Copart, Inc. Q3 FY2026 earnings call

### Insurance Business Trends - Global insurance unit sales declined 2.7% YoY (1.9% excluding catastrophic volume impacts); U.S. insurance volume declined 4.2% (~3% excluding catastrophic impacts). Management confirms long-term growth drivers remain intact, as gradual accident frequency declines are more than offset by rising total loss frequency. - Near-term softness stems from cyclical shifts: insurance carrier policy mix changes, and consumer pullback on coverage in response to rising premiums. Earned car years declined 4% YoY in Q4 2025 calendar while the total vehicle fleet grew 1.4%, with 25% of repairs now self-pay, reflecting consumer cost absorption. Long-term data confirms these trends are cyclical. - Total loss frequency reached 23.6% in Q1 2026 calendar, up 5 percentage points over four years. Copart actively drives higher total loss frequency by delivering superior auction returns, making total loss more economically attractive for insurance carriers.

### Auction Performance & Buyer Network - U.S. insurance ASP increased 4.1% YoY to a seasonally adjusted all-time high. International buyers represent over a third of U.S. volume and nearly half of U.S. auction proceeds. - The global buyer network spans 160+ countries, providing resilience: declining participation from some Middle Eastern markets was offset by growth from Central Europe, West Africa, Central America, and the Caribbean. No single region unduly influences auction outcomes. - Crossover buyers (users who first join Copart for non-insurance vehicles then begin bidding on insurance inventory) are a key growth driver. Over the past three years, a strong majority of 30,000+ new buyers from non-insurance channels bid on an insurance vehicle within 90 days of joining. - Pure sale (no reserve) volume for U.S. insurance sellers is at an all-time high, estimated to be an order of magnitude larger than competing platforms, as sellers entrust Copart to deliver maximum value.

### Operational & Strategic Investments - Copart continues to invest more in technology, physical infrastructure, and buyer network expansion than the rest of the industry combined. Recent initiatives include launching domestic U.S. long-haul delivery services, and rolling out AI-enabled tools to speed and improve front-end total loss decision-making for insurance clients, from claim initiation through title processing and auction. - PurpleWave (industrial/equipment segment) delivered over 25% 12-month gross transaction value growth, driven by successful territory expansion and deepened enterprise client relationships. The sales team is now 2.5-3x larger than at acquisition, with further nationwide expansion planned.

Consolidated: Revenue grew 2.1% YoY to $1.24 billion, gross profit increased 3.7% to $572.6 million with a 46.3% gross margin (up 71 bps YoY), operating income grew 2.8% to $464.3 million, net income was $402.4 million, and diluted EPS increased 2.4% to 43 cents. Average selling prices (ASP) rose 4.6% overall, offsetting a 2.4% YoY unit volume decline.

U.S. Segment: Revenue was essentially flat, down 0.4% YoY to ~$1.002 billion (contributing ~80.8% of consolidated revenue). Total units declined 4.2% YoY, with insurance units down 4.2% matching industry trends. Non-insurance segments showed growth: dealer services/power sports units grew 1%, Blue Car commercial consignment expanded over 4%, and combined fleet/finance volume grew double digits, partially offset by rental customer volume declines. U.S. gross profit grew 0.9% to $484.1 million with a 48.3% gross margin, and operating income was $390.4 million with a 38.9% operating margin. ASP growth: insurance +4.1%, non-insurance +3.7%, purchase units +23%.

International Segment: Revenue grew 14.1% YoY (7.9% excluding currency impact) to $234.2 million, contributing ~18.9% of consolidated revenue. Total units sold increased 5.9% YoY, with insurance units up 4.6% and non-insurance units up 11.2%. Inventory grew over 10% YoY, and assignments grew low-teens. Strong growth was led by the UK, Germany, and Canada. Gross profit increased 21.9% YoY, operating income reached $73.8 million with a 31.5% operating margin. ASP growth: insurance +8.4%, non-insurance +16.7%, and service revenue grew 17.9% driven by 10.5% higher fee per unit.

Management did not issue explicit numeric guidance for future periods, but outlined the following forward-looking expectations: - The near-term softness in insurance claims volume is expected to be cyclical rather than secular, with consumer insurance coverage trends expected to normalize over time. - Three core long-term growth drivers are expected to drive expansion over the next five years: 1. Continued growth in existing insurance markets, supported by sustained increases in total loss frequency driven by rising repair costs and Copart's superior auction returns 2. Expansion of non-insurance business (rental, fleet, finance, dealer, commercial consignment) which is benefiting from the existing liquidity flywheel and crossover buyer growth, with large untapped total addressable market 3. Continued international expansion in new markets that share favorable characteristics for total loss remarketing - Management expects ongoing growth in pure sale volume as insurance carriers continue to shift away from reserve auctions, recognizing that pure sales attract more buyer participation and deliver higher net returns.

• Cyclical consumer behavior: Near-term risk of sustained softness in insurance claims volume if consumers maintain reduced coverage levels or continue to self-pay minor repairs in response to elevated premium costs • Macroeconomic input cost risk: Rising fuel and transportation costs create pressure on towing and logistics operations, requiring rate adjustments that may impact margins if not fully passed through • Geopolitical risk: Global conflicts can disrupt buyer participation from specific regions, though the diversified buyer network has mitigated this impact in the current period • AI deployment risk: Insurance carriers require auditable, non-black-box AI decision-making, creating implementation challenges for new AI-enabled tools • Slower than expected non-insurance expansion: Penetration of dealer and whole car markets may take longer than expected, even with the Blue Car platform expansion

Q: How do higher fuel prices impact Copart, and how does the company mitigate this risk? / A: Copart uses a hybrid model of in-house towing fleets, supported third-party contractors via the Truck in a Box program, and independent subcontractors. Fuel costs impact all three segments. Management adjusts rates market-by-market to account for higher input costs, ensuring service providers can continue to support Copart's business profitably while maintaining service levels for clients.

Q: What is the impact of post-2020 new car sales declines on future salvage volumes, and what are Copart's core long-term growth drivers? / A: Declines in one to three years of new car sales do not materially impact Copart's salvage volumes, as the company's supply is a layered mix of more than a decade of vehicle sales. The key independent variable is total vehicles on the road and miles driven, not new car originations. Core 5-year growth drivers are: rising total loss frequency in existing insurance markets, growing non-insurance vehicle volume, continued international expansion, and upstream integration of total loss decision-making to capture volume earlier in the claims process.

Q: What are insurance carriers' outlook for claims, and what key industry catalysts did the recent advisory board discussion cover? / A: Insurance carriers confirm current soft claims trends, as consumers pull back coverage and self-pay minor repairs due to cost pressures, but they also agree these trends are cyclical and will eventually normalize. The top catalyst discussed was artificial intelligence deployment, with a focus on developing auditable, transparent AI tools (rather than black-box systems) to improve total loss decision-making. Copart is well-positioned to support carriers with AI expertise on the claims side.

Q: What is a crossover buyer, and how does the pure sale mix trend impact Copart's earnings? / A: Crossover buyers first discover Copart via non-insurance vehicles (often through search or social media), then expand their bidding to insurance vehicles as they learn the breadth of available inventory. Most new non-insurance buyers bid on an insurance vehicle within 90 days. Pure sale mix is not contractual; it has grown steadily because carriers recognize Copart's deep liquidity delivers higher net returns than reserve auctions. Higher pure sale volumes are positive for earnings, as they attract broader buyer participation and support higher auction prices and fees.