01—Abstract
Summary
Summary of the 10-K filed September 28, 2023. Cited figures are marked; the original filing is the authoritative source.
Copart (CPRT) closed fiscal 2023 (year ended July 31, 2023) with record results: total service revenues and vehicle sales of $3.87 billiona (up 10.5% from $3.50 billion), operating income of $1.49 billion (up 8.1%), and net income of $1.24 billion (up 13.5%).
Diluted EPS was $1.28b versus $1.13 in fiscal 2022, though these figures are restated for the two-for-one stock splits effected in November 2022 and August 2023. Growth was driven mainly by higher average auction selling prices and volume in the U.S. (service revenues up 12.2%), while International service revenues rose 11.4%, helped by 37% growth in vehicle sales. Operating margin held at about 39%, though yard operations costs rose 15.9% on fuel, subhaul, labor and Hurricane Ian costs.
Balance sheet strength stands out. Cash, cash equivalents and restricted cash were $957 millionc, plus $1.41 billion in newly purchased held-to-maturity Treasury bills, and the company carries only $11 million of revolver borrowings against a $1.25 billion facility. Working capital rose to $2.77 billion and stockholders' equity reached $5.99 billion.
Capital expenditures roughly doubled to $517 milliond, reflecting facility expansion. Management opened 8 new U.S. facilities and other sites and, notably, did not repurchase any shares in fiscal 2023, retaining capital for flexibility. The company has never paid a cash dividend.
Key risks include dependence on insurance-company sellers (83% of vehicles processed), weather-driven volume swings, pending U.K. CMA review of the Hills Motors acquisition (which was approved in July 2023 per the notes), international expansion and currency exposure, cybersecurity (a ransomware attack hit an immaterial subsidiary in March 2023), and pressure from fuel and commodity prices. Ernst & Young issued an unqualified opinion on both the financial statements and internal controls, with no critical audit matters.
02—Key points
Key Highlights
- Record fiscal 2023 total revenue of $3.87B (+10.5% YoY) and operating income of $1.49B (+8.1%), with net income of $1.24B (+13.5%).
- Service revenues grew 12.1% to $3.20B, led by U.S. growth of 12.2%, driven by higher auction selling prices and volume.
- Strong liquidity: $957M cash plus $1.41B in held-to-maturity Treasury bills; revolver drawn only $11M of a $1.25B facility.
- Capital expenditures nearly doubled to $517M, with 8 new U.S. facilities opened in fiscal 2023 and expansion in Brazil, Germany and Canada.
- No share repurchases in fiscal 2023 and no cash dividends ever paid; a two-for-one stock split was effected in November 2022 and another in August 2023.
- Operating margin stable at about 39%, though yard operations expense rose 15.9%, pressured by fuel, subhaul, labor and Hurricane Ian costs.
- Concentration and cyber risks remain: insurance companies supplied 83% of vehicles, and an immaterial subsidiary suffered a ransomware attack in March 2023.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed September 28, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $3.87B$3.50B | +10.5% |
| Operating Expenses | $2.38B$2.13B | +12.1% |
| Operating Income | $1.49B$1.37B | +8.1% |
| Net Income | $1.24B$1.09B | +13.5% |
| EPS (Basic) | $1.30$1.15 | +13.0% |
| EPS (Diluted) | $1.28$1.13 | +13.3% |
| Shares Outstanding (Basic) | 953.57M949.68M | +0.4% |
| Shares Outstanding (Diluted) | 966.65M964.60M | +0.2% |
05—Questions
Frequently Asked Questions
How profitable was Copart in fiscal 2023 and how did it compare to the prior year?
Net income rose to $1.24 billion from $1.09 billion (+13.5%), and operating income increased 8.1% to $1.49 billion. Operating margin was roughly 39%, unchanged from fiscal 2022. Diluted EPS was $1.28 versus $1.13, with per-share figures adjusted for the stock splits. The effective tax rate increased to 20.4% from 18.7%.
Is Copart's balance sheet strong enough to fund growth and returns?
Yes. Total assets reached $6.74 billion and stockholders' equity $5.99 billion. Cash and restricted cash were $957 million, with an additional $1.41 billion in Treasury bills maturing within 12 months. Borrowings were only $11 million under a revolver with capacity of $1.25 billion. Operating cash flow of $1.36 billion more than covered capex of $517 million, and the company is not restricted from paying dividends under its credit agreement.
What are the main risks investors should monitor?
Key risks include reliance on insurance companies for most vehicle supply, weather and total-loss frequency swings that affect volume, fuel and commodity price exposure, international expansion and foreign currency risk (no hedging), integration of acquisitions such as Hills Motors subject to U.K. regulatory review, and cybersecurity threats including a March 2023 ransomware incident at a subsidiary.
Why did Copart stop buying back stock in fiscal 2023?
The filing does not state a specific reason. It reports that no shares were repurchased under the program in fiscal 2021, 2022 or 2023, leaving 325.8 million shares available for repurchase. Management said it is considering alternative uses for its cash, including repurchases, dividends and acquisitions, and it expects its current cash and operating cash flow to cover working capital needs for the foreseeable future.
What drove revenue growth and what pressured costs?
U.S. service revenue growth came from higher revenue per car, reflecting higher auction selling prices and a shift in vehicle mix, plus volume gains. International growth was driven by vehicle mix and volume, partly offset by $22.6 million of currency headwinds. On the cost side, yard operations expenses rose 15.9% because of higher subhaul costs tied to fuel, labor overtime, catastrophe-related premiums and travel costs from Hurricane Ian.
06—Continue