CARS - Earnings call transcript Q4 2024

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Operator

Good morning, ladies and gentlemen. Welcome to Cars Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 27, 2025. I would now like to turn the conference over to Ms. Katherine Chen, Vice President of Investor Relations. ahead. go Please

Katherine Chen

this and pleasure everyone, Fourth Q&A. Alex for us. With joining by and and our Vetter, in Good Jain, results with Sonia business welcome thank the you my me Call. Conference to Year Inc. greater along are with to It's Alex discussing CFO. outlook. Full CEO; highlights morning, XXXX you morning the Quarter quarter We'll fourth call financial our will discuss year, full our start XXXX finish and then the from Sonia will detail, Cars.com

presentation. be call adjusted Before the tables financial presentation. release be I measures income non-GAAP the our the operating comparable Any GAAP expenses, non-GAAP financial non-GAAP turn margin, and these adjusted like appendix to including to discussing uncertainties. the are statements and to and cash forward-looking can risks financial description over measures in of attention which draw net EBITDA, certain flow. our and We'll earnings subject most of forward-looking press adjusted today, to EBITDA our directly with Reconciliations measures your our found can of I'd adjusted be definition Alex, and the in to in free statements measures included financial found

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

over And now turn to Alex. call the I'll

Alex Vetter

automotive nearly a business high, operating cash Revenue discipline the that our growth was We of and of adjusted delivering year-over-year, of $XXX and product you, $XXX fuel record million improvement. innovation platform. had digital strength million and Katherine. full full model. EBITDA XXXX, Free of point strong expansion leading multiyear the revenue, Thank also reflecting X% a our reached powerful up a year asset-light we flow of margin drove

to record track XXXX. of to OEM revenue our meaningfully revenue extended growth. National we quarter, best fourth and year-over-year year-over-year quarters since XX the For its XX% quarterly consecutive up outperformed,

seeing discipline solutions adjusted and growth leadership. On heading increased traffic drivers margin for subscriber also the crossed we're our continued gains cost More through strong XXXX, the bottom and expectations. Cars.com, that line, into AccuTrade. operate accelerate us we're our robust And our X,XXX the confidence and just broadly, EBITDA of seeing throughout the we us mark our to growth behind year. for economic reinforcing can conditions diverse gives dealer usage enabled dynamic marketplace momentum engagement exceed Altogether,

on our to and cuts made and and and on differentiated in to the connected win is focused to progress solutions acquisition our Each dealer efficiency, recent that in vision race tangible bottom platform quality arbitrage empowers a Our market enable to past but platform that top profitability. clear consumers, significant results. with operations year, We've reputation erode and forced participate new innovative retail consumers bring DealerClub. rather most solution with is of than dealerships the to best-in-class the lead culminating products lure a in wholesale price and on to the race automotive

continuing sales accelerating we're market. our to new increasing and on In enhancements growth to and velocity, delivery value by products improving focused packaging XXXX, innovative and our bring

grateful We're adtech strategies Lisa these springboard is early transformative and to and revenue and and are commercial with XXXX Cars acquisitions, to as an guide to the across Lisa next upon. growth of To these brand Commercial unlocking such focusing who launched We're in as growth a unified multiple the new Miller, on Officer. leader our excited build strategy, commercial key to growth we Commerce Doug dealer of drivers appointment of proud execution pleased to also us data. strong oversaw our created customer and through QX proven we're initiatives, track phase have provides record sales Gosselin her a announce Chief our support accelerating inspiring that Our goals. our the with expansion SaaS, of the go-to-market platform achieve cross-sell. a culture

Starting in review let's the in our driving year-over-year valuable was across appraisal We're number dealer QX Now tool changing XX% how the area up X,XXX a turn volume XXXX up a each to increasingly now industry performance used year-over-year, of vehicles appraisal view Dealers to of being trade-ins, and cars. of and over per XX% our our annual growth AccuTrade QX. dealerships, post as priorities AccuTrade. business. acquires source with acquired

AccuTrade's AccuTrade recent December to X about As cycle, which a dealers contribute who from should as in I'll pipeline, adoption of more AccuTrade Mini, new were new volume in and launch endorsed the announce and lift Maserati, capabilities, January QX to excited a play trade-in associated had to these role launches just endorsements franchise endorsements we're OEM appraisal sales to BMW, and key a we're sales utilize solution. few. on dealer our to X-month meaningfully for in AccuTrade we Close and Endorsements to in AccuTrade Subaru ARPD. name with pleased moment. XX% talk And the driving X- Based second an a to of dealer quarter Genesis, typical option to for build tools. begin expand

dominate innovation. win dealers Repeat and X% through consumer of to million XXX in-market product high-quality Our continuous who and up shoppers the XXXX has we quarter each up over high-intent and collectively was as traffic we XX deliver visitation continues share drove fourth mind leads to buyers scale. shoppers Cars.com. In quarter, and reached year-over-year been over to at Cars.com marketplace visits million

experience led user and leading In our average fact, are and time proprietary powerful us in a start on strong content competition over a to brand December, and shopping site, signal monthly visitors we on unique winning AI-enhanced giving our XXXX investments, that tools, consumers.

we're announced in mix this February. and through and organic, traffic awards as and brand. sustain advantages yields leadership just XX% were our Of is invested benefits marketing, Best also for This of brand strategy sustained annual that editorial greater long-term our to such Recall, over our

highlights Based marketplace year better on of impact, goals insights. our Cars.com are performance, attribution help delivered. competitive packaging proprietary clarity this dealership utilizing our us with with and Helping and within from primary our consistently dealers enhance features leads, elevates align traffic on understand value advantage embeds data dealers operations strong to gain pricing this attribution the immediately complementary and

that our spend instance, our packaging For more Cars.com more of value, budgets. X drive of and peers, our that traffic solution volume for customer XX% and better double the than We optimal anticipate of additional engagement. needs, see majority dealer into delivers dealer like websites media, knowing their who consumer where than offering adopt especially customers leads dealers platform more to converts than to the traffic outcomes Google,

opportunities and and customers agreements on made that For the initiatives. DXC capture legacy packages have DXC in year with is repackaging, we we parallel enhancements platform. X,XXX our see true We've websites focus higher better synergies specifically marketplace dealer into quarter, websites, tier has capabilities X,XXX migrating the Based the to websites, reached and Dealer growth our fourth customers and for our Inspire on of the product Canada. powered over in

National enterprise National QX, to contributor pushing to XX% year-over-year, was and our to growth exceeding growth in expectations and year important and be OEM our expect business full In XXXX. OEM also total up revenue handily We XX%. an

are the upfronts, in-market start As which OEMs up to Already of double investments inventory normalize, we reach will are more shoppers. in year, manufacturers levels to committed digits believe marketing the XXXX us year-over-year. by increase marketing dollars at

win which at like partners the We expect through have majority incremental Car Hub, interest testing on XXXX. OEM spending top only of of to our not but media, expressed new in dollars also during products committed OEM

across aims Looking and XXXX now marketplace. deepen expanded platform, with our to newly and our cross-selling map trade product appraisal wholesale our particularly ahead, connected differentiation road stimulate

distinct that capabilities. us augments In our proposition. a January, dealer-dealer announced deal we with reputation-based and clear DealerClub, wholesale This value of acquisition marketplace strategically billion wholesale platform $XX launches market into the a

ratings in with arbitration goodwill lowering risks of expense. successful auctions X% transparent transactions more our costs. and create less meaningful First, than DealerClub's or seller resulted have Since inception, arbitration while auctions

algorithms per vehicle. customized and data. AccuTrade are appraisal and inspections And with time on-the-lot consumer condition scaling optimize model velocity sustainable, marketplace daily IID, finally, are other to or inventory first-party market technology path analytics integration DealerClub our our and leverage which health wholesale words, exit of can depreciation profit that full valuation means a the which pricing reports profitability faster for also unparalleled insights other variables on and superior and and rather market-leading their potential drawn a and dealers to insights disruptive labor legacy used IIP's determine lot, demand the that quickly to estimate manual strategies should create can vehicle offers accuracy. Second, acquisition Platform, profitable vehicles with on evaluate system growth. a than Inventory from to unlocks ML our inventory In powered IIP's Intelligence real-time management AI auction. and inventory be of DealerClub new predictive retailed through or

our for problem market days As And and inventory we transactional DealerClub on aging mean even our dealer Intelligence over business. lots reduce risk dealers. Platform, average wholesale dealer returns old. the on million-plus are the $XXX leveraging by X% real stream persistent the would website, over and capturing and cars these for opportunity the in solve diminishing By at of can XXX,XXX XX marketplace identify directing of we vehicles to inventory that dealer on look Inventory a we can revenue

believe now, make speed are teams capture, disrupt work Intelligence to the dealers and critical success. and Inventory Cars.com and development still platform to DealerClub, auctions be milestones drive marketplace, our but laser-focused done, consisting industry product forward. There's attract traditional integration our the revenue we for our getting meaningful the us on ecosystem will new Ultimately, to essential AccuTrade, our of Platform to

Selectively, initiatives as repackaging half and the in and overall dealer new and ongoing improvement of growth the sales second are growth the for compounds in also us These position XXXX sustained innovation and organic for product accelerating for achieving work basis ARPD count expansion leadership, year. beyond.

new on numerous transactional mix. as We and to industry-leading adding have driving bottom grow both the DealerClub continuous top ahead, scaling a while our line are to improvement platform stream solutions revenue and and opportunities we and our committed

Now outlook. discuss performance I'll to the to Sonia fourth quarter and financial turn call over our

Sonia?

Sonia Jain

Thank you, Alex.

this continued ability million, performance partners in reflects increased our by ended to with fourth their deliver quarter $XXX.X growth. and X OEM National We growth and their demand marketing through we a focused of year-over-year. spending new this as higher Around year-over-year, there month of quarter each QX. still powered momentum profitable half a for Our sustained reached has for quarterly our and record, OEM strengthened execution dynamic spend, growth upfronts. products translated partners operating in earlier, OEM XX% ever fourth opportunity advertising revenue XXXX into believe environment. mentioned our XXXX is and year of the And meaningfully Alex highest

dealer year-over-year slightly fourth revenue down in robust, it was the While was quarter.

on elevated the AccuTrade second highest solutions We and experience churn to while throughout dealer softness, by continue the fewer seasonal was performance particularly were well. and for expected in sales strong upgrades with pressure month ARPD. dealer weighing performed some both slightly of our launches advertising was counts the AccuTrade net on quarter, year. revenues, and Marketplace affected some QX December

better delivery. that Alex in mentioned us XXXX. closely January monitoring to value in trends that confidence strong see marketplace metrics our our We leading these are marketplace grow previously reflect in The give ability and consumer indicators

Product expenditures Fourth marketing Moving reported Marketing lower that us and and supported $X and compensation primarily $XXX to efficiency year-over-year, on operating million costs of expenses allow basis. quarter to continuous million, investment year-over-year year-over-year a and increased new million $XXX X% technical reduced decreased adjusted $X compared adjusted to back-end and expenses even additional quarter to ago, were technology investments. The year majority the with year maintain adjusted for marketing were period over software. a in marketing both paid ago. basis, a and in this leadership improvements infrastructure reflecting sales $XXX roughly security Fourth million sales increase flat information spend. both from brand reported a same down on talent, million expenses. operating and enhanced

million year-over-year General reported and on and $X lower expense basis adjusted was slightly on administrative up an a basis.

$X.X million includes under therefore, is a reminder, which G&A compensation expenses. As earn-out, reported the expense including and DXC GAAP of operating deemed

year's or the of share $X Net to quarter, in $X.XX fourth or $XX on similar fourth November. quarter per million in was primarily $X.XX year-over-year. income net million attributable the Adjusted for diluted quarter RepairPal to diluted the share income share, sale per was for million gain fourth last $XX per substantially increase with or $X.XX diluted compared the

EBITDA. adjusted to Turning

Our to strong preserve slightly the profitability XX.X% fourth fourth quarter EBITDA quarter. of the quarter results growth the prior in year-over-year. of with $XX period due consistent million was was Adjusted cost softer-than-expected up despite discipline to in year margin fourth

XX,XXX Dealer XX On of quarter-over-quarter, was count [ in expected, to fourth quarter. key given down dealer metrics. dealers as slower ] dealer seasonally spend late the customers

we are dealer will that may and the which we targeted near from given NADA While at experience implemented are QX, some year-end, growth elevate prospects actively pressure at now optimistic in churn term. in closing, rate pipeline for particularly the built of strong we increases

to platform. our DealerClub and sales to attract customers our new expect we In addition, funnel widen

we an be integral dealers compelling approach selling and superior vehicles buying reputation-based our a to opaque of is expect expensive and to for processes. operations, alternative transparent, to current Wholesale will dealership and see part

is by leveraging back-end in scale efficiently integrating goal systems. and investing Our existing to resources front-end DealerClub sales our while

prudently a this at XXXX As such, revenue ramp time. not in factoring steep we're DealerClub in

calls. we with region, Southeast up future sign the are initial in However, and providing updates we'll focus hard to keep dealers pushing in

yet marketplace, Switching ARPD quarter-over-quarter. we less effectively was reflecting down lower of dealer across the the ARPD count subscriptions. package year-over-year, aforementioned to our and won multiple AccuTrade believe in the of endorsements upgrade quarter. value websites wave our The year the return $X,XXX ARPD. Fourth with in of was We more and can activity media expansion into initiatives $XX quarter ARPD that providing we to Approximately to to business our drive in customer flat ahead also breadth underway who opportunities customer will ARPD pathway. And QX for technology, with sales funneled product XX% further have us AccuTrade, and also DealerClub adoption. Marketplace appraisal growth. be cross-selling finally, our trade opens meaningful another is new our a like opportunities, robust and up be dealers for endorsed providing solutions acquired especially through base OEMs into affiliated of complementary lever with

$XXX million Net the primarily growth shifting flow provided from sheet. flow period, Now balance $XX higher operating to adjusted and totaled the activities XXXX was million the Free level cash highest roughly by for year. cash our EBITDA million of increased for year-over-year. $XX $XXX million since cash same Free year-over-year.

repurchased achieved approximately via XX% $XX.X quarter, and return our half fourth second commitment During we for the cash to approximately XXX,XXX to free of shares million flow shareholders share repurchases.

repurchased $XX shares XXXX. capital capital I'm to share share we totaling for allocation $XX XXXX, new a a we X.X and repurchase prior $XXX pleased million remains and million. $XXX refreshes a authorization. of our targeting to which term, announce increases million repurchases also over million Returning X-year are million authorization In to for $XX priority, million shareholders

of $XXX $XX of million the we million debt terms repaid to leverage, total as outstanding and liquidity of reducing XX, year, December full for In our debt XXXX.

of $XXX providing remains the to of fund increased and growth to December Xx, liquidity of million sustainable ample shareholders. low net range create X.Xx. leverage to our Our XX, Total target resources Xx end value strategy XXXX, total as at for our

Now full with year guidance. first I'll conclude and quarter XXXX

solutions. the slightly marketing revenue the growing first expect basis deliver fourth quarter quarter-to-date performance, prior National be a consistent our For midyear. period. rate, we year on and down for for premised dealer demand expect are work based on $XXX and that our QX is year-over-year which slated revenue to on with to expected was repackaging OEM revenue sustained we continue is and $XXX Based advertising for between million. exit on quarter, Recall significant and million expectations most our that revenue XXXX to year-over-year,

work of year, revenue for For product to quickly our between growth expected related to be is as half the such, that the we quarter platform. XXXX roughly revenue margin reflecting into of first including outlook in X% $XXX the and as year-over-year investments we to down initiatives, half initiatives EBITDA and between the to year-over-year when to these Adjusted year-over-year. weighted. driven guidance XX.X% X.X% full $XXX look anticipate repackaging also be for note new and first also I adoption, ongoing, slightly XXXX to and to XX%, adjusted DealerClub. And million XX%, million, DealerClub X% integrate business our of want are launches, of be several fiscal back margin is Adjusted or to the midpoint EBITDA XX% growth to range. by likely taking of more we the EBITDA growth anticipate while aforementioned

continue with leverage. expect operating sustained will coupled discipline, deliver cost We in velocity, sales strong to improvements

We positioned you thoughtfully And to I'd drive we execute call Operator? capital on we to EBITDA organic to progress forward push our updating platform growth, on like our our strategy. expand margin Q&A. accelerated are look return as forward. that, well open as to for and We shareholders the industry with

Operator

Thank Tom you. Instructions] D.A. Our White Davidson. of question from comes Mr. [Operator first

Thomas White

I if could. Two,

there on midpoint guess talk guidance, what or Just implied maybe -- what growth. the the bit expectations about full X% in revenue I that about Can dealer just year growth little total maybe 'XX a you or like kind Marketplace think is. the kind of just your to that there I reflects so is couple of DealerClub then outlook, at in beginning, I of it like a maybe there of in heard in the kind then sounded you I And but impact, contribution a prepared thought of wasn't the terms said be maybe revenues? things. going that remarks, baked

then the just DealerClub? X quarter. on the from And impact what's -- have just follow-up So I

Sonia Jain

Thanks question, Tom. the for

expect, our given come combination of of well AccuTrade we took growth back including of and of time X/X like large a But X/X we're a opportunity products. It fully revenue will continue be half incremental from media for it growth base. and as think to I opportunities, Obviously, So to upsells, quarterized, XXXX, to can our marketplace it coming installed little again, dealer the have revenue. as ramp websites, is push from guidance, our those XXXX you you to roughly the initiatives number. a weighted annualized would bit as already imagine, we marketplace from away regarding to probably huge the year the marketplace. full be given timing And growth, takes revenue as expecting a for into in cross-selling

Thomas White

just kind there? any sorry, I'm contribution Okay. presumed of And -- was then DealerClub there and

Sonia Jain

mean didn't that I question. Sorry, forget to

So on on the DealerClub, we're focused right integrated. getting now really business

actively a As drive mentioned, regions really targeting we're and with dealers. handful depth of to take

Our launch at well NADA our at or NADA received. announcement really was

to in we But really as ton time, optimistic focus point point, revenue the So we business getting feel baked going. no, business. at not the on we this in have a your about of just

Thomas White

kind And revenues. of just Understood. kind product I little kind a from just Okay. month-over-month happened on of I seen you the last earnings your you to of lines. what then could hoping talked you've all dealer remember October, bit, like itself, I call, about quarter was additions unpack across dealer If think

of what of of something or So if happened maybe to parts the in just just and understand what's media as trying Maybe of don't kind kind sort in softness And was dealer core other it quarter revenue? listings was solutions. know, it explain progressed? I

Alex Vetter

and there's profit, profit Yes. pullback. a on levels to we compression and dealers seasonal as do started Tom, typically normalize see always in see inventory typically, QX gross softness natural

quarter, this get seen on we've media cycles. the lots, of on now back our is and the lot are we cycle in QX of just like up obviously pulled But see rate. we've good little exit seeing a we're prior fourth inventory in impact did because our momentum in seen a back which before. And So return, that had QX first levels dealer quarter, solutions a there

Operator

Riley Our next B. Mr. Naved from question Securities. comes of Khan

Naved Khan

Great. I One customer AccuTrade on questions. have X count growth.

in about much of one. the you should And base the -- terms endorsements to like at an that just December be how retention these into the versus winning sort net of quarter. OEM OEM contributed what's that's was it having in a to So help. and translate for endorsement obviously, the seems seeing your AccuTrade. usually, an -- maybe going talk added forward XX It of going growth sales? and that But you and then are success is So from strong

guidance OpEx? year-on-year. The margins. I other around are XXX think I'm the what point for had mostly margins the a is like just improvement affect assumes question drivers marketing at At DealerClub, not Just that you that? trying does a I all? that you're there, your assuming little revenue bit. spends basis other or And a but Is midpoint, to think about obviously, And contribution it said lines, other talk

Alex Vetter

your Naved, questions. Sure, you for thank

a pleased the So not your QX, first with which quarter-over-quarter. gross comment the the only we of to call, front. the we healthy obviously, with But as on X% retention in XX%. that volume, we appraisals QX closely, were track there, really on were AccuTrade, pipeline momentum on from QX, all, sales up expansion the Appraisal up business but on mentioned demonstrated is to I and

averaging the So see are month appraisal technologies via higher through cars And also more we XX the QX. appraised can dealers they're platform. buying AccuTrade a cars. vehicles we're about that buying seeing in dealer are the through Average XX%

over auction for that inventory this of creates but there's platform AccuTrade we fees it acquisition on tons disruptively vehicle has we is and opportunities when priced volume so headroom product new and sales time, a the about opportunity, usage. fresher you pricing of is increasing starts with kind of that and fact very think think that believe value. with and Like, And the

desirability any for that we a and technology that the operational DealerClub dealer a AccuTrade integrate is at to a car well then with provide rekeying appreciate. the benefit retail it massive that benefit is a network with a depending will be any that don't singular launch -- huge received having wholesale or the vehicles X think NADA to going appraise dealers want on can a without AccuTrade wholesale its so data ejection I in of so now that click dealer to capability that is they reason and retail marketplace once market,

volume the as XX% the in endorsements, OEM endorsed AccuTrade. that came OEMs our call, QX from think I of had we previously on said

so gives will force reason solution, the certainly we've it X added to to time just the dealers a store. we dealers our and closer And to fact endorsements that build towards second AccuTrade new into think fortified quarter that sales in get implement OEM for lean because their takes

And so you on take bigger the we think important, the that endorsements margin I'll are second to have half. there? now on midpoint a impact will the comment but if drivers let -- want and Sonia, the

Sonia Jain

Yes. No, happy to.

margins, did We contribution to bake huge related not So a right. you're DealerClub. in from revenue

the However, prudently built we associated in costs business. opinion, integrating scaling with have, my and in

is equation we So on margins here. because side have of and downward that on an bit cost baked margins having little putting a pressure the into the impact

flow-through In and a on full expansion, strategy. as platform natural I like the the basis, year terms of from overall, probably a this describe the improvement benefit would in margins margin

we we're would to to revenue line. an and as to bottom then of down increasing So able see revenue, flow the scale expect that revenue grow portion

Naved Khan

Sonia. you, Thank Alex. you, Thank

Operator

Research. Another Mr. question Gary Prestopino of Barrington comes from

Gary Prestopino

end -- I fully XXXX completed? just you or the of by -- for integration XXXX? Are DealerClub by in have when to completed you launch be looking want a with to be -- the full the that clear on will integration,

Alex Vetter

on the club certainly been product day. Dealers is taking to functional preorders are Gary. hope the I We and every way, register. selling so, getting cars by the actually today. would have And dealers

had is has dealers. X,XXX So to a taken to DealerClub enrollments compare we which that pretty year incredible. get AccuTrade, XXX at that The fact us to the onset for

on dealers platform being and scaling are the we're vehicles So day transacted every today.

integration into the year. be cars AccuTrade the to we first and As to half done one-click to ability work the integration this of eject auction, that expect the in

get hope margin technology see DealerClub we but would this together, some compression we ramp great integrate margin up the that to first to you'll is why profile which investments year, year. AccuTrade for to half in the and be completed as I the back of full So

Gary Prestopino

what's vehicle you platform ability really helpful. just That's unified click, X acquisition can put how inventory, that then your just Okay. to manage customers? now, phrase, on can to could either a the exciting your me can have I inventory that have headline the sales you It changer. and seems the the value as channel. click, you I this you're to of And put wholesale you AccuTrade on X retail with X bundle then to on game cycle a another get in mean, going growth. slides a to drive be the dealer question of it Is and life this

Alex Vetter

Gary. Thanks,

you have sort depending dealers' And one-trick a certain constantly, others. to has where different, car on competition desirability inventory a we're the lower the inventory Our is propensity out intelligence than that geographies of markets' shows a which market. for definitively the is is the pony, price our as which some to erodes recommend retail And of point, know, dealers what the for price to the to dealers rolling just vehicle higher model profits.

or to our and differentiator that our most and platform. wholesale, And field major move a outcome, we -- so giving vehicles dealers the tools to retail of playing is able be think the whether know highest do yield to be level the

AccuTrade so helping IMS And existing providing we've feedback dealers insights tools. dealer Inventory on codeveloped the integration, from it. partners got our Intelligence dislike was they what provide to us with The

know And provide both so together AccuTrade Inventory is DealerClub. and on Intelligence, going to tremendous we've benefit. we got technology Bringing that market-leading

the us scale. at dealers that we using once have pricing know obviously, So gives that power technology we

our from opposed fees or But to our to you being savings when the about cost to auction traditional choice bottom I so now And massive as be is customers able think the think your low we're dropping because value again, very win of adoption. line. right we to auction, to want source dealers' eliminating inventory

think have upside solutions, technology in we tremendous so And our price.

Gary Prestopino

I I is have And the a would AccuTrade is subscription, DealerClub question is guess a Yes. transaction.

be As subscription it Or are subscription the maybe you the and product? for this, entire an you for transaction and bundling package it each fee upcharge you is to still if monthly contemplating bundle? getting going on just

Alex Vetter

we're benefits talked opportunity and on of premature about that fees marketplace customer. It's go. that you're an of -- sellers one we platform going signal exactly us to are there's the higher we have to DealerClub to sell the if is for a But seller your where that say pay to

we more dealers of to our incentivize platform. to So use want

I it we're we technology going incentives dealers have our of on. their that more and at a data think be them as also opportunity into benefits can't was pricing able operational provide going to to deliver model, because our great spot if ease their when provide our system consolidate solutions protect we to we're then to And to look own. for

So have different we'll models the our align and to us, more question, on and this model dealers year premature yes for technology opportunities. first hands. a really It's of in that to hopefully some half bundling motivates the of just we in put test their

Operator

question Our Marvin Mr. BTIG. from next Fong of comes

Marvin Fong

looked if I guess I'll I'm not quarter. like, It solution start on website just ticked the quarter-over-quarter. mistaken, down customers

everyone. of minds was ask shed on we Just aware could -- bigger And picture on the pretty of just light should then I much be hoping guess the some there? that's the dynamics I you I'll question

volatility? how about the the tariffs. [ mean incorporate full macro your you think range, kind interpret all into year in I the uncertainty your this -- ] even morning, investors I given achieving some How rattling Just guidance? saber did more should of confidence

Alex Vetter

requirements. with see quarter, players we to for It's upside, a increase going tremendous our a in website flat from standpoint. to data still Sure, but the security and relatively be particularly look, Marvin. the keep hard the long-tail was lot of as OEM requirements business Well, very up OEMs the

this nowhere all close here. on And business. We're of the so positioned, XX% to by endorsed to continue well build we're TAM being to OEMs

upside. And so we see tremendous

got at And Our the in has which Canadian #X faster provider even today. a growing is obviously, business, clip, Canada headroom. more we're

So OEM we eliminate exercise I can very like technologies finance. them trade-in, the system our extra of for are And cost and away because siphon with for dealers key stand-alone through spending going think right here. record. integrated show a are they're traffic the relationships can from We're instant that platform. more like manufacturers integrate now, That to how directly into money technologies solutions native the repackaging

the industry and on also So is be technology our will positioned answer key we're that I be would consolidation, guess, towards I be to leader, integrating short move this the think market it. here. to going

their building added them that website higher Intelligence diagnostics order value benefits certainly Inventory Platform, giving on prop than is just inventory dealer a Our provide website. customers their

And the going seeing to are have you're platform. run come part as now, their being so customers where again, retail to access data to the platform predictive Cars of to DI business Commerce life

the just us give OEM I here value that well. that adding plus our to think tons the so as endorsements platform website headroom we're of And

economic the never, And proven all supplier And I'll let on belief, through tariffs and is has relationships full My the to impacted and the past, comment this in resilient applicability super that cycles. business the has changes Sonia year consumers industry. OEM guide. general Marvin, in our macro or

any guide? on And side, don't impact Sonia, could tariffs comment but year there see the on full the so I maybe you

Sonia Jain

stable there, relatively a we're think inventory watching I indicators, environment. macro levels. interest affordability, actively key we're assuming Like out most mean, consumer others rates, I macro Yes.

well OEM both budgets of as those can well. as things budgets as All dealer impact

bit the have and products the confident you half retention and As the of accessible, of our a year. delivery half we to that which to over be profitability we the specifically also the expecting have value beginning dealer platform dealer noticed it for for But of related for guide planned back probably long term. provided bundling you from customers of in will more our look make year, as at repackaging, to initiatives are we the particularly the we're under strengthen QX, pressure the very first

we're have the confidence lot of monitoring planned in have we initiatives a and do the for We're relatively a macro we stable actively. So year. assuming

Marvin Fong

if And could X great. That's in it. Got I just sneak maybe more.

Just grew dealers from to It about if on XXX. by you DealerClub. several you I looks deal am the the hundred, time announced not me, mistaken,

for Just dealer of mean in growth kind of that of to set count we XXXX? I level we product think for the expectations, expectations kind how should think line should about --

Alex Vetter

look, it's here. early Well,

So expectations a I to to guess want I degree. temper

a years. is proven DealerClub of a few who a short dealer-to-dealer exchange a million founder to scaled matter the similar just in However, of operator $XXX marketplace

has record success knowledge And who we of has scaled track a so and marketplaces. pedigree, in-house, have

the huge operations it We're asset-light, right? arbitration relying are or in DealerClub Importantly, govern on because not carrying building costs marketplace. huge doing inspector to reputation we're dealer

lots, when a requires opposed that DealerClub is them at opportunity. we a that I'm we opportunity, about the a with vehicles we DealerClub to labor as and look target we really you efficiency. dealers access for our target disruptive costs the that market to growing opens And have data dealer see we what thrilled massive wholesale. or tremendous listings play we where to help And opportunity showed platform beards generate say one technology to so down tremendous low-cost we accurate this aging path can inventory needed really like And just move to and know up then are can scale. inventory can on And that when need inventory

the $XXX And on, Just market, dealer inventory million today. a early revenue being we way to players that though. and transact the occupy established market very but the all feedback been dealer it's this technology X% has technology And a dealer this better stream. of affirmative think -- very of it's the to in to and is terms this incredible,

Marvin Fong

Got it. great. sounds That

Operator

from of Another Spak Joe comes UBS. question

Joseph Spak

to guidance years, of points back go X the I over I and to to average guidance. basis that it's margin margins basis about just think XXX the seasonal quarter like past first which maybe points. sort closer of degradation, the is the than quarter-over-quarter more Sonia, is been EBITDA think XXX

year-over-year I basis And what's around maybe flip guess a bit, points. So really like XXX basis, it's on then even to that? little a driving it

that's the quarters, get XX revenue XXX for weighted. as you bps to average next X sounds that and So over year, it need like is to almost like the back-end the we

even to guess, the number get my So an you as it's larger back half.

So and margins year? just can cadence through of you understand what's driving the us help the unpack really

Sonia Jain

Yes.

the So of QX QX dealer the rate. rate, of exit reflective are particularly revenue exit kind margins

X have that's to basis, on the going So slightly a year-over-year it since year. for margins starting I was point would down And say factor. that's some impact our into

integration. are possible. mentioned, heavily In we've to want We as the addition, quickly as done this get in we investing as DealerClub

QX say on I that So reasons. a would primary those guidance. bit are the margin also is weighing the

the steadily we that, of margin that's typically, other the ramping see QX. QX year, say do margins as lower to than over year. with the the for would related being course Otherwise, I specific But margins typically our call out

follows growth half fairly expansion second over the of year weighted, In the the up is that we trend margins as pick of to of we'll and back the the get of expect the terms some our seasonal year, significantly in half given that typical course to year.

Joseph Spak

Okay.

the back some basically some additional spending it's and that revenue half, the with on then dealers ramping of So a in the drive early sort initiatives growth of effectively? helps of

Sonia Jain

correct. is That

Joseph Spak

for chatbots? just looking on it second operation been AI I of don't while. in we inquiring the what on or more you've as actually But for just think come plunge you anything is I could us haven't if then that has -- us than of a AI you're can And there you -- Okay. -- more just on solutions beyond either are working AI? like a of I they annually is I Like solutions? taking AI wondering And sort in up And help was efficiencies? or while. mean in are sort or sort that, dealer maybe I update dealerships consumer-facing dabbling know guess, on a question -- update are investing

Alex Vetter

the for Thanks I'm it. the to at about question. opportunity talk smiling

the cases, quality X that ratio, volume. And trends to cost handling a have that dealership our AI to So platform. ways pilots or value such with Which understated dealerships cost lead I obviously critical we've in attributed set that to And being And lift back a underscores appointments lead back lead the tested and attributing office dealers in with of center realizing think finding in dealerships with many handle a handle seeing expense. centers to the of dealerships because we've couple replaced seeing their that we're our eliminate operate and is volume closing low of both it's big and AI for platform. quality In to business of lead development some XX% we're cited gen. lead audience who biggest sales is component our minds dealerships. low

those right combat so of can some that that don't better dealers really think we quality let's close, audience. churn. we're our are leases pilots help of appointment volume say working the on our we let And a AI and the see of setting show now And When that us the challenge manage behalf and on the shows and dealer it if deliver rate. a can really take

product very predict a real to standpoint, right, And are exit we're so that a got that's data. data wholesale, retail for and vehicle, me in intelligence path leveraging dealers tech using best excited so from or demand real-time certainly and retail time inventory is powerful, excited retail demand the disruptive the fact

predictive data. MMR Most is on Manheim's We're them forward-looking rate showing failure data. dealers data, rely backwards-looking wholesale which

their business I going new here much to is to think so allow them some time huge. is to the the that run And take more industry technologies opportunity adopt proactively. But

Joseph Spak

'XX annually on for if you're amounts? even how spending much 'XX, or and Any similar versus spending maybe you're commentary more directionally,

Alex Vetter

with be to experimenting the workforce and because hard across to team everything we whole to break a work. out the in AI. whole to have efficiencies apply don't It's want we the AI to we do challenging it embracing find platform our separate employees that way AI and We're

But And to area a the so hard in it. functional every business it time, that pervasive we dedicated hope would company. leverage investment me for be in it's quantify to and over the my is throughout get

Operator

from Rajat Gupta comes of JPMorgan. question Another

Rajat Gupta

growth follow-up revenue a ramp. the half had second on I

on What elaborate X the half on going drivers. like the AccuTrade you some as more what count, drivers Can would you with expect more percentage then versus the bit areas X do the of help could on You the is terms are Like, many ramp? full granular be how lower granularity I dealers Any of Any color of benefit helpful give upgrade? RPD? mentioned tiers have will in other to that initiatives? Anything us guide? higher you dealer that's into And baked follow-up. second that repackaging of a on endorsement more in tiers?

Alex Vetter

of using rides technology, of as is to on appraise me to And dealership proving wider lot their the the So is successful to AccuTrade a expansion their right? confidence in to And use with porters is that to of standardize to dealers being labor [ vehicles multiple operations. X technology dealerships, from opposed standardize specialists. looking it. all stores There's number groups giving enable AccuTrade high-priced a across that coming reliable get expanding as and consolidation of the to exciting of mention, of what's Not savings be consolidation, Well, benefits able curation. opposed vehicles in to growth industry to human this is owners fact from a ] AccuTrade our to the dealerships Yes. that. the benefits store being processes trend, can off are our leverage it footprint and appraise to technology use economic to in

would And that so one. be

$X,XXX are Inventory The to really for month Intelligence In spending cases, OEM inventory that believe Platform. I doesn't but benefits endorsements certainly are to help, tool going dealerships the a added like integrate. embedding intelligence a $X,XXX some stand-alone

reason part So to that believe. intelligence is providing inventory as of platform that certainly fact we're another the

a integrating that wholesale car can so in a appraise dealers they've on benefit. wholesale even ownership marketed marketplace And wholesale they marketplace real another time ejection taken get before finally, is a and to of launch then a car that

shared dealer product call, the usage are all up and trends, as double is way here digits. on going to lead So the we

fortification of upside. this so that lot tremendous a And gives for platform having

Sonia Jain

Maybe context. also bit Rajat, a little to more add

As at expect to grow a between I are break growth, count do there of XXXX. it XXXX, we down maybe ARPD. we can in primary We and say of look dealer customers dealer drivers and would couple

drivers help would some will to point I believe Obviously, couple we velocity. our sales organizational changes different we're making I of accelerate that there. think a it's that

how the pleased exited be traffic the and I really marketplace competitive which in a would in the the health, think you see are end of at from at year But were #X one. we of leading of are UV look trends, that year. just believe perspective we terms core indicator to So a we we marketplace, when

for product as of on Alex here. perspective, In neighborhood We're know a the product the access We to the sales. we're XX% mentioned, in we we're their We value shared dealer from influencing way that stats delivering. focused getting heavily ensuring when DMS that some is past. addition, of get appropriate the in going data attribution retail we're to lead

so you ARPD. math which there, And to the it do revenue the of leads actually is when growth, second driver

But deliver undeniable. the value is we

terms that's market. So We've our headroom in it our something marketplace talked there's about -- preferred be go in a higher to which packaging enhance create live our products additional the yes, to believe means that year guide at tier we of elevate premium addition lot packages. the the in solution. packages this the of marketplace a And that into past to later we'll looking we marketplace an to structure. today, have opportunity, are and XX% included is in customers and in

these then for alluded in still opportunity as And done over opportunity And to and contract us while website with b, the legacy tiers there's do of relatively we sort through continue a something north. X Alex our our still that's we've think grow untapped ARPD terms year OEM. to a That's underway. or believe I of last also of they're renegotiating to to move few website renegotiation, package units, believe this agreements we grow website the well,

better, of good mix portion website move lot So when best. in you and of good, a better to tiers, the opportunity at we to have best the look who's in

that of I So color helps bit. in a hope terms little

Rajat Gupta

in more I'm lot especially pullback recent here I No, I the for encouraging, where where is free are XXXX to at flow in curious, there the cash you that, looking free low earnouts the is flow. given just in the end price? detail. the Obviously, range But is. buyback, stock of how standpoint definitely you've just at given more the play like pickup guess, be the share room available business, with role provided? aggressive the the mean from the especially the a on the cash Thanks given just like definitely. in a range, you're versus leverage And the a

Sonia Jain

Yes. No, great question. I appreciate it.

a will there everyone work. it opportunistic we when But of we to of think size target repurchases, capital certainly, be looks what that help comes share that to to how put kind put we terms like. I out in

and our So given -- guide, we in at upside of business. certainly current a lot see and the valuation

Operator

Another from of Mr. Doug question comes Arthur Huber Research.

Douglas Arthur

on I so got the to will off call, Thank hold a I follow-up. jump you. XX:XX until

Operator

concludes at gentlemen, this further time. today's you this participation. for you. Thank call. and are conference There Thank questions no Ladies your

disconnect. now may Goodbye. You

Cars.com (CARS) 27 Feb 252024 Q4 Earnings call transcript