10-QPeriod: Q2 FY2019

COPART INC Quarterly Report for Q2 Ended Jan 31, 2019

Filed February 28, 2019For Securities:CPRT

Summary

Copart, Inc. reported a solid performance for the six months ended January 31, 2019, with total service revenues and vehicle sales growing by 4.6% year-over-year to $811.6 million. This growth was primarily driven by a 3.7% increase in service revenues for the three months ended January 31, 2019, supported by both U.S. and international market expansion. Vehicle sales also saw a significant jump of 19.1% for the same three-month period, largely due to international growth. The company's operational efficiency improved, with yard operations expenses decreasing by 0.8% for the quarter and 2.7% for the six-month period, partially attributed to the normalization of costs following Hurricane Harvey. Net income saw a substantial increase of 26% for the six-month period, indicating strong profitability. Financially, Copart maintained a healthy liquidity position. Despite a decrease in cash and cash equivalents due to stock repurchases and capital expenditures, the company generated robust operating cash flows of $215.2 million for the six months ended January 31, 2019. The company also actively managed its debt, with outstanding borrowings on its Revolving Loan Facility increasing. Copart's strategic focus on expansion, both organic and through acquisitions, continues to drive revenue growth and market presence across multiple international territories.

Financial Highlights

51 data points
Beta

Revenue

$484.90M

42.9% Gross Margin

Net Income

$131.37M

27.1% Net Margin

EPS (Diluted)

$0.14

Total Assets

$2.30B

Cash & Equivalents

$108.17M

Free Cash Flow

$33.13M

Financial Statements
Beta
Revenue$484.90M
Cost of Revenue$61.21M
Gross Profit$208.23M
Operating Income$164.74M
Interest Expense$5.23M
Net Income$131.37M
EPS (Basic)$0.14
EPS (Diluted)$0.14
Shares Outstanding (Basic)923.19M
Shares Outstanding (Diluted)962.64M

Key Highlights

  • 1Service revenues increased by 3.7% for the three months and 4.6% for the six months ended January 31, 2019, driven by both U.S. and international markets.
  • 2Vehicle sales grew significantly by 19.1% for the three months and 31.8% for the six months ended January 31, 2019, with strong contributions from international operations.
  • 3Yard operations expenses decreased by 0.8% for the three months and 2.7% for the six months ended January 31, 2019, partly due to the resolution of Hurricane Harvey-related costs.
  • 4Net income showed a strong increase of 26% for the six-month period ended January 31, 2019, demonstrating improved profitability.
  • 5Operating cash flows increased by 15.5% to $215.2 million for the six months ended January 31, 2019.
  • 6The company repurchased $365.0 million of its common stock during the six months ended January 31, 2019, under its existing repurchase program.
  • 7Copart continues its international expansion strategy, opening new facilities and acquiring businesses in various global markets.

Frequently Asked Questions

Copart experienced revenue growth driven by both service revenues and vehicle sales. For the six months ended January 31, 2019, total service revenues and vehicle sales increased by 4.6% year-over-year. Service revenues grew due to increased volume and higher average auction selling prices, while vehicle sales saw a significant increase, particularly in international markets.

The company's yard operations expenses were favorably impacted in the reported period due to the decrease in abnormal costs related to Hurricane Harvey in the prior year. While the prior year saw significant costs for temporary storage, subhaulers, and labor, these abnormal expenses normalized in the current period, leading to a decrease in overall yard operations expenses.

Copart generated strong operating cash flows of $215.2 million for the six months ended January 31, 2019. However, cash and cash equivalents decreased significantly compared to the prior fiscal year-end, primarily due to substantial stock repurchases ($365.0 million) and capital expenditures. The company expects current cash and cash generated from operations to be sufficient for at least the next 12 months but may require drawing on its Revolving Loan Facility or issuing equity to fund future expansion.

Copart is actively pursuing international expansion by acquiring and developing facilities in new regions and existing markets. The company has established operations in the U.S., Canada, the U.K., Brazil, the Republic of Ireland, Germany, Finland, the U.A.E., Oman, Bahrain, and Spain. This strategy involves integrating acquired businesses, deploying its VB3 auction technology, and adapting to local market structures.