CARS - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to the Cars.com Fourth Quarter 2019 Earnings Conference Call. Hosting the call this morning is Alex Vetter, Chief Executive Officer; and Jandy Tomy, Interim Chief Financial Officer. This call is being recorded, and a live webcast can be found at investor.cars.com. A replay of the webcast will be available at this website until March 11, 2020. A copy of the accompanying slides can be found on the Cars.com IR website.

will question-and-answer there and with presentation, Jandy. today's be session a Alex Following

to over the Interim now turn I'd like call Officer. go Chief Please to ahead. Financial Tomy, Jandy

Jandy Tomy

and and our welcome Good XXXX morning, call. fourth everyone quarter conference earnings full to year

over call in statements draw measures, forward-looking Alex, I'd the which non-GAAP our financial description and can the your turn like to found attention presentation. I to Before our be our and to definition of

EBITDA, financial We margin, adjusted will adjusted certain today free EBITDA non-GAAP net flow. measures be and income, adjusted including discussing cash

directly of GAAP the financial Reconciliations our in non-GAAP measures these included of tables can to earnings in the found appendix most release and presentation. the comparable be press with measure this financial

factors those Cars.com of filings, dates. included in information, as more update obligation or For our information in current their reports. annual, of risk including quarterly assumes and no forward-looking statements any to respective please refer the the our SEC to

call to And at this the time, Alex. like I'd turn over now to

Alex Vetter

Thank this you, quarter XXXX. our morning, year our to be full and the welcome On call year and for call, business conference highlights fourth I'll discussing from Jandy. morning's everyone Good expectations quarter over will XXXX. an providing fourth of priorities financial results. the overview our into discuss and we as to head And our hand before I'll who then and call Jandy,

business, of XXXX on process, improvements substantial relationships, in our XXXX and in priorities business year our confidence finish our complete the engine that in was and control the for our growth a significant XXXX In the legacy shed throughout strategy. we propel most audience important We customer beyond. progress structures year momentum we accelerated solution growth achieved will business, our transformation. and our our national and dealer with watershed with for exit

customers. led value nearly to in the which dealer finish provide for ever, dealers. a dealer fundamental by More XXX quarter, base where our grew offerings our we strong our All than fourth of

large and empower our a and growing supporting, level effectively and strong digital And this audience smart tools by We partners. have achieved continued in a We and with investments, execution success sustainable more providing our through cost to listening sales. road and dealers XXXX buying by commitment dealer car generate to field did to the taking our to our high a relationships we playing dealer partners ROI. tenacious

market our sector The we're superior we that dealer and XXXX, traffic our beginning leading value a to and XXXX audience In for recognize well driven dedication industry to by the which by XX%, proposition is beyond. gives share me positioned community, record local our grew confidence levels.

number competitive We technical focuses on are the reflecting SEO differentiated our sophistication, delivering content. our one our brands, strength product now strategy and in of quality our that amongst high set,

share quality our without to substantial to I'm dealer by high for the our leads conversion In high revenue intermediaries audience we've thousands us sales taking that XXXX, been from them. growth, need entire partners. involvement control deliver pleased access to Giving former new direct affiliate we direct relationships with our of owners. back built customer consistently base nor able and of

milestone achieving We been since this aggressively striving company. an significant towards traded publicly became have independently we

solutions to sell across franchise endorsements our exclusive innovations new a strategy expansion talk was past dealers. including country. part last dealers for year new OEM demonstrated uplift on in with of over digital suite This The today's which Motors, of semi saw of this. that of once unique solutions we and the XXXX leading behind mid implications are on the about by our we more call provide valuable strength door as General basis our to XXXX, the in partnership our payments strategy the Later the financial will unlock this also contractual opened website our to XXXX an to us of

Finally, technology and platform. we sales efficiencies operating network our generated transforming significant through

are to benefits and of the in beyond. these XXXX initiatives continue realizing poised We

dealer turn XXX continued that in Despite now grew our our the dealer me by period growth fourth which incredibly the the the results the this quarter Let quarter. base, dealers is for marked pleased the strongest fourth fourth quarter. nearly historically since slowest the in for improvement sales, for I'm fact XXXX. quarter with

result customer the new retention. in of growth Our quarter and was improved both sales the

attributable customers. the audience and now Our improved rapid lowest sales counter growth, rate force direct trends, historical of is was having access all the of cancellation average year our to to and effectiveness, the to

are quarter solutions and the ultimately and in as fourth will way XXXX the Dealers our most dealer material our yielding category base well. isn't results increases and that tangible need our strategy drive line early continuing And the only leadership. is we the digital into dealer growth among top growth. want drive The in will that evidence

at fourth customers Dealer website from end incremental we will now year. products for end XX% quarter. in billing this before at XX% the is start subscription Revenue this Inspire program, announced XXXX DI products nearly we the under sold all mid the the have grew And of third the XXXX. underway. beginning in deliver and alone of the We is revenue grew The GM well quarter website which GM partnership website

XXX and have of out release XXXX. GM schedule. underway, GMs to summer complete, builds enrollment the dealer for actively and we second websites that this more revenue of roll these phase websites recognition to subject will throughout are begin first our half than Development With contracted now launch

to more in dealers There's GM also the future continues. as program opportunity the the find

growth driver foreseeable be We expect the the subscription this to revenue generated for future. key from partnership a

Audience visitors the increasingly XX% to and quarter as momentum, to respectively. XX% from market firmly category. our Driven and growth growing XX% organic and with year-over-year fourth establishing us efficient well leadership, as the in by XX% and share growing to unique we search, market player within as up content gap continue the on our traffic paid fastest accelerate continue close

performance continues. SEO leading market our Additionally,

fourth winners and and ranked winner for SEO biggest top XXXX traffic XX% of was search saw the losers year-over-year quarter, the we metrics industry Cars.com As growth the in authority automotive. SEO and

On revenue OEM front, the stabilizing. national advertising is

year. fourth of with was clients strongest our And the business us. spending the number of quarter the decline to returned a year-over-year So as in

now are ways marketing generally sales from programmatic consistent and And from We upfront signaling onsite business. the last revenue. with seek driving auction we OEM commitments now to seeing with momentum them of our further year, solutions. with as OEMs clients And open our are on we're media incremental stabilization partner our new new

from now and But strengths, and North have execute including us industry audience, with we and knowledge, unique the during we to into last advertising what been deliver XXXX. across years our the to new has our sector products data, Clearly, and going of in America. our see ability difficult OEM of right volatile all front OEM predict confidence two auto in

business our is our and inclusion, our our and foster Finally, to I our bring highest social community Upholding our the planet. expectations our environmental, responsible business that our customers, responsibility to is dive standards. cares about and a dedication efforts practices our of to highlight greater before to DNA. guidance cars and standards in driven awareness into Corporate XXXX, people, for culture I'd governance like of by integrity

of fourth invite quarter you investor.cars.com/esg. launched session procedures environment. and our and website in community security, that some explore I and within the support people, our data to the dedicated current that new highlights to a business We our policies the this culture, leadership ESG on

XXXX now position execution in Having the on our in exited solid a focus XXXX. is

newly growing look a in our innovating growth, focus class we market on platform. category ahead, and best of As be traffic solutions our will video end launched leading pursuit relentless and customer fuel

OEMs leverage stickier for We continue to our that dealer that translate invest and and digital in ultimately grow strength traffic dealers solutions ARPD. relationships into

our of the market on time unfettered dealers conversions us, the behind network basis first are With to solutions our entire able in now affiliate for to history. an we our

of dealer are very lapping efficiently to and subscription teams Our to latest our and and to the the retention unlock not and affiliate start revenue focuses comparisons on advocates range we to that positioned we strategy, able more customers are dealer digitally to growing to savvy Combined needs address dealers year. which year-over-year sales under this with value are immediately, well introducing now dedicated model. of able our later tools technologies work our

excited true our times evaluate driving other to force partner for engine, us entire sources. dealers is higher to through see What attribution automated ROI, other cars.com is and weighted traffic extremely is dashboard marketplaces. important launched. proprietary than our a Prism And as An of performance. methods vividly than new dealer that websites cars.com recently and channels, dealer reporting about allows conversion alerts. strategy, of launch the offers our tools group I'm delivers calculates particular, across reporting In Prism, product tracks more we part marketing sales we our and traffic that performance establishing marketing four quality level their Prism help

being evident true to becoming playing dealer commitment as level Our their champions of a success. partner field is dealers seeking and are more

population of our our video Dealers advertising with auto is One in top which advertising, buy Those to car. that end losing is ways television alternative Only held Vegas. Las This small for to market population to inefficient spends our National partnership which the industry we with a annual nearly who advertising is is we are today traditional the a reach newly with advertising. the market dealers a Automobile year, in show of the XX-year Association, trends trying its platform support platforms. shrinking. are TV billion aware unique that the meeting the NADA, over through is mass of recently dramatically viewership launched TV nationally you to and NADA, FUEL. market But familiar traditional in $XX fraction FUEL

than Cars.com to offerings qualified many is innovative And year. a video This dealers had as recognized these video In pre now. on And progressive we to market to buy shoppers enables car one in most highly of this messages contrast, dealers new the targeted platforms. service XX% run are more market widely the NADA at end car enroll. FUEL shoppers of

is beginning that FUEL available a positively customers, to in XXXX Cars.com in half. ARPD only to service second As the we contribute to expect

during earnings We more provide to commentary plan next quarter. our calls

XXXX. strategy many of beginning pieces we the XXXX, of second half went revenue fully we of have public out XXXX, the Primarily nearly the XXXX, By of realized. dealers been from with started years first in will fewer laid of X.X the the when we subscription XXXX quarter turn that than ago because of

in momentum our extraordinary dealer in strategy and transformation profitable with business our continuation our we revenue of will increasingly and dealer increase in dividends pay traffic, as sales faith for XXXX Fortunately, leverage growth. retention, strong

quarter end as Year-over-year the rate and improve year. fourth EBITDA each especially revenue for dealer with beginning impressive both comparisons sequentially the the by deficit we quarter will leading us due exit to run

pre sold on Our payments beta our as from completion site affiliate confidence dealer over cut revenue XXX June GM comes of such new and from the XXth, to websites. over midyear, factors

also Our result will audience factors our to number is revenue from car innovative outlook ability reflects that digital tools. using market XXXX increase for traffic This a the that leading of consist seeking to translate in tap dealers of increases buying both and EBITDA. our growing following. confidence comes halves a including distinct to two of into and

First, we the two before will comps. count favorable yield quarters sales year-over-year first in dealer lower carry dealer a net

website Second in recognition of are accumulate, once live billable. dealer will business that begin set the ramp websites the and revenue become to our GM

detail And and ending half transformation will and the uptick of new from year. June. in second savings in ARPD the back first in additional our cut platform. affiliate the Jandy an our over of Momentarily, for payments mid-year from to assumptions provide the the distinct after Fourth, drivers Third, half. final FUEL significant around technology finally

we For Overall, to exit to build growth XXXX rate. flat subscription be full revenue with we anticipate positive XXXX ultimately to sequentially year-over-year. that X% will year-over-year anticipate throughout and revenue revenue year, the growth we a down

OEMs in a exogenous We COVID-XX due will monitoring volatility, virus. advertising cautious as OEM be downside particular to to the of such built-in a sector's course past risk and factors

as We direct with in In we relationships. cash growth flat and positive year-over-year free XX% to lift year exiting capture rate. full XX% anticipate XX%. anticipate up be for dealer also XXXX, EBITDA expect our solutions between to be flow And from XXXX up we you XXXX and a adjusted the growth margins EBITDA

and I'd now assumptions additional call over the our like to XXXX to fourth our for Jandy turn year around key XXXX to details drivers. outlook, quarter and through financial results the go full

Jandy?

Jandy Tomy

reiterated and earnings decrease was November. XXX.X to guidance, related quarter revenue, solutions. and digital driven call primarily websites X% third as the as line with million, ARPD, XXXX million Alex. we XXXX. our during of when you XXX.X decline was by full in slightly previously This for a in dealer Revenue This national dealer Thanks in compared year-over-year our well with issued in lower decline which exclude accounts year

from XX.X related pro conversions dealer declined by X.X inspire decline prior year, X,XXX client growth million Wholesale year. Direct by driven and to and customers. the offset revenue our of revenue compared of XX% conversions, the and customers. XX.X XX.X in million of sales million dealer affiliate from to forma was a XX.X XX.X which result up prior the market million the the related dealer was affiliate million, to the million affiliate

affiliate the October end and last occurred channel. on marks market conversions the wholesale Note, of Xst our this sales

Our to was of sales. and primarily business the XX% national upfront XX.X the or was in lower down compared advertising result prior This million lower year. commitments XXXX, incremental

saw is in said quarter, XXXX. continued as However, a sales improvement which we into healthy Alex fourth national the in

meet that continue their needs. work partners with OEM evolving products deliver closely We to our to

to XXX.X for the expenses Total year. compared million were for billion prior operating X.X XXXX

third call, completion an our process. in stock price non-cash value in we performed exceeded recorded assets And fair company's million, following charge quarter of quantitative asset of we a review value. discussed the strategic and XXX.X decrease interim because estimated after the intangible the our book impairment earnings the sustained a test the As alternatives impairment of goodwill

were or in from charge do primarily covenants cash transformation. depreciation increase charge have due as result in or solutions XX.X early the financial purposes, our and liquidity planned marketing We an and due the our technology benefit impact and a revenue of The to goodwill associated flows, affiliate to any operations, impairment agreement. reduction was compared in expenses remains tax our certain credit assets deductible on and operating to to This the non-cash this million. excluding compliance the expect intangible impairment increased of costs increase to under related growth XXXX for increase with with our share intact million assets total amortization XXXX cash useful business payments investments, conversions, life XXX.X not and affect of

And these or share. XXX.X for was the per November. XX% or XXX.X in net guidance $XXX.X by prior XXXX efficiencies. million continued XX% in increases the EBITDA $X.XX reduction $X.XX or XXX.X or per year a in were year. compared our Net was from resulting to compares or was diluted partially for XXXX to with Adjusted diluted operating expenses focus on offset per million share, loss income million $X.XX the revenue, we prior diluted year. of reiterated in-line Adjusted million $XXX.X share which the in This was revenue in million also of

like on that we review move I'd of financial take Alex discussion the our to growth, Before as I operating to dealer fourth audience the quarter customers quarter successes achieved well in key as moment results, including fourth growth mentioned continued our a to earlier. metrics, in

with XXX.X XX% growth Average being million and traffic visitors of quarter XX.X the XXXX traffic XX% quarter date, in continued year-over-year. representing year-over-year. growth growth Our monthly audience the with fourth fourth to has visits our representing unique quarter were highest million

the and of as from the digital excluding inspire, websites reflecting was down related XXXX and ARPD an new XXXX. of compared was X% customers XXXX. quarter quarter X,XXX were solutions of revenue to December XX of from XXXX, fourth ARPD dealer fourth September one dealers increase XXX to of compared $X,XXX dealer XX, Dealer XX,XXX in

and dealer our continued as of Business to XXXX. customer driven enter Compared end sales in retention we improvement volume customers XXXX, rates. higher the X,XXX down and end new by were XXXX

$X.X was due in from million in our the was compared markets to of direct partially of results from and affiliate was year-over-year decrease million business, of customers. to Now XX% the the declined in revenue our by $XX.X Wholesale incremental to quarter, solutions, was by in turning dealer converted in newly digital affiliate conversions. due $XXX.X $XX revenues decline was market growth up fourth million dealer to decline for and period. $X.X digital driven solutions $XXX.X prior customers This conversions, compared $XX.X the million which the the offset uplift affiliate and results market affiliate year, million revenue growth prior the year a financial revenue the to million million primarily

business were of September the fourth the expenses national from in a operating million a $XXX.X year As national compared down contract of the was XXXX. $XXX.X began unfavorable as for prior to the the quarter. advertising This was lack the driven at of the amortization million increases conversion, stabilize quarter, the during year and our $XX revenue quarter by highest increase fully million. cost period. market amortized X% Alex quarter mentioned, with On basis of liability, represented XX, XXXX the affiliate which for was benefit for associated year-over-year to fourth fourth advertising Total the

investments by marketing reduction depreciation to to of of the offset related efficiencies. amortization These focus were technology and of increases increased from certain partially operating and continued expenses due reduction transformation. rise a resulting assets the Planned our useful our and

million the $X.X for was share of per to million was diluted XXXX. quarter loss for quarter fourth compared to Net fourth in net million XXXX $X.XX fourth of or quarter the of or of per compared the income diluted million net XXXX. quarter $XX.X income $XX.X share, $X.XX $X.X the in fourth Adjusted

and to revenue flow net quarter and to Adjusted million Net cash million shares cash XXX.X EBITDA fourth XXXX XX.X XX cash million In the XXX.X revenue million, in XXXX period. to million million XX% free by we in our million Free $XX.X XXXX, debt $XX.X flow compared provided XX.X for of or borrowing. or XXXX. repay prior the compared million, year was compared in XXXX. utilized of of XX% repurchase of to was was operating of XXX.X activities

December debt X.X leverage was as times. X.X below leverage and million XXXX. outstanding cash comfortably Net of at maximum XXX.X times December and XXXX, of were our net was XX.X Cash XX, XX, equivalents million

remaining announced the secured of previous we mentioned on As our our reset covenants existing leverage to call, October, that agreement. our in an we the net agreements amendment credit we've for that term

financial us capacity changes, and our with and sheet remains balance to increased provides flexibility market strong. This to respond

Additionally, times. which business. in the our reach of until we our approximately focus flexibility X leverage provides target In net deleveraging million on we reinvestment facility, XXX credit available near-term, the on continued for have our the remains

like Earlier our for discussed on around additional clarity I'd this the our expectations Alex time, this morning's of outlook. assumptions At XXXX. to provide some call,

within this versions provided that to Relations so, do the our morning. the I website review I As Investor have on posted invite earnings we presentation you

the Alex second several fundamentally are to different first half due and As discussed, factors.

that First, with dealers second nearly fewer than anniversary won't the ago our remember we XXXX stabilization of we X,XXX of half begin and a until dealer base year XXXX. the

associated But of the based Second, to in new servicing the our of rollout the a year. will than half customers fourth dealer in ensure with revenue business XXXX. began the more of website the GM quarter successful the sequentially throughout subscription build second GM investments XXX

in are investments And half first this Therefore, dealer the the of run these These revenue growth impact the negatively anticipated to the investments from inspire its the websites out, before and are in half because incremental into rest to the resulting due EBITDA are will year margin the depressed GM rolled the the to rate. built expected our be full of XXXX. GM business. necessary, begun is EBITDA having of first business

the increase is waves second the half to QX this end be throughout XX, XXXX. significant yield when completion the rolled rate Thus, In now. XXXX which four summer of of contractually in the inspire revenue will XXXX, from on us dealers revenue savings share to in months over Anticipated they just will quarter. dealer XXX XXXX, exit half fourth our of beginning In and of and progressively strong the contracted of XXXX, payments June affiliate second profit contribute for out website. GM with

In payments will totaled and XX million. approximately first in XXXX, be In these year. completed will these the of XXXX, be the payments million XX half

to as keep amortization XXXX we the of liability benefited year-over-year XX and positive related the non-cash the completion dampens EBITDA contract to please Additionally, payments the and EBITDA a unfavorable that million the of affiliate. in XXXX, adjusted in in from impact also on mind was adjusted benefit included of

Finally, XXXX. in ARPD we uptick in to an of expect second see half the

mind As focus we margin marketplace our solutions continue national and initiative. digital faster products strategy, mix GI advertising as products. our will that portion profitable, lower than to and in and margins of are at moving of our total our our FUEL further our be become extensions our a revenue FUEL revenue but on the percentage are Keep forward. solutions a Therefore, EBITDA by grow rate impacted larger including shifting

lastly, And range. of virus, be which OEM, resell a the could our the COVID-XX could our from products which by end repercussions the remember that advertising lead impacted scenario to guidance national in low results please

to with I'd turn call to And remarks. some the that, back like Alex closing for

Alex Vetter

Thank you Jandy.

the positioning and leadership. and XXXX to for platform created the close of strategy see has our financial year execution extremely is market we this solid As gratifying a growth with for that momentum a

XXXX. industry relationships. dealers open of ramp of Operator? call that, your on dealer Our and the questions. local I'd are our quality beginning strong our depth to in the to for the competitive to with position and a like And solutions And recognize we're

Operator

from [Operator first question of of D.A. Your Davidson. the line White Tom Instructions] comes

Tom White

a Good could X% excluding in more you stuff, help for One morning, it done inspire was on the a like some looks if what's tailwinds bit benefit kind of I could, ARPD quarter, and the us should happening the the that social. of guys. questions. seems dealer of my taking it affiliate to opened understand Thanks products number be have urban the that It up there markets some big of there? conversions like new like like been

pick to second guess in Jandy also weighted and or of that I that expect sort we said about and when. think more your in kind maybe you expect and sooner? development this up I'm why what you comments, about bit can I them So that that half offsetting Is of of presuming color a just a XXXX Thanks. tailwinds right kind ARPD

Alex Vetter

dealers market the final through in Muncie, like QX. that D, LA. vast and or the are executed or markets So from Indiana, smallest by the were rate is of markets, the want Keep value conversions you compared that are the biggest point to in size piece are look again the Thanks, markets C classify if affiliate you or they markets mix Tom. at for Certainly I footprint, in we which dealer D like yes got large market two to mind coming fractional our card right? but skewed smallest majority Chicago what we to

So roughly we dealers our fourth upside in quarter, over into I drag mix because the more think brought to ARPD with you're XXXX mentioning the do more in has which ARPD. we do see

this product question have will second we solution in Our your launched strategy solutions don't yet. like upgrades our taking the or we dealer Yes, even which bolster it's we are half before our account ARPD. is website form, things FUEL, really think uptake that in think on GM inspire ramps, XXX as have already calculations mind, up for we ARPD platform keep signed the dealer dealers a

do of XXXX. in half the driver strength we in So second that see

Jandy Tomy

remembering in on you're converted point the Tom, final to are what a put to that larger it XXXX. just And markets we

XXXX, from affiliates Canada, So fully year-over-year did also pressure XXXX of wasn't there net some pointing There's been new to. kind is is perspective, were there In downgrade. a in of the the there from and of that Alex we tailwinds. upsells and just in already

but launch as I of I is calls, ago growth launch, new on certainly rolling particular, it it by pressure in last years products part social, more and And we're So products, still kind beginnings being of type demand call think we social up we will we've dealers a areas the sold are now, couple cost kind of out. the of GM, X already that about some think right actually legacy of, been with in of it fall just continue experiencing fuel that matter offset these it's about product. for on then car the are of we're are from the canceling was to as we and talked product, ready pent to the cars I because at display it in

are and more Rand things of So those two they'll events really half from be coming revenue second perspective. any

Tom White

comments stuff. Maybe listings just pressure pricing on power legacy of just there? What one dealers about those renewal core maybe for lifting Any of discussions dealers. the going some canceling follow-up. Any make just related can Understand, you product. the of kind with sort core

Jandy Tomy

here very gap very know X months, been price. are about a and X X where discounting, I focused perspective. I on and There's always it look where, the months, out over upsell dealers in mean base call come of had dealers from coming isn't last, we've we've more bit focus that very level. to a don't wide had less little longer time pressure it ability that at in for we've frankly, on to you feeling we the actually in, dealers months, pricing at Locking average But natural to long the dealers cancel contracts start good we're compared XXXX turn in when with a to signed a of pricing

Alex Vetter

trends our And at certainly the right. backs are wind there, the traffic

deliveries value pricing Our attractive. improving, our more makes which

Operator

Riley comes question next with FBR. Krowl Lee from Your line the B. of

open. is line Your

Lee Krowl

your to X% impacts as full up just on guidance down to thoughts flat assumption. guys year? the flat on here baked an industry down kind just overall off year, that but of overall we sit wanted industry as of into are that you of is all, the kind how First outlined. of Obviously, in I level that get to start I you a assumptions the curious drivers and is want revenue one. What for earlier that's industry build the the Obviously, the to to part high

Alex Vetter

where see in the being fundamentals around turned Whereas 'XX that there's we our as extremely macro our be and factor we XXXX, advertising. think strong from dealer national 'XX. guidance a uncertainty it for I would were and in completely on even and volatility

technologies infancy. increasingly in that's primary been technology and solutions And really are would Dealers well also That's we're costs core And turning think and to we've where say, automate marketing been positioned operating marketplace. still its is there. to business. So in I remove focused. our their I

more uncertainty the business. rest for cautious outlook just the another opportunity. taking because see the we think I of of the big we growth a but on solution our the business, tailwind the the impact National, strategy, is market, the and So XXXX in see for we're

Lee Krowl

were, think like call two pipeline coming that guidance any highlighted. for on There in you assumption of I OEMs other GM of it solutions. these any believe, Is OEMs then, for I inspire the And the dealer was built into there sort the last online? that to were three

Alex Vetter

to is the Obviously why There largest, we is called material trajectory but in up there GM XXXX. due not. it any our no step being that's in OEM out, additions

Lee Krowl

one there on last just kind just what for when a terms General on start GM relations to discretion specifically, recognize? of set it you is a And Motors, the go at the of put means then or that live me, in point of for finer date the revenue is

Jandy Tomy

Yes.

a So websites is, a on roughly summer. a summer of And and right is so where it how the in out websites There plan is there's that wave schedule, be the they there out. this can this will beginning make roll sure just each schedule it roll many is clear. each now will to monthly. assigning is it partner GM to piece out roll

day. what GM's out right, the at the month, roll one the following But revenue the at we'll build. rolled the in of the one get tranche, month next the is roll out for another and and out far, so the look hands and end schedule you'll revenue will And then that's month tranche thus so you've

piece So of it. that

We have right this with certainly more to schedule to now, right as the of in schedule try But faster. and expectation this summer. get would be we're a working them now

Operator

Goldman from Sachs. comes the question line next of Daniel of Your Powell

Daniel Powell

Two questions, if I could.

of so wanted the lead to the to quarter ramping back just excluding to and get relative sort traffic there behind expectations On to in just that conversion coming these above a in of compared sort want core Was expectations? a secondly, you kind in in the that of SEO a a in, saw are one, where dealer driving of kind how inspire product, second GM the that sense the growth dealer of quarter? the products your dealer sense that growth for then sort half of be for in get inspire dealers growth first year. investments And seems of XX% you saw of the that to and in the

Alex Vetter

Daniel. Thanks,

the fourth sales is you starting on dealers XXX that just OEMs. on seeing XXXX in dealers, in organic I of to off back a close quarter. growth we GM were growing by count Obviously, XXXX, 'XX, loss sides, side positive momentum. And before we're great First the the on include we've including to all, 'XX, done XXXX marketplace down lot work website across the of dealer footing dealer go cut on and growth all to that's positive we

SEO. to So feel through be And our say that in performance. that. growth is majority about traffic traffic I would attributable would of we coming strong pleased largely our The

So buy working. is this of is dealers highest quality We've focused it some they you are getting that that that very and been from feedback dealers the recognizing lead can traffic traffic quality signals this that that isn't And year, elsewhere. on are convert. strong improving can

correlate traffic very to to have count in growth doesn't and higher growth going so lead signals the much the lead is vivid. of then growth. the traffic But always growth, traffic leads correlation right, quality And we're

that traffic being highest report size traffic sample end all I'll in and launching of also dealers more data participants. is what point is the on. is that large cars.com. in back XXXX that announcement their very and a dealers their there made get websites marketplace driving of is the total gives can we that, diagnostic over better only dealer they the marketplace Cars.com not hands we but on which this the quality into a see consistently performance quarter And traffic of And and conversions no vividly Prism, of quality dealers

and improve on see signals we and focused seriously them very trends. to continuing take And quality so we're those positive we

the On we strategy, use investments. Look, we've performance DI headcount in the in to we're some the headcounts revenue. largely the of and add got a margin business, before strong ramp because solution recognize our profile of having there

the on-board dealer something you lower to get and support is was it nonetheless, when them in effort production that Our headcount dealers, year. alone, that XXX ramp the have is get successfully have all the really to our than last to where to made launched I we provide we growth. But the momentum is and our the and right first goal much dealer dealers, lot of are wait who switch in community GM lot create and of see think think a approach. dealers on our for I brave a XXX are wave, the the that positive innovators focused and And

And so GM the we're going our that's second And going of XXX. to be the in round successful with more those more way. to bring dealers and

Operator

the line Dyer Steve Your next of of question Craig-Hallum. from comes

Steve Dyer

question, guess, dealers there's the of Alex, kind decision decent a of GM a on piggybacking have sounds you with that amount it think I XXX. just yet. still not made like who So

is sort other share vis-à-vis your of sense market their what to as have You the providers?

Alex Vetter

market the than see first in dealer more we nobody we data of were share us. that the shows round leader new gained In terms the so adoption. Certainly that

I incumbent aware the think that is sold market the who just CDK the the the majority obviously owns business.

want that think are to alternatives of that this more very I on dealers so And focused companies move to segment. will exclusively consider

will as that second wave only open opens think up up. I so the And more opportunity

Steve Dyer

but sense your in that missed you this, decide? maybe decided I percentage numbers is of what have to maybe And rough have that had percentage

Alex Vetter

it a for was less think I quarter [indiscernible]. than less sure,

and So of actually make dealers But should the I Jandy, we up elected it was change. follow make sure. sub XX% a think to

Jandy Tomy

Alex I'm with happy providers of stayed as leader we he that taking move, the decision and sort know didn't we defaulted a to with he CDK. as over to that the of follow-up. stayed new good a number far dealers that still Like there's were make X that said,

for to that go this opportunity us for back nice group. out year, still after is later back when us window there the So enrollment opens

Steve Dyer

guess anticipate quarter. saw the adds is sort would sequentially the year? maybe to is wondering in net you willing something what you and dealer in Nice throughout of I January to if I'm looking that you're dealers to how February and share add see continues the

Alex Vetter

couple points. data a to point of I'll

surprisingly cancellation down numbers very in to durable the closer X. our had those rate. In in and we rates we got we the in QX, 'XX, a In high performance. and X our quarter, conversion First retention vivid work of growth and do. sales February cancellation fourth where as of that affiliate year to had that's some our and we net we're from our distraction. free that January team months seeing that pacing no starting as improvement And improvement as our X% And strongest improvement in only had foremost, been the were And well. produced sales that's not

Steve Dyer

would been positive, quarter So, to or to you share? I have you not date prefer guess

Jandy Tomy

Yes, date. we are quarter positive to

certainly say I feeling base. of good stabilization dealer the about would the So, we're

Operator

Arthur line question from Research. Doug of Your Huber comes the next of

Doug Arthur

think you you operating I next on GM the the but touched will the be of that? the opens you accompanying investment adds window staffing. next there of another Alex, Will dealer that when some get this the on dealers up wave and ramp in for some costs are or leverage built wave

Alex Vetter

asking. I thanks for we think seeing but is I the from year, But we're not Doug, it financials. Yes, XXXX leverage in see a you tell scale. absolutely can that the

in the went but is we're in costs KPIs see to responsive being we're in it getting but our we the dealer to from operating continue to where GM investments down with dealers, serve, improvement existing demand. the as dealership those XX not see making we in And, development our cycle of cycles. a So XX to leverage the terms well XXXX, opportunity because big We only call production future launch days. a then And support. to the day

and our second because on revenue of doesn't model business in we but XXXX, actually of as the to our timing financials, dynamic it first over that's do financials that few in it, seeing half, years. see in see the leverage out late good that and the you business, we half just the we're appear So next again expense the the early points

Jandy Tomy

really big mean I the are investments absolutely. Yes, starting now.

last we grow year it. of for on year, and business, website business numbers kind DI continue full then If with last XXX added XXXX. year, the This GM customers to excluding in year, you you add GM the of look at the the top

some So into and have started we year investments year. last continuing are significant that this we

and or initial to the of bring incremental to dealers So, GM magnitude now. as be we this we're will not wave, doing there likely enroll this but some right on original investments, more what wave,

Doug Arthur

the the fourth lost? quarter. of on of incremental just through versus was a the affiliate Okay. on I numbers and what lot quarter. uplift the of guess, for And a wholesale, then Can thought get the fourth Jandy, out numbers you those what again, focusing of threw I the lastly, impact sense both you conversions you sort you just was? run just year

Jandy Tomy

sure. Yeah,

see. let's So

a fourth the The fourth that the in revenue keep market the out So of revenue around quarter $X.X confusion thing which of lot line was share expense I in there's the to there is item. revenue quarter. on think mind, in impact million the net incremental affiliate

we is So we And of $XX you'll the in total, we the liability. item, all in have contract the fourth in And benefit of that's of some affiliates. in million see expense. amortization importantly line payments the in that quarter, total had from QX, those what unfavorable million of former that $XX made to didn't

but ended P&L our every So running the and the that's XXXX, of had additive adjusted through quarter benefits that since non-cash benefits in it million QX. been that's we've EBITDA, that $X.X being in included

X and rate was have of run So there QX, expense, in but It's million that as a benefits. non-cash as million well. share X would affiliate seen million had QX truly in revenue benefit XX you we

So that's be forward. a think would lot that the parts piece other go to of in the to we mind moving people I fail keep realize. That as

Doug Arthur

And said you run share in out the expense, affiliates will QX.

correct? that is So

Jandy Tomy

right. That's

XX So we're expecting in X million QX million so million, about starting in it to then X Xst. be July zero QX, and

Operator

Nick comes Next question Citi. from of Jones line the of

Nick Jones

platform products What as talk into towards winning there their dealers. lack emphasis dealers learning channels leads through the about kind are for of network off and you more a I the FUEL like you you shift cars.com Is fly of wanted some term? on budget human of other how they and less IMB? through as guess better to to kind referral

Alex Vetter

into are to tap organic No, traffic. strong sources of wanting absolutely. Dealers

the they their that number dealers budget. subscribe probably channels to cars they open competing in think when is search, themselves realizing coming of more not one spend that back and necessarily other are currently where to I with us are reason

losers not gain. for going prey buy marketplaces, for these those and business but on they're realizing that to about then dealers, So they're more more picking around advocates winners the marketplaces, more their within progressive their shrewd versus much are I that business getting or and see

strong momentum dealer dealer the counts in because we're advocacy So XXXX that and in keeping to whole. commitment seeing dealer of

side think switch a is things the many solution the leverage It the incremental. of And side, us. the I for our isn't strength we're on doing marketplace. solution of that

cars.com to available only is fuel dealers. instance, for So

You our unless you're able our video buy marketplace. won't to be subscriber to a offering

the part are that's helping Facebook of marketplace. think I of their so their dealers out there's business, than to put optimize that the listings beyond no on I recognizing think benefit And one smart the partner just And helping we're dealerships we're them our there with strategies working different differentiated that's listings.

Nick Jones

digital one business. acquire combat auto I agencies the you try And mean to do saw marketing tech CDK's into maybe we follow the Ansira lean to up things. offerings some expect of

like You're IMB? FUEL launching

Alex Vetter

required category. I'll effective tell you agencies is always think are I to this is in being Look, the auto that around What industry. be specialization skating

the competitive specialization out while dealers And been But in online years. for the Video focus the agencies that is have auto to solutions. What vertical and is with with is businesses to are advantage. buy. so video many market problem traditional video, is and for audiences horizontal finding largely our same it's we're in the and that platforms offer untargeted

the And benefit greater generic than audience platform strength solutions of these provide. efficiency of our is the driving that leveraging and consumer we're our so

Operator

from of BTIG. comes the next of question Your line Marvin Fong

Marvin Fong

be Thank into apologies. I been be fourth Could to that what was planned. uptick mute. how asked, expense of Could the you also my Sorry, cost also, that And mentioned have in question. marketing beta going more rolling then and the test taking are sales side, items associated spending on will was kind you with for rolling my be? But that off. a done that help in dig little know I you some on? also off. might was costs the much you said technology several just quarter, on that quantify but the on you Most

Jandy Tomy

spending. some the normal from our is brand of program, investments of program, marketing spend kind the So our

have we year. with we year successes that remember an were spend in and efficiencies to XX we and incremental we the our programs, within to wind the traffic seen off dramatic also up within that started we You'll million success the with that generally, that marketing this need saw going the paid And without but SEO, didn't XX anticipation that the spending that million gained we spend.

spending. of some that So is

cost and in a with saves realized of throughout rest on year last the piece take to business. kind was it a and stock. moment of to other relish the both product that found year. with and for GM question And DI other in the there savings just The costs the we I'll Certainly just related the piece from sale is in XXXX on that the sales the transformation, growth a so businesses and DI and then compensation the force of within

savings there started in nice the transformation, saw XXXX. some That other was we throughout organization. well, realized the we as well places as As tech as

a this back XXXX, tech look we transformation. full do year, of the saves in the specifically of contracts but it's a cost will timing about, X in incremental kind is to bring those about the up as we new based on with of and talking contracts new been $XX forward are And run structure. we've million that the that million year. down have rate associated the wind And, the we coming As half with really

Marvin Fong

thanks. costs You like guidance had some for on said in well it the revenue And only your are kind embeds embedding you within the already? you Could a of go as into contemplated kind as guidance? sign you're customers Terrific of won the already is, of, And just it further end just looks second just if your up you That's ahead. that? already your Or drill benefits. oh, FUEL wins so question. you just hopefully you is sort of business guidance anticipating could question

Jandy Tomy

didn't Sorry to mean you. Marvin, interrupt I

stage, So, it early right. is

with pre but because great the this out. obviously around been it been also test rolling say, We have sort just customers in products, we phase, year FUEL, where but it have I'll revenue very we've are outlook is beta we're this cautious that of through rolled product is

the in asking got enrolled, and The for small we've we maybe around product it year. and what you it people it again associated full costs, and there. relatively budget beyond some positivity of with expectations the the certainly our were So oriented. success with for this cost about assumptions pre just But is is

of the with So is of new new product, the in it. media this it that costs really, to the and team majority associated support this product launch growth needed but the

Operator

of the Benchmark. from comes question next Daniel of Kurnos Your line

Unidentified Analyst

Thanks. the on you're Could was QX This and or converting new us a Chad lead strong for convert to how of you that is talk traffic give lead to growth what traffic is volume growth? about in doing help a what volume leads into sense Dan.

Jandy Tomy

of our volume going in lead that value the it and that I are to is that rate. our rates fact connection the I'll very, our and to day, and we're that mean, sales you perspective, we improvement end we're the in growth Rather, the the quality customers. point we're cancellation isn't the retention delivering a of by disclose. From And that quality very the back evidenced number at rates the focused leads to on generating. the

dealers. How that generating much generating, our and So of that that's very how made take the the a really through we've traffic efforts over at be to look evidence converting traffic. that connecting close we're would we're to to where

Alex Vetter

Daniel, markets. you of encourage I'd dealer also and your any

than nobody's I cars. back are finding saying. as a we're think doing what better dealers Overwhelmingly, job

back focus for strategies and us we're delivering. asking played by and they're So our quality the dealer what the on being is community to

Operator

comes Dyer Craig-Hallum. next from Your of the Steve question line of

Steve Dyer

for Just follow-up me. one

the be the incrementally QX and by that amount. kind which in given figure guidance to cause The on takes where QX? why to of puts the higher. QX some would would relative upswing. dealer be DI in downdraft the suggest would are, the counts the What of than of Just be lower revenue would kind trying would just out the I'm of cadence in QX

Jandy Tomy

Some piece national. of it and is softness is that other it the the ARPD of

declines And this So still fourth in quarter the national, improvement again, conversation. yielded year-over-year. we're and the what feeling we're business good seeing about in

national of is getting The of bit seasonal. place a is is back a to other more stable it piece

national in is but know to given hard typically quarters, year. recent back So the the the or see I course happened it's our higher what's half in X results, of the over of year revenue last

a to step also a like normal to about I at business. still we improvement little trend a January, of trend a in we're in piece see declines line double-digit And And in that QX. bit trends cautious QX a said, national we other saw be it's of X%, from we're But in was nice down, seasonal So seen QX that not nice December, the of it. anymore. would

Alex Vetter

is with lower this just we a were in also base point, dealer we're 'XX. I XXXX Alex. than in starting then much Steve,

will We time to it that QX so the persisting us QX. and in that line and see in of some dealer that the count so And second the gap lap half payments trend take overcome XXXX in positive as in first growth and The down half half of the the affiliate more so year in second top-line wind makes importantly which June. was the appealing. expansion EBITDA of sight

So those are the drivers. big

Steve Dyer

it the I just QX. year-over-year. to as excited understand more I'm relates

onward So you line the a do sounds back matter and I it then? the improving like sort Or just are of you QX strictly that more of, to in fold? of mean, bed in sight ARPD. visibility getting some or dealers have making

Jandy Tomy

really It's around product.

dealers focus products one out are sales rolling also right. get of those perspective new the higher piece it's from solutions new a it, dealers of larger yes, larger dealers cars to with But a and in. also on So with rate

the and and strategy. the the our continued and FUEL products as the to new FUEL of back solutions pointing So rollout growth DI solution of at ramp up and

back So as year. of year a of those half it's half in the of products a result the in of particular. more growing ARPD the back

Operator

call queue further at time. remarks. to any I in Mr. closing back no are turn questions for There the this Vetter

Alex Vetter

for everybody us you, Thank joining today.

Operator

you today's participating. Ladies this Thank and for concludes gentlemen, conference call.

now You may disconnect.

Cars.com (CARS) 26 Feb 202019 Q4 Earnings call transcript