Copart (NASDAQ:CPRT), which provides online auction services for car sellers as well as marketing services, saw revenue, net income, and earnings per share (EPS) spike double-digit percentages in the fiscal second quarter 2017.
Copart results: The raw numbers
|Metric||Q2 2017||Q2 2016||Year-Over-Year Change|
|Sales||$349.5 million||$299.7 million||16.6%|
|Net income||$66.1 million||$59 million||12%|
|Earnings per share||$0.56||$0.47||19.1%|
What happened with Copart this quarter?
The company said that it built out inventory in the quarter, while also seeing strong sales volume growth:
- Gross margin hit $146.8 million, an increase of 17.8% year over year.
- North American sales volume increased 18.4% year over year, and revenue in the region was up 20.5%.
- Unit sales volume in the U.K. grew by 15.4% compared to the year-ago quarter, and revenue from the region jumped by 15.5% year over year.
- Scrap prices increased by just under 40% year over year (Copart sells some salvaged vehicles, which are sold partially based on their scrap value).
- Overall, global revenue grew by 16.6% in the fiscal second quarter 2017.
- Copart brought in more inventory than it sold, which is typical for the company's second quarter.
- Average selling price (ASP) ticked up slightly, partly due to an increase in scrap prices.
- Earnings before interest and taxes (EBIT) grew just over 18% year over year to $108.9 million, up from $92.1 million in the year-ago quarter.
- Capital expenditures came in at $54 million for the quarter, 80% of which went to land development and lease buyouts.
What management had to say
Copart CFO Jeff Liaw kicked off the earnings call with a reminder to investors on what they should be focusing on with the company: "For the cleanest look at the business, we continue to encourage you to focus on revenue, gross profits, and operating income measures."
And those are all doing quite well. Revenue was up 16.6% year over year, gross profits jumped by 17.8%, and operating income popped 18.2% in the second quarter. Most of the good news came from the company's global unit sales growth of 18% in the second quarter, which management said was "consistent across the United States and [sic] as well as our international segment."
One negative note Copart's management mentioned came from currency exchange headwinds. "We did experience a detrimental year-over-year currency effect on revenue of approximately $9.5 million," Liaw said. He noted that this came from the weak British pound relative to the dollar, which was down 17% year over year.
Copart typically doesn't provide guidance for the coming quarter, and it didn't budge on that this quarter. However, management did say that the second quarter is traditionally one in which the company builds up inventory, and accrues additional costs as a result. Liaw mentioned that in the second quarter Copart received more units than it could sell and that "we have borne a substantial portion of the costs already for which the units will be sold later," which could help improve gross margin later this year.