Q3 2023 Cars.com Inc Earnings Call

Speaker 1: Your presentation

Speaker 1: 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 10K, which is available on the IR section of our website. We assume no obligation to update any forward-looking statements. Now, I'll turn the call over to Alex.

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 third quarter 2023 earnings call I am pleased to report that we delivered another quarter of solid results at the high end of our guidance range.

Speaker 2: Thank you, Robin, and welcome to our third quarter of 2023 earnings call. I'm pleased to report that we delivered another quarter of solid results at the high end of our guidance range. I'm also excited to announce our acquisition of D to C media, a leading automotive technology and digital solutions provider in Canada that enables us to expand our geographical footprint and gain approximately 1,000 new dealer customers.

I'm also excited to announce our acquisition of D to C media, a leading automotive technology and digital solutions provider in Canada that enables us to expand our geographical footprint and gain approximately 1000, new dealer customers.

Speaker 2: Before we discuss D to C, let's start with our strong quarterly result.

<unk>, we discuss D to C. Let's start with our strong quarterly results.

Speaker 2: Our third quarter revenue grew 6% year-over-year driven by growth across our portfolio, including 9% year-over-year ARPD growth. This resulted in adjusted EBITDA margins of 28% and we are well positioned to build on this growth.

Our third quarter revenue grew 6% year over year, driven by growth across our portfolio, including 9% year over year <unk> growth.

This resulted in adjusted EBIT margins of 28% and we are well positioned to build on this growth.

Speaker 2: Last month, we launched CARS Commerce, our new go-to-market B2B brand, as a natural evolution of our growth strategy. CARS Commerce reinforces our ability to deliver a connected platform that simplifies the retail, retail, and post-sale experiences for shoppers, retailers, and OEM.

Last month, we launched cars commerce, our new go to market <unk> brand is a natural evolution of our growth strategy cars commerce reinforces our ability to deliver a connected platform that simplifies the pre tail retail and post sale experiences for shoppers retailers and Oems.

Speaker 2: The mission of CARS commerce is to simplify everything about buying and selling cars. We aim to eliminate complexity and increase transparency throughout the local retail experience where sales and service are best facilitated.

Submission of cars commerce is to simplify everything about buying and selling cars, we aim to eliminate complexity and increased transparency throughout the local retail experience, where sales and service our best facilitated.

Speaker 2: Our asset-light platform approach, which combines our high-intent audience and industry-leading technology solutions, drives significantly more value and efficiency to dealers and OEMs.

Our asset light platform approach, which combines our high intent audience and industry, leading technology solutions drive significantly more value and efficiency to dealers and Oems are.

Speaker 2: Our simplified go-to-market strategy will drive a sustainable growth and adoption of our marketplace, solutions, and media products.

Our simplified go to market strategy will drive sustainable growth and adoption of our marketplace solutions and media products.

Speaker 2: Central to our platform is cars.com, our trademark brand that is the number one most recognized marketplace in the industry, attracting nearly 26 million in-market shoppers each month.

Central to our platform is cars dot com our trademark brand that is the number one most recognized marketplace in the industry, attracting nearly $26 million in market shoppers each month.

Speaker 2: This quarter, our traffic increased to 151 million visits, and our organic traffic remains strong at 62%. The Cars.com audience is highly engaged, with more than 84% planning to purchase a vehicle within 6 months, and nearly half within 30 days.

This quarter, our traffic increased to 151 million visits in our organic traffic remains strong at 62%.

<unk> dot com audience is highly engaged with more than 84% planning to purchase a vehicle within six months and nearly half within 30 days clearly we have the audience to match buyers and sellers at scale.

Speaker 2: Clearly we have the audience to match buyers and sellers at scale.

Speaker 2: Our research consistently shows that approximately 75% of our audience is undecided on make and model, and 90% have not selected a dealership. This is where the consumer pre-tailed journey begins with visits to cars.com for unbiased content, ratings and reviews.

Our research consistently shows that approximately 75% of our audience is undecided on make and model and 90% have not selected a dealership.

This is where the consumer pre tail journey begins with visits to cars dot com for unbiased content ratings and reviews.

Speaker 2: And we continually improve our marketplace experience to help consumers make more informed decisions.

And we continually improve our marketplace experience to help consumers make more informed decisions. This.

Speaker 2: This quarter we launched My Garage, which allows consumers to add their vehicle to our virtual garage and gain access to new features, such as the cars.com market value.

This quarter, we launched my garage, which allows consumers to add their vehicle to our virtual garage and gain access to new features such as the cars dot com market value.

<unk> dot com market value connects our marketplace retail data with our real time trade in values, helping consumers track the value of their vehicle and know the optimal time to sell or trade in their car.

Speaker 2: Cars.com MarketValue connects our Marketplace retail data with our real-time trade-in values, helping consumers track the value of their vehicle and know the optimal time to sell or trade in their car.

Speaker 2: We will continue adding capabilities to my garage and encourage consumers to register profiles on cars.com to keep them engaged between vehicle purchase.

We will continue to add capabilities to my garage and encourage consumers to register profiles on cars dot com to keep them engaged between vehicle purchases.

Not only do we provide consumers with critical information regarding vehicles. We also enhance their experience with dealership insights to help them decide where they'll purchase or trade in their car.

Speaker 2: Not only do we provide consumers with critical information regarding vehicles, we also enhance their experience with dealership insights to help them decide where they'll purchase or trade in their car.

Speaker 2: We are a leader in reputation management technology and have the largest reviews platform in the industry with more than 13 million dealer reviews left by car shoppers at quarter end.

We are a leader in reputation management technology and have the largest reviews platform in the industry with more than $13 million dealer reviews left by car shoppers at quarter end.

Speaker 2: For many consumers, and especially in the current environment of high interest rates, financing considerations are as important as the vehicle and dealership choice.

For many consumers and especially in the current environment of high interest rates financing considerations are as important as the vehicle in dealership choice.

The average new vehicle price on our marketplace is up 29% and used car prices increased 40% compared to 2019.

Speaker 2: Approximately 9,000 dealers have enabled shoppers to get pre-approved using our instant financing solution.

Approximately 9000 dealers have enabled shoppers to get preapproved, using our instant financing solution.

Given the significant consumer and customer value. We included instant financing in our 2023 marketplace Repackaging initiative, which is now complete and this is a significant driver of our 9% year over year <unk> growth.

Speaker 2: Given the significant consumer and customer value, we included instant financing in our 2023 marketplace repackaging initiative, which is now complete and is the significant driver of our 9% year-over-year ARPD growth.

Speaker 2: Additionally, I'm pleased to report that our customer count has stabilized and we ended the quarter with 18,715 dealer customers.

Additionally, I'm pleased to report that our customer count has stabilized and we ended the quarter with 18715 dealer customers.

Speaker 2: As part of the CAHRS Commerce launch, we have consolidated our MediaPoint solutions under the CAHRS Commerce Media Network umbrella.

As part of the cars Commerce launch we have consolidated our media point solutions under the car's Commerce media network umbrella <unk>.

Speaker 2: Customers of our marketplace and solutions can access our 26 million monthly in-market shoppers on cars.com across social, search, display, video, and content.

Customers of our marketplace and solutions can access our 26 million monthly in market shoppers on cars dot com across social search display video and content by.

Speaker 2: By reaching a highly engaged audience, both local and national automotive advertisers can influence the decision journey while shoppers are actively determining what, where, when, and how to purchase their next vehicle.

By reaching a highly engaged audience, both local and national automotive advertisers can influence the decision journey, while shoppers are actively determining what where when and how to purchase their next vehicle.

Speaker 2: We know that our retail media solutions drives meaningful business outcomes and solve real audience and measurement challenges that our customers currently face.

We know that our retail media solutions drive meaningful business outcomes and solve real audience and measurement challenges that our customers currently face.

Speaker 2: For local dealers, we have seen our product suite outperform Google search advertising by as much as 50% on a lower cost per lead basis.

For local dealers, we have seen our product suite outperformed Google search advertising by as much as 50% on a lower cost per lead basis.

Speaker 2: In addition, we see that we're reaching the karts.com audience across video, display and social channels, also improves dealer website traffic by more than 30% compared to single channel advertising.

In addition, we see that we're reaching the cars dot com audience across video display and social channels also improves dealer website traffic by more than 30% compared to single channel advertising.

Speaker 2: Bringing together our local media point solutions under CARS Commerce Media Network will allow us to better package our media products for greater retail out.

Bringing together our local media point solutions under cars Commerce Media network will allow us to better package, our media products for greater retail outcomes.

Speaker 2: Cars Commerce Media also works for OEMs. As an example, in the third quarter, one of our OEM partners increased their advertising investment with us for an electric vehicle campaign, which resulted in not only elevated searches and dealer connections on cars.com, but also on dealer websites that we observed via Dealer Inspire.

Cars Commerce media also works for Oems as an example in the third quarter one of our OEM partners increased our advertising investment with us for an electric vehicle campaign, which resulted in not only elevated searches and dealer connections on cars dot com, but also on dealer websites that we observe via dealer inspire.

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Speaker 2: Specifically, there was a double-digit lift in leads on dealer websites, a clear indication that Carr's Commerce Media Network drives retail sales results.

Pacifically there was a double digit lift in leads on dealer websites, a clear indication that cars Commerce media network drives retail sales results.

Speaker 2: Turning to solutions, which also contributed to our strong revenue growth. Our website solutions are endorsed by nearly every OEM in the United States. Today, we power more than 6,300 dealer websites, up 8%, and we grew website up cells by more than 1,000 compared to the prior year.

Turning to solutions, which also contributed to our strong revenue growth.

Our website solutions are endorsed by nearly every OEM in the United States today, we power more than 6300 dealer websites up 8% and we grew website up sales by more than 1000 compared to the prior year.

Speaker 2: AccuTrade, our trade and appraisal solution, also continues to gain traction, growing to more than 850 units compared to 400 in the prior year, and up nearly 100 units on a sequential basis.

Accu trade or trade in appraisal solution also continues to gain traction growing to more than 850 units compared to 400 in the prior year and up nearly 100 units on a sequential basis.

Speaker 2: AccuTrade creates a much-needed used car pipeline for dealers.

Accu trade creates a much needed used car pipeline for dealers.

Speaker 2: Dealers using our technology complete appraisals in a fraction of the time that it typically takes, while also increasing accuracy and transparency for the consumer. By arming everyone in the dealership with accurate turnkey technology, we are improving both dealership profitability and the consumer experience online and in the store.

Dealers using our technology complete appraisals in a fraction of the time that it typically takes while also increasing accuracy and transparency for the consumer by Army every one of the dealership with accurate turnkey technology, we are improving both dealership profitability and the consumer experience online and in the store.

Sure.

For the quarter dealers conducted more than 500000, appraisals and nearly 20% sequential increase.

Speaker 2: For the quarter, dealers conducted more than 500,000 appraisals, a nearly 20% sequential increase.

Speaker 2: Our solutions momentum continues. We are excited about our acquisition of D2C Media, a leading automotive technology and digital solutions provider in Canada. It affords us the opportunity to further expand our car commerce platform into the Canadian market and demonstrates our continued commitment to empowering dealers with innovative digital solutions.

Our solutions momentum continues we are excited about our acquisition of <unk> media, a leading automotive technology and digital solutions provider in Canada.

It affords us the opportunity to further expand our <unk> commerce platform into the Canadian market and demonstrates our continued commitment to empowering dealers with innovative digital solutions.

Speaker 2: DDC media has approximately 1000 customers today, and together we have website endorsements covering approximately 60% of OEMs operating in Canada, positioning us to unlock additional growth opportunities.

D to C media has approximately 1000 customers today and together, we have website endorsements covering approximately 60% of Oems operating in Canada positioning us to unlock additional growth opportunities.

Speaker 2: B2C has demonstrated strong financial performance, consistently generating double-digit top-line growth, and strong adjusted EBITDA margin.

DTC has demonstrated strong financial performance consistently generating double digit top line growth and strong adjusted EBITDA margins.

Speaker 2: This acquisition will allow us to accelerate the growth of both websites and our digital solutions into Canada.

This acquisition will allow us to accelerate the growth of both websites and our digital solutions into Canada.

Before I turn the call over to Sonya I want to recognize our team of innovators creators and problem solvers, who work every day to swiftly tailor our products and simplify everything about car buying and selling.

Speaker 2: Before I turn the call over to Sonia, I want to recognize our team of innovators, creators, and problem solvers who work every day to swiftly tailor our products and simplify everything about car buying and selling. Together, we posted another.

Together, we posted another quarter of solid results.

Speaker 2: launched Cars Commerce, grew dealer revenue, turned the corner on OEM sales, and expanded our growth opportunities with the acquisition of D2C Media.

Launched cars Commerce grew dealer revenue turned the corner on OEM sales and expanded our growth opportunities with the acquisition of <unk> media I am also honored to share that we were recognized as one of U S News and World Report's best companies to work for in 2024 and on behalf of all of our employees.

Speaker 2: I am also honored to share that we were recognized as one of U.S. News and World Report's best companies to work for in 2024. And on behalf of all of our employees, we are excited to welcome the newest D2C employees to the Cars Commerce team, where together we will continue to drive our platform strategy.

We are excited to welcome the newest <unk> employees to the cars Commerce team, where together, we will continue to drive our platform strategy.

Speaker 2: Now, I'd like to turn over the call to Sonia to provide additional details on the quarter. Sonia?

Now I'd like to turn over the call to Sonya to provide additional details on the quarter Sonya.

Speaker 3: Thank you, Alex. I, too, am pleased with our strong performance. We delivered accelerated year-over-year revenue growth and sequential improvement in margins at and above the high end of our guidance. I'm also excited about our acquisition of D2C Media, which we expect will be immediately accretive to our top-line growth rate and adjusted EBITDA margin.

Thank you Alex.

Im pleased with our strong performance, we delivered accelerated year over year revenue growth and sequential improvement in margin at and above the high end of our guidance.

Also excited about our acquisition of D to C media, which we expect will be immediately accretive to our top line growth rate and adjusted EBITDA margin.

Speaker 3: But first, let's start with our quarterly results. Revenue for the quarter told us $174 million, a 6% increase compared to the prior year driven by dealer revenue that grew 8% year over year to $157 million.

First let's start with our quarterly results.

Revenue for the quarter totaled $174 million.

6% increase compared to the prior year driven by dealer revenue that grew 8% year over year to $157 million.

OEM and national revenue was $15 million, 2% lower compared to the prior year. However, looking specifically at our OEM advertising customers revenue increased 12% year over year and sequentially OEM and national revenue grew $2 1 million. Additionally.

Speaker 3: OEM and National Revenue was $15 million, 2% lower compared to the prior year. However, looking specifically at our OEM advertising customers, revenue increased 12% year over year, and sequentially, OEM and National Revenue Group $2.1 million.

Speaker 3: Additionally, other revenue was down approximately $2 million dollars year over year. Primarily due to the planned expiration of a non-cash AccuTrade license agreement with a former owner that expired earlier this year.

Additionally, other revenue was down approximately $2 million year over year, primarily due to the planned exploration of a noncash <unk> license agreement with a former owner that expired earlier this year.

Speaker 3: Moving to our expenses, we continue to exercise disciplined expense management while investing to support our revenue growth. Adjusted operating expenses were $151 million, $14 million higher than a year ago, primarily due to higher investment in marketing, specifically brand media to support the cars.com possibilities advertising campaign, in-person employee events, and compensation expense.

Moving to our expenses, we continue to exercise disciplined expense management, while investing to support our revenue growth adjusted operating expenses were $151 million $14 million higher than a year ago.

Primarily due to higher investment in marketing, specifically brand media to support the cars Dot com possibilities advertising campaign in person employee.

And compensation expense.

Speaker 3: Our brand investments are critical to our organic traffic strength and ensure that cars.com remains top of mind for both consumers and dealers. The facet over 60% of our traffic comes to us organically, drives long-term marketing and financial efficiency for our business. And it also allows us to deliver a unique high-intent audience to our customers that cannot be duplicated through traditional paid advertising channels.

Our brand investments are critical to our organic traffic strength and ensure that cars dot com remains top of mind for both consumers and dealers. The fact that over 60% of our traffic comes to US organically. So that's long term marketing and financial efficiency for our business and it also allows us to deliver.

Our unique high intent audience to our customers that cannot be duplicated through traditional paid advertising channels.

Product and technology investment increased $3 million year over year, as we continue to invest in consumer and customer experience. It Alex referenced my garage and cars Dot com market value New features launched this quarter that drive consumer engagement marketplace, enhancing our organic traffic strength.

And dealer value delivery.

Net income for the quarter totaled $4 5 million or <unk> <unk> per diluted share compared to a net loss of <unk> <unk> per diluted share a year ago. The change in net income is primarily attributable to the change in the fair value of contingent consideration associated with the company's prior acquisitions.

Speaker 3: For the quarter, we delivered a just of EBITDA of $49 million, or 28.4% of revenue at the high end of our guidance range. Sequentially, our margin expanded 125 pieces points.

For the quarter, we delivered adjusted EBITDA of $49 million or 28, 4% of revenue at the high end of our guidance range sequentially, our margin expanded 125 basis points.

Speaker 3: Avalid's mentioned this quarter we completed our 2023 Marketplace Repackaging Initiative. Results have been positive, with over 80% of our 9% year-over-year growth in ARPD, driven by a combination of reprising and upgrades.

As Alex mentioned this quarter, we completed our 2023 marketplace Repackaging initiative, which has also been positive with over 80% of our 9% year over year growth in AARP D driven by a combination of repricing and upgrades to.

Speaker 3: To that point, nearly 70% of repackaged customers upgraded to either the value added preferred or premium package. Beave higher-tier packages include more of our platform advantages, and as a result, provide dealers with greater value. As an example, upgrading to the preferred or premium package has a double-digit improvement on inventory turn times for dealers.

To that point, nearly 70% of repackage customers upgraded to either the value added preferred or premium package beef higher tier packages include more of our platform advantage it and as a result provide dealers with greater value as an example, upgrading to the preferred our premium package has a double digit improvement.

Inventory turn times for dealers.

Speaker 3: With 2023 repackaging behind us, our customer base is stabilizing and we ended the quarter of with 18,715 customers. Independent of repackaging our QV retention rate remain near historic highs.

With 2023 repackaging behind Us our customer base is stabilizing and we ended the quarter with 18715 customers independent of repackaging, our <unk> retention rate remained near historic highs.

Speaker 3: Continue demand for our solution. Both websites and AccuTrade also bolstered our ARPD growth for the quarter. Website customers continue to grow. As the quarter ends, we powered more than 6,300 websites.

Continued demand for our solutions, both websites and Accu trade also bolstered our AARP growth for the quarter.

Website customers continued to grow as of quarter end, we powered more than 6300 website up over 400 from a year ago and up over 150 sequentially. We remained focused on value delivery to our customers and the size and scale of our audience is an important component of that equation for the quarter total traffic increase.

Speaker 3: up over 400 from a year ago and up over 150 sequentially.

Speaker 3: We remain focused on value delivery to our customers and the size and scale of our audience is an important component of that equation. For the quarter, total traffic increased to 151 million visits. And monthly unique visitors totaled 26 million.

151 million visits and monthly unique visitors totaled $26 million.

Speaker 3: We continue to make strategic moves that extend and advance our platform strategy. Yesterday, we acquired D to C media, a leading Canadian provider of website and digital advertising solutions that extend our reach into new markets with our already strong solutions portfolio.

We continue to make strategic moves that expand and advance our platform strategy yesterday, we acquired <unk> media, a leading Canadian provider of website and digital advertising solutions that extend our reach into new markets with our already strong solutions portfolio.

Speaker 3: Divisi Media has approximately 1,000 dealer customers, a strong in-market team with tenured experience in the Canadian market, and importantly, a business that has consistently delivered double-digit revenue growth and high adjusted EBITDA margins.

<unk> media has approximately 1000 dealer customers are strong in market team with tenured experienced in the Canadian market and importantly, a business that has consistently delivered double digit revenue growth and high adjusted EBITDA margins.

Speaker 3: We're excited about D2C's potential to help us accelerate our profitable top-line growth. Not only do we have the ability to grow our website footprint with our combined OEM endorsements, but we also see additional opportunity for growth through integration and cross-sell of our digital retailing tools and AccuTrade to Canadian customers.

We're excited about <unk> potential to help us accelerate our profitable top line growth not only do we have the ability to grow our website footprints that are combined OEM endorsement, but we also see additional opportunity for growth through integration and cross sell of our digital retailing tools and accu trade to Canadian customers.

Now turning to our balance sheet, our strong cash flow and liquidity position gives us the financial flexibility to invest in growth opportunities like data fee.

Speaker 3: Now turning to our balance sheet, our strong cash flow and liquidity position gives us the financial flexibility to invest in growth opportunities like D to C. Cash provided by operating activities for the nine month period and in September 30th, 2023 totaled $92 million. And free cash flow was $76 million compared to $77 million a year ago.

Cash provided by operating activities for the nine month period ended September 32023 totaled $92 million and free cash flow was $76 million compared to $77 million a year ago.

Speaker 3: Cash was strong year over year, despite the $16 million year over year increase in cash taxes. The majority of which was offset by favorable changes in working capital.

With strong year over year, despite the $16 million year over year increase in cash taxes, the majority of which was offset by favorable changes in working capital.

Speaker 3: During the first nine months of the year, we paid down $26 million of debt, reducing our total debt outstanding to $455 million as of September 30th, 2023. And year to date, we also repurchased 1.3 million shares for $24 million, and we continue to see value in sharey purchases.

During the first nine months of the year, we paid down $26 million of debt, reducing our total debt outstanding to $455 million as of September 32023, and year to date, we also repurchased one 3 million shares for $24 million and we continue to see value in share repurchases.

Speaker 3: At quarter end, our net leverage ratio was 2.1 times, at the low end of our target range of 2 to 2.5 times. We continue to maintain ample liquidity of $279 million, comprised of $49 million in cash on hand, and $230 million of undrawn revolver.

At quarter end, our net leverage ratio was two one times at the low end of our target range of two to two five times we.

We continue to maintain ample liquidity of $279 million.

Comprised of $49 million in cash on hand, and $230 million of Undrawn revolver.

Speaker 3: Yesterday, we funded the D to C media acquisition with a combination of cash on hand and revolver draw.

Yesterday, we funded the <unk> media acquisition with a combination of cash on hand and revolver draw.

Speaker 3: Pro forma for the acquisition, our net leverage ratio as of September 30th would have been two and a half times at the high end, but still within our target range.

Pro forma for the acquisition, our net leverage ratio as of September 30th would've been two five times at the high end, but still within our target range.

Speaker 3: I also want to reaffirm our commitment to our balanced capital allocation strategy. Given our strong free cash flow generation, we remain committed to paying down debt and continuing to repurchase shares.

I also want to reaffirm our commitment to our balanced capital allocation strategy, given our strong free cash flow generation, we remain committed to paying down debt and continuing to repurchase shares.

Speaker 3: Now, for our fourth quarter guidance, we expect to deliver a revenue of approximately $177 to $179 million. Representing Euro-Berier growth of 5.2 to 6.4%.

Now for our fourth quarter guidance, we expect to deliver revenue of approximately $177 million to $179 million.

Representing year over year growth of five two to six 4%.

Speaker 3: Our guidance reflects continued growth in dealer revenue driven by continued adoption of dealer solutions and media products, as well as modest sequential improvement in OEM and national revenue. In addition, our fourth quarter guidance includes two months of revenue associated with our acquisition of D2C Media, which we expect will contribute approximately 1.5% of our total revenue dollars in the fourth quarter.

Our guidance reflects continued growth in dealer revenue driven by continued adoption of dealer solutions and media products as well as modest sequential improvement in OEM and national revenue.

In addition, our fourth quarter guidance includes two months of revenue associated with our acquisition of D to C media, which we expect will contribute approximately one 5% of our total revenue dollars in the fourth quarter.

Speaker 3: Recall that sequentially the fourth quarter is often impacted by seasonal trends.

Recall that sequentially the fourth quarter is often impacted by seasonal trends.

Speaker 3: And our year-over-year growth rates reflect both the successful launch of AccuTrade Connected and the favorable renegotiation of key website agreements from the fourth quarter of last year.

And our year over year growth rate reflects both the successful launch of accu trade connected and the favorable renegotiation of key website agreements from the fourth quarter of last year.

Speaker 3: For the full year, our fourth quarter guidance, along with performance to date, places us comfortably within our previously shared revenue guidance range of 4% to 6%.

For the full year, our fourth quarter guidance, along with performance to date places us comfortably within our previously shared revenue guidance range of 4% to 6% full.

Speaker 3: Full year performance reflects the benefit of this year's Marketplace Repackaging Initiative, continued penetration of our dealer solutions, and modest improvement in OEM revenue offset by a challenging environment for auto-adjacent advertisers, including insurance.

Full year performance reflects the benefit of this year's marketplace Repackaging initiative continued penetration of our dealer solutions and modest improvement in OEM revenue offset by a challenging environment for auto adjacent advertisers, including insurance company.

Speaker 3: We expect fourth quarter adjusted EBITDA margins of 29.5 to 30.5% in line with our previous guidance of approaching 30%.

We expect fourth quarter, adjusted EBITA margin of $29, 5% to 35% in line with our previous guidance of approaching 30%.

Speaker 3: Our consistent and reliable growth demonstrates that our asset-light platform strategy with connected technology solutions generates strong, diversified revenue streams for our business. This, along with our focus execution, position us well to further drive sustainable, profitable growth.

Our consistent and reliable growth demonstrates that our asset light platform strategy with connected technology solution generate strong diversified revenue streams for our business that along with our focused execution position us well to further drive sustainable profitable growth.

Speaker 3: And with that, I'd like to open the call for Q&A. Operator?

And with that I'd like to open the call for Q&A operator.

If you would like to ask a question. Please press star one on your telephone keypad now.

Speaker 4: If you would like to ask a question, please press star 1 on your telephone keypad now. You will be placed into the queue.

You will be placed into the queue in the order received.

Speaker 4: Please be prepared to ask your question when proper.

Please be prepared to ask your question when prompted.

Speaker 4: Once again, if you have a question, please press star 1 on your phone now.

Once again, if you have a question. Please press star one on your phone.

Okay.

Speaker 4: And our first question comes from Tom White from D.A. Davidson.

And our first question comes from Tom White from D. A Davidson.

Your line is open.

Speaker 5: Great. Good morning. Thanks and nice quarter. Guys, a question on OEM ad spend. It sounds like it's it's purking up a bit. It's clearly, you know, it's been a few years since new vehicle production levels and inventories were kind of sufficient enough.

Great Good morning, Thanks, and nice quarter.

Okay.

A question on OEM AD spend it sounds like it's perking up a bit.

It's clearly it's been a few years since new vehicle production levels and inventories were kind of sufficient enough.

Speaker 5: to have these OEMs really need to support their franchise dealers with much spend. And in that time, I'd imagine that the types of digital advertising technologies and product offerings that are available to OEMs and getting pitched to OEMs have evolved and changed quite a bit. I'm curious if you'd say that that was true and how can you guys ensure that cars.com can recapture kind of its fair share of this OEM digital ad revenue?

Have these Oems really need to support their franchise dealers with much spend.

That time, I would imagine that the types of digital advertising technologies and product offerings that are available to Oems and getting pitched to Oems have evolved and changed quite a bit I'm curious if you'd say that that was true and how.

Can you guys ensure that cars dot com can recapture kind of its fair share of this OEM digital ad revenue.

Speaker 5: as it recovers in the coming quarters. Do you think you've got the right products? Do you need to change your ad kind of new offerings?

As it recovers in the coming quarters like do you think you've got the <unk>.

<unk> products do you need to change or add new offerings.

Speaker 5: you know, to capture that OEM kind of ad spend recovery. And then just a quick follow up on dealer count. Sounds like it's stabilized here and the repackaging is done. Just curious if you're seeing any kind of boomerang customers that maybe churned earlier in this year, kind of coming back now that it looks like inventories on dealer lots are, have been building a bit. Thanks.

Captured that OEM.

OEM kind of AD spend recovery and then just a quick follow up on dealer count it.

It sounds like it's stabilized here in the repackaging and I'm just curious if youre seeing any kind of boomerang customers that may be churned earlier in this year kind of coming back now that it looks like inventories on dealer lots are.

I have been building a bit thanks.

Okay.

Okay.

Speaker 2: Tom, thanks for your comments on the quarter. We too are pleased and to start on your question regarding OEM. You know, products are always going to change and evolve, but I think our core reason to believe is more about audience.

Tom Thanks for your comments on the quarter, we too are pleased and to start on your question regarding OEM.

Products are always going to change and evolve, but I think our core reason to believe is more about audience.

Speaker 2: You know, we're capturing organically the highest concentration of active in-market shoppers that are actively comparing makes and models and deciding what and where to buy in real time.

We're capturing organically the highest concentration of active in market shoppers that are actively comparing makes and models and deciding what and where to buy in real time.

Speaker 2: And if you look at OEM spending over the last, call it 10 years, it's been obsessed with legacy digital KPIs around frequency, clicks, impressions.

If you look at OEM spending over the last call. It 10 years, it's been obsessed with legacy digital kpis around frequency clicks impressions and we see the market moving much closer towards retail outcomes and that as Oems need to rethink their business models and become more efficient.

Speaker 2: And we see the market moving much closer towards retail outcomes and that as OEMs need to rethink their business models and become more efficient.

Speaker 2: They're going to need to spend less money, but maximize sales output. And we see clearly through our data that when OEMs invest in cars.com, it drives dealer retail results. And so yes, we'll tweak our product mix and we'll offer new solutions that

They're going to need to spend less money, but maximize sales output and we see clearly through our data that when Oems invest in cars dot com. It drives dealer retail results and so yes, we will tweak our product mix and will offer new solutions that.

Speaker 2: uses technology to its advantage, but ultimately the value prop is access to a high intention audience. I think on the market...

Uses technology to its advantage, but ultimately the value prop is access to a high intention audience I think on the marketplace side.

Speaker 2: you know we are seeing boomerang dealers that have come back i think that any time you raise rates and that's on your custom base you're going to lose a percentage of that market but the value we were delivering more than justifies the price points that we were asking and so we are seeing dealers come back to us particularly now that demand it's cooling inventory levels are rising dealers are looking to figure out how they're going to be able to move the inventory to faster rate

We are seeing boomerang dealers that have come back I think that anytime you raise rates in maths on your customer base youre going to lose a percentage of that market.

But the value we were delivering more than justifies the price points that we were asking and so we are seeing dealers come back to us, particularly now that demand is cooling and inventory levels are are rising dealers are looking to figure out how theyre going to be able to move their inventory at a faster rate.

Great. Thank you very much.

Thank you.

Speaker 4: you and our next question comes from Rajat Gupta from J.P.

And our next question comes from Richard.

Gupta from Jpmorgan.

Your line is open.

Speaker 6: Great. Thanks for taking the questions. I just had a question, you know, on a broader, you know, growth algorithm for the company. Outside of the D2C acquisition and with some of the repackaging initiatives now behind you.

Great. Thanks for taking the questions.

Just had a question on a broader growth algorithm for the company.

Outside of the <unk> acquisition and with some of the repackaging initiatives now behind you.

Speaker 6: What you're investing in banking on as a key source of growth, you know, into 2024 and beyond, is it, you know, the cross-cell of the new products, you know, is it, you know, rebound in dealer count, you know, OEM, national revenue. I mean, any one or two areas that you would stress on, that would be the key drivers of growth going forward. Just a broader question, I'm going to have like a more model follow-up.

What should investors be banking on.

The source of growth.

Into 2024 and beyond.

Is it the cross sell of the new products.

Rebound in dealer count.

OEM National revenue I mean, any one on one or two areas that you would stress on.

That could be the key drivers are.

Growth going forward.

Good question, but I'm going to have like a more model follow up thanks.

Speaker 2: Thanks for the question. I think what's exciting about the business is that we're sitting at a point in time where our growth vectors are very diversified and many. I think, let's start with just dealer count. We've got less than 20,000 dealers in a domestic TAM of 40,000.

Thanks for the question I think what's exciting about the business is that we're sitting at a point in time, where we are growth vectors are very diversified in many I think let's start with just dealer count we've got less than 20000 dealers in the domestic Tam of 40000.

Speaker 2: And then, even with the addition of D2C Media in Canada, we've got now 1,000 dealers in Canada with a TAM of close to 10,000 dealers that we can go after there as well. Importantly, even though we repackaged and repriced this year.

And then even with the addition of <unk> media in Canada, We've got to now 1000 dealers in Canada with a Tam of close to 10000 dealers that we can go after there as well importantly, even though we repackage and reprice. This year that doesn't mean that there is an additional opportunities to keep doing that in future years and <unk>.

Speaker 2: That doesn't mean that there is an additional opportunity to keep doing that in future years. And certainly we think OEM obviously abounced in the quarter, which is exciting to see. We've asked for investor patience as we retool that business and we got a nice bounce in it in third quarter. And we see tremendous upside in OEM spending.

Certainly we think OEM.

Obviously, it bounced in the quarter, which is exciting to see we've.

As for Investor patients as we retooled that business and we've got a nice balance and it in third quarter, and we see tremendous upside in OEM spending.

Speaker 2: over next year as well. I think that the big area of untapped opportunity is now bringing our digital solutions to the OEMs as well.

Over next year as well I think the big area of untapped opportunity as now, bringing our digital solutions to the Oems as well.

Speaker 2: You know, 50% of new vehicle sales have a trade-in, yet most OEMs do not have a trade-in solution for their customers as they want to offer on their Tier 1 websites, and we see continued adoption from OEMs wanting to outfit their dealer networks with tech. So...

50% of new vehicle sales have a trade and yet most of the Oems do not have a trade in solution for their customers as they want to offer on their tier one websites and we see continued adoption from Oems wanting to outfit their dealer networks with tech. So we've got a lot of opportunity for growth, whether it's product pricing packaging, but certainly the.

Speaker 3: We've got a lot of opportunity for growth, whether it's product pricing, packaging, but certainly the market share alone is a reason to believe. So, Neon, I don't know what else you'd add. No, I think you covered it really well. I think dealer customer growth continues to be a vector for us, and then I think importantly for a marketplace.

Market share alone is a reason to believe Sony I don't know what else you'd add no I think you covered it really well I think dealer dealer customer growth continues to be a vector for us and then I think importantly for marketplace repackaging. This year with kind of a two pronged initiative. We did we did take price, obviously, which you've seen reflected in our AARP D. But we also.

Speaker 3: repackaging this year. It was kind of a two-pronged initiative. We did take price obviously, which you've seen reflected in our ARPD, but we also put in place a packaging structure that we can leverage going forward as we think about how to advance more of the platform value in a bundled context, in a platform context, as opposed to point solutions, which are a little harder to increment quick.

Put in place the packaging structure that we can leverage going forward as we think about how to advance more of the platform value any bundled context.

And our platform contact as opposed to point solutions, which are a little harder to increment.

Quickly.

Speaker 6: God, just to follow up on Alex's comments, you know, on the OEM revenue, you know, now stabilizing and a big opportunity.

Okay.

Just a follow up on that.

Alex comments.

OEM revenue now stabilizing and a big opportunity.

Speaker 6: Is there any way to like size that, you know, how you anticipate that progressing, you know, beyond the third quarter, you get some guidance for the fourth quarter that will be sequentially up, but like how should we think about that run rate in the next year? And just relatively presumably that has higher incremental drop-through to the bottom line versus the dealer business.

Is there any way to size that.

How you anticipate that progressing.

Beyond the third quarter, you gave some guidance for the fourth quarter that will be sequentially, but how should we think about that run rate.

Into next year and just related to me.

Zero.

That has higher incremental drop through to bottom line versus the theater business.

Speaker 6: If you could add more color on that, it would be helpful.

Okay.

That would be helpful.

Speaker 2: And certainly the OEM revenues are some of the highest margin revenues that the business enjoys and it's been on a multi-year slide with the inventory shortages and now the inventory levels are blossoming again. There is an opportunity for us to expand this line of the business which has positive top line and bottom line implications. I think...

Yes, certainly the OEM revenues are some of the highest margin revenues that the business enjoys in its been on a multi year slide with.

With the inventory shortages and now that inventory levels are blossoming again, there is an opportunity for us to expand this line of the business, which has positive topline and bottom line implications I think.

Speaker 2: That said, OEM revenues tend to be very choppy, unlike our highly reoccurring sticky dealer subscription business, which you can reliably predict from quarter to quarter.

That said OEM revenues tend to be very choppy. Unlike our highly reoccurring sticky dealer subscription business, which you can reliably predict from quarter to quarter.

Speaker 2: you know, the OEM revenue comes in lumps and sees in seasonal needs for urgency by the OEMs to ramp up something in a period. So it is a little bit harder to predict without the reoccurrence of that revenue, but we definitely see...

The OEM revenue comes in lumps and and season seasonal needs for urgency by the Oems to ramp up something in a period and so it is a little bit harder to predict.

Without the reoccurring so that revenue, but we definitely see.

Speaker 2: big upside in OEM spending, close to $20 billion are being spent domestically by OEMs in advertising, yet 90% of those dollars are going to people that aren't in the market to buy a car. And so, we see tremendous upside in our go-to-market, which is part of why we've rebranded as Cars.com Commerce Media, so that OEMs know that we can actually help them facilitate transactions at the retail level.

Big upside in OEM spending close to $20 billion are being spent domestically by Oems and advertising yet 90% of those dollars are going to people that arent in the market to buy a car and so we see tremendous upside in our go to market, which is part of why we've rebranded as cars Dot com.

Commerce media, so that Oems know that we can actually help them facilitate transactions at the retail level.

Speaker 3: And I think we'll be in a good position to share more detail, right? When we give our 2024 guidance in a couple months around how to think about. Um, the shape of revenue evolving, but I do think and I think you probably got our takeaways. We were really pleased to see kind of that sequential improvement and turning the corner a little bit. So to speak on performance and their, their, the attractiveness they see in our audience.

Got it thank you.

We'll be in a good position to share more detail right. When we gave our 2024 our guidance in a couple of months around how to think about.

The shape of OEM revenue evolving, but I do think and I think you probably got our takeaway is we were really pleased to see kind of that.

Sequential improvement in turning the corner a little bit so to speak on OEM performance in there, they're the attractiveness the DNR audience.

Understood. Thanks for all the color I'll jump back in queue.

Okay.

Speaker 4: And we have a question from the VidCon from B-Rally Securities. Your line is open.

And we have a question from <unk> Khan from B Riley Securities.

Your line is open.

Yes. Thank you.

And congrats on the results I had a couple of questions. So in your <unk>.

Speaker 7: Congrats on the results. I had a couple of questions. So in your Q4 outlook, I think you guys expect, you guys said that you expect OEM to be up sequentially, and I'm wondering if you.

Q4 outlook can you guys expect you guys said that you expect OEM to be up sequentially and I'm wondering if you.

Speaker 7: If you're running any campaigns that gives you that level of visibility or is it more of a broad-based trend that's kind of helping this line? And the other question I have is just on the D2C media. Just, Alex, maybe can you talk about the levers you have to kind of drive the business up from here? You said it was a double-digit grower on its own. Just give us some thoughts on.

If youre running any campaigns that gives you that level.

Good day or is it more of a broad based trend that's going to open this line.

And the other question I had is just on the <unk> media.

Maybe can you talk about the levers you have to kind of drive the business.

From here you said it was double.

Or does it grow or on it.

So on just give us some thoughts on that.

Speaker 7: your thoughts on what you can do to kind of take it to the next level.

Okay.

What you can do to kind of take it to the next level.

Speaker 3: I think maybe just really briefly on the OEM question, given that we are part of the way through the quarter, a lot of OEM's book with us in advance. So we have a front that we do with them at the beginning of every year, and then we have incremental sales on top of that. And so at this point in the quarter, we have pretty solid visibility into our expectations, which is informing our guidance around OEM and national revenue.

I think maybe just really briefly on the on the OEM question given that we are part of the way through the quarter a lot of OEM book with us in advance so.

So we have upfront that we deal with them at the beginning of every year and then we have incremental sales on top of that and so at this point in the quarter, we had pretty solid visibility into our expectation.

Which is informing our guidance around OEM and national revenue.

Speaker 2: Correct. And then on D to C, a couple answers there. First and foremost, D to C only has a thousand dealers out of a tam of over 10,000 in Canada alone. So there's organic upside to grow just the share of dealers.

Correct and then on D to C. A couple answers there first and foremost DTC only has 1000 dealers out of a Tam of over 10000 in Canada alone. So theres organic upside to grow just the share of dealers'.

Speaker 2: using the D2C platform in Canada. But importantly, if you look at the OEM endorsement.

Using the <unk> platform in Canada, but importantly, if you look at the OEM endorsements.

Speaker 2: Currently, you know, as DI, we only had six OEM endorsements in Canada where D to C has 12. There is some duplication, but the net effect is that we have 15 OEMs where we have a license to hunt in the Canadian market. And so it opens up the sales aperture for that team to expand in Canada even faster than there that currently are.

Currently.

We only had six OEM endorsements in Canada, where <unk> has 12, there is some duplication, but the net effect is that we have 15 Oems where we have a license to hunt in the Canadian market and so it opens up the sales aperture for that team to expand in Canada, even faster than the.

We are it reminds me a lot of Gi and what it looked like there were we ran that playbook here in the U S market. So I consider this to be a similar play that we've run and executed before I think the final one is that.

Speaker 2: It reminds me a lot of DI and what it looked like there where we ran that playbook.

Speaker 2: here in the U.S. market. So I consider this to be a similar play that we've run and executed before. I think the final one.

Speaker 2: You know, Accutrade continues to build momentum. We are adding features. We're improving the onboarding. We're seeing higher dealer utilization and the value there is overwhelming. We want to distribute this technology throughout Canada and the DTC media team being locally entrenched with strong relationships to an established dealer base. Certainly gives us a distribution path for Accutrade and Canada.

Accu trade continues to build momentum we are adding features we're improving the onboarding, we're seeing higher diesel dealer utilization and the value there is overwhelming.

Want to distribute this technology throughout Canada, and the D to C media team being locally entrenched with strong relationships to an established dealer base certainly gives us a distribution path for accu trade in Canada I think further on obviously there is an aspiration to launch our marketplace in Canada, but that will come.

Speaker 2: I think further on, obviously there is an aspiration to launch our marketplace in Canada, but that will come once we've built up the supply side of our business in the country.

Once we've built up the supply side of our business in the country.

Speaker 8: understood. And in terms of just the product, Alex, you will have, you know, Deed inspired product and now you have the DTC. Is there a...

Understood.

And in terms of just the product Alex you'll have data inspire.

And now you have the.

Good to see.

Is there.

Speaker 8: somewhere down the line, just go for consolidating that or you see one better than the other and kind of.

Somewhere down the line is there scope for using that or do you see one better than the other and kind of.

Speaker 7: It's moving every customer to that. Is that something you can expect?

Moving over to <unk>.

That's similar to.

Is that something we can expect.

That's not necessarily the case.

Speaker 2: There is a plan to align road maps and leverage more synergy between the two platforms, but we are consolidating both brands under the car's commerce umbrella, so that we can work directly with OEMs for inclusion in their preferred programs.

There is a <unk>.

To align roadmaps and leverage more synergy between the two platforms, but we are consolidating both brands under the car's commerce umbrella. So that we can work directly with Oems for inclusion in their preferred programs and then provide robust reporting analytics and.

Speaker 2: and then provide robust reporting, analytics, and support that's North American in nature. And so that strengthens our OEM relationships and our ability to serve and support their needs because most of them are looking for solutions that cover both geographies. Our research audit and department grants a community portfolio of future coursed into the

Support that's north American in nature, and so that strengthens our OEM relationships and our ability to serve and support their needs because most of them are looking for solutions that cover both geographies.

Understood.

Okay. Thank you guys.

Thank you.

Speaker 4: As a reminder, if you would like to ask a question, please press star one on your telephone key.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad now.

And our next question comes from Gary <unk> from Barrington Research.

Speaker 4: And our next question comes from Gary Prestapino from Barrington Research.

Your line is open.

Speaker 9: Your line is open. Hey, thanks, good morning everyone.

Thanks, Good morning, everyone.

Couple of questions here first of all Alex.

Speaker 9: questions here. First of all, Alex, you said AccuTrade appraisals were up 20% to 500,000. Is that a year-over-year number, or was that sequentially?

You said accu trade appraisals were up 20% to 500000 is that a year over year number or was that sequentially.

Sequential.

Okay.

Speaker 9: Okay. In terms of car sales, though, through AccuTrade, can you give us some idea of, as a percentage of appraisals, how many are actually picked off by the dealers?

In terms of.

Car sales, though through through Accu trade can you give us some idea of as a percentage of appraisals, how many are actually.

Picked off by the dealers.

Speaker 2: I don't have that data handy, Gary, but we have visibility on that, and what's important is that we can see if the dealer that the car was originally sent to bought the car or if it appears in another one of our dealer partners, because through our backend technology, we can do VIN matching to see which dealer bought the car, and I will tell you that the vast majority of vehicles are being bought by the dealer network. Sometimes it's not the initial dealer, but the cars are absolutely being acquired by our network.

I don't have that data handy, Gary, but we have visibility on that and what's important is that we can see if the dealer that.

The car was originally sent to bought the car or if it appears in another one of our dealer partners because through our back end technology, we can do vin matching to see which dealer bought the car in.

I will tell you that the vast majority of vehicles are being bought by the dealer network, sometimes it's not the initial dealer, but the cars are absolutely being acquired by our network.

Speaker 9: Okay, that's great. So then we're only shifting to D2C Media. You said a thousand dealers out of 10K in Canada. Are most of their dealer-based franchised or?

Okay. That's great. So then shifting.

Shifting to D to C media.

You said 1000 dealers.

I think maintain Canada or most of their dealer base franchised or independents.

Yeah about 80% of their dealer network is franchise and about 20% independent.

Speaker 2: Yeah, about 80% of their dealer network is franchised and about 20% independent.

Okay.

Speaker 9: All right, and then it's pretty easy to see what you can cross sell off in a counter.

Alright, and then it's pretty.

Easy to see what you can cross sell up into Canada.

Speaker 9: But is there anything that D2C brings to you that you can, in terms of their products, that you can cross-sell into the U.S.?

But is there anything the D to C brings to you.

Are there products that you can cross sell into the U S market.

Okay.

They do have some great technology, both our CRM platform as well as.

Speaker 2: You know, they do have some great technology, both a CRM platform, as well as a BDC tool that helps do appointment setting on behalf of dealers.

Our BDC tool that helps do appointment setting on behalf of dealers.

Speaker 2: Gary, we have a lot of dealers that have personnel that turns over in the US. And so we have churn in our marketplace subscriptions and they built a solution that helps dealers preserve.

Gary we have a lot of dealers that have personnel that turns over in the U S and so we have churn in our marketplace subscriptions and they've built a solution that helps dealers preserve.

Speaker 2: volume from their websites by leveraging a call center approach that we think has really enabled them to build a highly sticky solution for dealers. And I could see applicability of that here in the U.S.

Volume from their websites by leveraging our call center.

The approach that we think has really enabled them to build a highly sticky solution for dealers and I could see applicability of that here in the U S. Over the next call. It 12 months will be consolidating our roadmaps and aligning so that we can build tech once and distributed.

Speaker 2: call it 12 months, we'll be consolidating our roadmaps and aligning so that we can build tech once and distribute it.

Speaker 2: Multiple times and that's that's really the benefit of our asset light software model is that we can get that operating synergy through the

Multiple times and that's really the benefit of our asset light software model is that we can get that operating synergy through the technology.

What about their advanced inventory management, what is that all about.

Speaker 2: What about their advanced inventory management? What is that all about, that product? Well, they've done some great work there, but as have we. And we look forward to sharing more news about some of our inventory management capabilities going into next year.

Well they've done some great work there, but as have we and we look forward to sharing more news about some of our inventory management capabilities going into next year.

But obviously as you can.

Speaker 2: imagine we're syndicating inventory within our platform across multiple solutions and powering dealer websites and the marketplace and so dealers have consistently said to us if you could add an inventory management capability that allows me to syndicate my inventory out to other third parties It would allow me to anchor more of my relationship with cars commerce and so stay tuned on that front We've got a lot of work underway and and it's an area of opportunity for us for sure

<unk>, we're syndicating inventory within our platform across multiple solutions and powering dealer websites in the marketplace and so.

Dealers have consistently said to us if you could add in inventory management capability that allows me to syndicate my inventory out to other third parties. It would allow me to anchor more of my relationship with cars Commerce and so stay tuned on that front, we've got a lot of work underway.

It's an area of opportunity for us for sure.

And then just just to be clear this is not dilutive to your adjusted EBITDA margin correct.

Speaker 9: And then just to be clear, this is not diluted to your justity, but gone margin. Correct.

No no.

Thank you.

Thank you Gary.

We have a question from Kunal <unk> from UBS.

Speaker 4: And we have a question from Kunal Madhukar from UBS.

Your line is open.

Speaker 8: Thanks for thanks for taking the question couple. If I could one on the Canadian market, can you talk about the comparative landscape that you are facing and what gives you the confidence that you can drive growth in a market that is probably similar to the US in terms of maturity?

Thanks, Thanks for taking the question.

If I could one on the Canadian market can you talk about the competitive landscape.

That you are facing and <unk> be the confidence that you can trade in a market that is probably similar to the U S in terms of maturity.

Speaker 8: And then on the overall dealer count as a whole, how should we think of the growth given that you know, dealer count was declining even prior to, you know, COVID?

And then on.

Overall dealer count as a whole how should we think of the growth given that dealer count was declining even prior to.

Covid.

Speaker 8: And so what should drive the growth in the U.S.?

And so what should drive.

The growth in the U S.

Once <unk> has shrunk.

Yeah.

Vanilla this year next year, but it won't be trough.

Strides to growth. Thank you.

Speaker 2: Sure, come on, thanks for the question. I think your first question was about the competitive landscape in Canada. And I would tell you, it is very analogous to what we saw with dealer inspired here in the US, a handful of providers without scale or infrastructure to really generate that scale and needing an investment to expand. And so...

Sure <unk>. Thanks for the question I think your first question was about the competitive landscape in Canada and I would tell you. It is very analogous to what we saw with dealer inspire here in the U S.

Handful of providers without scale or infrastructure to really generate that scale and needing an investment too to expand and so.

Speaker 2: You know, the DDC platform is fantastic. The best part of that asset are the people that are locally ensconced in their communities and have strong dealer relations and are looking for more product to sell. And so.

DTC platform is fantastic the best part of that asset are the people that are locally ensconced in their communities and have strong dealer relations and are looking for more product to sell and so we're.

Speaker 2: We're excited to partner and distribute our technology like AccuTrade throughout the region, where we've had steady, inbound demand from Canadian dealers, but not a real fulfillment capability to serve the market in real time. And so we've now rapidly built in distribution throughout the country. I think on the dealer count,

Excited to partner and distribute our technology like accu trade throughout the region, where we've had steady inbound demand from Canadian dealers, but not a real fulfillment capability to serve the market in real time, and so we've now rapidly built in distribution throughout the country.

I think on the dealer count side.

Speaker 2: You know, look, yes, we've been on a dealer slide prior to COVID, but you also have to remember, and we documented a chart in our earnings shows that dealer count. If you look at where some of that dealer growth or dealer loss came from, was been the fall with digital dealers. It largely scaled up over the last few years, as companies like Room, Carvana, SHIFT.

Look yes, we've been on a dealer slide prior to Covid, but you also have to remember and we documented a chart in our earnings it shows that dealer count if you look at where some of that dealer growth or dealer loss came from what has been the fall of digital dealers. It largely scaled up over the last few years is.

Companies like Vroom, Carvana shift tread car lots expanded virtual dealerships and those businesses have a lot bigger challenges that resulted in a pullback of close to 700 dealerships falling out of our dealer count I think the key to growing dealer count is provide incredible.

Speaker 2: tread, car lots, expanded virtual dealerships, and those businesses have a lot bigger challenges that resulted in a pullback of close to 700 dealerships falling out of our dealer count. I think the key to growing dealer count is provide incredible value, which we have through organic traffic, value delivery.

Value, which we have through our organic traffic value delivery or.

Speaker 3: our website solutions and our technologies and tools, but what's also important is having a robust service and support network that meets them where they are. And so, we're established in the market and we see great opportunity to continue to grow dealer sales. I just want to maybe add a couple more thoughts to that, which is, you know, we did experience dealer losses during COVID, but post-COVID.

Our website solutions and our technologies and tools, but what's also important is having a robust service and support network that meets them, where they are and so we are established in the market and we see great opportunity to continue to grow dealer sales I just want to maybe add a couple more thoughts to that which is we did experience.

Dealer losses during Covid, but post COVID-19.

Speaker 3: essentially post kind of Q2 of 2020, we were on a very steady progression upwards in terms of dealer customer addition. And I would attribute it to a couple different things. I think our investments in the business to improve traffic, the quality of our SEO, the strength of our organic audience.

Centrally post kind of Q2 of 2020, we were on a very steady progression upwards in terms of dealer customer addition, and I would attribute it to a couple of different things I think.

Our investments in the business to improve traffic quality of our the strength of our organic audience expansion of our product suite on the solution side, which is another sort of avenue by which dealers can get to know our marketplace.

Speaker 3: expansion of our product suite on the solution side, which is another sort of avenue by which dealers can get to know our marketplace.

Speaker 3: I think that's important to know. We have seen a little bit of pressure.

I think that that's important to know we have seen a little bit of pressure.

Speaker 3: In the last several quarters on the dealer customer number, which is Alex mentioned, is very much attributable to some of the challenges. Certain digital dealers were experiencing over call it the last year, which then resulted in them pulling back advertising spend when they're their business models were going through those challenges. But we were on a very steady clip of dealer customer growth and actually dealer customer growth even prior to COVID.

In the last several quarters on the dealer customer number which as Alex mentioned is very much attributable to some of the challenges certain digital dealers, we're experiencing over call. It the last year, which then resulted in non pulling back advertising spend when they're their business models are going to those challenges.

But we were on a very steady clip.

<unk> customer growth.

Actually dealer customer growth even prior to Covid.

So that that trend has been there it's just a little bit more under pressure. The last couple of quarters with digital dealer and then our decision frankly to go ahead with marketplace, we packaging, which we view adds really key to driving future growth in the business because it gives our customers access to a broader.

Speaker 3: So, that trend has been there, it's just a little bit more under pressure the last couple quarters with digital dealers, and then our decision, frankly, to go ahead with marketplace repackaging, which we view as really key to driving future growth in the business, a, because it gives our customers access to a broader

Speaker 3: broader access to our platform, which improves their performance. We've seen it in inventory, term times. We've seen it in ad efficiency.

Broader access to our platform, which improves their or their performance we've seen it in inventory turn times, we've seen an ad efficiency.

Speaker 10: and drive value in the future. So I just wanted to provide that additional color.

And drive value in the future. So I just wanted to provide that additional color.

Okay.

And if there are any final questions. Please press star one on your phone now.

And our next question is from Marvin Fong from <unk>.

Your line is open.

Speaker 11: Great. Thanks for taking my questions. Congratulations on the quarter. Just a broader question, I guess, seeing as how you're active in M&A again. Just I know that you are now back up to sort of the upper end of your leverage ratio, but could you just kind of talk about your appetite for additional M&A, or was this more like a one-off opportunistic acquisition? And then I have a follow-up.

Great.

Thanks for taking my questions congratulations on the quarter.

Just a broader question I guess the thing is though youre active in M&A again.

Just.

I know that you are now back up to sort of the upper end of your leverage ratio, but could you just kind of talk about your appetite for additional M&A or was this more like.

One off opportunistic acquisition.

And then I have a follow up.

Yeah, No I mean I think.

Speaker 3: Yeah, no, I mean, I think we believe D2C is a really attractive way for us to expand.

We believe <unk> is a really attractive way for us to expand our.

Speaker 3: our geography and also sort of extend the reach of our solution.

Our geography, and also sort of extend the reach of our solution. I think we continue to be open minded around M&A as an opportunity to accelerate our growth either geographically or as you've seen in other cases, whereas helped us really leapfrog, our product portfolio and product development. So that will continue.

Speaker 3: I think we continue to be open-minded around M&A as an opportunity to accelerate our growth, either geographically or, as you've seen in other cases, where it's helped us really leapfrog our product portfolio and product development. So, it'll continue to be interesting. But, you know, we have been very committed.

To be interesting, but we have been very committed to maintaining and operating within our target leverage range I think the great news for us as a business is just given the cash flow profile of the business. We can do we can do a little bit of everything. So we can in fact go out and do deals like this that are.

Speaker 3: to maintaining and operating within our target leverage range. I think the great news for us as a business is just given the cash flow profile of the business, we can do a little bit of everything, so we can, in fact, go out and do deals like this that are really accretive to our portfolio. And we do believe we'll be able to sort of swiftly pay down debt while continuing to operate. Thank you.

Accretive to our <unk>.

Portfolio and we do believe we will be able to sort of swiftly pay down debt while continuing to.

<unk>.

Speaker 3: You know, be out there in the market from a Sherry purchase.

I'll be out there in the market.

From a share repurchase perspective.

Speaker 11: Great, thanks, Sonia. And maybe just a two-part question on D to C operationally. So just so I understand, you know, basically because of the way the OEM and DORSEN is where it's like these, the D to C and D-LIN inspire basically have to operate.

Great, Thanks, Sonya and and maybe just.

Two part question on on D to C offer recently, so so just so I understand.

Basically because of the.

The way the OEM endorsements like these.

<unk> and dealer inspire and basically have to operate.

Speaker 11: separately and like dealing with fire can't like go into DDCs and Doris and so on. And just wanted to clarify how the two are going to kind of operate side by side until you can kind of integrate the road map. And then the second part of the question was just like.

Separately.

Im sorry, I cant, let go into D receive endorsements.

Just wanted to clarify how how the two are going to kind of.

Right side by side until you can kind of integrate the Roadmaps and then the second part of the question, but just like.

Speaker 2: You know, how, what, what sort of the visibility in terms of sort of, like, getting that 60% of endorsements higher, like, or, or, or, you know, approval windows by the opening up in the next. Year or so, or how do you plan on getting that 60%? Oh, thanks. Great. Great. Great. Great question. Marvin. Thank you. So.

How what's the visibility in terms of sort of like getting that 50% of endorsement is higher.

Sure.

Approval window by the Oems opening up in the next year or so or how do you plan on getting that 60%.

Great great.

Great question Marvin Thank you so.

Speaker 2: The way the OEM dealer business works for websites is that in Canada, as in the US, you need to be certified as a preferred provider in order to bring a franchise dealer on board. Certainly any independent operator, which again, DTC media has got over 200 independent dealers in their current customer count.

The way the OEM dealer business works for websites is that in Canada as in the U S. You need to be certified as a preferred provider in order to bring our franchise dealer onboard certainly any independent operator, which again DTC media has got over 200 independent dealers.

They're in their current customer count.

Speaker 2: So I'm speaking only to franchise, but you need that OEM endorsement and and D2C has been building that up in Canada to 12 Endorsements, but they didn't have some of the key ones that dealer inspire currently has in Canada We only have had six in Canada because it hasn't been a primary focus for us

So I'm speaking only to franchise, but you need that OEM endorsement and D to C has been building that up in Canada to 12 endorsements, but they didn't have some of the key ones that dealer inspire currently has in Canada. We only have six in Canada, because it hasnt been a primary focus for us.

Speaker 2: Now the team locally can sell significantly more dealers in Canada than before, because they can sell DI's solution now that they're part of the Cars Commerce family. And so we immediately open up D2C Media's TAM just by the sheer fact that they can sell on-program dealers for OEMs that they currently didn't have.

Now the team locally.

Can sell.

Significantly more dealers in Canada than before because they can sell solution now that they're part of the cars Commerce family and so we immediately open up D to C. Medias Tam just by the sheer fact that they can sell on program dealers for Oems that they occur.

Currently didn't have.

Speaker 2: I think over time we're going to consolidate our efforts under cars commerce.

I think over time, we're going to consolidate our efforts under cars commerce negotiate to get preferred relationships with all Oems likely successfully have done in the U S. We know that those relationships are easily brokered into in a Canadian expansion and so we feel very confident working with our OEM partners that.

Speaker 2: negotiate to get preferred relationships with all OEMs, like we successfully have done in the U.S.

Speaker 2: We know that those relationships are easily brokered into a Canadian expansion.

Speaker 2: And so we feel very confident working with our OEM partners that we'll rapidly expand the number of OEMs that we're eligible for, because what they're really looking for is capability.

Will rapidly expand the number of Oems that were eligible for because what they're really looking for is capability and we have shown that we have the capabilities to meet all of their technical product and operational needs and so it'll take us a little time, but I hope by this time next year.

Speaker 2: And we have shown that we have the capabilities to meet all of their technical product and operational needs. And so it'll take us a little time, but I hope by this time next year, we're at a much healthier mix of full OEM inclusion and no limitations to our distribution in Canada.

We're in a much healthier mix of full OEM inclusion and no limitations to our distribution in Canada.

Yes.

Perfect. That's very helpful. Thanks, so much.

Thank you.

Speaker 4: And seeing no further questions, I'll turn the call back over to our host, Robert.

And seeing no further questions I will turn the call back over to our host Robyn more random for final comments.

Thank you all for your question, we continue to share our story and we look forward to seeing many of you as part of our upcoming IR engagements.

Speaker 12: Thank you all for your questions. We continue to share our story and we look forward to seeing many of you as part of our upcoming IR engagement.

Speaker 12: A November 15th will participate in RBC Capital's conference in New York. November 16th will participate in the David Sins Technology Summit also in New York. And on November 20th, we'll participate in Needams Consumer Tech e-commerce virtual conference.

On November 15th we will participate in RBC Capitals Conference in New York November.

November 16th we will participate in da Davidson Technology Summit also in New York and on November 20th will participate in Needham Consumer Tech E Commerce Virtual conference.

Speaker 12: Details about these events are available on the event section of our IR website. This concludes our call and thank you.

Details about these events are available on the events section of our IR website.

This concludes our call and thank you for your time today.

Speaker 4: The meeting has now concluded. Thank you for joining.

The meeting is now concluded thank you for joining and have a great day.