Copart Q4 saw overall growth but a final contraction

Copart (CPRT -6.67%)the global leader in online vehicle auctions, on Wednesday reported mixed revenue for the fourth quarter and full fiscal year 2024. Q4 revenue of $1.07 billion was up 7.2% year-over-year. But earnings per share of $0.33 fell compared to Q4 2023.

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

Source: Copart. YOY = Year Over Year.

Copart Business Overview

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

Milestones for fiscal year 2024

For the fiscal year ending July 31, 2024, Copart reported a 9.5% increase in revenue to $4.2 billion. Gross profit rose 9.8% to $1.9 billion, indicating stable margins over the year. Net income rose 10.1% to $1.4 billion, demonstrating a strong year-over-year 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 has remained a cornerstone of Copart’s strategy. The company has further invested in its VB3 auction platform, leveraging artificial intelligence (AI) and machine learning to improve bidder experiences and operational efficiency. Copart’s service offerings also expanded, particularly in the non-insurance sectors, with Blue Car business volume and dealer sales volume growing 23% and 18%, respectively. These developments underscore Copart’s diversification strengths and its ability to attract a wider range of customers.

Operating expenses were a notable concern in the fourth quarter. Site operating costs increased by 16.9% year-on-year due to expansion activities and inflation. General and administrative expenses rose 46.6% to $81.4 million, adding pressure to total expenses. These rising costs have hurt profitability figures, despite the increase in revenue.

Net income in Q4 fell 7.3% year-over-year, but was still up 10% for the full year. to $323 million from the previous year. Q4 operating income fell 8%, highlighting difficulties in cost management. Operating income increased by 5.7% per year.

Outlook

Looking ahead, Copart management said it aims to continue global expansion and technological advancement. While no specific earnings guidance was provided, management highlighted continued investment in AI-based auction platforms and expanding its global footprint. This strategy signals the potential for continued revenue growth, but may put pressure on short-term profitability due to high investment costs.

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