Cars.com, Inc. ((CARS)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Cars.com, Inc. presented a mixed sentiment, highlighting both achievements and challenges. The company reported strong performance in audience growth, dealer count, and product adoption, particularly in the Dealer Club and AccuTrade segments. However, these positive aspects were tempered by a decline in revenue, uncertainty in OEM ad spending, and pressured dealer revenue. The suspension of full-year revenue guidance further underscored the uncertainties faced by the company.
Record Unique Visitors
The Cars.com marketplace achieved a milestone with a record 29 million average monthly unique visitors in the first quarter. Overall traffic reached 70 million visits, marking a 1% year-over-year increase after adjusting for an extra leap day in 2024. This growth underscores the platform’s strong consumer engagement and market presence.
Strong Growth in Dealer Club and AccuTrade
The Dealer Club saw a significant increase in active users, with a 60% rise in its first two months of integration. Additionally, AccuTrade appraisal volume grew by 16% quarter over quarter, with over 813,000 appraisals conducted in Q1. These figures highlight the successful adoption and integration of these services within the company’s offerings.
OEM Business Growth
The OEM business experienced a 6% year-over-year growth, reflecting the value automakers place on the high-quality end market audience provided by Cars.com. This growth is a positive indicator of the company’s ability to attract and retain OEM partnerships.
Share Repurchase and Cash Flow
Cars.com repurchased $22 million worth of shares during the first quarter, supported by strong free cash flow. This move aligns with the company’s capital return commitments for the year, showcasing its financial health and strategic focus on shareholder value.
Successful Dealer Growth
The dealer count increased to 19,250, marking the best quarter of sequential organic customer growth since mid-2022. This growth is indicative of the company’s successful efforts in expanding its dealer network and enhancing customer relationships.
Revenue Decline and Uncertainty
Despite the positive developments, first-quarter revenue saw a slight year-over-year decline. The company suspended its full-year revenue guidance due to uncertainties stemming from tariffs and media spending trends, highlighting the challenges in forecasting future performance.
Pressured Dealer Revenue
Dealer revenue decreased by 2% year over year, primarily due to a softer than normal start to the year for the marketplace and pressure on media products such as in-market video. This decline reflects the challenges faced in maintaining dealer revenue streams.
OEM Spending Uncertainty
While OEM revenue grew by 6%, some OEMs have shifted to month-to-month spending commitments due to uncertainty, impacting visibility on future ad spending. This shift poses challenges for the company in planning and forecasting future revenue.
Adjusted EBITDA Margin Pressure
The adjusted EBITDA performance of $51 million in Q1 was slightly down year over year, with a margin of 28.3% that exceeded outlook but still reflects revenue mix challenges. This indicates ongoing pressure on profitability despite exceeding margin expectations.
Forward-Looking Guidance
During the earnings call, Cars.com provided detailed guidance on various financial metrics and strategic initiatives. The company reported a revenue of $179 million, aligning with their guidance range, and highlighted an adjusted EBITDA that exceeded expectations by over a point. Despite the suspension of full-year revenue guidance due to uncertainty in dealer and OEM ad spending, Cars.com reaffirmed its adjusted EBITDA margin guidance for fiscal 2025 between 29-31%, supported by strong consumer engagement and product innovation.
In conclusion, the Cars.com earnings call reflected a mixed sentiment, balancing strong growth in audience and product adoption with challenges in revenue and market uncertainties. The company’s strategic initiatives and financial health remain robust, but the suspension of full-year guidance highlights the need for caution in navigating future uncertainties.