do have that information where it's provided. We don't focus on that as much as we focus on supply, how we're growing non-insurance, and returns both for insurance and non-insurance, what's ASP look like. We don't get into percentages as much because we don't really have a control over, you know, actual cash values and used car pricing. What we have control over is the actual sale price of the car.
Okay.
We really tend to focus on that.
That's fair. In terms of the supply of these non-insurance vehicles, can you know, you look at it, and you say, okay, there's, you know, dealers, individuals, you know, can you kind of rank order where the supply growth is coming from and give us an idea of that? I mean, is there a third category? I guess charity cars are in there too.
Well, sure. You've got charities, and you got dealers, and you got individuals. Those are all in there. I would break it out this way, that if you're looking at non-insurance, does the majority of that non-insurance come from institutions or businesses versus individuals? The answer to that is the majority comes from businesses and institutions. Individuals is the lesser component of that. They're all across the board, they're all growth drivers right now.
Okay. Just lastly, you know, with your G&A, you talk about you're gonna you know, it's gonna be lower and, where will you be focusing the bulk of that spending? Is it still gonna be in the NASCAR and the, I forget what the other ones were, the ones, the drag race, racers or? Is there any other markets that you're gonna be focusing on?
Yeah. I mean, you know, we're looking at all those options right now. You know, the way that we've done advertising in the past, we're tweaking some of that. The way that we've done keyword search, we're changing some of that. I mean, this is what we do. Yeah, I can't sit on the call today and tell you that we're gonna do X, Y, or Z, or we're gonna use more Google and less Yahoo or how we're going to actually I think people tend to focus on our marketing as very NASCAR and very NHRA related, but it is not just those components. There was a heavy spend in keyword search, a heavy spend in advertising on cable. We're looking at all these avenues and then just tweaking.
You know, some things we may not do anymore, some things we'll tweak, and then some things we'll do that are new that we haven't tried in the past.
Okay. Thanks, guys.
Okay.
Thanks, Gary.
Thanks, Gary.
There are no further questions. I'll turn the conference over to Mr. Adair for any additional closing comments.
Thank you. Well, we appreciate you all coming on the call, and, you know, it was our pleasure to give you some color on how the quarter and the year shaped up, and we look forward to reporting on Q1. Thanks again.
This does conclude today's conference. Thank you for your participation, and have a nice day.