What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-09-26 compared with 2024-09-30 · 65 added, 92 removed, 326 unchanged (33% of the section changed)

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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.

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 materially 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.

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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 dealers, individuals, charities, rental, banks, finance companies, and fleet operators.

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

We obtained 81%, 81%, and 83% of the total number of vehicles processed during fiscal 2025, 2024, and 2023, respectively, from insurance company sellers.

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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 the U.K., 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.

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dollar exchange rate to foreign currencies, which we believe has an impact on auction participation by international buyers;

(vi) changes in commodity prices, particularly the per ton price for crushed car bodies, as we believe this has an impact on the ultimate selling price of vehicles sold for scrap and vehicles sold for dismantling.

and (vi) changes in commodity prices, particularly the per ton price for crushed car bodies, as we believe this has an impact on the ultimate selling price of vehicles sold for scrap and vehicles sold for dismantling.

We cannot specifically quantify the financial impact that commodity pricing, used car pricing, and product sales mix has on the selling price of vehicles, our service revenues, or financial results.

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Operating Costs and Expenses:

Yard operations expenses consist primarily of:

(i) labor (operating personnel at yards);

Facility operations expenses consist primarily of:

(i) labor (operating personnel at facilities);

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

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

fees and interest expense on the credit facility, 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.

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:

Our primary source of working capital is cash flow from operations.

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

The primary factors affecting cash flows from operations are:

(i) seasonality;

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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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As part of our overall expansion strategy of offering integrated services to vehicle sellers, we anticipate acquiring and developing facilities in new regions, as well as the regions currently served by our facilities.

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.

We believe that these acquisitions and openings will strengthen our coverage, as we have facilities located 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 with the intention of providing global coverage for our sellers.

The following tables set forth operational facilities that we have opened and are now operational from August 1, 2022 through July 31, 2025:

United States Locations Date

Mobile South, Alabama August 2021

Madison, Wisconsin October 2021

Augusta, Georgia April 2022

Milwaukee South, Wisconsin

Punta Gorda, Florida

Anchorage, Alaska August 2022

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Casper, Wyoming July 2024

Napa, California October 2024

Laurel, Maryland November 2024

Chicago, Illinois May 2025

International Locations Geographic Service Area Date

Barcelona, Spain Spain September 2021

Halifax, Novia Scotia Canada April 2022

Brasília, Brazil Brazil September 2022

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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

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.

Helens, England United Kingdom October 2024

Castellón, Spain Spain November 2024

Vitoria, Spain Spain December 2024

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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Operating expenses:

Yard operations 40 % 39 % 37 %

Facility operations 42 % 40 % 39 %

Cost of vehicle sales 13 % 15 % 15 %

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The growth in the U.S.

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.

was driven primarily by an increase in revenue per car and an increase in volume.

The growth in International, after excluding positive fluctuations in currency exchange rates of $2.7 million, was driven primarily by an increase in revenue per car and increase in volume.

The following table presents a comparison of vehicle sales for fiscal 2025, 2024 and 2023:

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Vehicle Sales.

The increase in vehicle sales for fiscal 2024 of $4.4 million, or 0.7% as compared to fiscal 2023 came from (i) a decrease in the U.S.

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

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:

The increase in vehicle sales for fiscal 2025 of $2.5 million, or 0.4% as compared to fiscal 2024 came from (i) an increase in the U.S.

of $64.9 million and (ii) a decrease in International of $62.4 million.

The increase in the U.S.

was primarily driven by an increase in volume and an increase in revenue per car due to higher auction selling prices.

The decrease in International, after excluding positive fluctuations in currency exchanges rates of $5.7 million was primarily driven by a decrease in revenue per car due to lower auction selling prices, which we believe was due to change in mix of vehicles sold, and a decrease in volume related to sellers switching to a consignment model.

The following table presents a comparison of facility operations expense for fiscal 2025, 2024 and 2023:

Year Ended July 31, 2025 vs.

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(In thousands) 2025 2024 2023 Change % Change Change % Change

Yard operations expenses

Facility operations expenses

United States $ 1,646,183 $ 1,440,707 $ 1,292,527 $ 205,476 14.3 % $ 148,180 11.5 %

International 298,135 269,377 225,502 28,758 10.7 % 43,875 19.5 %

Total yard operations expenses $ 1,710,084 $ 1,518,029 $ 1,309,497 $ 192,055 12.7 % $ 208,532 15.9 %

Yard operations expenses, excluding depreciation and amortization

Total facility operations expenses $ 1,944,318 $ 1,710,084 $ 1,518,029 $ 234,234 13.7 % $ 192,055 12.7 %

Facility operations expenses, excluding depreciation and amortization

United States $ 1,485,186 $ 1,297,102 $ 1,173,373 $ 188,084 14.5 % $ 123,729 10.5 %

International 267,357 242,332 202,559 25,025 10.3 % 39,773 19.6 %

Yard depreciation and amortization

Facility depreciation and amortization

United States $ 160,997 $ 143,605 $ 119,155 $ 17,392 12.1 % $ 24,450 20.5 %

International 30,778 27,045 22,942 3,733 13.8 % 4,103 17.9 %

Yard Operations Expenses.

The increase in yard operations expenses for fiscal 2024 of $192.1 million, or 12.7% as compared to fiscal 2023 resulted from (i) an increase in the U.S.

Facility Operations Expenses.

The increase in facility operations expenses for fiscal 2025 of $234.2 million, or 13.7% as compared to fiscal 2024 resulted from (i) an increase in the U.S.

of $205.5 million, and (ii) an increase in International of $28.8 million.

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.

compared to the same period last year related to an increase in volume and in non-CAT related subhaul, labor, and facility costs combined with one time CAT costs of $56 million associated with Hurricanes Helene and Milton.

These costs are related to subhaul, labor costs incurred from overtime, increased security costs, and increased travel and lodging.

The increase in International, after excluding negative fluctuations in currency exchange rates of $1.8 million, is the result of an increase in volume and an increase in costs to process a car.

Included in facility operations expenses were depreciation and amortization expenses.

The increase in facility 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.

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Cost of Vehicle Sales .

The increase in cost of vehicle sales for fiscal 2024 of $5.0 million, or 0.8% as compared to fiscal 2023, was the result of (i) a decrease in the U.S.

of $13.3 million and (ii) an increase in International of $18.3 million.

The decrease in the U.S.

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 decrease in cost of vehicle sales for fiscal 2025 of $16.5 million, or 2.7% as compared to fiscal 2024, was the result of (i) an increase in the U.S.

of $64.7 million and (ii) a decrease in International of $81.1 million.

increase in the U.S.

was primarily the result of an an increase average purchase price due to a change in the mix of vehicles sold and an increase in volume.

The decrease in International, after excluding the negative fluctuations of currency exchange rates of $4.1 million, was primarily due to a lower average purchase price due to a change in the mix of vehicles sold, combined with a decrease in volume related to sellers switching to a consignment model.

The following table presents a comparison of general and administrative expenses for fiscal 2025, 2024 and 2023:

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

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.

of $62.4 million resulted primarily from increases in third party outside services (including legal, compliance, and system implementations), labor costs (as a result of investment in the business and the expansion of our sales force), facility costs and travel.

The increase in International, primarily from increases in labor costs, and computer software offset by a decrease in legal costs.

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

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The increase in total other income for fiscal 2025 of $56.3 million, or 39.5% as compared to fiscal 2024 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.

Treasury Bills, gain on sale of fixed assets, and realized and unrealized foreign currency gains.

Income Taxes.

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federal statutory tax rate of 21.0%.

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.

The effective tax rate for the fiscal year ended July 31, 2025 was favorably impacted by a $55.0 million tax benefit related to the Foreign Derived Intangible Income “FDII” deduction and $36.7 million in excess tax benefits from the exercise of employee stock options and negatively impacted by $38.6 million related to state income taxes.

The effective tax rate for the fiscal year ending July 31, 2024 was favorably impacted by a $47.7 million tax benefit related to the FDII deduction and $14.8 million in excess tax benefits from the exercise of employee stock options and negatively impacted by $40.6 million related to state income taxes.

Discussion of Fiscal Year ended July 31, 2024 compared to Fiscal Year ended July 31, 2023

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Cash, cash equivalents, and restricted cash increased $1,266.4 million and working capital increased $1,281.7 million at July 31, 2025, as compared to July 31, 2024.

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.

Cash, cash equivalents, and restricted cash increased primarily due to cash generated from operations, proceeds from held to maturity securities, 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, investment in held to maturity securities and certain income tax benefits related to stock option exercises and timing of cash payments.

Cash equivalents consisted of bank deposits, certificates of deposit, U.S.

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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;

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;

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and our current plans do not require repatriation to fund our U.S.

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 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.

Net cash provided by operating activities increased for fiscal 2025 as compared to fiscal 2024 due to improved cash operating results primarily from an increase in service and vehicle sales revenues, partially offset by an increase in facility 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 a decrease in accounts receivable of $111.4 million, vehicle pooling costs of $26.4 million, prepaid expenses and other current and non-current assets of $78.8 million, partially offset by an increase in income tax receivable of $7.1 million and decrease in income tax payable of $90.8 million.

Net cash used in investing activities decreased for fiscal 2025 as compared to fiscal 2024 due primarily to an increase in proceeds from the sale of held to maturity securities, a reduction in the purchase of held to maturity securities and an increase in capital expenditures.

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 facility 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 July 31, 2025, 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.

Net cash provided by financing activities increased in fiscal 2025 as compared to fiscal 2024 due primarily to an increase in proceeds from the exercise of stock options and a reduction in revolver facility payments.

For a discussion of fiscal 2024 as compared to fiscal 2023, 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, 2024, filed with the SEC on September 27, 2024 .

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.

For fiscal 2024, 2023, and 2022, we did not repurchase any shares of our common stock under the program.

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 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 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 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.

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 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.

The Credit Agreement contains customary affirmative and negative covenants and we were in compliance with all covenants related to the Credit Agreement as of July 31, 2024.

Note Purchase Agreement

On December 3, 2014, we entered into a Note Purchase Agreement and sold to certain purchasers (collectively, the “Purchasers”) $400.0 million in aggregate principal amount of senior secured notes (the “Senior Notes”) consisting of (i) $100.0 million aggregate principal amount of 4.07% Senior Notes, Series A, due December 3, 2024;

(ii) $100.0 million aggregate principal amount of 4.19% Senior Notes, Series B, due December 3, 2026;

(iii) $100.0 million aggregate principal amount of 4.25% Senior Notes, Series C, due December 3, 2027;

and (iv) $100.0 million aggregate principal amount of 4.35% Senior Notes, Series D, due December 3, 2029.

Interest is due and payable quarterly, in arrears, on each of the Senior Notes.

We may prepay the Senior Notes, in whole or in part, at any time, subject to certain conditions, including minimum amounts and payment of a make-whole amount equal to the discounted value of the remaining scheduled interest payments under the Senior Notes.

On May 24, 2022, we retired 100% of the Senior Notes .

We paid $420.6 million to retire the Senior Notes which included an additional $16.8 million make-whole payment, to the holders of the Senior Notes, and $3.8 million in accrued interest.

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

We had no outstanding borrowings under the Revolving Loan Facility as of July 31, 2025 and July 31, 2024.

The Second Amended and Restated Credit Agreement contains customary affirmative and negative covenants and we were in compliance with all covenants related to the Second Amended and Restated Credit Agreement as of July 31, 2025.

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

Critical Accounting Policies and Estimates

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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, 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.

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 an 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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The contract asset costs where the amortization period for the related asset is one year or less are expensed as incurred and recorded within general and administrative expenses in the accompanying consolidated statements of income.

In determining net income for financial statement purposes, we must make certain estimates and judgments in the

calculation of tax provisions and the resultant tax liabilities.

In determining net income for financial statement purposes, we must make certain estimates and judgments in the calculation of tax provisions and the resultant tax liabilities.

Deferred income tax assets and liabilities are recognized based on differences between the financial reporting and income tax basis of assets and liabilities and are measured using the tax rates and laws enacted at the time of such determination.

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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