Cars.com (CARS) 7 Nov 24 2024 Q3 Earnings call transcript

In a recent earnings call, Cars.com Inc. announced its strong financial performance for the third quarter of 2024, highlighting a 3% year-over-year revenue growth to $180 million, marking the second-best quarterly revenue in the company's history. The call, led by CEO Alex Vetter and CFO Sonia Jain, provided insights into the company's strategic initiatives and financial health, while addressing investor concerns and questions.

Product Innovation and Operational Efficiency

Cars.com has been focused on product innovation and operational efficiency, with notable success in its AccuTrade platform. The platform has seen significant growth, with appraisal volume rising to 671,000 appraisals in Q3, up 5% quarter-over-quarter, and dealers acquiring nearly 40% more vehicles per month via AccuTrade compared to a year ago. The platform's success is attributed to its ability to simplify the vehicle acquisition process for dealers, offering a more profitable and efficient alternative to traditional wholesale auctions.

Additionally, Cars.com has seen strong growth in its digital website experience and media solutions, with over 7,650 dealer websites powered during the third quarter, up nearly 150 customers sequentially. The company's focus on improving site speed and deploying AI translation capabilities for over 100 languages has resulted in double-digit increases in site speed and a more delightful consumer experience.

Financial Highlights and Strategic Partnerships

Cars.com reported an adjusted EBITDA margin of 28.5% for the quarter, which is at the top of the company's guidance range. This strong performance is driven by the company's diversified platform strategy and disciplined execution. Notably, OEM revenue grew 17% year-over-year, exceeding $17 million, reflecting broad demand across the marketplace. The company also reported a 17% increase in incremental wins, indicating a growing sales momentum.

Cars.com has also been actively pursuing strategic partnerships, including an exclusive agreement with Jaguar Land Rover to power dealer websites with the AccuTrade web application. The company aims to leverage OEM endorsement to stimulate dealer sales and awareness, with plans to win more partnerships in 2025.

Challenges and Future Outlook

The company acknowledged challenges such as the impact of CDK cyber hit, which affected sales momentum earlier in the year. However, the management expressed confidence in the recovery, pointing to October's strong sales growth across all product lines as evidence of the platform's resilience. The company anticipates a strong high single-digit year-over-year growth in OEM and national revenue for the fourth quarter, with continued product adoption and a focus on cost discipline and operational efficiency.

Conclusion

Cars.com Inc.'s strong third-quarter performance underscores its strategic initiatives in product innovation, operational efficiency, and strategic partnerships. The company's focus on delivering enterprise-grade technology and empowering dealers to streamline their operations is resonating with clients, setting the stage for sustainable growth in the coming quarters. With a clear vision and solid execution, Cars.com is well-positioned to capitalize on the opportunities in the automotive retail landscape.