COPART INC (CPRT)·Q3 2025 Earnings Summary

Executive Summary

• Q3 FY2025 delivered mixed results: EPS of $0.42 beat Wall Street, while revenue of $1.212B slightly missed consensus; margins compressed modestly on higher facility costs and storm-related expense recognition .
• Service revenue grew 9.3% YoY on international strength and higher revenue per unit; global ASPs +~3% and U.S. insurance ASPs +~2% supported auction outcomes despite inventory down ~11% in the U.S. .
• Purchased vehicle dynamics were bifurcated: U.S. revenue +22% but gross profit down $13M due to a $12M out-of-period cost adjustment; internationally, purchased revenue −25% while gross profit +~22% on Germany’s shift to consignment and stronger margins in the U.K. .
• Management highlighted rising total loss frequency (U.S. 22.8% in Q1 CY2025) as a secular growth driver and framed tariff policy as potentially modestly positive via higher repair costs and salvage returns; liquidity exceeded $5.6B (cash + revolver) at quarter end .

What Went Well and What Went Wrong

• What Went Well

  • International momentum: International service revenue +~18% YoY; international gross profit ~$73M (+~26%); insurance ASPs +~5%, aided by Germany’s transition to consignment and stronger UK margins .
  • Auction pricing resilience: Global ASPs +~3%; U.S. insurance ASPs +~2%—management cited global buyer arbitrage and platform liquidity driving superior outcomes versus peers .
  • Strategic readiness: Expanded storm capacity (Hall Ranch ~400 usable acres) positioning Copart to handle a storm >3x the largest Florida event in company history; continued investment in land, technology and Title Express .

• What Went Wrong

  • Revenue miss: $1.212B vs $1.229B consensus as U.S. insurance units fell ~1% YoY (−~2% ex-cat) and global inventory declined nearly 10%, signaling cyclical assignment softness tied to uninsured/underinsured drivers .
  • Purchased vehicle margin headwind: U.S. purchased vehicle gross profit decreased $13M in Q3 (includes ~$12M out-of-period cost of vehicles sold adjustment from Q1/Q2), compressing gross margin despite revenue +22% .
  • Heavy equipment softness: Purple Wave GTV flat on TTM basis amid uncertainty on infrastructure and tariffs, tempering non-insurance diversification near term .

Financial Results

Note: Asterisks (*) denote values retrieved from S&P Global.

Guidance Changes

Copart does not provide formal quarterly or annual guidance; no revenue, margin, OpEx, OI&E, tax rate, segment or dividend guidance was issued this quarter .

Earnings Call Themes & Trends

Management Commentary

• “In the United States, total loss frequency reached 22.8% in the first calendar quarter of 2025… the underlying drivers of total loss frequency remain quite consistent over time.” — Jeff Liaw .
• “Global service revenue increased nearly $88 million or over 9%… due to increased international volume and overall higher revenue per unit.” — Leah Stearns .
• “During the quarter, we recognized $6 million in incremental costs associated with [hurricanes]… excluding the costs associated with the hurricanes, facility-related costs per unit increased about 10% from the prior year.” — Leah Stearns .
• “We have not observed any hesitation from our buyers… attributable to proposed or enacted tariffs.” — Leah Stearns .
• “Our acquisition of Hall Ranch… offers nearly 400 usable acres… we now have the physical footprint to handle a storm more than 3x the size of the largest Florida storms on record.” — Jeff Liaw .

Q&A Highlights

• Physical storage and logistics as core differentiators: land investment supports insurance and non-insurance sellers; storage scarcity increases strategic value .
• Uninsured/underinsured dynamics: cycles can suppress insurance volumes; Copart can still capture via CashForCars and dealer channels, albeit with less immediacy than direct insurance consignment .
• Purple Wave: operating amid uncertainty (tariffs/infrastructure); still viewed as strategically additive with cross-platform synergies .
• Tariffs: increase repair costs (parts), potentially lifting total-loss decisions and salvage returns; many major importing nations aren’t main Copart liquidity sources; net effect “modestly more favorable” than chip shortage case .
• Legislative actions: storage fee caps likely benefit insurers; statutory total-loss thresholds less distorting unless mandatory repair policies emerge .

Estimates Context

• Q3 FY2025: EPS beat ($0.42 vs $0.4167 est) while revenue missed ($1.212B vs $1.229B est); miss tied to lower assignments and faster cycle times reducing inventory, plus a $12M out-of-period purchased vehicle cost adjustment affecting gross profit in the U.S. .
• Trajectory: Q1 and Q2 both beat on revenue and EPS (Q1: $1.147B vs $1.100B; $0.37 vs $0.3665; Q2: $1.163B vs $1.131B; $0.40 vs $0.3720), reinforcing pricing strength and operational execution .

Note: Estimates marked with * are retrieved from S&P Global.

Key Takeaways for Investors

• The quarter’s narrative is “quality over quantity”: ASP strength and international mix offset cyclical U.S. insurance unit softness; EPS beat despite facility cost inflation and storm expense recognition .
• Watch purchased vehicle margin normalization: the $12M out-of-period adjustment depressed Q3 U.S. purchased margins; expect cleaner run-rate ahead as Germany shifts to consignment and UK margins remain solid .
• Secular tailwinds intact: rising total loss frequency and digital workflows (Title Express, AI/computer vision tools) should continue to expand Copart’s insurance wallet share over time .
• Tariff regime likely a modest net positive: higher repair parts costs tilt decisions toward total-loss; buyer demand remains resilient; uncertainty persists, but management sees favorable salvage economics .
• Non-insurance diversification steady but uneven: Blue Car +~14% YoY and dealer +~3% YoY; heavy equipment (Purple Wave) softer near term—medium-term growth depends on macro clarity and salesforce ramp .
• Liquidity and capacity are strategic assets: >$5.6B liquidity and expanded storm storage footprint position Copart to respond quickly to CAT events—potential catalysts for auction volume spikes .
• Near-term trading setup: EPS resilience with a minor revenue miss; monitor inventory/assignments, tariff policy developments, and legislative actions on storage fees/total-loss thresholds for sentiment shifts .