Exchange: NASDAQ | Sector: Consumer Cyclical | Industry: Auto Dealerships
Q1 2025
Published: Nov 26, 2024
Earnings Highlights
Revenue of $1.15B up 12.4% year-over-year
EPS of $0.37 increased by 8.6% from previous year
Gross margin of 44.7%
Net income of 362.09M
"First, the dedicated owned storage capacity that we hold in reserve for storms of this nature, representing nearly 2,000 acres nationwide, and approximately 1,000 acres specifically for the Helene and Milton areas alone. Second, our technology and logistics teams have deployed real-time tools that, serve both our own people as well as our third-party towing network as well as our own employed drivers in optimizing routing and optimizing dispatch for the rapid retrieval and movement of vehicles through our network. And finally, our industry leading, contracted and full time towing and transport network which we have steadily built up over the years, was able to respond with unprecedented speed."" - Jeff Liaw
Copart Inc (CPRT) QQ1 2025 Earnings Analysis: Insurance-Driven Growth, International Expansion, and Storm-Related Margin Pressure
Executive Summary
Copart delivered a solid QQ1 2025 against a backdrop of ongoing growth in insurance-related vehicle recovery and a notable pace of international expansion. Revenue rose 12% year over year to $1.147 billion, supported by a 13% unit-volume increase in the insurance segment (excluding catastrophic events) and a 16% rise in international unit volumes. Management highlighted the company’s strategic investments in capacity, logistics, and technology to support continued growth, including the expansion of Title Express and the shift toward consignment-based models in international markets (e.g., Germany and the U.K.). However, the quarter also featured margin pressures from elevated facility-related costs and incremental hurricane-related expenses tied to Hurricanes Helene and Milton, which reduced per-unit cost efficiency in the near term. Despite these headwinds, Copart generated meaningful free cash flow and maintains a very strong liquidity position, underpinned by approximately $4.9 billion of liquidity (roughly $3.7 billion in cash) and over $4.9 billion of overall liquidity at quarter end. The combination of secular industry drivers (higher total loss frequency, growing vehicle miles traveled, and a expanding complex vehicle fleet) with Copart’s scalable platform supports a constructive long-term outlook, albeit with near-term volatility tied to catastrophe events and insurance loss dynamics.
Overview of QQ1 2025 performance with YoY and QoQ context:
- Revenue: $1,146,829,000 (+12.39% YoY; +7.28% QoQ)
- Gross Profit: $512,105,000 (+10.36% YoY; +12.90% QoQ)
- Gross Margin: 44.65% (down ~82 bps YoY)
- Operating Income: $406,367,000 (+2.78% YoY; +13.02% QoQ)
- Operating Margin: 35.43%
- Net Income: $362,086,000 (+8.89% YoY; +12.25% QoQ)
- EPS (GAAP): $0.38; EPS (Diluted): $0.37
- EBITDA: $461,229,000; EBITDA Margin: 40.22%
- Free Cash Flow: $245.5 million (approx.)
- Operating Cash Flow: $482.3 million; Capex: $236.8 million; Free Cash Flow Conversion: ~54% of operating cash flow
- Liquidity: >$4.9 billion; Cash: ~$3.7 billion; Net Debt: negative ~$3.581 billion
- Working Capital and Capital Allocation: Inventory up ~5% in the U.S.; International inventory up >10%; Global ASPs down <1% YoY (U.S. down ~1%, International up ~7%); Cat-related costs: Hurricanes Helene and Milton added $29 million in incremental costs; 18 million of costs capitalized and remaining recognized as sales occur.
- Unit and mix dynamics: Global unit sales +12% YoY; U.S. unit growth ~11% (fee units +11%, purchase units +6%); U.S. insurance unit volume +12% YoY (≈9% excluding cat units); International unit growth ~16%; Blue Car growth >20% YoY; NPA up ~14%; CDS down <1%; Charity/municipal volumes down ~4%.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.15B
12.39%
7.28%
Gross Profit
512.11M
10.36%
12.90%
Operating Income
406.37M
2.78%
13.02%
Net Income
362.09M
8.89%
12.25%
EPS
0.38
8.57%
15.15%
Key Financial Ratios
currentRatio
6.62
grossProfitMargin
44.7%
operatingProfitMargin
35.4%
netProfitMargin
31.6%
returnOnAssets
4.08%
returnOnEquity
4.59%
debtEquityRatio
0.01
operatingCashFlowPerShare
$0.5
freeCashFlowPerShare
$0.26
priceToBookRatio
6.28
priceEarningsRatio
34.23
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from the QQ1 2025 earnings call, grouped by theme:
- Strategy and market positioning
- Insurance and market evolution: Jeff Liaw highlighted growth in insurance-related channels, including bank rental and fleet sellers, and emphasized the industry-wide trend toward consignment-based models in international markets (Germany and the U.K.). He noted that Copart’s strategy aligns with shifting seller preferences to maximize speed and value for insurers and policyholders.
- Title Express and title processing: The company is actively managing titles for approximately 1 million vehicles per year, with Title Express playing a critical role in accelerating salvage-title processing and, in turn, improving speed to recovery inCAT events (e.g., Florida).
- Operational execution and catastrophe response
- Hurricane Helene and Milton response: Co-President/CEO Jeff Liaw outlined a three-pillar storm response framework: (1) dedicated storm storage capacity (~2,000 acres nationwide, ~1,000 acres targeted to Helene/Milton areas), (2) real-time logistics tools and a broad towing network, and (3) a large, contracted full-time towing and transport network enabling rapid retrieval and movement of vehicles.
- Cost implications: The quarter included $29 million of incremental hurricane-related costs (non-capitalized) with $18 million capitalized on the balance sheet; excluding these hurricane costs, facility-related costs per unit rose ~4% YoY as Copart continues to invest in capacity expansion.
- Growth dynamics and mix
- Unit and ASP trends: Global unit sales +12% YoY; U.S. unit growth +11% (fee units +11%, purchase units +6%); International unit growth +16%. Global ASPs declined by less than 1% YoY, with U.S. ASPs down ~1% and international ASPs up ~7%.
- Segmented performance: U.S. service revenue up ~13% (cat units ~2% of that), international service revenue up ~30%. Purchased vehicle gross profit up ~72% globally; U.S. purchased vehicle gross profit up ~77% (revenue +12%), international purchased vehicle revenue down ~12% but gross profit up ~67%.
- Profitability and cash flow
- Gross margin compression driven by higher facility costs and hurricane costs; gross margin declined 82 bps to 44.7%; U.S. gross margin down 260 bps to 47.2%; international gross margin rose to 32.3% (+740 bps) due to mix shifts toward consignment in Germany and improved margins in the U.K.
- Leverage and liquidity: Q1 GAAP operating income up ~3% despite headwinds; net income up ~9%; liquidity remained robust with over $4.9B of liquidity and free cash flow of ~$246M; the company generated operating cash flow of ~$482M and capex of ~$238M, underscoring strong cash generation and capital discipline.
- Industry context and risk factors discussed
- Total loss frequency remained elevated (CCC reported ~21.7% for the calendar quarter ended Sept 30) and is a key driver of Copart’s growth in unit volumes; management outlined longer-term secular trends supporting ongoing organic industry growth despite volatility from insurance pricing cycles and catastrophe events.
- Management emphasized ongoing investments to support growth and service levels, with a focus on capacity expansion and technology to mitigate volatility in supply and demand caused by weather events and used vehicle price dynamics.
First, the dedicated owned storage capacity that we hold in reserve for storms of this nature, representing nearly 2,000 acres nationwide, and approximately 1,000 acres specifically for the Helene and Milton areas alone. Second, our technology and logistics teams have deployed real-time tools that, serve both our own people as well as our third-party towing network as well as our own employed drivers in optimizing routing and optimizing dispatch for the rapid retrieval and movement of vehicles through our network. And finally, our industry leading, contracted and full time towing and transport network which we have steadily built up over the years, was able to respond with unprecedented speed."
— Jeff Liaw
As of the end of October we had over $4.9 billion of liquidity, which is comprised of nearly $3.7 billion in cash and our capacity under a revolving credit facility. For the quarter, we generated free cash flow of about $246 million, reflecting operating cash flow generation of $482 million and capital investments of about $237 million.
— Leah Stearns
Forward Guidance
Management did not issue formal numeric forward guidance for QQ2-Q4 2025. However, commentary indicates a constructive long-term outlook anchored in capacity expansion, continued investment in platform services and technology, and the shift toward higher-margin, consignment-based models in international markets. Key considerations for investors include:
- Operating leverage: Expect improvements in margin as the mix shifts toward higher-margin non-purchase models (consignment), particularly in international markets (Germany, U.K.).
- Catastrophe exposure: Near-term earnings may be sensitive to hurricane activity and weather-related events, given incremental costs in QQ1 and potential future capex to bolster storm response capabilities.
- Title Express and capacity investments: Ongoing deployment of capital into land, facilities, and technology is expected to sustain growth and service levels, supporting higher volumes and faster cycle times, especially in insurance-related channels.
- Insurance dynamics: Total loss frequency remains a critical driver; investors should monitor CCC and insurer behavior, as well as macro factors affecting uninsured motorist share and motor-vehicle claims frequency.
- Valuation and liquidity: Copart’s balance sheet remains debt-light with substantial liquidity; the company’s cash generation supports continued investments and potential capital allocation opportunities, while valuation metrics imply a premium vs. broader auto retail benchmarks given the company’s unique model and margin profile.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CPRT Focus
44.65%
35.40%
4.59%
34.23%
AN
18.20%
5.02%
7.30%
9.00%
ANSS
85.60%
11.70%
0.84%
133.45%
CDW
21.60%
6.95%
9.68%
23.60%
CTAS
50.10%
22.40%
11.20%
44.90%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Copart’s QQ1 2025 results underscore a combination of durable growth drivers and near-term margin volatility tied to catastrophe costs and facility investments. The company’s balance sheet remains exceptionally strong, with substantial cash and liquidity, enabling continued expansion in land, facilities, and technology to support growing insurance volumes and international activity. The strategic emphasis on Title Express, consignment-based models in Germany/UK, and diversified channels (Blue Car, CDS, NPA) provides multiple paths to higher-margin revenue in the medium term. Investors should monitor catastrophe-related cost cadence, evolution of total loss frequency, insurer behavior, and the pace of international market transitions to consignment models, which could meaningfully improve profitability as volume shifts occur. Given Copart’s cash generation capacity, disciplined capital allocation, and scalable platform, the investment thesis remains constructive, albeit with near-term earnings volatility linked to external events and insurance dynamics.
Key Investment Factors
Growth Potential
Structural growth in vehicle remarketing driven by rising total loss frequency, a growing drivable fleet with more complex safety tech, and expanding international markets (notably consignment and Title Express-enabled workflows). The shift to consignment in Germany and the U.K. could improve margins and seller adoption over time. Blue Car, CDS, and NPA segments provide diversified growth channels. Investment in land, capacity, and technology should underpin higher unit volumes and faster recovery cycles in catastrophe events.
Profitability Risk
Near-term margin pressure from hurricane-related costs and higher facility-related expenses; potential volatility in total loss frequency and used-vehicle prices; regulatory and macro risks (e.g., tariffs impacting auto supply chains); reliance on insurers’ loss settlement practices; competitive dynamics in international markets transitioning to consignment models; off-lease cycle and wholesale market fluctuations affecting non-insurance volumes.
Financial Position
Extremely strong liquidity and balance sheet with >$4.9B total liquidity and net debt of approximately -$3.58B, supported by ~$3.7B in cash. Consistent free cash flow generation (~$246M in QQ1 2025) provides runway for capacity expansion and technology investments. Modest leverage and robust operating cash flow position Copart well for continued growth and potential capital allocation opportunities.
SWOT Analysis
Strengths
Highly scalable, globally diversified remarketing platform with substantial liquidity and cash generation
Leading position in insurance-related salvage auctions and rapid catastrophe-response capabilities
Strong unit-volume growth, particularly in insurance channels and international markets
Operational advantages from Title Express and consignment-based models enhancing speed and outcomes for insurers and sellers
Low leverage and conservative balance sheet enabling continued capital investment
Robust free cash flow and capital allocation flexibility
Weaknesses
Near-term margin headwinds from hurricane-related costs and elevated facility costs per unit
Reliance on insurance loss settlement practices; variability in total loss frequency can impact volumes
Transition risk in international markets as higher-margin consignment models scale up
High valuation metrics relative to broader auto retail benchmarks may limit downside protection from multiple contraction
Opportunities
Expansion of consignment-based models in Germany and the U.K. with potential margin uplift
Scale-up of Title Express capabilities to accelerate salvage titles and improve insurer/customer experience
Growth in specialty equipment markets (e.g., Purple Wave partnership) and blue car initiatives
Continued capital investment in land and technology to support growth in insurance and non-insurance channels
Threats
Macro shocks: severe weather, catastrophe loss volatility, and insurance pricing cycles influencing total loss frequency
Regulatory and tariff developments affecting vehicle pricing and imports/export dynamics
Competitive pressure from other asset remarketing channels and evolving insurer preferences
Fluctuations in used vehicle prices influencing auction demand and unit economics
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