Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CarGurus Inc (CARG, Financial) reported a 15% year-over-year growth in Marketplace revenue, driven by new dealer additions, higher subscription tiers, and increased adoption of value-added products.
- The company achieved a 33% year-over-year growth in non-GAAP consolidated adjusted EBITDA, with margins expanding by 590 basis points to 28%.
- International business showed strong performance with a 23% year-over-year revenue growth, particularly in Canada where traffic share and session growth outpaced competitors.
- CarGurus Inc (CARG) successfully launched new products like Digital Deal and Next Best Deal Rating, enhancing dealer engagement and consumer experience.
- The company maintained a strong cash position, ending the quarter with $247 million in cash and cash equivalents, and announced a $200 million share repurchase program for 2025.
Negative Points
- Wholesale revenue declined by 44% year-over-year, reflecting a decrease in dealer-to-dealer transaction volume.
- Product revenue decreased by 23% year-over-year, despite a sequential increase, indicating volatility in this segment.
- The company recognized a $16.8 million non-cash impairment charge related to the discontinuation of the CG Buy Online pilot.
- Operating expenses increased by 5% year-over-year, with a noted one-off sales tax impact in Canada affecting OpEx.
- CarGurus Inc (CARG) faces increasingly difficult year-over-year comparisons as it laps a year of double-digit growth, potentially impacting future growth rates.
Q & A Highlights
Q: Could you update us on your brand investment strategy and the decision to discontinue CG Buy Online?
A: Jason Trevisan, CEO, explained that CarGurus is focusing on expanding brand awareness through sophisticated marketing strategies, targeting different stages of the consumer shopping journey. The decision to discontinue CG Buy Online was based on a disciplined capital allocation process, as explained by Elisa Palazzo, CFO, who noted that resources would be better deployed to other projects after a detailed analysis.
Q: How should we think about CarGurus' growth pipeline and product offerings?
A: Elisa Palazzo, CFO, highlighted that despite tougher comps in 2025, CarGurus expects strong growth driven by higher dealer engagement and adoption of value-added products. Jason Trevisan, CEO, added that the company is focused on upselling and cross-selling products, leveraging data to enhance dealer operations beyond marketing.
Q: Can you elaborate on the international business growth and OpEx increase?
A: Sam Zales, President and COO, noted strong growth in the UK and Canada, driven by new dealer acquisitions and product launches like Digital Deal. Elisa Palazzo, CFO, mentioned a one-off sales tax impact in Canada affecting OpEx, which should normalize next quarter.
Q: How does pricing work in your business, and what is your view on consumer demand?
A: Sam Zales, President and COO, explained that pricing is based on lead volume and quality, not seasonality, and is adjusted through annual business reviews. He noted that consumer demand was stronger in Q3, partly due to lower interest rates, and emphasized CarGurus' role in providing high ROI for dealers.
Q: What are the prospects for continued growth in CarGurus' core marketplace business?
A: Jason Trevisan, CEO, expressed confidence in continued growth, citing unlimited potential in adding value to higher-tier packages and cross-selling opportunities. He emphasized the focus on delivering great ROI to dealers, which supports sustained growth in the marketplace business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
