Copart, Inc. (CPRT) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong performance in several areas, such as product development, market strategy, and shareholder returns. The Q&A section revealed management's proactive approach to industry challenges and strategic investments, enhancing overall sentiment. Despite some cautious responses, the focus on growth and efficiency supports a positive outlook.
Key Financial Performance
Global insurance units Declined 9% or 4% excluding the effect of catastrophic units from a year ago. Reasons include shifts in policies in force, exposure levels across insurance carriers, softer claims activity due to consumer pullback in auto insurance coverage, and increases in total loss frequency.
U.S. insurance units Declined 10.7% or 4.8% excluding catastrophic units. Reasons are similar to global insurance units, including shifts in policies, softer claims activity, and rising total loss frequency.
Total loss frequency (U.S.) Increased to 24.2% in Q4 2025, up 10 basis points from a year ago. Long-term trend shows an increase from 15.6% in 2015 to 23.1% in 2025. Reasons include structural advantages in auction returns and rising total loss frequency driven by economic attractiveness of the total loss pathway.
U.S. insurance ASPs Increased 6% year-over-year, or 9% excluding catastrophic events. Reasons include scale and diversity of global buyer network, rising international participation, enhanced data-driven merchandising, and liquidity in auctions.
Consolidated revenue Declined 3.6% year-over-year to $1.12 billion. Excluding catastrophic events, revenue increased 1.3%. Decline attributed to lower unit volumes, while higher ASPs partially offset the decline.
Service revenue Declined 4% year-over-year. Decline attributed to lower unit volumes.
Purchased vehicle sales Decreased 1.4% year-over-year. Decline attributed to lower unit volumes.
Global gross profit Decreased 6.2% to $492.8 million. Adjusting for catastrophic events and a $6.8 million onetime expense, gross profit increased 0.4%, and gross margin increased 178 basis points to 45%.
Operating income Declined 8.8% to $388.7 million. Decline attributed to lower unit volumes and other factors.
Net income Decreased 9.5% to $350.7 million. Decline attributed to lower unit volumes and other factors.
Earnings per diluted share Decreased 9.2% to $0.36. Decline attributed to lower unit volumes and other factors.
U.S. total revenue Declined 5.5% year-over-year but was flat excluding prior year catastrophic events. Decline attributed to lower unit volumes, partially offset by higher revenue per unit.
U.S. insurance ASPs (excluding CAT) Increased 9% year-over-year. Reasons include scale and diversity of global buyer network, rising international participation, and enhanced data-driven merchandising.
U.S. gross profit Decreased 7.2% to $430 million, or 1.6% excluding catastrophic events. Gross margin was 46.6%. Decline attributed to lower unit volumes.
International revenue Increased 6.1% year-over-year, or 7.7% excluding catastrophic events, to $200 million. Growth driven by favorable FX impact and increase in fee revenue per unit.
International insurance ASPs Rose 9% year-over-year. Reasons include strong noninsurance growth across diversified international footprint.
Free cash flow Increased 58% year-to-date. Growth supported by disciplined capital allocation and operational efficiency.
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Operating Highlights
Artificial Intelligence Deployment: Copart has deployed AI across multiple dimensions, including business analytics, document processing, driver dispatch, and total loss decision tools. AI has significantly increased productivity and enhanced the value proposition for sellers and buyers.
International Expansion: Copart's international noninsurance units increased 9.1%, with strong growth in the U.K. and Canada. Revenue in the international segment increased 6.1% (7.7% excluding CAT events).
Cycle Time Efficiency: Copart operates the largest tow network in the industry and has a Title Express platform that accelerates title retrieval, reducing cycle times by 10 days or more for insurance clients.
Auction Liquidity: Copart's auctions benefit from a growing base of bidders, enhanced data-driven merchandising, and global buyer network, driving record average selling prices for U.S. insurance consignors.
Share Repurchase Program: Copart repurchased over 13 million shares for more than $500 million fiscal year-to-date, reflecting disciplined capital allocation.
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Risk or Challenges
Decline in Global Insurance Units: Global insurance units declined 9% year-over-year, with U.S. insurance units declining 10.7%. This decline is attributed to shifts in policies, exposure levels, and softer claims activity, which could impact revenue and operational efficiency.
Consumer Pullback in Auto Insurance Coverage: Consumers are reducing auto insurance coverage by foregoing collision coverage or raising deductibles. This trend could lead to reduced claims activity and revenue for the company.
Normalization of Vehicle Values: Industry-wide vehicle values have normalized from elevated levels during the supply chain-constrained period of 2021-2022. This normalization could impact auction returns and revenue growth.
Lower Unit Volumes: Global unit volumes declined 8%, with U.S. units down 9.5%. This reduction in volume could negatively affect revenue and operational performance.
International VAT Expense: A $6.8 million one-time expense accrual related to international VAT impacted global gross profit, highlighting potential regulatory and tax-related challenges.
Decline in Consolidated Revenue: Consolidated revenue declined 3.6% year-over-year, driven by lower unit volumes and reduced service revenue, which could impact overall financial performance.
Supply Chain and Operational Costs: The company operates the largest tow network, which involves significant operational costs. Any inefficiencies or disruptions in this network could impact cycle times and customer satisfaction.
Economic and Consumer Behavior Trends: Economic uncertainties and consumer behavior trends, such as reduced insurance coverage, could have cyclical impacts on claims activity and revenue.
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Guidance & Outlook
Insurance Business Trends: The company expects continued increases in total loss frequency, consistent with long-term historical trends. This is driven by structural advantages in their marketplace, rising international participation, and enhanced data-driven merchandising.
Artificial Intelligence Deployment: Copart plans to continue deploying artificial intelligence across various functions, including business analytics, document processing, and driver dispatch. AI is expected to enhance productivity and the value proposition for sellers and buyers over the long term.
U.S. Insurance Average Selling Prices (ASPs): The company projects continued growth in U.S. insurance ASPs, which increased 6% year-over-year and 9% excluding catastrophic events. This growth is attributed to the scale and diversity of their global buyer network.
International Segment Growth: The international segment is expected to see strong noninsurance growth, particularly in markets like the U.K. and Canada. International insurance ASPs rose 9%, indicating positive trends in this segment.
Capital Structure and Liquidity: Copart remains in a strong financial position with $6.4 billion in liquidity and no debt. The company plans to continue disciplined capital allocation to support growth and operational efficiency.
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Shareholder Return Plan
Share Repurchase Program: During the second quarter, Copart began to repurchase shares of its common stock through open market purchases and has subsequently repurchased shares under a 10b5-1 plan through the month of February. Fiscal year-to-date, the company has repurchased over 13 million shares for an aggregate amount of over $500 million.
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Key Q&A
Q:What are the macro factors that could change the trend line and get industry volumes back to growth, excluding total loss frequency?
A:Jeffrey Liaw explained that cyclicality in the auto insurance industry, premium growth and contraction, combined ratios, and rate increases approved by regulatory bodies are key factors. He noted that healthier income statements for carriers have led to compromised growth, but reinvestment in growth through marketing dollars and competitive rates could drive policy growth. Consumers have also pared back insurance coverage due to cost pressures.
Q:What are the expected returns and outcomes from the larger sales force and related investments?
A:Jeffrey Liaw stated that investments in commercial capabilities, product, and technology, including services like Title Express and AI tools, drive differential returns in unit volume, selling prices, and overall economics. He emphasized that each expenditure is justified by its economics and that the focus remains on generating profitable growth for the enterprise.
Q:What are Copart's land capacity needs for the next 1, 5, and 10 years?
A:Leah Stearns highlighted that Copart is in a strong position due to disciplined investments in land over the past decade. Faster cycle times improve land efficiency, but additional investments may be required to ensure future capacity. Jeffrey Liaw added that long-term stewardship requires land ownership, and Copart has invested aggressively in new and existing facilities to ensure readiness for industry growth and dynamic trends.
Q:Where does Copart see disruption risk from AI, and how is it defending its position?
A:Jeffrey Liaw stated that Copart is focused on disrupting itself by enhancing productivity and delivering better experiences through technology. He emphasized Copart's moats, including physical storage capacity, a global buyer base, an online auction platform, and regulatory knowledge. He noted that Copart is committed to leading in technology to mitigate disruption risks.
Q:Is the salvage industry becoming more price competitive, and how does Copart differentiate itself?
A:Jeffrey Liaw acknowledged that the industry has always been price competitive but emphasized that Copart focuses on delivered economic outcomes, such as selling prices, cycle times, and overall returns. He stated that empirical data supports Copart's superior economic outcomes compared to competitors.
Q:How is CDS performing, and what is driving its growth?
A:Leah Stearns reported that CDS had a 5% year-over-year increase in unit volume. Growth is driven by expanding the user base and increasing engagement within the current user base.
Q:What are the updated thoughts on accident frequency and its impact on the industry?
A:Jeffrey Liaw explained that accident frequency generally declines year-over-year due to advancements in vehicle safety technology. However, total loss frequency increases, offsetting the decline in accidents. He noted that the interplay of various factors, including distracted driving and transitional periods with mixed vehicle technologies, supports the long-term growth of totaled vehicles.
Q:What is Copart's approach to capital allocation and share buybacks?
A:Jeffrey Liaw stated that Copart evaluates various tools for capital allocation, including share buybacks, based on valuation multiples, interest rates, and long-term shareholder value. He emphasized that the decision to buy back shares is part of a deliberate strategy to return capital to shareholders.
Q:What catalysts could drive an inflection back to positive unit growth for Copart?
A:Jeffrey Liaw mentioned that growth in noninsurance segments continues, and cyclical factors in the insurance industry, such as consumer behavior and carrier growth rates, could influence unit growth. He noted that trends are often cyclical rather than secular.
Q:How does the rising mix of uninsured customers impact Copart's volume growth?
A:Leah Stearns explained that lower-value units are typically disposed of through fragmented markets like impound yards or retained by drivers. Some vehicles flow through Copart's cash-for-cars business, but the impact on overall volume growth is limited.
Q:How has the heavy equipment expansion performed, and why has Copart been cautious with M&A?
A:Jeffrey Liaw noted that the heavy equipment business has grown despite industry challenges like tariff-related uncertainty. Copart focuses on organic growth and has a high bar for M&A, prioritizing durable value creation over rapid expansion.
Q:What caused the sequential moderation in service revenue gross margin?
A:Leah Stearns attributed the moderation to a $6.8 million one-time tax accrual in the International segment. Excluding this, year-over-year gross margin performance was strong.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on certain topics, such as the exact catalysts for unit growth inflection and the precise impact of uninsured customers on volume growth. Responses often emphasized general trends and cyclical factors without offering concrete data or actionable insights.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI productivity
ASPs effect
America Europe
Asia margin
CEO Welcome
Europe Asia
Helene loss
Leah summary
Manheim index
Quad code
account win
activity consumer
activity length
addition lot
advantage
auction return
bidder
claim activity
client return
consideration
engineer
example
force
frequency calendar
haul
insurance client
insurance partner
insurance unit
intelligence
loss decision
network
party
policyholder
price insurance
process
retrieval vehicle
scale
selling price
supply
tool
trend insurance
truck
vehicle retrieval
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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Copart's earnings call reflects strong financial performance, with increased revenue, margins, and net income. The Q&A highlights strategic priorities and the impact of advanced technology, AI, and EVs, suggesting future growth. Although there are some uncertainties regarding autonomous vehicles and capital returns, the overall sentiment is positive, driven by strong international growth and shareholder returns. The company's focus on technology and operational efficiency further supports a positive outlook.
CPRT Report
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