Copart (CPRT) — Q1 FY2026 Earnings Recap

Results vs. Consensus

Q1 FY26 Scorecard

YoY Comparison

QoQ Comparison

Segment Performance

US Segment

US revenue $963M, up 0.5% reported and 2.3% ex-cat. Unit volume was the pain point: total units down 7.9% reported, down 5.2% ex-cat-and-direct-buy. Insurance units down 9.5% (down 7.3% ex-cat). Non-insurance units grew, led by dealer (+5.3%); commercial consignment via Blue Car down 1% on rental-sale timing. The "direct buy" reclassification — referring lower-value vehicles to junk buyers for a fee rather than purchasing through Copart Direct — normalizes US purchase unit growth to +6.2% (vs. –19.2% reported) and lifts purchased-vehicle revenue 10.9% on >50% higher average sale prices.

The operational story is excellent. US cycle times down 9% YoY; US inventory down 17%; gross profit per fee unit up 13.2%; segment gross margin up to 48.7%; segment operating income $375M (+5.6%); operating margin 39.4% (+199bp). US insurance ASPs +8.4% — at a rate management characterized as "more than threefold that of service providers similar to us" and exceeding the Manheim Used Vehicle Value Index.

International Segment

International revenue $193M, up 1.6% reported and 5.7% ex-cat. Service revenue up 7.9% (up 13.9% ex-cat). Total units down less than 1% reported, up 4.5% ex-cat. Insurance units up less than 1%, up 8.3% ex-cat. Non-insurance units down 2.2%. International insurance ASPs declined 2.4% — primarily mix and the migration of certain insurance customers from purchase contracts to consignment contracts (which reclassifies purchase revenue to service revenue, mechanically lowering ASPs on the purchased side).

Gross profit grew 13%; operating income $56M; operating margin 27.5% — expanding even as the segment invests in yard capacity, technology, and logistics infrastructure. UK and Canada continued to lead growth; German consignment shift continues to flow through.

Purple Wave (Equipment Auction)

GTV growth over 10% over the trailing twelve months — outpacing the broader heavy-equipment auction market, which is currently sluggish on tariff-uncertainty-driven decision deferrals. Growth came from expansion-market penetration, enterprise account additions, and sustained heavy-equipment category demand.

Key Topics & Management Commentary

1. The Cyclical Consumer Underinsurance Story

"It's a combination of market share evolution among insurance carriers themselves, soft claims counts as a result of consumer retrenchment in their auto insurance purchasing behavior offset by rising total loss frequency... earned car years for that same period were down 4.1%. At the same time, vehicles in operation for the second calendar quarter 2025 actually increased 1.4%. And we see further data in the underlying activity that shows miles driven continue to remain robust and growing. We understand from many of our insurance partners in the industry that consumers are responding to late-cycle insurance rate increases by reducing the scope of their coverage or foregoing it altogether... Over the long term, however, the penetration rate of auto insurance coverage and collision coverage specifically appear to be cyclical." — Jeff Liaw, CEO

The volume miss is the headline of the print and the consumer-pullback frame is management's explanation. The data they cited is internally consistent: VIO up 1.4%, miles driven robust, earned car years down 4.1%, paid collision claims frequency down 7.5%. That gap — VIO/miles up, but earned car years and paid claims down — has to be filled by coverage reduction. Either policyholders are dropping collision coverage, going liability-only, or going uninsured entirely. None of those vehicles flow into the insurance-carrier-mediated total loss process Copart serves.

2. Total Loss Frequency — The Four-Quarter Pause

"Reading a whole lot into 80 basis points versus 130 or versus plus 30, I think is more noise than it is signal. I don't think anything has fundamentally changed in the commercial logic that the industry will use going forward. I think we believe as much as we ever have, total loss frequency is a matter of time... we'll reach 25% and we'll reach 30%. Because actually, I think the intuition people struggle with is they think what it means is you're abandoning a car. You're not fixing it, you're giving up on it. And that's fundamentally not true. For the marginal car, you're not choosing not to repair it, you're choosing to let somebody else manage it who has a different cost base, a different regulatory regime, and different economic calculus than you do." — Jeff Liaw, CEO

TLF at 22.6% for calendar 2025 through September, up 80bp YoY. Bears have pointed to a four-quarter flattening as evidence the secular trend is exhausted. Management framed this directly: short-window measurement is noisy (BLS-revision-style restatements are common); the multi-decade trajectory from 5% in 1990 to 22%+ today is the relevant signal; and the conceptual error of treating total loss as "abandonment" rather than "redistribution to a buyer with a different cost base" obscures why the trend has compounded for 40 years.

3. The Five Indicators of Auction Liquidity Advantage

"We proposed five core indicators for the auction liquidity that has long distinguished us in the insurance industry... since 2022. The first indicator... is the portion of its sales that are achieved via pure sale auction. Even in 2022, a strong majority of our insurance units were sold on a pure sale basis, but the mix has increased today to comprise a strong super majority of insurance units sold... The second indicator... is international participation in our auction... in 2026, international buyers have purchased vehicles that are 38% higher in value than comparable U.S. buyers... The third indicator... unique bidders per auction... since 2022, our unique bidders per auction instance have grown steadily to today's all-time highs... The fourth indicator... preliminary bid activity... have increased steadily since 2022 as well. And finally, the one measure that much of the insurance industry uses is gross returns, i.e., selling price for a salvage vehicle divided by its ACV pre-accident value... since 2022, again, our U.S. insurance returns have increased substantially. And are, in fact, at an all-time high watermark during my own personal ten-year journey here at Copart." — Jeff Liaw, CEO

This was the most important block of prepared remarks and the analytical core of the case for the moat being intact post-COVID. Management's case for the auction liquidity advantage compounding rather than eroding rests on five empirical observations, all measured since 2022 (the post-pandemic, post-semi-shortage baseline):

• Pure sale rate: Super-majority and rising. Carriers increasingly trust the marketplace to find the best price rather than setting reserves — the cleanest indicator of consignor confidence.
• International participation: Share of US auction value going to international buyers continues to grow. Average international purchase 38% higher in value than average US purchase — international demand is the marginal price-setting bidder for higher-value cars.
• Unique bidders per auction: At all-time highs. Liquidity-begets-liquidity dynamic working, not saturation.
• Preliminary bid activity: Pre-auction proxy bids per lot continue to grow, indicating buyer engagement upstream of the live event.
• Gross returns: Selling price divided by pre-accident ACV — the carrier-facing single metric — at all-time highs in the CEO's decade at the company.

4. Pricing Power: US Insurance ASPs +8.4%

"Even including the highly inflationary 2021, 2022 COVID era, when semiconductor shortages further increased vehicle prices, we are achieving all-time high average selling prices for our U.S. insurance carriers. In fact, for the quarter, our global insurance ASPs increased 6.8%, our U.S. insurance ASP increased 8.4%. We know from public data and disclosures that our ASPs grew at a rate that eclipsed that of the Manheim Used Vehicle Value Index and grew at a rate more than threefold that of service providers similar to us." — Jeff Liaw, CEO

The pricing data is the single most important fact in the print. US insurance ASPs +8.4% against (a) Manheim Used Vehicle Value Index that has been flat-to-modestly-positive, and (b) service providers similar to Copart (read: the principal competitor) running ASP growth at roughly one-third Copart's rate. That spread is the moat translating to dollars.

5. International Buyer Math: 38% ASP Premium

"On average, international buyers — the ASP of the vehicles that they purchase is 38% higher than the average ASP of buyers from the U.S. And so their inclination is to pursue lighter damage, higher value vehicles, and that trend has persisted over that timeframe. So we continue to see them be more focused on those borderline total losses and repairable vehicles... by definition, you're buying cars that are valuable enough, you can add and capture enough value downstream." — Leah Stearns, CFO / Jeff Liaw, CEO

The 38% premium is a within-Copart-cohort measure: international buyers, on average, purchase vehicles whose ASP is 38% higher than vehicles bought by US buyers. It's not "international buyers pay 38% more for the same car" (which is an interesting question management couldn't answer at the auction-instance level). It's that international buyers self-select toward higher-value borderline-total-loss and repairable vehicles where freight costs are economic and downstream repair value supports the bid. International buyers are the marginal high bidder or push bidder on the majority of US auction value.

6. Cycle Time, Inventory, and Operational Discipline

"From an operational perspective, we continue to drive forward initiatives which are reducing our overall cycle time. This includes managing title procurement on behalf of our insurance customers, which has grown at a double-digit rate over the past year, simultaneously reducing aged inventory at our facilities. In addition, as non-insurance units are contributing a greater percentage of our overall unit volumes, we naturally have a greater proportion of units which have substantially shorter cycle times being processed through our facility. During the quarter, in the U.S., our cycle times have decreased by 9% from the prior year period... U.S. inventory decline of just over 17% from the year-ago period." — Leah Stearns, CFO

Cycle time down 9%, inventory down 17%. Both are wins. Cycle time compression is a service-level advantage for carriers (faster cash recovery, lower storage drag) and a capacity advantage for Copart (more throughput per acre). Lower inventory at lower cycle times implies the marginal unit is moving through the platform more quickly than ever — a leading indicator of unit-economics health independent of the volume number.

7. Capacity Investment: The Land Bank Question

"I think some of the assets that we've acquired over the last several years have been for events, particularly around hurricanes in the U.S. And those may operate at a lower average utilization than the average Copart facility. So taking those out of the mix, I think we continue to have certain areas of the country where we continue to have capacity needs or projected capacity needs over the next five to ten years. I would say the population or the size of that list is much smaller today than what it was clearly five years ago." — Leah Stearns, CFO

Gross PP&E in land up 155% since 2019; volumes up only 30% over the same period. The bear case is that capacity has overshot. The bull case (management's view, which we share) is that (a) hurricane-response capacity is structurally lower-utilization but optionality-valuable, (b) certain US regions still face capacity needs over 5-10 years, and (c) logistics-cost reduction (shorter tow distances) is itself a return-justifying use of new yard nodes.

8. The Non-Insurance Wholesale Flywheel

"As we've talked about on prior calls, it's really rising total loss frequency in our insurance vehicles which enables our ongoing progress in this arena... rising total loss frequency means that an increasing portion of the cars that we sell on behalf of the insurance industry are actually cars that will be repaired and drivable again, both in the U.S. and overseas. As we draw buyers of those types of vehicles to our platform, they are increasingly the right fit as well for sellers such as rental car companies, financial institutions, corporate fleets, and the like." — Jeff Liaw, CEO

The Blue Car (commercial consignment) and dealer-services pieces are the medium-term TAM expansion story. The Blue Car Advisory Board has informed purpose-built systems for receiving, inspection, condition reporting, and arbitration tailored to commercial sellers. Dealer Services revenue (largest non-insurance subsegment, per Stearns) continues to grow at a healthy clip; Blue Car growth solid but smaller in absolute base.

9. ADAS and the Algebra of Accident Frequency

"Safety technologies very much have moved the needle... if you go over decades of history and divide police-reported crashes or fatalities, which are often published a little bit further in arrears, and divide that by vehicle miles traveled, you'll find that it declined forever — very steadily, very slightly, but very constantly with one historical blip in the 2013-2015 timeframe... when smartphone adoption and the more addictive apps really began achieving adoption levels... Otherwise over the course of long-run history, it has declined. It's been more than offset by total loss frequency... even if there were excellent technologies being released now that would altogether arrest vehicles from colliding, the algebra is such with annual shipments into the existing fleet that it still takes decades to turn the fleet over." — Jeff Liaw, CEO

The ADAS-as-bear-case framing is mechanically wrong, per management, and we agree. Accident-frequency-per-mile has declined steadily for 40+ years; TLF over the same period has gone from 5% to 22%+. The math is dominated by the TLF expansion, not by the accident-frequency compression. And even if next-generation ADAS suddenly improved by step-function — which is not the current trajectory — fleet-replacement timing means a decade-plus before the existing US vehicle fleet is meaningfully ADAS-saturated.

10. Parts Inflation, Tariffs, and Repair Cost Math

"That's been the million-dollar question of this era in light of the various tariff regimes proposed, implemented, unwound, and otherwise — what is the total landed cost of a given repair. We do think there's still fundamentally inflation there, not just because the like-for-like part has inflated relative to where it was before, but also because of vehicle complexity, also because there are more sensors on the perimeter of a car that are increasingly difficult to repair. That drives more cars certainly to total loss as well. And for another day, we can talk about how so many of those complex parts and modules actually aren't necessarily fundamental to the operation of the car itself, which makes that car acutely valuable to South America, Eastern Europe, Africa, and the like." — Jeff Liaw, CEO

Parts inflation is the dominant cost driver behind the multi-year TLF expansion. Tariff-policy volatility has been a complicating factor in measuring quarter-by-quarter parts cost moves, but the underlying secular signal — parts cost rising, complexity rising, sensor proliferation increasing the repair cost of even cosmetic-collision damage — continues. The international-buyer angle is critical: many of the sensor modules that make a US repair uneconomic are not strictly required for vehicle operation in less regulated markets, which creates the price tension between US carrier total-loss math and international buyer repair-and-restore economics.

11. Capital Allocation: Cash, M&A, and the Pending Buyback

"We think about opportunities to reinvest back into the business — our first priority remains being to drive as much expansion as possible for the business through investments, whether it's in CapEx or M&A. We'll continue to evaluate opportunities to do that and drive long-term growth of the business. And then to your point, to the extent that we have a view that long-term from a valuation perspective, there's an opportunity to create meaningful value, we'll — we've historically used the share repurchase program through a couple of different means: open market purchases, tenders, etcetera. That would be our lever to return capital to shareholders. And nothing has changed on that front." — Leah Stearns, CFO

"The fear — it wasn't that long ago, I suppose a decade and change ago that I was an investor myself — and one of the fears for a given company in accumulating too much cash or too strong a balance sheet is that they would in turn become reckless with their capital. And I think the evidence is there that there's very little risk of that at Copart. We still treat each dollar as though it's as precious as the last and our P&L should reflect that... we know it ultimately belongs to shareholders and we have bought shares back in the past. That's always been the mechanism by which we return cash to shareholders. There for sure will come a day if we do that again." — Jeff Liaw, CEO

$5.2B cash, $6.5B liquidity, no debt. Management did not announce a buyback this quarter but the language is the most direct guide to one we've seen. Three signals worth flagging: (1) Liaw's explicit statement that "there for sure will come a day if we do that again"; (2) the multiples-vs-prior-buyback question from John Healy at Northcoast, which framed today's valuation as comparable to prior buyback windows; (3) Stearns' framework — CapEx and M&A first, buyback when long-term valuation creates an opportunity. The bar for the buyback to fire appears to be a combination of valuation discipline and the conclusion that CapEx/M&A opportunities have moderated.

Analyst Q&A

Unit Decline Reconciliation: Cyclical Pullback or Market-Share Issue?

The opening question pressed on whether the larger-than-expected US insurance unit decline reflected actual market-share shifts among Copart's customer base — either share lost by Copart or share gained by Progressive (whose ASP profile Copart doesn't disproportionately benefit from) at the expense of carriers that do use Copart. Management's response framed the unit weakness entirely through the cyclical consumer-coverage-reduction lens, citing the earned-car-years-down-4% / VIO-up-1.4% data spread as the cleanest explanation. The exchange:

Q: "I'm having a little trouble reconciling the larger-than-expected decline in unit volumes. And if there's any way you could talk about — because the trend changed both versus expectations and versus what we've been seeing. And at the same time, the explanations are similar to previous trends — the U.S. insurance, less collision coverage, and then share shifts between the carriers. Those trends have been happening for a little while now. So maybe help us understand what the kind of inflection in the changes. Is there any actual market share shift between carriers as opposed to from you to a competitor or your competitor etcetera? Or any way we can think about this change in the speed of unit change?" — Bob Labick, CJS Securities

A: "I don't think so, Bob. I think it is the factors you just described, which is principally that insurance coverage itself has changed... I think notably to see earned car years down 4% and change while literally vehicles in operation and miles driven are up I think speaks to the underlying activity. So our unit trends — I don't think is substantially different. If you can envision literally 4% of policies no longer having coverage of any kind, and then some other portion migrating down the value chain, so to speak, from collision coverage to liability only or what have you? I don't think it's far-fetched to extrapolate from that to the kinds of unit trends that we're seeing in our business." — Jeff Liaw, CEO

Total Loss Frequency: Reading the Four-Quarter Flattening

The follow-up pressed on whether the modest 80bp YoY improvement in TLF — and the four-quarter "pause" before that — represented a structural shift in carrier behavior or a measurement artifact. The exchange surfaced management's strongest articulation of why the multi-decade trend remains intact and why short-window TLF moves are noisy:

Q: "Total loss frequency — I know it was up 80 basis points year over year, but it's been like modestly flattish for the last four quarters or so. And I know one year through Copart's lens is like a minute for the rest of us, meaning it's too short to register as matter. But that said, what do you think has caused the kind of the pause in the expansion over the last four quarters of total loss frequency? What are you seeing beneath the hood, so to speak, for decisions at carriers? Can it be as simple as one carrier's gaining share and they generally have a lower total loss frequency rate and that's impacting it? Or what could be driving this? And what do you think it takes to get that to grow again?" — Bob Labick, CJS Securities

A: "The total loss frequency in recently as 1990 was 5%, 1980 was 4%, and today's 22% and change. So it's up 80 basis points versus a year ago. I think — Bob, already that even the data in any given quarter often gets corrected the same way that the Bureau of Labor Statistics will later revise unemployment looking backwards. Because you now know more cars were actually totaled that were in the repair chain, or cars intended to be totaled were actually owner retained. So I think reading a whole lot into 80 basis points versus 130 or versus plus 30, I think is more noise than it is signal... we'll reach 25% and we'll reach 30%." — Jeff Liaw, CEO

ADAS as Bear Case and the Uninsured-Driver Capture Question

Two-part exchange on (a) whether the accident-frequency decline is cyclical (consumer underinsurance) or structural (ADAS finally moving the needle), and (b) whether vehicles totaled outside the insurance channel can still flow through Copart. The first question prompted management's clearest articulation of why ADAS is a non-thesis-breaker over any reasonable investment horizon; the second exposed both an existing channel (Cash For Cars / Copart Direct) and the structural inefficiency of consumer-direct sourcing relative to institutional carrier relationships:

Q: "Follow-up on a similar line of questions — are you confident that this broader trend in accident claims, which are down, is more of a cyclical phenomenon tied to this increase in uninsured motorists? Or is there any evidence that ADAS technology is finally starting to move the needle? ... And then just following up — what happens to those cars that are involved in a severe accident, are not covered by insurance, and are those vehicles you're able to capture on your platform somehow?" — Craig Kennison, Baird

A: "Safety technologies very much have moved the needle. And have done so for forty years... over the course of long-run history, it has declined. Been more than offset by total loss frequency... even if there were excellent technologies that were being released now that would altogether arrest vehicles from colliding, the algebra is such with annual shipments into the existing fleet that it still takes decades to turn the fleet over. So I don't think you could see something in a year's time that would reflect a fundamental change in vehicle mix and ADAS penetration... [On uninsured capture] the answer to that is yes. I think somewhat less efficiently... we have a consumer business and Cash For Cars that sources vehicles directly from consumers... it's a far less efficient pathway for that kind of sourcing of vehicles than is a long-standing institutional relationship with a major insurance carrier." — Jeff Liaw, CEO

Capacity and the 155% Land Investment Question

The most analytically pointed question of the call: gross PP&E in land is up 155% since 2019 but volumes are up only 30% over the same period — is capacity overbuilt? Stearns reframed the calculation around hurricane-event optionality, acknowledged the list of capacity-needed regions has shortened, and pointed to logistics-cost reduction (shorter tow distances) as a continuing return justification for new nodes:

Q: "If I zoom out, your gross PP&E in land is up 155% since 2019. Your volumes are up about 30%, let's call it, since then. So just curious how you think about capacity investment, not only for 2026 and beyond. Obviously, that is a ton of capacity no matter how you cut the data. The last six years — how do you think about it from here given how much you've already grown capacity?" — Chris Bottiglieri, BNP Paribas

A: "Some of the assets that we've acquired over the last several years have been for events, particularly around hurricanes in the U.S. And those may operate at a lower average utilization than the average Copart facility. So taking those out of the mix, I think we continue to have certain areas of the country where we continue to have capacity needs or projected capacity needs over the next five to ten years. I would say the population or the size of that list is much smaller today than what it was clearly five years ago. And so we'll continue, in a disciplined manner, to allocate capital into assets that fit that classification... certainly the list of areas of the country where we do have needs over the next five to ten years is shorter than it was five years ago." — Leah Stearns, CFO

Market Share Optics and the Progressive Compare

A practical question on whether Copart's reported insurance unit weakness is fundamentally a share-shift-to-Progressive story (and therefore mathematically self-correcting as the year-over-year comparisons lap) versus a continuing trend. Management declined to comment on individual accounts as a matter of policy, but reframed the broader industry as dynamic over long timeframes — implying that even the Progressive secular gain may not persist linearly:

Q: "Sort of going back to one of the early questions around share — and obviously the optics, given Progressive having gained share within the insurance business, you either need your partners to gain share from Progressive or you need to gain Progressive volume. Is there any outlook for that either? Are you any indication that you see that some of the insurers that you do business with are becoming relatively more competitive with Progressive, or is there an outlook for picking up some of that volume given your higher ASPs? ... Do the optics of the share improve as you lap — did Progressive pick up share that, if the market stabilizes, at least the year-over-year compares become more favorable?" — Bret Jordan, Jefferies

A: "We don't comment on individual accounts. I would say that the insurance industry itself has proven over the long haul very dynamic, with different players gaining and losing share episodically over many years... we have observed that trend. There certainly have been some long-term secular gainers as well, Progressive being one of them. But generally, over the very long haul, we do see a very dynamic picture in that regard, both quote for and against us in that sense... overwhelming focus is on delivering excellent gross and net returns and we trust that the rest of it will take care of itself over the long haul." — Jeff Liaw, CEO

Cyclical Tailwinds: Vehicle Depreciation, Parts Inflation, Insurance Affordability

An integrated question on three forward macro drivers — softer used-car prices easing the carrier's economics of total-loss decisioning, parts inflation continuing to pressure repair costs, and softening insurance rates potentially reversing the consumer-coverage-reduction headwind. Management treated each in turn as net-supportive to Copart's volume thesis, though notably acknowledged the ASP cross-current from softer used-car prices:

Q: "If you look at the factors that would drive the business going forward — we have vehicle depreciation now picking up. That probably picks up a little more with lease returns, so the cost of replacing could go down. Whereas on the flip side, you've got parts inflation that's up 4-5%. CCC did talk about the cost of repair not growing quite that much. And then obviously, you've got insurance rates appear to be coming down in certain instances, and obviously they get the combined ratio at all-time lows. Those all kind of point towards total loss frequency picking up, and then the issue with the uninsured and less insured. Do you view that as a tailwind maybe picking up in your business?" — Jeff Licht, Stephens

A: "When you say vehicle depreciation, you just mean softness in general in the used car market — possibly on the horizon. All else equal, that is a supportive factor for volume for our business. A soft market means that the economics of total loss, all else equal, are less costly to the insurance carriers than it otherwise would be. They're writing a check for $16,000 instead of $17,000 to total the vehicle — would on a margin drive more volume to us. It probably also means though — the U.S. market can be divorced somewhat from the international market, though do overlap in some regards — but it could also be somewhat softer selling prices for us, which of course has the opposite effect... [On parts] we do think there's still fundamentally inflation there, not just because the like-for-like part has inflated relative to where it was before, but also because of vehicle complexity, also because there are more sensors on the perimeter of a car that are increasingly difficult to repair. That drives more cars certainly to total loss as well... [On insurance rates] the potential softening in insurance rates would be supportive of our business as well. That would cause the cyclical phenomenon described earlier about under-insurance or foregoing insurance presumably to reverse." — Jeff Liaw, CEO

Capital Return: The Buyback Question

The most consequential question of the call for share-price modeling. With $5.2B in cash, no debt, and shares trading at multiples comparable to prior repurchase windows, the question pressed on whether 6-12 months of inaction on the buyback front reflects valuation discipline or macro uncertainty. The two-part response — Stearns on the framework, Liaw on the philosophy — was the closest the company has come to publicly telegraphing a near-term buyback initiation without committing to one:

Q: "The cash on the balance sheet at record levels, the multiple on the shares right now are very close to the multiples that you last time bought stock back. Just given all of the noise in the ecosystem, what are the reasons for maybe not being active on the buyback front maybe over the next six to twelve months? Would there be gating factors? Or do you just view the economic outlook is too uncertain? Or kind of what are your thoughts there?" — John Healy, Northcoast Research

A: "Generally, you can expect that Copart will continue to focus on deploying capital when we see areas that we believe will create meaningful long-term value... our first priority remains being to drive as much expansion as possible for the business through investments, whether it's in CapEx or M&A... to the extent that we have a view that long-term from a valuation perspective there's an opportunity to create meaningful value, we'll — we've historically used the share repurchase program through a couple of different means: open market purchases, tenders, etcetera. That would be our lever to return capital to shareholders. And nothing has changed on that front. [Liaw:] The fear — it wasn't that long ago, a decade and change ago that I was an investor myself — and one of the fears for a given company in accumulating too much cash or too strong a balance sheet is that they would in turn become reckless with their capital. And I think the evidence is there that there's very little risk of that at Copart. We still treat each dollar as though it's as precious as the last... we know it ultimately belongs to shareholders and we have bought shares back in the past. That's always been the mechanism by which we return cash to shareholders. There for sure will come a day if we do that again." — Leah Stearns, CFO / Jeff Liaw, CEO

What They're NOT Saying

Three observations on what was absent or under-discussed in the prepared remarks and Q&A:

1. No FY26 guidance — and no explicit volume framing. Copart historically does not issue formal guidance, which is consistent with the long-horizon philosophy management has cultivated. But notably absent today was any framing of the rest-of-FY26 volume expectation. Investors will be left to triangulate from (a) the cyclical-coverage-reduction dynamic, (b) the difficult Q2 cat comparison (no major hurricanes expected to replicate prior year), and (c) the gradual reversion of underwriting cycle conditions. Our base case: ex-cat US insurance volumes flat-to-modestly-negative through 1H FY26, returning to positive growth in 2H FY26 / FY27.

2. Limited color on Cash For Cars / Copart Direct economic contribution. The direct-buy reclassification was explained mechanically, but the absolute size and growth rate of the Cash For Cars business (which became more strategically visible during the uninsured-vehicle-capture exchange) was not discussed. Given that this becomes the cyclical-pullback hedge in the consumer-coverage-reduction story, we'd like more disclosure here.

3. Silence on the Manheim convergence question. Management repeatedly noted that US insurance ASPs grew at a rate exceeding the Manheim Used Vehicle Value Index. Implicit but unstated: if used-vehicle prices soften as Licht's question implied, the question is whether Copart's pricing power continues to differentiate or whether the gap compresses. Management's answer treated soft used prices as net-positive for volume but acknowledged the ASP cross-current. The interaction effect — soft Manheim, sustained Copart ASP outperformance — was not addressed directly. This is the data series we'll be watching most closely over the next 2-3 quarters.

Market Reaction

• Pre-print: CPRT closed November 19, 2025 at approximately $52.10, near the lower end of its 52-week range, with sentiment dampened by the four-quarter pattern of declining US insurance volumes.
• Day-of: Stock opened down ~3-4% on the unit-volume miss; recovered partially intra-day as the gross margin beat and pricing-power commentary registered with longer-horizon holders. Closed November 20 down approximately 2.1% on roughly 1.5x average volume.
• Peer reaction: IAA / Ritchie Bros. (RBA) traded modestly higher in sympathy — the read-across suggested the volume softness was Copart-specific or industry-cyclical rather than competitive-share-shift to RBA's salvage subsidiary.
• Volume: 1.5x average — meaningful but not panic. Options activity skewed toward longer-dated puts, suggesting hedging rather than aggressive directional shorting.

The market reaction was milder than the headline unit miss might have suggested, which we read as a sign that the long-only investor base bought the cyclical-coverage frame on first read. The fact that the stock recovered intra-day on management's prepared remarks and Q&A — particularly the five-indicator auction-liquidity walk — suggests the bull case argument is well-understood by the active holder base. We would not characterize current price action as reflecting elevated thesis risk; rather, it appears to reflect short-term patience taxation while the cyclical dynamic plays out.

Street Perspective

Model Implications & Thesis Scorecard

We make modest model adjustments off the print:

• FY26 revenue: Trimmed by 1-2% to reflect US insurance unit softness extending through 1H. Fully offset in gross profit by margin expansion; FY26 EPS unchanged.
• FY26 gross margin: Raised by 50bp on the demonstrated fee-per-unit leverage.
• FY26 EPS: Maintained at the high end of our prior range, reflecting margin offsetting volume.
• Cash forecast: Raised; we now model end-FY26 cash of $5.7-6.0B absent a buyback. With a buyback initiated, EPS leverage from share count reduction adds 2-4% to FY27 EPS depending on size and timing.
• Fair value range: $52-$62 maintained.

Thesis Scorecard

Rating & Action

Maintaining Outperform. Fair value range $52-$62 unchanged. The Q1 FY26 print is a "patience-tested" quarter in the rating arc — unit weakness is real and is the third consecutive quarter of negative US insurance volume, but every structural indicator of the business's compounding capability accelerated through this print. Pricing power widened the gap vs. peers; margin expanded on operating leverage; the auction-liquidity moat as measured across five empirical indicators reached its strongest level in the post-COVID era; cash continued to compound. The cyclical consumer-coverage-reduction story is the most credible explanation for volume softness, supported by industry-wide data (ISS Fast Track, BLS-style data revisions on TLF), and we model its reversal through 2026 as insurance affordability improves.

The buyback signal from Liaw — "there for sure will come a day if we do that again" — is the most forward-leaning capital-return commentary we have heard from this management team. Combined with moderating CapEx and accelerating cash accumulation, we view a buyback initiation within 2-3 quarters as the most likely scenario. That would be material upside to our base case but is not required to validate the rating.

We would be adding on weakness, particularly if the stock breaks the lower end of the $52-$62 range on continued volume softness without thesis change.