Hello, and welcome to the Insurance Auto Auctions, Inc.'s Q2 2021 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now turn the conference over to Arif Ahmed, Vice President of Treasury. Mr. Ahmed, please go ahead..

Thanks, Keith. Good morning, everyone. Thanks for joining us today for IAA's second 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.

Such 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 included in our Annual Report on Form 10-K for the year-ended December 27, 2020, filed with the SEC on February 22, 2021.

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 second quarter earnings call. I want to start with how proud and appreciative I am of the dedication and hard work from our nearly 4000 team members across the US, Canada and the UK.

In these continuing uncertain times, they continue to support one another our clients, our partners and our industry. The IAA team continues to deliver for our customers while remaining focused on health and safety.

We were very pleased with the second quarter performance, including organic sales growth of 48% and organic adjusted EBITDA growth of 92% compared to a pandemic impacted Q2 of 2020. Comparing Q2 to Q1, we generated sales growth of 5% and adjusted EBITDA improvement of 15%.

Underlying these results is the continued strength in revenue per unit, as well as stronger volumes sold. As we indicated in our Q1 call, we expected negative and positive volume shift to occur over the second and third quarter of this year. The shifts are proceeding as we expected.

Our Q2 results include some of the impacts and we expect to be at a full run rate reflective of these shifts in Q4 of this year, and our full year outlook includes this projected impact. Looking ahead, we have increased our 2021 outlook to reflect our year-to-date performance, as well as our current expectation for the remainder of the year.

Let me now provide an update on our progress against our strategic initiatives. First, and most importantly, I'd like to discuss our primary focus of enhancing our relationships and expanding market share.

As we discussed last quarter, while we did have a top three customer move additional share away from us, we are encouraged by other share gains this year, including additional share from a top customer that has a strong reputation for leveraging data analytics and decision making.

While the share gains don't completely offset the share losses, the initiatives that we are undertaking continue to be positively received by both our sellers and our buyers. We are focused on the right things to grow market share.

We are continuing to drive attractive returns for our sellers through our merchandising enhancements that we are making as part of our Interact platform, are reducing cycle times for sellers through Loan Payoff inspection services and other operating initiatives, and acting as a true partner with a focus on providing best-in-class data analytics integration and support for our sellers.

Through our buyer digital transformation and our continued focus on innovation, we continue to lead the industry in developing tools and capabilities to help enhance the buyer experience, which will result in driving attractive returns for sellers on our platform.

In June, as part of this focus on broadening our relationships with sellers, we acquired the assets of Auto Exchange, a salvage auction provider with a strong presence in New Jersey and long-term seller relationships in that region. This acquisition will also expand our coverage footprint.

Prior to the acquisition, the business generated approximately $5 million in revenue and is off to a good start post transaction. We are actively integrating this business into our marketplace platform and welcoming the Auto Exchange members into the IAA family.

Turning now to our strategy of broadening our service offering, we've continued to expand our Loan Payoff network, ending the period with over 1700 financial institutions on the portal.

We've also enhanced our strategic agreement with Dealertrack to provide electronic registration and titling services in Ohio by facilitating the digital transfer of total loss titles.

As we also announced last month, we have enhanced our Loan Payoff product to include the ability for insurers to payoff leases from participating orders, making us the only industry participant to offer this capability.

Leases account for approximately 30% of new vehicle purchases, so this increased functionality should further differentiate Loan Payoff in the market. During the quarter, we also made good progress on expanding our international buyer network with year-over-year growth of 52% and sequential quarterly improvement of nearly 6%.

We also expand our strategic market alliance network with partnerships in Nigeria and the United Arab Emirates. We now currently have 13 market alliance partners in our global network. Our margin expansion plan remains on track.

We continue to see great results from buyer digital transformation and we are making good progress on our pricing, towing and branch process improvement initiatives. Product strategy and development also remains a key focus.

For more than a decade, we've demonstrated industry leadership in developing and implementing innovative new products and services. To further accelerate this development, Peg Burr has joined us as our new Senior Vice President of Product Management with a focus on driving competitive differentiation and grow through technology and innovation.

She brings extensive product strategy and management expertise to this role, and I could not be more pleased to have her on our team. Switching now to guidance, we're pleased to provide updated guidance for the full year 2021.

Based on our strong performance in Q2 and our current assessment for the remainder of the year, we are increasing our guidance for organic revenue growth in the range of 20% to 24% and our adjusted EBITDA guidance in the range of 29% to 33%. These higher ranges reflect both better revenue per unit and volumes compared to our previous guidance.

In summary, we're pleased with our results to date. As we look ahead, we will continue to focus on delivering against our objectives, including disciplined capital allocation and driving shareholder return.

To that end, as noted in our press release today, we are pleased to announce that our Board has authorized a $400 million, five year share repurchase program. But finally, I again want to thank all of our IAA team members for their continued hard work.

I'm also very proud that IAA has again been elected a Great Place to Work now for the third year in a row and we know our business success is a result of our great people who remain dedicated each and every day to executing against our initiatives and goals. And now, I'd like to turn the call over to Vance to discuss our financial results.

Vance?.

Thanks, John and good morning, everyone. Before I discuss our second quarter and outlook for fiscal 2021 in more detail, as a reminder, my discussion today will focus on our adjusted non-GAAP results. Please see today's press release for more details on our financial performance and our methodology when calculating non-GAAP results.

AS John mentioned, we are pleased with our second quarter performance with strong year-over-year revenue and profitability growth compared to the second quarter of fiscal 2020, which was heavily impacted by COVID-19.

Our financial performance also increased sequentially from Q1, as our results continued to reflect record revenue per unit driven by the enhancements we've made to our buyer platform, including tools like 360 View, growth in our global buyer network, improved [Technical Difficulty] as well as favorite macro conditions, including elevated used-vehicle price.

For the second quarter, consolidated revenues increased 50% to 445.1 million compared to the prior year period.

Organic consolidated revenue, which excludes the impact of foreign currency, increased 48% to 439.2 million, consisting of an increase in volume of 22.9%, primarily due to higher vehicle miles traveled against a pandemic impacted Q2 last year, as well as higher revenue per unit of 20.4%.

Service revenues increased 44.4% to 382.5 million compared to the second quarter of fiscal 2020 and vehicle sales increased 95.6% to 62.6 million. The increases in both service revenues and vehicle sales were primarily due to higher revenue per unit and higher volumes.

The vehicle sales were also positively impacted by an international provider switching from a consignment model to a purchase vehicle model in the fourth quarter of 2020. The total loss ratio was 19.4% compared to 19.5% in the second quarter of fiscal 2020. Sequentially, revenue increased by 5.1%, compared to the first quarter of 2021.

Looking at our geographic performance, revenues increased in both our US and international segments were driven primarily by higher revenue per unit. Both segments also saw a higher mix of vehicle sales but to a lesser extent in the US compared to international.

While the US economy opened up substantially in the past quarter, Canada and the UK were still under more severe restrictions for much of the quarter.

Gross profit increased to 195.9 million from 111.7 million in the second quarter of fiscal 2020, primarily due to higher revenue per unit, higher volume, and the benefits from our margin expansion plan. Gross margin increased 640 basis points versus the prior year to 44% from 37.6% in the prior year.

Sequentially, gross profit increased by 13.4% and gross margin increased by 320 basis points. At the end of the quarter, we did start to see some inflationary impact on our towing costs and we do expect towing costs to be higher in the second half of the year, which is reflected in our updated guidance.

SG&A expenses were 43.7 million compared to 34.3 million in the prior year. Adjusted SG&A expenses were 43.3 million, an increase of 31.6% compared to adjusted SG&A of 32.9 million in the prior year period. The increase is due mainly to higher incentive-based compensation related costs.

Adjusted EBITDA increased by 93.4% to 152.6 million from 78.9 million in the second quarter of fiscal 2020. Excluding the impact of foreign currency, organic adjusted EBITDA increased by 92.1% to 151.6 million for the second quarter of fiscal 2021.

Interest expense increased by 8.1 million to 21.9 million compared to 13.8 million in the second quarter of fiscal 2020. The increase was primarily driven by the 10.3 million loss on early extinguishment of debt in conjunction with the company's refinancing in the quarter, offset by lower interest rates on floating rate debt.

Nearly all this 10.3 million expense was non-cash. As a reminder, on April 30, we executed a new senior secured credit facility consisting of a $650 million term loan and a 525 million revolving credit facility, both maturing on April 30, 2026.

As expected, this facility reduced the interest rate on our floating rate debt in Q2 by 50 basis points and we continue to expect full year cash interest savings of approximately 4.5 million as a result of this new facility. The effective tax rate was 24.7% versus 24.4% in the second quarter of fiscal 2020.

Net income increased by 149.7% to 82.9 million from 33.2 million in the prior year. Adjusted net income increased by 154.9% to 93.3 million or $0.69 per diluted share, compared to 36.6 million or $0.27 per diluted share in the second quarter of fiscal 2020. Turning to our balance sheet and cash flow.

Net cash provided by operating activities for the quarter with 129.4 million. Capital expenditures for the quarter were 27.5 million compared to 11.5 million in the prior year. The increase was driven by a land purchase during the quarter and higher technology spending.

We ended the quarter with net debt of 894.4 million and a net leverage ratio of 1.8 times. We have reduced net debt by approximately 375 million since the time of the spent. Total liquidity was 801.5 million, which is nearly triple the level of liquidity we had at the time of the spent.

In the first six months of fiscal 2021, we generated free cash flow of 192.9 million, compared to 195.2 million in the prior year period. This slightly lower free cash flow in 2021 is driven by higher capital expenditures. Turning now to our outlook for fiscal 2021.

First, a reminder, the fiscal 2021 is a 53-week year with an extra week in the fourth quarter. Second, I do want to reiterate that our guidance assumes that there isn't a spike in COVID-19 cases in the countries we operate in and would have a significant negative impact on our results.

As John mentioned, we are raising our outlook for fiscal 2021 incorporating our better than expected Q2 performance, as well as our view of the remainder of the year. While we continue to expect to see revenue per unit moderate in the back half, the degree of moderation is somewhat less than what our original guidance assumed.

Our volume expectations in the second half are only slightly higher than they were a quarter ago, as miles driven trends have recovered slightly more quickly than we expected.

For the year, we now expect organic revenue to increase 20% to 24% from fiscal 2020 revenues of 1.384 billion as compared to our prior expectation of 15% to 20% organic revenue growth.

Organic adjusted EBITDA is now expected to increase 29% to 33% from fiscal 2020 adjusted EBITDA of 398.5 million versus our prior expectation of an increase of 23% to 28%. For the full year, we continue to expect interest expense of approximately 57 million to 59 million, which includes the Q2 write-off of deferred financing fees of 10.3 million.

We also continue to expect our effective tax rate to be in the range of 25% to 25.5% and we now expect depreciation and amortization to be in the range of 82 million to 86 million. As noted in our press release, our Board of Directors approved a 400 million share repurchase authorization.

A disciplined capital allocation plan is the foundation of how we run the company and returning capital to shareholders in the form of opportunistic share repurchases will be one aspect of this plan. Our philosophy on share repurchases is consistent with our overall philosophy on capital allocation.

We will repurchase shares when we believe they are trading at a discount to intrinsic value with some cushion and when the return on investment from repurchasing shares is favorable to other potential capital deployment opportunities.

We will not be targeting a certain amount of shares to be repurchased in any quarter, trying to offset dilution or managing EPS or to a targeted net leverage ratio.

In closing, we're very pleased with our first half performance overall for fiscal 2021 and our entire team is focused on delivering on our operational and financial goals for the full year. With that, we will open up the call to questions.

Operator?.

Yes. Thank you. [Operator Instructions] And the first question comes from Chris Bottiglieri from Exane BNP Paribas..

Hi, guys. Thanks for taking the question.

So, wanted to ask about the towing cost that you referenced on the call, can you just kind of maybe speak to that? Is that more fuel surcharges or is it just capacity or labor markets? And then, do these higher costs change the way you're thinking about you're towing optimization, self-help initiative, does this increase the urgency? Does it make it more difficult? Just kind of thoughts there will be helpful..

Yeah, Chris. This is Vance. I can go ahead and provide some perspective on that. So it's really not really about fuel [ph], what we're seeing in the marketplace.

Like in a lot of other industries, this is - labor is very tight, so getting kind of the amount of towing that we need for the demand and assignments that we're seeing in the volume has become a little bit more challenging and because of that, in certain markets, we're having to pay higher rates for towers.

So, it's really not about fuel, but it's really about the labor that's impacting towing costs. As it relates to our margin expansion plan, it really doesn't impact the margin expansion plan. The way to think about it really is that we're going to have some marginal impact in terms of our costs that's going to make the base a little bit higher.

The actual initiatives that we're executing in our margin expansion plan are still very much on track and we still expect to see the savings. It'll just come off a slightly higher base than we may have anticipated, given some of the higher towing costs..

Okay. That's really helpful. Thank you very much..

Yep. Thank you, Chris..

Thank you. And the next question comes from Stephanie Moore with Truist Securities.

Hi. This is Joe Hines on for Stephanie Moore. Good morning and congrats on the good results. I guess I just wanted to maybe ask about what you're seeing from an assignment level, maybe you said, you're kind of comparing maybe assignment volumes versus pre-COVID and how you are kind of thinking of pricing today is pre-COVID..

So, thank you, Joe. As we said in our remarks, volumes have come back relative to our original projection for 2021, a little bit faster. So we are seeing miles driven recover, which is resulting in assignment volumes. As we reported, the total loss frequency was basically flat year-over-year.

It was down a tick but we're still seeing robustness in the level of total loss frequency. So those factors, as we said, are still - they're a little bit ahead of where we originally thought. And in terms of pricing in the market, yeah, I mean, again, as we said, we've taken into account what used-car pricing is at.

We do believe it's going to moderate in the back half. It's a hard thing to predict. There's a lot of different reports out there on what might happen to the pricing but we've taken in that information, looked at our own data and made our best projection for the balance of the year..

And just to be - and just one thing to clarify, as it relates to pricing, when we think about data sources and information we're getting from the market, it's really around the elevated level of used-car prices.

So, in addition to that, there's also a number of things internally that we've done, that are positively impacting our revenue per unit where I talked about before. So things like going through an all-digital model and then also some of the enhancements like 360 View that we've made in our model..

Great. Thanks. It is helpful. And let me just squeeze in one more. If you could talk to sort of the non-insurance volume, sort of what you're seeing there, the opportunity you see in non-insurance and the value proposition that you sort of bring to that market..

Yeah, we're so bullish about that. I think we've done a really good job of expanding that. We do believe that we're a great venue for a certain element of sort of the lower end of the clear title market and we've done well there, and we've continued to deliver there. We've enhanced some of our offerings that are much more specific to that marketplace.

And yeah, it's also similar to some - to what we're seeing in the used-car world, there is a short supply, right, even in that market. So, I think sellers are really valuing what we're bringing to them to help optimize their recoveries..

Great. Thanks so much. That's everything for me..

Thanks, Joe..

Thank you. And the next question comes from Craig Kennison with Baird..

Hey, good morning. Thanks for taking my question. John, you had mentioned that total loss rate trends fell just a little bit, but that's running counter to the trend we've seen for some time.

I imagine there's some pandemic noise in that metric but as you unpack that, what do you think is driving that flattening in that curve?.

Yeah, Craig, it is hard to discern at this point. I mean, we're actually talking to our customers now around what they're saying, because I think you're right that there's probably some pandemic noise in it. But from what we're hearing from them, they haven't changed their view around total loss decision.

It's not like they're starting to repair - that they're actively repairing more cars, it's really just a function of how that math worked out for the quarter. So it's - we obviously keep an eye on it. We'll see what happens next quarter.

But nothing that we've heard or seen in the market is changing our view of that longer-term trend that we've been seeing..

Craig, just to add what John was saying.

We do believe that there was some pandemic impact, so if you think about the second quarter of 2020, the 19.5% there, we do believe that at that point that was kind of the height of the pandemic and insurance companies were likely not sending out adjusters as much, given the pandemic and so because of that, we believe that they were probably totaling more cars in that point in time.

So, we believe that there's probably some impact from that. The other thing, just to note as well is that the 19.4% in the second quarter of 2021, sequentially, the second quarter is usually a little bit lower on from a quarter-to-quarter perspective as well..

That helps, thank you. And then, with respect to ARPU growth, I think in the past you've said that you believe some of your internal initiatives represent a larger percentage or proportion of your growth than, let's say, the Manheim index for used car prices.

Does that still hold today?.

Yeah, we do. We believe it also holds today. So when we look at the data and the information we have, obviously, we have information and we're able to look at what our growth and proceeds are, and what our growth and revenue per unit are, and what the growth is in the Mannheim pricing, used car price Index as well.

And so, based on our assessment, we're continuing to see that that holds, which is in that. We believe going into an all-digital model, obviously with that the pricing changes that we got from now, 100% of transactions collecting the internet, before it was only 70%.

In addition, to the other enhancements we've made to the model, Feature Tour, our 360 View growth in our global buyer network has had a big impact as well, that all of those things combined, at this point, we continue to believe having a bigger impact than elevated used-car pricing.

Although we believe that elevated used-car pricing is having an impact, as we said in our prepared remarks, we would expect that that would moderate in the second half of the year and going into - from there on..

Got it. Okay. Thank you..

Thanks, Craig..

Thank you. And the next question comes from Daniel Imbro with Stephens..

Hey, good morning, guys. Thanks for taking my questions..

Hi, Daniel..

On that last comment, something you guys have been talking a lot about is growing the international buyer base.

Can you maybe talk about where we are in terms of that initiative? How early innings are we? And is the competition or customer acquisition costs increasing as you and your largest peer both maybe accelerate the pace of international marketing, kind of at the same time?.

I still think there's room for improving. I think we've done a really good job, as our data supports, over the last couple of years in growing that.

But there are still enormous whitespace in international market for us to find and penetrate buyers through our multiple approaches, whether it's the market alliance partners that we've talked about, through our digital marketing, and then spent to a lesser extent because of the pandemic, but our in-person work that we do.

All those, I think, we're still seeing strong growth and I don't see that moderating anytime soon. Acquisition costs, I think we've done a really good job through our digital channels to really make that pretty efficient. So I'm not seeing that as a - I'm not seeing any change in what our acquisition costs are and continue to grow that.

I really do think there's really, as I said, continued whitespace to grow our international buyer base..

That's helpful. Sorry..

Further to add, as we continue to add feature and function to help them do their job better, we think that we're going to help accelerate that through, whether it's how we're helping them transport, we're helping them pay for things, where we continue to think about those international buyers and what we can do to make their life a little easier.

And we think that's going to continue to help us grow that important segment..

That's helpful. Thanks, john..

Thank you..

Switching gears, in the past few quarters, you guys mentioned that ancillary services are driving down cycle times.

As assignments have increased, have you been able to keep cycle times down and lower than pre-COVID levels? And is there further room to drive down cycle times more and improve yard efficiency?.

I don't know. Vance or Arif, do you have? [indiscernible] talked about this specific. But I wanted to tell, Daniel, that there is still room to improve that, again, through our products and services.

Whether it's inspection services or loan payoff products, the wider adoption of that and penetration of that is taking meaningful timeline out of the cycle. We have experienced over the last year and a half, DMV issues where they slowed down, which, again, negatively affects our cycle time, it's a bit out of our control.

But I think we continue to look at that, we do believe there's - we have the ability and are going to work hard at trying to reduce cycle times, as we go..

Yeah, I would just add to what John said that, yeah, to John's point, I think at the beginning of the pandemic, which now about the second, third quarter of 2020, we did see more of an impact on cycle times because we had DMV closures and kind of things of that nature in certain markets, but just kind of the ability to kind of process titles and all that was a little bit more lengthy.

We've seen that moderate since that point in time to get back to a more maybe not completely, but almost completely normal level. And then certainly we believe whether it's related to things like Loan Payoff or other things that we're doing there continues to be a good opportunity there to reduce cycle times..

Got it. And then last one, if I could squeeze in on the guidance, Vance. The back half EBITDA margin does seem to imply a little bit of contraction, just to get the revenue guide down to the EBITDA guide you've given.

I think you mentioned towing cost inflation, but can you walk through what other factors are changing, as we go to the back half but that may be weighing on that EBITDA margin relative to the last few quarters?.

Yeah, I mean, the primary thing that makes you hit on the primary one, which is that we have [Technical Difficulty] some additional cost to what we think will happened in our forecast for the back half of the year and what we think will happen in between, just based on what we started to see at the end of the second quarter.

In addition to that, because of our performance, as we allude to SG&A, certainly if you look at it through the second quarter, it was up quite a bit and the reason for that is incentive compensation cost.

So that's having an impact to giving kind of how well the performance for the total year, certainly through two quarters of the year, is turning out to be and what we project going forward..

Okay. Got it. Thanks so much, guys..

Thanks, Daniel..

Thanks, Daniel..

Thank you. And the next question comes from Bret Jordan with Jefferies..

Hi. Good morning, guys..

Hi, Bret..

Hi, Bret..

You, I guess, in the past to sort of quantified what you see the Loan Payoff tool doing to improve cycle times.

And I guess now that you've added leases to that product, do you have a feeling, I guess, maybe more specifically, how you see the cycle time picking up with that?.

It is - we're still really bullish. As I said, I think it is still an important element. Different lenders and providers actually have different opportunity based on how good they were before.

So I think we're seeing, again, if you think about cycle time that I think we've talked about 45 to 90 days in total, taking 8, 10, 12, 15 days off of that is still really meaningful. We still believe that there is that opportunity. As we add more lenders, as we build in things like the lease tool, we're getting greater adoption.

So we still - yeah, we still do believe that it's a significant cycle time improvement tool..

And I don't think we have enough information on the leases, at this point in time, given that we're just rolling that out as to kind of - but certainly, as providers use the tool or may they now use it for leases, that we would expect that they would give a cycle time reduction there as well..

Okay, great. And quick question, I guess, on the clear title market, obviously a big, incremental market. Could you talk about the economics there? I guess you still forbid have to pay out Australian royalty to KAR to maybe be in that space.

But could you sort of talk about where you see the profits there versus your legacy transactions?.

Yeah, I mean, it's, an opportunity. I don't - I think we view it pretty equally in terms of the opportunity.

Again, putting the royalty payments to the side because that is temporary, but as we look at the pricing and the quality of the vehicles and the costs that it takes to service them, we think it's - yeah, I mean there's, again, different components within that clear title market, whether you're talking about really low value or you're talking about rental cars, which again are going to be at a different price point.

But all in, we view it very favorably from a profitability standpoint relative to our legacy business..

Okay, great. Thank you..

Thank you. [Operator Instructions] And the next question comes from Bob Labick with CJS Securities..

Hi, good morning. It's actually Lee Jagoda for Bob this morning.

So just to start, appreciating that some of the volumes have recovered faster than your original expectations, can you talk through your expectations for timing of when industry volumes may return to pre-COVID? levels?.

Yeah, good morning, and thanks for joining us. So, yeah, as we've talked about before, if you look at vehicle miles traveled, that's actually fairly close to pre-pandemic levels right now. And so obviously, if you think about assignments, they're a function of miles traveled, frequency of accidents, and total loss ratio.

Frequency and total loss, we're continue to - frequency continues to be fairly stable; total loss ratio, we continue to see the same drivers of that but we expect, we'll continue to drive that up. And then vehicle miles traveled, although different elements, it is nearly back or very, very close to pre-pandemic levels.

So you're seeing things like trucks and things of that nature that obviously are benchmarking higher than they were even pre-pandemic. But obviously, they get into wrecks and get into wrecks with cars, unfortunately, and then there's kind of cars, which are kind of like slightly below the last reading pre-pandemic.

So, it's pretty much close, if not back to the level..

Got it.

So again, once cars kind of get to that vehicle miles traveled pre-pandemic level and I look at like the buckets of your growth being total loss, frequency improvement, favorable market shifts, or growth in non-insurance, how do we look at those buckets in terms of your growth going forward; again, once vehicle miles driven on the car side kind of stabilizes..

Yeah, and once again, I mean, I would probably think about vehicle miles traveled, just total overall, has been - which, again, it's kind of nearly close to or at pre-pandemic levels right now. And then I think the other factors are kind of once again, accident frequency is fairly stable.

And then total loss rate, not considering what happened is comparison to second quarter of 2021 versus 2020, for the reasons we outlined, continues to rise, I think.

And then the other element that goes into that, the two other elements, one element is share shifts, we've talked a lot about that, kind of the impact on 2021, and then our focus on that and what we expect going forward.

And then, as John just mentioned, we believe that there is a - we continue to make good progress on non-insurance and we believe longer term, there's an outside growth - an outsized growth potential opportunity there to grow that business. It comes in many different segments, rental cars, repossession, fleet, all these type of things.

But certainly, as we look at kind of the dealer side and the lower end of that dealer side, we do believe there's opportunity there..

Very, very helpful. Thanks..

Thank you..

Thank you. [Operator Instructions] And the next question comes from Gary Prestopino with Barrington Research..

Hey, good morning, everyone..

Hi, Gary. Good morning..

Can you give us some idea of what your non-insurance vehicles process were in the quarter? What percentage change, were they up double digit, triple digit?.

Yeah, so we didn't provide and aren't necessarily going to provide the percentage growth of those. But one way to think about it, Gary, is that when - we are seeing continued strong growth in the non-insurance side. And if you look back to kind of the time of the spin, non-insurance was approximately 20% and insurance was 80%.

The non-insurance piece of that has grown and with index higher than the 20% now, if that's helpful. But we are continuing to see strong growth in non-insurance..

Okay, that's pretty helpful.

And then, is it possible to - if you look at the 2.4% increase in revenue per unit, is it possible that could you maybe parse that out like if we had flat year-over-year used car pricing, what would that increase have been? I guess what I'm trying to get at is, what are you doing internally, how is that impacting your revenue per unit, when you factor out used-car pricing?.

Yeah, Gary, it's very difficult to bifurcate between all the things that we're doing internally, and then the precise impact of kind of used-car - that used-car prices or elevated used-car prices, rather are having on.

But as we mentioned earlier, what we do feel comfortable saying is that, collectively, all the things that we've done to our model, albeit going all digital, now that we're collecting in the internet fees on 100% of transactions versus 70%.

Other pricing changes that we've implemented, certainly the growth in our global buyer network, enhancements we've made to our model, if you take all those things together, kind of self-help things that we've done on our own, that is more of a significant contribution, we believe, from the data we are seeing, relative to the impact that we think elevated used-car prices are having.

That's about the level of detail we can provide..

Okay. And John, as you look forward with used-car prices, I mean, you talk to people within the industry and whatever, is the thought that maybe we're plateauing here, but we're not going to see a dramatic snap back down.

And we've hit a new high level for a time being, or are we going to see continued attrition from here over the next two to three years in prices?.

Yeah, I mean, we're - it's so hard to say here. I mean, I think, as new car production begins to catch up with chip shortage, all that stuff, you are going to see some softening in the used-car market because there's going to be more availability of new cars, and they're not going to be as precious as they have been right now.

But what's the two to three year trend, I'm not going to hazard a guess at that..

Okay, thank you..

Thanks, Gary..

Thank you. And this will conclude the question-and-answer session. I'd like to return the floor to John Kett for any closing remarks..

Well, thank you all for joining us. Again, thank you for your support and interest in IAA and we look forward to updating your next quarter. Have a great day..

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines..