COPART INC

Copart is a leading global provider of online auctions and vehicle remarketing services, operating in the United States, the United Kingdom, Germany, Brazil, Canada, the United Arab Emirates, Spain, Finland, Oman, the Republic of Ireland, and Bahrain. The industry provides a venue for sellers to dispose of or liquidate vehicles to a broad domestic and international buyer pool, with sellers generally auctioning vehicles on a consignment basis for a fixed fee or a percentage of the sales price. The primary sellers are insurance companies, and the primary buyers are vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and the general public. The company believes that newer vehicles involved in accidents are more costly to repair and more likely to be deemed a total loss for insurance purposes due to the incorporation of advanced features such as unibody construction, airbags, advanced cameras, collision warning systems, and electrification of drivetrains.

The company faces significant competition from other remarketers of both salvage and non-salvage vehicles, including national, regional, and local competitors that may have established relationships and greater financial resources. The largest national or regional vehicle auctioneers in the U.S. include RB Global (including its subsidiary Insurance Auto Auctions, Inc.), Carvana, Openlane, Manheim, Inc., and ACV Auctions Inc., while the largest national dismantler is LKQ Corporation. Copart believes it offers the highest level of service in the industry and has established a leading market position through its virtual platform, comprehensive range of services, efficient integration of new facilities, increasing bidder participation, and application of technology. The company maintains a database of approximately 1 million registered members.

Copart generates revenue primarily through auction and auction-related sales transaction fees charged for vehicle remarketing services, which include vehicle purchasing fees, listing fees, selling fees, transportation fees, title processing fees, storage fees, bidding fees, and loading fees. In the U.S., Canada, Brazil, the Republic of Ireland, Finland, the U.A.E., Oman, and Bahrain, the company sells vehicles primarily as an agent, while in the U.K., Germany, and Spain it operates both as an agent and on a principal basis, purchasing salvage vehicles outright and reselling them. The company also derives revenue from purchased vehicle sales, which include the gross sales price of vehicles it owns. The majority of vehicles sold on behalf of insurance companies are damaged vehicles deemed a total loss, not economically repairable, or recovered stolen vehicles.

The company's service offerings include Copart Access, a proprietary internet-based service for vehicle sellers; Co.ai, a suite of total loss determination and valuation tools; IntelliSeller, an automated tool for auction decisions; estimating services in the U.K.; end-of-life vehicle processing in the U.K.; transportation services; vehicle inspection stations, with over 100 stations at facilities; on-demand reporting with a database containing over 300 fields of real-time and historical information; title processing; Title Express; loan payoff services; and flexible vehicle processing programs including the Consignment Program, Percentage Incentive Program, and Purchase Program. The company also offers Buy It Now and Make An Offer options, BluCar for financial institutions and fleet companies, Copart Dealer Services, Cash For Cars, National Powersport Auctions, Purple Wave Inc. for construction and agriculture remarketing, Copart Recycling in the U.K., and Copart 360 technology for 360-degree vehicle views.

The company's sales process utilizes VB3, its proprietary internet auction-style technology, which employs a two-step bidding process with an open preliminary bidding feature and an internet-only virtual auction. For fiscal 2026, sales of U.S. vehicles to International members on a unit basis was 38.2%, representing 45.8% of overall gross transaction per vehicle. The company obtained 79%, 81%, and 81% of the total number of vehicles processed during fiscal 2026, 2025, and 2024, respectively, from insurance company sellers. No single customer accounted for more than 10% of consolidated revenues for fiscal 2026, 2025, or 2024.

During fiscal 2026, the company opened two new operational facilities in Brazil and seven new operational facilities in the U.S. In September 2026, the company entered into an Agreement and Plan of Merger with ACV Auctions Inc. to acquire all of ACV's outstanding shares of common stock for $10.50 per share, net to the seller in cash, with the acquisition expected to complete by the end of the calendar year. The company also has a 2026 Credit Agreement providing for an unsecured revolving credit facility in an aggregate principal amount of up to $1,250 million maturing on January 23, 2031.

For fiscal 2026, the company's revenues were $4.7 billion and operating income was $1.7 billion. The company generated 81.6% of its revenue in the U.S. segment and 18.4% in the international segment. The company's business has grown as a result of acquisitions, increases in overall volume in the salvage car market, growth in market share, increases in revenue per sales transaction, and growth in non-insurance company sellers.

The company's growth strategy is to increase revenues and profitability by expanding its insurance vehicle remarketing business internationally, increasing whole-car vehicle volumes and related services, and developing technology-enabled services for vehicle sellers, buyers, and other customers. The company intends to pursue these strategies through both organic growth, primarily within its core insurance business, and inorganically through the development or acquisition of complementary businesses and facilities.

The company plans to grow its international insurance vehicle remarketing business by leveraging its existing operating capabilities, technology platforms, global buyer network, and relationships with insurance companies, potentially through the development or acquisition of facilities, entry into new markets, and expansion of existing operations. The company also plans to grow its whole-car business in the U.S. by expanding relationships with vehicle sellers and developing services that support the remarketing of vehicles through wholesale channels, including expanding services available to dealers, manufacturers, financial institutions, rental and fleet companies, and other vehicle sellers.

The company plans to develop technology services that improve the vehicle remarketing process, including tools that provide real-time access to inventory, vehicle condition and sales data, facilitate digital vehicle assignment and claims processing, support transportation and title-related workflows, integrate seller systems with its platforms, improve pricing and valuation information, and provide reporting and analytics. The company also expects to complete the acquisition of ACV Auctions Inc. by the end of the calendar year, which is expected to support its whole-car growth strategy.

The company's operating costs consist primarily of labor, transportation, facilities, other marketing and auction-related costs, and costs of vehicles sold. General and administrative expenses consist primarily of executive management, accounting, data processing, sales personnel, professional services, marketing expenses, and technology enhancements and maintenance. The company's cost structure is influenced by factors such as fuel prices, transportation rates, and facility-related expenses.

The company's operational outlook includes continuing to open new operational facilities, as it did in fiscal 2026 with two new facilities in Brazil and seven in the U.S. The company also plans to continue investing in its technology infrastructure, including its G2 platform, which is an integrated mesh of proprietary, distributed systems, and its hybrid infrastructure of co-located data centers and cloud platforms designed to provide redundancy. The company had approximately 11,900 full and part-time employees as of July 31, 2026.

The company's capital allocation strategy includes investing in capital expenditures for new facilities and technology, as well as pursuing strategic acquisitions. The company has a stock repurchase program, and as of July 31, 2026, it had repurchased shares under the program. The company also has a revolving credit facility of up to $1,250 million, which it may use for general corporate purposes.

The company faces headwinds from mild weather conditions, which can reduce the available supply of salvage vehicles, and extreme weather conditions, which can result in an oversupply and abnormal expenses. For example, during fiscal 2025, the company recognized substantial additional costs associated with Hurricanes Helene and Milton. The company also faces risks from fluctuations in foreign currency exchange rates, as it does not engage in foreign currency hedging arrangements.

The company faces constraints from regulatory and legal risks, including an ongoing investigation by the U.S. Department of Justice into potential violations of money laundering laws related to its practices and procedures for preventing and detecting money-laundering activity by its auction platform members. The company also faces risks from changes in laws affecting the import and export of vehicles, including tariffs, which could reduce demand for vehicles and impact its international buyer base.

The company depends on a limited number of major vehicle sellers for a substantial portion of its revenues, and although no single customer accounted for more than 10% of consolidated revenues, the loss of one or more major sellers could adversely affect results. The company faces significant competition from other remarketers, including RB Global, Carvana, Openlane, Manheim, and LKQ Corporation, which may have greater financial resources. The company's international operations expose it to risks including foreign currency exchange rate fluctuations, as it does not engage in hedging, and the need to adapt its business model to markets where insurers have historically played a less substantial role. The company is subject to an ongoing U.S. Department of Justice investigation into potential violations of money laundering laws related to its auction platform members, which could result in fines, penalties, and reputational harm. The company's business is also exposed to risks from extreme weather events, which can cause facility capacity constraints and abnormal expenses, as experienced with Hurricanes Helene and Milton.

Management's message emphasizes the company's role as a critical enabler for the global re-use and recycling of vehicles, parts, and raw materials, and its commitment to generating sustainable profits for stockholders while providing environmental and social benefits. The company highlights its response to catastrophic weather events, such as mobilizing to retrieve, store, and remarket tens of thousands of flood-damaged vehicles in South Florida in the wake of Hurricanes Helene and Milton in the fall of 2024. Management's strategic priorities include expanding the insurance vehicle remarketing business internationally, increasing whole-car vehicle volumes and services in the U.S., and developing technology services for customers. The company expects to complete the acquisition of ACV Auctions Inc. by the end of the calendar year, with the acquisition price of $10.50 per share.