01—Abstract
Summary
Summary of the 10-Q filed November 24, 2025. Cited figures are marked; the original filing is the authoritative source.
Copart's first-quarter fiscal 2026 results (three months ended October 31, 2025) show a business that continued to grow profitably while building a very large cash position.
Total service revenues and vehicle sales rose 0.7% to $1,155.0 milliona, with service revenues up 0.6% to $991.8 million. The U.S. service revenue declined 0.5% as it lapped one-time revenue from Hurricanes Helene and Milton in the prior year, while International service revenue grew 7.9% (about 5.1% excluding currency tailwinds of $3.7 million). Operating income rose 6.0% to $430.7 million, and the operating margin expanded from 36% to 38%, largely because facility operations expenses fell 4.0%, mainly from lapping hurricane-related costs in the U.S. Net income attributable to Copart increased 11.5% to $403.7 million, and diluted EPS rose to $0.41 from $0.37.
The effective tax rate fell to 17.4% from 20.0%, which supported earnings growth. The balance sheet and cash flow picture is the most striking feature of the quarter. Cash, cash equivalents, and restricted cash rose 88% to $5.23 billionb, driven by $535 million of operating cash flow and the maturity of $2.03 billion of held-to-maturity Treasury bills.
Working capital reached $5.42 billionc. Capital expenditures fell sharply to $108 million from $237 million a year earlier, and no shares were repurchased during the quarter. The company has no borrowings under its $1.25 billion revolving facility, and management says its cash, along with operating cash flow, is sufficient for the foreseeable future.
Management is also weighing additional buybacks, acquisitions, and dividends as uses for the cash, although Copart has never paid a cash dividend. The filing also flags a material open risk. The U.S. Department of Justice is investigating potential violations of money laundering laws related to auction platform members, and the company says it cannot predict the outcome or estimate a potential loss.
Investors should also note that income tax payable rose to $125.5 milliond from $41.1 million, which contributed $61.5 million to operating cash flow in the quarter, so part of the cash build is timing-related. The company also continues a multi-year rollout of a new financial system, and the Form 10-Q does not disclose any change to the internal control environment beyond that rollout.
02—Key points
Key Highlights
- Total service revenues and vehicle sales grew 0.7% to $1,155.0 million; service revenues rose 0.6% to $991.8 million, with U.S. down 0.5% (lapping hurricane one-time revenue) and International up 7.9%.
- Operating income increased 6.0% to $430.7 million, and operating margin widened to 38% from 36%, mainly because facility operations expenses fell 4.0% on the absence of prior-year hurricane costs.
- Net income attributable to Copart rose 11.5% to $403.7 million; diluted EPS was $0.41 versus $0.37, helped by a lower effective tax rate of 17.4% (vs. 20.0%).
- Cash, cash equivalents, and restricted cash reached $5.23 billion (up $2.45 billion, or 88%, since July 31, 2025), driven by $535 million of operating cash flow and $2.03 billion of matured held-to-maturity Treasury bills.
- Capital expenditures fell to $108 million from $237 million, and no shares were repurchased; 326 million shares remain available under the buyback authorization.
- The $1.25 billion revolving credit facility is undrawn, and the company was in compliance with all covenants; the consolidated total net leverage ratio was (2.55):1, reflecting net cash.
- The DOJ money laundering investigation remains ongoing, and management states it cannot predict the outcome or range of possible loss, making it the key contingent risk in the filing.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed November 24, 2025Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $1.16B$1.15B | +0.7% |
| Operating Expenses | $724.34M$740.46M | −2.2% |
| Operating Income | $430.69M$406.37M | +6.0% |
| Net Income | $403.71M$362.09M | +11.5% |
| EPS (Basic) | $0.42$0.38 | +10.5% |
| EPS (Diluted) | $0.41$0.37 | +10.8% |
| Shares Outstanding (Basic) | 967.65M963.18M | +0.5% |
| Shares Outstanding (Diluted) | 977.10M976.51M | +0.1% |
05—Questions
Frequently Asked Questions
Why did Copart's operating margin improve this quarter?
Operating margin rose to 38% from 36% mainly because facility operations expenses fell $20.1 million (4.0%), with the U.S. down $25.1 million. The decline reflects one-time hurricane Helene and Milton costs recognized in the prior-year quarter, partly offset by higher subhaul, insurance, and bank charges. Total revenue grew only 0.7%, so the margin gain came mostly from lower costs rather than from top-line growth.
How much of the cash increase is sustainable?
Part of the increase is not recurring. The $2.03 billion rise came largely from maturing Treasury bills, which converted investments into cash rather than generating new earnings. Operating cash flow of $535 million was also boosted by a $61.5 million increase in income taxes payable, which is a timing benefit that may reverse. Investors should treat the underlying free cash flow (roughly $427 million after capex) as the better measure of ongoing cash generation.
What is the main legal risk disclosed in the 10-Q?
The U.S. Department of Justice, Consumer Protection Branch, is investigating whether Copart violated money laundering laws in how it prevents and detects money laundering by its auction platform members. The company received a DOJ letter in October 2023, is cooperating, and says it cannot predict the duration, scope, outcome, or potential fines. Because no loss estimate is possible, the exposure is unquantified.
Is Copart's International business growing?
Yes, but more slowly than the headline suggests. International service revenues rose 7.9% to $136.3 million, and about $3.7 million of that growth came from favorable currency movements, so underlying growth is closer to 5%. International vehicle sales fell 9.4%, partly because some sellers shifted to a consignment model, which reduces the revenue recognized on each vehicle.
Will Copart pay dividends or resume buybacks?
Neither is confirmed. Copart has not paid a cash dividend since going public in 1994, and it did not repurchase any shares in the quarter. Management says it is considering additional buybacks, acquisitions, and dividends for its large cash balance, and the credit agreement does not meaningfully restrict dividends given the company's net cash position. Investors should watch future filings for any formal announcement.
06—Continue