CarGurus(CARG) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents CarGurus, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed accounting notes Unaudited Condensed Consolidated Balance Sheets This section presents the Company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Assets | | | | Cash and cash equivalents | $231,233 | $304,193 | | Total current assets | $308,972 | $391,206 | | Total assets | $726,121 | $824,536 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $97,199 | $93,051 | | Total liabilities | $290,644 | $282,847 | | Total stockholders' equity | $435,477 | $541,689 | - Total assets decreased by $98.4 million from December 31, 2024, to June 30, 2025, primarily driven by a decrease in cash and cash equivalents[13] Unaudited Condensed Consolidated Income Statements This section presents the Company's financial performance, detailing revenues, expenses, and net income (loss) for specified periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Total revenue | $234,033 | $218,692 | $459,191 | $434,488 | | Total cost of revenue | $29,651 | $36,248 | $55,102 | $77,083 | | Gross profit | $204,382 | $182,444 | $404,089 | $357,405 | | Total operating expenses | $179,538 | $276,028 | $333,490 | $424,705 | | Income (loss) from operations | $24,844 | $(93,584) | $70,599 | $(67,300) | | Net income (loss) | $22,343 | $(68,721) | $61,388 | $(47,420) | | Basic EPS | $0.23 | $(0.66) | $0.61 | $(0.45) | | Diluted EPS | $0.22 | $(0.66) | $0.60 | $(0.45) | - Net income significantly improved for both the three and six months ended June 30, 2025, compared to the prior year, moving from a net loss to positive net income, largely driven by a substantial decrease in impairment expenses[14] Unaudited Condensed Consolidated Statements of Comprehensive Income This section presents the Company's comprehensive income (loss), including net income and other comprehensive income items for specified periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income (loss) | $22,343 | $(68,721) | $61,388 | $(47,420) | | Foreign currency translation adjustment | $2,679 | $(203) | $3,917 | $(802) | | Comprehensive income (loss) | $25,022 | $(68,924) | $65,305 | $(48,222) | - Comprehensive income turned positive in 2025, primarily due to the shift from net loss to net income and a positive foreign currency translation adjustment, contrasting with a loss in 2024[16] Unaudited Condensed Consolidated Statements of Stockholders' Equity This section details changes in the Company's stockholders' equity, including common stock, retained earnings, and comprehensive income for specified periods | Metric | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------- | :----------------------------------- | | Total stockholders' equity | $435,477 | $541,689 | | Class A common stock shares outstanding | 84,738,943 | 89,002,571 | | Class B common stock shares outstanding | 14,216,250 | 14,986,745 | | Retained earnings | $418,642 | $375,119 | | Accumulated other comprehensive income (loss) | $1,370 | $(2,547) | - Total stockholders' equity decreased by $106.2 million from December 31, 2024, to June 30, 2025, primarily due to significant common stock repurchases ($185.9 million) and a decrease in additional paid-in capital, partially offset by net income and positive foreign currency translation adjustments[18] Unaudited Condensed Consolidated Statements of Cash Flows This section presents the Company's cash inflows and outflows from operating, investing, and financing activities for specified periods | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $140,998 | $123,561 | | Net cash used in investing activities | $(15,476) | $(44,373) | | Net cash used in financing activities | $(200,537) | $(153,975) | | Net decrease in cash, cash equivalents, and restricted cash | $(72,880) | $(75,561) | | Cash, cash equivalents, and restricted cash at end of period | $233,349 | $218,365 | - Net cash provided by operating activities increased by $17.4 million YoY for the six months ended June 30, 2025. Net cash used in financing activities increased significantly due to higher common stock repurchases[21] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements, covering accounting policies, revenue, impairments, and debt 1. Organization and Business Description CarGurus, Inc. operates as a multinational online automotive platform, winding down CarOffer's transaction business to focus on AI-powered inventory intelligence - CarGurus is winding down its CarOffer Transactions Business (Dealer-to-Dealer and Instant Max Cash Offer products) due to its ineffectiveness in a volatile pricing environment, shifting focus to AI-powered inventory intelligence and consumer vehicle sourcing via 'Sell My Car - Top Dealer Offers'[23][134] - The Company operates in the U.S. (CarGurus, Autolist, CarOffer), Canada (CarGurus), and the U.K. (CarGurus, PistonHeads), with two reportable segments: U.S. Marketplace and Digital Wholesale[24][25] 2. Summary of Significant Accounting Policies The unaudited financial statements conform to GAAP, with critical accounting estimates covering revenue recognition, asset impairment, and intangible asset valuation, including a Q2 2025 CarOffer impairment - The Company's critical accounting estimates involve sales allowance and variable consideration in revenue recognition, impairment and useful lives of long-lived assets, capitalization and useful lives of product, technology, and development costs, and valuation/recoverability of intangible assets and goodwill[34] - An interim impairment test for the CarOffer reporting unit was triggered in Q2 2025 due to sustained low transaction volume and delayed growth, resulting in a full impairment of goodwill and partial impairment of other long-lived assets[35][61] - New accounting pronouncements, ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures), are being evaluated for their impact on future consolidated financial statements[45][46] 3. Revenue Recognition Revenue is disaggregated by marketplace, Dealer-to-Dealer, and IMCO services; marketplace revenue increased significantly, while Dealer-to-Dealer and IMCO revenues decreased in 2025 | Revenue Source | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Marketplace | $221,998 | $195,167 | $434,233 | $382,386 | | Dealer-to-Dealer | $7,682 | $15,492 | $15,847 | $33,991 | | Sell My Car - Instant Max Cash Offer | $4,353 | $8,033 | $9,111 | $18,111 | | Total | $234,033 | $218,692 | $459,191 | $434,488 | - Marketplace revenue increased by 13.7% for the three months and 13.6% for the six months ended June 30, 2025, compared to the same periods in 2024[47] - Dealer-to-Dealer and IMCO revenues both decreased by approximately 50% for both the three and six months ended June 30, 2025, compared to the same periods in 2024[47] 4. Fair Value of Financial Instruments The Company's recurring fair value assets primarily consist of cash equivalents in mutual funds, categorized as Level 1 inputs | Asset Type | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :----------- | :--------------------------------- | :----------------------------------- | | Mutual funds | $47,396 | $165,074 | | Total | $47,396 | $165,074 | - Cash equivalents in mutual funds decreased significantly from $165.1 million at December 31, 2024, to $47.4 million at June 30, 2025[55] 5. Property and Equipment, Net Property and equipment, net, remained stable, with capitalized software additions offset by write-offs and CarOffer-related impairments | Category | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :-------------------------- | :--------------------------------- | :----------------------------------- | | Capitalized internal-use software | $20,404 | $20,060 | | Capitalized website development | $53,276 | $56,877 | | Leasehold improvements | $85,890 | $95,691 | | Total Property and equipment, net | $130,299 | $130,010 | - Capitalized internal-use software increased by $344k, primarily due to $3.3 million in additions, partially offset by $2.2 million in write-offs of fully depreciated Digital Wholesale assets and $769k in impairments[56] - Capitalized website development costs decreased by $3.6 million, mainly due to $13.4 million in write-offs of fully depreciated Digital Wholesale assets and $4.8 million in impairments, offset by $14.6 million in additions[57] 6. Impairments The Company recognized a $32.6 million impairment for the CarOffer reporting unit in Q2 2025, including $19.6 million in goodwill, due to low transaction volume and delayed growth - A triggering event in Q2 2025 led to a $32.6 million impairment for the CarOffer reporting unit, including a full impairment of goodwill ($19.6 million) and partial impairments of other long-lived assets[61][65][85] | Impairment Type | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------------------------- | :------------------------------------------ | :---------------------------------------- | | Capitalized website development (Cost of Revenue) | $2,919 | $2,919 | | Capitalized hosting arrangements (Operating Expense) | $291 | $291 | | Capitalized internal-use software (Operating Expense) | $769 | $769 | | Capitalized website development (Operating Expense) | $1,882 | $1,882 | | Intangible assets (Operating Expense) | $6,624 | $6,624 | | Goodwill (Operating Expense) | $19,568 | $19,568 | | Right-of-use assets (Operating Expense) | $499 | $499 | | Total Impairments | $32,552 | $32,552 | - The impairment charge reduced the carrying value of CarOffer reporting unit goodwill to zero[85] 7. Accrued Expenses, Accrued Income Taxes, and Other Current Liabilities Accrued expenses, income taxes, and other current liabilities decreased by $4.1 million due to 2024 bonus payouts, partially offset by new accruals | Category | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :---------------------------------------------------- | :--------------------------------- | :----------------------------------- | | Accrued bonus | $11,159 | $17,377 | | Accrued commissions | $5,244 | $4,818 | | Other accrued expenses, accrued income taxes, and other current liabilities | $15,490 | $13,780 | | Total | $31,893 | $35,975 | - Accrued bonus decreased by $6.2 million, mainly due to the payout of the remaining 2024 bonus, partially offset by new accruals[88] 8. Debt The Company had no long-term debt as of June 30, 2025, maintaining a $400.0 million revolving credit facility with $390.6 million available capacity - No long-term debt outstanding as of June 30, 2025[89] - The 2022 Revolver provides $400.0 million in borrowing capacity, with $9.4 million in letters of credit outstanding as of June 30, 2025, reducing available capacity to $390.6 million[90][93] - The Company was in compliance with all covenants of the Credit Agreement as of June 30, 2025[92] 9. Commitments and Contingencies The Company's commitments include letters of credit and restricted cash, with no pending litigation expected to have a material adverse effect - As of June 30, 2025, $9.4 million in letters of credit were outstanding, associated with the Company's leases[98] - Restricted cash amounted to $2.1 million as of June 30, 2025, related to pass-through payments from dealers in the Digital Wholesale business[99] - The Company is not currently subject to any pending or threatened litigation expected to have a material adverse effect on its business or financial results[101] 10. Stock-based Compensation and Common Stock Share Repurchases Stock-based compensation expense decreased in 2025, and the 2025 Share Repurchase Program was increased to $350.0 million, with $184.5 million repurchased in H1 2025 | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Stock options | $65 | $555 | $136 | $1,146 | | Restricted stock units | $12,960 | $15,002 | $25,789 | $30,233 | | Total stock-based compensation expense | $13,025 | $15,557 | $25,925 | $31,379 | - Stock-based compensation expense decreased by $2.5 million (16.3%) for the three months and $5.5 million (17.4%) for the six months ended June 30, 2025, compared to the prior year[102] - The 2025 Share Repurchase Program was amended to increase authorization by $150.0 million to a total of $350.0 million and extended to July 31, 2026. During the six months ended June 30, 2025, the Company repurchased 5,930,439 shares for $184.5 million[103][106][137] 11. Earnings Per Share Basic and diluted net income per share improved significantly in 2025, turning positive from prior year losses, with equivalent EPS for Class A and B common stock | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $22,343 | $(68,721) | $61,388 | $(47,420) | | Basic EPS | $0.23 | $(0.66) | $0.61 | $(0.45) | | Diluted EPS | $0.22 | $(0.66) | $0.60 | $(0.45) | | Basic weighted-average shares | 98,889,893 | 103,827,661 | 100,980,676 | 105,501,236 | | Diluted weighted-average shares | 100,184,067 | 103,827,661 | 102,614,441 | 105,501,236 | - Basic and diluted EPS turned positive in 2025, reflecting a significant improvement from losses in 2024, primarily due to increased net income[112] - Weighted-average shares outstanding decreased in 2025 compared to 2024, partly due to common stock repurchases[112] 12. Income Taxes The Company recognized an income tax provision in 2025 due to profitability, with effective tax rates lower than statutory, and the OBBBA is expected to provide material cash tax savings | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Provision for (benefit from) income taxes | $5,065 | $(21,702) | $14,571 | $(13,318) | | Effective tax rate | 18.5% | 24.0% | 19.2% | 21.9% | - The effective tax rate for Q2 2025 (18.5%) and YTD 2025 (19.2%) was lower than the statutory 21% due to windfall tax benefits and R&D tax credits, partially offset by state/local taxes and executive compensation limitations[114] - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is expected to result in material cash tax savings over the next several years due to provisions like accelerated cost recovery and immediate R&D expensing[116][200] 13. Segment and Geographic Information The Company operates U.S. Marketplace and Digital Wholesale segments; U.S. Marketplace revenue and income increased, while Digital Wholesale declined due to the CarOffer wind-down | Segment Revenue | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | U.S. Marketplace | $202,652 | $180,052 | $397,880 | $353,040 | | Digital Wholesale | $12,035 | $23,525 | $24,958 | $52,102 | | Other | $19,346 | $15,115 | $36,353 | $29,346 | | Total | $234,033 | $218,692 | $459,191 | $434,488 | | Segment Income (Loss) from Operations | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | U.S. Marketplace | $58,762 | $42,043 | $108,543 | $76,260 | | Digital Wholesale | $(37,041) | $(138,158) | $(42,820) | $(148,498) | | Other | $3,123 | $2,531 | $4,876 | $4,938 | | Total | $24,844 | $(93,584) | $70,599 | $(67,300) | - U.S. Marketplace revenue increased 13% for both the three and six months ended June 30, 2025, while Digital Wholesale revenue decreased 49% and 52% respectively, reflecting the impact of the CarOffer wind-down[122][125][128][130] 14. Subsequent Events The Board decided to wind down CarOffer Transactions Business, expecting $14.0 million to $19.0 million in expenditures, and increased the 2025 Share Repurchase Program to $350.0 million - CarGurus will wind down the CarOffer Transactions Business, focusing on AI-powered inventory intelligence and consumer vehicle sourcing through 'Sell My Car - Top Dealer Offers'[134] - The wind-down is expected to incur total expenditures of $14.0 million to $19.0 million, mostly in H2 2025, with remaining payments in H1 2026[135] - The 2025 Share Repurchase Program was increased by $150.0 million to $350.0 million and extended to July 31, 2026. As of August 7, 2025, $165.5 million remained authorized for repurchase[137][138] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial condition and results, highlighting the CarOffer wind-down, key metrics, revenue, expenses, segment performance, liquidity, and critical accounting estimates Company Overview CarGurus is a multinational online automotive platform leveraging technology for vehicle transactions, operating across U.S., U.K., and Canada, with U.S. Marketplace and Digital Wholesale segments - CarGurus is an online automotive platform using proprietary technology, search algorithms, and data analytics to provide trust, transparency, and competitive pricing for vehicle shopping[142] - The Company operates CarGurus, Autolist, and PistonHeads brands, with CarOffer as a subsidiary, and has two reportable segments: U.S. Marketplace and Digital Wholesale[143][144] | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :------------- | :----------------------------------------- | :----------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Revenue | $234.0 | $218.7 | $459.2 | $434.5 | | Net income (loss) | $22.3 | $(68.7) | $61.4 | $(47.4) | | Adjusted EBITDA | $77.3 | $55.6 | $143.6 | $106.0 | Wind Down of CarOffer CarGurus' Board decided to wind down the CarOffer Transactions Business due to market ineffectiveness, pivoting to AI-powered inventory intelligence, with $14.0 million to $19.0 million in expected expenditures - The CarOffer Transactions Business is being wound down as it proved less effective in a volatile pricing environment, with dealers requiring more flexibility and automation[149] - The Company will focus on AI-powered inventory intelligence and consumer vehicle sourcing through 'Top Dealer Offers' instead of facilitating transactions[149] - Wind-down activities are expected to be substantially completed in H2 2025, incurring $14.0 million to $19.0 million in expenditures, mostly in H2 2025 and H1 2026[150] Key Business Metrics CarGurus monitors key metrics including unique users, sessions, paying dealers, transactions, and QARSD; GA4 adoption affects user/session comparisons, and Digital Wholesale transactions will cease | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------------------- | :------------------------------------------ | :---------------------------------------- | | Average Monthly Unique Users (Total) | 44,294 | 44,969 | | Average Monthly Sessions (Total) | 105,895 | 106,919 | - Due to the transition to Google Analytics 4 (GA4) effective July 1, 2024, comparable monthly unique user and session data for periods prior to June 30, 2024, is unavailable[153][155][157] | Metric | As of June 30, 2025 | As of June 30, 2024 | | :-------------------------- | :------------------ | :------------------ | | Number of Paying Dealers (Total) | 33,095 | 31,352 | | U.S. QARSD | $7,533 | $6,942 | | International QARSD | $2,309 | $1,935 | | Consolidated QARSD | $6,349 | $5,848 | | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Transactions | 3,955 | 8,778 | 9,164 | 19,080 | - Transactions in the Digital Wholesale segment decreased by 55% for the three months and 52% for the six months ended June 30, 2025, compared to the prior year, and are expected to cease over time due to the CarOffer wind-down[160][161] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Adjusted EBITDA | $77,296 | $55,556 | $143,592 | $105,954 | - Adjusted EBITDA increased by 39.1% for the three months and 35.5% for the six months ended June 30, 2025, compared to the prior year, indicating improved operating performance[170] Components of Unaudited Condensed Consolidated Income Statements This section details the Company's revenue streams, cost of revenue, and operating expenses, explaining their composition, generation, and influencing factors - Marketplace revenue is primarily derived from dealer subscriptions (Listings, RPM, Digital Retail, Top Dealer Offers), advertising from auto manufacturers, and partnerships with financing companies[171][172][175][177][178][181] - Wholesale revenue comes from transaction fees on Dealer-to-Dealer and other marketplace vehicle sales, as well as inspection and transportation services. Product revenue is from the sale of vehicles acquired through IMCO transactions and arbitration[171][182][183][185] - Cost of revenue includes expenses for supporting marketplace services, vehicle transportation/inspection, net losses on guarantees, and personnel for Digital Wholesale transactions. Product cost of revenue includes vehicle cost and transportation for IMCO and arbitration sales[187][189][191] - Operating expenses include sales and marketing (personnel, advertising), product/technology/development (R&D personnel, software), general and administrative (executive, finance, legal, professional fees), impairments (CarOffer reporting unit), and depreciation/amortization[192][193][194][195][197] Results of Operations The Company experienced 7% Q2 and 6% YTD revenue growth driven by marketplace, offset by Digital Wholesale decline; net income improved substantially from lower impairment expenses | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change Amount (in thousands) | Change % | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------------------------- | :------- | | Marketplace Revenue | $221,998 | $195,167 | $26,831 | 14% | | Wholesale Revenue | $6,275 | $13,119 | $(6,844) | (52)% | | Product Revenue | $5,760 | $10,406 | $(4,646) | (45)% | | Total Revenue | $234,033 | $218,692 | $15,341 | 7% | | Total Cost of Revenue | $29,651 | $36,248 | $(6,597) | (18)% | | Impairments | $29,633 | $127,475 | $(97,842) | (77)% | | Net Income (Loss) | $22,343 | $(68,721) | $91,064 | NM | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change Amount (in thousands) | Change % | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------------------------- | :------- | | Marketplace Revenue | $434,233 | $382,386 | $51,847 | 14% | | Wholesale Revenue | $14,022 | $29,244 | $(15,222) | (52)% | | Product Revenue | $10,936 | $22,858 | $(11,922) | (52)% | | Total Revenue | $459,191 | $434,488 | $24,703 | 6% | | Total Cost of Revenue | $55,102 | $77,083 | $(21,981) | (29)% | | Impairments | $29,633 | $127,475 | $(97,842) | (77)% | | Net Income (Loss) | $61,388 | $(47,420) | $108,808 | NM | - Marketplace revenue growth was driven by increases in paying dealer count, QARSD, and advertising spend. Digital Wholesale revenue decline was primarily due to a 55% decrease in Transactions for Q2 2025 and 52% for YTD 2025[205][206][207][226][227][228] - U.S. Marketplace segment income from operations increased by 40% for Q2 2025 and 42% for YTD 2025. Digital Wholesale segment loss from operations decreased by 73% for Q2 2025 and 71% for YTD 2025, primarily due to lower impairment charges compared to the prior year[223][224][244][246] Liquidity and Capital Resources The Company's liquidity stems from $231.2 million cash and $390.6 million available credit; operating activities generated $141.0 million in H1 2025, while financing used $200.5 million due to repurchases - As of June 30, 2025, the Company had $231.2 million in cash and cash equivalents and $390.6 million in available borrowing capacity under its $400.0 million revolving credit facility[247][250] | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $140,998 | $123,561 | | Net cash used in investing activities | $(15,476) | $(44,373) | | Net cash used in financing activities | $(200,537) | $(153,975) | | Net decrease in cash, cash equivalents, and restricted cash | $(72,880) | $(75,561) | - Net cash used in financing activities increased by $46.6 million YoY, primarily due to $184.6 million in common stock repurchases in H1 2025[261] - The wind-down of CarOffer is expected to incur $14.0 million to $19.0 million in expenditures, impacting future liquidity[255] Critical Accounting Estimates The Company's critical accounting estimates involve revenue recognition, asset impairment, development cost capitalization, and intangible asset valuation, with a Q2 2025 CarOffer impairment charge - Critical accounting estimates include sales allowance, variable consideration in revenue recognition, impairment and useful lives of long-lived assets, capitalization of website development, internal-use software, and hosting arrangements, and valuation/recoverability of intangible assets and goodwill[271] - An interim impairment test for the CarOffer reporting unit in Q2 2025, triggered by low transaction volume and delayed growth, resulted in a partial impairment charge[272] Recently Issued Accounting Pronouncements Details on recently issued accounting pronouncements are provided in Note 2 of the Unaudited Condensed Consolidated Financial Statements - Refer to Note 2 for details on recently issued accounting pronouncements, including ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures), which the Company is currently evaluating[274][45][46] Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to market risks from interest rates, inflation, and foreign currency exchange rates; past impacts have been immaterial, but these risks are continuously monitored - The Company's primary market risks are interest rate risk (related to its $400.0 million revolving credit facility and cash equivalents), inflation risk, and foreign currency exchange risk (British pound, Euro, Canadian dollar)[276][277][278][282] - Interest rate fluctuations and foreign currency exchange rate changes have not had a material effect on the Company's business, financial condition, or results of operations for the periods presented[279][282] - Inflation has not materially affected the business, but potential future inflationary pressures could impact costs and vehicle purchasing behavior[281] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the period - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of June 30, 2025[283][284] - No material changes in internal control over financial reporting occurred during the period covered by the Quarterly Report[285] PART II. OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, equity security sales, other information, and exhibits Item 1. Legal Proceedings The Company is not currently subject to any pending or threatened litigation expected to have a material adverse effect on its business or financial results - The Company is not currently involved in any legal proceedings or claims that are believed to have a material adverse effect on its business or financial results[288] Item 1A. Risk Factors The CarOffer wind-down poses significant risks, including adverse business impacts and $14.0 million to $19.0 million in expenditures; future asset impairment and macroeconomic factors also present risks - The wind-down of CarOffer, including its transaction business, may adversely impact the Company's business, financial performance, and reputation, with expected expenditures of $14.0 million to $19.0 million[290][291] - Risks associated with the CarOffer wind-down include inability to retain qualified personnel, operational disruptions, diversion of management attention, exposure to unknown liabilities, and potential failure to realize anticipated benefits[294] - Goodwill, intangible assets, and other assets are subject to future impairment, as evidenced by the $32.6 million impairment charge related to CarOffer in Q2 2025, which could materially affect financial results[296] - Tariffs, trade restrictions, and other changes in trade policy could lead to economic downturns, impacting consumer demand for automobiles and adversely affecting the Company's business[297] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company had no unregistered equity sales, repurchasing 11,004 Class A shares for $329,000 in Q2 2025; $15.5 million remained authorized under the program, later increased to $350.0 million - No unregistered sales of equity securities occurred[299] | Period | Total Number of Shares of Common Stock Purchased | Weighted Average Price Paid per Share of Common Stock | | :----------------------------------- | :--------------------------------------------- | :------------------------------------------ | | April 1, 2025 through April 30, 2025 | 6,423 | $29.15 | | May 1, 2025 through May 31, 2025 | 600 | $30.94 | | June 1, 2025 through June 30, 2025 | 3,981 | $30.92 | | Total (Q2 2025) | 11,004 | $29.89 | - As of June 30, 2025, $15.5 million remained authorized under the Original 2025 Share Repurchase Program, which was subsequently amended to $350.0 million[106][301] Item 5. Other Information Jennifer Hanson, Chief People Officer, adopted a Rule 10b5-1 trading arrangement on June 4, 2025, to sell up to 27,978 Class A shares by July 6, 2026, with no other similar arrangements by officers or directors - Jennifer Hanson, Chief People Officer, adopted a Rule 10b5-1 trading arrangement on June 4, 2025, to sell up to 27,978 shares of Class A common stock by July 6, 2026[302] - The arrangement includes shares to be received upon future vesting of equity awards, net of taxes[305] Item 6. Exhibits This section lists exhibits filed or incorporated by reference into the Quarterly Report, including offer letters, relocation agreements, certifications, and XBRL documents - Exhibits include offer letters, relocation agreements, certifications (e.g., 31.1, 32.1), and Inline XBRL documents[307] Signatures The report is duly signed on behalf of CarGurus, Inc. by Jason Trevisan, Chief Executive Officer, on August 7, 2025 - The report was signed by Jason Trevisan, Chief Executive Officer, on August 7, 2025[312]