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CarGurus, Inc. (CARG) Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered double‑digit Marketplace growth (+13% YoY) with consolidated revenue of $225.2M, GAAP diluted EPS of $0.37 and non‑GAAP diluted EPS of $0.46; EPS beat consensus while revenue was slightly below the Street . Results were just below the midpoint of prior guidance due to weaker Digital Wholesale and Product volumes .
  • Guidance for Q2 2025 calls for $222–$242M total revenue, Marketplace $219.5–$224.5M, non‑GAAP Adjusted EBITDA $71.5–$79.5M, and non‑GAAP EPS $0.52–$0.58; ranges bracket consensus and imply continued margin strength at the midpoint .
  • Strategic execution was anchored by AI‑enabled products (VIN‑level targeting, conversational AI search), stronger OEM advertising, and international traction; management emphasized “transformative innovation” and reinvestment behind momentum .
  • The principal headwind was Digital Wholesale: transactions fell 26% sequentially and revenue declined 52% YoY, prompting a strategic assessment to pursue a more flexible, automated, and seller‑centric wholesale model .
  • Capital returns accelerated: CarGurus repurchased $184.2M of shares in Q1 (~6% of outstanding), reducing diluted share count and supporting non‑GAAP EPS growth .

What Went Well and What Went Wrong

What Went Well

  • Marketplace revenue grew 13% YoY to $212.2M, with non‑GAAP gross margin of ~93% and Marketplace adjusted EBITDA up 27% YoY; U.S. QARSD rose 10% YoY on tier upgrades and add‑on adoption .
  • AI‑driven product innovation boosted engagement and lead quality: “Highlight adoption grew 32% YoY, and average leads per day increased 115% YoY following VIN‑level targeting” .
  • International momentum: revenue +20% YoY, ~22% YoY aggregate lead growth, and rising direct traffic (Canada +85% YoY; U.K. +82% YoY), reinforcing ROI leadership with dealers .

What Went Wrong

  • Digital Wholesale weakness: transactions −26% Q/Q; revenue ~$7.7M (−52% YoY); segment EBITDA loss ~$(3.2)M; platform rigidity and market volatility pressured throughput and fulfillment .
  • Product revenue declined 58% YoY to $5.2M, reflecting lower volumes and mix shift away from lower‑margin offerings .
  • Sequential margin compression in Marketplace from seasonally high media spend tied to the February brand campaign launch, despite YoY expansion .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$215.8 $228.5 $225.2
GAAP Diluted EPS ($)$0.20 $0.43 $0.37
Non‑GAAP Diluted EPS ($)$0.34 $0.55 $0.46
GAAP Gross Margin (%)81.0% 87.0% 89.0%
Adjusted EBITDA ($USD Millions)$50.4 $76.4 $66.3
Adjusted EBITDA Margin (%)23.0% 33.0% 29.0%

Segment breakdown

SegmentQ3 2024 Revenue ($M)Q4 2024 Revenue ($M)Q1 2025 Revenue ($M)Q3 2024 Op Income ($M)Q4 2024 Op Income ($M)Q1 2025 Op Income ($M)
U.S. Marketplace$187.3 $193.4 $195.2 $50.4 $56.1 $49.8
Digital Wholesale$27.3 $18.3 $12.9 $(25.3) $(5.5) $(5.8)
Other$16.8 $16.8 $17.0 $2.3 $2.7 $1.8

Key KPIs

KPIQ3 2024Q4 2024Q1 2025
U.S. Paying Dealers24,561 24,692 25,153
International Paying Dealers7,123 7,318 7,219
Total Paying Dealers31,684 32,010 32,372
U.S. QARSD ($)$7,177 $7,337 $7,369
International QARSD ($)$2,057 $2,072 $2,073
Consolidated QARSD ($)$6,038 $6,144 $6,173
Digital Wholesale Transactions8,249 7,066 5,209

Consensus comparison (S&P Global)

MetricQ1 2024Q4 2024Q1 2025
Revenue Consensus Mean ($M)—$231.7*$226.6*
Revenue Actual ($M)$215.8 $228.5 $225.2
Primary EPS Consensus Mean ($)—$0.518*$0.436*
Primary EPS Actual ($)$0.34 (non‑GAAP) $0.55 (non‑GAAP) $0.46 (non‑GAAP)

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueQ1 2025$216M–$236M Actual $225.2M In‑line vs range
Marketplace RevenueQ1 2025$209M–$214M Actual $212.2M In‑line vs range
Non‑GAAP Adjusted EBITDAQ1 2025$60M–$68M Actual $66.3M In‑line vs range
Non‑GAAP EPSQ1 2025$0.41–$0.47 Actual $0.46 In‑line vs range
Total RevenueQ2 2025—$222M–$242M Sequentially higher vs Q1 guide
Marketplace RevenueQ2 2025—$219.5M–$224.5M Sequentially higher vs Q1 guide
Non‑GAAP Adjusted EBITDAQ2 2025—$71.5M–$79.5M Raised vs Q1 guide
Non‑GAAP EPSQ2 2025—$0.52–$0.58 Raised vs Q1 guide

Earnings Call Themes & Trends

TopicPrevious Mentions (Q‑2, Q3’24)Previous Mentions (Q‑1, Q4’24)Current Period (Q1’25)Trend
AI/Technology initiativesMarketplace acceleration; tools/insights focus Sustained revenue acceleration; data‑driven actionable insights “Year of transformative innovation” with VIN‑level targeting, dealer data insights, conversational AI search; engagement uplifts Strengthening
OEM advertisingNot highlighted in Q3 tableOEM advertising grew double‑digit YoY Continued double‑digit gains; strong upfronts Strengthening
International trendsPaying dealers +2%; QARSD +20% intl International revenue +26% YoY Intl revenue +20% YoY; direct traffic up sharply; ROI leadership affirmed Strengthening
Digital Wholesale (CarOffer)Impairment‑driven losses; model strain Segment operating loss persisted Transactions down; structural platform limitations; strategic reassessment underway Weakening; pivoting
Tariffs/MacroNot material to Q3 commentaryNot specifiedFluid tariff backdrop; no material impact seen; mixed consumer sentiment; flight to quality Volatile but manageable
App/Digital Deal adoption——App drives >30% of leads; MAUs +25% YoY; Digital Deal live on >11K dealers, ~1M listings; 1,100 dealers using embedded credit apps Strengthening

Management Commentary

  • “In 2025, we're building on that momentum in what we are calling the year of transformative innovation, innovation that's customer‑centric, differentiated, heavily leveraging AI and opens up new avenues of product and platform growth for us” — Jason Trevisan, CEO .
  • “Highlight adoption grew 32% year‑over‑year, and average leads per day increased 115% year‑over‑year following the introduction of VIN level targeting” — Prepared remarks .
  • “Digital Deal now supports over 11,000 dealers globally with nearly 1 million vehicle listings enabled… adoption reached 1,100 dealers… this is now the default financing experience within digital deal” — Prepared remarks .
  • “We have initiated a broader strategic assessment of a CarGurus wholesale business model that would have more sustainable growth and profitability potential” — Prepared remarks .

Q&A Highlights

  • Competitive landscape: Amazon’s potential used‑vehicle marketplace entry seen as challenging due to messy data and dealer trust requirements; no observed change in Hyundai trends on CarGurus .
  • OEM advertising outlook: Strength in Q1, with caution around tariffs; management remains “careful” but proud of momentum .
  • Marketplace growth algorithm: Revenue driven by paying dealers and QARSD; rapid dealer adds can moderate QARSD growth rate; Q2 Marketplace guide +12%–15% YoY .
  • Tariffs and sentiment: Highly fluid environment; consumer sentiment fell after a surge; larger dealers consolidate spend toward high‑quality leads; no change in spending patterns observed yet .
  • Margin reinvestment: Management choosing to invest behind momentum (product, marketing, app, account management) rather than maximize near‑term margin . CarOffer unlikely to pursue a “me‑too” auction; focus on differentiated insights and seller‑focused capabilities .

Estimates Context

  • Q1 2025: Revenue $225.2M vs consensus $226.6M (slight miss); non‑GAAP diluted EPS $0.46 vs consensus $0.436 (beat) .
  • Q4 2024: Revenue $228.5M vs consensus $231.7M (miss); non‑GAAP diluted EPS $0.55 vs consensus $0.518 (beat) .
  • Q3 2024: Revenue $231.4M vs consensus $223.5M (beat); non‑GAAP diluted EPS $0.45 vs consensus $0.426 (beat) .
  • Q2 2025 guidance ($222–$242M; $0.52–$0.58) brackets Street revenue $232.7M and EPS $0.546, indicating in‑line to modest upside potential at the midpoint* .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Marketplace remains the growth and margin engine: +13% YoY revenue, high‑90s non‑GAAP gross margin, and adjusted EBITDA up 32% YoY; expect continued leadership as OEM ads and tiers/add‑ons scale .
  • International is an underappreciated driver: strong lead growth, direct traffic, and dealer ROI gains in Canada/U.K. support share expansion .
  • Digital Wholesale is being re‑architected: near‑term drag persists (transactions −26% Q/Q; revenue −52% YoY), but strategic pivot to flexible, automated, insights‑led models could stabilize losses and enable optionality .
  • Q2 guide brackets consensus with elevated margin expectations at midpoint; management plans to reinvest in growth, tempering sequential margin expansion but supporting medium‑term compounding .
  • Capital returns meaningful: $184.2M repurchases (~6% of outstanding) lowered diluted share count and amplified EPS leverage; additional buyback capacity authorized for 2025 provides support .
  • Product innovation is an engagement catalyst: VIN‑level targeting, dealer data insights, and conversational AI discovery increase lead quality and time‑on‑site, bolstering QARSD and dealer retention .
  • Trading setup: EPS beats vs slight revenue shortfalls skew the narrative toward mix quality and margin leverage; watch updates on CarOffer strategy and OEM advertising resilience amid macro/tariff volatility .

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