Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the Cars First Quarter 2023 Earnings Conference Call. This call is being recorded, and a live webcast and the accompanying slides can be found at investor.cars.com. An archive of the webcast will be available at Cars Investor Relations website.

I'd now like to turn the call over to Robbin Moore-Randolph, Director of Investor Relations.

Robbin Moore-Randolph

Good morning, everyone, and thank you for joining us. welcome the to XXXX first pleasure call. conference my you Cars to quarter It's

morning Vetter, our business are Jain, this greater with will me With Alex Q&A. results financial We'll will first then in by finish discuss our call our CFO. along CEO; start discussing outlook. from the with highlights detail, quarter, Sonia XXXX Alex Sonia and the

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

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

risks are and subject forward-looking Any to statements uncertainties.

please to is in more available For which to our factors IR in filings, on XX-K, statements. including website. included SEC the our forward-looking no section refer most filed update obligation assume those of information, our recently We the any risk

Now over call turn Alex. to I'll the

Alex Vetter

and welcome first Thank you, earnings call. our Robbin, XXXX quarter to

guidance deliver our $XX to our and adjusted all performance million, margin, grew indicators. EBITDA representing Revenue range. year-over-year continue We on within comfortably totaled to key X% $XXX million a XX%

of Accu-Trade product solid through website media results the continued and these achieved addition growing strength, We year-over-year. ARPD marketplace upsells, X% growth,

of attract regardless level. fluctuating our audience shoppers for on levels, of customers on our dynamic significant marketplace remain solutions Although inventory digital dependent the to consistently ability industry vehicle inventory prices and with low and our remains its rely a

last customers of not in an enabler mile to with the retail. industry own empowering our We do take solutions, allowing them digital remain possession and inventory,

Our remained and audience trends traffic strong. engagement also

in a and monthly quarter, to we resulted us X% continue year-over-year. preserve product enabling as our of in organic focus were editorial unique strong content, XX% up the growth visitors best-in-class on For traffic, brand, X% increased and to traffic dollars app, strength The marketing year-over-year innovation.

proposition, sales strong subscription value new customer search our extends to platform CreditIQ packages packages that and better as the combine customers our features. as quarter, expansion well upon These tools we capabilities. Building new radius the like during that marketplace DealerRater introduced seamlessly enable leverage first

value our We tier. also for part of enhanced aligned reception new from opting the been subscription packages. demand these offered our positive premium with with pricing has strong Overall as dealers

last still in previous digital the discussed compared operations ended As this, Despite XXX and scaling XX,XXX customers, dealer year. their quarters, prior the we prior quarter to than back year. with fewer lower dealers began quarter the XXX

a the on digital would dealers, customers Excluding of year-over-year have loss up basis. been

grew at as and vehicle solution customers In from addition engagement to strength, our to consumers. seeing to website quarter strong dealers adopt our XXX-customer continue acquisition a year-over-year. is dealers more increase website than end, X,XXX and solutions, marketplace Accu-Trade appraisal also

which values sellers shoppers reduces and for our given and with real-time Consumers also values, more accurate demand greater transparency. valuations and proprietary to help appreciate data. Accu-Trade the using trade-in enables love accurate pinpoint Dealers transact supply trust and vehicle that VIN-specific need negotiation

more we XX% connected XXX on have and Appraisals than platform. our increased sequentially, by customers Accu-Trade now

our upsell and continued solid consumers stable These growth. and coupled outlook deliver is to for In deliver closing, use on with brand of balance the operating overwhelmingly trusted business we position opportunities, us who our continued strong well strong the subscription growth deliver for with momentum. platform year. Cars.com a to results fundamentals our revenue

Sonia?

Sonia Jain

Thank you, Alex.

revenue up media and grew quarter by year-over-year. $X first Accu-Trade. Dealer websites, to Revenue sales Our X% strong year totaled is driven million start. million, off or a the X% year-over-year for $XXX

OEM customers from saw revenue also strength We quarter. in this

down. was However, national customers revenue, our which includes insurance

result, a partially in revenue by our revenue national dealer was line. XX% offset OEM an growth and decrease As

expenses. to Moving

expenses operating compared to year. to On the million to expenses the $XXX is to an in and million The prior $XXX acquisition, adjusted product X% million Accu-Trade. increase due prior expenses in quarter first increased year. higher and the part Our compared integration $X technology were launch or of the for basis, operating related

Also, and continue our fulfillment. and new to sales sales marketing to we reflected sales revenue and in our in staff invest and operations of and is line. product cost increase support This

planned we in year-over-year, spent growth marketing the While sales due marketing audience and originally quarter, this on less was strong up than our to metrics.

X% efficiencies was and identify provide up year-over-year. in which the organic lean We up driven our traffic, XX% momentum spend the evaluate channels return. into highest by continually was marketing and Traffic year-over-year, for opportunities that

increased paid demand strategy on experiences. in quarter We and our and consumer with our to enhancements shifts acquisition user this app website capitalized

the income diluted $X.XX Net for quarter million $XX or totaled per share.

change the quarter's the million fair earnouts This acquisitions. recent our $X reflect in results related of to value

XX.X% to was initiatives. margin revenue. for compared by and quarter was offset EBITDA to growth investments revenue X% partially the our adjusted Adjusted support year, the million, $XX prior of growth, reflects the Margin up EBITDA

to and the pricing As simplify and to deliver us efforts packages. platform align out Alex customers. to allow our of delivery. value more started marketplace also afford value opportunity go-to-market recently roll new our our mentioned, we to They our us packages These better new

an year drive Still, increased of cancels. as showing in the progresses. tempered somewhat our and these will modest accumulate expect revenue packages, which incremental EBITDA, by we but adjusted increase packages Early results expected adoption higher-tiered are to

Now our results. the turning metrics key quarterly are that solid to foundation our for

surprise is dealer discussed, As customers additional if been not not pullback. would up operational year-over-year, This their dealer challenges. have digital continued a reflects and the for

we we the a remains our customers. strong, base selling ended to be total on with focused Year-over-year, to and by X,XXX cross website XX,XXX And quarter continue and new of healthy we dealer customers' solutions. customer customers customers. XXX Our grew

XX% sequential year-over-year elevated drive cancels was to growth. Dealer to muted ad in Although in business websites more the and website customers combined growth due dig Inspire quarter,

and full quarter solutions, a of the Accu-Trade. $XX by $X,XXX of First quarter to driven ARPD grew in benefit year-over-year growth digital website

continued growth marketplace opportunities expect cross-sell ARPD We and efforts. repackaging through our

capital our continue while maintaining business business, cash a flow, delivered subscription delever us Our and balanced allocation strong enabling strategy. consistent to to

down the we which to our XXXX. to During used $XX $XX maturing decreased the million, fixed notes remaining million which loan, nearly [X.XXX%] acquisition the That on fund million outstanding of we of is in rate to $XXX quarter, including our Accu-Trade unsecured in XXXX. debt, revolving senior related XX% paid

down and ago. resulted of combination a adjusted leverage a EBITDA year in paydown The X.Xx, X.Xx of growth ratio net from debt

of We to repurchases. share $X shareholders also returned million via capital

Our revolver going with on provides us hand. liquidity approximately cash This undrawn million our between is strategic and flexibility strong at forward. $XXX significant

performance position us continued for integrated platform well profitable growth. financial Our and strong

to and second revenue $XXX Looking the reflecting between revenue to we continued ahead deliver expect quarter, $XXX growth. million, million dealer

the OEM in the remain the quarter, the the realized will customers And pullback greenshoots OEM repackaging course historically largely second levels. our inventory first While quarter, rollout year. the over and marketplace of we the by cautious second in lean be revenue, the will despite full benefit national to and half accelerate insurance on of due

X% we impacted the to year-over-year. we will in anticipate X% to important comping is pullback. by Despite difficult quarter It comp, of not lap note this period dealer quarter, a be that the to growing second acquisition digital revenue by yet the will and Accu-Trade second fully

adjusted expected to EBITDA margin is quarter to XX% be XX%. Second

in Our to new in growth investment as business well relative national as brand the first margin increased quarter, outlook and contemplates revenue to lower OEM awareness advertising products. drive the marketing and of

of Building reaffirm that, on X%. expectations full XXXX revenue year we our growth X% to

We approaching fourth margins quarter exiting XX%. also anticipate the of with XXXX

to customer of on to positioned goals. deliver well asset-light our into translate profitability. and generation traffic strength will and our are continue relationship, model The growth of our We efficiency business

to And with operator, for the that, open questions. we'd call like

Operator

[Operator question Instructions] And from Thomas comes our from D.A. first White Davidson.

Thomas White

national I the OEM could. first and I if line. just couple, A on guess,

guess said new well maybe off of the perking and schedules, inventories it's still bit, still depressed overall, of bit little a I OEM but -- kind a of are that you bit. think line is largely I to tied kind guess, pre-pandemic production improving a kind are up vehicle but which, is quarter, levels. in I

years of of for current industry to factoring we into the of follow-up. you kind of out just futures there? I the my I the last inventory of enjoyed dealers of pace guess of kind then there, inventory this normal to, is this should got the like sort whether guess, vehicles And level question. a the for OEMs deciding new and the kind of of tight that and of ramp? are foreseeable high Is couple franchise how that's the I prices kind I understand I'm expect sort that's of and new first what new think put guess trying in

Alex Vetter

to have in that better that the that's overproduction. I don't think it's certainly, and admirable perfect the OEMs new production are no certain want trying for you're to Look, demand. thanks what towards normal yield is to marketplace seeing And Tom, question. balance in the

building that The downside demand faster is are and seeing ahead at companies market share you've levels. gains of got other car market

you they're If automakers, the taking product they're for street consumers Hyundai to because and market experience, Kia the drive recently, market at to on taking most and Korean look they've got share share. and

online, be a know to everyone it may market while the certain a so vast of And degree they does impulse have segment want preorder of what majority fitting buying in able car need. exactly and and market of the

and shelf cannot more product I possibly the to the they do believe consumer having expectations ahead is anticipate to life needs a that far of cycle industry And going changing so get the back on because schedule.

Thomas White

for sort That's a I sort or of maybe of road there's about on of sort map a I'm that guys' fuller the have in of you follow-up little Accu-Trade. that? the And makes Could guess, and Okay. of I And version that like guess, bit helpful -- talk just, sense. up the product a works. impression the under solution beefed sort you maybe

technology. marketplace? understand of just of you how kind expect trying in to it's that versus from of what other offerings comment differentiated kind feel the maybe And should the we on Just some

Alex Vetter

in data-driven as worth of what's the we're away Sure. excited about based seeing but of the as we're all, the well -- Well, really on car. that in growth Accu-Trade, mystical the a from demand legacy consumers box, we're just assessment not real-time black intrinsic pricing, to for trade well that's elevating dealerships, data industry your and health as supply and first a

X to does Cars.com ultimately, They worth. users And can friction it to and They it phone. X between know car stores can drive what accurate have their that is use to eliminates so is their on truly customers, to to get that do dealerships values. mobile their vehicle don't what so

seeing I -- appraisal up we're and think that quarter. XX% volume in the our in

dealers consumers vehicles are more using getting only Cars.com. So vehicle more are praising tech, valuations not our through but

Cars.com we more road because consumers' relationship need ahead, may extend opportunity to look trading expense to with map consumers to you because reduce value today, throughout Cars.com going to their consumers when with we're present think the values register ownership have we've get our journey. not their at with relationship cars here you I can the marketing that's long-term, an vehicle them got to really ongoing going while an a

the in and pipeline that's the So works. in

dealer themselves. You're more also trade seeing move into within groups us inventory helping

with they to want think more vehicles enabling a to go, exchange, told but cost cars have far their for can where legacy a groups both efficient amongst a than to which we and And the foundation something to the disruptive collective dealer auction able they'd large which the can us at in than is So far we dealer reduced auction. move be trade that love within group puts groups be is ultimately be a dealer-to-dealer love dealerships basically physical more model, Accu-Trade, dealerships, that peer technology. which really within

Operator

Our Research. next Prestopino from Barrington Gary question of comes

Gary Prestopino

out far have most of -- of In dealers, you are could dealers that segment space terms for Or dealer the continued guys? as we as you now the anticipate of equation in the of the clients? digital dips

Sonia Jain

for Thanks Gary. question, No. the

balance largely our are I view. the year of at they point, think this out of

we additional have any that really shouldn't on So drops meaningful front.

Gary Prestopino

been? with give out. Do mentioned right. you just us what the pulling be frame have dealers would exception Could change that All deal the then that handy? a And percentage you of would digital is that have of you -- up these

Sonia Jain

It's Yes. a year-over-year.

the actually We add would that heard new the think that's market point see -- business for -- strength of we digital that out with marketplace the healthy. But that I if I core tell dealers. low percentage with is you that packages. traditional be in year-over-year, of look And to additional digits. well think the our you packages base cancellations, for continues think us you single dealer mentioned a digital on call, And So as lot would is may or basis, I I received. the excluding products have on a note us actively we're being we for dealers our And have I think the it's to been what the point adjusting up.

Gary Prestopino

into question. would into And these situation detail dealer that what the that -- And why you to Could these lead packages? next a on are? more little to packages will new want be include? new for go kind details attractive an of What take a they

Alex Vetter

Gary. Sure,

dealerships to they our core are strategy options love optionality in dealers looking for is to of all, First they where presenting and and meet what are need. them

And we program preferred a a a program. have so base program, premium and

that branding embed directly packaging the and traffic classic your higher in including to their lender more search so own dealership as to private things to like the the food having in will vehicle which available, there's individual features chain radius. expansion, natural in search DealerRater pages detail Connect, result an to search in you opposed more than pages parlance, more the slightly And and inventory drives basically network, more the the can ability dealer's to you Salesperson optimize dealers' store connect geographies that generically go, website,

preferred a rates, adding have also ARPD end, we're into put into to continue premium and dealerships dealers most are we're It the excited -- we're gravitating to stimulate because to the And lot higher going look, shows raising tier. value. we So the clearly is that, not just growth. which tier

all take once the our while engage are and on some coming packages, good them dealers seeing them higher have we're churn price seen that with show rates. And increase, the initial features the presentation with we with of we

top, it's I to the through you know, can adds So actions it any as to early. as But take the flow not line bottom nicely here think only we to -- well.

our packaging trends, And initiative. feel with we front-footed traffic on very so strong our

Gary Prestopino

up and can packaging what tiers each to the this safely you dealer? premier, have we showing you're you that initiative, the went have for So said preferred all of of those in assume you -- if base prices as

Sonia Jain

Yes, that's right.

Operator

Our BTIG. next question from Fong from Marvin comes

Marvin Fong

Great.

maybe any point So your so to buildup the finer new? that full guidance. the lift of I'm if on the Was -- disaggregate, lift. new weakness I is kind in this there's ARPD is the guess by contemplated you're Or the being maybe curious, in quarter? to package last And reiterating another in full ARPD incremental this -- packages your from and put year just weakness been kind marketplace the offset change OEM, guidance? just year of your guidance

Sonia Jain

question, Thanks for the Marvin.

So we began the repackaging effort really towards the end of QX.

the in right, for in subscription takes and we're And at business, of early But to, with this tier very aware, you're as a process start a positive So it just was coming themselves. revenue has to of been, point flowing lot numbers. our premium in Alex opting time. alluding the incremental really been has and the time reception as for kind again, effectively folks upgrading reception through

our think the at QX we The in point, baked into process, price kind revenue just the prudent our given are revenue. year reaffirm QX in it's of And full included guidance. this efforts, already or It's we guidance. are where increase think our to repackaging I

Marvin Fong

Dealer move a Okay. pretty think was maybe And a a I there. think there solution, would bit website, I'm on, to then of just Inspire, elevated given right? curious, needs typically highlighted of you maybe I website dealer churn sticky, just for that

Or there Was on there? what's would just what's any another characterize or might So happening there? dealers how curious, share into go going solution? loss you

Sonia Jain

Yes.

are I somewhat want were for we nature, that that So offering, partake reasons of market a cancels experience in quarter. Dealer steep you of We couple some talked Inspire do about, the think we to websites it's promotions think, onetime competitors who just there in fairly higher in didn't in. part for did in slightly the

come the some confident our then may that there and with quarter, And that number delivery pleased both you I churn from repackaging degree value providing. is then line the think also I the when imagine, can on growth we're we've And OEM dealer. pretty think you there, the year-over-year been in I pricing. we pretty have to go and a going top of working in But of saw process from other mentioned that some the perspective We're just agreements as can on quarter. back we're working legacy through base

really are. with we're think I So happy we where

Alex Vetter

that We've and service by, the other And which usually add this thing. that's service. them. that really And think And we lack part. one Marvin, is stand dealers desperation action I value of more they're seen props with a on obviously I'd learned competitive dealerships, their quickly we see support we of our before. one it's dissatisfied But

price. do And that the QX, provide. feel lower I'll we opposite. customers. in lower cross-selling because not feel focused is we our we feel So We value value to also fact, that the in the note mostly on need We, our of then

So strategy. we of to churn. growth the didn't But yes, we feel and seeing solutions out our the have we're volume that in we where no, the are about new good sales lap some

Marvin Fong

terrific. appreciate Alex I and That's Sonia, it.

Operator

comes next [Operator Huber And Instructions] question our Research. Doug Arthur from of

Doug Arthur

Can you hear me?

Sonia Jain

Yes.

Alex Vetter

Yes.

Doug Arthur

Dealer a sticking second. for with Inspire Just

of said? So the quickly. through the that you ran you numbers dealer up XX%, say kind was the count Did that you what is sequentially,

Sonia Jain

we I up think we year-over-year. were shared that XXX what is

Doug Arthur

Okay.

Sonia Jain

To XXX year-over-year.

Doug Arthur

Okay.

dealer on -- chart, that up I based slightly. QX the that Is looking count from mean, So way? is it the the looks

Sonia Jain

XX about on a website sequential up It's customers. that's Yes. basis

Doug Arthur

Okay. the dealer. XX%? per And say could was And there customers be did growth revenue multiple you

Sonia Jain

That's right.

Doug Arthur

the expect up more from I kind the backdrop, competitive year. as Okay. any OEMs know know -- bulk last Do to there And I been and to I of are you you've you growth there, more the onboarding the penetration other mean, some -- churn but...? referred momentum

Sonia Jain

Yes.

those that focus that, the the our for big we business. to there's have I majority belt, for and real vast pleased, secured right, to DI. on And dealerships continuing is step opportunity us of under what think our share. was with I OEM a we fair And And win consider now all to to to individual we're the think win grow. go continue our be endorsements. ability So to With

tell for I to I muted of would number you be balance think is definitely net So what to expect I we the think would year. deliver QX relative able to what adds the the is

Operator

And seeing to turn CEO. Vetter, questions, further back I'll Instructions] Alex over no the [Operator call

Alex Vetter

participate On meetings few a call New Thank I XX, you. And Virtual On I May May wrap in will On we're Davidson D.A. fireside with Boston participate XX, going to in want before a investor Barrington in and we Technology, the Conference. in the York engagements. Media City. Annual call, host Communications and the just going Conference. we're XX, out JPMorgan chat Global IR upcoming to at Sonia to May

about will of these So section Events on IR details our the website. be available

X, call you, This concludes be our May thank and on much. very with you

Operator

day. The for and you meeting now has pleasant have Thank concluded. a joining,

Cars.com (CARS) 4 May 232023 Q1 Earnings call transcript