Copart (CPRT) — Q2 FY2026 Earnings Recap

Results vs. Consensus

Q2 FY26 Scorecard

YoY Comparison

QoQ Comparison

Segment Performance

US Segment

US revenue $922M, down 5.5% reported, flat ex-cat. Insurance volumes –10.7% (–4.8% ex-cat); Dealer Services +5%; BluCar commercial consignment –11.8% on rental-customer repair activity (rentals had higher in-fleet repair rate this quarter, deferring vehicle dispositions) partially offset by continued double-digit growth in fleet and bank/finance seller volumes. Reported US purchase units –23.6%, –8% on a direct-buy-normalized basis. Insurance ASPs +6%, +9% ex-cat; non-insurance ASPs +2%. US gross profit $430M (–7.2% reported, –1.6% ex-cat); gross margin 46.6%; operating income $342M (–9.2% reported, –2.3% ex-cat); segment operating margin 37.1%. US inventory –8.1% YoY; assignments down low single digit.

International Segment

International revenue $200M, +6.1% reported, +7.7% ex-cat, including $13.4M favorable FX. Service revenue +7.7% (+9.4% ex-cat) on fee revenue per unit +7.6%. Total units –0.7%, +1% ex-cat. Insurance units –2.6%, –1% ex-cat. Non-insurance units +9.1%. International insurance ASPs +9%. Gross profit +0.9% — held back by the $6.8M one-time VAT accrual — and operating income $47.2M at 23.6% operating margin.

Purple Wave (Equipment Auction)

GTV growth +17% TTM, continuing to outpace the broader heavy-equipment auction market (which is currently constrained by tariff-policy-driven decision paralysis among equipment sellers and buyers). Growth driven by expansion-market penetration and enterprise account additions.

Key Topics & Management Commentary

1. The Buyback Initiation

"During the second quarter, we began to repurchase shares of our common stock through open market purchases and have subsequently repurchased shares under a 10b5-1 plan through the month of February. Fiscal year-to-date, we have repurchased over 13 million shares for an aggregate amount of over $500 million." — Leah Stearns, CFO

"There's no particular witchcraft or anything magical to it. I think it's a function of what general valuation multiples are and where interest rates are, our own views of Copart relative valuation in comparison, and also the general long-term perspective that we return capital to shareholders via buybacks. So the fact that we're doing them is, in some respects, inevitable. I think we plus or minus said that in the past. The fact that we're doing them right now is a function of all of the aforementioned." — Jeff Liaw, CEO

This is the most significant operational news of the print and validates the capital-return signal we flagged in our Q1 recap. Three structural points: (1) Magnitude — $500M+ in a single fiscal half is the largest near-term repurchase pace Copart has executed in years; (2) Execution — combination of open-market purchases and 10b5-1 plan suggests programmatic ongoing repurchase rather than one-time opportunistic; (3) Framework — Liaw explicitly named the inputs (valuation multiples, interest rates, internal view of relative valuation) as the calculus, implying that current setup met the bar.

2. The Cyclical Insurance Dynamic — Year Four Quarters In

"A good portion of the industry, as you know, had passed through finally with the approval of various regulatory bodies, rate increases over the course of the past few years, long after, frankly, the carriers themselves had experienced underlying cost inflation in the repair universe, labor and otherwise. So there's a lagging effect... today, they have now far healthier income statements, but also compromised growth as a result. I think historical trends are any guide, there are ebbs and flows in that regard and many or some will begin reinvesting in growth and driving policy growth in the form of both marketing dollars as well as more competitive approaches to rates as well." — Jeff Liaw, CEO

Management's cyclical-pullback frame is now in its fourth consecutive quarter of articulation. The mechanism: (a) carriers experienced cost inflation 2021-2023; (b) regulatory approval to pass through rate increases lagged; (c) carriers now report healthier underwriting margins but compromised policy-in-force growth; (d) consumer response to higher rates has been coverage reduction (collision drop-off, higher deductibles, going uninsured); (e) the cycle should eventually reverse as carriers reinvest in growth via marketing and more competitive rate posture.

3. Total Loss Frequency: 24.2% in Q4 Calendar 2025

"In the United States, total loss frequency was 24.2% in the fourth quarter of calendar year 2025, a slight 10 basis point uptick from a year ago. The year ago period, of course, does include the effects of Hurricanes Helene and Milton. It's notable that total loss frequency has increased over that period, nonetheless. Then when you step back a bit over a multiyear horizon, the upward trajectory becomes clearer still. Total loss frequency in calendar year 2015 was 15.6% in comparison to 23.1% in calendar year 2025." — Jeff Liaw, CEO

The TLF disclosure is structurally the most important data point in the print and the bear-case rebuttal. Three numbers anchor the analysis: 15.6% in 2015, 23.1% in 2025 full year, 24.2% in Q4 calendar 2025. That's +750 basis points over a decade — and remarkably, the Q4 2025 print is +10bp YoY against a prior period that contained Helene and Milton cat events, which mechanically distorted the prior-year number upward.

4. Pricing Power: ASPs Outpacing Manheim Yet Again

"As you know, industry-wide vehicle values have normalized somewhat from the elevated levels we observed during supply chain constrained period of 2021 and 2022 as evidenced by Manheim indices and otherwise. We are nevertheless generating record average selling prices for our U.S. insurance consignors." — Jeff Liaw, CEO

The Manheim Used Vehicle Value Index has trended downward through 2025 as the post-COVID inflation in used vehicle prices has unwound. Copart's US insurance ASPs, by contrast, set new records this quarter (+9% ex-cat). The spread between Copart's ASP performance and the Manheim benchmark is the cleanest "moat translating to dollars" metric the company can produce.

5. AI Deployment — Liaw Personally Engaged

"We have deployed artificial intelligence at scale along multiple dimensions across our enterprise, including my own significant personal engagement in Quad code and other such platforms. We've observed, not surprisingly, an exponential monthly increase in use by our own in-house team of engineers. With approximately 1,000 full-time engineers across North America, Europe and Asia, we have by a healthy margin, the most robust and experienced bench of technology talent in the industry and the tech platform to show for it. Artificial intelligence is turbocharging their productivity day-to-day. We have also deployed our artificial intelligence in business analytics, document processing, our call for release processes, driver dispatch and so on and so forth. As one commercial example, 2 full years ago, we launched a total loss decision tool to the industry, which assists insurance carriers in making expedited total loss decisions with limited information, including, for example, a small sample of photos and otherwise." — Jeff Liaw, CEO

This is the most direct AI commentary Liaw has delivered. Three structural points: (1) Personal engagement — CEO is hands-on with code-generation tools; (2) Scale — 1,000 engineers, multi-continent footprint, exponential month-over-month tool adoption; (3) Customer-facing application already 2 years deployed — the total-loss-decision tool helps carriers make expedited total-loss decisions from limited photo data, a meaningful service revenue and stickiness lever.

6. Cycle Time Advantage and the Tow Network Scale

"To deliver excellent pickup times, we operate the largest tow network in the industry by a long shot, a unique combination of third-party subcontractors, owned trucks and employed drivers and what we call truck-in-a-box operators, who are independent third-party drivers who leverage Copart's purchasing and financing scale for their vehicles. All of these service providers benefit from Copart's best-in-class route density to optimize performance and cost. Finally, our Title Express offering, the process by which we obtain loan payoff balances and accelerate the retrieval of original titles, whether held by the banks or by individual policyholders, is by a factor of 5x or more the largest such platform in our industry. In many cases, we deliver cycle times 10 days better or more than the insurance clients can deliver on their own." — Jeff Liaw, CEO

The detailed operational disclosure was unusually direct. Three moat layers within cycle-time advantage: (a) tow network scale and structure (subcontractors + owned + employed + "truck-in-a-box" independent operators leveraging Copart's purchasing scale); (b) route density advantage from underlying volume; (c) Title Express 5x+ next-largest competitor.

7. The Industry Cyclicality of Carrier Share Shifts

"There is — as you know, there's cyclicality in the auto insurance industry itself, which you'll see in the form of premium growth and contraction. You'll see in the form of combined ratios and so forth... we may be in a uniquely or unusually Copart adverse moment in time in that respect, right, that some of the carriers that we are strongest with, have not grown as much in the course of the past 12 or 24 months. But over the long haul, we view those trends as often more cyclical than they are secular." — Jeff Liaw, CEO

Liaw's explicit framing — "we may be in a uniquely or unusually Copart adverse moment in time" — is the clearest acknowledgment that current carrier-share dynamics are running against the platform. The structural argument: carrier share is cyclical and reverts; Copart's strongest carrier relationships have under-grown for 12-24 months but will mean-revert; the industry's combined-ratio recovery suggests carriers will reinvest in growth through 2026.

8. Sales Force Buildup — What Did Copart Learn?

"It probably oversimplifying the picture to say it's merely the sales force itself for sure. We have invested in our commercial capabilities, as you described them, but also in product and tech... whether it's the services we provide to the insurance carriers in the form of Title Express, the artificial intelligence back to tools and so on and so forth... we do believe it drives differential returns to us, both in the form of unit volume, better selling prices, better economics period overall... we basically treat each expenditure as its own decision that needs to be warranted by the economics." — Jeff Liaw, CEO

The multi-year SG&A investment cycle has now stabilized into operating leverage. The sales-force build, combined with product/tech investments (Title Express, AI tooling), drives both unit-volume capture and ASP/economics on the units captured. Liaw's framing — every dollar evaluated on its own economic warrant — is the disciplined-capital-allocation framework that distinguishes Copart from peers.

9. Land Capacity: Still Investing, But With Greater Selectivity

"Today, I think we are in an incredibly strong position relative to where we were, say, a decade or even longer ago... But we are still focused on where we want to be positioned 10 years from now. And that ultimately may require additional investments in land. Certainly, faster cycle times will allow us to use our land on a more efficient basis... we'll continue to use that same discipline and that same approach." — Leah Stearns, CFO

"This is a dynamic puzzle, as you know, with industry trends and distribution of vehicles and population and so forth that land acquisition and development by its nature is a long lead time activity, right? So we can't wake up one morning and discovered that we suddenly need dramatically more land in the state of X and be able to respond accordingly. So we have to account for some margin, which we effectively do across the United States and invest accordingly. But for sure, as Leah said, we are in a far more robust position than we once were." — Jeff Liaw, CEO

Liaw recapped the 2016-launched "20/20/20" initiative (20 acquired facilities, 20 expanded facilities, 20 months) and the buyout of previously-leased facilities. Today's position is "considerably stronger" with dedicated catastrophic facilities and many hundreds of acres of optionality-valuable hurricane-response capacity. Land investment will continue but more selectively.

10. AI Disruption Risk and the Moat

"I think we're always appropriately paranoid about disruption and the directions that it could come from... I think the fundamental moats that ultimately define who we are, still are physical storage capacity for sure, a global liquid buyer base for sure, a highly recognized online auction platform, deep regulatory knowledge across 50 states, across a multitude of countries right? that is in and of itself a barrier entry as well. And then as for where those disruptive dimensions might be on the technology front, we're hell bent on making sure that we do it first." — Jeff Liaw, CEO

The moat layers per Liaw: (1) physical storage capacity, (2) global liquid buyer base, (3) online auction platform recognition, (4) regulatory knowledge across 50 states and multiple countries, (5) AI investment leadership ("hell-bent on making sure that we do it first"). The disruption-paranoia framing is healthy — companies that don't think about disruption are the ones that get disrupted.

11. Heavy Equipment Through the Tariff Cycle

"At the time we made the investment in our Purple Wave platform, I think we had not fully appreciated the disruption that the tariff complex would introduce into the industry and the uncertainty that it would inject into the industry for heavy equipment, right? It has caused something of a medium-term paralysis as folks didn't know if they should be selling because prices might go up or they should be buying because prices might go down. It has introduced some friction into an industry that had previously been more liquid." — Jeff Liaw, CEO

The acknowledgment that the original Purple Wave thesis didn't fully account for tariff disruption is unusual candor for Liaw. Despite the industry headwind, Purple Wave GTV grew 17% TTM — outperforming the broader heavy-equipment auction market materially. The platform is gaining share through the cycle bottom.

Analyst Q&A

What Reverses the Insurance Volume Trend

The opening question probed the macro factors — excluding TLF — that management is monitoring as leading indicators for a return to industry volume growth. The exchange surfaced the insurance-rate-cycle mechanism as the most direct lever, with a clear forward narrative: carriers have absorbed cost inflation, passed through rate increases, and now have healthier income statements but compromised growth — setting up a future reinvestment phase that should restore policy growth and earned car years:

Q: "You talked a little bit about some of the macro factors, claims frequency and lower earned car miles we talked about last call and stuff, trending similarly to prior calls. What are the things you guys are watching to see changes that will change this trend line and get the industry volumes back to growth going forward? I know, obviously, total loss frequency will impact that as well. But excluding total loss frequency, what are the other kind of macro factors that we can watch and you're watching to get industry volumes back to growth?" — Bob Labick, CJS Securities

A: "There's cyclicality in the auto insurance industry itself, which you'll see in the form of premium growth and contraction. You'll see in the form of combined ratios and so forth. And I think a good portion of the industry... had passed through finally with the approval of various regulatory bodies, rate increases over the course of the past few years, long after, frankly, the carriers themselves had experienced underlying cost inflation in the repair universe, labor and otherwise. So there's a lagging effect... so today, they have now far healthier income statements, but also compromised growth as a result. I think historical trends are any guide, there are ebbs and flows in that regard and many or some will begin reinvesting in growth and driving policy growth in the form of both marketing dollars as well as more competitive approaches to rates as well." — Jeff Liaw, CEO

Sales Force Investment ROI and the SG&A Leverage Question

A natural follow-up on whether the multi-year SG&A investment cycle — particularly the commercial team buildout — has delivered measurable returns. The exchange offered a useful disciplinary insight: Copart's framework is to evaluate every dollar of SG&A on the specific economic warrant of the underlying initiative, not as an aggregate cost-leverage metric:

Q: "SG&A has been back to getting generally operating leverage have been flat after a period of time where you had growth for multiple reasons. One of them was the sales force buildup. So I was wondering maybe if you could just give us a sense of what you've learned from that sales force — what you've learned from the buildup? What are the expected returns and outcomes from the larger sales force? And how have they been — what are the successes and failures so far from that?" — Bob Labick, CJS Securities

A: "I think it probably oversimplifying the picture to say it's merely the sales force itself for sure. We have invested in our commercial capabilities, as you described them, but also in product and tech. And along these other dimensions you've heard us talk about, whether it's the services we provide to the insurance carriers in the form of Title Express, the artificial intelligence back to tools and so on and so forth... we do believe it drives differential returns to us, both in the form of unit volume, better selling prices, better economics period overall... we basically treat each expenditure as its own decision that needs to be warranted by the economics. Every investment we make is justified by the economics of this specific project itself." — Jeff Liaw, CEO

Land Capacity Need Over the 1/5/10 Year Horizon

A multi-horizon question on whether Copart's capacity investment cycle is meaningfully complete. The exchange combined Stearns' forward framework with Liaw's retrospective on the 2016-launched "20/20/20" initiative — and concluded that despite a materially stronger asset base today than a decade ago, the long-lead-time nature of land acquisition requires continued margin-of-safety investment:

Q: "I wanted to ask about your land capacity needs. If you look at or project your volume for the next 1-, 5- and 10-year period and take into account faster cycle times that you've experienced, but also whatever market share dynamics are out there, how would you frame your need to invest in additional land capacity?" — Craig Kennison, Baird

A: "Today, I think we are in an incredibly strong position relative to where we were, say, a decade or even longer ago. That has been a result of very disciplined and focused investment in the magnitude of several hundreds of millions of dollars per year. But we are still focused on where we want to be positioned 10 years from now. And that ultimately may require additional investments in land. Certainly, faster cycle times will allow us to use our land on a more efficient basis. [Liaw:] I think it was now April 2016, so almost exactly 10 years ago, we launched the 20/20/20 initiative in which we were going to acquire 20 facilities, expand 20 facilities in the course of 20 months in recognition that the industry was growing and that we were shorter on capacity than we should be... we now have dedicated catastrophic facilities, as you're well aware, in the many hundreds of acres of otherwise idle land in anticipation of storms... we have to account for some margin, which we effectively do across the United States and invest accordingly." — Leah Stearns, CFO / Jeff Liaw, CEO

AI Disruption Risk to the Marketplace Moat

A timely question on whether AI-driven entrants could disrupt the established marketplace moat. The exchange surfaced Liaw's five-layer moat decomposition (physical storage, global liquid buyer base, online auction platform recognition, regulatory knowledge, AI investment leadership) and emphasized the company's "appropriate paranoia" disposition — a healthy tone for a 40-year incumbent in a technology-shifting industry:

Q: "Just a follow-up on your AI commentary. Certainly, it's been a big topic, especially in the last week. But could you maybe share with us where you see any disruption risk to what Copart does and where you feel well defended by your moat as it stands today?" — Craig Kennison, Baird

A: "I think we're always appropriately paranoid about disruption and the directions that it could come from. So we are always acutely aware of the need to disrupt ourselves and to inject the technology in all the places where we could enhance productivity first, but also deliver a better experience still to our sellers and buyers... I think the fundamental moats that ultimately define who we are, still are physical storage capacity for sure, a global liquid buyer base for sure, a highly recognized online auction platform, deep regulatory knowledge across 50 states, across a multitude of countries right? that is in and of itself a barrier entry as well. And then as for where those disruptive dimensions might be on the technology front, we're hell bent on making sure that we do it first." — Jeff Liaw, CEO

Pricing Competition vs. Delivered Economic Outcomes

A direct question on whether peer pricing competition explains Copart's underperforming unit growth dynamics — the exchange surfaced one of the most important strategic framings of the call: Copart's pricing approach is anchored not on fee competition but on "delivered economic outcomes" — total selling price plus cycle-time benefits net of fees — a sales argument that is empirically winnable but requires the right audience:

Q: "I've a question about market share dynamics. Do you think it's becoming more price competitive as the other player in the space doing either rebating or discounting or pricing delta to you that would explain what seems to be a differential in unit growth. Obviously, you've got the title transfer product and the cycle times and the foreign buyer base that would suggest that Copart might be a better outcome. But I guess how do we think about the differences that we're seeing in units recently?" — Bret Jordan, Jefferies

A: "The unit growth phenomenon, I think, is described — is explained in part by just differential growth rates in the insurance industry itself, right, which is to say if we didn't win any accounts from others in the industry and they didn't win any from us, there still is a delta in the growth rate of our underlying customers themselves that can explain a 'market share shift,' right, without literally losing one account one way or the other. That said, our industry has always been price competitive for the years that I've been here... Today, we are increasingly competing on the basis of delivered economic outcomes, which is a far better lens through which to view the Copart business... it's not just the X that you are paying to Copart or to your alternative providers, but it is the delivered economic outcome, which is, first and foremost, overwhelmingly so the selling price for the vehicle that you're selling at the platform. Secondarily, the cycle times... in virtually every case in which we have run the test empirically, the data bears out of that thesis that the returns that we generate dwarf any other differences that you could perceive in the full stack P&L." — Jeff Liaw, CEO

Capital Allocation Tools and the Buyback Mechanics

Following the company's buyback initiation disclosure, the natural follow-up: is open-market repurchase the right tool, or might Copart consider an accelerated program or Dutch tender? The response was philosophically interesting — Liaw treated the mechanism choice as "more rounding error than not" — emphasizing that the strategic decision was to return capital, not the specific tactical wrapper. This is consistent with Copart's broader capital-allocation philosophy of treating each decision on its own discrete merits:

Q: "On capital allocation, obviously, you're being pretty direct with the repurchase visibility now. But is this the right tool for you guys? Do you see yourselves just using open market purchases? Or do you look to kind of evaluate maybe something more formal or conceptual in terms of accelerated program or something like that? Or do you think this is just the right approach for right now?" — John Healy, Northcoast Research

A: "Over the course of my tenure, and I think over the course of Copart's 40-something year history, we've used a range of different tools including open market purchases as we've recently executed all the way to more structured Dutch tenders and the like. We always evaluate the full range of tools by which to execute the strategy. I think on the margin, I think that's ultimately more rounding error than it's not. I think what you've seen us conclude is that it made sense to buy Copart shares back as a way to distribute capital back to shareholders to distribute some of the cash flow that we had generated over the years back to shareholders. We thought this was an opportunistic time to do so, and this is the mechanism we chose to use in the moment." — Jeff Liaw, CEO

Why Now for the Buyback & Catalysts for Unit Inflection

A two-part question that closed on the most pressing forward-looking issues: the philosophical "why now" for the buyback decision and the practical question of what would catalyze an inflection back to positive insurance unit growth. The response on buyback was matter-of-fact — valuation, rates, internal view, long-term framework — with no hidden catalyst, while the unit-growth answer mapped a multi-driver framework: non-insurance unit growth continuing, BluCar segment growth, eventual insurance-carrier reinvestment in growth as the industry cycle turns:

Q: "Since you guys did make the decision to buy back shares and you're very deliberate in how you do everything, why did you view now is the time to do it? ... And as you think about units inflecting positive, is there any particular catalyst that you look for? Or will it just be the law of negative numbers getting less negative?" — Jeff Lick, Stephens

A: "On the share buybacks, there's no particular witchcraft or anything magical to it. I think it's a function of what general valuation multiples are and where interest rates are, our own views of Copart relative valuation in comparison and also the general long-term perspective that we return capital to shareholders via buybacks, right? So the fact that we're doing them is, in some respects, inevitable... [On unit inflection] our growth in the noninsurance world has continued. In the insurance universe, I think you've heard us describe the under insurance or insurance purchasing behavior of consumers as a cyclical matter. We believe that's true. We believe the historical numbers would back that up. As for the shifts of policies among different carriers, we believe that to some extent, that's cyclical as well, right, that we do see growth ebb and flow across any individual carrier. We may be in a uniquely or unusually Copart adverse moment in time in that respect, right, that some of the carriers that we are strongest with, have not grown as much in the course of the past 12 or 24 months. But over the long haul, we view those trends as often more cyclical than they are secular." — Jeff Liaw, CEO

Uninsured Vehicle Flow and the Junk-Unit Reclassification

A question on whether Copart's deemphasis of low-value units (sub-$1,000 pre-accident value, routed through the direct-buy channel) is contributing to the reported volume softness relative to broader salvage industry trends. The exchange usefully reframed the underlying economics — these are not units Copart wants in its primary auction inventory anyway — and surfaced the actual fate of uninsured-driver vehicles, which mostly flow into impound yards, owner-retained pathways, or Copart's own Cash For Cars channel:

Q: "Just wanted to start with a question on the headwind from rising mix of uninsured customers. Jeff, as you've noted previously, these vehicles are still getting into accidents, but maybe flowing through alternate channels. With Copart having deemphasized the low-value units from some of these channels, has this led to an additional pressure on Copart's overall volume growth relative to the broader salvage industry, including the noninsurance channel?" — Jash Patwa, JPMorgan

A: "I don't think so. Most of the lower value units are units that are less than $1,000 in pre-accident value. So they are very old nondrivable what the industry would consider junk units. I think the units that we are seeing flow through on the uninsured or underinsured side, are likely ending up in impound yards. They're likely ending up retained with the driver, but they then need to find a way to either get it repaired or dispose of the vehicle. So ultimately, some of those vehicles end up at our cash for cars business. Some of them may end up being auctioned or sold through an impound yard. So there are other avenues in which those vehicles could be disposed of." — Leah Stearns, CFO

What They're NOT Saying

Three observations on what was absent or under-discussed:

1. No specific buyback authorization ceiling disclosed. $500M+ executed YTD but no forward authorization size revealed. We assume the existing share repurchase authorization is large enough not to require Board action in the near term, and that the 10b5-1 plan provides programmatic ongoing execution. We'd model an additional $500M-$1B in capacity to absorb buyback continuation through 2H FY26.

2. No explicit margin guidance for cat-driven volume in 2H FY26. Q1 of last year was a heavy cat quarter; Q2 of last year was also impacted; Q3 / Q4 last year had less cat exposure. The forward cat-comp arithmetic flips around mid-FY26 — meaning reported volumes should look better organically by Q3-Q4 FY26 as the prior-year base normalizes. Management didn't quantify this but the math is clear.

3. Limited disclosure on commercial consignment timing dynamics. BluCar (commercial consignment) declined 11.8% on "higher repair activity among our rental customers" — a one-quarter timing item — partially offset by double-digit fleet and bank/finance growth. We'd like more granular disclosure of the rental-customer dynamic next quarter, particularly whether the rental "higher repair activity" is one-quarter-specific or a multi-quarter trend.

Market Reaction

• Pre-print: CPRT closed February 18, 2026 at approximately $54.50, having recovered modestly from the post-Q1 sell-off as buyside positioning normalized to the cyclical-coverage frame.
• Day-of (after-hours): Stock initially traded down ~1.5% on the volume miss, then reversed to up ~2% within an hour as the buyback disclosure registered. Closed the after-hours session up ~2.5%.
• Next-day: Stock opened up 3-4% on heavy volume as buyside refined models for the buyback impact on share count and per-share metrics. Closed February 20 up approximately 3.8% on ~1.8x average volume.
• Peer reaction: RBA (Ritchie Bros.) traded flat — the read-across was neutral. Insurance carrier stocks were also mostly flat, suggesting the market saw the Copart print as Copart-specific (buyback story) rather than industry-rotational.

The post-print rally on the buyback news is the cleanest market signal that the capital-return inflection is the dominant narrative of the print. The street had largely priced in the cyclical unit dynamics; the buyback was the surprise factor, and the magnitude — $500M+ YTD, 13M+ shares retired — was meaningfully above prior buy-side modeling. The reaction validates our Q1 thesis that the buyback initiation was the most likely near-term catalyst.

Street Perspective

Model Implications & Thesis Scorecard

Model updates off the print:

• FY26 revenue: Maintained — unit softness in line with our Q1 model adjustment; ASP power delivering as modeled.
• FY26 gross margin: Maintained at the upper end of our prior range; one-time VAT accrual is non-recurring.
• FY26 EPS: Raised by 1-3% reflecting buyback-driven share-count reduction across 2H FY26.
• FY27 EPS: Raised by 2-4% reflecting continued buyback execution and partial recovery of cyclical insurance volumes.
• Cash forecast: Trimmed to end-FY26 at $5.5-5.8B from prior $5.7-6.0B reflecting $1.5-2B FY26 buyback offset by FCF growth.
• Fair value range: $52-$62 maintained; we would expect upward pressure on the range as the buyback compounds into per-share metrics.

Thesis Scorecard

Rating & Action

Maintaining Outperform. Fair value range $52-$62 unchanged. This is the buyback-initiation quarter we modeled in our Q1 recap, fired earlier and at greater magnitude than our base case. $500M+ YTD repurchase / 13M+ shares retired through the 10b5-1 plan; Liaw's "inevitable" framing on continued capital return; FCF up 58% YTD generating cash faster than the buyback consumes it. The fundamental story is intact: US insurance ASPs +9% ex-cat (yet again outpacing Manheim and 3x service-provider peers); TLF at 24.2% in Q4 cal 2025 vs 15.6% in 2015 (the multi-decade secular signature continuing); margin discipline holding ex-cat and ex-VAT; international resilient; AI investment compounding.

The cyclical insurance dynamic is now in its fourth consecutive quarter and is the primary investor controversy. We continue to view it as cyclical (insurance-industry combined ratios at decade-lows; carriers approaching a reinvestment-for-growth phase; consumer rate-sensitivity meaningful but mean-reverting). We model insurance unit volumes returning to positive YoY growth in 2H FY26 / 1H FY27.

The capital-return inflection is the major upside revision. At current pace, buyback could reach $1.5-2B in FY26, materially reducing share count and driving EPS compounding. We expect the buyback to continue at $400-600M/quarter through 2H FY26 absent a material valuation reset. We would expect upward pressure on our fair value range as the buyback compounds; we hold the range at $52-$62 for now pending a full quarter of post-initiation execution data.