Q2 2023 Cars.com Inc Earnings Call
Can be found at Investor Dot cars Dot com, an archive of the webcast will be available at cars Investor Relations website.
Now I'd like to turn the call over to Robyn more Randolph director of Investor Relations.
Good morning, everyone and thank you for joining us it's my pleasure to welcome you to the Clar second quarter 2023 Conference call with me. This morning are Alex Vetter, CEO and Sonya Jane CFO .
Alex I'll start by discussing the business highlights from our second quarter and Sonya will discuss our financial results in greater detail along with our 2023 outlook.
I'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 adjusted operating expenses and free cash flow.
Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure can be found in the financial tables included with our earnings press release and in the appendix of our presentation.
Any forward looking statements are subject to risks and uncertainties.
For more information please refer to the risk factors included in our SEC filings, including those in our most recently filed 10-K, which is available on the IR section of our website.
We assume no obligation to update any forward looking statements now ill turn the call over to Alex.
Thank you Robin and welcome to our second quarter 2023 earnings call I am pleased to report another quarter of solid results and profitable growth.
Revenue grew 3% year over year to $168 million driven by dealer revenue that increased 6% year over year to $153 million.
We also improved our adjusted EBITDA margin sequentially to 27%.
Our success this quarter was driven by a number of factors that will underpin performance for the balance of this year and into next.
Specifically the rollout of our marketplace Repackaging initiative increased adoption of our digital solutions and our continued investment in delivering the highest quality and market digital audience to our partners.
We are over 60% complete with our marketplace Repackaging initiative that we started earlier this year and the results have been strong.
Seeing improved yield from repackaging with two thirds of our dealer customers opting into our upper tier packages. This is driving both revenue and adjusted EBITDA.
Our new packages allow dealers to capture the benefit of our investment in product development and more than 30% increase in traffic and value over the last five years.
As dealers opt in to a higher tier packages and leverage more features their engagement increases and it is far more likely for dealers to stay within our ecosystem and.
In fact, we're seeing our strongest retention from higher ERP dealers, who use at least three of our products, which leads to an <unk> of approximately three times the average customer and shows a clear upside potential as we remained focused on cross selling additional products.
As with any pricing initiative, we experienced incremental cancellation and as expected. This was largely confined to a segment of lower inventory dealers with legacy rates.
In total <unk> for the quarter grew 6% year over year and marketplace accounted for more than 50% or $78 of our year over year growth in ERP.
Please note that a significant portion of our repackaging work in the quarter was back half weighted and as a result, the benefit will not fully be reflected in our financials until the third quarter.
While our marketplace Repackaging initiative has been significant focus this year, we continue to see strong results from cross selling solutions, which drove the remaining 50% of our year over year <unk> growth.
We added more than 500, new website customer since last year, bringing our total of 6200 up 9% year over year. We also saw 800 net new website product upsells compared to the prior year and accu trade or no risk dealer appraisal solution also demonstrated momentum with connected customers growing to more than seven.
Third 50 units up approximately 130 units sequentially and 650 units year over year.
And dealer usage also continues decline appraisals completed using accu trade totaled more than 430000, a 10% sequential increase as used car prices continue to fluctuate it's more important than ever to have real time transparency and consistency in our vehicles valuation accu trade improves <unk>.
Stability by accurately pricing any car every time within minutes to close deals that are right on the money.
Combining digital solutions with demand generation capabilities is a strong differentiator for our strategy.
This quarter cars Dot com supported 27 million unique visitors to shop, and buy and sell vehicles across 156 million visits a 5% increase from the prior year.
As a reminder, more than 60% of our audience comes to US organically, which is also a competitive advantage and a testament to our longstanding investments and editorial content in the cars Dot Com brand.
We clearly see the power of our audience through our traffic delivery into dealer websites.
Dot com is consistently the leader in driving website referral traffic directly into dealer systems.
In fact, we generate two times as much traffic as our publicly traded peers and the strength of our organic traffic also allows us to bring more net new visitors to our customers than any other marketplace.
Platforms promote their participants, whereas aggregators high them for selfish gain as.
His dealerships lean more on Google analytics to monitor and measure traffic and value delivery. They will see cars dot coms platform power, it's far more evident.
Further consumers referred to a dealer website <unk> dot com.
Our three times more likely to buy a car then shoppers who only visited a dealer's website. This is proof that access to the unique cars dot com audience helps dealers sell more cars faster.
Innovation has also been a part of our DNA since the beginning and we continue to evolve both our consumer and dealer experience to allow far more efficient buying and selling of vehicles.
Increasingly innovation is becoming synonymous with adoption and integration of artificial intelligence.
We have been doing this for some time.
We use AI behind the scenes to help power our conversations chat tool a messaging solution that instantly connects customers with dealerships 24, 7%.
Antibody <unk>, our proprietary AI fueled chatbot handled 60% of all conversations on our marketplace and <unk> web sites this quarter and and its advanced language learning model continues to self educate and improve.
I'm also excited about the power and potential of generative AI to improve our products.
Using large Lang language models to analyze millions of reviews only available on cars Dot com. We are now using generative AI to synthesize consumer sentiment regarding dealer experience.
This helps consumers understand the expected dealership experience without having to sit through hundreds of dealer reviews.
We are also using generative AI to synthesize vehicle reviews and listing details.
This quarter, our teams to deploy technology that will provide users with bulleted synthesis of vehicle attributes cleaning up cluttered vehicle detailed descriptions into cleaner and more powerful vehicle displays.
Rather than expect consumers to read hundreds of reviews, our sift through on structured data. We are using the power of AI to gain efficiencies create better consumer and customer experiences and add meaningful value.
To reflect our spirit of innovation over 25 years, we recently elected to modernize our cars dotcom logo, which continues to emphasize our position at the Nexus of car buyers and sellers.
Coupled with this change we launched a new AD campaign called possibilities, which reminds us of both car buyers and sellers want the same thing a happy customer driving off the lot and our next drive.
As the second largest purchase purchase that most consumers will ever make car buyers typically spend two to three months sourcing information and getting inspiration about vehicles retailers financing and valuing their trading and.
Importantly, a car purchases often triggered by a lifestyle or life stage change and our new campaign showcases the excitement of purchasing your next car and our new tagline where to next highlights how personal transportation facilitates the next stage in the driver's life.
Our new logo and brand campaign kicked off in June with high profile media placements across TV digital social and audio and is directly delivered more than 800 million impressions.
We are excited about the positive response to our campaign has generated and expect to see this translate into continued organic traffic momentum.
Our platform of possibilities offers a comprehensive suite of solutions to help car buyers and sellers.
Our high intent audience, coupled with dealer adoption of our solutions creates a virtuous cycle that fuels our profitable growth.
And as inventory and OEM production builds this will further propel our performance.
Looking ahead I am confident we are well positioned to drive our growth for the second half of the year and beyond through our continued dealer adoption of our new marketplace packages, our digital solutions and providing high quality in market audience to our partners.
Now I'll turn the call over to Sonya to discuss our detailed financial performance in greater detail Sonya.
Thank you Alec we achieved another quarter of solid results delivering both revenue and adjusted EBITDA within our guidance range.
Total revenue for the corner with $168 million.
Presenting 3% year over year growth.
We experienced continued softness in our OEM and national revenue dealer revenue growth with particularly strong and up 6% year over year, driven by continued growth in solution and media products as well as growth, resulting from our marketplaces packaging initiative.
And given the subscription nature of our business, we expect to build upon second quarters results with accelerated revenue growth in the third quarter.
Diving deeper into our financial results I'd like to cover our expenses and the disciplined approach, we're taking to invest in top line growth.
For the quarter adjusted operating expenses were $147 million $8 million higher compared to the prior year.
This increase is primarily due to higher marketing and sales expenses due to compensation and are investing in the cars dot com brand, including the launch of our possibilities campaign.
These investments are critical to maintaining and growing our industry, leading brand, which allows us to deliver a highly engaged audience to our dealer customers.
Alex mentioned current Dot com, Jay good morning, consumer to dealer websites than any other marketplace and through the addition of feature it like instant cash offer an instant financing, we're helping our dealer customers further identify tank ready to transact to consumers.
We also continued investing in product development to support our growth, which led to higher product and technology expenses, driven by compensation and third party costs, specifically related to licenses and consulting costs.
Net income for the quarter totaled $94 million.
Or $1 37 per diluted share compared to $6 million or <unk> <unk> per diluted share a year ago.
Our current quarter net income was primarily related to the release of substantially all of the valuation allowance on our deferred tax assets originally recorded in 2020.
Based on our recent performance and expected future income, we believe we will be able to fully utilize our deferred tax asset.
With the financial context, let's turn to the initiatives that drove our success this quarter.
As Alex mentioned, our marketplaces packaging initiative is more than 60% complete as of the end of the quarter and is proven accretive to both the top and bottom line.
This is a strategic initiative intended to better align our value delivery with price simplest.
Simplify the go to market experience for both our dealer customers and sales team and enable dealers to leverage some of our cross platform capability within one package.
As with any initiatives that involve increased pricing, we anticipated incremental churn this quarter, particularly given that we had five cohort so either received advanced pricing notification or pricing changes in the quarter.
<unk> as we enter the second half of the year and moves beyond the marketplace be packaging initiatives, we have seen dealer customer trends stabilized in the month of July .
We ended the quarter with 18785 dealer customers, 2% lower compared to the prior quarter.
The variance is largely driven by cancellations from lower inventory lower <unk> customers.
Independent of our Repackaging initiative Gms retention rate remained at a historical high evidenced that our value delivery remained strong.
Overall marketplace contributed more than half of the 6% year over year growth in second quarter, AARP and sequentially. It drove our $86 Arpus increase.
Given our subscription based revenue model, we expect these strong results to fully accumulate in the third quarter.
Our continued efforts to cross sell have also played a strong role in our AARP growth increased sales of digital solutions drove approximately half of our year over year improvement in <unk>.
Our dealer inspire revenue grew 29% year over year from a combination of growth in website increased media upsells of our digital advertising solutions, including cross platform advertising on cars dot com and renegotiated contracts that better align our value delivery with our pricing and packaging structure.
Okay.
While OEM and national spending has not yet bounce back we are seeing strength in our dealer media products. They were responsible for nearly half of dealer inspire us year over year revenue growth.
Only RBC in existing dealer customers expand their use of our marketing services, but we're also seeing more dealers eager to take advantage of the cross platform benefits of our marketing products.
No. We do not include digital advertising revenue in our ERP today, but if we did AARP growth would be four points higher year over year.
Our performance this quarter reflects the strength of our platform strategy with growth across all major pillars of our business.
Now transitioning to cash cash provided by operating activities for the six months period, ending June 32023 totaled $56 million.
And free cash flow was $46 million.
$12 million increase in free cash flow year over year was primarily due to positive changes in our working capital and higher adjusted EBITDA, partially offset by increased cash taxes of $12 million during the first half of 2023.
Similar to last year, we also made our semi annual bond interest payment of $12 $8 million.
This quarter, but our cash interest was lower year over year due to the expiration of the swap and lower outstanding principal on our credit facility.
During the first six months of the year, we paid down $22 $5 million of debt, reducing our total debt outstanding to $459 million as of June 32023.
At quarter end net leverage was two three times comfortably in the middle of our target range of two to two five times.
We continue to maintain ample liquidity of $259 million.
Comprised of $230 million of Undrawn revolver capacity and $29 million of cash on hand.
Additionally, our strong balance sheet provides us with the financial flexibility to return capital to shareholders and year to date, we repurchased 900000 shares for $17 million.
Our continued strong execution and revenue generation enables us to maintain a balanced capital allocation strategy.
As a result of our steady operating performance and consistent reduction in leverage S&P global upgraded our credit rating to double B minus from B plus.
Now turning to our guidance for the third quarter of 2023, we expect to deliver strong sequential growth with revenue between 172 and $174 million.
Representing continued solid year over year growth of four five to five 7%.
Our third quarter guidance reflects the continued rollout of our marketplace, we packaging initiatives expansion of dealer solutions and media products via cross sell and modest sequential improvement in OEM and national revenue.
We expect third quarter adjusted EBITDA margins to be between 26, five and 28, 5% or.
Our adjusted EBITDA margin guidance reflects third quarter revenue guidance and increased marketing investment to support our new cars Dot Com brand campaign.
For the year, we're narrowing our revenue growth guidance range from 3% to 6% to 4% to 6% effectively raising the midpoint of our full year 2023 revenue guidance.
Our guidance reflects our strong first half performance and the continued benefit of our marketplace, we packaging initiatives as well as modest second half improvement in OEM and national revenue.
We're also reaffirming that fourth quarter adjusted EBITDA margins are still expected to approach 30%.
Our strong core operating Kpis dealer customers AARP and high intent scale audience together with continued focused execution position us well to achieve these goals.
With that I'd like to open the call for Q&A.
Operator.
We would like to ask a question. Please press star one on your telephone keypad now.
It will be placed into the queue in the order received.
Please be prepared to ask your question when prompted.
Once again, if you would like to ask a question. Please press star one on your phone now.
And our first question comes from Tom White from D. A Davidson. Please go ahead Tom.
Great. Good morning, everyone. Thanks for taking my question a couple if I could.
I guess, so revenues for this year for the quarter weather total revenues came in at the low end of the range, but the dealer revenue was up nicely.
Nicely up 6% beat our forecast by a couple million Bucks.
So it looks like I guess national revenue in the other line, maybe let you down a bit.
I think you said last quarter that the national Perking up a little bit.
Curious to hear a little bit of an update on that but but net net you're tightening the.
The range for the full year on revenue to the high end. So maybe just a bit of color on what's giving you confidence to do that it sounds like maybe it's not national revenue perking up maybe it's better retention rates from dealers. After the price hikes, just kind of curious, what's giving you the confidence on that.
Thanks, Thanks for the question Tom.
So we did have a really solid Q2 print, particularly in dealer revenue.
It's not just the marketplace. We packaging that we think is putting a lot of momentum into business that we're seeing where we're still seeing strong cross sell activity with solutions and our media products as well.
You're spot on that we did experience a little bit of softness in OEM and national as well as in our other align you don't we don't talk a ton about the other line, but there was some revenue that we've been seeing last year.
Weighted to the acquisition of Accu trade from license agreements that we inherited that we anticipated would.
Run off this year and what you see in the Delta there is simply the runoff of those license agreements, which were actually non cash. So they don't really have any material impact to adjusted EBITDA.
I think in terms of the forward looking guide a little bit on that.
We we have the marketplace repackaging, the 6% year over year growth that we reported on ERP D is sort of like a blended view of what we saw transpire over the course of the quarter I think we've comped a little bit about how we've taken a phased approach to repackaging launching kind of cohorts each month and so as you can.
Imagine the benefit of AARP is building in each sequential month. If you look at June as an example, and Peel back the onion, a little bit in terms of the drivers of AARP D.
Our core marketplace Arpus actually did grow.
Double digits on a year over year basis, I think one of the challenges in the numbers right now when you look at dealer revenue and dealer in RPE is the fact that we also had digital dealers in our numbers last year that we don't have the numbers in the same way this year and that's offsetting some of the some of the benefit of marketplace be packaging.
Yes.
Okay. That's helpful and then just on the National line.
I could be wrong, but I was under the impression that last quarter. There was some comments that suggested that.
Maybe that was perking up a bit in <unk>.
<unk> OEM revenue line I know, it's different than yours.
It's not kind of display advertising base, but there has picked up a little bit quarter over quarter. So just curious like what you're hearing from Oems.
Did anything slip out of the second quarter.
And kind of get delayed to the back half or is it still just very hard to forecast a hard to know exactly how that line is going to come in this year and then I'll get back in queue. Thank you.
Yes, my understanding is.
There are OEM business as its incentive spending and we do know that Oems are increasing incentives as inventories in moving nearly as fast as they would like we think that's a.
The low road too.
Growth for Oems, and we're recommending them spend more dollars to promote and compete for those vehicles sales as opposed to moving immediately to discounting.
So we do have fundamentally different approaches to creating value for Oems I think we were very pleased with the reception we're getting from Oems.
Certified pre owned has picked back up where Oems are starting to lean back in in the conversations. We're having are all very productive we're just not getting the conversion yet that we would've expected.
But we still feel good about the business line going into the second half of this year and don't see downside.
Feedback from clients, but rather more upside.
Great. Thank you.
And our next question comes from Marvin Fong from <unk>. Please go ahead Marvin.
Good morning, Thanks for taking my questions.
Maybe sonya.
I think you mentioned that the dealer churns stabilized in July .
Just exactly what you mean by that you mean that the.
Dealer count was kind of flattish compared to June or or is the churn just stabilizing but still at a negative number or just more color on that would be helpful.
Yeah, I think a little bit more stabilizing from a dealer count perspective relative to June .
I think as I mentioned earlier, we've taken kind of this phased approach to rolling out the repackaging, where we got notification to dealers in advance Q2 saw a lot of activity between notifications and actual rate increases given that we have some going into effect in Q3, two almost became a little bit of a bottom.
Mac so to speak as you think about as you think about dealer communications coming out of the second quarter.
There were 60, 60% complete with re packaging as of the end of Q2 as of the end of July we're 80% complete so as we head into the back stretch of the year.
Shifting from our focus a little bit from repackaging and warrants you like our ordinary course activities are continuing to focus on the cross sell of our solutions and media products.
Great. Thanks, and then.
And.
My next question just on OEM advertising, I guess just to drill down on that.
We provided full year guidance and obviously the implied fourth quarter performance. So.
What's sort of your.
Assumptions embedded in your guidance right now and just for Halloween.
That line item will perform in the fourth quarter should we expect.
Thanks.
Another sequential improvement from third quarter or.
Just share your thoughts.
That's helpful. Thank you.
No great question.
Generally what you said, we are cautiously optimistic about the OEM and National line as Alex mentioned earlier, the feedback and the reception, we're getting from our OEM OEM customers had been confident but are they think I'm sure. You are aware while production levels have been increasing new model launches continue to be shifting out.
And that's typically one of the big drivers for Oems and that being said.
We are expecting a modest improvement in our OEM and national revenue as we look sequentially into Q3, and then into Q4.
Perfect. Thanks, so much.
That will still just a caveat what I mean by modest.
That the numbers will still be down year over year, but we will see an uptick relative to where we are right now.
And our next question comes from Rajat Gupta from Jpmorgan. Please go ahead Roger.
Great Good morning, and thanks for taking the question.
One clarification first on the repackaging initiatives.
60%, you mentioned that the 80%.
So you are even through the third quarter that is that is a subset of the 25% targeted dealer base.
We're targeting this year right or.
Or is that 80% relative to the 25% number just wondering Jeff.
[laughter].
Happy happy to clarify Sanofi, we're actually targeting much more.
On <unk>.
25% of the customers. So we are targeting the majority of our substantially the majority of our dealer customers.
Got it because 80% of all your dealer customers.
We're not going to all of them a lot of them are already at market rates today, but you know call. It like the 70 ish percent.
Understood got it that's helpful clarification and then.
In terms of the dealer count.
The sequential move lower.
Any granularity on.
Franchise versus independent dealers.
One of your peers continues to see Craig.
Pressure in the independent segment I'm wondering if you're seeing any similar trends.
And also like any conversations youre, having with some.
Some of the digital only used car dealers around potentially returning to the platform.
Just had one more thanks.
Sure Great. Great question, one point of clarification I want to make is that while we are targeting the majority of our dealer base. We also are targeting the biggest increases came early in the year and so now that we got through July we picked up another full 20% of the dealer base through the repackaging. Please.
<unk> that July results were stable in dealer count.
Which means we're getting better at Ed justifying the rate that we're asking for in minimizing dealer churn.
The churn that we did experience.
It was largely two things the largest increases the dealers that we're furthest away from market rates. So their increases were much more sizable than others and there was a heavy concentration of that of smaller independent dealers with lower inventories. So I think the combination made a lot of sense to us.
We were asking a lot.
Year over year format from these dealers, but we know the values. There I think your point on digital dealers is timely and that.
As you know we're entering this year with almost 650 dealers taken out of our denominator about 650, I think Sony was the number of digital dealer locations that we had advertising on the platform and so that's been a headwind we've been out running.
But still generating.
Decent growth on dealer revenue and.
We are now back in discussions with many of the digital dealers, it's not in our guide we're not expecting that to come back in any meaningful way this year, but I think it's telling that the digital dealers that pulled back end of last year beginning of this year.
We're starting to realize that they've got to spend money if they want to move inventory and were fertile marketplace to help them do that.
You had a follow on question two I think yes.
Yes, just in this last one on the EBITDA margin guidance for the fourth quarter the exiting.
The exit rate, 30% number.
The reason for putting that out there is that to imply that 'twenty 'twenty four is going to be at least 30% EBITDA margin on an annualized basis or was that to indicate some sort of seasonality in the business.
Clarification there.
Yes.
Yeah.
That 30% target sitting out there sort of since the beginning of the year and really just to be very committed to showing kind of the sequential improvement that we.
Can drive in terms of adjusted EBITDA margin in the business. It is it is subject, though to investments and I wouldnt necessary and we have historically as an example tended to have lower margins as an example in Q1 when we have big industry event. So it's not necessarily setting a new bar for Gulf.
Forward expectations will stack, our 2024, our adjusted EBITDA guidance.
In subsequent quarters.
Got it great. Thanks for taking the questions and good luck.
As a reminder, if you would like to ask a question. Please press star one on your phone now.
And our next question comes from Gary <unk> from Barrington Research. Please go ahead Gary.
Hi, good morning, everyone.
Yes.
The dealer customers being down was there any more drip.
Digital dealers coming out this quarter or was that all done by the end of March.
Yes.
Good morning, Gary on the digital deal with your question that that was really done in March So no no additional stress there.
Okay, and then assuming the dealers that you were using that really pulled out where they the majority they were not using any of the really high price digital solutions things like that these were just mostly independent that we're low low budget dealers.
That is correct. When you look at our Q2 and some of the churn we experienced the majority of those dealers are independent dealers and even within that they tend to be higher at lower arpus lower inventory sort of one product.
Using dealer.
Okay.
So.
Alright.
So in terms of accu trade.
<unk>.
Are you finding that the <unk>.
Dealers that you are signing up for accu trade.
Do not have the solution to source.
Vehicles.
From consumers or trade amongst themselves.
Are you displacing something or are they just.
Taking on two or three different services that do the same thing.
Great question Gary.
<unk> generally have multiple ways they source inventory.
The most prevalent or legacy way of doing that is obviously buying cars at auction.
The emerging trend in the industry is obviously buying cars more directly from the public because youre able to get fresher inventory.
That hasn't cycled through the retail market, yet and typically if you can help a customer get out of a car you have got a much higher likelihood of selling them a new car. So it gets really two for one if you think about the legacy way of buying cars you can spend thousands of dollars in fees.
At auction Wherewith accu trade for $500 a month you have unlimited buying power rate every customer that comes through your service Lane, everyone Who's shopping for a car on your lot and of course sourcing private party opportunities directly from our marketplace. So we were really thrilled to see the organic lift in the number.
<unk> of cars appraised through accu trade the.
The dealer count number is growing nicely solutions accounted for 50% of our AARP growth.
And that's very sticky revenue and we see that with the dealers are using multiple solutions from us and not only stabilizes.
That creates a new revenue stream, but it also.
Stabilization for the marketplace and so we're thrilled with the growth in accu trade and just need to accelerate now which will will naturally happen. When we're through this marketplace repackaging. It takes a lot of cycle time to get through 16000 dealers with rate negotiations for your core marketplace offering and so our teams.
Our largely through that with 80% of it through through July and so youll see us shifting more towards cross selling and up selling now in the second half.
Okay, and then can you make any comments on fuel we haven't heard any any anything in your narrative. There I mean and that is a very high priced product out how is that.
How has the uptake been going there.
Terms of acceptance of the great Great question, Gary fuel is one of.
A few in media offerings that we have and generally we're pleased with it we didn't call. It out specifically because we are seeing interest from dealers and more media services from cars.
And so that's actually something that we're looking forward to exploring more in the second half because dealers are starting to see inventory not turned quite as fast organically on their lots and so they're turning to us for more additional media services.
It wasn't a huge focus for us in Q2 again for the marketplace Repackaging initiative, but now that we're through that dealers are talking to us more increasingly about spending more to move inventory and not only do we have fuel, but we've got re targeting solutions, we've got an inventory extension solution.
So we may not call it out by name, but media Upsells are picking up steam right now, which is nice topline in high margin revenue for us.
Okay, and lastly, do you guys see the.
OEM revenue ever getting back to maybe where it was pre COVID-19.
A year or two before before Covid given that you read everything you read from these Oems as we got to cut costs, Alright, GM said that directly on their conference call.
Is that something that you think we'll ever recover and if it's not going to recover is there anything that you can do to really try and increase the profitability of that business at a lower revenue stream.
Okay.
Gary I'm, a believer and I think the only thing we could debate is by when.
The macro thesis is do you believe that car companies.
I need to do more digitally or less digitally going forward and I think overwhelmingly the data supports that they need to do more digitally.
Oems continue to force dealerships to spend on their physical plant and we believe that they need to help dealers spend more on their digital plan and we're well positioned up and do that as you know we've got multiple vectors for growth with Oems.
Are we talking about raising rates on our website offering because we know we can justify higher fees. There. There's more that we can do on data targeting particularly with the collapse of the cookie and IP tracking theyre going to have to spend more with first party data sources to reach people when they shop, which we.
Got the largest organic audience for them to to reach buyers there.
And we're also talking to them about technology solutions.
I mentioned last <unk>.
<unk> that we're talking to a few Oems about using our trading tools are financing offerings. So there are new revenue streams and discussions that are happening and I will tell you that initial upfronts for 2024.
Our preliminarily very very strong in terms of what we're hearing from them. So I am a big believer I understand with the inventory shortage why it hasnt been a big Boon for our business. This year Budd, but a definite believer that this line of business is going to grow materially over the next few years.
Okay. Thank you.
Our next question comes from Steve Dyer from Craig Hallum Capital Group. Please go ahead Steve.
Good morning, Ryan on for Steve just one follow up for I guess, one question from US curious on the OEM International are you, having any increased interest or conversations from Oems as they look to advertise new EV models.
As they're ramping production demand seems a little lackluster for certain Oems anyways, just curious any interest on the <unk> side.
Inventory has exploded up almost 230% on our platform, but <unk>.
Consumer demand has actually softened.
From a consumer demand standpoint, and what we know about the EV market is search trends tend to correlate more with gas prices than they do with <unk>.
Product availability consumers flocked to EV search share last year, when gas prices were clipping north of $4 $5, a gallon and now that those prices have moderated we're seeing search share.
Wayne Unfortunately, many Oems.
Are immediately moving to drop price.
And we think that is certainly one way to move that inventory. We think that there is generally low consumer awareness of the various EEV offerings out there still.
And I hope that the Oems are listening right now and their agencies will call us because we can introduce their products to people who are actively shopping for them in real time and increase their likelihood to convert much more than just.
Dropping price and screaming incentives.
Very good thanks, good luck.
Thank you and at this time there are no further questions I would like to turn the call back over to Alexander your CEO for closing remarks.
I want to thank you for your interest in cars today, and joining us I'd like to mention that Sony and I are going to be participating in the BTG Virtual conference on August 16th and we'll keep you posted on another investor engagements throughout the year. This concludes our call.
This concludes today's conference call. Thank you for attending.