Quarterly Report for Quarter Ending January 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion, which presents Copart Inc.'s ("Copart," the "Company," "our," "us" or "we") results for periods occurring in the fiscal year ending July 31, 2026 and the fiscal year ended July 31, 2025, should be read in conjunction with our Consolidated Financial Statements as of and for the six months ended January 31, 2026, and the accompanying notes included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, as well as our Consolidated Financial Statements as of and for the year ended July 31, 2025, the accompanying notes and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-Kfor the fiscal year ended July 31, 2025 (the "2025 Form 10-K").

Results of Operations

The following table shows certain data from our consolidated statements of income expressed as a percentage of total service revenues and vehicle sales for the three and six months ended January 31, 2026 and 2025:

Comparison of the three and six months ended January 31, 2026 and 2025

The following table presents a comparison of service revenues for the three and six months ended January 31, 2026 and 2025:

Service Revenues. The decrease in service revenues during the three months ended January 31, 2026 of $(39.2) million, or (4.0)%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $(48.7) million and (ii) an increase in International of $9.4 million. The decrease in the U.S. compared to the same period last year was primarily related to the one time revenue associated with hurricanes Helene and Milton recognized in fiscal year 2025. The growth in International, after excluding positive fluctuations in currency exchange rates of $8.4 million, was driven primarily by an increase in revenue per car, offset by a decrease in volume.

The decrease in service revenues during the six months ended January 31, 2026 of $(33.7) million, or (1.7)%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $(53.1) million and (ii) an increase in International of $19.4 million. The decrease in the U.S. compared to the same period last year was primarily related to the one time revenue associated with hurricanes Helene and Milton recognized in fiscal year 2025 offset by an increase in revenue per car. The growth in International, after excluding positive fluctuations in currency exchange rates of $12.2 million, was driven primarily by an increase in revenue per car, offset by a decrease in volume.

The following table presents a comparison of vehicle sales for the three and six months ended January 31, 2026 and 2025:

Vehicle Sales. The decrease in vehicle sales for the three months ended January 31, 2026 of $(2.4) million, or (1.4)%, as compared to the same period last year, resulted from (i) a decrease in the U.S. of $(4.6) million and (ii) an increase in International of $2.2 million. The decrease in the U.S. was primarily driven by a decrease in volume, offset by an increase in revenue per car, which we believe was due to a change in mix of vehicles sold. The decrease in International, after excluding positive fluctuations in currency exchange rates of $5.1 million, was primarily driven by a decrease in volume related to sellers switching to a consignment model, offset by an increase in revenue per car, which we believe was due to a change in mix of vehicles sold.

The increase in vehicle sales for the six months ended January 31, 2026 of $0.3 million, or 0.1%, as compared to the same period last year, resulted from (i) an increase in the U.S. of $5.0 million and (ii) a decrease in International of $(4.7) million. The increase in the U.S. was primarily driven by an increase in revenue per car, which we believe was due to a change in mix of vehicles sold, offset by a decrease in volume. The decrease in International, after excluding positive fluctuations in currency exchange rates of $7.6 million, was primarily driven by a decrease in volume related to sellers switching to a consignment model.

The following table presents a comparison of facility operations expenses for the three and six months ended January 31, 2026 and 2025:

Facility Operations Expenses. The decrease in facility operations expense for the three months ended January 31, 2026 of $(11.6) million, or (2.4)%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $(23.5) million, and (ii) an increase in International of $11.8 million. The decrease in the U.S. compared to the same period last year was related to one time costs associated with hurricanes Helene and Milton recognized in fiscal year 2025 offset by increases in subhaul, freight, insurance, and bank charges. The increase in International, after excluding negative fluctuations in currency exchange rates of $(5.6) million, was the result of an increase in the cost to process a car. Included in facility operations expenses were depreciation and amortization expenses. The decrease in facility operations depreciation and amortization expenses during the three months ended January 31, 2026 as compared to the same period last year resulted primarily from the disposal of assets and a customer relationship being fully amortized in the United States. The increase in the International was result of depreciating new and expanded facilities placed into service

The decrease in facility operations expense for the six months ended January 31, 2026 of $(31.7) million, or (3.2)%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $(48.6) million, and (ii) an increase in International of $16.9 million. The decrease in the U.S. compared to the same period last year was related to one time costs associated with hurricanes Helene and Milton recognized in fiscal year 2025 offset by increases in subhaul, insurance, and bank charges. The increase in International,after excluding negative fluctuations in currency exchange rates of $(7.6) million, was the result of an increase in the cost to process a car. Included in facility operations expenses were depreciation and amortization expenses. The decrease in facility operations depreciation and amortization expenses during the six months ended January 31, 2026 as compared to the same period last year resulted primarily from the disposal of assets and a customer relationship being fully amortized in the United States. The increase in the International was result of depreciating new and expanded facilities placed into service

The following table presents a comparison of cost of vehicle sales for the three and six months ended January 31, 2026 and 2025:

Cost of Vehicle Sales. The increase in cost of vehicle sales for the three months ended January 31, 2026 of $2.7 million, or 1.8%, as compared to the same period last year resulted from (i) an increase in the U.S. of $3.6 million and (ii) a decrease in International of $(0.8) million. The increase in the U.S. was primarily the result of a change in the mix of vehicles sold offset by a decrease in volume. The decrease in International, after excluding the negative fluctuations of currency exchange rates of $4.3 million, was primarily due to a decrease in volume related to sellers switching to a consignment model.

The increase in cost of vehicle sales for the six months ended January 31, 2026 of $6.1 million, or 2.1%, as compared to the same period last year resulted from (i) an increase in the U.S. of $17.2 million and (ii) a decrease in International of $(11.2) million. The increase in the U.S. was primarily the result of a change in the mix of vehicles sold offset by a decrease in volume. The decrease in International, after excluding the negative fluctuations of currency exchange rates of $6.3 million, was primarily due to a decrease in volume related to sellers switching to a consignment model, combined with a change in the mix of vehicles sold.

The following table presents a comparison of general and administrative expenses for the three and six months ended January 31, 2026 and 2025:

General and Administrative Expenses. The increase in general and administrative expenses for the three months ended January 31, 2026 of $4.8 million, or 4.8%, as compared to the same period last year resulted from (i) an increase in the U.S. of $1.1 million and (ii) an increase in International of $3.7 million. Excluding depreciation and amortization, the decrease in the U.S. of $(0.5) million resulted primarily from decreases in legal, compliance, and system implementation, offset by increases in consulting, bank charges, and labor. The increase in International of $3.6 million, after excluding the negative fluctuations in currency exchange rates of $(1.1) million, resulted primarily from an increase in labor, third party outside services (including consulting and legal), and taxes. Depreciation and amortization expenses for the three months ended January 31, 2026 as compared to the same period last year increased as a result of the addition of technology assets being placed in service in the U.S. and Internationally.

The increase in general and administrative expenses for the six months ended January 31, 2026 of $5.3 million, or 2.6%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $2.3 million and (ii) an increase in International of $7.6 million. Excluding depreciation and amortization, the decrease in the U.S. of $4.4 million resulted primarily from decreases in legal, compliance, and system implementations offset by increase in labor, consulting services, insurance, and bank charges. The increase in International of $7.6 million, after excluding the negative fluctuations in currency exchange rates of $(1.7) million, resulted primarily from an increase in third party outside services (including consulting and legal), and labor. Depreciation and amortization expenses for the six months ended January 31, 2026 as compared to the same period last year increased as result of the addition of technology assets being placed in service in the U.S. and Internationally.

The following table summarizes total other income (expense) for the three and six months ended January 31, 2026 and 2025:

Other Income (Expense).The increase in total other income for the three months ended January 31, 2026 of $15.5 million, or 42.1%, as compared to the same period last year was due to higher interest income earned from U.S. Treasury Bills, and realized and unrealized currency gains.

The increase in total other income for the six months ended January 31, 2026 of $27.0 million, or 33.0%, as compared to the same period last year was due to higher interest income earned from U.S. Treasury Bills, realized and unrealized currency gains, and gain on sale of fixed assets.

The following table summarizes income taxes for the three and six months ended January 31, 2026 and 2025:

Income Taxes.See the Note to Unaudited Consolidated Financial Statements, NOTE 7 - Income Taxes in this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

The following table presents a comparison of key components of our liquidity and capital resources at January 31, 2026 and July 31, 2025 and for the six months ended January 31, 2026 and 2025, respectively, excluding additional funds available to us through our Revolving Loan Facility:

Cash, cash equivalents, and restricted cash and working capital increased $2,321.3 million and $491.0 million at January 31, 2026, respectively, as compared to July 31, 2025. Cash, cash equivalents, and restricted cash increased due to cash generated from operations, maturity of held to maturity securities as a result of maximizing our return on U.S. Treasury Bills, not fully offset by capital expenditures and the repurchase of common stock as part of our stock repurchase program. Working capital increased primarily from cash generated from operations and timing of cash receipts, partially offset by capital expenditures, and timing of cash payments. Cash equivalents consisted of bank deposits, U.S. Treasury Bills, and funds invested in money market accounts, which bear interest at variable rates.

Historically, we have financed our growth through cash generated from operations, public offerings of common stock, equity issued in conjunction with certain acquisitions and debt financing. Our primary source of cash generated by operations is from the collection of service fees and funds received from the sale of vehicles. We expect to continue to use cash flows from operations to finance our working capital needs and to develop and grow our business. In addition to our stock repurchase program, we are considering a variety of alternative potential uses for our remaining cash balances and our cash flows from operations. These alternative potential uses include additional stock repurchases, acquisitions and the payment of dividends. For further detail, see Note to Unaudited Consolidated Financial Statements, NOTE 2 - Long-Term Debt and NOTE 6 - Stock Repurchases in this Quarterly Report on Form 10-Q and under the subheading "Credit Agreement" below.

Our business is seasonal as inclement weather during the winter months increases the frequency of accidents and consequently, the number of cars involved in accidents which the insurance companies salvage rather than repair. During the winter months, most of our facilities process 5% to 20% more vehicles than at other times of the year. Severe weather events, including but not limited to hurricanes, tornadoes, and hailstorms, can also impact our volumes. These increased volumes require the increased use of our cash to pay out advances and handling costs of the additional business.

We believe that our currently available cash and cash equivalents and cash generated from operations will be sufficient to satisfy our operating and working capital requirements for the foreseeable future. We expect to acquire or develop additional locations and expand some of our current facilities in the foreseeable future. We may raise additional cash through drawdowns on our Revolving Loan Facility or potentially issue equity to fund this expansion. Although the timing and magnitude of growth through expansion and acquisitions are not predictable, the opening of new greenfield facilities is contingent upon our ability to locate property that (i) is in an area in which we have a need for more capacity; (ii) has adequate size given the capacity needs; (iii) has the appropriate shape and topography for our operations; (iv) is reasonably close to a major road or highway; and (v) most importantly, has the appropriate zoning for our business.

As of January 31, 2026, $362.8 million of the $5.1 billion of cash, cash equivalents, and restricted cash was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., the repatriation of these funds could be subject to the foreign withholding tax. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not require repatriation to fund our U.S. operations.

Net cash provided by operating activities increased for the six months ended January 31, 2026 as compared to the same period in 2025 as a result of changes in operating assets and liabilities. The changes in operating assets and liabilities were primarily the result of an increase in cash provided by a decrease in income tax receivable of $48 million, decrease in inventory of $14.6 million, decrease in accounts receivable of $8.2 million and an increase in income tax payable of $4.3 million These changes were offset by cash used due to a decrease in accounts payable and accrued liabilities of $83.4 million.

Net cash provided by investing activities increased for the six months ended January 31, 2026 as compared to the same period in 2025 due primarily to an increase in proceeds from maturing held to maturity securities, and proceeds from the sale of equipment, and a decrease in capital expenditures. Our capital expenditures are primarily related to lease buyouts of certain facilities, acquiring land, opening and improving facilities, capitalized software development costs for new software for internal use and major software enhancements, and acquiring facility equipment. We continue to develop, expand and invest in new and existing facilities.

Net cash used in financing activities decreased for the six months ended January 31, 2026 as compared to the same period in 2025 due primarily due to repurchases of common stock as part of our stock repurchase program.

Credit Agreement

On January 23, 2026, the Company entered into a Senior Revolving Credit Agreement (the "2026 Credit Agreement") by and among the Company, certain subsidiaries of the Company party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent. The 2026 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $1,250 million, including subfacilities for standby letters of credit and swingline loans. The 2026 Credit Agreement matures on January 23, 2031. The 2026 Credit Agreement replaced the previous secured credit facility under the credit agreement dated December 21, 2021 by and among the Company, certain subsidiaries of the Company party thereto, the lenders party thereto, and Bank of America, N.A., as the administrative agent (the "Second Amended and Restated Credit Agreement"), which was scheduled to mature on December 21, 2026.

Borrowings under the 2026 Credit Agreement bear interest based on the Company's option, either (1) the applicable fixed rate plus 0.75% to 1.125% or (2) the daily rate plus 0.0% to 0.125%, in each case, depending on the Company's consolidated total net leverage ratio. Additionally, the unused revolving commitments under the 2026 Credit Agreement are subject to the payment of a customary commitment fee at a range of 0.05% to 0.125%, depending on the Company's consolidated total net leverage ratio. As of January 31, 2026, the unused capacity of $1,250 million was fully available to us.

The 2026 Credit Agreement contains representations and warranties, conditions, and covenants. As of January 31, 2026, we were in compliance with these financial covenants.

In connection with entering into the 2026 Credit Agreement, the Company incurred $1.5 million in costs, which were capitalized as debt issuance fees. The debt issuance cost is amortized to interest expense over the term of the debt instrument and is included in other assets on the consolidated balance sheet.

Stock Repurchases

On September 22, 2011, our Board of Directors approved a 320 million share increase in our stock repurchase program, bringing the total current authorization to 784 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as we deem appropriate and may be discontinued at any time. We repurchased 5,480,191 shares of our common stock under the program during the six months ended January 31, 2026 at a weighted average price of $39.82 per share totaling $218.2 million. We did not repurchase any common stock under the program during the six months ended January 31, 2025. As of January 31, 2026, the total number of shares repurchased under the program was 464 million, and subject to applicable limitations under Delaware law, 320 million shares were available for repurchase under the program. See NOTE 11 - Subsequent Eventsin the Notes to Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q for information regarding share repurchases completed subsequent to January 31, 2026.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

Management has discussed the selection of critical accounting policies and estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed our disclosure relating to critical accounting policies and estimates in this Quarterly Report on Form 10-Q. There have been no material changes to the critical accounting policies and estimates from what was disclosed in our 2025 Form 10-K. Our significant accounting policies are described in the Notes to Unaudited Consolidated Financial Statements,NOTE 1 - Summary of Significant Accounting Policiesin this Quarterly Report on Form 10-Q.

Recently Issued Accounting Standards

For a description of new accounting standards that affect us, refer to the Notes to Unaudited Consolidated Financial Statements, NOTE 8 - Recent Accounting Pronouncements in this Quarterly Report on Form 10-Q.

Contractual Obligations and Commitments

There have been no material changes during the six months ended January 31, 2026 to our contractual obligations disclosed in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2025 Form 10-K.

Cautionary Note on Forward-Looking Statements

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to "Copart," the "Company," "we," "us," or "our" refer to Copart, Inc.

This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "intend," "forecast," "anticipate," "believe," "estimate," "predict," "potential," "continue" or the negative of these terms or other comparable terminology. The forward-looking statements contained in this Form 10-Q involve known and unknown risks, uncertainties and situations that may cause our or our industry's actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. These forward-looking statements are made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These factors include those listed in Part II, Item 1A. under the caption entitled "Risk Factors" in this Quarterly Report on Form 10-Q and those discussed elsewhere in this Quarterly Report on Form 10-Q. We encourage investors to review these factors carefully together with the other matters referred to herein, as well as in the other documents we file with the Securities and Exchange Commission (the "SEC"). We may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the SEC. We do not undertake to update any forward-looking statement that may be made from time to time by or on behalf of us.

Although we believe that, based on information currently available to us and our management, the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements.