01—Abstract
Summary
Summary of the 10-K filed September 27, 2021. Cited figures are marked; the original filing is the authoritative source.
Copart (CPRT) reported fiscal 2021 (year ended July 31, 2021) revenue of $2.69 billiona, up 22% from $2.21 billion in fiscal 2020, with operating income of $1.14 billion, up 39% from $816 million.
Net income reached $936.5 millionb, or $3.90 diluted EPS, versus $699.9 million and $2.93 in the prior year. Growth was driven mainly by higher revenue per car and rising average auction selling prices in the U.S., partly offset by lower unit volumes during the COVID-19 pandemic, which reduced accident volumes as miles driven fell. Operating margin expanded to 42% from 37%, reflecting operating leverage on higher pricing.
U.S. operations generated 84.4% of revenue, while International contributed 15.6%. The company ended the year with $1.05 billionc in cash, cash equivalents and restricted cash, up from $478 million, and no borrowings under its $1.05 billion revolving credit facility. Operating cash flow rose to $991 million, while capital expenditures of $463 million were directed toward new yards and facility expansion.
Management opened ten new U.S. facilities and one each in Germany and Spain during the year, and it did not repurchase any shares in fiscal 2021 or 2020. About $81.5 milliond of shares remain authorized under the repurchase program. The company has never paid a cash dividend, and it intends to retain earnings for use in the business.
Key risks flagged in the filing include continued COVID-19 disruption to accident and assignment volumes, dependence on a limited number of major insurance sellers, execution risk in international expansion (particularly Germany, where insurers have historically been less involved in vehicle disposition), exposure to foreign currency movements, cybersecurity threats, and possible regulatory or antitrust reviews of U.K. acquisitions. Several components of earnings were also lifted by one-time or discrete items, including $19.8 million of discrete tax benefits and $29.8 million of excess tax benefits from stock option exercises, so underlying growth may be somewhat lower than reported figures suggest.
02—Key points
Key Highlights
- Revenue rose 22% to $2.69 billion, and operating income rose 39% to $1.14 billion, with operating margin expanding to 42% from 37%.
- Diluted EPS reached $3.90, up from $2.93 in fiscal 2020, and net income climbed to $936.5 million.
- Growth was driven primarily by higher revenue per car and rising average auction selling prices, offset by lower U.S. unit volumes during COVID-19.
- Cash, cash equivalents and restricted cash more than doubled to $1.05 billion, and the company carried no borrowings under its $1.05 billion revolver at year-end.
- Operating cash flow grew 8% to $991 million, while capital expenditures of $463 million funded new facilities; ten new U.S. yards opened in fiscal 2021.
- No share repurchases were made in fiscal 2021 or 2020, leaving $81.5 million of authorization available, and no cash dividends have ever been paid.
- Insurance companies supplied 77% of vehicles processed, and no single customer accounted for more than 10% of revenue, though a limited number of major sellers remain concentrated.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed September 27, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $2.69B$2.21B | +22.1% |
| Operating Expenses | $1.56B— | — |
| Operating Income | $1.14B$816.10M | +39.3% |
| Net Income | $936.50M$699.91M | +33.8% |
| EPS (Basic) | $0.99$0.75 | +32.0% |
| EPS (Diluted) | $0.97$0.73 | +32.4% |
| Shares Outstanding (Basic) | 945.01M932.81M | +1.3% |
| Shares Outstanding (Diluted) | 961.16M954.62M | +0.7% |
05—Questions
Frequently Asked Questions
How did Copart's profitability change in fiscal 2021?
Net income increased to $936.5 million from $699.9 million, and diluted EPS rose to $3.90 from $2.93. Operating margin widened to 42% from 37%, driven by higher revenue per vehicle and higher average selling prices, which outpaced the increase in yard and administrative costs. Effective tax rate rose to 16.5% from 12.6%, with discrete items including $19.8 million of favorable adjustments and $29.8 million of excess tax benefits from stock option exercises.
What are the main risks COVID-19 poses to Copart's business?
The pandemic reduced accident volumes as miles driven declined, lowering vehicle assignments and processed volume, particularly in the U.K. where restrictions were tighter. Management notes that renewed shelter-in-place orders have occasionally stalled volume recovery. Other risks include yard operations disruption, supply and demand imbalances between new and salvage vehicles, and slower processing of DMV title paperwork. The company was deemed an essential business in its jurisdictions, which helped it maintain operations.
How strong is Copart's balance sheet and liquidity position?
The balance sheet is very strong. Cash and restricted cash rose to $1.05 billion, and working capital increased to $1.28 billion. The company had $400 million of senior secured notes outstanding, mostly due in 2025 and beyond, and no borrowings under its $1.05 billion revolving facility, which matures in July 2023. The consolidated total net leverage ratio was negative (0.45x), and management believes current liquidity is sufficient for at least the next 12 months.
What is Copart's growth strategy going forward?
Copart plans to grow through acquiring and developing storage facilities in key domestic and international markets, pursuing national and regional supply agreements with insurance companies, expanding service offerings such as IntelliSeller and ProQuote, and extending its VB3 internet auction model into new markets. The company also plans to keep investing in greenfield yards, with development costs ranging from $3 million to $50 million per site, and it may draw on its revolver or issue equity to fund expansion.
What international exposure and currency risks should investors consider?
International operations generated 15.6% of fiscal 2021 revenue and operate in roughly ten countries. The company does not hedge foreign currency exposure, so movements in the British pound, euro, Canadian dollar, and Brazilian real affect reported results. A hypothetical 10% adverse move in the U.S. dollar would have reduced operating income by $11.0 million in fiscal 2021. Expansion into Germany and Spain carries integration risk because insurers there have historically played a smaller role in vehicle disposition, and Brexit could still create cross-border disruption.
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