Q1 2024 Cars.com Inc Earnings Call

Unknown Executive: This reinforces the strength of our brand, the inherent profitability of our platform strategy, and our track record of driving disciplined growth.

Quality of our platform strategy and our track record of driving disciplined growth.

Unknown Executive: Our Q1 performance was achieved through steady execution of our platform strategy and key growth drivers. Over the last several years, we've not only expanded our leading marketplace but also thoughtfully added software and digital solutions that broaden our addressable market and provide us with multiple ways to deliver growth. This diversified approach powered first-quarter results by transforming OEM relationships, cross-selling cars commerce platform solutions, and the strength of our engaged market-leading audience. We leveraged this momentum to achieve our best quarterly top-line growth in over two years, putting us on solid footing to deliver full-year expectations.

Our Q1 performance was achieved through steady execution of our platform strategy and key growth drivers over the last several years, we've not only expanded our leading marketplace, but also thoughtfully added software and digital solutions that broaden our addressable market and provide us with multiple ways to deliver growth.

This diversified approach powered first quarter results by transforming OEM relationships cross selling cars commerce platform solutions and the strength of our engaged market leading audience.

We leveraged this momentum to achieve our best quarterly top line growth in over two years, putting us on solid footing to deliver full year expectations.

Unknown Executive: And we see the potential for even greater traction as macro tailwinds intersect with our value proposition to maximize advertising and operating efficiency that drives more vehicle sales. According to our growth drivers, OEM and national revenue was up 13% year-over-year from strong up-front and incremental sales that benefited from our consistent investments in OEM-related products. In light of the dynamics around recent supply normalization, we have seen renewed OEM interest in our market-leading solution. Reaching high intent buyers is an imperative with new model launches growing in 2024 and new car inventory up nearly 40%, according to our latest Industry Insights report.

And we see the potential for even greater traction as macro tailwind intersect with our value proposition to maximize advertising and operating efficiency that drive more vehicle sales.

Turning to our growth drivers OEM and national revenue was up 13% year over year from strong upfront in incremental sales that benefited from our consistent investments in OEM related products.

In light of dynamics around recent supply normalization, we have seen renewed OEM interest in our market leading solutions.

Reaching high intent buyers is an imperative with new model launches growing in 2024, and new car inventory up nearly 40%. According to our latest industry insights report.

Unknown Executive: It's therefore no surprise that our OEM partners are looking to us to help them connect more efficiently to in-market shoppers and showcase their cars. Approximately two-thirds of OEM customers increased marketing and advertising investments in our products and solutions during the first quarter, and these investments manifested across multiple aspects of our platform. For example, OEMs promoting new models via homepage takeovers helped Q1 sales for that product rebound to the highest level in four years. EV-only manufacturers also continue to be interested in directly lifting vehicles on our cars.com marketplace as a complement to traditional media advertising and to show up directly in consumer search results.

It's therefore, no surprise that our OEM partners are looking to us to help them connect more efficiently to end market shoppers and showcase their cars.

Approximately two thirds of OEM customers increased marketing and advertising investments in our products and solutions during the first quarter. These.

These investments manifest it across multiple aspects of our platform.

For example, Oems promoting new models via homepage takeovers helped Q1 sales for that product rebound to the highest level in four years.

EV only manufacturers also continue to be interested in directly lifting vehicles on our cars dot com marketplace as a complement to their traditional media advertising and to show up directly in consumer search results.

Unknown Executive: I'll also note that incremental spending commitments by OEMs, which are earmarked in response to real-time market conditions, were up nicely in Q1 and another signal of positive momentum for the business. We expect the same differentiation that is attracting renewed OEM investment in our solutions will also drive sustainable dealer customer growth over time. We ended Q1 with 19,381 dealer-customers and remain confident that we can deliver dealer-customer growth for the full year. Our new marketplace sales reached the highest level in three years, reaffirming our strong platform value.

I'll also note that incremental spending commitments by Oems, which are earmarked in response to real time market conditions were up nicely in Q1, and another signal of positive momentum for the business.

We expect the same differentiation that is attracting renewed OEM investment in our solutions will also drive sustainable dealer customer growth overtime.

We ended Q1 with 19381 dealer customers and remain confident that we can deliver dealer customer growth for the full year.

Our new marketplace sales reached the highest level in three years reaffirming our strong platform value.

Unknown Executive: However, as anticipated, we also experienced modest sequential attrition related to temporary cuts by some dealers as they adjusted to the profitability pressure. Through proactive conversations with these and other accounts, we already saw retention improve in April, and we're focused on making further progress.

However, as anticipated we also experienced modest sequential attrition related to temporary cuts by some dealers as they adjusted profitability pressures.

Through proactive conversations with these and other accounts, we already saw retention improve in April and we're focused on making further progress.

Unknown Executive: For both new and returning customers, we will continue to cross-sell Cars Commerce platform products that simplify retail operations while also growing ARPD. In Q1, we grew all of our industry-leading brands year-over-year. Dealers use AccuTrade, DealerInspire, and the Cars Commerce Media Network to efficiently acquire vehicles and market to high-intent buyers, and those who adopted multiple products had inventory that turned over 20 percent faster on average, which can be especially impactful given rising inventory levels. AccuTrade Connected customers grew to just under 1,000 accounts during the quarter, generating more than 622,000 appraisals.

For both new and returning customers, we will continue to cross sell cars Commerce platform products is simplify retail operations. While also growing AARP D. In Q1, we grew all of our industry, leading brands year over year.

Dealer chooses accu trade dealer inspire and the cars Commerce media network to efficiently acquire vehicles and market to high intent buyers.

And those who adopted multiple products had inventory that turned over 20% faster on average, which can be especially impactful given rising inventory levels.

Accu trade connected customers grew to just under 1000 accounts during the quarter generating more than 622000 appraisals.

Unknown Executive: At Germain Toyota in Naples, Florida, Leveraging AccuTrade has helped the team buy and sell approximately 100 vehicles each month on their service route. The success of our products has eliminated their need to go to auctions, saving them travel time, transportation costs, and expensive auction fees, while also creating a great experience for their customers. On the digital experience front, we grew 22% year-over-year to end the quarter, powering more than 7,400 websites across DI and D2C customers.

As you remain Toyota in Naples, Florida, leveraging accu trade has helped the team buy and sell approximately 100 vehicles each month through their service drive.

The success of our product is eliminated their need to go to auctions saving them travel time transportation costs and expensive auction fees.

While also creating a great experience for their customers.

On the digital experience front, we grew 22% year over year to end the quarter powering more than 7400 websites across <unk> and <unk> customers.

Unknown Executive: DUC has expanded its website and AccuTrade TAM into the Canadian market, and our team is working hard to accelerate penetration of these valuable subscription products. Moving to media products, VIN Performance Media is also off to a promising start, with early adopters seeing significant increases in leads, interaction, and website transfers for their promoted inventory. Our proprietary machine learning model, when matched against our in-market audience, not only promotes the right VIN to the right shopper across media channels but also powers in-demand features like targeted advertising to move aged inventory.

<unk> expanded our website in accu trade Tam into the Canadian market and our team is working hard to accelerate penetration of these valuable subscription products.

Moving to media products than performance media is also off to a promising start with early adopters seeing significant increases in leads interaction and web site transfers for their promoted inventory.

Our proprietary machine learning model when matched against our in market audience not only promotes the right then to the right shopper across media channels, but also powers in demand features like targeting advocate tightening to move aged inventory.

Unknown Executive: And finally, I'd like to highlight the Q1 performance of our number one recognized marketplace brand, Cars.com, which consistently delivers a large and engaged in-market audience to dealers and OEMs. More than 28 million average monthly shoppers visited Cars.com during the first quarter to research and shop for the right vehicle. Consumers trust and rely on unique resources they find on our marketplace, like our new affordability report, to steer them to the best vehicle for their budget and lifestyle.

And finally I'd like to highlight the Q1 performance of our number one most recognized marketplace brand cars dot com, which consistently delivers a large engage in market audience to dealers and Oems.

More than 28 million average monthly shoppers visited cars dot com during the first quarter to research and shop for the REIT vehicle.

Consumers trust and rely on our unique resource they find on a marketplace like our new affordability report to steer them to the best vehicle for their budget and lifestyle.

Unknown Executive: They also increasingly use tools like Gear Garage and the new Car Hub, which continue to drive strong repeat traffic to our marketplace, keeping us connected to consumers through their car ownership journey. Building strong organic relationships with consumers has been an enduring hallmark of Cars.com for over 25 years, and we're committed to delivering more innovative content and technology to capture in-market audiences at scale. In closing, focusing on our platform strategy helped us advance our product roadmap, accelerate to high single-digit revenue growth, and meaningfully improve profitability in the first quarter.

They also increasingly use tools like your garage in the new car hub, which continue to drive strong repeat traffic to our marketplace, keeping us connected to consumers through their car ownership journey.

<unk> strong organic relationships with consumers has been an enduring hallmark of cars dot com for over 25 years, and we're committed to delivering more innovative content and technology to capture and market audiences at scale.

In closing focusing on our platform strategy help us advance our product roadmap accelerate to high single digit revenue growth and meaningfully improved profitability in the first quarter. Our strategy is working as intended propelling sustainable growth with a durable and well rounded product portfolio that addresses our customers' most pressing.

Unknown Executive: Our strategy is working as intended, propelling sustainable growth with a durable and well-rounded product portfolio that addresses our customers' most pressing needs. We have immense opportunities ahead, and we're excited to show you what we think this business can do as we simplify car buying and selling for everyone. Now, Sonia will lead the discussion of our first quarter financial results.

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We have immense opportunities ahead, and we're excited to show you. What we think this business can do as we simplify car buying and selling for everyone.

Now Sony will lead the discussion of our first quarter financial results.

Yes.

Sonia Jain: Thank you, Alex. We started the year on strong footing, delivering solid revenue growth and an adjusted EBITDA margin that exceeded our guidance. Revenue was slightly above $180 million in the first quarter, an 8% increase over the prior year and the best quarterly growth we've seen in over two years. Both dealer revenue and OEM and national revenue were up year over year across all product categories. Dealer revenue grew 8% year over year, to $162 million, driven by contributions from repackaging, the acquisition and continued growth of D2C, and continued product penetration. OEM and national revenue was $15 million, up 13% compared to the prior year.

Sony: Thank you Alex we started the year on strong footing delivering solid revenue growth and an adjusted EBITDA margin that exceeded our guidance range revenue was slightly above $180 million in the first quarter, an 8% increase over the prior year and the best quarterly growth we've seen in over 10 years, both dealer revenue and OEM in Nash.

Sony: Revenue were up year over year across all product categories.

Sony: Dealer revenue grew 8% year over year to $162 million.

Given by contributions from the packaging the acquisition and continued growth of <unk> and continued product penetration OEM.

Sony: OEM and national revenue was $15 million up 13% compared to the prior year.

Sonia Jain: We benefited from additional OEM investment as they seek to raise consumer awareness amid rising inventory levels. Now turning to expenses, for the quarter, total operating expenses were $167 million compared to $155 million a year ago. Product and technology expenditures increased $4 million year-over-year as we enhanced marketplace features, further augmented our product portfolio, and invested in our back-end system. As a reminder, unlike the earnouts associated with our other acquisitions, the D2C earnout runs primarily through GNA, as it was deemed compensation expense under GAAP. And during the period, we expensed $2.8 million associated with the earnout.

We benefited from additional OEM investments as they seek to raise consumer awareness amid rising inventory levels.

Sony: Now turning to expenses for the quarter total operating expenses were $167 million compared to $155 million a year ago.

Sony: Product and technology expenditures increased $4 million year over year as we enhanced marketplace features further augmented our product portfolio and invested in our back end systems. As a reminder, unlike the earn out associated with our other acquisitions. The <unk> earn out rents primarily through G&A as it was deemed compensation expense.

Sony: Under GAAP and in the period, we expense $2 8 million associated with the earn out.

Sonia Jain: Adjusted operating expenses were $155 million, $9 million higher than the same period last year, primarily related to the aforementioned investments in technical talent and software to support our platform and product roadmap, and a $3 million increase in depreciation and amortization. Income for the first quarter was $0.8 million, or $0.01 per diluted share, compared to $11.5 million, or $0.17 per diluted share in the prior year. The change in net income is primarily attributable to earnouts associated with our acquisition.

Sony: Adjusted operating expenses were $155 million $9 million higher than the same period last year, primarily related to the aforementioned investments in technical talent and software to support our platform and products roadmap and a $3 million increase in depreciation and amortization.

Sony: Net income for the first quarter was zero point $8 million or <unk> <unk> per diluted share compared to $11 5 million or <unk> 17 per diluted share in the prior year.

Sony: The change in net income is primarily attributable to earn outs associated with our acquisition.

Sonia Jain: I'll also note, in our comparison, that income in Q1 2023 was elevated due to the outsized change in the fair value contingent consideration of our acquisition. Meanwhile, adjusted net income for the quarter was $28.7 million, or $0.43 per diluted share, compared to $26.2 million, or $0.39 per diluted share, a year ago. Adjusted EBITDA for the first quarter was $53 million, and while the adjusted EBITDA margin of 29.2% exceeded our guidance range, we're pleased with our year-over-year margin expansion of 270 basis points, which resulted from the strong flow-through of nearly two-thirds of our revenue growth to adjusted EBITDA. Moving to key metrics for Q1.

Sony: Also note in our comparison net income in Q1 2023 with elevated due to the outsized change in the fair value contingent consideration of our acquisitions.

Sony: Meanwhile, adjusted net income for the quarter was $28 7 million or <unk> 43 per diluted share compared to $26 2 million or <unk> 39 per diluted share a year ago.

Sony: Adjusted EBITDA for the first quarter was $53 million, while adjusted EBITDA margin of 29, 2% exceeded our guidance range. We're pleased with our year over year margin expansion of 270 basis points, which resulted from the strong flow through of nearly two thirds of our revenue growth to adjusted EBITDA.

Sonia Jain: We ended the quarter with 19,381 total customers, down slightly quarter over quarter due to what we believe are temporary budget cuts by some dealers in response to declining profitability. Nevertheless, we expect to grow full year dealer count as we work to win back these customers and expand into new accounts based on our strong value products. Unit Economics continued to strengthen as ARPD reached $2,505 for the first quarter, up 5% year-over-year, from positive repackaging contribution and AccuTrade growth, partially offset by lower ARPD from B to C. While AccuTrade customer satisfaction scores are strong, it does take time for dealers to implement and ramp utilization of the tool across their dealership, we're actively exploring ways to accelerate this learning curve over the next several quarters and believe it is a significant opportunity for us in the near future, and we do expect to keep growing our ARPD over time as we cross-sell additional products into existing accounts, sign up new customers, and hire tier marketplace packages, and improve overall retention through enhanced value delivery.

Sony: Moving to key metrics for Q1, we ended the quarter with 19381 total customers down slightly quarter over quarter due to what we believe are temporary budget cuts by some dealers in response to declining profitability. Nevertheless, we expect to grow full year dealer count as we work to win back these customers and.

Sony: And into new accounts based on our strong value proposition.

Sony: Unit economics continue to strengthen as our PD reached $2505 for the first quarter up 5% year over year from positive repackaging contribution and accu trade growth, partially offset by lower arpus from DTC customers.

Sony: While accu trade customer satisfaction scores are strong it does take time for dealers to implement and ramp utilization of the tool across their dealership. We're actively exploring ways to accelerate this learning curve over the next several quarters and believe it is a significant opportunity for us in the near future. I mean, do you expect to keep growing our ERP.

Sony: Over time, as we cross sell additional products into existing accounts sign up new customers and higher tier marketplace packages and improve overall retention through enhanced value delivery.

Sonia Jain: Now turning to our balance sheet, net cash provided by operating activities totaled $33 million year-to-date. Free cash flow remains strong at $27 million, roughly $5 million higher year-over-year, driven primarily by improved adjusted EBITDA and favorable working capital, partially offset by one-time cash costs and timing of interest. During the first quarter, we repurchased 500,000 shares for $9.5 million.

Sony: Now turning to our balance sheet net cash provided by operating activities totaled $33 million year to date free cash flow remained strong at $27 million.

Sony: Roughly $5 million higher year over year, driven primarily by improved adjusted EBITDA and favorable working capital, partially offset by onetime cash costs and timing of interest expense.

Sony: During the first quarter, we purchased 500000 shares for $9 5 million.

Sonia Jain: We also repaid $10 million of debt and reduced total debt outstanding to $480 million as of March 31, 2024. This brings our total net leverage to 2.2 times, down from 2.3 times last year and comfortably within our target range of 2 to 2.5 times. All together, we have ample liquidity of $226 million, including $31 million of cash-in-cash equivalents and $195 million of revolver capacity as of March 31, 2020. As discussed in our earnings release, we also recently amended our existing credit facility in a leverage-neutral transaction, replacing both our current term loan and revolving loan with a new $350 million revolver maturing in May 2029. We borrowed $80 million on the new facility at closing, effectively extinguishing outstanding balances on the current term and revolving loans, eliminating the need for any required amortization ahead of the maturity date.

Sony: We also repaid $10 million of debt and reduced total debt outstanding to $480 million as of March 31 2024.

Sony: This brings our total net leverage to two two times down from two three times last year and comfortably within our target range of two to two five times.

Sony: Altogether, we have ample liquidity of $226 million, including.

Sony: Including $31 million of cash and cash equivalents and $195 million of revolver capacity as of March 31 2024.

Sony: As discussed in our earnings release, we also recently amended our existing credit facility and a leverage neutral transaction, replacing both our current term loan and revolving loan with a new $350 million revolver maturing in May 2029.

Sony: We borrowed $80 million on the new facility at closing effectively extinguishing outstanding balances on the current term and revolving loan.

Sony: Emanating the need for any required amortization ahead of the maturity date.

Sonia Jain: This all-revolver structure bolsters our financial flexibility, adding $75 million of incremental liquidity and allows us to pursue the best return on capital, whether through organic growth or additive acquisitions or separately through returning capital to shareholders. We enjoy strong free cash flow conversion and will look to deploy our capital in a manner that drives incremental shareholder value. Looking ahead, we will continue buybacks under our remaining share repurchase authorization of $110 million, and we will also remain committed to paying down our debt. In addition, we anticipate making additional earn-out payments in Q2 related to certain acquisitions. I'll now conclude with our advice.

Sony: This all revolver structure bolsters, our financial flexibility, adding 75 million of incremental liquidity and allows us to pursue the best return on capital whether through organic growth or additive acquisitions or separately through returning capital to shareholders.

Sony: We enjoy strong free cash flow conversion and we will look to deploy our capital in a manner that drive incremental shareholder value. Looking ahead, we will continue buybacks under our remaining share repurchase authorization of $110 million and we will also remain committed to paying down our debt. In addition, we anticipate.

Sony: Making additional earn out payments in Q2 related to certain acquisitions.

Sony: I'll now conclude with our guidance in the second quarter of 2024, we expect to deliver revenue in the range of $181 million to $183 million.

Sonia Jain: In the second quarter of 2024, we expect to deliver revenue in the range of $181 to $183 million, or year-over-year growth of 7 to 9 percent. Guidance reflects continued strength in dealer revenue; OEM and national revenue growth is also expected to accelerate, benefiting from what we perceive as a more competitive sales environment that necessitates OEMs increasing their marketing and advertising directed to in-market shoppers. As a reminder, our Q2 revenue guidance also benefits from last year's repackaging initiative, which began in March of 2023.

Sony: Our year over year growth of 7% to 9%.

Sony: Guidance reflects continued strength in dealer revenue driven by increased adoption of products like dealer inspire and add trade.

Sony: OEM and National revenue growth is also expected to accelerate benefiting from what we perceive as a more competitive sales environment that necessitate Oems, increasing their marketing and advertising directly to end market shoppers.

Sony: As a reminder, our Q2 revenue guidance also benefits from last year's Repackaging initiative, which began in March of 2023.

Sonia Jain: We expect to deliver second-quarter adjusted EBITDA margins between 27.5 and 29.5%, an expansion of 150 basis points year-over-year at the midpoint of the range. This guidance reflects additional investments to support our marketplace brands and product development initiatives, as well as timing shifts of certain investments from the first quarter to the second quarter. For the year, we are reaffirming our guidance ranges of 6% to 8% revenue growth, as well as adjusted EBITDA margins between 28% to 30%.

Sony: We expect to deliver second quarter adjusted EBITDA margin between 27, five and 29, 5% an expansion of 150 basis points year over year at the midpoint of the range.

Sony: This guidance reflects additional investments to support our marketplace brands and product development initiatives as well as timing shifts of certain investments from the first quarter to the second quarter.

Sony: For the year, we are reaffirming our guidance ranges of 6% to 8% revenue growth as well as adjusted EBITDA margin between 28% to 30%.

Sonia Jain: With a growing and differentiated product portfolio, an efficient marketplace flywheel, which feeds our platform strategy, and an asset-light business model, we are poised to deliver on our goals and look forward to updating you on our progress throughout the year. Operator?

Sony: With a growing and differentiated product portfolio efficient marketplace, flywheel, which feeds our platform strategy and asset light business model, we are poised to deliver on our goals and look forward to updating you on our progress throughout the year.

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

Operator: We will now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you're using a spare phone, please lift the handset before pressing any key. Your first question comes from the line of Rajat Gupta from J.P. Morgan. Your line is open.

Speaker Change: We will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone you will hear prompt that your hand has been waste should you wish to decline from the polling process. Please press star followed by the Chew if youre using a speaker phone please lift your hence.

Speaker Change: Before pressing any keys.

Speaker Change: Your first question comes from the line of Rajat Gupta from Jpmorgan. Your line is open.

Rajat Gupta: Great, thanks for taking the questions. I had one clarification on the second quarter guidance and then another broader question. Just easily, if you look at the second quarter versus the first quarter, HIPAA data is always up. Typically, you know, you've also got it to higher revenue sequentially. If you're curious, like, why the midpoint imply, you know, a step down, I know you mentioned some OPEX shift, some spending shift from 1Q to 2Q. Maybe if you could quantify how much that was, and is there anything else to keep in mind when it comes to, you know, the seasonality this time around? And I have a follow-up.

Rajat Gupta: Great. Thanks for taking the question.

Rajat Gupta: One clarification on the second quarter guidance.

Rajat Gupta: Part of your question.

Rajat Gupta: So seasonally if you will.

Rajat Gupta: The second quarter was the first quarter EBITDA is always up.

Rajat Gupta: Typically you also guided to a higher revenue sequentially.

Rajat Gupta: If it's a curious like why does the midpoint imply.

Rajat Gupta: A step down in EBITDA I know you mentioned some opex shift.

Rajat Gupta: Some spending shifts from <unk>, maybe if you could quantify how much was that and is there anything else to keep in mind.

Rajat Gupta: When it comes to the seasonality this time around.

Speaker Change: I have a follow up thanks.

Sonia Jain: Hey, thank you for the question. It's Sonia.

Rajat Gupta: Okay. Thank you for the question, it's Sonya no Youre right. Historically Q1 has typically always been.

Sonya: A quarter with a little bit higher investment, particularly given the timing of events just given given the performance that we saw in timing of a couple of investments some of the investment. We were originally planning for Q1 shifted into Q2, nothing nothing nothing material in terms of how that would change our outlook for a full year, we still believe we're <unk>.

Sonia Jain: No, you're right. Historically, Q1 has typically always been, you know, a quarter with a little bit higher investment, particularly given the timing of events. Just given the performance that we saw and the timing of a couple investments, some of the investment we were originally planning for Q1 shifted into Q2. Nothing material in terms of how that would change our outlook for a full year. We still believe we're very much on target. And if you kind of take the two quarters together, you can see that we're pacing really well against that target. It's literally just a little bit of a shift.

Rajat Gupta: Much on target and if you kind of take the two quarters together you can see that we're pacing really well against that target. It is literally just a little bit of a shift in a couple of areas.

Rajat Gupta: Got it. Got it. So, like the mine, the first half of OPEX was tracking in line with what you had initially added?

Speaker Change: Got it got it.

Speaker Change: So.

Rajat Gupta: What do you mean like combined first half Opex was tracking in line with what you had initially anticipated.

Sonia Jain: That's the right way to think about it. Take it as a task versus individual. I understand. That's helpful.

Rajat Gupta: The right way to think about okay. That's the right way to think about it take it up first half versus individual quarter.

Rajat Gupta: And then, you know, further on, you provided, you know, some, some helpful guidance around, like, dealer count trajectory, you know, for the full year. I'm wondering if you could tie that with expectations for ARPD as well, and where do we stand from a product attachment perspective, you know, what incremental initiatives are in the pipeline to improve monetization? You know, our sense is that, you know, as some of the dealers come back to the platform, that should be, you know, further accretive to ARPD, or are you having to, like, work with them on pricing, you know, to get that retention back in any way? So, I'm just curious, like, how should we, you know, commingle those two, you know, as we think about, you know, You know, the RPD through the course of the year. Thanks.

Speaker Change: Alright, that's helpful.

Rajat Gupta: And then just.

Rajat Gupta: Further on you provided some helpful guidance around dealer com trajectory for the full year.

Rajat Gupta: Wondering if you could talk about what the expectations for <unk> as well.

Rajat Gupta: Where do we stand from a product attachment perspective, what incremental initiatives are in the pipeline.

Rajat Gupta: To improve the monetization.

Rajat Gupta: Our sense is that you know.

Rajat Gupta: Some of the dealers go back to the platform.

Rajat Gupta: That should be.

Rajat Gupta: Further accretive to RPT or are you having to like work with them on pricing to get that retention back.

Rajat Gupta: In any way.

Rajat Gupta: I'm just curious like how should we.

Rajat Gupta: Co mingle those too.

Rajat Gupta: Think about that.

Rajat Gupta: The RPT through the course of the year.

Unknown Executive: Great question. Well, first of all, I'll address the last part of your question, which is that we don't think price is the lever we need to pull to win dealer adoption, meaning that we're not going backwards in terms of our pricing to win dealers back. In fact, we're seeing dealers that canceled last year due to our pricing action are now engaging with us again. In fact, inbound dealer inquiries to the company, meaning dealers raising their hands and contacting us, are up 20% year-to-date.

Speaker Change: Sure Great question, well first of all I'll address the last part of your question, which is we don't think price is the lever we need to pull to win dealer adoption.

Speaker Change: Meaning that we're not going backwards in terms of our our pricing to win dealers back in fact, we're seeing dealers that canceled last year due to our pricing actions are now engaging with US again in fact inbound dealer inquiries to the company, meaning dealers raising their hand, contacting us are up 20%.

Unknown Executive: So, we're seeing dealers realize that our value is fantastic, and they need help moving inventory. I think a lot of the other initiatives that are going to continue to drive ARPD growth are things like integrating AccuTrade and CreditIQ into dealer websites. We think we can help dealers reduce third-party expenses by giving them both trade-in and online financing tools that can sit natively on their website and be integrated, and then protect the dealer's data, which is a big initiative for us to help dealers control their own first-party data and information.

Speaker Change: Year to date, so we're seeing dealers realize that our value is fantastic and they need help moving inventory I think a lot of the other initiatives that are going to continue to drive <unk> growth.

Speaker Change: Are things like integrating accu trade in credit IQ into dealer websites. We think we can help dealers reduce third party expenses by giving them both traded in an online financing tools that can sit natively on their website and b <unk>.

Speaker Change: Integrated and then protect the dealer's data, which is a big Big initiative for us to help dealers control of their own first party data and information and then we're testing also things like an independent dealer offering for smaller dealers to an entry point for them to be on our marketplace or with our website <unk>.

Unknown Executive: And then we're also testing things like an independent dealer offering for smaller dealers, an entry point for them to be on our marketplace or with our website solutions. And that will, like, pull down ARPD because we're going to be selling smaller dealerships with smaller inventory sizes. But that's not going to take away from the value upside we see with larger franchise dealers and growing spending there. Cross-sell remains a big priority for the business.

Speaker Change: <unk> and that will like it pulls down ERP day, because we're going to be selling smaller dealerships with smaller inventory size.

Speaker Change: But that's not going to take away from the value upside, we see with larger franchise dealers and growing growing spending their.

Speaker Change: Cross sell remains a big priority for the business.

Unknown Executive: So we can expect ARPD to, is it fair to say that 1Q is a low point for ARPD, as well as for dealer count, or is that more like... Our plan...

Speaker Change: Got it so that we can expect <unk> to it.

Speaker Change: As I said within the <unk>, the low point for RPT.

Speaker Change: While our dealer count or are there more likely.

Unknown Executive: Our plan calls for us to grow both, right? We want to reliably grow the dealer count, and we want to make incremental gains on ARPDs. So we're seeking to do both.

Speaker Change: Our plan calls for us to grow both right, we want to reliably grow dealer count and we want to make incremental gains on <unk>. So that's we're seeking to do both.

Rajat Gupta: Got it. Great. Thanks. Thanks for. Thanks for those notifications. I'll get back to you.

Rajat Gupta: Got it. Great. Thanks.

Speaker Change: Got it great. Thanks, Ben Thanks for thanks for all those modifications and I'll get back in queue.

Speaker Change: Thank you.

Operator: Your next question comes from the line of Tom White from Davidson. Your line is open.

Speaker Change: Your next question comes from the line of Tom White from Davidson. Your line is open.

Thomas Cauthorn White: Thanks for taking my question. Good morning.

Thomas Cauthorn White: Great. Thanks for taking my question good morning.

Thomas Cauthorn White: Alex I was hoping you could just share a bit more color on what you're hearing from local dealers.

Unknown Executive: Alex, I was hoping you could just share a bit more color on what you're hearing from local dealers as it relates to their priorities for marketing investments this year and maybe for the next couple of years. On the one hand, you know, rising inventories would suggest that dealers need to find incremental sources of demand. But I guess on the other hand, a lot of the dealers we talk to, you know, we're talking about prioritizing their own direct digital spend, like search and social.

Thomas Cauthorn White: As it relates to their priorities for marketing investments this year and maybe for the next couple of years.

Thomas Cauthorn White: On one hand, rising inventories would suggest that the dealers need to find incremental sources of demand, but I guess on the other handle out of the dealers we talk to.

Thomas Cauthorn White: Talking about prioritizing their own direct digital spend like search and social.

Unknown Executive: We've heard dealers say that sort of thing for years, and you know you guys have been able to grow dealer count and your peers have been able to grow kind of paying dealer count you know despite that kind of chatter from dealers but just curious if you can comment on you know are you seeing any kind of significant change on on the part of local dealers to engage with platforms like yours you know particularly as they're undergoing kind of a broader digital transformation of their of their operations kind of more generally and then i have a quick follow-up Sure, Tom. Great question.

Thomas Cauthorn White: We've heard dealer say that sort of thing for years.

Speaker Change: And you guys have been able to grow dealer count and your peers have been able to grow kind of paying dealer count despite that kind of chatter from dealers, but just curious if you can comment on are you seeing any kind of significant change on the part of local dealers to engage with platforms like yours.

Speaker Change: Particularly as they're undergoing kind of a broader.

Speaker Change: Digital transformation of their of their operations kind of more generally and then I have a quick follow up.

Unknown Executive: Sure, Tom. Great question. First of all, as you know, I mean, there isn't a retailer out there, not just auto, but any retail category that wouldn't want 100% of their traffic just to come straight through their own front door and not have to rely on channels to generate growth. That said, as much as I understand why people want that... The consumer need for independent third-party research is non-negotiable for the consumer

Speaker Change: Sure Tom Great Great question.

Speaker Change: First of all as you know I mean, there isn't a retailer out there not just auto but any retail category. There wouldn't want 100% of their traffic is to come straight through their own front door.

Speaker Change: And not have to rely on channels to generate.

Speaker Change: Growth.

Speaker Change: That said as much as I understand why people want that.

Speaker Change: The consumer need for independent third party research is a non negotiable for the consumer the consumer is has proven over 25 years that they reliably are seeking out trusted independent objective meta data and advice before they enter the retail auto market and so.

Unknown Executive: The consumer has proven for 25 years that they reliably are seeking out trusted independent objective meta data and advice before they enter the retail auto market, and so regardless of the industry's desire to make more investment to get traffic to come directly to them, we see through data that our third-party research marketplace platform is extremely durable. I think second to that point, because we power over 7,000 dealer websites, we see the disproportionate amount of money that dealers are spending on other channels to generate traffic and leads.

Speaker Change: Regardless of the industry desire to put more investment to get traffic to come directly to them. We see through data that are third party research marketplace platform is extremely durable I think second to that point, because we power over 7000 dealer websites, we see the disproportionate.

Speaker Change: Amount of money that dealers are spending on other channels to generate traffic and leads.

Unknown Executive: And without exception, the Cars.com marketplace is the most efficient traffic that they're buying that converts at a much higher rate than all their other traffic sources combined. And so the bigger macro trend we see is dealer profitability. www.cars.com.au, It universally supports that dealers need to be featured on these marketplaces because it's far more cost effective to generate sales.

Speaker Change: Without exception the cars dot com marketplace is the most efficient traffic that they are buying that converts at a much higher rate than all of their other traffic sources combined and so the bigger macro trend, we see is that dealer profitability.

Speaker Change: Challenges are waning, meaning the dealers are experiencing with rising inventory levels and pricing coming down on cars. Their overall profitability is challenged and when you interrogate their marketing mix.

Speaker Change: Universally supports dealers need to be featured on these marketplaces, because it's far more cost effective to generate sales.

Thomas Cauthorn White: Great. That's interesting. Thank you. That's your question, Tom.

Speaker Change: Great. That's interesting. Thank you for your question Tom.

Thomas Cauthorn White: Yeah, it did. Thanks. Just a quick follow-up, if I could, on OEM and National. You guys had some encouraging things to say there, I guess, in the prepared remarks, about interactions with OEMs and the impact of rising inventories, and I guess growth accelerated in the quarter, and it looks like it's going to accelerate a bit in the second, but I don't know. Do you guys have confidence that this line item can return to kind of pre-pandemic levels of revenue in any way?

Speaker Change: Yes, it did thanks.

Speaker Change: Just a quick follow up if I could on an OEM and national.

Speaker Change: You guys had some encouraging things to say there I guess in the prepared remarks.

Thomas Cauthorn White: About interactions with Oems and the impact of a rising inventories.

Thomas Cauthorn White: And I guess growth accelerated in the quarter and it looks like it's going to accelerate.

Speaker Change: And the second but.

Speaker Change: I don't know I guess.

Speaker Change: Do you guys have confidence that that.

Speaker Change: This line item can return to kind of pre pandemic levels of revenue kind of in any.

Thomas Cauthorn White: A reasonable timeframe here, or is there any risk that OEMs have kind of maybe moved their focus when it comes to brand spend to kind of like the latest shiny object, you know, be it social or connected TV or Tik Tok, just trying to understand like the, you know, the long-term kind of trajectory for this line.

Speaker Change: Reasonable timeframe here or is there is there any risk that Oems have.

Speaker Change: Kind of maybe moved their focus when it comes to brand spend to kind of like the latest shiny object.

Speaker Change: The social or connected TV.

Speaker Change: Or ticked up just trying to understand like the.

Speaker Change: The long term.

Speaker Change: And a trajectory for this line.

Unknown Executive: Tom, ironically, it's a little bit of the same answer in that, you know, manufacturer marketing and advertising spend is largely agency-led, and agencies and OEMs, again, want all car buyers to go directly to their brands and buy a car without any outside influence. And we do not believe that that is realistic, nor does it map at all to the consumer behavior that is fundamental to the car shopping journey, and you're not going to bypass that channel.

Thomas Cauthorn White: Tom Ironically, it's a little bit of the same answer and that manufacture marketing and advertising spend is largely agency led and agencies and Oems again, what all car buyers to go directly to their brands and buy a car without any outside influence and we do not believe that that is realistic.

Speaker Change: Nor nor is it map at all to the consumer behavior that overwhelmingly shows that research online.

Speaker Change: Is fundamental to the car shopping journey, and you're not going to bypass that channel and so as Oems become more confident that they've got to be in front of shoppers, while they shop, where they shop. We do think OEM can return to pre pandemic levels I think youre.

Unknown Executive: And so as OEMs become more confident that they've got to be in front of shoppers while they shop, where they shop, we do think OEMs can return to pre-pandemic levels. I think your question on timing is probably the more difficult one to answer in terms of, you know, we were pleased with OEM results in Q1. We saw not only strong upfront demand, but an increase in scatter dollars as well, which is more reactive to market conditions.

Speaker Change: Your question on timing is probably the more difficult one to answer.

Speaker Change: In terms of we were pleased with OEM results in Q1, we saw not only strong upfront, but we saw an increase in scattered dollars as well, which is more reactive to market conditions.

Unknown Executive: And so we're really pleased with the progress in the quarter and even the continued momentum in Q2. But it's also been hard to predict the OEM channel reliably over the last few years, but we think we're on a very healthy growth rate right now. Great. Thanks, Alex.

Unknown Executive: So we're really pleased with the progress in the quarter and even the continued momentum in Q2.

Speaker Change: But it's also been hard to predict the OEM channel reliably over the last few years, but we think we're on a very healthy growth rate right now.

Thomas Cauthorn White: Great. Thanks, Alex. I appreciate it.

Speaker Change: Great. Thanks, Alex Alex I appreciate it.

Alex: Thank you Tom.

Operator: Your next question comes from the line of Naved Khan from B Reilly Securities. Your line is open.

Speaker Change: Your next question comes from the line of Nevada, Ken from B Riley Securities. Your line is open.

Naved Ahmad Khan: Yeah, great. Thanks.

Ken: Yeah, great. Thanks, So a couple of questions for me.

Ken: Maybe just to put a final point on this and do that.

Ken: Alan.

Speaker Change: Got it.

Speaker Change: Good to hear that.

Ken: The count.

Ken: To be up.

Naved Ahmad Khan: But if I have to think about that please do.

Ken: Do you think that the.

Ken: Cowen <unk> start Glen in the back half versus the first half.

Naved Ahmad Khan: Second quarter, how should I think about that trajectory.

Speaker Change: So that's one and then the other question is on.

Speaker Change: As an actor trade actually I think have seen the fastest.

Speaker Change: The sequential addition in the last quarter wishes.

Naved Ahmad Khan: Any of that asking all previous.

Unknown Executive: Three quarters.

Naved Ahmad Khan: And wondering what is driving that acceleration is it just some seasonality, maybe the <unk> show or something else or.

Ken: Are you just kind of seeing increasing traction.

Sonia Jain: With that could trade.

Naved Ahmad Khan: So, a couple of questions for me. Maybe just to put a final point on this and do the count. It's good to hear that you expect the count to be up as we exit the year, but if I have to think about the trajectory, do you think that the count might start going up in the back half versus the first half, meaning the second quarter? How should I think about that trajectory? So, that's one.

Naved Ahmad Khan: Well, maybe we can start thanks for the questions not add maybe we can start with your first one on dealer count.

Naved Ahmad Khan: And then the other question is on... I think I've seen the fastest sort of sequential edition in the last quarter versus any of the last, you know, previous three quarters. I'm wondering what kind of acceleration is driving that acceleration. Is it just some seasonality, maybe the NADA show or something else, or are you just kind of seeing increasing traction? Thank you. Bye-bye.

Speaker Change: I think in.

Naved Ahmad Khan: Our prepared remarks, you talked a little bit about how we saw really strong new sales in Q1 some of the strongest we've seen in the last couple of years I think we're also pleased to see retention starting to improve so for the month of April in particular.

Speaker Change: Marketplace was up from a dealer count perspective, which we think are <unk>.

Speaker Change: Promising green shoes, as we think about the rest of the year and gave US a lot of confidence in being able to deliver that full year dealer customer growth that we were we were referring to.

Unknown Executive: Well, maybe we can start. Thanks for the questions, Naved.

Naved Ahmad Khan: So that that hopefully that helps give a little bit of context on what we're seeing.

Speaker Change: Right now.

Unknown Executive: Maybe we can start with your first question on dealer count. You know, I think in our prepared remarks, we talked a little bit about how we saw really strong new sales in Q1, some of the strongest we've seen in the last couple of years. I think we're also pleased to see retention starting to improve. So for the month of April in particular, marketplace was up from a dealer account perspective, which we think are, you know, promising green shoots as we think about the rest of the year and give us a lot of confidence in being able to deliver that full-year dealer customer growth that we were referring to.

Speaker Change: I think I think in terms of accu trade.

Unknown Executive: Last year, we spent quite a bit of time focused on our marketplace repackaging expanding dealer has access to the platform by adding more to our marketplace packages.

Unknown Executive: So hopefully that helps give a little bit of context on what we're seeing right now. I think in terms of AccuTrade, last year, we spent quite a bit of time focused on repackaging our marketplace and expanding dealers' access to the platform by adding more to our marketplace packages. Now that we're behind them, that's allowed for a lot more focus and intentionality when it comes to the cross-sell. So I think you see some of that coming through, and I think AccuTrade was really one of our hits at NADA this year. So we're excited about the potential in front of us with that business. It's hugely accretive to EBITDA and ARPD and, I think, also provides dealers with a lot of value relative to other platforms out there.

Unknown Executive: That's behind US that's allowed for a lot more focus and.

Sonia Jain: And intentionality when it comes to the cross sell so I think you see some of that come through and I think accu trade was really one of our hits at an Anda this year.

Unknown Executive: So we're excited about the potential in front of us with that business, it's hugely accretive to EBITDA, our EBITDA and ERP D. And I think also provides dealers with a lot of value relative to other platforms out there I don't know Alex if you want to.

Unknown Executive: I don't know, Alex, if you want to...

Unknown Executive: No, I would say we're pleased with the progress there. As you recall, Navi, we signaled in Q4 that we were going to focus much more this year on making sure current dealers are successful. More cycle time was spent in the first quarter helping the dealers that bought AccuTrade use it and be successful with it than there was really focused on growth. So the fact that our sales efforts have been focused on dealer engagement and we're getting steady growth, as soon as we nail the onboarding and utilization, is awesome.

Speaker Change: No I would say.

Speaker Change: We're pleased with the progress there as you recall, we signaled in Q4 that we were going to focus much more this year on making sure. Our current dealers are successful so.

Unknown Executive: More cycle time was spent in the first quarter, helping the dealers that bought accu trade use it and be successful with it and there was really focused on growth. So the fact that our sales motions have been focused on dealer engagement and we are getting steady growth as soon as we nail the onboarding and utilization.

Unknown Executive: Experience.

Unknown Executive: We should be able to scale this business.

Unknown Executive: Healthy rates in the future.

Unknown Executive: Awesome. Thank you, guys.

Navi: Awesome. Thank you guys.

Speaker Change: Thank you.

Unknown Executive: Yeah.

Operator: Your next question comes from the line of Gary Prestopino from Barrington Research. Your line is open.

Unknown Executive: Your next question comes from the line of Gary <unk> from Barrington Research. Your line is open.

Gary Frank Prestopino: Hey, good morning, Alex, Sonia, Catherine. Several questions here. First of all, Alex, in terms of what happened with the dealers in Q1, where you had some attrition there, was that attrition mainly related to say one to two point dealerships that were not in major metropolitan areas and independents as well? I'm just curious as to see where that attrition is coming from.

Gary Frank Prestopino: Hey, good morning, Alex Sonya Catherine.

Gary Frank Prestopino: Several questions here first of all Alex in terms of what happened with the dealers.

Gary Frank Prestopino: In Q1, where you had some attrition there.

Gary Frank Prestopino: Was that attrition.

Gary Frank Prestopino:

Gary Frank Prestopino: Mainly related to say, 1% to two point dealerships that were not in major metropolitan areas and independents as well.

Gary Frank Prestopino: I'm, just curious to see where that attrition is coming from.

Unknown Executive: Yeah, the segmentation wasn't vivid in any shape or size, Gary, like I wouldn't say that the churn we experienced was was dealer-specific, either geo or size of store, and we really felt it was more reactionary pressure to Transcribed by https://otter.ai, What's been good is that now that we're getting face-to-face time with those customers to show them the metrics that they're walking away from, like website traffic, phone calls, or even leads to their CRM, dealers are starting to realize that this is oxygen for their business. And so we did have a nice start to Q2 in dealer count, but most of the cancels in Q1 we think were just knee-jerk reactions that weren't specific to us, but more. Wanting to take out significant costs. Okay. And then.

Gary Frank Prestopino: Yes.

Gary Frank Prestopino: Segmentation wasn't vivid in any shape or size, Gary like I wouldn't say that the churn we experienced was.

Gary Frank Prestopino: Okay. And then in terms of AccuTrade, when you say it generates, as you said, 622,000 appraisals in a quarter, is that correct? Correct. How many of those appraisals, in general, turn into an actual transaction or do all of them?

Gary Frank Prestopino: Was dealer specific either geo or or size of store.

Gary Frank Prestopino: And we really felt it was more reactionary pressure too.

Gary Frank Prestopino: Macro cut backs of the whole expense base, meaning our sales force was hit with a lot of just we're canceling everything right now to reassess.

Gary Frank Prestopino: What's been good is that now that we're getting face to face time with those customers to show them. The metrics that they are walking away from like website traffic phone calls or even leads to their CRM.

Gary Frank Prestopino: Dealers are starting to realize that this is oxygen for their business and so we did have a nice start to Q2 in dealer count, but most of the cancels in Q1, we think we're just knee jerk reactions that werent specific to us but more.

Gary Frank Prestopino: Wanting to take out significant costs.

Gary Frank Prestopino: Okay, and then in terms of Accu trade when you say generated as you said 622000 appraisals in the quarter is that correct.

Gary Frank Prestopino: Okay.

Gary Frank Prestopino: Correct.

Gary Frank Prestopino: Okay.

Gary Frank Prestopino: Yes.

Gary Frank Prestopino: How many of those appraisals in general turned into an actual transaction or renewable or do all of them.

Unknown Executive: Well, they don't all turn into transactions, Gary, I can assure you that because dealers are giving customers offers on their cars, and so a much smaller percentage of those actually convert to inventory, but it allows the consumer to know that this dealer is somebody they can trust, and if they do, and when they do want to sell that car, the dealer is willing to give them a data-driven value that's market-driven. So there's still value in even just conducting the appraisal and providing the consumer utility.

Speaker Change: Well they don't they don't all turn into transactions, Gary I can assure you that because dealers are giving customers offers in their cars and so a much smaller percentage of those actually convert to inventory, but it allows the consumer to know that the steel or somebody they can trust and if they do and when they.

Unknown Executive: We want to sell that car the dealers willing to give them a data driven value that's market driven.

Unknown Executive: So there is still value in even just conducting the appraisal and providing the consumer utility.

Unknown Executive: Unknown Speaker Importantly, what we are starting to build is intelligence that allows us to see the inventory that is appraised and where else in the dealer network that vehicle appears. So if the dealer who appraised the car doesn't buy it, we can start to show that dealer who did, and then what retail price point they're now retailing that vehicle back in the open marketplace. So our use of data here is improving every day to help dealers understand opportunities won and lost. But ultimately, dealers are showing that they're buying far more cars using AccuTrade than anything else that they've done or used in the past.

Unknown Executive: And importantly, what we are starting to build his intelligence that allows us to see the inventory that is appraised and where else in the dealer network that vehicle appears so if the dealer who embraced the card doesn't.

Unknown Executive: By the car, we can start to show that dealer.

Unknown Executive: Who did and then what retail price point, they're now retailing that vehicle back in the open marketplace. So our use of data here is improving every day to help dealers understand opportunities won and lost and but ultimately dealers are showing that they are buying far more cars using accu trade than that.

Unknown Executive: Anything else that they've done or used in the past.

Gary Frank Prestopino: That's still a big number. I mean, you're talking about you had 1000 dealerships at the end of the quarter, right? So that's 622 appraisals per quarter to dealer. That's still pretty big.

Speaker Change: Yes, it's still it's still a big number I mean youre talking about the one.

Speaker Change: 1000 dealerships at the end of the quarter right, So that 622 appraisals quarter for dealer.

Gary Frank Prestopino: Still pretty big.

Unknown Executive: And that includes that we've got dealers who haven't really appraised many vehicles in volume, and so our internal KPI is that we know if we can get a dealer to appraise their first hundred vehicles, their degree of satisfaction and success with the platform is dramatically higher, and retention is, you know, secure. So that's why we're focused on that first hundred days and that first hundred reviews.

Speaker Change: Right and.

Gary Frank Prestopino: And that includes that we've got dealers, who haven't really appraised many vehicles that volume and so our internal kpis that we know if we can get a dealer to appraise their first 100 vehicles.

Unknown Executive: The degree of satisfaction and success of the plan.

Unknown Executive: That form is dramatically higher than the retention is.

Unknown Executive: Secure so that's why we're focused on that first 100 days in that first 100 appraisals.

Gary Frank Prestopino: And then, can you give us any statistics or stats or anything about VIN performance media? I think you mentioned it had a solid quarter of growth. Are there any statistics you can share with us there?

Unknown Executive: And then can you put any statistics or stats or anything about good performance media.

Gary Frank Prestopino: I think you mentioned it had a solid solid quarter of growth.

Gary Frank Prestopino: Any statistics, you can share with us there.

Unknown Executive: It's still fairly early innings, but we're seeing, generally speaking, a lot more consumer engagement with dealers who use VIN performance media, and that typically manifests itself across search, so interaction with vehicle detail pages, transfers to the dealer's website, and we see them showing up in their leads at a greater rate. But we'll probably come back as VIN performance media continues to grow and adoption continues to increase. We can come back with some more concrete information.

Gary Frank Prestopino: It's still fairly.

Gary Frank Prestopino: Early early innings, we're seeing generally speaking a lot more consumer engagement from.

Unknown Executive: With dealers, who use than performance media and that typically manifest itself across.

Unknown Executive: Search the interaction with vehicle detail pages transfers to the dealers website, and we see them showing up in.

Unknown Executive: Their leads at a greater at a greater rate.

Unknown Executive: But we'll probably come back has been performance media continues to grow and adoption continues to increase we can come back with some more concrete information.

Gary Frank Prestopino: Okay, that's good. And then the marketplace repackaging initiative, at the end of the year, you had about 70% of the dealers had opted for upper-tier packages. Has that changed precipitously by the end of this quarter?

Speaker Change: Okay. That's good and then the marketplace Repackaging initiative.

Gary Frank Prestopino: At the end of the year, you had about 70% of the dealers had opted for upper tier packages has that changed.

Gary Frank Prestopino: Does that change precipitously.

Gary Frank Prestopino: By the end of this quarter.

Unknown Executive: No, no material; there is no material change in the mix.

Gary Frank Prestopino: No no material no material change in the mix.

Gary Frank Prestopino: Okay. And then lastly, credit IQ. How is that? You had about 11,000 dealers at the end of 2023. Has that increased at all? I don't have the number off hand.

Speaker Change: Okay, and then lastly credit IQ.

Gary Frank Prestopino: Was that you had about 11000 dealers at the end of 2023.

Gary Frank Prestopino: That increased.

Gary Frank Prestopino: At all.

Unknown Executive: I don't have the number offhand modestly because of the softness in Dealer Count, which has been a key opportunity to grow dealers. The big focus there now is rolling out that technology on dealer websites, Gary, which will increase the volume. And what's been exciting about that is now lenders are wanting to talk to us more about things we can do directly for them, now that they know we're able to put their offers, not shoppers, on dealer websites. And so now that the distributional strength of our platform, www.larryweaver.com, Okay, thank you. Your next question comes from the line of Tog Arthur from Uber Research. Your line is open.

Gary Frank Prestopino: I don't have the number off hand modestly because of.

Unknown Executive: Softness in dealer count, which has been a key.

Tog Arthur: Opportunity to grow dealers the big focus there now is rolling out that technology on dealer websites, Gary which will increase the volume.

Tog Arthur: And what what's been exciting about that is now lenders are wanting to talk to us more about things. We can do directly for them now that they know we're able to put their offers not only on our marketplace, but in front of.

Unknown Executive: Shoppers on dealer websites and so now that the distributional strength of our platform.

Tog Arthur: Is better understood by lenders the level of conversations we're having with lenders about doing more is also increasing with their understanding of our broader capabilities. So stay tuned on that front, we hope to have some exciting developments there okay.

Tog Arthur: Okay. Thank you.

Unknown Executive: Okay.

Operator: Your next question comes from Doug Arthur from Uber Research. Your line is open. Yeah, good morning. Thank you. Sonia, can you unpack the...

Tog Arthur: Your next question comes from the line of Arthur from Huber Research. Your line is open.

Speaker Change: Yes. Good morning. Thank you Sonya can you unpack the 8% growth.

Douglas Middleton Arthur: And the dealer business line in Q1, how much was it.

Speaker Change: Generally speaking was from D to C, which I think you closed in November and how much.

Douglas Middleton Arthur: What was the growth rate.

Operator: Hi.

Douglas Middleton Arthur: Yeah, so, you know, I think we talked a little bit about D2C's impact at the time we bought them. So, they're, you know, particularly in the beginning of this year, before we closed the acquisition, they're going to be contributing a couple of points to our year-over-year revenue growth. We're moving a little bit away from our traditional dealer-inspired year-over-year growth metric. Part of the reason for that is we are now a lot more focused on selling at a platform level as opposed to individual products, you know, sort of individual branded levels.

Douglas Middleton Arthur: Yeah. So I think we talked a little bit about <unk>.

Douglas Middleton Arthur: <unk> impact at the time, we bought them. So there, particularly in the beginning of this year before we lap the acquisition theyre going to be contributing a couple of points of our year over year revenue growth.

Douglas Middleton Arthur: We're moving we're moving a little bit away from our traditional dealer inspire year over year growth metric part of the reason for that is we are now a lot more focused on selling at a platform level as opposed to individual product sort of individual branded level, but I think if you went back and you try.

Douglas Middleton Arthur: But I think if you went back and tried to do an apples-to-apples comparison on that, you would find that the year-over-year growth is fairly consistent with what we've seen in prior years, which is basically a double-digit growth rate. So, generally, one of the takeaways for Q1 and Q1 revenue growth should be that we saw improvement across all areas of the business, the marketplace, the solution side of our business, and the media side of our business.

Douglas Middleton Arthur: To do an apples to apples comparison on that you would find that the year over year growth is fairly consistent with what we've seen in prior years, which is basically a double digit.

Douglas Middleton Arthur: A double digit growth rate.

Douglas Middleton Arthur: So generally one of the takeaways should be for a Q1 and Q1 revenue growth as we saw improvement across all areas of the business.

Douglas Middleton Arthur: Marketplace, the solution side of our business and the media side of our business.

Speaker Change: Okay, great. Thank you.

Douglas Middleton Arthur: Yeah.

Sonia Jain: Your next question comes from the line of Marvin Fong from BTIG. Your line is open.

Douglas Middleton Arthur: Your next question comes from the line of Marvin Fong from <unk>. Your line is open.

Marvin Milton Fong: Great. Good morning, Thanks for squeezing me in here.

Marvin Milton Fong: Great. Good morning. Sorry I hopped on the call a little bit late, but I did see that ARPD was down sequentially, and I understand that. We only had a partial quarter of D to C contribution in the fourth quarter, but, you know, could you just help us understand, like, would ARPD have been up sequentially if we excluded D to C? That's my first question.

Marvin Milton Fong: On the call a bit late but.

Marvin Milton Fong: I did.

Marvin Milton Fong: I did see so <unk> was down sequentially and I understand that.

Marvin Milton Fong: We only had a partial quarter of <unk> contribution in.

Marvin Milton Fong: In the fourth quarter, but.

Marvin Milton Fong: Could you just help us understand like what <unk> had been up sequentially, if we exclude <unk>.

Marvin Milton Fong: That's my first question.

Sonia Jain: No, it's a great question, Marvin. D2C is a little bit of a, you know, while it's great revenue growth and it's margin accretive, it is a little bit of a drag on ARPD. It's a business that really isn't selling websites and website upsells and, increasingly, now also our AccuTrade product in Canada. If we pulled D2C out of the mix for Q1, we probably would have been flat to slightly up sequentially on ARPD.

Speaker Change: No. It's a great. It's a great question Marvin.

Speaker Change: D C is a little bit of a while it's a great revenue growth and it's margin accretive it is a little bit of a drag on AARP D. They don't bet. It's a.

Marvin Milton Fong: Great! That's super helpful.

Marvin Milton Fong: Business that really isn't is selling selling websites and web site Upsells and increasingly now also our accu trade products in Canada, if we hold the D to C. All of the.

Marvin Milton Fong: The mix for Q1, we probably would have been flat to slightly up sequentially on AARP D.

Marvin Milton Fong: Great.

Marvin Milton Fong: Super helpful and then.

Marvin Milton Fong: And then just a question on AccuTrade. I mean, I think when we last kind of talked about how nicely you guys got it forward directly, it said, you know, it'd take a couple of quarters to kind of get that, you know, all set up. So, you know, should we expect sort of the timing of that to sort of start hitting soon? And should we kind of think about, you know, the adoption and the dealer account for AccuTrade kind of seeing a nice little bump? Or do you kind of expect to see the same level of increases that we have been seeing? [inaudible]

Speaker Change: Just a question on <unk> I mean.

Speaker Change: I think when we will have kind of talked about the like when you guys got a direct you had said it would take a couple of quarters to kind of get that.

Marvin Milton Fong: All set up so.

Marvin Milton Fong: We expect sort of the <unk>.

Marvin Milton Fong: Timing of that to sort of start fitting soon and should we kind of think about.

Marvin Milton Fong: The adoption.

Marvin Milton Fong: <unk> I can tell you kind of seeing a nice little bump or do you kind of expect.

Marvin Milton Fong: To kind of see the same level of increases that we have.

Unknown Executive: Thanks for the question, Marvin. We have actually started to see the pickup with Ford dealers specifically, about 20% of our new sales. We're coming in at our Ford dealers, which is disproportionate to the number of Ford stores in the total TAM. So we're seeing the first signs of that acceleration happen due to the OEM endorsement, and we expect that to build not only with Ford dealers but hopefully other OEM endorsements as well.

Marvin Milton Fong: Okay.

Speaker Change: Thanks for the question Marvin.

Marvin Milton Fong: <unk> started to see the pickup with Ford dealers, specifically about 20% of our new sales.

Unknown Executive: We're coming in are for dealers, which is disproportionate to the number of <unk> stores in the.

Unknown Executive: And the total Tam so we're seeing the first signs of that acceleration happen due to the OEM endorsement.

Unknown Executive: And we expect that.

Unknown Executive: To build not only with four dealers, but hopefully other OEM endorsements as well.

Marvin Milton Fong: Great. And if I could just maybe whip in one more here,

Unknown Executive: Great.

Speaker Change: And if I could just maybe.

Unknown Executive: Then one more here.

Marvin Milton Fong: Really great to see the strength in advertising over OEM and national and appreciate what you kind of said about the commitment. You know, I know you guys did a great campaign with Tesla recently. I mean, how much of this is sort of tied to, you know, EVs? There's obviously a sales issue there and an inventory turn issue, or would you attribute it more to just kind of a broad-based demand from that customer base? Thanks. You know, specifically on the EV issue, we think it's a consumer education challenge, which is why digital platforms like

Marvin Milton Fong: Really great to see the strength in advertising OEM in national.

Marvin Milton Fong: Appreciate which kind of set about the commitment.

Marvin Milton Fong: I know you guys did a great campaign with Tesla recently, I mean, how much of this is tied to.

Marvin Milton Fong: <unk> obviously.

Marvin Milton Fong: Sales issue there in inventory turn issue.

Marvin Milton Fong: Or would you attribute it more to just the kind of a broad base.

Marvin Milton Fong: Net income from that customer base.

Marvin Milton Fong: Yeah.

Unknown Executive: You know, specifically on the EV issue, we think it's a consumer education challenge, which is why digital platforms like cars.com are perfect for Elon and Tesla, as well as other OEMs, right? Consumers have a lot of questions prior to purchase, and they need information, which we have. And so, you know, we've added things like driving range and battery life to our content around EVs so that consumers can see what each model can reliably generate in terms of time to recharge and distance and reduce range anxiety.

Marvin Milton Fong: Specifically on the EV issue, we think its a consumer education challenge, which is why digital platforms like cars Dot Com. We think are perfect for for Ilan and Tesla as well as other Oems that consumers have a lot of questions prior to purchase and they need information, which we have and then.

Unknown Executive: And so.

Unknown Executive: We've added things like driving range and battery life to our content.

Unknown Executive: Around evs, so the consumers can see what each model can reliably generate in terms of time to recharge and distance.

Unknown Executive: Reduce range anxiety. So we think the problem with Evs is largely educational we think car companies need to invest in platforms that provide that independent third party objectivity to help them develop confidence to go to the physical store and drive the product.

Unknown Executive: So we think the problem with EVs is largely educational. We think car companies need to invest in platforms that provide that independent third-party objectivity to help them develop confidence to go to the physical store and drive the product. So that's number one. I think number two, in general, we're pleased with the OEM progress. We're far from declaring victory, but we think this opportunity is tremendous because of the amount of time consumers are spending on our platform comparing makes and models. Tap into that, https://www.youtube.com.uk

Unknown Executive: So that's number one I think number two in general we're pleased with the OEM progress we're far from declaring victory.

Unknown Executive: We think this opportunity is tremendous because of the amount of time consumers are spending on our platform comparing makes and models the Oems that.

Unknown Executive: Tap into that.

Unknown Executive: Experience and talk to shoppers, while they are in the active shopping are going to take outsized share because they are tapping into retail demand.

Unknown Executive: Yeah.

Operator: Operator, do we have any more questions on the line?

Speaker Change: Operator, do we have any more questions on the line.

Operator: There are no further questions at this time. I will turn the call over back to you, Catherine Chen.

Unknown Executive: There are no further questions at this time I will turn the call over back to you Catherine Chen.

Catherine Chen: Great, thank you. Thanks, everyone.

Catherine Chen: Great. Thank you. Thanks, everyone on a final note I encourage you to read our inaugural corporate social responsibility and community action report, which is an illustration of who we are at our core is located on our Investor Relations website.

Catherine Chen: On a final note, I encourage you to read our inaugural Corporate Social Responsibility and Community Action Report, which is an illustration of who we are at our core. It's located on our Investor Relations website. We're also continuing our investor engagement and will host meetings at the following May conferences: First, the Needham Technology, Media, and Consumer Conference on May 14, the Barrington Virtual Spring Investment Conference on May 16th, the J.P. Morgan Global Technology, Media, and Communications Conference on May 21st, and finally, the B. Reilly Institutional Investor Conference on May 22nd. Thanks for joining the call, and we look forward to seeing many of you soon.

Catherine Chen: We're also continuing our investor engagement and will host meetings at the following May conferences first the Needham technology media and consumer conference on May 14.

Catherine Chen: The Barrington virtual spring investment conference on May 16.

Catherine Chen: J P Morgan Global Technology Media and Communications conference on May 21, and finally, the B Riley institutional Investor Conference on May 22nd.

Catherine Chen: Thanks for joining the call and we look forward to seeing many of you soon.

Operator: Ladies and gentlemen, thank you for participating. You may now disconnect.

Speaker Change: Ladies and gentlemen, thank you for participating you may now disconnect.