Cars.com Inc. Q2 FY2024 earnings call

• Revenue grew 6% year-over-year, with Q2 revenue reaching a new second quarter record. OEM and national revenue was robust, up 28% YOY. - Adjusted EBITDA was up 10% YOY, and free cash flow for the first half of 2024 was $56 million, the highest in 3 years. - Impacted by CDK disruption in June, causing sales momentum loss and product launch delays. - Transformed OEM relationships, with over 2/3 of OEM customers increasing spending in Q2. Attracted new EV entrants like INEOS and Rivian. - Accu-Trade subscriber growth didn't meet expectations, but initiatives improved engagement and appraisal volume. Won OEM endorsements such as Stellantis and Jaguar Land Rover. - Website solutions grew to nearly 7,520 customers, with D2C becoming number 1 dealer website provider in Canada.

Dealer revenue was $160 million, up 4% year-over-year, driven by D2C acquisition and increased adoption of trade, appraisal, and website products, contributing 89.4% to total revenue of $179 million. OEM and national revenue was $16 million, up 28% year-over-year, contributing 8.9% to total revenue.

• Q3 2024: Revenue expected $178M-$181M (2%-4% YOY), ~1%-2% impact from CDK. Adjusted EBITDA margin 26.5%-28.5%. - FY 2024: Revenue growth 4.5%-5.5% (reflects D2C acquisition and CDK impact). Adjusted EBITDA margin reaffirmed 28%-30%, midpoint implies 8% YOY growth.

• CDK Disruption: Interrupted sales conversations and product launches in June and July, impacting Q3 revenue due to subscription nature. - Accu-Trade Adoption: Slower than expected adoption, affecting revenue growth and subscription revenue.

Q: Explain 1% unexpected impact from legacy solutions contract and Accu-Trade churn.

A: Sonia Jain explained legacy contract impact was onetime timing issue. Accu-Trade churn due to difficulty in changing dealer operational processes and dealership turnover.

Q: CDK impact on dealer counts and ARPD.

A: CDK caused lost sales momentum, but dealer count grew, and ARPD was impacted by discrete items and D2C's lower price point.

Q: Competitive landscape and advantages.

A: Cars.com has organic traffic advantage, best-in-class website solutions, and Accu-Trade technology with strong platform efficacy.