Copart Reports Third Quarter Fiscal 2020 Financial Results

Copart, Inc. (NASDAQ: CPRT) today reported financial results for the quarter ended April 30, 2020.

For the three months ended April 30, 2020, revenue, gross profit, and net income were $550.4 million, $242.6 million, and $147.5 million, respectively. These represent a decrease in revenue of $2.8 million, or 0.5%; a decrease in gross profit of $9.0 million, or 3.6%; and a decrease in net income of $45.3 million, or 23.5%, respectively, from the same period last year. Fully diluted earnings per share for the three months were $0.62 compared to $0.81 last year, a decrease of 23.5%.

For the nine months ended April 30, 2020, revenue, gross profit, and net income were $1.7 billion, $757.4 million, and $534.4 million, respectively. These represent an increase in revenue of $180.5 million, or 12.0%; an increase in gross profit of $101.6 million, or 15.5%; and an increase in net income of $96.2 million, or 21.9%, respectively, from the same period last year. Fully diluted earnings per share for the nine months were $2.24 compared to $1.82 last year, an increase of 23.1%.

Excluding the impact of discrete income tax items, disposal of non-operating assets, foreign currency-related gains and losses, 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 nine months ended April 30, 2020 and 2019, were $0.58, $0.66, $1.88 and $1.64, 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, May 21, 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/copart052120. A replay of the call will be available through July 20, 2020 by calling [phone]. Use confirmation code: 48213700.

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 and losses, 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 and losses, 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, including statements concerning the potential impact of the COVID-19 pandemic on our business, operations, and operating results. 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 April 30,								Nine Months Ended April 30,
		2020				2019				2020				2019
Service revenues and vehicle sales:
Service revenues		$	491,582			$	473,682			$	1,489,472			$	1,285,295
Vehicle sales		58,778				79,434				190,452				214,087
Total service revenues and vehicle sales		550,360				553,116				1,679,924				1,499,382
Operating expenses:
Yard operations		231,985				213,804				692,547				602,664
Cost of vehicle sales		53,987				70,984				170,651				189,952
Yard depreciation and amortization		20,333				15,398				55,384				47,422
Yard stock-based compensation		1,442				1,351				3,971				3,621
Gross profit		242,613				251,579				757,371				655,723
General and administrative		37,017				34,072				115,102				102,113
General and administrative depreciation and amortization		6,382				5,714				18,627				15,958
General and administrative stock-based compensation		4,113				4,299				13,258				13,979
Total operating expenses		355,259				345,622				1,069,540				975,709
Operating income		195,101				207,494				610,384				523,673
Other expense:
Interest expense, net		(5,578)				(5,084)				(14,068)				(13,330)
Other income, net		2,277				1,719				2,640				7,538
Total other expense		(3,301)				(3,365)				(11,428)				(5,792)
Income before income taxes		191,800				204,129				598,956				517,881
Income tax expense		44,313				11,388				64,582				79,684
Net income		$	147,487			$	192,741			$	534,374			$	438,197
Basic net income per common share		$	0.63			$	0.85			$	2.30			$	1.90
Weighted average common shares outstanding		234,133				227,984				232,647				230,922
Diluted net income per common share		$	0.62			$	0.81			$	2.24			$	1.82
Diluted weighted average common shares outstanding		238,591				237,892				238,564				241,158

Copart, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
		April 30, 2020				July 31, 2019
ASSETS
Current assets:
Cash and cash equivalents		$	306,387			$	186,319
Accounts receivable, net		346,244				367,265
Vehicle pooling costs		75,357				76,548
Inventories		19,809				20,941
Income taxes receivable		31,578				19,526
Prepaid expenses and other assets		14,777				16,568
Total current assets		794,152				687,167
Property and equipment, net		1,838,297				1,427,726
Operating lease right-of-use assets		106,634				—
Intangibles, net		48,671				55,156
Goodwill		338,039				333,321
Deferred income taxes		310				411
Other assets		35,480				43,836
Total assets		$	3,161,583			$	2,547,617
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	250,841			$	270,918
Deferred revenue		7,884				6,466
Income taxes payable		905				3,482
Current portion of operating lease liabilities		23,395				—
Current portion of finance lease liabilities		3,543				1,138
Total current liabilities		286,568				282,004
Deferred income taxes		57,724				48,683
Income taxes payable		46,795				35,116
Operating lease liabilities, net of current portion		85,698				—
Long-term debt and finance lease liabilities, net of discount		403,653				400,091
Other liabilities		134				3,342
Total liabilities		880,572				769,236
Commitments and contingencies
Stockholders' equity:
Preferred stock		—				—
Common stock		23				23
Additional paid-in capital		646,331				572,559
Accumulated other comprehensive loss		(138,923)				(132,529)
Retained earnings		1,773,580				1,338,328
Total stockholders' equity		2,281,011				1,778,381
Total liabilities and stockholders' equity		$	3,161,583			$	2,547,617

Copart, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
		Nine Months Ended April 30,
		2020				2019
Cash flows from operating activities:
Net income		$	534,374			$	438,197
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost		76,756				63,709
Allowance for doubtful accounts		1,332				341
Equity in losses (earnings) of unconsolidated affiliates		1,918				(1,852)
Stock-based compensation		17,229				17,600
Gain on sale of property and equipment		(1,745)				(3,753)
Deferred income taxes		9,265				14,583
Changes in operating assets and liabilities:
Accounts receivable		19,102				(69,920)
Vehicle pooling costs		661				(15,026)
Inventories		1,209				(5,721)
Prepaid expenses and other current and non-current assets		6,268				(8,605)
Operating lease right-of-use assets and lease liabilities		(221)				—
Accounts payable and accrued liabilities		(15,636)				17,747
Deferred revenue		1,365				3,512
Income taxes receivable		(12,076)				(3,578)
Income taxes payable		9,168				7,304
Other liabilities		1,999				(1,042)
Net cash provided by operating activities		650,968				453,496
Cash flows from investing activities:
Purchases of property and equipment, including acquisitions		(490,998)				(260,081)
Proceeds from sale of property and equipment		2,153				17,928
Net cash used in investing activities		(488,845)				(242,153)
Cash flows from financing activities:
Proceeds from the exercise of stock options		55,656				17,261
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		(102,191)				(45,594)
Net proceeds on revolving loan facility		—				7,000
Net cash used in financing activities		(42,580)				(382,829)
Effect of foreign currency translation		525				(208)
Net increase (decrease) in cash and cash equivalents		120,068				(171,694)
Cash and cash equivalents at beginning of period		186,319				274,520
Cash and cash equivalents at end of period		$	306,387			$	102,826
Supplemental disclosure of cash flow information:
Interest paid		$	14,514			$	14,700
Income taxes paid, net of refunds		$	59,302			$	60,926

Copart, Inc.
Additional Financial Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts)
(Unaudited)
		Three Months Ended April 30,								Nine Months Ended April 30,
		2020				2019				2020				2019
GAAP net income		$	147,487			$	192,741			$	534,374			$	438,197
Effect of discrete income tax items		—				(10,170)				(3,008)				(10,170)
Effect of disposal of non-operating assets, net of tax		—				—				—				(1,598)
Effect of foreign currency-related (gains) losses, net of tax		(490)				94				(1,169)				(304)
Effect of recognizing tax benefit on exercise of employee stock options		(8,768)				(29,074)				(85,962)				(34,096)
Effect of payroll taxes on certain executive stock compensation, net of tax		—				1,295				2,867				1,295
Non-GAAP net income		$	138,229			$	154,886			$	447,102			$	393,324
GAAP net income per diluted common share		$	0.62			$	0.81			$	2.24			$	1.82
Non-GAAP net income per diluted common share		$	0.58			$	0.66			$	1.88			$	1.64
GAAP diluted weighted average common shares outstanding		238,591				237,892				238,564				241,158
Effect on common equivalent shares from ASU 2016-09		(710)				(1,731)				(995)				(1,949)
Non-GAAP diluted weighted average common shares outstanding		237,881				236,161				237,569				239,209

 

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