Cargurus ((CARG)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for CarGurus reflected a generally positive sentiment with significant achievements in the marketplace segment, international expansion, and strong dealer and consumer engagement. However, the call also underscored notable challenges in the wholesale and product revenue sectors, particularly with the CarOffer platform. While the company showcased promising growth and innovation, there are clear areas that require strategic reassessment and improvement.
Marketplace Revenue Growth
CarGurus reported a 13% year-over-year increase in marketplace revenue, adding $25 million. This growth was driven by an increase in dealer count, subscription tier upgrades, and the adoption of value-added products and services.
International Revenue Expansion
International revenue saw a robust 20% year-over-year increase, with notable growth in Canada and the UK. This was fueled by a 22% year-over-year aggregate lead growth and ongoing product innovation.
Improved Marketplace Margins
The company’s marketplace adjusted EBITDA grew by 27% year-over-year, with margins improving by more than 340 basis points to nearly 33%, reflecting enhanced operational efficiency.
Strong Dealer Engagement and Adoption
Dealer engagement was strong, with increased adoption of new products such as VIN level targeting and Digital Deal. The company added nearly 1,200 net new global dealers year-over-year.
Consumer Engagement and Brand Strength
CarGurus reinforced its brand strength by becoming Canada’s most downloaded auto app in Q1, contributing to an 85% year-over-year increase in direct traffic.
Decline in Wholesale and Product Revenue
The earnings call highlighted a significant decline in wholesale and product revenue, down 52% and 58% year-over-year, respectively, due to lower transaction volumes.
Challenges with CarOffer Platform
The CarOffer platform faced structural limitations and operational inefficiencies, prompting a strategic assessment to identify sustainable growth and profitability potential.
Forward-Looking Guidance
CarGurus provided an optimistic outlook for the future, with first-quarter revenue reported at $225 million, marking a 4% year-over-year increase. The company anticipates total revenue for the second quarter of 2025 to range from $222 million to $242 million, with marketplace revenue expected to grow between 12% and 15% year-over-year. Despite macroeconomic uncertainties, CarGurus projects a low double-digit year-over-year growth rate by the end of 2025.
In summary, CarGurus’ earnings call painted a picture of a company with strong marketplace and international growth, coupled with robust dealer and consumer engagement. However, challenges in the wholesale and product revenue segments, particularly with the CarOffer platform, highlight areas needing strategic focus. The forward-looking guidance remains optimistic, with expectations of continued growth despite external economic pressures.