Company. Copart: Building a Deep Moat Business from Junkyards and Wrecked Cars

Sep 5, 2023

Willis Johnson, Founder of Copart, went from being a liquidator to a critical service provider for insurance companies. Topics covered include Copart's early business career, industry dynamics, Copart becoming a salvage marketplace auction leader, cultural factors distinguishing great companies, Copart vs IAA competition, Copart's revenue streams and capital allocation strategy, analyzing return on invested capital and land ownership, international expansion opportunities, growth opportunities and pathways for Copart, and potential risks and challenges for the future.

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Introduction

00:00 • 2min

The Founding of Copart

01:58 • 6min

Maximizing Use of Lots and Creating Adjacent Businesses

08:26 • 22min

Reacting to Hurricane Katrina and Building Goodwill

30:38 • 20min

IAA vs. Copart: History, Strategies, and Challenges

50:09 • 16min

Competition, Customer Service, and Market Share

01:06:22 • 18min

Analyzing Copart's Revenue Streams and Capital Allocation Strategy

01:24:36 • 6min

Analyzing Return on Invested Capital and Land Ownership

01:30:57 • 2min

International Expansion and Growth Opportunities

01:33:00 • 18min

Analyzing Growth Opportunities and Pathways for a Business

01:51:15 • 2min

Analyzing the Risks and Challenges for CoPart in the Future

01:53:08 • 4min

In this podcast on Copart, Speedwell Research covers everything from Founder Willis Johnson’s early business career to the industry dynamics, and how Copart became the global, salvage marketplace auction leader. Investors can learn a lot from Willis Johnson’s early business intuition and movement from the lowest wrung of the salvage vehicle value chain as a liquidator to ultimately a critical service provider for insurance companies. We draw on Speedwell’s 85 page report, released in May 2023, to teach not just about Copart’s business, strategy, and formidable competitive advantages, but also to parse out cultural factors that distinguish truly great companies. We hope you enjoy!

(Please note that about 1/3rd into the podcast, the sound quality periodically declines. It then improves towards the last 1/3rd of the podcast. We apologize for this and have identified the issue for future recordings.)

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Show Notes

(0:00) Intro

(2:19) Willis Johnson Background History and Early Career

(9:19) BTS Auctions: The Beginnings of Copart

(14:12) Changing the Business Model to Align Incentives

(17:57) How Jay Adair was Introduced to Copart

(18:40) Copart’s Early Expansion

(24:09) Experimenting with Internet Auctions in the 90’s

(29:43) CAT Events and Copart's Ethics

(38:33) Industry Overview

(50:23) IAA History, IPO, Private Buyout, Merging with KAR, Spin-off, and Ritchie Bros Acquisition

(1:07:26) Copart vs IAA, Competitive and Cultural Differences, Market Share

(1:24:06) Financials

(1:27:12) Capital Allocation, Growth Assumptions

(1:30:58) ROIC and variations compared to IAA

(1:34:00) International, Details on How the German Market is Different, Barriers to International Growth

(1:45:27) Other Business Initiatives

(1:51:22) Growth Expectations and the Reverse DCF

(1:53:40) Risks, Autonomous Vehicles

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Purchase Speedwell's full ~22,000 word CPRT report here: https://speedwellresearch.com/2023/05/22/copart-deep-dive/

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Email us at info@speedwellresearch.com for any questions, comments, or feedback

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Disclaimer

Nothing in this podcast is investment advice nor should be construed as such. At the time of publishing, one or more contributors to the podcast had a position in CPRT. Furthermore, accounts one or more contributors advise on may also have a position in CPRT. This may change without notice. Please see our full disclaimers here: https://speedwellresearch.com/disclaimer/