CarGurus, Inc. Q2 FY2025 earnings call

• Delivered outstanding Q2 financial results with double-digit revenue growth and expanding profitability in U.S. and International Marketplace. - Marketplace revenue grew 14% y/y driven by net new dealers, wallet share expansion, and improved retention. International business had 28% y/y revenue growth with momentum in Canada and U.K. - Wound down CarOffer transactions business but retained underlying technology for sourcing strategy. - Focused on providing dealers data-driven solutions for smarter sourcing, etc. - Innovated across consumer journey with CG Discover, sponsored content, user experience enhancements. - Digital Deal adoption grew to ~12,000 dealers globally, driving higher leads and actions.

Marketplace revenue was $222 million for the second quarter, up 14% year-over-year. International business revenue was up 28% year-over-year. Wholesale revenue was approximately $6 million, down 52% year-over-year, and product revenue was roughly $6 million, down 45% year-over-year. Marketplace adjusted EBITDA grew 31% year-over-year to approximately $80 million, while Digital Wholesale adjusted EBITDA loss was approximately $3 million. Marketplace non-GAAP gross profit was up 13% year-over-year with non-GAAP gross margin roughly flat at 93%, while Digital Wholesale non-GAAP gross margin was up about 460 basis points year-over-year.

• Expect Q3 Marketplace revenue to be $228M-$233M, up 12%-14% y/y. - Non-GAAP Marketplace adjusted EBITDA expected $76.5M-$84.5M, up 9%-20% y/y. - Wind-down related charges in H2 2025 expected $14M-$19M. - Third quarter non-GAAP consolidated EPS expected $0.50-$0.58, up 14%-32% y/y. - Board approved $150M increase to share repurchase authorization with $15.5M remaining under prior authorization.

• Market volatility exposed structural limitations in CarOffer's transaction model. - Macroeconomic uncertainties like tariffs and interest rates affecting dealer and consumer behavior. - Competitive threats from new entrants like Amazon in the automotive marketplace space.

Q: How to think about dealer count/revenue per dealer and white space with current product suite?

A: Jason Trevisan said there's runway for existing products with cross-sell penetration opportunities, especially with dealer engagement in insights/analytics and new product introductions like VIN-level targeting and new cars.

Q: Thoughts on macro with tariffs and used supply?

A: Jason Trevisan said used inventory is up but not pre-COVID, and sourcing intelligence from CarOffer has upside for dealers.

Q: Broader macro and customer anxiety?

A: Jason Trevisan said tariffs create uncertainty, but AI is embraced for efficiency and consumer experience has human layer hard to replicate by AI.

Q: Clarification on CarOffer wind-down costs?

A: Jason Trevisan said $1M quarterly is recurring expenses absorbed by Marketplace, wind-down costs $14M-$19M with onetime/restructuring and wind-down ops, some noncash charges.

Q: Amazon as competitive threat and international focus?

A: Jason Trevisan said focus remains on Canada and U.K. for now, Sam Zales noted low volume from Amazon with dealers and trust in CarGurus' ecosystem.

Q: AI search traffic and dealer retention?

A: Jason Trevisan said low AI search adoption but growing, Sam Zales said retention improved due to dealer data insights and consultative engagement with dealers.