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CarGurus(CARG) - 2024 Q4 - Annual Report
CARGCarGurus(CARG)2025-02-20 21:16
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Revenue and Financial Performance - Revenue decreased to 894.4millionfortheyearendedDecember31,2024,from894.4 million for the year ended December 31, 2024, from 914.2 million for the year ended December 31, 2023, representing a 2% decrease[125]. - For the year ended December 31, 2024, the company recognized revenue of 894.4million,adecreasefrom894.4 million, a decrease from 914.2 million in 2023, representing a decline of approximately 2.9%[377][385]. - The marketplace revenue increased to 796.6millionin2024from796.6 million in 2024 from 698.2 million in 2023, reflecting a growth of about 14.1%[385]. - The total cost of revenue decreased to 155.4millionin2024from155.4 million in 2024 from 262.8 million in 2023, resulting in a gross profit of 738.9million,upfrom738.9 million, up from 651.5 million[385]. - Operating expenses increased to 725.5millionin2024from725.5 million in 2024 from 618.8 million in 2023, primarily due to a 134.5millionimpairmentcharge[385].−Consolidatednetincomefor2024was134.5 million impairment charge[385]. - Consolidated net income for 2024 was 20.97 million, a slight decrease from 22.05millionin2023[387].−Thecompanyreportedabasicnetincomepershareof22.05 million in 2023[387]. - The company reported a basic net income per share of 0.20 for 2024, down from 0.27in2023[385].−Totalassetsdecreasedto0.27 in 2023[385]. - Total assets decreased to 824.5 million as of December 31, 2024, from 918.9millionin2023,adeclineofapproximately10.3918.9 million in 2023, a decline of approximately 10.3%[384]. - Total liabilities decreased to 282.8 million in 2024 from 302.1millionin2023,indicatingareductionofabout6.4302.1 million in 2023, indicating a reduction of about 6.4%[384]. - Cash and cash equivalents increased to 304.2 million in 2024 from 291.4millionin2023,showingagrowthofapproximately4.8291.4 million in 2023, showing a growth of approximately 4.8%[384]. - The company reported a net loss of 14,889,000 in 2024, compared to a net income of 36,942,000in2023[391].MarketandEconomicFactors−Macroeconomicfactorssuchasincreasedinterestrates,inflation,andconsumerconfidencearecriticaldriversaffectingvehiclesalesand,consequently,thecompany′srevenue[103].−Thecompany’sfuturerevenueisuncertainduetopotentialmacroeconomiceffects,includinginflationandchangesinconsumerconfidence[126].−Thecompanyexpectsfluctuationsinrevenueandresultsofoperationsduetomacroeconomicfactors,includingincreasedinterestratesandlowerconsumerconfidence[193].−Theautomotiveindustryfaceschallengesincludingdealershipclosuresandconsolidations,whichcouldreducedemandforthecompany′sproductsandservices[97].OperationalRisksandChallenges−Thecompanyreliesonsubscriptionfeesfromdealers,withasignificantriskifdealersterminatetheiragreementsorifthenumberofpayingdealersdecreases[96].−Thereisariskofinventorychallengesimpactingthesupplyofvehiclesavailableforsale,whichcouldadverselyaffectrevenue[110].−Thecompanymayrequireadditionalcapitaltopursuebusinessobjectives,andfailuretogeneratesufficientcashflowscouldadverselyaffectitsfinancialcondition[92].−Thecompanyfacesrisksrelatedtointernationaloperations,includingcompetitionfromlocalprovidersandcompliancewithforeignlawsandregulations[129].−Thecompanyfacesintensecompetitionforretainingandattractinghighlyqualifiedpersonnel,whichcouldmateriallyaffectitsabilitytogrow[135].−Anyunplannedturnoverofkeypersonnelcoulddisrupttheexecutionofthecompany′sbusinessplanandstrategy[136].−Thecompanyfacessignificantcompetitionfromvariousonlineautomotivemarketplacesandmaystruggletomaintainorgrowthenumberofdealerssubscribingtoitsservices[188].TechnologyandDataManagement−Thecompanyreliesoninternetsearchenginestodrivetraffictoitswebsites,andanydeclineinsearchresultrankingscouldadverselyaffecttrafficandleadssenttodealers[120].−Thecompanymustcontinuallyinvestinproduct,technology,anddevelopmenttoimprovemarketplaceattractivenessandadapttochangingconsumerrequirements[117].−Thecompanymayexperienceinterruptionsindataaccessfromthird−partyproviders,whichcouldnegativelyaffecttheshoppingexperienceforconsumers[121].−Thecompanyreliesonthird−partyserviceprovidersforcriticaloperations,andanyfailureintheserelationshipscouldharmitsbusiness[148].−Disruptionsinthecompany′stechnologyinfrastructurecoulddamageitsreputationandresultinalossofconsumers[150].−Cybersecuritythreatsareincreasing,andthecompany′sdisasterrecoveryplansmaynoteffectivelyaddressallpotentialcyberrisks,impactingbrandreputationandconsumertrust[156].−Thecompanyreliesonthird−partyserviceprovidersforthecollection,processing,andstorageofconsumerdata,whichposesrisksofdatabreachesandpotentialliabilities[153].ComplianceandRegulatoryIssues−Thecompanyissubjecttocomplexlawsandregulationsthatcouldchallengeitsbusinessmodelandresultinsignificantpenaltiesordamages[139].−TheFederalTradeCommission(FTC)hastheauthoritytotakeactionsagainstunfairordeceptivepractices,whichcouldleadtosubstantialcostsforthecompany[142].−Thecompanyissubjecttonumerousevolvingprivacyregulations,includingtheEU′sGeneralDataProtectionRegulationandvariousU.S.stateconsumerprivacylaws,whichmayrequirechangestoitspoliciesandprocedures[158].−Failuretocomplywithdataprotectionlawscouldresultingovernmentalinvestigations,regulatoryfines,anddamagetobrandreputation,adverselyaffectingbusinessoperations[159].InternalControlsandGovernance−Apreviouslyidentifiedmaterialweaknessininternalcontroloverfinancialreportingcouldhinderthecompany′sabilitytoaccuratelyreportfinancialconditions,affectingmarketperception[172].−ThecompanyidentifiedandremediatedamaterialweaknessininternalcontroloverfinancialreportingduringtheyearendedDecember31,2024[173].−Thecompanymustmaintaineffectiveinternalcontrolsoverfinancialreporting,andanyfailurecouldadverselyaffectinvestorconfidenceandstockvalue[192].−Thecompany′sfoundercontrolsamajorityofthevotingpower,whichmayconflictwiththeinterestsofotherstockholdersandaffectcorporategovernance[180].StrategicInitiativesandFutureOutlook−ThecompanycompletedtheacquisitionofCarOfferonDecember1,2023,whichmayimpactoperationalefficiencyandfinancialresultsifnotsuccessfullyintegrated[111].−Thecompanyanticipatesthatfuturerevenuegrowthwillrequireafocusondevelopingnewproductsthatmustbewidelyadoptedbyconsumersanddealers[117].−Thecompanyannouncedasharerepurchaseprogramwithanaggregatepurchasepricenottoexceed36,942,000 in 2023[391]. Market and Economic Factors - Macroeconomic factors such as increased interest rates, inflation, and consumer confidence are critical drivers affecting vehicle sales and, consequently, the company's revenue[103]. - The company’s future revenue is uncertain due to potential macroeconomic effects, including inflation and changes in consumer confidence[126]. - The company expects fluctuations in revenue and results of operations due to macroeconomic factors, including increased interest rates and lower consumer confidence[193]. - The automotive industry faces challenges including dealership closures and consolidations, which could reduce demand for the company's products and services[97]. Operational Risks and Challenges - The company relies on subscription fees from dealers, with a significant risk if dealers terminate their agreements or if the number of paying dealers decreases[96]. - There is a risk of inventory challenges impacting the supply of vehicles available for sale, which could adversely affect revenue[110]. - The company may require additional capital to pursue business objectives, and failure to generate sufficient cash flows could adversely affect its financial condition[92]. - The company faces risks related to international operations, including competition from local providers and compliance with foreign laws and regulations[129]. - The company faces intense competition for retaining and attracting highly qualified personnel, which could materially affect its ability to grow[135]. - Any unplanned turnover of key personnel could disrupt the execution of the company's business plan and strategy[136]. - The company faces significant competition from various online automotive marketplaces and may struggle to maintain or grow the number of dealers subscribing to its services[188]. Technology and Data Management - The company relies on internet search engines to drive traffic to its websites, and any decline in search result rankings could adversely affect traffic and leads sent to dealers[120]. - The company must continually invest in product, technology, and development to improve marketplace attractiveness and adapt to changing consumer requirements[117]. - The company may experience interruptions in data access from third-party providers, which could negatively affect the shopping experience for consumers[121]. - The company relies on third-party service providers for critical operations, and any failure in these relationships could harm its business[148]. - Disruptions in the company's technology infrastructure could damage its reputation and result in a loss of consumers[150]. - Cybersecurity threats are increasing, and the company's disaster recovery plans may not effectively address all potential cyber risks, impacting brand reputation and consumer trust[156]. - The company relies on third-party service providers for the collection, processing, and storage of consumer data, which poses risks of data breaches and potential liabilities[153]. Compliance and Regulatory Issues - The company is subject to complex laws and regulations that could challenge its business model and result in significant penalties or damages[139]. - The Federal Trade Commission (FTC) has the authority to take actions against unfair or deceptive practices, which could lead to substantial costs for the company[142]. - The company is subject to numerous evolving privacy regulations, including the EU's General Data Protection Regulation and various U.S. state consumer privacy laws, which may require changes to its policies and procedures[158]. - Failure to comply with data protection laws could result in governmental investigations, regulatory fines, and damage to brand reputation, adversely affecting business operations[159]. Internal Controls and Governance - A previously identified material weakness in internal control over financial reporting could hinder the company's ability to accurately report financial conditions, affecting market perception[172]. - The company identified and remediated a material weakness in internal control over financial reporting during the year ended December 31, 2024[173]. - The company must maintain effective internal controls over financial reporting, and any failure could adversely affect investor confidence and stock value[192]. - The company's founder controls a majority of the voting power, which may conflict with the interests of other stockholders and affect corporate governance[180]. Strategic Initiatives and Future Outlook - The company completed the acquisition of CarOffer on December 1, 2023, which may impact operational efficiency and financial results if not successfully integrated[111]. - The company anticipates that future revenue growth will require a focus on developing new products that must be widely adopted by consumers and dealers[117]. - The company announced a share repurchase program with an aggregate purchase price not to exceed 200 million, effective January 1, 2025, and expiring December 31, 2025[185]. - Expectations regarding environmental, social, and governance (ESG) considerations may expose the company to potential liabilities and increased costs[177]. - The company may face reputational harm and legal proceedings if it fails to meet evolving stakeholder expectations regarding ESG initiatives[179].