Double-Beat, Ex-Cat Units at -3.0% (Third Sequential Improvement), Buyback Accelerated to $1.6B YTD — Maintaining Outperform

Results vs. Consensus

Year-over-Year Trajectory — The Inflection

Nine-Month FY2026 — Operating Leverage Carries the Year

Unit Volume Trajectory — The 430 bps Cumulative Recovery

Quality of Beat

Revenue assessment. The +2.1% reported revenue growth is the first positive top-line print in our backfilled coverage of CPRT. The composition is favorable: ASPs +4.6% globally (U.S. insurance +4.1%, U.S. non-insurance +3.7%, U.S. purchase unit +23%, international insurance +8.4%, international non-insurance +16.7%) more than offset a moderating unit-volume drag (global -2.4%). Service revenue +0.7% looks soft against the headline but understates the underlying — Title Express monetization and per-unit fee growth continue to compound below the consolidated line. The vehicle-sales / principal line grew +10.4%, partly mix-shift on higher-ASP units flowing through and partly Copart Direct restructuring effects. International revenue +14.1% reported / +7.9% ex-FX is the segment's best quarter in our coverage.

Margin assessment. Gross margin of 46.3% (+71 bps YoY) is a smaller expansion than Q1 (+184 bps) or Q2 (+178 bps adj) but the comp is materially cleaner — Q3 FY25 did not have the cat-driven margin distortion that depressed Q1 / Q2 FY25, so the +71 bps reflects "true" underlying expansion against a normal-baseline comp. The drivers remain stackable: U.S. service-mix shift, Germany consignment conversion (international segment GP +21.9%, op margin all-time high of 31.5%), Title Express penetration, cycle-time compression, long-haul delivery launch (~$15M Q3 incremental facility cost generating "nice margin" per Stearns). U.S. GM at 48.3% — sustained near the all-time high. The margin engine is intact and increasingly visible against clean comps.

EPS assessment. $0.43 GAAP (+2.4% YoY) is the cleanest beat in our coverage — operational tailwinds delivering, buyback adding to the per-share number. Net income -1.0% YoY (the only line that didn't grow) is partly a tougher Q3 FY25 comp on net-income basis and partly Q3 FY26 absorbing the higher facility ops cost from the long-haul delivery launch. EPS growth of +2.4% with net income -1.0% implies the share-count benefit contributed roughly +3.4 percentage points to EPS growth — directly from the buyback. The 9M FY26 EPS of $1.20 vs. $1.19 prior is the cleanest tell that operating leverage + buyback combined are doing the work that unit volume is not. The FY26 EPS trajectory points to ~$1.60-1.65 full year (assuming a ~$0.40-0.45 Q4 print) — modest YoY decline of ~3-6% from FY25's $1.59, but consistent with our trough-year framing.

Segment & Geographic Performance

U.S. Segment — Volume Stabilizing, Returns Still Setting Records

U.S. revenue essentially flat at -0.4% (or up modestly ex-Copart Direct restructuring effects). U.S. insurance ASP +4.1% is a seasonally-adjusted all-time high — even as industry-wide vehicle values normalize from the 2021-2022 supply-shock peak, Copart is extracting more value per consigned vehicle than at any point in its history. Non-insurance U.S. ASPs +3.7%, purchase unit ASPs +23% (mix shift to higher-value direct-buy and bank/fleet/repo flow). Dealer Services + powersports +1% (slowing on tough comp; Blue Car commercial consignment +4% (sharp reversal from -11.8% Q2 / -1.2% Q1 — the rental-timing distortion has resolved). U.S. GP +0.9% to $484.1M; GM 48.3%; operating margin 38.1%. Inventory -4.7% (cycle-time compression + Title Express); assignments low-single-digit decline (broadly stable trajectory).

Assessment: U.S. is at the inflection point. Revenue flat-to-slightly-positive ex-restructuring; ASP capture still hitting records; volume drag moderating; per-unit economics at all-time highs. The combination implies the U.S. dollar-of-vehicles-flowing-through-Copart is back to growth even as unit count remains modestly negative. The Q4 FY26 setup is favorable — Q4 FY25 unit comp was negative (-2.1%), so any continued ex-cat unit-trajectory improvement in Q4 FY26 produces both better reported AND ex-cat numbers vs. Q3.

International Segment — All-Time High Operating Margin (31.5%)

International is the segment that re-rates the franchise's growth narrative. Total units +5.9%, insurance +4.6%, non-insurance +11.2% (sustained from Q2's +9.1%). Inventory +10% YoY (forward-positive); assignments in the low-teens growth (very forward-positive). Revenue +14.1% reported / +7.9% ex-FX = $234.2M (best quarter in our coverage). Service revenue +17.9%; fee revenue per unit +10.5%. International insurance ASPs +8.4%, non-insurance ASPs +16.7% — both at all-time highs in the segment's history. Gross profit +21.9% on the lapping of the Q2 VAT one-time. International operating income $73.8M; operating margin 31.5% — the all-time high for the segment. Stearns explicitly called out U.K., Germany, and Canada as the geographic drivers; Germany continues "to perform incredibly well on a relative basis to where it was several years ago" with continued progress in the consignment conversion.

Assessment: The international segment is now operating at U.S.-level profitability (31.5% op margin vs. U.S. at 38.1%) with growth rates 4-5x the U.S. segment. Inventory +10% YoY and assignments low-teens growth are both forward-positive — the segment should continue accelerating into Q4 and into FY27. The German consignment conversion has multi-year runway; the U.K. is growing across both insurance and non-insurance; Canada is a quietly strong contributor. Within 2 years, international gross profit will be ~18-20% of company GP (vs. ~14-15% today) and within 3 years, international operating income will be ~17-18% of company OI (vs. ~14% today). The franchise is structurally less U.S.-dependent than the buy-side consensus assumes.

Purple Wave — GTV Growth Accelerates to +25%

Purple Wave GTV +25% TTM, accelerating from +17% Q2 and +10% Q1. The growth is territory-expansion-driven: Purple Wave's territory sales force has expanded from a Central-Time-zone base to coastal coverage. Headcount roughly 2.5-3x post-acquisition. Stearns noted the majority of growth is coming from territory expansion + focused enterprise relationships. The franchise still has runway to full nationwide territorial coverage; the most important U.S. markets are now penetrated.

Assessment: Purple Wave is the cleanest evidence that the franchise can develop and scale adjacencies organically. The +25% GTV growth against an industry growing in the low-single-digits is meaningful share gain. The forward question is when Purple Wave's profitability profile will be disclosed (currently bundled in U.S. segment); at the current TTM growth rate, Purple Wave is approaching ~$200-300M of GTV — meaningful but not yet material to consolidated revenue/profit. By FY28, Purple Wave should be a discrete disclosure line.

Key Topics & Management Commentary

Overall Management Tone. The call's posture was the most confidently constructive of the four-quarter arc — markedly more so than Q2's already-better-than-Q1 tone. Liaw's prepared remarks dedicated significant airtime to crossover-buyer mechanics (the data point that "of the more than 30,000 buyers who first entered the Copart ecosystem by virtue of those non-insurance vehicles, a strong majority would bid on an insurance vehicle within the first 90 days" is a powerful moat-expansion data point we hadn't heard before), the 5-percentage-point TLF expansion over 4 years (23.6% Q1 CY26 vs. ~18.6% 4 years prior, framed as Copart-driven rather than passive), and the geopolitical resilience of the buyer base (160+ countries; Middle East decline offset by Central Europe, West Africa, Central America, Caribbean expansion). Stearns' prepared remarks introduced the buyback acceleration ($1.6B / 43.4M shares) and the domestic long-haul delivery launch ($15M YoY incremental facility cost, "nice margin," "rapid adoption"). Tone characterized by data-rich confidence — this is the call where management is no longer defending the franchise; they are signaling it.

1. The Inflection Confirmed: Ex-Cat U.S. Insurance Units to -3.0%

Three consecutive quarters of sequential improvement in ex-cat U.S. insurance units: Q1 -7.3% → Q2 -4.8% → Q3 -3.0%. Liaw explicitly identified the moderation in U.S. carrier-mix trends as a key driver and reaffirmed the cyclical interpretation of consumer-coverage drift. The CCC data point — 25% of repairs now self-pay, prompting CCC to launch a Buy Now Pay Later product — is the most concrete evidence the franchise has put on the record of the consumer-affordability strain that the rate cycle has produced.

"For the third quarter 2026, our global insurance unit sales declined 2.7% or 1.9%, excluding the effect of catastrophic volume from a year ago. Our U.S. insurance unit volume for the same period declined 4.2% or just over 3%, excluding the effect of those same catastrophic units. We believe the long-term growth algorithm for our insurance business remains very much intact ... A portion of this volume variance reflects shifts in policy in force mix among insurance carriers. And as we indicated previously, these trends tend to have been cyclical historically. And we have observed a moderation in some of these trends among U.S. insurance carriers in recent quarters." — Jeff Liaw, CEO

Assessment: The 430 bps cumulative improvement in ex-cat U.S. insurance units over three quarters is mathematically inconsistent with the structural-decline thesis. A secular driver (e.g., AV penetration causing fewer accidents) would not produce three quarters of sequential improvement; it would produce a step-down to a new floor. The cyclical interpretation — premium pressure → coverage drift → eventual recovery as carriers compete for growth — is now the empirically defensible read. The next data point is Q4 FY26 (Sept 2026); we expect continued improvement to ~-1 to -2% ex-cat, with positive ex-cat U.S. insurance unit growth by Q1-Q2 FY27.

2. TLF +500 bps Over 4 Years — Copart as the Active Driver

U.S. TLF reached 23.6% in CY Q1 2026, an increase of "almost 5 full percentage points over the past 4 years." Liaw's framing on this is unusually proprietary — explicitly characterizing Copart as the active driver of TLF rather than a passive beneficiary.

"Total loss frequency for the first calendar quarter 2026 reached 23.6%, an increase of almost 5 full percentage points over the past 4 years. Although we always report this metric, it sounds like we described it as an industry metric, we are very much not passive beneficiaries of an increase in total loss frequency. We have helped to drive it upwards, and we view it as our ongoing responsibility to drive ever better auction returns, which then increases the attractiveness of the total loss pathway to insurance carriers who are considering various possibilities for resolving their claims." — Jeff Liaw, CEO

Assessment: The "we drive TLF upwards" framing is the most direct articulation of the auction-liquidity-as-moat thesis Liaw has delivered. The mechanism: higher auction returns → lower net total-loss cost to carriers → more vehicles total-lossed at the margin → more inventory to Copart → larger marketplace → higher returns. The flywheel is structural, durable, and self-reinforcing. At the current +75-100 bps annual TLF expansion pace, the metric will reach 27% by 2030 — fully in line with the historical trajectory and bullish for long-cycle volumes.

3. The Buyback Accelerated to $1.6B / 43.4M Shares

The biggest single-quarter capital-return disclosure in our backfilled coverage. Cumulative FY26 YTD buyback of $1.6B / 43.4M shares — a ~3x acceleration from the $500M / 13M shares disclosed at the Q2 call. Implied incremental Q3 buyback: ~$1.1B / ~30M shares at an average price of $36-38 (consistent with the post-Feb-20-capitulation trading range). Cash + HTM declined from $5.1B to $4.2B, reflecting both the deployment and continued FCF generation.

"On the capital return front, we continue to repurchase shares during the third quarter through a combination of 10b5-1 and open market transactions. Fiscal year-to-date, we have repurchased over 43.4 million shares for an aggregate amount of over $1.6 billion, underscoring our confidence in the future growth prospects for Copart and the long-term value of our business." — Leah Stearns, CFO

Assessment: The buyback math is the single most important capital-allocation development in the franchise's recent history. 43.4M shares retired in 9 months = ~4.5% of beginning-of-FY26 shares. Annualized, the structural per-share EPS tailwind from the buyback is ~6-8% — meaningfully larger than we modeled at the Q2 upgrade. Combined with the operating-leverage thesis (margins expanding) and the international growth engine, the per-share EPS algorithm is on a path to high-single-digit / low-double-digit annual growth through FY28 even at flat-to-modestly-negative U.S. insurance unit volumes. The "underscoring our confidence" language in Stearns' framing is the closest the franchise has come to issuing an explicit valuation view; the implied message is that management considers current prices attractive enough to deploy capital aggressively against. The remaining ~$4.2B of cash + HTM provides 2-3 years of additional runway at the current pace; the buyback is self-funding via the +12% YTD FCF growth.

4. International Acceleration: Inventory +10%, Assignments Low Teens

The under-appreciated story of the print. International segment total units +5.9%, with inventory +10% YoY (forward-positive — inventory growth precedes unit-sale growth by 1-2 quarters in this segment) and assignments in the low-teens growth (even more forward-positive). The acceleration is geographically broad: U.K., Germany, and Canada all driving. International insurance ASPs +8.4%; non-insurance ASPs +16.7%. Operating margin at 31.5% — all-time high in the segment's history.

"For the quarter, international revenue grew 14.1% or 7.9%, excluding the positive impact of foreign currency fluctuations, to $234.2 million. The primary source of growth internationally came from service revenues, which were up 17.9%, which was driven by a 10.5% increase in fee revenue per unit and strong volume growth. ... The profit picture was equally compelling, with gross profit increasing 21.9% and operating income reaching $73.8 million, representing a 31.5% operating margin." — Leah Stearns, CFO

Assessment: International is now at U.S.-level profitability with 4-5x the U.S. growth rate. The inventory + assignments leading indicators imply continued acceleration in Q4 FY26 and into FY27. The segment is on a trajectory to ~18-20% of consolidated GP by FY27 (vs. ~15% today), with operating margin trending toward 33-35% as the German consignment conversion completes and U.K. fee-revenue mix matures. The "international is the under-appreciated piece" framing we've maintained across all four quarters of this backfill is now empirically validated.

5. The Crossover Buyer Data Point

The most analytically novel disclosure of the call — and one that materially expands the auction-liquidity moat narrative. Of 30,000+ new buyers who entered the Copart ecosystem over the past 3 years via non-insurance vehicles (rental, bank, fleet, dealer), a "strong majority" placed a bid on an insurance vehicle within the first 90 days of their engagement.

"Looking back over the past 3 years of the more than 30,000 buyers who first entered the Copart ecosystem by virtue of those noninsurance vehicles, a strong majority would bid on an insurance vehicle within the first 90 days of their engagement. Whatever we or anyone else asserts about their auction liquidity, the best testimony for auction liquidity is your seller participation. Our sellers vote with their feet by entrusting ever more of their volume to us on a pure sale basis." — Jeff Liaw, CEO

Assessment: The crossover-buyer data point is the cleanest evidence to date that the non-insurance growth strategy is structurally bullish for the insurance core franchise. Every dollar of investment in attracting rental / bank / fleet / dealer sellers compounds into incremental bidder participation on insurance auctions — which means higher insurance ASPs, which means higher fee revenue per unit, which means stronger consignor economics, which means more durable carrier relationships. The flywheel is real and quantifiable. The "30,000 crossover buyers over 3 years" framing implies ~10,000 per year — meaningful incremental participation against a 300,000-strong global member base.

6. Geopolitical Resilience: 160 Countries, Buyer-Base Diversification

An unusually direct geopolitical disclosure. Middle East buyer participation has declined YoY due to "global conflict" — implying continued disruption in regional Middle East markets. The decline was offset by expansion in Central Europe, West Africa, Central America, and the Caribbean. Copart's buyer base now spans 160+ countries.

"In any given month or quarter, the precise mix of participating countries can surely vary. For example, given recent conflicts, direct participation in U.S. auctions from certain Middle Eastern markets has declined year-over-year. What has sustained overall demand has been the breadth and diversification of this buyer base. As certain corridors moderated, others expanded to fill the gap, including parts of Central Europe, West Africa, Central America and the Caribbean. The virtue of robust auction liquidity is that no single seller or buyer and, in fact, no single region, country or currency unduly influences the auction outcomes we deliver to our sellers." — Jeff Liaw, CEO

Assessment: The buyer-base diversification is the most defensible moat against geopolitical disruption. Even in a quarter where a major regional buyer corridor (Middle East) softened on conflict, the broader marketplace absorbed the gap without ASP compression — U.S. insurance ASPs +4.1% and a seasonally-adjusted all-time high. The 160-country breadth is the cleanest articulation of why Copart's ASP capture continues to grow faster than peer indices like Manheim. The franchise's structural advantage compounds with each additional buyer-country added.

7. Long-Haul Delivery: A Quietly Material New Revenue Line

Stearns introduced the U.S. domestic long-haul delivery launch as a new revenue/cost line in Q3. The product reduces friction for buyers (delivery certainty + upfront cost transparency) and generated a $15M YoY increase in facility operations cost in Q3 — implying it's now a meaningful revenue line of $20-30M+ annualized at "nice margin."

"On the long-haul side, that's an additional product that we have really always offered to our members. However, we shifted our market — our product offering a little over 12 months ago. We've seen rapid adoption of it and are quite pleased with the level of buyer participation that we've seen effectively procure long-haul delivery through the Copart delivered product. So we believe it reduces friction. It gives our buyers certainty in terms of cost upfront. And we're — like I said, we're pleased with how that's progressing. And just in terms of overall impact for the quarter, we saw about 15 million of year-over-year increase in cost on the facility ops line related to our long-haul delivery product. And that product is generating a nice margin for us as well as the revenue line." — Leah Stearns, CFO

Assessment: Long-haul delivery is a small but meaningful addition to the franchise's service portfolio that compounds the auction-liquidity moat. Reducing friction for international and domestic out-of-region buyers expands the addressable bidder pool per auction, which feeds the ASP capture algorithm. At ~$30-50M annualized run-rate within 2-3 years, this becomes a material revenue line; it also creates incremental dependence — once a buyer routes via Copart Delivered, they are less likely to develop relationships with competing logistics providers, locking in marketplace stickiness.

8. Pure-Sale Mix at All-Time Highs

The most defensible single articulation of the auction-liquidity moat. Pure-sale (non-reserve) auction mix is at all-time highs across U.S. insurance sellers, "literally an order of magnitude higher than what is available at other similar platforms." The mechanism: when consignors trust the marketplace to find optimal price discovery, they remove reserves; the absence of reserves attracts bidder participation; bidder participation drives higher ASPs; higher ASPs reinforce consignor trust in the platform.

"Today, for U.S. insurance sellers at Copart, the mix of pure sale units is at all-time highs. We estimate that our pure sale insurance volume is literally an order of magnitude higher than what is available at other similar platforms." — Jeff Liaw, CEO

Assessment: The "order of magnitude" framing is the most quantitatively grounded competitive-positioning statement we have on the record. Combined with the +4.1% U.S. insurance ASP and the all-time-high seasonally-adjusted level, the pure-sale data point implies Copart's marketplace efficiency is structurally several years ahead of the next-largest competitor. This is the durable moat-defense the franchise rests on.

9. New Car Sales Math: No Direct Read-Through to Salvage Volume

Bob Labick raised the question of whether the 2020-COVID-driven decline in U.S. SAAR would compound into a salvage-volume headwind in 2027 and beyond as those cohorts hit the sweet-spot age for total-loss frequency. Liaw's response decoupled new-car shipment levels from salvage volume — the relevant driver is miles driven and the existing 300M-vehicle fleet, not the year-specific new-car cohort.

"For us, the catalyst is much less when the cars enter the ecosystem in the first place. So whether the car was sold originally in '18, '19, '20 or '21, is not especially of consequence to us. What really matters to us is that the vehicles are on the road period, right? There are cars being driven miles being traversed in the cars themselves and then, of course, collision rates, total loss rates as well. So at least in theory, even at the extremes, if you completely eliminated all new cars sold in 2021 altogether, which is not that far from the truth, given what we now know of the semiconductor crisis at the time, that doesn't have any real pronounced effects given the way our supply is a layer cake of more than a decade's worth of new car shipments." — Jeff Liaw, CEO

Assessment: The "layer-cake" framing is the cleanest articulation of the franchise's resilience to single-year SAAR disruptions. The 300M-vehicle U.S. fleet is the relevant denominator; any single-year shipment shortfall produces ~5% deviation in fleet age-mix that recovers over multiple years. The implication: the 2020-2022 SAAR shortfall is not a 2026-2028 salvage-volume headwind in any meaningful way.

10. The 5-Year Growth Algorithm

Bob Labick's follow-up on the 5-year growth drivers prompted the most comprehensive articulation of the franchise's structural compounding. Three levers: (1) insurance-side TLF compounding × auction-liquidity reinforcing TLF; (2) non-insurance expansion (rental, bank, fleet, dealer) accelerated by the crossover-buyer flywheel; (3) international geographic expansion (existing markets + new markets over 10-20 years).

"The catalysts for that phenomenon, we think largely remain true. So that's the insurance business part 1 in all the markets in which we already do business today. Lever #2 ... is the liquidity that we are pursuing and succeeding in obtaining in noninsurance-insurance markets. These are the rental car companies, dealers, corporate fleets and financial institutions who are increasingly entrusting us with their vehicles as well. ... We have expanded globally, as you know, perhaps most notably in 2007. So almost 20 years ago. We're approaching the anniversary soon of our entry into the United Kingdom. We now also operate and operate profitably in Spain, in Germany, Finland, the Middle East, Canada, Brazil, et cetera. So international expansion has historically been part of our playbook as well. There are some countries that still share many of the characteristics that make total losses so compelling in the markets I just mentioned. There are other markets that will no doubt emerge over the course of the next 20 years, 10 or 20 years as well." — Jeff Liaw, CEO

Assessment: The three-lever framework is the cleanest articulation of the long-cycle bull case. Each lever has multi-year runway: TLF expansion has 7-10 years of trajectory before reaching plausible ceiling levels (~27-30%); non-insurance share expansion can run for 10+ years against a 15M+ vehicle TAM; international has 20+ years of geographic runway. Combined with the operating-leverage tailwind and the active buyback, the framework supports high-single-digit / low-double-digit per-share EPS growth for the next 5-7 years even in a tough macro environment.

11. AI Deployment at Scale: 1,000+ Engineers

Liaw continued the Q2 narrative on AI deployment — Copart now has ~1,000 engineers globally, "by a healthy margin, the most robust and experienced bench of technology talent in the industry." AI is deployed across the platform; the recent Insurance Advisory Board meeting included substantial AI discussion. Insurance carriers are described as "both excited and terrified" of AI given audit, regulatory, and reliability requirements.

"When it comes to catalysts for change in the future, definitely some discussion of near-term trends like the conflict that we and the world find ourselves in. We do talk about artificial intelligence and what it means for claims, what it means for insurance companies. As you might imagine, they are both excited and terrified of it, right? An insurance company by its nature have to be very thoughtful and rigorous about new tools that are deployed. In many cases, decisions they make or their service providers may have to be thoughtful and auditable and trackable and accountable. ... So we talked a great length about artificial intelligence, how we're deploying to Copart in support of their outcomes and how we can support them in deploying it as well. ... On the claims end, if anything, that's a language we may speak more fluently than they do as institutions." — Jeff Liaw, CEO

Assessment: The "we speak that language more fluently than they do" framing positions Copart as the AI-enabled claims-process infrastructure for the insurance industry. Combined with Title Express penetration and the auction-liquidity moat, the franchise is increasingly intermediating the entire vehicle-claim funnel rather than just the salvage end-point. This is the durable competitive-positioning narrative that supports multi-year multiple expansion.

Analyst Q&A Highlights

The 5-Year Growth Drivers and the New-Car Shipment Question

Bob Labick (CJS) opened Q&A with the dual-pronged question on long-cycle drivers: the COVID-era SAAR decline as a potential 2026-2028 salvage-volume headwind, and the broader question of what investors should anchor on for 5-year growth. The answer decoupled new-car cohort timing from salvage-volume dynamics and laid out the three-lever framework (insurance organic + non-insurance share + international geographic).

Q: "The decline in new car sales and SAAR kind of started in 2020 from COVID. And how do you see that as — is there an impact on expected salvage volumes in 2027 and beyond as those cohorts start hitting the sweet spot for total loss frequency? ... Can you talk about the kind of the macro drivers and that one in particular, the decline in SAAR? And then more so just the biggest Copart specific growth drivers over the next 5 years, noting that macro is a little bit tough."
— Bob Labick, CJS Securities

A: "For us, the catalyst is much less when the cars enter the ecosystem in the first place. ... What really matters to us is that the vehicles are on the road period. ... So whether the car was sold originally in '18, '19, '20 or '21, is not especially of consequence to us. ... I think you heard me walk through principally the insurance side of the house, which is to say that the insurance industry has been a strong growth lever for us for decades even on a same client basis ... Lever #2, you heard Leah and I both talk about some which is the liquidity that we are pursuing and succeeding in obtaining in noninsurance-insurance markets. ... We have expanded globally, as you know, perhaps most notably in 2007. ... So international expansion has historically been part of our playbook as well."
— Jeff Liaw, CEO

Assessment: The three-lever framework is the cleanest articulation of the long-cycle bull case the franchise has put on the record. Each lever is operationally independent and additive — the insurance side compounds via TLF; the non-insurance side compounds via the crossover-buyer flywheel; the international side compounds via geographic expansion + the consignment-conversion mechanism. Combined with the buyback's per-share EPS contribution, the structural compounding rate is meaningfully above the consensus model's assumed terminal growth.

The 2026 Insurance Advisory Board: AI and Claims Frequency

Craig Kennison (Baird) probed on the takeaways from Copart's annual Insurance Advisory Board meeting. Liaw's response provided the most direct insurance-industry-perspective data we have: ~1 in 6 policyholders has pulled back on coverage (research data from mid-2025), claims frequency is down because consumers are absorbing minor repairs rather than filing claims, and the cyclical-vs-secular debate is broadly aligned with Copart's framing in the carrier community.

Q: "Jeff, it sounds like you hosted a forum for your insurance partners. I'm just curious, first, what are those insurance partners saying about the outlook for claims in 2026, 2027? And then you had also mentioned some catalysts for change in the industry. And I wondered if you would elaborate on some of those catalysts."
— Craig Kennison, Baird

A: "I think everyone recognizes that, yes, many consumers, we've seen some research that indicates as many as 1 in every 6 policyholders in the auto space has pulled back on their insurance coverage in one way or the other, meaning they've moved from collision to liability only or they have increased their deductibles, et cetera. ... That's a survey done in the middle of 2025 or so. And we do hear insurance carriers echoing those statements. So they see claims frequency down. They know the consumers are swallowing hard, in some cases, and eating minor repairs on their own, either because economically, they wouldn't clear the deductible. Or even if they did, they fear the rate increase that might come with an actual economic claim as well. ... I think they also recognize these trends tend to be cyclical, not secular that eventually folks are rational about the coverage they need and want to pay for and folks who ultimately pay for the insurance they need. And that has proven true over a multiple decade-long horizon."
— Jeff Liaw, CEO

Assessment: The carrier-confirmed cyclical-not-secular framing is the most authoritative read on the consumer-coverage drift we have. The "1 in 6 has pulled back" data point is large enough to fully explain the ex-cat U.S. insurance unit decline (peak -7.3% Q1 FY26) without needing any secular driver. As premiums moderate and consumers re-add coverage over 2026-2027, the cyclical reversal should produce U.S. insurance unit growth materially above the franchise's underlying TLF + non-insurance compounding rate — i.e., a multi-quarter unit-growth tailwind into FY27.

International Service Revenue +18% — What's Driving Germany

Craig Kennison's follow-up probed on the +17.9% international service-revenue growth and Stearns' Germany-flip-toward-Copart-style-consignment commentary. Stearns confirmed broad-based strength (U.K., Germany, Canada) with Germany "continuing to perform incredibly well on a relative basis to where it was several years ago." The German consignment-conversion progress is now visible both in unit volume and profitability.

Q: "I'm just looking at that international service revenue line up, I think, 18%. Maybe could you get some light on what exactly is driving that? To what extent is the market performing, the underlying markets in which you participate? Is that performing well? And to what extent is that a representation of traction you're getting, especially I'm curious about in Germany, as I know you're flipping that market towards the Copart-style remarketing service."
— Craig Kennison, Baird

A: "The growth internationally that we saw on the revenue side ... there is contribution across many markets. The U.K. was particularly strong in the quarter. Germany followed it up as well as Canada. And so we've seen really strong demand across all 3 markets, both on the insurance side as well as the noninsurance business. Germany continues to perform incredibly well on a relative basis to where it was several years ago. We continue to see carriers be open-minded about how they're approaching the total loss process, and that's a market where we've seen some meaningful progress from a unit volume as well as a profitability perspective. So we're really pleased with our performance."
— Leah Stearns, CFO

Assessment: Germany continues to be the under-appreciated structural-growth story within the international segment. The consignment conversion is mechanically swapping low-margin principal-sale dollars for high-margin fee dollars, while the underlying unit volume is also growing. The combination is the cleanest structural-profitability-expansion story in the franchise. Within 2 years, Germany's contribution to international operating income could be 30-40% (vs. ~25% today) and the cross-Atlantic margin gap should narrow further.

The Crossover Buyer Flywheel

Jash Patwa (JPM) drew out the most analytically novel disclosure of the call: how non-insurance buyer acquisition feeds back into insurance auction participation. Liaw's response was richly detailed — describing the discovery journey from initial Google/SEM search → first whole-car purchase → discovery of insurance theft-recovery vehicles → expansion into damaged repairables → concentric-circle migration through brands and damage profiles.

Q: "Could you just give us an update on the size of the noninsurance-insurance or whole car business? And it would be really helpful to get a sense of the typical profile of a crossover buyer. How does their wallet share with Copart tend to evolve over time? If possible, it would be helpful to hear an example or anecdote of how a dealer maybe initially engages with Copart and what that early exploration phase looks like and how that activity typically ramps up as the relationship develops."
— Jash Patwa, JPMorgan

A: "On the nature of the crossover buyer, these are both domestic buyers and international buyers as well, who will first discover Copart through some mix of SEM or SEO. So literally, a Google search for a given vehicle may lead them to Copart for the first time. ... Then when they begin bidding, when they begin engaging on the platform, they discover that there's an insurance vehicle that was a theft recovery, right? So perhaps it was never damaged at all that might be in their sweet spot as well. Their business is transforming Lexus SUVs, and they discover Lexus SUV with hail damage or theft recovery, that begins — that whets their appetite for an insurance car. Then they discovered that there's a vehicle with light flood damage or rear-end damage, and it's just a camera that's knocked out — the car is otherwise intact and the drivetrain is fine, right? So you can imagine that a given buyer comes for one type of car. And then once he or she realizes the breadth of inventory available to him or her, they migrate outward in concentric circles ..."
— Jeff Liaw, CEO

Assessment: The "concentric circles" framing captures the flywheel mechanic with unusual clarity. Each new non-insurance buyer added to the platform increases the bidder count on insurance auctions, which raises insurance ASPs, which makes Copart a more attractive consignment partner for insurance carriers, which brings in more insurance volume, which attracts more buyers... etc. The 30,000 crossover-buyer / 90-day-bid statistic ($1.2-1.5M per year of incremental insurance-bidder participation) is the cleanest quantitative articulation of the moat we have on the record.

Pure-Sale Mix: Contractual or Discretionary

Jash Patwa's follow-up on the pure-sale-mix data point — is it contractual or could it reverse — produced an unusually direct competitive-positioning statement. Liaw confirmed pure-sale mix is discretionary, not contractual, and explained that it has trended steadily higher over Copart's history because consignors recognize the auction's price-discovery efficiency. "Effectively, nobody has increased their portion of managed sale auctions at Copart."

Q: "Could we double-click on the pure sale mix with U.S. insurance sellers? I just wanted to understand if this is more contractual in nature or something more dynamic that can be toggled up or down and whether a higher mix of PR sale units has positive implications for Copart's earnings profile?"
— Jash Patwa, JPMorgan

A: "It's not contractual. So our insurance carrier maintained the discretion to manage the auctions as they see fit. So in comparison to say where we were even 7 or 8 years ago, many more insurance carriers have moved to effectively a nearly 100% pure sale approach and a handful of carriers have moved from 100% down very meaningfully as well. Effectively, nobody has increased their portion of managed sale auctions at Copart. The reason that's true is because they know and they can literally physically attend ... a Copart auction and they see the thousands of attendees at a given auction. They see the bidders. If you were to watch 1 car transact to Copart, you'll see buyers in Poland bidding against buyers in Oklahoma and then Maine and then Canada and then Ecuador. ... So they recognize that there is no real way to escape the liquidity at Copart. ... that pure sale mix has increased very steadily and very meaningfully, really, through Copart's entire history, but in particular, over the past 5 to 7 years."
— Jeff Liaw, CEO

Assessment: The "nobody has increased managed-sale share" data point is the cleanest one-line summary of the auction-liquidity moat. Once a consignor experiences Copart's price discovery, they don't go back to reserve-based auctions. The mechanism is mathematically self-reinforcing — more bidders → better price discovery → more consignors trust the platform → more inventory → more bidders.

Whole-Car Business and the Brand Question

John Healy (Northcoast) pressed on the whole-car / non-insurance expansion: how big is the business, what kinds of vehicles flow through it from consignor side, and whether the "Copart" brand is the right vehicle for a more dealer-direct ambition. Liaw described the spectrum of vehicle sources from heavy-damage rental flow up to lightly-used voluntary repos and acknowledged the franchise is moving "up and to the right" on the vehicle-quality spectrum.

Q: "When you look at kind of the whole car business, I think there's different definitions that probably different folks in the industry use. ... where those whole car units are coming from? And are they largely attached to some sort of, what I would say, damaged vehicle, not necessarily a complete salvage? But would just kind of love for you to kind of dive into help us think about your definition of whole car. And secondly, as you think about growing that business and aspirations to be more on the dealer side, I know you've had Copart Dealer Services for a number of years, is that a strong enough presence brand to do what you want to accomplish there?"
— John Healy, Northcoast Research

A: "You've got the intuition that every car is somewhere on a spectrum from a total burn that's almost unrecognizable as a vehicle at all the way to a brand-new Bentley that is just off the dealer lot, and there's a spectrum of vehicles in between. And assuredly, when we talk about vehicles, we are sourcing from institutions other than insurance companies, we start at one end of the spectrum. For sure, we are an obvious marketplace for a damaged rental car or a heavily beaten up repo vehicle. From there, we earn the right to sell the 3-year-old car that is being de-fleeted by one of the major rental car companies. We earn the right to sell a repo vehicle that is actually an excellent condition. ... So we — as we described the concentric circles earlier, we have our foot in the door and we earn the right to sell 'better and better cars' over time. ... eventually, the TAM, when you consider all of the auction-mediated vehicles that are not from insurance companies in the United States, that's 15 million plus. ... as total loss frequency rises, as we earn the right to sell, more of those cars from the noninsurance sellers with each passing year, we earn the right to sell more of those cars as well. So I think you're right, it is a spectrum, and we are moving up and to the right on that spectrum."
— Jeff Liaw, CEO

Assessment: The "moving up and to the right" framing captures the multi-year strategic trajectory in 6 words. Each year, the average vehicle Copart sells through non-insurance channels has higher ASP, less damage, and competes more directly with traditional whole-car auction marketplaces (Manheim, ADESA). The 15M+ non-insurance auction-mediated vehicle TAM is the upside opportunity; Copart's current penetration of that pool is in the very low single digits. Multi-year, this is the franchise's largest TAM-expansion vector.

What They're NOT Saying

1. No forward buyback authorization size or pace commitment: Despite the $1.6B / 43.4M shares deployed, management still has not disclosed a forward authorization size or a structural framework (e.g., "we will return X% of FCF annually"). Optionality on magnitude / form preserved.
2. No FY26 EPS guidance or implied Q4 expectations: Even after a clean double-beat that solidifies the inflection narrative, the franchise maintains its long-standing no-guidance policy. Investors must triangulate Q4 from 9-month results ($1.20 EPS) + Q4 historical seasonality.
3. No quantification of Title Express revenue contribution: Title Express is described as "6, 7, 8x more than anyone else in the industry" but the actual revenue line is undisclosed. We estimate $80-120M annualized.
4. No segment-level Purple Wave profitability: Purple Wave GTV +25% TTM, headcount 2.5-3x post-acquisition, "focused enterprise accounts" — but operating margin and revenue contribution remain bundled in U.S. segment.
5. No long-haul delivery revenue line: Stearns referenced "nice margin" and "revenue line" but did not disclose the actual size of the long-haul delivery contribution beyond the $15M YoY cost increase. We estimate $20-30M annualized revenue.
6. No specifics on Middle East buyer-base decline magnitude: Liaw acknowledged "direct participation in U.S. auctions from certain Middle Eastern markets has declined year-over-year" but did not quantify the percentage decline or the regional offsets in absolute terms.
7. No detailed AI deployment ROI: The "1,000+ engineers" headcount and the "exponential monthly increase in use" are qualitative; no quantified productivity-gain metrics disclosed.
8. No commentary on the cyclical-recovery timeline for U.S. insurance unit volumes: Liaw confirmed the cyclical interpretation but did not estimate when the franchise expects to return to positive U.S. insurance unit growth (we model Q1-Q2 FY27).

Market Reaction

• Pre-print setup: CPRT entered May 21 close at ~$36, having drifted in a tight $30-36 range through March-April after the Feb 20 capitulation -10.94% sell-off. YTD into print: down ~30-35% from CY25 start. Sell-side stance: bifurcated with PTs in the $34-$42 range; the pre-print debate centered on whether Q3 ex-cat U.S. insurance units would show continued improvement from Q2's -4.8%.
• Options-implied move: ~5-6%, in line with trailing-8 baseline.
• After-hours (May 21 PM): Stock traded up ~2-3% on the double-beat headline + the $1.6B buyback disclosure.
• Regular session (May 22): Stock closed up ~+1.79% — the first positive post-earnings session in our four-quarter backfilled coverage. Reaction orderly, not capitulation-style buying.
• Post-print sell-side resets: Modestly positive. JPM PT raised from $34 to ~$38-40 (mid-cycle); several mid-tier shops moved Hold → Buy with PTs $42-$48. Barclays trimmed marginally; Underweight maintained. Sell-side weighted-average PT: ~$40-42 (up ~5-10% from pre-print).
• Peer cross-read: RBA up ~+1-2%; insurance carriers modestly weaker; auto parts flat.

The First Positive Post-Earnings Session Marks the Inflection. The +1.79% close on May 22 is modest in absolute magnitude but structurally important: it is the first positive post-earnings session in our four-quarter backfilled coverage of CPRT and reverses the negative-reaction streak (Sep 5 2025 -4.1%, Nov 21 2025 -2.0%, Feb 20 2026 -10.94%). In our experience covering compounder stocks, the first positive post-earnings reaction following a multi-quarter de-rating cycle is one of the most reliable inflection indicators — the bears have taken their PT cuts, the bulls are re-engaging, and the print validated the inflection thesis cleanly. The forward 6-12 month risk-reward is favorable.

Why the Magnitude Was Modest. Three factors limited the upside reaction: (a) much of the bull case had already been priced in over March-May as the buyback continued executing and the stock floor held at ~$30; (b) PT resets were modest because shops had already cut to the low-$30s in Nov / Feb; (c) the print delivered confirmation rather than "massive upside surprise" — there was no Q3 EPS blowout, just a clean validation of the trajectory. A +1.79% reaction on a clean inflection print is what one would expect given pre-positioning; it does not invalidate the multi-quarter upside thesis.

The Buyback Math Compounds. At the post-print price of ~$36, the $1.6B buyback YTD retired ~43.4M shares at an implied weighted-avg of ~$37. Annualized, the franchise is on a path to retire ~5-6% of shares in FY26 — a structural per-share EPS tailwind that compounds over multi-quarter horizons. If the buyback continues at the Q3 pace ($1.1B/quarter, which is unlikely sustained but possible against the $4.2B remaining cash + HTM), the franchise could retire 10-12% of beginning-of-FY26 shares by FY26 close. The reduced share count is the multi-year EPS-per-share lever the consensus model is now incorporating.

Street Perspective

Debate: Is the Inflection Cyclical, or Just a Temporary Reprieve?

Bull view: Three consecutive quarters of sequential ex-cat U.S. insurance unit improvement (Q1 -7.3% → Q2 -4.8% → Q3 -3.0%) plus Liaw's carrier-confirmed cyclical interpretation plus the CCC data on consumer self-pay reaching 25% all support the cyclical-bottoming framing. The forward chain — premium moderation → coverage re-uptake → claim funnel recovery — has a 6-12 month lag, implying U.S. insurance unit volume returns to flat by Q1-Q2 FY27 and positive by Q3 FY27. Combined with TLF +75-100 bps annual expansion, the U.S. insurance volume trajectory is on a 2-3 year recovery path.

Bear view: One favorable quarter does not mark a structural inflection. The Q3 print could be cat-comp tailwinds (Q3 FY25 was relatively benign) creating an optical improvement that reverses in Q4 if the seasonal storm activity returns. The underlying consumer-coverage drift could prove stickier than management anticipates if premium relief is slower than carriers project. Three quarters of improvement does not constitute a multi-year trend.

Our take: The bear case is increasingly difficult to maintain given the cumulative evidence. A 430 bps cumulative improvement over three quarters is statistically inconsistent with a noise-driven optical improvement. The cyclical drivers Liaw outlined are mechanical (combined ratios normalize → carriers compete for growth → premiums moderate → consumers re-add coverage), and the data underneath (claims frequency, earned-car-years, CCC self-pay data) consistently support the consumer-affordability-driven framing. We model U.S. insurance unit volume to inflect positive by Q1 FY27.

Debate: How Far Should the Buyback Push the Multiple?

Bull view: The $1.6B / 43.4M-share FY26 YTD buyback is unprecedented in CPRT's history. Annualized, the buyback contributes ~5-7% to per-share EPS growth independent of operations. If the pace sustains through FY27 (~$1.5-2.0B annualized), the franchise will retire ~10-12% of beginning-of-FY26 shares by FY27 end. At a ~24-26x multiple on the resulting per-share EPS, the stock should trade to $55-65 over 18-24 months — meaningful multi-quarter upside.

Bear view: The buyback pace is unlikely to sustain at the Q3 rate. Management has been explicit about "opportunistic" framing; if the stock price recovers materially, the pace should decelerate. The forward authorization size is undisclosed; investors are extrapolating from current execution rather than committed forward deployment. If the buyback decelerates to ~$500M annualized by FY27, the per-share EPS tailwind compresses to ~3% — meaningful but not transformative.

Our take: The bull case is the more defensible interpretation of the data. The framework — Stearns' "structural commitment" framing, Liaw's "we treat capital as precious" rationale, the 10b5-1 plan execution mechanics — all signal a multi-quarter program rather than a single tactical window. Combined with the +12% YTD FCF growth, the franchise is generating cash faster than even the aggressive current pace consumes it; the only question is how aggressively management chooses to deploy. We model FY27 buyback at $1.5-1.8B and FY28 at $1.2-1.5B as the FCF compounding and cash buffer adjust.

Debate: Is International Already Re-Rated, or Still Under-Appreciated?

Bull view: International segment growth (+14.1% revenue) and operating margin (31.5% all-time high) are still under-appreciated by the consensus model. The German consignment conversion has 2-3 years of runway; U.K. growth is accelerating; Canada is a quietly strong contributor. By FY28, international could be 20% of consolidated GP (vs. 14-15% today) — a structural mix-shift that supports multiple expansion.

Bear view: The international segment is too small to materially reshape the consolidated growth algorithm in the near term. At ~$235M of quarterly revenue and ~$74M of operating income, international is ~19% of revenue and ~16% of OI. Even if international grows 10-12% per year for the next 3 years vs. flat U.S., the consolidated growth rate only accelerates by ~2-3 ppts — meaningful but not transformative for multiple expansion.

Our take: The bear's math is correct on the magnitude, but understates the optical importance. The international segment is the cleanest counter-narrative to the bear's "U.S. franchise is structurally challenged" framing. As international GP share grows from 15% to 18-20% over 2-3 years, the consensus narrative will increasingly characterize CPRT as "a global auction franchise with a U.S. core" rather than "a U.S. salvage franchise with international expansion" — a positioning shift that tends to expand multiple. Modest revenue acceleration with significant narrative-shift produces meaningful multiple impact.

Model Update Needed

Valuation impact: Fair-value framework moves to $48-55 (vs. $42-48 post-Q2). 24-26x FY27E EPS of $1.85-1.95 = $44-50 base case. Bull case: 28x FY27E EPS at $2.00+ on cyclical recovery + accelerating buyback = $56-60. Bear case: 22x FY27E EPS at $1.75 = $38-40. Risk-reward remains favorable; 30-50% upside in the base/bull case vs. modest downside in the bear case.

Thesis Scorecard Post-Earnings

Overall: Thesis trajectory continues to strengthen. Five of five bull pillars confirmed and accelerating; three of five bear pillars resolved; one (AV / TAM compression) remains long-cycle neutral; one (carrier share dynamics) remains a watch item but is no longer near-term-binding. The Q3 print is the cleanest validation of the post-Q2 upgrade we could have asked for.

Action: Maintaining Outperform. The inflection has been confirmed across every dimension, the buyback continues to compound per-share EPS, international is accelerating, and TLF is reasserting its long-cycle compounding role. Fair-value range $48-55 (vs. ~$36 post-print) implies 30-50% upside over a 12-month horizon. Move to Hold only if (a) Q4 FY26 shows ex-cat U.S. insurance units re-deteriorating below -5%, or (b) the buyback pace materially decelerates without a corresponding multiple-driven reason, or (c) international growth stalls. Move to Underperform requires multiple bear-thesis pillars to re-emerge simultaneously — a low-probability outcome given the current trajectory.