CarGurus(CARG) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter revenue was $225 million, up 4% year over year, just below the midpoint of guidance range [28] - Marketplace revenue was $212 million for the first quarter, up 13% year over year, driven by strength in subscription-based listings revenue and OEM advertising revenue [28][30] - Non-GAAP gross profit was $200 million, up 14% year over year, with a non-GAAP gross margin of 89%, up approximately 720 basis points year over year [31] - Adjusted EBITDA was $66.3 million, up 32% year over year, with a margin of 29%, reflecting a favorable mix shift to high-margin Marketplace revenue [32] Business Line Data and Key Metrics Changes - Marketplace revenue grew 13% year over year, adding $25 million, driven by dealer count growth and increased adoption of value-added products [8] - International revenue expanded 20% year over year, supported by steady traffic growth and lead growth in Canada and the UK [8][10] - Wholesale revenue was about $8 million for the first quarter, down 52% year over year, driven by a 26% sequential decline in total digital wholesale segment transaction volumes [31] Market Data and Key Metrics Changes - In Canada, 90% of surveyed dealers reported better ROI on CarGurus compared to alternative platforms [9] - CarGurus was the most downloaded auto app in Canada in Q1, contributing to an 85% year over year increase in direct traffic [10] - The UK saw double-digit year over year lead growth, underpinned by an 82% year over year increase in direct traffic [10] Company Strategy and Development Direction - The company is focusing on three value creation drivers: expanding data-driven solutions for dealers, enhancing the car shopping journey for consumers, and enabling more online transactions [7] - The strategy for 2025 is termed the year of transformative innovation, heavily leveraging AI to open new avenues for product and platform growth [6] - The company is assessing its wholesale business model for sustainable growth and profitability potential [26] Management Comments on Operating Environment and Future Outlook - Management noted that while the market remains volatile, they have not seen a material impact on business related to tariffs [35] - The company anticipates exiting the year at a low double-digit year-over-year growth rate, despite potential shifts in market conditions [36] - Management emphasized the importance of continuing to invest in successful areas to maintain momentum and market share [77] Other Important Information - The company ended the first quarter with $173 million in cash and cash equivalents, a decrease driven by share repurchases and capital expenditures [34] - The first quarter marked a strong start to the year of transformative innovation, with solid financial results and measurable progress across strategic drivers [27] Q&A Session Summary Question: How does the company view Amazon's entry into the used vehicle market? - Management believes that while Amazon's entry into new vehicles is organized, the used vehicle market is more complex and less structured, which plays to CarGurus' strengths in dealer trust and integration [44][45] Question: What are the thoughts on OEM ad spending amidst tariff uncertainties? - Management expressed pride in the strong Q1 results for OEM advertising but acknowledged that manufacturers are cautious due to tariff uncertainties, which could impact future spending [50][51] Question: What changes are needed for the CarOffer platform to adapt to market volatility? - Management highlighted the need for operational efficiency and flexibility in the platform to better serve dealers and adapt to fluid pricing models [53][55]