Cars.com(US:CARS)2023-11-02 19:25Financial Data and Key Metrics Changes - Revenue for Q3 2023 totaled $174 million, a 6% increase year-over-year, driven by dealer revenue growth of 8% to $157 million [58] - Net income for the quarter was $4.5 million or $0.07 per diluted share, compared to a net loss of $0.04 per diluted share a year ago [32] - Adjusted EBITDA was $49 million, representing 28.4% of revenue, with a sequential margin expansion of 125 basis points [32][36] - Cash provided by operating activities for the nine-month period ended September 30, 2023, was $92 million, and free cash flow was $76 million [35] Business Line Data and Key Metrics Changes - The company launched Cars Commerce, a new B2B brand aimed at simplifying the car buying and selling process [12][17] - The traffic to Cars.com increased to 151 million visits, with organic traffic remaining strong at 62% [18] - The average new vehicle price on the marketplace increased by 29%, and used car prices rose by 40% compared to 2019 [49] - The number of dealer customers stabilized at 18,715, with over 80% of repackaged customers upgrading to higher-tier packages [21][62] Market Data and Key Metrics Changes - The company reported a 12% year-over-year increase in revenue from OEM advertising customers, with a sequential growth of $2.1 million [30] - The acquisition of D2C Media is expected to expand the company's geographical footprint and add approximately 1,000 new dealer customers in Canada [16][27] - The company noted that 90% of OEM advertising dollars are currently spent on audiences not in the market to buy a car, indicating a significant opportunity for growth [91] Company Strategy and Development Direction - The company aims to enhance its platform strategy through the integration of D2C Media and the expansion of its digital solutions into Canada [55][120] - The focus remains on delivering value to customers through improved traffic, SEO, and a robust service network [106] - The company plans to continue its balanced capital allocation strategy, including debt repayment and share repurchases [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in driving growth despite a mature market, citing the high engagement of the Cars.com audience [47] - The company anticipates continued growth in dealer revenue driven by the adoption of dealer solutions and media products [85] - Management highlighted the potential for OEM revenue to recover as inventory levels improve, with expectations for a sequential increase in Q4 [90] Other Important Information - The company was recognized as one of US News & World Report's Best Companies to Work for in 2024 [28] - The fourth quarter guidance includes two months of revenue from the D2C Media acquisition, expected to contribute approximately 1.5% to total revenue [65] Q&A Session Summary Question: Can you discuss the competitive landscape in the Canadian market? - Management noted that the Canadian market is similar to the US, with confidence in driving growth through established relationships and innovative solutions [106] Question: What are the key drivers of growth going forward? - Management highlighted diversified growth vectors, including dealer count expansion, OEM revenue recovery, and the introduction of new digital solutions [89] Question: How do you plan to increase OEM endorsements in Canada? - The company plans to leverage existing relationships and capabilities to expand OEM endorsements, aiming for a healthier mix of full OEM inclusion [120]