Note: We just wanted to provide a short update on CPRT, but big picture not much has changed from our update last quarter. You can find a PDF here.

2Q25 Summary.

Copart reported fiscal 4Q25, and the stock dropped -3% the following day. The stock is now down -23% from peak. This was another lackluster quarter with general trends continuing from what we saw last. Copart continues to execute on their long-term strategy while navigating cyclical headwinds in insurance volumes. Total revenues grew +5% y/y, which is down 200bps sequentially. Service revenue growth was +7% y/y, while vehicle sales growth continues to shrink at -4% y/y. This is a byproduct of the transition from a 1P model (directly purchasing the vehicles) to 3P (consignment).

US insurance volumes continued their decline from last quarter, falling -2% y/y in the quarter, and total global units fell -1% y/y. Copart CEO Jeff Liaw noted that the second half of fiscal 2025 was softer than their first half due to auto insurance carriers “optimizing for growth and profitability,” and the growing number of uninsured and underinsured motorists. While Copart says that these are cyclical ebbs and flows, it continues to show up as a headwind to insurance volumes, due to the fact that those vehicles bypass the traditional insurance loss funnel altogether.

While insurance volumes fell, Copart saw a notable increase in US insurance ASP, growing +5.7% y/y, as they continue to shift away from lower ASP units. CEO Jeff Liaw added that their ASPs “grew at a rate more than fivefold that of service providers similar to ours.”

Noninsurance unit volume decreased -2.1% in 4Q driven by a shift in their direct buying strategy. As part of this strategic shift, they now simply connect buyers and sellers of lower-value noninsurance units and do not buy them themselves. This drove a –33% reduction in Copart Direct (their Cash for Cars business).

Copart Blue was +2.8% y/y, but within that they noted double digit growth among bank and fleet partners. While this is down notably from prior quarters mid-teen growth, they noted that there were certain rental partners who decided to retain or repair more vehicles than they have seen historically.

International units grew +3% y/y for the quarter, this is down from +5% y/y (ex-CAT) then did last Q. Fee units increased +4% y/y, which they noted was helped by the transitions in Germany from purchase contracts to consignment.  

Inventory levels continue to fall -15% due to a decline in assignments, faster cycle times, and a reduction in aged inventory. They noted that AI is helping their Title Express offering serve more clients faster, which has helped improve cycle times and thus reduce inventory levels.   

Moving down the income statement, Copart saw improvement in margins with gross margin expanding 280bps y/y to 45.2%. The most apparent driver of the margin expansion is a shift from vehicle purchases to the consignment model, it also is likely that attaching more services is the other factor.

As CEO Liaw noted, “On recent earnings calls, we’ve talked at great length about the importance of our differentiated service offerings, including our efforts to help insurance companies mitigate their advanced charges, the decision support tools we provide to help them make calls quicker and better as well as a range of titling and loan payoff services we offer to them.” Adding these services (and charging for them) is a lesser mentioned lever Copart has to increase profitability.  Operating margins also expanded by a similar amount (300bps y/y) to 36.6%.

Overall, this was a mixed quarter for Copart as they continue to navigate the headwinds of insurance volumes, which is putting pressure on revenues. However, higher consignment mix shift and an increase in services has helped boost profitability. Total loss frequency increase again to 22.2%, showing that their softness isn’t a result of fewer accidents due to improved collision avoidance technology (one of the main bear cases with Copart). There is no reason to think there has been any structural shift in the industry or Copart’s leading position in it.

At a stock price of $48 per share, Copart has a market cap of about $47bn. Their 2025 EPS of $1.59, puts them at ~30x TTM earnings. However, they have amassed a notable amount of cash to the tune of ~$4.7bn and no debt. Backing this out, they trade at 27x ex-cash earnings.

Call Notes:

Insurance Volumes

• Global and U.S. insurance volumes fell -2% in 4Q.
• Global and U.S. insurance volumes increased +4% for full year 2025.
  • Growth was slower in 2H25 than 1H25 due to auto insurance carriers optimizing for growth and profitability and the continued rise of uninsured and underinsured motorists due to “substantial increases in insurance premiums.”
• Noninsurance volumes continue to grow faster.

Total Loss Frequency

• Total loss frequency for the second calendar quarter of 2025 was 22.2%, up 70 basis points in comparison to last year.

ASPs

• Global insurance grew +5.4% y/y.
• U.S. insurance grew +5.7% y/y.
  • “Grew at a rate more than fivefold that of service providers similar to ours.”

Unit Growth

• Global units fell -1% in 4Q and increased +4.8% for the full year
• U.S. units fell-2% in 4Q and increased +4.1% for the full year.
  • Noninsurance unit volume continues to grow faster than U.S. insurance business.

Blue Car

• Saw +15.3% growth in for the full year, but only a +2.8% increase in 4Q due to certain rental partners retaining or repairing a greater number of vehicles than historically.

International

• Purchase units continued to decline as certain insurance customers shift from purchase contracts to consigning units.

EVs

• More likely to be totaled due to all the tech and sensors involved to repair

“Indications have been favorable in that regard when it comes to electronic vehicles and total loss frequency, selling prices, and so forth.”

Autonomous Vehicles (ie. Waymo)

• Too early to tell due to not enough information and controlled areas

Auction Liquidity

• Continue to invest in employees and decrease the friction for buyers and sellers
  • “If we continue to generate excellent selling prices and improved-still growing selling prices on behalf of our clients, the rest of it takes care of itself.”
  • “Copart’s auction is uniquely digital. We have been exclusively an online auction platform since 2003, almost 2 decades before our competitors followed suit and only when they were compelled to do so by the COVID-19 crisis.’

Inventory Levels

• “Overall, inventory levels in the U.S. decreased 14.8% year-over-year. There are 3 main drivers of the U.S. inventory decline: first, we saw low double-digit declines in assignments; second, faster cycle times overall for vehicles sold; and three, the reduction in overall aged inventory.”
• “Over the past several years, we have observed that trends in assignment volumes have proven to be a more accurate predictor of future unit sales than static inventory levels.”

Capital Allocation

• “We have a two-pronged approach to any M&A activity. One is the investments. On a stand-alone basis, it’s self-compelling, meaning if John, Leah and I — you and Leah and I were sitting here in the room, would we be willing to write our own personal checks in support of a given investment if we were to hold it as a private company? And then the second question is does it enhance fundamentally what Copart is and what we do, right, and/or can we enhance what they do by virtue of Copart’s capabilities.”
• “Ultimately, the answer is share buybacks without a precise time frame. That’s when we would do so. But the cash doesn’t cause us to change our behavior either on M&A or on operating expenses, right? It just is we recognize it belongs to our shareholders, and we’ll treat it accordingly.”

---

Speedwell Research Reports.

Become a Speedwell Research Member to receive all of our in-depth research reports, shorter exploratory reports, updates, and Plus members also receive Excels.

(Many members have gotten their memberships expensed. If you need us to talk with your compliance department to become an approved vendor, please reach out at info@speedwellresearch.com).

---

*At the time of this writing, one or more contributors to this report has a position in CPRT. Furthermore, accounts one or more contributors advise on may also have a position in CPRT. This may change without notice.