CarGurus(US:CARG)2022-05-10 03:53Financial Data and Key Metrics Changes - Total first quarter revenue was $430.6 million, up 151% year-over-year and nearly $21 million ahead of the high-end of guidance [36] - Marketplace revenue was $163.3 million for the first quarter, up 2% from the prior quarter and up 5% from $155.8 million in the prior year [36] - Wholesale revenue was $91 million for the first quarter, up 559% from $13.8 million in the prior year and grew 10% compared to the previous quarter [37] - Product revenue was $176.3 million for the first quarter, up 9,896% from $1.8 million in the prior year and up 84% from the previous quarter [38] - Non-GAAP gross margin was 44%, down from 59% in the prior quarter and 86% in the year-ago quarter [40] - Non-GAAP operating income was $62.2 million, representing a margin of 14% [43] - First quarter GAAP net income attributable to CarGurus Inc. totaled $19.9 million [45] Business Line Data and Key Metrics Changes - CarOffer revenue was $267 million, growing 50% quarter-over-quarter and over 1600% year-over-year [10] - Instant Max Cash Offer generated approximately $162 million, exceeding the high end of forecasted guidance for the quarter and growing 92% quarter-over-quarter [15] - Dealer-to-dealer business generated $105 million in revenue, growing approximately 12% quarter-over-quarter and over 575% year-over-year [12] - U.S. QARSD grew approximately 5% year-over-year to $5,713 [18] - Internationally, QARSD grew by 40% to $1,556 year-over-year [20] Market Data and Key Metrics Changes - The dealer base expanded to 10,850 enrolled dealer rooftops at the end of Q1, with 1,750 rooftops added in the past quarter [10] - Internationally, the company ended Q1 with 6,648 paying dealers, down modestly quarter-over-quarter [20] - The company expanded its coverage to five additional states, now covering approximately 80% of the U.S. [15] Company Strategy and Development Direction - The company aims to create an end-to-end transaction-enabled marketplace for consumers and dealers [9][31] - Focus on activating digital deals and expanding into new geographies for Instant Max Cash Offer [8] - Continuous investment in technology and marketing to drive long-term growth [48] - Introduction of Digital Deal to enhance the car buying process for consumers [24][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic challenges, including semiconductor chip shortages and inflation affecting consumer demand [7][12] - The company remains optimistic about growth opportunities in the dealer market and the efficiency of the CarOffer model [14] - Future revenue guidance for Q2 is expected to be in the range of $480 million to $510 million [48] Other Important Information - The company generated $93.1 million in cash from operations in the first quarter [47] - Non-GAAP free cash flow was $89.3 million, including capital expenditures of $3.7 million [47] - The company ended the first quarter with $375 million in cash and investments, an increase of $53.1 million from the end of the fourth quarter [46] Q&A Session Summary Question: Can you discuss CarOffer's average gross merchandise sales per dealership and its impact on dealer behavior? - Management noted that wholesale pricing volatility has made dealers cautious about buying and selling, impacting overall engagement [50][52] Question: How does the moderation in used car demand affect CarGurus' marketplace business? - Management believes that as consumer demand wanes, dealers will need to market more aggressively, which could benefit CarGurus [56][58] Question: Can you elaborate on the decline in CarOffer's non-GAAP gross profit margin? - Management explained that price volatility and increased transportation costs contributed to the compression in gross margin [60][63] Question: What is the outlook for the wholesale dealer-to-dealer business as new inventory comes online? - Management indicated that the business will remain sensitive to wholesale prices and that uncertainty among dealers is a key factor [70][72] Question: How is the rental car segment performing in the wholesale dealer-to-dealer business? - Management expressed confidence that the rental car segment is a durable customer base and is expected to continue performing well [76][78]