Lessons in Management and Capital Intensity from Copart

This is Matt Reustle and today we are breaking down the vehicle auction giant, Copart. You may be unfamiliar with Copart but, at the time of this recording, the company has a $40 billion market cap. They operate in over 200 locations across the globe and they sell north of 3 million cars per year on behalf of their unique customer base.

Copart is a unique story in a very concentrated industry where they likely have 50% market share. It's a story defined by evolution. Its founder, Willis Johnson, didn't merely adopt a junkyard mentality. He was born into it, molded by it. To break down Copart, I'm joined by Adam Mead, CEO and Chief Investment Officer of Mead Capital Management. We cover all the angles of this unique industry giant. Please enjoy this breakdown of Copart.

Access Adam's Copart writeup for free here. Choose the October 2022 Copart issue and use the code "Breakdowns" for 100% off. 

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. 

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Show Notes

(00:02:32) - (First question) - An overview of Copart

(00:04:16) - The size and scope of the market 

(00:04:52) - The process of a vehicle entering into Copart’s system 

(00:06:36) - The other side of the marketplace, who buys from Copart

(00:08:16) - Selling cars whole or dismantling and how this has changed from the early days of the business

(00:09:55) - An overview of Willis Johnson’s career, forming Copart and his involvement today 

(00:13:26) - The financial structure of the business in the early days

(00:14:59) - Copart’s differences from the competition 

(00:18:42) - Biggest drivers of supply. Accidents, natural disasters, wear and tear  

(00:22:12) - Cashflow flow through, the economics for Copart

(00:24:08) - Associated costs with regards to the sale and movement of vehicles 

(00:26:12) - Average inventory numbers throughout the year

(00:27:32) - The margin profile of the business on a normalized basis

(00:29:29) - A breakdown of the CapEx budget on a yearly basis

(00:33:42) - The major drivers of growth for Copart 

(00:37:16) - The buyback history, stated goal and philosophy on dividends

(00:38:38) - Historical and potential future risks to the business  

(00:42:00) - The insurance companies’ opinion of the business, net positive or net negative

(00:43:37) - The framework investors use when valuing this business

(00:47:17) - Lessons learned from the research and analysis of Copart