Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cars.com Inc (CARS, Financial) reported a 6% year-over-year increase in Q2 revenue, marking the 15th consecutive quarter of revenue growth.
- OEM and national performance was particularly strong, with a 28% year-over-year increase, driven by increased demand from both new and existing partners.
- The company achieved record free cash flow of $56 million for the first half of 2024, the highest level in three years.
- Cars.com Inc (CARS) expanded its dealer customer base and maintained average revenue per dealer (ARPD), despite industry disruptions.
- The company secured new OEM endorsements, including certifications from Stellantis and Jaguar Land Rover, which are expected to drive future growth.
Negative Points
- The CDK disruption in June significantly impacted sales momentum and delayed product launches, affecting revenue growth.
- AccuTrade subscriber growth did not meet expectations, with challenges in dealer adoption and operational process changes.
- The company revised its full-year revenue growth guidance to 4.5% to 5.5%, down from previous expectations.
- There was a 1% unexpected impact from discrete items related to legacy solutions contracts, affecting Q2 revenue.
- Despite efforts, AccuTrade did not see growth in dealer customers during Q2, and the sales pipeline was affected by the CDK incident.
Q & A Highlights
Q: Can you explain the 1% unexpected impact from a legacy solutions contract and the dynamics leading to higher churn in AccuTrade?
A: The impact was related to legacy contracts in our website business, which are one-time in nature. For AccuTrade, while we made positive changes, dealer adoption was challenging due to operational process changes and turnover at dealerships. We are shifting to an OEM endorsement model to expand accounts, which may result in slower revenue growth but should increase dealer growth over time. - Sonia Jain, CFO and T. Alex Vetter, CEO
Q: How did the CDK disruption impact AccuTrade and what changes are being made?
A: The CDK disruption paused many sales motions, particularly with dealer groups, impacting our sales pipeline. We are focusing on dealer success and onboarding, which has improved product utilization. We are also pursuing OEM endorsements to facilitate growth, which will initially lower revenue but should lead to broader adoption. - T. Alex Vetter, CEO
Q: What is the impact of the CDK incident on your revenue guidance for the second half of the year?
A: The CDK incident caused a temporary disruption, impacting our sales momentum and delaying product launches. This has a compounding effect on our subscription revenue, contributing to a revised revenue growth expectation of 4.5% to 5.5% for the full year. - Sonia Jain, CFO
Q: Can you elaborate on the competitive landscape and Cars.com's advantages?
A: Our traffic is primarily organic, providing true incremental lift to sales performance. Our technology solutions, including websites and AccuTrade, are best in class. Despite slower growth in AccuTrade, it contributes significantly to our growth and platform efficacy, enhancing our profitability and free cash flow. - T. Alex Vetter, CEO
Q: How are you planning to use free cash flow in the second half of the year?
A: We intend to return approximately 50% of second-half free cash flow to shareholders via share repurchases. We believe this approach balances our capital allocation strategy, allowing us to continue debt paydown and pursue M&A opportunities while demonstrating confidence in our business. - Sonia Jain, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
