Copart's Q4 2025 Earnings Call: Contradictions in EV Total Loss Frequency, Market Share Dynamics, Autonomous Vehicle Impact, Light-Damaged Car Growth, and Auction Liquidity

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 4, 2025

Financials Results

• Revenue: $1.13B for Q4, up 5.2% YOY; $4.65B for FY25, up 9.7% YOY
• EPS: $0.41 per diluted share in Q4; $1.59 per diluted share for FY25
• Gross Margin: 45.3% in Q4; 45.2% for FY25

Business Commentary:

• Revenue Growth and ASP Increase:
• Copart, Inc. reported record global revenue of $1.13 billion for Q4 2025, reflecting a 5.2% increase from the previous quarter and 9.7% year-on-year growth.

• The growth was driven by an increase in global service revenue and higher average selling prices (ASPs) for insurance vehicles.

• Insurance Business Trends:

• Copart's global insurance volume grew by 4.5% for fiscal year 2025, with a decline in Q4 volumes, which decreased by 1.9% for global and 2.1% for the U.S.

• The decline in insurance volumes was attributed to ebbs and flows in insurance carrier business activities and a decline in uninsured and underinsured motorist populations.

• Inventory Management and Cycle Times:

• Copart's global inventory decreased by 13.1% year-over-year, with U.S. inventory declining by 14.8%.

• The decrease in inventory was due to lower assignment volumes, faster cycle times for vehicle sales, and a reduction in aged inventory.

• Technology and AI Integration:

• Copart is leveraging advanced artificial intelligence, including large language models, to enhance decision support tools for sellers and improve operational efficiency.
• The use of AI technologies is helping to compress cycle times and increase auction liquidity, contributing to higher selling prices and improved service offerings.

Sentiment Analysis:

• Management cited “another record year,” with Q4 revenue up 5.2% YOY to $1.13B and GAAP net income up 22.9% to $396.4M ($0.41 EPS). Global gross profit rose 12.4% with a 45.3% Q4 gross margin. ASPs increased 5.6% in Q4 (U.S. insurance ASP up 5.7% YOY), outpacing used vehicle indices and peers. FY25 revenue grew 9.7% to $4.65B and gross profit 10.1% to $2.1B.

Q&A:

• Question from Bob Labick (CJS Securities, Inc.): How are AI and advanced technologies changing Copart’s model now and over the next 5–10 years?
  Response: AI is broadly deployed for decision support, customer/agent tools, search and auction matching, and Title Express, compressing cycle times and improving efficiency, with further gains expected as deployments mature.

• Question from Bob Labick (CJS Securities, Inc.): What are you seeing on EV total loss frequency and its future impact?
  Response: EVs tend to total more easily due to extensive sensor/tech content requiring costly repairs and calibrations; returns are strong though overall EV exposure remains early and varies by country.

• Question from John Healy (Northcoast Research Partners, LLC): What are the top operational priorities entering the new fiscal year?
  Response: Relentlessly deepen auction liquidity by reducing buyer friction and enhancing member experience, which drives superior selling prices and supports growth across insurance and noninsurance sellers globally.

• Question from John Healy (Northcoast Research Partners, LLC): With $4.8B cash, how do you view capital returns and M&A over the next 24 months?
  Response: Share buybacks remain the primary return mechanism; M&A must be compelling standalone and strategically enhance Copart—cash levels don’t drive M&A or spending decisions.

• Question from Christopher Bottiglieri (BNP Paribas Exane, Research Division): Clarify the assignments decline and ex-cat impact.
  Response: Assignments declined low single digits; catastrophe assignments were not material in either period.

• Question from Christopher Bottiglieri (BNP Paribas Exane, Research Division): Your ASP growth versus peers and insurer returns?
  Response: Copart’s auction returns are superior; U.S. insurance ASP rose ~5.7% YOY in Q4, well above used vehicle indices and peer disclosures.

• Question from Bret Jordan (Jefferies LLC, Research Division): Any insights on autonomous vehicle crash rates and impact?
  Response: Impact is de minimis today; activity is geo-fenced and not typically insured through Copart’s carrier base, limiting visibility.

• Question from Bret Jordan (Jefferies LLC, Research Division): Are consumers re-adding coverage and how is insurer share shifting near term?
  Response: Under/unenrollment trends are cyclical; currently earned car years trail the car park. Carrier competitiveness is increasing as profitability improves.

• Question from Jeffrey Lick (Stephens Inc., Research Division): How could a less-active hurricane season affect units and profitability?
  Response: Storms are unpredictable; to date no major events. CAT work is not inherently profitable long-term, though it drives activity and timing effects across quarters.

• Question from Jeffrey Lick (Stephens Inc., Research Division): With insurer combined ratios improving, might pricing ease and normalize the market?
  Response: Likely more competitive behavior as carriers balance growth and profitability; some aggressiveness already observed, with dynamic responses expected.

• Question from Jash Patwa (JPMorgan Chase & Co, Research Division): Where are share-gain opportunities among large insurers vs. smaller carriers?
  Response: Opportunity is broader than carrier mix; Copart competes with repair decisions. Winning depends on superior returns and service (cycle times, Title Express) across sellers.

• Question from Jash Patwa (JPMorgan Chase & Co, Research Division): Rationale for combining select and bank repo auctions in Copart Wholesale?
  Response: It’s a tactical test to improve buyer-product matching via shared liquidity; auction architecture will adjust as needed to maximize returns.

• Question from Jash Patwa (JPMorgan Chase & Co, Research Division): Details on the PP&E sale and ongoing impact?
  Response: Small, nonrecurring gain from selling excess construction equipment recorded below operating income; no ongoing revenue or expense impact.