Thread by @borrowed_ideas

1/8 Thread: $CPRT FY 2Q'21 Earnings Call Notes

I wrote a deep dive on Copart this month. I love the company and management (you'll see why in these notes), but less of a fan of the industry and valuation.

Here are my notes.

2/8 For the second consecutive quarter, volume is down 13%, but offset by ASPs which is up by +35%, significantly outpacing overall industry.

Dealer business +10% when overall industry was down

3/8 Revenue +7.3%
Gross margin +49.8%, up 160 bps
Operating margin improved by ~500 bps
Capex for the quarter $136.1 Mn, 85% of which is growth capex

4/8 SS is throwing some softball:

"please talk about innovation"
Copart: nah, dawg, we are good.

5/8 Although ~40% of units are bought by international buyers, 90% of the units are affected by international buyers as they bid on many more cars than they buy.

6/8 Copart continues to think total loss frequency, which increased 5x in last 40 years, is the most important and secular driver for the demand.

Even >40% total loss frequency is in the realms of possibility at some point (not sure whether I believe that).

7/8 Good questions by JPM analyst Ryan Brinkman.

If Copart can become a major player in the whole car auction, things can become more interesting than it is now.

Copart has pretty great management at the helm with lots of skin in the game, so hard to rule them out.

8/8 Here's my deep dive on $CPRT (paywall):

mbi-deepdives.com/cprt/