Copart Q3 Earnings Call Highlights

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Copart (NASDAQ:CPRT) reported higher revenue and profit for its fiscal third quarter of 2026, even as insurance unit volumes declined amid softer claims activity and shifting consumer insurance behavior.

Chief Executive Officer Jeff Liaw said global insurance unit sales fell 2.7% in the quarter, or 1.9% excluding the impact of catastrophe-related volumes from the prior year. In the U.S., insurance unit volume declined 4.2%, or just over 3% excluding those catastrophic units.

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Liaw said the company continues to believe the long-term growth outlook for its insurance business remains intact, citing a multiyear pattern in which modest declines in accident frequency have been more than offset by increases in total loss frequency. He said total loss frequency is being driven by rising repair costs and by Copart’s ability to generate strong auction returns by finding “the highest and best use” for vehicles globally.

Revenue rises despite lower unit volumes

Chief Financial Officer Leah Stearns said consolidated revenue rose 2.1% year over year to $1.24 billion. The increase was driven by strength in service revenue and purchased vehicle sales, while average selling prices rose 4.6%, more than offsetting a 2.4% decline in total unit volumes.

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Global gross profit increased 3.7% to $572.6 million, and gross margin expanded 71 basis points to 46.3%. Operating income rose 2.8% to $464.3 million. Net income was $402.4 million, while diluted earnings per share increased 2.4% to $0.43, which Stearns said benefited in part from share repurchases.

Copart ended the quarter with approximately $5.5 billion of liquidity, including $4.2 billion in cash, equivalents and held-to-maturity securities, and no debt. Stearns said year-to-date free cash flow increased 12%, supported by capital allocation into land, facilities and technology.

The company has repurchased more than 43.4 million shares so far in fiscal 2026 for more than $1.6 billion through a combination of 10b5-1 and open market transactions.

Insurance volumes pressured by consumer pullback

Liaw attributed near-term volume softness partly to policy-in-force mix shifts among insurance carriers and to reduced claims activity as consumers respond to higher premiums. He cited ISS Fast Track data showing earned car years declined 4% year over year in the fourth calendar quarter of 2025, while vehicles in operation grew 1.4%.

“We believe this divergence, declining insurance coverage against a growing vehicle fleet, is clear evidence of the consumer pullback on insurance coverage,” Liaw said.

He also cited CCC data indicating that 25% of repairs are now self-pay, saying consumers are absorbing more of the financial burden of claims. Liaw said this behavior has historically been cyclical, with consumers reducing coverage when they feel pressure from insurance costs and later adjusting as conditions change.

Total loss frequency reached 23.6% in the first calendar quarter of 2026, an increase of nearly five percentage points over four years, Liaw said. He added that Copart sees itself as an active driver of that trend by improving auction returns and making total loss decisions more attractive to insurers.

U.S. segment flat as international business expands

In the U.S., total units declined 4.2%, or 3.3% excluding Copart Direct units. Insurance volumes were down 4.2%. U.S. inventory declined 4.7% year over year, and assignments were down at a low single-digit pace.

Stearns said momentum remained positive across parts of Copart’s diversified seller base. Dealer Services and powersports units grew 1%, while the Blue Car commercial consignment channel expanded more than 4%. Combined fleet and finance seller volume grew at a double-digit pace, partly offset by higher repair activity among rental customers. Copart Direct unit volume declined 26.3% as the company continued to shift lower-value units to its direct buy channel.

U.S. revenue was essentially flat, down 0.4%, as higher revenue per unit offset volume pressure. U.S. gross profit rose 0.9% to $484.1 million, with a gross margin of 48.3%. U.S. operating income was $390.4 million, representing a 38.9% operating margin.

Internationally, total units sold increased 5.9%, including a 4.6% increase in insurance units and an 11.2% gain in non-insurance units. International inventory rose more than 10% year over year, and assignments increased at a low-teens pace. Stearns cited broad-based growth, with particularly strong contributions from the U.K., Germany and Canada.

International revenue increased 14.1% to $234.2 million, or 7.9% excluding foreign currency effects. Service revenue rose 17.9%, driven by a 10.5% increase in fee revenue per unit and stronger volumes. International gross profit increased 21.9%, and operating income reached $73.8 million, a 31.5% operating margin.

Auction returns and buyer network remain key focus

Liaw said U.S. insurance average selling prices increased 4.1% year over year and reached a seasonally adjusted record high for Copart insurance ASPs in the third quarter. He said international buyers remain a critical driver of auction returns, accounting for more than one-third of the volume sold at U.S. Copart auctions and nearly half of auction proceeds.

Although participation from some Middle Eastern markets declined amid recent conflicts, Liaw said demand was supported by growth from other regions, including parts of Central Europe, West Africa, Central America and the Caribbean. Copart’s buyer network now spans more than 160 countries, he said.

Liaw also highlighted “crossover buyers,” or members who first come to Copart through non-insurance vehicles sold by rental car companies, financial institutions or dealers, and then begin bidding on insurance vehicles. He said that over the past three years, a majority of more than 30,000 buyers who first entered through non-insurance vehicles bid on an insurance vehicle within their first 90 days.

The company also said more U.S. insurance sellers are using “pure sale” auctions, which Liaw confirmed are non-reserve sales. He said the mix of pure sale units among U.S. insurance sellers is at an all-time high.

Management discusses growth initiatives

During the question-and-answer session, Liaw identified several long-term growth drivers, including continued increases in total loss frequency, expansion among non-insurance sellers such as rental car companies, dealers, fleets and financial institutions, and international growth.

Stearns said Purple Wave, Copart’s industrial equipment auction platform, generated more than 25% gross transaction value growth over the last 12 months. She said the business has expanded its territory sales force beyond its original central U.S. focus and has grown its team to roughly 2.5 to 3 times its size at acquisition.

Stearns also discussed Copart’s long-haul delivery service, saying the company shifted the offering a little over 12 months ago and has seen rapid adoption. She said the service added about $15 million year over year to facility operations costs in the quarter while also generating margin at the revenue line.

Liaw said Copart recently held its 2026 Insurance Advisory Board meeting with major U.S. Insurance clients, where topics included artificial intelligence deployment. He said insurers are exploring AI across their businesses, including claims, underwriting and pricing, while also being cautious because claims decisions must be auditable and accountable.

About Copart (NASDAQ:CPRT)

Copart (NASDAQ: CPRT) is a global provider of online vehicle auction and remarketing services, focused primarily on the sale of salvage and clean-title vehicles. The company operates a technology-driven auction platform that connects sellers — including insurance companies, vehicle finance firms, rental car companies, dealerships and fleet owners — with a broad buyer base consisting of vehicle dismantlers, recyclers, rebuilders and retail buyers. Copart's business model centers on efficient vehicle disposition using digital bidding and logistics services to maximize recovery value for its clients.

Core services include hosting live and timed online auctions, vehicle listing and inspection support, title processing, and transportation and storage solutions.

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