Copart, Inc.

Excuse me, everyone. We now have our speakers in conference. Please be aware that each of your lines is in enlistment mode. At the conclusion of today's presentation, we'll open the floor for questions. At that time, instructions will be given as a procedure to follow if you would like to ask a question. I would now like to turn the conference over to President and CFO, Jeff Leal. Please go ahead, sir.

Thank you, Dan, and welcome to COPAR's fiscal 2021st quarter earnings call. I'll ask Darren Hart, our VP of Finance, to start with the safe harbors.

Thanks, Jeff. During today's call, we'll discuss certain non-GAAP measures, including non-GAAP net income per diluted common share, which includes adjustments to reverse the effects of certain discrete income tax items, foreign currency-related gains, certain income tax benefits and payroll taxes related to applying for stock option exercises, and the effects on common equivalent shares from ASU 2016-09. We provide 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 the corresponding GAAP measures, is relevant in assessing Copart's business trends and financial performance. We analyzed our results on both a GAAP and non-GAAP basis described above. In addition, this call contains forward-looking statements within the meeting 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. We do not undertake to update any forward-looking statements that may be made from time to time on our behalf. For a more complete discussion of the risks that could affect our business, please review the management discussion analysis portion of our latest periodic report filed with the SEC. Thanks, Eric.

We are certainly pleased with our results for the quarter. Darren, in a moment, will walk through details of those results with the metrics that we traditionally disclose. Wanted to pause for a few minutes also to talk about some of the bigger themes in our business, as those themes, I think, will help explain and draw out the results of the past quarter, the past year, and frankly shed light also on our strategic approach to the business. We wanted to talk about the evolution of the total loss universe. I think historically we've been good and the industry's been good about talking about repair costs and why rising repair costs due to vehicle complexity and age and labor rates and the like were driving increased total loss frequency. Needless to say, those trends continue unabated and are accelerating due to rising complexity and the proliferation of accidents detection and avoidance systems. It's well understood among customers, investors, and other stakeholders that repairing cars has become progressively less attractive economically for many, many years. I think where we've been less effective is in communicating the other side of the salvage equation. And to be precise, I mean the values that we can generate for these cars at auction. The total loss industry has changed very dramatically over Copart's 37 years, and even fairly significantly over the past five. In our early days, of course, salvage vehicles were literally worth their weight in metal. see even vestiges of this in earnings calls as recently as a year ago when we were disclosing scrap prices and how they've changed year over year. I've been the CFO of Copar for four years, and most types of earnings calls we absolutely never want to talk about scrap prices. Why? Because these cars that we sell increasingly instead became valuable for their parts competition. As the dismantling industry evolved and the OEM leveraged their aftermarket parts businesses for profit through higher prices, the dismantling industry helped to drive salvage values upward. Since then, however, there's been a still more significant shift in our industry, which is that today these cars are not worth their weight in metals, not worth per se their value as parts, but instead their value as drivable, rebuildable vehicles, which has forever altered the salvage equation for ourselves and for our insurance company partners. The punchline then there is that the rising total loss frequency isn't just a function of repairing cars becoming more expensive. It's that totaling them and selling them has become more attractive over time as well. We have a number of initiatives underway with our insurance carrier partners for whom this reality is becoming more and more apparent. We intend to help them further optimize their claims processes, yielding more total and earlier ones as well. But how? How have we been able to drive those volumes increases with price increase at the same time. It's in part by becoming a still more global business. Our physical reach, our brand reputation, and, of course, the auction platform liquidity we offer has expanded the buyer universe for our cars and lifted the price we can achieve at auction. You can see it firsthand that our unit growth rates have certainly eclipsed that of the industry in general and certainly that of the dismantling industry as well, while our prices at auction have actually increased. And that's because the fastest-growing economies in the world, in Eastern Europe, in Africa, in Central and South America, are also the lowest automotive penetration markets in the world. So while we have grown our supply very substantially over the past few years, we've grown our demand much more still through our proactive marketing efforts. And that's the second theme I wanted to briefly tackle, and that's Copart's option liquidity. Liquidity being the flywheel that generates differentiated value for ourselves and for our customers. I'm sure we'll get questions in Q&A about certain market share wins in insurance. You already know that we don't comment on specific accounts on an individual basis, but I think we emphasize that over time we have grown market share very steadily over the years. We just haven't talked about them on an individual account basis. Why? Ultimately because auction results are the most important. We generate better value at auction than the rest of the industry and service levels as well, which we believe we, deliver better than others. Our growth, the growth of our option liquidity has further been enhanced by organic industry growth, of course, the same total loss phenomenon we described a moment ago. And then growth in our non-insurance business, which is fueled by, but also helps contribute to our insurance business. Every car we earn the right to sell from an automotive dealer also increases the value proposition of our option and all We've made the investment in land and technology process in people for decades that enabled us to grow this platform, making it more valuable with each passing year to our customers and to us, and so the virtuous cycle of optionability continues. The last theme I wanted to tackle is our international expansion efforts, which you already know has been an important driver of our past, but likewise will be an important driver of our future growth as well. We described in great detail during our fourth quarter presentation 2018 earnings call our expansion efforts in Germany. Our strategy there remains consistent. Build the physical infrastructure necessary to effectively serve a nationwide footprint. Build logistic capabilities to enable rapid vehicle pickups. Use purchased cars to speed our German options. Leverage the COCAR global buyer network and bring our value proposition to overhaul the claims process for the German insurance industry. As you know already, from Germany, our intentions are to expand elsewhere in Western Europe as well. Our year-over-year and sequential trends in Germany are encouraging, with substantial growth in unit volumes, revenue, and trading profits, providing very clear indications that our consignment model will be an economically superior competition for the insurance carriers and the German market in general. With that, why don't we dive into the specifics of the quarter, and I'll turn it back over to our Vice President, Darren Harsin.

Thanks, Jeff. We delivered another strong quarter with record first quarter revenues, gross profits, and operating profits. Global revenues grew by 20.2% or $93.1 million despite $3.9 million in foreign currency headwinds, primarily due to relative strength of the U.S. dollar against the British pound. Global service revenue grew by 23.6% while purchase vehicle sales were flat as we converted a substantial U.K. customer from a purchase-based sales contract to a fee-based sales contract. First quarter global unit sales volume increased by 12.4%, and vehicle inventories grew by 14.1% versus Q1 of last year. U.S. revenues grew by 25%, fueled by higher average selling prices and a 13.2% volume increase, driven by organic growth from our existing insurance and non-insurance customers and market share gains. Our non-insurance business represents approximately 24% of total U.S. sales volume and includes franchises, independent dealers, finance and leasing companies, fleets, charities, equipment dealers, and wholesalers. Excluding charities, our non-insurance unit sales volume increased by 13%. We attribute the growth across non-insurance to our increased marketing, sales, and operational focus and our option liquidity. First quarter U.S. average selling prices grew 4.2% year over year. ASPs continue improving as a result of more bidders, more international bidders, and therefore option liquidity, as well as an increasing mix of newer, less damaged cars. International bidding and buying activity reflect our proactive marketing efforts, as well as the effect we increased unique international bidders and unique domestic bidders by over 20%. The outcome is higher bids per unit and, therefore, better selling prices for our customers. Our selling prices continue to significantly outpace various used car indices, such as the Mannheim Used Car Price Index, which was roughly flat this quarter versus last year. Increasing ASPs then cycle back to our unit growth drivers. U.S. vehicle inventories grew by 15% due to these continued strong industry tailwinds as well as market share gains. International revenues were flat due to the aforementioned customer contract shift from purchase of eBay's revenue and unfavorable foreign currencies. International service revenues grew by 11.4%, while international volumes grew 8.4%, and international vehicle inventories grew 8.1%. Globally, purchase vehicle sales were flat as U.S. and Germany purchase vehicle growth was offset by U.K. customer contract shifts. Globally, gross profit grew from $195.9 million to $254.9 million, or 30.1%, and gross margin percentage grew from 42.5% to 46%, an expansion of 350 basis points. U.S. gross margins grew from 45.2% to 49.2%, driven by rising ASPs and operational efficiencies. International gross margins declined from 31.4% to 29.5%, in part due to the increasing mix of our chairman business. In the U.S. and globally, we do note rising labor, health insurance, and towing costs. However, these rising costs have been offset in part by rising SPs and operational efficiencies. General and administrative expenses, excluding stock compensation and depreciation, increased from $34.8 million a year ago to $38.8 million, primarily driven by a $3.7 million pre-tax charge related to the employer portion of payroll taxes on certain executive stock compensations. This one-time charge has been reflected as such on an after-tax basis in the non-GAAP earnings included in our earnings release. Beyond this item, international GMA growth in support of the expansion of our European businesses was offset by lower U.S. GMA due to decreased legal costs and higher capitalized software developments. While our G&A may fluctuate modestly in any given quarter, we continue to generally expect G&A expenses will grow but provide operating leverage over time. Operating income grew from $151.4 million to $205.4 million, or 35.6%, which represents a 420 basis point operating margin expansion, inclusive of an unfavorable $800,000 year-over-year foreign currency impact. Net interest expense was up year-over-year from $3.7 million to $4 million, primarily due to reduced offsetting interest income given our lower average cash balances. The Q1 income tax benefit of $16.1 million reflects a $62.4 million tax benefit on the exercise of employee stock options and a $3 million tax benefit from other discrete income tax items. The one-time benefit from the exercise of employee stock options as well as the discrete income tax benefits have been included and reflected such in the non-GAAP earnings included in our earnings relief. GAAP net income increased from $114.1 million to $218.2 million or 91.2% year-over-year. Non-GAAP net income increased 36.9% from $113.3 million to $155.4 million. Gap diluted earnings per share grew from $0.47 to $0.91, and non-gap diluted earnings per share grew from $0.47 to $0.65, or 38.3%. Now, turning to the balance sheet and cash flows. We adopted the new lease standard, ASC 842, this quarter, and now show a $136.4 million operating lease right of use asset and $140.3 million of operating lease liabilities on the balance sheet, We finished the quarter with $181.1 million in cash and $219.5 million in net debt. Operating cash flows for the quarter were $212.5 million, an increase of $105 million, driven by higher earnings due in part to the large income tax benefit. We invested $131.5 million in CapEx during the quarter, with over 85% attributable to capacity expansion. Given the sustained industry-wide volume-fueled growth due to a higher total loss frequency, we remain focused on purchasing and developing land to meet current and prospective demand. We currently have 39 new yard and expansion projects in the engineering phase and 33 projects in the development phase. During the quarter, we also collected $12.6 million in proceeds from stock option exercises and paid $101.4 million in for employee stock-based withholding. We thank you for your continued interest and co-partner. Dan, if you'd open it up to questions, that would be appreciated.

Yes, sir, and if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. Our first question in the queue comes from Bob Labic with CJS Securities.

Please go ahead. Good morning, and congratulations on another nice quarter.

Thanks, Bob.

I wanted to start, you've talked a lot about your strong international buyer base. You brought it up today, obviously, and how it benefits your insurance customers, I guess, actually like all your customers that are selling. Can you give us a little more color on the types of cars the international buyers are most focused on? Is it the same as the general pattern in the U.S.? Are they more focused on insurance or non-newer or older cars? Just a little color into what they're buying.

Bob, thanks for the question, and a good one. I think in general, the demand is similar, with the one nuance being that their interest is typically on higher-value vehicles, which makes logical sense because a car which is A very old basket case, which is largely just metal value, you would never bother to ship overseas. So they tend to focus on rebuildable, drivable vehicles in particular. So they overlap very heavily. I would say that we talk about how international bidders are purchasing approximately half the value of our U.S. options, plus or minus.

the aggregate with the nudge to higher value cars got it okay great that's helpful and then just related to that roughly half the value of cars purchased i know you don't target numbers like that at all but so where do you think the percentage goes given the trends in the industry right now over the next three to five years again i know you're just focusing on service servicing your customers and things you're not targeting a number but where do you think it might go

I don't have an end state in mind, but I think that it has grown steadily over time. There are a number of important secular tailwinds there that we mentioned a few moments ago about economic growth in those markets, low automotive penetration. I think we take for granted here in the U.S. that mobility is essential for our economic well-being, for education, for health care and life. I think there will be still more demand for U.S. vehicles, wrecked cars that can become drivable cars there, but we don't have an end state in mind per se at all.

Got it. Okay. And then looking at dealer cars, there's obviously been a lot of growth from franchise and independent dealer sales on Copart over the past couple of years. Can you talk a little bit about the typical car they're consigning to you and who the buyers are? Is that international or is that other dealers or? Just a little more info on the dealer cars.

Both. I think the dealer car, dealer source cars, I think you know, have been an area of emphasis for us for years with meaningful growth really over a number of quarters now. year over year, and that's because our value proposition, again, it's the same one as it is for the insurance carriers. It is delivered auction values which matter the most to them, and that is a function of the phenomenon we talked about a moment ago. That is liquidity. That is marketing efforts. That is international buyers and domestic alike. So it is, again, a fairly representative sample of buyers on the other side of that equation. Super. All right. Thanks so much.

Thanks, Bob. Our next question in the queue comes from Greg Kennison with Baird. Please go ahead.

Hey, thanks for taking my questions. And, Jeff, thanks for the thematic overview. I wanted to start with the U.K. conversion. You know, with that conversion to a consignment model, should we anticipate three more quarters of pressure on vehicle sales from that customer?

It would work. The word pressure, I probably hesitate. The math, yes, will persist for a few quarters, if that's what you mean. I think for us, it's not pressure for sake. I think we think about cars, our economics on a unit economic basis or per unit basis more so than we do the actual gross revenue.

Got it. And then I have another math question where we don't get to use numbers, but Clearly, you earned significant business from an insurer that previously committed nearly all of its volume to a competitor. First, why do you think Copart won that business? And second, this was described as a 30% volume customer that's going to happen, most of which by the end of this year. Does all of that math jive with how you understand the relationship?

Greg, you'll find this unsatisfying, but... More generically, we have earned very significant market share for years and for decades, often organically. And the reasons in general, so not how much amount of specific accounts are, that we deliver superior option results. That is first and foremost. Certainly, depending on where we are in a historical cycle, other considerations like catastrophic events and the like can also factor into the decision. But ultimately, it's about the economic value we deliver to our customers as well. Number two, the latest related, but somewhat distinct, is service levels. And that, in turn, is a function of our yard network, our people, our technology, our process, how well do we service an account day-to-day, week-to-week, year-to-year. And then, of course, as I noted a moment ago, how we service them in times of crisis as well. That's how every insurance carrier considers their salvage partner decisions. And depending on who the partner is and where we are in history, they'll prioritize differently. But those are the criteria that anyone could make that decision on.

And then my last question is just around innovation and what you might be doing to innovate your services or your auction platform. There's been talk lately among your competitors about improving cycle times through a platform that would connect banks and insurers or something better video and camera views such that, you know, you have a better look of the interior or exterior of the car if you're bidding from all the way across the ocean?

Yep. Good question. And I think perhaps we've been remiss in not describing them robustly enough on our earnings calls. But in general, we take those services, those types of services very seriously. So I'll comment just on one, for example, the loan payoff question I think you just raised. And for those who aren't already in the know, one complication in the resolution of a total loss claim can be that a policyholder has an outstanding loan on his or her car before the salvage claim can be resolved altogether. The loan payoff balance for DM owed on that loan needs to be obtained by the carrier and the policyholder so that the lender can first be paid off. As I understand it, others in the industry are in alpha or beta testing for a product they intend to launch at some point. We launched ours in May of 2019. So a whole six months ago, we had an automated loan payoff offering already slivered to our customers. We didn't talk about it on our earnings calls per se, but we recognize that as an important consideration for an insurance carrier and one wanting to resolve those claims. We love the claims process. We are meticulous students of it. We've appreciated for a while now that this is a sticking point and a bottleneck. And we developed and delivered the service accordingly six months ago.

I'm sorry to follow up, but is there any way you can describe the cycle time improvement from that loan payoff tool?

Hard to do, Craig, because it's very hard to isolate variables. As you might imagine, that is on a portion of the cards that have loans outstanding and a portion still for which those financial institutions are connected to the various intermediaries that we have partnered with. So it is not always quite so black and white, but it's certainly a tangible improvement that both we and our insurance partners appreciate.

Great. Thank you. Thanks, Craig.

And our next question in the queue comes from John Healy with North Coast Research. Please go ahead.

Thank you. I wanted to ask a question about the market share gains, Jeff. You alluded to the economics and the dollar returns in the business that you get the insurers. That was, I think, your lead-off point into why the company has been successful over the years in terms of gaining share. Is there any way you could kind of peel back the onion a little bit on that topic for us a little bit, you know, potentially over the last few years, how that dollar return number to the insurer maybe has changed if you think the gap has widened? And then also, what do you contribute the gap to? Is it just, you know, purely the build-out of the international buyer base and just scale? I'd just love to know a little bit more on that topic.

Sure. The delivered values at auction, you've heard it described at length on this call, the international buyers and how important they are. And I think that sometimes may be underappreciated, that how relevant they are, both for the units that are ultimately acquired by international buyers, but also on all the other units they bid on. They just help provide value disclosure, full and fair value realization across virtually all the units the cohort offers. Beyond that, there are a number of other considerations, too. BB3, if you haven't already, you should, quote, attend an online auction at Copark and do so for others in the industry and render your own judgments. But we have what we think is the best-in-class technology for sellers and buyers alike, which has, for us anyway, yielded increasing bidders. So bidders and bids well in excess even of our unit growth, meaning bids per unit. domestic bids per unit, international bids per unit have very consistently increased for a long time. So it's mostly about the option liquidity phenomenon.

Great. And then I just wanted to ask about the land investment in the quarter. Kind of jumped up a little bit. And I was curious to know if you could help us think about what we should be thinking about in terms of normalized land spend over the next couple of years. And, you know, should we look at Q1 as kind of a anomaly or a sign of things to come here?

I think capital expenditures in particular, I think, are hard to extrapolate from a given quarter. We're talking about parcels of land that in some cases cost multiple tens of millions of dollars. So reading into one quarter's numbers, I think, is faulty. I would say that if you consider the past four years, to be, quote, elevated capital expenditure levels for co-parts, those investments will continue for years to come, both as necessary for the business that we have today as well as the growth we anticipate.

Great. Thank you. Thank you. Our next question comes from Brett Jordan with Jeff Rees. Please go ahead. Hey, good morning, guys. Hey, Jeff, if you could put it in perspective, maybe give us a feeling for what the yield spread does look like versus the average competitor. Obviously, you've done a good job building out the entire base and the frequency of their bidding, but could you sort of quantify how much the yield does benefit your auction?

We have to quantify, right? We know it. We believe it's significant. We believe that the industry has generally voted with its feet, but literally an have an all-out equal option comparison life-to-life. But we believe that simply the international composition of our bids, the increasing number of bids per unit over time is pretty compelling evidence that's true.

Do you think it's single-digit percentage points or double-digit percentage points, some sort of ballpark? Brett, I don't know.

I can't say. We literally don't have the data to do that. Literally no car is ever sold on multiple auctions, so you can't quantify that. Okay.

All right. And then the question, I guess you talked about mix, and maybe 50% of the volume is now being rebuilt. Could you compare that to where we were five years ago? You sound like we've had a big change recently, but what percent was scrap, what percent was dismantled, and what percent was built five years ago versus now?

We won't be able to give you point-to-point comparisons, in part because we don't have perfect visibility either. A red-hilled buyer who buys 400 units or much may have different intentions for different of those units. We can surmise that if they're based in the Ukraine, they intend to drive them again, versus if it's a buyer who is six miles away and also owns a scrapyard, we can guess, we can render a different judgment. But those would be estimates in the aggregate, I think directionally very precarious. It's been a very significant shift from scrap and dismantling in favor of rebuildable, drivable cars. You can see that in part also in literally the physical appearance of the cars we've been selling. If you attended the Copart auction in the 1980s and saw what was sort of a 50% damaged car, you would see one that is obliterated very clearly whenever you return to the road. If you look at a car today with 50% damage, it looks like a car, but it's probably people were willing to temporarily forego to drive the car right away. So the very nature of the car has changed as well.

Okay. And I guess, do you have any new thoughts as far as the upper boundary of total loss rates? If we're in the high teens now, what that number could go to?

No, no, no new thoughts. And perhaps we have old ones then. And that is to say the total loss frequency, I think folks who see 20% or whatever today wonder, could it someday be capped at 25%? And I think if you take then the 40-year view and look back to 1980, you'll see the total off-season. I don't see the logic in believing that it will ultimately top out at 25 instead. If we're having this conversation at any point over the past 40 years, I think we would have foreseen feelings that are quite a bit less than reality ended up being. So our view is that so long as there is a natural outlist for these cars in the form of international buyers, in particular in higher-growth economies who need cars, that there's no particular – There's no ceiling. There's no gate to where the water can go.

Thank you. Our next question in the queue comes from Chris with Wolf Research. Please go ahead. Thanks for taking the question. The first one is on the ASP growth. Pretty demonstrable growth there last year. 4% is still really impressive, but Want to get your sense if you're laughing at anything or kind of how do you think about the decelerate here on the ASD growth?

I think there's enough noise in any given quarter that I think it's all – you hear me talk about this with respect to many variables in our business, this one included. I've looked over a longer period of time that that selling price improvement is – is a good selling quarter for us, and it's been consistent now that we've been up consecutively for 12 quarters or so. As you know, there are secular and typical forces here, the secular ones being the total loss frequency. As we go to more cars, those are generally better ones. Secular drivers being able to improve more of them. They will drive ASCs upward as well. There are typical forces here as well, including currency and things of that sort that can cause fluctuations in both directions. to continue delivering better values for our customers.

Gotcha. And then I'm going to kind of re-ask the question in a different way that was asked earlier, but when I look at your CapEx and LTM basis, about $440 million, roughly double what it was a few years ago, yet the yard up and depreciation have kind of barely bunched recently. So I guess this would imply that you probably have more land in the development phase right now, and I'll track that, and I'm going to go back and see if you can disclose that, but I just want to get a sense for what's behind the sudden urgency of land expansion. Is there any way to kind of thematically bifurcate where you're kind of adding capacity or is it internationally, domestically? Is it yard expansion, existing yards? Are you trying to, you know, as big as a customer land? Is there anything you can do to provide clarity on the capacity additions that would be helpful?

The strong majority of these expenditures are for our customers. of demand, demand today, meaning if you had perfect visibility into every co-part yard, you'd be able to see that plenty of them could use more space now. Therefore, a good portion of the CapEx is for expansions. Whenever we can expand into continuous space, we, of course, would love to, but the operating efficiency that that affords us, and when necessary, we'll expand it. We will instead build new facilities elsewhere. So you're right to guess that we have many facilities in development. What's driving that is simply demand today and demand growth in the future.

Gotcha. Okay. Thank you. Thank you. Once again, if you'd like to ask a question, please press star 1. We'll pause for another moment. Just allow anyone else an opportunity to signal for questions. Our last question in the queue comes from Derek Glenn with Consumer Edge Research. Please go ahead.

Hey, guys. Good morning. Thanks for taking our questions. Just a follow-up on yard ops. You've gained some leverage on that line item over time, probably helped in part by higher pricing, but I'm wondering if you see any areas of inefficiencies there that you guys can tackle or any initiatives for that cost item in particular to drive further margin improvement?

It's a fair question, and the answer is somehow both yes and no. So this is an area of... of relentless focus for us is how we optimize the efficiency of our yard operations. And therefore, we deploy initiatives all the time, including, for example, a sub-halls driver app last year, which reduces wasteful, unnecessary trips that our drivers make to our yard. So that times hundreds. We have a number of initiatives underway. I don't know that any of them would yield a step-function change in inflation we see in our business from fuel and health care and the other factors I'm sure you know quite well. So, yes, it is an area of ongoing emphasis for us and has been forever.

Got it. And then just secondly, it's been a couple years since you announced the acquisition of NPA. Just want to get an update there. Can you give us a sense of how the power sports business is progressing, what its contribution or growth has looked like, and broadly if it's met your expectations?

Got it. Yeah, MPA has been a great acquisition for us. We're thrilled that they are part of the Copart family to date. I think you may remember from the time we did the deal that our logic was twofold. We needed to like the transition. to believe that it would contribute strategic value to Copark and our insurance and non-insurance business as well. I think it's delivered on both fronts. The business has grown organically on its own, meaning the power sports business, the auctions that we run through MPA have grown on their own. And likewise, it's contributed to our expertise when it comes to the power sports space, which you may remember we noted is a nuance in different markets in many So now having that expertise in health has contributed to our capabilities in our traditional business as well. So yes, on both counts.

Great. Thanks, guys. And speakers, there are no more questions in the queue.

Great. Thank you for joining us for the call. We'll look forward to talking to you next quarter. Thank you, everyone. Thank you, ladies and gentlemen.

This concludes today's presentation. You may now disconnect.