01—Abstract
Summary
Summary of the 10-Q filed November 21, 2023. Cited figures are marked; the original filing is the authoritative source.
Copart's first-quarter fiscal 2024 10-Q (quarter ended October 31, 2023) shows a strong operating quarter.
Service revenues rose 18.3% to $859.5 milliona, driven by a 17.0% increase in U.S. service revenue on higher volume and revenue per car. Operating income grew 27% to $395.4 million, and the operating margin expanded from 35% to 39% of total revenues. Net income attributable to Copart rose 35% to $332.5 million, and diluted EPS was $0.34 versus $0.25 a year earlier (both figures reflect the August 2023 two-for-one stock split).
Vehicle sales declined 3.4%, with U.S. vehicle sales down 19.4% as the company deliberately reduced principal-unit exposure. The balance sheet and cash flow picture changed meaningfully. Cash, cash equivalents and restricted cash climbed to $2.58 billionb from $957 million, mainly because $1.38 billion of held-to-maturity Treasury bills matured or were sold.
Operating cash flow was $375.2 millionc, up 20%, while capital expenditures and acquisitions totaled $256.7 million. The company held $10.6 million of revolver borrowings and reported a net leverage ratio of (1.37):1, indicating a net cash position. Management described minimum liquidity of $3.8 billion and said no material restriction on dividends exists, though Copart has not paid a cash dividend since 1994.
The main items to monitor are the 80% acquisition of Purple Wave, Inc. (October 2023, consideration of about $112 milliond in shares), the DOJ Consumer Protection Branch money-laundering investigation disclosed in the risk factors and Note 13, and the heavy reliance on a limited number of insurance sellers. Results also benefited from a $25 million Hurricane Ian cost in the prior-year comparison period, which is why yard operations expense per car appears lower. Effective tax rate was stable at 21.4%.
02—Key points
Key Highlights
- Service revenues up 18.3% to $859.5M (U.S. +17.0%, International +29.0%), driven by volume and higher revenue per car
- Operating income up 27% to $395.4M; operating margin expanded to 39% from 35%
- Net income attributable to Copart up 35% to $332.5M; diluted EPS $0.34 vs. $0.25 (split-adjusted)
- Cash and restricted cash rose to $2.58B from $957M, largely from $1.38B of matured/sold held-to-maturity Treasury bills
- Operating cash flow of $375.2M (+20%); capex and acquisitions of $256.7M
- Acquired 80% of Purple Wave, Inc. in October 2023 for shares valued at $112.1M; 20% redeemable noncontrolling interest recorded at $25.2M
- DOJ Consumer Protection Branch is investigating possible money-laundering law violations related to member practices; Company is cooperating
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed November 21, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.02B$893.37M | +14.2% |
| Operating Expenses | $625.04M$581.87M | +7.4% |
| Operating Income | $395.38M$311.50M | +26.9% |
| Net Income | $332.53M$245.85M | +35.3% |
| EPS (Basic) | $0.35$0.26 | +34.6% |
| EPS (Diluted) | $0.34$0.25 | +36.0% |
| Shares Outstanding (Basic) | 958.13M952.20M | +0.6% |
| Shares Outstanding (Diluted) | 971.68M964.34M | +0.8% |
05—Questions
Frequently Asked Questions
Why did cash balances increase so sharply this quarter?
The main driver was the sale or maturity of $1.38 billion of held-to-maturity U.S. Treasury bills, which moved into cash and cash equivalents. Operating cash flow of $375 million also contributed, partly offset by $257 million of capital expenditures and acquisitions. This is a reclassification of liquidity rather than new capital raised.
Is Copart's revenue growth coming from more vehicles or higher prices?
Both, but mostly volume and mix in the U.S. U.S. service revenue grew on higher volume and higher revenue per car from vehicle mix, fee optimization, and supply-chain restrictions on new cars. U.S. vehicle sales fell 19.4% as management deliberately reduced principal-unit exposure and lowered auction selling prices. International service revenue grew 29%, partly helped by currency gains of about $5.7 million.
Does Copart pay dividends, and are there restrictions on doing so?
Copart has not paid a cash dividend since becoming public in 1994. Its credit agreement permits dividends without limit if the net leverage ratio is below 3.25:1, which the company meets (currently (1.37):1). Management does not view the covenants as a significant restriction, and it lists dividends as one of several alternative uses for its cash, along with buybacks and acquisitions.
What is the status of the DOJ investigation mentioned in the filing?
The U.S. Department of Justice Consumer Protection Branch is conducting an ongoing investigation into possible violations of money-laundering laws tied to Copart's procedures for detecting money-laundering activity by its members. The company is cooperating and says further inquiries may follow. The filing does not estimate a potential loss or accrual, and it warns that any resulting fines, penalties or reputational harm could be material.
How much buyback capacity does Copart have?
Copart made no share repurchases in the quarter. As of October 31, 2023, 458 million shares had been repurchased under the program, leaving 326 million shares available under the authorization of 784 million shares, subject to Delaware law limits. The company's 2026 cash position and credit facility both give it room to repurchase if it chooses to.
06—Continue