Good day, and welcome to the IAA, Inc. First Quarter 2021 Earnings Conference Call. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Arif Ahmed, Vice President, Treasury. Please go ahead..

Thanks, Cole. Good morning, everyone, and thanks for joining us today for IAA's First Quarter Fiscal 2021 Earnings Conference Call. Speaking today are John Kett, Chief Executive Officer and President; and Vance Johnston, our Chief Financial Officer. After John and Vance have made their formal remarks, we will open the call to questions.

Before we begin, I would like to remind you that certain comments made during this call regarding our plans, strategies and goals and our anticipated financial performance constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are based on management's current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to differ materially from such statements.

Those important factors are referred to in IAA's press release issued today and in the Risk Factors section in our annual report on Form 10-K for the year ended December 27, 2020, filed with the SEC on February 22, 2021.

The forward-looking statements made today are as of the date of this call, and IAA does not undertake any obligations to update these forward-looking statements. Finally, the speakers will refer to certain adjusted or non-GAAP financial measures on this call.

A reconciliation schedule of the non-GAAP financial measures to the most directly comparable GAAP measures is available in IAA's press release issued today. A copy of today's press release may be obtained by visiting the Investor Relations page of the website at www.iaai.com. I will now turn the call over to John.

John?.

Thanks, Arif. Good morning, and thank you all for joining us for our first quarter call. I'm going to make a couple brief comments on the quarter before I talk about our initiatives. We were very pleased with a strong start to the year. We generated organic sales [Technical Difficulty] 6% for the quarter.

As we noted in our prior call, we came in the first quarter of 2021 with good momentum for assignments, volumes sold and revenue per unit. As the quarter unfolded, revenue per unit continued to increase each month and assignments continued at a steady pace.

In fact, March represented the first month of year-over-year assignment growth that we have seen since the pandemic began. Along with strong industry tailwinds, another key driver to our results continues to be the benefits generated from our Buyer Digital Transformation.

BDT has contributed to the significant increases that we experienced in revenue per unit over the past year. So now let me turn to our strategic initiatives. We continue to make good progress and are seeing positive results from our margin expansion plan.

As we discussed on our last call, with the completion of our BDT last spring, our focus has turned to the other elements of the plan. Towing Optimization, Branch Process Improvement and Pricing Optimization all remain on track.

Our restricting and consolidation of towing resources in several markets is beginning to pay dividends, both in terms of improved service and lower costs. We're on target to complete these transitions by the end of 2021. We also made good progress in the quarter on both Pricing Optimization and Branch Process Improvement.

Shifting now to other initiatives. We continue to be excited with the progress that we are making with loan payoff in support of our initiatives to broaden our service offering. During the first quarter, we added over 100 new lenders to our loan payoff platform, and we ended the quarter with over 1,600 financial institutions on our portal.

We also expanded our national footprint with DDI, building out our electronic title and registration processing expertise in both Michigan and Indiana.

Our negative equity capabilities of loan payoff, which are unequaled in the market, continue to be an important differentiator, particularly given the continuing increase in the percentage of vehicles with loans that exceed their pre-crash size.

Our customers are continuing to see significant reductions, and in some situations, of up to 22 days in cycle times using loan payoff. For buyers, we continue to expand the enhancements that we've made to our tools and product offerings, and our growth and expansion of our global buyer network continues to be very successful.

During the first quarter, we grew our international buyer network by 15% sequentially quarter-over-quarter and over 50% on a year-over-year basis.

This growth is both from traditional broker buyers and market alliance partnerships, and reinforces the great strides that we are making with digital marketing and search engine optimization to attract both domestic and global buyers to our platform.

We also continue to make good progress in building out our strategic market alliance network, most recently announcing that we added CAROMOTO, an experienced export supplier based in Moldova, which is a key element in providing access to our buyers in the growing Eastern European market. We also introduced 2 new value-added features to our U.K.

merchandising platform, IAA Engine Start and IAA Key Image. These tools will give buyers additional vehicle details, creating greater confidence to bid and purchase vehicles. We also expanded our merchandising platform, Interact, in Canada in the quarter after the positive reception that we received last year in the U.S.

As we look ahead at the remainder of the year, we expect to continue to benefit in the progress we have made and continue to make with our strategic initiatives as well as industry tailwinds that continue to support strong revenue per unit trends.

Our noninsurance business also continues to perform well with double-digit year-over-year volume growth in the first quarter, driven in part by growth in dealer volume.

Our noninsurance team has done a nice job of growing both our base business and identifying and closing attractive new prospects in this space, and we will continue to pursue additional opportunities.

As Vance will discuss in more detail, we are also in a position, despite the ongoing pandemic, to provide guidance with respect to our expectations for revenue and EBITDA growth for the year. For the year, we expect organic revenue growth of 15% to 20% and organic adjusted EBITDA growth in the range of 23% to 28%.

Our expectations incorporate currently known volume shifts, both negative and positive, including a shift away of additional volume from a top 3 customer.

The timing of these shifts will impact individual quarters differently, but we expect a strong 2021 overall, which also incorporates some wins to date included from a top customer that are partially expected to offset the aforementioned negative volume shift.

We also expect continued strong revenue per unit trends as well as continued improvement in vehicles miles driven. IAA has made enormous progress in improving and enhancing our offerings, and I believe we are very well positioned going forward to drive higher levels of performance and expand our market position.

So before I close, I also want to spend a few minutes on another important initiative within IAA, the continued focus that we are putting on diversity, equity and inclusion within our organization.

It was my honor earlier this year to sign the CEO Action for Diversity and Inclusion Pledge, the largest CEO-driven business coalition to advance diversity and inclusion in the workplace.

We've also established a formal diversity equity and inclusion program within IAA with 3 different areas of focus, each with strong involvement from across the organization.

We firmly believe that addressing these issues with vigor and transparency will allow us not only to create greater employee satisfaction, but also allow us to better serve our buyer and seller customers. So in closing, I want to thank all of our teams for all their hard work and dedication to IAA.

And I will now turn the call over to Vance to review our results and outlook in more detail.

Vance?.

Thanks, John. I will focus my discussion today on our adjusted non-GAAP results and just touch on key highlights from our first quarter financial performance before providing more detail on our outlook for fiscal 2021. Please see today's press release for more details on our financial performance and our methodology when calculating non-GAAP results.

For the quarter, consolidated revenues increased 15.5% to $423.5 million compared to the prior year period. Organic consolidated revenue, which excludes the impact of foreign currency, increased 14.4% to $419.5 million as a 28.2% increase in revenue per vehicle more than offset the 10.7% decrease in volume.

Service revenues increased 7.9% to $360.4 million compared to the first quarter of fiscal 2020, and vehicle sales increased 93.6% to $63.1 million compared to the prior year period. The total loss ratio increased to 20.4% from 20% in the first quarter of 2020. Looking at our geographic performance. Revenues increased in both our U.S.

and international segments were driven by higher revenue per unit, offset by lower volume. International revenue also benefited from a higher mix of vehicle sales as one of our providers switched from a consignment model to a purchased vehicle model during the fourth quarter of 2020.

Gross profit increased to $172.7 million from $135.6 million in the first quarter of fiscal 2020. Gross margin increased 380 basis points in the quarter, primarily due to higher revenue per unit as well as benefits from our margin expansion plan.

It's worth noting that we achieved this level of gross margin improvement even with purchased vehicles accounting for a much higher percentage of revenue compared to the prior year. SG&A expenses were $43.4 million compared to $38 million in the prior year.

Adjusted SG&A expenses were $39.4 million, an increase of 11% compared to $35.5 million in the prior year period, due mainly to higher compensation-related costs. Adjusted EBITDA increased by 33.2% to $133.2 million from $100 million in the first quarter of fiscal 2020.

Excluding the impact of foreign currency, organic adjusted EBITDA increased by 32.6% to $132.6 million for the first quarter of fiscal 2021. Interest expense declined by $3 million to $13 million compared to $16 million in the first quarter of fiscal 2020. The decline was primarily driven by lower interest rates on our floating rate debt.

The interest rate on our term loan was 2.38%. The effective tax rate was 25.2% versus 25.3% in the first quarter of fiscal 2020. Net income increased to $72.5 million from $44.7 million in the prior year.

Adjusted net income increased by 56.1% to $77.9 million or $0.58 per diluted share compared to $49.9 million or $0.37 per diluted share in the first quarter of fiscal 2020. Turning to our balance sheet and cash flows. Capital expenditures for the quarter were $30.3 million compared to $10.6 million in the prior year.

The increase was driven in part by a land purchase early in the quarter and increased investments in technology. We ended the quarter with a total liquidity of $677.7 million and with a leverage ratio of 2.3x, which is nearly a full turn below the 3.2x level at the time of the spin.

During the period, we generated free cash flow of $91 million compared to $86.7 million in the first quarter of fiscal 2020. Turning now to our outlook for fiscal 2021. As John mentioned, we are providing an outlook for fiscal 2021.

For the year, we expect organic revenue to increase 15% to 20% from fiscal 2020 revenues of $1,384.9 million and our organic adjusted EBITDA to increase 23% to 28% from fiscal 2020 adjusted EBITDA of $398.5 million.

As discussed, this outlook incorporates the benefits we expect to continue to realize from our strategic initiatives as well as industry tailwinds, which remain supportive of strong revenue per unit trends.

As John reviewed, these expectations also include known volume losses as well as wins, including additional volume losses from a top 3 customer, which will partially be offset by known volume gains, including from some of our top customers.

We expect this shift in volume to occur over the next few months, and we expect to be at a full run rate of these net shifts in the fourth quarter of 2021. For fiscal 2021, we also expect our effective tax rate to be in the range of 25% to 25.5% and for depreciation and amortization to be in the range of $88 million to $92 million.

And as noted in our press release today, subsequent to quarter end, on April 30, we executed a new senior secured credit facility consisting of a $650 million term loan A and a $525 million revolving credit facility, both maturing on April 30, 2026. This replaces our existing $774 million term loan B and $361 million revolving credit facility.

We are pleased that we were able to capitalize on strong market conditions to execute this transaction, which provides us with attractive terms and additional liquidity to support future growth.

This facility will reduce the interest rate on our floating rate debt by 50 basis points for the next 2 quarters with a rate tied to the pricing grid after that, and the potential for an up to 87.5 basis point reduction in interest rate depending on leverage.

For the full year, we expect interest expense of approximately $57 million, which includes a noncash write-off of deferred financing fees of approximately $10 million.

On a cash basis, we expect our new capital structure to result in savings of approximately $4.4 million for the remainder of 2021 due to both a lower rate as well as a lower debt balance. We will have no mandatory principal payments required on this new facility in 2021.

In closing, I want to reiterate John's comments that we are very proud of the progress we have made to improve our competitive offering and elevate the buyer and seller experience. With that, we'll open up the call to questions.

Operator?.

[Operator Instructions]. And our first question today will come from Daniel Imbro with Stephens Inc..

Congrats on the start to the year..

Thanks, Daniel..

Thank you, Daniel..

Vance, I want to start on the volume backdrop. It has stepped down a bit sequentially. Can you provide a bit more cadence -- or color on the cadence of the quarter from both assignments and volume growth? I know John said March was good for assignments.

And then with April just wrapped up here last week, can you talk about how assignment have maybe trended through April as we lap easier comps and miles-driven begin to recover?.

Yes. Daniel, this is Vance. I'll go first and then John, I'm sure, will add in as well. So yes, through the -- for the first quarter of the year, we continue to see assignments kind of continue to increase more slightly relative to kind of somewhat of a pickup as it relates to vehicle miles traveled certainly in the U.S.

What we're seeing overall is that vehicle miles traveled is still down from pre-pandemic levels, but not a lot. It's kind of in the 7% range down from pre-pandemic levels. And so that's what we're kind of continuing to see. Now we expect that to get better throughout the rest of the year.

That's the expectation as restrictions are continuing to be lifted and markets open up. Internationally, We're continuing to see more restrictions in place. So vehicle miles traveled and assignments are down more internationally. But as you know, the bulk of our business by far is in the U.S..

Yes. I think Vance said it well, Daniel. I think that we do expect restrictions to continue to be reduced or limited, which is going to result in greater miles travel, which will result in improving assignment levels..

Yes. Got it. That's helpful. And then moving to the gross margin side, Vance, really a nice service gross margin leverage. I think up over 600 basis points year-over-year.

Is that just a byproduct of stronger revenue per unit? Is that your margin expansion playing? Can you maybe parse out what drove that core margin leverage?.

Yes. No, I think, Daniel, you hit on it. The primary driver of that is going to be the really, really strong revenue per unit. And so that's, by far and away, going to be the biggest element of that.

But in addition to that, we continue to see the impact of the cost reductions as part of our Buyer Digital Transformation and moving to an all-digital auction platform. So that certainly is also contributing as well..

And then just a quick follow-up on that. You noted in the guide that you raised your revenue per unit assumption to kind of assuming it remains elevated.

Should we interpret that as you're assuming stronger core gross margins through the remainder of the year?.

Well, I think we haven't given anything by quarter in terms of kind of what our expectations are. But we do think, as we thought about guidance and the trends that we're seeing in revenue per unit, we do continue to see really elevated revenue per unit levels.

And we, at this point, based on, one, the things that we've done to our own model and the changes we've made and which we believe is the largest benefit that we're seeing in terms of driving higher revenue per unit, we expect those are clearly sustainable in our minds. But on top of that, there's also higher used car prices.

The Manheim used car price index, for example, is at an all-time high and continues to go higher. And we expect that to stay from all the information that we see here, elevated throughout at least the remainder of 2021..

And our next question will come from Craig Kennison with Baird..

Just to follow up on that last point related to revenue per unit. You've seen phenomenal growth rates on a year-over-year basis.

But is your guidance more that you think it could remain elevated such that as you face some of these difficult comps we might be flat or up a little bit? Or do you think these growth rates are partly sustainable?.

I think -- I'll go first and then John may want to add color as well, is that as we've talked about -- it's tough to completely bifurcate and say what percentage is due to the things that we've done internally and what percentage is due to things that are more macro-driven.

Having said that, we do believe at this point, based on the continuing set of trends that we've seen, that the bigger impact is coming from the things that we've done internally, things such as going to an all-digital auction format; the growth that we've seen in our global buyer network, which has been really significant; in innovation, such as 360 View, Feature Tour; other things we're doing with tools and information we're providing buyers as part of our Interact merchandising platform.

We think that, that's the largest contributor. Now we do think that elevated used car prices has an impact because, all things considered, people are going to be more willing to pay more for a car if they can sell it for more. And we do think that, that's probably have an impact.

We think it's less -- certainly less than kind of at this point, than what we're seeing from the internal things that we've done to change our operating model and drive better results. So over time, one would expect that the used car price index will come down at some point in time.

We don't necessarily from what we see and read and the information we gather, see that happening very much in 2021. We expect it to see a very high elevated levels..

That's really helpful. And just to follow up on that. If you just isolate the things that are within your control and the impact on ARPU in the last year.

Can you stack success on that and make further gains of the same kind of magnitude again in the year going forward? Are there many innovations happening on the platform that allow you to charge that extra fee?.

Yes. We are continuing to add feature and capabilities that we're able to charge for to the platform. So we do believe that we can continue to grow. Whether it's going to be at the pace it was or not, that remains to be seen for some of the things that Vance just described in terms of the macro factors.

But we continue to, as I've said in my remarks, broaden our service offering, both to buyers and sellers. And to the extent we do that, we can charge for our services and the products. So we think we can continue to grow ARPU in a sustainable way..

And just to add to what John was saying. The other thing to that is, we believe a large contributor to it is the growth of our global buyer network. And certainly, we've made a lot of progress there, but we still believe we have a lot of gain -- a lot of additional opportunity there.

And so as we continue to grow that global buyer network, add more bidders to the platform, they're bidding on more units and bidding more times, more unique bidders per unit, that obviously continues to drive up proceeds and revenue per unit as well..

And our next question will come from Bob Labick with CJS Securities..

It's actually Lee Jagoda for Bob this morning. Just a couple for me. Can you talk a little bit about your noninsurance progress? Obviously, a very large market.

What if anything changed during the pandemic? And then maybe a little bit of how you're attacking it or which areas you find most attractive, whether it's dealer cars, repos or just non-insured end-of-life cars..

Yes. Thanks. And I think one of the things happened in the pandemic was that there was some disruption in the whole car market, which gave us an opportunity to really capitalize on that, and we continue to build on that.

We do believe there's growth in all the areas you described, whether it's in the fleet rental, in the dealer or just in the noninsurance kind of the lower end of that market. Still enormous growth opportunities. We -- through our digital platform, we've built some customization to really help those sellers put their cars in the market.

The merchandising features that we have, they really like and they're embracing. So yes, it's an area that we continue to focus on. And again, we've had some nice growth. And we think we see continued opportunities to grow that business above and beyond where it's at today..

Got it. And then just one more for me.

So given the volumes have been down for basically the last year, how has that impacted your efficiency at your yards? And has the reduced volume changed any of your land expansion goals at all or your philosophy around the land?.

Yes. This is Vance. I have an answer to that question. So if you think about the cost structure, and we -- I think we pointed out this before in our yards. So certainly, a portion of that is labor.

And so as we've had kind of, certainly at the beginning of the pandemic in 2020 when we have reduced assignments, as we talked about, we kind of reduced hours. We didn't reduce employees. We just kind of reduced hours to kind of align ourselves more appropriately with the level of volume that was coming in.

So clearly, we have the ability to kind of flex that. And we're very proud of the fact that we just kind of reduced the hours. We didn't reduce employees in the U.S., and we think that was an important thing to do. But outside of that, if you think about rent, rent is a -- rent and some of the other costs we have are more of a fixed cost nature.

So there's not as much kind of deleveraging or ability to kind of flex that, if you will. And then the other one is clearly tow costs, and tow costs are variable on the unit. So as units go down, your tow cost flux completely with that because you're not paying to have that unit towed, if that helps..

And I would just add on land, we do take a longer view on. We think about growth, our customers' growth and the market in making land decisions. So we continue to make sure we've got capacity to support our sellers for the long term..

And our next question will come from Stephanie Benjamin with Truist..

I wanted to touch on the commentary about just some shifts in volumes from top 3 customers, both positive and negative. I think the understanding is that shifts occur throughout the year in a given period. But I'd love to hear maybe a little bit, as much as you can give, on the back story behind some of these shifts.

Just particularly, on the positive front, do you view that this is something that has to do with the investments that have been made over the course of the year as well just to improve the overall experience and the tools that the insurance carriers have now? And on the same -- on the flip side of that, the shift away with those volumes with the top 3 customers.

So what do you think is driving some of these moves as best as you can tell us?.

Sure, Stephanie. Yes. So as we've talked about before, carriers have different criteria for making decisions. They look at their own metrics. They look at this portion of their claims operation differently. And so we really -- as I said in my comments, I feel very good about the suite of services and products that we put together.

And we're getting -- we have gotten good traction in the market with a number of carriers, big and small. That being said, we had one that made a decision to move some business away. But again, as we've talked about over the last couple of years, there are going to be swings in volume that occur.

And -- but again, in the long term, I really believe that we are positioned well to continue to improve our position. So yes, it really is a -- it's -- each company kind of looks at this decision-making very differently..

Great. Absolutely. And then just a follow-up to your international expansion commentary. Can you maybe speak to the best you can about maybe some particular regions where you're seeing a lot of the expansion? Is it broad-based? You called out, I think, an opportunity in Eastern Europe. And any geographic commentary would be helpful..

Sure. Yes. No, it is fairly broad-based in terms of our -- and we're talking about buyer growth, international buyer growth. It is fairly broad-based. We continue to grow and improve in Central and South America. And then Eastern Europe, the Middle East, West Africa, those are all -- continue to be strong markets. So I wouldn't point to one over another.

Again, I think the tools that we've deployed around our SEO and our digital acquisition strategy, I think, has really helped drive this growth fairly evenly..

And our next question will come from Chris Bottiglieri with Exane BNP Paribas..

I was just hoping you could unpack the revenue guidance a little bit. It seems like FX rates and purchased vehicle mix are pretty helpful right now. It seems like you think the ARPU is going to stay strong with pricing to a reasonable estimate.

Is it fair to assume then that like the -- that the volume like 2-year CAGR, does that get worse over the course of the year because of like net share count losses? Or how do you think about volumes specifically on a pre-COVID basis as you move forward throughout the year?.

Yes. So Chris, this is Vance speaking. So we're not providing guidance by quarter. So what I -- just to give you some sense of help. We do -- as we talked about, we do expected elevated -- expect elevated revenue per unit levels to stay intact for the remainder of 2021. So that will be the biggest kind of positive impact.

We did talk through kind of the share shifts and kind of the net downside impact of those. So we can't really get into kind of the specifics of that, but all things considered equal, that would have a net volume impact.

And then if you were to compare 2021 to 2019, obviously, coming out of the pandemic and a little bit of some of the share movements volume, you have higher ARPU by quite a bit by a significant amount in 2021 versus 2019.

And then you'd have less volume given kind of what's happening with the pandemic and then some -- and a little bit due to some of the shifting around the volume as well..

Got you. Okay. That's really helpful. And then wanted to just get a sense for towing costs. I think you mentioned this earlier, but can you just give us a sense there? I know you have like a big optimization plan that you're hoping to take costs out of towing. I would think those costs are very inflationary now.

Is that true? Is that what you're seeing? And then two, could you give us a sense for if your own initiatives are helping to offset that? And kind of like what inning are you in terms of optimizing those costs?.

Yes. So I'll start, and then John will probably want to jump in as well. And so Chris, one, we're not seeing a ton of inflationary costs. Obviously, there's not some out there, but it's not excessive by any stretch.

What we -- to your point, the Towing Optimization initiatives that we have, which are things such as redistricting, talk about going from -- going away from an anchor towing model to more of a distributed model within markets, and there's a variety of other initiatives. Those are well underway.

And so we remain on track with the timing related to those, and we feel comfortable with the benefits related to those that we outlined. And to some degree -- to the degree that there is kind of some inflationary, this is more offsetting that and then some, is the way I would describe it..

Yes. And just to add to it. I think when you think about tow cost, fuel prices are probably the biggest component of that cost. So it's -- to the extent that fuel prices change, we could see some impact to tow costs. But that really is the biggest variable element in the cost structure..

And our next question will come from Bret Jordan with Jefferies..

On the organic revenue outlook, is there any impact from the higher mix of purchased vehicles? Or are we pretty much lapping that and it's apples-to-apples?.

So Bret, there is an impact because we did have a customer that we alluded to in the fourth quarter of 2020, an international customer that went -- that switched their agreement from a consignment model to a purchased vehicle model, which is not abnormal in those markets.

And so we didn't have that in the first quarter of 2020, so we haven't effectively lapped that. So we are getting some benefit from a revenue standpoint because of that..

Okay. And then a question, I guess you talked about the growth rate of the global buyer network program.

Could you talk at all about maybe the volume impact from those foreign buyers or maybe the percentage of your bids that are coming from those foreign markets?.

Well, Bret, I think, again, we've talked about in the past the -- it continues to grow and be strong. We haven't talked about specifics because of the nature of some of our domestic buyers who are then going to export the vehicle. So we're really trying to isolate what's truly international demand that is difficult. So we don't want to misstate it.

But needless to say that we have seen a commensurate growth in our volume to international buyers relative to that growth and their participation. So they are bidding and buying really strong..

Okay. And one last question. I guess the ARPU in noninsurance, I guess I'd assume it's higher than your average or maybe more run and drive cars in that mix.

Could you just talk about what you see in the economics of noninsurance vehicles versus the portfolio average?.

I mean we're seeing increases in ARPU across the board, right? Bret, I think that's getting to your question, kind of where we've seen more or less between noninsurance and insurance.

But we're -- and it's interesting because on the noninsurance side, you really have to bifurcate between different noninsurance products because noninsurance includes things like rental cars that are in end of life.

It includes kind of dealer cars, things of that nature that are not necessarily damaged vehicles, but maybe high mileage that may be really good vehicles versus you may have cars that are donated, not all, but some cars that are donated that are not, right, that are not going to have kind of higher -- they're going to have -- skew lower on the proceeds level.

So it really varies across noninsurance. What we can say for sure is that we're seeing proceeds higher and revenue per unit higher across the board for insurance and noninsurance..

[Operator Instructions]. Our next question will come from Gary Prestopino with Barrington Research..

Couple of questions here. When you cited the buyer base, you said international was up 15%.

Is that correct? Or is that the total buyer base, up 15%?.

That's international buyer network is up 15% sequentially quarter-over-quarter and over 50% on a year-over-year basis..

So how does that translate into your total buyer base then? How much has that increased year-over-year?.

I don't think that we've disclosed that. So our international buyer base -- and I don't know that we disclosed the percentage composition of our international or total buyer base. But obviously, our international buyer base is meaningful and becoming much more meaningful over time. It's because of the growth that we're seeing.

For example, it's grown 50% year-over-year. So I think it's fair to say that our domestic buyer base continues to be really, really healthy and really, really strong, but it would not have grown 50% year-over-year growth..

Is this demand on the buyer -- the international buyer base side, could that be also driven a lot by the fact that there's just less cars out there and they can't get their hands on cars to export?.

Yes. No, we think that's -- yes, I think that's right. We believe that some of the contributing factors are, if you think about some of these developing countries, their economies are developing. They're looking for more automobiles to be -- for the people in the -- for the citizens of their country.

There's more disposable income to purchase vehicles, yet there's not necessarily the network of an OEM dealer sitting on every corner or sitting even close to some of these populous areas.

And so this becomes an opportunity to get cars, refurbish those cars and get them back out on the road for drivers in these developing countries and to do that in a way that the economics works for the buyers, which is one of the reasons why it makes it so beneficial because they can buy these cars that are higher mileage, low-value, damaged vehicles, arbitrage, the repair costs.

And that offsets the shipping costs and then be able to sell these vehicles in these developing markets, which is a great thing for society as well..

Okay. Just a couple more questions here. You mentioned assignments, but you didn't talk about inventories as you started this quarter or ended last quarter.

Year-over-year, can you give us some idea of the level of inventory percentage change year-over-year and maybe sequentially as well?.

Yes, Gary. Year-over-year, it's up 3.7%..

And then just two more quick questions.

The $10 million of fees that you're getting from refinancing, is that all going to be recognized in Q2? Or is that ratably across the next three quarters?.

Yes. Gary, that gets written off. Those are just fees from the old deal. So those aren't new fees incurred. So those are fees that get written off from the previous transaction based on specific accounting. Those will all get written off this quarter..

And this will conclude the question-and-answer session. I'd like to turn the conference back over to John Kett for any closing remarks..

Just want to say thank you again for your interest and participation this morning, and we look forward to continuing to update you on our progress. Thank you, and have a great day..

The conference has now concluded. Thank you for attending today's presentation. At this time, you may disconnect and have a great day..