• Revenue: $180 million, up 3% year-over-year.
• Dealer Revenue: $160 million, grew 2% year-over-year.
• OEM and National Revenue: $17 million, up 17% year-over-year.
• Adjusted EBITDA: $51 million, up 3% year-over-year.
• Adjusted EBITDA Margin: 28.5%, at the top of guidance range.
• Net Income: $19 million or $0.28 per diluted share.
• Adjusted Net Income: $28 million or $0.41 per diluted share.
• Operating Expenses: $168 million, up 5% year-over-year.
• Adjusted Operating Expenses: $156 million, up 4% year-over-year.
• Dealer Customers: 19,255, down 135 quarter-over-quarter.
• Average Revenue Per Dealer (ARPD): $2,478, up slightly quarter-over-quarter.
• Free Cash Flow: $104 million year-to-date, $28 million higher year-over-year.
• Share Repurchases: 1.2 million shares for $21 million in Q3.
• Total Debt: Reduced to $470 million as of September 30, 2024.
• Total Net Leverage: 2x, at the low end of target range.
• Total Liquidity: $330 million as of September 30, 2024.

• Warning! GuruFocus has detected 4 Warning Signs with CARS.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cars.com Inc (NYSE:CARS) achieved a 3% year-over-year revenue growth, marking the 16th consecutive quarter of growth and setting a new record for Q3 revenue.
• OEM revenue grew 17% year-over-year, reaching a new 3-year high, driven by broad demand from partners.
• AccuTrade returned to positive quarter-over-quarter subscriber growth, with appraisal volume rising 5% quarter-over-quarter.
• The company maintained a strong adjusted EBITDA margin of 28.5%, at the top of their guidance range.
• Cars.com Inc (NYSE:CARS) saw significant growth in their digital website experience and media solutions, becoming the number-1 franchise dealer website provider in Canada.

Negative Points

• Dealer customer count decreased by 135 dealers quarter-over-quarter, reflecting challenges from a third-party DMS outage.
• Operating expenses increased by 5% year-over-year, with adjusted operating expenses up 4% compared to the same period last year.
• Average revenue per dealer (ARPD) was down $70 year-over-year, attributed to D2C growth which contributes lower average revenue per dealer.
• The company faced pressure from macro trends impacting dealer profitability and budget, affecting sales momentum.
• Despite positive growth in October, the company acknowledged that Q4 is typically a softer period for dealer growth due to seasonal factors.

Q & A Highlights

Q: Can you provide more details on the October dealer count growth? Was it driven by new additions in AccuTrade and D2C, or did you manage to bring back some dealers who had left? A: Our October growth was strong across the board, with increases in marketplace and all product solutions. The DMS impact lasted longer than expected, but October's performance indicates we're moving past it. We have one enterprise client still discussing remedies for the outage, but overall, sales momentum is back. - T. Alex Vetter, CEO

Q: How should we think about marketing spend for Q4? Was the reduction due to seasonality or adjustments because of the outage? A: We aim for the best ROI on marketing and sales investments. We had a favorable comp against last year due to rebranding costs. Sequentially into Q4, there might be some growth in marketing spend, but typically, Q3 events don't repeat in Q4. - Sonia Jain, CFO

Q: Can you elaborate on the dynamics in dealer revenue and the impact of the CDK situation? A: October showed strong dealer growth across all products. Historically, Q4 is softer due to election years, but we're optimistic about growth in all product lines. Our product innovations, like AccuTrade, are driving dealer revenue growth. - T. Alex Vetter, CEO and Sonia Jain, CFO

Q: How did the hurricanes impact business and AccuTrade adoption in the quarter? A: The hurricanes initially halted consumer traffic, but we've seen a rebound with stronger demand. Dealers are increasingly recognizing the profitability of sourcing cars from private sellers over auctions, which is a durable trend benefiting AccuTrade adoption. - T. Alex Vetter, CEO

Q: What is the outlook for AccuTrade dealer growth, and what are OEMs looking for before endorsing AccuTrade? A: We're pleased with AccuTrade's growth and expect consistent dealer additions. OEM endorsements have driven significant sales, and we're in discussions with more OEMs for 2025, which could accelerate growth. - T. Alex Vetter, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.