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Item 7. Management’s Discussion and Analysis

2024-09-30 compared with 2023-09-28 · 103 added, 134 removed, 315 unchanged (43% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K for the fiscal year ended July 31, 2023, or this Form 10-K, 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”), including forward-looking statements concerning the potential impact of the COVID-19 pandemic on our business, operations, and operating results.

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-K 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 I, Item 1A under the caption entitled “Risk Factors” in this Form 10-K and those discussed elsewhere in this Form 10-K.

Unless the context otherwise requires, references in this Form 10-K to “Copart,” the “Company,” “we,” “us,” or “our” refer to Copart, Inc.

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.

All references to numbered Notes are to specific Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K and which descriptions are incorporated into the applicable response by reference.

The following is a discussion and analysis of our financial condition and results of operations as of, and for, the periods presented and should be read in conjunction with our audited Consolidated Financial Statements and the related Notes thereto included elsewhere in this Annual Report on Form 10-K.

This discussion and analysis contains forward-looking statements, including statements regarding industry outlook, our expectations for the future of our business, and our liquidity and capital resources as well as other non-historical statement.

These statements are based on current expectations and are subject to numerous risks and uncertainties, including but not limited to the risks and uncertainties described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materiality from those contained in or implied by these forward-looking statements.

All references to numbered Notes are to specific Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K and which descriptions are incorporated by reference.

Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operation (“MD&A”) have the same meanings as in such Notes.

We are a leading global provider of online auctions and vehicle remarketing services with operations in the United States (“U.S.”), Canada, the United Kingdom (“U.K.”), Brazil, the Republic of Ireland, Germany, Finland, the United Arab Emirates (“U.A.E.”), Oman, Bahrain, and Spain.

We are a leading global provider of online auctions and vehicle remarketing services with operations in the United States (“U.S.”), the United Kingdom (“U.K.”), Germany, Brazil, Canada, the United Arab Emirates (“U.A.E.”), Spain, Finland, Oman, the Republic of Ireland, and Bahrain.

Our goals are to generate sustainable profits for our stockholders, while also providing environmental and social benefits for the world around us.

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Each vehicle that enters our business operations already exists, with whatever fuel technology and efficiency it was designed and built to have, and the substantial carbon emissions associated with the vehicle’s manufacture have already occurred.

However, upon our receipt of an existing vehicle, we help decrease its total environmental impact by extending its useful life and thereby avoiding the carbon emissions associated with the alternative of new vehicle and auto parts manufacturing.

For example, many of the cars we process and remarket are subsequently restored to driveable condition, reducing the new vehicle manufacturing burden the world would otherwise face.

However, upon our receipt of an existing vehicle, we help facilitate the decrease of its total environmental impact by extending its useful life and thereby avoiding the carbon emissions associated with the alternative of new vehicle and auto parts manufacturing.

For example, many of the cars we process and remarket are subsequently restored to drivable condition, reducing the new vehicle manufacturing burden the world would otherwise face.

Many of our cars are purchased by dismantlers, who recycle and refurbish parts for vehicle repairs, again reducing new and aftermarket parts manufacturing.

And finally, some of our vehicles are returned to their raw material inputs through scrapping, reducing the need for further new resource extraction.

In each of these cases, our business reduces the carbon and other environmental footprint of the global transportation industry.

Finally, some of our vehicles are returned to their raw material inputs through scrapping, thereby reducing the need for further new resource extraction.

In each of these cases, our business facilitates the reduction of the carbon and other environmental footprint of the global transportation industry.

Beyond our environmental stewardship, we also support the world’s communities in two important ways.

First, we believe that we contribute to economic development and well-being by enabling more affordable access to mobility around the world.

For example, many of the automobiles sold through our auction platform are purchased for use in developing countries where affordable transportation is a critical enabler of education, health care, and well-being more generally.

Secondly, because of the special role we play in responding to catastrophic weather events, we believe we contribute to disaster recovery and resilience in the communities we serve.

For example, we mobilized our people, entered into emergency leases, and engaged with a multitude of service providers to timely retrieve, store, and remarket tens of thousands of flood-damaged vehicles in South Florida in the wake of Hurricane Ian in the fall of 2022.

Secondly, we believe we play an important role in the communities we serve through our response to and management of catastrophic weather events.

This includes our investments in equipment and infrastructure which support our overall disaster recovery efforts.

For example, we mobilized our people, and engaged with a multitude of service providers to timely retrieve, store, and remarket tens of thousands of flood-damaged vehicles in South Florida in the wake of Hurricane Ian in the fall of 2022.

We provide vehicle sellers with a full range of services to process and sell vehicles primarily over the internet through our Virtual Bidding Third Generation internet auction-style sales technology, which we refer to as VB3.

Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers, vehicle rental companies, and individuals.

Vehicle sellers consist primarily of insurance companies, but also include dealers, individuals, charities, rental, banks, finance companies, and fleet operators.

We obtained 81%, 83%, and 80% of the total number of vehicles processed during fiscal 2024, 2023, and 2022, respectively, from insurance company sellers.

We sell the vehicles principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and to the general public.

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In the U.S., Canada, Brazil, the Republic of Ireland, Finland, the U.A.E., Oman, and Bahrain, we sell vehicles primarily as an agent and derive revenue primarily from auction and auction-related sales transaction fees charged for vehicle remarketing services as well as fees for services subsequent to the auction, such as delivery and storage.

In the U.K., Germany, and Spain we operate both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for our own account.

In the U.K., Germany, and Spain

we operate both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for our own account.

we recognize revenue on a principal basis from selling dismantled parts through GPS.

In Germany and Spain, we also derive revenue from listing vehicles on behalf of insurance companies and insurance experts to determine the vehicle’s residual value and/or to facilitate a sale for the insured.

Key Financial Performance Measures

We monitor and analyze a number of key financial performance indicators in order to manage our business and evaluate our financial and operating performance.

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Service and Vehicle Sales Revenue:

Our service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services.

These auction and auction related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle;

Our service revenues consist of auction and auction-related sales transaction fees charged for vehicle remarketing services.

These auction and auction-related services may include a combination of the following:

vehicle purchasing fees:

vehicle listing fees;

vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle;

transportation fees for the cost of transporting the vehicle to or from our facility;

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Vehicle auction selling prices are driven primarily by:

(i) market demand for rebuildable, driveable vehicles;

(i) market demand for rebuildable, drivable vehicles;

(ii) used car pricing, which we also believe has an impact on total loss frequency;

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This increase in total loss frequency may have been driven by changes in used car values and repair costs over the same long-term horizon, which we believe are generally trending upward.

Recently we have noted fluctuations in total loss frequency.

Nonetheless, we believe the long-term trend of increases in total loss frequency will continue.

We believe the long-term trend of increases in total loss frequency will continue.

In the near term changes in used car prices and repair cost, are inversely related but may impact total loss frequency and thereby affect our growth rate.

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Operating Costs and Expenses:

Yard operations expenses consist primarily of operating personnel (which includes yard management, clerical, and yard employees);

vehicle transportation;

property related taxes;

equipment maintenance and repair;

marketing costs directly related to the auction process;

and costs of vehicles sold under the purchase contracts.

General and administrative expenses consist primarily of executive management;

data processing;

sales personnel;

professional services;

marketing expenses;

and system maintenance and enhancements.

Other Income (Expense):

Other income (expense) consists primarily of interest income on Treasury bills, interest expense on long-term debt, see Notes to Consolidated Financial Statements, Note 9 — Long-Term Debt;

foreign exchange rate gains and losses;

Yard operations expenses consist primarily of:

(i) labor (operating personnel at yards);

(ii) transportation (miles traveled and fuel rates);

(iii) facilities (maintenance, property-related taxes, rent, and insurance);

(iv) other (marketing and auction related costs);

and (v) costs of vehicles sold.

General and administrative expenses consist primarily of executive management, accounting, data processing, sales personnel, professional services, marketing expenses, and technology enhancements and maintenance.

Other Income and Expense:

Other income consists primarily of interest income on U.S.

Treasury Bills, foreign exchange rate gains and losses;

gains and losses from the disposal of assets, which will fluctuate based on the nature of these activities each period;

and earnings from unconsolidated affiliates.

fees and interest expense on the credit facility, and earnings from unconsolidated affiliates.

Liquidity and Cash Flows:

Our primary source of working capital is cash operating results and debt financing.

The primary source of our liquidity is our cash and cash equivalents and Revolving Loan Facility.

Our primary source of working capital is cash operating results.

The primary source of our liquidity is our cash and cash equivalents and our revolving credit commitments under the Second Amended and Restated Credit Agreement (the “Revolving Loan Facility.”).

The primary factors affecting cash operating results are:

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(x) product mix;

(xi) contract mix to the extent applicable;

(xi) contract

mix to the extent applicable;

(xii) our capital expenditures;

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These factors are further discussed in the “Results of Operations” and “Risk Factors” sections of this Annual Report on Form 10-K.

Potential internal sources of additional working capital and liquidity are the sale of assets or the issuance of shares through option exercises and shares issued under our Employee Stock Purchase Plan.

A potential external source of additional working capital and liquidity is the issuance of additional debt or equity.

However, we cannot predict if these sources will be available in the future or on commercially acceptable terms.

We also generate additional working capital and liquidity from the sale of assets and the issuance of shares through option exercises and shares issued under our Employee Stock Purchase Plan.

In addition, we believe we have access to additional liquidity from the sale of equity or debt securities, if needed.

Acquisitions and New Operations

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We believe that these acquisitions and openings will strengthen our coverage, as we have facilities located in the U.S., Canada, the U.K., Brazil, the Republic of Ireland, Germany, Finland, the U.A.E., Oman, Bahrain, and Spain with the intention of providing global coverage for our sellers.

All of these acquisitions have been accounted for using the purchase method of accounting.

The following tables set forth operational facilities that we have opened and are now operational from August 1, 2021 through July 31, 2024:

United States Locations Date

Redding, California August 2020

Dothan, Alabama August 2020

Jacksonville, Florida August 2020

Milwaukee, Wisconsin September 2020

Houston, Texas December 2020

Knightdale, North Carolina March 2021

Gastonia, North Carolina May 2021

Bismarck, North Dakota June 2021

Fairburn, Georgia July 2021

Dyer, Indiana July 2021

Mobile South, Alabama August 2021

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Wayland, Michigan July 2023

Rutland, Vermont August 2023

Phoenix, Arizona November 2023

Austin, Texas June 2024

Casper, Wyoming July 2024

International Locations Geographic Service Area Date

Bruchmühlbach-Miesau, Rhineland-Palatinate (Mannheim) Germany February 2021

Mallorca, Balearic Islands Spain April 2021

Barcelona, Spain Spain September 2021

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Ottawa, Ontario Canada February 2023

Corby, England United Kingdom October 2023

Glasgow, Scotland United Kingdom December 2023

Alhendin, Granada Spain January 2024

Gloucester, England United Kingdom March 2024

Barcelona, Spain Spain May 2024

Cookstown, Ontario Canada July 2024

The following table sets forth the operational facilities obtained through business acquisitions from August 1, 2021 through July 31, 2024:

Locations Geographic Service Area Date

Des Moines, Iowa United States July 2021

Skelmersdale, England United Kingdom July 2022

Dumfries, England United Kingdom July 2022

In October 2023, we acquired a controlling interest in Purple Wave, an online offsite heavy equipment auction company headquartered in Manhattan Kansas.

The period-to-period comparability of our consolidated operating results and financial position is affected by business acquisitions, new openings, weather, and product introductions during such periods.

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(iii) increasing our service offerings;

and (iv) expanding the application of

VB3 into new markets.

and (iv) expanding the application of VB3 into new markets.

In addition, we implement our pricing structure and auction procedures, and attempt to introduce cost efficiencies at each of our acquired facilities by implementing our operational procedures, integrating our management information systems, and redeploying personnel, when necessary.

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Operating income 37 % 39 % 39 %

Total other income (expense) 3 % (1) % (1) %

Total other income 3 % 3 % (1) %

Income before income taxes 40 % 42 % 38 %

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The growth in the U.S.

was driven primarily by (i) an increase in revenue per car due to higher auction selling prices, which we believe is due to a change in mix of vehicles sold and restrictions within the global supply chain for automobiles and (ii) an increase in volume.

The growth in International, excluding the unfavorable impact of $22.6 million due to changes in foreign currency exchange rates, primarily from the change in the European Union euro, Canadian dollar and British pound to U.S.

dollar exchange rates, netting against a favorable impact of the Brazilian real to the U.S.

dollar exchange rate, was driven primarily by an increase in revenue per car due to a change in mix of vehicles sold and an increase in volume.

was driven primarily by an increase in volume and an increase in revenue per car due to fee optimization.

The growth in International, after excluding positive fluctuations in currency exchange rates of $10.8 million, was driven primarily by an increase in volume offset by a minor decrease in revenue per car.

The following table presents a comparison of vehicle sales for fiscal 2024, 2023 and 2022:

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of $9.4 million and (ii) an increase in International of $13.8 million.

The decline in the U.S.

was primarily the result of a decrease in volume as a result of a proactive approach to mitigate principle unit exposure, offset by higher average auction selling prices, which was primarily due to a change in the mix of vehicles sold.

The increase in International, excluding an unfavorable impact of $21.5 million due to changes in foreign currency exchange rates, which was driven primarily from the unfavorable change in the European Union euro, Canadian dollar and British pound to U.S.

dollar exchange rates, was primarily the result of higher average auction selling prices, which largely was due to a change in mix of vehicles sold combined with increased prices resulting from the restrictions within the global supply chain for automobiles and an increase in volume.

The decrease in the U.S.

was primarily driven by a decrease in revenue per car due to lower auction selling prices, while performing favorably to the declining overall market trend, offset by an increase in volume.

The growth in International, after excluding positive fluctuations in currency exchanges rates of $10.0 million was primarily driven by an increase in volume, offset by a decrease in revenue due to lower auction selling prices, which we believe is due to a change in the mix of vehicles sold.

The following table presents a comparison of yard operations expense for fiscal 2024, 2023 and 2022:

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of $148.2 million, and (ii) an increase in International of $43.9 million.

Excluding depreciation and amortization, the increase in the U.S.

compared to the same period last year relates to an increase in the cost to process each car combined with an increase in volume.

The increase in cost to process each car was driven by increased subhaul costs primarily related to the fluctuation of fuel costs, and labor costs, combined with an increase in premiums for catastrophic related subhaul, labor costs incurred from overtime, and increased travel and lodging associated with Hurricane Ian.

The increase in International, excluding a favorable impact of $12.1 million due to changes in foreign currency exchange rates, primarily from the favorable change in the European Union euro, Canadian dollar and British pound to U.S.

dollar exchange rate offset by an unfavorable change in the Brazilian real to U.S.

dollar exchange rate, was primarily due to an increase in the cost to process each car which is driven by an increase in subhaul, fuel and labor costs combined with an increase in volume.

Included in yard operations expenses were depreciation and amortization expenses which increased year over year due to the depreciation of new and expanded facilities placed into service in U.S.

and International locations.

The increase in the U.S.

compared to the same period last year relates to an increase in volume and an increase in the cost to process a car, driven by increase in subhaul, labor costs, title, facility, supplies, advertising and bank charges and the investment in Purple Wave.

The increase in International, after excluding negative fluctuations in currency exchange rates of $5.8 million, is the result of an increase in volume which was partially offset by a decrease in the cost to process a car.

Included in yard operations expenses were depreciation and amortization expenses.

The increase in yard operations depreciation and amortization expenses as compared to the same period last year resulted primarily from depreciating new and expanded facilities placed into service in the U.S.

and International.

The following table presents a comparison of cost of vehicle sales for fiscal 2024, 2023 and 2022:

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The decrease in the U.S.

was primarily the result of a decrease in volume as a result of a proactive approach to mitigate principal unit exposure, offset by higher average purchase prices, which was primarily due to increased demand and a change in the mix of vehicles sold.

The increase in International, excluding the favorable impact of $17.8 million due to changes in foreign currency exchange rates, primarily from the favorable change in the European Union euro, Canadian dollar and British pound to U.S.

dollar exchange rates, was primarily driven by higher average purchase prices due to the change in mix of vehicles sold and higher volume.

was primarily the result of a lower average purchase price due to a change in the mix of vehicles sold, partially offset by an increase in volume.

The increase in International of $18.3 million, after excluding the negative fluctuations of currency exchange rates of $8.6 million, was primarily due to an increase in volume and higher average purchase prices due to the change in the mix of vehicles sold.

The following table presents a comparison of general and administrative expenses for fiscal 2024, 2023 and 2022:

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Excluding depreciation and amortization, the increase in the U.S.

of $12.2 million resulted from increases in, labor costs, outside services and travel costs offset by a decrease in legal costs.

The increase in International, excluding a favorable impact of $2.7 million due to changes in foreign currency exchange rates, primarily from the favorable change in the European Union euro, Canadian dollar and British pound to U.S.

dollar exchange rate offset by an unfavorable change in the Brazilian real to U.S.

dollar exchange rate, resulted from increases in stock compensation, labor costs, legal costs, travel costs, and marketing costs.

The decrease in depreciation and amortization expenses resulted primarily from fully depreciating certain intangible and technology assets in the U.S.

and International locations.

of $78.9 million resulted primarily from increases in labor costs, legal costs, facility repairs, and the consolidation of Purple Wave.

The increase in International, after excluding the negative fluctuations in currency exchange rates of $1.3 million, resulted primarily from increases in labor costs, and marketing costs offset by a decrease in bank charges.

The increase in depreciation and amortization expenses was the result of new intangibles and technology being placed in service in the U.S.

and International.

The following table summarizes total other expenses and income taxes for fiscal 2024, 2023 and 2022:

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Income taxes 352,254 316,587 250,824 35,667 11.3 % 65,763 26.2 %

Other Expenses.

The increase in total other income for fiscal 2023 of $101.8 million, or 299.0% as compared to fiscal 2022 was primarily due to higher interest income earned from Treasury Bills, realized and unrealized foreign currency gains, net against a decrease in interest expense and decrease of extinguishment of debt offset by losses from equity method investments.

Other Income (Expenses).

The increase in total other income for fiscal 2024 of $74.8 million, or 110.4% as compared to fiscal 2023 was primarily due to higher interest income earned from U.S.

Treasury Bills, and gain on sale of fixed assets, net against a decrease in realized and unrealized foreign currency gains.

Income Taxes.

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federal statutory tax rate of 21.0%.

The effective tax rate for fiscal year ending July 31, 2023 was favorably impacted by $1.5 million of discrete tax adjustments made in connection with finalizing our fiscal year 2022 tax return.

The effective tax rate for fiscal year ending July 31, 2022 was unfavorably impacted by $8.2 million of discrete tax adjustments made in connection with finalizing our fiscal year 2021 tax return and favorably impacted by $17.0 million of discrete tax items related to amending previously filed income tax returns.

The effective tax rate for the fiscal year ended July 31, 2024 was favorably impacted by $0.8 million of tax adjustments made in connection with finalizing our fiscal year 2023 tax return.

The effective tax rate for fiscal year ending July 31, 2023 was favorably impacted by $1.5 million of tax adjustments made in connection with finalizing our fiscal year 2022 tax return.

The effective tax rates in the current and prior year were also impacted by the recognition of excess tax benefits from the exercise of employee stock options of $14.8 million and $21.0 million for fiscal years 2024 and 2023, respectively.

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Financing cash flows 19,273 66,615 (382,693) (47,342) 71.1 % 449,308 117.4 %

Capital expenditures, excluding acquisitions $ (516,636) $ (337,448) $ (462,996) $ (179,188) (53.1) % $ 125,548 27.1 %

Acquisitions — (106,604) (5,000) 106,604 100.0 % (101,604) (2,032.1) %

Cash, cash equivalents, and restricted cash decreased $426.8 million and working capital increased $1,008.3 million at July 31, 2023, as compared to July 31, 2022.

Cash, cash equivalents, and restricted cash decreased primarily due to the purchase of held to maturity securities of $1,406.6 million as at July 31, 2023, offset by cash generated from operations and proceeds from stock option exercises.

Capital expenditures, and acquisitions $ (493,328) $ (516,636) $ (444,052) $ 23,308 4.5 % $ (72,584) (16.3) %

Cash, cash equivalents, and restricted cash increased $556.7 million and working capital increased $1,019.8 million at July 31, 2024, as compared to July 31, 2023.

Cash, cash equivalents, and restricted cash increased primarily due to cash generated from operations and proceeds from stock option exercises.

Working capital increased primarily from cash generated from operations and timing of cash receipts and payments, partially offset by capital expenditures and certain income tax benefits related to stock option exercises and timing of cash payments.

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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 reimbursable advances from the proceeds of vehicle sales.

Our primary source of cash generated by operations is from the collection of service fees and reimbursable advances from the proceeds of vehicle sales.

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, the payment of dividends, and acquisitions.

For further detail, see Notes to Consolidated Financial Statements, Note 9 — Long-Term Debt and Note 12 — Stockholders’ Equity and under the subheadings “ Credit Agreement ” below.

For further detail, see Notes to Consolidated Financial Statements, Note 9 – Long-Term Debt and Note 12 — Stockholders’ Equity 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.

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We expect to acquire or develop additional locations and expand some of our current facilities in the foreseeable future.

We may be required to raise additional cash through drawdowns on our Revolving Loan Facility or issuance of additional equity to fund this expansion.

We may raise additional cash through drawdowns on our Revolving Loan Facility or issuance of additional equity to fund this expansion.

Although the timing and magnitude of growth through expansion and acquisitions are not predictable, the opening of new greenfield yards is contingent upon our ability to locate property that (i) is in an area in which we have a need for more capacity;

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and (v) most importantly, has the appropriate zoning for our business.

As of July 31, 2023, $145.5 million of the $957.4 million of cash, cash equivalents, and restricted cash was held by our foreign subsidiaries.

As of July 31, 2024, $180.5 million of the $1.5 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 still be subject to the foreign withholding tax following the U.S.

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Net cash provided by operating activities increased for fiscal 2024 as compared to fiscal 2023 due to improved cash operating results primarily from an increase in service and vehicle sales revenues, partially offset by an increase in yard operations and general and administrative expenses, and changes in operating assets and liabilities.

The change in operating assets and liabilities was primarily the result of an increase in funds received in income tax receivable of $63.1 million, inventory of $37.4 million, deferred revenue of $6.5 million and income tax payable of $21.8 million, partially offset by accounts receivable of $25.5 million, accounts payable of $18.3 million, and vehicle pooling costs of $7.4 million.

Net cash used in investing activities increased for fiscal 2023 as compared to fiscal 2022 due primarily to the purchase of held to maturity securities and an increase in capital expenditures net against proceeds from the sale of assets.

The change in operating assets and liabilities was primarily the result of an increase income tax payable of $24.7 million, and accounts payable of $41.5 million, partially offset by accounts receivable of $22.2 million, and prepaid expenses of $11.1 million.

Net cash used in investing activities decreased for fiscal 2024 as compared to fiscal 2023 due primarily to proceeds from the sale of held to maturity securities net against the purchase of held to maturity securities.

Our capital expenditures are primarily related to acquiring land, opening and improving facilities, capitalized software development costs for new software for internal use and major software enhancements, acquiring yard equipment, and lease buyouts of certain facilities.

We continue to develop, expand, and invest in new and existing facilities and standardize the appearance of existing locations.

As of the year ended July 31, 2023, we have no material non-cancelable commitments for future capital expenditures.

Net cash provided by (used in) financing activities changed from a use of cash to providing cash in fiscal 2023 as compared to fiscal 2022 due primarily to an increase in proceeds from the exercise of stock options and a reduction in principal payments on long term debt as discussed in further detail in the Notes to Consolidated Financial Statements, Note 12 — Stockholders’ Equity.

As of July 31, 2024, we had no material non-cancelable commitments for future capital expenditures.

Net cash provided by (used in) financing activities decreased in fiscal 2024 as compared to fiscal 2023 due primarily to a decrease in proceeds from the exercise of stock options, a reduction in principal payments on debt and a reduction in the drawdown on the revolver facility as discussed in further detail in the Notes to Consolidated Financial Statements, Note 12 — Stockholders’ Equity.

For a discussion of fiscal 2023 as compared to fiscal 2022, please refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended July 31, 2023, filed with the SEC on September 28, 2023 .

Stock Repurchases

On September 22, 2011, our Board of Directors approved a 320 million share increase in the stock repurchase program, bringing the total current authorization to 784 million shares.

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.

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As of July 31, 2024, the total number of shares repurchased to date under the program was 458,196,792, and subject to applicable limitations under Delaware law, 325,803,208 shares were available for repurchase under our program.

In fiscal 2021, certain employees exercised stock options through a cashless exercise.

In fiscal 2022 and 2023, no employees exercised stock options through a cashless exercise.

A portion of the options exercised were net settled in satisfaction of the exercise price.

We remitted $0.0 million, $0.0 million, and $3.8 million during the years ended July 31, 2023, 2022, and 2021, respectively, to the proper taxing authorities in satisfaction of the employees’ statutory withholding requirements.

The exercised stock options, utilizing a cashless exercise, are summarized in the following table:

Period Options Exercised Weighted Average Exercise Price Shares Net Settled for Exercise Shares Withheld for Taxes (1)

Net Shares to Employees Weighted Average Share Price for Withholding Employee Stock-Based Tax Withholding (in 000s)

FY 2021—Q4 360,000 4.43 49,464 117,396 193,140 32.25 3,786

FY 2022 — — — — — — —

FY 2023 — — — — — — —

(1) Shares withheld for taxes are treated as a repurchase of shares for accounting purposes but do not count against our stock repurchase program.

In fiscal 2024, certain employees held stock option awards that could be exercised through a cashless exercise.

For the years ended July 31, 2024, 2023 and 2022, no employee exercised stock options through a cashless exercise.

If exercised a portion of the options exercised will be net settled in satisfaction of the exercise price and employees’ statutory withholding requirements.

Any shares withheld for taxes are treated as a repurchase of shares for accounting purposes, but do not count against our stock repurchased program.

Credit Agreement

On July 21, 2020, we entered into a First Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, Truist Bank (as successor by merger to Suntrust Bank), BMO Harris Bank N.A., Santander Bank, N.A., and Bank of America, N.A., as administrative agent (as amended from time to time, the “Credit Agreement”), bringing the aggregate principal amount of the revolving credit commitments under the Credit Agreement ( the “Revolving Loan Facility”) to $1,050.0 million.

On December 21, 2021, we entered into a Second Amended and Restated Credit Agreement by and among Copart, certain subsidiaries of Copart party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “Second Amended and Restated Credit Agreement”).

The Second Amended and Restated Credit Agreement amends and restates certain terms of the First Amended and Restated Credit Agreement, dated as of July 21, 2020, by and among Copart, the lenders party thereto, and Bank of America, N.A., as administrative agent (as successor in interest to Wells Fargo Bank, National Association) (the “Existing Credit Agreement”).

The Second Amended and Restated Credit Agreement provides for, among other things, (a) an increase in the secured revolving credit commitments by $200.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Second Amended and Restated Credit Agreement (the “Revolving Loan Facility”) to $1,250.0 million, (b) an increase in the letter of credit sublimit from $60.0 million to $100.0 million, (c) addition of Copart UK Limited, CPRT GmbH and Copart Autos España, S.L.U., each a wholly-owned direct or indirect foreign subsidiary of Copart, as borrowers, (d) addition of the ability to borrow under the Second and Amended and Restated Credit Agreement in certain foreign currencies including Pounds Sterling, Euro and Canadian Dollars, (e) extension of the maturity date of the revolving credit facility under the Existing Credit Agreement from July 21, 2023 to December 21, 2026, (f) replacing the LIBOR interest rate applicable to U.S.

Dollar denominated borrowings with a Secured Overnight Financing Rate (”SOFR”) interest rate, and (g) changing the pricing levels with respect to the revolving loans as further described below.

The Second Amended and Restated Credit Agreement provides for a revolving loan facility of $1.250.0 million maturing on December 21, 2026 (including up to $550.0 million equivalent of borrowings in the Pounds Sterling, European Union Euro and Canadian dollars) with a $150.0 million equivalent sub-facility available to CPRT GmbH, a $150.0 million equivalent sub-facility available to Copart Autos España, S.L.U.

and a $250.0 million sub-facility available to Copart UK Limited.

The proceeds may be used for general corporate purposes, including working capital, capital expenditures, potential share repurchases, acquisition, or other investments relating to the Company’s expansion strategies in domestic and international markets.

We had $0.0 million and $11 million outstanding borrowings under the Revolving Loan Facility as of July 31, 2024 and July 31, 2023, respectively.

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For further detail on both the Credit Agreement and Note Purchase Agreement, see Notes to Consolidated Financial Statements, Note 9 – Long-Term Debt .

Off-Balance Sheet Arrangements

As of July 31, 2023, we had no off-balance sheet arrangements pursuant to Item 303(a)(4) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended.

Critical Accounting Policies and Estimates

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For additional information, see Note 1 — Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements.

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes in Part I., Item I., “Financial Statements.”

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes.

Revenue Recognition

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Service revenues

Our service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services.

Our service revenues consist of auction and auction-related sales transaction fees charged for vehicle remarketing services.

Within this revenue category, our primary performance obligation is the auctioning of consigned vehicles through an online auction process.

These auction and auction related services may include a combination of vehicle purchasing fees, vehicle

listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle;

These auction and auction-related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle;

transportation fees for the cost of transporting the vehicle to or from our facility;

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This fee is recognized ratably over the term of the arrangement, generally one year, as each day of access to the online auction platform represents the best depiction of the transfer of the service.

No provision for returns has been established, as all sales are final with no right of return or warranty, although we provide for expected credit losses in the case of non-performance by our buyers or sellers.

No provision for returns has been established, as all sales are final with no right of return or warranty, except for separately identified vehicles subject to the arbitration policy, although we provide for expected credit losses in the case of non-performance by our buyers or sellers.

Year Ended July 31,

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We recognize liabilities when we determine a tax position is not more likely than not to be sustained upon examination by the tax authorities.

We use significant judgment in determining whether a tax position's technical merits are more likely than not to be sustained and in measuring the amount of tax benefit that qualifies for recognition.

We use judgment in determining whether a tax position's technical merits are more likely than not to be sustained and in measuring the amount of tax benefit that qualifies for recognition.

We recognize penalties and interest accrued related to income taxes as a component of the provision for income taxes.

Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different from what is reflected in the historical income tax provisions and accruals.

We recognize liabilities, if any, related to global low-taxed intangible income (“GILTI”) in the year in which the liability arises and not as a deferred tax liability.

We recognize liabilities, if any, related to global low-taxed intangible income in the year in which the liability arises and not as a deferred tax liability.

Recently Issued Accounting Standards

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis