Copart, Inc. Stock

Good day, everyone, and welcome to the Copart, Inc. Fourth Quarter Fiscal 2026 Earnings Call. Just a reminder, today's conference is being recorded.

Before turning the call over to management, I will share Copart's safe harbor statement. The company's comments today include forward-looking statements within the meaning of the federal securities laws including management's current views with respect to trends, opportunities and uncertainties in the company's industry. These forward-looking statements involve substantial risks and uncertainties. For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors in the company's annual report on Form 10-K for the year ended July 31, 2025, and each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements.

I will now turn the call over to the company's CEO and Executive Chairman, Jay Adair.

All right. Thank you. Well, welcome, everyone, to the fourth quarter earnings call for 2026. And I've got some prepared remarks that I'll talk to, and then I will turn it over to Leah Stearns, our CFO, and then we will open it up for questions.

So I'll remind you that on the prior call, I talked about the 3 pillars of growth for Copart. We will continue to focus on international expansion, on insurance, we'll continue to focus on whole car expansion domestically and then we'll continue to invest in technology and services that assist all of our customers.

Additionally, we view the differentiators for Copart as one, we are a business that is run by founders and that has a founder's mindset. We don't think in quarters or years, we think in decades, very long term. Number two, I would say liquidity. When you think about how our website functions we are constantly focused on improving buyer activity. And I'll talk more about some of the buyer data that we've got, but that liquidity continues to be a differentiator. And then in the spirit of acting like a start-up, we are very fast. We're moving very quickly, and we're bringing products and services to market in quarters, not in years. So we expect to have some of that coming out in the next 4 quarters.

Looking at global unit sales, we were down across the company, 2.9%, domestically that was down 5.7%. Internationally, we were up 10%. Global insurance units were down 4.2% with domestic insurance being down 7.5% and international insurance being up 11.2%. With the exception of 1 single customer loss, domestic insurance assignments would be up 2.3%. Collision claim frequency we are down 3.4% year-over-year. This is a moderation from a high of single-digit declines through 2025. Total loss frequency reached 23.3% in the second quarter of 2026, the highest second quarter on record, up from 22.4% in the same quarter last year.

Looking at severity. Average collision severity was over $6,300 per claim, up nearly 8.8% year-over-year, fastest in more than 3 years and the fourth straight quarter of acceleration. Repair costs are up more than 50% from 2019 levels per data from CCC. Looking at rental car rates, and that's something that obviously costs or increases the cost of repair for insurers. That rose by 4.5% year-over-year. Obviously, every additional day of repair and any costs associated with that increase the total cost of repair.

Turning to the complexity of vehicles. I recently had a conversation with a client, a friend of mine that was talking about how complex cars are and there was a recent article by Parametric Technology Corporation that pointed out a military drone has 3.5 million lines of code. And Airbus aircraft has 30 million lines of code. and the Windows 10 operating system has 50 million lines of code. What makes this interesting is that a new Tesla has approximately 100 million lines of code. So when we think about cars, they really are becoming computers on wheels. We believe total loss frequency will continue to go up.

Vehicle miles traveled were up 0.27% year-over-year in the fourth quarter of 2026. Vehicles in operation or what we refer to as the car part was up 1.6% year-over-year in calendar quarter to 2026. Looking at insurance ASPs globally, we were up 3.1% year-over-year in the fourth quarter of '26. Domestically, we were up 3.7% year-over-year in fourth quarter '26. And internationally, we were up 3.3% year-over-year in fourth quarter of '26. Turning to the Manheim used vehicle value index. It was up 2.8% year-over-year in the fourth quarter of '26. So we are outpacing the Manheim Index.

As we've stated before, liquidity comes from buyers. And so I'd like to give you some statistics now on why we believe and others believe that we have the greatest liquidity in the industry. Vehicles sold to buyers less than a year. This means that 1 year or more ago, that buyer was not buying from Copart was likely not aware of Copart. Vehicles that have been sold to buyers less than a year for 2026 were 8.9% of our total vehicles. That number for fiscal year '25 was 8.3%. So we've seen nice growth there. Expanding it out an additional year, vehicles sold to buyers that have been with Copart less than 2 years for 2026, our total sales, they represented 21.7% of our vehicles.

Now I'd like to turn to vehicles sold in the U.S. to international buyers. These are buyers outside the U.S. Total units sold in fiscal year '26 represent 38.2% of our units. However, more importantly, the dollars purchased, the amount of dollars that were spent on the vehicles that we sold represented 45.7% of the total amount of dollars that we sold in the vehicle. So they're obviously buying a more valuable vehicle when they're purchasing internationally.

On the previous call, I spoke to AI, and I think about AI as a very important differentiator for Copart. As we stated, we'll continue to lower cost through automation. This is an important part of our journey, and we're very focused on that. But I think even more important is using AI to create more demand for the vehicles that we're selling. The ability for a buyer to find that vehicle and to find a vehicle that matches their desired purchase is becoming more and more important every single day. So if you think about the journey of becoming aware of Copart and signing up becoming a member and then from membership to bidding and then to buying us connecting that buyer to that vehicle, we believe, is more important than ever.

And then finally, I think about accuracy. Every time that we can automate something and use AI, we eliminate errors and improved accuracy is one of our core tenets in Copart and continuing to make sure that we have less and less opportunity for mistakes.

Looking at OpEx per car in Q4 '26 versus Q4 '25, we are up 12.7%. Leah will talk more about expense control. My point is that we are focused on it. We are going to be working towards reducing our costs on a per car basis.

Finally, let me close by talking about our most recent announcement. We have agreed to acquire ACV, 1 of the largest, primarily digital automotive marketplaces in the country. ACV sells more than 800,000 vehicles each year. And importantly, operates with virtually no land of its own. We are excited about using our locations as staging areas for their vehicles and combining our global buyer base with their digital marketplace and remarketing technology. Copart and ACV are highly complementary. We bring physical scale, deep institutional relationships, salvage expertise and international buyer demand with more than 275 locations, over 4 million vehicles sold a year and approximately 1 million members across more than 185 countries. ACV brings dealer liquidity and relationships and inspections and valuation technology transacting approximately $10 billion of gross merchandise value in 2025 across more than 22,000 active buyers.

Together, Copart and ACV create a more complete automotive marketplace, connecting the right vehicle to the right buyer through the right channel without forcing every vehicle into a single operating model. For dealers, that means 1 partner to value, manage and dispose of virtually every used vehicle they touch. For commercial consignors like banks, rental car companies, fleet and leasing companies, it means 1 national relationship across multiple disposition channels, optimizing net proceeds. For buyers, it means unparalleled wholesale selection at every price point with integrated transportation and complete vehicle marshaling.

Copart has a very strong track record of driving strong return on invested capital across the businesses it has acquired, and we view this transaction in the same framework as our past acquisitions. We expect the transaction to be accretive to earnings in the first full year and we will provide more details after it closes. We are excited about ACV's people first culture, which fits naturally with our own culture. This is an all-cash transaction funded from cash on hand with no financing conditions. It's structured as a tender offer, which supports a relatively quick and clean path to closing. It is subject to the customary conditions you would expect, including regulatory review. Both Boards have unanimously approved the transaction. We expect to close by the end of the calendar year and ACV will operate as an independent subsidiary, led by its existing team. I will obviously explain more after the close.

With that, let me hand it over to Leah, our CFO, who will give you an update on the numbers, and then we will open it up for questions.

Thank you, Jay, and good afternoon to everyone on the call. I will lead today with our financial results and per unit economics for the fourth quarter and fiscal year 2026. Then I'll walk you through our U.S. and international segments and close with capital structure and liquidity highlights. For the fourth quarter, consolidated revenue grew to $1.2 billion, up 2.4% year-over-year, driven by the strength in both service revenues and purchased vehicle sales. Global service revenue increased more than $13 million or 1.4%, and global purchased vehicle sales increased $14 million or 8.3%. For fiscal year 2026, revenue was $4.7 billion, up 0.4% with service revenue up $1 million, which was primarily due to increased international volumes and higher revenue per unit. As a reminder, FY '25 included the benefit of Hurricane Helene and Milton. Excluding the impact of these storms, FY '26 total revenue grew 2.4%.

Finally, purchased vehicle sales were up $18.4 million during the quarter or approximately 2.7%. On a per unit basis, fourth quarter revenue per unit increased 5.4% and approximately 5.7% for the full year. Average selling prices continue to expand across the platform with global ASPs increasing 3.5% versus the prior year quarter and 5.5% for the full year. We believe the continued growth in our ASPs reflects the strength of our auctions as our global auction liquidity continues to deliver superior outcomes for our sellers.

Global gross profit for the quarter was $481 million, a decrease of $28 million or 5.5% with gross margin of 41.8%. Our gross profit declines primarily reflect the impact of costs associated with our continued investment across new products and services including long-haul delivery, Title Express and our dedicated wholesale facilities in the U.S. For the fiscal year, gross profit was $2.1 billion, down $15.8 million or 0.8%. And was flat when you exclude the impact of CAT events in 2025. Gross margin was 44.7% for the full year.

Fourth quarter operating income decreased 10.6% to $368.9 million, and for the fiscal year, operating income decreased 2.6% to $1.7 billion. Fourth quarter net income attributable to Copart decreased 17.4% to $327.4 million or $0.35 per diluted common share, which was down 14.6%. As a reminder, we had a onetime $13 million gain on the disposal of assets in the fourth quarter of 2025. This, combined with lower interest income in the fourth quarter of 2026, which was a result of our deployment of $1.63 billion into share repurchases earlier in the fiscal year contributed to the year-over-year decline in net income. For the fiscal year, net income attributable to Copart decreased 4.4% to $1.48 billion or $1.55 per diluted common share.

On a global basis, total fourth quarter sold units declined 2.9% year-over-year, while fiscal 2026 units sold declined 5.5% or 3.1%, excluding CAT units. For the quarter, global assignment volumes decreased 2.2%. And as of year-end, global inventory was down 1% from a year ago period.

Turning to our U.S. segment. Total revenue was up 0.4% in the quarter as higher revenue per unit largely offset a decline in volume. U.S. service revenue decreased less than 1% for the quarter and less than 2% for the full year, with the full year decline primarily related to the onetime revenue associated with Hurricane Helene and Milton, which was recognized in fiscal '25 and offset by an increase in revenue per car. U.S. purchased vehicle revenue was up $11.1 million or 10.9% in the quarter with purchased vehicle gross profit up $0.5 million or 8.7%. For the fiscal year, U.S. purchased vehicle revenue increased $15.6 million or 3.9%, and purchased vehicle gross profit increased $2.7 million or 10.5%.

For the full year, U.S. purchased unit margins were 6.7%, representing an increase of 40 basis points compared to fiscal '25. U.S. facility-related costs increased $30 million or 7.7% in the fourth quarter. which is a 14.2% increase on a per unit basis and again reflects the ongoing investments I referenced earlier. For the full fiscal year, U.S. facility-related costs decreased $11.8 million or 0.7%, while increasing 6.6% on a per unit basis. We continue to invest across our U.S. business on behalf of our sellers and members to enhance the products and services we offer. That being said, cost management is an equally important component of our long-term strategy, and we believe we can execute on both dimensions. We are focused on managing our facility cost down on a per unit basis through focused cost management across the company.

U.S. gross profit was $403.8 million, down 8.3% for the quarter and down 2.7% for the fiscal year. with gross margin of 43.4% for the quarter and 46.8% for the full year. Our U.S. operating income was $312.2 million, reflecting a 33.6% operating margin for the quarter. Total fourth quarter units sold declined 5.7% and 6.9% for the fiscal year 2026. U.S. insurance volumes decreased 7.5% in the quarter and 8% for the fiscal year, which is primarily a result of the industry trends around claims frequency, which Jay described a few moments ago.

Beyond insurance, our diversified seller base is showing signs of inflection. While our U.S. noninsurance unit volume declined 3.9% for the full fiscal year, which was primarily a result of lower Copart direct units. Our noninsurance unit volume returned to modest growth in the fourth quarter, up 0.2%, marking a strong sequential improvement, which we believe reflects the traction of our commercial and dealer initiatives. Our dealer units grew 5.8% in the quarter and 3.9% for the year. Blue Car, which serves our bank, rental and fleet partners expanded nearly 20% over the prior year quarter and 2.4% for fiscal 2026 with continued double-digit growth across our bank and fleet customers. And Copart direct unit volume declined 11.7% in the quarter or 34.5% for the fiscal year 2016 as we continue to optimize our principal unit strategy.

U.S. inventory was down 3.4% year-over-year, with the 3 main drivers being the decline in assignments of 5%, faster cycle times experienced by our customers and the reduction in overall aged inventory. In the U.S., ASPs increased 4.2% in the quarter, with full year ASPs increasing 5.5%. U.S. insurance ASPs increased 3.7% or 5.5% for the full year. U.S. noninsurance ASPs increased 5.9% in the quarter or 5.6% for the full year and were led by bank and finance seller ASPs, which were up 12.4% year-to-date. -- and with part direct ASPs increasing 29.2%.

Turning to our International segment. Fourth quarter revenue grew 11.7% to $222.1 million. The primary source of growth was service revenues, up 15.5% for the quarter and 12.4% for the year, driven by a 3.5% increase in fee revenue per unit and volume growth. International purchased vehicle revenue increased $2.9 million or 4.4% in the quarter, while purchased vehicle gross profit decreased $3.4 million or 22.1%. And -- for the full year, international purchased vehicle revenue increased $2.8 million or 1% and purchased vehicle gross profit increased $2.3 million or 4.5%. International facility-related costs were up $8.8 million or 11.4% in the quarter, an increase of 1.2% on a per unit basis. And up $33.3 million or 11.2% for the fiscal year or 7.2% on a per unit basis.

The profit picture for international is equally compelling. Our international gross profit increased 11.8% to $77.6 million for the quarter at a 35% gross margin and was $301.9 million for fiscal year 2026 which was up 12.3% and drove a 35.2% margin. International operating income reached $56.8 million, representing a 25.6% operating margin. International ASPs were up 3.3% in the quarter and 7.3% on a full year basis. International insurance ASPs increased 3.3% for the quarter and 5.2% for the full year. Internationally, the story is 1 of continued momentum. Total units sold increased 10% in the quarter with insurance units up 11.2% and noninsurance units up 6%. Fee units increased 11.5% for the quarter and 4.6% for the fiscal year and were primarily driven by our U.K. and Canadian operations, while purchased units increased 0.2% for the quarter and declined 2.1% for the full year.

For fiscal year '26, total international units grew 3.7%. International inventory ended the quarter up 10.4% from a year ago period and international assignments grew 10% in the quarter. Our performance continues to reflect the investments we are making in complementary products and services. And as I mentioned earlier, this includes Title Express for insurance customers, long-haul delivery for our members and dedicated wholesale facilities for our dealer and commercial sellers. On that last point, today, we have 25 dedicated wholesale facilities co-located at existing Copart locations in the top U.S. metro markets, which serve 80% of the addressable wholesale market. Our investments to date have included facility upgrades, the hiring of skilled technicians and the implementation of technology capabilities to serve this segment of our customers at a superior level.

And finally, turning to our capital structure and liquidity. Copart remains in an exceptionally strong financial position. As of the end of July, we had approximately $5.7 billion of liquidity and comprised of $4.5 billion in cash, cash equivalents and held-to-maturity securities, plus $1.25 billion of capacity under our revolving credit facility with no debt outstanding. Our balance sheet gives us tremendous flexibility to the opportunistic investors throughout business and credit cycles. Accounting for the consideration associated with the ACV transaction we announced a short while ago, we will still retain significant financial flexibility and capacity to drive further accretive investments.

We continue to focus on driving best-in-class outcomes for our customers while generating superior long-term returns for our shareholders. Thank you. And with that, Jay and I would be happy to take your questions.

[Operator Instructions] And the first question comes from the line of Bob Labick with CJS Securities.

Congratulations on buying a great company and getting a great management team as well. .

Thank you, Bob. We're excited about it. .

It's really exciting. And just on that, can you talk a little bit about the fit of ACV into the Copart culture could you guys have such a strong culture and tell us how they fit into it.

Sure. Yes. George and I have gotten to know each other really well as well as many of the senior team. It's 1 of the things I talked about. They really -- they have a start-up mentality the way they run the company. They think very agile, and there is noncorporate. And I would say as nonlarge-public company as you can get, they think scrappy like we do, and you've heard me use those terms in the past. We are a very scrappy company that can make decisions very quickly, and they have that same -- they have very much that same culture.

Additionally, I'd say there's a friendship culture that they have. We're all friends in this company. We get along -- I mean we don't just get along, we hang out together. So it's one of those things where we're all pretty chummy, and I noticed that with them as well. So they're going to fit in perfect. We're about winning. They're about results-driven culture and I think we're just going to get along great. We're going to put these 2 companies together and it's going to be amazing.

That's great. And then you said they're going to operate as a subsidiary. So I'm assuming that means you'll retain each of the brands? Is that right?

Yes, for sure, we're going to maintain both brands. But look, make no mistake. We are going to integrate buyers. -- we're going to integrate the liquidity of the buyers so that they're available on both platforms. But they will be marketing that product separately. They'll be selling those cars on their website separately from Copart. They'll be utilizing the logistics of Copart. We can move a vehicle anywhere in the country in less than 24 hours, and we do it sometimes over 15,000 to 20,000 times a day. So there's a bunch that we bring to the table, but there's also a bunch that they bring to the table with their technology and their buyer base. So it's -- they're going to be separate brands, but they will be integrated on some level between buyers and experiences, that kind of thing. But again, separately, separate websites separately and operating.

Okay. Great. And last one for me, I'll jump back, I promise. But obviously, you already have some whole cars and you have massive auction liquidity. Just thinking over the next several years, how does growing your liquidity in whole car and going up value in dealers at dealer ultimately benefit your insurance customers as well.

Well, I think it's just going to -- it's obvious, it's going -- I mean I feel like it's a lot of question. You just -- you did the answer, but you want me to answer it anyway. It is obvious that as we bring in more independent dealers -- yes, you're right, we have a huge number of independent dealers today as we bring in more independent dealers in their case, more franchise dealers. They have more franchise dealers than we do. So as we bring in more of those buyers, that will improve returns, especially when you start to look at insurance damage vehicles. More often than not now, you're seeing cars that don't look like they should have been totaled but their economic totals. And so while they're still drivable, while they're repairable, they're economically totaled. And so that's going to help on that front.

On their units, they have a certain amount of trade-ins that are on the lower end that our international buyers, especially Mexico, just love those vehicles. And so given our network, one of the things that you challenge logistically is if you buy 50 cars from dealerships, and they're staying at the dealership. How does the 9 car get in there to pick those up. With Copart, we can move those vehicles over to Copart and then 9 car coming through can pick those up on their time and bring them down to Mexico or bring them to a port where they're going to be shipped. So the international play and the logistics play is going to become real powerful.

The next question comes from the line of Craig Kennison with Baird.

Wanted to ask, Jay, I'm trying to anticipate, I guess, where you may want to invest in ACV to accelerate the growth plan. It sounds like you plan to leverage existing land. Do you need to invest in people or technology? Or do you need new parts of the business like wholesale financing or you intend to get into reconditioning? Just trying to get the scope and scale of where your investments may be.

Sure. Some of the investment, Craig, is going to be in training. So we've got to bring the ACV folks up to speed on what Copart can do and what offerings we have, and we've got to do the same thing for Copart. So we've got to bring some of the Copart folks up to speed on what ACV products and services are. Some of the investment will be in making areas for our facilities that are specialty for so that they're not considered Copart areas. They'll be partitioned often separated so that they're for ACV.

And then part of the investment will be technology. We're going to keep -- we're doubling down on tech right now. I mean there's no question about that. We are -- there is a buzz at Copart right now about all that we're accomplishing and that we're getting done at Copart on the technology front, and that will continue with this deal. So you'll see continued investment in ACV as well as Copart on tech and making tech that enables the buyer to come in and access both products. So they are separate, but they feel connected.

And then with respect to your core operations, Jay, I think you mentioned your operating cost per vehicle, they were up 12%, and you had a plan to address that. Can you help us understand that plan?

Yes. I mean we're on it. That's really all I can tell you. We're aware of it. We've identified it and we are on it. We are going to be focusing on reducing costs and getting that cost down. And so in just focusing on the cost, that's going to be one piece of it. The other side is as we bring more units through we're going to leverage those costs through more units. So the per car, I fully anticipate per car cost to come to go down.

And on that unit side, I know you mentioned one customer loss. But has the drama died down or are there still RFPs out there that lead to uncertainty?

I don't think there's any drama. I mean, if anything, there's swagger maybe right now is what I would say at Copart, we're pretty pumped up about where we're headed. And we've got a lot of great people that are kicking ass and that's going to continue. That's not going to change. And I feel wonderful about our relationships with our existing customers. So everything is good. I don't really have anything that I would say right now is drama. I think everything is really positive.

The next question comes from the line of Chris Bottiglieri with BNP Paribas.

This is Ian Davis on for Chris. -- first 1 for me is how should we think about opportunities for future M&A from here? Do you think this acquisition precludes you from doing another deal with substantial size for a little while? I know there were some rumors floating around further opportunities towards tech services. So just wanted to get thoughts on other acquisitions and maybe SaaS-based models that could further increase your access to data from here? .

Yes. No, I don't think this prohibits us from doing any future acquisitions. We're looking at other businesses that we may want to acquire in the auction space. So we've got a lot of options. Even with this deal done, we've got over $2 billion of cash on our balance sheet. So I think we're in a great spot.

What really matters to me is that we buy companies that make sense that fit in with Copart and that Copart can add a lot of value. I'm not really big on buying businesses that are -- I'm not going to go out and buy hotels tomorrow because Copart books hotel rooms across the country. That's not synergistic enough. In this case, this is going to be a sharing of customers sharing of buyers. Remember, we do a bunch of wholesale today already. So a bunch of the customers that are with ATV or with Copart. So we're sharing customers, we're sharing buyers in some cases and now we have the ability to put this network of facilities and logistics network. By the way, ACV has got a logistics engine internally that they've developed as well. So there's a lot of benefit here. If there's something in the future that has similar benefit, we'll look at it.

Got it. That's helpful. And then I think thinking about that international pillar, what's the frame, another way to frame you're thinking there? Is this something that you want to strike a balance between data best and expanded capabilities in existing international markets or maybe pursuing completely new international markets. Is that -- how should we think about that for the coming year or 2? And what will potential bolt-on M&A play into that part?

Yes. We're profitable in all of our international markets now, and that was something that we wanted to see. But do we want to expand in the existing markets? Absolutely. I think that we said for the quarter, we were up 10%. And -- so we want to expand in the existing markets. Do we want to expand outside of those markets into new countries? The answer is yes.

The next question comes from the line of John Healy with Northcoast Research.

Jay, I wanted to ask just about how the transaction is structured with the tender offer. I know you mentioned that helps close faster. But curious if there's any sort of guardrails on the transaction. Is there any sort of like breakup fee? Or is there anything that prohibits a competing tender offer that would -- you guys have evaluated or any parameters or any way you've kind of attempted to get deals certainly with us.

I mean it's a publicly held company. So some of the -- what you would expect in terms of Go shop or breakup fees exist. But at the end of the day, I think we've -- I think we negotiated a good deal for both of us. I think it makes sense for both companies.

Okay. Could you share with us that I haven't seen any filings at what those might be the breakups or go shops or anything like that?

No, not really. I think it's best that it just comes out in the filings. I don't think it's appropriate for the call, but for one, but for 2, I'm not a lawyer.

So John, this is on file, so you should be able to see the detail there.

Okay. And then just you guys have made a the past, and you had the Blue Car. I think you had Copart Go, you have Copart Dealer Services and some different iterations of things. And just curious your thoughts kind of thinking backward, you've had traction, but maybe not as big of a splash as maybe we would have thought or maybe hope for. So was it just the branding and maybe that's a big part of value to you guys is just kind of keeping it distinctly and kind of their presence in the mind of dealers? Just Kind of curious what you've kind of learned in the past iterations of the whole car strategy and how that might have evolved with what you're going to do going forward?

Well, sure, happy to do that for you. If you go back 20 years ago, literally, there was no dealer services at Copart. We founded that in 2007. And there is definitely no Blue Car. And yet if you look at noninsurance, it's 25%, 26%, 24%.

Around 1/4, okay.

So it's roughly 1/4 of our volume today. So given that, I think we've been very successful. But to get into those franchise dealers and get into the higher-end trades, I think, does take a different product. And ACV is a different product than Copart. The way they inventory the vehicle all the way through to the condition report, it is different. So I think this opens up the world and our ability to do a lot more vehicles in that space.

The next question comes from the line of Bret Jordan with Jefferies.

On the -- 1 of your peers seems to have been using price to gain some volume. And I guess could you talk about what you're seeing sort of in the market on the insurance side around pricing behavior getting back to rational?

I mean, look, there's -- you have 2 options in this business. You either can generate the liquidity and get the returns on the units -- that are going to generate -- that are going to bring the dollars in for the customer or you've just got to cut pricing dramatically because you're not getting the returns, and that's how you offset that weakness. And at the end of the day, we don't need to play that game. We've got an amazing liquidity. This is only going to make it better. We are going to be that much stronger in terms of our returns and our prices. I mean think about every car that is that is not damaged or lightly damaged is going to be put in front of thousands of dealers. I mean, that alone gets me excited. So I'm not concerned about pricing per se going forward. I'm focused on improving liquidity, so it's even more compelling.

Great. And then I guess you mentioned ACVA bank relationships on the commercial side. Given you have physical real estate, could you sort of expand the repo business with this relationship? Or is that something just a path...

I mean we don't know. We didn't buy a repo business. We're not repossessing the car.

otal repo business, just given the bank relationships that they may have. .

We love selling repos. I don't think I want to be the guy on television that picks the car up at someone's house. So I don't think we want to actually do the repo, but we love selling repos. We love picking them up from the repo lots and then auction them off. So we're going to focus heavily on that.

The next question comes from the line of Jeff Wick with Stephens.

I'll add my congratulations. It's a great acquisition. I think you guys are going to be great with it. I was curious, you mentioned your real estate and your properties and kind of melding that in with ACV. And I was curious, is that along the lines of their commercial business? Or do you see a way on their dealer business as well? Obviously, part of the allure or the value of the digital business is the car sits there, those you don't have the cost of the move, sometime you can actually consider wholesaling or retailing at the same time, do you see ways where you might actually be able to bolster the product offering on the dealer side as well using physical locations?

Well, let me start by saying they've built an amazing business selling over 800,000 cars, of which the majority are sold at the dealership. That said, there are some dealers that get frustrated that the vehicles, they've got limited inventory. They want the vehicles moved. So I think it's both, is the answer to your question. It's going to enhance vehicles that are sold at dealerships where they need to be moved. It's going to enhance when the buyer has bought the vehicle, but they don't want to pick it up for 2 weeks. We can move it to our location and store it until the buyer has time to get it. And then I'd say both because then it's also going to help on the commercial side. So when it comes to repos, that was the last question. Repossessions can't be kept at the repo lot and so they have to be brought to Copart. So we'll bring them in and then we'll auction them off. So I think it's both. .

And then just a quick follow-up on international. During your kind of introductory call, you had mentioned about Germany and how you're using that as a model on the consignment side. I was wondering if it's always struck me as a little counterintuitive that Europe is a little more into the salvage business. if you can just kind of update where that is in other countries.

Sure. I mean there are some markets that are similar to the U.S. model, and there are some markets that are similar to the German model. And I would say the good news is that we figured out the German model. We've had the U.S. model figured out for quite a while, but we've now got the German model figured out. So it's time to start growing and it's time to start expanding across Europe, and we're going to be doing that.

And do you think the current growth rate you're at where you're kind of growing low double digits, that sustainable for the time.

I never give guidance on growth. But I'm just telling you as the CEO that we're going to start growing in those markets.

The next question comes from the line of John Babcock with Barclays. .

Just first 1 is a clarification question. I think in the press release, it mentioned you expecting the deal to be accretive in fiscal '28. I was just curious because I think you might have mentioned accretive this year. So is it supposed to be accretive this year or next year?

Well, we expect the transaction to be breakeven in the current -- effectively accretive in the first full year, which will be in FY '26.

Okay. Got you. That's helpful. And the next...

I said given there's uncertainty in terms of when it closes, we've just guided to '28.

And then next one, I was wondering, I just wanted a little bit of clarity on the increase in spending that you had. I was wondering how much of that is driven by your own decision to increase investments in the business versus increases in costs that you can't control?

So the majority of it is driven by the introduction of new products and services. So for example, I think $17 million of the year-over-year increase in our facility operations cost was driven by increased costs associated with our long-haul delivery service. And again, that's a business that we typically generate a nice margin on. So from where we stand, some of this is purely discretionary. If we see the revenue coming from a product like that, we're willing to forgo -- we're willing to take on the additional costs associated with it. And the vast majority of the costs that we have incurred year-over-year have been associated with products and services that we've introduced for customers as well as bringing on additional capacity with new facilities. So only a small portion was related to increase in fuel costs, for example, as a result of some of the elevated cost environment that the broader economy is experiencing.

Okay. And then I guess just as a follow-up to that, on the call in early July, you talked about increasing spending, and I mean, that basically happened partway through the quarter. So I'm just kind of curious, should we expect that the magnitude of spending should increase further in the coming quarter as you start to hit more of a run rate for the quarter? Or how would you have us think about that? .

We don't guide specifically to cost or to any of the metrics on the P&L. But I would say we continue to see opportunities to drive growth across the new products and services that we're offering. So from that, you can extrapolate your expectation with respect to how costs will trend?

Okay. And then just one last question, if you don't mind. You mentioned that you're not concerned about pricing. Should we think that margins should be comparable next year? Or are there pressures that could weigh on them?

I mean, like Les said, I'm going to jump in because we just don't give guidance on earnings or any of that. We're very focused on making sure our customers are happy and we're very focused on increasing -- and we're focused on cost control, and we're going to try and reduce cost per car. So that's what we're letting the Street know and then you'll see the results.

[Operator Instructions] And the next question comes from the line of Josh Patwa with JPMorgan.

Congratulations on the acquisition announcement as well -- just 1 just on ACV auctions. The Viper technology, in particular, seems like a very compelling too. I was curious if that is something you look to deploy at the salviyards to accelerate and take and condition reporting -- and relatedly, is there an opportunity to bring ACV's dealer-to-dealer wholesale auction capabilities to international markets.

Yes. We're going to look at everything that we can do internally. So we'll be forming a team to see what benefits we can bring from ACV over to Copart, what benefits we can bring from Copart and we admit it very clear that we're looking at expanding domestically in whole car right now and internationally in insurance and in salvage. And so we're going to continue on that path.

That's clear. And just as a quick follow-up. Could you give us a refresher on RPU composition within the U.S. insurance business I'm just wondering how large a share is the fixed fee from insurance carriers today and how that has evolved over the past few years? And more broadly, as the value of your service improvements compound with rising repair and rental car costs, -- is there an opportunity to capture more of that in how you're compensated? And where else in the claim process do you see room to take on more for carriers.

So Josh, I would say we don't speak specifically to our pricing strategy, but we certainly have had an opportunity to expand products like Title Express. -- to our customers, which has driven an increase in revenue per unit over the course of the last several years. So we will continue to look for ways to add incremental value, for example, offering loan payoff products for our carrier customers. Those will come along with additional fee opportunities, but we won't speak specifically to the mix or how that pricing strategy has developed.

This concludes our Q&A session. And now I'd like to hand the call back to Jay Adair for closing remarks.

Thanks, sir. Appreciate it. George, if you're listening, we're excited, and I couldn't be more excited to be your partner on this. It's great to be back at Copart. I look forward to all that we're going to do together. Again, I'm going to reiterate the fact that we are focused on speed and that we are, as a team, we've got great people, and we are super fired up. So I can't wait to report on the next quarter. I look forward to all that we're going to do, and I thank you all for attending today. Thanks so much. Bye.

Thank you. This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.

Good day, everyone, and welcome to this Copart, Inc. Conference Call. Just a reminder, today's conference is being recorded.

Before turning the call over to management, I will share Copart's safe harbor statement. The company's comments today include forward-looking statements within the meaning of the federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in the company's industry. These forward-looking statements involve substantial risks and uncertainties.

For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors in the company's annual report on Form 10-K for the year ended July 31, 2025, and each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements.

I will now turn the call over to the company's Executive Chairman and incoming Chief Executive Officer, Jay Adair.

Thank you, Joe. Well, good morning, everyone. I was reflecting and the last time that I did analyst calls, it was a couple of years ago, but I started doing analyst calls in 1996. So I thought I'd give you a little background on myself. I know most of -- I think I know most of the people on this call. But for those who don't know me, I started with Copart 37 years ago in the summer of 1989 when Copart was a relatively small business. And we went through a private equity or private fundraising period in 1993. And by 1994, we were publicly held.

I had the pleasure of going on that road show. And it was the first time that I've been to New York. So it was -- to say it was an interesting experience was an understatement. It was an amazing experience. Within a couple of years, we were reserving copart.com, and I was building out and spending most of my time building out web pages and web products for copart.com.

By 1998, we had gone with online. We had invented, I should say, the first online bidding product by 1999. We had vehicle images, and I remember getting a phone call from Scott McNealy, who worked down in Silicon Valley and wanted to see what we were doing and came up to Fairfield to see what company was taking so many images and changing the industry the way we work. By 2003, we had moved everything completely to online. I built that product with our team. We patented that product, and we would effectively be the only digital -- fully digital auction for the next 20 years.

In 2004, we decided we wanted to expand and go outside the U.S. by going to Canada, followed that in '06 by going to the U.K. and then followed that by going to Spain and Germany and Brazil and the Middle East and Ireland, and so I'll talk more about our growth, but I've got a lot of background in international expansion with the company as well. I guess, first, I'll start by talking about the CEO transition. Let me just make it very, very clear. Jeff and I worked together for 11 years, and I consider him a dear friend. I'm thankful to him for everything that he did for this company as CFO, as President as Co-CEO and as CEO.

My return back to CEO is something that Jeff and I decided on together. We both agreed that it was the right thing for Copart and my intent is to lead the company for the next 10-plus years. This is not an interim arrangement, and I won't be going through a process of finding my successor. I'm just going to focus and double down on all of our initiatives to build Copart and to grow Copart, and we'll talk about that.

There's really three growth pillars that we focus on: international expansion on insurance, whole car expansion domestically and then technology services for our customers. I want to be very, very clear. This is a growth company. And there is a lot of noise and a lot of rhetoric out there, and I have a pretty good history of saying, I don't listen to the noise, and I don't respond to things, and I'm going to continue that. So I might be asked questions that I won't answer or that I don't want to answer.

But at the end of the day, it's because we're going to focus on what it takes to win, and I don't plan to put my playbook for winning out there publicly for my competitor to see. I believe -- I mean I know our customers personally, and I believe our customer relationships are stronger than ever. The idea that, that is not the case, I believe, is just false. During our Q3 earnings call, we shared that total loss frequency reached approximately 23.6% in the most recent period, up nearly 5 points over the past 4 years, driven by repair costs and by the record auction returns we generate, which make the total loss decision more attractive to carriers.

When I started, total loss frequency was 8%. And we've watched that continue to improve and continue to increase over the decades, and we believe that will continue. Another point on our Q3 earnings call was that U.S. insurance ASPs reached an all-time high in the most recent quarter, up approximately 4.1% year-over-year. And international buyers, crossover buyers and finance buyers continue to be critical drivers of our auction returns. Our global buyer network now spans more than 160 countries.

I'll talk a little bit about the cyclical headwinds that we're facing. But I think it's very important to realize that we are not only the largest, but you can look at all the activity that comes on to our website, and you will see that we have the best auction liquidity in the industry. On cyclical headwinds, we are experiencing the impact of cyclical and, in our view, unprecedented dislocation across the U.S. industry, the U.S. insurance industry. The 2022 to 2024 inflationary cycle pushed carrier combined ratios out of balance, driving rate increases, which drove consumers to pull back their level of insurance coverage, which was observed through a shift toward higher deductibles and liability-only policies.

I believe that is now softening, and we are starting to see insurance companies become more aggressive again. And much of this is from 2020, COVID, the impact of that, the impact of insurers cutting dividends back and reducing insurance rates. And now we've seen kind of the flip side of that, as we have seen in the past year or 2, and I think we're now going to see things kind of normalize. We believe the consumer retrenchment is cyclical, not structural. So I want to make that very clear.

On international momentum, we are going to be firing that machine back up again. We have slowed that historically as we were figuring out different models to the Copart model in Germany. We have figured that out now. We are profitable, and we know how to grow in that market, and so we'll be expanding in other international markets in Europe and other locations as well.

International unit volumes grew 5.9% and international revenue grew 14.1% year-over-year in Q3 2026 with both insurance and noninsurance channels contributing. So it's an area of significant focus for us as a team, and we will be, for lack of a better term, speeding that up as we go forward.

Looking at our balance sheet. As of Q3 fiscal year '26, we have nearly $4.2 billion of cash. This is after recently deploying $1.6 billion into share repurchases. We have no debt on the balance sheet to speak of. We believe we have the liquidity to continue to look at all strategic options available to us. Before I open it up to questions, I'll point out that Leah Stearns is here in the room with me, our CFO. So if there's some questions that are financially focused, I'm going to let her answer those.

I'll say this. We continue to deliver for our customers. We will continue to focus and be a customer-centric company. We'll continue to provide the best liquidity in the industry. And I will tell you after -- I'm not saying I was ever left because I've been Executive Chairman, I've been involved and Jeff and I, over the last 2 years, 2-plus years, we speak regularly, if not daily, multiple times a week, but I have dug in heavily in just the last week and I'm excited, and I'm looking forward to the changes we're going to make, and I'm back. So it's not like I'm here temporary. I'm here to stay, and I'm excited for everything that we plan to do for this company. On that note, I'd like to open it up for questions.

[Operator Instructions] And our first question comes from the line of Bob Labick with CJS Securities.

Good morning, and welcome back to the calls, Jay.

Thanks, Bob. How are you?

Yes. I'm doing well, thank you. It's great to hear your voice. I know you've stayed active with the company, but we haven't talked in quite a while. So it's really nice.

Jeff was really good at Investor Relations. So you are correct. I was not that engaged in that component, but good to hear your voice as well.

So thanks for the background. Obviously, we've known you guys for ever. I wanted to get your thoughts on how AI is shaping the industry and how Copart is positioned and positioning yourselves to excel. And how you see the industry evolving over the next 5 to 10 years with the understanding that you don't want to give away too much of your playbook, but kind of big picture on that stuff, if you could?

It won't be 5 to 10. It's less than 5. We think of AI in quarters, not years. And it might be the only time in my life that I've thought in quarters and not years. But it's happening that quick. AI is something that if you're not doing it, you're missing out. We often refer to it we've actually given guidance to our team on what tools are the best. And we often refer to AI as if you're not utilizing it, you're doing the company a disservice.

So, there's a big focus internally. We have a head of AI. And so that's something that we'll continue to -- the obvious things are efficiencies, and we'll do -- we're doing that already. The less obvious is strategic and that I won't comment on, but we are looking at strategic availabilities in AI as well.

Okay. Great. And then just kind of also big picture. Just remind us in terms of -- you outlined your priorities for growth. But how do you think about build versus buy given the fortress balance sheet that you have? And what are your thoughts there?

We're going to do both. We will be doing M&A obviously, and we'll be building as well. And as you all know, we're sitting on a ton of cash, and we have the ability to do both. So we will.

Super. And then maybe last one, and I'll certainly jump back in queue. But kind of in your mind, what do you think investors are missing on the Copart story now, and how can you guys get that best out there?

I think -- I never like to one, Wall Street's fickle. And two, I never like to predict what investors are going to do and how they're going to think. But I think they're hearing a narrative potentially that's out there in the industry, potentially from a competitor. And there's always two sides of the story. And at the end of the day, we're a phenomenal company. We've got amazing people. We've got phenomenal relationships with our customers. And we're going to do what Copart has always done. We're just going to execute. We're not going to talk about it. We're not going to tell people what we're about to do. And then when we do win, we're not going to tell people that we won. We're just going to do it. Let the results speak for themselves.

The next question comes from the line of Gary Prestopino with Barrington Research.

Jay, how are you?

I'm good, Gary. How are you?

No, just fine. It's been a while. A couple of questions and welcome back. I'm really looking forward to working with you again. A couple of questions to you. Well, one question. You talked about the changes that you're going to implement. And does that really revolve around the growth pillars, the international salvage, whole car U.S. and tech services customers.

It does. Yes. We're going to be speeding up some of those initiatives. And so to do that, we've got to have a more robust team.

Okay. So in terms of starting that whole process, I mean, how long does it take you? I realize that you've been in your leadership in there for about a week. Now, how long does it take for you to reinvigorate that growth engine?

No, I think that everyone in the company is excited. I think they're already feeling like let's go do some of these things. And so, it's going to take me time to -- we're promoting people already, but it's going to take time to hire people. And so it's not years, it's quarters, but it's going to take some time.

Okay. That's great. And then just in terms of what's going on in the industry, the cyclical headwinds. In terms of the consumers actually repairing their cars versus just getting a check or whatever, do you think that if the premiums just continue to stabilize, you'll see a shift? Or do we have to see more down trend in the policy cost for consumers for them to step up to the plate and get a car repaired.

I think as things normalize, people will get coverage again. I just think when insurance rates get that outrageous that it causes people to drop their coverage and go with liability only. And I think as rates come back down and things normalize, you'll see people saying, okay, yes, that's only x a year more. Go ahead and get me collision or comprehensive coverage.

Okay. And then one last quick question, and I'll jump off. You've gone through a pretty strong exercise of buying land over the last couple of years. Are you at the point now where you don't need to buy any more land particularly for catastrophic events, and you can shift resources to your 3 growth pillars in a bigger way?

Yes. We've got an amazing network of locations and not just the number of locations but the number of acres per location. So I think we're in a good spot. We'll have to do a little bit of development still and we've got a little bit of add-on. So nothing like you saw over the last 10 years. The last 10 years was just $0.5 billion a year in buying land and developing those locations. That's definitely going to slow down.

The next question comes from the line of Chris Bottiglieri with BNP Paribas.

This is Ian Davis, on for Chris. Thanks for the time here. I wanted to ask you one on Purple Wave. So I know that Jeff and Leah had sounded constructive on the expansion there. How are you thinking about the go-forward strategy for this segment? Is it reasonable to think that some of your more recently acquired land is going to perhaps be targeted more towards supporting heavy equipment? Just want to get some of your thoughts and thinking there.

Yes. I mean we've already got access to our locations for Purple Wave. I think I am focused right now on international and domestic Copart. I'll focus on that next. I can give you a better answer in a quarter. Leah is here. She's happy to give you her response. I just have not been that close to it.

So Ian, I think what we've primarily focused on with respect to Purple Wave has been the expansion of the territory sales force, and that was foundational to our ability to serve enterprise accounts. So as we think about the continuation of the expansion strategy for Purple Wave, it will be principally focused on the execution on that front. And again, Purple Wave is domestically focused.

So we're effectively taking a sales team with territory coverage primarily in the central time zone of the U.S. and pushing it out to the coast, initially focused on the areas where the highest GMV exists. And as we're successful in those markets, continuing to further penetrate into some of the secondary and tertiary markets. So that is our current strategic road map that we're executing on with respect to Purple Wave and would expect that to continue through '27.

Got it. That's helpful. And then I know you spoke to it, Jay, whole car domestically. Maybe just some brief thoughts on where you're most excited, some of the unturned stones that you think are going to help support the next leg of growth? Just maybe 1 or 2 pieces or thoughts there.

Well, it's historically been a nice growth engine for Copart. I'd like to see that increase dramatically. To do that, we're looking at restructuring, and we're looking at some other strategic moves that would help that. But the intent -- I'm not going to tell you exactly how we're going to get there, but I'll tell you that the goal is that it looks very different in 3 to 4 quarters.

The next question comes from the line of Craig Kennison with Baird.

You mentioned, Jay, 3 growth pillars, international, whole car domestic and then tech services. Where do you need to invest the most in terms of resources? And how do you intend to fund that? Is it a reallocation? Or could you be looking at an era of investment before we start to see, sort of, the returns on the bottom line?

Well, I think we've got to focus on M&A for all 3. And then in addition to doing M&A for all 3, we've got to focus on investing and making some of the products that we've got already more robust. So it's hard for me to tell you it's 1/3, 1/3, 1/3 or 40/40/20, but I will tell you, they're all going to be material investments.

And when you look at your own M&A history, what sort of lessons do you lean on in terms of what makes for successful M&A within Copart?

If you look historically, all of the M&A that we have done has been in our industry. They've been acquisitions that made sense. They plug into Copart, and we can utilize our land or utilize our auction technology or our knowledge. And so we're going to continue to do that. We're not going to go out and buy something that has nothing to do with our industry. We have -- look, it's no secret. You guys know how we think about ROI. So we will be disciplined. We will be focused on making sure that we're getting the right return for our investments. But it's to buy and to build in our respective industries, not to be in -- I'm not going to go jump into something totally different.

And then just thinking about your balance sheet, any of us who have read Junk to Gold know your aversion to debt. But is that still true? Or could you lean into the balance sheet to do the right deal and take on some debt?

To do the right deal, I would take on some debt.

The next question comes from the line of Bret Jordan with Jefferies.

I guess when you think about the margin profile in the last few years, you've added some operating expense for CDS and BluCar and Purple Wave. Are we going to start leveraging that in the nearer term? Or is there sort of another phase of investment to get to the end game? Obviously, you're talking a lot of growth and maybe some hiring. But how do we sort of think about the cadence of the SG&A growth in the last 3 years versus levering that maybe in the next year or 2?

It's not an easy answer because I think we can leverage it, but I don't want to be pigeonholed. So I'm going to tell you, I think we can leverage it, but I'm not going to make a statement like that on a call and then stop me from making a good long-term decision to invest in the company. So that would be my intent. But if something comes along, I see that I need to make the investment to grow even faster. And when we talk about growth, our growth is the right kind of growth. You don't see us growing and doing enormous volume and not bringing that to the bottom line. So given that, I would say I think we can leverage it, but I would leave our options open.

The next question comes from the line of John Healy with Northcoast Research.

I wanted to ask a question about the timing of all of this. I appreciate all of the initiative. But I was just trying to maybe dig in just a little bit more on why in July of '26 is this happening and kind of the impetus of the timing per se right now?

Well, I think from a timing standpoint, I'm not technically CEO yet. We've -- we're going to transition that at the end of the month. I was back and forth with Jeff this morning. So that's all coming, and I'm very -- I'm digging in, but I'm digging in, in a very short period of time compared to being in an Executive Chairman role. I think it was the right thing to do. I mean, Jeff and I had these conversations. And as I said already, we're friends and he lives maybe 10 houses down from where I live. I mean, at the end of the day, I've got enormous respect for him. He does for me. None of that changes. But what was decided in our conversations was for me to get back involved and start to drive the company as CEO. And so that's what we decided.

Understood. And then just you talked about the competitive set and not putting your cards on the table about what the playbook is, but trust us, you got a playbook. I'm curious your thoughts of -- while you've kind of taken a reprieve, your competitor has obviously changed and evolved and new owners and all those things. What do you think the biggest differences in terms of how you're competing with them? Is this just them have -- they have caught up a little bit to you guys in terms of maybe service and attention? Or I guess as you look at your competitor, maybe just talk to us how you feel the landscape has changed a little bit.

Yes. I think they've espoused some rhetoric that's out there in the marketplace. I haven't seen where their products have dramatically changed. But historically, you can go back and listen to 30 years of transcripts from me, and you're not going to see me talk about my competitor a lot. So I'm not going to change that. Copart has got -- just in the last year has invested in a number of initiatives that we're working on, just like we had a decade ago and 2 decades before that.

Online bidding started in '98. That's almost 30 years ago. When you think about digital auctions and virtual bidding, we were signing people on to AOL, and they were dialing in to be able to bid in our auctions. I mean, we have tried to be very cutting edge, not bleeding edge, and we'll continue that. We'll continue to have differentiators in the space. And I look at a number of our products are just significantly better today than they were a year ago, and we're going to double down on those initiatives. So there will be a little bit more spending, but it's going to drive -- it will drive the business forward, so it's necessary.

The next question comes from the line of Jeff Lick with Stephens.

Jay, I was wondering, you talked about the narrative that's developed, which is primarily, I think, the simple narrative is if you look at your competitors' units, which are positive and your insurance units or different units that you disclose have been negative. So it has the look that you're losing share. But when you dig in, whether you want to look at the Progressive or the underinsured and uninsured maybe it isn't the case. Could you maybe just expound upon anything that you're looking at, whether you want to talk about pure sale? Or how should investors just focus on Copart and see that you're going in the right direction and maybe not even focus on the differential between units?

Yes. I mean there are -- there is a unit loss. There was an account that was lost in some ways, and, in some ways, Copart chose not to do business. And so that has historically happened, and I won't mention the company. I don't view that as some fundamental change in the relationship we have with all of our clients. So if you look at the rest of our clients, we've got great relationships with them. They recognize us for delivering not just the service, but the liquidity and being not just the largest, but the best place for them to liquidate their vehicles.

If we didn't have the kind of liquidity that we're talking about, we couldn't be growing all the noninsurance business. We couldn't be growing all the dealer volume. These are folks that would look at that and say, why would we give you more cars unless you're getting the return. So there has been that. I don't think that, that's going to continue throughout the organization, and I think Copart has the ability to win that business back. And I suspect over time, you'll see that kind of behavior. You'll see us winning business. So that's our plan, Jeff.

And then on the whole car front, the one asset you appear to have is the ability to take your international buyer base and liquidity and offer that to the dealers and the commercial sellers. Is that an area, I think, that you guys would incrementally focus on and try to build relationships that way?

We have historically, but you said dealers and whole car, but it's also insurance. And we were the first to build an international buyer base. That was back in the '90s. I remember seeing buyers from Tijuana coming into our website first. And then it got to a point where I was looking up to see where countries were from because there were so many different countries that were buying at Copart. Not just the fact that we've been marketing and working that for 30 years, but the fact that we've got Middle Eastern presence European presence, Eastern European presence. All of that is part of what drives that buyer base and that buyer liquidity. And yes, we'll continue to do that. We're not going to move away from that. That's a big differentiator for our sellers is to see where those vehicles are selling to when we actually sell them.

Just from an educational point of view, how does an insurer become the owner of record of a whole car? Obviously, the transmission mechanism is it's a salvage and the title is transferred to them.

They don't really become -- when we talk about whole car, we're talking about noninsurance. So we're talking about banks, finance companies and things like that. Insurance is going to be a damaged vehicle for the most part. Might be a recovered theft that has very little damage to it. But for the most part, it's a damaged vehicle.

And the next question comes from the line of John Babcock with Barclays.

I guess just the first is on really overall strategy. I was wondering how much, as you're focused in on growth, you're thinking about the salvage auction business versus some of the other areas like international whole car and tech. And if you could just broadly talk about where perhaps more emphasis is needed, that would be helpful.

Yes. I mean, like I said earlier, I mean, the focus is going to be on international. It's going to be on growing the existing core business. It's going to be on technology. For me to break it out, I can't break it out and tell you 1/3, 1/3, 1/3. It's that, that is the focus. And you -- the team at Copart have heard me say before, I can't remember 4, 5 or 6 things, 3 things, FBI, CIA, I can remember 3 things. And so when we talk about our growth, those are going to be the 3 pillars and the 3 legs, and that's going to be the focus. And we'll -- we are not some rigid organization. We're a flexible organization, and we will flex as we need to put more effort into one area versus the other.

Okay. Got you. And just back to the M&A side of things. Are you thinking about something that -- and again, recognizing that it's probably still early, you're probably still not even at the point where you're really even looking at things, but do you envision doing something that may be transformative, something that's more tuck-in? How do you kind of envision that going forward?

We're going to focus on things that fit our industry. We're not going to be going outside of our industry.

Got you. And then just last question before I pass it over. Now that you're coming in, do you think that there is more need for a strategy shift here? Do you think there is need for changes on the operational front? I was wondering if you could talk about that.

Yes, happy to talk about it. No, the operations team is amazing. I mean we've got amazing systems, people. All of our facilities, we've continued to invest in them over the last decade, let alone the last year. So no, they're great. I feel very happy with where the company is sitting. It has been well operated. And -- but there's nothing I can say about that, that I'm displeased with. I'm very happy with everything. But if we're going to grow at a little faster rate, it does take some changes like with respect to structural setup with people, organization, how we move people around in the organization, hiring some people on the outside. So in addition to that will be M&A. I think that's it, isn't it? All right. No further questions. Is that right?

That's correct. Mr. Adair, you can go ahead with closing remarks.

Yes, I appreciate that. Thank you. I'm going to look forward to the earnings call when we come out. I think it was just important for us to do this call. It's the first time Copart has ever done a call between earnings releases in 30 years, 32 years as a public company. But we just felt it was important for you to hear some of this and not wait till the actual quarter comes out. Given that, it was a pleasure to talk to you all again, hear voices that I haven't heard in a while and look forward to reporting on the quarter and the year in the coming months. And Leah and I will have a lot to tell you then. So thanks for your time today, guys. We appreciate you, and we're signing off. Bye-bye.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and enjoy the rest of your day.

Good day, everyone, and welcome to the Copart, Inc. Third Quarter Fiscal 2026 Earnings Call. Just a reminder, today's conference is being recorded.

Before turning the call over to management, I will share Copart's safe harbor statement. The company's comments today include forward-looking statements within the meaning of the federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in the company's industry. These forward-looking statements involve substantial risks and uncertainties. For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors in the company's annual report on Form 10-K for the year ended July 31, 2025, and each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements.

I will now turn the call over to the company's CEO, Jeff Liaw.

Welcome, and thank you for joining us for our call today. We're pleased to report the results of our third quarter fiscal year 2026. I'll begin with some brief remarks on our insurance business before passing the call to Leah to provide a summary of our financial results. We'll then take your questions.

On our insurance business. First, for the third quarter 2026, our global insurance unit sales declined 2.7% or 1.9%, excluding the effect of catastrophic volume from a year ago. Our U.S. insurance unit volume for the same period declined 4.2% or just over 3%, excluding the effect of those same catastrophic units.

We believe the long-term growth algorithm for our insurance business remains very much intact that over many years, we've observed modest gradual declines in accident frequency, which are then more than offset by increases in total loss frequency. Total loss frequency is, in turn, a function of ever-rising repairs, but more importantly, the differentiated returns that Copart generates by finding the highest and best use for a car globally, which is often full restoration back to roadworthiness.

Nevertheless, the underlying drivers of near-term volume trends remain consistent with those we've discussed with you in prior quarters. A portion of this volume variance reflects shifts in policy in force mix among insurance carriers. And as we indicated previously, these trends tend to have been cyclical historically. And we have observed a moderation in some of these trends among U.S. insurance carriers in recent quarters.

Claims activity also remains somewhat softer as consumers continue adjusting their insurance existing behavior in response to rising premiums. As one indicator of this trend from a macro level, earned car years according to ISS Fast Track, have declined 4% year-over-year in the fourth calendar quarter of 2025 while vehicles in operation grew 1.4%. We believe this divergence, declining insurance coverage against a growing vehicle fleet is clear evidence of the consumer pullback on insurance coverage, as one other strong indication of consumers absorbing ever more of the financial burdens of their claims.

CCC has published data indicating that 25% of repairs are now self-pay and that in response, they've actually created a Buy Now, Pay Later product to support those consumers.

Long-term historical data, though, indicates that this consumer retrenchment phenomenon regarding insurance coverage is cyclical and likely counter inflationary. When consumers feel pocket book pressure especially on a lag basis regarding their auto insurance rates, they dial back their coverage. The same has been true in reverse. This softness in claims activity has been partially offset by continued increases in total loss frequency, consistent with the very long-term industry trend. The underlying forces here have been remarkably consistent, rising repair costs on the one hand and on the other, increasing auction returns at Copart.

Total loss frequency for the first calendar quarter 2026 reached 23.6%, an increase of almost fivefold percentage points over the past 4 years. Although we always report this metric, it sounds like we described it as an industry metric we are very much not passive beneficiaries of an increase in total loss frequency. We have helped to drive it upwards and we view it as our ongoing responsibility to drive ever better auction returns, which then increases the attractiveness of the total loss pathway to insurance carriers who are considering various possibilities for resolving their claims.

We are focused, as always, on delivering superior outcomes for our clients, first and foremost, through auction returns, but also, of course, through our differentiated service offerings from vehicle retrieval to title processing. We continue to invest heavily in our technology platforms, our physical infrastructure and our global buyer network to enable those outcomes, representing absolute investment levels. They're substantially exceed the balance of the industry collectively, we do so proudly as stewards of the industry.

On returns, specifically, despite the logistical and economic disruptions of global conflict, U.S. insurance ASPs increased 4.1% year-over-year for the quarter, reaching a seasonally adjusted all-time record high for Copart insurance ASPs in the third quarter.

Consistent with our prior discussions, international buyers are a critical driver of these auction returns and today represent more than 1/3 of the volumes sold at U.S. Copart auctions and nearly half of our auction proceeds. In any given month or quarter, the precise mix of participating countries can surely vary. For example, given recent conflicts, direct participation in U.S. auctions from certain Middle Eastern markets has declined year-over-year. What has sustained overall demand has been the breadth and diversification of this buyer base. As certain corridors moderated, others expanded to fill the gap, including parts of Central Europe, West Africa, Central America and the Caribbean.

The virtue of robust auction liquidity is that no single seller or buyer and, in fact, no single region, country or currency unduly influences the auction outcomes we deliver to our sellers. The resilience of our marketplace comes from the depth and diversity of a buyer network we have spent decades cultivating, now spanning more than 160 countries worldwide.

That network breadth is a meaningful driver of returns for our insurance clients. Our analysis also shows that international buyers financed to buyers, new buyers and particularly crossover buyers, which I'll describe in greater detail, are critical enablers of the higher auction returns that we generate for our sellers.

We call crossover buyers, those members who first discover Copart and engage with us, in search of a vehicle sold by rental car companies, financial institutions, dealers and the like, who then discover the wealth of product available from insurance sellers and then engage as buyers there as well. Looking back over the past 3 years of the more than 30,000 buyers who first entered Copart ecosystem by virtue of those noninsurance vehicles, a strong majority would bid on an insurance vehicle within the first 90 days of their engagement.

Whatever we or anyone else asserts about their auction liquidity, the best testimony for auction liquidity is your seller participation. Our sellers vote with their feet by entrusting ever more of their volume to us on a pure sale basis. They know that by virtue of Copart's buyer recruitment product delivery and auction management practices that we will yield the highest and best value the first time through our auction. And in fact, today, for U.S. insurance sellers at Copart, the mix of pure sale units is at all-time highs. We estimate that our pure sale insurance volume is literally an order of magnitude higher than what is available at other similar platforms.

We recently completed our 2026 Insurance Advisory Board meeting, a gathering of our largest U.S. insurance clients together to discuss current and future catalysts of change in our industry. including, of course, very notably artificial intelligence deployment. It marks though just one visible moment in our ongoing day-to-day engagement with our clients to extend and expand our commercial relationships as we handle ever more of the claims processes for them, including providing them the AI-enabled tools to make front-end total loss decisions more accurately through to title procurement, loan settlement and ultimately, auction as well.

With that, I'll turn the call over to Leah Stearns.

Thank you, Jeff, and good afternoon to everyone on the call. I'll begin by walking through our financial results for the quarter, beginning with our consolidated performance, followed by a review of our U.S. and international segments.

For the third quarter, consolidated revenue grew to $1.24 billion, up 2.1% year-over-year, driven by strength in both service and purchased vehicle sales. During the quarter, we continued to see expansion in average selling prices, which rose 4.6% and more than offset a modest decline in unit volumes of 2.4%.

On the insurance side, global units were down 2.7%, consistent with the industry dynamics Jeff outlined, while global noninsurance units decreased 1.4%. Notably, while global inventory was down 2% from the prior year, global assignment volumes grew at a low single-digit pace.

From a profitability standpoint, the quarter was strong. Global gross profit increased 3.7% to $572.6 million, with global gross margins increasing 71 basis points to 46.3%. During the quarter, we continued to invest across our platform to enhance the products and services we offer to participants across our global marketplace. This includes the recent launch of our domestic long-haul delivery services in the U.S.

Operating income grew 2.8% to $464.3 million, net income was $402.4 million, and earnings per diluted share increased 2.4% to $0.43, benefiting in part from our ongoing share repurchase activity.

Turning to our U.S. segment. Total units declined 4.2% or 3.3% excluding Copart direct units. Insurance volumes decreased 4.2%, which are consistent with the claims frequency trends Jeff described a few moments ago.

Beyond insurance, we are seeing encouraging momentum across our diversified seller base. Our Dealer Services and Power sports businesses grew unit by 1%. And our BluCar commercial consignment channel expanded by over 4% over the prior year. Combined fleet and finance seller volume grew at a healthy double-digit pace, which was partially offset by the continued impact of higher repair activity we've seen among our rental customers.

Our Copart direct unit volume declined 26.3% as we continue to strategically shift lower-value units to our direct by channel.

On the inventory side, U.S. inventory is down 4.7% year-over-year, and U.S. assignments declined at a low single-digit pace during the quarter.

Shifting to Purple Wave. Our focus on organic territory sales expansion continues to yield strong gross transaction value growth which was more than 25% for the last 12 months. The momentum we are experiencing is being fueled by strong traction in our expansion markets and deepening relationships with select enterprise accounts. which is a real testament to the progress our team is making to scale their platform.

On revenue, the U.S. segment was essentially flat, down 0.4% as higher revenue per unit largely was offset by volume headwinds. Insurance ASPs increased 4.1%, noninsurance ASPs increased 3.7% and purchased unit ASPs increased 23%. U.S. gross profit grew to $484.1 million, up 0.9%, and gross profit margin was 48.3%. Operating income was $390.4 million, reflecting a 38.1% operating margin.

Internationally, the story is one of continued momentum. Total units sold increased 5.9% with insurance units up 4.6% and noninsurance units growing at an impressive 11.2% in the quarter. Inventory in our international segment increased over 10% from a year ago period and international assignments increased at a low teens pace. These trends reflect the broad based growth that we are seeing across our diversified international footprint, with particularly strong contributions from the U.K., Germany and Canada.

For the quarter, international revenue grew 14.1% or 7.9%, excluding the positive impact of foreign currency fluctuations, to $234.2 million. The primary source of growth internationally came from service revenues, which were up 17.9%, which was driven by a 10.5% increase in fee revenue per unit and strong volume growth. Revenue per unit was positively impacted by strong ASP growth with insurance ASPs increasing 8.4% and noninsurance ASPs growing 16.7%.

The profit picture was equally compelling, with gross profit increasing 21.9% and operating income reaching $73.8 million, representing a 31.5% operating margin.

Finally, turning to our capital structure and liquidity. Copart remains in an exceptionally strong financial position. We ended the quarter with liquidity of approximately $5.5 billion, which includes $4.2 billion in cash and equivalents and held-to-maturity securities and no debt.

Our balance sheet gives us tremendous flexibility to be opportunistic investors throughout business and credit cycles. We continue to generate robust free cash flow, which has increased 12% year-to-date, supported by disciplined capital allocation, into land, facilities and technology, which positions us to finally, serve both insurance and noninsurance clients while delivering strong operating efficiency.

On the capital return front, we continued to repurchase shares during the third quarter through a combination of 10b5-1 and open mark transactions. Fiscal year-to-date, we have repurchased over 43.4 million shares for an aggregate amount of over $1.6 billion, underscoring our confidence in the future growth prospects for Copart and the long-term value of our business.

Thank you. And with that, we'll open up the call for questions.

[Operator Instructions] And the first question comes from the line of Bob Labick with CJS Securities.

So I want to start on fuel. Fuel prices, transportation costs are up across the economy and talked about a lot in general and was wondering if you could talk -- remind us how it flows through for Copart now. I think years ago, it was all company fleet, then you outsourced your fleet. I think you kind of have a hybrid towing fleet now. So if you could give us color on the impact and do you charge surcharges, pricing to your customers? Or how do you mitigate fuel as well?

Great. Thanks for your question, Bob. The fuel -- we are, as you noted, a hybrid, we do manage our own in-house truck fleet. We do have a substantial program that we call out a box in which we help contractors and help support their businesses with a structured lease program and a structured tow toll program with us as well. So we have cultivated liquidity on the towing side with some mix of our owned assets as well as the supported third parties as well. And then as you know, for many years, we have leveraged the -- a large third-party subcontractor network as home. So all 3 would be above. And not surprisingly, fuel is very relevant to all of them. And so we have been thoughtfully responsive with them as necessary to adjust rates, to ensure ongoing service and to ensure that they also can long term prosperously support us, our business as well as the business of our clients. So it's a microeconomic decision market by market, but we do have to account, of course, for that input cost in our business.

Okay. Understood. Great. And then I guess, one bigger picture question in terms of the decline in new car sales and SAAR kind of started in 2020 from COVID. And how do you see that as, is there an impact on expected salvage volumes in 2027 and beyond as those cohorts start hitting the sweet spot for total loss frequency? I know there's lots of other variables you talked about insurance affordability claims are in car years, et cetera, which can be offsetting. But I guess I drive it down to one thing. Can you talk about the kind of the macro drivers and that one in particular, the decline in SAAR. And then more so just the biggest Copart specific growth drivers over the next 5 years, noting that macro is a little bit tough?

Yes. A very good question. And Bob, if I just conjecture on my part. But I think in your mind, you may be thinking there are some auction houses, for example, who sell vehicles on behalf of OEMs at the end of a lease. And so if in 1 year, there are very few lease originations, then 3, 5, 7 years, hence, perhaps there are fewer vehicles to sell them.

For us, the catalyst is much less when the cars enter the ecosystem in the first place. So whether the car was sold originally in '18, '19, '20 or '21, is not especially of consequence to us. What really matters to us that the vehicles are on the road period, right? There are cars being driven miles being traversed in the cars themselves and then, of course, collision rates, total loss rates as well.

So at least in theory, even at the extremes, if you completely eliminated all new cars sold in 2021 altogether, which is not that far from the truth, given what we now know of the semiconductor crisis at the time, that doesn't have any real pronounced effects given the way our supply is a layer cake of more than a decade's worth of new car shipments, right? So any given 1 or 2 or 3 years of disruption, so long as it doesn't coincide with a dramatic decline in miles driven, which, in turn, would really be the independent variable of consequence, not the new cars to begin with.

Got it. Understood. And then just like the primary drivers, I guess, is my last one, I'll get back in queue for your growth over the next 5 years.

Sure. I think you heard me walk through principally the insurance side of the house, which is to say that the insurance industry has been a strong growth lever for us for decades even on a same client basis, so to speak, as a frequency has historically been very much more than offset by rising total loss frequency. The catalysts for that phenomenon, we think largely remain true. So that's the insurance business part 1, in all the markets in which we already do business today.

Lever #2, you heard Leah and I both talk about some which is the liquidity that we are pursuing and succeeding in for entertaining in non-insurance markets. These are the rental car companies dealers, corporate fleets and financial institutions who are increasingly entrusting us with their vehicles as well.

As you know from our prior discussions, Bob, the nature of rising total loss frequency means that we are ever more selling actual cars and not selling basket parts or not selling baskets of raw materials. And to the extent that we're selling vehicles that are drivable that are worth $5,000, $10,000, $15,000, $20,000 plus we become with each passing day and year the more appropriate forum for a growing variety of vehicles, including those vehicles from the aforementioned institutions.

So that's a big -- that has been a meaningful growth lever for the past 5 years. And with the confluence of total loss frequency and the natural flight will effect of earning more of those cars, we expect more liquidity to come from those sources as well.

We have expanded globally, as you know, perhaps most notably in 2007. So almost 20 years ago. We're approaching the anniversary soon of our entry into the United Kingdom, we now also operate and operate profitably in Spain, in Germany, Finland, the Middle East, Canada, Brazil, et cetera.

So international expansion has historically been part of our playbook as well. There are some countries that still share many of the characteristics that make total losses so compelling in the markets I just mentioned. There are other markets that will no doubt emerge over the course of the next 20 years, 10 or 20 years as well. So international expansion also relevant.

The one thing I skipped over, I lost over briefly is the total loss frequency. When I mentioned at the outset that we view it as our responsibility to help drive total loss frequency upwards, right? And so far, as we play an affirmative role in enhancing the economics of total loss, we can help insurance carriers literally save money every time they choose to total a car instead of repairing it because we could generate a better return by selling the car to Poland or Central America, we are helping them, we're helping preserve their P&Ls. We're helping them keep their rates lower to their policyholders as well.

So that sounds esoteric, but it's a very real what we do day-to-day is to build the tools to enable them to make that decision partner with them to incorporate it more and more upstream, the earlier, the better. But as you know, in the United States, at the scene of the accident, those toes typically are directed not by the insurance carriers or even by the policyholders, those typically happen on police rotation. So that's a difficult moment of which to intercept a vehicle, but we are moving upstream, closer to that moment, the better in terms of arresting depreciation or arresting fee accumulation of advanced charges and equipping the insurance carriers to make a better and faster total loss decision.

So those are the big levers. You've heard also talk about the ecosystem that we serve. You heard Leah talk today some about logistics and long-haul towing. We are pursuing those initiatives both because they can be profit streams for us but also because they reduce friction, right? The better that logistics and financing and warranty and so forth can be for our buyers, the more -- the greater the breadth of buyers who can reasonably participate on any given car that is sold at a Copart auction.

The next question comes from the line of Craig Kennison with Baird.

Jeff, it sounds like you hosted a forum for your insurance partners. I'm just curious, first, what are those insurance partners saying about the outlook for claims in 2026, 2027. And then we also mentioned some catalysts for change in the industry. And I wondered if you would elaborate on some of those catalysts.

Sure. Appreciate the question, Craig. This is an annual gathering we have of our major insurance clients here in the U.S. In some respects, it's a big deal because we're gathered face-to-face for several days in a row and talking about some really meaty matters together. And then on the other hand, it's also overstating it a bit because we talk to these clients all the time, day-to-day to week-to-week. But it does become a forum to tackle issues that beyond the day-to-day, beyond resolving individual claims, beyond figuring out how to succeed in X geography or Y geography.

In this case, when it comes to claims frequency, I think we'll hear a variety of perspectives on it. I think everyone recognizes that, yes, many consumers, we've seen some research that indicates as many as 1 in every 6 policyholders in the auto space has pulled back on your insurance coverage in one way or the other, meaning they've moved from collision to liability only or they have increased their deductibles, et cetera, et cetera, like that survey done in the middle of 2025 or so. And we do hear insurance carriers echoing those statements. So they see claims frequency down. They know the consumers are swallowing hard, in some cases, and eating minor repairs on their own, either because economically, they wouldn't clear the stuff deductible or even if they did, if they fear the rate increase that might come with an actual economic claim as well. So that's what we're hearing from the insurance industry. I think they also recognize these trends tend to be cyclical, not secular that eventually folks are rational about the coverage they need and want to pay for and book pay for the insurance they need. And that has proven true over a multiple decade-long horizon.

When it comes to catalysts for change, in the future, definitely some discussion of near-term trends like the conflict that we and the world find ourselves in. We do talk about artificial intelligence and what it means for claims, what it means for insurance companies. As you might imagine, they are both excited and terrified of it, right? An insurance company buys nature have to be very thoughtful and rigorous about new tools that are deployed, in many cases, decisions they make or their service providers may have to be thoughtful and auditable and cable and accountable, that can't be black box decision making either. So we talked a great length about artificial intelligence, how we're deploying to Copart in support of their outcomes and how we can support them in deploying it as well.

I think the insurance industry, broadly speaking, I would say, is exploring AI certainly across the multiple dimension of its industry. But if anything, we understand it on the claims side as well as anyone, but they will consider it for marketing, certainly, underwriting, certainly, repricing and the like claims. If anything, that's a language we may speak more fully than they do at institutions.

And then either Jeff or Leah, I'm just looking at that international service revenue line up, I think, 18%. Maybe could you get some light on what exactly is driving that? To what extent is the market performing. The underlying markets in which you participate, is that performing well? And to what extent is that a representation of traction you're getting especially I'm curious about in Germany as I know you're flipping that market towards the Copart-style remarketing service.

Yes. Yes, Craig. So the growth internationally that we saw on the revenue side was, as I mentioned in my prepared remarks, there is contribution across many markets. The U.K. was particularly strong in the quarter. Germany followed it up as well as Canada. And so we've seen really strong demand across all 3 markets, both on the insurance side as well as the non-insurance business.

Germany continues to perform incredibly well on a relative basis to where it was several years ago. We continue to see carriers be open-minded about how they're approaching the total of process, and that's a market where we've seen some meaningful progress from a unit volume as well as a profitability perspective. So we're really pleased with our performance.

The next question comes from of Josh Batla with JPMorgan.

Could you just give us an update on the size of the non-insurance or whole car business? And it would be really helpful to get a sense of the typical profile of a crossover buyer. How does their wallets go part tend to evolve over time? If possible, it would be helpful to your example or anecdote of how a dealer maybe initially engages with Copart and what that early exploration phase looks like and how that activity typically ramps up as the relationship develops. I have a follow-up.

It's a fair question. On the, I'll start with your second question on the nature of the crossover buyer. These are both domestic buyers and international buyers as well. who will first discover Copart through some mix of SEM or SEO, so literally a Google search for a given vehicle may lead them to Copart for the first time.

It can also be via social media. If you will check us on the YouTubes and TikTok and Instagrams and such, not even just our content alone, but you'll find third parties posting about the vehicles they bought and transformed from Copart. So they'll discover us in a range of different ways. And naturally, it's often in the first car you explore Copart is one that could theoretically be driven off a Copart lot or close to it. Those are the cars that most intrigued them at the outset.

Then when they begin bidding when they begin engaging on the platform, they discover that there's an insurance vehicle that was a step recovery. So perhaps it was never damaged at all that might be in their sweet spot as well. Their business is transforming Lexus SUVs, and they discover Lexus SUV with hail damage or theft recovery, that begins that what their appetite for an insurance car, then they discovered that there's a vehicle with light flood damage or rear-end damage, and it's just a camera that's knocked out the car is otherwise intact and the drivetrain is fine, right?

So you can imagine that a given buyer comes for one type of car. And then once he or she realizes the breadth of inventory available to him or her, they migrate outward in concentric circles from that Lexus to other insurance Lexus then to Toyota then to BMWs then to cars further away geographically from where they originated. So that tends to be the discovery journey.

The member universe for us is very dynamic right? So we have many tens of thousands of new members every year. It's, there's tremendous creative disruption in the automotive rebuilding business, so to speak. So in every country, there are new folks in business. Every year, folks who go out of business every year. So replenishing that bar universe is critical. But we have generally found that folks come to pursue very excellent conditioned vehicles, and then they tend to expand their aperture from there.

Got it. That's very helpful. Just as a follow-up, could we double-click on the pure sale mix with U.S. insurance sellers? I just wanted to understand if this is more contractual in nature or something more dynamic can be toggled up or down and whether a higher mix of pure sales units has positive implications for Copart on profile?

It's a fair question. It's not contractual. So our insurance carrier maintained the discretion to manage the auctions as they see fit. So in comparison to say where we were even 7 or 8 years ago, many more insurance carriers have moved to effectively a nearly 100% pure sale approach, and a handful of carriers have moved from 100% down very meaningfully as well. Effectively, nobody has increased their portion of managed sale auctions at cohort.

The reason that's true is because they know and they can literally physically attend and not, but virtually other computers attend a cohort auction and they see the thousands of attendees that give an auction. They see the bidders. If you were to watch on car transact Copart, you'll see buyers in Poland bidding against buyers in Oklahoma and then Maine and then Canada and in Ecuador. You'll see it happen in real time. So they recognize that there is no real way to escape the liquidity at Copart. A vehicle that is sold at Copart will find highest and best use worldwide. And so the insurance carriers have voted with their feet.

They could, in theory, impose high reserve prices on every car. I think they, at this point, recognize that, that's counterproductive as well, right, that will mirror the chill buyer participation. If you have ever bought anything at auction, and I myself have silly things musical instruments or collectibles that I'll buy at the eBays and elsewhere. Buyers tend to gravitate to pure sale, pure sale items, and you tend to generate better outcomes and faster outcomes when buyers are excited to participate. So that pure sale mix has increased very steadily and very meaningfully, really, through Copart's entire history, but in particular, over the past 5 to 7 years.

Understood. Great color. If I could just sneak one more in on RPU, continued strong growth here despite having fully lapped prior pricing actions. Could you maybe unpack the drivers of the strength, maybe break it down between contribution from pure ASP expansion versus other vectors like mix and initiatives like Title Express?

Just directionally speaking, we definitely, as I noted, have provided more services of the Title Express offering. Here at Copart, we would estimate we are processing volume 6, 7, 8x more than anyone else in the industry. So that particular product has penetrated more accounts. So that's a portion of it. As you noted, a portion is simply by virtue of the higher selling prices we're sharing it. We're generating an auction. The mechanism of our economics are such that as we deliver higher sale prices to our sellers, we also share in a very small portion of that incremental proceeds as well. Those are the big drivers. Certainly, volume growth on the growth among those non-insurance sellers that we noted earlier. Those cars tend to sell for even more still than the average insurance card as well. Those are all the underlying drivers.

The next question comes from the line of John Healy with Northcoast Research.

Jeff, I appreciate the comments on the whole car side. And frankly, that's kind of one of the areas we're getting most questions about from investors. So I would love to spend a couple more minutes there. Can you just remind us again just the size of the business, maybe either in terms of dollars or units again?

And when you look at kind of both our business, I think there's different definitions that probably folks in the industry use. When I talk to people in the industry, they seem to tell me that you guys are selling a lot of hail damage type vehicles. So would love to know from a consignor standpoint, not necessarily the demand side that you talked about in the last question. But from a seller standpoint, where those whole car units are coming from? And are they largely attached to some sort of, what I would say, damaged vehicle, not necessarily a complete salvage? But we'd just kind of love for you to kind of dive into help us think about your definition of hold car. And secondly, as you think about growing that business and aspirations to be more on the dealer side, I know you've had Copart Dealer Services for a number of years, is that a strong enough presence brand to do what you want to accomplish there? And I know you've kind of toyed around with BluCar for the last couple of years, but what's your level of satisfaction with BluCar do you think you maybe need a different tool, a different platform or maybe just a brand that doesn't say Copart to be a successful area as you want it to be?

Yes. It's a very fair question. And I think underlying it, John, you've got the intuition that every car is somewhere on a spectrum from a total burn that's almost unrecognizable as a vehicle at all the way to a brand-new family that is just off the dealer lot, right? And there's a spectrum of vehicles in between.

And assuredly, when we talk about vehicles, we are sourcing from institutions other than insurance companies. We start at one end of the spectrum. For sure, we are an obvious marketplace for a damaged rental car or a heavily beaten up repo vehicle. From there, we earn the right to sell the 3-year-old car that is being deflated by one of the major rental car companies. We are in the right to sell a repo vehicle that is actually an excellent condition, right? That was a voluntary repo of a car that's 4 years old with very large mileage on it.

And so we -- as we described the concentric circles earlier, we have our foot in the door to earn the right to sell both to better and better cars over time. That is reflected in part in our average selling prices. We tend to talk about insurance in isolation, but it's reflected in the average selling prices of the cars we sell from financial institutions as well. So eventually, the TAM, when you consider all of the auction mediated vehicles that are not from insurance companies in the United States, that's $15 million plus, right? And not all of them are day 1 addressable for us. But as total loss frequency rises as we earn the right to sell more of those cars from the noninsurance sellers with each passing year, we earn the right to sell more of those cars as well. So I think you're right, it is a spectrum, and we are moving up into the right on that spectrum.

Great. And then just you might have mentioned it, and I missed it. Can you talk a little bit about the industrial side of the business? Maybe where you're at as you think about investments there, maybe I don't know if you mentioned how the GTV performed. Any call outs for us to think about how Purple Wave is performing?

Sure, John, I'll take that. Just in terms of GTV, we look at it on an LTM basis, and GTV has grown over 25% year-over-year. And so we're very pleased with that. The majority of the growth is coming from territory expansion. We started out the business with a principally Central Time zone focused territory sales force and have expanded out to the coast, the majority of our investment, Purple Wave has been in headcount in that territory sales force as well as some very focused enterprise-level accounts that are focused on building relationships with large nationwide sellers. So the GTV growth that we're seeing is a result of the success that we've had with that territory expansion and the enterprise relationships. And we're pleased with that.

I'd say we're probably about, in terms of overall size, the team is about 2.5 to 3x the size it was when we acquired Purple Wave. And we still have some ways to go in terms of achieving full nationwide coverage. We certainly hit the top areas that are most important for Copart to penetrate from a territory presence perspective, and we're pleased with the progress we're seeing so far.

[Operator Instructions] And the next question comes from the line of Jeff Lick with Stephens.

It actually get most of them on the whole car side, but I was wondering if you could talk a little bit on the recent long haul that you referenced. What exactly you're doing there? And how is that impacting -- how you're adding that into your business?

Sure, Jeff, on the long-haul side, that's an additional product that we have really always offered to our members. However, we shifted our market -- our product offering a little over 12 months ago. We've seen rapid adoption of it and are quite pleased with the level of participation that we've seen effective procure long-haul delivery through the Copart delivered product. So we believe it reduces friction. It gives our buyers certainty in terms of cost upfront. And we're -- like I said, we're pleased with how that's progressing.

And just in terms of overall impact for the quarter, we saw about $15 million of year-over-year increase in cost on the facility ops line related to our long-haul delivery product. And that product is generating a nice margin for us as well as the revenue line.

And just a quick point of clarification. Pure sale units, is that just analogous to a non-reserved sale or is there any nuance there?

That's it. That's correct.

Thank you. This concludes question-and-answer session. I'd like to turn the call over to Jeff Leah for closing remarks.

Great. Thank you, everybody. We'll talk to you next quarter.

And this does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Good day, everyone, and welcome to the Copart, Inc. Second Quarter Fiscal 2026 Earnings Call. Just a reminder, today's conference is being recorded. Before turning the call over to management, I will share Copart's safe harbor statement.

The company's comments today include forward-looking statements within the meaning of the federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in the company's industry. These forward-looking statements involve substantial risks and uncertainties.

For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors in the company's annual report on Form 10-K for the year ended July 31, 2025, and each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements.

I will now turn the call over to the company's CEO, Jeff Liaw.

Thank you, Owen. Welcome, and thank you for joining our second quarter fiscal year 2026 earnings call. I'll begin with some brief remarks on trends in our insurance business before passing the call to Leah to provide a summary of our financial results. We'll then be happy to take your questions.

On our insurance business. For the second quarter, our global insurance units declined 9% or 4%, excluding the effect of catastrophic units from a year ago. Our U.S. insurance units declined 10.7% for the same period or 4.8%, excluding those catastrophic units. The underlying drivers of these changes remain consistent with what we've discussed on our prior calls.

First, shifts in policies in force and exposure levels across insurance carriers who themselves are experiencing differential growth rates. Softer overall claims activity driven by a consumer pullback in auto insurance coverage, all partially offset by continuing increases in total loss frequency.

On the latter point, total loss frequency continues its inexorable rise, consistent with the long-term historical trends we've observed and discussed at great length. In the United States, total loss frequency was 24.2% in the fourth quarter of calendar year 2025, a slight 10 basis point uptick from a year ago.

The year ago period, of course, does include the effects of Hurricanes Helene and Milton. It's notable that total loss frequency has increased over that period, nonetheless. Then when you step back a bit over a multiyear horizon, the upward trajectory becomes clearer still. Total loss frequency in calendar year 2015 was 15.6% in comparison to 23.1% in calendar year 2025. Against that backdrop, our focus remains on delivering superior long-term economic and service outcomes to our insurance clients.

First and foremost, we maximize returns for our insurance partners. We believe our auction returns continue to reflect structural advantages of our marketplace and recent account wins for which we have empirical before and after returns data validates that position.

As you know, industry-wide vehicle values have normalized somewhat from the elevated levels we observed during supply constrained -- supply chain constrained period of 2021 and 2022 as evidenced by Manheim indices and otherwise. We are nevertheless generating record average selling prices for our U.S. insurance consignors.

As we discussed at great length on our first quarter call, we attribute this performance to the scale and diversity of our global buyer network, rising international participation, enhanced data-driven merchandising and the liquidity that comes from consistently finding for each vehicle we auction its highest and best use globally.

The critical driver of long-term competitive advantage for Copart is that liquidity. We migrated first to an online-only auction in 2003 and have benefited from an almost 2-decade head start in comparison to the rest of the industry. In short then, we benefit from a growing base of bidders as evidenced in bidders per auction, bidders per lot, watch list additions per lot and so on.

Our selling customers have also voted with their pocketbooks, entrusting us with more pure sale units than they ever have before, knowing our auction will achieve a full and fair market value. The ancillary benefit from that change and that evolution is that our sellers can themselves reduce their own internal administrative burdens by extension.

As evidenced by marketplaces across a multitude of industries, liquidity begets liquidity. The fact that our auctions continue to drive strong returns and price discovery yields further growth by bringing new sellers to our platform and frankly, by enhancing the economic attractiveness of the total loss pathway for our insurance clients as well.

Our strong returns are literally one of the critical drivers of rising total loss frequency in the industry. To that point, our U.S. insurance ASPs for the quarter increased 6% year-over-year. Excluding the effect of the catastrophic events from a year ago, our average selling prices for the U.S. insurance sector grew by 9% year-over-year, yet again outpacing industry trends.

The second important element from our insurance carriers' perspective is cycle times, both from assignment to vehicle retrieval and from vehicle retrieval to vehicle sale. These are critical drivers of economic value and policyholder satisfaction for our insurance clients.

To deliver excellent pickup times, we operate the largest tow network in the industry by a long shot, a unique combination of third-party subcontractors, owned trucks and employed drivers and what we call truck-in-a-box operators, who are independent third-party drivers who leverage Copart's purchasing and financing scale for their vehicles. All of these service providers benefit from Copart's best-in-class route density to optimize performance and cost.

Finally, our Title Express offering, the process by which we obtain loan payoff balances and accelerate the retrieval of original titles, whether held by the banks or by individual policyholders, is by a factor of 5x or more the largest such platform in our industry. In many cases, we deliver cycle times 10 days better or more than the insurance clients can deliver on their own because we benefit from unmatched scale and the purpose-built technology platform that, that scale enables.

On the specific question of claims activities, we talked at length about -- on our last 2 calls about trends we've observed in the insurance industry, including consumers paring back their coverage by foregoing collision coverage, raising their deductibles or both. These trends have continued in our most recent quarter, historical data does indicate over the long haul that these are more cyclical forces than they are secular.

The last point I wanted to make was to shed some light on artificial intelligence and what it means as a critical tool for Copart specifically. We have deployed artificial intelligence at scale along multiple dimensions across our enterprise, including my own significant personal engagement in Quad code and other such platforms.

We've observed, not surprisingly, an exponential monthly increase in use by our own in-house team of engineers. With approximately 1,000 full-time engineers across North America, Europe and Asia, we have by a healthy margin, the most robust and experienced bench of technology talent in the industry and the tech platform to show for it.

Artificial intelligence is turbocharging their productivity day-to-day. We have also deployed our artificial intelligence in business analytics, document processing, our call for release processes, driver dispatch and so on and so forth. As one commercial example, 2 full years ago, we launched a total loss decision tool to the industry, which assists insurance carriers in making expedited total loss decisions with limited information, including, for example, a small sample of photos and otherwise.

In every case, as we deploy this critical technology, we are appropriately respectful of the critical privacy and reliability considerations that our sellers will have as well as the business practices, legal and regulatory considerations of our insurance business partners specifically.

We have already seen AI substantially increase our productivity across functions, and we will deploy it -- we will continue to deploy it to continue doing so. We also know that artificial intelligence will enhance the value proposition we can deliver to sellers and buyers at our marketplace over the long haul.

With that, I'll turn the call over to our CFO, Leah, to discuss our second quarter financial results.

Thank you, Jeff, and good afternoon to everyone on the call. I'll begin by walking through our financial results for the quarter, beginning with our consolidated performance, followed by a review of our U.S. and International segments.

For the second quarter, consolidated revenue declined 3.6% year-over-year to $1.12 billion. The prior year included revenue from over 49,000 CAT-related vehicles. Excluding CAT, consolidated revenue increased 1.3%. Service revenue declined 4% and purchased vehicle sales decreased 1.4%.

Revenue performance was driven by higher ASPs, which were up 6% on a reported basis and 7.1% excluding CAT, which were offset by lower unit volumes, which declined 8% globally and down 3.6%, excluding CAT. Global insurance units declined 9.3% or 4.1% adjusted for CAT, while global noninsurance units decreased 2.7%.

Global inventory declined 7% from the prior year, while global assignment volume declined low single digit. Global gross profit decreased 6.2% to $492.8 million. The prior year included profit from the CAT units, and this quarter included a $6.8 million onetime expense accrual related to international VAT.

Adjusting for these items, global gross profit increased 0.4% and global gross margin increased 178 basis points to 45%. Operating income declined 8.8% to $388.7 million, while net income was $350.7 million, down 9.5% from last year. And earnings per diluted share decreased 9.2% to $0.36.

Turning to our U.S. segment. Total units declined 9.5% or 4.5%, excluding CAT and direct buy. Insurance volumes decreased 10.7% or 4.8%, excluding CAT, which are consistent with the claims frequency trends Jeff described a few moments ago.

Dealer Services unit growth was 5%, while commercial consignment units, which are marketed through our BluCar channel, declined 11.8%, reflecting higher repair activity among our rental customers, while fleet and bank finance seller volume continues to grow at a healthy double-digit pace.

In addition, as we continue to shift lower value units to our direct buy channel, reported U.S. purchase units declined 23.6% or just 8% on a normalized basis.

As of the end of the quarter, our U.S. inventory had declined 8.1% from the year ago period. During the quarter, U.S. assignments declined low single digit from the prior year Purple Wave's gross transaction value growth of more than 17% over the last 12 months continues to significantly outperform the broader industry and reflects our strong performance in our expansion markets as well as growth in our enterprise accounts.

U.S. total revenue declined 5.5%, but was flat excluding prior year CAT events. Fee revenue declined 5.6% and was also flat, excluding CAT, as lower unit volume was offset by an increase in revenue per unit. U.S. insurance ASPs increased 6% or 9% excluding CAT, and noninsurance ASPs increased 2%. U.S. gross profit decreased 7.2% to $430 million or 1.6% excluding CAT, and gross margin was 46.6%.

Operating income was $341.5 million, down 9.2% year-over-year or 2.3%, excluding CAT and U.S. segment operating margin was 37.1%.

Turning to our International segment. International units declined less than 1% or grew 1%, excluding prior year CAT events. Insurance units decreased 2.6% or 1% excluding CAT, and international noninsurance units increased 9.1%. We continue to see strong noninsurance growth across our diversified international footprint, including in the U.K. and Canada.

Revenue increased 6.1% or 7.7% excluding CAT to $200 million, including a $13.4 million favorable FX impact. Service revenues increased 7.7% or 9.4%, excluding CAT, which was driven by a 7.6% increase in fee revenue per unit. International insurance ASPs rose 9%. Gross profit grew 0.9% and operating income was $47.2 million or a 23.6% operating margin.

Finally, turning to our capital structure and liquidity. Copart remains in an exceptionally strong position. We ended the quarter with liquidity of approximately $6.4 billion, including cash and cash equivalents of $5.1 billion and no debt. We continue to generate robust free cash flow, which has increased 58% year-to-date. This is supported by disciplined capital allocation into assets, which position us to efficiently support our growth to serve both insurance and noninsurance clients while also delivering strong operational efficiency.

In addition, during the second quarter, we began to repurchase shares of our common stock through open market purchases and have subsequently repurchased shares under a 10b5-1 plan through the month of February. Fiscal year-to-date, we have repurchased over 13 million shares for an aggregate amount of over $500 million.

And with that, I'd like to thank you for joining the call, and we'll open it up for questions.

[Operator Instructions]. And our first question comes from the line of Bob Labick with CJS Securities.

So Jeff, you talked a little bit about some of the macro factors, claims frequency and lower earned car miles we talked about last call and stuff, trending similarly to prior calls. What are the kind of -- what are the things you guys are watching to see changes that will change this trend line and get the industry volumes back to growth going forward? I know, obviously, total loss frequency will impact that as well. But excluding total loss frequency, what are the other kind of macro factors that we can watch and you're watching to get industry volumes back to growth?

Yes. Fair question, Bob. I think there is -- as you know, there's cyclicality in the auto insurance industry itself, which you'll see in the form of premium growth and contraction. You'll see in the form of combined ratios and so forth. And I think a good portion of the industry, as you know, had passed through finally with the approval of various regulatory bodies, rate increases over the course of the past few years, long after, frankly, the carriers themselves had experienced underlying cost inflation in the repair universe, labor and otherwise.

So there's a lagging effect where it took them a while and which it took them a while to pass the rate increases through, and so today, they have now far healthier income statements, but also compromised growth as a result.

I think historical trends or any guide, there are ebbs and flows in that regard and many or some -- some or many will begin reinvesting in growth and driving policy growth in the form of both marketing dollars as well as more competitive approaches to rates as well.

So I think those are the kinds of things I'd look to as the consumer always weighs various -- their basket of goods and services purchased, I think more so than on average over the course of my time in the industry and over -- in comparison to Copart's own history, I think consumers have felt the pain more in the past year or so, relatively speaking, and have pared back their insurance coverage as a result. I think the numbers do bear that out.

Okay. Great. And then just one more for me, just changing gears a little. SG&A has been back to getting generally operating leverage have been flat after a period of time where you had growth for multiple reasons. One of them was the sales force buildup. So I was wondering maybe if you could just give us a sense of what you've learned from that sales force -- what you've learned from the buildup? What are the expected returns and outcomes from the larger sales force? And how have they been -- what are the successes and failures so far from that?

Yes, fair question, Bob. And I think it probably oversimplifying the picture to say it's merely the sales force itself for sure. We have invested in our commercial capabilities, as you described them, but also in product and tech.

And along these other dimensions you've heard us talk about, whether it's the services we provide to the insurance carriers in the form of Title Express, the artificial intelligence back to tools and so on and so forth. So there's more to the picture than just that alone. But yes, we do believe it drives differential returns to us, both in the form of unit volume, better selling prices, better economics period overall.

I don't tend to read too much into any given quarter or any given quarter's percentage change versus a year ago. I understand for a host of reasons why you and other analysts might, right? But we basically treat each expenditure as its own decision that needs to be warranted by the economics.

Every investment we make is justified by the economics of this specific project itself. And so in the aggregate, there will be periods in which SG&A grows more than in others. I wouldn't have read that much into even the past few years as you described, just as I wouldn't read a whole lot into today's results either. The calculus remains the same, invest the capital on behalf of our shareholders as though it's ours because it is to generate profitable growth for the enterprise hard stop.

The next question comes from the line of Craig Kennison with Baird.

I wanted to ask about your land capacity needs. If you look at or project your volume for the next 1-, 5- and 10-year period and take into account faster cycle times that you've experienced, but also whatever market share dynamics are out there, how would you frame your need to invest in additional land capacity?

Sure, Craig, I'll take that. Today, I think we are in an incredibly strong position relative to where we were, say, a decade or even longer ago. That has been a result of very disciplined and focused investment in the magnitude of several hundreds of millions of dollars per year. But we are still focused on where we want to be positioned 10 years from now. And that ultimately may require additional investments in land.

Certainly, faster cycle times will allow us to use our land on a more efficient basis. And we take all of that into consideration as we look at individual assets, as Jeff said, even on the investment front, whether it's G&A or incremental land parcel, we look at it on a specific investment basis to ensure that it's adding capacity and capabilities for Copart to serve our customers in the future.

So ultimately, we'll continue to use that same discipline and that same approach. I certainly think that relative to where we were, like I said it's at the outset, 10 years ago, we're in a much better position from a land ownership perspective than capacity, but we do anticipate continuing to invest in our portfolio on a disciplined basis to ensure that in a decade from now, we will be well positioned as well.

Craig, I'd add to that point that I think it was now April 2016, so almost exactly 10 years ago, we launched the -- what you remember you were here at the time, the 20/20/20 initiative in which we were going to acquire 20 facilities, expand 20 facilities in the course of 20 months in recognition that the industry was growing and that we were shorter on capacity than we should be.

We've invested very aggressively over the decade since to develop both new capacity -- purchase new land to develop new and existing facilities and to frankly, buy out facilities that we had largely leased over the years. We recognize that long-term stewardship for the industry really requires ownership.

Leasing means you don't ultimately control your ability to service the insurance industry. We want to ensure that we could do just that.

Now sitting here where we are, as Leah just described in February of 2026, we are in a considerably stronger position than we were then. We now have dedicated catastrophic facilities, as you're well aware, in the many hundreds of acres of otherwise idle land in anticipation of storms.

The one caveat I'd provide to you is that this is a dynamic puzzle, as you know, with industry trends and distribution of vehicles and population and so forth that land acquisition and development by its nature is a long lead time activity, right? So we can't wake up one morning and discovered that we suddenly need dramatically more land in the state of X and be able to respond accordingly. So we have to account for some margin, which we effectively do across the United States and invest accordingly. But for sure, as Leah said, we are in a far more robust position than we once were.

Yes. And then, Jeff, just a follow-up on your AI commentary. Certainly, it's been a big topic, especially in the last week. But could you maybe share with us where you see any disruption risk to what Copart does and where you feel well defended by your moat as it stands today?

I think we're always appropriately paranoid about disruption and the directions that it could come from. So we are always acutely aware of the need to disrupt ourselves and to inject the technology in all the places where we could enhance productivity first, but also deliver a better experience still to our sellers and buyers. So there are certainly a range of different folks, different purveyors of vehicles today, some that have been in existence for decades, others of which are more upstart by nature, virtual only, et cetera.

I think the fundamental moats that ultimately define who we are, still are physical storage capacity for sure, a global liquid buyer base for sure, a highly recognized online auction platform, deep regulatory knowledge across 50 states, across a multitude of countries right? that is in and of itself a barrier entry as well.

And then as for where those disruptive dimensions might be on the technology front, we're hell bent on making sure that we do it first. So I would say I don't see a specific threat on the horizon, but I'm also -- we're always looking over our shoulder as well.

The next question comes from the line of Bret Jordan with Jefferies.

I've a question about market share dynamics. Do you think it's becoming more price competitive as the other player in the space doing, I guess, either rebating or discounting or pricing delta to you that would explain what seems to be a differential in unit growth.

Obviously, you've got the title transfer product and the cycle times and the foreign buyer base that would suggest that Copart might be a better outcome. But I guess how do we think about the differences that we're seeing in units recently?

Yes. The unit growth phenomenon, I think, is described -- is explained in part by just differential growth rates in the insurance industry itself, right, which is to say if we didn't win any accounts from others in the industry and they didn't win any from us. There still is a delta in the growth rate of our underlying customers themselves that can explain a "market share shift, " right, without literally losing one account one way or the other.

That said, I think your point -- your second point is the important one, which is that our industry has always been price competitive for the years that I've been here and many years before that. Probably for the entire existence of Copart, we have competed against others in the industry on the basis of price.

Today, we are increasingly competing on the basis of delivered economic outcomes, which is a far better lens through which to view the Copart business. It's our responsibility as an enterprise, our commercial team's responsibility and my personal responsibility to make sure that we convey that message to our customers and to the industry that they understand it's not just the X that you are paying to Copart or to your alternative providers, but it is the delivered economic outcome, which is, first and foremost, overwhelmingly so the selling price for the vehicle that you're selling at the platform.

Secondarily, the cycle times, which have both direct economic consequences in the form of storage, for example, and indirect consequences in the form of policyholder satisfaction and the like. And on a tertiary, maybe further down still than that, the fees that you're paying us or to others in the industry. It's our job to convey that message. It's a complex nuanced one.

We have to make sure we have the right audience for it and the data behind it. But I would say, in virtually every case in which we have run the test empirically, the data bears out of that thesis that the returns that we generate dwarf any other differences that you could perceive in the full stack P&L.

Okay. Great. And could you -- I might have missed this. Did you give us an update on how CDS has been doing?

Yes. CDS had a nice quarter. They were up 5% year-over-year in terms of unit volume.

Okay. Is that growth with various dealers? Or is that comp store -- is that comp dealer growth? Are you expanding it to a broader user base? Or are you growing within the current user base?

We're always growing the user base.

Our next question comes from the line of John Healy with Northcoast Research.

I wanted to spend a little bit of time just on accident frequency. For the last 3 or 4 quarters, I feel like it's been a hot button debate. And knowing Leah and Jeff, I'm sure you guys don't stop thinking and working on this viewpoint. I would love to spend a little bit of time there. Just any updated thoughts about ADAS view of kind of the algorithm that investors might be able to use to think about the nuances of growth.

Obviously, the volume numbers are down big, but there's some explainable reasons in terms of policies in force that you noted. But I was just hoping we can try to get some comfort with thinking about that overarching volume number for the industry, put aside whatever you or IAA are doing. Just what does this business really grow, do you think in the next 3 to 5 years?

Fair question, John. And I would say it has been true for probably all of our adult lives, if not our entire lives, that accident frequency, generally speaking, declines year-over-year. That has always been true because cars are designed better and they're safer over the years.

In the 1970s and the 1980s, we saw for the first time the proliferation of anti-lock brakes. Eventually, we'd see traction control and so on. Today, of course, the safety technologies are arriving in the form of forward autonomous braking modules, lane departure warning, sensors, rear cameras and so on and so forth. So accident frequency has declined always, plus or minus year-over-year.

I think there's one blip from -- if I have my years straight from 2013 to '15 or '14 to '16, some short period of time in which that wasn't true. I think cell phone proliferation, smartphone use accelerated in a way then it was unusual in [ mice ] or standards. So accident frequency declines, it always has. And as a result, the number of cars involved in collisions declines generally.

The reason it historically has happened very gradually is because the relevant population of vehicles is in the hundreds of millions in the U.S. and the number of new vehicles we'll ship in a given year, depending on the state of the economy, is 15 million or 14 million or 18 million, right? The vehicle park of 300 million or so in the U.S. can turn over only so fast.

So the changes in accident frequency end up being gradual. And the tailwind in the business is that even if the number of cars that are in accidents decline, the number of cars that are totaled in absolute terms still grows because there are more -- enough total loss frequency increases to more than offset the decrease in accident frequency.

Based on what we know now, I don't think that calculus changes. I think there are certainly folks in the autonomous driving universe who may have a different view, but we continue to believe that the algebra is still the same. There is an installed base of vehicles that will collide. There is an awkward transitional period also as many of those cars don't have the newest and best technology while cars are on the road that do.

The cars that do are often driven by drivers who are still more distracted than they otherwise would be. We've talked about that thesis some in the past as well, the notion of risk homeostasis and folks tolerating more risk as they drive as they depend still more on technology. So the interplay of all of the above still leads us to believe that the number of cars that are totaled industry-wide is likely to grow over the medium to long term. That's still the calculus as we see it.

To your question also on accident frequency, the reality is that a lot of the data often happens in arrears, right? The [ police ] reported crashes, fatalities, the most objective such indicators sometimes are published on a lagging basis. But based on everything we track on a regular basis, our fundamental thesis remains unchanged.

Got it. That's helpful. And just on capital allocation, obviously, you're being pretty direct with the repurchase visibility now. But is this the right tool for you guys? Do you see yourselves just using open market purchases? Or do you look to kind of evaluate maybe something more formal or conceptual in terms of accelerated program or something like that? Or do you think this is just the right approach for right now?

Yes. Over the course of my tenure, and I think over the course of Copart's 40-something year history, we've used a range of different tools including open market purchases as we've recently executed all the way to more structured Dutch tenders and the like. We always evaluate the full range of tools by which to execute the strategy.

I think on the margin, I think that's ultimately more rounding error than it's not. I think [ what you've ] seen us conclude is that it made sense to buy Copart shares back as a way to distribute capital back to shareholders to distribute some of the cash flow that we had generated over the years back to shareholders.

We thought this was an opportunistic time to do so, and this is the mechanism we chose to use in the moment. As you might imagine, the calculus, the various inputs into that kind of decision can change as to the magnitude or the form of the buybacks that it might take. I think it's difficult to predict in the vacuum what that means as we look forward.

The next question comes from the line of Jeff Lick with Stephens Inc.

Jeff, I know you're always thinking about long-term stuff. I was wondering if we just think about the next year that's in front of us, year or 2, things that are changing. Obviously, you've got an insurance cycle, rates are coming down and marketing dollars going up, so they'll be more focused on profitability and lease returns that will be ramping up, potentially a lot of those lease returns will be EVs.

And then obviously, we've talked about the interesting kind of transition where you'll have some autonomous in the hands of a select few. I'm just curious if any of these things you view affecting your business in some kind of nonlinear way? And then just as a follow-up, I'm just curious since you guys did make the decision to buy back shares and you're very deliberate in how you do everything, why did you view now is the time to do it?

Sure. To tackle those questions separately, I don't know that the catalysts you described, whether it's a mix of technologies, lease returns and so forth, could have an effect on the business and the trajectory of the business in the near and medium term.

From our vantage point, it doesn't change the trajectory over a 5- or 10-year term, insofar as that would inform how we choose to invest in physical capacity, technology, our people, business process, artificial intelligence. It doesn't per se change what we do day-to-day, right? I think we are always most keenly focused on the metrics and the forward indicators that would guide decision-making, right, as opposed to what might guide near term, what might influence near-term results, right? It's more the decision-making that we're focused on day-to-day.

As to your question about the share buybacks, there's no particular witchcraft or anything magical to it. I think it's a function of what general valuation multiples are and where interest rates are, our own views of Copart relative valuation in comparison and also the general long-term perspective that we return capital to shareholders via buybacks, right? So the fact that we're doing them is, in some respects, inevitable. I think we plus or minus said that in the past. The fact that we're doing them right now is a function of all of the aforementioned. So there's nothing unusual. No aspects of that decision that you would find particularly creative, right? It's the ordinary calculus that would go into a decision like that.

And then just one last quick follow-up. As you think about units inflecting positive, is there any particular catalyst that you look for? Or will it just be the law of negative numbers getting less negative? Is there anything that you're looking for that says, hey, this might drive an inflection back to positive unit growth?

Yes. I think the question is probably almost too general, right, meaning we have so many different geographies and businesses, and we continue to drive growth in the BluCar segment. You heard Leah's color about the rental car universe being -- having a slightly different approach this quarter.

There's cyclicality that's not necessarily tied to the macro economy when it comes to rental car dispositions. And the same is true, frankly, for repossessions from the financial industry or fleet management from corporate clients and such. But nonetheless, taking a step back, our growth in the noninsurance world has continued.

In the insurance universe, I think you've heard us describe the under insurance or insurance purchasing behavior of consumers as a cyclical matter. We believe that's true. We believe the historical numbers would back that up.

As for the shifts of policies among different carriers, we believe that to some extent, that's cyclical as well, right, that we do see growth ebb and flow across any individual carrier. We may be in a uniquely or unusually Copart adverse moment in time in that respect, right, that some of the carriers that we are strongest with, have not grown as much in the course of the past 12 or 24 months. But over the long haul, we view those trends as often more cyclical than they are secular.

[Operator Instructions]. The next question comes from the line of Jash Patwa with JPMorgan.

Just wanted to start with a question on the headwind from rising mix of uninsured customers. Jeff, as you've noted previously, these vehicles are still getting into accidents, but maybe flowing through alternate channels. With Copart having deemphasized the low-value units from some of these channels, has this led to an additional pressure on Copart's overall volume growth relative to the broader salvage industry, including the noninsurance channel? And I have a follow-up.

Jash, I'll take that. I don't think so. Most of the lower value units are units that are less than $1,000 in pre-accident value. So they are very old nondrivable what the industry would consider junk units.

I think the units that we are seeing flow through on the uninsured or underinsured side, are likely ending up in impound yards. They're likely ending up retained with the driver, but they then need to find a way to either get it repaired or dispose of the vehicle. So ultimately, some of those vehicles end up at our cash for cars business. Some of them may end up being auctioned or sold through an impound yard.

So there are other avenues in which those vehicles could be disposed of. It just so happens that it's a highly fragmented market, given that it's the consumer's decision to determine where that ultimate vehicle goes if it's not going through the insurance channel.

Understood. That's helpful. And then I just appreciate your perspective on the heavy equipment expansion. How has this initiative performed relative to your internal expectations a couple of years ago when Purple Wave was integrated? While the industry cycle has been challenging, curious like what areas do you see as a room for improvement? And given the significant consolidation opportunity in the sector, what has kept Copart on the sidelines from pursuing more M&A activity over the past couple of years?

Jash, fair question. I'd say that the -- at the time we made the investment in our Purple Wave platform, I think we had not -- we had not fully appreciated the disruption that the tariff complex would introduce into the industry and the uncertainty that it would inject into the industry for heavy equipment, right? It has caused something of a medium-term paralysis as folks didn't know if they should be selling because prices might go up or they should be buying because prices might go down. It has introduced some friction into an industry that had previously been more liquid. And I think we've seen that from other providers in the space, publicly traded and otherwise.

On your question of how to grow the business, we have invested in our platform organically in the form of hiring more sales talent, again, investing in the tech platform, investing on the product side as well. And we've grown that business well, growing that business at a rate that outpaces the industry generally.

M&A is always a lever available to companies like ours, of course, with our capitalization and capabilities. It's not our general inclination, right? We have been long-term company builders and have built Copart with the exception of one very meaningful M&A transaction some decades ago in the form of New England recovery. We've by and large, grown the business organically. That is certainly the most durable way to create value for our shareholders long term.

The fastest way to grow territory is, of course, to acquire companies, we're most interested in building durable value as opposed to simply building terrain. So I think that's our approach by default, if there arise compelling M&A opportunities in heavy equipment or otherwise, we certainly would pursue them.

But you probably know from having followed us over the years that our bar is very high, right, that in the 10 years I've been here, we've only done a tiny handful of acquisitions collectively representing a very tiny percentage of enterprise value. That hurdle will always be high, which is not to say we wouldn't do it. But I just want you to understand the cultural bias, which is to grow and to grow organically.

Understood. That's very helpful color. And if I could sneak one more in here. Could you double-click on the sequential moderation in service revenue gross margin in the quarter and whether there were any onetime factors that may have impacted it during the quarer?

Sure, Jash. I had mentioned in my prepared remarks that there was a $6.8 million onetime tax accrual in the International segment. If you look at the ex-CAT margins, I think you'll see that year-over-year on a gross margin basis, we performed quite well. And then on the international side, there was that onetime item.

There are no further questions at this time. I'd like to turn the call back to Jeff Liaw for closing remarks.

Thank you for joining us, and we'll talk to you next quarter. Have a good afternoon.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Good day, everyone, and welcome to the Copart, Inc. First Quarter Fiscal 2026 Earnings Call. Just a reminder, today's conference is being recorded. Before turning the call over to management, I will share Copart's safe harbor statement.

The company's comments today include forward-looking statements within the meaning of the federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in the company's industry. These forward-looking statements involve substantial risks and uncertainties. For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors in the company's annual report on Form 10-K for the year ended July 31, 2025, and each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements.

I will now turn the call over to the company's CEO, Jeff Liaw.

Welcome, and thanks for joining us for our first quarter fiscal year 2026 Earnings Call. I'll begin with some brief remarks on trends in our insurance business, our progress in growing our noninsurance vehicle business and then a short discussion of the key drivers behind our auction returns before passing the call to Leah to review our first quarter financial results. We'll then take a few questions.

First, on our insurance business, our global insurance units for the first quarter of 2026 declined 8.4% or a 5.6% decline, excluding catastrophic volumes from a year ago. Our U.S. insurance units declined 9.5% for the same period and 7.3%, excluding catastrophic activity as well.

The underlying drivers of these trends are consistent with what we have discussed in prior quarters. It's a combination of market share evolution among insurance carriers themselves, soft claims counts as a result of consumer retrenchment in their auto insurance purchasing behavior offset by rising total loss frequency.

On that last point, total loss frequency has continued its long-term upward trend, consistent with nearly the entirety of the history of our company and our industry. In the U.S., for the calendar year 2025 through September, total loss frequency was 22.6%, an increase of 80 basis points or so year-over-year according to CCC.

We continue to sustain and expand what we believe to be our advantage in generating best-in-class auction returns for our insurance clients. Even including the highly inflationary 2021-2022 COVID era, when semiconductor shortages further increased vehicle prices, we are achieving all-time high average selling prices for our U.S. insurance carriers. And in fact, for the quarter, our global insurance ASPs increased 6.8%. Our U.S. insurance ASPs increased 8.4%. We know from public data and disclosures that our ASPs grew at a rate that eclipsed that of the Manheim used vehicle value index and grew at a rate more than threefold that of service providers similar to us. I'll talk in greater detail in my comments shortly on the underlying drivers of this performance.

On the question of claims frequency, on our last call, we talked about this subject and its near-term effects on our business. According to ISS Fast Track, paid claims frequency for collision coverage for the second calendar quarter of 2025 compared to the same period last year was down 7.5% and in fact, earned car years for that same period were down 4.1%. At the same time, vehicles in operation for the second calendar quarter 2025 actually increased 1.4%, and we see further data in the underlying activity that shows miles driven continue to remain robust and growing. We understand from many of our insurance partners in the industry that consumers are responding to late-cycle insurance rate increases by reducing the scope of their coverage or foregoing it all together. And as a result of that consumer retrenchment, more vehicles that historically would have entered the insurance company mediated total loss process now do not.

Over the long term, however, the penetration rate of auto insurance coverage and collision coverage specifically appear to be cyclical.

I'll now turn our attention to Copart's noninsurance/wholesale business. As we've talked about on prior calls, it's really rising total loss frequency in our insurance vehicles, which enable our ongoing progress in this arena as well. Rising total loss frequency means that an increasing portion of the cars that we sell on behalf of the insurance industry are actually cars that will be repaired and drivable again, both in the U.S. and overseas. As we draw buyers of those types of vehicles to our platform, they are increasingly the right fit as well for sellers such as rental car companies, financial institutions, corporate fleets and the like.

We've also contributed to this flywheel effect by building purpose-built enhancements for commercial sellers as well with guidance from our Blue Car Advisory Board, a host of industry leaders from the aforementioned industries. We built -- we have built specialized systems for receiving inspection, condition reporting and arbitration, all designed to meet the unique expectations and unique needs of those types of partners.

The single most important lever we have in achieving commercial outcomes -- excellent commercial outcomes for our sellers is our fundamental auction liquidity in comparison to many other pathways of disposition for these sellers, we offer an always-on digital global marketplace that is committed to finding the highest and best use for that vehicle anywhere it might be.

That brings us to our last topic, which is the question of auction returns at Copart and why we believe the underlying indicators show that this advantage is not just a durable one but in fact, the fact is expanding. We proposed 5 core indicators for the auction liquidity that has long distinguished us in the insurance industry. We believe that auction liquidity and returns have been a pronounced advantage for us since we became the first online-only salvage auction marketplace in 2003, but I'll focus in particular on the post-COVID, post-semiconductor period since 2022. The first indicator of the health of the marketplace is the portion of its sales that are achieved via pure sale auction. Even in 2022, a strong majority of our insurance units were sold on a pure sale basis, but the mix has increased today to comprise a strong supermajority of insurance units sold. Our consignors know that with an always-on global digital marketplace, they will trust the platform to find the highest and best value for a vehicle based on the attendance of any given auction or Copart. And in fact, for the typical institutional carriers, they hold only unique, exotic vehicles on occasion to be managed with reserve prices and such.

The second indicator for a strong marketplace like ours is international participation in our auction. Global demand leads to more bidders, more competition and higher price and better price discovery. And again, since 2022, against the backdrop of global economic uncertainty, tariffs and so forth, the share of our U.S. vehicles and auction value that have been purchased by international buyers has continued to grow. In the first quarter of 2026, international buyers have purchased vehicles that are 38% higher in value than comparable U.S. buyers by comparison. We believe that these are long-term durable trends as population growth and mobility demand growth outside the United States, outside the U.K., Canada and so forth continues to outpace what we were experiencing firsthand in our origin markets.

The third indicator we would propose would be the unique bidders per auction. We sometimes face the question as to whether a marketplace like ours can ever experience saturation. That is the unit volume can grow so much that it eclipses the buyer base's ability to absorb it. I would argue that most historical marketplace analyses in other industries would say quite the opposite. Liquidity begets liquidity. And in fact, since 2022, our unique bidders per auction instance have grown steadily to today's all-time highs as well.

The fourth indicator we look at is to assess preliminary bid activity. Our live auction technology is distinctive in its ability to dynamically draw full and fair prices for preliminary bids are also one indicator of auction health, i.e., the quantity of proxy bids submitted before the auction even begins. And in fact, preliminary bids as a portion -- preliminary bids per lot auction instance have increased steadily since 2022 as well.

And finally, the one measure that much of the insurance industry uses is gross returns, i.e., selling price for a salvaged vehicle divided by its ACV or pre-accident value. This is a single simple metric that the industry commonly uses. And since 2022, again, our U.S. insurance returns have increased substantially and are, in fact, at an all-time high watermark during my own personal 10-year journey here at Copart. Taken together, we believe that higher pure sale rates, expanding international demand, greater bidder participation, stronger pre-auction engagement and rising gross returns collectively attest to our principal competitive advantage with our consignors, and that is delivering full and fair prices according to the global marketplace. They in turn are the hard won result of our aggressive investments in storage capacity, technology and people for years and decades. They're also the best long-term indicators of the strength of our business.

And with that, I'll turn it over to our CFO, Leah Stearns, and then we'll take your questions thereafter.

Thank you, Jeff, and good afternoon to everyone on the call. I'll begin by walking through our financial results for the quarter, beginning with our consolidated performance, followed by a review of our U.S. and International segment performance.

For the first quarter, total global units sold decreased 6.7% with fee units decreasing 6.3%. During the prior year period, Copart responded to several catastrophic events around the world, from Hurricanes Helene and Milton in the U.S. to catastrophic flooding in the Middle East, Germany and Brazil. These events, which did not recur this year, impacted our reported year-over-year unit growth. Normalizing for the impact of these cat events, our global units sold decreased 4.6%. Global insurance units declined 8.1% or 5.6% adjusted for cat, while global noninsurance units declined 1.5%.

For the first quarter, consolidated revenue grew just under 1% year-over-year or 2.9% excluding cat, to $1.16 billion, with service revenue increasing just under 1% and purchased vehicle sales increasing nearly 2%. Our fee revenue per unit increased over 7% during the quarter, which was primarily driven by growth in our average selling prices, which have increased 8.5% from the prior year period.

Global gross profit increased 4.9% or 3.7%, excluding cat, to $537 million. Gross profit per fee unit increased 12.3% and purchase unit gross profit decreased 3% to $22 million from the prior year period. Gross margin improved 184 basis points to 46.5%, reflecting the nonrecurrence of onetime expenses related to our cat response.

Operating income rose 6% or 4.5%, excluding cat, to $431 million, while net income was $404 million, up 11.5% versus last year, and earnings per diluted share increased 10.8% to $0.41. This was driven by revenue growth, margin expansion and the continued growth in interest income we've earned due to our growing cash balance.

Turning to our U.S. segment. In the first quarter, total units sold declined 7.9% or 5.2% excluding cat and direct buy units. U.S. insurance volumes declined 9.5% or 7.3%, excluding cat. Our insurance unit volume trends are consistent with the industry themes Jeff described a few moments ago. Our U.S. noninsurance business continues to perform well, led by dealer unit sales, which increased 5.3% commercial consignment units, which are marketed through our Blue Car channel, were down just over 1%, which was primarily a result of timing related to the sale of rental units as our fleet and bank and finance seller volumes continue to grow. We continue to focus on driving higher value units through our marketplace and have developed a more profitable channel for Copart to manage lower value units through, which we have branded direct buy. These are units which Copart would have previously purchased through its Copart Direct, Cash for Cars business unit and instead now is earning a referral fee to connect a junk buyer to the individual seller. As a result, the units are not part of Copart's inventory, and we do not incur costs associated with the processing and handling of the unit. Normalizing for this shift, U.S. purchase units increased 6.2% for the prior year period. compared to a decline of 19.2% on a reported basis.

U.S. purchased vehicle sales, which is primarily comprised of our Copart direct units, increased 10.9%, which reflects the lower unit volume being offset by substantially higher average sale prices, which increased over 50% from the prior year period. From an operational perspective, we continue to drive forward initiatives, which are reducing our overall cycle time. This includes managing title procurement on behalf of our insurance customers, which has grown at a double-digit rate over the past year, while simultaneously reducing aged inventory at our facilities.

In addition, as noninsurance units are contributing a greater percentage of our overall unit volumes, we naturally have a greater proportion of units, which have substantially shorter cycle times being processed through our facilities. During the quarter, in the U.S., our cycle times have decreased by 9% from the prior year period, and these improvements -- while these improvements in cycle time are decreasing inventory levels, they are increasing the overall processing capacity of our existing facilities. As of the end of the quarter, these trends were the main driver of our U.S. inventory decline of just over 17% from the year ago period, while U.S. assignments declined 9.5% or low single digit excluding cat.

We also continue to invest in Purple Wave, our online equipment auction platform. Purple Wave's GTV growth of over 10% over the last 12 months continues to outperform the broader industry and reflects strong buyer engagement in our expansion markets, growth in our enterprise accounts and sustained demand in the heavy equipment category.

The market continues to experience the impact of broad uncertainty, which is causing customers to delay decisions around equipment purchases and sales as they contemplate the impact of the broader macro and geopolitical environment. From a U.S. segment perspective, total revenue increased 0.5% or 2.3% excluding cat, which reflects the decline in unit volume, offset by an increase in revenue per unit. On a per unit basis, U.S. fee revenue increased 7.5%, which reflects the positive impact of higher average selling prices, including our U.S. insurance ASPs, which have increased 8.4% from the year ago period.

U.S. gross profit increased 3.7% to $464 million, and U.S. gross profit per fee unit increased 13.2%, supporting an increase in our U.S. segment gross margin up to 48.7%. As a result, U.S. segment operating income was $375 million, up 5.6% year-over-year, reflecting strong execution and continued cost control, even against the backdrop of lower insurance volumes in the prior year cat. U.S. segment operating margin was 39.4%, reflecting a nearly 200 basis point increase from the prior year period.

In our International segment, total units sold declined by less than 1% or grew 4.5%, excluding the cat units in the prior year. International insurance units increased less than 1% or 8.3%, excluding cat, and international noninsurance units declined 2.2%. We continue to see strong insurance growth across our diversified international footprint including in the U.K. and Canada.

International revenue increased 1.6% or 5.7%, excluding cat year-over-year, an increase to $202 million. International service revenues increased 7.9% or 13.9%, excluding cat, which primarily reflects higher international fee revenue per unit, which increased 8.1%. Our average selling price for international insurance units declined 2.4% from a year ago period.

Purchased vehicle revenue declined 9.4%, which reflects the impact of a few of our insurance customers who have migrated from a purchase contract to a consignment contract structure. Gross profit for the International segment grew 13%, and operating income was $56 million or a 27.5% operating margin, which continues to expand even as we invest in yard capacity, technology and logistics infrastructure to support our long-term international growth.

Turning to our balance sheet. Copart remains in an exceptionally strong position. We ended the quarter with liquidity of approximately $6.5 billion, including cash and cash equivalents of $5.2 billion and no debt. We continue to generate robust free cash flow supported by disciplined capital allocation into assets which position us to efficiently support our growth to serve both insurance and noninsurance clients while also delivering strong operational efficiency.

With that, we thank you, and we'll open up the call for your questions.

[Operator Instructions] And the first question comes from the line of Bob Labick with CJS Securities.

So I know you don't talk about specific clients, accounts and things like that, but I'm having a little trouble reconciling the, I guess, larger-than-expected decline in unit volumes. And I don't know if there's any way you could talk about -- because the trend changed both versus expectations and versus what we've been seeing and at the same time, the explanations are similar to previous trends, right? The U.S. insurance less collision coverage and then share shifts between the carriers, those trends have been happening for a little while now. So maybe help us understand what the kind of inflection in the change is. Is there any like actual market share shift between carriers as opposed to from you to a competitor or a competitor set, et cetera? Or anything we can think about this, the change in the speed of unit change that makes sense?

I don't think so, Bob. I think that would be -- I think it is the factors you just described, which is principally that insurance coverage itself has changed, but I think notably to see earned car years down 4% and change while literally vehicles and operation and miles driven are up, I think, speaks to the underlying activity. So our unit trends, I don't think is substantially different.

if you can envision literally 4% of policies no longer having coverage of any kind and then some other portion migrating down the value chain, so to speak, from collision coverage to liability only or what have you, I don't think it's farfetched to extrapolate from that to the kind of unit trends that we're seeing in our business.

Okay. Great. And then a slightly different question. Just trying to think forward. Total loss frequency, I know it was up 80 basis points year-over-year, but it's been like modestly flattish for the last 4 quarters or so. And I know 1 year through Copart's lens is like a minute for the rest of us, meaning it's too short to register or matter. But that said, what do you think has caused the kind of the pause in the expansion over the last 4 quarters of total loss frequency? What are you seeing beneath the hood, so to speak, for decisions at carriers? Can it be as simple as one carrier is gaining share and they generally have a lower total loss frequency rate, and that's impacting it? Or what could be driving this? And what do you think it takes to get that to grow again?

Yes. I think your first observation is the very correct one, which is that measured in the kinds of investment cycles through which we have to manage our business because the nature of our business is such that investments in anything, tech, land, people, et cetera, requires years of conviction. And we have that conviction in space, meaning over a good horizon. You know this story, I think maybe most of the folks listening to the call already do as well. The total loss frequency in -- as recently as 1990 was 5%. 1980, it was 4%. And today, it's 22% and change. So it's up 80 basis points versus a year ago.

I think, Bob, you know already that even the data in any given quarter often gets corrected the same way that the Bureau of Labor Statistics will later revise unemployment looking backwards because you now know more cars were actually totaled that were in the repair chain or cars intended to be totaled were actually owner retained. So I think reading a whole lot into 80 basis points versus 130 or versus plus 30, I think, is more noise than it is signal. I don't think anything has fundamentally changed in the commercial logic that the industry will use going forward. I think we believe as much as we ever have the total loss frequency as a matter of time and different analysts will draw different conclusions on that front. But we'll reach 25%, and we'll reach 30% because it's actually not -- I think the intuition people struggle with is that they think what it means is you're abandoning a car, right? You're not fixing it. You're giving up on it.

And that's fundamentally not true. For the marginal car, you're not choosing not to repair it. You're choosing to let somebody else manage it, who has a different cost base, a different regulatory regime and a different economic calculus than you do as a U.S. Massachusetts insurance carrier.

So the last comment I'd make, Bob, is there's also probably unprecedented volatility in some of these input variables, right, in the form of tariffs, parts prices, shop utilization, I think it's been quite a bit more volatile over the course of the past 3 years than it has been probably at any point in your career or mine. So there have been shocks to the system of that sort and how those exactly unfold in any given month or quarter or year is harder to speak to, but our long-term conviction remains the same.

The next question comes from the line of Craig Kennison with Baird.

I'll follow sort of a similar line of questions. But Jeff, are you confident that this broader trend in accident claims, which are down, is more of a cyclical phenomenon tied to this increase in uninsured motorists? Or is there any evidence that ADAS technology is finally starting to move the needle?

Yes. It's a very good question, Craig. And I would tell you that safety technologies very much have moved the needle and have done so for 40 years, right? So if you go over decades of history and divide police reported crashes or fatalities, which are often published a little bit further in arrears and divide that by vehicle miles traveled, you'll find that it's declined forever, right, very steadily, very slightly but very constantly with one historical blip in the 2013, '14, '15 time frame. I may have my years off by 1 year or the other, when smartphone adoption and the more addictive apps really began achieving adoption levels that had previously not been seen. So that caused a blip and upward increase in accident frequency with the same numerators and denominators. But otherwise, over the course of long-run history, it has declined.

It's been more than offset by total loss frequency. That's the importance of Bob's question from a moment ago. It's always been dwarfed by that, right? Accident frequency has decreased but not nearly enough to offset the fivefold, 5.5-fold increase in total loss frequency over that same 45-year horizon.

I think the algebra is such that it's -- even if there were excellent technologies that were being released now that would altogether arrest vehicles from colliding, the algebra as such with annual shipments in the -- into the existing fleet that it still takes decades to turn the fleet over. So I don't think you could see something in a year's time that would reflect a fundamental change in vehicle mix and ADAS penetration.

And then just following up on something you said earlier, Jeff. But what happens to those cars that are involved in a severe accident but are not covered by insurance? And are those vehicles you're able to capture on your platform somehow?

Craig, the answer to that is, yes, I think, somewhat less efficiently, right? So we have a consumer business in Cash for Cars that sources vehicles directly from consumers. While you and others on this call certainly recognize the Copart brand name, we are not yet a household consumer name. So we have a different business that purchases those cars from consumers. So they don't sell on a consignment basis through us. They sell the cars to us directly.

And those are often the types of cars that our Cash for Cars platform will acquire because those are vehicles that are much less easily traded into dealers to buy the next car. So we are a natural outlet for those cars. But as you might imagine, it's a far less efficient pathway for that kind of sourcing of vehicles than is a long-standing institutional relationship with a major insurance carrier.

The next question comes from the line of Chris Bottiglieri with BNP Paribas.

I have 2 for me. What does it delve into the 38% disparity between international and U.S. bidders? Are you saying that international bidders bid on average 38% more than domestic vehicles in the same vehicle. That's the case. I just -- I would think with your international mix versus your peer that 38% price differential in the $5,000 vehicle would be pretty insurmountable given the average fee's only $1,000. Just curious how you think about that, the advantage you have on international mix, why it's not leading to -- it almost seems irrational not to use you at that point in parties up big. Just curious how you think about the backdrop about that.

Chris, the impact that Jeff was alluding to is that the, on average, international buyers the ASP of the vehicles that they purchase is 38% higher than the average ASP of buyers from the U.S. And so their inclination is to pursue lighter damage, higher-value vehicles, and that trend has persisted PAUSE over that time frame. So we continue to see them be more focused on those borderline total losses and repair vehicles.

Got you. And do you have stats on the question I asked, do you have a sense for how much more international bidders bid on the same vehicle than domestic? Do you have the other parts of any of that, Leah?

That becomes -- I mean, of course, that's a function of literally a microeconomic question per auction instance, right, almost by definition, if the institutional buyer wins the vehicle, and that speaks for approximately half of our U.S. auction value is going to an international buyer or they are the "push bidder", where they're the second high bidder, which helps to dictate the -- which dictates the ultimate sale price of the vehicle.

That is a strong majority of the vehicles that we sell today. So they are there. They do drive value upwards and very meaningfully so.

To your question from a moment ago, to make sure you understood the algebra precisely, it is literally that the average car bought by an international buyer is 38% more valuable than the average car bought by domestic buyer. That is largely because, yes, they favor the higher-end vehicles. You can imagine that if you are incurring the freight cost to move a car from here to Poland, it has to be worth your while, right? You're not moving a $400 vehicle that's mostly just its metal, right? That will never be worthwhile to move halfway across the world. And so by definition, you're buying cars that are valuable enough. You can add and capture enough value downstream.

Got you. Okay. And then unrelated big picture question. If I got to zoom out, your gross prepay in land is up 155% since 2019, and your volumes are up about 30%, let's call it, since then. So just curious how you think about capacity investment, not only for '26 and beyond. Like, obviously, that is a ton of capacity no matter how you cut the data the last 6 years. How do you like -- what do you do from here given how much you've already grown the capacity?

Sure, Chris. I mean I think some of the assets that we've acquired over the last several years have been for events, particularly around hurricanes in the U.S. and those may operate at a lower average utilization than the average Copart facility. So taking those out of the mix, I think we continue to have certain areas of the country where we continue to have capacity needs or projecting capacity needs over the next 5 to 10 years. I would say the population or the size of that list is much smaller today than what it was clearly 5 years ago.

And so we'll continue to, in a disciplined manner, allocate capital into assets that fit that classification in terms of our capacity needs. And we do also continuously look for ways to bring down our logistics cost to the extent that we can add another node to the overall network that can materially bring down the distance that we need to tow units into our facilities. That's another consideration for us to make.

But I would say, certainly, the list of areas of the country where we do have needs over the next 5 to 10 years is shorter than it was 5 years ago.

Next question comes from the line of Bret Jordan with Jefferies.

Sort of going back to one of the early questions, I guess, around market share and obviously, the optics given Progressive having gained share within the insurance business. You either need your partners to gain share from Progressive or you need to gain Progressive volume. Is there any outlook for that, either any indication that you see that some of the insurers that you do business with are becoming relatively more competitive with Progressive? Or is there an outlook for picking up some of that volume given your higher ASPs?

Yes. Those are totally reasonable questions. As you know, we don't comment on individual accounts. I would say that the insurance industry itself has proven, over the long haul, very dynamic with different players gaining and losing share episodically over many years, right? So we have observed that trend. There certainly have been some long-term secular gainers as well, Progressive being one of them. But it generally -- generally, over the very long haul, we do see a very dynamic picture in that regard, right, both for and against us in that sense, assuming a static set of accounts.

But as for the prospects of winning or losing any individual account, as you've heard at great length today, the overwhelming focus is on delivering excellent gross and net returns. And we trust that the rest of it will take care of itself over the long haul.

Do the optics of the share improve as you lap? Did Progressive pick up share that if the market stabilizes, at least the year-over-year compares become more favorable? Or is their share continuing to trend up?

Yes, probably a better question or analysis of their data than of ours. But I would point you in their direction. I'm probably not positioned to comment in great detail on their relative market share growth in comparison to the industry overall. Obviously, they have outgrown the market over the course of the past few years and in general, over many, many years. But as for what happens from here on out, we have some visibility but frankly, not better than what you and a good analyst would figure out in a hurry.

And a quick housekeeping for Leah, the noninsurance CDS versus Blue Car, could you give us sort of a size, rough estimate sort of versus each other CDS larger than Blue Car or Blue Car larger than CDS, just so we can get a feeling for measuring these growth rates?

Sure. No. So CDS is larger, continues to be larger. It's been growing. While Blue Car has been growing at a very healthy clip, it still remains a larger unit -- business unit for us in the first quarter.

And the potential breadth of both is in terms of the total volume mediated by dealers and by institutions of the sort that we described earlier today.

Yes, the TAM is larger than salvaged, isn't it?

Right. Yes.

The next question comes from the line of Jeff Lick with Stephens.

Jeff, I apologize for the background noise. I'm stuck in the airport. Jeff, I was wondering if you could just maybe opine a little bit, if you look at the factors that would kind of drive the business going forward, we have vehicle depreciation now picking up. That probably picks up a little more with lease returns. So the cost of replacing could go down whereas on the flip side, you've got parts inflation that's up 4%, 5%. CCC did talk about the cost of repair not growing quite that much. And then Obviously, you've got insurance rates appear to be coming down in certain instances, and obviously, to get the combined ratio at all-time lows, those are all going to point towards total loss frequency picking up and then the issue with the uninsured and less insured. Do you kind of view that -- obviously, should view that as a tailwind maybe picking up in your business?

Got it. Let me try to address them one by one. I think when you say vehicle depreciation, you just mean softness in general in the used car market possibly on the horizon. And all else equal, that is a supportive factor for volume for our business. A soft market means that the economics of total loss, all else equal, are less costly to the insurance carriers than otherwise they're writing a check for $16,000 instead of $17,000 to total the vehicle. They would, on the margin, drive more volume to us.

It probably also means though the U.S. market can be divorced somewhat from the international market, they do overlap in some regards. But it could also be to somewhat softer selling prices for us, which, of course, has the opposite effect. So you can imagine more unit volume, somewhat lesser unit economics if it were to happen to a meaningful degree.

Your second question about parts prices and repair costs and others tracking that, that's been the million-dollar question of this era in light of the various tariff regimes proposed implemented unwound and otherwise is what is the total landed cost of a given repair. We do think there's still fundamentally inflation there not just because the like-for-like part has inflated relative to where it was before but also because of vehicle complexity, also because there are more sensors on the perimeter of a car that are increasingly difficult to repair. That drives more cars certainly to total loss as well. And for another day, we can talk about how so many of those complex parts and modules actually are necessarily fundamental to the operation of the car itself, which makes that car acutely valuable to South America, Eastern Europe, Africa and the like.

And then the last question you asked was about the potential softening in the insurance rates as well, that would be supportive of our business as well. That would cause the cyclical phenomenon we described earlier about underinsurance or foregoing insurance presumably to reverse, right, increases or enhances the affordability of insurance policies and the more cars that are effectively covered by one of our clients or one of the folks in the industry, the more cars that are processed in an accident through their funnels, so to speak.

Just a quick follow-up. I'm wondering with respect to the whole car business and the non-damaged total car business and dealer to dealer, do you have any more kind of evolved or thoughts in terms of how you guys may address that market vis-a-vis organic versus acquisition?

Yes. It's a fair question. I think you're aware, probably from having followed us for a while, our default approach is always organic, right? We prefer to build on the back of the liquidity we have, the technology, the facilities, the people, the capabilities we've built over decades. That is often the best, most harmonious way to build a business within Copart. That said, from time to time, we have made strategic moves as well. We acquired National Powersports Auctions some years ago, made a big investment in Purple Wave to step into the yellow or heavy equipment space as well.

So those arrows are both in the quiver. To date, we've been satisfied with the levers available to us to build organically, piggybacking largely off of the liquidity we've talked about at great length on this call. But could there be an acquisition that is compelling enough to pursue? We would always look at it as we always have.

[Operator Instructions] And the next question comes from the line of John Healy with Northcoast Research.

Jeff, I'd love to get your thoughts just on where you think we are in the continuum of premium to the consumer from the insurance industry. Do you view '26 as a year where the consumer might still feel some headwinds there? Or as you look at insurance industry profitability and what goes on to the prices that are offered in terms of the different ratios, I think that they're kind of mandated to abide by, I mean, how do you see that kind of playing out in terms of the repairable claim equation for '26?

Yes. And John, that is both a great question and probably the wrong one for us, probably meaning if you just imagine the tapestry of variables that will dictate that outcome. It's some combination of the general consumer sentiment, in turn a function of unemployment, wage growth, et cetera, inflation in a whole wide variety of different baskets of goods and services and then inflationary in the insurance rates themselves, right? So it is -- there are so many moving parts there that offering my own prognostication is probably just reckless conjecture at this point.

It does seem like there are insurance carriers committed to growing and growing again. Some of them have talked more publicly about that as well that the -- they've been wise, in their defense. It's not that not that long ago. In 2020, insurance carriers were issuing policy credits because suddenly people weren't driving accident frequencies way down. They feared the churn that would come from folks who are sitting at home and not driving again. So they issued credits. They literally were giving money back to consumers. They walk up a year later. ACV spiked. Parts price spiked. Labor wage rates went crazy. The repair cost spiked, and they suddenly found themselves underwater.

They retrenched. They pursued rate release. They made all the operational decisions you might in that environment. Now some are, of course, asking the question have we overcorrected. Are we now foregoing growth too much so in pursuit of combined ratios and so forth? That is such a dynamic puzzle that you're better off pursuing those avenues rather than asking us. We have a view, but it's indirect enough that I think it's better to ask them directly.

Understood. So maybe switching gears to something unique to you guys. The cash on the balance sheet at record levels, I think the multiple on the shares right now are very close to the multiples that you last time bought stock back. Just given all of the noise in the ecosystem, what are the reasons for maybe not being active on the buyback front maybe over the next 6 to 12 months? Would there be gating factors? Or do you just view the economic outlook is too uncertain? Or kind of what are your thoughts there?

So John, on that, I would just say, I think, generally, you can expect that Copart will continue to focus on deploying capital when we see areas that we believe will create meaningful long-term value for the business and for our shareholders. And we'll continue to do that. That's our responsibility from a management perspective and our Board.

So today, as we think about opportunities to reinvest back into the business, we -- our first priority remains being to drive as much expansion as possible for the business through investments, whether it's in CapEx or M&A. We'll continue to evaluate opportunities to do that and drive long-term growth of the business.

And then to your point, to the extent that we have a view that long term from a valuation perspective, there's an opportunity to create meaningful value, we'll -- we've historically used the share repurchase program through a couple of different means, open market purchases, tenders, et cetera, that, that would be our lever to return capital to shareholders. And nothing has changed on that front.

John, just add a slightly finer point to it. I think the fear wasn't that long ago, I suppose, a decade and change ago that I was actively investor myself. And one of the fears for a given company in accumulating too much cash or too strong a balance sheet is that they would in turn become reckless with their capital. And that I think the evidence is there that there's very little risk of that at Copart. We still treat each dollar as though as it's as precious as the last and our P&L should reflect that, and our capital spending and our M&A activities should reflect that as well, meaning the standards for what we will invest capital in have not changed. In the 10 years I've been here, I don't think they changed in the 20 years before I got here either.

So we will treat that cash as though it is dear to us as it is to anyone. We understand how important it is to our shareholders, so we'll do the right thing with it. And as we articulated, we know it ultimately belongs to shareholders, and we have bought shares back in the past. That's always been the mechanism by which we return cash to shareholders. There for sure, we'll come today, we do that again. And exactly as to how, when and where, I think we always defer. We always suggest that that's a conversation for another day.

This concludes the question-and-answer session. I'd like to turn the call back over to Jeff Liaw for closing remarks.

Thanks, everybody. We'll talk to you in a quarter. Have a good holidays.

This concludes today's conference. You may disconnect your lines at this time, and enjoy the rest of your day.

Good day, everyone, and welcome to the Copart, Inc. Fourth Quarter Fiscal 2025 Earnings Call. Just a reminder, today's conference is being recorded. Before turning the call over to management, I will share Copart's safe harbor statement.

The company's comments today include forward-looking statements within the meaning of federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in the company's markets. These forward-looking statements involve substantial risks and uncertainties. For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors and the company's annual report on Form 10-K for the year ended July 31, 2024, and each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements.

I will now turn the call over to the company's CEO, Jeff Liaw.

Thank you, Owen. Welcome, and thanks for joining us for our fiscal year 2025 call. We're pleased to announce the results of another record year for Copart across a number of dimensions, including units sold, revenue and operating profit. For that, I wanted to extend our gratitude to our clients, our members and our people who enable our success.

I'll begin today with some brief remarks on our insurance business and trends in the industry, followed by a discussion about Copart's auction liquidity before passing the call to Leah to discuss the results of our financial performance for the fourth quarter and the full fiscal year. We'll then take your questions.

First, regarding our insurance business. For the full fiscal year 2025, Copart grew its global insurance volume by 4.5% and our U.S. insurance volume by 4.2%. During the fourth quarter itself, global insurance volumes sold decreased by 1.9% and U.S. insurance volumes declined by 2.1%. Year-over-year growth rates for the second half of our fiscal year were softer than in the first half for several reasons, including the ebbs and flows of business activity among individual auto insurance carriers themselves as they optimize for growth and profitability. We also note ebbs and flows of uninsured and underinsured motorist populations, the result of substantial increases in insurance premiums over the course of the past several years.

As one specific citation earned car years for the first calendar quarter of 2025 declined by 3% versus that same quarter in 2024 according to ISS, all while the vehicle car park grew at 1.3% for the same period. You might surmise that underinsurance is less relevant for vehicles that have encountered accidents severe enough to consider a total loss, but consider the scenario in which a policyholder has downgraded from collision coverage to liability only or has elected to forego insurance coverage altogether. Those vehicles may bypass the traditional insurance total loss funnel altogether.

Other industry sources such as CCC have observed what they describe as a cyclical disconnect between accident activity and insurance claims frequency as well. We also track other industry indicators such as traffic fatalities, some of which are published much more episodically but which generally indicate that accident rates are declining but that they're doing so at rates consistent with long-standing historical trends.

We've talked in the past before about how accident frequency has declined virtually every year since Copart's inception and almost certainly for decades preceding that. These declines have generally occurred very gradually as new safety technologies such as anti-lock brakes in the 1970s and '80s penetrate the installed base with each vintage of newly manufactured vehicles. Over those same long-term horizons, however, total loss frequency has generally increased at a rate far exceeding the decline in accident frequency itself. And in fact, for the quarter, total loss frequency has continued its long-term upward trend consistent with, again, the entire history of our company. In the United States, total loss frequency for the second calendar quarter of 2025 was 22.2%, up from 21.5% in the same quarter in 2024.

As a tidbit for context, according to CCC's most recently published crash course report, calibrations occurred on 31% of DRP estimates in the first calendar quarter, up from 24% a year ago, an indication of further vehicle complexity, complexity of repairs and repair costs for vehicles that enter the repair window. We've long noted that vehicle repairs become less attractive with the passing of time. As vehicle complexity increases, parts and labor cost increase as well. We've also talked at length about how total loss itself becomes more attractive as growing economies seek more and more U.S. salvaged vehicles to satisfy their demand for more mobility.

On recent earnings calls, we've talked at great length about the importance of our differentiated service offerings, including our efforts to help insurance companies mitigate their advanced charges, the decision support tools we provide to help them make calls quicker and better as well as a range of titling and loan payoff services we offer to them. But we also know that, above all else, the critical value we provide sellers at Copart is that our auction platform will find the highest and best use of every vehicle anywhere in the world.

I wanted to spend a few minutes today to underscore the importance of that auction liquidity and to describe why our liquidity is a distinct advantage for Copart. First, I would note that Copart's auction is uniquely digital. We have been exclusively an online auction platform since 2003, almost 2 decades before our competitors followed suit and only when they were compelled to do so by the COVID-19 crisis.

By extension, we are also uniquely global. We have some 300,000 paying registered members at Copart from virtually every non-sanctioned country around the world. The result of that is unmatched global breadth. International members account for approximately 40% of all vehicles sold at Copart's U.S. auctions, comprising almost half of auction proceeds because international buyers generally purchase vehicles that are more valuable than those acquired by domestic buyers. We invest heavily in marketing resources, in product and the member experience more generally to ensure a deep pool of demand for the vehicles we auction on behalf of our sellers.

As context, the top 10 individual buyers of vehicles at Copart collectively purchase a low single-digit percentage of all the vehicles we sell at U.S. auctions. The nature of the vehicle wholesaler and rebuilder economy is the frequent disruptions exits and new business formations, and we invest in the resource to ensure that we continue to maintain a deep pool of demand for our vehicles.

The fruits of our labor are visible in the selling prices we generate for our clients in the past quarter and the past year and frankly, for the past 43 years as well. For the quarter, specifically, we experienced ASP growth globally of 5.4% for all insurance vehicles sold. And for our U.S. insurance clients, growth of 5.7% for the fourth quarter versus a year ago. We know from public data and from public disclosures that our ASPs grew at a rate that eclipsed that of used vehicle value indices like the Manheim Used Vehicle Value Index and grew at a rate more than fivefold that of service providers similar to ours.

I wanted to spend a few minutes to talk about auction liquidity as one of the critical propositions that we deliver to our sellers, frankly, across both insurance as well as our noninsurance sellers as well.

With that, I'll pass the call to Leah to talk about our fourth quarter and our full fiscal year.

Thank you, Jeff. I will begin with our 2025 sales trends. For fiscal year '25, global unit sales increased 4.8% and declined in the fourth quarter by 0.9%. Focusing on our U.S. business. For fiscal year '25, unit growth was 4.1% with fee units growing 4.1% and purchased units growing 4.7%. For the fourth quarter, unit sales declined 1.8%. This reflects fee units declining 1.2% and purchased units declining 16.7%.

Over the past several months in the U.S., we have transitioned a significant volume of low-value noninsurance units from our Copart direct channel, which are purchased units to our direct buy channel. This change has allowed Copart to more efficiently market lower ASP vehicles by directly connecting sellers and buyers and avoiding the unnecessary costs associated with transportation and storage at a Copart facility. As a result, they are not captured in our units sold metrics. Normalizing for this, U.S. units declined 0.6% for the fourth quarter.

Our global and U.S. insurance volume grew 4.5% and 4.2%, respectively, for fiscal year '25 and decreased approximately 2% for the fourth quarter versus the prior year period. For the fiscal year '25, our noninsurance unit volume increased 2.8% and decreased 2.1% in the fourth quarter. The fourth quarter decline in noninsurance U.S. volume was driven by our direct buy strategy, which resulted in Copart Direct or our Cash for Cars business line unit sales to decline 5.4% in FY '25 and 32.6% in the fourth quarter. Normalizing for this, noninsurance unit volume continues to grow faster than our U.S. insurance business.

Blue Car, which services our bank, rental and fleet partners, continued its strong trend with 15.3% growth in fiscal year '25 and growth of 2.8% in the fourth quarter. We continue to see double-digit growth in Blue Car across our bank and fleet partners. This was partially offset during the fourth quarter by certain rental partners who retained or repaired a greater number of vehicles than we had seen historically.

Dealer sales volume consisting of Copart Dealer Services and National Powersport Auctions increased 1.4% for the fiscal year '25 and 2.1% for the fourth quarter. Low-value units, including charities and municipalities increased 4.9% year-over-year and increased 1.2% for the fiscal year '25. Our International segment units sold grew 8.1% for fiscal year '25 and for the fourth quarter, grew 3.3%. Fee units increased 9.8% for the full fiscal year and 3.6% for the quarter. Purchase units declined 1.8% for the full year and increased 1.9% for the quarter. Fee unit growth continues to benefit from the shift of insurance units primarily in Germany, transitioning from purchase contracts to consignment.

Turning to Purple Wave. Their GTV grew 9.4% for the fiscal year 2025. And while we are observing an industry-wide trend across the heavy equipment and agricultural sectors of sellers taking a cautious wait-and-see approach due to uncertainties in the broader macro environment, Purple Wave's overall GTV continues to significantly outpace the industry from a growth perspective.

Our global ASPs increased by 5.6% in the fourth quarter and 2.4% for the full year. Our global inventory decreased 13.1% from the year ago period. Overall, inventory levels in the U.S. decreased 14.8% year-over-year. There are 3 main drivers of the U.S. inventory decline. First, we saw low double-digit declines in assignments; second, faster cycle times overall for vehicles sold; and three, the reduction in overall aged inventory. Over the past several years, we have observed that trends in assignment volumes have proven to be a more accurate predictor of future sales than static inventory levels.

Our inventory business ended the quarter compared to prior year with inventory levels decreasing 3.9%, which is primarily due to the sale of several cat units in the Middle East. International assignments grew just over 1% for the quarter.

Turning to our financial performance. Global revenue increased to $1.13 billion for the quarter and $4.65 billion for fiscal year '25, reflecting a 5.2% and 9.7% growth, respectively. Global service revenue increased $63.1 million or 7% from the same period last year and increased approximately $407.7 million and 11.4% for the full fiscal year due primarily to increased volumes and overall higher revenue per unit. Our U.S. service revenue grew by 6.2% for the quarter and 10.4% for the year, and international service revenue grew by 13% for the fourth quarter and 18.9% for the year.

Global purchased vehicle sales for the fourth quarter decreased $7 million or 4% and increased $2.5 million or about 0.4% for the fiscal year. Global purchased vehicle gross profit increased by 53.3% in the fourth quarter and 33.7% for the fiscal year. In the U.S., purchased vehicle revenue was up $4.1 million or 4.2%. However, purchased vehicle gross profit decreased $1 million or about 14.2% in the quarter. And for the fiscal year, U.S. purchased vehicle revenue increased $64.9 million or 19.2% and purchased vehicle gross profit remained largely flat. Year-to-date, our U.S. purchased unit margins were 6.3%, a decrease of about 113 basis points compared to FY '24.

Internationally, purchased vehicle revenue decreased by $11.1 million or 14.2% and gross profit increased by $8.5 million or 127.5% in the fourth quarter. And for the full year, purchased vehicle revenue decreased $62.4 million or 18.5% and purchased vehicle gross profit increased $18.7 million or 60%. The reduction in international purchased vehicle revenue accompanied by an increase in gross margin continues to be driven by an increase in German units being consigned, which were previously subject to a purchase contract as well as stronger purchase unit margins in the U.K.

Global facility-related costs, which include facility operations, depreciation, amortization and stock-based compensation increased $14.4 million or 3.2% in the fourth quarter and $234.2 million or 13.7% for the full fiscal year. In the U.S., facility-related costs increased $13 million or 3.4% for the fourth quarter, and facility-related costs per unit increased 5.4% from the prior year period. This increase in per unit cost reflects our ongoing investments and expanded operational capacity to support our continued growth.

For the full fiscal year, U.S. related costs increased $205.5 million or 14.3% and facility-related costs per unit increased 9.7%. For the quarter, international facility-related costs were up $1.4 million, an increase of 1.9% or a decrease of 1.4% on a per unit basis. And for the full fiscal year, international facility costs increased $28.8 million, an increase of 10.7% or 2.4% on a per unit basis.

During the quarter, global gross profit was $509.7 million, an increase of $56.2 million or 12.4%, and our gross margin percentage was 45.3% in the quarter. For the fiscal year, global gross profit was $2.1 billion, an increase of $192.4 million or 10.1%, and our gross margin percentage was 45.2%. In the U.S., our gross profit was $440.3 million, an increase of 8.4% for the quarter and an increase of 7% for the full fiscal year. Gross margin was 47.5% for the quarter and for the full year. Our international gross profit was $69.5 million, an increase of 47.1% for the quarter and was $268 million for fiscal year '25, an increase of 36.7%, and gross margin was 34.9% in the quarter and 33.9% for the year.

Turning to general and administrative expenses. Spend in the quarter was $97.1 million, reflecting an increase of $3.1 million year-over-year. For the year, spend was $402.9 million, an increase of $67.7 million. Fourth quarter GAAP operating income increased by 14.8% to $412.6 million, and for the fiscal year, GAAP operating income increased by 8% to $1.7 billion. Finally, fourth quarter GAAP net income attributable to Copart, Inc. increased by 22.9% to $396.4 million or $0.41 per diluted common share. During the quarter, we benefited from an increase of $6.4 million from interest income as we have actively invested our cash into treasury securities. For the quarter, our tax rate was 17.4%, which reflects the impact of increased tax credits and a reduction in state tax expense. For the fiscal year, GAAP net income attributable to Copart, Inc. increased by 13.9% to $1.55 billion or $1.59 per diluted common share.

Turning to our capital structure. As of the end of July, we had $6 billion of liquidity, which is comprised of $4.8 billion in cash and held-to-maturity securities and our capacity under our revolving credit facility.

With that, Jeff and I would be happy to take some questions.

[Operator Instructions] Our first question today is coming from Bob Labick from CJS Securities.

Congratulations on another strong year. So I wanted to start talking about AI a little bit. Technology advancements in general and not just a bucket hold to AI, but that Copart and for the industry and your partners and participants in the industry, how is advanced technologies and AI changing the industry? Is it like earlier decisions on total losses, faster cycle times, et cetera? And how is that impacting your business model now? And then the follow-up is -- because I know you guys are always looking well ahead. How do those changes impact the industry in 5 to 10 years?

Yes. Great question, Bob. And of course, a potential multiple day conference to dive deeper into all the different arenas in which we are deploying advanced artificial intelligence and where we could as well. I think you described the general parameters very well that, in short, it is widely deployed inside Copart today, including for some of the decision support reasons you described, which is that we equip many of our sellers with tools to allow them to make instantaneous total loss decisions informed by literally millions of similar vehicles we've sold over the years. Those decision support tools are very much empowered by current generation large language model technologies.

Beyond that, certainly in the obvious arenas, such as customer support and also in agent support here at Copart, so even the folks who still are interacting day-to-day with members and buyers are equipped with better information with LLM behind the scenes and on and on. So I think we are still, like many companies, in the early stages but have many different arenas in which we have that technology deployed today. We also have it at the auction level as I think about the products and the vehicles that we're recommending to our buyers, we are -- search results, et cetera, all of these different domains are informed by AI as it stands now. And no doubt that as the tools themselves improve and as our deployments become still more sophisticated, that it will enhance the business as it is. It will make us radically more efficient in delivering the services we deliver today, and no doubt, it will unlock future opportunities as well. But I think it's fair to say it is both allowing us to do what we do more efficiently, compressing cycle times for our clients, compressing cycle times for us.

You heard Leah describe that phenomenon when it comes to inventory. One of the reasons that inventory contracts is that our title Express offering for which we are providing this service and procuring the original titles on behalf of our insurance clients and doing so for more and more clients with each passing quarter that is we're yielding better cycle times there in part because when we do the work, it's enabled by our tech stack, our LLM deployments in ways that are more efficient than the insurance carriers before they transfer that responsibility over to us. So great question, and no doubt that answer will evolve over the quarters and years to come.

Okay. Yes, super. And then just kind of sticking with thinking ahead in that regard in technology. Obviously, EVs have been in the fleet for a while, but they're still a very small percentage. I was wondering if you could maybe comment on the total loss frequency of EVs now and how that might progress or how you see that kind of progressing and impacting total loss frequency over the next 5, 10 years.

Sure. I think you're right to observe that it still remains early. I think the degree to which it is early varies by country as well. So in places like the United Kingdom, we had a greater EV penetration than we have, for example, in the U.S. or in Canada or in Brazil. The one element of your question is a little bit hard to parse is that EVs are not otherwise identical to internal combustion engine vehicles, where they tend to be very different in nature as well. So it's rarely the case that I'm talking about a car that's exactly the same as its brother or sister vehicle but simply with a combustion engine driving the drivetrain itself.

In broad strokes, the returns on EVs are very strong. They total, if anything, more easily. But I think that's in part because of all the technology that tends to come with it, right? So I don't know that it's the battery necessarily or the drivetrain but electric vehicles tend to have next-gen sensors on the perimeter of the vehicle, tend to have the adaptive headlights, rear cameras, lane departure sensors, et cetera, that make the car pretty easily total because of any kind of damage on the perimeter often requires advanced calibrations and reprogramming and so forth.

So so far, the indications be favorable in that regard when it comes to electric vehicle and total loss frequency, selling prices and so forth.

Your Next question today is coming from John Healy from Northcoast Research.

Jeff, I wanted to just ask priority-wise for the new fiscal year as you roll into that. I know you guys gave us a ton of color on the quarter and the like. But was just hoping you could maybe identify, I don't know, whether it's 1 or 2 kind of key things, either from an operations or a presence in the market standpoint. There might be some sort of operational milestones that we might look to or you and we are putting your time and effort kind of away from just the quarter-to-quarter trends.

Yes. Fair enough, John, and I appreciate your questions. Tough to pin down 1 or 2 for obvious reasons. But in broad strokes, we talked about auction liquidity today and how essential it is for everything else that we do. Auction liquidity enables us to serve our incumbent insurance clients better. It allows us to win in the marketplace with insurance carriers and allows us to win among sellers beyond insurance companies as well. So we continue to invest in auction liquidity broadly speaking, and that literally can mean recruiting and retaining members. It can mean reducing friction in the member experience itself, making it easier to discover products to bid on to purchase them, to physically retreat them or have them delivered, to you to finance them, to obtain warranties and so forth. It's all about reducing the friction of being a participant at a Copart auction. So that's a broad brush answer, but we know that if we deliver on that particular dimension, the rest of it falls into place, right, meaning the vehicles, we will continue to earn the right to sell them. If we continue to generate excellent selling prices and improved still growing selling prices on behalf of our clients, the rest of it takes care of itself.

And so I mentioned in passing the more client orientation among noninsurance sellers as well. We talked about that on prior calls. It's an interesting dynamic there in which we view it as very synergistic, earning the right to sell more rental cars, more finance repossessioned vehicles, corporate fleets and the like is not at all at odds with our core legacy insurance business. It's very much synergistic in the sense that the more cars we sell for insurance companies, the more they look like drivable cars that are from rental car companies and vice versa. So it is about enhancing that mutual liquidity and enhancing the depth of our auction platform, which in turn brings the buyers.

So those are broad stroke answers. As you might imagine, when you then slice the business up into its different component parts and we start talking about what it means to do business in the U.K. or in Germany or in Brazil, Canada U.S., we have different and more specific priorities, including Purple Wave and NPA, et cetera. But in the broadest strokes, those are the big priorities, frankly, for this fiscal year and for every fiscal year, right? It's fundamentally auction liquidity, service to our insurance clients and selling -- driving outstanding selling prices for our clients.

Great. That's helpful. And then just a follow-up for me. The cash is at record levels for you guys. I think Leah mentioned, what, $4.8 billion in cash. Obviously, I imagine you'll be making investments into your auction liquidity, as you mentioned. But any thoughts with rates probably coming down and that cash being at the levels that it is, if you could just kind of go over for us your appetite for capital returns, what and when or how you view M&A? Could you -- what sort of things we might see kind of in the next 24 months or so?

Sure. I think we wouldn't project precise time lines as to when we would do XYZ. What I'd tell you is that, over the long haul, say, over the course of the past 10 years or so, we have consistently returned cash to shareholders via buybacks. In some cases, we've done broader structured tenders. In other cases, we've executed open market purchases and such. And that will long term also be the mechanism likely by which we return cash to shareholders.

On your question about M&A, we are always scouring the world for opportunities that help to enhance our service proposition. I think I've mentioned before, but we have a two-pronged approach to any M&A activity. One is the investments on a stand-alone basis, it's self compelling, meaning it's John, Leah and -- Leah and I were sitting here in the room, would we be willing to write our own personal checks in support of a given investment if we were to hold it as a private company. And then the second question is does it enhance fundamentally what Copart is and what we do, right? And/or can we enhance what they do by virtue of Copart's capabilities.

You'll note that I didn't say in the rubric there that we have the capital for the available cash. That's neither here nor the there. I think we know that for the vast majority of companies we would ever entertain acquiring, we could easily finance it either with the balance sheet or by taking on debt to do so. So the cash doesn't per se inform an M&A strategy. Could some of it be used someday for an acquisition? Certainly, yes. You've heard about a couple over the course of the past 10 years in the company in its history has executed M&A initiatives in the U.K. here in North America as well that have been very productive and ultimately have enhanced our longer-term service offering.

So ultimately, the answer is share buybacks without a precise time frame. That's when we would do so. But the cash doesn't cause us to change our behavior either on M&A or on operating expenses, right? It just is we recognize it belongs to our shareholders and we'll treat it accordingly.

Next question is coming from Chris Bottiglieri from BNP Paribas.

Two for me. The first one was can you go over the low-decline in the segments number. I want to make sure I had that right. But like relatedly, do you have a sense where that number was ex cat to give us like a like-for-like for the strength of underlying business?

Chris, I didn't hear what you said what's the line?

The -- I think you said the assignments declined low double digits. I'm not sure I heard that right. There's a lot of numbers you gave.

Okay. Yes. So cat really didn't play into that given the fact that there were not assignments in the prior -- there weren't a material number of assignments in either period from cat.

Got you. Okay. All right. And then Second question was, there was a pretty spicy comment but you had mentioned that you grew your ASPs 5x faster than similar service provider. Can you just kind of elaborate there what you're seeing, how you guys measure that? And more importantly, your ARPU and GPUs are significantly higher than your closest peer. I would imagine on a like-for-like basis, you guys generate higher returns to your insurers. Just curious to what extent you study that, you have data on that and what your insurers tell you in that regard.

Yes. Leah you want to talk about that?

Yes. Maybe just to clarify, Chris, the assignment decline was low single digit, not low double digits. I just want to make sure you heard that correctly.

I did not.

Okay. And then do you want to speak?

On the returns at auction, yes, we do believe we generate superior auction returns here at Copart. There are, of course, other service providers like us, some of whom may disclose their results and their ASP changes year-over-year as well. So we understand our number. We haven't seen anything close to the, I think, 5.7% that we generated an increase in insurance returns this fourth quarter versus a year ago for the same fourth quarter. We haven't seen anything approaching that.

Your next question today is coming from Bret Jordan from Jefferies.

One long-term question, sort of keeping with that [ what does technician ]. Do you have any thoughts on what you're seeing around autonomous vehicles? Obviously, it's pretty much in its infancy, but as far as crash rates and what urban autonomous driving might do to some of those regional crash volumes. And a quick follow-up, too.

And you mean simply a true autonomous Waymo vehicles and the...

Yes, exactly. Like a Waymo, obviously, the few that we have out there, are they crashing at a lower rate than an Uber driver in the same market might be?

Right. At this point, I think our information is not better than yours. So we'll read what Waymo themselves will publish on the matter. And as you and others know, their activity still remains in fairly constrained geo-fenced areas under specific conditions.

It's very difficult to measure. And they -- as far as I understand it, are generally speaking, not insured by the same large national insurers that would ordinarily consign volume through Copart. So we wouldn't have first-hand visibility into the vehicle volume that is being totaled, so to speak. So I think at this point, a de minimis effect on auction activity cohort.

Okay. I just want to say long term, if that's a population that might not crash or may crash more. And I guess, short-term cyclical question. You've talked about consumer bias to maybe underinsure drop comprehensive. And obviously, insurance companies change around market share. Do you see any near term either insurance company behavior changes that might change who's winning or losing share and/or any bias for consumers to add insurance back more recently?

To the second half of your question, I would say when we look at the relative relationship historically versus earned car years in comparison to the car park, we see ebbs and flows, meaning in the United States, sometimes earned car years will grow at a rate that meaningfully outpaces the car park, suggesting that folks are signing up for insurance more than they did before. We've also seen periods like now when earned car years are declining relative to the car park, which suggests they're pulling back either on deductibles on collision coverage and comprehensive in favor of liability only or foregoing it altogether. So it, over our history, appears to be a cyclical phenomenon, not a secular one.

Your next question is coming from Jeff Lick from Stephens.

Congrats on the nice quarter. I was wondering if you could just elaborate, as we get into 1Q, last year was a fairly robust hurricane season, how that will kind of manifest itself if it's not that this year, both in terms of units and then also profitability, just kind of the gives and takes there. And I had a quick follow-up.

Yes. The storm season, of course, difficult to prognosticate, I'd say when we were looking at forecasts in March, April, May, June, and planning our business accordingly. I think we expected a very busy storm season. It seems that weather patterns are growing more acute or weather volatility more acute over time.

To date, that hasn't manifested itself, knock on wood, because we have not yet experienced any meaningful storm. The precise economic impact of any given storm very difficult to predict in advance. If you're talking about the last go around, I think in the majority of cases on a true PAUSE truly fully loaded basis over a long horizon, catastrophic events are surely not per se profitable for Copart. It's a service offering we provide for insurance industry. They know that we are the backstop. So we are the insurance provider, so to speak, for the insurance industry themselves, and we've been over backwards and acquire land that sits idle for years until the major storm arrives, and we have own trucks and employee drivers to make sure that we have the flexible capacity to address their needs at that time.

So precisely year-over-year quarters, we don't tend to provide forward guidance. There's no doubt that it accounted for meaningful activity a year ago, both in the form of cost. I think to some extent in the form of revenue, though that tends to lag the sale of the vehicles and the recognition of the revenue tends to lag. So some of that would happen in the first PAUSE quarter. Much of it also would have happened in subsequent quarters as well.

And then just a quick follow-up on the insurance situation. As you look at the combined ratios now, they're actually below kind of pre-COVID levels and you're seeing, obviously, Progressive continuing to take share. I'm just curious now that you have insurance companies that are kind of back to normal or better-than-average profitability. Do you foresee a -- would you think that there'd be a little more price competition and that might have the effect of normalizing the insurance situation as rates could conceivably come down?

That's certainly a better question posed to them of course. What we tell you over the long haul is that, that does ebb and flow. So I think your observation is fair that the combined ratio is now after a lot of pressure on them over the past few years has now ameliorated somewhat. I think by virtue of both rate increases, as you know, the insurance regulations are such that the carriers can't always pass through rates when they want to and that activity often happens on a lag basis.

So they've realized that benefit now. We are seeing anecdotally more aggressive behavior on the part of some insurance carriers. It's always the [indiscernible] they're managing growth and profitability. And that's a dynamic equation for sure. I think your observations about some specific carriers have definitely been true. I think we do expect to see competitive response in the industry in a dynamic industry as it always has been.

[Operator Instructions] Our next question is coming from Jash Patwa from JPMorgan Chase.

Jeff, maybe just taking a 30,000-foot view of the salvage auction industry in the U.S., could you give us a deeper sense of the current market structure, particularly in terms of Copart share with the larger insurance carriers and where you see incremental share growth opportunities over the next couple of years? It seems like Copart is already working with most of the top 10 carriers who collectively represent 75% of the market. And the #10 carrier has less than 3% share. So I'd just be interested to your perspective on where there's still opportunity with the larger accounts. Or if incremental share growth will be more about winning contracts with the long tail of smaller carriers. And I have a follow-up.

Yes. I appreciate the question. We view our opportunity and our threats much more expansively than that, right? So in terms of the clients we serve, yes, they are insurance carriers. And yes, there are banks and rental car companies and dealers and individuals, right? If we sell X cars, the actual number of auction-mediated vehicles that are sold in the United States per year is multiples of that. It's 5x or more of the volume that we sell per year.

And that, frankly, remains true even for the specific sellers that you described that there are always options they can consider and even an insurance carrier can sell their cars through other intermediaries, they can have more of them repaired, right? So in many respects, we compete with the repair shops, the higher the returns we generate, the more we can win the rights to resolve that claim versus the repair industry and the lower the returns we generate, the more we lose head-to-head, against the repair shops as well.

So there are a number of competitive threats that we face on any given day. I think we still have a lot of conviction that if we deliver excellent auction returns and deliver excellent service. I think you know what that means. That means expediting cycle times were treating cars very quickly from where they sit, especially when they accrue storage. It means interacting with policyholders very effectively, in particular on the title procurement, Title Express side of the house, so that we can resolve plans amicably with their customers who otherwise may churn if experiencing a tough claims resolution process.

So anyway, the long-winded answer to your question, but we view much more expansive than that. We have many fold opportunities to win, many fold opportunities to lose. That's our job to do.

That's helpful. And then just maybe a question on Copart wholesale. I noticed the recent announcement about combining the select auctions and the bank repo auctions. Could you walk us through the strategy behind this move and maybe share your perspective on what the next phase of evolution for the wholesale platform might look like.

Sure. I think you're describing a very specifical -- specific tactical experiment, which we undertake across our platform all the time in terms of the right way to separate segregate the volume in ways that are responsive to the right buyers at the right time. So it's not speaking necessarily of a broader strategy, except to say that, in general, we think shared liquidity is a good thing, right? The fact that Copart has X registered paying members who will buy cars, we want to expose them to the right product. And so always the question we ask is how do we expose the right buyers to the right product. And that can be text, e-mail. It can be search results. It can be notifications in app and it frankly can be also the architecture by which these auctions themselves are organized, whether it's select or rental or otherwise.

So those are all the levers that we're pulling on an ongoing basis. So you shouldn't be surprised that, that sticks. You shouldn't be surprised that, that changes over time as well. The point of it is, the objective is clear, generate the very best returns by matching the right buyers to the right cars. And as we head down that path, you expect to see lots of dials turned back and forth. I think we're in a good spot, but I think there's still room to create still more value for ourselves and for our sellers.

Got it. If I could just sneak one more in. Leah, I'm not sure if this came up before, but could you give us some more color about the PP&E sale in the quarter and whether we should incorporate any implications from a revenue or expense standpoint moving forward?

No, it was a small equipment sale related to some excess construction equipment that we held. So no, there was a slight gain in the quarter. You see that in other income and expense below EBITDA, below operating income. And so that is nonrecurring, but that wasn't really material to the overall quarter.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to Jeff Liaw for any further closing comments.

Thank you, everybody. We'll talk to you for the first quarter.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation.