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Cars.com Inc. (CARS)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $179.7M (+3.1% YoY) and Adjusted EBITDA was $51.1M with a 28.5% margin, landing at the top of Q3 margin guidance; revenue fell within the guided $178–$181M range. This marks 16 consecutive quarters of revenue growth and continued operating discipline .
  • GAAP diluted EPS was $0.28; Adjusted diluted EPS was $0.41. The YoY increase in GAAP net income was primarily driven by the change in fair value of contingent consideration from prior acquisitions .
  • OEM & National revenue grew 17% YoY to $17.0M, while Dealer revenue grew 2% YoY; AccuTrade Connected subscriptions reached ~950, and platform engagement remained robust (Traffic 154.2M visits; >60% organic) .
  • FY 2024 guidance reaffirmed: revenue growth 4.5%–5.5% and Adjusted EBITDA margin 28%–30%; Q4 outlook calls for high single-digit YoY growth in OEM & National and modest Dealer growth, with an expected ~30% Adjusted EBITDA margin exit-rate for Q4 .
  • Capital deployment remains active: repurchased 1.2M shares (~$21M), about 45% of quarterly free cash flow; net leverage at 2.0x and total liquidity of $329.6M support continued buybacks and investment in product and technology .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA margin was 28.5%, at the high end of guidance, underscoring cost discipline and operating leverage: “We’re pleased to deliver…strong Adjusted EBITDA margin of 28.5% at the high end of our guidance” — CFO Sonia Jain .
  • OEM & National revenue rose 17% YoY to $17.0M, with record incremental wins and broad spend increases across partners; sets up for 2025 upfront strength .
  • AccuTrade momentum: ~950 AccuTrade Connected dealers; appraisals rose to 671,000 (+5% QoQ), and dealers acquired ~40% more vehicles per month YoY via AccuTrade, boosting profitability and turn .

What Went Wrong

  • Dealer customers declined QoQ (19,255 vs. 19,390 in Q2) amid CDK DMS outage effects and dealer profit normalization pressures; company noted recovery starting in October .
  • ARPD declined 3% YoY to $2,478, reflecting mix impact from D2C Media’s lower ARPD and macro dealer profitability trends .
  • UVs fell YoY (24.5M vs. 26.0M) even as overall platform visits rose 2% YoY; highlights shifting traffic dynamics and measurement changes (RudderStack from 2024) .

Financial Results

Summary Financials (GAAP and Non-GAAP)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$180.176 $178.894 $179.651
Diluted EPS (GAAP) ($)$0.01 $0.17 $0.28
Adjusted EPS (diluted) ($)$0.43 $0.38 $0.41
Adjusted EBITDA ($USD Millions)$52.673 $50.425 $51.131
Adjusted EBITDA Margin (%)29% 28% 28.5%

Segment Revenue Breakdown ($USD Thousands)

SegmentQ1 2024Q2 2024Q3 2024
Dealer$161,815 $159,843 $159,513
OEM & National$15,307 $15,828 $17,014
Other$3,054 $3,223 $3,124
Total Revenue$180,176 $178,894 $179,651

KPIs

KPIQ1 2024Q2 2024Q3 2024
Average Monthly Unique Visitors (Millions)28.3 26.1 24.5
Traffic (“Visits”) (Millions)171.4 158.1 154.2
ARPD ($)$2,505 $2,474 $2,478
Dealer Customers (Count)19,381 19,390 19,255

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (Q3 2024)Q3 2024$178–$181M Actual $179.7M (within range) Achieved within range
Adjusted EBITDA Margin (Q3 2024)Q3 202426.5%–28.5% Actual 28.5% (top of range) Raised vs guidance band (achieved top end)
Revenue Growth (FY 2024)FY 20244.5%–5.5% (revised at Q2) Reaffirmed 4.5%–5.5% Maintained
Adjusted EBITDA Margin (FY 2024)FY 202428%–30% Reaffirmed 28%–30% Maintained
OEM & National RevenueQ4 2024N/AHigh single-digit YoY growth expected New
Dealer RevenueQ4 2024N/AModest YoY growth expected New
Adjusted EBITDA Margin Exit-RateQ4 2024N/A~30% exit-rate expected New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AccuTrade adoption & impactQ1: Growth in digital experience and AccuTrade; ARPD +5% YoY . Q2: AccuTrade certified by multiple OEMs; Q3 outlook noted slower AccuTrade Connected subs .~950 AccuTrade Connected; 671k appraisals (+5% QoQ); ~40% more vehicles acquired per month YoY; OEM endorsements driving sales .Improving adoption and conversion; OEM endorsement tailwind.
OEM & National revenueQ1: +13% YoY . Q2: +28% YoY; two-thirds of OEMs raised spend .+17% YoY; record incremental wins; sequential strength vs initial expectation .Strong, lumpy but positive momentum.
Dealer base & ARPDQ1: 19,381 dealers; ARPD $2,505 . Q2: 19,390 dealers; ARPD $2,474 .19,255 dealers (down 135 QoQ); ARPD $2,478 (up slightly QoQ; down YoY) .Dealer count pressured; monetization resilient.
CDK DMS outageQ2 outlook: disruption to June/July sales and product launches .Sales pipeline rebooted slower; October growth across products indicates recovery .Recovering in Q4 start.
Media Solutions: VIN Performance Media (DPM)Not highlighted in Q1; Q2 cadence on websites and media .Subscriber base almost quadrupled since Q1; >$3M annualized revenue; improved inventory turn and days listed .Rapid adoption; measurable dealer ROI.
AI/technology initiativesQ1/Q2: platform differentiation and product development .AI translation (>100 languages) for dynamic auto content; infra upgrades doubled site speed .Enhancing product performance and scale.
Marketplace engagementQ1: Traffic +4% YoY . Q2: Traffic +1% YoY .62% organic traffic; high-intent audience, repeat visitation +4% QoQ; leads/visit +7% QoQ; New Car Hub 7x lead conversion .Strong organic reach and conversion quality.
Macro & regional factorsQ2: Revised FY revenue growth to 4.5%–5.5% given AccuTrade pace and CDK impact .Hurricanes caused temporary demand dips; 30-day lagged rebound in impacted regions .Transient regional volatility; demand rebounds.

Management Commentary

  • “Revenue grew 3% year-over-year, our 16th consecutive quarter of growth… OEM revenue grew 17% year-over-year… adjusted EBITDA margin of 28.5% at the top of our guidance range” — Alex Vetter, CEO .
  • “We’re pleased to deliver another quarter of revenue growth, as well as strong Adjusted EBITDA margin of 28.5% at the high end of our guidance… year-to-date free cash flow to $104 million, the highest level in three years” — Sonia Jain, CFO .
  • “Our marketplace influenced around 30% of dealer unit sales in a sample this quarter… Average revenue per dealer grew slightly quarter-over-quarter” — Alex Vetter .
  • “We powered over 7,650 dealer websites… became the #1 franchise dealer website provider in Canada… deployed new AI translation capability for over 100 languages” — Alex Vetter .
  • “We’re reaffirming our fiscal year 2024 outlook of 4.5% to 5.5% revenue growth… Adjusted EBITDA margin outlook remains at 28% to 30%… expect to exit Q4 with adjusted EBITDA margin of approximately 30%” — Sonia Jain .

Q&A Highlights

  • Dealer demand and CDK outage: Sales momentum returned across Marketplace and solutions in October; one remaining enterprise client still resolving remedies; overall platform momentum improving .
  • Marketing spend pacing: Sequential opportunity to dial back in Q4 due to seasonality and absence of Q3 event costs; consistent ROI focus .
  • Dealer revenue dynamics: October dealer growth across products; higher-tier marketplace package penetration increased from 68% to 75% YoY, supporting monetization .
  • OEM line visibility: Lumpy by nature; picked up earlier penalties rebooked as media; strong demand across clients; constructive setup for 2025 upfronts .
  • VIN Performance Media adoption: Several hundred dealers; flat monthly fee pricing; benefits include targeted weight on aging inventory, higher turn rates, improved economics .
  • Macro/regional impacts: Hurricanes caused short-term traffic/demand pauses followed by stronger replacement vehicle demand; dealers increasingly prioritize street-buying via AccuTrade for higher gross profit per unit .

Estimates Context

  • S&P Global consensus estimates for Q3 2024 were unavailable at the time of this analysis due to data access limits, so we cannot provide direct EPS and revenue comparison to Street estimates [GetEstimates error].
  • As a proxy, actual results were measured versus company guidance: revenue of $179.7M fell within the guided $178–$181M range and Adjusted EBITDA margin of 28.5% achieved the top of the guided 26.5%–28.5% range; this should be supportive for near-term estimate stability on margins and potentially modest OEM line-upward adjustments .

Key Takeaways for Investors

  • Q3 execution was solid: revenue within range and margin at the top end; the OEM channel continues to provide outsized growth and a constructive setup for 2025 .
  • AccuTrade traction and OEM endorsements are translating to higher appraisal volumes and better inventory sourcing economics, an important structural driver of dealer profitability across cycles .
  • Monetization resilience: ARPD ticked up QoQ despite dealer count pressure; mix shift to higher-tier marketplace packages supports pricing power .
  • Buybacks and balance sheet flexibility: 1.2M shares repurchased (~$21M); net leverage 2.0x and liquidity $329.6M provide ample capacity for continued capital returns and product investment .
  • Near-term trading: Evidence of October rebound post-CDK and strong OEM growth may be a catalyst into Q4; watch for Q4 margin exit-rate (~30%) confirmation and upfronts commentary on 2025 OEM commitments .
  • Medium-term thesis: Platform breadth (Marketplace, Dealer Websites, AccuTrade, Media Solutions) and AI-enabled enhancements strengthen differentiation, support recurring revenue growth, and sustain margin expansion within the reaffirmed 28%–30% framework .
  • Risk watch: Dealer profit normalization and macro shocks (e.g., regional weather impacts) can pressure dealer budgets and customer count; management’s focus on ROI and automation tech adoption aims to offset these headwinds .

Sources: earnings press release and 8-K with exhibits ; Q3 2024 earnings call transcript ; prior-quarter press releases .