Copart Reports Second Quarter Fiscal 2020 Financial Results

Copart, Inc. (NASDAQ: CPRT) today reported financial results for the quarter ended January 31, 2020.

For the three months ended January 31, 2020, revenue, gross profit, and net income were $575.1 million, $259.9 million, and $168.7 million, respectively. These represent an increase in revenue of $90.2 million, or 18.6%; an increase in gross profit of $51.7 million, or 24.8%; and an increase in net income of $37.3 million, or 28.4%, respectively, from the same period last year. Fully diluted earnings per share for the three months were $0.71 compared to $0.55 last year, an increase of 29.1%.

For the six months ended January 31, 2020, revenue, gross profit, and net income were $1.1 billion, $514.8 million, and $386.9 million, respectively. These represent an increase in revenue of $183.3 million, or 19.4%; an increase in gross profit of $110.6 million, or 27.4%; and an increase in net income of $141.4 million, or 57.6%, respectively, from the same period last year. Fully diluted earnings per share for the six months were $1.62 compared to $1.01 last year, an increase of 60.4%.

Excluding the impact of discrete income tax items, disposal of non-operating assets, foreign currency-related gains, certain income tax benefits and payroll taxes related to accounting for stock option exercises, and the effect on common equivalent shares from ASU 2016-09, non-GAAP fully diluted earnings per share for the three and six months ended January 31, 2020 and 2019, were $0.65, $0.52, $1.30 and $0.99, respectively. A reconciliation of non-GAAP financial measures to the most directly comparable financial measures computed in accordance with U.S. generally accepted accounting principles (GAAP) can be found in the tables attached to this press release.

On Thursday, February 20, 2020, at 11 a.m. Eastern Time, Copart will conduct a conference call to discuss the results for the quarter. The call will be webcast live and can be accessed at http://stream.conferenceamerica.com/copart022020. A replay of the call will be available through April 20, 2020 by calling [phone]. Use confirmation code: 44749280.

About Copart

Copart, Inc., founded in 1982, is a global leader in online vehicle auctions. Copart’s innovative technology and online auction platform links sellers to more than 750,000 Members in over 170 countries. Copart offers services to process and sell salvage and clean title vehicles to dealers, dismantlers, rebuilders, exporters, and in some cases, to end users. Copart sells vehicles on behalf of insurance companies, banks, finance companies, charities, fleet operators, dealers and also sells vehicles sourced from individual owners. With operations at over 200 locations in 11 countries, Copart has more than 150,000 vehicles available online every day. Copart currently operates in the United States (Copart.com), Canada (Copart.ca), the United Kingdom (Copart.co.uk), Brazil (Copart.com.br), the Republic of Ireland (Copart.ie), Germany (Copart.de), Finland (Copart.fi), the United Arab Emirates, Oman and Bahrain (Copartmea.com), and Spain (Copart.es). For more information, or to become a Member, visit Copart.com/Register.

Use of Non-GAAP Financial Measures

Included in this release are certain non-GAAP financial measures, including non-GAAP net income per diluted share, which exclude the impact of discrete income tax items, disposal of non-operating assets, foreign currency-related gains, certain income tax benefits and payroll taxes related to accounting for stock option exercises, and the effect on common equivalent shares from ASU 2016-09. These non-GAAP financial measures do not represent alternative financial measures under GAAP. In addition, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Furthermore, these non-GAAP financial measures do not reflect a comprehensive view of Copart’s operations in accordance with GAAP and should only be read in conjunction with the corresponding GAAP financial measures. This information constitutes non-GAAP financial measures within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission. Accordingly, Copart has presented herein, and will present in other information it publishes that contains these non-GAAP financial measures, a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Copart believes the presentation of non-GAAP net income per diluted share included in this release in conjunction with the corresponding GAAP financial measures provides meaningful information for investors, analysts and management in assessing Copart’s business trends and financial performance. From a financial planning and analysis perspective, Copart management analyzes its operating results with and without the impact of discrete income tax items, disposal of non-operating assets, foreign currency-related gains, certain income tax benefits and payroll taxes related to accounting for stock option exercises, and the effect on common equivalent shares from ASU 2016-09.

Cautionary Note About Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws, and these forward-looking statements are subject to substantial risks and uncertainties. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected or implied by our statements and comments. For a more complete discussion of the risks that could affect our business, please review the “Management’s Discussion and Analysis” and the other risks identified in Copart’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as filed with the Securities and Exchange Commission. We encourage investors to review these disclosures carefully. We do not undertake to update any forward-looking statement that may be made from time to time on our behalf.

Copart, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
		Three Months Ended January 31,								Six Months Ended January 31,
		2020				2019				2020				2019
Service revenues and vehicle sales:
Service revenues		$	510,034			$	416,807			$	997,890			$	811,613
Vehicle sales		65,106				68,091				131,674				134,653
Total service revenues and vehicle sales		575,140				484,898				1,129,564				946,266
Operating expenses:
Yard operations		237,683				199,383				460,562				388,860
Cost of vehicle sales		57,900				61,212				116,664				118,968
Yard depreciation and amortization		18,231				14,839				35,051				32,024
Yard stock-based compensation		1,437				1,238				2,529				2,270
Gross profit		259,889				208,226				514,758				404,144
General and administrative		39,242				33,236				78,085				68,041
General and administrative depreciation and amortization		6,051				5,560				12,245				10,244
General and administrative stock-based compensation		4,704				4,691				9,145				9,680
Total operating expenses		365,248				320,159				714,281				630,087
Operating income		209,892				164,739				415,283				316,179
Other (expense) income:
Interest expense, net		(4,464		)		(4,555		)		(8,490		)		(8,246		)
Other (expense) income, net		(354		)		4,782				363				5,819
Total other (expense) income		(4,818		)		227				(8,127		)		(2,427		)
Income before income taxes		205,074				164,966				407,156				313,752
Income tax expense		36,367				33,593				20,269				68,296
Net income		$	168,707			$	131,373			$	386,887			$	245,456
Basic net income per common share		$	0.73			$	0.57			$	1.67			$	1.06
Weighted average common shares outstanding		232,671				230,798				231,920				232,343
Diluted net income per common share		$	0.71			$	0.55			$	1.62			$	1.01
Diluted weighted average common shares outstanding		238,470				240,660				238,566				242,743

Copart, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
		January 31, 2020				July 31, 2019
ASSETS
Current assets:
Cash and cash equivalents		$	93,511			$	186,319
Accounts receivable, net		445,963				367,265
Vehicle pooling costs		90,595				76,548
Inventories		18,515				20,941
Income taxes receivable		68,415				19,526
Prepaid expenses and other assets		14,964				16,568
Total current assets		731,963				687,167
Property and equipment, net		1,789,326				1,427,726
Operating lease right-of-use assets		104,360				—
Intangibles, net		50,291				55,156
Goodwill		338,262				333,321
Deferred income taxes		348				411
Other assets		34,055				43,836
Total assets		$	3,048,605			$	2,547,617
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	296,977			$	270,918
Deferred revenue		7,603				6,466
Income taxes payable		728				3,482
Current portion of operating lease liabilities		23,314				—
Current portion of revolving loan facility and finance lease liabilities		14,215				1,138
Total current liabilities		342,837				282,004
Deferred income taxes		55,499				48,683
Income taxes payable		43,650				35,116
Operating lease liabilities, net of current portion		81,906				—
Long-term debt, revolving loan facility and finance lease liabilities, net of discount		399,846				400,091
Other liabilities		138				3,342
Total liabilities		923,876				769,236
Commitments and contingencies
Stockholders' equity:
Preferred stock		—				—
Common stock		23				23
Additional paid-in capital		617,714				572,559
Accumulated other comprehensive loss		(119,870		)		(132,529		)
Retained earnings		1,626,862				1,338,328
Total stockholders' equity		2,124,729				1,778,381
Total liabilities and stockholders' equity		$	3,048,605			$	2,547,617

Copart, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
		Six Months Ended January 31,
		2020				2019
Cash flows from operating activities:
Net income		$	386,887			$	245,456
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost		48,097				42,487
Allowance for doubtful accounts		1,301				96
Equity in losses (earnings) of unconsolidated affiliates		3,124				(514		)
Stock-based compensation		11,674				11,950
Gain on sale of property and equipment		(1,315		)		(3,890		)
Deferred income taxes		6,719				6,632
Changes in operating assets and liabilities:
Accounts receivable		(78,510		)		(86,125		)
Vehicle pooling costs		(13,921		)		(20,218		)
Inventories		2,765				(11,640		)
Prepaid expenses and other current and non-current assets		7,184				(725		)
Operating lease right-of-use assets and lease liabilities		331				—
Accounts payable and accrued liabilities		24,862				7,338
Deferred revenue		1,021				2,843
Income taxes receivable		(48,722		)		15,286
Income taxes payable		5,794				6,890
Other liabilities		(371		)		(662		)
Net cash provided by operating activities		356,920				215,204
Cash flows from investing activities:
Purchases of property and equipment		(400,352		)		(136,727		)
Proceeds from sale of property and equipment		1,639				17,488
Net cash used in investing activities		(398,713		)		(119,239		)
Cash flows from financing activities:
Proceeds from the exercise of stock options		32,594				5,220
Proceeds from the issuance of Employee Stock Purchase Plan shares		3,955				3,501
Repurchases of common stock		—				(364,997		)
Payments for employee stock-based tax withholdings		(101,422		)		(27		)
Net proceeds on revolving loan facility		13,600				93,300
Net cash used in financing activities		(51,273		)		(263,003		)
Effect of foreign currency translation		258				692
Net decrease in cash and cash equivalents		(92,808		)		(166,346		)
Cash and cash equivalents at beginning of period		186,319				274,520
Cash and cash equivalents at end of period		$	93,511			$	108,174
Supplemental disclosure of cash flow information:
Interest paid		$	9,007			$	9,018
Income taxes paid, net of refunds		$	57,591			$	39,327

Copart, Inc.
Additional Financial Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts)
(Unaudited)
		Three Months Ended January 31,								Six Months Ended January 31,
		2020				2019				2020				2019
GAAP net income		$	168,707			$	131,373			$	386,887			$	245,456
Effect of discrete income tax items		—				—				(3,008		)		—
Effect of disposal of non-operating assets, net of tax		—				(1,598		)		—				(1,598		)
Effect of foreign currency-related gains, net of tax		(416		)		(56		)		(679		)		(399		)
Effect of recognizing tax benefit on exercise of employee stock options		(14,829		)		(4,847		)		(77,194		)		(5,022		)
Effect of payroll taxes on certain executive stock compensation, net of tax		—				—				2,867				—
Non-GAAP net income		$	153,462			$	124,872			$	308,873			$	238,437
GAAP net income per diluted common share		$	0.71			$	0.55			$	1.62			$	1.01
Non-GAAP net income per diluted common share		$	0.65			$	0.52			$	1.30			$	0.99
GAAP diluted weighted average common shares outstanding		238,470				240,660				238,566				242,743
Effect on common equivalent shares from ASU 2016-09		(969		)		(1,675		)		(1,137		)		(2,058		)
Non-GAAP diluted weighted average common shares outstanding		237,501				238,985				237,429				240,685

 

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