Copart (CPRT) Q1 2018 Earnings Conference Call Transcript

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Copart (NASDAQ: CPRT)
Q1 2018 Earnings Conference Call
Nov. 22, 2017 11:00 a.m. ET

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Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Copart Incorporated Q1 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.

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Please go ahead, sir.

Jay Adair -- Chief Executive Officer

Thank you, Chantel. Good morning, everyone, and welcome to the Q1 earnings release conference call for 2018. With me, in the room today is Jeff Liaw, CFO and Will Franklin, Executive Vice President for Copart. With that, will turn it over to Jeff Liaw who will give you some color commentary and then over to Will Franklin and then we will open up for questions.

So, it's my pleasure to introduce Jeff Liaw.

Jeff Liaw -- Chief Financial officer

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 analyzed our results on both GAAP and non-GAAP basis 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 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. The underlying factor this year was slightly beneficial year-over-year currency effect of 1.7 million dollars on foreign operations primarily due to relative strength in the British Pound after lapping the BREXIT event in June of the 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 boosted the revenue for some cars not yet sold through our auctions. We enjoyed global unit sales growth of 10% with US growth of 11% and international growth of 5%.

US unit growth was driven primarily by market growth, territory wins, new customer wins as well as the effects of catastrophic events and acquisitions. If we exclude catastrophic events from both periods, last year and this year, for the Q1, US unit sales grew by 10.6% year over year. Excluding acquisitions, US unit sells grew at 8.3%.

Turning to inventory. This is again the non-GAAP inventory measures. These are literally the cars in Copart facilities. Global inventory grew by 17.5%.

Excluding [inaudible] 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 million dollars year-over-year or 21.8%. Our purchased car revenue growth of 6.1 million dollars or 15.8%, continuing the trend you've seen in recent quarters as we've migrated business from principal to agency arrangements. Our gross profit grew from 145.3 million to 163.3 million with a decrease in gross margins from 42% to 38.9% 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 almost 14% in average selling prices largely due to increased selling prices for our insurance carrier source cars due to a combination of factors which we 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 unit growth, meaning we have more bidders and more bids per car that we're 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, up 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 million dollars. In a catastrophic event, we incurred two types of cost including first, unit-related expenses such a 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 the majority of our sub-haul and flood cleanup expenses in this period, our future mix of catastrophic costs will shift more toward ongoing period expenses including rent, people, and travel.

The net effect for us in this quarter of hurricane Harvey was an approximately 17 million dollars 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 35.2 million last year to 34 million this year ex-DNA. This is largely the result of lapping 5.2 million dollars in payroll taxes from a year ago in connection with certain executive stock options exercises. Excluding this, [inaudible] increased by 4 million dollars, approximately half of which is attributable to acquisitions and the balance organic. Our GAAP operating income grew from 104.8 million dollars to 123.9 or 18%.

If we normalized simply for the payroll expenses incurred last year, operating income was up 13%. As noted previously, our net catastrophic losses this quarter of 17 million dollars, 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 5.6 million to 5.4, due largely to a lower funded debt balance.

Last note on the P&L. On non-GAAP net income, grew from 66.3 million to 77.1 million, a growth of 16%. This excludes the book tax benefits of our early adoption of ASU 2016-09 regarding the tax treatment of certain stock option exercises. This also excludes US 3 million dollars 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 counts up slightly from 234.7 million to 236.8 million 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 93.3 million dollars compared to 74 0.3 million a year ago due to a combination of factors including increased cash earnings. Our capital expenditures in the quarter were approximately 41.5 million 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.

Will Franklin -- Executive Vice President

Thank you, Jeff. Let me add a few comments, provide some color on our performance in 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 $73.2 and $19.19 respectively.

Excluding the impact of hurricane Harvey, our revenue and EBIT growth would have been 54.7 million and 36.5 million dollars 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 49.9 million dollars 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, we continued growth in our non-insurance business and our recent NPA acquisition.

We continued to experience growth in the overall salvage car market. Despite the introduction of accident avoidance technology as propagation throughout the car park, accident frequency continues to grow. According to independent fiscal services, the average quarterly growth in the number of paid collision claims for the last 18 quarters has been 4.7% and in 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 sold rather of that repaired or restored. It is important to note that the growth in total loss frequency as 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 of these vehicles, charities, municipalities, equipment dealers and brokers. On a quarter-over basis, volume from the franchise and independent dealers grew by 23%.

These cars are typically rent-a-drive cars, yielding higher ASPs with higher profitability and bearing a shorter cycle time. Overall growth excluding NPA and our non-insurance volume was 13%. In North America, 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 a beneficial change in the mix of vehicles sold at auction as we saw a meaningful decreased in the number charity cars and a significant increase in dealer cars and we added to our mix the motorcycles from NPA which carried a higher ASP and 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 valuable 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 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 U.K., we saw a 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% and we continued to focus on the more profitable markets. We can change to see meaningful progress in Germany [inaudible] by weekly auctions for three insurance suppliers of two major rental car companies. Auction buyer participation is exceeding our expectation as a number of participants and the number of unique bidders per auction is higher than those same metrics for the US.

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 two days and high bids are accepted to a 21-day contingency period in which the seller may withdraw the offer.

Key to our growth in Germany is the expansion of our network of facilities. In addition to the soul operational facilities which are located near Hanover, we have purchased, are in the process of developing two new facilities in northern Germany, one near Berlin and the other near Leipzig. We expect to begin phasing-in operations at these locations within six months. We continue our efforts to open at least three other facilities in Germany, one in the western and two in the southern areas of the country.

We're 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 remain immaterial in both revenue and EBIT. At the end of the quarter, our North America revenue was up approximately 20%. Excluding [inaudible], 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&A expense and we are pleased with our efforts to gain leverage by limiting its growth. The total G&A expense for the quarter was 34 million dollars and included 1.8 million dollars of additional G&A expense associated with the NPA operations.

Excluding the additional NPA cost, G&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 operations. In 2016, the insurance industry experienced 750 extreme weather events. In 2015, that number was 730.

During the 10-year period ending in 2015, the average number of events per year was 590. [Inaudible] and our ability to address them on behalf of our insurance customers are becoming an increasingly important part of our service offerings. Our goal of providing an immediate land capacity to our insurance customers during the [inaudible] along with the continuing organic growth in the insurance market and our growth in the noninsurance 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 two new yards, one in Exeter, Rhode Island, and one Andrews, Texas. In addition, we expended seven existing locations and opened one 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 [inaudible] yards in Houston, North Carolina, New Jersey and Alabama, we could add another 1000 acres during the remainder of this fiscal year.

That concludes my comments on the quarter. Chantel, we will turn the call back over to you for the Q&A session.

Jay Adair -- Chief Executive Officer

Chantel.

Questions and Answers:

Operator

Thank you very much. Ladies and gentlemen, at this time, if you would like to ask a question, you may press star 1 on your touchtone phone now. Once again, to ask a question, please press star 1 on your touchtone phone now.

Our first question will come from Bob Labick, CJS Securities.

Bob Labick -- CJS Securities

Good morning and congratulations on a nice start to fiscal 2018.

Jeff Liaw -- Chief Financial officer

Thank you, Bob.

Bob Labick -- CJS Securities

I want to start with the NPA, the National Power Sports. What did you learn since you've had it in the fold? How's it going versus your expectation expectations and are you looking at additional adjacent growth opportunities? Are there any on the radar now or how should we think about [inaudible]?

Jeff Liaw -- Chief Financial officer

Thanks, Bob. So, the National Power Sports acquisition, I think, we completed in June of this year and it has performed according to our expectations. We acquired the business believing, as you may recall from our prior discussion that but it was both an excellent stand-alone investment as a company well positioned in an attractive marketplace with room to grow ahead of it and it was also very strategically relevant to us given our recent focus on the power sports arena with crash toys and otherwise that it would ultimately help us serve our existing customers as well. That piece has remained very much intact.

The company's performing well. The team is excited to be part of the family as well. So, no surprises there.

Bob Labick -- CJS Securities

Okay.

Jeff Liaw -- Chief Financial officer

And then the question about other, not particularly, I think we wouldn't speculate on any forward-looking M&A activity but no, it's not per se part of the systemic program.

Bob Labick -- CJS Securities

Okay, great. And then congratulations on the progress in Germany. You've answered many of my questions there. So, I'll just shift to, I think, the other news on the call which is really interesting was the positive pricing on US 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 were up because of the hurricane? How much is it a structural shift? And what are the drivers behind that shift of newer cars being totaled?

Will Franklin -- Executive Vice President

I think that what we're seeing is it's not a one-time event. I think it's a trend. I think what's happening is we're saying the increase in repair costs 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 it's predicted by the year 2020, 45% of all repairs will be handled by MSOs.

All these are leading to an increase in repair cost which in turn are leading to a higher salvage frequency in the new and more complex cars.

Bob Labick -- CJS Securities

Okay, super. Well, thank you very much.

Jeff Liaw -- Chief Financial officer

Thanks, Bob.

Operator

Thank you very much. Our next question will come from Craig Kennison, Baird.

Craig Kennison -- Robert W. Baird

Good morning. Thank you for taking my questions as well. I wanted to ask about Harvey first of all. I think on 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?

Jeff Liaw -- Chief Financial officer

So, the sales of the units this quarter of approximately 12,000 or thereabouts and the pickup activity, they're still staggered. We, by and large, completed the pickups in this quarter.

Craig Kennison -- Robert W. Baird

Got it.

Will Franklin -- Executive Vice President

Just to point out again what Jeff said previously, the majority of the expenses associated with processing these cars, the recovery and the storage and [inaudible] land occurs at the very beginning of the process, right up to the assignment and that's why you see the loss generated in this quarter. So, you see some choppiness in the impact of the storm on our financial results for the next couple of quarters but on an overall basis, we expect to have a loss.

Craig Kennison -- Robert W. Baird

Yeah, that's very helpful, as you frame it. And maybe following up on that, well, of the 36 million costs 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.

Will Franklin -- Executive Vice President

That's the abnormal cost and primarily is due to the extra storage, the extra labor cost and primarily extra towing cost.

Craig Kennison -- Robert W. Baird

Thank you. And then shifting gears, the incremental margin in the quarter look to be fantastic. I mean, your EBIT margin on a quarterly 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?

Jeff Liaw -- Chief Financial officer

Well, we [inaudible] providing a forward-looking guidance, as you know, Craig. There's nothing particularly distorting the quarter, I'd say, meaning beside the [inaudible] obviously which we helped to normalized for you. So, you're seeing the benefits in some cases of some operating leverage, some strong unit growth, leveraging our existing facilities and infrastructure. You're seeing of course of G&A has not grown anywhere near the rate that our revenue and gross profit has.

So, I think it's largely operating leverage on the G&A level and then, of course, the selling price phenomenon you heard Will and me both talk about.

Craig Kennison -- Robert W. Baird

Yeah, makes sense. Hey, congratulations. Thank you.

Jeff Liaw -- Chief Financial officer

Thank you, Craig.

Operator

Thank you. Our next will come from John Healy, Northcoast Research.

John Healy -- Northcoast Research

Thank you. I wanted to follow up on the comment you guys made about the cars that you're seeing completely to 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 look at cars less than three years old or three to eight 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 in maybe that 0 to 3 or 3 to 8-year-old car population?

Will Franklin -- Executive Vice President

John, 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, etc. and that's what yielded the commentary you heard today which is that we are seeing a newer mix of cars in Q1 of this year as compared to the Q1 of last year.

Jeff Liaw -- Chief Financial officer

I might add another comment that there's another metric that we look at and that's the estimated repair value to the ECV of the car and we're saying what we hope, we think, is a trend of cars being totaled at a lower repair to ECV ratio.

John Healy -- Northcoast Research

Okay. And then I wanted to ask about the cost associated with Harvey event. On the kind of processing side, how much of that processing cost you think would stay in until those vehicles are absolutely sold? How much of that kind of what I'd say variable expense line item should we see into Q2 and Q3? Thanks.

Jeff Liaw -- Chief Financial officer

John, 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 also the flood cleanup. Those expenses were largely incurred in Q1. That said, there is ongoing processing cost, 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 of course expenses that comes from having extra personnel deployed there.

So, those expenses will continue in subsequent quarters.

John Healy -- Northcoast Research

Okay, great. Have a great Thanksgiving, guys.

Jeff Liaw -- Chief Financial officer

Thank you.

Operator

Thank you. Our next question will come from Bret Jordan, Jefferies.

Bret Jordan -- Jefferies

Hey, good morning, guys. What are you seeing on title transfer time [inaudible] Harvey? Is the product moving pretty quickly? And it seems like you've got, is it 70,000 odd cars left to clear?

Will Franklin -- Executive Vice President

No, we don't have 70,000 left to clear but yeah we have seen a slowdown and it's just the capacity of the states that 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 a slowdown.

Bret Jordan -- Jefferies

Okay. I think you said that you had 85,000 assignments on the last quarter conference call and you said you had done 12,000 on Q1 or. So, are there fewer than 70,000 remaining?

Will Franklin -- Executive Vice President

No, we've got more than that but what we're dealing with right now, Bret, is we've already sold more cars in November than we sold in last quarter. So, trying to do the math when we're selling at such a fast rate, I think two things from listening to that question is the majority of the vehicles will be sold in this quarter. So, in Q2, the quarter we're in now, we're going to unload the majority of those vehicles, we will be selling the remaining Q3 and Q4 but the majority will go in Q2. The second thing I would say is because we've incurred, what Jeff said, 17 million of expense ...

Jeff Liaw -- Chief Financial officer

36 million in expense, 19 of revenue. So, 17 million net loss.

Will Franklin -- Executive Vice President

17 million dollars net in the last quarter, it'll be profitable going [inaudible]. They're going to benefit Q2, they're going to benefit Q3 and benefit Q4 but overall we will lose, as we explained earlier.

Bret Jordan -- Jefferies

Okay, great. I a couple times in your prepared remarks you mentioned account wins. Is there anything meaningful shifting on the insurance side?

Jeff Liaw -- Chief Financial officer

Nothing that we would identify specifically. We're always competing for business [inaudible] competitive market but we're also always trying to improve our service offerings and our products and I think we're doing a very good job in doing that.

Bret Jordan -- Jefferies

Okay, great. And then you said 1000 acres possible in the balance of fiscal 2018. Would that get you to sort of where you need to be from a real estate standpoint or are we looking against 2019, growing real estate beyond that level?

Will Franklin -- Executive Vice President

If the trends continue, we're seeing 10% growth in just the insurance salvage market. That means we'd have to add 700 or 800 acres a year to keep pace. And in addition to that, we've employed or a new approach to [inaudible] where we want to be able to land bank large [inaudible] capacity in high-risk areas and that also [inaudible] our need for land. So, I don't see the need for land abating for the next couple of years.

Bret Jordan -- Jefferies

Okay, great. Thank you.

Will Franklin -- Executive Vice President

Thanks, Bret.

Operator

Thank you. Our next question will come from Ben Bienvenu, Stephens Inc.

Unidentified Analyst -- Stephens

Thanks. I'm [Inaudible] in for Ben. Congrats on a nice quarter. So, G&A is actually down year over year and Jeff, I think you called out that we're a big driver was [inaudible] over a step-up in payroll taxes [inaudible] options.

Going forward, do you guys still expect it to on a dollar basis but leveraged as a percentage of sales and is there [inaudible] revenue growth that you need to get that leverage?

Will Franklin -- Executive Vice President

Well, to answer your question, yes, we expect it to grow and I'm convinced [inaudible] 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 gross, it's still leverageble.

Unidentified Analyst -- Stephens

Okay, can you maybe talk about what's driving the improvement of that margin? Is there any big call out you're doing or is it a lot of smaller things that are driving these efficiencies?

Jeff Liaw -- Chief Financial officer

For an earlier question, I think our margins are driven by unit volume leverage. So, the benefits of selling additional units through our facilities, so to speak, so 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 question here which is G&A which grows but typically not at rates anywhere close to the kind of revenue growth rates we're experiencing today.

Unidentified Analyst -- Stephens

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 and immediate term.

Will Franklin -- Executive Vice President

Well, we're currently in Spain and think we have the same opportunity in Spain. We have one existing facility in Madrid and we're currently looking at expanding into the areas of Barcelona and the [Inaudible]. So, I think that would be the next area that we'll probably be focusing our efforts.

Unidentified Analyst -- Stephens

Okay. Well, that's it from me, guys. Thanks so much.

Jeff Liaw -- Chief Financial officer

Thank you.

Operator

Thank you. Our next question will come from Matthew Paige, Gabelli.

Matthew Paige -- Gabelli

Good morning. Congrats on a nice quarter. Just one question for me today and 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?

Jeff Liaw -- Chief Financial officer

I think your premise is the right one which is the sample size remains so small but it's in most respects too early to tell. The combination of factors would be 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 escalates repair costs and could or should lead to total loss rates being higher but it's too early to render a definitive conclusion on the [inaudible].

Matthew Paige -- Gabelli

All right, great. Appreciate the color. Happy Thanksgiving.

Operator

Thank you. Once again, we will take any final question by pressing the star 1 on your touchtone phone. Our next question will come from Gary Prestopino, Barrington Research.

Gary Prestopino -- Barrington

Hey, good morning, everyone. A couple of questions here. Because a lot of these cars that you're getting in hurricane Harvey are freshwater cars versus saltwater, I know you said you only auctioned off 12,000, a small amount relative to what you've been assigned but can you give us some idea relative to other hurricanes where there has been saltwater damage? Are you seeing a lift in the price of the cars because they're freshwater damage or that doesn't really matter at all?

Will Franklin -- Executive Vice President

We are, Gary. And I think it goes beyond the nature of the damage. I think that the interest companies and the repair shops are completely overwhelmed by the [inaudible] 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 [inaudible] than overall company average is.

Gary Prestopino -- Barrington

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?

Jeff Liaw -- Chief Financial officer

We didn't. We just provided the color that the US new sales would have been paid 8.3% excluding [inaudible].

Gary Prestopino -- Barrington

Okay, all right. So, you don't call it 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. Has there been any shift in the amount of cars that are non-insurance? I believe it kind of hovers around 20%. Are you seeing it shift higher now as a percentage?

Will Franklin -- Executive Vice President

Yes, non-insurance cars are growing as a percentage excluding Harvey of course and that's been driven primarily by cars from the franchise and independent dealerships but there are other segments that have been growing as well.

Gary Prestopino -- Barrington

I mean, if it was 20%, has the shift been now at 22%, 23% or is that something you just haven't called out?

Will Franklin -- Executive Vice President

It's something we haven't called out. We talked about the growth in that market itself which was 13% last quarter.

Gary Prestopino -- Barrington

All right, OK. And then in terms of these non-insurance vehicles, on an overall basis, especially the ones that are trade-ins, are they lifting your cumulative average selling price or are you still looking at maybe the 10 to the 12-year-old car that's going to get $2,000 at an auction.

Will Franklin -- Executive Vice President

Well, six quarters ago where much of your [inaudible] and 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 adjustments to our approach to charities and we've reduced the number of cars coming from that market. At the same time, we did spend significantly our efforts in the areas of franchise and independent 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 or [inaudible] to our overall ASPs.

Gary Prestopino -- Barrington

Thank you. Have a great Thanksgiving.

Operator

Thank you very much. Our next question will come from Ryan Brinkman, JP Morgan.

Samik Chatterjee -- JPMorgan Chase

Hi. Good morning. This is Samik on for Ryan Brinkman. I just wanted to get your outlook first on pricing.

You have strong momentum when it comes to ASPs this quarter but as we sort of go through the processing of vehicles related to the hurricanes in the coming quarters, do you see it having a sort of a more depressing or a bit of pressure on pricing going forward just given the volumes you will be processing or do you think the mix is strong enough here to offset that?

Will Franklin -- Executive Vice President

The mix is [inaudible] 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.

Samik Chatterjee -- JPMorgan Chase

Okay. Then when I look at the cost headwinds you had of 36 million in the quarter and when I compare that to the closest competitor, they had roughly 5 million of costs and I was wondering if you had any thought. I know don't have [inaudible] the exact nature of their cost but if there are any thoughts you have what's driving that big difference between you and your closest competitor in the abnormal cost related to the hurricanes?

Will Franklin -- Executive Vice President

As you noted, we don't, of course, have any visibility as to how they account for the catastrophic events. I'll note off course that our quarter doesn't end [inaudible] the same time that theirs does. So, that may be a driver. We just know that 36 million dollars is what it took for us to provide excellent service to our customers in connection with these catastrophic events.

It's hard for me to comment on theirs.

Samik Chatterjee -- JPMorgan Chase

Okay, great. Thank you.

Jeff Liaw -- Chief Financial officer

I mean, it's just part of one weather area which I think we exceeded, I think, the expectations of our insurance [inaudible]. We actually obtain in excess of 800 acres of storage capacity at a cost of 15 million dollars and I think those types of efforts generate costs in excess of what otherwise would be expected in these situations.

Samik Chatterjee -- JPMorgan Chase

Okay, great. Thank you. Thanks for taking our questions.

Operator

At this time, we no further questions in the queue.

Jay Adair -- Chief Executive Officer

Thank you, Chantel. Thank you, everyone, for attending Q1 call for Copart. Happy Thanksgiving and we look forward to reporting on Q2 next year.

Operator

Thank you very much. Ladies and gentlemen, at this time, this conference has now concluded. You may disconnect your phone line and have a great rest of the week. Thank you.

Duration: 41 minutes

Call Participants:

Jay Adair -- Chief Executive Officer

Jeff Liaw -- Chief Financial officer

Will Franklin -- Executive Vice President

Bob Labick -- CJS Securities

Craig Kennison -- Robert W. Baird

John Healy -- Northcoast Research

Bret Jordan -- Jefferies

Unidentified Analyst -- Stephens

Matthew Paige -- Gabelli

Gary Prestopino -- Barrington

Samik Chatterjee -- JPMorgan Chase

More CPRT analysis

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