Executive Summary / Key Takeaways

• Unrivaled Auction Liquidity and Digital Leadership: Copart's core investment thesis is anchored in its uniquely digital and global online auction platform, VB3, which has fostered unmatched liquidity and consistently delivers superior average selling prices (ASPs) for sellers, significantly outpacing competitors and used vehicle value indices.
• Secular Tailwinds and Strategic Expansion: The company benefits from long-term industry trends including rising total loss frequency driven by increasing vehicle complexity and repair costs, coupled with strategic expansion into non-insurance segments like BluCar and Purple Wave, diversifying revenue streams and leveraging its core capabilities.
• Robust Financial Performance and Capital Deployment: Copart achieved record revenue and operating profit in fiscal year 2025, demonstrating strong profitability and cash flow generation. The company strategically deploys capital into physical infrastructure (land), technology (AI, Title Express), and its global workforce to enhance service levels and support future growth.
• Technological Moat and Operational Efficiency: Proprietary AI-enabled tools (Co.ai, IntelliSeller) and services like Title Express streamline operations for both Copart and its clients, reducing cycle times, administrative burdens, and reinforcing its competitive moat against rivals.
• Resilience Amidst Cyclicality and External Risks: While facing cyclical fluctuations in insurance coverage and macroeconomic uncertainties like tariffs, Copart's diversified buyer base, operational readiness for catastrophic events, and digital-first model position it for resilience and continued market share gains.

The Digital Foundation of Global Vehicle Remarketing

Copart, Inc. (NASDAQ:CPRT) stands as a global leader in online vehicle auctions and remarketing services, a position forged over decades of strategic innovation and relentless focus on market liquidity. Since its inception in 1982 and becoming a public entity in 1994, Copart's defining moment arrived in 2003 with its pioneering transition to an exclusively online auction platform, Virtual Bidding Third Generation (VB3). This move, nearly two decades ahead of its competitors, established a foundational digital advantage that continues to drive its market dominance. The company's overarching strategy centers on maximizing returns for vehicle sellers—primarily insurance companies—by connecting them to a vast, global buyer base through its highly efficient digital marketplace.

Copart's business model is a critical enabler for the global re-use and recycling of vehicles, parts, and raw materials, extending the useful life of existing vehicles and reducing the environmental footprint associated with new manufacturing. This also contributes significantly to economic development by providing affordable mobility solutions, particularly in emerging economies worldwide. The company's strategic initiatives include continuous expansion of its physical footprint, pursuing global seller agreements, and enhancing its service offerings, all underpinned by its advanced technological infrastructure.

Technological Edge: Fueling Efficiency and Liquidity

Copart's technological differentiators are central to its competitive moat and operational prowess. The core of its platform is VB3, an internet auction-style sales technology that facilitates a two-step bidding process, allowing registered members worldwide to participate. This virtual model eliminates the need for physical auctions, significantly expanding the pool of available buyers and driving competitive bidding. For fiscal year 2025, 69.8% of U.S. vehicles were sold to members registered outside the state, with 38.8% going to international members, underscoring the global reach enabled by VB3.

The company's commitment to innovation extends to a suite of AI-enabled tools. Co.ai, a proprietary total loss determination and valuation tool, leverages machine learning and computer vision to provide online salvage value estimates, assisting sellers in making faster and more accurate total loss decisions. IntelliSeller, another AI-powered tool, optimizes auction decisions, such as setting minimum bid values and suggesting re-auctioning, to ensure optimal returns while minimizing cycle time. These tools are widely deployed within Copart, equipping sellers with instantaneous decision support informed by millions of historical vehicle sales.

A significant service enhancement is Title Express, which now processes well over 1 million titles annually. This platform streamlines the complex process of title transfer and loan payoff, especially challenging given the fragmented U.S. lender base. By taking on this administrative burden, Copart reduces cycle times for vehicles, improves efficiency for insurance carriers, and builds a critical point of trust. The company also pioneered Copart 360 (C360) in July 2020, a proprietary technology capturing 360-degree views of vehicle interiors and exteriors, enhancing the online buyer experience. These technological advancements contribute directly to Copart's ability to generate superior ASPs, reduce operational costs, and strengthen its market positioning.

Competitive Landscape and Strategic Positioning

Copart operates within a highly competitive vehicle remarketing industry, facing direct competition from major national and regional vehicle auctioneers such as RB Global (RBA) (including Insurance Auto Auctions, Inc.), Openlane, Manheim, Inc., and ACV Auctions Inc. (ACVA). Additionally, large vehicle dismantlers like LKQ Corporation (LKQ) can bypass remarketing companies by purchasing salvage vehicles directly from insurance companies. In international markets, the competitive set includes local vehicle auction and sales companies, dismantlers, and privately-held independent remarketers.

Copart's competitive advantages are deeply rooted in its digital-first model and extensive physical infrastructure. Its exclusive online auction platform since 2003 provides a significant lead over competitors who were compelled to adopt online models only during the COVID-19 crisis. This digital prowess, coupled with a global network of approximately 1 million registered buyers from virtually every non-sanctioned country, creates unmatched auction liquidity. This is a critical differentiator, as evidenced by Copart's ASPs growing at a rate that "eclipsed that of used vehicle value indices like the Manheim Used Vehicle Value Index and grew at a rate more than fivefold that of service providers similar to ours" in Q4 FY25.

The company's extensive geographic coverage, with 281 operating facilities globally (including nearly 2,000 acres of dedicated land for catastrophic events), further enhances its ability to respond to market needs and natural disasters with maximum efficiency. This physical footprint, combined with its proprietary technology, allows Copart to offer a comprehensive range of value-added services that competitors struggle to replicate at scale. While competitors like IAA and KAR (KAR) also possess significant networks, Copart's integrated digital and physical approach, particularly its focus on reducing friction in the member experience and expediting claims processes for sellers, provides a distinct edge in operational execution and strategic adaptability.

Financial Performance and Operational Momentum

Copart delivered a strong financial performance in fiscal year 2025, achieving record units sold, revenue, and operating profit. Total revenues reached $4.65 billion, marking a 9.7% increase from fiscal year 2024, while operating income grew 8% to $1.70 billion. Net income attributable to Copart, Inc. increased by 13.9% to $1.55 billion, or $1.59 per diluted common share.

The company's gross profit margin for FY25 stood at 45.2%, reflecting its operational efficiency and pricing power.

Service revenues, which constitute the vast majority of Copart's top line, increased by 11.4% for the full fiscal year, driven primarily by increased volumes and higher revenue per unit. In the U.S. segment, service revenues grew by 10.4% to $3.45 billion, while the International segment saw an impressive 18.9% increase to $517.1 million. This international growth was notably bolstered by a strategic shift in Germany, where insurance units transitioned from purchase contracts to higher-margin consignment models, aligning Copart's interests more closely with its sellers.

The company's investment in operational capacity is evident in its facility-related costs, which increased by 13.7% for the full fiscal year. In the U.S., per-unit facility costs rose 9.7%, reflecting ongoing investments in expanded capacity. Despite these investments, Copart maintains a robust liquidity position, with $6 billion as of July 31, 2025, comprising $4.8 billion in cash and held-to-maturity securities, alongside its $1.25 billion revolving credit facility, which had no outstanding borrowings.

Net cash provided by operating activities increased in fiscal 2025 to $1.80 billion, demonstrating strong cash flow generation.

Outlook and Strategic Initiatives

Copart's management maintains a confident outlook for sustained organic industry growth over the long term, spanning five, ten, and twenty-year horizons. This optimism is predicated on several key assumptions: continued population growth (U.S. population has grown 1% compounded since 1960), increasing vehicle miles traveled (up 2% compounded since 1960 and now above pre-pandemic peaks), and, most critically, a persistent rise in total loss frequency. Total loss frequency, which has grown more than fourfold since 1990, is expected to continue its upward trajectory as vehicles become increasingly complex and expensive to repair. The proliferation of safety technologies, while reducing accident frequency, paradoxically contributes to higher total loss frequency by making perimeter sensors and chips easily damaged and costly to fix.

The company plans to continue its aggressive investment strategy, prioritizing capital deployment into physical storage capacity (acquiring and developing new facilities, including dedicated land for catastrophic events), its technology platform (further AI/ML deployments, Title Express enhancements), and its global workforce. These investments are aimed at continuously improving service levels, enhancing auction liquidity, and supporting future growth and industry volatility. For instance, the investment in Purple Wave's specialty equipment sales team is expected to generate "meaningful growth in specialty equipment gross transaction value over the next 12 to 24 months." Management also anticipates that G&A expenses related to this expansion will "partially recede over the next 12 months," positioning the business for strong operating leverage.

Risks and Challenges

Despite its strong market position and growth trajectory, Copart faces several pertinent risks. Cyclical fluctuations in the uninsured and underinsured motorist populations, driven by rising insurance premiums, can modestly offset insurance business growth, though management expects these trends to eventually reverse. The ongoing U.S. Department of Justice investigation into potential money laundering violations by auction platform members presents a legal and reputational risk, with uncertain financial implications.

International expansion, while a key growth driver, exposes Copart to risks such as managing diverse regulatory environments, foreign currency exchange rate volatility, and adapting to varied business cultures. The company's reliance on a limited number of major vehicle sellers, though diversified, remains a concentration risk. Furthermore, while tariffs are expected to have a "neutral to modestly positive effect" on the business due to offsetting forces (increased repair costs driving total loss frequency vs. potential increases in pre-accident values), the "great unknown" of retaliatory tariffs and their precise impact on international buyers introduces uncertainty. Operational challenges include maintaining sufficient storage capacity, especially during severe weather events, and effectively managing growth across its expanding global footprint.

Conclusion

Copart, Inc. stands as a compelling investment proposition, underpinned by its enduring digital leadership and a robust business model that capitalizes on fundamental industry trends. The company's pioneering online auction platform, VB3, coupled with strategic investments in AI-driven tools like Co.ai and Title Express, creates a powerful competitive moat, consistently delivering superior returns for sellers and driving operational efficiencies. This technological prowess, combined with a vast global buyer network and extensive physical infrastructure, positions Copart to capture continued market share in the evolving vehicle remarketing landscape.

While macroeconomic shifts and cyclical factors present challenges, Copart's proactive investment in capacity, technology, and its people, alongside its proven ability to respond to catastrophic events, underscores its resilience. The long-term outlook remains favorable, driven by increasing total loss frequency and strategic diversification into non-insurance segments. For discerning investors, Copart's blend of digital innovation, operational excellence, and a clear strategic roadmap offers a compelling narrative for sustained value creation.