Copart: 3Q25 Business Update (Calendar 1Q25)
Market Share challenged by Ritchie Bros/ IAA?
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3Q25 Business Update.
Copart reported fiscal 3Q25 and the stock dropped -11% in reaction. Service growth decelerated 600bps sequentially from +15% y/y to +9% y/y. However, gross profits grew much less—at only +5% y/y. This was due to facility operation expenses growing +12% y/y as they continue to build out their land and facility footprint ahead of capacity needs. This meant earnings were only up about +5% y/y (if you strip out the increase in interest income from their $4.3bn in cash and securities).
This was a fairly “meh” quarter as they noted US insurance volumes fell -1% y/y (ex-CAT) and total global units growth of +2% didn’t keep pace with peer Ritchie Bros (Ticker RBA), which grew units +7%. In fact, on Ritchie Bro’s call, they noted “we have gained market share globally in salvage in the first quarter”.
However, this may not be quite as negative as it seems as Copart as purposely been shifting away from lower value units for some time and their US insurance ASPs grew +2% y/y this quarter, whereas Ritchie Bros fell -3% y/y. (Also note that Ritchie Bros does not give us insurance volume—only total volume. But on the call they did insinuate that recent insurance carrier gains have helped boost volumes).
Further supporting the thesis that Ritchie Bros is catering to a lower end market, they noted “that at the margin, we saw some buyer hesitancy in the first quarter due to the threat of tariffs”. Whereas Copart said almost the opposite: “We have not observed any hesitation from our buyers, which we would attribute to proposed or enacted tariffs.”
In response to why nominal insurance volumes haven’t kept pace with an increase in total loss frequency this quarter, CEO Jeff Liaw notes that the number of non-insured and underinsured drivers has been increasing over the past 4 years. He expects this is cyclical and will reverse. But for now, that is showing up as a headwind to insurance volumes.
Nevertheless though, as Copart has sailed through the pandemic, the car part shortage, and the recent high inflationary environment unscathed, it does seem they are starting to hit some road bumps. They noted that inventories have declined -10% y/y, which CFO Leah Stearns explained is generally a prospective sales indicator. She attributed 3 reasons to the decline: lower assignments, faster cycle times, and the reduction in low-value unit aged inventory.
In elaborating though, she mainly attributed it to uninsured drivers: “The trends we are observing in our inventory levels reflect the cyclical impacts associated with an increasing share of [ underinsured ] and noninsured motorists and varying growth trajectories amongst insurance carriers. We continue to believe that the secular trends in favor of rising total loss frequency will drive our long-term growth.”
While the slower service growth and higher operating expenses do not make for a great quarter, Copart continues to execute and focus on building the business for the long-term. They talked about adding storage to be “stewards” for the industry in the future, and continue to take more critical functions over from insurance companies like titling.
While it is true that Ritchie Bros getting their act together may have resulted in a very slight impact to insurance volumes, it seems like those were volumes Copart was willing to forgo (lower value). Though, it also shouldn’t be assumed that this is a byproduct of better service from Ritchie Bros relative to Copart, but rather the fact that insurance companies always want more than one service provider and so have been happy to throw IAA a lifeline to support them now and then (Ritchie Bros acquired IAA in 2023). We remain confident though that Copart continues to offer insurance carries far superior services.
Copart Blue, their noninsurance volume, continues to grow strongly at +14% y/y. This volume tends to be higher quality and thus more profitable for Copart. It will be interesting to see if they continue to move upmarket in this segment, which could one day land them in more direct competition with other used whole car players.
We estimate Copart will likely do around $1.60 for the year and so they trade around a 33x multiple with >$4bn in net cash.
For more on Copart, check out our last Business Update here.
Below are some notable quotes from the call.
Call Notes.
Units
Global insurance volume remained relatively flat y/y with a nominal decline of 0.3% globally in unit sales and 0.9% in the United States.
Global insurance and U.S. insurance units sold grew by 1.3% and 0.6%,
U.S. insurance unit volume decreased close to 1% year-over-year and decreased approximately 2%, excluding cat units.
Total Loss Frequency
Total loss frequency reached 22.8% in the first calendar quarter of 2025, up 100 basis points or thereabouts in comparison to last year.
International
Saw unit sales growth of 6% in the quarter and about 5% excluding cat units, with fee units increasing 9% and purchase units decreasing 13% for the quarter.
Purchase units continued to decline as certain insurance customers shift from purchase contracts to consigning units.
Tariffs
“Virtually all of those parts as it stands now, we're facing tariffs to some extent, which increases the cost of the repair for the insurance industry. So for any given claim, they're evaluating their choices, considering their choices, which can be to repair the car or to total it.
It assuredly has made the repair path less attractive because the parts are more expensive. In some cases, the parts will be delayed and delayed parts, of course, compromises the policyholder experience and likely extends the duration of the rental as well. That's that side of the ledger.
On Copart's side of the ledger, when you consider the total loss, I think there are offsetting considerations there. On the one hand, if used car prices should rise and ACVs should rise because new cars become more scarce, then the cost of a total loss indemnity may be higher but by the same token, our salvage returns will be higher as well.”
Heavy Equipment Space
Observed softness in the heavy equipment auction space, due in part to widespread uncertainty regarding infrastructure spending and tariffs. Our partner in the equipment space, Purple Wave, nevertheless maintained flat GTV year-over-year for the trailing 12 months ending April 30.
The Purple Wave transaction was very much on both fronts. It was that we affirmatively liked the investment on its own merits, and we also thought it was beneficial to Copart. We are, even just day to day, a huge purveyor of equipment of construction, agricultural equipment, heavy-duty trucks and the like. The expertise that they brought was meaningful to us. And certainly, the expertise that we bring in the form of managing large physical storage facilities, large liquid digital auctions and so forth made for a very good fit.
Auction Liquidity
We believe our auctions are outperforming other platforms on delivered ASPs to our sellers, attributable to the active participation of our global member base as well as our unique digital auction platform. We have not observed any hesitation from our buyers, which we would attribute to proposed or enacted tariffs.
Inventory Levels
Inventory levels in the U.S. decreased approximately 11%
There are 3 main drivers of the inventory decline: lower assignments, faster cycle times and the reduction in low-value unit aged inventory. As we've noted previously, year-over-year changes in inventory levels can be a directional indicator of prospective unit sales trends. The trends we are observing in our inventory levels reflect the cyclical impacts associated with an increasing share of [ underinsured ] and noninsured motorists and varying growth trajectories amongst insurance carriers. We continue to believe that the secular trends in favor of rising total loss frequency will drive our long-term growth.
Storage
Storage is increasingly difficult to procure anywhere in the United States, anywhere in any of the countries we serve, frankly. So we view it also as -- we view it as our responsibility in being stewards of the industry as well to make sure that we can continue to support insurance companies and the other companies you described as well to make sure that we can continue to offer the service that we do for decades and for generations to come.
Market Share
I think market share, as you might imagine, is a very complicated, very downstream metric, right? So it is affected by things like the relative growth of individual insurance carriers that we serve. And so if on any given day, we happen to be serving an insurance carrier who is growing faster or slower, that can affect the overall volume trends for us relative to the rest of the industry.
I think we've gained share, frankly, for many years and decades before I arrived even at the company at all. So that's a long-standing trend. And I think the drivers there won't surprise you. We are committed to delivering the very best possible net returns to our clients by investing in the land we've already talked about, by investing in the digital auction platform and by making our partners, our clients faster, more accurate, more efficient at what they do.
We've talked in previous calls, I won't drag you through all of it here, about advanced charges and how important they are to our insurance companies and the suite of tools, in some cases, computer vision, artificial intelligence enabled that empower them to address those opportunity sets as well. We know that if we take care of those particular objectives, if we are exceptional along those dimensions -- like our stock price, the stock price and market share will take care of itself. We know what the input variables are. We know where to invest our time, attention and resources, and we have high confidence that if we execute on those fronts that the market share dynamic will take care of itself.
But I think the short answer to your question is that it is more the random fluctuations and the misalignment of reporting periods and so forth. We don't line up precisely. It's underlying insurance carrier growth trends, all of which I think are generally cyclical by nature, right? All of those kinds of variables will move in both directions over time.
For further reading, check out our Copart Extensive Research Report here. You can also find our last Copart update here.
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*At the time of this writing, one or more contributors to this report has a position in CPRT. Furthermore, accounts one or more contributors advise on may also have a position in CPRT. This may change without notice.
much thx for this superb update.
in the service sector, most trials for lower quality via lower cost fail. i see copart regaining lower value clients biz at a superior price within 2 yrs.
also, there is no trend that supports fewer insured drivers, quite the opposite.