CI
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 $2,478, reflecting mix impact from D2C Media’s lower ARPD and macro dealer profitability trends .
- UVs fell YoY (24.5M vs. 26.0M) even as overall platform visits rose 2% YoY; highlights shifting traffic dynamics and measurement changes (RudderStack from 2024) .
Financial Results
Summary Financials (GAAP and Non-GAAP)
Segment Revenue Breakdown ($USD Thousands)
KPIs
Guidance Changes
Earnings Call Themes & Trends
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 .