Copart’s Q4 Saw Top-Line Growth, But Bottom-Line Contractions

Copart (CPRT -0.88%), the global leader in online vehicle auctions, reported mixed fiscal 2024 fourth-quarter and full-year earnings on Wednesday. Q4 revenue of $1.07 billion was up 7.2% year over year. But earnings per share of $0.33 were down compared to 2023’s Q4.

The quarter showed solid revenue growth but highlighted some challenges in managing costs and profitability.

Source: Copart. YOY = Year over year.

Overview of Copart’s Business

Copart is a global leader in online vehicle auctions, specializing in selling used and salvaged vehicles to dealers, dismantlers, rebuilders, and individuals. The company’s auction platform, VB3, enables efficient auction processes and broad bidder participation. Copart’s recent focus has been on expanding its market presence globally and advancing its technology platforms. Copart has built strong relationships with insurance companies, a broad international footprint, and a diverse range of value-added services.

Fiscal 2024 Highlights

For the fiscal year ended July 31, 2024, Copart reported a 9.5% increase in revenue to $4.2 billion. Gross profit grew by 9.8% to $1.9 billion, indicating stable margins over the year. Net income rose by 10.1% to $1.4 billion, showcasing a strong annual performance despite quarterly challenges. The company ended the fiscal year with cash reserves of $1.5 billion and total assets of $8.4 billion.

In fiscal 2024, Copart worked to expand its global market presence. The company opened new facilities in Germany, Spain, Brazil, and Canada, which contributed significantly to its revenue growth. As of July 31, Copart operates 250 locations in 11 countries.

Technological innovation remained a cornerstone of Copart’s strategy. The company invested further in its VB3 auction platform, leveraging artificial intelligence (AI) and machine learning to enhance bidder experiences and operational efficiencies. Copart’s service offerings also expanded, particularly in non-insurance sectors with the “Blue car” business and dealer sales volume growing by 23% and 18%, respectively. These developments underscore Copart’s diversification strengths and its ability to attract a broader range of clients.

Operating expenses were a notable concern in the fourth quarter. Yard operations costs increased by 16.9% year over year, driven by expansion activities and inflation. General and administrative expenses jumped 46.6% to $81.4 million, adding to the strain on overall expenses. These rising costs impacted profitability metrics despite the revenue growth.

Net income in Q4 declined by 7.3% year over year, but it was still up 10% for the full year. to $323 million from the prior year. Q4 operating income fell by 8%, highlighting struggles in cost management. Operating income was up 5.7% for the year.

Outlook

Looking ahead, Copart management said it aims to continue global expansion and technological advancement. While no specific forward earnings guidance was provided, management emphasized ongoing investments in AI-driven auction platforms and expanding its global footprint. This strategy signals potential for continued revenue growth but may pose near-term profitability pressures due to high investment costs.

Investors should keep an eye on Copart’s cost management efforts and the impact of macroeconomic factors on the used vehicle market. The company’s ability to navigate these challenges will be critical to its future financial performance.