COPART, INC. Unless the context otherwise requires, references in this Form 10-Q to "Copart,"
the "Company," "we," "us," or "our" refer to
This Quarterly Report on Form 10-Q, including the information incorporated by
reference herein, contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the Securities Act), and
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange
Act). All statements other than statements of historical facts are statements
that could be deemed forward-looking statements. In some cases, you can identify
forward-looking statements by terms such as "may," "will," "should," "expect,"
"plan," "intend," "forecast," "anticipate," "believe," "estimate," "predict,"
"potential," "continue" or the negative of these terms or other comparable
terminology. The forward-looking statements contained in this Form 10-Q involve
known and unknown risks, uncertainties and situations that may cause our or our
industry's actual results, level of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these statements. These forward-looking
statements are made in reliance upon the safe harbor provision of the Private
Securities Litigation Reform Act of 1995. These factors include those listed in
Part II, Item 1A. under the caption entitled "Risk Factors" in this Form 10-Q
and those discussed elsewhere in this Form 10-Q. We encourage investors to
review these factors carefully together with the other matters referred to
herein, as well as in the other documents we file with the
Although we believe that, based on information currently available to us and our management, the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements.
Overview
We are a leading provider of online auctions and vehicle remarketing services
with operations in
Our goals are to generate sustainable profits for our stockholders, while also providing environmental and social benefits for the world around us. With respect to our environmental stewardship, we believe our business is a critical enabler for the global re-use and recycling of vehicles, parts, and raw materials. We are not responsible for the carbon emissions resulting from new vehicle manufacturing, governmental fuel emissions standards or vehicle use by consumers. Each vehicle that enters our business operations already exists, with whatever fuel technology and efficiency it was designed and built to have, and the substantial carbon emissions associated with the vehicle's manufacture have already occurred. However, upon our receipt of an existing vehicle, we help decrease its total environmental impact by extending its useful life and thereby avoiding the carbon emissions associated with the alternative of new vehicle and auto parts manufacturing. For example, many of the cars we process and remarket are subsequently restored to drivable condition, reducing the new vehicle manufacturing burden the world would otherwise face. Many of our cars are purchased by dismantlers, who recycle and refurbish parts for vehicle repairs, again reducing new and aftermarket parts manufacturing. And finally, some of our vehicles are returned to their raw material inputs through scrapping, reducing the need for further new resource extraction. In each of these cases, our business reduces the carbon and other environmental footprint of the global transportation industry.
Beyond our environmental stewardship, we also support the world's communities in
two important ways. First, we believe that we contribute to economic development
and well-being by enabling more affordable access to mobility around the world.
For example, many of the automobiles sold through our auction platform are
purchased for use in developing countries where affordable transportation is a
critical enabler of education, health care, and well-being more generally.
Secondly, because of the special role we play in responding to catastrophic
weather events, we believe we contribute to disaster recovery and resilience in
the communities we serve. For example, we mobilized our people, and engaged with
a multitude of service providers to timely retrieve, store, and remarket tens of
thousands of flood-damaged vehicles in
We provide vehicle sellers with a full range of services to process and sell vehicles primarily over the internet through our Virtual Bidding Third Generation internet auction-style sales technology, which we refer to as VB3. Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers, vehicle rental companies, and individuals. We sell the vehicles principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and to the general public. The majority of the vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total loss; not economically repairable by the insurance companies; or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. We offer vehicle sellers a full range of services that help expedite each stage of the vehicle sales process, minimize administrative and processing costs, and maximize the ultimate sales price through the online auction process.
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In the
We monitor and analyze a number of key financial performance indicators in order to manage our business and evaluate our financial and operating performance. Such indicators include:
Service and Vehicle Sales Revenue: Our service revenue consists of auction and
auction related sales transaction fees charged for vehicle remarketing services.
These auction and auction related services may include a combination of vehicle
purchasing fees, vehicle listing fees, and vehicle selling fees that can be
based on a predetermined percentage of the vehicle sales price, tiered vehicle
sales price driven fees, or at a fixed fee based on the sale of each vehicle
regardless of the selling price of the vehicle; transportation fees for the cost
of transporting the vehicle to or from our facility; title processing and
preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees.
These fees are recognized as net revenue (not gross vehicle selling price) at
the time of auction in the amount of such fees charged. Purchased vehicle
revenue includes the gross sales price of the vehicles which we have purchased
or are otherwise considered to own. We have certain contracts with insurance
companies, primarily in the
Our revenue is impacted by several factors, including total loss frequency and
the average vehicle auction selling price, as a significant amount of our
service revenue is associated in some manner with the ultimate selling price of
the vehicle. Vehicle auction selling prices are driven primarily by: (i) market
demand for rebuildable, driveable vehicles; (ii) used car pricing, which we also
believe has an impact on total loss frequency; (iii) end market demand for
recycled and refurbished parts as reflected in demand from dismantlers; (iv) the
mix of cars sold; (v) changes in the
Operating Costs and Expenses: Yard operations expenses consist primarily of operating personnel (which includes yard management, clerical, and yard employees); rent; vehicle transportation; insurance; property related taxes; fuel; equipment maintenance and repair; marketing costs directly related to the auction process; and costs of vehicles sold under the purchase contracts. General and administrative expenses consist primarily of executive management; accounting; data processing; sales personnel; professional services; marketing expenses; and system maintenance and enhancements.
Other (Expense) Income: Other (expense) income consists primarily of interest expense on long-term debt, see Notes to Unaudited Consolidated Financial Statements, Note 7 - Long-Term Debt; foreign exchange rate gains and losses; gains and losses from the disposal of assets, which will fluctuate based on the nature of these activities each period; and earnings from unconsolidated affiliates.
Liquidity and Cash Flows: Our primary source of working capital is cash operating results and debt financing. The primary source of our liquidity is our cash and cash equivalents and Revolving Loan Facility. The primary factors affecting cash operating results are: (i) seasonality; (ii) market wins and losses; (iii) supplier mix; (iv) accident frequency; (v) total loss frequency; (vi) volume from our existing suppliers; (vii) commodity pricing; (viii) used car pricing; (ix) foreign currency exchange rates; (x) product mix; (xi) contract mix to the extent applicable; (xii) our capital expenditures; and (xiii) other macroeconomic factors. These factors are further discussed in the Results of Operations and Risk Factors sections of this Quarterly Report on Form 10-Q.
Potential internal sources of additional working capital and liquidity are the sale of assets or the issuance of shares through option exercises and shares issued under our Employee Stock Purchase Plan. A potential external source of additional working capital
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and liquidity is the issuance of additional debt or equity. However, we cannot predict if these sources will be available in the future or on commercially acceptable terms.
Acquisitions and New Operations
As part of our overall expansion strategy of offering integrated services to
vehicle sellers, we anticipate acquiring and developing facilities in new
regions, as well as the regions currently served by our facilities. We believe
that these acquisitions and openings will strengthen our coverage, as we have
facilities located in the
The following tables set forth operational facilities that we have opened and
are now operational from
United States Locations Date
Mobile South, Alabama August 2021
Madison, Wisconsin October 2021
Augusta, Georgia April 2022
Milwaukee South, Wisconsin May 2022
Punta Gorda, Florida June 2022
Anchorage, Alaska August 2022
Rapid City, South Dakota August 2022
Kansas City, Missouri September 2022
International Locations Geographic Service Area Date
Barcelona, Spain Spain September 2021
Halifax, Novia Scotia Canada April 2022
The following table sets forth the operational facilities obtained through
business acquisitions from
Locations Geographic Service Area Date
Skelmersdale, England United Kingdom July 2022
Dumfries, England United Kingdom July 2022
The period-to-period comparability of our consolidated operating results and financial position is affected by business acquisitions, new openings, weather and product introductions during such periods.
In addition to growth through business acquisitions, we seek to increase revenues and profitability by, among other things, (i) acquiring and developing additional vehicle storage facilities in key markets, including foreign markets; (ii) pursuing global, national, and regional vehicle seller agreements; (iii) increasing our service offerings; and (iv) expanding the application of VB3 into new markets. In addition, we implement our pricing structure and auction procedures, and attempt to introduce cost efficiencies at each of our acquired facilities by implementing our operational procedures, integrating our management information systems, and redeploying personnel, when necessary.
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