Cars.com, Inc. ((CARS)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Cars.com, Inc. presented a balanced sentiment, highlighting both achievements and challenges faced by the company. On the positive side, the company reported revenue growth in its OEM and national segments, dealer expansion, and improved marketplace performance. However, these gains were tempered by challenges such as dealer revenue softness, uncertainty in OEM advertising investments, and a decline in net income. Despite these hurdles, Cars.com shows promise with strong growth initiatives and strategic changes.
Revenue Growth and Dealer Expansion
Cars.com reported steady revenue of $179 million year-over-year, with a notable 5% growth in OEM and national revenue. The company also achieved a significant milestone in dealer expansion, adding over 160 dealers, marking the best sequential organic growth in over three years.
Strong Marketplace and Platform Performance
The company’s marketplace and platform performance reached new heights, with traffic hitting a second-quarter record of 162 million, representing a 2% increase year-over-year. The introduction of new AI-powered search capabilities resulted in a doubling of the lead submission rate, showcasing the effectiveness of their technological advancements.
AccuTrade and DealerClub Growth
AccuTrade’s subscriber base grew to 1,070 dealers, with appraisal activity increasing by 14% quarter-over-quarter. Additionally, DealerClub transaction volume saw a significant 50% sequential growth, highlighting the success of these platforms in driving dealer engagement.
Share Repurchase Increase
Cars.com raised its full-year share repurchase target to between $70 million and $90 million, up from the previous range of $60 million to $70 million. This move reflects the company’s confidence in its financial position and commitment to returning value to shareholders.
Adjusted EBITDA and Margin Improvement
The company reported an adjusted EBITDA of $51 million, slightly up year-over-year, with a margin of 28.5%, which is at the high end of the outlook range. This demonstrates Cars.com’s ability to maintain profitability while navigating market challenges.
Temporary Softness in Dealer Revenue
Despite overall growth, dealer revenue experienced a 1% year-over-year decline, attributed to a slightly lower Average Revenue Per Dealer (ARPD) and mix issues. This softness highlights areas where the company may need to focus its efforts to ensure sustained growth.
Uncertainty in OEM Advertising Investment
OEM revenue growth faced challenges due to fluctuations in advertising investments and a nearly one-third decline in sell-through rates on certain display products year-over-year. This uncertainty underscores the need for strategic adjustments in advertising approaches.
ARPD Decline
The second quarter saw an ARPD of $2,435, down approximately $40 both year-over-year and sequentially. This decline was largely due to customer and product mix, indicating potential areas for strategic refinement.
Net Income Decline
Net income for the second quarter was reported at $7 million, down from $11 million a year ago. This decline was primarily due to changes in the fair value of contingent consideration for prior acquisitions, highlighting the impact of past strategic decisions on current financial performance.
Forward-Looking Guidance
Looking ahead, Cars.com provided guidance for the remainder of the year, emphasizing several key metrics. The company anticipates low single-digit revenue growth in the second half of 2025, supported by initiatives such as increased sales velocity, product integration, and enhanced AI features. The annual guidance reaffirms an adjusted EBITDA margin outlook of 29% to 31%, with a focus on cost discipline and leveraging growth initiatives. Additionally, the company highlighted a dealer count increase to 19,412, marking the best organic growth in over three years.
In summary, the Cars.com earnings call reflected a balanced sentiment, acknowledging both positive achievements and existing challenges. While the company faces hurdles such as dealer revenue softness and OEM advertising uncertainties, its strong growth initiatives and strategic changes offer a promising outlook. With a focus on technological advancements and market expansion, Cars.com is well-positioned to navigate the evolving automotive landscape.