Copart · 10-Q · Item 2 MD&A

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion, which presents Copart Inc.'s (“Copart,” the “Company,” “our,” "us” or “we”) results for periods occurring in the fiscal year ending July 31, 2026 and the fiscal year ended July 31, 2025, should be read in conjunction with our Consolidated Financial Statements as of and for the nine months ended April 30, 2026, and the accompanying notes included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, as well as our Consolidated Financial Statements as of and for the year ended July 31, 2025, the accompanying notes and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the fiscal year ended July 31, 2025 (the "2025 Form 10-K").

Results of Operations

The following table shows certain data from our consolidated statements of income expressed as a percentage of total service revenues and vehicle sales for the three and nine months ended April 30, 2026 and 2025:

Three Months Ended April 30,

Nine Months Ended April 30,

(In percentages)

Service revenues and vehicle sales:

Service revenues

%

%

%

%

Vehicle sales

%

%

%

%

Total service revenues and vehicle sales

%

%

%

%

Operating expenses:

Facility operations

%

%

%

%

Cost of vehicle sales

%

%

%

%

General and administrative

9

%

8

%

9

%

9

%

Total operating expenses

%

%

%

%

Operating income

%

%

%

%

Other income (expense)

3

%

4

%

4

%

4

%

Income before income taxes

%

%

%

%

Income taxes

8

%

8

%

8

%

7

%

Net income

%

%

%

%

Comparison of the three and nine months ended April 30, 2026 and 2025

The following table presents a comparison of service revenues for the three and nine months ended April 30, 2026 and 2025:

Three Months Ended April 30,

Nine Months Ended April 30,

(In thousands)

Change

%

Change

Change

%

Change

Service revenues

United States

$

$

$

)

)%

$

$

$

)

)%

International

$

%

$

%

Total service revenues

$

$

$

%

$

$

$

)

)%

Service Revenues. The increase in service revenues during the three months ended April 30, 2026 of $21.2 million, or 2.1 %, as compared to the same period last year resulted from (i) a decrease in the U.S. of $(3.2) million and (ii) an increase in International of $24.4 million. T1The decrease in the U.S. compared to the same period last year was primarily driven by a decrease in volume, partially offset by an increase in revenue per car. T2The growth in International, T3after excluding positive fluctuations in currency exchange rates of $8.7 million, was driven primarily by an increase in volume and an increase in revenue per car.

The decrease in service revenues during the nine months ended April 30, 2026 of $(12.5) million, or (0.4)%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $(56.3) million and (ii) an increase in International of $43.8 million. The decrease in the U.S. compared to the same period last year was primarily related to the one-time revenue associated with hurricanes Helene and Milton recognized in fiscal year 2025 offset by an increase in revenue per car. The growth in International, after excluding positive fluctuations in currency exchange rates of $20.9 million, was driven primarily by an increase in revenue per car and an increase in volume.

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The following table presents a comparison of vehicle sales for the three and nine months ended April 30, 2026 and 2025:

Three Months Ended April 30,

Nine Months Ended April 30,

(In thousands)

Change

%

Change

Change

%

Change

Vehicle sales

United States

$

$

$

)

)%

$

$

$

%

International

$

%

$

$

)

)%

Total vehicle sales

$

$

$

%

$

$

$

%

Vehicle Sales. The increase in vehicle sales for the three months ended April 30, 2026 of $4.1 million, or 2.3 %, as compared to the same period last year, resulted from (i) a decrease in the U.S. of $(0.4) million and (ii) an increase in International of $4.5 million. The decrease in the U.S. was primarily driven by a decrease in volume, offset by an increase in revenue per car, which was due to a change in mix of vehicles sold. The increase in International, after excluding positive fluctuations in currency exchange rates of $4.4 million, was primarily driven by an increase in revenue per car, which was due to a change in mix of vehicles sold.

The increase in vehicle sales for the nine months ended April 30, 2026 of $4.4 million, or 0.9%, as compared to the same period last year, resulted from (i) an increase in the U.S. of $4.5 million and (ii) a decrease in International of $(0.1) million. The increase in the U.S. was primarily driven by an increase in revenue per car, which was due to a change in mix of vehicles sold, offset by a decrease in volume. The decrease in International, after excluding positive fluctuations in currency exchange rates of $12.0 million, was primarily driven by a decrease in volume related to sellers switching to a consignment model marginally offset by an increase in revenue per car, which was due to a change in mix of vehicles sold.

The following table presents a comparison of facility operations expenses for the three and nine months ended April 30, 2026 and 2025:

Three Months Ended April 30,

Nine Months Ended April 30,

(In thousands)

Change

%

Change

Change

%

Change

Facility operations expenses

United States

$

$

$

%

$

$

$

)

)%

International

%

%

Total facility operations expenses

$

$

$

%

$

$

$

)

)%

Facility operations expenses, excluding depreciation and amortization

United States

$

$

$

%

$

$

$

)

)%

International

%

%

Facility depreciation and amortization

United States

$

$

$

%

$

$

$

%

International

%

%

Facility Operations Expenses. The increase in facility operations expense for the three months ended April 30, 2026 of $14.5 million, or 3.0%, as compared to the same period last year resulted from (i) an increase in the U.S. of $6.8 million, and (ii) an increase in International of $7.6 million. The increase in the U.S. compared to the same period last year was primarily due to increases in subhaul, labor, and insurance offset by a decrease in deferred vehicle costs and facility repair costs. The increase in International, after excluding negative fluctuations in currency exchange rates of $(4.5) million, was the result of an increase in the cost to process a car.

Included in facility operations expenses were depreciation and amortization expenses. The increase in facility operations depreciation and amortization expenses during the three months ended April 30, 2026 as compared to the same period last year resulted primarily from depreciating new and expanded facilities placed into service in the U.S. and International.

The decrease in facility operations expense for the nine months ended April 30, 2026 of $(17.2) million, or (1.2)%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $(41.8) million, and (ii) an increase in International of $24.6 million. The decrease in the U.S. compared to the same period last year was related to one-time costs associated with hurricanes Helene and Milton recognized in fiscal year 2025 offset by increases in subhaul, insurance, and bank charges. The increase in International, after excluding negative fluctuations in currency exchange rates of $(12.2) million, was the result of an increase in the cost to process a car.

Included in facility operations expenses were depreciation and amortization expenses. The increase in facility operations depreciation and amortization expenses during the nine months ended April 30, 2026 as compared to the same period last year resulted primarily from depreciating new and expanded facilities placed into service in the U.S. and International.

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The following table presents a comparison of cost of vehicle sales for the three and nine months ended April 30, 2026 and 2025:

Three Months Ended April 30,

Nine Months Ended April 30,

(In thousands)

Change

%

Change

Change

%

Change

Cost of vehicle sales

United States

$

$

$

)

)%

$

$

$

%

International

%

)

)%

Total cost of vehicle sales

$

$

$

)

)%

$

$

$

)

)%

Cost of Vehicle Sales. The decrease in cost of vehicle sales for the three months ended April 30, 2026 of $(9.4) million, or (5.6)%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $(14.8) million and (ii) an increase in International of $5.4 million. The decrease in the U.S. was primarily the result of a decrease in volume, offset by an increase in average purchase price due to a change in mix of vehicles sold. The increase in International, after excluding the negative fluctuations of currency exchange rates of $(3.9) million, was primarily due to an increase in average purchase price due to a change in mix of vehicles sold.

The decrease in cost of vehicle sales for the nine months ended April 30, 2026 of $(3.3) million, or (0.7)%, as compared to the same period last year resulted from (i) an increase in the U.S. of $2.4 million and (ii) a decrease in International of $(5.8) million. The increase in the U.S. was primarily the result of a change in the mix of vehicles sold, offset by a decrease in volume. The decrease in International, after excluding the negative fluctuations of currency exchange rates of $(10.2) million, was primarily due to a decrease in volume related to sellers switching to a consignment model, combined with a change in the mix of vehicles sold.

The following table presents a comparison of general and administrative expenses for the three and nine months ended April 30, 2026 and 2025:

Three Months Ended April 30,

Nine Months Ended April 30,

(In thousands)

Change

%

Change

Change

%

Change

General and administrative expenses

United States

$

$

$

%

$

$

$

%

International

%

%

Total general and administrative expenses

$

$

$

%

$

$

$

%

General and administrative expenses, excluding depreciation and amortization

United States

$

$

$

%

$

$

$

%

International

%

%

General and administrative depreciation and amortization

United States

$

$

$

%

$

$

$

%

International

%

%

General and Administrative Expenses. The increase in general and administrative expenses for the three months ended April 30, 2026 of $7.6 million, or 7.5%, as compared to the same period last year resulted from (i) an increase in the U.S. of $6.4 million and (ii) an increase in International of $1.2 million. Excluding depreciation and amortization, the increase in the U.S. of $5.7 million resulted primarily from an increase in labor, third party outside service, advertising, and insurance. The increase in International of $1.1 million, after excluding the negative fluctuations in currency exchange rates of $(1.0) million, resulted primarily from an increase in labor, and stock-based compensation, offset by a decrease in taxes.

Depreciation and amortization expenses for the three months ended April 30, 2026 as compared to the same period last year increased as a result of the addition of technology assets being placed in service in the U.S. and International.

The increase in general and administrative expenses for the nine months ended April 30, 2026 of $12.9 million, or 4.2%, as compared to the same period last year resulted from (i) an increase in the U.S. of $4.2 million and (ii) an increase in International of $8.8 million. Excluding depreciation and amortization, the increase in the U.S. of $1.4 million resulted primarily from an increase in labor, insurance, and third party outside services offset by decreases in legal, compliance, and stock-based compensation. The increase in International of $8.7 million, after excluding the negative fluctuations in currency exchange rates of $(2.8) million, resulted primarily from an increase in labor, stock-based compensation, and third party outside services (including consulting and legal), offset by a decrease in taxes.

Depreciation and amortization expenses for the nine months ended April 30, 2026 as compared to the same period last year increased as result of the addition of technology assets being placed in service in the U.S. and International.

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The following table summarizes total other income (expense) for the three and nine months ended April 30, 2026 and 2025:

Three Months Ended April 30,

Nine Months Ended April 30,

(In thousands)

Change

%

Change

Change

%

Change

Total other income

$

$

$

)

)%

$

$

$

%

Other Income (Expense). The decrease in total other income for the three months ended April 30, 2026 of $(13.4) million, or (26.2)%, as compared to the same period last year was due to lower interest income earned from U.S. Treasury Bills, and realized and unrealized currency gains.

The increase in total other income for the nine months ended April 30, 2026 of $13.5 million, or 10.2%, as compared to the same period last year was due to higher interest income earned from U.S. Treasury Bills, realized and unrealized currency gains, and gain on sale of fixed assets.

The following table summarizes income taxes for the three and nine months ended April 30, 2026 and 2025:

Three Months Ended April 30,

Nine Months Ended April 30,

(In thousands)

Change

%

Change

Change

%

Change

Income taxes

$

$

$

%

$

$

$

%

Income Taxes. See the Note to Unaudited Consolidated Financial Statements, NOTE 7 – Income Taxes in this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

The following table presents a comparison of key components of our liquidity and capital resources at April 30, 2026 and July 31, 2025 and for the nine months ended April 30, 2026 and 2025, respectively, excluding additional funds available to us through our 2026 Credit Agreement:

(In thousands)

Change

% Change

Cash, cash equivalents, and restricted cash

$

$

$

%

Working capital

)

)%

Nine Months Ended April 30,

(In thousands)

Change

% Change

Operating cash flows

$

$

$

)

)%

Investing cash flows

)

)%

Financing cash flows

)

)

)%

Capital expenditures and acquisitions

$

)

$

)

$

)%

Cash, cash equivalents, and restricted cash and working capital increased $573.6 million and decreased $(539.9) million at April 30, 2026, respectively, as compared to July 31, 2025. Cash, cash equivalents, and restricted cash increased due to cash generated from operations, maturity of held to maturity securities as a result of maximizing our return on U.S. Treasury Bills, not fully offset by capital expenditures and the repurchase of common stock as part of our stock repurchase program. Working capital decreased primarily due to the use of cash for shares repurchases, and timing of cash payments, partially offset by cash generated from operations and timing of cash receipts. Cash equivalents consisted of bank deposits, U.S. Treasury Bills, and funds invested in money market accounts, which bear interest at variable rates.

Historically, we have financed our growth through cash generated from operations, public offerings of common stock, equity issued in conjunction with certain acquisitions and debt financing. Our primary source of cash generated by operations is from the collection of service fees and funds received from the sale of vehicles. We expect to continue to use cash flows from operations to finance our working capital needs and to develop and grow our business. In addition to our stock repurchase program, we are considering a variety of alternative potential uses for our remaining cash balances and our cash flows from operations. These alternative potential uses include additional stock repurchases, acquisitions and the payment of dividends.

For further detail, see Note to Unaudited Consolidated Financial Statements, NOTE 2 – Long-Term Debt and NOTE 6 – Stock Repurchases in this Quarterly Report on Form 10-Q and under the subheading “Credit Agreement” below.

T4Our business is seasonal as inclement weather during the winter months increases the frequency of accidents and consequently, the number of cars involved in accidents which the insurance companies salvage rather than repair. During the winter months, most of our facilities process 5% to 20% more vehicles than at other times of the year. Severe weather events, including but not limited to hurricanes, tornadoes, and hailstorms, can also impact our volumes. These increased volumes require the increased use of our cash to pay out advances and handling costs of the additional business.

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We believe that our currently available cash and cash equivalents and cash generated from operations will be sufficient to satisfy our operating and working capital requirements for the foreseeable future. We expect to acquire or develop additional locations and expand some of our current facilities in the foreseeable future. We may raise additional cash through drawdowns on our 2026 Credit Agreement or potentially issue equity to fund this expansion. Although the timing and magnitude of growth through expansion and acquisitions are not predictable, the opening of new greenfield facilities is contingent upon our ability to locate property that (i) is in an area in which we have a need for more capacity; (ii) has adequate size given the capacity needs; (iii) has the appropriate shape and topography for our operations; (iv) is reasonably close to a major road or highway; and (v) most importantly, has the appropriate zoning for our business.

As of April 30, 2026, $391.9 million of the $3.4 billion of cash, cash equivalents, and restricted cash was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., the repatriation of these funds could be subject to the foreign withholding tax. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not require repatriation to fund our U.S. operations.

Net cash provided by operating activities decreased for the nine months ended April 30, 2026 as compared to the same period in 2025 as a result of changes in operating assets and liabilities. The changes in operating assets and liabilities were primarily the result of an increase in cash used due to an increase in accounts receivable of $55.4 million, an increase in vehicle pooling costs of $16.1 million and a decrease in accounts payable of $61.5 million.These changes were offset by cash provided by a decrease in income tax payable of $20.0 million.

Net cash provided by investing activities increased for the nine months ended April 30, 2026 as compared to the same period in 2025 due primarily to an increase in proceeds from maturing held to maturity securities, a decrease in purchases of held to maturity securities, proceeds from the sale of equipment, and a decrease in capital expenditures. Our capital expenditures are primarily related to lease buyouts of certain facilities, acquiring land, opening and improving facilities, capitalized software development costs for new software for internal use and major software enhancements, and acquiring facility equipment. We continue to develop, expand and invest in new and existing facilities.

Net cash used in financing activities increased for the nine months ended April 30, 2026 as compared to the same period in 2025 primarily due to repurchases of common stock as part of our stock repurchase program.

Credit Agreement

On January 23, 2026, the Company entered into a Senior Revolving Credit Agreement (the “2026 Credit Agreement”) by and among the Company, certain subsidiaries of the Company party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent. The 2026 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $1,250 million, including subfacilities for standby letters of credit and swingline loans. The 2026 Credit Agreement matures on January 23, 2031. The 2026 Credit Agreement replaced the previous secured credit facility under the credit agreement dated December 21, 2021 by and among the Company, certain subsidiaries of the Company party thereto, the lenders party thereto, and Bank of America, N.A., as the administrative agent (the “Second Amended and Restated Credit Agreement”), which was scheduled to mature on December 21, 2026.

Borrowings under the 2026 Credit Agreement bear interest based on the Company’s option, either (1) the applicable fixed rate plus 0.75% to 1.125% or (2) the daily rate plus 0.0% to 0.125%, in each case, depending on the Company’s consolidated total net leverage ratio. Additionally, the unused revolving commitments under the 2026 Credit Agreement are subject to the payment of a customary commitment fee at a range of 0.05% to 0.125%, depending on the Company’s consolidated total net leverage ratio. As of April 30, 2026, the unused capacity of $1,228 million was fully available to us.

The 2026 Credit Agreement contains representations and warranties, conditions, and covenants. As of April 30, 2026, we were in compliance with these financial covenants.

In connection with entering into the 2026 Credit Agreement, the Company incurred $1.5 million in costs, which were capitalized as debt issuance fees. The debt issuance cost is amortized to interest expense over the term of the debt instrument and is included in other assets on the consolidated balance sheet.

Stock Repurchases

On September 22, 2011, our Board of Directors approved a 320 million share increase in our stock repurchase program, bringing the total current authorization to 784 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market, including under plans complying with Rule 10b5-1, or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as we deem appropriate and may be discontinued at any time. T5We repurchased 43,433,164 shares of our common stock under the program during the nine months ended April 30, 2026 at a weighted average price of $37.63 per share totaling $1,632.5 million.

We did not repurchase any common stock under the program during the nine months ended April 30, 2025. As of April 30, 2026, the total number of shares repurchased under the program was 502 million, and subject to applicable limitations under Delaware law, 282 million shares were available for repurchase under the program.

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Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

Management has discussed the selection of critical accounting policies and estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed our disclosure relating to critical accounting policies and estimates in this Quarterly Report on Form 10-Q. There have been no material changes to the critical accounting policies and estimates from what was disclosed in our 2025 Form 10-K. Our significant accounting policies are described in the Notes to Unaudited Consolidated Financial Statements, NOTE 1 – Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q.

Recently Issued Accounting Standards

For a description of new accounting standards that affect us, refer to the Notes to Unaudited Consolidated Financial Statements, NOTE 8 – Recent Accounting Pronouncements in this Quarterly Report on Form 10-Q.

Contractual Obligations and Commitments

There have been no material changes during the nine months ended April 30, 2026 to our contractual obligations disclosed in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Form 10-K.

Cautionary Note on Forward-Looking Statements

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “Copart,” the “Company,” “we,” “us,” or “our” refer to Copart, Inc.

This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. The forward-looking statements contained in this Form 10-Q involve known and unknown risks, uncertainties and situations that may cause our or our industry’s actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements.

These forward-looking statements are made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These factors include those listed in Part II, Item 1A. under the caption entitled “Risk Factors” in this Quarterly Report on Form 10-Q and those discussed elsewhere in this Quarterly Report on Form 10-Q. We encourage investors to review these factors carefully together with the other matters referred to herein, as well as in the other documents we file with the SEC. We may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the SEC. We do not undertake to update any forward-looking statement that may be made from time to time by or on behalf of us.

Although we believe that, based on information currently available to us and our management, the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements.

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