CarGurus, Inc. is a multinational, online automotive platform for buying and selling vehicles that is building upon its industry-leading listings marketplace with both digital retail solutions and the CarOffer online wholesale platform. The company was founded in 2006 and is headquartered in Boston, Massachusetts.
Company History and Early Growth
CarGurus' history traces back to 2006 when Langley Steinert, the company's co-founder and Executive Chair, recognized the need for a more transparent and data-driven car shopping experience for consumers. Leveraging his prior experience as a co-founder of TripAdvisor, Steinert set out to create an online marketplace that would bring trust, transparency, and competitive pricing to the automotive shopping experience.
In the early years, CarGurus faced challenges as it worked to build brand awareness and gain traction in the crowded automotive marketplace industry. However, the company's focus on delivering value to both consumers and dealers through its data-driven approach began to pay off, and CarGurus steadily grew its user base and dealer network. The company's early focus was on developing proprietary technology, search algorithms, and data analytics to power its online listings marketplace. This enabled CarGurus to quickly gain traction and establish itself as a leading destination for car shoppers and dealers alike. By 2010, the platform had grown to feature over 2 million vehicle listings from over 40,000 dealers across the United States.
Expansion and Diversification
Over the next decade, CarGurus continued to expand its reach, launching operations in Canada in 2014 and the United Kingdom in 2015. The company also diversified its business model, moving beyond its core listings marketplace to introduce new products and services aimed at empowering both consumers and dealers throughout the entire vehicle acquisition and sale process. The company reached a major milestone in 2012 when it launched its first international marketplace in the United Kingdom. This expansion outside of the United States demonstrated CarGurus' ability to replicate its successful model in new markets.
In 2018, CarGurus acquired the online wholesale platform CarOffer, further strengthening its position as a comprehensive automotive marketplace. The CarOffer platform enables dealers to efficiently source, acquire, and sell vehicles through a data-driven, online wholesale marketplace. This acquisition allowed CarGurus to not only connect car shoppers with dealers but also empower dealers to more efficiently source and sell vehicles through a digital platform. The integration of CarOffer with CarGurus' existing marketplace offerings has been a key focus for the company in recent years.
Current Operations
Today, CarGurus operates in the U.S., Canada, and the U.K., serving millions of consumers and thousands of dealers through its integrated suite of marketplace, digital retail, and wholesale offerings. The company's commitment to innovation and delivering value to its stakeholders has driven its growth and transformation into a leading player in the automotive technology landscape.
Financials
Financially, CarGurus has demonstrated strong performance in recent years. In 2023, the company reported annual revenue of $914.2 million, down from $951.4 million in 2021. Net income for 2023 was $36.9 million, compared to $109.2 million in 2021. The company's operating cash flow in 2023 was $124.5 million, with free cash flow of $83.3 million.
For the first nine months of 2024, CarGurus reported revenue of $665.8 million, down 4% year-over-year. However, the company's marketplace revenue grew 14% year-over-year during this period, demonstrating the strength of its core business. Consolidated adjusted EBITDA for the first nine months of 2024 was $170.8 million, up 27% year-over-year.
In the most recent quarter (Q3 2024), CarGurus reported revenue of $231.36 million, up 5% year-over-year. Net income for the quarter was $22.51 million. Operating cash flow for Q3 2024 was $56.20 million, with free cash flow of $56.62 million.
CarGurus operates through two reportable segments: U.S. Marketplace and Digital Wholesale. The U.S. Marketplace segment, which includes revenue from dealer subscriptions, advertising, and partnerships with financing services companies, generated $187.25 million in revenue for Q3 2024, representing 81% of total revenue. The Digital Wholesale segment, which primarily derives revenue from the CarOffer platform, generated $27.34 million in revenue, representing 12% of total revenue.
Liquidity
In terms of liquidity, CarGurus ended the third quarter of 2024 with $246.7 million in cash and cash equivalents, and $390.1 million in available borrowing capacity under its revolving credit facility. The company's balance sheet remains healthy, with a current ratio of 2.95 and a quick ratio of 2.95 as of September 30, 2024. CarGurus has a debt-to-equity ratio of 0, indicating a strong financial position with no long-term debt.
Challenges and Strategic Focus
CarGurus' growth has not been without its challenges, however. In the third quarter of 2024, the company recognized a $16.8 million non-cash impairment charge related to the discontinuation of its CG Buy Online pilot, an initiative that allowed consumers to purchase dealer vehicles directly on the company's platform. This decision was made after a careful review of the company's invested capital base and a determination that the resources could be better deployed to other growth and innovation initiatives.
Despite this setback, CarGurus remains focused on its strategic priorities, which include providing more value to its dealer partners, enhancing the consumer experience, enabling online transactions, and rebuilding and integrating its digital wholesale business. The company's strong market position, diverse product offerings, and ongoing investments in innovation position it well for continued success in the evolving automotive technology landscape.
Performance and Outlook
CarGurus has consistently demonstrated strong performance, exceeding its consolidated adjusted EBITDA guidance in the third quarter of 2024. The company's non-GAAP consolidated adjusted EBITDA grew 33% year-over-year, with the margin expanding by approximately 590 basis points to 28%. Marketplace revenue accelerated, delivering 15% year-over-year growth despite increasingly difficult comparisons to prior year results.
Looking ahead to the fourth quarter of 2024, CarGurus expects consolidated revenue to be in the range of $219 million to $239 million, representing a year-over-year change of -2% to +7%. Marketplace revenue is projected to be between $208 million and $213 million, up 14% to 17% year-over-year. The company anticipates non-GAAP consolidated adjusted EBITDA to be in the range of $72 million to $80 million, with non-GAAP earnings per share expected to be between $0.50 and $0.55.
Conclusion
In conclusion, CarGurus has evolved from a pioneering online listings marketplace to a comprehensive automotive platform, offering solutions that empower both consumers and dealers throughout the vehicle acquisition and sale process. The company's commitment to innovation, strong financial performance, and healthy balance sheet suggest that it is well-positioned to capitalize on the ongoing transformation of the automotive industry. With its focus on key strategic priorities and continued growth in its core marketplace business, CarGurus appears poised for sustained success in the competitive automotive technology landscape.