A conference call to discuss Copart's recently released third-quarter results revealed increases in both earnings and vehicle volume.

For the three months ended April 30, revenue, gross margin and net income were $347.2 million, $157.6 million, and $74.0 million, respectively. These represent an increase in revenue of $50.1 million, or 16.9 percent; an increase in gross margin of $30.2 million, or 23.7 percent; and an increase in net income of $16.5 million, or 28.6 percent, respectively. All measures are comparisons from the same quarter of last year.

Fully diluted earnings per share for the three months were $0.64 compared to $0.44 last year, an increase of 45.5 percent.

During the call, chief financial officer Jeffrey Liaw noted that volume increases were seen across almost all major insurance carriers, attributable to increased accident rates, heightened driving activity and elevated repair rates.

Liaw touched on the effect of scrap metal prices on ASP, noting “a recent stabilization” of scrap trends, which he said had declined in the past year.

“We are still down year-over-year for the third quarter in comparison to 2015, approximately 9 percent for scrap rates for crushed car bodies, according to American Recycler. But we are still up sequentially, almost 14 percent growth for the second quarter alone,” he said.

William Franklin, executive vice president, offered some insights into volume growth in the North American salvage market — which is up 16.4 percent.

“Accident frequency was up, driven by lower fuel prices and higher unemployment trends, which is leading to increases to miles driven and average speed of travel and consequently to more frequent and more severe accidents. And we believe this trend will continue,” he said.

“At the same time, we are also seeing growth in salvage frequency,” or the rate at which cars involved in accidents are deemed an economic loss in total  as opposed to viable for repair.

He suggested some possible reasons for this. First, he said, is higher repair costs, driven by industry consolidation and increasing complexity of vehicles that makes them more expensive to repair.

Second, he said, is an increase in average age of the car park, which reached 11.5 years last year and is expected to grow. “As cars age, their value declines, making it less likely they’ll be repaired.”

Franklin also referenced volume growth of 11.1 percent in the U.K. due to increases in market size and market share.

In addition, he said, U.K. volume from non-insurance sellers grew by 23 percent as dealer and direct-purchase programs grew in volume and profitability. Likewise in the U.S., Copart saw a 10.4-percent growth in volume from its non-insurance suppliers, led by increases in charity and donation cars as well as cars from dealers and brokers.

Franklin reiterated the company’s plan announced last quarter to accommodate volume growth through the opening of 15 yards within a year. During the current quarter, he said, Copart acquired five new yards, two of which were placed in service.

Responding to a question from a conference call listener, Liaw said that inventory for the quarter grew at about 20.7 percent year-over-year. He reminded that’s a global number representing physical assets.

“If you isolate the effect of weather events that we experienced in Texas, excluding the growth from that alone we still observe inventory growth of approximately 18 percent year-over-year,” he said.

Commitment to community

While strong numbers are a good thing, Auto Remarketing wanted to know a little more about the Copart’s work outside of work, as it were. We caught up with chief executive officer Jay Adair to talk more about the company’s “Copart in Your Community” initiative.

The effort is focused on four areas: Law enforcement aid, disaster relief, economic growth and environmental responsibility.

“We are tilted, if you will, toward law enforcement, fire departments and the military,” Adair said.

For example, the company last year partnered with the Brighton Fire Department outside of Denver by providing vehicles from Allstate Insurance for training of FD employees. The vehicles were brought to the training location, where they were staged in various accident scenarios over a couple of days.

Copart has done this with several departments over the last couple of years, Adair said.

“Brighton is just one example. We’ve very keen on working with local fire departments and police departments to allow them to do training exercises in our locations. I wouldn’t say that’s an outlier,” Adair said. “That’s the norm. I can’t think of a city we’re in where the police and fire aren’t partners with us.

“They take advantage of using our facilities and we’re happy to be able to do that. Police departments love to come in with police dogs and do exercises where they have to try and find somebody in the yard.”

That community service mindset is something Copart likes to instill in its employees, Adair said.

“We encourage charitable involvement,” said Adair, who sits on the board of a local hospital and chamber of commerce. “Our people are involved locally and at the corporate office in everything from their local church to preventative cancer runs — even including dog rescues. We have a lot of pet lovers in the company. We’re really across the board. We encourage our folks to be active.

“When they want to do something, like a 5K for cancer prevention, folks like me and the rest of the team will get involved in and attend those kinds of events. It’s not just putting your dollars up; you’ve got to be physically involved, personally involved.”