CarGurus(CARG) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2024 was $219 million, down 9% year-over-year, primarily due to lower wholesale and product volumes, partially offset by a double-digit expansion in the marketplace business [23] - Non-GAAP consolidated adjusted EBITDA grew 23% year-over-year to$ 55.6 million, with a margin expansion of approximately 650 basis points to 25% [27] - Non-GAAP gross profit was $183 million, up 8% year-over-year, with a gross margin of 84%, an increase from 71% in the prior year [26] Business Line Data and Key Metrics Changes - Marketplace revenue was$ 195 million for Q2 2024, up 14% year-over-year, driven by subscription-based listings revenue growth of $23 million [24] - Marketplace adjusted EBITDA grew 49% year-over-year to approximately$ 61 million, with margins expanding due to revenue growth and operating cost leverage [27] - Digital wholesale revenue was $13 million, down 59% year-over-year, reflecting a decline in dealer-to-dealer transaction volume [25] Market Data and Key Metrics Changes - International business revenue grew 21% year-over-year, driven by an expansion in the dealer base and increased traffic [25] - The U.S. customer base is increasingly shifting towards larger dealers with higher advertising budgets, leading to sustained revenue growth [7] Company Strategy and Development Direction - The company is focused on enhancing its subscription-based marketplace and deepening partnerships with dealers by integrating services into their daily operations [5] - Continued investment in product innovation and data analytics is aimed at improving dealer performance and consumer experience [12][14] - The company aims to build an end-to-end transaction-enabled platform to support dealers and consumers throughout the car ownership journey [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the marketplace's growth momentum and the effectiveness of their product offerings in driving dealer engagement [22] - The company anticipates continued revenue growth in the marketplace segment for Q3 2024, with guidance of$ 199 million to $204 million [30] - Management acknowledged challenges in the digital wholesale segment but remains committed to rebuilding and integrating wholesale and retail insights [21] Other Important Information - A non-cash goodwill impairment charge of$ 127 million was recognized related to the CarOffer business, which does not impact cash flow or ongoing operations [28] - The company ended Q2 2024 with $216 million in cash and cash equivalents, a decrease of$ 30 million from the previous quarter [29] Q&A Session Summary Question: Impact of CDK outage on revenue and EBITDA - Management reported no impact from the CDK outage on revenue or billing for Q2 and does not anticipate any carryover impact for Q3 [33] Question: Status of CarOffer and future volume ramp-up - Management indicated that restructuring the sales organization and improving product integration are ongoing, with no specific timeline provided for volume ramp-up [34] Question: Insights on higher adoption of add-on products - Management noted that increased adoption is due to better product insights and education for dealers, leading to improved performance on the platform [37][38] Question: Drivers of pricing momentum from dealers - Management highlighted that higher dealer sign-ups and upgrades to premium tiers are contributing to pricing momentum, alongside a growing suite of non-lead value products [44] Question: OEM advertising revenue clarity - Management expressed pride in the growth of OEM advertising revenue, driven by increased new vehicle inventory and direct advertising requests from OEMs [63]