Two of the largest salvage auction companies are in different stages of their journeys as publicly traded companies. One on its way toward a first anniversary; the other breaking out silver to celebrate.
For IAA, it’s taking its first steps being public after completing the spin-off from KAR Auction Services earlier this calendar year. For Copart, it’s now been 25 years as a public company.
Despite the significant differences in time as having shareholders and reporting quarterly performances, the top executives at both IAA and Copart speak about their operations in glowing terms about recent performance and what’s ahead.
Copart chief executive officer Jay Adair began a conference call when the company shared results of its last fiscal year about what it was like to become public back in 1994.
“I’m very excited about what has happened in the last 25 years. How could I not be? For a kid that went to New York City for the first time and looked up, I couldn’t believe it. I just could not believe, couldn’t believe what I saw. It was that incredible,” Adair said. “I have never been emotional, but it was a really, really incredible experience and to be sitting here today and looking at the company, this has gone from just over $20 million a year in revenue to a company that has broke to $2 billion revenue number, it’s impressive.
“We have over 7,000 people that make up Copart,” he continued. “They were led by the best people in the world at what they do. The team that we have built over the last 25 years are amazing. That’s why we’ve seen the kind of results we’ve seen. In all my years I’ve never seen Copart be in a better position, in a better opportunity to seize the future. I’m enormously excited about what we’re going to do for the next 10 years.”
Meanwhile, the amount of time as a public company might be considerably shorter, IAA CEO and president John Kett displayed considerable enthusiasm, too, which the company revealed its first quarterly results to shareholders in August.
“You know it took a lot of hard work to get us to this important milestone for IAA as we successfully spun off from KAR Auctions Services in June. I want to thank all of our team members for their hard work and dedication to get us to this point,” Kett said during his company’s call.
“We feel really good about the future for IAA and we have a lot of great opportunities in front of us,” he continued. “We have grown to be a leader in our industry and as a standalone public company. We are now able to benefit from an enhanced strategic focus and a streamlined operating structure.
“With a significant addressable market for our services and strong industry tailwinds that have driven an increasing percentage of claims to be declared a total loss. We believe the resulting favorable industry backdrop combined with our strategic growth initiatives, position us well to grow our business and drive shareholder value,” Kett went on to say.
Copart completed its most recent fiscal year on July 31.
In this closing quarter, Copart reported revenue, gross profit, and net income came in at $542.6 million, $242.6 million and $153.5 million, respectively. These figures represent an increase in revenue of $93.4 million, or 20.8%; an increase in gross profit of $54.2 million, or 28.8%; and an increase in net income of $43.7 million, or 39.9%, respectively, compared to the period last year.
For its 2019 fiscal year, Copart indicated revenue, gross profit, and net income were $2.0 billion, $898.3 million and $591.7 million, respectively. These amounts represent an increase in revenue of $236.3 million, or 13.1%; an increase in gross profit of $136.0 million, or 17.8%; and an increase in net income of $173.8 million, or 41.6%, respectively, from a year ago.
Copart executives reiterated why its 2018 fiscal year was a challenging one. Their operating results were adversely affected by abnormal costs of $79.7 million incurred as a result of Hurricane Harvey. Those costs included
— Temporary storage facilities
— Abnormally high costs for subhaulers
— Increased labor costs due to overtime
— Travel and lodging due to the reassignment of employees to the affected region
— Equipment lease expenses to handle the increased volume, as well as cost of vehicle sales
IAA’s first quarterly financial statement to shareholders included metrics from the second quarter.
IAA reported that its consolidated revenues increased 10.0% to $366.4 million from $333.2 million in the second quarter of 2018, primarily due to increased volumes of approximately 6% and higher revenue per vehicle of approximately 4%.
Its U.S. revenues increased 6.8% to $320.5 million from $300.1 million in the prior-year period. International revenues increased 38.8% to $45.9 million from $33.1 million in the prior-year period.
The increase in international revenues was primarily due to a higher mix of purchased vehicles as well as an increase in volume and revenue per unit.
The company went on to share that its gross profit, which IAA defines as total consolidated revenues minus cost of services, and exclusive of depreciation and amortization, increased by 5.0% to $138.7 million from $132.1 million a year earlier. Executive said the increase in gross profit was primarily due to the increase in revenues, which was partially offset by an increase in its cost of services. The increase in cost of services was primarily due to a higher mix of purchased vehicles in its international business as well as an increase in occupancy costs, which resulted in a gross margin decline of 180 basis points to 37.9% in the second quarter of this year.
“This quarter marked a significant milestone in IAA’s history as we successfully executed our spin-off from KAR Auction Services to become an independent public company. I want to thank the management teams and employees at both KAR and IAA for all of their hard work and dedication over the past number of months that enabled this outcome,” Kett said in a news release.
“We generated strong top and bottom-line results for the second quarter, which demonstrates the strength of our business model. We are making good progress in our transition to a stand-alone public company,” Kett said.
“As we look ahead to the remainder of this year and beyond, we are committed to executing the strategic growth initiatives we have laid out. We expect to deliver results for fiscal 2019 in line with the outlook we previously provided,” he said.
Copart promotes Liaw to president
In other company news, Copart also announced at the time of its quarterly financial statement that Jeff Liaw had been promoted to the position of president, effective Sept. 3. Liaw will report directly to Adair.
Prior to his elevation to president, Liaw served as Copart’s senior vice president and chief financial officer, a position he has held since Jan. 4, 2016.
Liaw will continue to serve as Copart’s chief financial officer until a successor is named, according to the company.
Prior to joining Copart, Liaw served as the CFO of FleetPride, a privately held company that distributes truck and trailer parts nationwide. Prior to joining FleetPride in 2013, Liaw was a principal of TPG Capital Management, a private equity firm.
As part of the executive management team reorganization, the company also announced Copart executive vice president Will Franklin will transition away from his executive officer role and will assume the role of senior advisor to the chief executive officer. In this new role, Franklin will remain actively involved with the company, advising the CEO on a wide range of areas including expansion initiatives, business development, and other matters.