CARS - Earnings call transcript Q2 2022

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Operator

Good morning. Thank you for attending today's Cars Second Quarter 2022 Earnings Conference Call. My name is Alexis, and I will be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to the management team.

proceed. may You

Robbin Moore-Randolph

discussing CEO; and pleasure everyone, XXXX for start Q&A. us. financial Alex quarter, We'll joining our highlights from in Call. Interim finish Good XXXX outlook. greater welcome thank you my Vetter, are morning to detail me Quarter the CFO. and by Jandy our to will It's Tomy, With morning, this with Jandy you Alex business will and our call Car's discuss Conference results second along Second with

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

adjusted Reconciliations financial EBITDA cash with GAAP adjusted and press be free these directly the found expenses presentation. of in margin, certain our tables of appendix We measures will today, and discussing operating flow. financial financial can the be comparable most release the included non-GAAP measures non-GAAP measure and to in earnings including EBITDA our adjusted

our obligation please those forward-looking refer including included We our the factors in to available current section risk no any which our filings, on IR of information, quarterly assume are our SEC reports, to annual, in update more and website. statements. For

turn I'll call the Now over Alex. to

Alex Vetter

persists and strategy Total Revenue retention, the Robbin, prior solution our and attributable are the end reflection of in year. in production of delay mix high and national product albeit quarter revenue, the a demand to an inventory, customer is macroeconomic both and rising and XXXX of the vehicle range, to and offset they quarter due at strengthening factors, results the earnings the poll, prices recent compared of their unsurprising X% continued OEM grew value our suggested uncertainty, gas strength elevated may with our a environment supply. In you, marketplace. adoption limited at revenue including welcome revenue Thank and consumer which Cars.com purchase limited growth dealer ongoing interest second direct another users our decreases rates. to solid challenges. Despite call. to of We of delivered demonstrating a which guidance

remainder to our reflected as trends second our the continue the half At these year, seeing of demand for strategy. we same are the growing expect pent-up of of and guidance. this We strength in the benefits durable solutions consumer also time,

As the X% a driven still of their result the maintaining accelerate margins. second the promotional XXXX in solutions, while remainder advertising We of spending which strong to EBITDA of limiting XXXX. X% half this are into at will grow to challenges, for production dealer year OEMs and plan by

our and to consumers relevant We strategy. advance changing are to the well meet platform dealers solutions needs positioned and both as we deliver digital continue of

for As buyers the a that connecting strategy success There platform a financial across details I'll tech sellers common performance. built range are and technology, turning before reminder, which Jandy reinforces is key on content our value. over highlight more drivers our solutions X to and quarter: call audience, this to a of about from our our

visitors strength the brand to increased in and a the our is content the for unique marketplace year driven ago. First, compared quarter, authority. This by X% original to Cars.com

second American-made engage but is their demand journey. This especially XXXX released of where a we in and way June, relevant for content for the the provide claimed is row. growing strengthened gas the in supporting Index our The editorial trusted editorial relevant Made despite when our shoppers that brand to of only year most flourish production and our affecting prices shoppers given contextually the vehicle with In Tesla year, Made compared help levels Index the American high Our normalize. will media leadership position revenue end-market efficient believe expertise. of most increase placements. with environment XXX We content and Cars it's an prior the XX% relevant a does the early an combination the has challenges press shoppers traffic to area strength EVs. advice, to and OEM established Not and than more shopping broader position purchase us a delivered American many strong for grow industry SEO

days acquire in timed our pleased to Accu-Trade's increased and profitable our from by cash welcome coming piloting more brings of leadership their dealers. is that of rollout generated on and offer a is Brian own of used dealer same this experience well operate more well-respected Instant competitive their way customers industry sell Instant is check tremendous wars used than Brian and from Solutions. Since individuals May, in looking is to of their with car to NADA, dealership, And experienced This dealers sell and in at of pick a Two adopters, by Automotive X directly the transactions margin our no profitable traditional first turn Offer the Simches vehicles and tremendous Crown car way to profit interest a Cars.com Let's has a and the and in Accu-Trade. and inventory lets them operational enhanced Hendrick our buy Cars.com And in Germain reporting better team. solution. Group We've of Automotive time directly wholesale bypassing the for demonstrate business. capabilities local get vehicle to for increase other efficiency, appraise Since to operator, general to leading parties quickly in valuation. Accu-Trade the one Accu-Trade have rollout us X,XXX value in our deep staff efficiently. dealer the Accu-Trade announced launch in the Group, qualified early and the vehicle vehicle public, valuation than The and a successful are saving there's moved bidding to to vehicle consumers we've Accu-Trade. auctions. acquired cars operations gross the Automotive private offers exceptional Offer in David in cash from to reflected Kramer of seeing using of up inbound improvements critical week, XXX day. Alvarrez areas: environment our minutes, parts robust way. bringing acquisition. operational and leveraged XX I'm one some lean far dealers transparency he to Group speed to most nationwide into vehicles Hendrick A Technology the the Jay considerable of XX% we of to industry. Crown demand the shared transparency where transform success

interest discuss ramp and will dealers Accu-Trade the scale. for this As will start more profitability, confident a but second their XXXX of contribution out half doing relatively as to throughout material what we financial see low, and The from are to is subscription it continue impact beyond we demand is in product have year. this XXXX and dealership and in that roll

than us Subaru also we sites. in Dealer website. the the dealerships has to our And website that more and U.S. provider, potentially giving Inspire dealer named continue technology expand Dealer certified to end, We share as XXX opportunity to a service Inspire excited At America powered I'm of quarter X,XXX

at off across automotive with website will the during our and power first customers, dealer our quarterly entire dealer the this average ARPD compared the growing, seeing We were share guidance. increase dealer. and of platform had strategy In growth driven sequentially portfolio. our pay budget to are XX success in XXX Even website the in reductions we high per advertising ARPD diversified market third total, end our solid of anticipate solutions. revenue our year. quarter At grew overall end, increases by and the XX,XXX solutions expand also ongoing proving prior and a website sequentially. our both year quarter deploying Subaru another Cars the of we industry, of the In are delivered quarter our And summary, of solutions growth digital up year-over-year. customer results

this over and further the through We now Jandy. strategy. positioned continued the growth half platform to of in beyond the realization of And I'll turn year are to call our well second our

Jeanette Tomy

X% margin our and Thank expansion X% with XX% and by a very million the up second a quarter, high and you'll challenges of up is revenue, Alex, of I'm line closely was dealer of growth in for items. growth the grew driven well which was were X% solutions. end was to business adjusted that see Note down which national subscription the strong which to revenue at Performance X% quarter. production representing growth compared Revenue prior setting of ARPD, as XXXX for correlated our continued compared the digital year-over-year by $XXX and continued the with for in Total year for growth growth you, momentum. growth and setting result was primarily OEM EBITDA to in also other in continued point results which revenue strong our delivered million, customers dealer in were our Accu-Trade the both to remainder and starting contributed in the ago. $XXX adoption We our ongoing XXXX. off a driven us revenue, pleased the quarter Alex. Like year. guidance, in great

ongoing continue and we dealer will new confidence deliver inflation, shortages, solid inventory model that we we this and rising products, prices subscription interest our our gives to As to the revenue launch value growth. driving customers ARPD and Accu-Trade in product, rates, the continue business Despite our diversified connected our show our will deliver growth. us up gas revenue

expenses. to on Moving

consulting $XXX increase due the the million compared costs and year. were higher and compensation adjusted product to higher including For quarter, and related acquisition. expenses, CreditIQ This to primarily to prior technology operating expenses $X Accu-Trade was the million,

XX% to the share, in diluted was guidance. and essentially Net revenue. expense. again, delivered and million increases XXX planned, totaled flat end $X points. high expanded adjusted these quarter $X.XX revenue, our traffic ago. million to $XX help a of We amortization and of marketing increased decrease second a of Partially the by income for basis grow margin sales As or per compared or EBITDA Sequentially, investments offsetting drive solutions year depreciation

our to key turning foundation Now the quarterly are results. of these metrics, which solid

dealer sequential X% growth represents operational customers from by dealer XX,XXX retains them growth and deliver Accu-Trade with evidenced attracts for and strong a and of putting also partner position to XX. fundamentals. digital business reflect us with of we only cancellations underpinned the end. related value Our The or customers dealers, at is This continuing single to XXX financial Results quarter at XXX dealers year-over-year, prohibited quarter us. by

grown dealer would X these the during quarter. still Excluding items, have customers

X% in sequentially. push solutions dealers approximately and U.S. to for our The in fueled XX,XXX growth the and digital continued ARPD continue X% year-over-year We universe adoption in of growth the growth

also Our traffic compared to prior business XX, up year. website from a Dealer up unique Generating the revenue OEM high-quality Inspire we've customers, dealer had customers. for delivered to At and consistently June ago website X,XXX grew XXX sequentially. continues year engaged in grow. is our an audience something and and we XX% XXX total

XX our XXX average we in-market million car by UVs best which For had quarter, year-over-year. and represents We UVs, visits. the X% grew million shoppers

down elevated However, traffic consumer heightened strong to to stimulus plan. from due demand X% related confidence in traffic XXXX consumer year was federal and economic the the prior

the period. and million Our have our $XX run enable payment was reasons: repurchase year-over-year Cash the flow through back period in X-month provided shareholders profile primary $XX to program. financial had generation, flow Cash into was one ending XXXX, by down strengthening business, to first, extra to XX, performance and for share continued investing year cash which of returning the substantial period We been execution X payables. in due strong million. and our operating cash free current was our activities year June current we timing

income Second, year range last Net X.Xx. at target with X Act above end recall ago to year, associated our and leverage million to had our X.Xx ability And we year-over-year a carry EBITDA. back the was third, and a CARES quarter lower refund $X NOL. that of our slightly tax X.Xx,

the Accu-Trade reflects As this step-up borrowing temporary fund acquisition. a quarter's last to reminder,

level anticipate to consistent getting range within back due we're our quarters. coming at comfortable our While we in cash target generation, this strong,

hand. maintain We with liquidity to Further, balance return on cash provides sheet continue capital with us to our on ample financial million our shareholders. $XXX flexibility available revolver, the strong to supplementing our

X.X repurchased for shares year shares our $XX representing million, bringing of total outstanding. repurchased this we quarter, shares X.X the X% to our million, During million

Now turning guidance. to

XXXX, of revenue $XXX.X continued growth. approximately quarter For of the million as third well to year-over-year deliver to solid representing we million, as expect growth $XXX.X sequential

and against Our guidance strong inventory XXXX reflects macroeconomic continuing shortages industry-wide environment. half performance our a first balanced challenging the

for margin profitability optimizing third focus EBITDA on expense quarter and and and growth. for the our expansion expect reflecting sequential XX% to XX%, management We adjusted be our between margin

of X% we year-over-year, half does revenue For inventory assuming X% growth XXXX, of that XXXX. recover expect the second before not to

encouraged about sentiment assume in customer are we not guidance segment the our this by recovery year. a While this OEM our value, does

Our call continued our and a In we strategy. to Alex. back poised execute of and of I'd and performance the to based us on beyond. integrated year, and year the strong second reflects to growth deliver financial look that, guidance solution for momentum over sequential well-executed revenue half leaves value to like conclusion, turn the position and this With profitable growth as

Alex Vetter

Thank you, Jandy.

ability current business in ready our are solution we Our rapidly accelerate Revenue and many platform begin continue diversifying the working. resilient conditions. growth the we're of we confidence is despite the expanding. have to margins The market is to in And to as strategy and sustainable and Operator, our our strategy. growing Q&A. environment, continues prove challenges

Operator

[Operator Instructions].

from The Naved comes first with Truist the Khan question of line Securities.

Naved Khan

Yes.

couple Just questions. a of

or on test maybe the was one looks data can -- dealers. provide some It seeing test runs the early like Offer, So you're it on and interest Instant level from you positive. the the color

think what can the subscription on grow? from the the a usage-based Maybe Can of the like And touch are? I dealers. terms to you monetization a having can opportunities in there continues talk demand adoption now you you If model. to you're as move Accu-Trade, about right

Alex Vetter

We've connected dealers. the lot a would say over demos of has Well, a NADA understatement. of since this an to be our since of to And lot debut got done with products year overwhelming has launched at been industry. in that Cars.com, Accu-Trade Accu-Trade time. response X,XXX We've

We're lot are free. subscription you and something to we billable up it's a going selling to get not know, we've XX,XXX more take dealers, for so onboard us to It's time for that got them. a looking sign dealers. and you product, As ramp and can to configure

time onboarding hours. where, for weeks Accu-Trade So takes XX takes say, few average a than a with our marketplace more dealer

dealer friction here efficiency And changes been we valuation, ramp profitability our the as we moving on the on money get so shared overall more there both meaningful and the Accu-Trade will there's on be dealers step slower in and buyers which solution, to But vehicle accurate and time as vehicle saving in a dealer between call, board. dealership reducing acquisition, is sellers.

going strong this is with know really then exit subscription we meaningful rate. And we're year so And to end revenue. adding this a

build I Our I and is voices DXD model, and look dealer further. take testimonial. want introductory pricing it transactions, that we a will variable be Then at $X,XXX a because X. to market to month. see on will lot but be critical mass of upside pricing we share that room some But will be best trading our marketing Phase where a will based think

Naved Khan

some over go give like us color? just then like Offer, here, maybe Got initial looking go is uptake it. and And on the what you from can Instant the

Alex Vetter

utility we base dealers a in was city We've And because of dealers just largely to nationally. the Accu-Trade. every pretty Well, Yes. using already healthy got that country. launched we got across now the almost consumer

propensity could felt get the to marketing of that And functionality Cars.com press we'll you we week consumer to through Ironically, so because, we begin made on on traffic marketing the this we nationally. much means. need that know, don't We a consumers. as directly organic we do and announcement turn our

volume appraisal significant cash and seeing so spend. without any And incremental vehicle offer we're instant consumer already on marketing both

just trade-in a functionality have of sharing getting we just space going turning the I that got. the lines, than onset, dealers sufficient on, And But that we've in appraise just that dealers. at their to the using opportunities more we're change this Dealers may we bigger volume is think scale service because that Accu-Trade to importantly, support the generate. this to dealers, showrooms in much as to we're I'm are support vehicles their process. during

they're call, for technology opportunities some using that we're processing addition them in the in so like And we to the cases, of appraisals Cars. shared through hundreds in dealers, generating Accu-Trade

Naved Khan

ads. it. about I if Maybe A may. vehicle Got quick Google talk just follow-up,

early been participants? or year. kind Has impact on was other of I this think launched Cars there on either it any

Alex Vetter

Sure.

advertiser Google's course, as we're, also provider. then both and So Google closely longtime across a solutions and on of monitoring business our move as dealer a

we've both I'll just so and And impacts. share seen positive that negative

than side, we're vehicle think generate on global BXC and ad paid investments forms providing in ads the per our I search the larger seeing historical first environment. because We're own efficient. making lower are participation action channel cost content into our actual more SEM the

we're results for I model. to than more X it's be upshot our impacted the think maintaining the and pushing watching that operating our that of whole negatively and because industry. the we for is are, content original is we're Page strength down organic competitors far guess I downside our

X there. by there's in a -- are our of the more definitely again, And into having there being or the competitors our fall in channel so X Page mixed for participants And time some is to issue in this cases, ranking. The bid an they at seeing it's lot we're not mostly brand. bag consumed that's that market. organic most because larger a And

It's hearing, buying side, not on also customer high lukewarm so Google's Cars.com, face feedback. very is which I in it, is We're DLAs a intention think for destination of on dealers. search the even bar are more dealer let's And we behalf auto. preliminary than research the frankly, research, moment.

are coming search from off they the they're so bar Cars.com. Google And to less likely than convert

Xx generating ads. efficiency vehicle than vehicle fact, dealer for seeing that is our exposure the the Google In we're on more Cars.com almost

closely. open this auction. I subscription good But relative strength about we're really we feel the our to it watching think offering So of

Operator

The the with Fong of next comes Marvin line from BTIG. question

Marvin Fong

Offer. Instant Another question on

more almost believe XX,XXX it already. back items? on Or which XX%, guidance strong, that almost many question said for that would quite do -- You fourth level? is be function of you for I margin. spend your quarter, Instant EBITDA comment sustainable a third other be of The this pulling margins good you you Is see quarter Offer? would base be follow-up how on well just dealer like how you you previously, And great. on a a get would there. quite If could or customers XX,XXX just EBITDA expense But this covered would was the just marketing think performing,

Alex Vetter

from a way of Well, auction. And about the cars mean XX,XXX legacy all, buying Sure. XX,XXX standpoint, today, systems. are all then sourcing at dealers I buy dealers first cars cars TAM dealers the again, think digital they dealer minimum through auctions. these auction, have

is look utility. at Accu-Trade larger you're say friction Even vehicles we've appraise a universal I because quickly be using not Accu-Trade benefit customer, TAM other than to can it's and your into our like Cars.com customers of got solutions any accurately a and that this So itself. introduced between reducing and if

And could the marketplace see of so and I things potential that so that using our the than integrating be being we a Accu-Trade. think both dealers our do same these marketplace. wider benefit Accu-Trade on has at time, But are

dealers Accurate their get also detail the this Cars.com. instance, For pages trade-in on functionality on vehicle

and to consumers So can to want it's do they ads. for buy. think car, a when up you trade-in ramp again, for directly because, the their take process configuring vehicle signing to just Cars.com marketing time Accu-Trade online not going free what from listing it's they're to shopping begin I

to to this live that coming what throughout are subscriptions understand their second to the it bit and do use But And launched onboarding dealers now Accu-Trade demos due more growing we're we've does we half get a to our take teams. the to going need So appraise of with year. to diligence more cars. got have ramping little

Jeanette Tomy

both revenue. it's From a of combination a perspective, incremental Marvin, margin actually

nice the flow-throughs the to So on grow, connection nice planning second bottom careful the subscription as watching build XX% from flow-through a that's of definitely to business, level the for perspective of as But our Marketing and both expense expense the but and the was and across that revenue we're we're in combination growth. our line same the in is quarter, optimizing management. management. as being about well lever. revenue it as operating we're with expenses whole total at But also continues about it's getting cost

Operator

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

Gary Prestopino

a number to the Accu-Trade a questions to get of marketplace Accu-Trade? one I got to I've with just and customer Does clear up that this thing dealer want Offer. Instant here have be

Alex Vetter

Accu-Trade actually does package they and connected website own them Gary, No, of they lower to their brings marketplace, to for buy can their the If functionality direct require part incremental get use our from in a and opportunities website our be buying fee, the vehicle own store. marketplace. which for Accu-Trade that the want

Gary Prestopino

Okay.

So words... in other

Alex Vetter

a them open XXX% of seeing part desire to Like Most sourcing inventory from be of the we're are, Gary. market.

Gary Prestopino

Okay.

what a worked Instant So Accu-Trade. through is trying to product? is correct? that -- of Is has just well, that Or I'm separate understand Offer kind

Alex Vetter

works Accu-Trade. through It

Accu-Trade. go car, the from instant the Offer, into directly the buy So Instant can the opportunity the directly put and number on in the the car Accu-Trade the dealers guarantee consumer. tool, flow the us from But appraise it, get

Gary Prestopino

have that's Or still, they're the So Offer, It might to do is going am guy, to dealer a to still to as be something a is but I'm in going still what the marketplace there? have no right? what to pay, not same on pay to saying I matter platform. be Accu-Trade Instant they order wrong

Alex Vetter

No, that's correct.

Gary Prestopino

Okay.

with And for dealers then offering sign fine. co-op advertising dollars they Subaru also side? up on are That's you the their or co-op to Okay. business, website the

Alex Vetter

head my to that back know We'll Subaru services above can the get They just there's us top check and for partnership on with negotiated But dollars set beyond so marketing and eligible you do if dollars pricing, between website. base of the and don't eligible. I believe we offer with A is don't if our lot terms co-op I Subaru. off website. of partner pricing OEMs go for that the us today. co-op established

Gary Prestopino

just I That's then lastly, And Okay. to fine. here. clear want something up

Accu-Trade of increase with dealers. XX and that dealers. had You includes net said XXX you Along a --

math, it's it's of a And net right so I of kind related dealer. a single Could lose you dealers. math How did the you do cancellations Because Or XXX am to clear a it the that? there? it's like dealers? just -- then digital my digital many maybe lose single dealer. up some So looks you or if loss with

Jeanette Tomy

multiple single locations. the So customer has

the on inventory. locations are So advertising subscriptions based the where their

that than that addition Accu-Trade more dealers, of XXX dealers. the cancellation, offset with that, the the Accu-Trade with So

Gary Prestopino

I'm understand be Jandy. they If trying dealer, the don't to they -- have shouldn't it, They done just digital a web. locations. should all they're on

understand. So that's trying what I'm to

Alex Vetter

based so our the we subscription Gary, prices, on charge DMA.

So if a digital in need to dealer market. they wants to sell those cars for in to San zip to cars codes, pay Antonio, Antonio access in order appear for that San

to -- we're certainly, their cities, And dealers and have the charging this. fees. them and about every more about dealership so don't physical want think various virtual appear have searches their whether reach to in incremental time they this But worry expand

Operator

the [Operator Instructions]. line D.A. Tom of comes The next White from question Davidson. with

Thomas White

on a I and And bit ARPD growth I then I between, maybe how just guess, it quarter. a different guess product in deal. was back of I kind the growth follow-up And the the there disaggregate of you about year? ARPD this maybe moving should on have was half pricing was mix? little hoping X%, of kind Subaru X% we think up could last pieces up

Jeanette Tomy

Yes.

and Inspire what's So solutions the driving Dealer FUEL. ARPD, from really that's a solutions in perspective, growth both

offsetting But remember, have probably as dealer that to nicely inventory that are also, you rate levels. doing very downgrades targeted related to base ARPD increases lower been growth. the also across We the contributed

with many dependent marketplace dealers our how -- quarters, of have ARPD. last cars know, their pricing that well, the is you on put suppose, lots. significant -- declines our the on the part upon I pressure as X marketplace on over the years, And X So

well as there in is piece mix. other The

dealer typically our So at in lower as existing rates to we coming grow customers. slightly than are dealers continue customers,

on also pressure that's So putting marketplace.

Thomas White

in Okay. all That's do on you half? you there here think and super know given helpful. reason guide modeling to back a a of grow be ARPD. guys to moving kind I a those conservative on of macro, continue the mean level kind kind mean over more And of what's can piece? the pieces I But ARPD I don't that maybe at is bit similar to Or that going

Jeanette Tomy

of grow, DI Tom, growth even continued be dealer customers growth being is ARPD particularly core ARPD the driver with that connected is dealer can because and sold with we in package here expect to solutions this and and really with think grow that And rolling and to we're going Yes. our to do stability -- what the come see through Accu-Trade, come the dealers. Yes. out we'll in growth revenue to Accu-Trade the continue through business. ARPD. -- the continue that's We marketplace the in will in that

Thomas White

Okay.

after on then think there I And you good. a of only go Sounds deal, -- sort like of deal, the the with kind the was of Subaru GM remember I it X could tranche was a at dealers time.

and at number once? tackle Or those can go of try the whatever there? of was, XXX dealers out how should potentially we Just curious think dynamic Just or you if phasing there's kind the and here? kind similar a about all

Alex Vetter

Yes.

has than when GM a was we being GM OEM Subaru no So smaller staging. out, rolled

is dealers inbound we've I from And And by a ad Subaru more of and strong nationally. dealers jump so eligibility confirm that there dealers spending then that's importantly, Subaru. so did we can support co-op marketing cooperable digi more on spend basically, ball it's interest of seen for the

Jeanette Tomy

And the website, yes.

Operator

no There currently are time. There this questions questions further at Instructions]. waiting time. no registered [Operator additional at this are

the So now back Alex or to closing I remarks. additional conference Vetter for pass will

Alex Vetter

and our say that to wanted Thank concludes And Cars you joining us thank today. in call. interest you. your for Just

Operator

Cars for Conference Second concludes XXXX That Call. Earnings you your the Thank Quarter participation.

You may now disconnect your lines.

Cars.com (CARS) 3 Aug 222022 Q2 Earnings call transcript