Copart, Inc. (CPRT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call shows strong financial performance with increased gross profit and operating income, especially in the U.S. segment. International growth is solid despite some declines in ASP. Liquidity is strong with no debt. The Q&A highlights some concerns about insurance coverage changes and market dynamics, but overall, the business outlook is positive with strategic investments and growth in key segments like BluCar. The market strategy, including disciplined capital allocation, supports a positive sentiment.
Key Financial Performance
Global insurance units Declined 8.4% or 5.6% excluding catastrophic volumes from a year ago. The decline is attributed to market share evolution among insurance carriers, soft claims counts due to consumer retrenchment in auto insurance purchasing behavior, offset by rising total loss frequency.
U.S. insurance units Declined 9.5% or 7.3% excluding catastrophic activity. The decline is due to similar reasons as global insurance units, including market share evolution, soft claims counts, and rising total loss frequency.
Total loss frequency (U.S.) Increased to 22.6% for the calendar year 2025 through September, an increase of 80 basis points year-over-year. This is part of a long-term upward trend.
Global insurance ASPs Increased 6.8% year-over-year. This reflects all-time high average selling prices for U.S. insurance carriers, even surpassing the inflationary COVID era.
U.S. insurance ASPs Increased 8.4% year-over-year. This growth rate eclipsed the Manheim Used Vehicle Value Index and similar service providers.
Consolidated revenue Grew just under 1% year-over-year or 2.9% excluding catastrophic events, to $1.16 billion. Service revenue increased just under 1%, and purchased vehicle sales increased nearly 2%.
Fee revenue per unit Increased over 7% during the quarter, driven by growth in average selling prices, which increased 8.5% from the prior year period.
Global gross profit Increased 4.9% or 3.7% excluding catastrophic events, to $537 million. Gross profit per fee unit increased 12.3%, while purchased unit gross profit decreased 3% to $22 million.
Gross margin Improved 184 basis points to 46.5%, reflecting the nonrecurrence of one-time expenses related to catastrophic response.
Operating income Rose 6% or 4.5% excluding catastrophic events, to $431 million.
Net income Increased 11.5% to $404 million, driven by revenue growth, margin expansion, and growth in interest income.
Earnings per diluted share Increased 10.8% to $0.41.
U.S. segment revenue Increased 0.5% or 2.3% excluding catastrophic events, reflecting a decline in unit volume offset by an increase in revenue per unit.
U.S. fee revenue per unit Increased 7.5%, driven by higher average selling prices, including U.S. insurance ASPs, which increased 8.4%.
U.S. gross profit Increased 3.7% to $464 million. Gross profit per fee unit increased 13.2%, and U.S. segment gross margin rose to 48.7%.
U.S. segment operating income Increased 5.6% to $375 million, reflecting strong execution and cost control.
U.S. segment operating margin Increased nearly 200 basis points to 39.4%.
International segment revenue Increased 1.6% or 5.7% excluding catastrophic events, to $202 million. Service revenues increased 7.9% or 13.9% excluding catastrophic events.
International fee revenue per unit Increased 8.1% year-over-year.
International average selling price for insurance units Declined 2.4% year-over-year.
International gross profit Grew 13%, reflecting operational efficiency and investments in yard capacity, technology, and logistics.
International operating income Was $56 million, with a 27.5% operating margin, showing continued expansion.
Liquidity Ended the quarter with $6.5 billion, including $5.2 billion in cash and cash equivalents, and no debt.
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Operating Highlights
Purple Wave GTV growth: Purple Wave's GTV growth of over 10% over the last 12 months continues to outperform the broader industry, reflecting strong buyer engagement in expansion markets, growth in enterprise accounts, and sustained demand in the heavy equipment category.
International insurance growth: Strong insurance growth across diversified international footprint, including in the U.K. and Canada. International service revenues increased 7.9% or 13.9% excluding catastrophic events.
International buyer participation: International buyers purchased vehicles 38% higher in value than comparable U.S. buyers, with international demand continuing to grow.
Auction liquidity and returns: Higher pure sale rates, expanding international demand, greater bidder participation, stronger pre-auction engagement, and rising gross returns collectively attest to Copart's competitive advantage in delivering full and fair prices.
Cycle time improvements: U.S. cycle times decreased by 9% from the prior year period, increasing processing capacity of existing facilities and reducing inventory levels by over 17%.
Noninsurance/wholesale business expansion: Rising total loss frequency has enabled progress in noninsurance/wholesale business, attracting sellers such as rental car companies, financial institutions, and corporate fleets. Specialized systems for receiving inspection, condition reporting, and arbitration have been developed to meet unique needs of these partners.
Investment in technology and infrastructure: Continued investments in storage capacity, technology, and logistics infrastructure to support long-term growth in both U.S. and international markets.
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Risk or Challenges
Decline in Global Insurance Units: Global insurance units for the first quarter of 2026 declined 8.4%, with U.S. insurance units declining 9.5%. This decline is attributed to market share evolution among insurance carriers, soft claims counts due to consumer retrenchment in auto insurance purchasing, and reduced insurance coverage by consumers.
Consumer Retrenchment in Insurance Purchasing: Consumers are responding to late-cycle insurance rate increases by reducing the scope of their coverage or foregoing it altogether, leading to fewer vehicles entering the insurance-mediated total loss process.
Impact of Catastrophic Events: The absence of catastrophic events, which contributed to higher unit volumes in the prior year, has negatively impacted year-over-year unit growth.
Economic and Geopolitical Uncertainty: Uncertainty in the macro and geopolitical environment is causing delays in equipment purchases and sales, impacting the heavy equipment category and broader market demand.
Decline in International Insurance ASPs: Average selling prices for international insurance units declined by 2.4% year-over-year, which could impact revenue growth in international markets.
Shift in Insurance Customer Contracts: Some international insurance customers have migrated from purchase contracts to consignment contracts, leading to a decline in purchased vehicle revenue.
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Guidance & Outlook
Insurance Business Trends: The company anticipates a continued long-term upward trend in total loss frequency, which has been a consistent pattern in the industry. Rising total loss frequency is expected to support growth in the noninsurance vehicle business as more vehicles become repairable and drivable again.
Noninsurance/Wholesale Business Growth: Copart expects ongoing progress in the noninsurance/wholesale business, driven by rising total loss frequency. The company is leveraging its platform to attract buyers and sellers, including rental car companies, financial institutions, and corporate fleets. Investments in specialized systems for commercial sellers are expected to enhance this segment.
Auction Liquidity and Returns: The company projects sustained and expanding advantages in auction liquidity and returns. Key indicators include higher pure sale rates, growing international demand, increased bidder participation, stronger pre-auction engagement, and rising gross returns. These trends are supported by investments in storage capacity, technology, and personnel.
International Market Trends: Copart foresees long-term durable trends in international demand, driven by population growth and mobility demand outside the U.S., U.K., and Canada. International buyers are purchasing vehicles at higher values compared to U.S. buyers, and this trend is expected to continue.
Operational Efficiency: The company is focused on reducing cycle times and improving processing capacity at existing facilities. These efforts are expected to enhance operational efficiency and support future growth.
Purple Wave Expansion: Copart is investing in its Purple Wave online equipment auction platform, which has shown over 10% growth in gross transaction value over the last 12 months. The company expects sustained demand in the heavy equipment category and growth in expansion markets.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What caused the larger-than-expected decline in unit volumes?
A:The decline in unit volumes is attributed to changes in insurance coverage, such as a 4% decrease in earned car years despite an increase in vehicles in operation and miles driven. This reflects a shift in policies, with some moving from collision coverage to liability only or having no coverage at all.
Q:Why has total loss frequency been modestly flat over the last four quarters?
A:The flatness in total loss frequency is attributed to noise rather than a fundamental change. Historical data shows a steady increase in total loss frequency over decades, and the long-term trend is expected to continue. Volatility in factors like tariffs, parts prices, and shop utilization has also contributed to short-term fluctuations.
Q:Is the decline in accident claims due to cyclical phenomena or ADAS technology?
A:The decline in accident claims is attributed to both cyclical phenomena, such as an increase in uninsured motorists, and the long-term impact of ADAS technology. However, the adoption of safety technologies takes decades to significantly impact the vehicle fleet.
Q:What happens to cars involved in severe accidents but not covered by insurance?
A:These cars are often acquired through Copart's consumer business, Cash For Cars, which purchases vehicles directly from consumers. However, this pathway is less efficient compared to institutional relationships with major insurance carriers.
Q:What is the 38% disparity between international and U.S. bidders?
A:International buyers tend to purchase vehicles with an average selling price (ASP) 38% higher than those bought by U.S. buyers. This is because international buyers focus on higher-value vehicles to justify the cost of shipping.
Q:How does Copart plan to address capacity investment for 2026 and beyond?
A:Copart plans to allocate capital in a disciplined manner to address capacity needs in specific areas over the next 5 to 10 years. The focus is on optimizing logistics costs and addressing areas with projected capacity needs.
Q:What is Copart's outlook on gaining market share from Progressive or other insurers?
A:Copart does not comment on individual accounts but notes that the insurance industry is dynamic, with players gaining and losing share over time. The focus remains on delivering excellent returns, trusting that market dynamics will play out favorably in the long term.
Q:What are the relative sizes of CDS and BluCar?
A:CDS is larger than BluCar, although BluCar is growing at a healthy rate. CDS remains the larger business unit for Copart.
Q:What factors could drive Copart's business forward?
A:Factors include vehicle depreciation, parts inflation, repair costs, and insurance rates. Vehicle depreciation and lower insurance rates could increase total loss frequency, while parts inflation and repair costs could drive more cars to total loss.
Q:How does Copart plan to address the non-damaged whole car business?
A:Copart prefers organic growth but is open to strategic acquisitions if compelling opportunities arise. The focus is on leveraging existing liquidity, technology, and facilities.
Q:What is Copart's approach to capital allocation and share buybacks?
A:Copart prioritizes reinvesting in the business through CapEx and M&A. Share buybacks are considered when they create meaningful long-term value, and the company remains disciplined in its capital allocation.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about Progressive's market share trends and the outlook for gaining volume from Progressive. They also provided limited clarity on the impact of insurance rates on repairable claims for 2026, deferring to external factors and other industry players for analysis.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACV value
ASPs disclosure
ASPs insurance
Advisory host
BluCar Advisory
CCC advantage
CEO Welcome
COVID era
Canada origin
Copart Inc
Copart fact
Copart harbor
Copart indicator
Copart noninsurance
Copart sale
Leah
Liquidity
ability
auction instance
auction liquidity
auction marketplace
auction return
auto insurance
bidder auction
claim frequency
collision coverage
consignor
consumer retrenchment
demand bidder
health
indicator auction
insurance ASPs
insurance unit
outcome
portion
progress
return advantage
term trend
type
value buyer
CPRT Transcript
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The earnings call shows strong financial performance with increased gross profit and operating income, especially in the U.S. segment. International growth is solid despite some declines in ASP. Liquidity is strong with no debt. The Q&A highlights some concerns about insurance coverage changes and market dynamics, but overall, the business outlook is positive with strategic investments and growth in key segments like BluCar. The market strategy, including disciplined capital allocation, supports a positive sentiment.
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CPRT Report
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