Cars.com - Earnings Call - Q1 2025

Executive Summary

• Q1 revenue of $179.0M was down 1% YoY and slightly below S&P Global consensus ($179.79M), while adjusted diluted EPS of $0.37 missed consensus ($0.49); adjusted EBITDA margin of 28.3% exceeded the company’s Q1 margin guidance range (25.5%–27%) on disciplined costs and lower-than-anticipated DealerClub integration expense. Q1 2025 consensus values marked with * are from S&P Global.*
• Dealer revenue fell 2% YoY on softer marketplace and media attach, partly offset by websites and appraisal tech; OEM & National grew 6% YoY, but management suspended FY25 revenue guidance citing tariff-driven timing volatility in media spend; FY25 adjusted EBITDA margin guidance reaffirmed at 29%–31%.
• Marketplace engagement hit records (29.0M avg monthly UVs; 170.1M visits), dealer count rose sequentially to 19,250, and AccuTrade appraisals hit 813k (+16% q/q, +31% y/y), underpinning confidence in Dealer revenue reacceleration in 2025.
• Stock narrative catalysts: revenue guidance suspension (macro/ tariff uncertainty) as an overhang; margin resilience and record marketplace engagement as offsets; management expects Q2 revenue up YoY and QoQ and Q2 adjusted EBITDA margin of 27%–29%.

What Went Well and What Went Wrong

• What Went Well

  • Adjusted EBITDA margin 28.3% topped guidance, driven by cost discipline and lower-than-expected DealerClub integration costs; free cash flow was $23.7M and the company repurchased 1.6M shares for $21.5M in Q1.
  • Audience and marketplace momentum: record 29.0M avg monthly UVs (+3% YoY), 170.1M visits, and sequential dealer count growth to 19,250; OEM revenue +6% YoY supported by high-quality in-market audience.
  • Solutions traction: >100 new website customers added; AccuTrade appraisals 813k (+16% q/q, +31% y/y); DealerClub users +60% with nearly 2x completed auctions from Feb to Mar and early workflow integrations (one-click appraisal-to-auction).

• What Went Wrong

  • Revenue down 1% YoY and slightly below consensus; adjusted diluted EPS ($0.37) below consensus ($0.49), reflecting marketing/media pressure and severance costs tied to targeted headcount reductions. Q1 2025 consensus values marked with * are from S&P Global.*
  • Media visibility deteriorated as some OEMs shifted to month-to-month commitments and dealers curtailed discretionary media (e.g., video), prompting suspension of FY25 revenue guidance.
  • Dealer ARPD edged down 1% YoY to $2,473 on mix; subscription Dealer revenue declined 2% YoY amid macro-driven pressure on dealer ad budgets.

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Cars.com First Quarter 2025 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, May 8th of 2025. I would now like to turn the conference over to Katherine Chen, President of Investor Relations. Please go ahead.

Katherine Chen (President of Investor Relations)

Good morning, everyone, and thank you for joining us. It's my pleasure to welcome you to the Cars.com first quarter 2025 conference call. With me today are Alex Vetter, CEO, and Sonia Jain, CFO. Alex will start by discussing the business highlights from our first quarter. Sonia will discuss our financial results in greater detail along with our outlook. We'll finish the call with Q&A. Before I turn the call over to Alex, I'd like to draw your attention to our forward-looking statements and the description and definition of non-GAAP financial measures, which can be found in our presentation. We will be discussing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, adjusted net income, and free cash flow.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the financial tables included with our earnings press release and in the appendix of our presentation. Any forward-looking statements are subject to risks and uncertainties. For more information, please refer to the risk factors included in our SEC filing, including those in our most recently filed 10-K, which is available on the IR section of our website. We assume no obligation to update any forward-looking statements. I will now turn the call over to Alex.

Alex Vetter (CEO)

Thank you, Katherine. We delivered a solid first quarter, making important progress on growth initiatives while also strengthening our bottom line. Revenue of $179 million was within our guidance range, and adjusted EBITDA was a highlight for the quarter, exceeding the high end of our expected range by more than a point. Strong free cash flow also enabled us to repurchase $22 million of shares during the quarter, which paced well ahead of our capital return commitment for the year. Before we get further into Q1 results, let's take a step back to ground our long-term strategy in light of the changes happening in automotive. Our platform strategy, which combines a leading and scaled consumer marketplace with dealer software tools, has been key to our diversified growth.

There is still significant opportunity to deepen product penetration, and we are seeing elevated interest in Accu-Trade and DealerClub as the industry focuses on used cars. Thoughtful product innovation leveraging AI and data intelligence positions us well to meet industry demand to simplify car buying and selling. The same is true for consumers, where our sustained investments in shopping tools and brand leadership are translating into record marketplace metrics. While we're not immune to near-term uncertainty that has affected the automotive outlook, the core value proposition of our platform remains incredibly strong and arguably even more relevant for the industry today. We gained share in each of our end markets to exit March with much stronger momentum relative to the soft start in January that we discussed on our last call. Dealer count rose to 19,250 dealers, the best quarter of sequential organic customer growth since mid-2022.

Our solutions portfolio was a standout in Q1, adding over 100 new website customers and additional Accu-Trade subscribers. For consumers, our in-depth editorial and news coverage of tariffs is resonating with shoppers, helping set a new record for unique visitors in Q1. As a result, OEM business also grew 6% year-over-year, reflecting the value automakers place on our high-quality end market audience. These broad-based improvements, from unit growth to operational efficiency, are strong signals that dealer revenue will return to year-over-year growth. We are also particularly well placed to benefit from the emerging tailwinds in the marketplace and used car solutions. The Cars.com Marketplace is supporting a surge in consumer interest that peaked in March and stayed strong through April, reflecting a better user experience as well as incremental demand from tariff-motivated shoppers.

A record 29 million average monthly unique visitors utilize Cars.com to browse, research, and submit leads in Q1. Overall traffic of 170 million visits was also up 1% year-over-year after adjusting for an extra leap day in 2024. Specifically, traffic to our news and editorial content was up more than 50% year-over-year, driven by resources like our American-Made Index. Multi-year investments in brand marketing and editorial are producing clear and strong ROI for our marketplace, and we expect to sustain engagement with content like our affordability report and the next American-Made Index update due in June. Attribution and marketplace analytics also remain at the forefront of our engineering and product development roadmap. In the second quarter, we'll be incorporating additional data intelligence into Cars.com leads, expanding dealers' access to important and actionable insights like consumer shopping behavior and estimated budget.

We expect this enhancement to improve lead quality and also boost long-term dealer satisfaction. This feature will be bundled into marketplace packages and another example of our commitment to enhancing value delivery. We're optimistic that audience strength and product innovation, combined with new commercial leadership, will help marketplace contribute to overall dealer revenue growth in 2025. Turning to the supply side, we are well positioned to drive adoption of Accu-Trade and DealerClub as the market focuses on acquiring used vehicle inventory. Accu-Trade appraisal volume was up over 813,000 appraisals in Q1, up a substantial 16% quarter-over-quarter, and putting us well on our way to over 1 million quarterly appraisals. On an appraisal per dealer basis, the 14% quarter-over-quarter increase in Q1 was the best sequential growth we've seen since starting to track this metric.

This strong activity points to not only the success of our redesigned sales onboarding and account management support model, but also the increasing importance of acquiring in-demand, late-model, high-quality vehicles directly from consumers. On average, the top quartile of Accu-Trade users acquired nearly 50 cars through the service lane in February and March, demonstrating the importance and scale of Accu-Trade's impact. DealerClub, the latest addition to our platform, also opens up a new channel for used vehicle acquisition or disposal via transparent, reputation-based dealer-to-dealer auctions. In its first two months of integration with the Cars Commerce platform, DealerClub increased active users by 60% and nearly doubled its volume of completed transactions from February to March. We also grew our pipeline by over 2,500 prospects in Q1 alone, leveraging our industry reach to accelerate dealer adoption.

DealerClub users have already benefited from early integration with the Cars Commerce platform, which I also note has been some of our fastest development work to date. In Q1, we updated DealerClub auctions with Accu-Trade pricing data, providing real-time insights to empower informed buying and selling decisions. Just last week, we also turned on the one-click ability for dealers to push Accu-Trade appraisals directly into DealerClub auctions. Looking ahead, we plan to use our inventory intelligence to help dealers identify aging inventory on our marketplace or retail websites to manage inventory lifecycle within our platform. Shifting to progress on websites, Dealer Inspire and D2C Media were up nicely in Q1, adding over 100 new customers quarter over quarter. Shortened website time to launch and improved website speed and performance both contributed to the net growth we achieved in the quarter.

Moving to our OEM and national business, Q1 revenue was up 6% year over year, and around 1/3 of our OEM partners increased their spending on Cars Commerce Media. However, late in the quarter, there were early signs from a handful of OEMs looking to more closely manage their media commitments. With auto industry outlook being revised down for the year, we need to operate on the basis that media spending trend may persist, putting pressure on new car sales for OEMs and franchise dealers. Based on those trends, we believe it's prudent to suspend full-year revenue guidance until external visibility improves. However, the value of our platform remains clear, and we're focused on driving commercial improvements, platform innovation, and product adoption, and we remain confident in our ability to drive full-year revenue growth. We have also consistently demonstrated sustained cost discipline.

Our existing cost controls are performing well, and we have additional operating levers to manage the business across a range of macroeconomic scenarios. As such, we are reaffirming our adjusted EBITDA guidance. In closing, Q1 produced many positive key takeaways that give us confidence in our ability to deliver consistent growth and long-term value creation. Our business is fundamentally strong and resilient, and we believe that we're poised for growth in the current cycle. We're confident that we can execute through dynamic external conditions and re-accelerate our growth trajectory. Now, I'll turn the call to Sonia to discuss first quarter financial performance and our outlook. Sonia.

Sonia Jain (CFO)

Thank you, Alex. While first quarter revenue was down slightly year-over-year, we are pleased that we made progress on multiple growth drivers. We outperformed adjusted EBITDA margin expectations and supported strong capital return initiatives during the first quarter. First quarter revenue of $179 million was within our range of expectations based on the exit rate from Q4 into Q1 and also reflected a handful of discrete timing shifts, primarily stemming from customers reacting to the tariff environment. Dealer revenue was down 2% year-over-year from a softer-than-normal start to the year for marketplace and some pressure on media products such as in-market video. Re-accelerating marketplace performance remains a key focus area, and we saw growing signs of improvement throughout the quarter. We were pleased to grow total marketplace customers month over month in February and March, driven by strength in winning independent dealers.

Additionally, we improved on the slightly elevated churn that we called out in December and have seen levels improve since January. Alex already pointed out our accomplishments around audience strength in Q1, which we believe is a leading indicator of underlying marketplace health and growth potential. Our solutions portfolio demonstrated strong performance in the quarter, helping offset some of the pressure on marketplace and media. We added over 100 new website customers in Q1, with over 70% of those wins coming from Dealer Inspire. As previously discussed, renegotiating legacy agreements that govern DI packages is a growth initiative for 2025. We completed three of these negotiations during Q1, a strong start to the year that helps us better compete for and win subscribers. Furthermore, we are optimistic that we can favorably revise two to three additional agreements by year-end.

Accu-Trade also steadily expanded its user base, crossing the 1,000 subscriber mark during Q1, as we noted in our February earnings call. Sourcing used vehicle inventory is once again in sharp focus after production forecasts were slashed due to recent policy changes, and our new commercial leadership has prioritized converting this influx of interest to drive greater Accu-Trade and DealerClub growth for 2025. Turning to OEM and national, revenue was up 6% year-over-year, delivering a solid first quarter performance in what is typically a seasonally slower period. Incremental spending also reached its highest Q1 level since 2018 across a broad spectrum of automakers. However, as is to be expected when uncertainty rises, we also saw early indicators that OEMs are more closely managing their marketing and advertising investments.

Sell-through rates of our media products remained high but stepped down modestly from February to March as more tariffs were announced. In general, both OEMs and dealers are signaling that they prefer more flexibility on the timing of media investments to match the faster news cycle as macro factors continue to evolve. We're confident that our value delivery and consumer scale will continue to draw strong spending from our partners despite decreased visibility into the specific timing of investments in this part of our business in the short term. Now, switching to operating expenses, first quarter expenses were $173 million compared to $167 million a year ago, up 3% year-over-year, primarily from higher severance-related costs and the inclusion of new DealerClub expenses and partially offset by lower lease costs. First quarter adjusted operating expenses were $155 million, roughly flat to the same period a year ago.

Product and technology expenditures increased less than $1 million year-over-year on both a reported and adjusted basis. The majority of this increase was attributable to compensation expense, partially offset by lower software licensing costs. Marketing and sales costs increased $1 million year-over-year on a reported basis, primarily driven by compensation expense, and was roughly flat on an adjusted basis as we supported our scaled and growing consumer marketplace with efficient investments in paid and brand marketing. General and administrative expense was up $3 million year-over-year on a reported basis and down $1 million on an adjusted basis. The majority of the reported increase was attributable to severance-related costs resulting from a targeted headcount reduction in March to optimize marketing, technical operations, and commercial teams. In addition, we simplified organizational structure and increased focus on core strategic initiatives.

Net loss for the first quarter was $2 million, or -$0.03 per diluted share, compared to net income of $1 million or $0.01 per diluted share a year ago, with the variance primarily attributable to the severance-related costs just described above. Adjusted net income for the first quarter was $24 million, or $0.37 per diluted share, compared to $29 million, or $0.43 per diluted share a year ago. Adjusted EBITDA performance of $51 million in the first quarter was down slightly year-over-year. We delivered adjusted EBITDA margin of 28.3% in the first quarter, exceeding our outlook and a result of continued cost discipline coupled with lower-than-anticipated integration costs associated with the DealerClub acquisition. Moving to key metrics, dealer count of 19,250 customers, not including DealerClub users, was up more than 40 dealers quarter-over-quarter, growing well to start the year.

Solutions growth was a bright spot, particularly on websites. In addition, we saw sequential independent dealer growth within marketplace, a known opportunity for us and one we actively repositioned resources to drive. Looking ahead, we expect to drive dealer count growth from additional solution sales, improved demand for marketplace, and converting and cross-selling DealerClub users into our subscription-based products. For ARPD, first quarter performance of $2,473 was roughly flat quarter-over-quarter and down $32 year-over-year, primarily reflecting changes in our customer mix. We continue to believe we can return to ARPD expansion in 2025 based on multiple growth initiatives that we previously laid out. First, packaging more value into our marketplace subscriptions, such as with media products, which we will begin to roll out around mid-year as planned. Second, driving more Accu-Trade subscriptions through product differentiation and by leveraging OEM endorsements.

As more dealers pivot to acquiring used vehicles due to tariff-related production constraints, our sales team reported a notable increase in dealers asking to demo and trial both our Accu-Trade and DealerClub solutions in late Q1. Repackaging legacy agreements for websites is also an uplift for ARPD, and our success to start the year gives us confidence we can complete more of these negotiations, which will help align pricing with value delivery. Shifting to our cash flow and balance sheet, net cash provided by operating activities totaled $29 million for the first quarter. Free cash flow was $24 million during the period, down slightly year-over-year and reflecting adjusted EBITDA performance. We repurchased approximately 1.6 million shares for $22 million in the first quarter, a strong demonstration of our commitment to return capital to shareholders.

Recall in February, we announced the share repurchase target of $60 million-$70 million for 2025, and we're substantially overachieving this target on an average quarterly basis in Q1. Net outstanding remained at $460 million as of March 31st, 2025, bringing total net leverage to 2.1x, still at the low end of our target range of 2x-2.5x. Total liquidity was $321 million as of March 31st, 2025, which provides ample future capacity to invest in our growth strategy and pursue thoughtful capital allocation to create long-term value. Now, let's conclude with second quarter and full year 2025 guidance. As touched upon in the earlier revenue discussion, we are seeing signs that the magnitude and timing of some media investments may continue to shift given greater near-term macro and tariff-driven uncertainty.

This uncertainty is pressuring the new car market, where we are more indexed than other players due to our diversified revenue and strong relationships with OEMs and franchise dealers. While our business is fundamentally strong and we have confidence in the growth opportunities ahead, particularly around the dealer business, we believe it is prudent to adjust our approach to guidance to reflect changing market conditions. As such, we are suspending full year revenue guidance until visibility improves. To give some color in the absence of an outlook range, we do expect Q2 revenue to be up year-over-year and quarter over quarter. We also continue to expect full year revenue to be up year-over-year, driven by growth initiatives related to greater product adoption, repackaging, and product innovation, including DealerClub. Growth for the year is expected to be back half-weighted as subscription-based revenue compounds in later quarters.

Setting aside external volatility, we remain firmly in control of our cost structure and operational levers. Adjusted EBITDA margin for the second quarter of 2025 is expected to be between 27%-29%, roughly flat year-over-year at the midpoint, reflecting revenue mix and marginally higher investments in our stated growth initiatives. We are also reaffirming an adjusted EBITDA margin outlook for fiscal 2025 between 29%-31%. Consumers and dealers are increasingly gravitating to our platform, and upcoming product releases and enhancements to our commercial approach should further amplify our platform differentiation and appeal. Despite some market uncertainty, our business remains strong, and we are confident in our ability to deliver full year growth. With that, I'd like to open the call for Q&A. Operator?

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Should you have a question, please press Star one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press Star two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Naved Khan of B. Riley Securities. Your line is already open.

Naved Khan (Managing Director)

Hi. Thank you very much. I have two questions. One, understanding that the tariffs have created a ton of uncertainty for the different players, including the OEMs, the dealers, and the marketplaces. I'm just trying to sort of understand the impact, and it seems like it could be twofold.

One is obviously the dealer and OEM ad spending on the platform, and the second is maybe driven by how the used car volumes might be affected, may or may not be affected because of the tariffs. Trying to understand the relative magnitude and the uncertainty in these two buckets. The second question I have is around Accu-Trade, but I'll save it after you answer the first one.

Alex Vetter (CEO)

Sure, Naved. Thanks for the questions. First of all, on the consumer side, certainly the tariff news has pulled forward a lot of pent-up demand of consumers flocking to the marketplace, looking for deals and looking to lock in purchases before tariffs are impacted. We are seeing very favorable consumer traffic trends.

We think with inventory shortages, like we saw during the COVID pandemic, when there's limited supply, marketplaces also get elevated traffic levels because consumers search far wider radius. We have a ton of degree of confidence that organic traffic trends we think are going to persist throughout this year and give us a tailwind of natural consumer usage and value delivery for our customers. I think, obviously, on the dealer side, we're feeling very front-footed. We grew marketplace in February and March. We see positive sentiment from dealers that are leaning into technologies like Accu-Trade and using DealerClub to source used cars, fearing that they won't be able to get new car supply. Fundamentally, on the dealer side, we see a lot of health. On the OEM side, I think that's where it's much harder to predict.

We had a large OEM say that their upfront commitment, they're no longer committed. They think they'll spend the money, but they want to move to month-to-month until they get better visibility. It is really that uncertainty on the OEM side that gives us pause on our full year view because that had been a nice growth engine for the business all of last year. Even this year, we grew OEM revenue in the first quarter 6%. We feel good about the business, but the signals that we're getting give us less certainty on their commitment.

Naved Khan (Managing Director)

Okay, great. My follow-up question was around Accu-Trade. I think you, on the last call, had announced some endorsements, and you were optimistic of winning even more endorsements through the course of 2025.

I wanted to get a sense of how we should think about the growth in customer count. Sequentially, I think the numbers look flat. Wondering if there's a lag there in terms of endorsements translating into dealer wins or maybe is there something in terms of elevated churn that might be eating away into the basis? Any color would be helpful. Thanks.

Alex Vetter (CEO)

No, first of all, I think we feel very confident about Accu-Trade and our growth potential. We flagged the numbers in terms of usage growth over the quarter, which fundamentally signals dealers' behavioral change is shifting aggressively to sourcing inventory differently from their service-lane customers and also sourcing from marketplaces like Cars.com. We've actually seen elevated interest in both Accu-Trade and DealerClub in the current period because dealers are not confident that they're going to get steady new car supply.

It's slower to ramp on solutions because of the onboarding, training, and engagement that we need from the dealership to install Accu-Trade and get them using it. Fundamentally, we feel very good about the inbound interest that we're getting with Accu-Trade and the sentiment we're getting from the dealers that are using, particularly the power dealers, right? We flagged that the top quartile of dealerships are acquiring 50 cars a month using our software. As word of that spreads to other dealers, we anticipate more adoption.

Sonia Jain (CFO)

Maybe one other thing to just add related to the endorsements. Those do take kind of a little bit of time to season in the market. We were expecting to see more impact from those endorsements rolling into our Q2 numbers versus Q1.

I think from where we sit today, looking at kind of April and the way April shook out, we're feeling good about kind of that upward trajectory in terms of net new Accu-Trade units in addition to the utilization metrics that Alex talked about, which really supports strong long-term retention.

Naved Khan (Managing Director)

Very helpful. Thank you.

Operator (participant)

Your next question comes from Rajat Gupta of JPMorgan. Your line is already open.

Rajat Gupta (Analyst)

Great. Thanks for taking the question. I just have a couple. Firstly, on the first quarter results, clearly good progress here on several fronts. Dealer count going up as well. I mean, you were pretty much in line with your guidance for revenue, but clearly well ahead on the EBITDA. I was curious, was there some proactive measures that you had started to take maybe in March around cost and investments as the tariff news started to gain traction?

I was just curious what drove the margin upside versus your initial expectation. I just have a quick follow-up. Yeah.

Sonia Jain (CFO)

No, thanks for the question, Rajat. I think in terms of EBITDA, we've always really focused on managing the cost structure of the business well. I'd point out to a couple of different things related to where adjusted EBITDA margins landed. I think number one, we're excited about the progress we've made in the DealerClub integration process, but the cost did come in a little bit lower than we'd originally planned. We've been able to move quickly and efficiently. OpEx was just generally flat on a year-over-year basis on an adjusted basis. That's just general cost discipline. We did make some adjustments late in the quarter.

These are actually unrelated to tariffs, more focused around how we want to run the business and tighten up our areas of focus. We did make a targeted headcount reduction. That's less of an impact to Q1 in terms of a benefit from a cost structure perspective, more something that you would see in the following quarters.

Rajat Gupta (Analyst)

Understood. That's very helpful. You mentioned a couple of things around you're starting to see some signals from dealers and OEMs on maybe just changing spending patterns on media. You also guided to second quarter revenue being up. Could you help us tie up those comments? I mean, are you still expecting dealer up and OEM down? Just trying to understand the mix of that. What are you actually seeing on the ground today, like in April, in terms of just incremental customers?

What exactly are the customers saying in terms of spending? Have you already started to see a drop in spending, or is it something you just expect in the second half, maybe? Thanks.

Alex Vetter (CEO)

Yeah, I think that's part of the reason why it's a little bit harder to predict, Rajat, because we are getting mixed signals from both segments. I'd say on the dealer side, we've seen some pullback in media commitments. Dealers have said, "I'm not going to run video advertising this quarter. I'm staying on marketplace." In fact, as I mentioned, we grew marketplace in February and March. We are seeing dealers understand the importance of getting their inventory found on our marketplace, but we are seeing a pullback in terms of discretionary or ancillary media solutions running alongside or on top. It's the same on the OEM side. I think we're seeing steady commitment.

1/3 of our OEMs actually increased their spending with us in the quarter, but equally, we saw some of our bigger OEM clients signal to us that they want to move to month-to-month as opposed to lock-in quarterly or six-month commitments until they see a clearer picture. I guess the positive is they still are seeing opportunities with us. They're just unwilling to make the same media commitments. Again, our software solutions rock solid. Websites were up over 100. Dealers aren't pulling back on their websites in any macro environment. Our software tools like Accu-Trade and DealerClub continue to get strong organic growth. It's really the media side that's harder to predict.

Sonia Jain (CFO)

It's the visibility on the media side. It's not as though OEMs and dealers don't see the value in the product and don't want to get in front of consumers.

It's really become, I think, a bit more of a timing question as to when they deploy those funds to maximize kind of impact on the inventory they, in fact, have available to sell.

Rajat Gupta (Analyst)

Understood. Great. Thanks for all the color and good luck.

Operator (participant)

Your next question comes from Tom White of Davidson. Your line is already open.

Tom White (Managing Director and Senior Equity Research Analyst)

Great. Thank you for taking my questions. Maybe hoping you guys could just double-click on the comments just about the improvement in the marketplace business over the course of the quarter, kind of relative to how things were trending exiting last year. I guess I'm just trying to understand the comments around February and March being better sequentially. Is that mostly some of the progress with the independent dealers that you touched on? And what are sort of the drivers of that? Is it sort of sales outreach?

I guess I'm just trying to put that commentary with maybe some of the comments you just made about dealers generally being strong, but there being a little bit of trepidation maybe on some of the media stuff kind of on the side. Yeah, just trying to understand the sequential improvement in marketplace over the course of the quarter.

Alex Vetter (CEO)

Sure, Tom. We've seen this behavior before in the dealer environment where seasonal or macro events can trigger reactionary behavior. Q4 typically is relatively soft. This year, Q4 for us was much softer than we were anticipating as dealers began pulling back rather aggressively. That persisted into January. However, when you saw the consumer demand and consumer traffic levels remained elevated, we started to see dealers blink and realize, "Wait a minute, the market's continuing to grow.

I don't have to overreact here." And we've even seen some of the dealers that we lost in Q4 come back. We saw growth in marketplace in February. We saw growth in marketplace in March, and we continue to see positive trends there heading into Q2. Again, I think where we're seeing more of the softness is saying, "I just want to run on the base marketplace. I'm not going for the $10,000-$15,000 a month media campaign on top of that." Core marketplace metrics, both on the consumer and the dealer side, remain strong.

Sonia Jain (CFO)

Maybe one clarifying comment, because we do have a marketplace package that's called the base package, is we still see we haven't seen any material change in the tier distribution of our packages. To Alex's point, they want marketplace. They want to be in the package they're in on marketplace.

We continue to skew up tier from a package perspective. It's just those ancillary media attach rates feel like they're under a little bit more pressure.

Tom White (Managing Director and Senior Equity Research Analyst)

Okay. That's very helpful. Then maybe just one little housekeeping follow-up. The reported dealer count, is DealerClub included in that? And will it be included in it going forward? Doesn't sound like it, but I just want to make sure. I understand.

Sonia Jain (CFO)

It's not included in the number right now. I think it's still a little bit on the smaller side. Transparently, relative to our subscription business, DealerClub is a transactional business. It doesn't mean that at some point we won't think about these dealer count numbers together. For now, we're trying to present you kind of a clean, more subscription-based number.

Tom White (Managing Director and Senior Equity Research Analyst)

Okay. Thank you very much.

Operator (participant)

Your next question comes from Marvin Fong of BTIG.

Your line is already open.

Marvin Fong (Director)

Great. Good morning. Thanks for taking my questions. First question, just on all the positive activity around Accu-Trade and DealerClub. Maybe two-part question. Just the 2,500 prospects, I believe that was for DealerClub specifically. How quickly does that close? It would seem to me that that's something that could be done a lot faster than the Accu-Trade product. The second part of that question is just on monetization, right? I think DealerClub is currently not really charging for that on the seller side. What are your thoughts there given the interest you're seeing? Do you see now as a time to continue to build market share, or is there a monetization opportunity that you can sort of accelerate there? I have a follow-up.

Alex Vetter (CEO)

Sure, Marvin.

First of all, obviously, the immediate growth to DealerClub, I think, underscores the synergy that the Cars Commerce platform can help bring to the club and enable dealer volume. We've had over 2,500 prospects reach out to inquire more and register for DealerClub. We've been onboarding dealerships aggressively each and every month, and we're excited about that volume. I think, obviously, it's a subset of that that are actually transacting on the platform, but those numbers are growing at 60% per month. We're excited to see that volume. Increasingly, in this environment, sourcing used cars is a real pain point. The fact that dealers can do this far more cost-effectively than the traditional marketplaces that are now charging premiums because of elevated wholesale prices.

There are multiple economic benefits here for dealerships to change their sourcing strategy, and DealerClub is well positioned. In the quarter, we really focused on integration to benefit our Accu-Trade subscribers so that it strengthens Accu-Trade. We shared on the call that now dealers can, with one click, appraise the vehicle, and if they're not interested in retailing it, they can launch it for sale in DealerClub. That workflow improvement creates a lot of efficiency because dealers have to manually enter cars into the other marketplaces. We think that'll strengthen both Accu-Trade and DealerClub volume as well. We've got more initiatives planned on the integration, but preliminarily, I think we've hit a very solid double out of the gates with DealerClub with momentum to come.

Marvin Fong (Director)

That's great. Great to hear.

Second question, just on OEM and national, obviously, understand why that's under pressure. Could you help us understand? I mean, you had previously talked about the strength you had in the upfront. I think you made a comment, though, that upfront may not be actually a firm commitment. As we think about how much of this is a timing modulation versus essentially some commitments might not actually get spent, how much of the upfront commitments are actually at risk? Can you just remind us kind of how much of the total ad spend in a year is typically attributable to the upfront? That would be very helpful. Thanks.

Alex Vetter (CEO)

Sure. Marvin, I think this is more timing than it is anything else. We have even had OEMs signal to us as soon as they get clarity that they can give us equal clarity.

Right now, they're operating week to week, and therefore, their commitments to us at best are month to month. I'm empathetic to their plight and certainly have a ton of respect for the challenges that they're dealing with. To me, it's purely timing. We even saw this with some of the dealer pullback in Q4 and even January. The fact that we're now seeing those same customers reassume work with us because the consumer demand persists and even is elevated gives me confidence that we'll see a similar behavior once the macro news settles down and the picture's clearer for our clients. Sonia, do you want to comment on what percentage total ad spend is attributable to upfronts?

Sonia Jain (CFO)

Yeah. It's somewhere in 50/50 right now.

I think what I would reiterate, what Alex said, I think the challenge at the moment is not that we're getting spend pulled. It's that we're seeing spend shift. Just from a visibility perspective, as we look to give you guys insight into business performance, that certainly creates a little bit more challenge than normal. Again, the quality of the audience wanting to get in front of our in-market audience, that remains of interest. It's really just a timing question of when those dollars come into play.

Marvin Fong (Director)

When you say timing, just to follow up, I mean, you're saying it would still be spent this calendar year, or do you think the shift could move into next year?

Sonia Jain (CFO)

Unfortunately, that's the crux of the challenge. It's hard to say.

As an example, we saw some OEMs who had spend planned in April shift some of that spend into June and July. You are starting to see a little bit of shifting like that, as Alex kind of mentioned. Instead, they are going more to a month-to-month management of their spend. Generally speaking, what I would say is, based on what we know today, based on our Q1 numbers, which were roughly at the midpoint of our guidance range and the growth drivers' performance, we feel good about where we are and the progress we have made. We expect to be up on revenue on a year-over-year basis. We expect to deliver a solid Q2. The visibility and the specificity is a little bit harder to nail down right now.

Marvin Fong (Director)

Okay. That is perfectly understandable. Thanks so much.

Operator (participant)

Your next question comes from Joe Spak of UBS.

Your line is already open.

Joe Spak (Managing Director)

Great. Thank you. I actually wanted to pick up right there on the visibility because I think as you sort of describe the environment, it's understandable about the guidance for the year. Especially, it sounds like there's way more uncertainty in the back half. I do want to, I guess, get a better sense of your true visibility in the near term. I know you ended up providing a little bit more color on Q2, but we've got a little bit over a month and a half left. I thought the subscription stuff, which is like 80% of sales, is pretty low variance in the short term. It doesn't sound like there's any real change there. Just maybe you could sort of go over this again, but how much visibility do you really have on the ad side?

Because you've even said a couple of times they're going month to month, but it would seem like you should have a pretty good sense of that even by now as we're in May.

Sonia Jain (CFO)

I think on the subscription side of the business, like we said, marketplace is growing. We feel confident in our ability to deliver dealer websites. Those were up 100 in the quarter. Accu-Trade is showing strong signals from Q1 rolling into Q2. I think where there is a little bit of uncertainty continues to be on media. Some relatively discreet shifts in spend can have an impact on how those overall numbers do tend to roll up.

I mean, if you look at OEM and national individually and think about that on an annual basis in terms of total revenue, or even on a quarterly basis in terms of total revenue, you can kind of do a little bit of math on what a relatively small change on that number could do to a guidance range.

Joe Spak (Managing Director)

Okay. I mean, is it possible, if not plausible, that OEM national number is down this year?

Sonia Jain (CFO)

We still feel good about the ability to deliver year-over-year growth in the business, which I think would be contingent on seeing growth in both dealer revenue and OEM revenue. I think what's a little bit harder to say right now is a specificity on the range of what that growth is going to look like and in what timeframe that growth is going to be delivered.

On the media side of the business, when you think about some of the audience metrics that we put up for Q1, that gives us confidence. That is what drives that media portion of the business, that high-quality in-market audience, and all the signals are green.

Joe Spak (Managing Director)

Okay. Just the second question. I know you have talked about your exposure to new versus used, and in the past, you have given us that franchise versus independent dealers, which is a good proxy for that, I guess. Maybe you could just remind us of that split. I am also just curious if you can or are willing to provide your estimated revenue split just as it relates to new versus used, if that is even possible.

Alex Vetter (CEO)

Yeah. We do not break it out just because our subscription includes new and used exposure, and so we do not segment it out.

We do mirror the market, right? 15%-20% of our revenue is anchored more on new car-oriented traffic, and the bulk of it is on used. You can infer it, but it mimics sort of vehicle sales volumes between new and used. I think on the franchise-to-indie split, we do not break that out, but I will say there has been increased interest from independent dealers because consumers clearly are looking for more affordable vehicles and more cost-effective options than some of the higher-priced new cars. We are seeing steady pickup on independent dealer volume in the current quarter.

Joe Spak (Managing Director)

Okay. Appreciate it.

Sonia Jain (CFO)

I would say indies are roughly, call it like 1/3 of the marketplace mix.

Joe Spak (Managing Director)

Sorry. What was that?

Sonia Jain (CFO)

Roughly 1/3 of the marketplace mix.

Alex Vetter (CEO)

Current mix is about 1/3 independent.

Joe Spak (Managing Director)

Okay. Thank you.

Operator (participant)

Ladies and gentlemen, as a reminder, if you have a question, please press star one. There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect. Goodbye.