Copart Inc 2026 Q4 Earnings Call

All right, thank you. Welcome everyone to the fourth quarter earnings call for 2026. I've got some prepared remarks that I'll talk to, and then I will turn it over to Leah Stearns, our CFO, and then we will open it up for questions. I'll remind you that on the prior call, I talked about the three pillars of growth for Copart. We will continue to focus on international expansion on insurance. We'll continue to focus on whole car expansion domestically, and then we'll continue to invest in technology and services that assist all of our customers. Additionally, we view the differentiators for Copart as one, we are a business that is run by founders and that has a founder's mindset. We don't think in quarters or years. We think in decades. Very long term. Number two, I would say liquidity.

When you think about how our website functions, we are constantly focused on improving buyer activity, and I'll talk more about some of the buyer data that we've got, but that liquidity continues to be a differentiator. In the spirit of acting like a startup, we are very fast. We're moving very quickly, and we're bringing products and services to market in quarters, not in years. We expect to have some of that coming out in the next four quarters. Looking at global unit sales, we were down across the company 2.9%. Domestically, that was down 5.7%. Internationally, we were up 10%. Global insurance units were down 4.2%, with domestic insurance being down 7.5% and international insurance being up 11.2%. With the exception of one single customer loss, domestic insurance assignments would be up 2.3%. Collision claim frequency, we are down 3.4% year-over-year.

This is a moderation from a high of single-digit declines through 2025. Total loss frequency reached 23.3% in the second quarter of 2026, the highest second quarter on record, up from 22.4% in the same quarter last year. Looking at severity, average collision severity was over $6,300 per claim, up nearly 8.8% year-over-year. Fastest in more than three years and the fourth straight quarter of acceleration. Repair costs are up more than 50% from 2019 levels per data from CCC. Looking at rental car rates, that's something that obviously costs or increases the cost of repair for insurers, that rose by 4.5% year-over-year. Obviously, every additional day of repair and any costs associated with that increase the total cost of repair.

Turning to the complexity of vehicles, I recently had a conversation with a client friend of mine that was talking about how complex cars are. There was a recent article by PTC that pointed out a military drone has 3.5 million lines of code. An Airbus aircraft has 30 million lines of code, and the Windows 10 operating system has 50 million lines of code. What makes this interesting is that a new Tesla has approximately 100 million lines of code. When we think about cars, they really are becoming computers on wheels. We believe total loss frequency will continue to go up. Vehicle miles traveled were up 0.27% year-over-year in the fourth quarter of 2026. Vehicles in operation, or what we refer to as the car park, was up 1.6% year-over-year in calendar quarter two 2026.

Looking at insurance ASPs globally, we were up 3.1% year-over-year in the fourth quarter of 2026. Domestically, we were up 3.7% year-over-year in fourth quarter 2026, and internationally, we were up 3.3% year-over-year in fourth quarter of 2026. Turning to the Manheim Used Vehicle Value Index, it was up 2.8% year-over-year in the fourth quarter of 2026. We are outpacing the Manheim Index. As we've stated before, liquidity comes from buyers. I'd like to give you some statistics now on why we believe and others believe that we have the greatest liquidity in the industry. Vehicles sold to buyers less than a year. This means that one year or more ago, that buyer was not buying from Copart, was likely not aware of Copart.

Vehicles that have been sold to buyers less than a year for 2026 were 8.9% of our total vehicles. That number for fiscal year 2025 was 8.3%. We've seen nice growth there. Expanding it out an additional year, vehicles sold to buyers that have been with Copart less than two years for 2026, our total sales, they represented 21.7% of our vehicles. Now I'd like to turn to vehicles sold in the U.S. to international buyers. These are buyers outside the U.S. Total units sold in fiscal year 2026 represent 38.2% of our units. However, more importantly, the dollars purchased, the amount of dollars that were spent on the vehicles that we sold represented 45.7% of the total amount of dollars that we sold in the vehicles. They're obviously buying a more valuable vehicle when they're purchasing it internationally.

On the previous call, I spoke to AI, and I think about AI as a very important differentiator for Copart. As we stated, we will continue to lower costs through automation. This is an important part of our journey, and we are very focused on that. But I think even more important is using AI to create more demand for the vehicles that we are selling. The ability for a buyer to find that vehicle and to find a vehicle that matches their desired purchase is becoming more and more important every single day. If you think about the journey of becoming aware of Copart, then signing up, becoming a member, and then from membership to bidding and then to buying, us connecting that buyer to that vehicle, we believe is more important than ever. And then finally, I think about accuracy.

Every time that we can automate something and use AI, we eliminate errors, and improved accuracy is one of our core tenets in Copart in continuing to make sure that we have less and less opportunity for mistakes. Looking at OpEx per car in Q4 2026 versus Q4 2025, we are up 12.7%. Leah will talk more about expense control. My point is that we are focused on it. We are going to be working towards reducing our costs on a per car basis. Finally, let me close by talking about our most recent announcement. We have agreed to acquire ACV, one of the largest primarily digital automotive marketplaces in the country. ACV sells more than 800,000 vehicles each year and, importantly, operates with virtually no land of its own.

We are excited about using our locations as staging areas for their vehicles and combining our global buyer base with their digital marketplace and remarketing technology. Copart and ACV are highly complementary. We bring physical scale, deep institutional relationships, salvage expertise, and international buyer demand with more than 275 locations, over 4 million vehicles sold a year, and approximately 1 million members across more than 185 countries. ACV brings dealer liquidity and relationships and inspections and valuation technology, transacting approximately $10 billion of gross merchandise value in 2025 across more than 22,000 active buyers. Together, Copart and ACV create a more complete automotive marketplace, connecting the right vehicle to the right buyer through the right channel without forcing every vehicle into a single operating model. For dealers, that means one partner to value, manage, and dispose of virtually every used vehicle they touch.

For commercial consignors like banks, rental car companies, fleet, and leasing companies, it means one national relationship across multiple disposition channels, optimizing net proceeds. For buyers, it means unparalleled wholesale selection at every price point with integrated transportation and complete vehicle marshaling. Copart has a very strong track record of driving strong return on invested capital across the businesses it has acquired, and we view this transaction in the same framework as our past acquisitions. We expect the transaction to be accretive to earnings in the first full year, and we will provide more details after it closes. We are excited about ACV's people-first culture, which fits naturally with our own culture. This is an all-cash transaction funded from cash on hand with no financing conditions. It is structured as a tender offer, which supports a relatively quick and clean path to closing.

It is subject to the customary conditions you would expect, including regulatory review. Both boards have unanimously approved the transaction. We expect to close by the end of the calendar year, and ACV will operate as an independent subsidiary led by its existing team. I will obviously explain more after the close. With that, let me hand it over to Leah, our CFO, who will give you an update on the numbers, and then we will open it up for questions.

Thank you, Jay, and good afternoon to everyone on the call. I will lead today with our financial results and per-unit economics for the fourth quarter and fiscal year 2026. Then I will walk you through our U.S. and international segments and close with capital structure and liquidity highlights. For the fourth quarter, consolidated revenue grew to $1.2 billion, up 2.4% year-over-year, driven by the strength in both service revenues and purchased vehicle sales. Global service revenue increased more than $13 million, or 1.4%, and global purchased vehicle sales increased $14 million, or 8.3%. For fiscal year 2026, revenue was $4.7 billion, up 0.4%, with service revenue up $1 million, which was primarily due to increased international volumes and higher revenue per unit. As a reminder, FY 2025 included the benefit of Hurricane Helene and Milton. Excluding the impact of these storms, FY 2026 total revenue grew 2.4%.