Cars.com Inc. (CARS) is an audience-driven technology company empowering the automotive industry. The company simplifies everything about car buying and selling with powerful products, solutions and AI-driven technologies that span pre-retail, retail and post-sale activities, enabling more efficient and profitable retail operations.

Business Overview

The company's platform is organized around four industry-leading brands: the flagship automotive marketplace and dealer reputation site Cars.com, award-winning digital retail technology and marketing services from Dealer Inspire, essential trade-in and appraisal technology from AccuTrade, and exclusive in-market media solutions from the Cars Commerce Media Network.

Financials

In the fiscal year ended December 31, 2023, Cars.com reported annual revenue of $689.18 million and net income of $118.44 million. The company generated annual operating cash flow of $136.72 million and free cash flow of $115.84 million, showcasing the strength of its business model.

Looking at the first quarter of 2024, Cars.com delivered solid financial results. Revenue increased 8% year-over-year to $180.18 million, driven by growth across both the Dealer and OEM and National segments. Dealer revenue grew 8% to $161.82 million, while OEM and National revenue increased 13% to $15.31 million.

The company's diversified platform strategy continues to pay dividends, with strong performance across its key business lines. In the Dealer segment, Cars.com saw increased adoption of its digital solutions, including website creation and hosting, as well as its trade-in and appraisal technology, AccuTrade. The OEM and National segment benefited from renewed investments from automakers seeking to connect with in-market shoppers amid rising inventory levels.

Adjusted EBITDA for the first quarter was $53.0 million, with an adjusted EBITDA margin of 29.2%, reflecting the inherent profitability of the company's platform model and disciplined approach to growth. Net income for the quarter was $0.78 million, or $0.01 per diluted share.

Key Operating Metrics

The company's key operating metrics also demonstrated progress. Average monthly unique visitors to the Cars.com platform reached 28.3 million in the first quarter, while the number of dealer customers stood at 19,381, down slightly from the prior quarter but expected to grow for the full year. Monthly average revenue per dealer (ARPD) increased 5% year-over-year to $2,505, driven by the company's marketplace repackaging initiative and growth in its AccuTrade product.

Outlook

Looking ahead, Cars.com provided guidance for the second quarter of 2024, expecting revenue in the range of $181 million to $183 million, representing year-over-year growth of 7% to 9%. The company anticipates adjusted EBITDA margin between 27.5% and 29.5% for the second quarter, reflecting additional investments to support its marketplace brands and product development initiatives.

For the full year 2024, Cars.com reaffirmed its guidance of 6% to 8% revenue growth and adjusted EBITDA margin between 28% and 30%. The company's diversified product portfolio, efficient marketplace flywheel, and asset-light business model position it well to deliver on these goals and continue its trajectory of sustainable growth.

Recent Developments

One of the key drivers of Cars.com's performance has been its focus on expanding its OEM and National segment. In the first quarter, the company saw a 13% year-over-year increase in revenue in this segment, as automakers sought to raise consumer awareness amid rising inventory levels. The company's ability to connect OEMs with its large and engaged in-market audience has been a significant competitive advantage.

Additionally, Cars.com's digital solutions, such as Dealer Inspire and AccuTrade, have been instrumental in driving growth and improving dealer profitability. The company's focus on cross-selling these products to its dealer customer base has been a key part of its strategy, with dealers who adopt multiple Cars.com solutions seeing their inventory turn over 20% faster on average.

The company's recent acquisition of D2C Media, a leading provider of website and digital advertising solutions in Canada, has also contributed to its first-quarter performance, adding $3.7 million in revenue. This strategic move has expanded Cars.com's geographic reach and product capabilities, further strengthening its position in the automotive technology landscape.

Liquidity

In terms of liquidity, Cars.com remains in a strong financial position. As of March 31, 2024, the company had $31.4 million in cash and cash equivalents, and $195.0 million in available borrowing capacity under its revolving credit facility. The company's recent amendment to its credit agreement, which replaced its term loan and revolving loan with a new $350 million revolving facility, has further bolstered its financial flexibility and liquidity.

Conclusion

Looking ahead, Cars.com's diversified platform strategy, strong brand recognition, and focus on innovation position the company well to navigate the evolving automotive industry. The company's ability to deliver value to both dealers and OEMs through its comprehensive suite of products and solutions, coupled with its large and engaged in-market audience, are key competitive advantages that should drive continued growth and profitability.

Overall, Cars.com's first-quarter performance and guidance for the remainder of 2024 demonstrate the strength and resilience of its business model. The company's diversified platform, efficient operations, and strong liquidity provide a solid foundation for sustainable growth in the years to come.