Copart Earnings Call INSIGHTS: International Expansion, CapEx Outlook
On Wednesday, Copart, Inc. (NASDAQ:CPRT) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Robert Labick – CJS Securities: First question obviously international expansion has been a big theme for you guys recently and then you move into the UAE looks like a nice location. Can you talk a little bit more broadly about what Copart can bring to a new geography? Obviously, your advantage in North America is the land, logistics, technology, supply base and buyers, but going into a new area, what are the big advantages Copart brings?
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A. Jayson Adair – CEO: I’ll go ahead and respond to that. If you don’t mind too for folks that are asking question, if you point them out to, whether the question is for Will or myself, that’d be great. But I’d be happy to comment on that, Bob. Dubai is our second largest. The UAE is the second largest market that we sell to outside of the U.S. The number one market being Mexico, and so for us to get a footprint, yes, we get to sell cars and we’re holding. We had three auctions now in that market, so that’s great, that allows for growth, that allows for us to go out and reach out to all the insurers there and process their vehicles, but it also allows for us to recruit buyers in that market to take payments in that market and to assist in the shipping process which is something today. The logistics of that is being done through vendors to the buyer base or by buyers directly and now that we’ve got a facility, we’ve got storage, we can actually assist in not necessarily the actual shipping but once it is shipped from a U.S. location to the Middle East, we can then take that vehicle and store it at our location for them and assist in that process. So it just allows us now to expand throughout the Middle East into those markets and its part of our strategy to deploy in a number of international markets, which I’d bring up the last point, which is really important, we’re a unique Company and that we get a benefit by having a global footprint. Lot of companies get the analogy of – when Walmart opens up in the U.K. and they’ve got out to buyers that are out there probably aren’t going online and buying products at Walmart in the U.S., but for Copart when we open up in a market like the U.K. we started selling motorcycles in the U.S. So there is an opportunity as we open up in multiple locations around the world to cross-pollinate the buyer base between markets.
Robert Labick – CJS Securities: Then I’ll stick with you Jay. You’ve had a lot of success with the non-insurance market growth, volume growth. What are the key areas going forward in that market and how big can non-insurance be for Copart?
A. Jayson Adair – CEO: Well, we’ve talked about those key points in the past. We go after all facets of the non-insurance market whether it be TPA or charity or dealer business and we are going to continue to go after that. We have been successful and I really think the limit is quite high. It’s an enormous market compared to the size of the total loss vehicles in the U.S. or the U.K. or Europe or any market. So it’s one of those books of business. What excites me about is one of the books of business where we have had some really great growth in the last year on the insurance side and yet that business has been able to maintain that 79-21 split. So they have been able to keep the growth going on even though the insurance side has been growing. So that has got to stop.
John Lovallo – Bank of America Merrill Lynch: Jay, I will start with you. I think over the past quarters you had mentioned potentially giving an outlook on CapEx. I was wondering, if you guys are in a position to do that?
A. Jayson Adair – CEO: Yes. John, it’s funny because we met this week talking about it and we may give some CapEx guidance in the following quarter. It just felt way too difficult. The range was so wide for us and that really got (boiled) down, just don’t know what dealers are going to get done. So the range was so wide that we just felt like it wasn’t a good idea. I will leave you with this. We spent a little over $200 million last year buying our shares back. We look at our cash position and the return on our cash as a factor on the return we can get from buying our own company back. So we are not going to go out there and deploy capital on things that are not a good use of capital. We are not going to go out do businesses that don’t make sense and we are not going to go out and expand yards that don’t need the expansion. So, we have got great capacity today, but we are expanding some yards just to maintain that capacity and we are looking at targets out there, and if we can get a better feel for it in the next quarter, the quarter after that, then we’ll give you guys some guidance on that, but otherwise for now we have decided to hold off, because the variance is so wide.
John Lovallo – Bank of America Merrill Lynch: Jay, one more for you. G&A last quarter I think you had mentioned that kind of the $25 million, $26 million per quarter run rate. Is that still reasonable for 2013?
A. Jayson Adair – CEO: The fact that it will change in 2013 is our – we are really transforming our Company from a technology standpoint. We have got technology that will continue to run the Company for the next year, or two, or three, but for us to take advantage of the world we live in today, both on a (server mode) level and on a cloud-based computing level, all the technology that’s out there, we have got to really transform our Company to that next point. So there is going to be G&A costs associated that are one-time and so we expect G&A to be higher than that this year. But candidly the good news is, is that is a one-time duplicative cost that’s associated with running two systems at the same time and once that one system is in and it’s running and it’s functioning, the other system will be shut down. Those costs will go away. I will just add to that. When that happens and we got a feel for what that expense is going to be, Will is going to call that out so that you know exactly what parts of G&A are considered non-recurring.
John Lovallo – Bank of America Merrill Lynch: Will, I will end with you. Just on the share repurchases in the quarter, I think it was 2.8 million shares, and the share count didn’t drop by quite as much. I am just wondering if a large portion of this was offsetting dilution from stock comp?
William E. Franklin – SVP and CFO: No, it’s just that you don’t get credit for the entire quarter when you purchase a share during the middle of the quarter. You’ll portion the benefit throughout the quarter. So, if it’s purchased in the middle of the quarter, you don’t get 45 days, that or half the benefit of the share purchased during the quarter.