10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                         to                        

Commission file number: 000-23255

COPART, INC.

(Exact name of registrant as specified in its charter)

Delaware		000-23255		94-2867490
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)
14185 Dallas Parkway	Suite 300	Dallas	Texas	75254
(Address of principal executive offices) (zip code)

(972) 391-5000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001	CPRT	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 23, 2023, 476,592,516 shares of the registrant’s common stock were outstanding.

Copart, Inc.

Index to the Quarterly Report on Form 10-Q

January 31, 2023

Table of Contents	Page Number
PART I - Financial Information
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Stockholders’ Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview	20
Acquisitions and New Operations	22
Results of Operations	23
Liquidity and Capital Resources	27
Critical Accounting Policies and Estimates	28
Recently Issued Accounting Standards	29
Contractual Obligations and Commitments	29
Off-Balance Sheet Arrangements	29
Item 3 - Quantitative and Qualitative Disclosures About Market Risk	29
Item 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures	30
Changes in Internal Controls	30
PART II - Other Information
Item 1 - Legal Proceedings	31
Item 1A - Risk Factors	31
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3 - Defaults Upon Senior Securities	44
Item 4 - Mine Safety Disclosures	44
Item 5 - Other Information	44
Item 6 - Exhibits	45
Signatures	46

2

Copart, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share amounts)	January 31, 2023		July 31, 2022
ASSETS
Current assets:
Cash, cash equivalents, and restricted cash	$	1,660,952	$	1,384,236
Accounts receivable, net	765,192		578,573
Vehicle pooling costs	133,598		112,242
Inventories	52,071		58,791
Income taxes receivable	436		49,882
Prepaid expenses and other assets	26,532		18,731
Total current assets	2,638,781		2,202,455
Property and equipment, net	2,656,273		2,485,764
Operating lease right-of-use assets	106,656		116,303
Intangibles, net	51,186		54,680
Goodwill	404,046		401,954
Other assets	75,466		47,708
Total assets	$	5,932,408	$	5,308,864
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	439,271	$	399,034
Deferred revenue	23,796		20,061
Income taxes payable	3,820		—
Current portion of operating and finance lease liabilities	20,736		21,794
Total current liabilities	487,623		440,889
Deferred income taxes	76,471		80,060
Income taxes payable	65,322		64,637
Operating and finance lease liabilities, net of current portion	87,394		95,683
Long-term debt and other liabilities	1,946		1,996
Total liabilities	718,756		683,265
Commitments and contingencies
Stockholders’ equity:
Preferred stock: $0.0001 par value - 5,000,000 shares authorized; none issued	—		—
Common stock: $0.0001 par value - 1,600,000,000 shares authorized; 476,564,148 and 476,081,948 shares issued and outstanding, respectively.	48		48
Additional paid-in capital	875,009		838,508
Accumulated other comprehensive loss	(156,507)		(169,365)
Retained earnings	4,495,102		3,956,408
Total stockholders’ equity	5,213,652		4,625,599
Total liabilities and stockholders’ equity	$	5,932,408	$	5,308,864

The accompanying notes are an integral part of these consolidated financial statements.

3

Copart, Inc.

Consolidated Statements of Income

(Unaudited)

	Three Months Ended January 31,				Six Months Ended January 31,
(In thousands, except per share amounts)	2023		2022		2023		2022
Service revenues and vehicle sales:
Service revenues	$	789,797	$	711,090	$	1,516,637	$	1,378,908
Vehicle sales	166,927		156,370		333,459		298,684
Total service revenues and vehicle sales	956,724		867,460		1,850,096		1,677,592
Operating expenses:
Yard operations	375,497		323,814		748,274		622,508
Cost of vehicle sales	154,727		140,304		305,839		266,712
General and administrative	60,975		56,014		118,955		110,923
Total operating expenses	591,199		520,132		1,173,068		1,000,143
Operating income	365,525		347,328		677,028		677,449
Other expense:
Interest income (expense), net	14,480		(4,433)		18,902		(9,540)
Other expense, net	(2,902)		(840)		(5,724)		(28)
Total other income (expense)	11,578		(5,273)		13,178		(9,568)
Income before income taxes	377,103		342,055		690,206		667,881
Income tax expense	83,426		54,643		150,681		120,106
Net income	$	293,677	$	287,412	$	539,525	$	547,775
Basic net income per common share	$	0.62	$	0.61	$	1.13	$	1.15
Weighted average common shares outstanding	476,376		474,372		476,237		474,334
Diluted net income per common share	$	0.61	$	0.60	$	1.12	$	1.14
Diluted weighted average common shares outstanding	482,536		482,374		482,238		482,488

The accompanying notes are an integral part of these consolidated financial statements.

4

Copart, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)	2023		2022		2023		2022
Comprehensive income, net of tax:
Net income	$	293,677	$	287,412	$	539,525	$	547,775
Other comprehensive income:
Foreign currency translation adjustments	42,429		(12,124)		12,858		(22,642)
Comprehensive income	$	336,106	$	275,288	$	552,383	$	525,133

The accompanying notes are an integral part of these consolidated financial statements.

5

Copart, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

	Common Stock					Accumulated Other Comprehensive Income (Loss)
				Additional Paid-in Capital
(In thousands, except share amounts)	Outstanding Shares	Amount						Retained Earnings		Stockholders’ Equity
Balances at July 31, 2022	476,081,948	$	48	$	838,508	$	(169,365)	$	3,956,408	$	4,625,599
Net income	—	—		—		—		245,848		245,848
Currency translation adjustment	—	—		—		(29,571)		—		(29,571)
Exercise of stock options, net of repurchased shares	75,554	—		1,061		—		(295)		766
Stock-based compensation	38,312	—		10,192		—		—		10,192
Balances at October 31, 2022	476,195,814	48		849,761		(198,936)		4,201,961		4,852,834
Net income	—	—		—		—		293,677		293,677
Currency translation adjustment	—	—		—		42,429		—		42,429
Exercise of stock options, net of repurchased shares	223,426	—		9,754		—		(536)		9,218
Stock-based compensation	30,351	—		10,131		—		—		10,131
Shares issued for Employee Stock Purchase Plan	114,557	—		5,363		—		—		5,363
Balances at January 31, 2023	476,564,148	48		875,009		(156,507)		4,495,102		5,213,652

The accompanying notes are an integral part of these consolidated financial statements.

	Common Stock					Accumulated Other Comprehensive Income (Loss)
				Additional Paid-in Capital
(In thousands, except share amounts)	Outstanding Shares	Amount						Retained Earnings		Stockholders’ Equity
Balances at July 31, 2021	474,028,546	$	48	$	761,810	$	(100,860)	$	2,868,203	$	3,529,201
Net income	—	—		—		—		260,363		260,363
Currency translation adjustment	—	—		—		(10,518)		—		(10,518)
Exercise of stock options, net of repurchased shares	291,972	—		5,572		—		(249)		5,323
Stock-based compensation	42,182	—		9,452		—		—		9,452
Balances at October 31, 2021	474,362,700	48		776,834		(111,378)		3,128,317		3,793,821
Net income	—	—		—		—		287,412		287,412
Currency translation adjustment	—	—		—		(12,124)		—		(12,124)
Exercise of stock options, net of repurchased shares	492,902	—		6,413		—		(350)		6,063
Stock-based compensation	5,534	—		9,662		—		—		9,662
Shares issued for Employee Stock Purchase Plan	87,848	—		5,022		—		—		5,022
Balances at January 31, 2022	474,948,984	48		797,931		(123,502)		3,415,379		4,089,856

The accompanying notes are an integral part of these consolidated financial statements.

6

Copart, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended January 31,
(In thousands)	2023		2022
Cash flows from operating activities:
Net income	$	539,525	$	547,775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost	78,094		65,627
Allowance for credit loss	2,133		1,695
Equity in losses of unconsolidated affiliates	4,030		685
Stock-based compensation	20,323		19,114
Gain on sale of property and equipment	(748)		(755)
Deferred income taxes	(3,309)		6,003
Changes in operating assets and liabilities:
Accounts receivable	(186,559)		(152,763)
Vehicle pooling costs	(21,268)		(29,623)
Inventories	8,001		(8,589)
Prepaid expenses, other current and non-current assets	(29,176)		(19,889)
Operating lease right-of-use assets and lease liabilities	414		657
Accounts payable and accrued liabilities	27,619		10,741
Deferred revenue	3,709		(309)
Income taxes receivable	49,430		4,577
Income taxes payable	7,615		1,655
Other liabilities	—		(53)
Net cash provided by operating activities	499,833		446,548
Cash flows from investing activities:
Purchases of property and equipment	(256,719)		(156,200)
Purchase of assets in connection with acquisitions	—		(469)
Proceeds from sale of property and equipment	16,343		1,252
Investment in unconsolidated affiliate	(1,993)		—
Purchase of held to maturity securities	—		(374,866)
Net cash used in investing activities	(242,369)		(530,283)
Cash flows from financing activities:
Proceeds from the exercise of stock options	10,815		11,985
Proceeds from the issuance of Employee Stock Purchase Plan shares	5,363		5,022
Payments for employee stock-based tax withholdings	(831)		(599)
Payments of finance lease obligations	(13)		(314)
Net cash provided by financing activities	15,334		16,094
Effect of foreign currency translation	3,918		(8,968)
Net increase (decrease) in cash, cash equivalents, and restricted cash	276,716		(76,609)
Cash, cash equivalents, and restricted cash at beginning of period	1,384,236		1,048,260
Cash, cash equivalents, and restricted cash at end of period	$	1,660,952	$	971,651
Supplemental disclosure of cash flow information:
Interest paid	$	706	$	9,311
Income taxes paid, net of refunds	$	98,324	$	128,972

The accompanying notes are an integral part of these consolidated financial statements.

7

Copart, Inc.

Notes to Consolidated Financial Statements

January 31, 2023

(Unaudited)

NOTE 1 – Summary of Significant Accounting Policies

Basis of Presentation and Description of Business

Copart, Inc. (“the Company”) provides vehicle sellers with a full range of services to process and sell vehicles over the internet through the Company’s Virtual Bidding Third Generation (“VB3”) internet auction-style sales technology. Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers, vehicle rental companies, and individuals. The Company sells principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and directly to the general public. The majority of vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total loss or not economically repairable by the insurance companies or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. The Company offers vehicle sellers a full range of services that expedite each stage of the vehicle sales process, minimize administrative and processing costs and maximize the ultimate sales price through the online auction process. In the United States (“U.S.”), Canada, Brazil, the Republic of Ireland, Finland, the United Arab Emirates (“U.A.E.”), Oman, and Bahrain, the Company sells vehicles primarily as an agent and derives revenue primarily from auction and auction related sales transaction fees charged for vehicle remarketing services as well as fees for services subsequent to the auction, such as delivery and storage. In the United Kingdom (“U.K.”), Germany, and Spain, the Company operates both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for its own account. In Germany and Spain, the Company also derives revenue from listing vehicles on behalf of insurance companies and insurance experts to determine the vehicle’s residual value and/or to facilitate a sale for the insured.

Principles of Consolidation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments of a normal recurring nature considered necessary for fair presentation of the Company’s financial position as of January 31, 2023 and July 31, 2022, its consolidated statements of income, comprehensive income and stockholders’ equity for the three and six months ended January 31, 2023 and 2022, and its cash flows for the six months ended January 31, 2023 and 2022. Interim results for the three and six months ended January 31, 2023 are not necessarily indicative of the results that may be expected for any future period, or for the entire year ending July 31, 2023. These consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2022. Certain prior year amounts have been reclassified to conform to current year presentation.

The consolidated financial statements of the Company include the accounts of the parent company and its wholly-owned subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.

On October 3, 2022, the Company’s Board of Directors approved a two-for-one common stock split effected in the form of a stock dividend subject to and contingent upon, among other things, obtaining stockholder approval of an amendment to the Company’s certificate of incorporation to increase the number of authorized shares of common stock. On October 31, 2022, the Company’s stockholders approved such increase at a special meeting of stockholders. As such, on November 3, 2022, the Company effected the two-for-one stock dividend to stockholders of record as of October 6, 2022. The stock dividend increased the number of shares of common stock outstanding. Certain prior year amounts have been retroactively adjusted to conform to current year presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, but are not limited to, vehicle pooling costs; income taxes; stock-based compensation; and contingencies. Actual results may differ from these estimates.

8

Revenue Recognition

The Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. Service revenue and vehicle sales revenue are recognized at the date the vehicles are sold at auction, excluding annual registration fees. Costs to prepare the vehicles for auction, including inbound transportation costs and titling fees, are deferred and recognized at the time of revenue recognition at auction.

The Company’s disaggregation between service revenues and vehicle sales at the segment level reflects how the nature, timing, amount and uncertainty of its revenues and cash flows are impacted by economic factors. The Company reports sales taxes on relevant transactions on a net basis in the Company’s consolidated results of operations, and therefore does not include sales taxes in revenues or costs.

Service revenues

The Company’s service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services. Within this revenue category, the Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. These auction and auction related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle; transportation fees for the cost of transporting the vehicle to or from the Company’s facility; title processing and preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees. These services are not distinct within the context of the contract. Accordingly, revenue for these services is recognized when the single performance obligation is satisfied at the completion of the auction process. The Company does not take ownership of these consigned vehicles, which are stored at the Company’s facilities located throughout the U.S. and at its international locations. These fees are recognized as net revenue (not gross vehicle selling price) at the time of auction in the amount of such fees charged.

The Company has a separate performance obligation related to providing access to its online auction platform as the Company charges members an annual registration fee for the right to participate in its online auctions and access the Company’s bidding platform. This fee is recognized ratably over the term of the arrangement, generally one year, as each day of access to the online auction platform represents the best depiction of the transfer of the service.

No provision for returns has been established, as all sales are final with no right of return or warranty, although the Company provides for credit loss expense in the case of non-performance by its buyers or sellers.

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Service revenues
	United States	$	705,733	$	630,707	$	1,357,390	$	1,221,465
	International	84,064		80,383		159,247		157,443
	Total service revenues	$	789,797	$	711,090	$	1,516,637	$	1,378,908

Vehicle sales

Certain vehicles are purchased and remarketed on the Company’s own behalf. The Company has a single performance obligation related to the sale of these vehicles, which is the completion of the online auction process. Vehicle sales revenue is recognized on the auction date. As the Company acts as a principal in vehicle sales transactions, the gross sales price at auction is recorded as revenue.

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Vehicle sales
	United States	$	82,196	$	96,679	$	179,387	$	184,382
	International	84,731		59,691		154,072		114,302
	Total vehicle sales	$	166,927	$	156,370	$	333,459	$	298,684

Contract assets

The Company capitalizes certain contract assets related to obtaining a contract, where the amortization period for the related asset is greater than one year. These assets are amortized over the expected life of the customer relationship. Contract assets are classified as current or long-term other assets, based on the timing of when the Company expects to recognize the related revenues and are amortized as an offset to the associated revenues on a straight-line basis. The Company assesses these costs for impairment at least quarterly and as “triggering” events occur that indicate it is more likely than not that an impairment exists. The contract asset costs where the amortization period for the related asset is one year or less are expensed as incurred and recorded within general and administrative expenses in the accompanying consolidated statements of income.

9

The change in the carrying amount of contract assets was as follows (In thousands):

Balance as of July 31, 2022	$	4,778
Capitalized contract assets during the period	25,540
Costs amortized during the period	(2,545)
Effect of foreign currency exchange rates	36
Balance as of January 31, 2023	$	27,809

Vehicle Pooling Costs

The Company defers costs that relate directly to the fulfillment of its contracts associated with vehicles consigned to and received by the Company, but not sold as of the end of the period. The Company quantifies the deferred costs using a calculation that includes the number of vehicles at its facilities at the beginning and end of the period, the number of vehicles sold during the period, and an allocation of certain yard operation costs of the period. The primary expenses allocated and deferred are inbound transportation costs, titling fees, certain facility costs, labor, and vehicle processing. If the allocation factors change, then yard operation expenses could increase or decrease correspondingly in the future. These costs are expensed into yard operations expenses as vehicles are sold in subsequent periods on an average cost basis.

Foreign Currency Translation

The Company records foreign currency translation adjustments from the process of translating the functional currency of the financial statements of its foreign subsidiaries into the U.S. dollar reporting currency. The British pound, Canadian dollar, Brazilian real, European Union euro, U.A.E. dirham, Omani rial, and Bahraini dinar are the functional currencies of the Company’s foreign subsidiaries as they are the primary currencies within the economic environment in which each subsidiary operates. The original equity investment in the respective subsidiaries is translated at historical rates. Assets and liabilities of the respective subsidiary’s operations are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars at average exchange rates in effect during each reporting period. Adjustments resulting from the translation of each subsidiary’s financial statements are reported in other comprehensive income.

The cumulative effects of foreign currency exchange rate fluctuations were as follows (In thousands):

Cumulative loss on foreign currency translation as of July 31, 2021	$	(100,860)
Loss on foreign currency translation	(68,505)
Cumulative loss on foreign currency translation as of July 31, 2022	$	(169,365)
Gain on foreign currency translation	12,858
Cumulative loss on foreign currency translation as of January 31, 2023	$	(156,507)

Fair Value of Financial Instruments

The Company records its financial assets and liabilities at fair value in accordance with the framework for measuring fair value in U.S. GAAP. In accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, the Company considers fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants under current market conditions. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

Level I    Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level II    Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly.

Level III    Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate.

The amounts recorded for financial instruments in the Company’s consolidated financial statements, which included cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximated their fair values as of January 31, 2023 and July 31, 2022, due to the short-term nature of those instruments and are classified within Level II of the fair value hierarchy. Cash equivalents are classified within Level II of the fair value hierarchy because they are valued using quoted market prices of the underlying investments.

Cash, Cash Equivalents, and Restricted Cash

10

The Company considers all highly liquid investments purchased with original maturities of three months or less at the time of purchase to be cash equivalents. Cash, cash equivalents, and restricted cash include cash held in checking, U.S. Treasury Bills, and money market accounts. The Company periodically invests its excess cash in money market funds and U.S. Treasury Bills. The Company’s cash, cash equivalents, and restricted cash are placed with high credit quality financial institutions. The carrying values of the Company’s cash equivalents that were not carried at fair value in the consolidated balance sheets were $1,477.5 million and $1,237.0 million as of January 31, 2023 and July 31, 2022, respectively, and fair values of the Company’s cash equivalents that were not carried at fair value in the consolidated balance sheets were $1,478.9 million and $1,237.3 million as of January 31, 2023 and July 31, 2022, respectively.

NOTE 2 — Acquisitions

Fiscal Year 2022 Transactions

On July 5, 2022, the Company acquired 100% of the voting stock of ILT Project Limited which conducts business primarily as Hills Motors (“Hills”), a leading parts recycler in the United Kingdom. Hills predominantly sells recycled parts to the public. The purchase price paid for Hills was $106.6 million.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed for Hills (in thousands).

Cash	$	8,960
Accounts receivable and prepaid expenses	5,348
Inventory	4,913
Property and equipment	22,259
Intangible assets	15,931
Goodwill	56,051
Liabilities assumed	(6,858)
Fair value of net assets and liabilities acquired	$	106,604

The Hills acquisition was undertaken for the strategic fit to the Company. This acquisition has been accounted for using the purchase method in accordance with ASC 805, Business Combinations, which resulted in the recognition of goodwill in the Company’s consolidated financial statements. Goodwill arose because the purchase price reflected a number of factors, including future earnings and cash flow potential; the comparable multiples of earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers; and the complementary strategic fit and resulting synergies brought to existing operations. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and is not amortized for financial reporting purposes. The acquisition of Hills is currently undergoing review by the U.K. Competition and Markets Authority. Given the timing of the acquisition the Company has not completed its determination of the fair value of assets acquired and liabilities assumed and the amount shown in the table above are preliminary amounts. The estimates and assumptions used in the preliminary purchase price allocation are subject to change if additional information, which existed as of the acquisition date, becomes known to the Company. However, the Company believes any changes to the preliminary purchase price allocation will not have a material impact to the Company’s consolidated financial position and results of operations.

The Hills acquisition did not result in a significant change in the Company’s consolidated results of operations; therefore, pro forma financial information has not been presented. The operating results have been included in the Company’s consolidated financial position and results of operations since the acquisition date.

11

NOTE 3 — Accounts Receivable, Net

Accounts receivable, net consisted of:

(In thousands)	January 31, 2023		July 31, 2022
Advance charges receivable	$	580,966	$	440,650
Trade accounts receivable	160,121		137,243
Other receivables	32,704		7,257
	773,791		585,150
Less: Allowance for credit loss	(8,599)		(6,577)
Accounts receivable, net	$	765,192	$	578,573

Advance charges receivable represents amounts paid to third parties on behalf of insurance companies for which the Company will be reimbursed when the vehicle is sold. As advance charges are recovered within one year, the Company has not adjusted the amount of consideration received from the customer for a significant financing component. Trade accounts receivable includes fees and gross auction proceeds to be collected from insurance companies and buyers.

NOTE 4 — Property and Equipment, Net

Property and equipment, net consisted of the following:

(In thousands)	January 31, 2023		July 31, 2022
Land	$	1,647,906	$	1,526,446
Buildings and improvements	1,288,499		1,209,331
Transportation and other equipment	459,597		429,405
Office furniture and equipment	86,091		84,728
Software	84,054		78,216
	3,566,147		3,328,126
Less: Accumulated depreciation and amortization	(909,874)		(842,362)
Property and equipment, net	$	2,656,273	$	2,485,764

Depreciation expense on property and equipment was $36.5 million and $31.4 million for the three months ended January 31, 2023 and 2022, respectively, and $73.7 million and $61.3 million for the six months ended January 31, 2023 and 2022, respectively.

NOTE 5 – Leases

The Company has both lessee and lessor arrangements. The Company determines whether a contract is or contains a lease at the inception of the contract or at any subsequent modification. A contract will be deemed to be or contain a lease if the contract conveys the right to control and direct the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the right to obtain substantially all of the economic benefits from the use of the property, plant, and equipment. Depending on the terms, leases are classified as either operating or finance leases if the Company is the lessee, or as operating, sales-type, or direct financing leases if the Company is the lessor. Certain of the Company’s lessee and lessor leases have renewal options to extend the leases for additional periods at the Company’s discretion.

Leases - Lessee

The Company leases certain facilities and certain equipment under non-cancelable finance and operating leases, which are recorded as right-of-use assets and lease liabilities. Certain leases provide the Company with either a right of first refusal to acquire or an option to purchase a facility at fair value. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the right-of-use asset and the lease liabilities. The effects of these escalation clauses or concessions have been reflected in lease expense on a straight-line basis over the expected lease term and any variable lease payments subsequent to establishing the lease liability are expensed as incurred. The lease term commences on the date when the Company has the right to control the use of the leased property, which is typically before lease payments are due under the terms of the lease. Certain of the Company’s leases have renewal periods up to 40 years, exercisable at the Company’s option, and generally require the Company to pay property taxes, insurance and maintenance costs, in addition to the lease payments. At lease inception, the Company includes all renewals or option periods that are reasonably certain to exercise when determining the expected lease term, as failure to renew the lease would impose an economic penalty.

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Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the expected lease term. To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates based on the information available at lease commencement date, as rates are not implicitly stated in the Company’s leases.

Components of lease expense were as follows:

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Operating lease expense		$	6,687	$	6,943	$	13,547	$	13,997
Finance lease expense:
	Amortization of right-of-use assets	5		155		12		309
	Interest on finance lease liabilities	—		2		—		4
Short-term lease expense		1,134		1,723		2,303		3,491
Variable lease expense		314		330		553		554
Total lease expense		$	8,140	$	9,153	$	16,415	$	18,355

Supplemental cash flow information related to leases as of January 31, 2023 were as follows:

		Six Months Ended January 31,
(In thousands)		2023		2022
Cash paid for amounts included in the measurement of lease liabilities
	Operating cash flows related to operating leases	$	13,178	$	13,344
	Operating cash flows related to finance leases	—		3
	Financing cash flows related to finance leases	13		314
Right-of-use assets obtained in exchange for new operating lease liabilities		8,597		14,156
Right-of-use assets obtained in exchange for new finance lease liabilities		—		—

Leases - Lessor

The Company’s lessor arrangements include certain facilities and various land locations, of which each qualifies as an operating lease. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the straight-line rental income. The effects of these escalation clauses or concessions have been reflected in lease payments receivable on a straight-line basis over the expected lease term and any variable lease income subsequent to establishing the receivable will be recognized as earned.

The cost of the leased space as of January 31, 2023 and July 31, 2022 was $51.2 million and $51.2 million, respectively. The accumulated depreciation associated with the leased assets as of January 31, 2023 and July 31, 2022 was $3.3 million and $2.8 million, respectively. Both the leased assets and accumulated depreciation are included in Property and equipment, net on the consolidated balance sheet. Rental income from these operating leases was $4.1 million and $3.7 million for the three months ended January 31, 2023 and 2022, respectively, and $8.3 million and $7.2 million for the six months ended January 31, 2023 and 2022, respectively, and is included within Service revenues on the consolidated statements of income.

NOTE 6 – Goodwill and Intangible Assets

The following table sets forth amortizable intangible assets by major asset class:

(In thousands)	January 31, 2023		July 31, 2022
Amortized intangibles:
Supply contracts and customer relationships	$	72,196	$	71,875
Trade names	18,915		18,896
Licenses and databases	673		633
Accumulated amortization	(40,598)		(36,724)
Intangibles, net	$	51,186	$	54,680

Aggregate amortization expense on amortizable intangible assets was $1.9 million and $1.8 million for the three months ended January 31, 2023 and 2022, respectively, and $3.8 million and $3.7 million for the six months ended January 31, 2023 and 2022, respectively.

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The change in the carrying amount of goodwill was as follows:

(In thousands)
Balance as of July 31, 2022	$	401,954
Effect of foreign currency exchange rates	2,092
Balance as of January 31, 2023	$	404,046

NOTE 7 – Long-Term Debt

Credit Agreement

On December 21, 2021, the Company entered into a Second Amended and Restated Credit Agreement by and among Copart, certain subsidiaries of Copart party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement amends and restates certain terms of the First Amended and Restated Credit Agreement, dated as of July 21, 2020, by and among Copart, the lenders party thereto, and Bank of America, N.A., as administrative agent (as successor in interest to Wells Fargo Bank, National Association) (the “Existing Credit Agreement”). The Second Amended and Restated Credit Agreement provides for, among other things, (a) an increase in the secured revolving credit commitments by $200.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Second Amended and Restated Credit Agreement (the “Revolving Loan Facility”) to $1,250.0 million, (b) an increase in the letter of credit sublimit from $60.0 million to $100.0 million, (c) addition of Copart UK Limited, CPRT GmbH and Copart Autos España, S.L.U., each a wholly-owned direct or indirect foreign subsidiary of Copart, as borrowers, (d) addition of the ability to borrow under the Second and Amended and Restated Credit Agreement in certain foreign currencies including Pounds Sterling, Euro and Canadian Dollars, (e) extension of the maturity date of the revolving credit facility under the Existing Credit Agreement from July 21, 2023 to December 21, 2026, (f) replacing the LIBOR interest rate applicable to U.S. Dollar denominated borrowings with a SOFR-based interest rate, and (g) changing the pricing levels with respect to the revolving loans as further described below.

The Second and Amended and Restated Credit Agreement provides for the Revolving Loan Facility of $1,250.0 million maturing on December 21, 2026 (including up to $550.0 million equivalent of borrowings in Pounds Sterling, Euro and Canadian Dollars) with a $150.0 million equivalent sub-facility available to CPRT GmbH, a $150.0 million equivalent sub-facility available to Copart Autos España, S.L.U. and a $250.0 million equivalent sub-facility available to Copart UK Limited. The proceeds may be used for general corporate purposes, including working capital and capital expenditures, potential share repurchases, acquisitions, or other investments relating to the Company’s expansion strategies in domestic and international markets.

Borrowings under the Second Amended and Restated Credit Agreement bear interest based on, at our option, either (1) the applicable fixed rate plus 1.00% to 1.75% or (2) the daily rate plus 0.0% to 0.75%, in each case, depending on Copart’s consolidated total net leverage ratio. Additionally, the unused revolving commitments under the Second Amended and Restated Credit Agreement are subject to the payment of a customary commitment fee at a range of 0.175% to 0.275%, depending on Copart’s consolidated total net leverage ratio. The applicable fixed rates described above with respect to borrowings denominated in (1) U.S. Dollars is SOFR plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (2) Pounds Sterling is SONIA plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (3) Euro is EURIBOR, and (4) Canadian Dollars is CDOR. The Company had no outstanding borrowings under the Revolving Loan Facility as of January 31, 2023 and July 31, 2022.

The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by certain of the Company’s domestic subsidiaries meeting materiality thresholds set forth in the Second Amended and Restated Credit Agreement. Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the assets of the subsidiary guarantors pursuant to a Security Documents Confirmation Agreement as part of the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends, or make distributions on and repurchase stock, in each case subject to certain exceptions. The Company is also required to maintain compliance, measured at the end of each fiscal quarter, with a consolidated total net leverage ratio and a consolidated interest coverage ratio. The Second Amended and Restated Credit Agreement contains no restrictions on the payment of dividends and other restricted payments, as defined, as long as (1) the consolidated total net leverage ratio, as defined, both before and after giving effect to any such dividend or restricted payment on a pro forma basis, is less than 3.25:1, in an unlimited amount, (2) if clause (1) is not available, so long as the consolidated total net leverage ratio both before and after giving effect to any such dividend on a pro forma basis is less than 3.50:1, in an aggregate amount not to exceed the available amount, as defined, and (3) if clauses (1) and (2) are not available, in an aggregate amount not to exceed $50.0 million; provided, that, minimum liquidity, as defined, shall be not less than $75.0 million

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both before and after giving effect to any such dividend or restricted payment. As of January 31, 2023, the consolidated total net leverage ratio was (1.05):1. Minimum liquidity available as of January 31, 2023 was $3.0 billion. Accordingly, the Company does not believe that the provisions of the Second Amended and Restated Credit Agreement represent a significant restriction to its ability to pay dividends or to the successful future operations of the business. The Company has not paid a cash dividend since becoming a public company in 1994. The Company was in compliance with all covenants related to the Second Amended and Restated Credit Agreement as of January 31, 2023.

Related to execution of the Second Amended and Restated Credit Agreement, the Company incurred $2.7 million in costs, which were capitalized as debt issuance fees. The debt discount is amortized to interest expense over the term of the respective debt instruments and is included in other assets on the balance sheet as no amounts are outstanding on the Revolving Loan Facility.

NOTE 8 – Net Income Per Share

The table below reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:

	Three Months Ended January 31,		Six Months Ended January 31,
(In thousands)	2023	2022	2023	2022
Weighted average common shares outstanding	476,376	474,372	476,237	474,334
Effect of dilutive securities	6,160	8,002	6,001	8,154
Weighted average common and dilutive potential common shares outstanding	482,536	482,374	482,238	482,488

There were no material adjustments to net income required in calculating diluted net income per share. Excluded from the dilutive earnings per share calculation were 3,091,704 and 300,500 options to purchase the Company’s common stock for the three months ended January 31, 2023 and 2022, respectively, and 6,247,298 and 411,000 options to purchase the Company’s common stock for the six months ended January 31, 2023 and 2022, respectively, because their inclusion would have been anti-dilutive.

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NOTE 9 – Stock-based Compensation

The Company recognizes compensation expense for stock option awards without a market condition on a straight-line basis over the requisite service period of the award. The following is a summary of activity for the Company’s stock options for the six months ended January 31, 2023:

(In thousands, except per share and term data)	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding as of July 31, 2022	11,394	$	29.31	5.50	$	398,331
Grants of options	294	65.49
Exercises	(299)	36.15
Forfeitures or expirations	(263)	54.34
Outstanding as of January 31, 2023	11,126	$	29.49	5.01	$	414,798
Exercisable as of January 31, 2023	8,910	$	24.46	4.33	$	377,288

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. The number of options that were in-the-money was 13,689,922 at January 31, 2023.

The Company grants option awards to certain executives that contain service and market conditions. The options will become exercisable over five years, subject to continued service by the executive, with 20% vesting on the first anniversary of the grant date and the balance vesting monthly over the subsequent four years. Separate and apart from the time-based vesting schedule, the options are also subject to a market condition requiring the trading price of Copart, Inc. common stock on the NASDAQ Global Select Market to be greater than or equal to 125% of the exercise price of the options, determined both (i) at the time of any exercise, and (ii) based on the closing price on each of the twenty consecutive trading days preceding the date of any exercise. The exercise price of the options is equivalent to the closing price of the Company’s common stock on the grant date. The fair value of the awards is determined at the grant date using either Lattice or Monte Carlo model, risk-free interest rates ranging from 0.71% to 3.57%, estimated volatility ranging from 25.2% to 29.3%, and no expected dividends. The total estimated compensation expense to be recognized by the Company over the five-year service period for these options is $48.4 million and will be recognized using the accelerated attribution method over each vesting tranche of the award. The Company recognized $6.5 million and $4.6 million in compensation expense related to these awards in the six months ended January 31, 2023 and 2022, respectively.

The following is a summary of activity for the Company’s stock option awards subject to market conditions for the six months ended January 31, 2023:

(In thousands, except per share and term data)	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding as of July 31, 2022	2,810	$	47.83	8.33	$	45,590
Grants of options	150	65.70
Exercises	—	—
Forfeitures or expirations	—	—
Outstanding as of January 31, 2023	2,960	$	48.73	7.92	$	52,920
Exercisable as of January 31, 2023	1,092	$	43.09	7.40	$	25,682

The table below sets forth the stock-based compensation recognized by the Company for stock options, restricted stock, and restricted unit awards:

	Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)	2023		2022		2023		2022
General and administrative	$	8,789	$	8,247	$	17,536	$	16,718
Yard operations	1,342		1,415		2,787		2,396
Total stock-based compensation	$	10,131	$	9,662	$	20,323	$	19,114

The Company’s restricted stock awards (“RSA”) and restricted stock unit awards (“RSU”) have generally been issued with vesting periods ranging from two years to five years and vest solely on service conditions. Accordingly, the Company recognizes compensation expense for RSA and RSU awards on a straight-line basis over the requisite service period of the award.

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The following is a summary of activity for the Company’s RSA and RSU for the six months ended January 31, 2023:

(In thousands, except per share data)	Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding as of July 31, 2022	354	$	60.28
Grants	263	64.01
Vested	(59)	57.67
Forfeitures or expirations	(8)	53.99
Outstanding as of January 31, 2023	550	$	62.44

NOTE 10 – Stock Repurchases

On September 22, 2011, the Company’s Board of Directors approved a 160 million share increase in the stock repurchase program, bringing the total current authorization to 392 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as the Company deems appropriate and may be discontinued at any time. The Company did not repurchase any shares of its common stock under the program during the six months ended January 31, 2023 or 2022. As of January 31, 2023, the total number of shares repurchased under the program was 229,098,396, and 162,901,604 shares were available for repurchase under the program.

NOTE 11 – Income Taxes

The Company’s effective income tax rates were 21.8% and 18.0% for the six months ended January 31, 2023 and 2022, respectively, which differs from the U.S. statutory rate of 21% primarily due to state income taxes, deduction for Foreign Derived Intangible Income, and excess tax benefits associated with equity-based compensation. The effective tax rate for the year ended July 31, 2022 was also impacted by the filing of amended returns in certain jurisdictions.

The Company applies the provisions of the accounting standard for uncertain tax positions to its income taxes. For benefits to be realized, a tax position must be more likely than not to be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company is currently under examination by certain taxing authorities in the U.S. for fiscal years between 2014 and 2018. At this time, the Company does not believe that the outcome of any examination will have a material impact on the Company’s consolidated results of operations and financial position.

NOTE 12 – Recent Accounting Pronouncements

Pending

On October 28, 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 creates an exception to the general recognition and measurement principle for contract assets and liabilities from contracts with customers acquired in a business combination. Under this exception, an acquirer applies ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities on the acquisition date instead of using fair value of the contract assets and contract liabilities as is required under ASC 805 Business combinations. The Company’s adoption of ASU 2021-08 is not expected to have a material impact on the Company’s consolidated results of operations and financial position.

Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company’s adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated results of operations and financial position.

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NOTE 13 – Legal Proceedings

The Company is subject to threats of litigation and is involved in actual litigation and damage claims arising in the ordinary course of business, such as actions related to injuries, property damage, contract disputes, and handling or disposal of vehicles. There are no material pending legal proceedings to which the Company is a party, or with respect to which any of the Company’s property is subject.

The Company provides for costs relating to matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of any such matters on the Company’s future consolidated results of operations and cash flows cannot be predicted because any such effect depends on future results of operations and the amount and timing of the resolution of any such matters. The Company believes that any ultimate liability regarding existing litigation and claims would not have a material effect on its consolidated results of operations, financial position, or cash flows. However, the amount of the liabilities associated with claims, if any, cannot be determined with certainty. The Company maintains insurance which may or may not provide coverage for claims made against the Company. There is no assurance that there will be insurance coverage available when and if needed. Additionally, the insurance that the Company carries requires that the Company pay for costs and/or claims exposure up to the amount of the insurance deductibles.

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NOTE 14 – Segments and Other Geographic Reporting

The Company’s U.S. and International regions are considered two separate operating segments and are disclosed as two reportable segments. The segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results, including total revenues and operating income.

The following table presents financial information by segment:

	Three Months Ended January 31, 2023						Three Months Ended January 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Service revenues	$	705,733	$	84,064	$	789,797	$	630,707	$	80,383	$	711,090
Vehicle sales	82,196		84,731		166,927		96,679		59,691		156,370
Total service revenues and vehicle sales	787,929		168,795		956,724		727,386		140,074		867,460
Yard operations	323,397		52,100		375,497		278,093		45,721		323,814
Cost of vehicle sales	79,040		75,687		154,727		90,263		50,041		140,304
General and administrative	49,328		11,647		60,975		46,384		9,630		56,014
Operating income	$	336,164	$	29,361	$	365,525	$	312,646	$	34,682	$	347,328
Depreciation and amortization	$	34,121	$	4,293	$	38,414	$	29,316	$	3,987	$	33,303
Capital expenditures and acquisitions	89,428		14,636		104,064		86,788		5,185		91,973

	Six Months Ended January 31, 2023						Six Months Ended January 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Service revenues	$	1,357,390	$	159,247	$	1,516,637	$	1,221,465	$	157,443	$	1,378,908
Vehicle sales	179,387		154,072		333,459		184,382		114,302		298,684
Total service revenues and vehicle sales	1,536,777		313,319		1,850,096		1,405,847		271,745		1,677,592
Yard operations	649,641		98,633		748,274		534,714		87,794		622,508
Cost of vehicle sales	171,480		134,359		305,839		170,605		96,107		266,712
General and administrative	96,865		22,090		118,955		92,932		17,991		110,923
Operating income	$	618,791	$	58,237	$	677,028	$	607,595	$	69,854	$	677,449
Depreciation and amortization	$	69,057	$	8,415	$	77,472	$	57,046	$	8,028	$	65,074
Capital expenditures and acquisitions	225,711		31,008		256,719		141,060		15,609		156,669

	January 31, 2023						July 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Total assets	$	5,136,744	$	795,664	$	5,932,408	$	4,615,788	$	693,076	$	5,308,864
Goodwill	270,269		133,777		404,046		270,269		131,685		401,954

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. The forward-looking statements contained in this Form 10-Q involve known and unknown risks, uncertainties and situations that may cause our or our industry’s actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. These forward-looking statements are made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These factors include those listed in Part II, Item 1A. under the caption entitled “Risk Factors” in this Form 10-Q and those discussed elsewhere in this Form 10-Q. We encourage investors to review these factors carefully together with the other matters referred to herein, as well as in the other documents we file with the Securities and Exchange Commission (the “SEC”). We may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the SEC. We do not undertake to update any forward-looking statement that may be made from time to time by or on behalf of us.

Although we believe that, based on information currently available to us and our management, the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements.

Overview

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

Our goals are to generate sustainable profits for our stockholders, while also providing environmental and social benefits for the world around us. With respect to our environmental stewardship, we believe our business is a critical enabler for the global re-use and recycling of vehicles, parts, and raw materials. We are not responsible for the carbon emissions resulting from new vehicle manufacturing, governmental fuel emissions standards or vehicle use by consumers. Each vehicle that enters our business operations already exists, with whatever fuel technology and efficiency it was designed and built to have, and the substantial carbon emissions associated with the vehicle’s manufacture have already occurred. However, upon our receipt of an existing vehicle, we help decrease its total environmental impact by extending its useful life and thereby avoiding the carbon emissions associated with the alternative of new vehicle and auto parts manufacturing. For example, many of the cars we process and remarket are subsequently restored to drivable condition, reducing the new vehicle manufacturing burden the world would otherwise face. Many of our cars are purchased by dismantlers, who recycle and refurbish parts for vehicle repairs, again reducing new and aftermarket parts manufacturing. And finally, some of our vehicles are returned to their raw material inputs through scrapping, reducing the need for further new resource extraction. In each of these cases, our business reduces the carbon and other environmental footprint of the global transportation industry.

Beyond our environmental stewardship, we also support the world’s communities in two important ways. First, we believe that we contribute to economic development and well-being by enabling more affordable access to mobility around the world. For example, many of the automobiles sold through our auction platform are purchased for use in developing countries where affordable transportation is a critical enabler of education, health care, and well-being more generally. Secondly, because of the special role we play in responding to catastrophic weather events, we believe we contribute to disaster recovery and resilience in the communities we serve. For example, we mobilized our people, and engaged with a multitude of service providers to timely retrieve, store, and remarket tens of thousands of flood-damaged vehicles in South Florida in the wake of Hurricane Ian in the fall of 2022.

We provide vehicle sellers with a full range of services to process and sell vehicles primarily over the internet through our Virtual Bidding Third Generation internet auction-style sales technology, which we refer to as VB3. Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers, vehicle rental companies, and individuals. We sell the vehicles principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and to the general public. The majority of the vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total loss; not economically repairable by the insurance companies; or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. We offer vehicle sellers a full range of services that help expedite each stage of the vehicle sales process, minimize administrative and processing costs, and maximize the ultimate sales price through the online auction process.

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In the U.S., Canada, Brazil, the Republic of Ireland, Finland, the U.A.E., Oman, and Bahrain, we sell vehicles primarily as an agent and derive revenue primarily from auction and auction related sales transaction fees charged for vehicle remarketing services as well as fees for services subsequent to the auction, such as delivery and storage. In the U.K., Germany, and Spain we operate both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for our own account. In Germany and Spain, we also derive revenue from listing vehicles on behalf of insurance companies and insurance experts to determine the vehicle’s residual value and/or to facilitate a sale for the insured.

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

Service and Vehicle Sales Revenue: Our service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services. These auction and auction related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle; transportation fees for the cost of transporting the vehicle to or from our facility; title processing and preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees. These fees are recognized as net revenue (not gross vehicle selling price) at the time of auction in the amount of such fees charged. Purchased vehicle revenue includes the gross sales price of the vehicles which we have purchased or are otherwise considered to own. We have certain contracts with insurance companies, primarily in the U.K., in which we act as a principal, purchasing vehicles and reselling them for our own account. We also purchase vehicles in the open market, primarily from individuals, and resell them for our own account.

Our revenue is impacted by several factors, including total loss frequency and the average vehicle auction selling price, as a significant amount of our service revenue is associated in some manner with the ultimate selling price of the vehicle. Vehicle auction selling prices are driven primarily by: (i) market demand for rebuildable, driveable vehicles; (ii) used car pricing, which we also believe has an impact on total loss frequency; (iii) end market demand for recycled and refurbished parts as reflected in demand from dismantlers; (iv) the mix of cars sold; (v) changes in the U.S. dollar exchange rate to foreign currencies, which we believe has an impact on auction participation by international buyers; (vi) restrictions within the global supply chain; and (vii) changes in commodity prices, particularly the per ton price for crushed car bodies, as we believe this has an impact on the ultimate selling price of vehicles sold for scrap and vehicles sold for dismantling. We cannot specifically quantify the financial impact that commodity pricing, used car pricing, and product sales mix has on the selling price of vehicles, our service revenues, or financial results. Total loss frequency is the percentage of cars involved in accidents that insurance companies salvage rather than repair and is driven by the relationship between repair costs, used car values, and auction returns. Over the past 30 years we believe there has been an increase in overall growth in the salvage market driven by an increase in total loss frequency. This increase in total loss frequency may have been driven by changes in used car values and repair costs over the same long-term horizon, which we believe are generally trending upward. Recently we have noted fluctuations in total loss frequency. Nonetheless, we believe the long-term trend of increases in total loss frequency will continue. In the near term changes in used car prices and repair cost, may tend to reduce total loss frequency and thereby affect our growth rate. Used car values are determined by many factors, including used car supply, which is tied directly to new car sales, and the average age of cars on the road. The average age of cars on the road has continued to increase, growing from 9.6 years in 2002 to 12.2 years in 2022. Repair costs are generally based on damage severity, vehicle complexity, repair parts availability, repair parts costs, labor costs, and repair shop lead times. The factors that can influence repair costs, used car pricing, and auction returns are many and varied and we cannot predict their movements with precision.

Operating Costs and Expenses: Yard operations expenses consist primarily of operating personnel (which includes yard management, clerical, and yard employees); rent; vehicle transportation; insurance; property related taxes; fuel; equipment maintenance and repair; marketing costs directly related to the auction process; and costs of vehicles sold under the purchase contracts. General and administrative expenses consist primarily of executive management; accounting; data processing; sales personnel; professional services; marketing expenses; and system maintenance and enhancements.

Other Income and Expense: Other income consists primarily of interest income on T-bills, foreign exchange rate gains and losses; gains and losses from the disposal of assets, which will fluctuate based on the nature of these activities each period; fees and interest expense on the credit facility, and earnings from unconsolidated affiliates.

Liquidity and Cash Flows: Our primary source of working capital is cash operating results. The primary source of our liquidity is our cash and cash equivalents and Revolving Loan Facility. The primary factors affecting cash operating results are: (i) seasonality; (ii) market wins and losses; (iii) supplier mix; (iv) accident frequency; (v) total loss frequency; (vi) volume from our existing suppliers; (vii) commodity pricing; (viii) used car pricing; (ix) foreign currency exchange rates; (x) product mix; (xi) contract mix to the extent applicable; (xii) our capital expenditures; and (xiii) other macroeconomic factors. These factors are further discussed in the Results of Operations and Risk Factors sections of this Quarterly Report on Form 10-Q.

Potential internal sources of additional working capital and liquidity are the sale of assets or the issuance of shares through option exercises and shares issued under our Employee Stock Purchase Plan. A potential external source of additional working capital and liquidity is the issuance of additional debt or equity. However, we cannot predict if these sources will be available in the future or on commercially acceptable terms.

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Acquisitions and New Operations

As part of our overall expansion strategy of offering integrated services to vehicle sellers, we anticipate acquiring and developing facilities in new regions, as well as the regions currently served by our facilities. We believe that these acquisitions and openings will strengthen our coverage, as we have facilities located in the U.S., Canada, the U.K., Brazil, the Republic of Ireland, Germany, Finland, the U.A.E., Oman, Bahrain, and Spain with the intention of providing global coverage for our sellers.

The following tables set forth operational facilities that we have opened and are now operational from August 1, 2021 through January 31, 2023:

United States Locations	Geographic Service Area	Date
Mobile South	Alabama	August 2021
Madison	Wisconsin	October 2021
Augusta	Georgia	April 2022
Milwaukee South	Wisconsin	May 2022
Punta Gorda	Florida	June 2022
Anchorage	Alaska	August 2022
Rapid City	South Dakota	August 2022
Kansas City	Missouri	September 2022
Grenada	Mississippi	January 2023

International Locations	Geographic Service Area	Date
Barcelona, Spain	Spain	September 2021
Halifax, Novia Scotia	Canada	April 2022
Büdingen, Hesse	Germany	January 2023

The following table sets forth the operational facilities obtained through business acquisitions from August 1, 2021 through January 31, 2023:

Locations	Geographic Service Area	Date
Skelmersdale, England	United Kingdom	July 2022
Dumfries, England	United Kingdom	July 2022

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

In addition to growth through business acquisitions, we seek to increase revenues and profitability by, among other things, (i) acquiring and developing additional vehicle storage facilities in key markets, including foreign markets; (ii) pursuing global, national, and regional vehicle seller agreements; (iii) increasing our service offerings; and (iv) expanding the application of VB3 into new markets. In addition, we implement our pricing structure and auction procedures, and attempt to introduce cost efficiencies at each of our acquired facilities by implementing our operational procedures, integrating our management information systems, and redeploying personnel, when necessary.

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Results of Operations

The following table shows certain data from our consolidated statements of income expressed as a percentage of total service revenues and vehicle sales for the three and six months ended January 31, 2023 and 2022:

	Three Months Ended January 31,				Six Months Ended January 31,
(In percentages)	2023		2022		2023		2022
Service revenues and vehicle sales:
Service revenues	83	%	82	%	82	%	82	%
Vehicle sales	17	%	18	%	18	%	18	%
Total service revenues and vehicle sales	100	%	100	%	100	%	100	%
Operating expenses:
Yard operations	39	%	37	%	40	%	37	%
Cost of vehicle sales	16	%	16	%	17	%	16	%
General and administrative	6	%	6	%	6	%	7	%
Total operating expenses	61	%	59	%	63	%	60	%
Operating income	39	%	41	%	37	%	40	%
Other income (expense)	1	%	(1)	%	1	%	(1)	%
Income before income taxes	40	%	40	%	38	%	39	%
Income taxes	9	%	6	%	8	%	7	%
Net income	31	%	34	%	30	%	32	%

Comparison of the Three and Six Months Ended January 31, 2023 and 2022

The following table presents a comparison of service revenues for the three and six months ended January 31, 2023 and 2022:

		Three Months Ended January 31,								Six Months Ended January 31,
(In thousands)		2023		2022		Change		% Change		2023		2022		Change		% Change
Service revenues
	United States	$	705,733	$	630,707	$	75,026	11.9	%	$	1,357,390	$	1,221,465	$	135,925	11.1	%
	International	84,064		80,383		3,681		4.6	%	159,247		157,443		1,804		1.1	%
	Total service revenues	$	789,797	$	711,090	$	78,707	11.1	%	$	1,516,637	$	1,378,908	$	137,729	10.0	%

Service Revenues. The increase in service revenue during the three months ended January 31, 2023 of $78.7 million, or 11.1%, as compared to the same period last year resulted from (i) an increase in the U.S. of $75.0 million and (ii) an increase in International of $3.7 million. The growth in the U.S. was driven primarily by (i) an increase in revenue per car due to higher auction selling prices, driven by the relative scarcity of vehicles due to global supply chain disruptions and a change in the mix of vehicles sold and (ii) an increase in volume. Excluding the unfavorable impact of $7.0 million due to changes in foreign currency exchange rates, primarily from the change in the European Union euro, Canadian dollar and British Pound to U.S. dollar exchange rates, net against a favorable impact of the Brazilian Real to the U.S. dollar exchange rate, the growth in International was driven primarily by an increase in volume resulting from higher miles driven and an increase in revenue per car due to a change in mix of vehicles sold.

The increase in service revenues during the six months ended January 31, 2023 of $137.7 million, or 10.0%, as compared to the same period last year resulted from (i) an increase in the U.S. of $135.9 million and (ii) an increase in International of $1.8 million. The growth in the U.S. was driven primarily by (i) an increase in revenue per car due to higher auction selling prices, which we believe is due to a change in mix of vehicles sold and restrictions within the global supply chain for automobiles and (ii) an increase in volume. Excluding the unfavorable impact of $17.9 million due to changes in foreign currency exchange rates, primarily from the change in the European Union euro, Canadian dollar and British Pound to U.S. dollar exchange rates, net against a favorable impact of the Brazilian Real to the U.S. dollar exchange rate, the growth in International was driven primarily by an increase in revenue per car due to a change in mix of vehicles sold and an increase in volume.

The following table presents a comparison of vehicle sales for the three and six months ended January 31, 2023 and 2022:

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		Three Months Ended January 31,								Six Months Ended January 31,
(In thousands)		2023		2022		Change		% Change		2023		2022		Change		% Change
Vehicle sales
	United States	$	82,196	$	96,679	$	(14,483)	(15.0)	%	$	179,387	$	184,382	$	(4,995)	(2.7)	%
	International	84,731		59,691		25,040		41.9	%	154,072		114,302		39,770		34.8	%
	Total vehicle sales	$	166,927	$	156,370	$	10,557	6.8	%	$	333,459	$	298,684	$	34,775	11.6	%

Vehicle Sales. The increase in vehicle sales for the three months ended January 31, 2023 of $10.6 million, or 6.8%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $14.5 million and an (ii) an increase in International of $25.0 million. The decrease in the U.S. was primarily (i) driven by a decrease in volume as a result of a proactive approach to mitigate principle unit exposure and (ii) offset by higher average auction selling prices, which we believe was due to a change in the mix of vehicles sold. Excluding an unfavorable impact of $7.9 million due to changes in foreign currency exchange rates, primarily from the unfavorable change in the European Union euro, Canadian dollar and British Pound to U.S. dollar exchange rates, the increase in International was primarily the result of higher average auction selling prices, which we believe was due to a change in mix of vehicles sold and an increase in volume.

The increase in vehicle sales for the six months ended January 31, 2023 of $34.8 million, or 11.6%, as compared to the same period last year, resulted from (i) a decrease in the U.S. of $5.0 million and (ii) an increase in International of $39.8 million. The a decrease in the U.S. was primarily (i) the result of a decrease in volume as a result of a proactive approach to mitigate principle unit exposure, offset by higher average auction selling prices, which we believe was due to a change in the mix of vehicles sold. Excluding an unfavorable impact of $20.7 million due to changes in foreign currency exchange rates, primarily from the unfavorable change in the European Union euro, Canadian dollar and British Pound to U.S. dollar exchange rates, the increase in International was primarily the result of (i) an increase in volume and (ii) higher average auction selling prices, which we believe was due to a change in mix of vehicles sold combined with increased prices resulting from the restrictions within the global supply chain for automobiles.

The following table presents a comparison of yard operations expenses for the three and six months ended January 31, 2023 and 2022:

		Three Months Ended January 31,								Six Months Ended January 31,
(In thousands)		2023		2022		Change		% Change		2023		2022		Change		% Change
Yard operations expenses
	United States	$	323,397	$	278,093	$	45,304	16.3	%	$	649,641	$	534,714	$	114,927	21.5	%
	International	52,100		45,721		6,379		14.0	%	98,633		87,794		10,839		12.3	%
	Total yard operations expenses	$	375,497	$	323,814	$	51,683	16.0	%	$	748,274	$	622,508	$	125,766	20.2	%
Yard operations expenses, excluding depreciation and amortization
	United States	$	293,472	$	253,596	$	39,876	15.7	%	$	589,322	$	487,612	$	101,710	20.9	%
	International	47,955		41,928		6,027		14.4	%	90,522		80,158		10,364		12.9	%
Yard depreciation and amortization
	United States	$	29,925	$	24,497	$	5,428	22.2	%	$	60,319	$	47,102	$	13,217	28.1	%
	International	4,145		3,793		352		9.3	%	8,111		7,636		475		6.2	%

Yard Operations Expenses. The increase in yard operations expense for the three months ended January 31, 2023 of $51.7 million, or 16.0%, as compared to the same period last year resulted from (i) increase in the U.S. of $45.3 million and (ii) increase in International of $6.4 million. The increase in the U.S. compared to the same period last year relates to an increase in volume combined with an increase in the cost to process each car. The increase in cost to process each car was driven by increased subhaul costs primarily in relation to the fluctuation of fuel costs, and labor costs. The increase in International relates primarily to an increase in volume and an increase in subhaul and labor costs. Excluding a favorable impact of $4.0 million due to changes in foreign currency exchange rates, primarily from the favorable change in the European Union euro, and British Pound to U.S. dollar exchange rate. Included in yard operations expenses were depreciation and amortization expenses. The increase in yard operations depreciation and amortization expenses during the three months ended January 31, 2023 as compared to the same period last year resulted primarily from depreciating new and expanded facilities placed into service in the U.S.

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The increase in yard operations expense for the six months ended January 31, 2023 of $125.8 million, or 20.2%, as compared to the same period last year resulted from (i) an increase in the U.S. of $114.9 million, and (ii) an increase in International of $10.8 million. The increase in the U.S. compared to the same period last year relates to an increase in volume combined with an increase in the cost to process each car. The increase in cost to process each car was driven by increased subhaul costs primarily related to the fluctuation of fuel costs, and labor costs, combined with an increase in premiums for catastrophic related subhaul, labor costs incurred from overtime, and increased travel, lodging, and equipment lease cost associated with Hurricane Ian. The increase in International relates primarily to an increase in volume and an increase in subhaul and labor costs. Excluding a favorable impact of $10.4 million due to changes in foreign currency exchange rates, primarily from the favorable change in the European Union euro and British Pound to U.S. dollar exchange rate. Included in yard operations expenses were depreciation and amortization expenses. The increase in yard operations depreciation and amortization expenses during the six months ended January 31, 2023 as compared to the same period last year resulted primarily from depreciating new and expanded facilities placed into service in the U.S.

The following table presents a comparison of cost of vehicle sales for the three and six months ended January 31, 2023 and 2022:

		Three Months Ended January 31,								Six Months Ended January 31,
(In thousands)		2023		2022		Change		% Change		2023		2022		Change		% Change
Cost of vehicle sales
	United States	$	79,040	$	90,263	$	(11,223)	(12.4)	%	$	171,480	$	170,605	$	875	0.5	%
	International	75,687		50,041		25,646		51.2	%	134,359		96,107		38,252		39.8	%
	Total cost of vehicle sales	$	154,727	$	140,304	$	14,423	10.3	%	$	305,839	$	266,712	$	39,127	14.7	%

Cost of Vehicle Sales. The increase in cost of vehicle sales for the three months ended January 31, 2023 of $14.4 million, or 10.3%, as compared to the same period last year resulted from (i) a decrease in the U.S. of $11.2 million and (ii) an increase in International of $25.6 million. The decrease in the U.S. was primarily the result of a decrease in volume as a result of a proactive approach to mitigate principle unit exposure, offset by higher average purchase prices, which we believe was due to a change in the mix of vehicles sold, and increased demand. Excluding the favorable impact of $6.8 million due to changes in foreign currency exchange rates, primarily from the favorable change in the European Union euro, and British Pound to U.S. dollar exchange rates, the increase in International of $25.6 million was primarily driven by higher average purchase prices due to the change in mix of vehicles sold, increased demand, and an increase in volume.

The increase in cost of vehicle sales for the six months ended January 31, 2023 of $39.1 million, or 14.7%, as compared to the same period last year resulted from (i) an increase in the U.S. of $0.9 million and (ii) an increase in International of $38.3 million. The increase in the U.S. was primarily the result of higher average purchase prices, which we believe was due to increased demand and a change in the mix of vehicles sold, offset by decrease in volume as result of purchase price pressure. Excluding the favorable impact of $17.6 million due to changes in foreign currency exchange rates, primarily from the favorable change in the European Union euro, and British Pound to U.S. dollar exchange rates, the increase in International of $38.3 million was primarily due to higher volume, and higher average purchase prices due to the change in mix of vehicles sold.

The following table presents a comparison of general and administrative expenses for the three and six months ended January 31, 2023 and 2022:

		Three Months Ended January 31,								Six Months Ended January 31,
(In thousands)		2023		2022		Change		% Change		2023		2022		Change		% Change
General and administrative expenses
	United States	$	49,328	$	46,384	$	2,944	6.3	%	$	96,865	$	92,932	$	3,933	4.2	%
	International	11,647		9,630		2,017		20.9	%	22,090		17,991		4,099		22.8	%
	Total general and administrative expenses	$	60,975	$	56,014	$	4,961	8.9	%	$	118,955	$	110,923	$	8,032	7.2	%
General and administrative expenses, excluding depreciation and amortization
	United States	$	45,132	$	41,566	$	3,566	8.6	%	$	88,128	$	82,989	$	5,139	6.2	%
	International	11,499		9,436		2,063		21.9	%	21,785		17,599		4,186		23.8	%
General and administrative depreciation and amortization
	United States	$	4,196	$	4,819	$	(623)	(12.9)	%	$	8,738	$	9,944	$	(1,206)	(12.1)	%
	International	148		194		(46)		(23.7)	%	304		392		(88)		(22.4)	%

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General and Administrative Expenses. The increase in general and administrative expenses for the three months ended January 31, 2023 of $5.0 million, or 8.9%, as compared to the same period last year resulted from (i) an increase in International of $2.0 million, and (ii) an increase in the U.S. of $2.9 million. Excluding depreciation and amortization, the increase in International of $2.1 million resulted primarily from increases in legal costs. The increase in the U.S. of $3.6 million resulted primarily from increases in labor costs and legal costs. Depreciation and amortization expenses for the three months ended January 31, 2023 as compared to the same period last year declined slightly driven from fully depreciating certain intangible and technology assets in the U.S. and international locations.

The increase in general and administrative expenses for the six months ended January 31, 2023 of $8.0 million, or 7.2%, as compared to the same period last year resulted from (i) an increase in International of $4.1 million and (ii) an increase in the U.S. of $3.9 million. Excluding depreciation and amortization, the increase in International of $4.2 million resulted primarily from increases in stock compensation, labor costs, legal costs, travel costs and marketing costs. The increase in the U.S. of $5.1 million resulted primarily from increases in stock compensation, labor costs, legal and travel costs. Depreciation and amortization expenses for the six months ended January 31, 2023 as compared to the same period last year declined slightly driven from fully depreciating certain intangible and technology assets in the U.S. and international locations.

The following table summarizes total other expense for the three and six months ended January 31, 2023 and 2022:

	Three Months Ended January 31,								Six Months Ended January 31,
(In thousands)	2023		2022		Change		% Change		2023		2022		Change		% Change
Total other income (expense)	$	11,578	$	(5,273)	$	16,851	319.6	%	$	13,178	$	(9,568)	$	22,746	237.7	%

Other Expense. The increase in total other income for the three months ended January 31, 2023 of $16.9 million as compared to the same period last year was primarily due to higher interest income earned from T-bills offset by unrealized foreign currency losses.

The increase in total other income for the six months ended January 31, 2023 of $22.7 million as compared to the same period last year was primarily due to higher interest income earned from T-bills offset by unrealized foreign currency losses.

The following table summarizes income taxes for the three and six months ended January 31, 2023 and 2022:

	Three Months Ended January 31,						Six Months Ended January 31,
(In thousands)	2023		2022	Change	% Change		2023	2022	Change	% Change
Income taxes	$	83,426	54,643	28,783	52.7	%	150,681	120,106	30,575	25.5	%

Income Taxes. Our effective income tax rates were 22.1% and 16.0% for the three months ended January 31, 2023 and 2022, respectively, and 21.8% and 18.0% for the six months ended January 31, 2023 and 2022, respectively. The effective tax rates in the current and prior year were impacted by the recognition of excess tax benefits from stock-based compensation. The recognition of excess tax benefits from the exercise of employee stock options is $0.1 million and $4.0 million for the three months ended January 31, 2023 and 2022, respectively, and $0.7 million and $7.0 million for the six months ended January 31, 2023 and 2022, respectively. The effective tax rate in the prior year was also impacted by the filing of amended returns in certain jurisdictions for a benefit of $17.5 million.

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Liquidity and Capital Resources

The following table presents a comparison of key components of our liquidity and capital resources at January 31, 2023 and July 31, 2022 and for the six months ended January 31, 2023 and 2022, respectively, excluding additional funds available to us through our Revolving Loan Facility:

(In thousands)	January 31, 2023		July 31, 2022		Change		% Change
Cash, cash equivalents, and restricted cash	$	1,660,952	$	1,384,236	$	276,716	20.0	%
Working capital	2,151,158		1,761,566		389,592		22.1	%

	Six Months Ended January 31,
(In thousands)	2023		2022		Change		% Change
Operating cash flows	$	499,833	$	446,548	$	53,285	11.9	%
Investing cash flows	(242,369)		(530,283)		287,914		54.3	%
Financing cash flows	15,334		16,094		(760)		(4.7)	%
Capital expenditures and acquisitions	$	(256,719)	$	(156,669)	$	(100,050)	(63.9)	%

Cash, cash equivalents, and restricted cash and working capital increased $276.7 million and $389.6 million at January 31, 2023, respectively, as compared to July 31, 2022. Cash, cash equivalents, and restricted cash increased primarily due to cash generated from operations and proceeds from stock option exercises not fully offset by capital expenditures. Working capital increased primarily from cash generated from operations and timing of cash receipts and payments, partially offset by capital expenditures, certain income tax benefits related to stock option exercises, and timing of cash payments. Cash equivalents consisted of bank deposits, U.S. Treasury Bills, and funds invested in money market accounts, which bear interest at variable rates.

Historically, we have financed our growth through cash generated from operations, public offerings of common stock, equity issued in conjunction with certain acquisitions and debt financing. Our primary source of cash generated by operations is from the collection of service fees and funds received from the sale of vehicles. We expect to continue to use cash flows from operations to finance our working capital needs and to develop and grow our business. In addition to our stock repurchase program, we are considering a variety of alternative potential uses for our remaining cash balances and our cash flows from operations. These alternative potential uses include additional stock repurchases, acquisitions and the payment of dividends. For further detail, see Notes to Unaudited Consolidated Financial Statements, Note 7 – Long-Term Debt and Note 10 – Stock Repurchases and under the subheadings “Credit Agreement” below.

Our business is seasonal as inclement weather during the winter months increases the frequency of accidents and consequently, the number of cars involved in accidents which the insurance companies salvage rather than repair. During the winter months, most of our facilities process 5% to 20% more vehicles than at other times of the year. Severe weather events, including but not limited to tornadoes, hurricanes, and hailstorms, can also impact our volumes. These increased volumes require the increased use of our cash to pay out advances and handling costs of the additional business.

We believe that our currently available cash and cash equivalents and cash generated from operations will be sufficient to satisfy our operating and working capital requirements for the foreseeable future. We expect to acquire or develop additional locations and expand some of our current facilities in the foreseeable future. We may be required to raise additional cash through drawdowns on our Revolving Loan Facility or potentially issue equity to fund this expansion. Although the timing and magnitude of growth through expansion and acquisitions are not predictable, the opening of new greenfield yards is contingent upon our ability to locate property that (i) is in an area in which we have a need for more capacity; (ii) has adequate size given the capacity needs; (iii) has the appropriate shape and topography for our operations; (iv) is reasonably close to a major road or highway; and (v) most importantly, has the appropriate zoning for our business.

As of January 31, 2023, $113.6 million of the $1.7 billion of cash, cash equivalents, and restricted cash was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., the repatriation of these funds could still be subject to the foreign withholding tax following the U.S. Tax Reform. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not require repatriation to fund our U.S. operations.

Net cash provided by operating activities increased for the six months ended January 31, 2023 as compared to the same period in 2022 due to higher costs associated with Hurricane Ian. The change in operating assets and liabilities was primarily the result of an increase in cash provided by income tax receivable of $44.9 million and decrease in cash used of $8.4 million vehicle pooling and $16.8 million in inventory. This is offset by increase in accounts receivable of $33.8 million.

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Net cash used in investing activities decreased for the six months ended January 31, 2023 as compared to the same period in 2022 due primarily to increased capital expenditures. Our capital expenditures are primarily related to lease buyouts of certain facilities, acquiring land, opening and improving facilities, capitalized software development costs for new software for internal use and major software enhancements, and acquiring yard equipment. We continue to develop, expand and invest in new and existing facilities.

Net cash provided by financing activities decreased for the six months ended January 31, 2023 as compared to the same period in 2022 due primarily to a decrease in proceeds from the exercise of stock options.

Credit Agreement

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

On December 21, 2021, we entered into a Second Amended and Restated Credit Agreement by and among Copart, certain subsidiaries of Copart party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement amends and restates certain terms of the First Amended and Restated Credit Agreement, dated as of July 21, 2020, by and among Copart, the lenders party thereto, and Bank of America, N.A., as administrative agent (as successor in interest to Wells Fargo Bank, National Association) (the “Existing Credit Agreement”). The Second Amended and Restated Credit Agreement provides for, among other things, (a) an increase in the secured revolving credit commitments by $200.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Second Amended and Restated Credit Agreement (the “Revolving Loan Facility”) to $1,250.0 million, (b) an increase in the letter of credit sublimit from $60.0 million to $100.0 million, (c) addition of Copart UK Limited, CPRT GmbH and Copart Autos España, S.L.U., each a wholly-owned direct or indirect foreign subsidiary of Copart, as borrowers, (d) addition of the ability to borrow under the Second and Amended and Restated Credit Agreement in certain foreign currencies including Pounds Sterling, Euro and Canadian Dollars, (e) extension of the maturity date of the revolving credit facility under the Existing Credit Agreement from July 21, 2023 to December 21, 2026, (f) replacing the LIBOR interest rate applicable to U.S. Dollar denominated borrowings with a Secured Overnight Financing Rate (“SOFR”) interest rate, and (g) changing the pricing levels with respect to the revolving loans as further described below.

We had no outstanding borrowings under the Revolving Loan Facility as of January 31, 2023 and July 31, 2022. The Credit Agreement contains customary affirmative and negative covenants and we were in compliance with all covenants related to the Credit Agreement as of January 31, 2023.

Stock Repurchases

On September 22, 2011, our Board of Directors approved a 160 million share increase in the stock repurchase program, bringing the total current authorization to 392 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as we deem appropriate and may be discontinued at any time. We did not repurchase any shares of our common stock under the program during the six months ended January 31, 2023 or 2022. As of January 31, 2023, the total number of shares repurchased under the program was 229,098,396, and 162,901,604 shares were available for repurchase under the program.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including costs related to vehicle pooling costs; income taxes; stock-based compensation; and contingencies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management has discussed the selection of critical accounting policies and estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed our disclosure relating to critical accounting policies and estimates in this Quarterly Report on Form 10-Q. There have been no material changes to the critical accounting policies and estimates from what was disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022 filed with the SEC on September 27, 2022. Our significant accounting policies are described in the Notes to Unaudited Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q.

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Recently Issued Accounting Standards

For a description of the new accounting standards that affect us, refer to the Notes to Unaudited Consolidated Financial Statements, Note 12 – Recent Accounting Pronouncements in this Quarterly Report on Form 10-Q.

Contractual Obligations and Commitments

There have been no material changes during the six months ended January 31, 2023 to our contractual obligations disclosed in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022, filed with the SEC on September 27, 2022.

Off-Balance Sheet Arrangements

As of January 31, 2023, we had no off-balance sheet arrangements other than a letter of credit and our funding commitments pursuant to surety bonds, none of which have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to the information required under this Item from what was disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022, filed with the SEC on September 27, 2022.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), or Disclosure Controls, as of the end of the period covered by this Quarterly Report on Form 10-Q. This evaluation, or Controls Evaluation, was performed under the supervision and with the participation of management, including our Co-Chief Executive Officer (“Co-CEO”) and our Chief Financial Officer (“CFO”). Disclosure Controls are controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Co-CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based upon the Controls Evaluation, our Co-CEO and CFO have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Disclosure Controls were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is accumulated and communicated to management, including the Co-CEO and CFO, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission.

(b) Changes in Internal Controls

There have not been any changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of Legal Proceedings that affect us, refer to the Notes to Unaudited Consolidated Financial Statements, Note 13 – Legal Proceedings included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

Set forth below and elsewhere in this Quarterly Report on Form 10-Q and in other documents we file with the SEC are descriptions of the risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this Quarterly Report on Form 10-Q. The descriptions below include any material changes to and supersede the description of the risk factors affecting our business previously disclosed in “Part I, Item 1A, Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended July 31, 2022.

Risks Related to Our Business and Industry

We depend on a limited number of major vehicle sellers for a substantial portion of our revenues. The loss of one or more of these major sellers could adversely affect our consolidated results of operations and financial position, and an inability to increase our sources of vehicle supply could adversely affect our growth rates.

Although no single customer accounted for more than 10% of our consolidated revenues during the six months ended January 31, 2023, a limited number of vehicle sellers historically have collectively accounted for a substantial portion of our revenues. Vehicle sellers have terminated agreements with us in the past in particular markets, which has affected revenues in those markets. There can be no assurance that our existing agreements will not be canceled. Furthermore, there can be no assurance that we will be able to enter into future agreements with vehicle sellers or that we will be able to retain our existing supply of salvage vehicles. A reduction in vehicles from a significant vehicle seller or any material changes in the terms of an arrangement with a significant vehicle seller could have a material adverse effect on our consolidated results of operations and financial position. In addition, a failure to increase our sources of vehicle supply could adversely affect our earnings and revenue growth rates.

Our expansion into markets outside the U.S., including expansions in Europe, Brazil, and the Middle East expose us to risks arising from operating in international markets. Any failure to successfully integrate businesses acquired or operational capabilities established outside the U.S. could have an adverse effect on our consolidated results of operations, financial position, or cash flows.

We first expanded our operations outside the U.S. in fiscal 2003 with an acquisition in Canada. Subsequently, in fiscal 2007 and fiscal 2008 we made significant acquisitions in the U.K., followed by acquisitions in the U.A.E., Brazil, Germany, and Spain in fiscal 2013, expansions into Bahrain and Oman in fiscal 2015, expansion into the Republic of Ireland and India in fiscal 2016, and an acquisition in Finland in fiscal 2018, and a parts recycler in U.K. in fiscal 2022. In addition, we continue to evaluate acquisitions and other opportunities outside of the U.S. Acquisitions or other strategies to expand our operations outside of the U.S. pose substantial risks and uncertainties that could have an adverse effect on our future operating results. In particular, we may not be successful in realizing anticipated synergies from these acquisitions, or we may experience unanticipated costs or expenses integrating the acquired operations into our existing business. We have and may continue to incur substantial expenses establishing new yards and operations, acquiring buyers and sellers, and implementing shared services capabilities in international markets. Among other things, we plan to ultimately deploy our proprietary auction technologies at all of our foreign operations and we cannot predict whether this deployment will be successful or will result in increases in the revenues or operating efficiencies of any acquired companies relative to their historic operating performance. Integration of our respective operations, including information technology and financial and administrative functions, may not proceed as anticipated and could result in unanticipated costs or expenses such as capital expenditures that could have an adverse effect on our future operating results. We cannot provide any assurance that we will achieve our business and financial objectives in connection with these acquisitions or our strategic decision to expand our operations internationally. For example, although we continue to operate a technology and operations center in India for administrative support, we decided to suspend our salvage operations in India in fiscal 2018, until the Indian market develops in a manner better suited to our business model, which did not have a material effect on our consolidated results of operations and financial position.

As we continue to expand our business internationally, we will need to develop policies and procedures to manage our business on a global scale. Operationally, acquired businesses typically depend on key seller relationships, and our failure to maintain those relationships would have an adverse effect on our consolidated results of operations and could have an adverse effect on our future operating results. Moreover, success in opening and operating facilities in new markets can be dependent upon establishing new relationships with buyers and sellers, and our failure to establish those relationships could have an adverse effect on our consolidated results of operations and future operating results.

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In addition, we anticipate our international operations will continue to subject us to a variety of risks associated with operating on an international basis, including:

•    the difficulty of managing and staffing foreign offices;

•the increased travel, infrastructure, and legal compliance costs associated with multiple international locations;

•    the need to localize our mix of product and service offerings in response to customer requirements, particularly the need to implement our online auction platform in foreign countries;

•    the need to comply with complex foreign and U.S. laws and regulations that apply to our international operations;

•    tariffs, trade barriers, trade disputes, and other regulatory or contractual limitations on our ability to operate in certain foreign markets;

•    exposure to foreign currency exchange rate risk, which may have an adverse impact on our revenues and revenue growth rates;

•    adapting to different business cultures, languages, and market structures, particularly where we seek to implement our auction model in markets where insurers have historically not played a substantial role in the disposition of salvage vehicles;

•    repatriation of funds currently held in foreign jurisdictions to the U.S., which may result in higher effective tax rates;

•    military conflicts, including the Russian invasion of Ukraine;

•    public health issues, including but not limited to the COVID-19 pandemic;

•    environmental issues;

•    natural and man-made disasters; and

•    political issues.

As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. Our failure to manage any of these risks successfully could harm our international operations and have an adverse effect on our operating results.

Our business is exposed to risks associated with online commerce security and credit card fraud.

Consumer concerns over the security of transactions conducted on the internet or the privacy of users may inhibit the growth of the internet and online commerce. To securely transmit confidential information such as customer credit card numbers, we rely on encryption and authentication technology. Unanticipated events or developments could result in a compromise or breach of the systems we use to protect customer transaction data. Furthermore, our servers may also be vulnerable to viruses transmitted via the internet and other points of access. While we proactively check for intrusions into our infrastructure, a new or undetected virus could cause a service disruption.

We maintain an information security program and our processing systems incorporate multiple levels of protection in order to address or otherwise mitigate these risks. Despite these mitigation efforts, there can be no assurance that we will be immune to these risks and not suffer losses in the future. Under current credit card practices, we may be held liable for fraudulent credit card transactions and other payment disputes with customers. As such, we have implemented certain anti-fraud measures, including credit card verification procedures. However, a failure to adequately prevent fraudulent credit card transactions could adversely affect our consolidated financial position and results of operations.

Our security measures may also be breached due to employee error, malfeasance, insufficiency, or defective design. Additionally, outside parties may attempt to fraudulently induce employees, users, or customers to disclose sensitive information in order to gain access to our data or our users’ or customers’ data. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our products and services that could have an adverse effect on our consolidated financial position and results of operations.

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Implementation of our online auction model in new markets may not result in the same synergies and benefits that we achieved when we implemented the model in the U.S., Canada, and the U.K.

We believe that the implementation of our proprietary auction technologies across our operations had a favorable impact on our results of operations by increasing the size and geographic scope of our buyer base, increasing the average selling price for vehicles sold through our sales, and lowering expenses associated with vehicle sales.

For example, we implemented our online system across all of our U.S., Canada, and U.K. salvage yards between in fiscal 2004 and fiscal 2008 and experienced increases in revenues and average selling prices, as well as improved operating efficiencies in those markets. In considering new markets, we consider the potential synergies from the implementation of our model based in large part on our experience in the U.S., Canada, and the U.K. However, we cannot predict whether these synergies will also be realized in new markets.

Failure to maintain sufficient capacity to accept additional vehicles at one or more of our storage facilities could adversely affect our relationships with insurance companies or other sellers of vehicles.

Capacity at our storage facilities varies from period to period and from region to region. For example, following adverse weather conditions in a particular area, our yards in that area may fill and limit our ability to accept additional salvage vehicles while we process existing inventories. For example, Hurricane Ida had, in certain quarters, an adverse effect on our operating results, in part because of yard capacity constraints in the impacted areas of the U.S. We regularly evaluate our capacity in all our markets and where appropriate, seek to increase capacity through the acquisition of additional land and yards. We may not be able to reach agreements to purchase independent storage facilities in markets where we have limited excess capacity, and zoning restrictions or difficulties obtaining use permits may limit our ability to expand our capacity through acquisitions of new land. Failure to have sufficient capacity at one or more of our yards could adversely affect our relationships with insurance companies or other sellers of vehicles, which could have an adverse effect on our consolidated results of operations and financial position.

Because the growth of our business has been due in large part to acquisitions and development of new facilities, the rate of growth of our business and revenues may decline if we are not able to successfully complete acquisitions and develop new facilities.

We seek to increase our sales and profitability through the acquisition of complementary businesses, additional facilities and the development of new facilities. For example, in fiscal 2020, we opened two new operational facilities in Germany, one new operational facility in Brazil, and three new operational facilities in the U.S. In fiscal 2021, we opened one new operational facility in Germany, one new operational facility in Spain, ten new operational facilities in the U.S., and acquired an operational facility in Des Moines, Iowa. In fiscal 2022, we opened one new operational facility in Canada, one new operational facility in Spain, and five new operational facilities in the U.S. In fiscal 2023, we opened one new operational facility in Germany and four new operational facilities in the U.S. As for strategic acquisitions of complementary businesses, we acquired National Powersport Auctions in fiscal 2017, and in fiscal 2022 we acquired Hills Motors (“Hills”) a used, or “green” parts recycler in the U.K. that has four operating facilities. The Hills acquisition is currently undergoing review by the CMA. Acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers, the availability of affordable financing in the capital markets and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms. There can be no assurance that we will be able to:

•    continue to acquire additional facilities on favorable terms;

•    expand existing facilities in no-growth regulatory environments;

•    obtain or retain buyers, sellers, and sales volumes in new markets or facilities;

•    increase revenues and profitability at acquired and new facilities;

•    maintain the historical revenue and earnings growth rates we have been able to obtain through facility openings and strategic acquisitions;

•    create new vehicle storage facilities that meet our current revenue and profitability requirements; or

•    obtain necessary regulatory approvals under applicable antitrust and competition laws.

In addition, certain of the acquisition agreements under which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it. In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities. We cannot assure that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial statements. Any failure to continue to successfully identify and complete acquisitions and develop new facilities could have a material adverse effect on our consolidated results of operations and financial position.

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As we continue to expand our operations, our failure to manage growth could harm our business and adversely affect our consolidated results of operations and financial position.

Our ability to manage growth depends not only on our ability to successfully integrate new facilities, but also on our ability to:

•    hire, train and manage additional qualified personnel;

•    establish new relationships or expand existing relationships with vehicle sellers;

•    identify and acquire or lease suitable premises on competitive terms;

•    secure adequate capital;

•identify productive uses for available capital reserves; and

•    maintain the supply of vehicles from vehicle sellers.

Our inability to control or manage these growth factors effectively could have a material adverse effect on our consolidated results of operations and financial position.

If we experience problems with our subhaulers and trucking fleet operations, our business could be harmed.

We rely primarily upon independent subhaulers to pick up and deliver vehicles to and from our storage facilities in the U.S., Canada, Brazil, the Republic of Ireland, Germany, Finland, the U.A.E., Oman, Bahrain, and Spain. We also utilize, to a lesser extent, independent subhaulers in the U.K. Our failure to pick up and deliver vehicles in a timely and accurate manner could harm our reputation and brand, which could have a material adverse effect on our business. Further, an increase in fuel cost may lead to increased prices charged by our independent subhaulers, which may significantly increase our cost. We may not be able to pass these costs on to our sellers or buyers.

In addition to using independent subhaulers, in the U.S., U.K. and Germany we utilize a fleet of company trucks to pick up and deliver vehicles from our storage facilities in those geographies. In connection therewith, we are subject to the risks associated with providing trucking services, including but not limited to inclement weather, disruptions in transportation infrastructure, accidents and related injury claims, availability and price of fuel, any of which could result in an increase in our operating expenses and reduction in our net income.

New member programs could impact our operating results.

We have initiated and intend to continue to initiate programs to open our auctions to the general public. These programs include the Registered Broker program through which the public can purchase vehicles through a registered member, and Copart Lounge programs through which registered members can open Copart storefronts in foreign markets with internet kiosks enabling the general public to search our inventory and purchase vehicles. Initiating programs that allow access to our online auctions to the general public will involve material expenditures and we cannot predict what future benefit, if any, will be derived. These programs could also create additional risks including heightened regulation and litigation risk related to vehicle sales to the general public, and heightened branding, reputational, and intellectual property risk associated with allowing Copart registered members to establish Copart-branded storefronts in foreign jurisdictions.

Factors such as mild weather conditions can have an adverse effect on our revenues and operating results, as well as our revenue and earnings growth rates, by reducing the available supply of salvage vehicles. Conversely, extreme weather conditions can result in an oversupply of salvage vehicles that requires us to incur abnormal expenses to respond to market demands.

Mild weather conditions tend to result in a decrease in the available supply of salvage vehicles because traffic accidents decrease and fewer automobiles are damaged. Accordingly, mild weather can have an adverse effect on our salvage vehicle supply, only a portion of which are referred to as inventory, which would be expected to have an adverse effect on our revenue and operating results and related growth rates. Conversely, our salvage vehicle supply will tend to increase in poor weather such as a harsh winter or as a result of adverse weather-related conditions such as flooding. During periods of mild weather conditions, our ability to increase our revenues and improve our operating results and related growth will be increasingly dependent on our ability to obtain additional vehicle sellers and to compete more effectively in the market, each of which is subject to the other risks and uncertainties described in these sections. In addition, extreme weather conditions, although they increase the available supply of salvage cars, can have an adverse effect on our operating results. For example, during fiscal 2023, we recognized substantial additional costs associated with

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Hurricane Ian. Weather events have had, in certain quarters, an adverse effect on our operating results, in part because of yard capacity constraints in the impacted areas of the U.S.

If we lose key management or are unable to attract and retain the talent required for our business, we may not be able to successfully manage our business or achieve our objectives.

Our future success depends in large part upon the leadership and performance of our executive management team, all of whom are employed on an at-will basis and none of whom are subject to any agreements not to compete. If we lose the service of one or more of our executive officers or key employees, in particular Willis J. Johnson, our Chairman, and A. Jayson Adair and Jeffrey Liaw, our Co-Chief Executive Officers, or if one or more of these executives decide to join a competitor or otherwise compete directly or indirectly with us, we may not be able to successfully manage our business or achieve our business objectives.

More generally, our future success also depends on our ability to attract and retain a talented workforce. The labor market is highly competitive, and our business could be adversely affected if we are unable to attract and retain talented personnel in our organization at appropriate staffing levels. In addition, because our core technology platform is internally developed, we face heightened risks relating to workforce recruitment and retention of key personnel with subject matter expertise relating to our technology platform.

The vehicle sales industry is highly competitive and we may not be able to compete successfully.

We face significant competition for the supply of salvage and other vehicles and for the buyers of those vehicles. We believe our principal competitors include other auction and vehicle remarketing service companies with whom we compete directly in obtaining vehicles from insurance companies and other sellers, and large vehicle dismantlers, who may buy salvage vehicles directly from insurance companies, bypassing the salvage sales process. Many of the insurance companies have established relationships with competitive remarketing companies and large dismantlers. Certain of our competitors may currently or in the future have greater financial resources than we do. Due to the limited number of vehicle sellers, particularly in the U.K., and other foreign markets, the absence of long-term contractual commitments between us and our sellers and the increasingly competitive market environment, there can be no assurance that our competitors will not gain market share at our expense.

We may also encounter significant competition for local, regional, and national supply agreements with vehicle sellers. There can be no assurance that the existence of other local, regional, or national contracts entered into by our competitors will not have a material adverse effect on our business or our expansion plans. Furthermore, we are likely to face competition from major competitors in the acquisition of vehicle storage facilities, which could significantly increase the cost of such acquisitions and thereby materially impede our expansion objectives or have a material adverse effect on our consolidated results of operations. These potential new competitors may include consolidators of automobile dismantling businesses, organized salvage vehicle buying groups, automobile manufacturers, automobile auctioneers and software companies. While most vehicle sellers have abandoned or reduced efforts to sell salvage vehicles directly without the use of service providers such as us, there can be no assurance that this trend will continue, which could adversely affect our market share, consolidated results of operations and financial position. Additionally, existing or new competitors may be significantly larger and have greater financial and marketing resources than us; therefore, there can be no assurance that we will be able to compete successfully in the future.

Risks Related to Regulatory Compliance and Legal Matters

Our business activities and public policy interests expose us to political, regulatory, economic, and reputational risks.

Our business activities, facilities expansions, and civic and public policy interests may be unpopular in certain communities, exposing us to reputational and political risk. For example, public opposition in some communities to different aspects of our business operations has impacted our ability to obtain required business use permits. Additionally, our interests in legislative and regulatory processes at different levels of government in the geographies in which we operate have been opposed by competitors and other interest groups. Although we believe we generally enjoy positive community relationships and political support in our range of operations, shifting public opinion sentiments and sociopolitical dynamics could have an adverse effect on our business and reputation.

Our operations and acquisitions in the U.S. and certain foreign areas expose us to political, regulatory, economic, and reputational risks.

Although we have implemented policies, procedures, and training designed to ensure compliance with anti-bribery laws, trade controls and economic sanctions, and similar regulations, our employees or agents may take actions in violation of our policies. We may incur costs or other penalties in the event that any such violations occur, which could have an adverse effect on our business and reputation.

In some cases, the enforcement practices of governmental regulators in certain foreign areas and the procedural and substantive rights and remedies available to us may vary significantly from those in the United States, which could have an adverse effect on our business.

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Although we face risks associated with international expansion in each of the non-U.S. markets where we operate, our current focus on the German market heightens the risks we face relating to our expansion plans in Germany.

In addition, some of our recent acquisitions have required us to integrate non-U.S. companies which had not previously been subject to U.S. law. In many countries outside of the United States, particularly in those with developing economies, it may be common for persons to engage in business practices prohibited by laws and regulations applicable to us, such as the U.S. Foreign Corrupt Practices Act (“FCPA”), U.K. Bribery Act, Brazil Clean Companies Act, India’s Prevention of Corruption Act, 1988 or similar local anti-bribery laws. These laws generally prohibit companies and their employees or agents from making improper payments for the purpose of obtaining or retaining business. Failure by us and our subsidiaries to comply with these laws could subject us to civil and criminal penalties that could have a material adverse effect on our consolidated operating results and financial position.

In addition, certain acquisitions in the U.K. may be reviewed by the CMA. If an inquiry is made by the CMA, we may be required to demonstrate that our acquisitions will not result, or be expected to result, in a substantial lessening of competition in the U.K. market. Although we believe that there will not be a substantial lessening of competition in the U.K. market, based on our analysis of the relevant U.K. markets, there can be no assurance that the CMA will agree with us if it decides to make an inquiry. If the CMA determines that by our acquisitions of certain assets, there is or likely will be a substantial lessening of competition in the U.K. market, we could be required to divest some portion of our U.K. assets. In the event of a divestiture order by the CMA, the assets disposed may be sold for substantially less than their carrying value. Accordingly, any divestiture could have a material adverse effect on our operating results in the period of the divestiture.

We face risks associated with transacting on a principal rather than agent basis, which may have an adverse impact on our gross margin percentages and expose us to inventory risks.

Certain of the vehicles that we remarket in the U.S. and foreign markets may be transacted either wholly or partially on the principal model, in which the vehicle is purchased and then resold for our own account, rather than the agency model, in which we generally act as a sales agent for the legal owner of vehicles. Further, operating on a principal basis exposes us to inventory risks, including losses from theft, damage, and obsolescence. In addition, our business in the U.S., Canada, and the U.K. has been established and grown based largely on our ability to build relationships with insurance carriers. In other markets, including Germany, insurers have traditionally been less involved in the disposition of vehicles. As we expand into markets outside the U.S., Canada, and the U.K., including Germany in particular, we cannot predict whether markets will readily adapt to our strategy of online auctions of automobiles sourced principally through vehicle insurers. Any failure of new markets to adopt our business model could adversely affect our consolidated results of operations and financial position.

Acquisitions typically will increase our sales and profitability although, given the typical size of our acquisitions to date, most acquisitions will not individually have a material impact on our consolidated results of operations and financial position. We may not always be able to introduce our processes and selling platform to acquired companies due to different operating models in international jurisdictions or other facts. As a result, the associated benefits of acquisitions may be delayed for years in some international situations. During this period, the acquisitions may operate at a loss and certain acquisitions, while profitable, may operate at a margin percentage that is below our overall operating margin percentage and, accordingly, have an adverse impact on our consolidated results of operations and financial position. Hence, the conversion periods vary from weeks to years and cannot be predicted.

Our business is subject to a variety of domestic and international laws and other obligations regarding privacy and data protection.

We are subject to federal, state and international laws, directives, and regulations relating to the collection, use, retention, disclosure, security, and transfer of personal data. These laws, directives, and regulations, and their interpretation and enforcement continue to evolve and may be inconsistent from jurisdiction to jurisdiction. For example, the General Data Protection Regulation (“GDPR”), which went into effect in the European Union on May 25, 2018, applies to all of our activities conducted from an establishment in the European Union and may also apply to related products and services that we offer to European Union users. Similarly, the California Consumer Privacy Act, or AB375 (“CCPA”), the California Privacy Act (“CPRA”), the Colorado Privacy Act (“CPA”), the Virginia Consumer Data Protection Act (“VCDPA”) and the Brazilian General Data Protection Law (“LGPD”), were also recently enacted and became effective in 2020 and these laws create new data privacy rights for individuals. Complying with the GDPR, the CCPA, the CPRA, the CPA, the VCDPA, the LGPD, and similar emerging and changing privacy and data protection requirements may cause us to incur substantial costs or require us to change our business practices. Noncompliance with our legal obligations relating to privacy and data protection could result in penalties, legal proceedings by governmental entities or others, and significant legal and financial exposure and could affect our ability to retain and attract customers. Any of the risks described above could adversely affect our consolidated results of operations and financial position.

Regulation of the vehicle sales industry may impair our operations, increase our costs of doing business, and create potential liability.

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Participants in the vehicle sales industry are subject to, and may be required to expend funds to ensure compliance with a variety of laws, regulations, and ordinances. These include, without limitation, land use ordinances, business and occupational licensure requirements and procedures, vehicle titling, sales, and registration rules and procedures, and laws and regulations relating to the environment, anti-money laundering, anti-corruption, exporting, and reporting and notification requirements to agencies and law enforcement relating to vehicle transfers. Many of these laws and regulations are frequently complex and subject to interpretation, and failure to comply with present or future regulations or changes in interpretations of existing laws or regulations may result in impairment or suspension of our operations and the imposition of penalties and other liabilities. At various times, we may be involved in disputes with local governmental officials regarding the development and/or operation of our business facilities. We may be subject to similar types of regulations by governmental agencies in new markets. In addition, new legal or regulatory requirements or changes in existing requirements may delay or increase the cost of opening new facilities, may limit our base of vehicle buyers, may decrease demand for our vehicles, and may adversely impact our ability to conduct business.

Changes in laws or the interpretation of laws, including foreign laws and regulations, affecting the import and export of vehicles may have an adverse effect on our business and financial condition.

Our internet-based auction-style model has allowed us to offer our products and services to international markets and has increased our international buyer base. As a result, foreign importers of vehicles now represent a significant part of our total buyer base. As a result our foreign buyers may be subject to a variety of foreign laws and regulations, including the imposition of import duties by foreign countries. Changes in laws, regulations, and treaties that restrict or impede or negatively affect the economics surrounding the importation of vehicles into foreign countries may reduce the demand for vehicles and impact our ability to maintain or increase our international buyer base. In addition, we and our vehicle buyers must work with foreign customs agencies and other non-U.S. governmental officials, who are responsible for the interpretation, application, and enforcement of these laws, regulations, and treaties. Any inability to obtain requisite approvals or agreements from such authorities could adversely impact the ability of our buyers to import vehicles into foreign countries. In addition, any disputes or disagreements with foreign agencies or officials over import duties, tariffs, or similar matters, including disagreements over the value assigned to imported vehicles, could adversely affect our costs and the ability and costs of our buyers to import vehicles into foreign countries. For example, in March 2008, a decree issued by the president of Mexico became effective that placed restrictions on the types of vehicles that can be imported into Mexico from the U.S. The adoption of similar laws or regulations in other jurisdictions that have the effect of reducing or curtailing our activities abroad, changes in the interpretation, application, and enforcement of laws, regulations, or treaties, any failure to comply with non-U.S. laws or regulatory interpretations, or any legal or regulatory interpretations or governmental actions that significantly increase our costs or the costs of our buyers could have a material adverse effect on our consolidated results of operations and financial position by reducing the demand for our products and services and our ability to compete in non-U.S. markets.

The operation of our storage facilities poses certain environmental risks, which could adversely affect our consolidated results of operations, financial position, or cash flows.

Our operations are subject to international, federal, provincial, state and local laws and regulations regarding the protection of the environment in the countries in which we have storage facilities. In some cases, we may acquire land with existing environmental issues, including landfills as an example. In the salvage vehicle remarketing industry, large numbers of wrecked vehicles are stored at storage facilities, requiring us to actively monitor and manage potential environmental impacts. In the U.K., we provide vehicle de-pollution and crushing services for end-of-life vehicles. We could incur substantial expenditures for preventative, investigative, or remedial action and could be exposed to liability arising from our operations, contamination by previous users of certain of our acquired facilities or facilities which we may acquire in the future, or the disposal of our waste at off-site locations. In addition to conducting environmental diligence on new site acquisitions, we also take such appropriate actions as may be necessary to avoid liability for activities of prior owners, and we have from time to time acquired insurance with respect to acquired facilities with known environmental risks. There can be no assurances, however, that these efforts to mitigate environmental risk will prove sufficient if we were to face material liabilities. We have incurred expenses for environmental remediation in the past, and environmental laws and regulations could become more stringent over time. There can be no assurance that we or our operations will not be subject to significant costs in the future or that environmental enforcement agencies at the state and federal level will not pursue enforcement actions against us. In addition to acquiring insurance in connection with certain acquisitions, we have also obtained indemnification for pre-existing environmental liabilities from many of the persons and entities from whom we have acquired facilities, but there can be no assurance that such indemnifications will be available or sufficient. Any such expenditures or liabilities could have a material adverse effect on our consolidated results of operations, financial position, or cash flows.

Changes in federal, state and local, or foreign tax laws, changing interpretations of existing tax laws, or adverse determinations by tax authorities could increase our tax burden or otherwise adversely affect our results of operations, and financial condition.

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We are subject to taxation at the federal, state, provincial, and local levels in the U.S., the U.K., and various other countries and jurisdictions in which we operate, including income taxes, sales taxes, value-added (“VAT”) taxes, and similar taxes and assessments. The laws and regulations related to tax matters are extremely complex and subject to varying interpretations. Although we believe our tax positions are reasonable, we are subject to audit by the Internal Revenue Service, “IRS”, in the United States, HM Revenue and Customs in the United Kingdom, state tax authorities in the states in which we operate, and other similar tax authorities in international jurisdictions. We have been subject to audits and challenges from applicable federal, state, or foreign tax authorities in the past, and may be subject to similar audits and challenges in the future. While we believe we comply with all applicable tax laws, rules, and regulations in the relevant jurisdictions, tax authorities may elect to audit us and determine that we owe additional taxes, which could result in a significant increase in our liabilities for taxes, interest, and penalties in excess of our accrued liabilities.

New tax legislative initiatives may be proposed from time to time, such as proposals for comprehensive tax reform in the United States, which may impact our effective tax rate and which could adversely affect our tax positions or tax liabilities. Our future effective tax rate could be adversely affected by, among other things, changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in interpretations of existing tax laws, or changes in determinations regarding the jurisdictions in which we are subject to tax. From time to time, U.S. federal, state and local, and foreign governments make substantive changes to tax rules and their application, which could result in materially higher taxes than would be incurred under existing tax law and which could adversely affect our financial condition or results of operations.

For example, on August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 which includes changes to the U.S. corporate income tax system, including a 15% minimum tax based on “adjusted financial statement income” for certain large corporations which will not be effective until fiscal year 2024 and a 1% excise tax on share repurchases after December 31, 2022. We are currently assessing the potential impact of these legislative changes.

Risks Related to Our Intellectual Property and Technology

Our internet-based sales model has increased the relative importance of intellectual property assets to our business, and any inability to protect those rights could have a material adverse effect on our business, results of operations, or financial position.

Our intellectual property rights include patents relating to our auction technologies, as well as trademarks, trade secrets, copyrights, and other intellectual property rights. In addition, we may enter into agreements with third parties regarding the license or other use of our intellectual property. Effective intellectual property protection may not be available in every country in which our products and services are distributed, deployed, or made available. We seek to maintain certain intellectual property rights as trade secrets. The secrecy could be compromised by third parties, or intentionally or accidentally by our employees, which would cause us to lose the competitive advantage resulting from those trade secrets. Any significant impairment of our intellectual property rights, or any inability to protect our intellectual property rights, could have a material adverse effect on our consolidated results of operations and financial position.

We also may not be able to acquire or maintain appropriate domain names in all countries in which we do business. Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of our trademarks and other proprietary rights.

We have in the past been and may in the future be subject to intellectual property rights claims, which are costly to defend, could require us to pay damages, and could limit our ability to use certain technologies in the future.

Litigation based on allegations of infringement or other violations of intellectual property rights are common among companies who rely heavily on intellectual property rights. Our reliance on intellectual property rights has increased significantly in recent years as we have implemented our auction-style sales technologies across our business and ceased conducting live auctions. Recent U.S. Supreme Court precedent potentially restricts patentability of software inventions by affirming that patent claims merely requiring application of an abstract idea on standard computers utilizing generic computer functions are patent ineligible, which may impact our ability to enforce our issued patent and obtain new patents. As we face increasing competition, the possibility of intellectual property rights claims against us increases. Litigation and any other intellectual property claims, whether with or without merit, can be time-consuming, expensive to litigate and settle, and can divert management resources and attention from our core business. An adverse determination in current or future litigation could prevent us from offering our products and services in the manner currently conducted. We may also have to pay damages or seek a license for the technology, which may not be available on reasonable terms and which may significantly increase our operating expenses, if it is available for us to license at all. We could also be required to develop alternative non-infringing technology, which could require significant effort and expense.

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We have developed a proprietary enterprise operating system, and we may experience difficulties operating our business as we continue to design and develop this system.

We have developed a proprietary enterprise operating system to address our international expansion needs. The ongoing design, development, and implementation of our enterprise operating systems carries certain risks, including the risk of significant design or deployment errors causing disruptions, delays or deficiencies, which may make our website and services unavailable. This type of interruption could prevent us from processing vehicles for our sellers and may prevent us from selling vehicles through our internet bidding platform, VB3, which would adversely affect our consolidated results of operations and financial position. In addition, the transition to our internally developed proprietary system will continue to require us to commit substantial financial, operational and technical resources before the volume of business increases, without assurance that the volume of business will increase. We began using our internally developed proprietary system with our expansion into Spain in fiscal 2016 and Germany in fiscal 2017.

We may also implement additional or enhanced information systems in the future to accommodate our growth and to provide additional capabilities and functionality. The implementation of new systems and enhancements is frequently disruptive to the underlying business of an enterprise and can be time-consuming and expensive, increase management responsibilities and divert management attention. Any disruptions relating to our system enhancements or any problems with the implementation, particularly any disruptions impacting our operations or our ability to accurately report our financial performance on a timely basis during the implementation period, could materially and adversely affect our business. Even if we do not encounter these material and adverse effects, the implementation of these enhancements may be much more costly than we anticipated. If we are unable to successfully implement the information systems enhancements as planned, our financial position, results of operations, and cash flows could be negatively impacted.

Our success depends on maintaining the integrity of our systems and infrastructure. As our operations continue to grow in both size and scope, domestically and internationally, we must continue to provide reliable, real-time access to our systems by our customers through improving and upgrading our systems and infrastructure for enhanced products, services, features and functionality. Any failure to maintain the integrity of our systems and infrastructure may result in loss of customers due, among other things, to slow delivery times, unreliable service levels, or insufficient capacity, any of which could have a material adverse effect on our business, consolidated results of operations, and financial position.

Disruptions to our information technology systems, including failure to prevent outages, maintain security, and prevent unauthorized access to our information technology systems and other confidential information, could disrupt our business and materially and adversely affect our reputation, consolidated results of operations, and financial condition.

Information availability and security risks for online commerce companies have significantly increased in recent years because of, in addition to other factors, the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, and other external parties. These threats may derive from fraud or malice on the part of third parties or current or former employees. In addition, human error or accidental technological failure could make us vulnerable to information technology system disruptions and/or cyber-attacks, including the introduction of malicious computer viruses or code into our system, phishing attacks, ransomware attacks, or other information technology data security incidents.

Our operations rely on the secure processing, transmission, and storage of confidential, proprietary and other information in our computer systems and networks. Our customers and other parties in the payments value chain rely on our digital technologies, computer and email systems, software, and networks to conduct their operations. In addition, to access our products and services, our customers increasingly use personal smartphones, tablet PCs, and other mobile devices that may be beyond our control.

Information technology system disruptions, cyber-attacks, ransomware attacks, or other cyber security incidents could materially and adversely affect our reputation, operating results, or financial condition by, among other things, making our auction platform inoperable for a period of time, damaging our reputation with buyers, sellers, and insurance companies as a result of the unauthorized disclosure of confidential information (including account data information), or resulting in governmental investigations, litigation, liability, fines, or penalties against us. If such attacks are not detected immediately, their effect could be compounded. While we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of these cyber risks, our insurance coverage may be insufficient to cover all losses and would not remedy damage to our reputation.

We have in the past identified attempts by unauthorized third parties to access our systems and disrupt our online auctions. These attempts have caused minor service interruptions, which were promptly addressed and resolved, and our online service was restored to normal business. For example, in April 2015, we identified that unauthorized third parties had gained access to data provided to us by our members that is considered to be personal information in certain jurisdictions. We immediately investigated, including the engagement of an external expert security firm, and made the required notifications to members whose information may have been accessed and to regulatory agencies.

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We are regularly evaluating and implementing new technologies and processes to manage risks relating to cyber-attacks and system and network disruptions, including but not limited to usage errors by our employees, power outages, and catastrophic events such as fires, tornadoes, floods, hurricanes, and earthquakes. We have further enhanced our security protocols based on the investigation we conducted in response to the security incident. Nevertheless, we cannot provide assurances that our efforts to address prior data security incidents and mitigate against the risk of future data security incidents or system failures will be successful. The techniques used by criminals to obtain unauthorized access to sensitive data change frequently and are often not recognized immediately. We may be unable to anticipate these techniques or implement adequate preventative measures and believe that cyber-attacks and threats against us have occurred in the past and are likely to continue in the future. If our systems are compromised again in the future, become inoperable for extended periods of time, or cease to function properly, we may have to make a significant investment to fix or replace them, and our ability to provide many of our electronic and online solutions to our customers may be impaired. In the event of a ransomware attack, we could suffer significant financial and reputational harm, regardless of whether we choose to pay the ransom amount. In addition, as cyber-threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Any of the risks described above could materially and adversely affect our consolidated results of operations and financial position.

Rapid technological changes may render our technology obsolete or decrease the competitiveness of our services.

To remain competitive, we must continue to enhance and improve the functionality and features of our websites and software. The internet and the online commerce industry are rapidly changing. In particular, the online commerce industry is characterized by increasingly complex systems and infrastructures. If competitors introduce new services embodying new technologies or if new industry standards and practices emerge, our existing websites and proprietary technology and systems may become obsolete. Our future success will depend on our ability to:

•    enhance our existing services;

•    develop, access, acquire, and license new services and technologies that address the increasingly sophisticated and varied needs of our current and prospective customers; and

•    respond to technological advances and emerging industry standards and practices in a cost-effective and timely basis.

Developing our websites and other proprietary technology entails significant technical and business risks. We may use new technologies ineffectively or we may fail to adapt our websites, transaction-processing systems, and network infrastructure to customer requirements or emerging industry standards. If we face material delays in introducing new services, products, and enhancements, our customers and suppliers may forego the use of our services and use those of our competitors. 

Risks Related to Ownership of Our Common Stock

Our annual and quarterly performance may fluctuate, causing the price of our stock to decline.

Our revenues and operating results have fluctuated in the past and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control. Factors that may affect our operating results include, but are not limited to, the following:

•    fluctuations in the market value of salvage and used vehicles;

•    fluctuations in commodity prices, particularly the per ton price of crushed car bodies;

•    the impact of foreign exchange gain and loss as a result of international operations;

•the impact of potential negative interest rates on our cash reserves;

•    our ability to successfully integrate our newly acquired operations in international markets and any additional markets we may enter;

•the availability of salvage vehicles or other vehicles we sell including the supply of used and salvage vehicles in relation to the supply of new vehicle alternatives;

•    variations in vehicle accident rates;

•variations in total loss frequency rates;

•supply chain disruptions;

•    member participation in the internet bidding process;

•    delays or changes in state title processing;

•    changes in international, state or federal laws, regulations, or treaties affecting the vehicles we sell;

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•    changes in the application, interpretation, and enforcement of existing laws, regulations or treaties;

•    trade disputes and other political, diplomatic, legal, or regulatory developments;

•    inconsistent application or enforcement of laws or regulations by regulators, governmental or quasi-governmental entities, or law enforcement or quasi-law enforcement agencies, as compared to our competitors;

•    changes in laws affecting who may purchase the vehicles we sell;

•    the timing and size of our new facility openings;

•    the announcement of new vehicle supply agreements by us or our competitors;

•    the severity of weather and seasonality of weather patterns;

•    the amount and timing of operating costs and capital expenditures relating to the maintenance and expansion of our business, operations, and infrastructure;

•    the availability and cost of general business insurance;

•    labor costs and collective bargaining;

•    changes in the current levels of out of state and foreign demand for salvage vehicles;

•    the introduction of a similar internet product by a competitor;

•    the ability to obtain or maintain necessary permits to operate;

•goodwill impairment;

•crimes committed against us, including theft, forgery, and counterfeit payments;

•    military conflicts, including the Russian invasion of Ukraine;

•    bank failures;

•natural and man-made disasters;

•    public health issues, including COVID-19 and other pandemics;

•monetary policy and potential inflation impacts, including any adverse effects of inflation on our cash reserves; and

•    political issues.

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Due to the foregoing factors, our operating results in one or more future periods can be expected to fluctuate. As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance. In the event such fluctuations result in our financial performance being below the expectations of public market analysts and investors, the price of our common stock could decline substantially.

We are partially self-insured for certain losses and if our estimates of the cost of future claims differ from actual trends, our results of operations could be harmed.

We are partially self-insured for certain losses related to our different lines of insurance coverage including, without limitation, medical insurance, general liability, workers’ compensation, and auto liability. Our liability represents an estimate of the ultimate cost of claims incurred as of the balance sheet date. The estimated liability is not discounted and is established based upon analysis of historical data and actuarial estimates. Further, we utilize independent actuaries to assist us in establishing the proper amount of reserves for anticipated payouts associated with these self-insured exposures. While we believe these estimates are reasonable based on the information currently available, if actual trends, including the severity of claims and medical cost inflation, differ from our estimates, our results of operations could be impacted.

Our executive officers, directors, and their affiliates hold a large percentage of our stock and their interests may differ from other stockholders.

Our executive officers, directors and their affiliates beneficially own, in the aggregate, more than 11% of our issued and outstanding common stock as of January 31, 2023. If they were to act together, these stockholders would have significant influence over most matters requiring approval by stockholders, including the election of directors, any amendments to our certificate of incorporation and certain significant corporate transactions, including potential merger or acquisition transactions. In addition, without the consent of these stockholders, we could be delayed or prevented from entering into transactions that could be beneficial to us or our other investors. These stockholders may take these actions even if they are opposed by our other investors.

We have certain provisions in our certificate of incorporation and bylaws which may have an anti-takeover effect or that may delay, defer or prevent acquisition bids for us that a stockholder might consider favorable and limit attempts by our stockholders to replace or remove our current management.

Our Board of Directors is authorized to create and issue from time to time, without stockholder approval, up to an aggregate of 5,000,000 shares of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval, and which may include rights superior to the rights of the holders of common stock. In addition, our bylaws establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions the stockholders desire.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action or proceeding asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (iv) any action or proceeding asserting a claim that is governed by the internal affairs doctrine, shall be the Court of Chancery of the State of Delaware.

This provision does not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended, for which the U.S. federal courts have exclusive jurisdiction, or the Securities Act of 1933, as amended.

Any person or entity purchasing or otherwise acquiring or holding or owning (or continuing to hold or own) any interest in any of our securities shall be deemed to have notice of and consented to the foregoing provisions. Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the exclusive forum provision may (i) increase the costs for a stockholder, and/or (ii) limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, other employees, stockholders, or others which may discourage lawsuits with respect to such claims. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provision. Further, in the event a court finds the exclusive forum provision contained in our amended and restated certificate of incorporation to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations.

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General Risk Factors

Cash investments are subject to risks.

We may invest our excess cash in securities or money market funds backed by securities, which may include U.S. treasuries, other federal, state and municipal debt, bonds, preferred stock, commercial paper, insurance contracts and other securities both privately and publicly traded. All securities are subject to risk, including fluctuations in interest rates, credit risk, market risk, and systemic economic risk. Changes or movements in any of these investment-related risk items may result in a loss or impairment to our invested cash and may have a material effect on our consolidated results of operations and financial position.

Macroeconomic factors such as high fuel prices, declines in commodity prices, fluctuations in used car prices, and vehicle-related technological advances may have an adverse effect on our revenues and operating results, as well as our earnings growth rates.

Macroeconomic factors that affect oil prices and the automobile and commodity markets can have adverse effects on our revenues, revenue growth rates (if any), and operating results. Significant increases in the cost of fuel could lead to a reduction in miles driven per car and a reduction in accident rates. A material reduction in accident rates, whether due to, among other things, a reduction in miles driven per car, vehicle-related technological advances such as accident avoidance systems and, to the extent widely adopted, the advent of autonomous vehicles, could have a material impact on revenue growth. Similarly, a reduction in total loss frequency rates, due to among other things, sharp increases in used car prices that make it less economical for insurance company sellers to declare a vehicle involved in an accident a total loss, could also have a material impact on revenue growth. In addition, under our Percentage Incentive Program contracts, which we refer to as PIP, the cost of transporting the vehicle to one of our facilities is included in the PIP fee. We may incur increased fees, which we may not be able to pass on to our vehicle sellers. A material increase in transportation rates could have a material impact on our operating results. Volatility in fuel, commodity, and used car prices could have a material adverse effect on our revenues and revenue growth rates in future periods.

Adverse U.S. and international economic conditions may negatively affect our business, operating results, and financial condition.

The capital and credit markets have historically experienced extreme volatility and disruption, which has in the past and may in the future lead to economic downturns in the U.S. and abroad. As a result of any economic downturn, the number of miles driven may decrease, which may lead to fewer accident claims, a reduction of vehicle repairs, and fewer salvage vehicles. Increases in unemployment, as a result of any economic downturn, may lead to an increase in the number of uninsured motorists. Uninsured motorists are responsible for disposition of their vehicle if involved in an accident. Disposition generally is either the repair or disposal of the vehicle. In the situation where the owner of the wrecked vehicle, and not an insurance company, is responsible for its disposition, we believe it is more likely that vehicle will be repaired or, if disposed, disposed through channels other than us. Adverse credit markets may also affect the ability of members to secure financing to purchase salvaged vehicles which may adversely affect demand. In addition, if the banking system or the financial markets deteriorate or are volatile, our credit facility or our ability to obtain additional debt or equity financing may be affected. These adverse economic conditions and events may have a negative effect on our business, consolidated results of operations, and financial position.

Fluctuations in foreign currency exchange rates could result in declines in our reported revenues and earnings.

Our reported revenues and earnings are subject to fluctuations in currency exchange rates. We do not engage in foreign currency hedging arrangements; consequently, foreign currency fluctuations may adversely affect our revenues and earnings. Should we choose to engage in hedging activities in the future we cannot be assured our hedges will be effective or that the costs of the hedges will not exceed their benefits. Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies, primarily the British pound, Canadian dollar, Brazilian real, European Union euro, U.A.E. dirham, Omani rial, and Bahraini dinar could adversely affect our consolidated results of operations and financial position.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

a)Exhibits

3.1	Amended and Restated Certificate of Incorporation of Copart, Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on November 2, 2022)
3.2	Amended and Restated Bylaws of Copart, Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on March 31, 2022)
10	Executive Officer Employment Agreement, effective December 5, 2022, between the registrant and Leah Stearns
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3**	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Date File, formatted in Inline Extensible Business Reporting Language (iXBRL) and contained in Exhibit 101
*	Filed herewith
**	The certifications furnished in Exhibits 32.1, 32.2 and 32.3 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

COPART, INC.

/s/ LEAH STEARNS

Leah Stearns, Chief Financial Officer

(Principal Financial and Accounting Officer and duly Authorized Officer)

Date: February 24, 2023

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EX-10

EXHIBIT 10

NOTE : CERTAIN NON-MATERIAL AND CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM ATTACHED EXHIBIT B.

COPART, INC.

EXECUTIVE OFFICER

EMPLOYMENT AGREEMENT

This Executive Officer Employment Agreement is entered into with an effective date of December 5, 2022 (the “Effective Date”) by and between Copart, Inc., headquartered in Texas (the “Company”), and Leah Stearns (the “Executive”).

1.    Duties and Scope of Employment.

(a)    Position and Duties. As of the Effective Date, Executive will serve as Senior Vice President and Chief Financial Officer. Executive will render such business and professional services in the performance of her duties, consistent with Executive’s position within the Company, as shall reasonably be assigned to her by either of the co-Chief Executive Officers (co-CEO’s) (together, “Senior Management”) and as are contemplated by the Company’s bylaws. During the term of Executive’s employment with the Company, Executive shall report to and be subject to the directives of the Board of Directors (the “Board”) and Senior Management. Executive shall also abide by the provisions of the Company’s employee handbook, any ethics and compliance directives, and other policies and procedures adopted by the Company. The period of Executive’s employment under this Agreement is referred to herein as the “Employment Term.” Executive’s successful completion of a drug and background check with satisfactory results is a condition precedent to Company’s obligations under this Agreement.

(b)    Obligations. During the Employment Term, Executive will perform her duties faithfully and to the best of her ability and will devote her full business efforts and time to the Company. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of a co-CEO, subject to the terms of Section 8, below.

2.    Employment Terms.

(a)    Basic "At Will" Rule. The Employment Term shall begin upon the Effective Date and shall continue thereafter until terminated by the Company or Executive. Executive acknowledges and agrees that her employment with the Company is “at will” and may be terminated at any time, with or without notice, with or without good cause, or for any or no cause, at the option of either the Company or Executive. Executive understands and agrees that neither her job performance nor promotions, commendations, bonuses or the like from the Company shall give rise to, or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of Executive’s at-will employment with the Company.

(b)    Termination. If the Company terminates Executive’s employment at any time for any reason other than Cause or Disability, both as defined below, or if Executive terminates her employment at any time for Good Reason, as defined below, the provisions of Section 9(a)(i) shall apply. If Executive terminates her employment at any time other than for Good Reason, the provisions of Section 9(a)(ii) shall apply. Upon termination of Executive’s employment with the Company, Executive’s rights under any applicable benefit plans shall be determined under the provisions of those plans.

(c)    Death. Executive’s employment shall terminate in the event of her death. The Company shall have no obligation to pay or provide any compensation or benefits under this Agreement on account of Executive’s death, or for periods following Executive’s death; provided, however, that the Company’s obligations under Section 9(a)(i) shall not be interrupted as a result of Executive’s death subsequent to a termination to which such paragraph applies. Executive’s rights under the benefit plans of the Company in the event of Executive’s death shall be determined under the provisions of those plans.

(d)    Cause. For all purposes under this Agreement, “Cause” shall mean Executive’s:

(i)    willful or grossly negligent failure to substantially perform her duties hereunder;

(ii)    commission of gross misconduct which is injurious to the Company;

(iii)    breach of a material provision of this Agreement (including, without limitation, Section 10) or the agreements, policies, practices, and ethics and compliance directives incorporated herein by reference;

(iv)    material violation of a federal or state law or regulation applicable to the business of the Company;

(v)    misappropriation or embezzlement of Company funds or an act of fraud or dishonesty upon the Company made by Executive;

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(vi)    conviction of, or plea of nolo contendre to, a felony; or

(vii)    continued failure to comply with directives of Senior Management.

(e)    No act, or failure to act, by Executive shall be considered “willful” unless committed (1) without good faith and (2) without a reasonable belief that the act or omission was in the Company’s best interest. No compensation or benefits will be paid or provided to Executive under this Agreement on account of a termination for Cause, or for periods following the date when such a termination of employment is effective. Executive’s rights under the benefit plans of the Company shall be determined under the provisions of those plans.

(f)    Disability. The Company may terminate Executive’s employment for Disability by giving Executive 30 days’ advance notice in writing. For all purposes under this Agreement, “Disability” shall mean that Executive, at the time notice is given, has been unable to substantially perform her duties under this Agreement for a period of not less than six (6) consecutive months as the result of her incapacity due to physical or mental illness. In the event that Executive resumes the performance of substantially all of her duties hereunder before the termination of her employment under this subparagraph (f) becomes effective, the notice of termination shall automatically be deemed to have been revoked. No compensation or benefits will be paid or provided to Executive under this Agreement on account of termination for Disability, or for periods following the date when such a termination of employment is effective. Executive’s rights under the benefit plans of the Company shall be determined under the provisions of those plans.

(g)    Good Reason. Employment with the Company may be regarded as having been constructively terminated by the Company, and Executive may therefore terminate her employment for “Good Reason” within 30 days following the expiration of any Company cure period (as described below) and thereupon become entitled to the benefits of Sections 9(a)(i) below, if one or more of the following events (described in clauses (i) through (iii) below) shall have occurred without Executive’s prior written consent. Executive will not resign for “Good Reason” without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within 90 days of the initial existence of such grounds for “Good Reason” and a reasonable cure period of 30 days following the date of such notice, provided that such grounds for “Good Reason” can be adequately cured.

(i)    the assignment to Executive of any duties or the reduction of Executive’s duties, either of which results in a material diminution in Executive’s position or responsibilities with the Company in effect immediately prior to such assignment, or the removal of Executive from such position and responsibilities (other than a promotion or similar move to another position);

(ii)    a material reduction by the Company or any of its wholly-owned subsidiaries in the Base Salary (as defined below) of Executive as in effect immediately prior to such reduction; or

(iii)    a breach by the Company or any of its wholly-owned subsidiaries of a material provision of this Agreement.

3.    Reserved.

4.    Compensation.

(a)    Base Salary. For all services to be rendered by Executive pursuant to this Agreement, the Company agrees to pay Executive during the Employment Term a base salary (the “Base Salary”) at an annual rate of $550,000. The Base Salary may be paid through the payroll of either Company or its subsidiary. In either case, the Base Salary shall be paid in accordance with Company’s or the subsidiary’s regular payroll practices. The Company agrees to review the Base Salary at least annually after the conclusion of the Company’s fiscal year and to make such adjustments therein as the Board may approve.

(b)    Annual Bonus. Beginning with the Company’s 2023 fiscal year and for each fiscal year thereafter during the Employment Term, Executive will be eligible to earn an annual bonus (the “Bonus”) based upon Executive’s contributions and performance, in the form of cash in an amount up to $450,000, as determined by Senior Management and approved by the Board or any authorized committee (the “Committee”). The earning and payment of an annual bonus shall be a discretionary decision of the Committee and may be pro-rated during the first partial fiscal year of Executive’s employment. The Bonus, if any, will be paid as soon as practical following the determination by the Board or the Committee that the terms of the Bonus have been satisfied and amount calculated, but in no event after the fifteenth day of the third month of the Company’s fiscal year or the calendar year, whichever is later, following the date the Bonus is awarded and calculated and it is no longer subject to a substantial risk of forfeiture. To be eligible to earn the Bonus, to encourage Executive’s retention, Executive must be employed by the Company on the day the Bonus is paid.

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(c)    Equity Grants. Senior Management will recommend to the Company’s Board of Directors or its Committee after commencement of Executive’s employment that Executive receive a grant of options to purchase with respect to 180,000 shares of Copart’s Common Stock, and a grant of 60,000 Restricted Stock Units. Such grants will be subject to vesting conditions (time-based, performance-based, and/or other conditions) and other conditions and terms as determined in the sole discretion of the Board of Directors and/or its Committee, and further subject to applicable policies then in effect or implemented thereafter. Any grant will be subject to the approval of the Board of Directors or its Committee. Any grant will be priced in accordance with Company’s equity incentive plan and Company’s policies governing equity awards. Thereafter Executive will be eligible to participate in future grants in amounts commensurate with her position, at intervals consistent with similarly situated executives, all subject to recommendation by Senior Management and approval by the Board of Directors or its Committee, in all such cases in their respective sole discretion.

5.    Employee Benefits. During the Employment Term, Executive shall be entitled to participate in employee benefit plans or programs of Company, if any, to the extent that her position, tenure, salary, age, health and other qualifications make her eligible to participate, subject to the rules and regulations applicable thereto. Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

6.    Vacation. Executive will be entitled to paid vacation of three (3) weeks per year in accordance with the Company’s vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

7.    Expenses. Executive shall be entitled to prompt reimbursement for all reasonable ordinary and necessary travel, entertainment, and other expenses incurred by Executive while an employee of Company (in accordance with the policies and procedures established by Company for its senior executive officers) in the performance of her duties and responsibilities under this Agreement; provided, however, that Executive shall properly and promptly account for such expenses in accordance with Company’s policies and procedures.

8.    Other Activities. Executive shall devote substantially all of her working time and efforts during Company’s normal business hours to the business and affairs of Company and its subsidiaries and to the diligent and faithful performance of the duties and responsibilities duly assigned to her pursuant to this Agreement, except for vacations, holidays and sickness. Executive may, however, devote a reasonable amount of her time to civic, community, or charitable activities and, with the prior written approval of Senior Management, serve as a director of other corporations and to other types of business or public activities not expressly mentioned in this paragraph. In addition, subject to the first sentence of this Section 8, Senior Management acknowledges its approval of Employee continuing the activities listed in Exhibit B to this Agreement.

9.    Termination Benefits. Executive shall be entitled to receive severance and other benefits upon a termination of employment only as follows:

(a)    Severance.

(i)    Involuntary Termination. If the Company terminates Executive’s employment other than for Disability or Cause, or if Executive terminates her employment for Good Reason, then, in lieu of any severance benefits to which Executive may otherwise be entitled under any Company severance plan or program, and subject to the remaining provisions of this Section 9, Executive shall be entitled to a lump sum payment equal to Fifty Percent (50%) of Executive’s then-current Base Salary, less applicable tax withholding.

(ii)    Other Termination. In the event Executive’s employment terminates for any reason other than as described in Section 9(a)(i) above, including by reason of Executive’s death or Disability, the Company’s termination of Executive for Cause, or Executive’s resignation other than for Good Reason, then Executive shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing severance and benefit plans and policies at the time of such termination, if any.

(b)    Release of Claims Agreement. The receipt of any severance payments or benefits pursuant to Section 9(a)(i) or any other section of this Agreement is contingent upon Executive signing and not revoking a severance agreement and release of claims in a form reasonably acceptable to the Company (the “Release”), which must become effective no later than the 60th day following Executive’s delivery of the Release (the “Release Deadline”), and if not, Executive will be ineligible for severance payments or benefits under this Agreement. To become effective, the Release must be executed by Executive and any revocation periods (as required by statute, regulation, or otherwise) must have expired without Executive having revoked the Release. In addition, no severance payments or benefits will be paid or provided until the Release actually becomes effective.

(c)    Section 409A.

(i)    Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Payments”)

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will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

(ii)    Any severance payments or benefits under this Agreement that would be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executive’s separation from service, or, if later, such time as required by Section 9(c)(iii). Except as required by Section 9(c)(iii), any installmentpayments that would have been made to Executive during the sixty (60) day period immediately following Executive’s separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executive’s separation from service and the remaining payments shall be made as provided in this Agreement.

(iii)    Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” (“Specified Employee”) within the meaning of Section 409A at the time of Executive’s termination, then any Deferred Payments, which are otherwise due to Executive on or within the six (6) month period following Executive’s termination will accrue during such six (6) month period and will become payable in a lump sum payment on the date six (6) months and one (1) day following the date of Executive’s separation from service or the date of Executive’s death, if earlier. All Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Treasury Regulation Section 1.409A-2(b)(2).

(iv)    Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4) will not constitute Deferred Payments for purposes of clause (i) above.

(v)    Amounts paid under the Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) that do not exceed the Section 409A Limit will not constitute Deferred Payments for purposes of clause (i) above. For this purpose, “Section 409A Limit” means the lesser of two (2) times: (A) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during Executive’s taxable year preceding the taxable year of Executive’s termination of employment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (B) the maximum amount that may be taken into account under a qualified plan pursuant to Code Section 401(a)(17) for the year in which Executive’s employment is terminated.

(vi)    The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

(d)    No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement (whether by seeking new employment or in any other manner).

10.    Protective Covenants. Executive agrees that the covenants below (i) are reasonable and necessary for the protection of legitimate business interests of Company, including its Proprietary Information, (ii) are not against the public interest, and (iii) do not place an unreasonable burden upon Executive’s ability to earn a living.

(a)    Definitions. “Company Entity” means the Company and any of its affiliates or subsidiaries for which Executive provides services or about which Executive receives Proprietary Information. “Customer” means a person or entity doing business with a Company Entity and with whom/which Executive has had business-related contact on behalf of a Company Entity or about whom/which Executive obtains Proprietary Information through her employment with the Company. A “Competing Business” is a person or entity that is in the business of auctioning, processing, buying, or selling used or salvage vehicles, or otherwise provides products or services that would displace any products or services of a Company Entity. “Disparage” means any negative statement, whether written or oral, about any Company Entity or any Company Entity directors, officers, employees, products or services.

(b)    Non-Disparagement. During the Employment Term and thereafter, Executive shall not disparage any Company Entity, or any Company Entity directors, officers, employees, products or services. and shall take no action which is intended, or would reasonably be expected, to harm any Company Entity or Company Entity directors, officers, employees, products or services or their reputation or which would reasonably be expected to lead to unwanted or unfavorable publicity to a Company Entity. The parties agree and acknowledge that this non-disparagement provision is a material term of this Agreement, the absence of which would have resulted in the Company refusing to enter into this Agreement.

(c)    Proprietary Information. During the Employment Term and thereafter, Executive shall not, without the prior written consent of the Board, disclose or use for any purpose (except in the course of her employment under this Agreement and in furtherance of the business of the Company Entities) any confidential information or proprietary data of any Company Entity,

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including without limitation, any information or data regarding the Company’s results of operations, financial condition, financial methods, or the Company’s business methods, ideas, plans or strategies. As an express condition of Executive’s employment with the Company, Executive agrees to execute a Confidentiality and Intellectual Property Assignment Agreement in the form attached hereto as Exhibit A, and any such additional confidentiality agreements as requested by the Company.

(d)    Restriction on Interfering with Employee Relationships. During the Employment Term and for eighteen (18) complete calendar months thereafter, Executive will not, either directly or indirectly, (1) solicit, induce, or encourage any employee of a Company Entity to leave the Company Entity, or (2) help another person or entity to hire away an employee of a Company Entity, unless otherwise expressly authorized in writing to do so by an authorized officer of the Company Entity.

(e)    Restriction on Interfering with Customer Relationships. During the Employment Term and for eighteen (18) complete calendar months thereafter, Executive will not, directly or indirectly, interfere with the relationship between a Company Entity and a Customer. It shall be considered a prohibited act of interference for Executive to participate in soliciting, encouraging, or inducing a Customer (1) to do business with a Competing Business, or (2) to stop or reduce doing business with a Company Entity, except where such conduct is expressly authorized in writing by an authorized officer of the Company Entity. The parties stipulate that this restriction is inherently limited to a reasonable geography or geographic substitute because it is limited to the place or location where the Customer is located at the time.

(f)    Restriction Against Unfair Competition. Executive agrees that during the Employment Term and for a period of eighteen (18) complete calendar months thereafter, Executive will not, directly or indirectly, as an employee, consultant, advisor, contractor, shareholder, director, partner, joint-venturer, or investor, provide services within the United States, (or within any country in which a Company Entity is doing business or within any country in which an affiliate or subsidiary of Copart, Inc. is doing business), to any Competing Business where such services are (1) the same or similar in function or purpose to the services Executive performed for Company during the last two years of Executive’s employment or (2) otherwise likely or probably to result in the use or disclosure of Proprietary Information. The foregoing shall not be construed to prohibit passive investments such as mutual funds or ownership of less than 1% of a publicly-held company’s outstanding stock. The parties stipulate that the geographic limitation used in this restriction is a reasonable given Executive’s high level duties for the Company, the Company’s nationwide and international business, and Executive’s in-depth knowledge of the Company’s Proprietary Information.

11.    Right to Advice of Counsel. Executive acknowledges that she has consulted with counsel and is fully aware of her rights and obligations under this Agreement.

12.    Reporting. Nothing in this Agreement, including the Non-Disparagement provision in Section 10(b) above, shall be construed to prohibit Executive from reporting conduct to, providing truthful information to or participating in any investigation or proceeding conducted by any federal or state government agency or self-regulatory organization.

13.    Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption agreement prior to the effectiveness of any such succession shall entitle Executive to the benefits described in Section 9(a)(i) of this Agreement, subject to the terms and conditions therein.

14.    Assignment. This Agreement and all rights under this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective personal or legal representatives, executors, administrators, heirs, distributees, devisees, legatees, successors and assigns. This Agreement is personal in nature, and Executive shall not, without the prior written consent of the Company, assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity. If Executive should die while any amounts are still payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee or, if there be no such designee, to Executive’s estate.

15.    Absence of Conflict. Executive represents and warrants that her employment by the Company as described herein will not conflict with and will not be constrained by any prior employment or consulting agreement or relationship.

16.    Notices. All notices, requests, demands and other communications called for hereunder shall be in writing and shall be deemed given (i) on the date of delivery, or, if earlier, (ii) one (1) day after being sent by a well-established commercial overnight service, or (iii) three (3) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

If to the Executive:    Leah Stearns

3916 Windsor Ave.

Dallas TX 75205

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If to the Company:    Copart, Inc.

    14185 Dallas Parkway, Suite 300

     Dallas, TX 75254

Attn: Chief Legal Officer

or to such other address or the attention of such other person as the recipient party has previously furnished to the other party in writing in accordance with this paragraph.

17.    Waiver. Failure or delay on the part of either party hereto to enforce any right, power, or privilege hereunder shall not be deemed to constitute a waiver thereof. Additionally, a waiver by either party of a breach of any promise hereunder by the other party shall not operate as or be construed to constitute a waiver of any subsequent breach by such other party.

18.    Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

19.    Arbitration.

(a)    Arbitration. In consideration of Executive’s employment with the Company, the Company’s promise to arbitrate all employment-related disputes and Executive’s receipt of the compensation and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s employment with the Company or the termination of Executive’s employment with the Company, including any breach of this Agreement, shall be subject to binding arbitration. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under State or Federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Texas Labor Code claims of harassment, discrimination or wrongful termination and any statutory claims, as well as and all disputes arising out of or relating to the interpretation or application of Section 19 of this Agreement, including the enforceability, revocability, or validity of this Section. Executive and the Company agree that workers’ compensation claims (other than wrongful discharge claims), claims for unemployment, and disputes that are not subject to arbitration under the Dodd-Frank Wall Street Reform and Consumer Protection Act are excluded from arbitration under this Agreement. Executive further understands that this agreement to arbitrate also applies to any disputes that the Company may have with employee.

(b)    Procedure. The Federal Arbitration Act (“FAA”) applies to this Agreement. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its national rules for the resolution of employment disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes. Executive agrees that the arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator shall issue a written decision on the merits. Executive also agrees that the arbitrator shall have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive shall pay the first $2,000.00 of any fees associated with any arbitration Executive initiates. Any arbitration hereunder shall be conducted in Dallas, Texas.

(c)    Remedy. Except as provided by Section 19(d) of this Agreement, arbitration shall be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided by the FAA, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding any other provision of this Agreement, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(d)    Availability of Injunctive Relief. Notwithstanding any other provision of this Agreement, either party may pursue in court injunctive, declaratory, and other relief incidental to the enforcement of any confidential information, non-disclosure, non-solicitation, and/or non-competition provisions contained in any agreement between the Company and Executive, including, without limitation, the provisions contained in Section 10 of this Agreement. In the event either party seeks such relief, the prevailing party shall be entitled to recover reasonable costs and attorneys’ fees.

(e)    Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the equal employment opportunity

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commission or the workers’ compensation commission. This Agreement does, however, preclude Executive from pursuing court action or remedies regarding any such claim.

20.    Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that she has been provided an opportunity to seek the advice of an attorney before signing this Agreement.

21.    Integration. This Agreement, together with the Exhibits hereto, represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by the Company.

22.    Headings. The headings of the paragraphs contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of any provision of this Agreement.

23.    Applicable Law. This Agreement shall be governed by and construed in accordance with the internal substantive laws, and not the choice of law rules, of the State of Texas. The state and federal courts of Texas shall be the exclusive forum for any non-arbitral disputes arising between the parties to this Agreement.

24.    Cooperation. Executive shall, without further remuneration, provide Executive’s reasonable cooperation in connection with any action or proceeding by a third party (or any appeal from any action or proceeding) that relates to events occurring during or relating to Executive’s employment hereunder. If Executive’s cooperation is needed under this paragraph, the Company shall use reasonable best efforts to schedule Executive’s participation at a mutually convenient time, and shall reimburse Executive for reasonable travel and out-of–pocket expenses (following presentment of reasonable substantiation). This provision shall survive any termination of this Agreement or Executive’s employment.

25.    Counterparts. This Agreement may be executed in one or more counterparts, none of which need contain the signature of more than one party hereto, and each of which shall be deemed to be an original, and all of which together shall constitute a single agreement.

26.    Tax Withholding.    All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

27.    Acknowledgment. Executive acknowledges that she has had the opportunity to discuss this matter with and obtain advice from her private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

IN WITNESS WHEREOF, each of the parties has executed this Executive Officer Employment Agreement, in the case of the Company by its duly authorized officer, as of the day set forth below.

COMPANY:

Copart, Inc.

By: /s/ JEFFREY LIAW     Date: December 6, 2022

    Jeffrey Liaw, Co-CEO

EXECUTIVE

By: /s/ LEAH STEARNS     Date: December 2, 2022

    Leah Stearns

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Exhibit A

COPART CONFIDENTIALITY AND

INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT

(1)    Confidential Information and Trade Secrets

a.    You agree that all non-public information communicated to you with respect to the business of Copart, Inc. and its subsidiaries and affiliated entities (collectively, “Copart”), including without limitation Copart’s business management information system and any other confidential or trade secret information (collectively “Confidential Information”) gained by you by reason of association or employment with Copart, whether or not that Confidential Information was directly, indirectly or unintentionally communicated, shall be treated by you as confidential and shall not be disclosed to anyone without Copart’s express authorization. “Confidential Information” includes, but is not limited to, all data, systems, compilations, programs, devices, strategies, concepts, ideas or methods, regardless of whether kept in a document, electronic storage medium, or in your memory, and any and all information concerning or related to:

(i)    Copart’s financial condition, results of operations, and amounts of compensation paid to officers and employees;

(ii)    marketing and sales programs of Copart and the terms and conditions (including prices) of sales and offers of sales for products and/or services by Copart along with information regarding Copart’s proposed products or designs, whether or not pursued by Copart;

(iii)    the terms, conditions and current status of Copart’s agreements and relationships with any customers, suppliers or other entities;

(iv)    the identities and business preferences of Copart’s actual and prospective customers and/or suppliers or any employee or agent of Copart’s actual and prospective customers and/or suppliers with whom Copart communicates along with Copart’s practices and procedures for identifying prospective customers;

(v)    the names and identities of any and all of Copart’s customers, including any and all customer lists or similar compilations;

(vi)    the manufacturing processes and techniques, regulatory approval strategies, computer programs, data, formulae, and compositions, service techniques and protocols, new product designs and other skills, ideas, and strategic plans possessed, developed, accumulated or acquired by Copart;

(vii)    personnel information including the productivity and profitability (or lack thereof) of Copart’s employees, agents, or independent contractors;

(viii)    any communications between Copart, its officers, directors, shareholders or employees, and/or any attorney retained by Copart for any purpose, or any person retained or employed by such attorney for the purpose of assisting such attorney in his or her representation of Copart;

(ix)    the cost or overhead associated with the goods and services provided by Copart along with Copart’s pricing structure for its goods or services, including its margins, discounts, volume purchases, rebates, mark-ups and/or incentives; and

(x)    any other matter or thing, whether or not recorded on any medium or kept in your memory, (A) by which Copart derives actual or potential economic value from such matter or thing being not generally known to other persons or entities who might obtain economic value from its disclosure or use, or (B) which gives Copart an opportunity to obtain an advantage over its competitors who do not know or use the same.

b.    You promise and agree that, both during and after your employment relationship or association with Copart, you shall not use or disclose any Confidential Information to any other person, unless specifically authorized in writing by an officer of Copart to do so. If an officer of Copart gives you written authorization to make any such disclosures or to use such information, you shall do so only within the limits and to the extent of that authorization. If a time limit is required in order to make this restriction enforceable, then the restrictions on use or disclosure of Confidential Information will only apply for three (3) years after the end of your employment or association where information that does not qualify as a trade secret is concerned (the restrictions will apply to trade secret information for as long as the information remains qualified as a trade secret).

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c.    You acknowledge and agree that the unauthorized use of or disclosure of any Confidential Information constitutes unfair competition for which Copart has no adequate remedy at law thereby making injunctive relief appropriate.

d.    You agree that during your employment or association with Copart, you will not improperly use, disclose, or induce Copart to use any proprietary information or trade secrets of any former employer or other person or entity which you have an obligation to keep in confidence. You further agree that you will not bring onto Copart’s premises or transfer onto Copart’s technology systems any unpublished document, proprietary information, or trade secrets belonging to any such third party unless disclosure to, and use by, Copart has been consented to in writing by such third party.

e.    You acknowledge that Copart has received and will in the future receive confidential or proprietary information belonging to third parties (“Third Party Confidential Information”) subject to a duty on Copart’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. You hereby agree to hold all such Third Party Confidential Information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out your work for Copart consistent with Copart’s agreement with such third party. You further agree to comply with any and all Copart policies and guidelines that may be adopted from time to time regarding Third Party Confidential Information.

2.    Intellectual Property Assignment

a.    As between Copart and you, you agree that all right, title, and interest in and to any and all Company Inventions and Intellectual Property, as defined herein, are the sole property of Copart. “Company Inventions and Intellectual Property” or “CIIP” refers to all inventions, works of authorship, copyright eligible works (such as materials, records, notes, drawings, and software), ideas, designs, developments, improvements, discoveries, and other intellectual property you develop, discover, or create (i) that relate to Copart’s business, or to any actual or demonstrably anticipated research, future work, or projects of Copart, whether or not conceived or developed alone or with others, and whether or not conceived or developed during regular working hours, or (ii) that result from any work you performed for Copart, performed on company time, or performed using Copart’s property, resources, or Confidential Information. You hereby assign to Copart, without further consideration, your entire right, title, and interest (throughout the United States and in all foreign countries) free and clear of all liens and encumbrances in and to all such CIIP, which shall be the sole property of Copart, whether or not patentable. You also agree to promptly make full written disclosure to Copart of any CIIP.

b.    You hereby acknowledge and agree that all writings, ideas, information, and other works which may be copyrighted (including software and computer programs) which are related to the present or planned, or reasonably anticipated business of Copart and are prepared by you (solely or jointly with others) during your relationship with Copart shall be, to the extent permitted by law, deemed to be “works for hire” or the result of “works for hire,” as defined by U.S. copyright laws, with the copyright automatically vesting in Copart. To the extent that such writings and works are not works for hire, you hereby waive any and all rights in such writings and works and hereby assign to Copart all of your present and future rights, title and interest, including copyright, in such writings and works.

c.    Any assignment to Copart of CIIP includes all rights of attribution, paternity, integrity, modification, disclosure and withdrawal, and any other rights throughout the world that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like (collectively, “Moral Rights”). To the extent that Moral Rights cannot be assigned under applicable law, you hereby waive and agree not to enforce any and all Moral Rights, including, without limitation, any limitation on subsequent modification, to the extent permitted under applicable law.

d.    You agree to keep and maintain adequate, current, accurate, and authentic written records of all CIIP made by you (solely or jointly with others) during the term of your employment or association with Copart. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by Copart. As between Copart and you, the records are and will be available to and remain the sole property of Copart at all times.

e.    You further agree to reasonably cooperate with Copart, both during and after employment or association with Copart, in obtaining and enforcing patents, copyrights, trademarks, and other protections of Copart’s rights in and to all CIIP. Without limiting the generality of the foregoing, you shall, at any time during or after employment or association with Copart, at Copart’s request, execute all papers, render all assistance, and perform all lawful acts which Copart considers necessary or advisable for the preparation, filing, prosecution, issuance, procurement, maintenance or enforcement of patents, trademarks, copyrights and other protections, and any applications for any of the foregoing, of the United States or any foreign country for any CIIP and for the transfer of any interest you may have therein. You shall execute any and all papers and documents required to vest title in Copart or its nominee in any CIIP. If Copart is unable because of your mental or physical incapacity or for any reason to secure your signature to apply for or pursue any application for any United States or foreign patent, copyright or other registration covering CIIP, then you hereby irrevocably designate and appoint Copart and its duly authorized officers and agents as your agent and attorney in fact, to act for and on your behalf to do all lawfully permitted acts to further the prosecution and issuance of such registrations with the same legal force and effect as if executed by you.

9

f.    Attached hereto as Schedule A is a list describing all inventions, original works of authorship, developments, improvements and trade secrets that were made by you prior to your employment with Copart, that relate to Copart’s proposed business, products or research and development, and are owned in whole or in part by you (“Prior Inventions”); or, if no such list is attached or if Schedule A is unsigned, you represent that there are no such Prior Inventions. You agree that you will not incorporate, or permit to be incorporated, any Prior Invention into any Copart product, process or service without Copart’s prior written consent.

3.    Conflicting Obligations

You hereby represent and warrant that you have no other agreements, relationships, or commitments to any other person or entity that conflict with the provisions of this Agreement, your obligations to Copart under this Agreement, or your ability to perform the services for which you are being retained by Copart. You further agree that if you have signed a confidentiality agreement or similar type of agreement with any former employer or other entity, you will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. You represent and warrant that after undertaking a careful search (including searches of your computers, cell phones, electronic devices, and documents), you have returned all property and confidential information belonging to all prior employers (and/or other third parties you have performed services for in accordance with the terms of your applicable agreement).

4.    Return of Company Materials

Following the end of your employment or association with Copart or at any time upon demand from Copart, you will immediately deliver to Copart, and will not keep in your possession, recreate, or deliver to anyone else, any and all Copart property, including, but not limited to, Confidential Information, Third Party Confidential Information, all devices and equipment belonging to Copart (including computers, handheld electronic devices, telephone equipment, and other electronic devices), all tangible embodiments of the CIIP, all electronically stored information and passwords to access such property, Copart credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any of the foregoing items, including, without limitation, those records maintained pursuant to Section 2(e). You also hereby consent to an exit interview (at Copart’s election) to confirm your compliance with this Section 4.

5.    Defend Trade Secrets Act

Pursuant to the Defend Trade Secrets Act of 2016, you acknowledge that you shall not have criminal or civil liability under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, if you file a lawsuit for retaliation by Copart for reporting a suspected violation of law, you may disclose the trade secret to your attorney and may use the trade secret information in the court proceeding, if you (X) file any document containing the trade secret under seal and (Y) do not disclose the trade secret, except pursuant to court order.

6.    Miscellaneous

a.    The laws of the State of Texas (without regard to Texas’s conflict of law rules), as well as any and all applicable federal law, including U.S. copyright laws, shall apply to this Agreement. You hereby expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in Dallas County, Texas, for any lawsuit arising out of this Agreement.

b.    This Agreement will be binding upon your heirs, executors, assigns, administrators, and other legal representatives, and will be for the benefit of Copart, its successors, and its assigns. There are no intended third-party beneficiaries to this Agreement, except as may be expressly otherwise stated. Notwithstanding anything to the contrary herein, Copart may assign this Agreement and its rights and obligations under this Agreement to any successor to all or substantially all of Copart’s relevant assets, whether by merger, consolidation, reorganization, reincorporation, sale of assets or stock, or otherwise, without the need for further consent by you.

c.    This Agreement, together with Schedule A, sets forth the entire agreement and understanding between the Company and you with respect to the subject matters contained herein and supersedes all prior written and oral agreements, discussions, or representations between us regarding these subject matters.

d.    If a court or other body of competent jurisdiction finds, or the parties mutually believe, any provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision will be enforced to the maximum extent permissible so as to effect the intent of the parties, and the remainder of this Agreement will continue in full force and effect.

10

e.    No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in a writing signed by the President or CEO of Copart and you. Waiver by Copart of a breach of any provision of this Agreement will not operate as a waiver of any other or subsequent breach.

f.    The rights and obligations of the parties to this Agreement will survive termination of your employment or association with Copart.

Acknowledged and agreed:

/s/ LEAH STEARNS December 2, 2022______________

Leah Stearns Date

11

Schedule A

LIST OF PRIOR INVENTIONS

If you have Prior Inventions, please list them in the space below. If you do not have any Prior Inventions or you would like to include additional Prior Inventions on separate pages, check the appropriate box at the bottom of the page.

    Title        Date        Identifying Number or Brief Description    

Check the following as applicable:

_____    All of my Prior Inventions are listed above

X     I have no Prior Inventions

_____    I have attached additional sheets describing my prior inventions

/s/ LEAH STEARNS December 2, 2022______________

Leah Stearns Date

12

Exhibit B

PRE-APPROVED OTHER ACTIVITIES

(Section 8 of Executive Officer Employment Agreement)

[Information Omitted From This Exhibit B]

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, A. Jayson Adair, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Copart, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2023

/s/ A. JAYSON ADAIR

A. Jayson Adair

Co-Chief Executive Officer

(Principal Executive Officer), Director

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey Liaw, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Copart, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2023

/s/ JEFFREY LIAW

Jeffrey Liaw

Co-Chief Executive Officer

(Principal Executive Officer)

EX-31.3

EXHIBIT 31.3

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Leah Stearns, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Copart, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2023

/s/ LEAH STEARNS

Leah Stearns

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, A. Jayson Adair, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge, the Quarterly Report of Copart, Inc. on Form 10-Q for the quarter ended January 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Copart, Inc.

/s/ A. JAYSON ADAIR

A. Jayson Adair

Co-Chief Executive Officer

(Principal Executive Officer), Director

Date: February 24, 2023

A signed original of this written statement required by Section 906 has been provided to Copart, Inc. and will be retained by Copart, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing except to the extent that the Company specifically incorporates it by reference.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey Liaw, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge, the Quarterly Report of Copart, Inc. on Form 10-Q for the quarter ended January 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Copart, Inc.

/s/ JEFFREY LIAW

Jeffrey Liaw

Co-Chief Executive Officer

(Principal Executive Officer)

Date: February 24, 2023

A signed original of this written statement required by Section 906 has been provided to Copart, Inc. and will be retained by Copart, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing except to the extent that the Company specifically incorporates it by reference.

EX-32.3

EXHIBIT 32.3

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Leah Stearns, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge, the Quarterly Report of Copart, Inc. on Form 10-Q for the quarter ended January 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Copart, Inc.

/s/ LEAH STEARNS

Leah Stearns

Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: February 24, 2023

A signed original of this written statement required by Section 906 has been provided to Copart, Inc. and will be retained by Copart, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing except to the extent that the Company specifically incorporates it by reference.

XML

Cover - shares	6 Months Ended
	Jan. 31, 2023	Feb. 23, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jan. 31, 2023
Document Transition Report	false
Entity Registrant Name	COPART, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	000-23255
Entity Tax Identification Number	94-2867490
Entity Address, Address Line One	14185 Dallas Parkway
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75254
City Area Code	972
Local Phone Number	391-5000
Title of 12(b) Security	Common Stock, par value $0.0001
Trading Symbol	CPRT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Smaller reporting company	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		476,592,516
Entity Central Index Key	0000900075
Current Fiscal Year End Date	--07-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus (i.e. Q1,Q2,Q3,FY)	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jan. 31, 2023	Jul. 31, 2022
Current assets:
Cash, cash equivalents, and restricted cash	$ 1,660,952	$ 1,384,236
Accounts receivable, net	765,192	578,573
Vehicle pooling costs	133,598	112,242
Inventories	52,071	58,791
Income taxes receivable	436	49,882
Prepaid expenses and other assets	26,532	18,731
Total current assets	2,638,781	2,202,455
Property and equipment, net	2,656,273	2,485,764
Operating lease right-of-use assets	106,656	116,303
Intangibles, net	51,186	54,680
Goodwill	404,046	401,954
Other assets	75,466	47,708
Total assets	5,932,408	5,308,864
Current liabilities:
Accounts payable and accrued liabilities	439,271	399,034
Deferred revenue	23,796	20,061
Income taxes payable	3,820	0
Current portion of operating and finance lease liabilities	20,736	21,794
Total current liabilities	487,623	440,889
Deferred income taxes	76,471	80,060
Income taxes payable	65,322	64,637
Operating and finance lease liabilities, net of current portion	87,394	95,683
Long-term debt and other liabilities	1,946	1,996
Total liabilities	718,756	683,265
Commitments and contingencies
Stockholders’ equity:
Preferred stock: $0.0001 par value - 5,000,000 shares authorized; none issued	0	0
Common stock: $0.0001 par value - 1,600,000,000 shares authorized; 476,564,148 and 476,081,948 shares issued and outstanding, respectively.	48	48
Additional paid-in capital	875,009	838,508
Accumulated other comprehensive loss	(156,507)	(169,365)
Retained earnings	4,495,102	3,956,408
Total stockholders’ equity	5,213,652	4,625,599
Total liabilities and stockholders’ equity	$ 5,932,408	$ 5,308,864

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jan. 31, 2023	Jul. 31, 2022
Statement of Financial Position [Abstract]
Preferred stock par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	1,600,000,000	1,600,000,000
Common stock, shares issued (in shares)	476,564,148	476,081,948
Common stock, shares outstanding (in shares)	476,564,148	476,081,948

XML

Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022
Service revenues and vehicle sales	$ 956,724	$ 867,460	$ 1,850,096	$ 1,677,592
Operating expenses:
Yard operations	375,497	323,814	748,274	622,508
Cost of vehicle sales	154,727	140,304	305,839	266,712
General and administrative	60,975	56,014	118,955	110,923
Total operating expenses	591,199	520,132	1,173,068	1,000,143
Operating income	365,525	347,328	677,028	677,449
Other expense:
Interest income (expense), net	14,480	(4,433)	18,902	(9,540)
Other expense, net	(2,902)	(840)	(5,724)	(28)
Total other income (expense)	11,578	(5,273)	13,178	(9,568)
Income before income taxes	377,103	342,055	690,206	667,881
Income tax expense	83,426	54,643	150,681	120,106
Net income	$ 293,677	$ 287,412	$ 539,525	$ 547,775
Basic net income per common share (in dollars per share)	$ 0.62	$ 0.61	$ 1.13	$ 1.15
Weighted average common shares outstanding (in shares)	476,376	474,372	476,237	474,334
Diluted net income per common share (in dollars per share)	$ 0.61	$ 0.60	$ 1.12	$ 1.14
Diluted weighted average common shares outstanding (in shares)	482,536	482,374	482,238	482,488
Service revenues
Service revenues and vehicle sales	$ 789,797	$ 711,090	$ 1,516,637	$ 1,378,908
Vehicle sales
Service revenues and vehicle sales	$ 166,927	$ 156,370	$ 333,459	$ 298,684

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022
Comprehensive income, net of tax:
Net income	$ 293,677	$ 287,412	$ 539,525	$ 547,775
Other comprehensive income:
Foreign currency translation adjustments	42,429	(12,124)	12,858	(22,642)
Comprehensive income	$ 336,106	$ 275,288	$ 552,383	$ 525,133

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Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings
Outstanding shares, beginning balance (in shares) at Jul. 31, 2021		474,028,546
Stockholders' equity, beginning balance at Jul. 31, 2021	$ 3,529,201	$ 48	$ 761,810	$ (100,860)	$ 2,868,203
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	260,363				260,363
Currency translation adjustment	(10,518)			(10,518)
Exercise of stock options, net of repurchased shares (in shares)		291,972
Exercise of stock options, net of repurchased shares	5,323		5,572		(249)
Stock-based compensation (in shares)		42,182
Stock-based compensation	9,452		9,452
Outstanding shares, ending balance (in shares) at Oct. 31, 2021		474,362,700
Stockholders' equity, ending balance at Oct. 31, 2021	3,793,821	$ 48	776,834	(111,378)	3,128,317
Outstanding shares, beginning balance (in shares) at Jul. 31, 2021		474,028,546
Stockholders' equity, beginning balance at Jul. 31, 2021	3,529,201	$ 48	761,810	(100,860)	2,868,203
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	547,775
Outstanding shares, ending balance (in shares) at Jan. 31, 2022		474,948,984
Stockholders' equity, ending balance at Jan. 31, 2022	4,089,856	$ 48	797,931	(123,502)	3,415,379
Outstanding shares, beginning balance (in shares) at Oct. 31, 2021		474,362,700
Stockholders' equity, beginning balance at Oct. 31, 2021	3,793,821	$ 48	776,834	(111,378)	3,128,317
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	287,412				287,412
Currency translation adjustment	(12,124)			(12,124)
Exercise of stock options, net of repurchased shares (in shares)		492,902
Exercise of stock options, net of repurchased shares	6,063		6,413		(350)
Stock-based compensation (in shares)		5,534
Stock-based compensation	9,662		9,662
Shares issued for Employee Stock Purchase Plan (in shares)		87,848
Shares issued for Employee Stock Purchase Plan	5,022		5,022
Outstanding shares, ending balance (in shares) at Jan. 31, 2022		474,948,984
Stockholders' equity, ending balance at Jan. 31, 2022	$ 4,089,856	$ 48	797,931	(123,502)	3,415,379
Outstanding shares, beginning balance (in shares) at Jul. 31, 2022	476,081,948	476,081,948
Stockholders' equity, beginning balance at Jul. 31, 2022	$ 4,625,599	$ 48	838,508	(169,365)	3,956,408
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	245,848				245,848
Currency translation adjustment	(29,571)			(29,571)
Exercise of stock options, net of repurchased shares (in shares)		75,554
Exercise of stock options, net of repurchased shares	766		1,061		(295)
Stock-based compensation (in shares)		38,312
Stock-based compensation	10,192		10,192
Outstanding shares, ending balance (in shares) at Oct. 31, 2022		476,195,814
Stockholders' equity, ending balance at Oct. 31, 2022	$ 4,852,834	$ 48	849,761	(198,936)	4,201,961
Outstanding shares, beginning balance (in shares) at Jul. 31, 2022	476,081,948	476,081,948
Stockholders' equity, beginning balance at Jul. 31, 2022	$ 4,625,599	$ 48	838,508	(169,365)	3,956,408
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 539,525
Exercise of stock options, net of repurchased shares (in shares)	299,000
Outstanding shares, ending balance (in shares) at Jan. 31, 2023	476,564,148	476,564,148
Stockholders' equity, ending balance at Jan. 31, 2023	$ 5,213,652	$ 48	875,009	(156,507)	4,495,102
Outstanding shares, beginning balance (in shares) at Oct. 31, 2022		476,195,814
Stockholders' equity, beginning balance at Oct. 31, 2022	4,852,834	$ 48	849,761	(198,936)	4,201,961
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	293,677				293,677
Currency translation adjustment	42,429			42,429
Exercise of stock options, net of repurchased shares (in shares)		223,426
Exercise of stock options, net of repurchased shares	9,218		9,754		(536)
Stock-based compensation (in shares)		30,351
Stock-based compensation	10,131		10,131
Shares issued for Employee Stock Purchase Plan (in shares)		114,557
Shares issued for Employee Stock Purchase Plan	$ 5,363		5,363
Outstanding shares, ending balance (in shares) at Jan. 31, 2023	476,564,148	476,564,148
Stockholders' equity, ending balance at Jan. 31, 2023	$ 5,213,652	$ 48	$ 875,009	$ (156,507)	$ 4,495,102

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022
Cash flows from operating activities:
Net income	$ 539,525	$ 547,775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost	78,094	65,627
Allowance for credit loss	2,133	1,695
Equity in losses of unconsolidated affiliates	4,030	685
Stock-based compensation	20,323	19,114
Gain on sale of property and equipment	(748)	(755)
Deferred income taxes	(3,309)	6,003
Changes in operating assets and liabilities:
Accounts receivable	(186,559)	(152,763)
Vehicle pooling costs	(21,268)	(29,623)
Inventories	8,001	(8,589)
Prepaid expenses, other current and non-current assets	(29,176)	(19,889)
Operating lease right-of-use assets and lease liabilities	414	657
Accounts payable and accrued liabilities	27,619	10,741
Deferred revenue	3,709	(309)
Income taxes receivable	49,430	4,577
Income taxes payable	7,615	1,655
Other liabilities	0	(53)
Net cash provided by operating activities	499,833	446,548
Cash flows from investing activities:
Purchases of property and equipment	(256,719)	(156,200)
Purchase of assets in connection with acquisitions	0	(469)
Proceeds from sale of property and equipment	16,343	1,252
Investment in unconsolidated affiliate	1,993	0
Purchase of held to maturity securities	0	(374,866)
Net cash used in investing activities	(242,369)	(530,283)
Cash flows from financing activities:
Proceeds from the exercise of stock options	10,815	11,985
Proceeds from the issuance of Employee Stock Purchase Plan shares	5,363	5,022
Payments for employee stock-based tax withholdings	(831)	(599)
Payments of finance lease obligations	(13)	(314)
Net cash provided by financing activities	15,334	16,094
Effect of foreign currency translation	3,918	(8,968)
Net increase (decrease) in cash, cash equivalents, and restricted cash	276,716	(76,609)
Cash, cash equivalents, and restricted cash at beginning of period	1,384,236	1,048,260
Cash, cash equivalents, and restricted cash at end of period	1,660,952	971,651
Supplemental disclosure of cash flow information:
Interest paid	706	9,311
Income taxes paid, net of refunds	$ 98,324	$ 128,972

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Summary of Significant Accounting Policies

6 Months Ended

Jan. 31, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation and Description of Business

Copart, Inc. (“the Company”) provides vehicle sellers with a full range of services to process and sell vehicles over the internet through the Company’s Virtual Bidding Third Generation (“VB3”) internet auction-style sales technology. Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers, vehicle rental companies, and individuals. The Company sells principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and directly to the general public. The majority of vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total loss or not economically repairable by the insurance companies or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. The Company offers vehicle sellers a full range of services that expedite each stage of the vehicle sales process, minimize administrative and processing costs and maximize the ultimate sales price through the online auction process. In the United States (“U.S.”), Canada, Brazil, the Republic of Ireland, Finland, the United Arab Emirates (“U.A.E.”), Oman, and Bahrain, the Company sells vehicles primarily as an agent and derives revenue primarily from auction and auction related sales transaction fees charged for vehicle remarketing services as well as fees for services subsequent to the auction, such as delivery and storage. In the United Kingdom (“U.K.”), Germany, and Spain, the Company operates both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for its own account. In Germany and Spain, the Company also derives revenue from listing vehicles on behalf of insurance companies and insurance experts to determine the vehicle’s residual value and/or to facilitate a sale for the insured.

Principles of Consolidation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments of a normal recurring nature considered necessary for fair presentation of the Company’s financial position as of January 31, 2023 and July 31, 2022, its consolidated statements of income, comprehensive income and stockholders’ equity for the three and six months ended January 31, 2023 and 2022, and its cash flows for the six months ended January 31, 2023 and 2022. Interim results for the three and six months ended January 31, 2023 are not necessarily indicative of the results that may be expected for any future period, or for the entire year ending July 31, 2023. These consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2022. Certain prior year amounts have been reclassified to conform to current year presentation.

The consolidated financial statements of the Company include the accounts of the parent company and its wholly-owned subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.

On October 3, 2022, the Company’s Board of Directors approved a two-for-one common stock split effected in the form of a stock dividend subject to and contingent upon, among other things, obtaining stockholder approval of an amendment to the Company’s certificate of incorporation to increase the number of authorized shares of common stock. On October 31, 2022, the Company’s stockholders approved such increase at a special meeting of stockholders. As such, on November 3, 2022, the Company effected the two-for-one stock dividend to stockholders of record as of October 6, 2022. The stock dividend increased the number of shares of common stock outstanding. Certain prior year amounts have been retroactively adjusted to conform to current year presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, but are not limited to, vehicle pooling costs; income taxes; stock-based compensation; and contingencies. Actual results may differ from these estimates.

Revenue Recognition

The Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. Service revenue and vehicle sales revenue are recognized at the date the vehicles are sold at auction, excluding annual registration fees. Costs to prepare the vehicles for auction, including inbound transportation costs and titling fees, are deferred and recognized at the time of revenue recognition at auction.

The Company’s disaggregation between service revenues and vehicle sales at the segment level reflects how the nature, timing, amount and uncertainty of its revenues and cash flows are impacted by economic factors. The Company reports sales taxes on relevant transactions on a net basis in the Company’s consolidated results of operations, and therefore does not include sales taxes in revenues or costs.

Service revenues

The Company’s service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services. Within this revenue category, the Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. These auction and auction related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle; transportation fees for the cost of transporting the vehicle to or from the Company’s facility; title processing and preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees. These services are not distinct within the context of the contract. Accordingly, revenue for these services is recognized when the single performance obligation is satisfied at the completion of the auction process. The Company does not take ownership of these consigned vehicles, which are stored at the Company’s facilities located throughout the U.S. and at its international locations. These fees are recognized as net revenue (not gross vehicle selling price) at the time of auction in the amount of such fees charged.

The Company has a separate performance obligation related to providing access to its online auction platform as the Company charges members an annual registration fee for the right to participate in its online auctions and access the Company’s bidding platform. This fee is recognized ratably over the term of the arrangement, generally one year, as each day of access to the online auction platform represents the best depiction of the transfer of the service.

No provision for returns has been established, as all sales are final with no right of return or warranty, although the Company provides for credit loss expense in the case of non-performance by its buyers or sellers.

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Service revenues
	United States	$	705,733	$	630,707	$	1,357,390	$	1,221,465
	International	84,064		80,383		159,247		157,443
	Total service revenues	$	789,797	$	711,090	$	1,516,637	$	1,378,908

Vehicle sales

Certain vehicles are purchased and remarketed on the Company’s own behalf. The Company has a single performance obligation related to the sale of these vehicles, which is the completion of the online auction process. Vehicle sales revenue is recognized on the auction date. As the Company acts as a principal in vehicle sales transactions, the gross sales price at auction is recorded as revenue.

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Vehicle sales
	United States	$	82,196	$	96,679	$	179,387	$	184,382
	International	84,731		59,691		154,072		114,302
	Total vehicle sales	$	166,927	$	156,370	$	333,459	$	298,684

Contract assets

The Company capitalizes certain contract assets related to obtaining a contract, where the amortization period for the related asset is greater than one year. These assets are amortized over the expected life of the customer relationship. Contract assets are classified as current or long-term other assets, based on the timing of when the Company expects to recognize the related revenues and are amortized as an offset to the associated revenues on a straight-line basis. The Company assesses these costs for impairment at least quarterly and as “triggering” events occur that indicate it is more likely than not that an impairment exists. The contract asset costs where the amortization period for the related asset is one year or less are expensed as incurred and recorded within general and administrative expenses in the accompanying consolidated statements of income.

The change in the carrying amount of contract assets was as follows (In thousands):

Balance as of July 31, 2022	$	4,778
Capitalized contract assets during the period	25,540
Costs amortized during the period	(2,545)
Effect of foreign currency exchange rates	36
Balance as of January 31, 2023	$	27,809

Vehicle Pooling Costs

The Company defers costs that relate directly to the fulfillment of its contracts associated with vehicles consigned to and received by the Company, but not sold as of the end of the period. The Company quantifies the deferred costs using a calculation that includes the number of vehicles at its facilities at the beginning and end of the period, the number of vehicles sold during the period, and an allocation of certain yard operation costs of the period. The primary expenses allocated and deferred are inbound transportation costs, titling fees, certain facility costs, labor, and vehicle processing. If the allocation factors change, then yard operation expenses could increase or decrease correspondingly in the future. These costs are expensed into yard operations expenses as vehicles are sold in subsequent periods on an average cost basis.

Foreign Currency Translation

The Company records foreign currency translation adjustments from the process of translating the functional currency of the financial statements of its foreign subsidiaries into the U.S. dollar reporting currency. The British pound, Canadian dollar, Brazilian real, European Union euro, U.A.E. dirham, Omani rial, and Bahraini dinar are the functional currencies of the Company’s foreign subsidiaries as they are the primary currencies within the economic environment in which each subsidiary operates. The original equity investment in the respective subsidiaries is translated at historical rates. Assets and liabilities of the respective subsidiary’s operations are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars at average exchange rates in effect during each reporting period. Adjustments resulting from the translation of each subsidiary’s financial statements are reported in other comprehensive income.

The cumulative effects of foreign currency exchange rate fluctuations were as follows (In thousands):

Cumulative loss on foreign currency translation as of July 31, 2021	$	(100,860)
Loss on foreign currency translation	(68,505)
Cumulative loss on foreign currency translation as of July 31, 2022	$	(169,365)
Gain on foreign currency translation	12,858
Cumulative loss on foreign currency translation as of January 31, 2023	$	(156,507)

Fair Value of Financial Instruments

The Company records its financial assets and liabilities at fair value in accordance with the framework for measuring fair value in U.S. GAAP. In accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, the Company considers fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants under current market conditions. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

Level I    Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level II    Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly.

Level III    Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate.

The amounts recorded for financial instruments in the Company’s consolidated financial statements, which included cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximated their fair values as of January 31, 2023 and July 31, 2022, due to the short-term nature of those instruments and are classified within Level II of the fair value hierarchy. Cash equivalents are classified within Level II of the fair value hierarchy because they are valued using quoted market prices of the underlying investments.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less at the time of purchase to be cash equivalents. Cash, cash equivalents, and restricted cash include cash held in checking, U.S. Treasury Bills, and money market accounts. The Company periodically invests its excess cash in money market funds and U.S. Treasury Bills. The Company’s cash, cash equivalents, and restricted cash are placed with high credit quality financial institutions. The carrying values of the Company’s cash equivalents that were not carried at fair value in the consolidated balance sheets were $1,477.5 million and $1,237.0 million as of January 31, 2023 and July 31, 2022, respectively, and fair values of the Company’s cash equivalents that were not carried at fair value in the consolidated balance sheets were $1,478.9 million and $1,237.3 million as of January 31, 2023 and July 31, 2022, respectively.

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Acquisitions

6 Months Ended

Jan. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

Fiscal Year 2022 Transactions

On July 5, 2022, the Company acquired 100% of the voting stock of ILT Project Limited which conducts business primarily as Hills Motors (“Hills”), a leading parts recycler in the United Kingdom. Hills predominantly sells recycled parts to the public. The purchase price paid for Hills was $106.6 million.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed for Hills (in thousands).

Cash	$	8,960
Accounts receivable and prepaid expenses	5,348
Inventory	4,913
Property and equipment	22,259
Intangible assets	15,931
Goodwill	56,051
Liabilities assumed	(6,858)
Fair value of net assets and liabilities acquired	$	106,604

The Hills acquisition was undertaken for the strategic fit to the Company. This acquisition has been accounted for using the purchase method in accordance with ASC 805, Business Combinations, which resulted in the recognition of goodwill in the Company’s consolidated financial statements. Goodwill arose because the purchase price reflected a number of factors, including future earnings and cash flow potential; the comparable multiples of earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers; and the complementary strategic fit and resulting synergies brought to existing operations. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and is not amortized for financial reporting purposes. The acquisition of Hills is currently undergoing review by the U.K. Competition and Markets Authority. Given the timing of the acquisition the Company has not completed its determination of the fair value of assets acquired and liabilities assumed and the amount shown in the table above are preliminary amounts. The estimates and assumptions used in the preliminary purchase price allocation are subject to change if additional information, which existed as of the acquisition date, becomes known to the Company. However, the Company believes any changes to the preliminary purchase price allocation will not have a material impact to the Company’s consolidated financial position and results of operations.

The Hills acquisition did not result in a significant change in the Company’s consolidated results of operations; therefore, pro forma financial information has not been presented. The operating results have been included in the Company’s consolidated financial position and results of operations since the acquisition date.

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Accounts Receivable, Net

6 Months Ended

Jan. 31, 2023

Accounts Receivable [Abstract]

Accounts Receivable, Net

Accounts Receivable, Net

Accounts receivable, net consisted of:

(In thousands)	January 31, 2023		July 31, 2022
Advance charges receivable	$	580,966	$	440,650
Trade accounts receivable	160,121		137,243
Other receivables	32,704		7,257
	773,791		585,150
Less: Allowance for credit loss	(8,599)		(6,577)
Accounts receivable, net	$	765,192	$	578,573

Advance charges receivable represents amounts paid to third parties on behalf of insurance companies for which the Company will be reimbursed when the vehicle is sold. As advance charges are recovered within one year, the Company has not adjusted the amount of consideration received from the customer for a significant financing component. Trade accounts receivable includes fees and gross auction proceeds to be collected from insurance companies and buyers.

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Property and Equipment, Net

6 Months Ended

Jan. 31, 2023

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and Equipment, Net

Property and equipment, net consisted of the following:

(In thousands)	January 31, 2023		July 31, 2022
Land	$	1,647,906	$	1,526,446
Buildings and improvements	1,288,499		1,209,331
Transportation and other equipment	459,597		429,405
Office furniture and equipment	86,091		84,728
Software	84,054		78,216
	3,566,147		3,328,126
Less: Accumulated depreciation and amortization	(909,874)		(842,362)
Property and equipment, net	$	2,656,273	$	2,485,764

Depreciation expense on property and equipment was $36.5 million and $31.4 million for the three months ended January 31, 2023 and 2022, respectively, and $73.7 million and $61.3 million for the six months ended January 31, 2023 and 2022, respectively.

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Leases

6 Months Ended

Jan. 31, 2023

Leases [Abstract]

Leases

Leases

The Company has both lessee and lessor arrangements. The Company determines whether a contract is or contains a lease at the inception of the contract or at any subsequent modification. A contract will be deemed to be or contain a lease if the contract conveys the right to control and direct the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the right to obtain substantially all of the economic benefits from the use of the property, plant, and equipment. Depending on the terms, leases are classified as either operating or finance leases if the Company is the lessee, or as operating, sales-type, or direct financing leases if the Company is the lessor. Certain of the Company’s lessee and lessor leases have renewal options to extend the leases for additional periods at the Company’s discretion.

Leases - Lessee

The Company leases certain facilities and certain equipment under non-cancelable finance and operating leases, which are recorded as right-of-use assets and lease liabilities. Certain leases provide the Company with either a right of first refusal to acquire or an option to purchase a facility at fair value. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the right-of-use asset and the lease liabilities. The effects of these escalation clauses or concessions have been reflected in lease expense on a straight-line basis over the expected lease term and any variable lease payments subsequent to establishing the lease liability are expensed as incurred. The lease term commences on the date when the Company has the right to control the use of the leased property, which is typically before lease payments are due under the terms of the lease. Certain of the Company’s leases have renewal periods up to 40 years, exercisable at the Company’s option, and generally require the Company to pay property taxes, insurance and maintenance costs, in addition to the lease payments. At lease inception, the Company includes all renewals or option periods that are reasonably certain to exercise when determining the expected lease term, as failure to renew the lease would impose an economic penalty.

Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the expected lease term. To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates based on the information available at lease commencement date, as rates are not implicitly stated in the Company’s leases.

Components of lease expense were as follows:

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Operating lease expense		$	6,687	$	6,943	$	13,547	$	13,997
Finance lease expense:
	Amortization of right-of-use assets	5		155		12		309
	Interest on finance lease liabilities	—		2		—		4
Short-term lease expense		1,134		1,723		2,303		3,491
Variable lease expense		314		330		553		554
Total lease expense		$	8,140	$	9,153	$	16,415	$	18,355

Supplemental cash flow information related to leases as of January 31, 2023 were as follows:

		Six Months Ended January 31,
(In thousands)		2023		2022
Cash paid for amounts included in the measurement of lease liabilities
	Operating cash flows related to operating leases	$	13,178	$	13,344
	Operating cash flows related to finance leases	—		3
	Financing cash flows related to finance leases	13		314
Right-of-use assets obtained in exchange for new operating lease liabilities		8,597		14,156
Right-of-use assets obtained in exchange for new finance lease liabilities		—		—

Leases - Lessor

The Company’s lessor arrangements include certain facilities and various land locations, of which each qualifies as an operating lease. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the straight-line rental income. The effects of these escalation clauses or concessions have been reflected in lease payments receivable on a straight-line basis over the expected lease term and any variable lease income subsequent to establishing the receivable will be recognized as earned.

The cost of the leased space as of January 31, 2023 and July 31, 2022 was $51.2 million and $51.2 million, respectively. The accumulated depreciation associated with the leased assets as of January 31, 2023 and July 31, 2022 was $3.3 million and $2.8 million, respectively. Both the leased assets and accumulated depreciation are included in Property and equipment, net on the consolidated balance sheet. Rental income from these operating leases was $4.1 million and $3.7 million for the three months ended January 31, 2023 and 2022, respectively, and $8.3 million and $7.2 million for the six months ended January 31, 2023 and 2022, respectively, and is included within Service revenues on the consolidated statements of income.

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Goodwill and Intangible Assets

6 Months Ended

Jan. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

The following table sets forth amortizable intangible assets by major asset class:

(In thousands)	January 31, 2023		July 31, 2022
Amortized intangibles:
Supply contracts and customer relationships	$	72,196	$	71,875
Trade names	18,915		18,896
Licenses and databases	673		633
Accumulated amortization	(40,598)		(36,724)
Intangibles, net	$	51,186	$	54,680

Aggregate amortization expense on amortizable intangible assets was $1.9 million and $1.8 million for the three months ended January 31, 2023 and 2022, respectively, and $3.8 million and $3.7 million for the six months ended January 31, 2023 and 2022, respectively.

The change in the carrying amount of goodwill was as follows:

(In thousands)
Balance as of July 31, 2022	$	401,954
Effect of foreign currency exchange rates	2,092
Balance as of January 31, 2023	$	404,046

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Long-Term Debt

6 Months Ended

Jan. 31, 2023

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Credit Agreement

On December 21, 2021, the Company entered into a Second Amended and Restated Credit Agreement by and among Copart, certain subsidiaries of Copart party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement amends and restates certain terms of the First Amended and Restated Credit Agreement, dated as of July 21, 2020, by and among Copart, the lenders party thereto, and Bank of America, N.A., as administrative agent (as successor in interest to Wells Fargo Bank, National Association) (the “Existing Credit Agreement”). The Second Amended and Restated Credit Agreement provides for, among other things, (a) an increase in the secured revolving credit commitments by $200.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Second Amended and Restated Credit Agreement (the “Revolving Loan Facility”) to $1,250.0 million, (b) an increase in the letter of credit sublimit from $60.0 million to $100.0 million, (c) addition of Copart UK Limited, CPRT GmbH and Copart Autos España, S.L.U., each a wholly-owned direct or indirect foreign subsidiary of Copart, as borrowers, (d) addition of the ability to borrow under the Second and Amended and Restated Credit Agreement in certain foreign currencies including Pounds Sterling, Euro and Canadian Dollars, (e) extension of the maturity date of the revolving credit facility under the Existing Credit Agreement from July 21, 2023 to December 21, 2026, (f) replacing the LIBOR interest rate applicable to U.S. Dollar denominated borrowings with a SOFR-based interest rate, and (g) changing the pricing levels with respect to the revolving loans as further described below.

The Second and Amended and Restated Credit Agreement provides for the Revolving Loan Facility of $1,250.0 million maturing on December 21, 2026 (including up to $550.0 million equivalent of borrowings in Pounds Sterling, Euro and Canadian Dollars) with a $150.0 million equivalent sub-facility available to CPRT GmbH, a $150.0 million equivalent sub-facility available to Copart Autos España, S.L.U. and a $250.0 million equivalent sub-facility available to Copart UK Limited. The proceeds may be used for general corporate purposes, including working capital and capital expenditures, potential share repurchases, acquisitions, or other investments relating to the Company’s expansion strategies in domestic and international markets.

Borrowings under the Second Amended and Restated Credit Agreement bear interest based on, at our option, either (1) the applicable fixed rate plus 1.00% to 1.75% or (2) the daily rate plus 0.0% to 0.75%, in each case, depending on Copart’s consolidated total net leverage ratio. Additionally, the unused revolving commitments under the Second Amended and Restated Credit Agreement are subject to the payment of a customary commitment fee at a range of 0.175% to 0.275%, depending on Copart’s consolidated total net leverage ratio. The applicable fixed rates described above with respect to borrowings denominated in (1) U.S. Dollars is SOFR plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (2) Pounds Sterling is SONIA plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (3) Euro is EURIBOR, and (4) Canadian Dollars is CDOR. The Company had no outstanding borrowings under the Revolving Loan Facility as of January 31, 2023 and July 31, 2022.

The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by certain of the Company’s domestic subsidiaries meeting materiality thresholds set forth in the Second Amended and Restated Credit Agreement. Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the assets of the subsidiary guarantors pursuant to a Security Documents Confirmation Agreement as part of the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends, or make distributions on and repurchase stock, in each case subject to certain exceptions. The Company is also required to maintain compliance, measured at the end of each fiscal quarter, with a consolidated total net leverage ratio and a consolidated interest coverage ratio. The Second Amended and Restated Credit Agreement contains no restrictions on the payment of dividends and other restricted payments, as defined, as long as (1) the consolidated total net leverage ratio, as defined, both before and after giving effect to any such dividend or restricted payment on a pro forma basis, is less than 3.25:1, in an unlimited amount, (2) if clause (1) is not available, so long as the consolidated total net leverage ratio both before and after giving effect to any such dividend on a pro forma basis is less than 3.50:1, in an aggregate amount not to exceed the available amount, as defined, and (3) if clauses (1) and (2) are not available, in an aggregate amount not to exceed $50.0 million; provided, that, minimum liquidity, as defined, shall be not less than $75.0 million

both before and after giving effect to any such dividend or restricted payment. As of January 31, 2023, the consolidated total net leverage ratio was (1.05):1. Minimum liquidity available as of January 31, 2023 was $3.0 billion. Accordingly, the Company does not believe that the provisions of the Second Amended and Restated Credit Agreement represent a significant restriction to its ability to pay dividends or to the successful future operations of the business. The Company has not paid a cash dividend since becoming a public company in 1994. The Company was in compliance with all covenants related to the Second Amended and Restated Credit Agreement as of January 31, 2023.Related to execution of the Second Amended and Restated Credit Agreement, the Company incurred $2.7 million in costs, which were capitalized as debt issuance fees. The debt discount is amortized to interest expense over the term of the respective debt instruments and is included in other assets on the balance sheet as no amounts are outstanding on the Revolving Loan Facility.

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Net Income Per Share

6 Months Ended

Jan. 31, 2023

Earnings Per Share [Abstract]

Net Income Per Share

Net Income Per Share

The table below reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:

	Three Months Ended January 31,		Six Months Ended January 31,
(In thousands)	2023	2022	2023	2022
Weighted average common shares outstanding	476,376	474,372	476,237	474,334
Effect of dilutive securities	6,160	8,002	6,001	8,154
Weighted average common and dilutive potential common shares outstanding	482,536	482,374	482,238	482,488

There were no material adjustments to net income required in calculating diluted net income per share. Excluded from the dilutive earnings per share calculation were 3,091,704 and 300,500 options to purchase the Company’s common stock for the three months ended January 31, 2023 and 2022, respectively, and 6,247,298 and 411,000 options to purchase the Company’s common stock for the six months ended January 31, 2023 and 2022, respectively, because their inclusion would have been anti-dilutive.

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Stock-based Compensation

6 Months Ended

Jan. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-based Compensation

The Company recognizes compensation expense for stock option awards without a market condition on a straight-line basis over the requisite service period of the award. The following is a summary of activity for the Company’s stock options for the six months ended January 31, 2023:

(In thousands, except per share and term data)	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding as of July 31, 2022	11,394	$	29.31	5.50	$	398,331
Grants of options	294	65.49
Exercises	(299)	36.15
Forfeitures or expirations	(263)	54.34
Outstanding as of January 31, 2023	11,126	$	29.49	5.01	$	414,798
Exercisable as of January 31, 2023	8,910	$	24.46	4.33	$	377,288

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. The number of options that were in-the-money was 13,689,922 at January 31, 2023.

The Company grants option awards to certain executives that contain service and market conditions. The options will become exercisable over five years, subject to continued service by the executive, with 20% vesting on the first anniversary of the grant date and the balance vesting monthly over the subsequent four years. Separate and apart from the time-based vesting schedule, the options are also subject to a market condition requiring the trading price of Copart, Inc. common stock on the NASDAQ Global Select Market to be greater than or equal to 125% of the exercise price of the options, determined both (i) at the time of any exercise, and (ii) based on the closing price on each of the twenty consecutive trading days preceding the date of any exercise. The exercise price of the options is equivalent to the closing price of the Company’s common stock on the grant date. The fair value of the awards is determined at the grant date using either Lattice or Monte Carlo model, risk-free interest rates ranging from 0.71% to 3.57%, estimated volatility ranging from 25.2% to 29.3%, and no expected dividends. The total estimated compensation expense to be recognized by the Company over the five-year service period for these options is $48.4 million and will be recognized using the accelerated attribution method over each vesting tranche of the award. The Company recognized $6.5 million and $4.6 million in compensation expense related to these awards in the six months ended January 31, 2023 and 2022, respectively.

The following is a summary of activity for the Company’s stock option awards subject to market conditions for the six months ended January 31, 2023:

(In thousands, except per share and term data)	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding as of July 31, 2022	2,810	$	47.83	8.33	$	45,590
Grants of options	150	65.70
Exercises	—	—
Forfeitures or expirations	—	—
Outstanding as of January 31, 2023	2,960	$	48.73	7.92	$	52,920
Exercisable as of January 31, 2023	1,092	$	43.09	7.40	$	25,682

The table below sets forth the stock-based compensation recognized by the Company for stock options, restricted stock, and restricted unit awards:

	Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)	2023		2022		2023		2022
General and administrative	$	8,789	$	8,247	$	17,536	$	16,718
Yard operations	1,342		1,415		2,787		2,396
Total stock-based compensation	$	10,131	$	9,662	$	20,323	$	19,114

The Company’s restricted stock awards (“RSA”) and restricted stock unit awards (“RSU”) have generally been issued with vesting periods ranging from two years to five years and vest solely on service conditions. Accordingly, the Company recognizes compensation expense for RSA and RSU awards on a straight-line basis over the requisite service period of the award.

The following is a summary of activity for the Company’s RSA and RSU for the six months ended January 31, 2023:

(In thousands, except per share data)	Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding as of July 31, 2022	354	$	60.28
Grants	263	64.01
Vested	(59)	57.67
Forfeitures or expirations	(8)	53.99
Outstanding as of January 31, 2023	550	$	62.44

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Stock Repurchases	6 Months Ended
	Jan. 31, 2023
Equity [Abstract]
Stock Repurchases	Stock Repurchases On September 22, 2011, the Company’s Board of Directors approved a 160 million share increase in the stock repurchase program, bringing the total current authorization to 392 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as the Company deems appropriate and may be discontinued at any time. The Company did not repurchase any shares of its common stock under the program during the six months ended January 31, 2023 or 2022. As of January 31, 2023, the total number of shares repurchased under the program was 229,098,396, and 162,901,604 shares were available for repurchase under the program.

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Income Taxes

6 Months Ended

Jan. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s effective income tax rates were 21.8% and 18.0% for the six months ended January 31, 2023 and 2022, respectively, which differs from the U.S. statutory rate of 21% primarily due to state income taxes, deduction for Foreign Derived Intangible Income, and excess tax benefits associated with equity-based compensation. The effective tax rate for the year ended July 31, 2022 was also impacted by the filing of amended returns in certain jurisdictions.

The Company applies the provisions of the accounting standard for uncertain tax positions to its income taxes. For benefits to be realized, a tax position must be more likely than not to be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company is currently under examination by certain taxing authorities in the U.S. for fiscal years between 2014 and 2018. At this time, the Company does not believe that the outcome of any examination will have a material impact on the Company’s consolidated results of operations and financial position.

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Recent Accounting Pronouncements

6 Months Ended

Jan. 31, 2023

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Pending

On October 28, 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 creates an exception to the general recognition and measurement principle for contract assets and liabilities from contracts with customers acquired in a business combination. Under this exception, an acquirer applies ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities on the acquisition date instead of using fair value of the contract assets and contract liabilities as is required under ASC 805 Business combinations. The Company’s adoption of ASU 2021-08 is not expected to have a material impact on the Company’s consolidated results of operations and financial position.

Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company’s adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated results of operations and financial position

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Legal Proceedings	6 Months Ended
	Jan. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
Legal Proceedings	Legal Proceedings The Company is subject to threats of litigation and is involved in actual litigation and damage claims arising in the ordinary course of business, such as actions related to injuries, property damage, contract disputes, and handling or disposal of vehicles. There are no material pending legal proceedings to which the Company is a party, or with respect to which any of the Company’s property is subject. The Company provides for costs relating to matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of any such matters on the Company’s future consolidated results of operations and cash flows cannot be predicted because any such effect depends on future results of operations and the amount and timing of the resolution of any such matters. The Company believes that any ultimate liability regarding existing litigation and claims would not have a material effect on its consolidated results of operations, financial position, or cash flows. However, the amount of the liabilities associated with claims, if any, cannot be determined with certainty. The Company maintains insurance which may or may not provide coverage for claims made against the Company. There is no assurance that there will be insurance coverage available when and if needed. Additionally, the insurance that the Company carries requires that the Company pay for costs and/or claims exposure up to the amount of the insurance deductibles.

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Segments and Other Geographic Reporting

6 Months Ended

Jan. 31, 2023

Segment Reporting [Abstract]

Segments and Other Geographic Reporting

Segments and Other Geographic Reporting

The Company’s U.S. and International regions are considered two separate operating segments and are disclosed as two reportable segments. The segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results, including total revenues and operating income.

The following table presents financial information by segment:

	Three Months Ended January 31, 2023						Three Months Ended January 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Service revenues	$	705,733	$	84,064	$	789,797	$	630,707	$	80,383	$	711,090
Vehicle sales	82,196		84,731		166,927		96,679		59,691		156,370
Total service revenues and vehicle sales	787,929		168,795		956,724		727,386		140,074		867,460
Yard operations	323,397		52,100		375,497		278,093		45,721		323,814
Cost of vehicle sales	79,040		75,687		154,727		90,263		50,041		140,304
General and administrative	49,328		11,647		60,975		46,384		9,630		56,014
Operating income	$	336,164	$	29,361	$	365,525	$	312,646	$	34,682	$	347,328
Depreciation and amortization	$	34,121	$	4,293	$	38,414	$	29,316	$	3,987	$	33,303
Capital expenditures and acquisitions	89,428		14,636		104,064		86,788		5,185		91,973

	Six Months Ended January 31, 2023						Six Months Ended January 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Service revenues	$	1,357,390	$	159,247	$	1,516,637	$	1,221,465	$	157,443	$	1,378,908
Vehicle sales	179,387		154,072		333,459		184,382		114,302		298,684
Total service revenues and vehicle sales	1,536,777		313,319		1,850,096		1,405,847		271,745		1,677,592
Yard operations	649,641		98,633		748,274		534,714		87,794		622,508
Cost of vehicle sales	171,480		134,359		305,839		170,605		96,107		266,712
General and administrative	96,865		22,090		118,955		92,932		17,991		110,923
Operating income	$	618,791	$	58,237	$	677,028	$	607,595	$	69,854	$	677,449
Depreciation and amortization	$	69,057	$	8,415	$	77,472	$	57,046	$	8,028	$	65,074
Capital expenditures and acquisitions	225,711		31,008		256,719		141,060		15,609		156,669

	January 31, 2023						July 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Total assets	$	5,136,744	$	795,664	$	5,932,408	$	4,615,788	$	693,076	$	5,308,864
Goodwill	270,269		133,777		404,046		270,269		131,685		401,954

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jan. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation and Description of Business

Basis of Presentation and Description of Business

Copart, Inc. (“the Company”) provides vehicle sellers with a full range of services to process and sell vehicles over the internet through the Company’s Virtual Bidding Third Generation (“VB3”) internet auction-style sales technology. Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers, vehicle rental companies, and individuals. The Company sells principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and directly to the general public. The majority of vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total loss or not economically repairable by the insurance companies or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. The Company offers vehicle sellers a full range of services that expedite each stage of the vehicle sales process, minimize administrative and processing costs and maximize the ultimate sales price through the online auction process. In the United States (“U.S.”), Canada, Brazil, the Republic of Ireland, Finland, the United Arab Emirates (“U.A.E.”), Oman, and Bahrain, the Company sells vehicles primarily as an agent and derives revenue primarily from auction and auction related sales transaction fees charged for vehicle remarketing services as well as fees for services subsequent to the auction, such as delivery and storage. In the United Kingdom (“U.K.”), Germany, and Spain, the Company operates both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for its own account. In Germany and Spain, the Company also derives revenue from listing vehicles on behalf of insurance companies and insurance experts to determine the vehicle’s residual value and/or to facilitate a sale for the insured.

Principles of Consolidation

Principles of Consolidation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments of a normal recurring nature considered necessary for fair presentation of the Company’s financial position as of January 31, 2023 and July 31, 2022, its consolidated statements of income, comprehensive income and stockholders’ equity for the three and six months ended January 31, 2023 and 2022, and its cash flows for the six months ended January 31, 2023 and 2022. Interim results for the three and six months ended January 31, 2023 are not necessarily indicative of the results that may be expected for any future period, or for the entire year ending July 31, 2023. These consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2022. Certain prior year amounts have been reclassified to conform to current year presentation.

The consolidated financial statements of the Company include the accounts of the parent company and its wholly-owned subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, but are not limited to, vehicle pooling costs; income taxes; stock-based compensation; and contingencies. Actual results may differ from these estimates.

Revenue Recognition

Revenue Recognition

The Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. Service revenue and vehicle sales revenue are recognized at the date the vehicles are sold at auction, excluding annual registration fees. Costs to prepare the vehicles for auction, including inbound transportation costs and titling fees, are deferred and recognized at the time of revenue recognition at auction.

The Company’s disaggregation between service revenues and vehicle sales at the segment level reflects how the nature, timing, amount and uncertainty of its revenues and cash flows are impacted by economic factors. The Company reports sales taxes on relevant transactions on a net basis in the Company’s consolidated results of operations, and therefore does not include sales taxes in revenues or costs.

Service revenues

The Company’s service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services. Within this revenue category, the Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. These auction and auction related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle; transportation fees for the cost of transporting the vehicle to or from the Company’s facility; title processing and preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees. These services are not distinct within the context of the contract. Accordingly, revenue for these services is recognized when the single performance obligation is satisfied at the completion of the auction process. The Company does not take ownership of these consigned vehicles, which are stored at the Company’s facilities located throughout the U.S. and at its international locations. These fees are recognized as net revenue (not gross vehicle selling price) at the time of auction in the amount of such fees charged.

The Company has a separate performance obligation related to providing access to its online auction platform as the Company charges members an annual registration fee for the right to participate in its online auctions and access the Company’s bidding platform. This fee is recognized ratably over the term of the arrangement, generally one year, as each day of access to the online auction platform represents the best depiction of the transfer of the service.

No provision for returns has been established, as all sales are final with no right of return or warranty, although the Company provides for credit loss expense in the case of non-performance by its buyers or sellers.

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Service revenues
	United States	$	705,733	$	630,707	$	1,357,390	$	1,221,465
	International	84,064		80,383		159,247		157,443
	Total service revenues	$	789,797	$	711,090	$	1,516,637	$	1,378,908

Vehicle sales

Certain vehicles are purchased and remarketed on the Company’s own behalf. The Company has a single performance obligation related to the sale of these vehicles, which is the completion of the online auction process. Vehicle sales revenue is recognized on the auction date. As the Company acts as a principal in vehicle sales transactions, the gross sales price at auction is recorded as revenue.

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Vehicle sales
	United States	$	82,196	$	96,679	$	179,387	$	184,382
	International	84,731		59,691		154,072		114,302
	Total vehicle sales	$	166,927	$	156,370	$	333,459	$	298,684

Contract assets

The Company capitalizes certain contract assets related to obtaining a contract, where the amortization period for the related asset is greater than one year. These assets are amortized over the expected life of the customer relationship. Contract assets are classified as current or long-term other assets, based on the timing of when the Company expects to recognize the related revenues and are amortized as an offset to the associated revenues on a straight-line basis. The Company assesses these costs for impairment at least quarterly and as “triggering” events occur that indicate it is more likely than not that an impairment exists. The contract asset costs where the amortization period for the related asset is one year or less are expensed as incurred and recorded within general and administrative expenses in the accompanying consolidated statements of income.

Vehicle Pooling Costs

Vehicle Pooling CostsThe Company defers costs that relate directly to the fulfillment of its contracts associated with vehicles consigned to and received by the Company, but not sold as of the end of the period. The Company quantifies the deferred costs using a calculation that includes the number of vehicles at its facilities at the beginning and end of the period, the number of vehicles sold during the period, and an allocation of certain yard operation costs of the period. The primary expenses allocated and deferred are inbound transportation costs, titling fees, certain facility costs, labor, and vehicle processing. If the allocation factors change, then yard operation expenses could increase or decrease correspondingly in the future. These costs are expensed into yard operations expenses as vehicles are sold in subsequent periods on an average cost basis.

Foreign Currency Translation

Foreign Currency Translation The Company records foreign currency translation adjustments from the process of translating the functional currency of the financial statements of its foreign subsidiaries into the U.S. dollar reporting currency. The British pound, Canadian dollar, Brazilian real, European Union euro, U.A.E. dirham, Omani rial, and Bahraini dinar are the functional currencies of the Company’s foreign subsidiaries as they are the primary currencies within the economic environment in which each subsidiary operates. The original equity investment in the respective subsidiaries is translated at historical rates. Assets and liabilities of the respective subsidiary’s operations are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars at average exchange rates in effect during each reporting period. Adjustments resulting from the translation of each subsidiary’s financial statements are reported in other comprehensive income.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company records its financial assets and liabilities at fair value in accordance with the framework for measuring fair value in U.S. GAAP. In accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, the Company considers fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants under current market conditions. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

Level I    Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level II    Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly.

Level III    Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate.

The amounts recorded for financial instruments in the Company’s consolidated financial statements, which included cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximated their fair values as of January 31, 2023 and July 31, 2022, due to the short-term nature of those instruments and are classified within Level II of the fair value hierarchy. Cash equivalents are classified within Level II of the fair value hierarchy because they are valued using quoted market prices of the underlying investments.

Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted CashThe Company considers all highly liquid investments purchased with original maturities of three months or less at the time of purchase to be cash equivalents. Cash, cash equivalents, and restricted cash include cash held in checking, U.S. Treasury Bills, and money market accounts. The Company periodically invests its excess cash in money market funds and U.S. Treasury Bills. The Company’s cash, cash equivalents, and restricted cash are placed with high credit quality financial institutions.

Recent Accounting Pronouncements

On October 28, 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 creates an exception to the general recognition and measurement principle for contract assets and liabilities from contracts with customers acquired in a business combination. Under this exception, an acquirer applies ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities on the acquisition date instead of using fair value of the contract assets and contract liabilities as is required under ASC 805 Business combinations. The Company’s adoption of ASU 2021-08 is not expected to have a material impact on the Company’s consolidated results of operations and financial position.

Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company’s adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated results of operations and financial position

Segments and Other Geographic Reporting

The Company’s U.S. and International regions are considered two separate operating segments and are disclosed as two reportable segments. The segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results, including total revenues and operating income.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jan. 31, 2023

Accounting Policies [Abstract]

Schedule of disaggregation of revenue service revenues

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Service revenues
	United States	$	705,733	$	630,707	$	1,357,390	$	1,221,465
	International	84,064		80,383		159,247		157,443
	Total service revenues	$	789,797	$	711,090	$	1,516,637	$	1,378,908

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Vehicle sales
	United States	$	82,196	$	96,679	$	179,387	$	184,382
	International	84,731		59,691		154,072		114,302
	Total vehicle sales	$	166,927	$	156,370	$	333,459	$	298,684

Contract with customer, asset and liability

The change in the carrying amount of contract assets was as follows (In thousands):

Balance as of July 31, 2022	$	4,778
Capitalized contract assets during the period	25,540
Costs amortized during the period	(2,545)
Effect of foreign currency exchange rates	36
Balance as of January 31, 2023	$	27,809

Schedule of foreign currency translation

The cumulative effects of foreign currency exchange rate fluctuations were as follows (In thousands):

Cumulative loss on foreign currency translation as of July 31, 2021	$	(100,860)
Loss on foreign currency translation	(68,505)
Cumulative loss on foreign currency translation as of July 31, 2022	$	(169,365)
Gain on foreign currency translation	12,858
Cumulative loss on foreign currency translation as of January 31, 2023	$	(156,507)

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Acquisitions (Tables)

6 Months Ended

Jan. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of assets acquired and liabilities assumed

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed for Hills (in thousands).

Cash	$	8,960
Accounts receivable and prepaid expenses	5,348
Inventory	4,913
Property and equipment	22,259
Intangible assets	15,931
Goodwill	56,051
Liabilities assumed	(6,858)
Fair value of net assets and liabilities acquired	$	106,604

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Accounts Receivable, Net (Tables)

6 Months Ended

Jan. 31, 2023

Accounts Receivable [Abstract]

Schedule of accounts receivable

Accounts receivable, net consisted of:

(In thousands)	January 31, 2023		July 31, 2022
Advance charges receivable	$	580,966	$	440,650
Trade accounts receivable	160,121		137,243
Other receivables	32,704		7,257
	773,791		585,150
Less: Allowance for credit loss	(8,599)		(6,577)
Accounts receivable, net	$	765,192	$	578,573

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Property and Equipment, Net (Tables)

6 Months Ended

Jan. 31, 2023

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment, net consisted of the following:

(In thousands)	January 31, 2023		July 31, 2022
Land	$	1,647,906	$	1,526,446
Buildings and improvements	1,288,499		1,209,331
Transportation and other equipment	459,597		429,405
Office furniture and equipment	86,091		84,728
Software	84,054		78,216
	3,566,147		3,328,126
Less: Accumulated depreciation and amortization	(909,874)		(842,362)
Property and equipment, net	$	2,656,273	$	2,485,764

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Leases (Tables)

6 Months Ended

Jan. 31, 2023

Leases [Abstract]

Lease cost

Components of lease expense were as follows:

		Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)		2023		2022		2023		2022
Operating lease expense		$	6,687	$	6,943	$	13,547	$	13,997
Finance lease expense:
	Amortization of right-of-use assets	5		155		12		309
	Interest on finance lease liabilities	—		2		—		4
Short-term lease expense		1,134		1,723		2,303		3,491
Variable lease expense		314		330		553		554
Total lease expense		$	8,140	$	9,153	$	16,415	$	18,355

Schedule of cash flow information related to leases

Supplemental cash flow information related to leases as of January 31, 2023 were as follows:

		Six Months Ended January 31,
(In thousands)		2023		2022
Cash paid for amounts included in the measurement of lease liabilities
	Operating cash flows related to operating leases	$	13,178	$	13,344
	Operating cash flows related to finance leases	—		3
	Financing cash flows related to finance leases	13		314
Right-of-use assets obtained in exchange for new operating lease liabilities		8,597		14,156
Right-of-use assets obtained in exchange for new finance lease liabilities		—		—

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jan. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of aggregate amortization expense on intangible assets

The following table sets forth amortizable intangible assets by major asset class:

(In thousands)	January 31, 2023		July 31, 2022
Amortized intangibles:
Supply contracts and customer relationships	$	72,196	$	71,875
Trade names	18,915		18,896
Licenses and databases	673		633
Accumulated amortization	(40,598)		(36,724)
Intangibles, net	$	51,186	$	54,680

Schedule of change in carrying amount of goodwill

The change in the carrying amount of goodwill was as follows:

(In thousands)
Balance as of July 31, 2022	$	401,954
Effect of foreign currency exchange rates	2,092
Balance as of January 31, 2023	$	404,046

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Net Income Per Share (Tables)

6 Months Ended

Jan. 31, 2023

Earnings Per Share [Abstract]

Schedule of reconciliation of basic weighted shares outstanding to diluted weighted average shares outstanding

The table below reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:

	Three Months Ended January 31,		Six Months Ended January 31,
(In thousands)	2023	2022	2023	2022
Weighted average common shares outstanding	476,376	474,372	476,237	474,334
Effect of dilutive securities	6,160	8,002	6,001	8,154
Weighted average common and dilutive potential common shares outstanding	482,536	482,374	482,238	482,488

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Stock-based Compensation (Tables)

6 Months Ended

Jan. 31, 2023

Share-Based Payment Arrangement [Abstract]

Summary of option activity for stock options

The following is a summary of activity for the Company’s stock options for the six months ended January 31, 2023:

(In thousands, except per share and term data)	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding as of July 31, 2022	11,394	$	29.31	5.50	$	398,331
Grants of options	294	65.49
Exercises	(299)	36.15
Forfeitures or expirations	(263)	54.34
Outstanding as of January 31, 2023	11,126	$	29.49	5.01	$	414,798
Exercisable as of January 31, 2023	8,910	$	24.46	4.33	$	377,288

The following is a summary of activity for the Company’s stock option awards subject to market conditions for the six months ended January 31, 2023:

(In thousands, except per share and term data)	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding as of July 31, 2022	2,810	$	47.83	8.33	$	45,590
Grants of options	150	65.70
Exercises	—	—
Forfeitures or expirations	—	—
Outstanding as of January 31, 2023	2,960	$	48.73	7.92	$	52,920
Exercisable as of January 31, 2023	1,092	$	43.09	7.40	$	25,682

Recognized stock-based compensation expense

The table below sets forth the stock-based compensation recognized by the Company for stock options, restricted stock, and restricted unit awards:

	Three Months Ended January 31,				Six Months Ended January 31,
(In thousands)	2023		2022		2023		2022
General and administrative	$	8,789	$	8,247	$	17,536	$	16,718
Yard operations	1,342		1,415		2,787		2,396
Total stock-based compensation	$	10,131	$	9,662	$	20,323	$	19,114

Share based payment arrangement restricted stock and restricted stock unit activity

The following is a summary of activity for the Company’s RSA and RSU for the six months ended January 31, 2023:

(In thousands, except per share data)	Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding as of July 31, 2022	354	$	60.28
Grants	263	64.01
Vested	(59)	57.67
Forfeitures or expirations	(8)	53.99
Outstanding as of January 31, 2023	550	$	62.44

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Segments and Other Geographic Reporting (Tables)

6 Months Ended

Jan. 31, 2023

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The following table presents financial information by segment:

	Three Months Ended January 31, 2023						Three Months Ended January 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Service revenues	$	705,733	$	84,064	$	789,797	$	630,707	$	80,383	$	711,090
Vehicle sales	82,196		84,731		166,927		96,679		59,691		156,370
Total service revenues and vehicle sales	787,929		168,795		956,724		727,386		140,074		867,460
Yard operations	323,397		52,100		375,497		278,093		45,721		323,814
Cost of vehicle sales	79,040		75,687		154,727		90,263		50,041		140,304
General and administrative	49,328		11,647		60,975		46,384		9,630		56,014
Operating income	$	336,164	$	29,361	$	365,525	$	312,646	$	34,682	$	347,328
Depreciation and amortization	$	34,121	$	4,293	$	38,414	$	29,316	$	3,987	$	33,303
Capital expenditures and acquisitions	89,428		14,636		104,064		86,788		5,185		91,973

	Six Months Ended January 31, 2023						Six Months Ended January 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Service revenues	$	1,357,390	$	159,247	$	1,516,637	$	1,221,465	$	157,443	$	1,378,908
Vehicle sales	179,387		154,072		333,459		184,382		114,302		298,684
Total service revenues and vehicle sales	1,536,777		313,319		1,850,096		1,405,847		271,745		1,677,592
Yard operations	649,641		98,633		748,274		534,714		87,794		622,508
Cost of vehicle sales	171,480		134,359		305,839		170,605		96,107		266,712
General and administrative	96,865		22,090		118,955		92,932		17,991		110,923
Operating income	$	618,791	$	58,237	$	677,028	$	607,595	$	69,854	$	677,449
Depreciation and amortization	$	69,057	$	8,415	$	77,472	$	57,046	$	8,028	$	65,074
Capital expenditures and acquisitions	225,711		31,008		256,719		141,060		15,609		156,669

	January 31, 2023						July 31, 2022
(In thousands)	United States		International		Total		United States		International		Total
Total assets	$	5,136,744	$	795,664	$	5,932,408	$	4,615,788	$	693,076	$	5,308,864
Goodwill	270,269		133,777		404,046		270,269		131,685		401,954

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Summary of Significant Accounting Policies - Narrative (Details) $ in Millions	Oct. 03, 2022	Jan. 31, 2023 USD ($)	Jul. 31, 2022 USD ($)
Description Of Business and Summary Of Significant Accounting Policies [Line Items]
Common stock split, conversion ratio	2
Cash equivalents		$ 1,477.5	$ 1,237.0
Cash equivalents		$ 1,478.9	$ 1,237.3

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Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022
Disaggregation of Revenue [Line Items]
Total service revenues	$ 956,724	$ 867,460	$ 1,850,096	$ 1,677,592
Service revenues
Disaggregation of Revenue [Line Items]
Total service revenues	789,797	711,090	1,516,637	1,378,908
Vehicle sales
Disaggregation of Revenue [Line Items]
Total service revenues	166,927	156,370	333,459	298,684
Operating Segments | United States | United States
Disaggregation of Revenue [Line Items]
Total service revenues	787,929	727,386	1,536,777	1,405,847
Operating Segments | United States | Service revenues | United States
Disaggregation of Revenue [Line Items]
Total service revenues	705,733	630,707	1,357,390	1,221,465
Operating Segments | United States | Vehicle sales | United States
Disaggregation of Revenue [Line Items]
Total service revenues	82,196	96,679	179,387	184,382
Operating Segments | International | International
Disaggregation of Revenue [Line Items]
Total service revenues	168,795	140,074	313,319	271,745
Operating Segments | International | Service revenues | International
Disaggregation of Revenue [Line Items]
Total service revenues	84,064	80,383	159,247	157,443
Operating Segments | International | Vehicle sales | International
Disaggregation of Revenue [Line Items]
Total service revenues	$ 84,731	$ 59,691	$ 154,072	$ 114,302

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Summary of Significant Accounting Policies - Carrying Amount of Contract Assets (Details) $ in Thousands	6 Months Ended
	Jan. 31, 2023 USD ($)
Contract with Customer, Asset, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 4,778
Capitalized contract assets during the period	25,540
Costs amortized during the period	(2,545)
Effect of foreign currency exchange rates	36
Ending balance	$ 27,809

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Summary of Significant Accounting Policies - Foreign Currency Translation (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jan. 31, 2023	Jul. 31, 2022
Cumulative Translation Adjustment Summary [Roll Forward]
Cumulative loss on foreign currency translation, beginning balance	$ (169,365)	$ (100,860)
Gain (Loss) on foreign currency translation	12,858	(68,505)
Cumulative loss on foreign currency translation, ending balance	$ (156,507)	$ (169,365)

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Acquisitions - Narrative (Details) - Hills Green Parts $ in Millions	Jul. 05, 2022 USD ($)
Business Acquisition [Line Items]
Percentage of voting interests acquired	100.00%
Purchase price, consideration	$ 106.6

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Acquisitions (Details) - USD ($) $ in Thousands	Jan. 31, 2023	Jul. 31, 2022	Jul. 05, 2022
Business Acquisition [Line Items]
Goodwill	$ 404,046	$ 401,954
Hills Green Parts
Business Acquisition [Line Items]
Cash			$ 8,960
Accounts receivable and prepaid expenses			5,348
Inventory			4,913
Property and equipment			22,259
Intangible assets			15,931
Goodwill			56,051
Liabilities assumed			(6,858)
Fair value of net assets and liabilities acquired			$ 106,604

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Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Jan. 31, 2023	Jul. 31, 2022
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross, current	$ 773,791	$ 585,150
Less: Allowance for credit loss	(8,599)	(6,577)
Accounts receivable, net	765,192	578,573
Advance charges receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross, current	580,966	440,650
Trade accounts receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross, current	160,121	137,243
Other receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross, current	$ 32,704	$ 7,257

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Property and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022	Jul. 31, 2022
Property, Plant and Equipment [Line Items]
Property and Equipment	$ 3,566,147		$ 3,566,147		$ 3,328,126
Less: Accumulated depreciation and amortization	(909,874)		(909,874)		(842,362)
Property and equipment, net	2,656,273		2,656,273		2,485,764
Depreciation	36,500	$ 31,400	73,700	$ 61,300
Land
Property, Plant and Equipment [Line Items]
Property and Equipment	1,647,906		1,647,906		1,526,446
Buildings and improvements
Property, Plant and Equipment [Line Items]
Property and Equipment	1,288,499		1,288,499		1,209,331
Transportation and other equipment
Property, Plant and Equipment [Line Items]
Property and Equipment	459,597		459,597		429,405
Office furniture and equipment
Property, Plant and Equipment [Line Items]
Property and Equipment	86,091		86,091		84,728
Software
Property, Plant and Equipment [Line Items]
Property and Equipment	$ 84,054		$ 84,054		$ 78,216

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Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022
Leases [Abstract]
Renewal term	40 years		40 years
Operating lease expense	$ 6,687	$ 6,943	$ 13,547	$ 13,997
Amortization of right-of-use assets	5	155	12	309
Interest on finance lease liabilities	0	2	0	4
Short-term lease expense	1,134	1,723	2,303	3,491
Variable lease expense	314	330	553	554
Total lease expense	$ 8,140	$ 9,153	$ 16,415	$ 18,355

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Leases - Supplemental Cash Flow Disclosures (Details) - USD ($) $ in Thousands	6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022
Leases [Abstract]
Operating cash flows related to operating leases	$ 13,178	$ 13,344
Operating cash flows related to finance leases	0	3
Financing cash flows related to finance leases	13	314
Right-of-use assets obtained in exchange for new operating lease liabilities	8,597	14,156
Right-of-use assets obtained in exchange for new finance lease liabilities	$ 0	$ 0

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Leases - Lessor (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022	Jul. 31, 2022
Leases [Abstract]
Property subject to or available for operating lease gross	$ 51.2		$ 51.2		$ 51.2
Property subject to or available for operating lease accumulated depreciation	3.3		3.3		$ 2.8
Operating lease income	$ 4.1	$ 3.7	$ 8.3	$ 7.2

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Goodwill and Intangible Assets - Amortizable Intangible Assets (Details) - USD ($) $ in Thousands	Jan. 31, 2023	Jul. 31, 2022
Amortized intangibles:
Accumulated amortization	$ (40,598)	$ (36,724)
Intangibles, net	51,186	54,680
Supply contracts and customer relationships
Amortized intangibles:
Gross carrying amount	72,196	71,875
Trade names
Amortized intangibles:
Gross carrying amount	18,915	18,896
Licenses and databases
Amortized intangibles:
Gross carrying amount	$ 673	$ 633

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Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Aggregate amortization expense	$ 1.9	$ 1.8	$ 3.8	$ 3.7

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Goodwill and Intangible Assets - Change in Goodwill (Details) $ in Thousands	6 Months Ended
	Jan. 31, 2023 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 401,954
Effect of foreign currency exchange rates	2,092
Ending balance	$ 404,046

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Long-Term Debt (Details) - USD ($)		6 Months Ended
	Dec. 21, 2021	Jan. 31, 2023	Dec. 20, 2021
Revolving Credit Facility
Line of Credit Facility [Line Items]
Debt offering costs	$ 2,700,000
Second Amended and Restated Credit Agreement | Revolving Credit Facility
Line of Credit Facility [Line Items]
Maximum leverage	50,000,000
Minimum liquidity	$ 75,000,000
Total consolidated net leverage ratio		(105.00%)
Minimum liquidity		$ 3,000,000,000
Second Amended and Restated Credit Agreement | Revolving Credit Facility | Minimum
Line of Credit Facility [Line Items]
Line of credit facility, commitment fee percentage		0.175%
Second Amended and Restated Credit Agreement | Revolving Credit Facility | Maximum
Line of Credit Facility [Line Items]
Line of credit facility, commitment fee percentage		0.275%
Second Amended and Restated Credit Agreement | Revolving Credit Facility | Scenario 1
Line of Credit Facility [Line Items]
Line of credit facility, covenant terms 1	325.00%
Second Amended and Restated Credit Agreement | Revolving Credit Facility | Scenario 2
Line of Credit Facility [Line Items]
Line of credit facility, covenant terms 1	350.00%
Base Rate | Second Amended and Restated Credit Agreement | Revolving Credit Facility | Minimum
Line of Credit Facility [Line Items]
Line of credit facility, commitment fee percentage		1.00%
Base Rate | Second Amended and Restated Credit Agreement | Revolving Credit Facility | Maximum
Line of Credit Facility [Line Items]
Line of credit facility, commitment fee percentage		1.75%
Daily Rate | Second Amended and Restated Credit Agreement | Revolving Credit Facility | Minimum
Line of Credit Facility [Line Items]
Applicable interest rate added to reference rate in order to compute variable interest rate		0.00%
Daily Rate | Second Amended and Restated Credit Agreement | Revolving Credit Facility | Maximum
Line of Credit Facility [Line Items]
Applicable interest rate added to reference rate in order to compute variable interest rate		0.75%
WellsFargo,NationalAssociation,TruistBank,BMOHarrisBankN.A.,SantanderBankN.A.,andBankofAmerica,N.A. | Second Amended and Restated Credit Agreement | Revolving Credit Facility
Line of Credit Facility [Line Items]
Line of credit facility, increase (decrease), net	$ 200,000,000
Maximum borrowing capacity	1,250,000,000
Outstanding borrowings	100,000,000		$ 60,000,000
WellsFargo,NationalAssociation,TruistBank,BMOHarrisBankN.A.,SantanderBankN.A.,andBankofAmerica,N.A. | Second Amended and Restated Credit Agreement | Letter of Credit
Line of Credit Facility [Line Items]
Maximum borrowing capacity	550,000,000
WellsFargo,NationalAssociation,TruistBank,BMOHarrisBankN.A.,SantanderBankN.A.,andBankofAmerica,N.A. | Second Amended and Restated Credit Agreement | Letter of Credit | CPRT GmbH
Line of Credit Facility [Line Items]
Maximum borrowing capacity	150,000,000
WellsFargo,NationalAssociation,TruistBank,BMOHarrisBankN.A.,SantanderBankN.A.,andBankofAmerica,N.A. | Second Amended and Restated Credit Agreement | Letter of Credit | Copart Autos España, S.L.U.
Line of Credit Facility [Line Items]
Maximum borrowing capacity	150,000,000
WellsFargo,NationalAssociation,TruistBank,BMOHarrisBankN.A.,SantanderBankN.A.,andBankofAmerica,N.A. | Second Amended and Restated Credit Agreement | Letter of Credit | Copart UK Limited
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 250,000,000

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Net Income Per Share (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022
Earnings Per Share [Abstract]
Weighted average common shares outstanding (in shares)	476,376	474,372	476,237	474,334
Effect of dilutive securities (in shares)	6,160	8,002	6,001	8,154
Weighted average common and dilutive potential common shares outstanding (in shares)	482,536	482,374	482,238	482,488

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Net Income Per Share - Narrative (Details) - shares	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022
Employee Stock Option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options excluded from the calculation of dilutive earnings (in shares)	3,091,704	300,500	6,247,298	411,000

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Stock-based Compensation - Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Oct. 31, 2022	Jan. 31, 2023	Jul. 31, 2022
Shares
Outstanding, beginning balance (in shares)	11,394	11,394
Grants of options (in shares)		294
Exercises (in shares)		(299)
Forfeitures or expirations (in shares)		(263)
Outstanding, ending balance (in shares)		11,126	11,394
Exercisable (in shares)		8,910
Weighted Average Exercise Price
Outstanding, beginning balance (in dollars per share)	$ 29.31	$ 29.31
Grants of options (in dollars per share)		65.49
Exercises (in dollars per share)		36.15
Forfeitures (in dollars per share)		54.34
Outstanding, ending balance (in dollars per share)		29.49	$ 29.31
Exercisable (in dollars per share)		$ 24.46
Weighted Average Remaining Contractual Term (In years)	5 years 6 months	5 years 3 days
Weighted Average Remaining Contractual Term, exercisable (In years)		4 years 3 months 29 days
Aggregate Intrinsic Value		$ 414,798	$ 398,331
Aggregate Intrinsic Value, exercisable		$ 377,288
Option, Market Based
Shares
Outstanding, beginning balance (in shares)	2,810	2,810
Grants of options (in shares)		150
Exercises (in shares)		0
Forfeitures or expirations (in shares)		0
Outstanding, ending balance (in shares)		2,960	2,810
Exercisable (in shares)		1,092
Weighted Average Exercise Price
Outstanding, beginning balance (in dollars per share)	$ 47.83	$ 47.83
Grants of options (in dollars per share)		65.70
Exercises (in dollars per share)		0
Forfeitures (in dollars per share)		0
Outstanding, ending balance (in dollars per share)		48.73	$ 47.83
Exercisable (in dollars per share)		$ 43.09
Weighted Average Remaining Contractual Term (In years)		7 years 11 months 1 day	8 years 3 months 29 days
Weighted Average Remaining Contractual Term, exercisable (In years)		7 years 4 months 24 days
Aggregate Intrinsic Value		$ 52,920	$ 45,590
Aggregate Intrinsic Value, exercisable		$ 25,682

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Stock-based Compensation - Narrative (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023 USD ($)	Jan. 31, 2022 USD ($)	Jan. 31, 2023 USD ($) day shares	Jan. 31, 2022 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for calculating intrinsic value (in shares) | shares			13,689,922
Deferred compensation arrangement with individual - requisite service period			5 years
Cost not yet recognized, period for recognition			5 years
Total stock-based compensation	$ 10,131	$ 9,662	$ 20,323	$ 19,114
Share-based Payment Arrangement, Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, award vesting rights, percentage			20.00%
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payment arrangement, nonvested award, option, cost not yet recognized, amount	$ 48,400		$ 48,400
Total stock-based compensation			$ 6,500	$ 4,600
Employee Stock Option | Valuation Technique, Option Pricing Model
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate, minimum			0.71%
Risk free interest rate, maximum			3.57%
Expected volatility, minimum			25.20%
Expected volatility, maximum			29.30%
Expected dividend rate			0.00%
Employee Stock Option | Share-based Payment Arrangement, Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			4 years
Option, Market Based
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percent of exercise price			125.00%
Consecutive trading days | day			20
Restricted Stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			2 years
Restricted Stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			5 years

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Stock-based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Jan. 31, 2023	Jan. 31, 2022
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 10,131	$ 9,662	$ 20,323	$ 19,114
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	8,789	8,247	17,536	16,718
Yard Operations
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 1,342	$ 1,415	$ 2,787	$ 2,396

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Stock-based Compensation - Company RSA's and RSU's (Details) shares in Thousands	6 Months Ended
	Jan. 31, 2023 $ / shares shares
Restricted Shares
Outstanding, beginning balance (in shares) | shares	354
Grants of restricted stock (in shares) | shares	263
Vested restricted stock (in shares) | shares	(59)
Forfeited restricted stock (in shares) | shares	(8)
Outstanding, ending balance (in shares) | shares	550
Weighted Average Grant Date Fair Value
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 60.28
Grants (in dollars per share) | $ / shares	64.01
Vested (in dollars per share) | $ / shares	57.67
Forfeited (in dollars per share) | $ / shares	53.99
Outstanding, ending balance (in dollars per share) | $ / shares	$ 62.44

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Stock Repurchases - Narrative (Details) - Stock Repurchase Program 2011 - shares	6 Months Ended
	Jan. 31, 2023	Sep. 22, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock repurchase program additional number of shares authorized approved (in shares)		160,000,000
Stock repurchased (in shares)	229,098,396
Number of shares available for repurchase under stock repurchase program (in shares)	162,901,604
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized for repurchase (in shares)		392,000,000

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Income Taxes (Details)	6 Months Ended
	Jan. 31, 2023	Jan. 31, 2022
Income Tax Disclosure [Abstract]
Effective income tax rate reconciliation, percent	21.80%	18.00%

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Segments and Other Geographic Reporting (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jan. 31, 2023 USD ($)	Jan. 31, 2022 USD ($)	Jan. 31, 2023 USD ($) segment	Jan. 31, 2022 USD ($)	Jul. 31, 2022 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments | segment			2
Number of reportable segments | segment			2
Service revenues and vehicle sales	$ 956,724	$ 867,460	$ 1,850,096	$ 1,677,592
Yard operations	375,497	323,814	748,274	622,508
Cost of vehicle sales	154,727	140,304	305,839	266,712
General and administrative	60,975	56,014	118,955	110,923
Operating income	365,525	347,328	677,028	677,449
Depreciation and amortization	38,414	33,303	77,472	65,074
Capital expenditures and acquisitions	104,064	91,973	256,719	156,669
Total assets	5,932,408		5,932,408		$ 5,308,864
Goodwill	404,046		404,046		401,954
Operating Segments | US | United States
Segment Reporting Information [Line Items]
Service revenues and vehicle sales	787,929	727,386	1,536,777	1,405,847
Yard operations	323,397	278,093	649,641	534,714
Cost of vehicle sales	79,040	90,263	171,480	170,605
General and administrative	49,328	46,384	96,865	92,932
Operating income	336,164	312,646	618,791	607,595
Depreciation and amortization	34,121	29,316	69,057	57,046
Capital expenditures and acquisitions	89,428	86,788	225,711	141,060
Total assets	5,136,744		5,136,744		4,615,788
Goodwill	270,269		270,269		270,269
Operating Segments | International | International
Segment Reporting Information [Line Items]
Service revenues and vehicle sales	168,795	140,074	313,319	271,745
Yard operations	52,100	45,721	98,633	87,794
Cost of vehicle sales	75,687	50,041	134,359	96,107
General and administrative	11,647	9,630	22,090	17,991
Operating income	29,361	34,682	58,237	69,854
Depreciation and amortization	4,293	3,987	8,415	8,028
Capital expenditures and acquisitions	14,636	5,185	31,008	15,609
Total assets	795,664		795,664		693,076
Goodwill	133,777		133,777		$ 131,685
Service revenues
Segment Reporting Information [Line Items]
Service revenues and vehicle sales	789,797	711,090	1,516,637	1,378,908
Service revenues | Operating Segments | US | United States
Segment Reporting Information [Line Items]
Service revenues and vehicle sales	705,733	630,707	1,357,390	1,221,465
Service revenues | Operating Segments | International | International
Segment Reporting Information [Line Items]
Service revenues and vehicle sales	84,064	80,383	159,247	157,443
Vehicle sales
Segment Reporting Information [Line Items]
Service revenues and vehicle sales	166,927	156,370	333,459	298,684
Vehicle sales | Operating Segments | US | United States
Segment Reporting Information [Line Items]
Service revenues and vehicle sales	82,196	96,679	179,387	184,382
Vehicle sales | Operating Segments | International | International
Segment Reporting Information [Line Items]
Service revenues and vehicle sales	$ 84,731	$ 59,691	$ 154,072	$ 114,302