COPART INC (CPRT)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY2025 delivered double‑digit growth with revenue up 14% to $1.16B and diluted EPS up 21% to $0.40, driven by 8% global unit growth, higher per‑unit service revenue, and resilient ASPs; gross margin was 45% as CAT costs were recognized during the quarter .
• Operating income increased 12% to $426.2M; net income rose 19% to $387.4M; tax rate was ~17%; interest income added nearly $7M YoY as cash was deployed into Treasuries .
• Key drivers: record total‑loss frequency in the U.S. (23.8% in CQ4; 22.2% for the year) supporting insurance volumes, continued adoption of Title Express (well over 1M titles annually), and growth in non‑insurance channels (Blue Car +27% YoY) .
• Estimate context: S&P Global consensus data was unavailable at time of drafting. Third‑party previews indicated EPS consensus ~$0.37 and revenue ~$1.13B; actuals of $0.40 and $1.16B imply an EPS beat and revenue above those figures; interpret with caution given source differences .

What Went Well and What Went Wrong

• What Went Well

  • Insurance trends: “For the fourth quarter in the United States, total loss frequency hit 23.8%, an all‑time high… the full year trend of 22.2% represents an all‑time annual high,” underpinning volume and per‑unit economics .
  • Title Express scaling and stickiness: “We are processing well over 1 million titles per year via our Title Express platform, no carrier who has started with Copart has taken it back in‑house” .
  • Non‑insurance growth: Blue Car +27% YoY; international fee units +11%; service revenue +15% globally; purchased vehicle gross profit up 110% globally on mix/contract shifts (Germany/U.K. to consignment and stronger consumer purchase margins) .

• What Went Wrong

  • CAT costs: $27M of incremental hurricane‑related expenses in the quarter; ~>$5M remains capitalized to be expensed as remaining CAT units sell, elevating facility cost per unit ex‑CAT by ~12% YoY in the U.S. .
  • Dealer Services volatility: CDS down ~5% YoY with overall wholesale market softness and choppy month‑to‑month compares, tempering dealer channel growth .
  • Macro/currency/tariff sensitivities: Management views tariffs/currency as net neutral to modestly positive but with offsetting forces that could affect ASPs and unit flows; USD strength can weigh on export demand (offset by diversified buyer base) .

Financial Results

Quarterly summary vs prior periods and consensus (all $USD):

Estimate comparison (non‑S&P sources; S&P Global unavailable):

• Consensus EPS ($): 0.37 (preview) vs Actual 0.40 → beat .
• Consensus Revenue ($B): 1.13 (preview) vs Actual 1.16 → above preview . Note: S&P Global consensus was unavailable due to API limits at drafting time.

Segment mix:

KPIs and operating drivers:

Guidance Changes

Copart did not provide quantitative forward guidance (revenue, margins, OpEx, OI&E, tax rate, segment metrics, dividends) for Q2 FY2025.

(Management discussed drivers and positioning but provided no formal ranges in the release or call) .

Earnings Call Themes & Trends

Management Commentary

• “Our insurance carriers… are entrusting us with more of the workflow… now that we are processing well over 1 million titles per year via our Title Express platform, no carrier who has started with Copart has taken it back in‑house.” — CEO Jeff Liaw .
• “For the fourth quarter in the United States, total loss frequency hit 23.8%, an all‑time high… the full year trend of 22.2% represents an all‑time annual high.” — CEO Jeff Liaw .
• “During the quarter, we recognized $27 million of incremental costs associated with the Hurricanes Helene and Milton… There remains over $5 million in costs… currently capitalized.” — CFO Leah Stearns .
• “Global purchased vehicle gross profit increased 110%… [from] Germany… transitioned from a purchase contract to a consignment model as well as stronger purchase unit margins in the U.K.” — CFO Leah Stearns .
• On tariffs/currency: net effect likely neutral to modestly positive; USD strength can suppress export ASPs but diversified global buyer base offsets — CEO Jeff Liaw .

Q&A Highlights

• Process friction and solutions: Earlier “first notice of loss” and AI‑enabled assessment reduce cycle time and costs; Title Express at scale handles lender fragmentation and expedites salvage titles, improving returns and storage utilization .
• Purchased vehicle margin drivers: Mix/contract shifts (Germany, U.K. moving to consignment) and better consumer purchase margins; view “purchase” models as transitional toward consignment over time .
• Channel dynamics: CDS volatility tied to wholesale softness; NPA strength; continued pruning of low‑value units to prioritize higher margin per unit .
• Macro sensitivities: Tariffs neutral–modestly positive; currency more “short the dollar” but diversified demand mitigates; uninsured motorist trends can be a modest offset but historically small .

Estimates Context

• S&P Global consensus unavailable at drafting due to data limits (EPS/Revenue consensus for Q2 FY2025). Where helpful, we cite third‑party previews:
  • EPS consensus ~$0.37 vs actual $0.40 (beat) .
  • Revenue consensus ~$1.13B vs actual $1.16B (above preview) .
• Where estimates may adjust: Given stronger‑than‑preview EPS, continued service revenue growth (+15%) and unit growth (+8%), models may lift per‑unit fee revenue, interest income run‑rate, and U.S. gross margin assumptions; CAT cost roll‑off and G&A trajectory remain watch points .

Key Takeaways for Investors

• Insurance tailwinds endure: Record total‑loss frequency and expanding insurer workflows (Title Express) continue to support core volume and per‑unit economics .
• Mix is improving: Shift from purchase to consignment in Germany/U.K. and pruning low‑value units are lifting purchased vehicle margins and overall profitability quality .
• CAT cost digestion is transient: $27M expensed this quarter with >$5M remaining; underlying U.S. facility cost per unit up ~12% ex‑CAT as investments scale, but gross margin held at 45% .
• Strong balance sheet optionality: >$5B liquidity and rising interest income provide flexibility to keep investing in land, tech, and people while supporting cash returns if pursued .
• International steady, buyer network diversified: Modest ASP headwinds from USD/currency offset by broad global buyer base; international insurance ASPs +3% .
• Near‑term trading setup: Positive narrative (EPS outperformance vs previews, resilient margins, strong unit growth) vs. known offsets (CDS volatility, CAT costs) should keep focus on per‑unit revenue, Title Express penetration, and gross margin sustainability .
• Medium‑term thesis: Secular drivers (vehicle complexity, labor/parts inflation) favor total losses; Copart’s platform scale, real estate, and AI tools deepen moat across insurance and non‑insurance channels .

Supporting Data (source documents)

• Q2 FY2025 8‑K and Exhibit 99.1: revenue $1.163B, EPS $0.40, gross profit $525.6M, operating income $426.2M, net income $387.4M; balance sheet and cash flow details .
• Q2 call: unit growth, ASP changes, CAT costs, gross margin math, U.S./Intl splits, tax rate, liquidity; Title Express scale; tariff/currency commentary .
• Prior quarters for trend analysis: Q1 FY2025 (revenue $1.147B; EPS $0.37; gross margin 44.7%) ; Q4 FY2024 (revenue $1.069B; EPS $0.33; gross margin 42.4%) .