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CarGurus, Inc. (CARG) Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $228.5M (+2% YoY), with Marketplace revenue up 15% YoY to $210.2M; GAAP net income was $45.9M and non-GAAP adjusted EBITDA was $76.4M (33% margin), driving non-GAAP diluted EPS of $0.55, at the high end of prior guidance .
  • Segment mix improved: U.S. Marketplace operating income rose to $56.1M (+30% YoY) while Digital Wholesale operating loss narrowed to $(5.5)M; total paying dealers reached 32,010 and QARSD increased double-digits, supported by migration to premium tiers and data-driven products .
  • Q1 2025 guidance: revenue $216–$236M, Marketplace $209–$214M, non-GAAP adjusted EBITDA $60–$68M, non-GAAP EPS $0.41–$0.47; management expects sequential margin compression as media spend ramps (new “Big Deal” brand campaign) and Digital Wholesale volumes decline with losses increasing sequentially .
  • Stock-relevant catalysts: continued dealer wallet share consolidation to high-yield marketplaces, accelerating adoption of AI-driven Dealer Data Insights, international expansion, and OEM ads returning to double-digit growth; risks include tougher comps in 2025 and wholesale weakness .

What Went Well and What Went Wrong

What Went Well

  • Marketplace growth and mix: Q4 Marketplace revenue up 15% YoY; consolidated gross margin expanded to 87% on mix shift to higher-margin Marketplace .
  • Premium tiers and insights: Premium subscription migration rose 23% YoY in Q4, fueled by Dealer Data Insights (e.g., Next Best Deal Rating and Acquisition Insights) improving pricing actions and turn times .
  • International and OEM ads: International revenue rose 26% YoY in Q4, and OEM advertising returned to double-digit growth, supported by normalizing new car supply and improved targeting .

What Went Wrong

  • Digital Wholesale softness: Wholesale revenue fell 55% YoY in Q4 to $9.9M, with transactions down 48% YoY to 7,066; segment loss persisted despite sequential improvement .
  • Product revenue decline: Product revenue declined 55% YoY and 44% sequentially, as origination channel conditions reverted to normal post-Q3 .
  • Near-term margin headwind: Q1 2025 Marketplace margins expected down sequentially on ramping media spend (“Big Deal”), while Digital Wholesale losses are expected to rise sequentially on lower transactions .

Financial Results

Consolidated Performance (USD Millions unless noted)

MetricQ2 2024Q3 2024Q4 2024
Total Revenue$218.692 $231.358 $228.538
Marketplace Revenue$195.167 $204.019 $210.194
Wholesale Revenue$13.119 $12.107 $9.850
Product Revenue$10.406 $15.232 $8.494
GAAP Gross Profit$182.444 $182.551 $198.989
GAAP Gross Margin %83% 79% 87%
Non-GAAP Gross Margin %84% 83% 87%
Non-GAAP Adjusted EBITDA$55.556 $64.882 $76.395
Adjusted EBITDA Margin %25% 28% 33%
GAAP Net Income$(68.721) $22.511 $45.881
Non-GAAP Diluted EPS ($)$0.41 $0.45 $0.55
Cash & Equivalents (period end)$218.365 $250.741 $304.193

Drivers:

  • Marketplace listings and value-added products drove revenue and margin expansion; Q4 non-GAAP gross margin and EBITDA margin rose on favorable mix .
  • Q2 GAAP loss was driven by goodwill and asset impairments; Q4 had no impairment, boosting GAAP profitability .

Segment Breakdown

Segment MetricQ2 2024Q3 2024Q4 2024
U.S. Marketplace Revenue$180.052 $187.253 $193.395
Digital Wholesale Revenue$23.525 $27.339 $18.344
Other Revenue$15.115 $16.766 $16.799
U.S. Marketplace Operating Income$42.043 $50.410 $56.068
Digital Wholesale Operating Loss$(138.158) $(25.317) $(5.500)
Other Operating Income$2.531 $2.341 $2.710

Notes:

  • U.S. Marketplace operating leverage improved quarter-on-quarter; Digital Wholesale loss narrowed significantly by Q4 .
  • Other segment continued to contribute mid-teens revenue .

KPIs

KPIQ2 2024Q3 2024Q4 2024
Total Paying Dealers31,352 31,684 32,010
U.S. QARSD ($)$6,942 $7,177 $7,337
International QARSD ($)$1,935 $2,057 $2,072
Transactions (Digital Wholesale)8,778 8,249 7,066

Context:

  • Dealer adds and QARSD growth reflect premium tier migration and stronger adoption of value-added products and services .
  • Transactions declined as management prioritized unit economics and product-market fit in wholesale .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Total RevenueQ4 2024$219M–$239M $228.5M Within range
Marketplace RevenueQ4 2024$208M–$213M $210.2M Within range
Non-GAAP Adjusted EBITDAQ4 2024$72M–$80M $76.4M Within range
Non-GAAP EPSQ4 2024$0.50–$0.55 $0.55 High end achieved
Total RevenueQ1 2025n/a$216M–$236M New guidance
Marketplace RevenueQ1 2025n/a$209M–$214M New guidance
Non-GAAP Adjusted EBITDAQ1 2025n/a$60M–$68M New guidance
Non-GAAP EPSQ1 2025n/a$0.41–$0.47 (107.0M diluted shares) New guidance

Qualitative guidance:

  • Marketplace margins down sequentially in Q1 as media spend ramps (“Big Deal” brand campaign) .
  • Digital Wholesale volumes expected to decrease; segment EBITDA losses to increase sequentially .

Earnings Call Themes & Trends

TopicQ2 2024 (Prev-2)Q3 2024 (Prev-1)Q4 2024 (Current)Trend
AI/Technology initiativesPersonalization, conversational search pilots; app improvements; DDI suite launch (Next Best Deal Rating, Max Margin, Acquisition Insights) Continued AI-driven personalization and comparison pages; deeper app engagement; DDI adoption scaling Expanded DDI adoption; ~1M Q4 price changes; 69% acquired vehicles recommended; 70% increase in Digital Deal close rates at early adopters Strengthening, broader workflow integration
Brand/Marketing mixMargin expansion with operating leverage; steady OpEx; media spend lower in Q4 seasonality anticipated Lower media spend in Q4; plan to increase brand investment mid/high funnel; testing TV/online video Q1 ramp in media (Big Deal campaign) expected to lower sequential margins Shift toward brand/CTV/video; seasonal ramp
Dealer spend consolidationLarger, more sophisticated dealers increasing wallet share; premium upsell Gains in dealer count and premium tiers; consultative account management Anecdotal consolidation to high-yield platforms; dealers dropping other partners to focus on CarGurus Consolidation tailwind
Digital Deal adoption7,451 dealers (+157% YoY) Q2; high-value actions close ~3x higher 8,474 dealers (+~150% YoY) Q3; ~20% of dealer leads from Digital Deal 9,570 dealers (+105% YoY); Canada launch; financing integration pilot with dealer systems Continued penetration; new geographies & features
Top Dealer Offers (TDO)68 metros; 388 dealers; intake tool rollout 80 metros; ~500 dealers (+~30% QoQ); strong consumer engagement ~0.5M monthly Sell My Car visitors; 40% also purchasing; strategic onboarding continues Controlled scaling; sticky dealer value
International expansion21% YoY revenue growth; traffic and dealer base gains 23% YoY revenue; product rollouts (Digital Deal, NBDR) 26% YoY revenue; investing in GTM/marketing; targeted returns Accelerating with product localization
OEM advertisingStrong growth as inventory normalizes Double-digit YoY; direct buys and targeting improvements Double-digit YoY; Q1 seasonal dial-down expected Recovery with seasonality
Digital WholesaleRebuild: leadership, operations, data-driven matrix; goodwill impairment in Q2; Q3 impairment for CG Buy Online discontinuation Operational improvements (transportation margins, fulfillment times), insights-driven functionality; losses persist Sequential EBITDA loss improvement; Q1 volumes expected down; losses up sequentially Gradual rebuild; near-term headwinds
Macro/TariffsNo CDK outage revenue impact; post-COVID dealer spend consolidating Used sales strength; rising days-on-market; comps getting tougher Tariff scenarios could shift demand to used; outcomes depend on price/turn adjustments Mixed macro; watch affordability

Management Commentary

  • “We delivered exceptional results in 2024, with sustained revenue acceleration and significant margin expansion across geographies.” — CEO Jason Trevisan .
  • “Fourth quarter consolidated revenue was $229 million, up 2% year-over-year… Consolidated adjusted EBITDA was $76.4 million, up 25% year-over-year.” — CFO Elisa Palazzo .
  • “Premium subscription tiers were up 23% year-over-year in the fourth quarter… nearly 1 million price changes to inventory we recommended, up 33% from Q3.” — CEO Jason Trevisan .
  • “We expect first quarter Marketplace margins to be up year-over-year but down sequentially as we ramp our media spend due to the launch of our new brand campaign called Big Deal.” — CFO Elisa Palazzo .
  • “Dealers are consolidating to a smaller set of partners… we’re hearing dealers say… we can drop other partners and focus exclusively within CarGurus.” — CEO Jason Trevisan .

Q&A Highlights

  • Digital Deal financing integration: Pilot enables direct credit applications into dealer FMS, complementing existing hard-pull financing and driving down-funnel conversion .
  • Tariff/affordability scenario: Management expects potential demand shift from new to used; impact depends on price adjustment speed and dealer turn times .
  • Dealer additions and growth drivers: Best-ROI positioning, data insights (NBDR), and enhanced account management cited as key to net adds and QARSD expansion .
  • Platform integration: Increasing integration with CRM/IMS/DMS as CarGurus embeds deeper into dealer workflows .
  • Capital allocation: 2025 $200M repurchase program active; prioritizing product innovation, international expansion, and brand virality while maintaining sustainable margins .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 (EPS and revenue) was unavailable due to request limit constraints; therefore, we cannot provide an estimates comparison. Values retrieved from S&P Global.
  • Management’s Q4 results landed within prior guidance ranges with EPS at the high end, suggesting estimates may modestly lift for Marketplace while Q1 sequential margin guidance and expected Digital Wholesale losses could temper near-term EBITDA expectations .

Key Takeaways for Investors

  • Marketplace momentum intact: Double-digit Marketplace growth, rising QARSD, and premium tier migration validate pricing power and product ROI; non-GAAP margins expanded materially on mix .
  • Watch Q1 margin dynamics: Planned media ramp (Big Deal campaign) implies sequential EBITDA margin compression despite YoY margin improvement .
  • Wholesale is a rebuild: Sequential loss improvement in Q4 but Q1 volumes/losses likely worsen near term; long-term thesis hinges on data-led unit economics and product-market fit .
  • International is a multi-year growth vector: 26% YoY growth, targeted GTM/marketing investments, and U.S. product playbook rollouts (Digital Deal/DDI) should support durable expansion .
  • OEM ads returning: Double-digit YoY growth aided by normalizing inventory; anticipate Q1 seasonal dial-down, then re-acceleration later in the year .
  • Dealer spend consolidation tailwind: Focus on high-yield marketplaces and integrated workflow tools strengthens share gains and retention with larger dealer groups .
  • Capital returns balanced with growth: 2025 $200M buyback active while maintaining investment in innovation and brand; cash rose to $304M in Q4 .

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