Exchange: NASDAQ | Sector: Consumer Cyclical | Industry: Auto Dealerships
Q4 2024
Published: Sep 30, 2024
Earnings Highlights
Revenue of $1.07B up 7.2% year-over-year
EPS of $0.33 decreased by 8.3% from previous year
Gross margin of 42.4%
Net income of 322.57M
""Today, we're approaching a run rate of 1 million titles obtained per year on behalf of our insurance clients."" - Jeff Liaw
Copart Inc (CPRT) QQ4 2024 Results: Insurance-Led Volume Growth, Unwavering Liquidity, and Strategic Acceleration in Whole-Car and Purple Wave
Executive Summary
Copart reported solid Q4 FY2024 results, highlighted by a 7% year-over-year revenue increase to $1.069 billion and a full-year revenue of just over $4.2 billion, up about 10% year over year. The quarterly gross margin was 42.4%, with GAAP operating income of $359.5 million and net income of $322.6 million ($0.33 per share). Management emphasized the durability of the insurance channel, which grew 6% YoY in volume, and the continued strength of non-insurance volumes (notably fleet/rental and dealer channels) which grew ~20% YoY in Q4 and ~28% for the year. A cornerstone of the strategy is accelerating the cross-sell flywheel between insurance clients and non-insurance buyers, underpinned by Title Express and a broader platform integration. Copart is also advancing its Purple Wave asset-light expansion, which delivered 17% full-year growth. The company ended the year with highly conservative capitalization and strong liquidity (over $4.6 billion in total liquidity, including ~$3.4 billion in cash and investments and a revolving credit facility of >$1.2 billion), supporting its long-term investment horizon. Net cash position remained robust, with a negative net debt of approximately $1.40 billion and free cash flow of $962 million for the year. Management signaled ongoing investments in yard infrastructure, technology, and acquisitions/partnerships to sustain scalable growth, while acknowledging non-recurring yard-related costs in Q4 that temporarily pressured margins. While valuations remain high by several metrics, Copart’s combination of liquidity, operational leverage, and diversified growth engines positions it to benefit from ongoing insurance-for-total-loss trends and a shifting mix toward higher-value, cross-sell opportunities.
Key Performance Indicators
Revenue
1.07B
QoQ: -5.17% | YoY:7.16%
Gross Profit
453.58M
42.43% margin
QoQ: -12.87% | YoY:-0.87%
Operating Income
359.54M
QoQ: -17.76% | YoY:-7.95%
Net Income
322.57M
QoQ: -15.62% | YoY:-7.25%
EPS
0.33
QoQ: -17.50% | YoY:-8.33%
Revenue Trend
Margin Analysis
Key Insights
Q4 2024 revenue: $1.069B, up 7.16% YoY and down 5.17% QoQ. Full-year 2024 revenue: >$4.2B, up ~10% YoY.
Operating income: Q4 $359.5M, operating margin 33.63%; FY GAAP operating income rose by >$85M, approx. 6% year over year.
Net income and margins: Q4 net income $322.6M with net margin ~30.17%; FY net income >$1.40B (net margin not explicitly stated but implied positive).
Earnings per share: Q4 EPS $0.33 (diluted $0.33).
Financial Highlights
Revenue and profitability
- Q4 2024 revenue: $1.069B, up 7.16% YoY and down 5.17% QoQ. Full-year 2024 revenue: >$4.2B, up ~10% YoY.
- Gross profit: Q4 $453.6M, gross margin 42.43%; FY gross profit >$1.90B with gross margin 45.0% (up ~10 bps).
- Operating income: Q4 $359.5M, operating margin 33.63%; FY GAAP operating income rose by >$85M, approx. 6% year over year.
- Net income and margins: Q4 net income $322.6M with net margin ~30.17%; FY net income >$1.40B (net margin not explicitly stated but implied positive).
- Earnings per share: Q4 EPS $0.33 (diluted $0.33).
- Cash flow and liquidity: Operating cash flow $1.473B; capital expenditures $511M; free cash flow $962M for the year; cash and cash equivalents $1.514B at period end; total cash and short-term investments $3.424B; net debt is negative by ~$1.396B; total liquidity >$4.6B.
- Efficiency and asset turnover: DSO ~66 days; DIO ~6.3 days; DPO ~28 days; cash conversion cycle ~72.5 days.
- Valuation context (as of report date): P/E ~39.6x; P/B ~6.8x; P/S ~47.8x; EV/EBITDA ~123.9x; P/FCF ~169.7x; no dividend declared (dividend yield ~0%).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.07B
7.16%
-5.17%
Gross Profit
453.58M
-0.87%
-12.87%
Operating Income
359.54M
-7.95%
-17.76%
Net Income
322.57M
-7.25%
-15.62%
EPS
0.33
-8.33%
-17.50%
Key Financial Ratios
currentRatio
7.03
grossProfitMargin
41.9%
operatingProfitMargin
33.6%
netProfitMargin
30.2%
returnOnAssets
3.83%
returnOnEquity
4.29%
debtEquityRatio
0.02
operatingCashFlowPerShare
$0.45
freeCashFlowPerShare
$0.31
priceToBookRatio
6.8
priceEarningsRatio
39.64
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the Q4 FY2024 earnings call:
- Strategy and growth initiatives: Title Express continues to gain traction, approaching a run rate of 1 million titles obtained per year on behalf of insurance clients, underscoring Copart’s role as a front-end integration partner for insurers. Jeff Liaw stated: 'Today, we are approaching a run rate of 1 million titles obtained per year on behalf of our insurance clients.' The Purple Wave partnership is strengthening, with 17% year-over-year full-year growth, reflecting ongoing geographic expansion and the transition to a national footprint. Liaw noted: 'Purple Wave drove 17% year-over-year growth for the full year.'
- Unit economics and cross-sell flywheel: Leah Stearns highlighted non-insurance volume growth (fleet/rental and dealer channels) of over 20% in Q4 and ~28% for the year, and U.S. non-insurance volume growth outpacing insurance growth (about 12.6% in Q4, ~28% for the year). Management emphasizes the 'flywheel' effect as total loss frequency rises and crossover buyers mature from insurance pools to non-insurance channels.
- Margin dynamics and costs: The company incurred roughly $16M in non-recurring yard-op costs in Q4, including ~ $12M in the U.S. and ~$4M internationally, contributing to gross-margin compression (Q4 gross margin declined ~340 bps YoY). Leah Stearns explained these as non-recurring items related to taxes and invoicing adjustments but also cited ongoing investments in yard personnel and infrastructure.
- Market dynamics and ASP trends: Global ASPs declined about 5% in Q4 vs year-ago, with U.S. ASPs down less than 4% YoY and up ~2% sequentially. Manheim Used Vehicle Value Index fell ~8.6% YoY, while U.S. insurance ASPs outpaced the broader market by staying comparatively resilient. Jeff Liaw described the longer-term trend: accident frequency tends to decline over time as vehicle safety improves, while total loss frequency has historically outpaced it, supporting Copart’s core liquidity advantage.
- Capital deployment and balance sheet: The company reiterated a disciplined, multi-decade investment horizon, prioritizing yard infrastructure, 1,100+ acres of land additions, 370 transportation assets, and strategic partnerships, with free cash flow of $962M for the year. Copart’s liquidity position remains robust, enabling ongoing expansion without compromising balance sheet strength.
"Today, we're approaching a run rate of 1 million titles obtained per year on behalf of our insurance clients."
— Jeff Liaw
"Global revenue in the quarter increased to nearly $1.1 billion representing growth of over $71 million or about 7%."
— Leah Stearns
Forward Guidance
Outlook and assessment:
- Growth drivers: Copart’s insurance channel continues to be a stable growth engine (6% YoY insurance unit growth in Q4, 7% for the year), complemented by accelerating non-insurance volume growth (fleet/rental and dealer channels up >20% in Q4 and ~28% for the year). The cross-sell flywheel (from insurance-originated buyers to non-insurance opportunities) is a durable competitive advantage that should support volume and liquidity advantages across markets.
- Title Express and platform expansion: The near-term trajectory suggests continued adoption by insurers and lenders, with potential expansion into new states and additional title-processing collaborations. The near-term metric to watch is the 1 million titles/year run-rate, which would gradually translate into incremental fee-based revenue and higher liquidity in Copart’s auctions.
- Purple Wave expansion: Expect further geographic expansion and additional price- and volume-led growth in the equipment sector, aided by a more expansive agent network and ongoing integration with Copart’s technology platforms.
- Margin trajectory and cost structure: Margin headwinds in Q4 were driven by non-recurring yard costs and higher yard staffing, suggesting a potential near-term margin compression. As capacity scales and volume normalizes, Copart should realize operating leverage and potential gross-margin improvements (especially in U.S. operations) barring further non-recurring episodes.
- Key factors to monitor: (1) Insurance and total-loss cycle dynamics (frequency vs severity), (2) ASP stabilization in the U.S. market relative to Manheim indices, (3) incremental capital deployment efficiency (yard infrastructure and technology), (4) competitive landscape and fee-model trajectory, (5) international expansion effectiveness and FX exposure, and (6) storm-season-related costs and catastrophe provisioning.
- Conclusion: Given a strong liquidity position, resilient cash generation, and an expanding suite of growth platforms (Title Express, Whole-Car/Blue-Car, Purple Wave, international growth), Copart appears positioned to convert volume gains into long-term profitability and shareholder value, albeit with volcanic attention to cost control and margin progression in the near term. No formal full-year guidance was provided, but the company’s capital-allocation discipline and increasing scale of core platforms support a constructive long-term investment thesis, contingent on insurance market dynamics remaining favorable and yard-cost normalization materializing over time.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CPRT Focus
42.43%
33.60%
4.29%
39.64%
AN
17.20%
4.71%
7.57%
9.10%
ANSS
91.80%
40.30%
4.64%
26.09%
CDW
22.30%
7.88%
11.20%
21.92%
CTAS
47.50%
22.20%
9.60%
41.54%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Copart’s Q4 2024 results demonstrate a resilient, multi-channel growth strategy underpinned by a robust balance sheet and a scalable platform. The insurance channel remains a steady growth engine while non-insurance volumes, especially fleet/rental and dealer segments, fuel a cross-sell flywheel that enhances liquidity and price realization. The Title Express initiative and Purple Wave expansion provide visible catalysts for longer-term revenue diversification and margin expansion, supported by substantial capital investments in yard infrastructure and real assets. The company’s liquidity headroom and free cash flow generation provide ample runway to fund growth initiatives without compromising financial flexibility.
However, the equity is priced at premium levels (high P/E, P/S, and EV multiples), reflecting Copart’s strong growth profile and cash-generation capabilities. Investors should weigh the durable cash flows, low leverage, and strategic growth optionality against near-term margin pressures from non-recurring costs and potential cyclical volatility in insurance and used-vehicle pricing. The key is to monitor ASP stabilization in the U.S., the efficiency gains from yard-scale operations, the continued uptake of Title Express, and the ramp of Purple Wave’s nationwide footprint, along with sensitivity to storms and regulatory shifts that could alter the cost structure and volume mix. Overall, the investment thesis supports a constructive stance for long-term holders who want exposure to a scalable, cash-generative platform with multiple growth rails in the evolving auto remarketing ecosystem.
Key Investment Factors
Growth Potential
High-quality growth drivers include: (a) Title Express expansion targeting ~1 million titles/year run-rate as a scalable, high-margin service for insurers; (b) non-insurance channel expansion (blue-car, dealer services, cash-for-cars) with >20% quarterly growth and cross-sell benefits feeding liquidity; (c) Purple Wave expansion toward national reach with ongoing investment in sales force and geographic footprint; (d) international growth with 17% quarterly unit growth and 21% annual growth, supported by improved inventory velocity and increasing ASPs in select markets; (e) yard infrastructure investments (1,100+ acres and 370 transportation assets) to bolster capacity, service levels, and liquidity across geographies; (f) durable free cash flow generation (free cash flow of $962M in FY2024) underpinning a strong financial position to fund growth initiatives.
Profitability Risk
Key risks include: (a) dependence on insurance cycles and total-loss frequency trends, which could deteriorate if used-vehicle values stabilize or improve unexpectedly; (b) near-term margin compression from non-recurring yard costs and ongoing investments in platform and staffing; (c) execution risk in international expansion and integration of Purple Wave; (d) regulatory and tax changes affecting titling processes or cross-border sales; (e) catastrophe exposure from severe weather events leading to operational costs and capacity shifts; (f) competition in the salvage and whole-car markets and potential pricing pressure on fees in certain segments.
Financial Position
Copart maintains an exceptionally strong liquidity profile with over $4.6B in total liquidity, including approximately $3.4B in cash and investments and more than $1.2B capacity under revolving credit facilities. The company reports cash and cash equivalents of $1.514B and net debt of approximately -$1.396B, indicating a net cash position. FY2024 free cash flow of $962M underscores robust cash generation, enabling continued capital investments in yard infrastructure, land acquisitions, and equipment, while preserving execution flexibility. The balance sheet shows a conservative debt profile and ample liquidity to support growth opportunities and potential M&A or strategic partnerships. Operational metrics such as a current ratio of 7.03 and a quick ratio of 6.96 suggest ample short-term liquidity. The company’s high cash conversion cycle (~72.5 days) reflects the working-capital-intensive nature of the auction and logistics business but remains manageable within the strong liquidity framework.
SWOT Analysis
Strengths
Strong liquidity and conservative capital structure (over $4.6B total liquidity; net cash position).
Diversified revenue base anchored by insurance-related volume and a fast-growing non-insurance channel (fleet/rental, dealer services, and cash-for-cars).
Scale and liquidity advantage in auctions with ongoing cross-sell benefits (insurance to non-insurance buyers).
Title Express and other integrated services enhance insurer relationships and create a defensible moat.
Purple Wave expansion provides a growth vector in the equipment space and expands Copart’s geographic and customer reach.
International growth with double-digit unit-volume expansion and rising ASPs in certain markets.
Weaknesses
Near-term margin compression driven by non-recurring yard costs and higher yard-headcount investments.
High valuation multiples across key metrics (P/E, P/S, EV/FCF) may heighten sensitivity to revenue cyclicality and margin shifts.
Significant reliance on insurance and total-loss trends, which can be volatile with economic or regulatory shifts.
Capital-intensive expansion through yard investments may create execution risk and longer payback periods in periods of slower volume growth.
Opportunities
Scale and monetization of Title Express across more insurers and jurisdictions.
Expansion of whole-car and blue-car programs to broaden seller concentration and improve liquidity.
Continued Purple Wave national expansion and cross-selling opportunities into new sectors (construction, agriculture, etc.).
Material international growth opportunities aided by a lower-dollar environment and cross-border demand from international buyers.
Potential for further accretive acquisitions or partnerships that fit the capital-allocation framework.
Threats
Macro and insurance-cycle risk: slower growth or a downturn in auto insurance adoption could dampen total-loss volumes.
Weather-related catastrophes raise short-term costs and capital needs in storm-prone periods.
Regulatory changes around titling, salvage auctions, or cross-border sales could impact operations.
Competitive dynamics in the salvage and whole-car markets could pressure margins or market share.