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01/10 00:28
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals: a 6% revenue growth and a strong OEM performance were offset by increased competition and economic risks. The Q&A highlighted concerns about legacy contracts and disruptions impacting revenue guidance. Despite positive share repurchase plans and liquidity, uncertainties around dealer adoption and the CDK disruption weigh on sentiment. Given the market cap of $1.3 billion, a neutral stock price movement is likely, with potential fluctuations within a -2% to 2% range over the next two weeks.
Revenue $179 million, up 6% year-over-year; growth driven by strong OEM performance (up 28% year-over-year) and increased dealer revenue.
Dealer Revenue $160 million, up 4% year-over-year; growth attributed to D2C acquisition and increased adoption of trade and appraisal products.
OEM and National Revenue $16 million, up 28% year-over-year; reflects increased OEM investments in marketing and advertising.
Total Operating Expenses $169 million, up from $156 million year-over-year; increase due to higher product and technology expenditures and D2C operating costs.
Adjusted Operating Expenses $156 million, up roughly 6% year-over-year; reflects increased investments in the business.
Net Income $11 million or $0.17 per diluted share; compared to adjusted net income of $26 million or $0.38 per diluted share, up from $23 million or $0.33 per diluted share year-over-year.
Adjusted EBITDA $50 million, up $5 million or 10% year-over-year; driven by strong operating leverage.
Adjusted EBITDA Margin 28.2%, in line with guidance; reflects revenue growth and disciplined investments.
Free Cash Flow $56 million year-to-date, up $11 million year-over-year; driven by improved adjusted EBITDA and lower cash taxes.
Total Debt Outstanding $475 million as of June 30, 2024; down from previous levels, with total net leverage at 2.1 times, down from 2.3 times year-over-year.
Total Liquidity $304 million as of June 30, 2024; provides ample resources for growth strategy.
Average Revenue Per Dealer (ARPD) $2,474, up slightly year-over-year; driven by increased product penetration.
Accu-Trade: Accu-Trade's subscriber growth in Q2 did not meet expectations, but significant progress was made in initiatives to enhance engagement and appraisal volume, leading to nearly 100% retention for users who enrolled in April and May.
DI Website Redesign: A new DI website redesign has yielded double-digit gains in consumer traffic, engagement, and conversion for pilot sites.
Accu-Trade Trade-in Website Application: The redesigned Accu-Trade trade-in website application drives high-quality leads to dealers and grew 40% quarter-over-quarter.
OEM Revenue Growth: OEM revenue grew 28% year-over-year, with over 2/3 of OEM customers increasing their spending on Cars.com products.
New Customer Acquisition: New EV entrants INEOS and Rivian became customers in Q2, alongside past success with Tesla.
Dealer Customer Growth: Despite disruptions, dealer customer count grew sequentially, with a focus on cross-selling solutions.
Free Cash Flow: Free cash flow grew to $56 million for the first six months of 2024, the highest level in 3 years.
Adjusted EBITDA: Adjusted EBITDA was $50 million, up 10% year-over-year, with an adjusted EBITDA margin of 28.2%.
Operating Expenses: Total operating expenses were $169 million, up from $156 million a year ago, primarily due to increased product and technology expenditure.
OEM Partnerships: Cars.com is transforming OEM relationships, with a focus on deepening product differentiation and expanding partnerships.
Accu-Trade Strategy: Efforts to drive Accu-Trade adoption are underway, with a focus on improving dealer satisfaction and retention.
Share Repurchase Strategy: Cars.com intends to return approximately 50% of second half free cash flow to shareholders via share repurchases.
CDK Cyber Incident Impact: The CDK cyber incident in June disrupted dealership operations, leading to paused sales conversations and product launches, which resulted in considerable loss of sales momentum.
Revenue Guidance Impact: The company expects a 1% to 2% revenue impact in Q3 due to the CDK incident, affecting both lost sales and delayed product launches.
Accu-Trade Subscriber Growth: Accu-Trade's subscriber growth did not meet expectations, indicating challenges in driving adoption despite improvements in onboarding and support.
Competitive Pressures: Increased competition for consumer awareness is noted, particularly as vehicle supply rises, which may affect market positioning.
Economic Factors: The overall economic environment and industry-wide disruptions pose risks to maintaining growth and profitability.
Regulatory Issues: The company referenced risks associated with regulatory factors in their SEC filings, although specific issues were not detailed in the call.
Revenue Growth: Q2 revenue was up 6% year-over-year, reaching record year-to-date revenue in the first half of 2024.
OEM Business Growth: OEM revenue grew 28% year-over-year, with over 2/3 of OEM customers increasing their spending.
Accu-Trade Initiatives: Accu-Trade's onboarding process enhancements led to a 31% increase in appraisals per dealer.
New OEM Endorsements: Accu-Trade was certified by Stellantis Digital and selected by Jaguar Land Rover as their exclusive trade and appraisal solution.
Digital Website Growth: Grew to nearly 7,520 customers in Q2, with D2C becoming the number 1 dealer website provider in Canada.
Q3 2024 Revenue Guidance: Expected revenue in the range of $178 million to $181 million, reflecting 2% to 4% year-over-year growth.
Q3 2024 Adjusted EBITDA Margin Guidance: Expected adjusted EBITDA margin between 26.5% and 28.5%.
FY 2024 Revenue Growth Guidance: Revised expectation of 4.5% to 5.5% revenue growth for the fiscal year.
FY 2024 Adjusted EBITDA Margin Guidance: Reaffirming adjusted EBITDA margin outlook between 28% to 30%.
Share Repurchase Program: During the second quarter, Cars.com repurchased 300,000 shares for $4.9 million, bringing first half repurchases to $14 million. The company has $105 million remaining on its current share repurchase authorization and intends to return approximately 50% of second half free cash flow to shareholders via share repurchases.
The earnings call reveals several negative factors: missed EPS expectations, suspended revenue guidance, and regulatory/supply chain challenges. The Q&A section highlights uncertainty in ad spending and management's unclear responses. Despite positive aspects like share repurchases and cost discipline, the overall sentiment is negative, especially with the market cap indicating a small-cap stock, which tends to react strongly to negative news.
The earnings call presents a generally positive outlook with a record revenue, strong OEM growth, and high EBITDA margins. Share repurchases indicate confidence in stock value. Despite some challenges like dealer count decline and CDK outage, management's optimistic guidance and strategic growth initiatives, especially in OEM and AccuTrade, suggest potential for stock appreciation. The market cap indicates a small-cap stock, which may react strongly to positive news. Overall, the sentiment leans positive, with potential for a 2% to 8% stock price increase.
The earnings call presented mixed signals: a 6% revenue growth and a strong OEM performance were offset by increased competition and economic risks. The Q&A highlighted concerns about legacy contracts and disruptions impacting revenue guidance. Despite positive share repurchase plans and liquidity, uncertainties around dealer adoption and the CDK disruption weigh on sentiment. Given the market cap of $1.3 billion, a neutral stock price movement is likely, with potential fluctuations within a -2% to 2% range over the next two weeks.
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