Exchange: NASDAQ | Sector: Consumer Cyclical | Industry: Auto Dealerships
Q2 2025
Published: Feb 26, 2025
Earnings Highlights
Revenue of $1.16B up 14% year-over-year
EPS of $0.40 increased by 17.7% from previous year
Gross margin of 45.2%
Net income of 387.40M
"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." - Jeff Liaw
Copart reported a resilient QQ2 2025 performance with revenue of $1.163B, up 14% year over year, driven by an 8% increase in insurance volume and continued strength in non-insurance seller activity. The quarter benefited from the expansion of Title Express (processing >1 million titles annually) and ongoing investment in technology, capacity, and people to sustain growth. Gross margin stood at ~45.2%, with GAAP operating income of $426.2M and net income of $387.4M ($0.40 per share). Cash flow remained robust, delivering nearly $178.1M of operating cash flow and free cash flow of $61.5M, while the balance sheet remains extremely liquid with more than $3.3B in cash and cash equivalents and net debt of about -$3.22B, underscoring substantial financial flexibility. Management stressed the strategic importance of insurance, Title Express, international expansion, and Purple Wave as growth vectors, while acknowledging macro and policy risk factors such as total loss frequency dynamics, tariff considerations, and currency effects. The absence of formal numerical guidance was noted, but management signaled confidence in continued revenue growth and margin stability supported by scale, network effects, and ongoing capital investments. For investors, the key takeaway is a high-quality cash-generating platform with multiple growth rails and substantial liquidity, offset by macro uncertainties and competitive dynamics in the remarketing market.
- Revenue: $1.163B, +14.0% YoY, +1.4% QoQ.
- Gross Profit: $525.6M, gross margin 45.2%.
- Operating Income: $426.2M, operating margin 36.6%.
- Net Income: $387.4M, net margin 33.3%.
- EPS: $0.40 (diluted $0.40).
- EBITDA: $480.5M, EBITDA margin ~41.0%.
- Cash Flow: Net cash from operating activities $178.1M; Free cash flow $61.5M.
- Liquidity: Cash and cash equivalents $3.339B; total cash and short-term investments $3.798B; total liquidity >$5.0B.
- Balance sheet: Total assets $9.19B; total liabilities $0.863B; total stockholdersā equity $8.301B.
- Leverage: net debt negative ~$3.22B (net cash).
- Key operational metrics: current ratio 7.89x, days sales outstanding 68.3 days, days inventory outstanding 8.3 days, cash conversion cycle -2.7 days.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.16B
14.03%
1.44%
Gross Profit
525.55M
14.23%
2.63%
Operating Income
426.21M
12.19%
4.88%
Net Income
387.40M
18.97%
6.99%
EPS
0.40
17.65%
5.26%
Key Financial Ratios
currentRatio
7.89
grossProfitMargin
45.2%
operatingProfitMargin
36.6%
netProfitMargin
33.3%
returnOnAssets
4.22%
returnOnEquity
4.67%
debtEquityRatio
0.01
operatingCashFlowPerShare
$0.19
freeCashFlowPerShare
$0.06
priceToBookRatio
6.73
priceEarningsRatio
36.07
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Growth drivers and strategic levers: Jeff Liaw highlighted ongoing expansion of insurance volume, auction liquidity, and the pilots around Title Express; emphasized AI-enabled image recognition and new service offerings to improve total-loss turnaround.
- Title Express traction: Management noted processing well over 1 million titles per year via Title Express and stated that no carrier that started with Copart has taken Title Express work back in-house, underscoring stickiness and potential for recurring ancillary revenue.
- Insurance and total-loss dynamics: Insurance volume grew 8% YoY in the quarter; total loss frequency in the U.S. reached an all-time high (23.8% in Q4 domestic), with full-year trend around 22.2%, supporting Copartās total-loss monetization model through faster, larger-scale liquidation.
- Tariffs and macro considerations: Jeff acknowledged tariff implications as largely neutral to modestly positive for Copart, given cross-border dynamics and the nature of vehicles Copart auctioneers for buyers internationally.
- Purple Wave expansion and cross-market network effects: Leah Stearns described Purple Waveās 8% GTV growth YoY and the two-pronged expansion approach (denser existing markets and targeted new markets) to capitalize on heavy equipment liquidity; cross-pollination with Copartās core buyer base was highlighted as a strategic benefit.
- International mix and margin dynamics: International service revenue rose ~17% YoY; international gross margin around 33% while U.S. margins remained near 48%; transition of certain German insured vehicles to consignment models and UK seller contracts to consignment contributed to higher margins in some international purchase markets.
- Capital allocation and liquidity: Management emphasized strong liquidity (over $5B total) and minimal leverage, with no dividend payout; continued investment in technology, real estate, and people to sustain growth.
- Operational efficiency and cost discipline: Per-unit facility costs rose due to capacity expansion and hurricane-related expenses; excluding hurricane-related costs, per-unit facility costs were up ~12% YoY, indicating ongoing investment in capacity while maintaining margin discipline.
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.
ā Jeff Liaw
We believe tariffs would have a likely neutral to modestly positive effect on our business.
ā Jeff Liaw
Forward Guidance
Copart did not provide formal forward-looking guidance for QQ3/Q3 and the full-year 2025 in the press materials. Nevertheless, management articulated a constructive multi-year growth framework anchored in: (1) Insurance volume growth and expanded claims-service offerings (e.g., Title Express), (2) continued expansion of non-insurance seller volumes via auction liquidity flywheel, (3) international expansion with margin improvement through consignment arrangements and price-realization in higher-margin markets (Germany UK), (4) Purple Wave scaling in the heavy equipment segment with potential cross-selling opportunities across Copartās dealer and insurance clients. Our qualitative assessment is that margins should remain resilient given the mix shift toward higher-margin international consignments and continued efficiency gains from scale. Risks to the outlook include: (a) sustained elevated total-loss frequency or changes in insurance pricing dynamics, (b) tariff regimes or retaliatory measures that could affect global vehicle flows and prices, (c) currency volatility impacting cross-border demand, and (d) regulatory or cultural inertia, particularly in the German market where consignment adoption remains in flux. Key indicators to monitor will include: quarterly Title Express title throughput, insurance volume growth, international ASPs and gross margins, Purple Wave GTV growth and cross-market utilization, and the evolution of per-unit facility costs as capacity is scaled.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CPRT Focus
45.18%
36.60%
4.67%
36.07%
AN
17.90%
4.24%
5.96%
12.56%
ANSS
87.30%
28.60%
2.33%
53.92%
CDW
21.80%
8.00%
12.90%
26.14%
CTAS
49.80%
23.10%
10.40%
51.79%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Copartās QQ2 2025 results reflect a high-quality, cash-generative business with multiple growth engines. The company combines a strong operational backbone (gross margins near 45%, healthy operating margins, and substantial free cash flow) with strategic levers that could sustain growth beyond the core auto remarketing business. Title Express has crossed a meaningful throughput milestone (>1 million titles/year) and appears to be a durable, stickier value-add for insurers, which could widen Copartās total addressable market. Purple Wave adds another growth vector in the heavy equipment space, with 8% GTV growth and a scalable, service-oriented model driven by people and systems rather than heavy capital expenditure. International operations are delivering margin improvements through consignment and favorable UK/Germany dynamics, though adoption remains contingent on regulatory and cultural factors. The balance sheet is exceptionally strong, with net cash and substantial liquidity, enabling continued investments in technology, capacity expansion, and potential strategic acquisitions or buybacks if desired. Investors should monitor: (1) total-loss frequency and insurance pricing trends, (2) Title Express adoption rates and carriersā willingness to expand, (3) Purple Waveās execution in new markets and cross-selling opportunities, (4) international consignmentsā margin trajectory, and (5) tariff/currency developments that could impact cross-border activity. Bottom line: Copart is well-positioned to monetize its platform advantages through growing volumes, higher-margin services, and a cash-rich balance sheet, justifying a favorable long-term outlook while remaining cognizant of macro and regulatory risks.
Key Investment Factors
Growth Potential
- Title Express scale could accelerate insurance workflow efficiency and title procurement, increasing carriersā reliance on Copart for total-loss processing.
- Non-insurance seller flywheel: expanding liquidity and reach beyond insurance channels could broaden addressable TAM for Copart.
- Purple Wave: geographic densification and new market entries could unlock material incremental GTV and cross-selling with Copartās core buyers.
- International consignments: higher-margin UK and German markets, with consignment arrangements potentially widening gross margin and faster inventory turnover as claims workflows align with insurer objectives.
Profitability Risk
- Macro volatility around total-loss frequency and used-vehicle pricing pressures from tariffs or regulatory shifts.
- Currency exposure in cross-border volumes remains an amortized risk; although Copart benefits from geographic diversification, significant USD strength/weakness could affect international demand and ASPs.
- Germany regulatory/cultural transition to consignment and insurer-driven models may take longer than anticipated, affecting near-term margin and volume mix.
- Competition in the auto remarketing ecosystem from other platforms and potential consolidation could pressure share gains in certain regions.
Financial Position
- Extremely strong liquidity profile with cash and short-term investments of ~$3.8B and total liquidity >$5B, providing substantial optionality for capex, acquisitions, or buybacks if pursued.
- Minimal leverage with total debt ~$119M and net cash ~$3.22B, supporting financial flexibility to weather macro shocks.
- Very high gross margins (~45%) and solid operating margin (~36.6%), supported by scale, technology investments, and a favorable mix toward higher-margin services and international consignments.
- Robust free cash flow generation ($61.5M in QQ2 2025) relative to modest capital expenditures, suggesting potential for continued deleveraging opportunities or opportunistic investments.
SWOT Analysis
Strengths
Industry-leading online vehicle remarketing platform with scale across the U.S., Canada, UK, and international markets.
Strong gross margins (~45%) and robust cash generation with net cash position.
Diversified growth vectors: Title Express for insurers, non-insurance seller flywheel, Purple Wave expansion, and international consignments.
Very strong liquidity and minimal leverage enabling strategic flexibility.
High liquidity of inventory and favorable working capital dynamics (negative CCC).
Weaknesses
High degree of exposure to macro insurance cycles and total-loss frequency variability.
Regulatory and cultural friction in international markets (e.g., Germany) could delay margin expansion.
Limited dividend policy (no cash return to shareholders currently) despite strong cash position.
Exportability of assets and cross-border liquidity could be constrained by tariff/regulatory developments.
Opportunities
Scale Title Express adoption to further streamline insurer workflows and expand title procurement revenue.
Accelerate Purple Wave penetration into adjacent markets and cross-sell to Copartās buyer base.
Leverage consignments in international markets (Germany/UK) to improve margins and inventory turnover.
Capitalize on strong liquidity to fund expansion, technology investments, and potential selective acquisitions if strategic.
Benefit from ongoing growth in insurance volumes and non-insurance seller participation as auction liquidity remains high.
Threats
Tariffs and trade policies that could impact vehicle pricing and cross-border demand.
Macro volatility affecting total-loss frequency and used-vehicle values.
Currency fluctuations impacting international revenue and margins.
Competition and regulatory changes in key markets (e.g., Germany) potentially slowing growth.