Core Viewpoint - CarGurus Inc. is considered one of the most undervalued NASDAQ stocks, despite a recent target price cut by Oppenheimer from $40 to $38, maintaining an Outperform rating due to its strong fundamentals and resilience against AI disruption [1]. Group 1: Target Price and Valuation - Oppenheimer reduced its target price on CarGurus by 5.0% to $38, citing the impact of AI disruption on valuation multiples in the tech sector, which has contributed to an approximate 18% decline in CarGurus' stock price year to date [1]. - The firm believes that CarGurus' proprietary valuation data, strong dealer relationships, and AI adoption will protect it from the negative effects of large language model (LLM) disruptions, justifying the overweight rating [1]. Group 2: Product Development and Revenue Guidance - Oppenheimer sees potential upside for CarGurus due to new products and features like PriceVantage, New Car Exposure, CG Discover, and Dealership Mode, which are expected to leverage the company's scale and lead to high incremental margins [2]. - Management's revenue guidance for 2026, released alongside Q4 2025 earnings, indicates that subscription upgrades and increased new-product attach rates will enhance the U.S. quarterly average revenue per subscribing dealer (QARSD) pricing [3]. Group 3: Company Overview - CarGurus Inc. operates as an online automotive platform for buying and selling vehicles, featuring a car listings marketplace and digital retail solutions, including the CarOffer digital wholesale platform [4]. - The company operates through segments such as the customer-facing U.S. Marketplace and the Digital Wholesale division, which provides dealer-to-dealer services and products sold on the CarOffer platform [4].

Financial Data and Key Metrics Changes - Revenue from continuing operations grew 14% year-over-year for the full year 2025, marking the second consecutive year of mid-teens growth [4][21] - Adjusted EBITDA from continuing operations increased by 25% year-over-year [4][23] - Fourth quarter revenue grew 15% year-over-year to $241 million, driven by strength in subscription-based listings revenue and international business [21] - Full-year non-GAAP net income per diluted share attributable to common stockholders was $2.28, up 31% year-over-year [25] Business Line Data and Key Metrics Changes - Consolidated QARSD grew 8% year-over-year, with global paying dealer count increasing by 2,399 [7][21] - Add-on product adoption rose nearly 25% year-over-year, indicating strong engagement and platform usage [7] - International revenue grew 27% year-over-year, with fourth quarter revenue up 32% year-over-year [22] Market Data and Key Metrics Changes - U.S. QARSD grew 8% year-over-year in the fourth quarter [21] - International QARSD grew 16% year-over-year in the fourth quarter [22] - The dealer count in international markets surged 14% year-over-year to 8,360 dealers [22] Company Strategy and Development Direction - The company aims to expand its suite of data-driven solutions across dealer workflows, enhancing profitability for dealers [7] - Focus on product innovation, with more new products launched in 2025 than in any prior year, embedding data and intelligence into dealer workflows [5][19] - The strategy includes moving into software and data across dealer workflow verticals, effectively doubling the total addressable market [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth rates due to strong visibility and no customer concentration [32] - The company anticipates continued investment in AI-driven innovation and product development, with expectations for new products to significantly contribute to revenue growth [19][35] - The outlook for 2026 includes revenue growth expectations of 10%-13% year-over-year, with a focus on long-term growth and healthy margins [28] Other Important Information - The company completed the wind down of CarOffer, presenting its financial results as discontinued operations [20] - A new $250 million share repurchase program has been authorized, reflecting the company's commitment to returning value to shareholders [26] Q&A Session Summary Question: Visibility of growth rate and new products' contribution - Management highlighted that strong growth is driven by QARSD and new dealer additions, with new products expected to enhance long-term growth [32][34] Question: Inclusion of Price Vantage in revenue guidance - Price Vantage and New Car Exposure are included in the revenue guidance, with significant potential in non-marketing verticals [39][40] Question: Margin outlook for 2026 - The company aims to optimize for long-term growth while maintaining healthy margins, with investments focused on product development and international expansion [41][49] Question: Contribution of dealer count and QARSD to revenue outlook - Management noted that while they do not break out revenue contributions, there is a relationship between dealer count growth and QARSD [55] Question: Factors driving improved dealer satisfaction and retention - Enhanced ROI for dealers, lead growth, and new software tools have contributed to record retention rates [57][59] Question: Traffic growth and consumer experience improvements - Investments in AI and brand campaigns have driven traffic growth, with a focus on enhancing the consumer experience [68]

Financial Data and Key Metrics Changes - Revenue from continuing operations grew 14% year-over-year for the full year 2025, marking the second consecutive year of mid-teens growth [4][21] - Adjusted EBITDA from continuing operations increased by 25% year-over-year [4][23] - Fourth quarter revenue grew 15% year-over-year to $241 million, driven by strength in subscription-based listings revenue and international business [21] - Full-year non-GAAP net income per diluted share attributable to common stockholders was $2.28, up 31% year-over-year [25] Business Line Data and Key Metrics Changes - Consolidated CarSid grew 8% year-over-year, with global paying dealer count increasing by 2,399 [7][21] - Add-on product adoption rose nearly 25% year-over-year, indicating strong engagement and platform usage [7] - International revenue grew 27% year-over-year, with fourth quarter revenue up 32% year-over-year [22] Market Data and Key Metrics Changes - U.S. CarSid grew 8% year-over-year, with 1,357 new paying U.S. dealers added [21] - International dealer count growth surged 14% year-over-year to 8,360 dealers [22] - CarGurus influenced 55% of all attributed vehicle sales in 2025, reinforcing its market position [10] Company Strategy and Development Direction - The company aims to expand its suite of data-driven solutions across dealer workflows, enhancing profitability for dealers [7] - Focus on product innovation, with more new products launched in 2025 than in any prior year, including Price Vantage and CG Discover [5][19] - The strategy includes leveraging AI-driven innovation to enhance product velocity and differentiation [4][19] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth rates due to strong visibility and no customer concentration [32] - The company anticipates revenue growth of 10%-13% year-over-year for 2026, with continued investment in product and technology [28] - Management highlighted the importance of trust and clarity in consumer decision-making, especially in the evolving AI landscape [18] Other Important Information - The company completed the wind down of CarOffer, presenting its financial results as discontinued operations [20] - A new $250 million share repurchase program was authorized, reflecting the company's commitment to returning value to shareholders [26] Q&A Session Summary Question: Visibility of growth rate and new products' contribution - Management indicated strong growth visibility due to effective execution on growth levers and new product introductions, which are expected to enhance long-term growth [32][34] Question: Inclusion of Price Vantage in revenue guidance - Price Vantage and New Car Exposure are included in the revenue guidance as they have been launched and are part of the operating plan [39] Question: Margin outlook and investment strategy - Management emphasized a focus on long-term growth and healthy margins, indicating that the 2026 margin guidance is not a new normal but rather a strategic investment phase [41][42] Question: Contribution of dealer count and CarSid to revenue - Management did not break out revenue outlook between CarSid and dealer count but noted the relationship between the two metrics [54] Question: Factors driving improved dealer satisfaction and retention - Improved dealer satisfaction is attributed to clear ROI, lead growth, and the introduction of new software and data tools that enhance profitability [57][59] Question: Traffic growth and consumer engagement - Traffic growth is driven by enhanced consumer experience and broader reach through marketing campaigns, including the Big Deal campaign [68]

Financial Data and Key Metrics Changes - Revenue from continuing operations grew 14% year-over-year for the full year 2025, marking the second consecutive year of mid-teens growth [3][19] - Adjusted EBITDA from continuing operations increased by 25% year-over-year [3][22] - Fourth quarter revenue grew 15% year-over-year to $241 million, driven by strength in subscription-based listings revenue and international business [19][20] - Full-year 2025 non-GAAP net income per diluted share attributable to common stockholders was $2.28, up 31% year-over-year [24] Business Line Data and Key Metrics Changes - Consolidated CarSid grew 8% year-over-year, with global paying dealer count increasing by 2,399 [5][19] - Add-on product adoption rose nearly 25% year-over-year, indicating strong engagement and platform usage [5] - Digital Deal leads with high-value actions increased 78% year-over-year, reflecting deeper shopper progression into transactions [12] Market Data and Key Metrics Changes - International revenue grew 27% year-over-year, with fourth quarter revenue up 32% year-over-year [20] - International dealer count grew 14% year-over-year to 8,360 dealers [20] Company Strategy and Development Direction - The company aims to expand its suite of data-driven solutions across dealer workflows, enhancing profitability for dealers [5][6] - Focus on product innovation, with more new products launched in 2025 than in any prior year, embedding data and intelligence into dealer workflows [4][17] - The strategy includes leveraging AI-driven innovation to enhance consumer engagement and streamline transactions [3][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth rates due to strong visibility and a diversified dealer base [31] - The company anticipates continued investment in product and technology to support long-term growth, with a focus on maintaining healthy margins [39][40] - Management highlighted the importance of trust and confidence in the consumer journey, which shapes their investment strategy [76] Other Important Information - The company completed the wind down of CarOffer, presenting its financial results as discontinued operations [18] - A new $250 million share repurchase program was authorized, emphasizing the commitment to return value to shareholders [25] Q&A Session Summary Question: Visibility of growth rate and new products' contribution - Management indicated strong growth visibility due to effective execution on growth levers and new product introductions, which are expected to enhance long-term growth [31][34] Question: Inclusion of Price Vantage in revenue guidance - Price Vantage and New Car Exposure are included in the revenue guidance as they have been launched and are expected to contribute to growth [37] Question: Margin outlook and investment strategy - Management clarified that the margin outlook reflects a balance between investing for growth and maintaining healthy margins, with a focus on long-term sustainability [39][40] Question: Factors driving improved dealer satisfaction and retention - Improved dealer satisfaction is attributed to clear ROI from lead growth and the introduction of new software and data tools that enhance profitability [56] Question: Traffic growth and consumer engagement - Traffic growth is driven by enhanced consumer experience and broader reach through marketing campaigns, leading to increased app downloads and active users [66]

Q4 and Full Year 2025 Earnings Presentation February 19, 2026 Cautionary Note Regarding Forward - Looking Statements This presentation includes forward - looking statements . Other than statements of historical facts, all statements contained in this presentation, including statements regarding our future financial and operating results; our first quarter and full year 2026 financial and business performance, including guidance ; our plans to focus on technology and analytics that will enable smarter sourci ...

Core Insights - CarGurus reported Q3 CY2025 results that exceeded market revenue expectations, with sales increasing by 3.2% year-on-year to $238.7 million, and non-GAAP profit of $0.57 per share, which was 3.7% above analysts' consensus estimates [1][3][5] Financial Performance - Revenue for Q3 CY2025 was $238.7 million, surpassing analyst estimates of $235 million, reflecting a 3.2% year-on-year growth and a 1.6% beat [5] - Adjusted EPS was $0.57, exceeding analyst estimates of $0.55 by 3.7% [5] - Adjusted EBITDA reached $78.67 million, with a margin of 33%, beating analyst estimates of $76.39 million [5] - Operating margin improved to 22.9%, up from 11.9% in the same quarter last year [5] - The number of paying dealers increased to 33,673, up by 1,989 year-on-year [5] - Market capitalization stands at $3.18 billion [5] Future Outlook - Guidance for Q4 CY2025 includes revenue of $238.5 million at the midpoint, which aligns with analyst expectations, and adjusted EPS guidance of $0.64, above analyst estimates of $0.61 [5] - EBITDA guidance for Q4 CY2025 is set at $87 million at the midpoint, exceeding analyst estimates of $84.27 million [5] - Management emphasized ongoing investments in AI-driven product innovation and deeper integration of software across dealer workflows as key to future performance [4] - The company aims to capture greater dealer wallet share and drive more efficient transactions through new offerings like PriceVantage and CG Discover [4] - While management is optimistic about sustaining double-digit growth rates, they acknowledged potential macroeconomic headwinds and changing consumer sentiment [4]

Core Insights - CarGurus aims to double its total addressable market by introducing AI-powered products beyond its current automotive shopping platform [1][2] - The company is expanding its addressable market to include $3.5 billion spent by U.S. dealers on marketplaces and an additional $4 billion on software and data products [2] Product Development - CarGurus has launched PriceVantage, a machine learning-based pricing solution for dealers that utilizes real-time consumer demand data [3][4] - PriceVantage helps dealers enhance pricing strategies, improve turn times, and increase profitability by providing data-driven recommendations [4] Performance Metrics - Early beta results for PriceVantage show that engaged dealers experienced a 5X improvement in turn-time compared to competitors, with price-drop recommendations leading to a 68% median increase in daily vehicle detail page views [5] - 77% of the recommendations from PriceVantage met or exceeded predicted sales velocity outcomes [5] Consumer-Focused Innovations - CarGurus introduced CG Discover, a generative AI-powered shopping assistant that personalizes vehicle recommendations based on consumer needs, with traffic to this tool tripling quarter over quarter [6] - Another tool, Dealership Mode, provides real-time support to consumers at dealerships, enhancing their experience by offering vehicle pricing, ratings, and financing calculators [6][7] Market Opportunity - Research indicates that 80% of consumers are open to using AI in their car-buying journey, highlighting significant growth potential for CarGurus' AI initiatives [6]

Financial Data and Key Metrics Changes - In Q3 2025, consolidated revenue was $239 million, up 3% year-over-year [28] - Marketplace revenue was $232 million, reflecting a 14% year-over-year increase, driven by subscription-based listings revenue [29] - Non-GAAP gross profit was $214 million, an 11% increase year-over-year, with a non-GAAP gross margin of 90%, up about 650 basis points [30] - Adjusted EBITDA was approximately $79 million, up 21% year-over-year, with an adjusted EBITDA margin of 33%, up about 490 basis points [31] - Non-GAAP diluted earnings per share was $0.57, a 30% increase year-over-year [34] Business Line Data and Key Metrics Changes - U.S. CarSID grew 8% year-over-year, with 1,182 new paying U.S. dealers added [29] - International operations saw revenue growth of 27% year-over-year, with international CarSID up 15% year-over-year [29] - Digital Deal adoption surpassed 12,500 dealers, with significant growth in high-value actions such as financing applications and appointment scheduling [21] Market Data and Key Metrics Changes - The international market is showing strong growth, with CarGurus adding over 800 customers in Canada and the U.K. [54] - The company is maintaining lower pricing in international markets to build market share before increasing prices over time [54] Company Strategy and Development Direction - The company is focused on expanding its suite of data-driven solutions across dealer workflows to enhance profitability [11] - CarGurus aims to deepen monetization through scalable software and data solutions, expanding its addressable market significantly [9][10] - The strategy includes enhancing consumer engagement through innovations like CG Discover and Dealership Mode, which aim to streamline the car buying journey [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength and growth of the marketplace, with expectations for continued investment in AI-centric innovations [37] - The company anticipates fourth-quarter marketplace revenue to be between $236 million and $241 million, representing a year-over-year increase of 12% to 15% [35] - Management highlighted the importance of maintaining a balance between innovation and disciplined execution to ensure sustainable growth [80] Other Important Information - The company is winding down the CarOffer transactions business, which will be accounted for as a discontinued operation in Q4 [30] - Total wind-down-related charges are expected to be in the range of $13 million to $15 million, lower than previously estimated [33] Q&A Session Summary Question: What is the trend regarding dealers using CarGurus? - Management noted that dealers are using fewer marketplace partners, with the average dropping from three to under two, indicating consolidation towards those offering the best ROI [41] Question: How is the ROI for Digital Deal perceived by dealers? - Management indicated that more consumers are engaging in high-value actions, which drives higher quality leads and further ROI for dealers, suggesting potential for future pricing power [45] Question: What are the growth prospects in international markets? - Management expressed pride in international growth, emphasizing the strategy of maintaining lower prices to build market share before increasing them over time [54] Question: How does CarSID growth relate to dealer rooftops? - Management explained that CarSID growth is mathematically related to the number of rooftops, with recent growth in rooftops acting as a headwind to CarSID growth [67] Question: What insights are generated from Dealership Mode? - Management highlighted that Dealership Mode provides valuable insights into consumer behavior at dealerships, enhancing the understanding of customer engagement [82]

Financial Data and Key Metrics Changes - In Q3 2025, consolidated revenue was $239 million, up 3% year-over-year [28] - Marketplace revenue was $232 million, reflecting a 14% year-over-year increase, driven by subscription-based listings revenue [29] - Non-GAAP gross profit was $214 million, up 11% year-over-year, with a non-GAAP gross margin of 90% [30] - Adjusted EBITDA was approximately $79 million, up 21% year-over-year, with an Adjusted EBITDA margin of 33% [31] - Non-GAAP diluted earnings per share was $0.57, reflecting a 30% year-over-year increase [34] Business Line Data and Key Metrics Changes - U.S. CarSID grew 8% year-over-year, with 1,182 new paying U.S. dealers added [29] - International operations saw revenue growth of 27% year-over-year, with international CarSID up 15% year-over-year [29] - Digital Deal adoption surpassed 12,500 dealers, with significant growth in high-value actions such as financing applications and deposits [21] Market Data and Key Metrics Changes - The international market is showing strong growth, with CarGurus adding over 800 customers in Canada and the UK [53] - The company is maintaining lower pricing in international markets to build market share before increasing prices [52] Company Strategy and Development Direction - The company is focused on expanding its suite of data-driven solutions across dealer workflows to enhance profitability [11] - CarGurus aims to deepen monetization through scalable software and data solutions, expanding its addressable market significantly [9][10] - The strategy includes leveraging AI capabilities to enhance dealer performance and consumer experience [24][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth of the marketplace and the early results of new product investments [36] - The company anticipates continued growth in both U.S. and international markets, with a focus on innovation and AI-driven solutions [37] - Management highlighted the importance of building trust and transparency in the consumer journey to enhance engagement [10][17] Other Important Information - The company is winding down the CarOffer transactions business, which is expected to impact revenue from digital wholesale going forward [30] - Cash and cash equivalents at the end of the quarter were $179 million, down from the previous quarter due to share repurchases [34] Q&A Session Summary Question: What is the trend regarding dealers using CarGurus? - Management noted that dealers are using fewer marketplace partners, with the average dropping from three to under two, indicating consolidation towards those offering better ROI [41] Question: How is the ROI for Digital Deal perceived by dealers? - Management indicated that more consumers are engaging in high-value actions, which drives higher quality leads and further ROI for dealers, presenting an opportunity for future pricing power [44][45] Question: What is the growth potential in international markets? - Management expressed pride in international growth and indicated that they are strategically keeping prices lower to build market share before increasing them [52][54] Question: How does CarSID growth relate to dealer rooftops? - Management explained that CarSID growth is influenced by the number of rooftops, with a natural headwind when rooftops grow faster than CarSID [66] Question: What insights are gained from CG Discover? - Management highlighted that CG Discover provides a conversational experience that enhances user engagement and leads to higher conversion rates [72][75]

Financial Data and Key Metrics Changes - In Q3 2025, consolidated revenue was $239 million, up 3% year-over-year [27] - Marketplace revenue was $232 million, reflecting a 14% year-over-year increase, driven by subscription-based listings revenue [28] - Non-GAAP gross profit was $214 million, up 11% year-over-year, with a non-GAAP gross margin of 90%, an increase of about 650 basis points [29] - Adjusted EBITDA was approximately $79 million, up 21% year-over-year, with an adjusted EBITDA margin of 33%, up about 490 basis points [30] - Non-GAAP diluted earnings per share was $0.57, reflecting a 30% year-over-year increase [32] Business Line Data and Key Metrics Changes - U.S. CarSID grew 8% year-over-year, with 1,182 new paying U.S. dealers added, marking the seventh consecutive quarter of positive net dealer adds [28] - International operations saw revenue growth of 27% year-over-year, with international CarSID up 15% year-over-year [28] - Wholesale revenue was approximately $2 million, and product revenue was roughly $5 million, as the company ceased facilitating transactions in the CarOffer business [29] Market Data and Key Metrics Changes - The international market is showing strong growth, with a focus on building market share while maintaining competitive pricing [42][44] - The company is experiencing a trend of dealers using fewer marketplace partners, indicating consolidation in the market [37] Company Strategy and Development Direction - The company is expanding its suite of data-driven solutions across dealer workflows to enhance profitability [10] - New product innovations include Price Vantage, a machine learning-based pricing tool, and CG Discover, a GenAI-powered shopping assistant [10][16] - The strategy focuses on deepening monetization across four key pillars: inventory, marketing, conversion, and data [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength and growth of the marketplace, with expectations for continued investment in AI-centric innovations [35] - The company anticipates capturing more dealer wallet share and deepening consumer engagement to support long-term growth [27][35] - Management noted that the combination of proprietary data and machine learning positions the company for new levels of intelligence and efficiency [26] Other Important Information - The company is winding down the CarOffer transactions business, which is expected to be accounted for as a discontinued operation in Q4 [29] - The company has approximately $55 million remaining on its share repurchase authorization [32] Q&A Session Summary Question: What is the trend regarding dealers using CarGurus? - Management noted that dealers are using fewer marketplace partners, with the average dropping from three to under two, indicating consolidation [37] Question: How is the ROI for Digital Deal perceived by dealers? - Management highlighted that 80% of consumers want to engage more online, and the Digital Deal program is packaged into premium tiers, driving higher quality leads and ROI for dealers [39] Question: What are the growth prospects in international markets? - Management expressed pride in international growth, emphasizing the importance of lead quality and competitive pricing to attract dealers [42][44] Question: How does CarSID growth relate to dealer rooftops? - Management explained that CarSID growth is influenced by the number of rooftops, with a natural headwind when rooftops grow faster than CarSID [50] Question: What insights are generated from Dealership Mode? - Management indicated that Dealership Mode provides valuable consumer insights, helping dealers understand customer interests and financing needs [58][59]