CARG - Earnings call transcript Q4 2019

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Operator

Greetings. Welcome to the CarGurus Fourth Quarter 2019 Earnings Results Conference Call. At this time, all participants are in a listen-only-mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

to conference like host, to now Mr. would turn over the your I of Relations. Nelson, Investor Rodney Head Thank you.

You begin. may

Rodney Nelson

Thank you, on Operating website. Sam Trevisan, is Chief Officer; the operator. the fourth our call and Langley quarter Good release Officer. market afternoon Executive and Steinert, earnings press our Investor on the We'll welcome Chief close call. and be today discussing issued results Jason Relations posted CarGurus' in XXXX announced President Officer; Chief after to and Zales, With me today Founder and CarGurus' Financial

the operational regarding uncertainties, and within them reports may During strategy, risks and from and plans, results. subject our which cause risks call, today recent in to materially our earnings business, those available in and expectations most Information statements is release for to actual business distributed we not regarding laws, full-year statements concerning our differ press securities quarter statements will could concerning SEC's are future Forms to performance, except of which on XX-Q, on and forward-looking and by law. no are and required section as and Investor statements or for international the our update XXXX, considered expectations. first Relations our financial These promises guidance the prospects, undertake are financial make growth, the XX-K We statements, website. be website including obligation forward-looking our other that and our applicable and management's guarantees, our

measures in market filings and The in press Relations SEC's SEC during and website release can to to A sec.gov. at will of our of certain Investor included refer the investors.cargurus.com, our be the non-GAAP our call, non-GAAP measures. course after reconciliation press close section found we issued at website Further, financial the GAAP release, today. today's of is

also our website. on Relations be Our presentation the fourth found Investor quarter can investor section of

to I'll that, Langley. turn it over With

Langley Steinert

finished everyone XXXX fourth to today. for with thanks joining CarGurus strong quarter. us And Rodney. you, Thank a

U.S. delivered for industry-leading lead traffic generated supporting over growth, XXXX, year paying ROI we XX marketplace our over connections believe leads, our continued for and and Our dealers. is we million and million what the full XX

We new over as multi-product we to U.S. of at dealers XX% a U.S., rate attach XXXX consistent the ended with are in product X,XXX our of least adoption, seeing with subscribing products. three

These lifts spend dealer, but trends penetration with only see dealers are we improved as multiple encouraging, well. as not product multi-product retention per

improve Westlake the our a financing our completed In proposition, on consumer With of of consumer roll-out addition, the we fourth second transaction. our now online quarter. are creating to our industry-leading board, to consumers in Financial, complete Westlake pre-qualification we continue used closer variety enabling and roughly value partner, a see to audience, pre-qualifications, us listings, a loan XX% on more richer of experience U.S. loan wider bringing and for offer and car

We processing for peer-to-peer bringing our transactions transactions. quarter, party also began our trust marketplace in transparency the first private and digital to fully fourth

and our international healthy as yielding to markets. our continues additions lead paying in audience growth of scale strong Finally, business efficiently, dealer commercialized each is

XX%. resources experience, these significant We dealers. deliver brand direct the important unique into generated these attracted invested increase improve visitors to we traffic, the and two-year representing against made we million million recognition, and average annual compounded In sessions, XXXX, unique users the of to year, each XX.X rate progress continued quarter, consumer site, we quarter. a throughout to increase of our growth and and course quality the XX.X fourth U.S. Over that monthly leads of the of our quantity the monthly ultimately boost average initiatives

rate representing and brand XX% awareness quarter, the annual year a sources owned drivers in over and direct Traffic are growth brand traffic. key increased from year in XX%. Our channel growing app-based of two-year fourth investments compounded behind these

efficiencies in U.S. strategies business. algorithmic acquisition our in lead cost addition, our to yield declining In continued per traffic

are investing consumer experience the marketplace. in our and improving also We

with always mobile and consumer interface roll-out the changes, helping the in These experience, deliver our substantial are financing overhaul early tweaks produce our While our we the best improvements making to platform of several are audience not possible we XXXX, as often over last such quarters. great will net a more with growth only elements in engine. they conversion, for, vehicle dealer likelihood a supporting result deal find purchase executing strong a pre-qualification is the exact process looking on they of educated The loan more the more are our but are consumer ROI. lead higher of

year high-teens. dealers to while XXXX, grew year paying XX% For we leads full leads dealers grew our year, the over the to in

two our provide optimization last side rate We in reflecting drive have growing simply leads a XX%, improvements at dealer the years, growth towards on to a grown ROI. of invest we dealers. consumer to annual marketplace our of Over over channel these customer traffic for the acquisition our leads compounded high-quality

we initiatives, business the U.S. net an solid paying XX,XXX. market our U.S. to new to dealer despite in elevated continued in additions As XXX our We share. quarter, industry-leading U.S. bringing added our dealers phase business, a dealer of our to see these fourth net result paying paying

and listings our new paying products us, marketing products. fourth generated best our add-ons ever the quarter, and grew XX% launch AARSD audience existing growth spend increasing AARSD and addition, we year, quarter. high over dealers our contribution In with we are In other year in the as their grow U.S. ROI digital from

we company-wide initiatives, XXXX, devote into to establishing we resources. again which once move several will are and strategic substantial attention we As

While I be year. will to will on of we in strategic some XXXX our we projects the on the initiatives call, coming want focused in detail greater highlight discuss our QX do earnings

visitor span years, audience, our both our and improving This dealer consumer past of increasing we our consumer on focus marketplace. maintaining experience, conversion, growing the high-quality the growth. are several in impact lead and delivering focus As initiatives, side and will

dealers by believe to search only side, best U.S., brand supported over our continue results, traffic as XX,XXX consumer listings and CarGurus will new our their direct consumer IMV in X.X to awareness organic surface we With the find the marketplace. building more transparency and invest our need unmatched financing, million features to features consumers raise first such On in next as from vehicle. over to such deal and we drive

we spell believe value are out our an investing XXXX, to we In that more will differentiated campaign in clearly proposition ad consumers.

relationship In to will audience. a us such consumer experience addition, our we have a that by focus mobile and will more renewed retention channels creating through application consumer on a e-mail, allow as direct with build richer

we to the and a subscribing $XX products profitability. digital and and annually This marketing on dealers dealers, digital growth the for critical incentives focused more dealer becoming paying us of on the billion building a dealer's we deeper includes input portfolio provide unlocks marketing. more dealer of On value growing our side, spend creating by a are that a listings making

featuring boasts continue which and suite, We see to adoption products, X,XXX now our social as such U.S. which strong RPM now over new the live is delivery, customers, ads of listing new programs, in

a only RPM, weeks encouraged are are are performance launch the we by we early few but of seeing. the into We

value Our for product are exciting and always several paying two dealers. engineering and to teams ways last and have rolled looking years, our consumers to provide the products new out we over

leaning that increasingly buying, to we we or As our are solutions approach growth. needs, partnering support business a of on offer contemplate long-term three-pronged building,

to talented engineering audience features shoppers their have of the Paying exposure will CarGurus, With position leading we is believe Autolist and Autolist. and boost network a automotive market. marketplace. organic will augment that we car announced application, CarGurus primarily that the a a mobile January, already opportunity the a dealers in that our marketplace technology best-in-class the gaining product U.S. large mind, CarGurus' in acquisition Like team, first to by access in on Autolist of

to will economics for even better an our across traffic we two acquire addition, marketplaces U.S. business. strategically unit in In the drive effort

unlock sales Company. We're our and excited Autolist leading to help even everyone partner us our at for I'd behalf to On of already more Autolist to an our to by dealers. audience the CarGurus, driving welcome the opportunity like larger critical entire team become grow

markets, their quarter, international the logged fourth dealers PistonHeads, growth year-over-year vehicles. all efficiently attractive, average we monthly marketplaces to representing international unique average the monthly of high and Including million to audience sessions XX.X growth visitors XX% million impact scale respectively. continue over business, across our for XX% XX Turning list to attracted in our marketplaces our our creating who

investing in Canada our started Coming investments brand into in the we in began XXXX, U.K. the XXXX. we brand in in to addition

economics. fell While rapidly business. These on are an impact investment XX% these and infancy, are lead still investments in our year-over-year strategy cost we allowing core in demonstrating In trends the encouraging relative us acquisition. our improving their aggressive see to maintain unit Canada in while year-over-year our U.K. XX% continue per cost an consumer fourth quarter, of to

XXX added dealer We additions total dealers. continue now international dealers international and quarter our net the paying X,XXX business we to fourth in strong we in new net count paying as deliver

a to our our Before Jason financial make few want discusses guidance, comments results regarding XXXX and outlook. I

reduce to we also from dealers. we more reduce growth high evidenced our X is to site in experience, our First, business. businesses. short-term steps the our over between engagement that we ad But and you've growth taking rates several continue ROI and even over steps the user will our U.S. and heard within core are quarters. Furthermore, us consumer In This that lead theme last marketplace create our conversion lead the XXXX, load about in make could A likely revenue, few site experience decisions these particularly years. for improve may advertising active prioritize times last paying spread will connection impressions. value

from As de a our year. result, this minimis expect growth advertising we business

and growth, having for dealers and these value for are business on steps the over Our in mindset a the the focus new products marketplace long-term. and we management growth drive revenue long-term subscription itself prides and taking consumers team are we creation to ones invest right believe

in relationship while our it direct traffic U.S. lead modest to business are growth traffic growth listings to continue as seeing most expect generated prioritized Second, continue U.S. healthy grow quarters, revenue the quarter to have first audience we we see last our in and well. always Though trends trends fully XXXX. we has over to also we improved growth U.S. lead the as X growth,

audience. previously, algorithmic to grow I both to in brand As we continue invest our will acquisition traffic noted our and strategies

that As introduce our well value messaging differentiate believe will we campaign proposition consumers. to new unique as further

future the acquisition be consumer in our to committing to reduce retain In addition, we'll users over-time. of cost our better resources

I'm EBITDA business continue confident deliver pleased and we leverage leverage long-term details, more in will Third, via progress we trend core business U.S. Jason marketing our with profit provide is sales and adjusted but operating XXXX. as our targets. A demonstrating. to our very the continues towards our are will operating operating

international future us confidence these give our and trends in prudently the as investing are markets. marketplaces in improve in unit economics We our profitability

finance, consumer PXP, continue to initiatives and will growth trade-in new products we such RPM, opportunities. Finally, in future unlock other invest long-term as to

In we to M&A our augment become dollar revenue through addition, look a we business business multi-billion as aim long-term. to

to employees from X,XXX To you. such without recognize one in is delivered our the and up, not nearly America and strong contributions like our would that in possible North Europe wrap XXXX. success of I'd a CarGurus tremendous all be results of employee each

have our world's business and lot with forward in of ahead transparent working exciting I'm you and work We all build us and the trusted looking grow to of of most automotive a marketplace. XXXX to

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

Jason Trevisan

of ahead I'll and $XXX.X million by Total our for revenue million, quarter first quarter of fourth guidance year-over-year Langley. our the followed was of up a you, Thank overview quarter the XX% performance provide roughly high-end range. detailed XXXX. fourth and $X our full-year guidance

Our XX% other year-over-year ago revenue year and marketplace grew $XXX.X $XX.X the and million to advertising revenue XX% to grew million. period, subscription versus

Focusing $XXX geography, to XX% accounted our grew on revenue U.S. grew of in total revenue XXX% XX% million, to by fourth business the $XX.X U.S. while million. revenue international year-over-year quarter. for performance year-over-year

dealer dealers to XX,XXX paying we dealers year XX,XXX dealers up finished QX. XXX in XX,XXX ended the In XXX the dealer ago additions quarter of paying net in U.S. an XXX and paying third to quarter. quarter. Turning additions total from X% year-over-year and third net the with increase This global fourth representing of with we of the QX compares We count, paying U.S. from dealer the surpassed in end total the an increase quarter. XXX

our as we As market remain paid increases. share quarter-to-quarter often net adds dealer gradual stated dealer will likely U.S.

the strong we dealer our our versus We markets, we commercialized PistonHeads acquired of delivered In quarter. across XXXX. business, Italy. of its quarter since X,XXX in best year additions We the addition QX, with dealer period. net new U.K. international the XXX and Further, dealers, ago international the paying dealers in up it Canada, year ended paying saw net XX% paying each added fourth

was volume play but the best lead products in in would anticipated and ever quarter, before. contributions a connection largest volume, In for XXXX, in we connection and also products, role key roughly U.S. packaging. entering year-over-year U.S. than larger our growth full-year from driver expected ever AARSD generated X quarter we products the pricing contribution XX% we our AARSD our growth even saw As of from growth new new AARSDs $XX,XXX. fourth of U.S. new to in each and levers, to AARSD lead fourth the unit grew we

growth. the once for Throughout we of XXXX, delivery driver suite. new we from RPM new we to of again expect we're XXXX marketing and be connection retargeting excited primary leads and continue AARSD strong In saw to the product volume products contributions our and U.S. QX such and digital demand products by audience as to that social ads launch grow expect

with we XX% believe to ROI $X,XXX. the what previous in excluded customers. International price industry-leading this for Italian marketplace dealer we have often, our stated and remain to increases grew from quarters AARSD judicious metric. is impact Similar our maintain As we gradual unit PistonHeads will of we to year-over-year

marketplace. However, XXXX the X calculation we each course into begin quarters of operating trailing AARSD the performance as of we to accrue business is performance in each will layer over for

percentage As a dealer growth result, include generate both these international and we rates continue growth we count. to high lumpy expect businesses paying international in AARSD as

roughly Fourth which I'll of basis compensation was a acquisition-related non-GAAP margin points expenses quarter. stock-based discuss and year out quarter on amortization XX.X% from non-GAAP ago intangible down our our XXX the assets profitability and gross basis, expenses. acquired expense, backs

to we contributed discussed year-over-year contraction the As margin percentage. quarter, X in factors last gross

media cost recognized we retargeting First, our our costs associated audience in with revenue. product of

headwind a margins. As gross this product modest will create scales, it to

investments data contraction. our year-over-year center hosting technology Second, and to expenses cloud contributed the in also

deck income on outlined these or Investor targets not our in change posted website. EBITDA margin long-term factors investor stated operating Relations do However, our adjusted our

XX% period. expense from XX.X% Total non-GAAP year-over-year. the to brand fourth acquisition Non-GAAP driving XX% ago fourth $XX conversion and of were operating sales quarter in the expenses in our business. on-site down year-over-year million addition marketing improvement for yielding more channel is our direct million, and XX% leverage and traffic represented and revenue, customer $XXX.X sales up marketing investments, result quarter grew own in to in economics The of the year improvements better

in and increased efficiency meaningfully see This to traffic our acquisition business. For in acquisition is spend testament XXXX, cost our in improvements an our continue on-site lead growth we per example, to though a of efficiency U.S. we U.S. our have team we of mid-single-digit made the declines conversion. the The brand. traffic

non-GAAP development technology XX% million grew representing revenue. expenses of fourth Our quarter to year-over-year X.X% and product $XX.X

and to $XX.X technology to full-year product XXXX, the we expenses XX% product grow our million development non-GAAP the reflecting year-over-year and For have made grew engineering investments headcount.

revenue previously, noted de as minimis both today. products business we've engineering generating other and initiatives supports such As that our emerging and organization PXP, product financing, our and trade-in consumer are core

new believe to business. future large streams addressable our these total represent revenue growth we However, levers in initiatives markets and will unlock

will As opportunities. invest pursuit we of growth in yet we stated aggressively prudently previously, these

generated $XX.X of roughly $X guidance our quarter, range. of operating prior million ahead the in We high-end the non-GAAP million income fourth of

gross operating by totaled GAAP We up million. operating and driven year attributable diluted XX% per international $XX.X quarter margin loss year-over-year. year was primarily compared continued up of was expense to up $X.XX period. the quarter the GAAP roughly quarter a million were Fourth Geographically, fourth operating operating fourth sales generated our operating net high-end of U.S. to Our total million, $XXX operating was shareholders ago in expenses marketing million and business quarter gains Fourth of we income ahead acquisition. our was common million basis, GAAP a our loss driven year-over-year. increase GAAP the On expenses income efficiency $XX.X XX% and income income range. guidance million, XX% $X.X quarter, in outperformance $X.XX had of quarter. The ago primarily in fourth XX.X% $XX.X versus by the growth. an $XX.X prior share of Non-GAAP for traffic earnings

international by business scaling U.K. performance our in operating core is primarily improving businesses. Canadian our and in driven Our efficient

our cost per Canada business cost year-over-year. XX% quarter, year-over-year per Langley lead fourth lead declined As XX% in while fell U.K. in our mentioned the core in

quarter we profitability noted on achieve to I cover have to As in ground our markets. call, still third meaningful these

We in XXXX. in of in to We the continue non-GAAP XXXX to million business website includes the in operations $X.X the increase cash from expenditures and unit and flow, $XX.X our encouraging million U.K. with $XXX.X to end which of of ended and see capital We an economic costs reduce from quarter $X.X free the fourth and our losses international Canada trends quarter in the million. cash in both capitalized investments, in expect cash relative million development third million generated quarter. fourth $XX.X operating and

withheld During we RSU compensation stemming settlements in remitted from quarter, equity share from plan. and payments $X.X the fourth our million withholding

for may to other equity imminent. going to evaluate is change practice managing withholding tax this this no related compensation continue practice and though avenues We explore to forward

on Before operating XXXX guidance outlook the quarter for outlook note provide our our full-year I guidance. January regarding our that my which first some impact and reflects for Please of factors commentary XXXX, provide context want Autolist, additional and XX. the I and income revenue impacting we to acquired

First, we business are of consolidated Autolist revenue to the millions to dollars contribute in XXXX. mid-single-digit expecting of

PistonHeads. to this a several beginning in year expect growth expect for proposition Autolist investments XXXX platform. a traffic that a than value there Autolist as we to on integration the between Autolist scale and required material similarities feeling paying our and we Autolist lap dealers high-ROI year lead will drive was in While for businesses, We expect for make the shorter are period PistonHeads therefore dealers

year headwind income As million a $X.X non-GAAP a investments. these our XXXX roughly to includes guidance stemming full result, from operating

the ad the creates partner impressions and majority desktop our we revenue OEM including represents shift user which and anticipating use. CPMs little better There vast from several and to in business mix they mobile, to service Second, XXXX growth are very ad ongoing of on are the OEM our advertising downward line. from choose devices which advertising automotive pressure impacting on the factors that business consumers in other

drive consumer referenced, and improve generate reduce we decision an making Langley time. load and ad revenue subscription increase experience, as conversion, the marketplace our on the to site effort leads to over Additionally, dealers in greater conscious to are more

first certainly revenue, decision short this the this consumers term supports dealers While best forgoing growth the subscription our for as XXXX This from is muted means and QX, revenue long-term. impact is to CarGurus evident yield in expect we know transactional sequential revenue flat a both will business advertising we XXXX. interest in total quarter decision and of over healthier most guidance relatively advertising QX,

XX% our as the Finally, tax effective begins normalize. we increase for the rate full our our roughly year non-GAAP expect of our to XXXX rate impact to equity year compensation effective plan to compares full to of XX%. tax on rate non-GAAP XXXX This tax

we for of XXXX, in at full to generate to With mind factors of $XXX XX% expect growth the high-end year-over-year the these million range. year total $XXX representing million, revenue the

This $XX operating income operating represents the expect at million margin. points full-year high-end non-GAAP non-GAAP ahead of range $XX roughly our We XX.X% basis operating a XX in the range, margin XXXX non-GAAP the of of million. to

headwind non-GAAP noted impact a guidance XXXX I of Autolist. accounts income operating from million As roughly $X.X the full-year our earlier, for

high non-GAAP XX.X% at or ahead Excluding XXX of implying full end guidance margin. $XX.X points a to income $XX.X nearly margin of basis XXXX million, operating been Autolist, have range year the our the million our non-GAAP would impact operating operating

reflecting per tax year share rate We effective $X.XX XX%. of earnings full to expected $X.XX expect XXXX our of non-GAAP

consumer million and expect million Much car the first Focusing peak of the total revenue to in we XXXX, million $XXX.X of non-GAAP typically share during of to first half $XX $XXX.X earnings shopping quarter, million. on per income year. marketing the spend $X.XX. of to plan happen Non-GAAP operating to periods, which align we $X.XX our like $XX

underlying growth business XXXX, that Although pressure place encouraged strength on that widening in we core among revenue position we our dealers. are are is in by our we taking advertising the steps leadership continued will believe

to in continue leverage operating are unit margin We U.S. expansion deliver the improving and driving economics that

lead grow We to are in investing and solid trends early seeing are we U.S. traffic and our aggressively XXXX. leading position

growth as well consumer RPM, We as of are areas as dealer as trade-in. seeds such in and selling via financing such emerging and products PXP delivery

the building my U.S. scaling looking businesses tremendous up the Finally, forward and to marketplaces And our international efficiently remarks U.K. abroad our our work an all and to in in economics we by their and unit like are improving even stronger employees echoing of for CarGurus largest driving to in in thanks Langley's we're XXXX. prepared XXXX. I'd Canada in wrap

With that, open we'll Q&A. for it up

Operator

line Instructions] proceed [Operator of comes Schackart William Our Ralph with question with question. Blair. first the Please your from

Ralph Schackart

thanks and my taking afternoon Good question. for

in think First, full XX% if about revisit the so off and you're growth could XXXX XX contemplates or QX XXXX. XX% just about guide for year for is coming a that on midpoint about we or revenue I percent second, the so and

So by start advertising that I that way, something about the outlook call Thanks. sort if slowing? you wanted the been to is appear deal Wouldn't how to given curious just sell is or know in else just Langley with of Jason be, purely if strong but but the XXXX XXXX continues first has business advertising talked and question. and also the just impacting caused there the on

Jason Trevisan

it's question. Thanks Sure. the Jason. for Ralph,

dealers and you've would growth growth, would this expecting been that adding trend growing assume advertising certainly as a we're and growth muted guidance then also So continue. listings AARSD. we versus downward in historically an drivers as historical look so biggest area where quarterly that upfront annualized seen there at Again, said But there remarks business have the our the trends. new you is of in there

continue be one in sort are we away and quarter expect of gradual so adds taken to dealer XXXX each to Our our levers. going of we biggest

a advertising. the X, marketplace changing continuation trend and trend of combination So then those it's really the the of in listings

Ralph Schackart

kind to the switching EBITDA just maybe guide. Then Okay.

about called maybe relatively question out first in investment. campaign you Thanks. a of seems X give new Jason, like resources scale new Can products. $X.X a what investments you called retention vis-à-vis the ad there and us you Autolist? what trends support about also there talked for sort out of within Then it investment for is, then maybe those larger to seeing two, you million you're Autolist. think for investment, sense that I categories,

Jason Trevisan

Sure. Not sure to quantify but can if the Autolist relative speak other going Autolist. to we're and things to I

think able about So since we a integration we're the incredibly the to on quality volumes. excited and pretty as at when about going loss of opportunity the do is ahead acquisition, site on integration we an talked significant materializes do the it. business really magnitude we been standalone done is had very we but to but Once in traffic our drive this those well. a extremely we Autolist ways not year much monetize same in revenue has or that going unit as reality and Hence, nature business to more that traction even traffic, to economics. with side What team next we on we keeping as the invest our that learn the of are but can we there see team high-quality that and there monetize of innovating efficient we so need not to because we typically is they which that have renewal to some our positive complete, company can to only significantly platform terrific confident pretty drive the they that year. traffic that growing as are from in we're in the said, place also The of invest we

new the third? efforts was what was we question retention, talked with that second the And Your about around products.

Ralph Schackart

about a talked campaign new brand open as Thanks. well. You

Jason Trevisan

that. and a site products at relationship with deeper our to on take largely will us allow I'll developing So, and that us people efforts features it's a build consumer. shot are resources The the retention in

And by is why nature free compelling. are so those there so that's channels

new there products, In with people. investment the is same. So

do of good by call products steady our engineering continue a We we're built what introduced we that portion and teams have on is team product products. going of A new to stream had we've engineering focused to and our midterm that.

the X some longer-term about, we talk that us not of XX products they're issue to instead opportunities are these but in big the So you next can that months. hear

So was get referring sales do, marketing better and on much better our changing and to our of to Then our brand, investment not brand positioning engineers. leverage how going we're for so comment so that's dramatically to think messaging year better and we're that dealers a a on it's of we we how a and experience still the it differentiates explains ROI we percentage of but the company next that are us expect which in absolutely our consumers. to that and we're better instead,

Ralph Schackart

Thanks, Okay, that's helpful. Jason.

Operator

question. Our next Khan question comes your with from the line of Naved with SunTrust. proceed Please

Unidentified Analyst

would say Naved you guys inning what and rates, you. strength that certain are are dealers? to is there in new Thank attach in platform Any are color you terms appreciated. guys for any be the Robert the in, This would and are of geos guys what in, of you terms inning on Thanks. products certain you in seeing adding [ph]

Samuel Zales

coming across achieving I'm the be Zales. I'd probably called pages. products Robert, bottom I'll terrific. the about. love the we their broader to in mention well segments. choice very country period are of say the very consumers. that analogy just We you've of The early dealer Most the consumer value that. early strong more mentioned that of think that penetration, consumers. delivered today all step heard a branding more product finding of to market around both extended the as and enabled was are in I tremendous A Sam for independent get that a and maybe vehicle think The other vehicles market we from innings. dealers but and going of I It's early of for as of transactions dealer who we'll inventory of an which country inning think franchise They product our what exposure brand couple first the our more excited multi-product -- are those across dealers. the Its It's are the proposition set local this delivery baseball brings digital detail we're a or those. product were their we and there. are market been is that that Jason further first attach market lot time focus. careful early for about to a growth first phase their those to in good in uptick vehicle of dealers across a in and both do either stage those XX% for had mentioned remarks rates is a in there so as think deliver

The is other digital suite. marketing RPM, of our this set products

the I go As ago. a first said, of door was product the couple years out to the branding

put then they other its that sell give on about front social inventory product a early of looked we're in for is We're to and we The prospecting first really that which And deal what target consumers the this or excited the very to after product goal particular them call in look launched front. at year. we'll audience quarter. is funnel information to that website. dealer Now, on good ability excited have a from an the audience is back the retargeting dealership's consumer for uptick the that came and here that beginning retarget those drive you to vehicle about a more and we site. that we but did not And our leading dealer's but in innings the sites we're consumer down just that amplify a at of dealerships

more dealers sophisticated those segments. point all to obviously franchise independent the segments across those small from the and defers dealers say, buying I'd into products. interest Price Again,

Unidentified Analyst

you. helpful. Thank Great, very

Operator

of Our your next with Davidson. question comes DA with Please from the line White Tom proceed question.

Thomas White

Great, taking thanks for question. my

for just for dealers that time it's mentioned customers of them. if opposed direct products know One of traffic guys maybe to dependent curious I from of sort having you Langley, reacquire retain of aren't over very traffic highlighted at lifeblood? you're always driver? to traffic and to your strategic all as level be or subscription-based how reliant focused make going less sources traffic the on audience and to high business a Then channels. the a maybe kind to improving you've just is at growth leads ways kind secondarily focus a have you as you I'm of don't diversified on more

Just could color to hoping give hope that. Thanks. more a you bit you on how achieve

Langley Steinert

It's Langley.

we last focused quarters X a time these lot So spent conversion. in of on

our free traffic to Traffic is thing. is that more our always most of our goal. focus. while car it se and all, the of always that's end per as in to the traffic opposed converts important In the not a leads dealers So the turn dealers sale paying good, to leads necessarily is of it's

lead I our was XXXX, in theXX% average believe range. instance for So growth number in

don't and necessarily that can always see you So leads correlate. traffic

think traffic of another cost in As quite a it's that converts? per more Company, of be that the It's the certainly to I of able we not going be fact efficiencies about can think bit U.S. about a in going traffic. efficiency, about leads. were is kind acquire we that to more our more drive we to evidence as always really

cost to I per his cost think the domestic of Jason able that lead the bit our to in drive talked drive in international Actually, our able remarks are little markets both quite a down in bit. down. and U.S. we're around per a lead prepared we

not So convert. about it's about always again, in that paying leads to our turn it's traffic, dealers

more in efficiency love cars. while traffic, So we'd -- have about always we're to really selling more always it's

retention, certainly, that a always having a purchase repeated is is often. purchases focus between is over thing. not ours typically good reacquire it's considered X-year span of terms Obviously, to a In of customers

of retain engaged of can big Certainly, a about that we've with. we lot time a spending customers already how thinking focus we're ours. So

Thomas White

you. Thank

Operator

Our next with question comes Kurnos Company. from the Please line of Dan proceed question. with your Benchmark The

Daniel Kurnos

Thanks.

why guess now that? Just complete order Langley, ad I on me. call a working reducing guess, high it the would guess from but don't to of And app, refresh, guess loads, of sort how I want I I view on the side, a I the maybe I consumer-facing couple you kind you of money channel level, found maybe it forward growth of in -- think of kind unit changes just of you assuming guys was as is you're OEM going to that to that view over time. I'm a sort past. how the magnitude you making. But sequential sort expect on return

Langley Steinert

the of to made to we subscription going prefer it's have, generally, just our forward advertising dealer lead stickier. customers OEM trade-off couple subscription more of would selling revenue advertising Yes, repeatable nice conversion for because if I just Yes. decisions would from this revenue -- load, because is business. comments but experience, higher an experience Jason's see the rate reiterate conscious next cars, quarters I a being site we for some made cars. can business mean, our probably we It's OEMs always improve dealers around improved some in reduce recurring. oftentimes over ad buying It's a to which always it's

err which, to the trying to we're if So going to said, revenues think term, of experience more as quarter, improving we dealer Jason business and drive comes brand, push lead on long conversions the customer shove, in always may to probably overall consumers customers, some a the for the to side it's dealers. our our short-term for the given in and both decision our lower but right

Daniel Kurnos

that, get I Sure. Langley.

massive overhaul, It's it's optimization? Just it's or just of terms not anything clear simply but or to anything challenges in conversion in to of else. this, response timing tweaks though, not be on a

Langley Steinert

It's an ongoing process.

Daniel Kurnos

but get of don't next major it way I you investing, Jason, But AARSD re-excel Is you out? we'll can material think the you're frame there's think to All did PXP maybe up be any time way I how turns don't to specifics, guys that some to obviously, magnitude you for any I of how kind I color. And kind doubt right, year. investing brand frame fair compare finance enough. and you're then last if consumer know -- -- way year? just a this want much And there guess, any to of campaign. order

Jason Trevisan

it's that question, deals line specifics, straight it dozens behind sort on stream. growing 'XX fact that these despite a product sign immaterial when don't on from revenue, and of is it we're volumes That consumer out and 'XX is of to expect and not these an nicely the times we that -- revenue accounting us units. from growth it's is odd we say we growing stream a to say we us yes, Without that to adding bring material the so the growing -- for I mean, today, first and into But growth lenders, break getting you've 'XX. revenue grow trajectory, Westlake. finance heard the So level nice that would a is revenue. got I

resources. -- second sorry. I Your didn't I'm question second follow your on

Daniel Kurnos

year. my were piece comparison -- -- Well, a campaign. this And any re-accelerate becomes like, PXP, brand color lead just between the of whether last was flows just time a material in it other your on of then sort just the volume. question there through, I the obviously, large if sounds growth you that of AARSD as was that to it next year, for and first expectations, the kind guys And

magnitude. of order maybe Just

Jason Trevisan

Yes.

are we've the the still not a digital instance, people mean, for and PXP, That -- question. we've PXP. significant our apologize. consumer to to the that made near-term crack I I following It's We're forgot nicely. started more there progress heard list. On not revenue, Sorry, getting small. as milestone. problem on. you product fully it's transaction or complex I as is I'm the very is about revenue But still code volumes growing on there, great some finance.

don't AARSD, to In AARSD terms we XXXX growth. of guide

what the is be we that in the key expect talked contributor we lead about still remarks volume think I to there.

AARSD, continue year. as total contribution new However, definitely a have percent and we expect growing that of products to been to this

Daniel Kurnos

re-excel, sort back 'XX I'll offline. Thanks. fine. I that's was fine. it Yes, I'll get queue. take but it's in looking more of for

Operator

question of Sachs. question. Goldman next Daniel with Please from the line comes proceed Powell your from Our

Daniel Powell

Great, thanks if for taking I Two, may. the questions.

just what to to start last from the On first, you've new been curious year dealers year. to end see hearing the

Just detail campaign. And all seeing your the of the there's in a in brand has curious if the timing ROI I'm with of just how context second then bit some curious any you're changed change around at viewing more your lead related there. growth. they're that question,

Is definitely it's targeted the of that year brand that of mentioned Thanks. Just later customer curious decision part retention. there the launch now this at why the that saw around to You drove you campaign? anything initiative. that over

Langley Steinert

XX% year-on-year not Yes one around take ROI. it's dealer another is the the of scale lead driving you there first growth. marketplace player I Langley. our I'll Dan, in can assure that's

on no think have very we compared very that attractive. is growth. our I ROI fact at I our competitors have that to think much our Okay? So, value growth the practically And dealers pricing who the scale, scale,

that So, competitors paying compared in to scale the we dealers is pudding, I have our proof speaks and is think dealers -- and I substantially to the the higher, of number all and ROI. think

Jason Trevisan

question, In conflating terms of things. the the other think piece might of two be you I

that, differentiation existing from consumers So, offer the our two we during tools to consumers prop customers shopping things retain which better, and a brand our shopper. a to are journey. we their products, talked about differentiated, in car and better articulates we were the superior how opinions, in value the our Separate features, better that to user, a remarks campaign, also in investing

execution. quite both initiatives to two their related in consumers, So, different but

Operator

Please Jones comes Citigroup. question of Our question. Nick with from next the your line with proceed

Nicholas Jones

Hi, feel One there to have kind my out of and are the be thanks of opportunities of other there How on Any you any questions. that? I taking are would color about do there more guys -- aggressively Do pipeline. for some there, products enter like guess great. kind M&A the PXP? you targets

Langley Steinert

good we about M&A Yes pipeline. really feel our Nick,

going have scale are uniques code businesses. flavors we have The when time I dozens a whom to cracking and about businesses on is that very that of would scale the to the with sell our And, to far would advance are interesting I of to our mapped M&A. the and to make it our platform be it built in month. those who products In compelling robust of about industry dealers, of that what different on, We've a are a ever. two there industry. then are describing and potential we have of close code market, much think and than is lot products talked instance, hard core really -- One but these listings to really very out so And the yes, has if really of two of hard we've executed scale, sort around company other businesses well-known many to of other probably growing fact, more these technologies the built the attach million We've But now which the against could for been the now the some products you're literally reason $XX has think are crack we're more dealers. a not ancillary there hundreds, their emerging PXP. it's so offering great realizing products. hundreds products those And the have to is alone, that talked challenges that and quickly, opportunities there for can't third may flavors. that is that

we So, M&A. feel about great

our component that how emphasized We strategy. have a I think be critical growth will to

Nicholas Jones

years. acquisition cookies Got or impact marketing strategy? kind one cost third-party does it. Do to Google that the announced to And of next any get quick How that separate of have early rid on what to your might thoughts they're outcome going two the you that in follow-up be? potentially is of

Langley Steinert

our to because audience, us audience. something every arguably brand, then the changes many value the through in the Apple on recently the of and we're importance other to are an with company of means, we has rules happened those opportunity around for aware have new and can't our that arms that internet It's and how to field. I It's get that reasons why own keenly channels, mean, you that other beginning consumer it's we building our our Google announced. have leverage of and of understand value at the retarget direct of sort other for and more if navigate emphasize and

Nicholas Jones

for Thanks Great. my taking questions.

Operator

Marvin comes BTIG. question. your of Our with next the question from line with Fong proceed Please

Marvin Fong

the Thank my rate. with is attach question good start XX%, first I'll number. My very taking Great. on you question. for

it points think up was year. this X I

XXXX, in think it X I points. was up

the talk it about how of you you just it kind coming how could and about year? think for the attach So Thanks. rate is evolving

Samuel Zales

call what one for a earlier product on business, listings answered of that several It's message Hi bit our last beyond we listings our the years. in business, additional had the really Marvin, the core Sam Zales. I

new be which of retargeting amplified. at broader early 'XX innings that rate set the year. the 'XX 'XX period launched and that So sale product, of point about, products page, beginning last the in product, delivery the at vehicle and growth of would allows which that from was That those 'XX of suite, that the of talked Early in all that The of 'XX to to 'XX. that at up the really branding lifted product rate years. last the that that reflects to detail focus over launched on product, a and then the 'XX the mostly start brand digital the product dealer we beginning only RPM to was marketing 'XX

the And additional of just has launch social -- product, then, the the which launched. now

of on new penetration to really that to made So, just because excited fact we the but market. XX% our we've the to I'm of accelerate continue to actually getting look for products it rate, that

we more but as being this I point go rate reflected hear you'll So, focus. about forward, think attach that big the

path forward. are on next phase mature coming set market to really more will growth that of products the and these going Now hitting their be that

Marvin Fong

ad thanks. load. a follow-up, the digging into Great, the as in change And just

the compared find really consumers I Just have guess like It you wanted the previous were curious peers. ads of just in too as experience ads on just what a navigation to that was And seems did curious was to site? experience that some converting a of don't lot at not point the result many as guys it your you you change? about it what of

Langley Steinert

Yes.

to test not conversion. into [indiscernible] and a it's parts call our we the various find and where get So whole of probably things, we site in enough of time this bunch

Marvin Fong

Thank All great. you. right,

Operator

with Securities. comes proceed your from Ron question. question JMP of Please Josey line with Our next the

Ronald Josey

forward, and deliver potentially consumers, to they answer And know specifically, talk could going how be involved the market your but customers. that better wanted little to as in you dealers now just PXP? on now for PXP think Thank taking any you guidance prices market you. here small. from a as digital. revenue wanted maybe more I this plan Great. contribution really to specifically, does to to it you understand, is to I the how I it's include Maybe focus call. is I Thanks but well, also instant mentioned fully more, might Jason, digital, in that said financials,

Jason Trevisan

Ron. Hey,

to testing, are follow on Langley's to we last comment. So,

excited How that and their of to a themselves, sort of they it, don't having people sell of of fully that We want and confident number We that we're differentiated who have to reached want to so our product opportunity, they tinkering don't consumers. are dealers peer-to-peer other do early the always another and to we've truly just do car to that lot are days an them. we ways relates capability consumer to experience out offering feel testing consumers differentiation, a tired drives to in and set deal marketing. we very now to go in It's market the market, with marketing. now a eventually with peer-to-peer haggling digital test with get with

love And access dealers that an very -- so, opportunity is for that that's pool would to. a much of cars

after linked our peer talk in and sellers a area nicely because trade-in, are they've really from an And then dealer. fatigue, hearing initially, and some trade-in if where not so, you've PXP about some of portion to are that's interested, a time peer-to-peer peer gotten heard us interested and certainly good

ability but peer-to-peer bid it's principally on guidance we little working on early, includes are dealers revenue from the And to XXXX And for PXP. so, the very today. having cars

Ronald Josey

you, Thank Jason. it. Got

Operator

comes proceed next your Research. Derek from Please Glynn question Edge with Our question. line of from the Consumer

Derek Glynn

taking the Yes, question. you thank for

wanted on acquiring marketplace, a behind the strategic and rationale scale. seems It more this Just leading Autolist. color smaller have you already just to get like

an investment. mentioned acquire You

perhaps standpoint, is engineering anything it there worth or bringing town something So, or your from a was else technology that umbrella? under

Jason Trevisan

relatively more San you have is built least smaller believe, us, ability a have does at at gives despite and when get us do is for their, They the who unit cost it it the scale, engineering thing to in it in we Jason, lot Francisco, to the way, a dealers, accretive innovation. look other economics. a scale talent. great This of really fantastic certainly But again. It's team efficient,

hopefully of And comments so, we from you've are our always gleaned -- all this today.

are deliver scale. said, to always to them leads to always Langley to because we and as try more going give give dealers to get want more We them more value,

unit And economics, scale and we market with so, despite the nice do do really are fact that delivering we're do that. if to absolutely scale today, today, going go we more leading more can attractive

benefit so -- stronger foremost, do it's I super would -- bigger, It to be say the cost and team. allows a get effectively, our better, we to a to And allows first of dealers. it it partner it's us and us innovative

Derek Glynn

Got it. Thank you.

Operator

from your of comes proceed question the next line Please Our with Kelly with Jed question. Oppenheimer.

Jed Kelly

more earlier comment in driving any in. I you an Great. marketplace? me sneaking put in to there exclusive dealers your more using leads higher view With drive as you your of dealers, do can for of sort how of attach rate, guess you Thanks Is that their and relationship? ROI, exclusive XX% incentives just

Samuel Zales

marketplace I Sam really a good think are it's selling in don't question. Zales. Jed, we It's the against out the competition.

Langley think said I well.

driving got you've the the will with a come that is information you're to attractive. they dealers, scale on connections and the biggest return on out investment in rates If of marketplace close really

who probably spending of digital also, making moving going most then collecting this marketing to it, that are suite over in that acquisition marketing would in ROI. certainly, investor, and to investing looking at on of they're offline dealer the dollars billion I smart dealers money, how making marketing. say that taking marketing as that's why spend $XX say, spending But me on spend is any measuring we're and digital keep any on the it's that you we're competitors today any think on and keep those to their of subscriptions more cost customer smart going if the at marketplace, I'm more and

see dealer are that talked to that sources impact is and closed from direct demonstrate leads. websites, the research at a that that a growing and closed how tremendous about third-party traffic. CarGurus ROI to from close inventory information in take dealer's any Langley business, on said, partnerships about from connection sales. and change that our marketplace require the that the any sale, couple continue putting sites, our in their means you'll to connections clicks the lot the hearing looking player our we're that how and scale data excited compare of much into those don't data the in connections to walk-in us rates be what that lead dealerships, dealers a But for more of close and from total As future that at the of that those to last might the on does leads and I've It we this to value competitor and us third-party we are on what leads, on website how they and dealers own make. will those years of to what have of spend that and

just We're might data research of because that dealer go to do look that relationship. of like we're not We'll win what exclusive you're an into spend just to expect what to saying. about getting. the excited We're more going

Jed Kelly

you. Thank

Operator

James. comes Raymond Kessler Our question. from final with your of proceed with Aaron the Please question line

Aaron Kessler

guys. of Maybe a Great. couple questions. Thanks, just

overall just the First, brand terms you're at I just maybe go. then on core Thank brand kind you slowed additionally, product, it where potentially in real that your maybe kind ARRSD on And could and [indiscernible] especially Maybe back of quick. today kind know just just to of you. a in has awareness, AARSD of thoughts and you are latest where of a awareness. where kind think U.S. bit. your growth, growth of

Samuel Zales

AARSD I'll with Sam At it's think XX%, Zales. we it's Aaron, solid. growth. the start

the quarter, being which the the fourth growth I it's element on in of and in we think keep of the that prepared talking interesting, the you focus AARSD That's that to rate. heard we levers We leads. that remarks lead growth I of growth. each saw meaningful, we strongest That's of why conversion see is about -- been think constant -- continuing. the audience in see

we've fourth We're has a rate quarter. being as We're product to growth always economic growth. And that with we've the adoption grown meaningful important growth said pricing impressed that. New and time. more about factor then deliberate unit AARSD products in been at became be over more That basis. a being new more careful in about very AARSD we'll

the the unit our where deal We other is return last continue as will from program but pricing, factors, growth we're increases will on and to ask also well. for those two price most that the appropriate, for find making unit money per the we'll

forward. So, go I as feel levers three about good those we

Jason does that. see in develop brand that. they the it It when were think differentiation. that XX%, in marketplace? the I where we're through awareness to I continue was over to we as that the invest From before, mid-teens. with we're shared in seem I the very growth as our to before we in But not that where ago, increase. aided guys? consumers Hopefully awareness for can't incredible that unique it think proposition was play How going is -- may come a right, teens? XX% Is perspective, high pleased continue have we But said year brand we to shared XXs, remember statistic out you a experience see grew, that significant I that number think brand our business, which

Jason Trevisan

upside. unaided And still has awareness our enormous

Aaron Kessler

you. Great, it. Got thank

Operator

would our We I closing to have remarks. Steinert like reached Mr. over call Langley for the to back session. And the question-and-answer any end of turn

Langley Steinert

prepared CarGurus we're employees XXXX, their in excited thank our thank we the remarks, calling to for today, hard and and in want said want for work as in all I I for XXXX. to everyone especially

Operator

concludes teleconference. This today's

now lines time, may a disconnect have you your You your thank at And wonderful this for day. participation.

CarGurus (CARG) 13 Feb 202019 Q4 Earnings call transcript