Q1 2021 Cars.com Inc Earnings Call

And then.

Good morning, and welcome to the cars first quarter 2021 earnings conference call.

This call is being recorded and a live webcast can be found at investor Doc cars Dot com.

A replay of the webcast will be available until may 20th.

A copy of the accompanying slides can also be found on company's investor Relations website.

I'd now like to turn the call over to Robyn more Randolph director of Investor Relations.

Good morning, everyone and thank you for joining us.

My pleasure to welcome you to the cars first quarter 2021 conference call and my first call as cars director of Investor Relations.

With me this morning are Alex Vetter, CEO, and so UGG CFO.

Alex I'll start by discussing our highlights from the quarter and providing an update on our expectations for 2021 then.

And then Sonya will discuss our financial results in greater detail, along with our second quarter expectations, we'll finish the call with Q&A.

Before I turn the call over to Alex I'd like to draw your attention to our forward looking statements and the description and definition of non-GAAP financial measures, which can be found in our presentation.

We will be discussing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin and free cash flow.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the financial tables included with our earnings press release, and India appendix of the presentation.

For more information please refer to the risk factors included in our SEC filings, including those in our annual and quarterly and current reports, which are available on the investors section of our website.

We assume no obligation to update any forward looking statements or information.

Of the respective date now I'll turn the call over to Alex.

Thank you Robyn we're very excited to have you join the team to share with the investment community. The details of our strategy, our growing momentum and the large opportunity ahead of us.

And welcome to our first quarter call, everyone and I'm pleased to share our performance this quarter and the acceleration we've made on our path towards market leadership.

Our momentum continues driven by dealer customer growth and ongoing product adoption, resulting in revenue growth.

COVID-19 is encourage more dealers to embrace digital solutions and they are now increasingly comfortable operating in both physical and digital environments.

Not only are they meeting and shoppers expectations in terms of when where and how they want to shop, but they are also achieving great efficiencies by embracing our market leading digital solutions.

These trends are driving our highest customer growth simply became a public company and the momentum continues across all lines of our business.

We delivered solid year over year revenue growth for the quarter, driven by continued growth and ARPG dealer.

Dealer customers increased sequentially for the third straight quarter. Following Q2 of 2020 when dealers were obviously impacted by the COVID-19 pandemic.

We have now grown our dealer customer base and five of the last six quarters.

Grew our revenue and our adjusted EBITDA year over year, and we expanded our margins, while making disciplined investments to drive future growth.

Our investments focus on ever increasing traffic quality and our value delivery is increasingly evident to dealers.

COVID-19 has made dealers realize that they can't focus solely on the physical showroom and we are now seeing dealers look for more data and insights around the quality of their digital traffic.

Our unique visitors were up 4% year over year this quarter with our continued focus on driving quality traffic and improved attribution. We are seeing the strongest retention rates and growth and dealer customers and shine the dealers increasingly appreciate the value we are delivering.

<unk> Dot com continues to generate traffic far more efficiently than our competitors our brand strength developed over the last 23 years and our product quality are consistently rewarded with organic traffic and.

In fact, our first quarter SCO traffic was record breaking reaching an all time high driven by our continued focus and investment and unique content and product experience.

This organic advantage enables us to generate more ROI from product innovation and customer technology solutions, creating a virtuous cycle of helping dealerships operate more efficiently.

Increasing ROI from high quality organic traffic has proven to be highly sustainable and we continue to generate the majority of our traffic from organic sources.

This is a direct result of our brand strength. The most popular mobile app incredibly strong editorial content and now over 10 million ratings and reviews, a first and our industry and for our company.

Powered by dealer Rater cars Dot Com has the leading car dealer review platform within our competitive set and important distinction is reviews are critical to the car shopping journey and.

<unk>, one and three shoppers won't make a purchase without reading and review because they trust unbiased advice from others like them, especially for a large considered purchase like a car.

Importantly, the pandemic environment spurred faster growth of our reviews with 38% and consumers reporting that they read more reviews because of COVID-19.

Additionally, the number of car shoppers, leaving reviews about local dealers is on the rise March 2021 marked our highest review volume of dealer reviews ever with more than 100000, new reviews and a single month.

The cars Dot com audience represents high quality ready device shoppers and our recent car study consumers, who shopped on cars Dot com and visited a dealer website are two times more likely to buy a car and shoppers who only visited the dealer's website. These shoppers are more deeply engaged and look at 19 more.

Total vehicle detail pages on the dealer's website than a shopper, who goes directly to the dealer website.

And short access to the cars dot com audience helps dealers and Oems and sell more cars faster.

As dealers are now more focused on digital metrics, the strength and quality of our traffic reinforces our platform strength and clarifies attribution.

There is no doubt that this has contributed to our record retention rates.

And we don't take our organic traffic record retention rates and superior brand strength for granted and March we launched our new it's magical campaign focusing on the lasting connection between consumers and their cars with cars has been creating for nearly a quarter of a century.

The campaign builds on our car chemistry position and highlights the art and science behind every car match made on cars Dot com.

This campaign elevates our value proposition by highlighting the breadth and freshness of our inventory intelligent pricing tools reviews editorial content and the overall car shopping experience all of which attract consumers organically to our marketplace.

We launched this multimedia campaign in March with high impact placements throughout the <unk> basketball tournament.

We continue to support our strong value delivery by increasing investments in brand advertising and high value lead generation rather than simply on traffic.

With the strength of our value delivery. This quarter, we were able to keep our marketing expense and lower than planned demonstrating our flexibility to drive strong results through strategic investments.

We are confident that our emphasis on branding and lead generation is a high ROI investment for us as our dealer customer additions and retention rates remained strong.

Our pure and market audience towers, our marketplace and underpins, our dealer and <unk> growth or.

Our products and solutions are designed for and increasingly digital world and show sustainable success supporting the growth of our network of dealer customers to 18823 on increase of 451 dealers over Q4 of last year with.

The strength of our industry, leading digital solutions as evidenced by our record low cancellation rates and highest quarterly growth since 2017.

<unk> has also grown for three consecutive quarters, driven by the success of fuel our dealer inspire products and the cars dot com marketplace.

Our website customers continued to grow reaching 4700 at quarter and to date. Our team has launched approximately three quarters of the pre sold GM dealer website and the momentum continues and we're proud to announce a similar program with four direct giving us the opportunity to sell our website products to over 3004 dealerships.

In the U S. Similarly.

And another GM. This partnership semi exclusive we are one of a few approved partners and the four direct program.

Another one of our fastest growing products fuel continues to set the standard for digital video success across the automotive industry and.

And because of the current inventory situation dealers are now leveraging fuel to source vehicles and manage inventory shortages by advertising for trade ins and instant offers further solidify and fuel is an important part of their marketing mix.

One such fuel customers J D. Dan for a general manager of mainly Honda and Santa Rosa, California. They added vehicle acquisition messaging to their video campaign and within a few months of starting fuel sword and number one on the local market for the first time J D says and I quote fuel has propelled us into the number one position and our market for the first.

Time, and I'm able to brand and message the buyers not just passive listeners reviewers, but buyers here, if those cars dot com and market customers enable the target and message with fuel.

As evidenced by Jd's testimonial fuel continues to deliver value as dealers seek to connect and influence our targeted and market car shopping on.

Moving on.

Our OEM and national revenue came in better than anticipated.

Given the uncertainty around global supply chain disruptions, including chip shortages, we will continue to maintain a more conservative outlook for national advertising.

Keep in mind that new car inventory shortages are helping local dealers maximize pricing and gross profits on both new and used car sales and supply is tight and demand is high.

And the impact on individual Oems will vary not all Oems will be impacted at the same magnitude by these shortages.

Looking at the wider automotive industry trends, we are seeing a significant increase and first time buyers and urban buyers entering the auto market.

And they're entering the auto market with an abbreviated purchase timeline.

Demand for the latest technology and enhanced safety features is driving price increases for both new and used vehicles.

These are durable trends that we believe will help ensure a strong retail environment and 2021.

New car shortages and rising consumer demand are leading to strong used car sales and although we expect new car inventories to fall further with near term production declines due to ongoing semiconductor shortages. This tightening assist dealers and Oems to hold firm on price and it's helping dealers maximize gross profit.

March Saar was $17 75 million and the best month since October of 2017, and the strongest Q1 for retail auto sales and a decade and.

Tumor confidence is also rise and March was the highest since the pandemic a year ago supported by the new round of stimulus checks and and accelerated vaccine rollout, which is another signal for continued strength and 2021.

And April is trending even higher April SAR came in at a record breaking $18 5 million and the highest ever recorded for April <unk>.

Retail sales, specifically are up 21% versus April 2019, and up 111% over last year.

We remain confident and our growth outlook for cars and 2021 and beyond this growth will be even more pronounced and Q2 because of the COVID-19 relief, we provided last year and the momentum we have from growing both dealers and AARP D. Sony.

Tony will provide more detail on our financial expectations. Shortly we anticipate that our investments and product innovation and marketing will continue to fuel the momentum and a favorable top line trends as we enter the second half of the year.

A strong board is also important to our continued success.

To that and we recently announced the addition of GNL Ross to our board of directors. She brings valuable customer centric insight to our board through 28 years of leadership and experience as a dealer owner operator.

And Ella for Nations only second generation African American female auto dealer and was recently named to the automotive news 100, leading women and the North American auto industry.

While other technology companies are seeking to disrupt the local dealer model, where and enabler of dealer success and we are thrilled to have janelle on our board.

In summary, I want to reiterate how pleased I am with the continued momentum and the strong operating and financial results that our team delivered.

And now I'm going to turn the call over to Joan.

Thank you Alec.

And July results I'd like to call your attention to the fact that we have renamed our revenue and category better aligned with our customer type and you may recall and the last and our affiliate contract ended in 2019 and the wholesale retail distinction is no longer relevant and wholesale revenue will no longer be part of our prior period comparison.

And with Q1, we have renamed what was our direct revenue per dealer body and our national advertising revenue to OEM and National revenue No Reclassifications were made between revenue category. This is simply in Inc.

Now moving on to our results, we continued our momentum and the last several quarters and again delivered solid financial results. This quarter top line revenue and adjusted EBITDA growth were strong and we nearly doubled free cash flow year over year.

Revenue for the first quarter was $153 million.

Up 4% year over year, driven by increased Arpus from digital solution sales and underpinned by strong operating performance. Our momentum continues with strong sequential growth and dealer customary and year over year dealer inspire revenue grew 25 per day.

While dealers are benefiting from tighter inventory it is not necessarily and the same for Oems OEM and national revenue and the first quarter was $18 million down $1 3 million or 7% year over year, although OEM and national revenue showed signs of stabilization over the past few quarters recent supply chain does.

Fraction and resulted in reduced advertising spend while our advertising products are best in class and provide Oems with access to a pure and market car buying audience continued disruptions and the new car supply chains may constrain our ability to grow advertising and marketing sales to OEM and the near term.

Now, let's review expenses, our operating expenses for the first quarter were $136 7 million compared to $1 1 billion for the prior year period, or $147 3 million, excluding a noncash goodwill and intangible asset impairment charge of $905 9 million share.

By the COVID-19 pandemic.

Fences were down primarily due to the end of our affiliate revenue share expenses and the second quarter of 2020, coupled with day reduction in depreciation and amortization. In addition, we continue to benefit from cost reductions made and efficiencies identified and implemented in 2020, which provide us the opportunity to make targeted and.

And then and still generate strong adjusted EBITDA growth.

Our brand to drive a high concentration of organic traffic and is one of our greatest strength, we generated 74% of our traffic through organic channel acquire and our brand is a key driver of this organic strength and.

And as Alex mentioned, we invested in brand advertising and the first quarter to support this high value channel.

Right the strategic shift we were able to maintain flat year over year on marketing expense Inc.

Total he spent less than what we had planned on marketing this quarter as we were able to rely on the strength of record traffic for continued delivery of our high value audience and ROI to our D. R.

Recognition of our value proposition is increasingly evident and strong dealer customer growth and retention rates as well as continued improvement and dealer sentiment for it well.

And we'll continue to be prudent with our marketing investment monitoring and Opportunistically allocating channel spend while balancing our total level of investment based on overall value delivery.

Net income for the first quarter of 2021, with $5 3 million or <unk> <unk> per diluted share and adjusted EBITDA was $48 1 million or 31% of revenue compared to $35 2 million or 24% of revenue for the prior year period.

I'll now move on to our key operating metrics that are the foundation of the solid quarterly results. We had 18823 dealer customers at quarter and an increase of two and 5% compared to 18372 dealer customers as of year end 2020. This increase is primarily.

Due to continued strength and retention rates, coupled with solid new sales as Alex mentioned this represents the highest growth and dealer customers since becoming a standalone public company four years ago.

And let's say customers also continued to grow reaching 4700 at the end of the quarter. We continued to rollout. The previously sold GM website and today approximately three quarters of the GM site. Our lives. We are very excited to further strengthen our pipeline with our recently announced partnership with four direct getting 3000 for a dealer.

And the opportunity to subscribe to our award winning website and technology platform and.

And the first quarter, we had 26 million average monthly unique visitors and a $156 6 million visits.

And grew our shopper audience with unique visitors up 4% year over year, while traffic was down just 1% growth and unique visitors was due in part to the recent rebound and consumer confidence and on a record level of SCO visit in addition, and the amount of stimulus checks and continued progress and the vaccine rollout had accelerated into.

And car purchases.

We believe consumer demand for vehicle ownership will remain strong even think cars Dot Com survey indicated significant pent up consumer demand for car ownership.

57% of Americans planning to take a trip up from pre pandemic levels.

70% of those are opting to drive to their destination. The strength of consumer demand is also evident and the April SAR numbers that Alex mentioned earlier and we expect this trend to continue.

<unk> increased 8% year over year, driven by growth and our digital solution fuel, which launched just a year ago has been highly accretive to AARP D. We also see continued strong growth and our web site pollution and these customers are increasingly overlapping with our marketplace customers, which is.

Driving AARP D even higher.

Our PD revenue and profitability will continue to grow as we increase penetration of our digital Felicia and therefore cross selling opportunities are at the top of our priority list as we grow our dealer base.

Our balance sheet and liquidity remains strong supported by a recurring revenue model, let's drive significant free cash flow generation and gives us the financial flexibility to thoughtfully and back in the business and our brand we will continue to invest and the business to drive product penetration innovation and revenue growth.

Net cash provided by operating activities for the quarter with $54 million up 74% compared to $28 9 million and the prior year period free cash flow and the first quarter with $44 1 million up 91% from $23 1 million and the year prior debt.

<unk> improvement and free cash flow was driven by growth and adjusted EBITDA and a $9 million tax refunds received and the first quarter keep in mind, our quarterly cash flows will be impacted by the $12 $8 million of semi annual interest payment on our bonds.

You may burst and November 1st.

Our strong free cash flow generation enabled us to pay down $52 5 million and debt during the quarter, including $50 million and voluntary prepayment as a result, our total debt outstanding was reduced to $545 million as of March 31, bringing our total net leverage down to just two nine times.

Down from three four times net leverage by the end of 2020.

Now turning to our outlook, we are pleased with our current performance and momentum and remain confident and our growth outlook for 2021 for the second quarter of 2021, we expect revenue to be between 152 and $154 million, which reflects continued momentum and our solutions business and strength.

And our core marketplace business our guidance range also reflects some potential risks outside of our control specifically related to ongoing supply chain disruption.

We expect to see strong year over year growth and adjusted EBITDA for the second quarter with adjusted EBITDA margins between 28, and 30% we expect to deliver the strong margin, while increasing investments to support continued growth and the business, including investments to accelerate product innovation and marketing to support our brand and <unk>.

Quality traffic acquisition, when our value delivery and strong E mail pullback on planned marketing spend much of any debt this past quarter.

In summary, our focus on execution and high ROI investment coupled with the growing adoption of our suite of market, leading digital solutions will continue to drive our financial performance and further strengthen our competitive position, we are well positioned for growth and 2021 and beyond and with that I'd like to turn the call.

Back to Alex.

Thank you Sonya.

Our outlook for the industry remains bright and.

Strong consumer demand continued dealer health and our differentiated solution strategy position us well to continue driving growth throughout 2021 and beyond operator, we're now ready to begin the Q&A.

At this time, ladies and gentlemen, if you would like to ask a question. Please go ahead and press star and the number one on your telephone keypad.

And again Thats star one to ask a question.

Our first question today comes from the line of Marvin Fong with PBT, Inc. Please proceed with your question.

Good morning, Thanks for taking my question.

First of all on just on the four direct win congratulations on that just wondering if you could help us understand the dynamics on that.

You were one of the Hollywood lineup with the Gms the genome.

<unk>.

How many incumbents, where they were prior and then also if you could just give us an idea of when potentially.

Dealers can start.

Yes.

Opting into.

To work with dealer inspire what would be the cadence of that rollout that'd be great. Thanks, and then I'll have a follow up.

Sure Marvin Thanks for the question.

The Ford and GM dealers, similar and approximate size of the opportunity Gm's and about 1000 more dealers on our network.

And then forward, but I think there are some fundamental differences number one recall that GM was and exclusive.

Provider with one website company prior to opening it up and Ford has always provided choice, so we're not going against and and.

<unk> customer base Thats, all consolidated with one provider so Ford Scot.

Five providers now that they've opened up to where GM went from one to three and so there are some fundamental differences and the opportunity based on existing providers as far as timing goes when the announcement was made and obviously it began.

The excitement within forward and within dealer inspire and dealers contacting us about.

And solutions vis vis their existing providers so.

Slightly smaller opportunity, but yet our pipeline.

And just a few weeks ago.

Perfect. Thanks, and then my follow up.

Believe your leverage target was three times and it looks like you guys have hit that debt.

On a net on net.

Our leverage basis, just curious now how youre thinking about the use of cash.

And do you guys have done well with our recent acquisitions haven't done anything in a while I'm curious your thoughts on maybe doing.

Some inorganic growth and leveraging M&A.

And just in general how you plan to deploy free cash flow going forward, while debt pay down and continue to be the priority.

Yeah, I would say, we're really excited that we were able to bring leverage down below the three times level staffing side I don't think our capital allocation priorities have materially changed we remain focused on driving growth and the business both organically and also inorganic opportunities to.

And interest to us and as well as continuing to pay down debt, which we think just gives us far more strategic flexibility as we think about driving growth and the future.

That's great Thanks, Sonya and Alex Congratulations on.

On the great quarter. Thanks, Thank you Marvin.

Your next question today comes from the line of Dan <unk> with the Benchmark Company. Please proceed with your question.

Great. Thanks, good morning.

Was it pretty strong dealer customer add number in Q1 kind of in line, what we thought on the on the <unk> and the website customers. So.

It's tough to kind of parse out underlying organic bursty.

And do but.

Maybe if you can just help us think about as we go forward here, obviously, we're all very well aware of the inventory constraints I don't know if we have thoughts on consumer demand pull forward, especially with the massive amount of stimulus and the market but.

You seem to still be having pretty good traction you talked about dealer retention. So.

And I don't know that we should be expecting similar size and step up I guess your guidance would really imply that anyway, because it's how do you think about sort of the legacy or underlying core marketplace and dealer count growth going forward given the marketplace dynamics.

Thanks, Dan well look we were really pleased that we had record sales in Q1 and it just the year started strong and by the way continues the momentum we are growing our dealer count.

Well in Q4 of 19 and grew it again in Q1 before COVID-19 and so we were on a growth trajectory before COVID-19 certainly the whole world changed and Q2 of last year, but we're right back on that growth agenda, and and again experienced record sales in Q1 I think.

We are not expecting to set another record and Q2, but that said.

We're finding really strong persistence.

Work on the retention front, our dealer base is sticky and strong and ex accentuated by our solutions.

Our revenue mix, I think where we see opportunities continues to be on the AARP day side, even though there are inventory shortages. Our digital solution strategy continues to grow at a strong rate and we're pleased that dealerships with fewer visits to their physical showroom are shifting more to.

And invest in digital technologies, and tools, which has been a growth vector for us for quite some time and and as part of our differentiated strategy I think on the traffic side. We definitely believe we pulled forward. Some traffic I know February was muted a bit by snow storms across the U S, which led to some of the softening and the Q1 <unk>.

And but we are seeing persistent consumer demand, we believe that that is.

And to lead us to a robust retail market for much of 2001 or 'twenty one.

I think maybe it's worth adding to that I think COVID-19 has also brought a lot of new consumers into the market for a purchase of a car whether its because theyre nervous about NAV candid options or some of the shifts in terms of people moving from urban to suburban areas are also driving on.

Increased.

Increased attractiveness of car ownership and great point, we're seeing growth and sales rates and markets like San Francisco, New York city's that used to not really think highly of car ownership and we're seeing growth great retail sales volumes and those markets great point.

Got it that's helpful and Alex you always talk about it the strength youre seeing the fuel I mean, just to kind of.

And go off on your comment the stack on the Gaba AARP growth.

Obviously, that's the way I would think a pretty good contributor I don't know you probably don't want to break it out.

And how rapidly that scaling in terms of where it's being offered uptake attach rate and you can kind of give us there I think would be really helpful.

Well I think what's exciting about fueled and is leading to some of the strong gains youre seeing and ERP D.

And yet.

Product platform is only penetrated less than 15% of the U S. So we've seen strong initial adoption by the most digitally progressive dealers and across the country, but we've got a long way to go to fully penetrate fuel across the U S. So I feel like we're still in the very early innings of our.

And a fuel which is why we're still and education mode, helping dealerships understand the efficiency of narrow cast and your message only to and market shoppers and that being far more efficient and a lot of the match marketing the dealers still still spend on today and I think to sort of build on the AARP day growth fuel is certainly.

And then really beneficial to us as we look year over year, but we are increasingly particularly SDI has continued to grow looked at the cross selling opportunity between our solution customers on our marketplace customers as and we penetrate our base more deeply with our suite of products. We're also seeing really nice growth and arpus on that.

Got it thanks for your additional color there and then.

Not trying to short sell the cross sell and just trying to understand the big driver so but anyway. Thanks for all the color guys really appreciate it and a nice start to the year.

Thanks, Dan.

Your next question comes from the line of Mitchum and <unk> with Citi. Please proceed with your question.

Great. Thanks for taking the questions two from me first.

And as strong SCO help reduce the planned marketing investments could you talk about the sustainability of this strength.

Drawing versus.

On the competition and do you expect this to kind of.

Persist throughout the year and then I have a second question.

Sure Nick our Seo strength.

Certainly has been persistent over the past three years Theres been no platform growing its share of organic traffic more consistently and.

And repeatedly quarter to quarter and cars and so we think key to that is our differentiated content strategy. While other marketplaces, just harvest listings. We're the largest producer of original programming, whether that's our expert reviews or our dealer review platform, we're generating tons of unique content that can help.

And be found on cars and Google is certainly rewarding that.

<unk> and so yes, we do think it's been proven to be very durable and consistent as you know we've been consistently less on marketing and our peer group, but yet are generating outsized traffic than they are because we spend more in sales and they spend more on marketing, but yet were growing faster.

Driven by SCO strength.

Great Great that's helpful and then.

Maybe just looking at.

Opportunities and the landscape, maybe I'll call it auto tech.

And you have Julia of dealer inspire on your big competitors got into.

The auction environment.

Do you see opportunities out there as dealers get.

Zeroing in on finding inventory.

More creatively on more aggressively on the other areas to get involved and maybe more transactional.

As opposed to maybe more lead gen or web presence type services.

Sure well look we certainly want to run way to go with our existing organic solutions right. We're still on.

And under 5000 dealers on websites and a much bigger universe, we still haven't even really begun to focus on the independent dealer segment with website solutions and and fuel as I mentioned before early early innings. So we've got a lot of upside and growth on our existing solutions I think there has been a lot more investment in.

Auto Tech and the past year, driven by COVID-19 and what's exciting about that is all of these technologies really need distribution and whether that distribution is to a large consumer install base on our marketplace platform or.

Through our robust sales network Thats established with over 19000 dealers, we can bring solutions to market and so we are contacted frequently by a lot of the innovation and the category Who's got great technology, but really need distribution and so.

We will continue to look for solving problems and either consumer market or the dealer market. If theres pinpoint there that we can deploy technology to drive out cost from the industry or to make the process better.

We're active and looking at those opportunities.

Great. Thanks, Jeff.

Thanks, Nick.

And again, ladies and gentlemen, if you would like to ask a question. Please go ahead and press star one on your telephone.

Your next question comes from the line of Steve Dan.

And with your question.

Good morning, Brian on for Steve.

Curious on the dealer growth on the customer pick up there how much of that was reactivation of suspended dealers versus new dealer growth.

We'll look.

Everybody locked a lot of dealers during the pandemic, Ryan and and so we're almost back to our pre COVID-19 levels. So a good healthy percentage of that is dealers coming back.

We saw particular and noted strength and franchise dealers and engaging in the platform and.

And so we're right back almost to our pre COVID-19 levels, and we were growing dealer accounts again pre COVID-19. So.

I don't have the exact percentage of new sales that were former dealers, but we're definitely bringing back a lot of the accounts that we lost during the pandemic, we are and and the great thing is we're actually bringing back a lot of new accounts, it's a mix of new and and folks you suspended during the COVID-19 period, but I think it's.

And I'll call. It roughly 50 50 between the two buckets.

And then just a follow up on that how much is left and kind of the pipeline of suspended accounts that haven't necessarily made a decision whether to drop or to reactivate.

You know I don't know that that's necessarily the right way for us to.

And look at it right. What we're trying to do is go out there and create like a healthy dealer base that is interested and lots of star marketplace solutions, but our entire suite of products, which includes <unk> and fuel and so we're evaluating the opportunity that way as opposed to a spin.

Specifically suspended dealers right, we have no dealers that we're grandfathering in or had anybody we ended up in Q3 of last year, where we basically said you either need to re re sign or canceled outright. So we've got no dealers and have suspended status from last year.

And then just on on Q2, I get the OEM revenue down and.

And the challenging and vehicle just from the supply side et cetera, but I guess it sounds like fuel is on fire. It sounds like <unk> is doing volume for Gms ramping I guess all of the good stuff that you talked about.

With the business it feels like that should be able to offset but I guess as the OEM channel really that challenged.

But it's more than offsetting all of those things relative to Q1.

Well look we are being cautious because the chip shortage is a macro factor that evolving by the day. So I think our low end of the guidance range is partially driven by that like there's just a lot of uncertainty there I would say, we're seeing really strong robust.

Trends on the demand side and on the dealer side, which which are all going to be growth, but on a subscription basis. The great success. We had in Q2 only contribute so much to the Q2 picture. It definitely acceleration continues throughout the year, but with so much uncertainty around the OEM.

And we did provide a more cautious outlook because of the uncertainty there.

So I guess are you assuming potentially dealer churn.

Cause of that environment or do you think dealer growth can continue and this is primarily and ERP D I guess headwind.

Yes, so on and ARPG headwind and that's been strong and growing and dealer count has been solid as well and in fact, we grew dealer count and April. So we're seeing the growth trends on dealer continue I think where we've applied some conservatism is just on the national uncertainty and outlook, there, which as you know.

It doesn't impact the ERP D, but rather our national revenue bucket, yes, no. That's right I think when we look at the business in terms of dealer revenue, we do see a lot of momentum there between our solutions business and <unk>.

Grew 25% year over year adjusted Q1.

And in marketplace, we continue to see really strong retention rates and there is strength and are in sort of the.

And the franchise base of dealers that we havent orientation toward so what you see and the guidance range. We've put forward on the revenue Frank and some level of conservatism on lets me thought with crude and just given the uncertainty around the inventory supply chain, it's up a little bit out of our control.

And OEM revenue has always been that that OEM and national lending and line have always been slightly more volatile if it's not a traditional subscription business that we have on the dealer revenue side.

Yep Yep.

Makes sense.

On the you talked about or I guess, the online shopper theres a lot of push towards end to end online solution for dealers.

Have you seen any cannibalization of your marketplace subscriptions with customers that are doing more with Ti.

No just the opposite in fact as dealers are embracing digital retail and increasingly what we're hearing from dealers is wanting to augment their website volume with with users from our marketplace and we're seeing this through the day I connected platform right now if a user comes to the dealer's website through cars Dot com.

And they are converting at two times the rate of all their other traffic sources combined and so that's been one of the exciting things on COVID-19 is that with showrooms empty dealers are studying these digital metrics with a much finer tooth comb and.

Seeing the qualitative aspects of our audience and so we now have more inbound demand for dealers wanting to source and market audiences because they see that it converts higher and just to build on Alex's comment and then if we look at our shared customer who are using both the dealer inspire products as well as marketplace.

Actually grown substantially year over year, it's up I want to say over 20%. So we are seeing more uptake as opposed to Q1.

Yes.

Great and I'll hop back in the queue and good luck guys.

Thank you Ryan.

And there are no further questions and Kieran.

I turn the call back to Alex.

So I want to thank everybody for your interest and cars today, Sony and I are going to be presenting at the Jpmorgan technology Media and Communications conference on May 24th and there'll be information posted on the details of that event on the IR section of our website. This concludes our call. Thank you very much.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

And then.

Net.

[music].

Good day.

[music].