Q2 2024 CarGurus Inc Earnings Call

August 8, 2024

Operator: Good day, and welcome to the CarGurus, Inc. 2nd Quarter 2024 Earnings Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Kirndeep Singh, Vice President and Head of Investor Relations. Please go ahead.

Operator: Good day, and welcome to the CarGurus Inc. 2nd quarter, 2024 earnings results conference call. All participants will be in a listen-only mode.

Good day and welcome to the car Gurus, Inc. Second quarter 'twenty 'twenty four earnings results Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchstone phone. To withdraw your question, please press star, then two.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.

To withdraw your question. Please press Star then two please.

Operator: Please note, this event is being recorded.

Please note this event is being recorded.

Kirndeep Singh: I would now like to turn the conference over to you, Kirndeep Singh, Vice President and Head of Investor Relations. Please go ahead.

Courtney Deeping: I would now like to turn the conference over to your current deep thing Vice President and head of Investor Relations. Please go ahead. Thank you operator, good afternoon I'm delighted to welcome you to congregate second quarter 2024 earnings call with me on the call today are Jason Robinson, Chief Executive Officer, Sam Bell, President and Chief operating Officer.

Kirndeep Singh: Thank you, operators. Good afternoon.

Kirndeep Singh: Thank you, Operators, good afternoon.

Kirndeep Singh: I'm delighted to welcome you to CarGurus 2nd quarter, 2024 earnings call. With me on the call today are Jason Trevisan, Chief Executive Officer, Sam Zales, President and Chief Operating Officer, and Elisa Palazzo, Chief Financial Officer. During the call, we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in such statements.

Kirndeep Singh: I'm delighted to welcome you to CarGurus' second quarter 2024 earnings call. With me on the call today are Jason Trevisan, Chief Executive Officer, Sam Zales, President and Chief Operating Officer, and Elisa Palazzo, Chief Financial Officer. During the call, we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to risk and uncertainties, which could cause our actual results to differ materially from those reflected in such statements.

Speaker Change: We the Palazzo Chief Financial Officer during the call, we will be making forward looking statements, which are based on our <unk>.

Patients and believe these.

These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in such statements.

Kirndeep Singh: Information concerning those risks and uncertainties is discussed in our S&C findings, which can be found on the S&C's website and in the Investor Relations section of revised forward-looking statements, except as required by law. Further, during the course of our call today, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to comparable non-GAAP measures is included in our press release issued today, as well as in our updated investor presentation, which can be found on the Investor Relations section of our website. We believe that these non-GAAP financial measures and other business metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency as it relates to metrics used by our management in its financial and operational decision making.

Kirndeep Singh: Information concerning those risks and uncertainties is discussed in our SEC filings, which can be found on the SEC's website and in the Investor Relations section of our website. We undertake no obligation to update or revise forward-looking statements, except as required by law. Furthermore, during the course of our call today, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to comparable non-GAAP measures is included in our press release issued today, as well as in our updated investor presentation, which can be found in the investor relations section of our website.

Information concerning those risks and uncertainties is the Scott.

Speaker Change: Finally, which can be found on the Sec's website and in the Investor Relations section of our website.

We undertake no obligation to update or revise forward looking statements, except as required by law.

Speaker Change: Further during the course of our call today, we will refer to certain non-GAAP financial measure a reconciliation of GAAP to comparable non-GAAP measure is included in our press release issued today as well as in our updated investor presentation, which can be found on the Investor Relations section of our website.

Kirndeep Singh: We believe that these non-GAAP financial measures and other business metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency as it relates to metrics used by our management in its financial and operational decision-making. With that, I'll now turn the call over to Jason.

Speaker Change: We believe that these non-GAAP financial measures and other business metrics provide useful information about our operating results enhance the overall understanding of past financial performance and future prospects and allow for greater transparency as it relates to metrics used by our management in its financial and operational decision, making with that I'll now turn the call over.

Jason Trevisan: When that all now turns, the call over to Jason. Thank you, Current Deep, and thanks to all of you for joining us today. We are very pleased with our second quarter performance. Our subscription-based marketplace business continued to accelerate. Our margins expanded sequentially, and we executed well against our growth strategy. We further strengthened our partnership with dealers by embedding our services more deeply into their daily decision-making processes and deepened our connection with consumers by empowering them to complete a larger portion of their transactions online, enabled by the continued progress we made in upgrading and scaling our end-to-end transaction-enabled platform.

Speaker Change: Jason.

Jason Trevisan: Thank you, Kirndeep, and thanks to all of you for joining us today. We are very pleased with our second quarter performance. Our subscription-based marketplace business continued to accelerate, our margins expanded sequentially, and we executed well against our growth strategy. We further strengthened our partnership with dealers by embedding our services more deeply into their daily decision-making processes, and deepened our connection with consumers by empowering them to complete a larger portion of their transactions online, enabled by the continued progress we made in upgrading and scaling our end-to-end transaction-enabled platform.

Jason: Thank you Karen and thanks to all of you for joining US today, we're very pleased with our second quarter performance, our subscription based marketplace business continued to accelerate our margins expanded sequentially and we executed well against our growth strategy.

Jason: We further strengthened our partnership with dealers by embedding our services more deeply into their daily decision, making processes and deepened our connection with consumers by empowering them to complete a larger portion of their transactions online enabled by the continued progress we made in upgrading and scaling our end to end transaction enabled platform.

Speaker Change:

Jason Trevisan: Similar to last quarter, I will provide a high-level overview of our results and will then highlight the progress we made across our four drivers of value creation. We ended the second quarter at the high end of our forecasted revenue and above our adjusted EBITDA guidance range. Our non-GAAP consolidated adjusted EBITDA grew 23% year-over-year, and margin expanded about 650 basis points year-over-year to 25%. Our marketplace business accelerated for the fifth consecutive quarter, delivering 14% year-over-year growth. And marketplace EBITDA grew 49% year-over-year, with margins expanding 735 basis points versus the prior year percent. In the second quarter, we achieved the highest quarterly revenue increase since 2021, driven by growth in our global dealer base, increased adoption of add-on products, and migration toward higher subscription tiers.

Speaker Change: Similar to last quarter I will provide a high level overview of our results and will then highlight the progress we made across our four drivers of value creation.

Speaker Change: We ended the second quarter at the high end of our forecasted revenue and above our adjusted EBITDA guidance range.

Speaker Change: Our non-GAAP consolidated adjusted EBITDA grew 23% year over year and margin expanded about 650 basis points year over year to 25%.

Jason Trevisan: Our marketplace business accelerated for the fifth consecutive quarter, delivering 14% year-over-year growth, and Marketplace EBITDA grew 49% year over year, with margins expanding 735 basis points versus the prior year period. In the second quarter, we achieved the highest quarterly revenue increase since 2021, driven by growth in our global dealer base, increased adoption of add-on products, and migration toward higher subscription tiers. Notably, in the US, our customer base has increasingly shifted toward larger dealers with higher advertising budgets, who have a greater demand for data insights and analytics.

Speaker Change: Our marketplace business accelerated for the fifth consecutive quarter, delivering 14% year over year growth and marketplace EBITDA grew 49% year over year with margins expanding 735 basis points versus the prior year period.

Speaker Change: In the second quarter, we achieved the highest quarterly revenue increase since 2021, driven by growth in our global dealer base increased adoption of add on products and migration toward higher subscription tiers.

Jason Trevisan: Notably, in the US, our customer base has increasingly shifted toward larger dealers with higher advertising budgets, who have a greater demand for data insights and analytics. We are also seeing a sustained increase in wallet share across our dealer base, as more dealers adopt additional value added products, whether purchased Alacart or included in premium packages. This is evidenced by our double-digit year-over-year revenue growth, while long-term advertising budgets for publicly traded dealers have increased at a mid-to-high single-digit rate. We continue to experience strong momentum in our international business, which grew revenue 21% year-over-year, with growth profitability in line with our domestic business.

Speaker Change: Notably in the U S. Our customer base is increasingly shifted toward larger dealers with higher advertising budgets.

Speaker Change: A greater demand for data insights and analytics.

Jason Trevisan: We are also seeing a sustained increase in wallet share across our dealer base as more dealers adopt additional value-added products, whether purchased a la carte or included in premium packages. This is evidenced by our double-digit year-over-year revenue growth, while long-term advertising budgets for publicly traded dealers have increased at a mid-to-high single-digit rate. We continue to experience strong momentum in our international business, which grew revenue 21% year over year, with gross profitability in line with our domestic business.

Speaker Change: We are also seeing a sustained increase in wallet share across our dealer base as more dealers adopt additional value added products, whether purchased Ala carte or included in premium packages.

Speaker Change: This is evidenced by our double digit year over year revenue growth, while long term advertising budgets for publicly traded dealers have increased at a mid to high single digit rate.

Speaker Change: We continue to experience strong momentum in our international business, which grew revenue 21% year over year with gross profitability in line with our domestic business.

Jason Trevisan: The outperformance was driven by sustained growth, both in the UK and Canada, where we further expanded our traffic share and dealer base. Lastly, I am pleased to report that our OEM advertising business delivered strong year-over-year growth in the quarter as new vehicle inventory levels continue to recover and the number of impressions on our website further increased. The impressive results we achieved in the second quarter reflect our ongoing progress against our four drivers of value creation, a steadfast commitment to delivering greater value to our dealer partners and continuously improving the consumer experience.

Speaker Change: The outperformance was driven by sustained growth both in the U K and Canada, where we further expanded our traffic share and dealer base.

Speaker Change: Lastly, I am pleased to report that our OEM advertising business delivered strong year over year growth in the quarter as new vehicle inventory levels continued to recover and the number of impressions on our website further increased.

Speaker Change: The impressive results, we achieved in the second quarter reflect our ongoing progress against our four drivers of value creation.

Speaker Change: A steadfast commitment to delivering greater value to our dealer partners continuously improving the consumer experience.

Jason Trevisan: Advancing Transaction Enablement and Rebuilding and Integrating our Wholesale Business, providing more value to dealers. This quarter, we further enriched our platform by expanding our predictive analytics product suite and leveraging our market-leading consumer audience to deliver increased lead and non-lead value to our dealer partners. Our efforts led to 15% year-over-year growth in listings revenue.

Speaker Change: Further advancing transaction enablement, and rebuilding and integrating our wholesale business.

Jason Trevisan: Providing more value to dealers. This quarter, we further enriched our platform by expanding our predictive analytics products suite and leveraging our market leading consumer audience to deliver increased lead and non-lead value to our dealer partners. Our efforts led to 15% year-over-year growth in listings revenue. As we strive to provide greater value to our dealer partners, the quality and quantity of our leads remain crucial drivers. In the second quarter, our platform delivered strong year-over-year lead growth, and traffic to lead conversion rate also went up sequentially, as we focused on engaging high intent shoppers and improving our lower funnel efficiency.

Speaker Change: Providing more value to dealers.

Speaker Change: This quarter, we further enriched our platform by expanding our predictive analytics product suite and leveraging our market, leading consumer audience to deliver increased lead and non lead value to our dealer partners. Our efforts led to 15% year over year growth in listings revenue.

Jason Trevisan: As we strive to provide greater value to our dealer partners, the quality and quantity of our leads remain crucial drivers. In the second quarter, our platform delivered strong year-over-year lead growth, and our traffic-to-lead conversion rate also went up sequentially as we focused on engaging high-intent shoppers and improving our lower funnel efficiency. In addition to our high-intent audience leadership, we continue to invest in new tools and services that offer our dealers enhanced data with actionable insights, supporting their day-to-day decision-making processes and automotive lifecycle needs. This quarter, we made significant advancements across three of our key data insights offerings. First, Next Best Deal Rating.

Speaker Change: As we strive to provide greater value to our dealer partners the quality and quantity of our leads remain crucial drivers.

Speaker Change: In the second quarter, our platform delivered strong year over year lead growth and traffic to lead conversion rate also went up sequentially as we focused on engaging high intent shoppers and improving our lower funnel efficiency.

Jason Trevisan: In addition to our high intent audience leadership, we continue to invest in new tools and services that offer our dealers enhanced data with actionable insights, supporting their day-to-day decision-making process and automotive life cycle needs.

Speaker Change: In addition to our high intent audience leadership, we continue to invest in new tools and services that offer our dealers enhanced data with actionable insights supporting their day to day decision, making process and automotive lifecycle needs.

Jason Trevisan: This quarter, we made significant advancements across three of our key data insights offerings. First, next best deal rating. This was our initial dealer data insight initiative and has achieved remarkable adoption with over 9,200 dealers in just three quarters since its launch. When dealers adjust their listing prices as suggested by our report, they experience a median increase of 40% in daily vehicle description page views, and decrease the turn time for these vehicles by 35%. Engagement remains strong with a nearly 50% weekly open rate and approximately 55% of dealers making at least one recommended price change within seven days.

Speaker Change: This quarter, we made significant advancements across three of our key data insights offerings.

Speaker Change: First next best deal rating.

Jason Trevisan: This was our initial Dealer Data Insights initiative and has achieved remarkable adoption with over 9,200 dealers in just three quarters since its launch. When dealers adjust their listing prices, as suggested by our report, they experienced a median increase of 40% in daily vehicle description page views and decreased the turn time for these vehicles by 35 percent. Engagement remains strong with a nearly 50% weekly open rate and approximately 55% of dealers making at least one recommended price change within seven days.

Speaker Change: This was our initial dealer data insights initiative and has achieved remarkable adoption with over 9200 dealers in just three quarters since its launch.

Speaker Change: When dealers adjust their listing prices as suggested by a report.

Speaker Change: They experienced a median increase of 40% in daily vehicle description page views and decrease the turn time for these vehicles by 35%.

Speaker Change: Engagement remains strong with a nearly 50% weekly open rate and approximately 55% of dealers, making at least one recommended price change within seven days.

Jason Trevisan: Second, our newest product, Maximize Margin, leverages similar data as Max Best Deal Rating to inform dealers how much they can increase the price of a vehicle without jeopardizing the current deal rating and associated VDP views and leads. This is especially important for vehicles with limited availability and in high demand. Third, acquisition insights report, which informs dealers about which vehicles to acquire to meet market demand, is now live with dealers and featured Plus and Featured Priority Plus. We've developed a proprietary Kardos index that measures demand based on our visitors' searches and availability of inventory, with the aim to ultimately help inform a dealer's inventory list on car offers by prioritizing lead quality and quantity and pursuing relentless innovation to deliver unparalleled ROI.

Jason Trevisan: Second, our newest product, Maximize Margin, leverages similar data as Next Best Deal Rating to inform dealers how much they can increase the price of a vehicle without jeopardizing the current deal rating and associated VDP views and leads. This is especially important for vehicles with limited availability and in high demand. Third, the Acquisition Insights Report, which informs dealers about which vehicles to acquire to meet market demand, is now live with dealers in Featured Plus and Featured Priority Plus. We've developed a proprietary CarGurus index that measures demand based on our visitors' searches and availability of inventory, with the aim to ultimately help inform a dealer's inventory list at car auctions.

Speaker Change: Second our newest product maximize margin Leverages similar data as next best deal rating to inform dealers how much they can increase the price of a vehicle without jeopardizing the current deal rating and associated PDP views and leads.

Speaker Change: This is especially important for vehicles with limited availability and in high demand.

Speaker Change: Third acquisition insights report, which informs dealers about which vehicles to acquire to meet market demand is now live with dealers featured plus and featured priority plus.

Speaker Change: We've developed a proprietary Carter's index that measures demand based on our visitors searches and availability of inventory with the aim to ultimately help inform a dealer's inventory list on car offer.

Jason Trevisan: By prioritizing lead quality and quantity and pursuing relentless innovation to deliver unparalleled ROI, we are establishing ourselves as long-term partners for our dealers, capturing a greater share of the overall auto digital advertising market. Approximately 50% of our dealers who have subscribed to our services for more than a year have increased their spend with us through add-on products, listing upgrades, and renewals. 36% of all contracts signed this quarter were for six months or longer.

Speaker Change: By prioritizing lead quality and quantity and pursuing relentless innovation to deliver unparalleled ROI, we are establishing ourselves as long term partners for our dealers capturing a greater share of the overall auto digital advertising market.

Jason Trevisan: We are establishing ourselves as long-term partners for our dealers, capturing a greater share of the overall auto digital advertising market. Approximately 50% of our dealers who have subscribed to our services for more than a year have increased their spend with us through add-on products, listings upgrades, and renewals motions. 36% of all contracts signed this quarter were six months or longer. 54% of our renewals motions resulted in longer term contracts, and 22% resulted in add on products or higher listings to your migration. Long term contracts yield higher retention rates and predictable revenue from our customer base while facilitating new renewal opportunities at term end.

Speaker Change: Approximately 50% of our dealers, who have subscribed to our services for more than a year have increased their spend with us through add on products listings upgrades and renewals motions.

Speaker Change: 36% of all contract signed this quarter were six months or longer.

Jason Trevisan: 54% of our renewals motions resulted in longer-term contracts, and 22% resulted in add-on products or higher listings tier migration. Long-term contracts yield higher retention rates and predictable revenue from our customer base while facilitating new renewal opportunities at term end. Better Consumer Experience. This quarter, we continue to invest in enhancing our consumer app, which contributed 28% of our leads. We simplified the vehicle search process and customized the experience for our returning users by offering more tailored results that incorporate elements from their previous session. This personalization provides continuity to the shopping journey and increases content relevance. As we've made these continuous app improvements, we saw the one-month app use retention rate increase by 16%.

Speaker Change: 54% of our renewals motions resulted in longer term contracts and 22% resulted in add on products or higher listings tier migration.

Speaker Change: Long term contracts yield higher retention rates and predictable revenue from our customer base, while facilitating new renewal opportunities at term end.

Jason Trevisan: Better consumer experience. This quarter we continue to invest in elevating our consumer app, which contributed 28% of our leads. We simplified the vehicle search process and customized the experience for our returning users by offering more tailored results that incorporate elements from their previous sessions. This personalization provides continuity to the shopping journey and increases content relevance. As we've made these continuous app improvements, we saw the one month's app use retention rate increase by 16%.

Speaker Change: Better consumer experience.

Speaker Change: This quarter, we continued to invest in elevating our consumer App, which contributed 28% of our leads.

Speaker Change: We simplified the vehicle search process and customize the experience for our returning users by offering more tailored results that incorporate elements from their previous sessions.

Speaker Change: This personalization provides continuity to the shopping journey and increases content relevance.

Speaker Change: As we've made these continuous app improvements we saw the one month app use retention rate increased by 16%.

Jason Trevisan: Enhancing the consumer experience goes beyond our mobile app. This quarter we continue to progress on our AI initiatives. We are leveraging AI and consumer content generation, conversational search, vehicle recommendations, and much more to streamline the shopping journey and provide consumers with key information and data at their fingertips. The investment in the app and AI are just two examples of our broader commitment to improving the consumer experience and engaging with our market-leading consumer audience throughout their vehicle life cycle. We ended the quarter as the most visited automotive marketplace, with 56% more visits than our closest competitor.

Jason Trevisan: Enhancing the consumer experience goes beyond our mobile app. This quarter, we continue to progress on our AI initiative. We're leveraging AI and consumer content generation, conversational search, vehicle recommendations, and much more to streamline the shopping journey and provide consumers with key information and data at their fingertips. The investment in the app and AI is just two examples of our broader commitment to improving the consumer experience and engaging with our market-leading consumer audience throughout their vehicle lifecycle.

Speaker Change: Enhancing the consumer experience goes beyond our mobile app.

Speaker Change: This quarter, we continued to progress on our AI initiatives.

Speaker Change: We are leveraging AI and consumer content generation conversational search vehicle recommendations and much more to streamline the shopping journey and provide consumers with key information and data at their fingertips.

Speaker Change: The investment in the App and AI are just two examples of our broader commitment to improving the consumer experience and engaging with our market leading consumer audience throughout their vehicle lifecycle.

Jason Trevisan: We ended the quarter as the most visited automotive marketplace with 56% more visits than our closest competitors. Additionally, 47% of our monthly unique visitors did not visit our leading competitors' websites, highlighting our strong market leadership among consumers and the unique and unrivaled audience we offer our dealers. These metrics do not factor in our sizable and highly engaged app user base, which primarily comes from organic. If we factored the app in, our audience would likely be even larger, enabling digital transactions.

Speaker Change: We ended the quarter is the most visited automotive marketplace with 56% more visits than our closest competitor.

Jason Trevisan: Additionally, 47% of our monthly unique visitors did not visit our leading competitors' websites, highlighting our strong market leadership among consumers and the unique and unrivaled audience we offer our dealers. These metrics do not factor in are sizeable and highly engaged app user base, which primarily comes from organic. If we factor aphid in, our audience would likely be even larger.

Speaker Change: Additionally, 47% of our monthly unique visitors did not visit our leading competitors websites highly.

Speaker Change: Highlighting our strong market leadership, among consumers and a unique and unrivaled audience, we offer our dealers.

Speaker Change: These metrics do not factor in our sizable and highly engaged app user base, which primarily comes from organic channels.

Speaker Change: We factor App in our audience would likely be even larger.

Jason Trevisan: Enabling digital transactions. Our vision is to build an end-to-end transaction-enabled platform that supports consumers and dealers throughout the entire car ownership journey, facilitating transacting online. As we have continued to advance and innovate our online retailing capabilities, we are becoming the digital partner of choice for dealers, enabling them to compete on a vast scale outside of their local demographic area and expand their reach. In the second quarter, we deepen the penetration of our digital retail products suite, which enables consumers to complete more of the shopping journey online. An advanced top dealer offers, which allows dealers to source high quality cars from local consumer inventory.

Speaker Change: Enabling digital transactions.

Jason Trevisan: Our vision is to build an end-to-end transaction-enabled platform that supports consumers and dealers throughout the entire car ownership journey. Facilitating Transacting Online, As we have continued to advance and innovate our online retailing capability. We are becoming the digital partner of choice for dealers, enabling them to compete on a vast scale outside of their local demographic area and expand their reach. In the second quarter, we deepened the penetration of our digital retail products, which enable consumers to complete more of the shopping journey online, and Advanced Top Dealer Offers, which allows dealers to source high-quality cars from local consumer inventory. These efforts drove the adoption rate of add-on products up by 37% year-over-year in the U.S.

Speaker Change: Our vision is to build an end to end transaction enabled platform that supports consumers and dealers throughout the entire car ownership journey.

Speaker Change: <unk> transacting online.

Speaker Change: As we have continued to advance and innovate our online retailing capabilities, we are becoming the digital partner of choice for dealers, enabling them to compete on a vast scale outside of their local demographic area and expand their reach.

Speaker Change: In the second quarter, we deepen the penetration of our digital retail product suite, which enables consumers to complete more of the shopping journey online.

Speaker Change: And advanced top dealer offers which allows dealers to source high quality cars from local consumer inventory.

Jason Trevisan: These efforts drove the adoption rate of add-on products up by 37% year-over-year in the U.S. In the second quarter, we saw continued strength in digital deal adoption, which has grown 22% quarter-over-quarter and 157% year-over-year to 7,451 dealers. In a little over two years since its launch, digital deal has been adopted by 30% of our U.S. paying dealers. High value actions, such as financing, can close up to three times higher than traditional leads, providing dealers with ready-to-purchase shoppers. With days on lot remaining elevated, dealers are especially interested in broadening their inventory reach beyond local demographics, resulting in growth in digital deal with geographic expansion.

Speaker Change: These efforts drove the adoption rate of add on products up by 37% year over year in the U S.

Jason Trevisan: In the second quarter, we saw continued strength in digital deal adoption, which has grown 22% quarter over quarter and 157% year over year to 7,451 deals. In a little over two years since its launch, Digital Deal has been adopted by 30% of our U.S. paying dealers. High-value actions, such as financing, can close up to three times higher than traditional leads, providing dealers with ready-to-purchase shopping. With days on the lot remaining elevated, dealers are especially interested in broadening their inventory's reach beyond local demographics, resulting in growth in digital deals with geographic expansion.

Speaker Change: In the second quarter, we saw continued strength in digital deal adoption, which has grown 22% quarter over quarter and 157% year over year to 7451 dealers.

Speaker Change: And a little over two years since its launch digital deal has been adopted by 30% of our U S paying dealers.

Speaker Change: High value actions, such as financing can close up to three times higher than traditional needs, providing dealers with ready to purchase shoppers.

Speaker Change: With days on lot remaining elevated dealers are especially interested in broadening their inventories reach beyond local demographics, resulting in growth in digital deal with geographic expansion.

Jason Trevisan: With 238,000 deliverable vehicles, we offer consumers one of the largest selections of deliverable inventory with the greatest selection of options and prices that best meets their needs. In the second quarter, we also made progress on top dealer offers, our subscription-based consumer vehicle sourcing product, powered by car offers matrix technology. We expanded the offer into 68 metro cities with 388 dealers participating in the program, and we rolled out our vehicle intake tool to all dealers, fostering greater transparency between dealers and consumers in the appraisal process.

Jason Trevisan: With 238,000 deliverable vehicles, we offer consumers one of the largest selections of deliverable inventory with the greatest selection of options and prices that best meets their needs. In the second quarter, we also made progress on Top Dealer Offers, our subscription-based consumer vehicle sourcing product powered by CarOffers Matrix technology. We expanded the offering to 68 metro cities with 388 dealers participating in the program.

Speaker Change: With 238000 deliverable vehicles, we offer consumers one of the largest selections of deliverable inventory with the greatest selection of options and prices that best meets their needs.

Speaker Change: In the second quarter. We also made progress on top dealer offers are subscription based consumer vehicles sourcing product powered by car offers matrix technology.

Speaker Change: We expanded the offering to 68 metro cities with 388 dealers participating in the program.

Jason Trevisan: And we rolled out our vehicle intake tool to all dealers, fostering greater transparency between dealers and consumers in the appraisal process. Since our launch, we found that dealers are eager to access fresh consumer trade-ins, and nearly 35% of individuals who submit a lead to sell their car are actively looking to purchase, representing an important trade-in opportunity for dealers. Rebuilding and Integrating Digital Wholesales

Speaker Change: And we rolled out our vehicle intake tool to all dealers fostering greater transparency between dealers and consumers in the appraisal process.

Jason Trevisan: Since our launch, we found that dealers are eager to access fresh consumer trade-ins, and nearly 35% of individuals who submit a lead to sell their car are actively looking to purchase, representing an important trade-in opportunity for dealers.

Speaker Change: Since our launch we found that dealers are eager to access fresh consumer trade ins and nearly 35% of individuals who submit a lead to sell their car are actively looking to purchase representing an important trade and opportunity for dealers.

Jason Trevisan: Rebuilding and integrating digital wholesale. I will conclude by sharing the progress we've made in our digital wholesale business. In the last few months, we have been rebuilding car offers leadership team and optimizing our go-to-market strategy in order to re-energize our commercial engine. We have also been further integrating wholesale and retail insights to enhance matrix functionality. In Q2, we strengthened our Salesforce leadership to overhaul car offers commercial strategy, building analytical backbone to inform decisions and actions, and implement an execution playbook that will advance sales effectiveness and efficiency. This will better equip our sales representatives to build stronger relationships with our dealer partners.

Speaker Change: Rebuilding and integrating digital wholesale.

Jason Trevisan: I will conclude by sharing the progress we've made in our digital wholesale business. In the last few months, we have been rebuilding CarOffers' leadership team and optimizing our go-to-market strategy in order to re-energize our commercial end-users. We have also been further integrating Wholesale and Retail Insights to enhance matrix functionality. In Q2, we strengthened our Salesforce leadership to overhaul CarOffer's commercial strategy. Build an analytical backbone to inform decisions and actions, and implement an execution playbook that will advance sales effectiveness and efficiency. This will better equip our sales representatives to build stronger relationships with our dealer partners. We have also recently bolstered our senior operations team to refine our logistics and inspection capabilities and elevate our dealer experience.

Speaker Change: I will conclude by sharing the progress we've made in our digital wholesale business.

Speaker Change: In the last few months, we have been rebuilding car offers leadership team and optimizing our go to market strategy in order to Reenergize, our commercial engine.

Speaker Change: We have also been further integrating wholesale and retail insights to enhance matrix functionality.

Speaker Change: In Q2, we strengthened our sales force leadership to overhaul car offers commercial strategy.

Speaker Change: Building analytical backbone to inform decisions and actions.

Speaker Change: And implement an execution playbook that will advance sales effectiveness and efficiency.

Speaker Change: This will better equip our sales representatives to build stronger relationships with our dealer partners.

Jason Trevisan: We also recently bolstered our senior operations team to refine our logistics and inspection capabilities and elevate our dealer experience. We are focused on enhancing performance by improving consistency in the transaction experience and driving profitability in our operational capabilities. Our goal is to provide a better dealer experience, optimize conversion, and reduce churn in the transaction funnel.

Speaker Change: We also recently bolstered our senior operations team to refine our logistics and inspection capabilities and elevate our dealer experience.

Jason Trevisan: We are focused on enhancing performance by improving consistency in the transaction experience and driving profitability in our operational capability. Our goal is to provide a better dealer experience, optimize conversion, and reduce churn in the transaction funnel. Another key area of investment is data. CarOffer is leveraging the largest collection of consumer retail data from CarGurus to generate actionable insights for profitable buying and selling strategies. Metrics like market day supply, turn time, and profit per day empower dealers with greater control and confidence to bid competitively on ideal vehicles.

Speaker Change: We are focused on enhancing performance by improving consistency in the transaction experience and driving profitability in our operational capabilities.

Speaker Change: Our goal is to provide a better dealer experience optimize conversion and reduce churn and the transaction funnel.

Jason Trevisan: Another key area of investment is data. Car offer is leveraging the largest collection of consumer retail data from Kardos to generate actionable insights for profitable buying and selling strategies. Metrics like market day supply, turn time, and profit per day empower dealers with greater control and confidence to bid competitively on ideal vehicles. Each dealership has access to a vast amount of curated data presented in a simple, easy to navigate dashboard. Dealers can now create matrix rules based on these insights to optimize their bidding strategies. Our performance managers are using this data along with the matrix analyzer to help dealers adjust their bidding strategies and make recommendations to stay competitive in a dynamic pricing wholesale environment.

Speaker Change: Another key area of investment is data.

Speaker Change: Our offer is leveraging the largest collection of consumer retail data from Carter's to generate actionable insights for profitable buying and selling strategies.

Speaker Change: Metrics like market days supply turn time and profit per day, empower dealers with greater control and confidence to bid competitively on <unk>.

Speaker Change: Deal vehicles.

Jason Trevisan: Each dealership has access to a vast amount of curated data presented in a simple, easy-to-navigate dashboard. Additionally, dealers can now create matrix rules based on these insights to optimize their bidding strategy. Our performance managers are using this data, along with a matrix analyzer, to help dealers adjust their bidding strategies and make recommendations to stay competitive in a dynamic pricing wholesale environment. Furthering our matrix functionality, we also reengineered the matrix to be more targeted and accurate across an expanded set of vehicle options. Combined with the release of CarGurus powered Market Insight, Car Offer is giving dealers increased confidence to buy and sell programmatically.

Speaker Change: Each dealership has access to a vast amount of curated data presented in a simple easy to navigate dashboard.

Speaker Change: Dealers can now create matrix rules based on these insights to optimize their bidding strategies.

Speaker Change: Our performance managers are using this data along with the matrix analyzer to help dealers adjust their bidding strategies and make recommendations to stay competitive and a dynamic pricing wholesale environment.

Jason Trevisan: Furthering our matrix functionality, we also re-engineered the matrix to be more targeted and accurate across an expanded set of vehicle options. Combined with the release of Kardos powered market insights, Car Offer is giving dealers increased confidence to buy and sell programmatically. As a result of these collected changes, dealer NPS has risen, and we expect these enhancements to increase customer attention and unlock new growth opportunities over time.

Speaker Change: Furthering our matrix functionality, we also reengineered the matrix to be more targeted and accurate across an expanded set of vehicle options.

Speaker Change: Bind with the release of Carter's powered market insights our offer is giving dealers increased confidence to buy and sell programmatically.

Jason Trevisan: As a result of these collective changes, Dealer NPS has risen, and we expect these enhancements to increase customer retention and unlock new growth opportunities over time. While we're making significant strides in optimizing key aspects of our business, it is a slower rebuild than we anticipated it would be when we assumed control of the business in December 2023. The new leadership we've brought in is refining and enhancing our commercial and operational initiatives, and we have made exciting product enhancements to integrate retail data with wholesale functionalities in ways that don't exist elsewhere in the market.

Speaker Change: As a result of these collective changes dealer NPS has risen and we expect these enhancements to increase customer retention and unlock new growth opportunities overtime.

Jason Trevisan: While we're making significant strides in optimizing key aspects of our business, it is a slower rebuild than we anticipated it would be, and we assume control of the business in December 2023. The new leadership we brought in is refining and elevating our commercial and operational initiatives, and we have made exciting product enhancements to integrate retail data with wholesale functionalities in ways that don't exist elsewhere in the market. Although the process has taken several corners, we continue to believe in the value of combining wholesale and retail capabilities to offer a differentiated end-to-end transaction platform that allows dealers to predict, source, market, and sell cars with our integrated data and correspondingly elevated sophistication.

Speaker Change: While we're making significant strides in optimizing key aspects of our business. It is a slower rebuild than we anticipated it would be when we assumed control of the business in December 2023.

Speaker Change: The new leadership, we brought in as refining and elevating our commercial and operational initiatives and we have made exciting product enhancements to integrate retail data with wholesale functionalities in ways that don't exist elsewhere in the market.

Jason Trevisan: Although the process has taken several quarters, we continue to believe in the value of combining wholesale and retail capabilities to offer a differentiated end-to-end transaction-enabled platform that allows dealers to predict, source, market, and sell cars with our integrated data and correspondingly elevated sophistication. To conclude, we are extremely pleased with our marketplace results and the progress we have made against our strategic goals. Each quarter, through our value creation drivers, we have consistently introduced new products, valuable data and insights, and features that enhance our end-to-end capabilities, delivering even greater value to our customers.

Speaker Change: Although the process has taken several quarters, we continue to believe in the value of combining wholesale and retail capabilities to offer a differentiated end to end transaction enabled platform that allows dealers to predict source market and sell cars with our integrated data and correspondingly elevated.

Speaker Change: Occasion.

Jason Trevisan: To conclude, we are extremely pleased with our marketplace results and the progress we made against our strategic goals. Each quarter, through our value creation drivers, we have consistently introduced new products, valuable data and insights, and features that enhance our end-to-end capabilities, delivering even greater value to our customers. Our services are becoming an integral part of the dealer's daily workflow, increasing their engagement and long-term retention. We believe this will lead to continued earnings growth and a robust pipeline of products that will support sustained market share expansion over time.

Speaker Change: To conclude we are extremely pleased with our marketplace results and the progress we made against our strategic goals each quarter through our value creation drivers, we've consistently introduce new products valuable data and insights and features that enhance our end to end capabilities, delivering even greater value to our customers.

Jason Trevisan: Our services are becoming an integral part of the dealer's daily work, increasing their engagement and long-term retention. We believe this will lead to continued earnings growth and a robust pipeline of products that will support sustained market share expansion over time. At every stage of our growth, we remain committed to prudent financial management, operational excellence, and efficient capital allocation. We believe these principles are key to driving greater profitability and creating lasting value for our shareholders. Now, I will turn the call over to Elisa to discuss our financial results.

Speaker Change: Our services are becoming an integral part of the dealers daily workflow, increasing their engagement and long term retention.

Speaker Change: We believe this will lead to continued earnings growth and a robust pipeline of products that will support sustained market share expansion over time.

Jason Trevisan: At every stage of our growth, we remain committed to prudent financial management, operational excellence, and efficient capital allocation. We believe these principles are key to driving greater profitability and creating lasting value for our shareholders.

Speaker Change: At every stage of our growth, we remain committed to prudent financial management operational excellence and efficient capital allocation.

Speaker Change: We believe these principles are key to driving greater profitability and creating lasting value for our shareholders now let me turn the call over to Lisa to discuss our financial results.

Elisa Palazzo: Now, let me turn the call over to Aliza to discuss our financial results. Thank you, Jason, and thank you all for joining us today. My commentary will cover a detailed overview of our second quarter performance, followed by our guidance for the third quarter of 2024. Second quarter consolidated revenue was $219 million, down 9% year-over-year, driven by lower wholesale and product volumes, partly assessed by double-digit expansion of our marketplace business. Marketplace revenue was $195 million for the second quarter, up 14% year-over-year and above the high end of our guidance range. The sustained acceleration of our marketplace business was driven by continued strength in subscription-based listings revenue, which grew $23 million year-over-year, reflecting increasing the adoption of add-on products such as top dealer offers, dealers upgrade to premium tiers, and the addition of new dealers at current market rates.

Elisa Palazzo: Thank you, Jason, and thank you all for joining us today. My commentary will cover a detailed overview of our second quarter performance, followed by our guidance for the third quarter of 2020. The second quarter consolidated revenue was $219 million, down 9% year-over-year, driven by lower wholesale and product volume, partly affected by double-digit expansion of our marketplace. Marketplace revenue was $195 million for the second quarter, up 14% year-over-year and above the high end of our guidance.

Lisa: Thank you Jason.

Lisa: And thank you all for joining us today.

Lisa: My commentary will cover a detailed overview of our second quarter performance.

Speaker Change: All of them by our guidance for the third quarter of 2024.

Lisa: Second quarter consolidated revenue was $219 million down 9% year over year.

Lisa: And by lower wholesale and product volumes, partly offset by double digit expansion of our marketplace business.

Speaker Change: Marketplace revenue was 195 for the second quarter.

Speaker Change: Up 14% year over year and the bomb the high end of our guidance range.

Elisa Palazzo: The sustained acceleration of our marketplace business was driven by continued strength in subscription-based listing revenue, which grew 23 million euros. Reflecting increasing adoption of add-on products such as top dealer offers, dealer upgrades to premium tiers, and the addition of new dealers at current market, We grew our dealer count by 255 dealers year-over-year and 177 sequentially, putting our global paying dealer base at the highest level since the first quarter of 2020. The strong momentum in our marketplace, which has historically outperformed the market and competitors, reflects our relentless focus on product innovation and our unwavering commitment to enhance the value proposition offered to our dealer partners. The strength of our international business continued in the second quarter.

Speaker Change: The sustained acceleration of our marketplace business was driven by continued strength in subscription based listings, Robyn, which grew 23 million year over year.

Speaker Change: Reflecting the increasing adoption of add on products such as stopping at all.

Speaker Change: Dealers are great the premium tiers and the ambition of new dealers at current market rates.

Elisa Palazzo: We grew our dealer count by 255 year-over-year, and 177 sequentially, putting our global paying dealer base at the highest level since the first quarter of 2020. The strong momentum in our marketplace business, which has historically outperformed against the market and competitors, reflects our relentless focus on product innovation and our unwavering commitment to enhance the value proposition offered to our dealer partners. The strength of our international business continues in the second quarter. Revenue grew 21% year-over-year, driven by an expansion in our dealer base, with new and existing dealers subscribing at current market rates, driving international cars in up 20% year-over-year.

Lisa: We grew our dealer count by 255 dealers you got over a year and 177 sequentially.

Speaker Change: Our global paying dealer base and the highest level since the first quarter of 'twenty.

Speaker Change: The strong momentum in our marketplace business, which has historically outperformed against the market and competitors reflect our relentless focus on product innovation and our unwavering commitment to enhance the value proposition offered to our dealer partners.

Speaker Change: The strength of our international business continued in the second quarter.

Elisa Palazzo: Revenue grew 21% year over year, driven by an expansion in our dealer base, with new and existing dealers subscribing at current market rates, driving international car sales up 20% year over year. We continue to gain traffic and wallet share internationally, with sessions and unique visitors up 19% and 21% year-over-year, respectively. Wholesale revenue was $13 million for the second quarter, down 59% year over year, driven by a decline in dealer-to-dealer transaction volume as we continue to focus on rebuilding our commercial pipeline and reinvesting in our product in a disciplined manner, with the ultimate aim of returning to profitable growth.

Speaker Change: Revenue grew 21% year over year, driven by an expansion in our dealer base with new and existing dealers subscribing at current market rates.

International Carson: International Carson.

Carson: 20% yeah over here.

Elisa Palazzo: We continue to gain traffic and wallet share internationally, with sessions and unique visitors up 19% and 21% year-over-year, respectively. Also, revenue was $13 million for the second quarter, down 59% year-over-year, driven by a decline in dealer-to-dealer transaction volume as we continue to focus on rebuilding our commercial pipeline and reinvesting in our product in a disciplined manner, with the ultimate aim of returning to profitable growth. Lastly, product revenue was $10 million for the second quarter, down 72% year-over-year, reflecting declining instant-max cash offer revenue as a growing number of consumers and dealers continue to shift to top dealer offers, a complementary subscription-based product that allows dealers to source vehicles directly from consumers.

Speaker Change: We continued to gain traffic and wallet share internationally with sessions and unique visitors up 19% and 21% year over year, respectively.

Speaker Change: Wholesale revenue was 13 million for the second quarter.

Speaker Change: Down 59% year over year.

Speaker Change: Driven by a decline in dealer to dealer transaction volume as we continue to focus on rebuilding our commercial pipeline.

Speaker Change: We are investing in our pharma and they.

Speaker Change: Disciplined manner with.

Speaker Change: With the ultimate aim of returning to profitable growth.

Elisa Palazzo: Lastly, product revenue was $10 million for the second quarter, down 72% year-over-year. Reflecting Declining Incent Max Cash Offer Lavigne, as a growing number of consumers and dealers are enticed to shift to top deal off, a complimentary subscription-based product that allows dealers to source vehicles directly from consumers.

Speaker Change: Lastly.

Speaker Change: Product revenue was 10 million for the second quarter.

Operator: Good day, and welcome to the CarGurus Inc. 2nd quarter, 2024 earnings results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchstone phone. To withdraw your question, please press star then two. Please note, this event is being recorded.

Elisa Palazzo: The combined impact on declining instant-max cash offer revenue, an increasing top dealer offers revenue, is accreted at the consolidated growth rapid level.

Elisa Palazzo: The combined impact of declining instant max cash offer revenue and increasing top dealer offers revenue is accreted at the consolidated gross profit level. I will now discuss our profitability and expenses on a non-GAAP basis. Second quarter non-GAAP consolidated gross profit was 183 million, up 8% year-over-year. Non-GAAP Growth Margin was 84%, up from 7-1-2 in the prior year quarter.

Elisa Palazzo: I will now discuss our profitability and expenses on a non-GAAP basis. The second quarter non-GAAP consolidated growth rapid was $183 million, up 8% year-over-year. This year, known gap growth margin was 84%, up from 71% in the prior year quarter. The meaningful year of a year expansion in non-gap growth margin was primarily due to the ongoing revenue mix shift towards high margin like a place business. Marketplace non-GAAP growth profit was up 17% year-over-year in dollar terms and growth margin expanded about 230 basis points year-over-year to 93% driven by favorable product mix. For digital wholesale, non-GAAP growth margin was down approximately 17 percentage points year-over-year, as the lower transaction volume was not sufficient to cover our fixed cost base.

Kirndeep Singh: I would now like to turn the conference over to you, Kirndeep Singh, Vice President and Head of Investor Relations. Please go ahead. Thank you, Operators, good afternoon.

Kirndeep Singh: I'm delighted to welcome you to CarGurus 2nd quarter, 2024 earnings call. With me on the call today are Jason Trevisan, Chief Executive Officer, Sam Zales, President and Chief Operating Officer, and Elisa Palazzo, Chief Financial Officer. During the call, we will be making forward-looking statements which are based on our current expectations and beliefs. These statements are subject to risk and uncertainties which could cause our actual results to differ materially from those reflected in such statements.

Elisa Palazzo: The meaningful year-over-year expansion in non-GAAP gross margin was primarily due to the ongoing revenue mix shift towards high-margin marketplaces. Marketplace non-GAAP gross profit was up 17% year-over-year in dollar terms, and gross margin expanded about 230 basis points year-over-year to 93%, driven by favorable products. Our digital wholesale non-GAAP gross margin was down approximately 17 percentage points year over year as the lower transaction volume was not sufficient to cover our fixed costs.

Kirndeep Singh: Information concerning those risks and uncertainties is discussed in our S&C findings which can be found on the S&C's website and in the Investor Relations section of revised forward-looking statements except as required by law. Further, during the course of our call today, we will refer to certain non-gap financial measures. A reconciliation of gap to comparable non-gap measures is included in our press release issue today as well as in our updated investor presentation which can be found on the Investor Relations section of our website.

Kirndeep Singh: We believe that these non-gap financial measures and other business metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency as it relates to metrics used by our management in its financial and operational decision making.

Elisa Palazzo: Consolidated adjusted EBDA was 55.6 million, up 23% year-over-year. Consolidated adjusted EBDA margin was 25%, approximately 650 basis points higher year-over-year. The strong performance was written by sustained growth in marketplace revenue and high flow-through margins. Marketplace adjusted EBDA grew 49% year-over-year to approximately 61 million, as we gained leverage across our operating cost base while revenue growth continued to accelerate. Digital wholesale adjusted EBDA loss was approximately 5.7 million, sequentially lower, as the declining growth profit was partly assessed by lower operating expenses. Second quarter non-GAAP operating expense was 132 million, up 3% year-over-year and nearly flat sequentially, demonstrating our ability to effectively leverage our cost base as we continue to grow our top one.

Elisa Palazzo: Consolidated Adjusted EBITDA was $55.6 million, up 23% year-over-year. Consolidated Adjusted EBITDA Margin was 25%, approximately 650 basis points higher year over year. The strong performance was driven by sustained growth in marketplace revenue and high flow through the marketplace.

Jason Trevisan: When that all now turns the call over to Jason. Thank you, current deep, and thanks to all of you for joining us today. We are very pleased with our second quarter performance. Our subscription-based marketplace business continued to accelerate. Our margins expanded sequentially and we executed well against our growth strategy. We further strengthened our partnership with dealers by embedding our services more deeply into their daily decision-making processes and deepened our connection with consumers by empowering them to complete a larger portion of their transactions online, enabled by the continued progress we made in upgrading and scaling our end-to-end transaction-enabled platform.

Elisa Palazzo: Marketplace Adjusted EBITDA grew 49% year over year to approximately $61 million, and this represents regained leverage across our operating cost base while revenue growth continues to accelerate. Digital Wholesale Adjusted EBITDA loss was approximately $5.7 million, and the declining gross profit was partly offset by lower operating expenses. Second quarter non-GAAP operating expense was $132 million, up 3% year-over-year and nearly flat sequentially. Demonstrating our ability to effectively leverage our cost base as we continue to grow our top line. As digital wholesale volumes continued to decline in the second quarter, we updated our financial forecasts and conducted a review of goodwill and other asset values.

Elisa Palazzo: As digital wholesale volumes continue to decline in the second quarter, we updated our financial forecast and conducted a review of goodwill and other assets' value. Accordingly, we recognized a no-cash goodwill impairment charge of 127 million associated with the car offer business. We recognized the goodwill in connection with the initial acquisition in 2021, when digital wholesale activity was at its peak and corporate valuations were at much higher levels. This charge does not impact our cash flow, liquidity, or ongoing business operations. We do not believe these changes are outlook on the long-term strategic merit of owning a digital wholesale asset, and the synergistic value of combining wholesale and retail data to offer unique sourcing capabilities that differentiate our end-to-end transactional enabled last one.

Elisa Palazzo: Accordingly, we recognize a non-cash goodwill impairment charge of $127 million associated with the Karakoram Bishop. We recognize the goodwill in connection with the initial acquisition in 2021, when digital hotel activity was at its peak, and Corporate Valuations were worth much higher loans.

Jason Trevisan: And marketplace EBITDA grew 49% year-over-year with margins expanding 735 basis points versus the prior year-percent. In the second quarter, we achieved the highest quarterly revenue increase since 2021, driven by growth in our global dealer base, increased adoption of add-on products, and migration toward higher subscription tiers. Notably, in the US, our customer base has increasingly shifted toward larger dealers with higher advertising budgets, who have a greater demand for data insights and analytics.

Elisa Palazzo: This charge does not impact our cash flow, liquidity, or ongoing business operations. We do not believe these changes are an outlook on the long-term strategic merit of owning a digital wholesale asset and the synergistic value of combining wholesale and retail data to offer unique sourcing capabilities that differentiate our end-to-end transaction-enabled platform. Non-GAAP diluted earnings per share attributable to common shareholders was $0.41 for the second quarter, up $0.12 or 41% year over year, reflecting an increase in consolidated adjusted EBDA and lower diluted shifts.

Elisa Palazzo: Non-GAAP diluted earnings per share attributable to common shareholders was 41 cents for the second quarter, up 12 cents or 41% year-over-year, reflecting the increase in consolidated adjusted EBDA and lower diluted shifts. We ended the second quarter with 216 million in cash equivalent, a decrease of 30 million from the end of the first quarter. The lower cash balance was primarily driven by 61 million spent on shared purchases in the quarter, and approximately 26 million in cutbacks, primarily related to the buildout of our new headquarters. As a reminder, we expect to move into the new headquarters at the end of the second quarter.

Jason Trevisan: We are also seeing a sustained increase in wallet share across our dealer base, as more dealers adopt additional value added products, whether purchased Alacart or included in premium packages. This is evidenced by our double-digit year-over-year revenue growth, while long-term advertising budgets for publicly traded dealers have increased at a mid-to-high single-digit rate. We continue to experience strong momentum in our international business, which grew revenue 21% year-over-year, with growth profitability in line with our domestic business.

Elisa Palazzo: We ended the second quarter with $216 million in cash and cash equivalents, a decrease of $30 million from the end of the first quarter. The lower cash balance was primarily driven by $61 million spent on share repurchases in the quarter and approximately $26 million in CapEx, primarily related to the buildout of our new headquarters.

Elisa Palazzo: As a reminder, we expect to move into the new headquarters at the end of September, and we expect the related cash outlays to normalize by year end. I will now close my prepared remarks with our guidance for the third quarter of 2024. We expect our third-quarter consolidated revenue to be in the range of $212 to $232 million. We expect the momentum in our marketplace business to continue in the third quarter, with revenue expected to be in the range of $199 to $204 million, up between 12% and 15% year-over-year.

Elisa Palazzo: And we expect the related cash outlays to normalize by year ends.

Elisa Palazzo: I will now close my prepared remarks with our guidance for the third quarter of 2024. We expect our third quarter consolidated revenue to be in the range of 212 to 232 million. We expect the momentum in our marketplace business to continue in the third quarter. We revenue expected to be in the range of 199 to 204 million, up between 12% and 15% year over year. For digital wholesale, we expect third quarter volumes to decline sequentially. This outlook reflects the current transaction run rate and seasonality in the second half of the year. We expect our third quarter non-GAAP consolidated adjusted EBDA to be in the range of 66 million to 64 million.

Elisa Palazzo: For digital wholesale, we expect third-quarter volumes to decline sequentially. This outlook reflects the current transaction run rate and seasonality in the second half of the year. We expect our third quarter non-GAAP consolidated adjusted EBITDA to be in the range of $66 million to $64 million. In the marketplace segment, we expect shorter margin expansion in the third quarter, driven by continued operating leverage. In digital wholesale, we expect EBITDA losses to increase modestly on a sequential basis due to lower volumes and disciplined reinvestment in product operations and data analytics with the aim of returning to growth over time.

Jason Trevisan: The impressive results we achieved in the second quarter reflect our ongoing progress against our core drivers of value creation, a steadfast commitment to delivering greater value to our dealer partners, continuously improving the consumer experience, further advancing transaction enablement, and rebuilding and integrating our wholesale business. Providing more value to dealers. This quarter, we further enriched our platform by expanding our predictive analytics products suite, and leveraging our market leading consumer audience to deliver increased lead and non-lead value to our dealer partners.

Jason Trevisan: Our efforts led to 15% year-over-year growth in listings revenue. As we strive to provide greater value to our dealer partners, the quality and quantity of our leads remain crucial drivers. In the second quarter, our platform delivered strong year-over-year lead growth and traffic to lead conversion rate also went up sequentially, as we focused on engaging high intent shoppers and improving our lower funnel efficiency. In addition to our high intent audience leadership, we continue to invest in new tools and services that offer our dealers enhanced data with actionable insights, supporting their day-to-day decision-making process and automotive life cycle needs.

Elisa Palazzo: In the marketplace segment, we expect further margin expansion in the third quarter driven by continued operating leverage. In digital wholesale, we expect EBDA losses to increase modestly on a sequential basis due to lower volumes and disciplined reinvestment in product operations and data analytics with the aim of returning to growth over time. As guided at the beginning of the year, we expect third quarter non-GAAP operating expenses to remain roughly flat sequentially in dollar terms, but to decline as a percentage of revenue, driving further expansion of our consolidated EBDA margin. Finally, we expect non-GAAP earnings for share to be in the range of 38 cents to 44 cents.

Elisa Palazzo: As guided at the beginning of the year, we expect third quarter non-GAAP operating expenses to remain roughly flat sequentially in dollar terms but to decline as a percentage of revenue, driving further expansion of our consolidated EBW. Finally, we expect non-GAAP earnings per share to be in the range of $0.38 to $0.44, and Diluted Weighted Average Common Shears Offending to be approximately 105. With that, let's open the call for Q&A. We will now begin the question and answer session.

Elisa Palazzo: In diluted weighted average, common share of spending to be approximately 105 million.

Operator: With that, let's open the call for Q&A. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. We ask that you please limit yourself to one question and one follow-up.

Jason Trevisan: Engagement remains strong with a nearly 50% weekly open rate and approximately 55% of dealers making at least one recommended price change within seven days. Second, our newest product, Maximize Margin, leverages similar data as Max Best Deal Rating to inform dealers how much they can increase the price of a vehicle without jeopardizing the current deal rating and associated VDP views and leads. This is especially important for vehicles with limited availability and in high demand.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. We ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster.

Operator: At this time, we will pause momentarily to assemble our roster.

Jason Trevisan: Third, acquisition insights report, which informs dealers about which vehicles to acquire to meet market demand is now live with dealers and featured plus and featured priority plus. We've developed a proprietary Kardos index that measures demand based on our visitor's searches and availability of inventory with the aim to ultimately help inform a dealers inventory list on car offer by prioritizing lead quality and quantity and pursuing relentless innovation to deliver unparalleled ROI.

John Colantuoni: The first question comes from John Colantuani with Jeffries. Please go ahead.

John Colantuoni: The first question comes from John Colantuoni with Jeffreys. Please go ahead.

Vincent Kardos: Hey, this is Vincent. Thanks for taking the question. Two from me, please. First maybe just help us size the impact of the CDK adage on revenue in EBITDA and 2Q and 3Q, if any. And then maybe a second on car offer, what still needs to be done there and how should we be thinking about the timing at this point to a rampant volume. Thanks.

Jason Trevisan: We are establishing ourselves as long term partners for our dealers capturing a greater share of the overall auto digital advertising market. Approximately 50% of our dealers who have subscribed to our services for more than a year have increased their spend with us through add on products, listings upgrades and renewals motions. 36% of all contract signed this quarter were six months or longer. 54% of our renewals motions resulted in longer term contracts and 22% resulted in add on products or higher listings to your migration. Long term contracts yield higher retention rates and predictable revenue from our customer base while facilitating new renewal opportunities at term end.

Elisa Palazzo: Thanks for your question.

Elisa Palazzo: Thanks for your question. I will address your CDK one. We have not seen any impact from the CDK outage, nor on billing, nor on the amount we have been able to collect. And most importantly, we don't anticipate any carryover impact expected for the third quarter. Thanks, Lisa and John.

Elisa Palazzo: I will address your CDK one. We have not seen any impact from the CDK adage, nor on the amount we have been able to collect. And most importantly, we don't anticipate any carryover impact expected for the third quarter.

Elisa Palazzo: Thanks, Lisa.

Jason Trevisan: Thanks, Elisa. And John, I can take the, this is Jason. I can take the car offer question. So, what needs to be done there is, as you've heard us talk about, we are restructuring the sales organizations and the go-to-market activities, and we are also investing in and making really exciting improvements in the product, specifically around data and how we're integrating data into the car offer matrix creation and matrix management to ensure that our customers there have confidence in the types of buys and sells that they're doing.

Jason Trevisan: And John, I can take the. This is Jason. I can take the car offer questions. So what needs to be done there is, as you've heard us talk about, we are restructuring the sales organizations and the go-to-market motions. And we are also investing in and making really exciting improvements in the product specifically around data and how we are integrating data into the car offer matrix creation and matrix management to ensure that our customers there have confidence in the types of buys and sells that they are doing. In terms of timing on your question, we've not given a timeline.

Jason Trevisan: Better consumer experience. This quarter we continue to invest in elevating our consumer app which contributed 28% of our leads. We simplified the vehicle search process and customized the experience for our returning users by offering more tailored results that incorporate elements from their previous sessions. This personalization provides continuity to the shopping journey and increases content relevance. As we've made these continuous app improvements we saw the one month's app use retention rate increase by 16%.

Jason Trevisan: Enhancing the consumer experience goes beyond our mobile app. This quarter we continue to progress on our AI initiatives. We are leveraging AI and consumer content generation, conversational search, vehicle recommendations and much more to streamline the shopping journey and provide consumers with key information and data at their fingertips. The investment in the app and AI are just two examples of our broader commitment to improving the consumer experience and engaging with our market leading consumer audience throughout their vehicle life cycle.

Jason Trevisan: Just as we said in our prepared remarks, it's taking longer than we thought when we estimated it back in Q4 of 23. But we now have, with the new leadership there, our arms around things in a much better way. And we remain disciplined in how we are investing to operate the business and to aim to regrow volumes.

Jason Trevisan: In terms of timing, on your question, we've not given a timeline. Just as we said in our prepared remarks, it's taking longer than we thought when we estimated it back in Q4 of 2023. But we now have, with the new leadership there, our arms around things in a much better way. And we remain disciplined in how we're investing to operate the business and aim to regrow volume.

Jason Trevisan: We ended the quarter as the most visited automotive marketplace with 56% more visits than our closest competitor. Additionally 47% of our monthly unique visitors did not visit our leading competitors websites highlighting our strong market leadership among consumers and the unique and unrivaled audience we offer our dealers. These metrics do not factor in are sizeable and highly engaged app user base which primarily comes from organic. If we factor aphid in, our audience would likely be even larger.

Vincent Kardos: Good, thanks.

Nicholas Jones: The next question comes from Nick Jones with Citizens JMP. Please go ahead.

Nick Jones: The next question comes from Nick Jones with Citizens JMP. Please go ahead.

Nicholas Jones: Great.

Operator: Great, thanks for taking the questions. I have two.

Nicholas Jones: Thanks for taking the questions. I have two. If you are seeing some higher adoption of add-on products, kind of driving marketplace strength, can you speak to what you are learning through this higher adoption? Is this helping you build on maybe a more robust product pipeline? Is there a lot more wood to chop to drive deeper integrations based on the success you are seeing here?

Nick Jones: So you're seeing some higher adoption of add-on products, kind of driving the market. Place Strength. Can you speak to, I guess, what you're learning through this higher adoption? I mean, is this helping you build out maybe a more robust product pipeline? And is there a lot more kind of wood to chop to drive deeper integrations based on the success you're seeing here? And then maybe a follow-up to this is, you know, you mentioned the customer base is shifting towards larger dealers with higher advertising budgets. What does this mean? I guess, you know, what's driving this? Is it just more effective for CarGurus?

Nicholas Jones: And then maybe a follow-up to this. You mentioned the customer base is shifting towards larger dealers with higher advertising budgets. What does it mean? What is driving this? Is it more effective for car grooves? Are there lower-touch, self-serve solutions that could be added to the product roadmap to maybe re-visit some of these smaller dealers with lower budgets?

Jason Trevisan: Are there any kind of lower-touch self-serve solutions that could be added to the product roadmap to maybe revisit some of these smaller dealers with lower budgets? Thank you.

Jason Trevisan: Thank you.

Jason Trevisan: Sure, this is Jason. So the increasing penetration of other products is really a function of us, I mean, two things. We're developing more insights and products and analytics that not only support a more sophisticated view into the market for dealers, but also more, sort of ammunition for them to use our platform better and to get more out of our platform. And so, as we arm dealers with those, those dealers that are using them well are seeing better results. And a great example of that is what you heard us talk about with the next best deal rating. Dealers who are using that insight product are generating more vehicle detail pages, they're generating more leads, they're turning their cars faster.

Jason Trevisan: Sure, this is Jason. So the increasing penetration of other products is really a function of us. I mean, two things. We're developing more insights and products and analytics that not only support a more sophisticated view of the market for dealers but also provide more ammunition for them to use our platform better and to get more out of our platform. And so, as we arm dealers with those, those dealers that are using them well are seeing better results. And a great example of that is what you heard us talk about with the next best deal rating.

Jason Trevisan: An advanced top dealer offers, which allows dealers to source high quality cars from local consumer inventory. These efforts drove the adoption rate of add-on products up by 37% year-over-year in the U.S. In the second quarter, we saw continued strength in digital deal adoption, which has grown 22% quarter-over-quarter and 157% year-over-year to 7451 dealers. In a little over two years since its launch, digital deal has been adopted by 30% of our U.S, paying dealers.

Jason Trevisan: High value actions, such as financing, can close up to three times higher than traditional leads, providing dealers with ready-to- purchase shoppers. With days on lot remaining elevated, dealers are especially interested in broadening their inventory reach beyond local demographics, resulting in growth in digital deal with geographic expansion. With 238,000 deliverable vehicles, we offer consumers one of the largest selections of deliverable inventory with the greatest selection of options and prices that best meets their needs.

Samuel Zales: Dealers who are using that Insight product are generating more vehicle detail pages, they're generating more leads, they're turning their cars faster. And so, we often talk about it as... customers who adopt it more are running better dealerships because they're so much more effective on our platform, and our platform is the largest in the market by quite a bit. And so, number one is that we're developing those insights and products. Number two, I think we're doing a much better job explaining them to our customers and educating them on how to use them, and helping them tie their usage of them to results on our platform to results in their dealership.

Jason Trevisan: And so we often talk about it as customers who adopt more are running better dealerships because they're so much more effective on our platform. And our platform is the largest in the market by quite a bit. And so that number one is that we're developing those insights and products. Number two is, I think we're doing a much better job explaining to our customers and educating them on how to use them and helping them tie usage of them to results on our platform to results in their dealership. And so we have; you've heard us talk about how we're more consultative than we ever have been before. We're engaging with our customers more, and the combination of having the insights and products, explaining them better, is leading to the better adoption.

Jason Trevisan: In the second quarter, we also made progress on top dealer offers, our subscription-based consumer vehicle sourcing product, powered by car offers matrix technology. We expanded the offer into 68 metro cities with 388 dealers participating in the program, and we rolled out our vehicle intake tool to all dealers, fostering greater transparency between dealers and consumers in the appraisal process. Since our launch, we found that dealers are eager to access fresh consumer trade-ins, and nearly 35% of individuals who submit a lead to sell their car are actively looking to purchase, representing an important trade-in opportunity for dealers.

Samuel Zales: And so we have, you've heard us talk about how we're more consultative than we ever have been before. We engage with our customers more, and the combination of having the insights and products and explaining them better is leading to better adoption. I'll let Sam talk just a little bit about the profile of the dealers and why we are seeing a mixed evolution. Thanks, Jason and Nick.

Sam Zales: I'll let Sam talk just a little bit about the profile of the dealers and why we are seeing a mix evolution toward larger dealers. Thanks, Jason and Nick. Thanks for the question. We are proud of the results we're seeing, exceptionally proud of the results we're seeing in our marketplace business, as you can tell from the numbers. You know it starts with the consumer experience, and we talked about the incredible growth of both our leads and our sessions in the business from a consumer perspective. That's because we cover the widest array in the largest source of inventory from the smallest dealers up to the largest dealers.

Samuel Zales: Thanks, Jason and Nick. Thanks for the question. We are proud of the results we're seeing, exceptionally proud of the results we're seeing in our marketplace business, as you can tell from the numbers. You know, it starts with the consumer experience, and we talked about the incredible growth of both our leads and our sessions in the business from a consumer perspective. That's because we cover the widest array and the largest source of inventory, from the smallest dealers up to the largest dealers. We're always going to have a broad mix there to serve our consumers and have this incredible 56% larger share of sessions than our closest competitors.

Sam Zales: We're always going to have a broad mix there to serve our consumers and have this incredible 56% larger share of sessions than our closest competitors. But I think the shift on the dealer side is to more sophistication, and the customers that are looking at ROI. You know that every customer in the dealer community today is trying to figure out how to make more profit, and I think we're viewed now as the profit maximization platform for their business. So when they look at that, you've got those customers are more sophisticated typically the larger franchise dealers, and in some cases the larger and mid-size independence as well. Is the effort to say I'm watching my my my profits.

Jason Trevisan: This will better equip our sales representatives to build stronger relationships with our dealer partners. We also recently bolstered our senior operations team to refine our logistics and inspection capabilities and elevate our dealer experience. We are focused on enhancing performance by improving consistency in the transaction experience and driving profitability in our operational capabilities.

Samuel Zales: But I think the shift on the dealer side is to more sophistication and customers that are looking at ROI. You know that every customer in the dealer community today is trying to figure out how to make more profit, and I think we're viewed now as the profit maximization platform for their business. So when they look at that, you've got those customers who are more sophisticated, typically the larger franchise dealers, and in some cases, the larger and mid-size independents as well, in the effort to say, I'm watching my profits. I'm going to spend more on your platforms. I know I can grow faster.

Jason Trevisan: Our goal is to provide a better dealer experience, optimize conversion, and reduce churn in the transaction funnel. Another key area of investment is data. Car offer is leveraging the largest collection of consumer retail data from Kardos to generate actionable insights for profitable buying and selling strategies. Metrics like market day supply, turn time, and profit per day empower dealers with greater control and confidence to bid competitively on ideal vehicles. Each dealership has access to a vast amount of curated data presented in a simple, easy to navigate dashboard.

Samuel Zales: So we get more spend, and we retain it better with the larger customers. They're not typically going out of business quickly. They're not typically having trouble making their payments.

Sam Zales: I'm going to spend more on your platforms. I know I can grow faster. So we get more spend, and we retain it better with the larger customers. They're not typically going out of business quickly. They're not typically having trouble making their payments. So that sophistication in that larger dealer audience has been great for us. It leads them to buy more products. from us. Top dealer offer will not be sold to every one of our customers to serve the consumer well and sell my car capability. We want the larger and more sophisticated customers to participate in that.

Samuel Zales: So that sophistication in that larger dealer audience has been great for us. It leads them to buy more products from us. So the top dealer offer will not be sold to every one of our customers. To serve the consumer well and to sell my car capability, we want the larger and more sophisticated customers to participate in that. Digital deal. Remember, you're bringing the consumer further down the funnel of shopping. They're going to put their financing information in there,

Jason Trevisan: Dealers can now create matrix rules based on these insights to optimize their bidding strategies. Our performance managers are using this data along with the matrix analyzer to help dealers adjust their bidding strategies and make recommendations to stay competitive in a dynamic pricing wholesale environment. Furthering our matrix functionality, we also re-engineered the matrix to be more targeted and accurate across an expanded set of vehicle options. Combined with the release of Kardos powered market insights, car offer is giving dealers increased confidence to buy and sell programmatically. As a result of these collected changes, dealer NPS has risen and we expect these enhancements to increase customer attention and unlock new growth opportunities over time.

Sam Zales: Digital deal. Remember you're bringing consumers further down the funnel of shopping. They're going to put their financing information in there. You want the dealer who can serve them, serve that consumer with more of that complex sale process and close that business, as we said, up to three times faster because of an action like telling you what their pre-qualification is. We're running the business to grow that, and that's helped us continue to continue to grow this marketplace, Carcid, which has been phenomenal for us. And it's on the backs of having all of those dealers, small and large. But traditionally, the more sophisticated, larger dealers retain with us longer and spend more with us, and we're really proud of that growth.

Samuel Zales: You want the dealer who can serve them, serve that consumer with more of that complex sale process and close that business, as we said, up to three times faster because of an action like telling you what their pre-qualification is. We're running the business to grow that, and that's helped us continue to grow this marketplace, CarSid, which has been phenomenal for us, and it's on the backs of having all of those dealers, small and large. But traditionally, the more sophisticated, larger dealers stay with us longer and spend more with us, and we're really proud of that growth.

Jason Trevisan: While we're making significant strides in optimizing key aspects of our business, it is a slower rebuild than we anticipated it would be and we assume control of the business in December 2023. The new leadership we brought in is refining and elevating our commercial and operational initiatives and we have made exciting product enhancements to integrate retail data with wholesale functionalities in ways that don't exist elsewhere in the market. Although the process has taken several corners, we continue to believe in the value of combining wholesale and retail capabilities to offer a differentiated end-to-end transaction platform that allows dealers to predict, source, market, and sell cars with our integrated data and correspondingly elevated sophistication.

Vincent Kardos: Thanks, Jason, thanks.

Jed Kelly: The next question comes from Jed Kelly with Oppenheimer. Please go ahead. Hey, great. Thanks for taking my question. Managing multiple calls. I'm with some of the opening remarks.

Jed Kelly: The next question comes from Jed Kelly with Oppenheimer. Please go ahead.

Operator: Hey, great. Thanks for taking my question. I manage multiple calls, so I missed some of the opening remarks, but can you just talk about sort of what's driving some of the momentum with pricing you're seeing from dealers and then just how is your inside sales force doing sort of, you know, kind of trying to help you guys tie the wholesaling relationships with the marketplace?

Jed Kelly: But can you just talk about sort of what's driving some of the momentum with pricing you're seeing from dealers? And then just how is your inside sales force doing, sort of kind of trying to help you guys tie the wholesaling relationships with the marketplace? Thanks.

Jason Trevisan: To conclude, we are extremely pleased with our marketplace results and the progress we made against our strategic goals. Each quarter, through our value creation drivers, we have consistently introduced new products, valuable data and insights and features that enhance our end-to-end capabilities, delivering even greater value to our customers. Our services are becoming an integral part of the dealer's daily workflow, increasing their engagement and long-term retention. We believe this will lead to continued earnings growth and a robust pipeline of products that will support sustained market share expansion over time.

Jason Trevisan: Sure. Hey, Jed. It's Jason. So the pricing momentum, I assume you're referring to Carcid. Yes, when you say pricing. Yeah, yeah. So it's consistent drivers that we've talked about in the past that are continuing to keep up and even grow momentum. So we are signing on dealers at higher rates than we have in the past. And I think that's the function of the market recognizes the value and the volume of the leads that we provide at the core of our product. But also a growing suite of what we sometimes hear called non-lead value. And so, in addition to just the customers, they're getting a lot more in the form of tools and insights.

Jason Trevisan: Sure. Hey Jed, it's Jason.

Jason Trevisan: So the pricing momentum, I assume you're referring to CARCID? Yes. Yeah. Yeah.

Jason Trevisan: So, it's consistent drivers that we've talked about in the past that are continuing to keep up and even grow momentum. So, we are signing on dealers at higher rates than we have in the past, and I think that's a function of the market recognizing the value and the volume of the leads that we provide at the core of our product. But also, a growing suite of what we sometimes hear called non-lead value.

Jason Trevisan: And so, in addition to just the customers, they're getting a lot more in the form of tools and insights. The second is upgrading dealers to higher tiers, and historically, for us, that really was a means by which they could get more leads and certainly get more branding. But increasingly, through smarter bundling, it's also now being driven by dealers who are looking for access to some of these insights that are only available to higher-tier products.

Jason Trevisan: The second is upgrading dealers to higher tiers, and historically for us, that really was a means by which they can get more leads and certainly get more branding. But increasingly, through smarter bundling, it's also now being driven by dealers who are looking for access to some of these insights that are only available to higher tier products. And that's a really key point. And I think that's one that we're really pleased with how well that's working. And you heard the examples in the script, or if you missed it, you said you may miss it. You will read about them.

Jason Trevisan: And that's a really key point. And I think that's one that we're really pleased with how well that's working. And you heard the examples in the script, or if you missed it, you said you may have missed it, you will read about them.

Jason Trevisan: But examples where we're getting really tremendous adoption, both in terms of just the volume of dealers that are signing up for these but then their usage of them. And so they're using these on a daily and weekly basis. basis.

Elisa Palazzo: The sustained acceleration of our marketplace business was driven by continued strength in subscription-based listings revenue, which grew $23 million year-over-year, reflecting increasing the adoption of add-on products such as top dealer offers, dealers upgrade to premium tiers, and the addition of new dealers at current market rates. We grew our dealer count by $255 year-over-year, and 177 sequentially, putting our global paying dealer base at the highest level since the first quarter of 2020.

Jason Trevisan: But examples where we're getting really tremendous adoption, both in terms of just the volume of dealers that are signing up for these, but then their usage of them. And so they're using these on a daily and weekly basis. Next are additional products. And again, you know, we have continued to invest in innovation, and we're seeing that through the adoption of other products like Highlight and Digital Deal and so forth. And then the last is just pricing, and we continue to do that through a variety of different renewal options, but we still believe we're priced under the market.

Jason Trevisan: Next is additional products, and again, you know, we have continued to invest in innovation, and we're seeing that through adoption of other products like Highlight and Digital Deal and so forth. And then the last is just pricing, and we continue to do that through a variety of different renewal motions, but we still believe we're priced under the market. That's reflected in a better ROI. And so that's a lever that we have been able to pull on in the last year plus. And then I'd be remiss to not also mention just lead quantity. Our traffic has grown.

Elisa Palazzo: The strong momentum in our marketplace business, which has historically outperformed against the market and competitors, reflects our relentless focus on product innovation, and our unwavering commitment to enhance the value proposition offered to our dealer partners. The strength of our international business continues in the second quarter. Revenue grew 21% year-over-year, driven by an expansion in our dealer base, with new and existing dealers subscribing at current market rates, driving international cars in up 20% year-over-year.

Jason Trevisan: That's reflected in a better ROI. And so that's a lever that we have been able to pull on in the last year plus. And then I'd be remiss not to also mention just lead quantity. Our traffic has grown. We remain incredibly focused on lead quality as well. We're not going to sacrifice that, but we've seen really nice lead volume. Sam, did you want to talk about a second question? Sure.

Jason Trevisan: We remain incredibly focused on lead quality as well. We're not going to sacrifice that, but we've seen really nice lead volume growth.

Sam Zales: Sam, did you want to talk about a second question? Sure, thanks, Jed. Jason hit it all on the real success we've had when you asked about our sales team thinking about supporting car offer. They're busy right now growing the marketplace business, 14 plus percent; our best quarter we've had in four years, so we're really, really proud of those results. But you're right to hit the point that acquisition of inventory, particularly last four years of inventory. So the 2020 models to 2024 are hard to come by in the market today. So it's a pain point, and inventory turns are slow, and dealers are trying to figure out how to source inventory effectively.

Samuel Zales: Sure. Thanks, Jed. Jason hit it all on the real success we've had. When you asked about our sales team thinking about supporting the car offer, they're busy right now growing the marketplace business by 14-plus percent, our best quarter we've had in four years. So we're really, really proud of those results. But you're right to hit the point that acquisition of inventory, particularly the last four years of inventory, so the 2020 models to 2024, are hard to come by in the market today. So it's a pain point, and inventory turns are slow, and so dealers are trying to figure out how to source inventory effectively.

Elisa Palazzo: We continue to gain traffic and wallet share internationally, with sessions and unique visitors up 19% and 21% year-over-year, respectively. Also revenue was $13 million for the second quarter, down 59% year-over-year, driven by a decline in dealer-to-dealer transaction volume as we continue to focus on rebuilding our commercial pipeline and reinvesting in our product in a disciplined manner, with the ultimate aim of returning to profitable growth. Lastly, product revenue was $10 million for the second quarter, down 72% year-over-year, reflecting declining instant-max cash offer revenue as a growing number of consumers and dealers continue to shift to top dealer offers, a complementary subscription-based product that allows dealers to source vehicles directly from consumers.

Sam Zales: So we're being very targeted about what we're doing with our sales team building back up the car offer acquisition customer acquisition business. As Jason mentioned before, our focus at Car Offer and it's taking us longer than we expected is on the operations of the business. Their go to market team has completely been revamped. We have new leadership in there, new analytics, new approach, new incentives to how they're running that business day to day. It took longer than we thought to get there, and we have more work to be done. The operations of the business focusing on logistics and inspections we've upgraded with new leadership there as well.

Samuel Zales: So we're being very targeted about what we're doing, with our sales team building back up the car offer acquisition and customer acquisition business. As Jason mentioned before, our focus at Car Offer, and it's taking us longer than we expected, is on the operations of the business. Their go-to-market team has completely been revamped. We have new leadership in there, new analytics, new approach, and new incentives for how they're running that business day-to-day. It took longer than we thought to get there, and we have more work to do.

Elisa Palazzo: The combined impact on declining instant-max cash offer revenue, an increasing top dealer offers revenue, is accreted at the consolidated growth rapid level. I will now discuss our profitability and expenses on a non-gap basis. The second quarter non-gap consolidated growth rapid was $183 million, up 8% year-over-year. This year, known gap growth margin was 84% up from 71% in the prior year quarter. The meaningful year of a year expansion in non-gap growth margin was primarily due to the ongoing revenue mix shift towards high margin like a place business.

Samuel Zales: The operations of the business, focusing on logistics and inspections, we've upgraded with new leadership there as well. The focus right now is ensuring a product market fit for our customers. You heard Jason talk about the analytics we've now put into the matrix.

Sam Zales: The focus right now is ensuring a product market fit for our customers. You heard Jason talk about the analytics we've now put into the matrix. We're now putting Car Gurus demand data, consumer demand data in a local market and matching that to inventory turns for a dealer to predict for them. When they'd be most successful sourcing inventory and upgrading the automation of our matrix. When that is done, we will be turning on our sales team to say, "get car offer" onto your next sales call. But what we're doing in a targeted way is saying, for example, those dealers who are in top dealer offer, that's not a huge percentage of our customer base.

Samuel Zales: We're now putting CarGurus demand data, consumer demand data, in a local market and matching that to inventory terms for a dealer to predict for them when they'd be most successful sourcing inventory and upgrading the automation of our matrix. When that is done, we will be turning on our sales team to say, get the car offer onto your next sales call, but what we're doing in a targeted way is saying, for example, those dealers who are in the top dealer offer, that's not a huge percentage of our customer base.

Elisa Palazzo: Marketplace non-gap growth profit was up 17% year-over-year in dollar terms and growth margin expanded about 230 basis points year-over-year to 93% driven by favorable product mix. For digital wholesale non-gap growth margin was down approximately 17% point year-over-year as the lower transaction volume was not sufficient to cover our fixed cost base. Consolidated adjusted EBDA was 55.6 million, up 23% year-over-year. Consolidated adjusted EBDA margin was 25% approximately 650 basis points higher year-over-year. The strong performance was written by sustained growth in marketplace revenue and high flow through margins.

Sam Zales: It's growing really, really well. Let's take that customer base and teach them they can use the D to D matrix, the dealer to dealer matrix, to go use the car offer platform to be even more successful. So we're targeted. Once we get the operations working as well as we want to, we will turn on much more of that Car Gurus to Car Offer lead generation process.

Samuel Zales: It's growing really, really well. Let's take that customer base and teach them how to use the D2D matrix, the dealer to dealer matrix, to go use the car offer platform to be even more successful. So we're targeting, once we get the operations working as well as we want to, to turn on much more of that CarGurus to car offer lead generation process.

Vincent Kardos: Thank you, helpful.

Operator: Thank you.

Rajat Gupta: The next question comes from Rajat Gupta with JP Morgan. Please go ahead. Great. Thanks for taking the question. I wanted to follow up on a couple of the questions earlier. Just around network of X. I mean, clearly, you know, this is not even the business, you know, you know, that. But it seems like, you know, the margin and expansion that you're seeing, you know, just sequentially one, two, two, two, three, two, you know, also like you're here. It's pretty; it's pretty material. I would just curious, you know, if you could help us understand that cadence a bit more.

Rajat Gupta: The next question comes from Rajat Gupta with J.P. Morgan. Please go ahead.

Rajat Gupta: Great. Thanks for taking the time to answer the question. I wanted to follow up on like a couple of the questions earlier, just around network effects. I mean, clearly, you know, this is not in the business, you know, we know that. But it seems like, you know, the margin expansion that you're seeing, you know, just sequentially 1Q to 2Q, 2Q to 3Q, you know, also like year over year, it's pretty material. I was just curious, you know, if you could help us understand that cadence a bit more and why it is taking off right now?

Elisa Palazzo: Marketplace adjusted EBDA grew 49% year-over-year to approximately 61 million, as we gained leverage across our operating cost base while revenue growth continued to accelerate. Digital wholesale adjusted EBDA loss was approximately 5.7 million, sequentially lower, as the declining growth profit was partly assessed by lower operating expenses. Second quarter non-gap operating expense was 132 million, up 3% year-over-year and nearly flat sequentially, demonstrating our ability to effectively leverage our cost base as we continue to grow our top one.

Rajat Gupta: And why is this taking off right now? Is it just that the incremental sales and marketing efforts are starting to become a lot more efficient in order to attach that extra product or the extra customer and get them on board. I'm just curious. If this white deal is likely to, you know, just continue to reflect here going forward and have a quick follow-up. Thanks.

Rajat Gupta: Is it just that the incremental sales and marketing efforts are starting to become a lot more efficient in order to attach that extra product or the extra customer or get them on board? I was just curious. If this flywheel is likely to, you know, just continue to inflect here going forward, have a quick follow-up.

Jason Trevisan: Sure. Thanks for that, Jason. I think it's so we agree. We think there's a lot of momentum, and relative to market growth rates and competitors' growth rates, we're clearly gaining share anecdotally from customers. We hear a lot more enthusiasm and commitment to what we're doing. And then we ever have before.

Jason Trevisan: Sure. Thanks, Rajat and Jason. I think there's a lot of momentum, and relative to market growth rates and competitors' growth rates, we're clearly gaining share. Anecdotally, from customers, we hear a lot more enthusiasm and commitment to what we're doing than we ever have before. And so, I think it's driven by a number of things, but I don't think any of them are revolutionary.

Jason Trevisan: I think it's just a compounding effect of us doing a lot of things well. And so, you know, I think post-COVID, dealers didn't need to invest much in marketing channels, and now they do. Over the past, you know, one to two years, they've really had to increase that, and I think they're looking at what they were doing pre-COVID, which was, you know, spending on a lot of different channels, and now they're saying, okay, if I'm going to come back, I'm going to come back to the ones that deliver volume and really work, and I don't need to go on as So, I think that's number one.

Jason Trevisan: And so I think it's driven by a number of things, but I don't think any of them are revolutionary. I think it's just a compounding effect of us doing a lot of things well.

Jason Trevisan: And so, you know, I think post-COVID dealers didn't need to invest much in marketing channels. And now they do have, over the past, you know, one to two years, they've really had to increase that. And I think they're looking at what they were doing pre-COVID, which was, you know, spending on a lot of different channels. And now they're saying, OK, if I'm going to come back, I'm going to come back to the ones that deliver volume and really work. And I don't need to go on as many as I was before.

Elisa Palazzo: We do not believe these changes are outlook on the long-term strategic merit of owning a digital wholesale asset, and the synergistic value of combining wholesale and retail data to offer unique sourcing capabilities that differentiate our end-to-end transactional enabled last one. Non-gap-dialuted earnings per share attributable to common shareholders was 41 cents for the second quarter, up 12 cents or 41% year-over-year, reflecting the increase in consolidated adjusted EBDA and lower diluted shifts. We ended the second quarter with 216 million in cash equivalent, a decrease of 30 million from the end of the first quarter.

Jason Trevisan: Number two, I think we just have continued to innovate, and I think you hear that, and you're seeing that with some of the various products, and the innovation is not just to sell them something else that they might be, you know, buying elsewhere, but it's helping them, as we've said a few times on this call already, perform better on our platform and to help them run better dealerships. And that might be that they turn cars faster, or it might be that they get more margin on their cars, or it might be that we're helping them source cars more intelligently.

Jason Trevisan: So I think that's number one. Number two, I think we just have continued to innovate. And I think you hear that, and you're seeing that with some of the various products. And the innovation is not just to sell them something else that they might be, you know, buying elsewhere. But it's helped them, as we've said a few times on this call already, to help them perform better on our platform and to help them run better dealerships. And that might be that they turn cars faster, or it might be that they get more margin in their cars, or it might be that we're helping them source cars more intelligently.

Elisa Palazzo: The lower cash balance was primarily driven by 61 million spent on shared purchases in the quarter, and approximately 26 million in cutbacks, primarily related to the buildout of our new headquarters. As a reminder, we expect to move into the new headquarters at the end of the second quarter. And we expect the related cash outlays to normalize by year ends.

Jason Trevisan: It's a number of ways, but it is totally aligned with them and running a better dealership.

Jason Trevisan: It's in a number of ways, but it is totally aligned with them and running a better dealership. And I think that's translating into not only ROI from just the leads on our platform. And I'd also mention its exposure to an audience that they can't get on other platforms. You know, you heard us say that almost half the consumers on our site don't go to our competitors' sites. But it's also touching more people at their dealership to run a better operation.

Jason Trevisan: And I think that's translated into not only ROI from just the leads on our platform. And I've also mentioned its exposure to an audience that they can't get on other platforms. You know, you heard us say that almost half the consumers on our site don't go to our competitors' sites. But it's also touching more people at their dealership to run a better operation.

Jason Trevisan: And I do think marketplaces tend to be a winner-take-most model over time. And I think as we're having both sides, both audience, consumer audience, as well as dealers, start to gravitate more and more to us. And I do think that is, in fact, a flywheel. That's very clear.

Jason Trevisan: And I do think marketplaces tend to be a winner-take-most model over time. And I think as we're having both sides, both audience, the consumer audience, as well as dealers, start to gravitate more and more to us. And I do think that is, in fact, a flywheel effect.

Elisa Palazzo: We revenue expected to be in the range of 199 to 204 million, up between 12% and 15% year over year. For digital wholesale, we expect third quarter volumes to decline sequentially. This outlook reflects the current transaction run rate and seasonality in the second half of the year. We expect our third quarter non-gap consolidated adjusted EBDA to be in the range of 66 million to 64 million. In the marketplace segment, we expect further margin expansion in the third quarter driven by continued operating leverage.

Rajat Gupta: Unless that's very clear, just a quick follow-up... You know, I noticed you didn't... I know I barely saw your hand... I would do it for you.

Rajat Gupta: Just a quick follow up. I know you mentioned you didn't have an impact from CDK, but you do have, you know, a decent chunk of your customers that are, you know, franchise dealers as well.

Samuel Zales: I was curious, like, you know, first of all, like, I was surprised that you did not see any impact, but, you know, we're just looking medium term, you know, given the experience that these dealers had with the outage and, you know, the challenges that they were facing. I was curious, how could CarGurus, in a way, take advantage of the situation in terms of offering some of the solutions to them? Because you're already pretty much integrated with these dealers for a lot of other stuff. I'm just wondering if there's an opportunity for you here, you know, long-term, to get into those channels.

Rajat Gupta: Now, I was curious, like, you know, first of all, like I was surprised that you did not see any impact. But, you know, but we're just looking medium-term, given the experience, you know, these dealers had the outage and, you know, the challenges that they were facing. I was curious, like, what, now, how could, you know, car dealers, you know, take advantage of the situation in terms of offering some of the solutions to them, because you're only pretty much integrated with these dealers for a lot of other stuff.

Elisa Palazzo: In digital wholesale, we expect EBDA losses to increase modestly on a sequential basis due to lower volumes and discipline reinvestment in product operations and data analytics with the aim of returning to growth over time. As guided at the beginning of the year, we expect third quarter non-gap operating expenses to remain roughly flat sequentially in dollar terms, but to decline as percentage of revenue, driving further expansion of our consolidated EBDA margin.

Rajat Gupta: Just wondering, like, if there's an opportunity for you, you know, medium-long term to get into those channels.

Sam Zales: Thanks. Roger, it's Sam Zales. I'll take it. And if Jason Earlees wants to add on, we can. We did, we did grow right through the CDK outage. It really, we didn't see a blip. There's certainly customers who said, I want to consider something like Top Dealer offer, which is new to us. When they were very large, as you said, franchise players, who might have said, I'm going to put off for a little bit of time to make that decision. And I think that boaths well for a pipeline for us as we go forward. But we grew through it.

Samuel Zales: Rajat, it's Sam Zales. I'll take it. And if Jason or Elisa wants to add on, we can. We did grow right through the CDK outage. We really didn't see a blip. There were certainly customers who said, I want to consider something like a top dealer offer, which is new to us, when they were very large, as you said, franchise players, who might have said, I'm going to put off for a little bit of time to make that decision. And I think that bodes well for a pipeline for us as we go forward.

Elisa Palazzo: Finally, we expect non-gap earnings for share to be in the range of 38 cents to 44 cents. In diluted weighted average, common share of spending to be approximately 105 million.

Operator: With that, let's open the call for Q&A. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster.

Sam Zales: I, we, we certainly heard of the challenges on the financial side of invoice payments and others, but Aliza's already covered. We didn't see any challenges to our results on that front. And I think what you're seeing is Jason's point-on-the-ply will effect, when, you know, an industry outage occurs. I think customers are going to focus on the partner who brings them not only the most new business and the most return on investment, but those who are partnering them with them as what I've called the profit maximization platform. These new tools that Jason's talking about literally gives a dealer predictive analytics and AI tools to say, how do I grow my business by sourcing, marketing, and selling my vehicles as effectively and efficiently as I can.

Samuel Zales: We certainly heard of the challenges on the financial side of invoice payments and others, but Elisa's already covered that. We didn't see any challenges to our results on that front. And I think what you're seeing is Jason's point about the flywheel effect.

Samuel Zales: When, you know, an industry outage occurs, I think customers are going to focus on the partner who brings them not only the most new business and the most return on investment, but those who are partnering with them as what I've called the profit maximization platform. These new tools that Jason's talking about literally give a dealer predictive analytics and AI tools to say, "How do I grow my business by sourcing, marketing, and selling my vehicles as effectively and efficiently as I can?"

Vincent Kardos: The first question comes from John Colantuani with Jeffries. Please go ahead. Hey, this is Vincent on thanks for taking the question. Two from me, please. First maybe just help us size the impact of the CDK adage on revenue in EBITDA and 2Q and 3Q, if any. And then maybe a second on car offer, what still needs to be done there and how should we be thinking about the timing at this point to a rampant volume.

Samuel Zales: And so I can't speak more to the fact that there's no question we heard from dealers that they've got this challenge in the market. We sold them through the process, and we will continue to do so. And our hope is that we even have a pipeline built up for some of those who just couldn't make a decision on something until the CDK outage was over. So we're really proud of that continued marketplace growth. We're excited about where we are going in the future.

Sam Zales: And so I can't speak more to the fact that there's no question we heard from dealers that they've got this challenge in the market. They, we sold them through the process and continued to do so in our hope is that we, we even have a pipeline built up for some of those who just couldn't make a decision on something until the CDK outage was done.

Sam Zales: So we're really proud of that continued marketplace growth, and we're excited about where we go in the future. So the conditions on the BMS side of things that your platform can allow you to easily build up on and do offer to these dealers eventually beyond just the core marketplace offering.

Vincent Kardos: Thanks. Thanks for your question. I will address your CDK one. We have not seen any impact from the CDK adage nor on the amount we have been able to collect. And most importantly, we don't anticipate any carryover impact expected for the third quarter. Thanks, Lisa.

Samuel Zales: Questions on the DMS side of things that your platform can allow you to easily build upon and to offer to the dealers, eventually, beyond just the core marketplace.

Jason Trevisan: I think you'll see us and Jason Chineman, if you want to lead the product initiatives, but I think you'll see us do more Rajat in the work. to provide analytics. I think you can think of us as not only the largest consumer marketplace who provides the most down funnel leads in quantity and quality to our dealers and our dealer partners, also the online and digital experiences as well. We're using that platform to say what data and predictive analytics would be most important to our dealers. Today, most of them will say to me and our team, how do you provide me with information to make me continue growing faster?

Samuel Zales: I think you'll see us and Jason chime in if you want to lead the product initiatives, but I think you'll see us do more, Rajat, in the work, to provide analytics. I think you can think of us as not only the largest consumer marketplace that provides the most down-funnel leads in quantity and quality to our dealers and our dealer partners, but also the online and digital experiences as well. We're using that platform to determine what data and predictive analytics would be most important to our dealers.

Jason Trevisan: And John, I can take the, this is Jason. I can take the car offer questions. So what needs to be done there is, as you've heard us talk about, we are restructuring the sales organizations and the go-to-market motions. And we are also investing in and making really exciting improvements in the product specifically around data and how we are integrating data into the car offer matrix creation and matrix management to ensure that our customers there have confidence in the types of buys and sells that they are doing.

Samuel Zales: Today, most of them will say to me and our team, how do you provide me with information to make me continue growing faster? We had big profits coming out of COVID, and we'd love to sustain those. So data, I think, is the first element.

Jason Trevisan: We had big profits coming out of COVID, and we'd love to sustain those. So data, I think, is the first element you heard about. Some of those new tools we're providing. I think where we go going forward is how do you, yes, as you said, integrate into the tools they're using day to day, whether that's their CRM solution and being able to say, this digital deal consumer came further down the funnel. They set up an appointment; they put down a deposit; they've given you their pre-qualification for financing. Be ready to accept that, and you don't need as many sales resources because you can turn that down funnel chopper into a closed sale as quickly as possible.

Operator: You heard about some of those new tools we're providing. I think where we go going forward is how do you, yes, as you said, integrate into the tools they're using day-to-day, whether that's their CRM solution and being able to say this digital deal consumer came further down the funnel. They set up an appointment and put down a deposit. They've given you their prequalification for financing. Be ready to accept that, and you don't need as many sales resources because you can turn that down-funnel shopper into a closed sale as quickly as possible.

Jason Trevisan: In terms of timing on your question, we've not given a timeline. Just as we said in our prepared remarks, it's taking longer than we thought when we estimated it back in Q4 of 23. But we now have with the new leadership there, our arms around things in a much better way. And we remain disciplined in how we are investing to operate the business and to aim to regrow volumes. Good, thanks.

Jason Trevisan: So, yes, it's data integration and integration into the systems they're using, but I think it starts with the consumer audience and our down funnel chopper and then the data we're providing on top of it.

Operator: Yes, it's data integration and integration into the systems they're using, but I think it starts with the consumer audience and our down-funnel shopper and then the data we're providing on top. The next question comes from Naved Khan with B. Reilly Securities. Please go ahead.

Nicholas Jones: The next question comes from Nick Jones with Citizens JMP. Please go ahead. Great. Thanks for taking the questions. I have two. If you are seeing some higher adoption of add-on products, kind of driving market place strength, can you speak to what you are learning through this higher adoption? Is this helping you build on maybe a more robust product pipeline? Is there a lot more wood to chop to drive deeper integrations based on the success you are seeing here?

Naved Khan: The next question comes from Navad Khan with B. Riley Securities. Please go ahead. Hi, this is Ryan. Thanks for taking my question.

Naved Khan: The next question comes from Naved Khan with B. Reilly Securities. Please go ahead.

Ryan: Two, if I may, so I was hoping to get a little more clarity on OEM ad revenue in the quarter and then also wondering about marketing spend in the second half. Thanks.

Nicholas Jones: And then maybe a follow-up to this. You mentioned the customer base is shifting towards larger dealers with higher advertising budgets. What does it mean? What is driving this? Is it more effective for car grooves? Are there lower touch, self-serve solutions that could be added to the product roadmap to maybe re-visit some of these smaller dealers with lower budgets? Thank you.

Sam Zales: Hey, Ryan, Sam Zales. I'll take the first one, and on the OEM advertising, very, very proud of what we've done in that business, growing it this year and really proud to do so. Obviously, in the market right now, the OEMs, you know, there's new inventory, new car inventory, so OEMs are now excited to advertise those to their customers. I think what we've seen is a move to the strongest endemic platform in the marketplace, and you know our down funnel shopper. And we talked about our numbers: 56% more minutes than our closest competitor, and 47% of our consumers don't go to other competitive sites.

Samuel Zales: Hey, Ryan, Sam Zales, I'll take the first one. And on the OEM advertising, I'm very, very proud of what we've done in that business, growing it this year, and really proud to do so. Obviously, in the market right now, the OEMs, you know, there's new inventory, new car inventory. So they are now excited to, you know, advertise those to their customers. I think what we've seen is a move to the strongest endemic platform in the marketplace.

Samuel Zales: And our down-funnel shopper, and we talked about our numbers, 56% more minutes than our closest competitor, and 47% of our consumers don't go to other competitive sites. So that's known in the market, and that's what's helping fuel our growth. And we're really, really proud of that.

Sam Zales: So that's known in the market, and that's what's helping fuel our growth, and we're really, really proud of that advertiser moving from programmatic buys coming to us and saying, "I want to buy direct from you," and that means a lot to us. Our programmatic partners always know of our endemic success, but the partner saying, "I want to buy from you directly" is really fueled that growth. Let me be direct to say, as great as our advertising team is doing and growing that business, and as great as we want to serve that OEM population. Our priority will always be the consumers coming down funnel to create transactions with our dealer partners, so leads and digital transactions will always be the priority for the company.

Elisa Palazzo: Advertisers are moving from programmatic buys, coming to us and saying, I want to buy direct from you, and that means a lot to us. Our programmatic partners always know of our endemic success, but the partners saying, I want to buy from you directly, have really fueled that growth. Let me be direct to say... As great as our advertising team is doing in growing that business and as great as we want to serve that OEM population, our priority will always be the consumers coming down the funnel to create transactions with our dealer partners.

Jason Trevisan: And a great example of that is what you heard us talk about with the next best deal rating, dealers who are using that insight product are generating more vehicle detail pages, they're generating more leads, they're turning their cars faster. And so we often talk about it as customers who adopt more are running better dealerships because they're so much more effective on our platform. And our platform is the largest in the market by quite a bit.

Elisa Palazzo: So, leads and digital transactions will always be the priority for the company. So, compared to others in the market, we're not going to flood our site with ads and spaces to allow OEMs to run the page full. And that's what I think you're seeing in our lead growth, in our marketplace growth, in our business, and in the Car Sid growth is because we're driving that as our priority and having the additional benefit of our advertising team growing their business as well. So, we're really proud of that. That's a great margin for our business. Elisa, I think you'll talk next about the marketing side.

Elisa Palazzo: So compared to others in the market, we're not going to flood our site with ads and spaces to allow OEMs to run the page full, and that's what I think you're seeing in our lead growth in our marketplace growth in our business and the car said growth is because we're driving that as our priority and having the additional benefit of our advertising team growing their business as well. So really proud of that. That's great margin to our business, at least I think you'll talk next to the market.

Jason Trevisan: And so that number one is that we're developing those insights and products. Number two is, I think we're doing a much better job explaining to our customers and educating them on how to use them and helping them tie usage of them to results on our platform to results in their dealership. And so we have, you've heard us talk about how we're more consultative than we ever have been before we're engaging with our customers more and the combination of having the insights and products explaining them better is leading to the better adoption.

Elisa Palazzo: Yeah, absolutely thanks, Sam, and thanks, Ryan.

Elisa Palazzo: Yeah, absolutely. Thanks, Sam, and thanks, Raya. What we've got it for in terms of topics and in...

Elisa Palazzo: What we've got it for in terms of topics and in general is to stay to remain constant in dollar terms between Q1 and Q3 but to go down as percentage revenue, and then we do expect marketing expense to go down in the fourth quarter because typically we spend less in media in the fourth quarter. Thank you.

Elisa Palazzo: The general expectation is to remain constant in dollar terms between Q1 and Q3, but to go down as

Elisa Palazzo: percentage of revenue. And then we do expect marketing expense to go down in the fourth quarter because, typically, we spend less on media in the fourth quarter.

Samuel Zales: I'll let Sam talk just a little bit about the profile of the dealers and why we are seeing a mix evolution toward larger dealers. Thanks Jason and Nick. Thanks for the question. We are proud of the results we're seeing, exceptionally proud of the results we're seeing in our marketplace business as you can tell from the numbers. You know it starts with the consumer experience and we talked about the incredible growth of both our leads and our sessions in the business from a consumer perspective.

Elisa Palazzo: We spend less on media in the fourth quarter.

Marvin Fong: Next question comes from Marvin Fong with BTIG. Please go ahead. Great, good evening. Thanks for taking my questions. First one on top deal offer, I think you said 388 dealers are on that, which is fantastic. You know, I was just curious, you know, is, is, is, is it good growth?

Marvin Fong: The next question comes from Marvin Fong with BTIG. Please go ahead.

Marvin Fong: Great. Good evening.

Samuel Zales: Thanks for taking my questions. First one on the top dealer offer, I think you said 388 dealers are on that, which is fantastic, is, um... Is growth being limited by the car offer and the fact that you're not leaning into growth there yet? you might get too much traffic, or should we kind of see that as growing at its own pace because I think, you know, we recall that CarOffer touched out at some point north of 10,000 dealers.

Samuel Zales: That's because we cover the widest array in the largest source of inventory from the smallest dealers up to the largest dealers. We're always going to have a broad mix there to serve our consumers and have this incredible 56% larger share of sessions than our closest competitors. But I think the shift on the dealer side is to more sophistication and the customers that are looking at ROI. You know that every customer in the dealer community today is trying to figure out how to make more profit and I think we're viewed now as the profit maximization platform for their business.

Marvin Fong: Something limited by car offer in the fact you're not leaning into growth there yet, or, you know, because you might get too much traffic, or should we kind of see that as growing at its own pace, because I think, you know, we recall that car offer, you know, touched out some point north of 10,000 dealers, what you would seem that you have ample runway in your, in your Rolex, to kind of continue to call on dealers, so just kind of address how he should think about the growth of those trajectory of the dealer count for that product.

Samuel Zales: So when they look at that you've got those customers are more sophisticated typically the larger franchise dealers and in some cases the larger and mid-size independence as well is the the effort to say I'm watching my my my profits. I'm going to spend more on your platforms. I know I can grow faster. So we get more spend and we retain it better with the larger customers. They're not typically going out of business quickly.

Samuel Zales: They're not typically having trouble making their payments. So that sophistication in that that larger dealer audience has been great for us. It leads them to buy more products, from us. Top dealer offer will not be sold to every one of our customers to serve the consumer well and sell my car capability. We want the larger and more sophisticated customers to participate in that. Digital deal. Remember you're bringing consumer further down the funnel of shopping.

Samuel Zales: So it would seem that you have ample runway in your Rolodex to kind of continue to call on dealers. So just kind of address how you should think about the growth trajectory of the dealer count for that product.

Marvin Fong: And then I have a follow up.

Marvin Fong: Marvin, it's Sam. I'll take it that there's really not a connection to car offer, if you will. We have mentioned when we've talked about top dealer offer, we want an exceptional consumer experience and an exceptional dealer experience. So we're being, remember we've been out for a quarter and a half. I think with the product at this point. And in full, you know, broad national or close to national coverage. So we're going to be working with our largest, most sophisticated dealers who have a process to manage these sell my car leads. I will tell you that just this week I heard from a dealer council member who's been with us since 2014, since I was here, it said to me, you're crushing the market in your sell my car leads.

Samuel Zales: Marvin, it's Sam. I'll take it. There's really not a connection to the car offer, if you will. We have mentioned when we talked about top dealer offers, we want an exceptional consumer experience and an exceptional dealer experience. So we're being – remember, we've been out for a quarter and a half with the product at this point, and in full, you know, broad national coverage or close to national coverage. We're going to be working with our largest, most sophisticated dealers who have a process to manage these sell-my-car leads.

Samuel Zales: I will tell you that just this week, I heard from a dealer council member who's been with us since 2014, since I was here, and said to me, "you're crushing the market, and you're selling my car leads." That doesn't tell me the whole market is working that way, but he is a large, sophisticated, multi-store retailer who has the processes to take these leads in and effectively work with the consumer. We needed to use an intake tool that we now have out with all of our dealers on the Top Dealer Offer platform, who are utilizing that tool to make sure the appraisal matches the consumer experience.

Sam Zales: That doesn't tell me the whole market is working that way. But he is a large, sophisticated multi-store retailer who has the processes to take these leads in and effectively work with the consumer. We've needed to use an intake tool that we now have out with all of our dealers on the top dealer offer platform, who are utilizing that tool to make sure the appraisal matches the consumer experience. So the consumer walking in knowing that the vehicle had a different price on it because we saw these dense or scratches has to know why, and we're hoping for that great NPS or consumer experience to do that.

Samuel Zales: They're going to put their financing information in there. You want the dealer who can serve them, serve that consumer with more of that complex sale process and close that business as we said, up to three times faster because of an action like telling you what their pre-qualification is. We're running the business to grow that and that's helped us continue to continue to grow this marketplace carcid, which has been phenomenal for us.

Samuel Zales: So, the consumer walking in knowing that the vehicle had a different price on it because we saw these dents or scratches has to know why, and we're hoping for that great NPS or consumer experience to do that. You'll see this product not be launched at thousands of our dealers. We're going to launch it. So, the 388 doesn't matter as much as growing the marketplace revenues as effectively as possible or charging a premium price for it.

Samuel Zales: And it's on the backs of having all of those dealers small and large, but traditionally the more sophisticated larger dealers retain with us longer and spend more with us and we're really proud of that growth. Thanks Jason, thanks.

Sam Zales: So you'll see this product not be launched to thousands of our dealers. We're going to launch it. So the 388 to me doesn't matter as much as are we growing the marketplace revenues as effectively as possible. We're charging a premium price for it. It's an incredible lead as I talked about pain point in the market is how do I acquire inventory and you know that gold to a retailer is consumer inventory. So we're going to see not sending these leads out to hundreds and tens of thousands of dealers. It'll be a smaller base of our sophisticated dealers who are ready to take on that consumer experience.

Jed Kelly: The next question comes from Jed Kelly with Oppenheimer. Please go ahead. Hey, great. Thanks for taking my question. Managing multiple calls. I'm with some of the opening remarks. But can you just talk about sort of what's driving some of the momentum with pricing you're seeing from dealers? And then just how is your inside sales force doing sort of kind of trying to help you guys tie the wholesaling relationships with the marketplace?

Samuel Zales: It's an incredible lead. As I talked about, the pain point in the market is, how do I acquire inventory? And you know that gold to a retailer is consumer inventory. So, we're not going to see these leads sent out to hundreds or tens of thousands of dealers. Instead, it'll be a smaller base of our sophisticated dealers who are ready to take on that consumer experience. They're happy with the program. We're really happy with the growth, and that's part of the fuel for Car Sid growth for the program.

Sam Zales: They're happy with the program. We're really happy with the growth, and that's part of the fuel of car said growth for the business.

Jed Kelly: Thanks. Sure. Hey, Jed. It's Jason. So the pricing momentum, I assume you're referring to carcid. Yes, when you say pricing. Yeah, yeah. So it's consistent drivers that we've talked about in the past that are continuing to keep up and even grow momentum. So we are signing on dealers at higher rates than then we have in the past. And I think that's the function of the market recognizes the value and the volume of the leads that we provide at the core of our product.

Marvin Fong: Great. Thanks, Sam.

Marvin Fong: And then my phone.

Marvin Fong: Well, you know, just kind of a maybe a nitpick on the guidance, but you know, it's a pretty wide range and you know, it's kind of hard to imagine that you could, you know, surprise to the upside purely on the marketplace. So are you kind of leaving some wiggle room in case a product or wholesale revenue, you know, comes in a lot better than expected, or you could just kind of talk about, you know, what would it take to kind of reach that to 30 to reach the upper end of your. Okay.

Marvin Fong: And then my follow-up, you know, just kind of maybe a nitpick on the guidance, but, you know, it's a pretty wide range, and it's kind of hard to imagine that you could, you know, surprise to the upside, purely on the marketplace. So are you kind of leaving some wiggle room in case? Product or Wholesale revenue comes in a lot better than expected, or you could just kind of talk about what it would take to kind of reach the upper end of your revenue guidance.

Marvin Fong: Thanks, Marvin.

Elisa Palazzo: Thanks, Marvin. So for the wholesale, the digital wholesale business is a transaction based business. So the best indicator is the current run rate. And so, you know, we feel that this range is actually appropriate for given, you know, the current level of transactions that we're seeing in the

Elisa Palazzo: So, for the digital wholesale business, is it a transaction-based business? So, the best indicator is the current run rate, and so, you know, we feel that this range is actually appropriate for, given, you know, the current level of transactions that we're seeing in the business. Okay, perfect. That's fair.

Jed Kelly: But also a growing suite of what we sometimes hear called non-lead value. And so in addition to just the customers, they're getting a lot more in the form of tools and insights. The second is upgrading dealers to higher tiers and historically for us, that really was a means by which they can get more leads and certainly get more branding. But increasingly through smarter bundling, it's also now being driven by dealers who are looking for access to some of these insights that are only available to higher tier products.

Marvin Fong: Okay. Perfect. That's fair. Thanks a lot.

Elisa Palazzo: Thanks a lot. Thanks.

Thomas White: The next question comes from Tom White with DA Davidson. Please go ahead.

Tom White: The next question comes from Tom White with D.A. Davidson. Please go ahead.

Tom White: Great, thanks. Just one for me on the car offer, maybe coming at it from a different way. Jason, would you say that the build-out of the team there and sort of the most pressing kind of needed product improvements and enhancements are largely kind of behind you? And maybe the main thing to getting volumes back up is just kind of rebuilding trust and maybe credibility with some dealers that had, you know, maybe not the best experience before with the product.

Thomas White: Great, thanks.

Thomas White: Just one for me on car offer. Maybe coming out in a different way. Jason, would you say that the build out of the team there and sort of the most pressing kind of needed product improvements and enhancements are largely kind of behind you, and maybe the main thing to getting volumes back up is just kind of rebuilding trust, and maybe credibility with some dealers that had, you know, maybe not the best experience before with the product. And if that's an accurate characterization, just, you know, here's your thoughts about how you accelerate that kind of trust rebuilding, particularly if some dealers may have, you know, maybe shifted to other kind of competing digital platforms, you know, over the last several quarters.

Jed Kelly: And that's a really key point. And I think that's one that we're really pleased with how well that's working. And you heard the examples in the script or if you missed it, you said you may miss it. You will read about them. But examples where we're getting really tremendous adoption, both in terms of just the volume of dealers that are signing up for these but then they're usage of them. And so they're using these on a daily and weekly basis, basis.

Tom White: And if that's an accurate characterization, just, you know, curious to hear your thoughts about how you accelerate that kind of trust rebuilding, particularly if some dealers may have, you know, maybe shifted to other competing digital platforms over the last several quarters.

Jed Kelly: Next is additional products, and again, you know, we have continued to invest in innovation and we're seeing that through adoption of other products like highlight and digital deal and so forth. And then the last is just pricing, and we continue to do that through a variety of different renewal motions, but we still believe we're priced under the market, that's reflected in a better ROI. And so that's a lever that we have been able to pull on in the last year plus.

Jason Trevisan: Thanks.

Jason Trevisan: Sure. You know, dealers will always use multiple sources to get cars in their lot. So, you know, it's not a, there's not high switching costs for them to add a channel.

Jason Trevisan: Sure. But dealers will always use multiple sources to get cars on their lot, so it's not a... There are not high switching costs for them to add a channel, so I actually don't think that has much to do with it. Our product is better today at CarOffer than it was, you know, two years ago, but two years ago, it was processing a significant volume, in large part because wholesale prices were rising so much.

Jason Trevisan: So, I actually don't think that has much to do with it. We, you know, the, our product is better today at car offer than it was, you know, two years ago. And, but two years ago, it was, you know, processing significant volume in large part because wholesale prices were rising so much. We've made a number of enhancements to the platform, and largely it's to give buyers and sellers confidence that they will conduct a great transaction. It'll be a great experience, and they will, for buyers, they will end up with a car that they'll make money with.

Jed Kelly: And then I'd be remiss to not also mention just lead quantity. Our traffic has grown. We remain incredibly focused on lead quality as well. We're not going to sacrifice that, but we've seen really nice lead volume growth. Sam, did you want to talk about a second question? Sure, thanks, Jed. Jason hit it all on the real success we've had when you asked about our sales team thinking about supporting car offer. They're busy right now growing the marketplace business, 14 plus percent our best quarter we've had in four years, so we're really, really proud of those results.

Jason Trevisan: We've made a number of enhancements to the platform, and largely, it's to give buyers and sellers confidence that they will conduct a great transaction, it'll be a great experience, and they will, for buyers, end up with a car that they'll make money on. To do that in a price declining or highly priced volatile environment, you need more insights and more safeguards. So, we've made a lot of progress there, but I don't know if there's necessarily a finish line.

Jason Trevisan: To do that in a price declining or highly priced volatile environment, you need more insights and more safeguards. So, we've made a lot of progress there.

Jason Trevisan: I don't know if there's necessarily a finish line. We expect to always make the product better, but we've certainly made progress there and will continue to in terms of restructuring the sales org. That's, you know, something that as well; there's no finish line. You're always optimizing it, but we did have to move from the sort of old model and old profile of sales rep and account manager to the new one. And that has been done over the last few months, so that's still early, but making progress there. And I do think that the platform is working really well for some customers now, and we need to just find more of those target customers.

Jason Trevisan: We expect to always make the product better, but we've certainly made progress there and will continue to. In terms of restructuring the sales org, that's, you know, something that is, well, there's no finish line, you're always optimizing it, but we did have to move from the sort of old model and old profile of sales rep and account manager to the new one, and that has been done over the last few months.

Jed Kelly: But you're right to hit the point that acquisition of inventory particularly last four years of inventory. So the 2020 models to 2024 are hard to come by in the market today. So it's a pain point and inventory turns are slow and so dealers are trying to figure out how to source inventory effectively. So we're being very targeted about what we're doing with our sales team building back up the car offer acquisition customer acquisition business.

Jason Trevisan: So, that's still early, but we are making progress there. And I do think that the platform is working really well for some customers now, and we need to just find more of those target customers, and we will start to... guys, the sales team as it gets rebuilt, and as we continue to add features, and a lot of those features are rooted in data, to give them more confidence that they'll have a great experience.

Jed Kelly: As Jason mentioned before, our focus at car offer and it's taking us longer than we expected is on the operations of the business. Their go to market team has completely been revamped. We have new leadership in there, new analytics, new approach, new incentives to how they're running that business day to day. It took longer than we thought to get there and we have more work to be done. The operations of the business focusing on logistics and inspections we've upgraded with new leadership there as well.

Jason Trevisan: And we will start to judge the sales team as it gets rebuilt and as we continue to add features. And a lot of those features are rooted in data. to give them more confidence that they'll have a great experience.

Jason Trevisan: Great. Thanks, Jason.

Joseph Spak: The next question comes from Joe Spak with UBS. Please go ahead. Thanks for taking the question. I guess just sticking with digital wholesale here. I guess just to confirm the decline in sales and properly, this is made from car offer or other dealer to dealer products as well.

Joe Speck: The next question comes from Joe Speck with UBS. Please go ahead. K.C.

Jed Kelly: The focus right now is ensuring a product market fit for our customers. You heard Jason talk about the analytics we've now put into the matrix. We're now putting car gurus demand data consumer demand data in a local market and matching that to inventory turns for a dealer to predict for them. When they'd be most successful sourcing inventory and upgrading the automation of our matrix. When that is done, we will be turning on our sales team to say get car offer onto your next sales call.

Operator: Thanks for taking the question. I guess just sticking with digital wholesale here. Again, just to confirm the decline in sales and profitability, is this this is your main car offer or other dealer to dealer products as well? This is Jason.

Jason Trevisan: This is Jason. I mean, that is through car offer, which is really our only dealer-to-dealer wholesale. So the transactions, right? I think, you know, obviously, 58% of your year; I think it's 87% below the highest query level you told us.

Jason Trevisan: I mean, it's vetted through the car offer, which is really only dealer-to-dealer wholesale. So, you know, the transactions, right, I think, you know, obviously, 58% year over year, I think it's 87% below the highest core level you told us. I know, there's some seasonality that you mentioned earlier, even in the third quarter, but how do we know if and when we're sort of at the bottom, like, is there, like, a couple years ago, it was 10,000 dealers enrolled, like, Where are we now?

Jed Kelly: But what we're doing in a targeted way is saying, for example, those dealers who are in top dealer offer, that's not a huge percentage of our customer base. It's growing really, really well. Let's take that customer base and teach them they can use the D to D matrix, the dealer to dealer matrix to go use the car offer platform to be even more successful. So we're targeted. Once we get the operations working as well as we want to, we will turn on much more of that car gurus to car offer lead generation process.

Speaker: Thank you, helpful.

Jason Trevisan: I know there's some seasonality that you mentioned earlier, even the third quarter, but how do we know if and when we're sort of at the bottom? Like, is there, like, I know a couple of years ago, there were 10,000 dealers enrolled, like, where are we now? Yeah, so we haven't given dealer count numbers. We did share in the past that there's, and I think this is in, you know, some of the Q&A and so forth, that there are different definitions of dealers and so much as enrolled versus active and so forth. And, you know, right now we're at a stage where we completed the acquisition and really got ball control in December.

Jason Trevisan: Yeah, so we haven't given dealer count numbers. We did share in the past that there are, and I think this is in, you know, some of the Q&A and so forth, that there are different definitions of dealers in so much as enrolled versus active and so forth. And, you know, right now, we're at a stage where we completed the acquisition and really got ball control in December.

Jason Trevisan: We restructured the sales organization earlier this year, and we're making all the product enhancements that I just talked about. A lot of the decline that you see when you go further back was a function of other factors that I think are no longer as relevant. One is was just sort of the rapid wholesale price increase environment, unit price, and the rental fleet. And so, those are not relevant anymore; that contributed to someone the loss of volume, but now, like I said, we have dealers who are being really successful on the platform, and then we're seeing really good uptake on some of these enhancements.

Jason Trevisan: We restructured the sales organization earlier this year, and we're making all the product enhancements that I just talked about. A lot of the decline that you see when you go further back was a function of other factors that I think are no longer relevant. One was just sort of the rapid wholesale price increase, the environment, unit price, and the rental. And so those are not relevant anymore, which contributed to some of the loss of volume, but now, like I said, we have dealers who are being really successful on the platform, and we're seeing really good uptake on some of these enhancements.

Rajat Gupta: It's pretty, it's pretty material. I would just curious, you know, if you could help us understand that cadence a bit more. And why is this taking off right now? Is it just that the incremental sales and marketing efforts are starting to become a lot more efficient in order to attach that extra product or the extra customer and get them on board. I'm just curious. If this white deal is likely to, you know, just continue to reflect here going forward and have a quick follow up.

Rajat Gupta: Thanks. Sure. Thanks for that, Jason. I think it's so we agree. We think there's a lot of momentum and relative to market growth rates and competitors growth rates were clearly gaining share anecdotally from customers. We hear a lot more enthusiasm and commitment to what we're doing. And then we ever have before. And so I think it's driven by a number of things, but I don't think any of them are revolutionary. I think it's just a compounding effect of us doing a lot of things well.

Jason Trevisan: So examples are we're helping car offer buyers bid on IMV. We're helping car offer buyers get smarter by helping them estimate turn times and margin of the car that they buy in wholesale when they go to sell it at retail. All of those things are helping them be more confident when they're not as confident that wholesale unit prices are going to keep rising. Okay.

Jason Trevisan: So, examples are we're helping car offer buyers bid on IMV. We're helping car offer buyers get smarter with helping them estimate turn times and margin of the car that they buy in wholesale when they go to sell them at retail. All of those things are helping them be more confident when they're not as confident that wholesale unit prices are going to keep rising. Okay.

Jason Trevisan: And then just, you know, on the impairment, and, you know, I know, you sort of mentioned you don't really see any long-term change for the strategic value of offering this to your customers, but, Um, you know, presumably, by taking impairment, some things change about future profitability. I think, you know, you used to sort of have, I think it was like a 40 to 45% gross margin target on that dealer to dealer wholesale business. So what's sort of the new target when things get turned around that we should be thinking about?

Joe Spak: And then, just, you know, on the impairment, and, you know, I know you sort of mentioned, you don't really see any long-term change for the strategic value of offering this to your customers. But, you know, presumably the impairment, by taking the impairment, some things change about future profitability. I think, you know, usage is what I have. I think it was like a 40 to 45 percent gross margin target there on that dealer-to-dealer wholesale business.

Rajat Gupta: And so, you know, I think post COVID dealers didn't need to invest much in marketing channels. And now they do have over the past, you know, one to two years, they've really had to increase that. And I think they're looking at what they were doing pre COVID, which was, you know, spending on a lot of different channels. And now they're saying, OK, if I'm going to come back, I'm going to come back to the ones that deliver volume and really work.

Rajat Gupta: And I don't need to go on as many as I was before. So I think that's number one. Number two, I think we just have continued to innovate. And I think you hear that and you're seeing that with some of the various products. And the innovation is not just to sell them something else that they might be, you know, buying elsewhere. But it's helped them, as we've said a few times on this call already, to help them perform better on our platform and to help them run better dealerships.

Elisa Palazzo: So, what's sort of the new target when things get turned around that we should be thinking? Thanks, Joe. So, the impairment does not change our beliefs in the value of digital wholesale. This is a very strategic asset that allows us to operate across the continuum of a transaction bicycle, source a car, market, and sell. It is highly synergistic value because we allow us to use our expensive and differentiated rental data to inform the car offer matrix, so allowing dealers to have a more informed sourcing. And, you know, it's a very large exam with a very rapid digital option.

Elisa Palazzo: Thanks, Joe. So the

Elisa Palazzo: The impairment does not change our belief in the value of...

Elisa Palazzo: is a very strategic asset that allows us to operate.

Elisa Palazzo: across the continuum of a transactional life cycle. Source

Elisa Palazzo: Car, Market, and Sell; it is highly synergistic value because it allows us to use our expansive and differentiated retail data to inform the car offer matrix.

Rajat Gupta: And that might be that they turn cars faster, or it might be that they get more margin in their cars, or it might be that we're helping them source cars more intelligently. It's a number of ways, but it is totally aligned with them and running a better dealership. And I think that's translated into not only ROI from just the leads on our platform. And I've also mentioned its exposure to an audience that they can't get on other platforms.

Elisa Palazzo: tricks, so allowing dealers to have a more informed sourcing.

Elisa Palazzo: And, you know, it's a very large market with very rapid digital adoption, and we want to be...

Elisa Palazzo: option, and we want to be a leading market participant in this space. So overall, we are working on returning the business to profitable growth.

Elisa Palazzo: And we want to be a leading market participant in this space. So, overall, we are working on returning the business to profitable growth.

Rajat Gupta: You know, you heard us say that almost half the consumers on our site don't go to our competitors sites. But it's also touching more people at their dealership to run a better operation. And I do think marketplaces tend to be a winner-take-most model over time. And I think as we're having both sides, both audience, consumer audience, as well as dealers, start to gravitate more and more to us. And I do think that is in fact a flywheel.

Doug Arthur: The next question comes from Doug Arthur with Hubert Research Partners. Please go ahead. Yeah, thanks. Just a quick, the gross profit margin on marketplaces was unusually high this quarter. It looks like there was some kind of reduction in fees for advertising campaigns. Is that something one should think about that level going forward, or was that unusually high?

Doug Arthur: The next question comes from Doug Arthur with Huber Research Partners. Please go ahead.

Doug Arthur: Thanks. Just a quickie.

Elisa Palazzo: The gross profit margin on marketplaces was unusually high this quarter. It looks like there was some kind of reduction in fees for Advertising Campaigns. Should one think about that level going forward, or was this unusually high?

Elisa Palazzo: So, thanks for the question. I wouldn't call it unusually high. It's actually been keeping grinding higher and higher. And it's simply a factor of the fact that we continue to have revenue with a very high flow through. And so our listening revenues are very high subscription-based business. The advertising business is also very high flow through, and as Jason and Sam has said, we continue to add value added products on top of our original business. And so, again, this is just a function of very having very high incremental margin, but I wouldn't call anything unusual. Okay, thank you.

Elisa Palazzo: So thanks for the question. I wouldn't call it unusually high. It's actually been keeping grinding higher and higher. And it's simply a factor of the fact that we continue to have revenue with a very high flow-through. And so our listings revenues are very high for the subscription-based business. The advertising business is also very high flow-through. And as Jason and Sam have said, we continue to add value-added products on top.

Elisa Palazzo: of our original business. And so again, this

Elisa Palazzo: This is just a function of adding a very high incremental margin.

Doug Arthur: But I wouldn't call it anything unusual. Okay. Thank you.

Ronald Josey: The next question comes from Ron Josie with Citigroup. Please go ahead. Thanks for taking the question. Jason Sam, I want to ask about two things on the product side, one on TDO. On the product, I think you talked about Simplified Vehicle Search came out. And I was interested to know, is that helping, or has this led, or how has this led to improve quality and the quantity of leads that are coming through? Specifically, you know, would love to just more how the new search processes impacted or could impact about our business. And that's one.

Ron Josey: The next question comes from Ron Josey with Citigroup.

Ron Josey: Great, thanks for taking the question. You know, Jason, Sam, I want to ask you about two things, one on the product side and one on TDO. On the product, I think you talked about Simplified Vehicle Search coming out, and I was interested to know, is that helping or has this led, or how has this led to improve the quality and the quantity of leads that are coming through? Specifically, I would love to hear just more about how the new search processes have impacted or could impact the broader business, and that's one.

Ron Josey: And then on TDO, different from the question on the 3 to 8 dealers, I want to ask more about what's needed to expand beyond the 68 metros. There's clearly a product market fit here, you know, with the 35% of end market demand and sophisticated dealers here, but I want to understand more about what's needed to really, you know, get beyond those 68 metros and go more nationally. Thank you.

Ronald Josey: And then on TDO, different from the question on 38 dealers, I want to ask more about what's needed to expand beyond the 68 metrics. There's clearly a product market fit here, sit here, you know, with 35% of the market demand and understood sophisticated dealers here, but I want to understand more about what's needed to really, you know, get beyond those 68 metrics and go more nationally.

Ronald Josey: Thank you.

Jason Trevisan: Sure, Ron, I can take the first. So yeah, we've invested a lot in our consumer experience and you heard us talk about some of it on the in the script, but that's both in the app as well as on the, in the web on the web. And that's in a few different ways. There's some pretty strong themes of personalization starting to come through that we've been working on. And then certainly AI is helping us get a better sort order and search recommendation in a few different ways. We're doing it through conversational search to help with upper final customers looking who are still trying to decide on a type of car.

Jason Trevisan: Sure, Ron. I can take the first one.

Jason Trevisan: So, yeah, we've invested a lot in our consumer experience, and you heard us talk about some of it in the script, but that's both in the app as well as on the web, and it works in a few different ways. There are some pretty strong themes of personalization starting to come through that we've been working on, and then certainly AI is helping us get a better sort order and search recommendation in a few different ways.

Jason Trevisan: We're doing it through conversational search to help with upper funnel customers who are still trying to decide on a type of car, and then we're doing it in the search order itself once someone is in a search. We're also starting to apply that to helping facilitate the consumer and dealer interaction and engagement itself, which sounds like a lot of sophistication. It is, but what it's ultimately resulting in is a simpler experience for the consumer, and that's helping with our conversion rate.

Jason Trevisan: And then we're doing it in the sort order itself. Once someone is in a search, starting to apply that to help and facilitate the consumer and dealer interaction and engagement itself. And so we, and that sounds like a lot of sophistication. It is, but it what it's ultimately resulting in is a simpler experience for the consumer. And that's helping with our conversion rate. That's also helping with lead quality, which is then helping dealers convert. And so we do consider ourselves a search company, and we've started to invest quite a bit more over the past. I would say year to two on how we make those that search process much smarter, much simpler.

Jason Trevisan: That's also helping with lead quality, which is then helping dealers convert, and so we do consider ourselves a search company, and we've started to invest quite a bit more over the past, I would say, year or two in how we make that search process much smarter, much simpler, much faster. Dan, do you want to talk about TDO expansion? Yeah, sure, Ron.

Rajat Gupta: , to provide analytics. I think you can think of us as not only the largest consumer marketplace who provides the most down funnel leads in quantity and quality to our dealers and our dealer partners, also the online and digital experiences as well. We're using that platform to say what data and predictive analytics would be most important to our dealers. Today, most of them will say to me and our team, how do you provide me with information to make me continue growing faster?

Jason Trevisan: Very much better.

Sam Zales: Sam, do you want to talk about TDO expansion? Yeah, sure.

Samuel Zales: Thanks for the question. And again, I'm going to say I'm really proud of the expansion of the TDO business. It's We've only been on what you'd call "not national." I hear why you're saying that the 68 percent of the country or so that we're covering right now for about three, four months. And so we're really pleased with the take rate on the dealer side, which is fueling a lot of consumer demand for sell my car. I think we've also said, you know, it's great to know that anybody coming in to sell my cars is, in many cases, looking to buy a car. So it submits leads for us as well.

Sam Zales: Ron, thanks for the question. And again, I'm going to say I'm really proud of the expansion of the TDO business. We've only been on what you'd call not national. I hear why you're saying that the 68% of the country or so that we're covering right now for about three, four months. And so we're really pleased with the take rate. On the dealer side, which is fueling a lot of consumer demand for sell my car. I think we've also said, you know, it's great to know that anybody coming in to sell my cars, in many cases, looking to buy a car, so it submits leads for us as well.

Rajat Gupta: We had big profits coming out of COVID and we'd love to sustain those. So data, I think, is the first element you heard about some of those new tools we're providing. I think where we go going forward is how do you, yes, as you said, integrate into the tools they're using day to day, whether that's their CRM solution and being able to say, this digital deal consumer came further down the funnel.

Samuel Zales: The challenge here, as you've known us over the years, Ron, is to balance consumer experience with dealer experience. So getting this product up and running and, you know, adopted in the marketplace depends on the consumer having the experience where the offer and then that offer to what is finalized in the store are consistent and values-driven and done very well. So the consumer leaves saying, "I had a great experience, or if I didn't sell my car there, I at least got a fair offer."

Sam Zales: The challenge here, as you've known us over the years, Ron, is to balance consumer experience with dealer experience. So getting this product up and running and, you know, adopted in the marketplace was is the consumer having the experience where the offer and then that offer to what is finalized in the store is consistent and values driven and done very well for the consumer leaves saying I had a great experience. Or, if I didn't sell my car there, I at least got a fair offering. We do things differently than our competitors in the marketplace where we're not shipping the lead out to multiple dealers, so the consumer is overwhelmed by the responsiveness.

Rajat Gupta: They set up an appointment, they put down a deposit, they've given you their pre-qualification for financing. Be ready to accept that and you don't need as many sales resources because you can turn that down funnel chopper into a closed sale as quickly as possible. So, yes, it's data integration and integration into the systems they're using, but I think it starts with the consumer audience and our down funnel chopper and then the data we're providing on top of it.

Samuel Zales: We do things differently than our competitors in the marketplace, where we're not shipping the lead out to multiple dealers, so the consumer is overwhelmed by the responsiveness, and the dealer doesn't know if they're getting their fair share of the exclusive opportunity. So we've tried to really balance how fast we grow this experience to give us the best customer-satisfying result overall and to expand our car set. And we're really proud of where CarSet's going with that product take rate with TDO. Now, we've only been out to, as we've said, about 400 dealers so far. The question is, how much faster do we want to push this?

Ryan: The next question comes from Navad Khan with B Riley Securities. Please go ahead. Hi, this is Ryan. Thanks for taking my question.

Sam Zales: And the dealer doesn't know if they're getting their fair share at the exclusive opportunity. So we've tried to really balance how fast we grow this experience to give us the best customer-satisfying result overall. And to expand our car. So we're really proud of where car is going with that product take rate with TD out now. We've only been out, as we've said, to about 400 dealers so far. The question is how much faster do we want to push that? I think we have pent-up demand in some markets, and then we have to open up demand in other markets.

Elisa Palazzo: Two if I may, so I was hoping to get a little more clarity on OEM ad revenue in the quarter and then also wondering about marketing spend in the second half. Thanks. Hey, Ryan, Sam Zales, I'll take the first one and on the OEM advertising, very, very proud of what we've done in that business growing it this year and really proud to do so. Obviously in the market right now, the OEMs, you know, there's new inventory, new car inventory, so OEMs are now excited to advertise those to their customers.

Samuel Zales: I think we have pent-up demand in some markets, and then we have to open up demand in other markets. So we're going to be balancing that, as always, with ensuring this continues to be a great consumer experience. As you know, if you look at our numbers overall in the business, the marketplace numbers for our consumers coming in blow away the competition. As I've said, 47% of consumers don't go to other competing sites. We want to keep the TDO experience similar to that so it keeps customers coming back to CarGurus and coming back.

Sam Zales: So we're going to be balancing that as always with ensuring this continues to be a great consumer experience. Because you know if you look at our numbers overall in the business, the marketplace numbers for our consumers coming in blows away the competition. You know, as I said, 47% of consumers don't go to other competitive sites. We want to keep the TDO experience similar to that. So it keeps customers coming back to Carvers and continuing with us.

Elisa Palazzo: I think what we've seen is a move to the strongest endemic platform in the marketplace and you know our down funnel shopper and we talked about our numbers 56% more minutes than our closest competitor and 47% of our consumers don't go to other competitive sites. So that's known in the market and that's what's helping fuel our growth and we're really, really proud of that advertiser moving from programmatic buys coming to us and saying I want to buy direct from you and that means a lot to us are programmatic partners always know of our endemic success but the partner saying I want to buy from you directly is really fueled that growth.

Sam Zales: Super helpful guys.

Ron Josey: Super helpful, guys. Thank you, Jason. Thank you, Sam.

Jason Trevisan: Thank you, Jason. Thank you, Jim.

Operator: It includes our question and answer session.

Jason Trevisan: This concludes our question and answer session. I would like to turn the conference back over to Jason Trevisan for any closing remarks.

Jason Trevisan: I would like to turn the conference back over to Jason Trevison for any closing remarks. Thank you. So I just like to thank everyone for your interest in Car Gurus and especially thank all of our employees, our customers, and our shareholders. I hope everyone has a great evening.

Jason Trevisan: Thank you. So I'd just like to thank everyone for your interest in CarGurus and especially thank all of our employees, our customers, and our shareholders. I hope everyone has a great evening. The conference is now concluded.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye. Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Elisa Palazzo: Let me be direct to say as great as our advertising team is doing and growing that business and as great as we want to serve that OEM population. Our priority will always be the consumers coming down funnel to create transactions with our dealer partners so leads and digital transactions will always be the priority for the company. So compared to others in the market we're not going to flood our site with ads and spaces to allow OEMs to run the page full and that's what I think you're seeing in our lead growth in our marketplace growth in our business and the car said growth is because we're driving that as our priority and having the additional benefit of our advertising team growing their business as well.

Operator: BF-WATCH TV 2021 BF-WATCH TV 2021 BF-WATCH TV 2021

Elisa Palazzo: So really proud of that that's great margin to our business at least I think you'll talk next to the market. Yeah absolutely thanks Sam and thanks Ryan. What we've got it for in terms of topics and in general is to stay to remain constant in dollar terms between Q1 and Q3 but to go down as percentage revenue and then we do expect marketing expense to go down in the fourth quarter because typically we spend less in media in the fourth quarter. Thank you.

Operator: A.

Samuel Zales: Something limited by car offer in the fact you're not leaning into growth there yet, or, you know, because you might get too much traffic, or should we kind of see that as growing at its own pace, because I think, you know, we recall that car offer, you know, touched out some point north of 10,000 dealers, what you would seem that you have ample runway in your, in your Rolex, to kind of continue to call on dealers, so just kind of address how he should think about the growth of those trajectory of the dealer count for that product. And then I have a follow up.

Samuel Zales: Marvin, it's Sam. I'll take it the, there's really not a connection to car offer, if you will. We have mentioned when we've talked about top dealer offer, we want an exceptional consumer experience and an exceptional dealer experience. So we're being, remember we've been out for a quarter and a half. I think with the product at this point. And in full, you know, broad national or close to national coverage. So we're going to be working with our largest most sophisticated dealers who have a process to manage these sell my car leads.

Samuel Zales: I will tell you that just this week I heard from a dealer council member who's been with us since 2014 since I was here, it said to me, you're crushing the market in your sell my car leads. That doesn't tell me the whole market is working that way. But he is a large sophisticated multi store retailer who has the processes to take these leads in and effectively work with the consumer. We've needed to use an intake tool that we now have out with all of our dealers on the top dealer offer platform who are utilizing that tool to make sure the appraisal matches the consumer experience.

Samuel Zales: So the consumer walking in knowing that the vehicle had a different price on it because we saw these dense or scratches has to know why and we're hoping for that great NPS or consumer experience to do that.

Samuel Zales: So you'll see this product not be launched to thousands of our dealers. We're going to launch it. So the 388 to me doesn't matter as much as are we growing the marketplace revenues as effectively as possible. We're charging a premium price for it. It's an incredible lead as I talked about pain point in the market is how do I acquire inventory and you know that gold to a retailer is consumer inventory.

Samuel Zales: So we're going to see not sending these leads out to hundreds and tens of thousands of dealers. It'll be a smaller base of our sophisticated dealers who are ready to take on that consumer experience. They're happy with the program. We're really happy with the growth and that's part of the fuel of car said growth for the business. Great. Thanks Sam. And then my phone.

Marvin Fong: Well, you know, just kind of a maybe a nitpick on the guidance, but you know, it's a pretty wide range and you know, it's kind of hard to imagine that you could, you know, you know, surprise to the upside purely on the marketplace. So are you kind of leaving some wiggle room in case a product or wholesale revenue, you know, comes in a lot better than expected or you could just kind of talk about, you know, what would it take to kind of reach that to 30 to reach the upper end of your.

Marvin Fong: Okay. Thanks, Marvin. So, for the digital wholesale business, is it transaction-based business? So, the best indicator is the current run rate, and so, you know, we feel that this range is actually appropriate for, given, you know, the current level of transactions that we're seeing in the business. Okay, perfect, that's fair. Thanks a lot.

Speaker: Thanks.

Tom White: The next question comes from Tom White with DA Davidson. Please go ahead. Great, thanks. Just one for me on car offer. Maybe coming out in a different way.

Jason Trevisan: Jason, would you say that the build out of the team there and sort of the most pressing kind of needed product improvements and enhancements are largely kind of behind you, and maybe the main thing to getting volumes back up is just kind of rebuilding trust, and maybe credibility with some dealers that had, you know, maybe not the best experience before with the product. And if that's an accurate characterization, just, you know, here's your thoughts about how you accelerate that kind of trust rebuilding, particularly if some dealers may have, you know, maybe shifted to other kind of competing digital platforms, you know, over the last several quarters.

Jason Trevisan: Thanks. Sure. You know, dealers will always use multiple sources to get cars in their lot. So, you know, it's not a, there's not high switching costs for them to add a channel. So, I actually don't think that has much to do with it. We, you know, the, our product is better today at car offer than it was, you know, two years ago. And, but two years ago, it was, you know, processing significant volume in large part because price wholesale prices were rising so much.

Jason Trevisan: We've made a number of enhancements to the platform, and largely it's to give buyers and sellers confidence that they will conduct a great transaction. It'll be a great experience, and they will, for buyers, they will end up with a car that they'll make money with. To do that in a price declining or highly priced volatile environment, you need more insights and more safeguards. So, we've made a lot of progress there. I don't know if there's necessarily a finish line.

Jason Trevisan: We expect to always make the product better, but we've certainly made progress there and will continue to in terms of restructuring the sales org. That's, you know, something that as well, there's no finish line. You're always optimizing it, but we did have to move from the sort of old model and old profile of sales rep and account manager to the new one. And that has been done over the last few months, so that's still early, but, but making progress there.

Jason Trevisan: And I do think that the platform is working really well for some customers now, and we need to just find more of those target customers. And we will start to judge the sales team as it gets rebuilt and as we continue to add features. And a lot of those features are rooted in data, to give them more confidence that they'll have a great experience.

Joe Spak: The next question comes from Joe Spak with UBS. Please go ahead. Thanks for taking the question. I guess just sticking with digital wholesale here. I guess just to confirm the decline in sales and properly, this is made from car offer or other dealer to dealer products as well. This is Jason. I mean, that is through car offer which is really our only dealer to dealer wholesale. So the transactions, right? I think, you know, obviously, 58% of your year, I think it's 87% below the highest query level you told us.

Jason Trevisan: I know there's some seasonality that you mentioned earlier, even the third quarter, but how do we know if and when we're sort of at the bottom? Like, is there, like, I know a couple of years ago, there was 10,000 dealers enrolled, like, where are we now? Yeah, so we haven't given dealer count numbers. We did share in the past that there's, and I think this is in, you know, some of the Q&A and so forth, that there are different definitions of dealers and so much as enrolled versus active and so forth.

Jason Trevisan: And, you know, right now we're at a stage where we completed the acquisition and really got ball control in December. We restructured the sales organization earlier this year, and we're making all the product enhancements that I just talked about. A lot of the decline that you see when you go further back was a function of other factors that I think are no longer as relevant. One is was just sort of the rapid wholesale price increase environment, unit price, and the rental fleet.

Jason Trevisan: And so, those are not relevant anymore, that contributed to someone the loss of volume, but now, like I said, we have dealers who are being really successful on the platform, and then we're seeing really good uptake on some of these enhancements. So, examples are we're helping car offer buyers bid on IMV. We're helping car offer buyers get smarter with helping them estimate turn times and margin of the car that they buy in wholesale when they go to sell them at retail. All of those things are helping them be more confident when they're not as confident that wholesale unit prices are going to keep rising. Okay.

Jason Trevisan: And then, just, you know, on the impairment, and, you know, I know you sort of mentioned, you don't really see any long-term change for the strategic value of offering this to your customers. But, you know, presumably the impairment, by taking the impairment, some things change about future profitability. I think, you know, usage is what I have. I think it was like a 40 to 45 percent gross margin target there on that dealer to dealer wholesale business.

Jason Trevisan: So, what's sort of the new target when things get turned around that we should be thinking? Thanks Joe. So, the impairment does not change our beliefs in the value of digital wholesale. This is a very strategic asset that allows us to operate across the continuum of a transaction bicycle, source a car, market, and sell. It is highly synergistic value because we allow us to use our expensive and differentiated rental data to inform the car offer matrix, so allowing dealers to have a more informed sourcing.

Jason Trevisan: And, you know, it's a very large exam with a very rapid digital option. And we want to be a leading market participant in this space. So, overall, we are working on returning the business to profitable growth.

Speaker: The next question comes from Doug Arthur with Hubert Research Partners. Please go ahead. Yeah, thanks. Just a quick, the gross profit margin on marketplaces was unusually high this quarter. It looks like there was some kind of reduction in fees for advertising campaigns. Is that something one should think about that level going forward or was that was this unusually high? So, thanks for the question. I wouldn't call it unusually high. It's actually been keeping grinding higher and higher.

Speaker: And it's simply a factor of the fact that we continue to have revenue with a very high flow through. And so our listening revenues are very high subscription based business. The advertising business is also very high flow through and as Jason and Sam has said, we continue to add value added products on top of our original business. And so, again, this is just a function of very having very high incremental margin, but I wouldn't call anything unusual.

Ronald Josey: Okay, thank you. The next question comes from Ron Josie with City Group. Please go ahead. Thanks for taking the question. Jason Sam, I want to ask about two things on the product side, one on TDO. On the product, I think you talked about simplified vehicle search came out. And I was interested to know, is that helping or has this led or how has this led to improve quality and the quantity of leads that are coming through?

Ronald Josey: Specifically, you know, would love to just more how the new search processes impacted or could impact about our business. And that's one. And then on TDO, different from the question on 38 dealers, I want to ask more about what's needed to expand beyond the 68 metrics. There's clearly a product market fit here, sit here, you know, with 35% of the market demand and understood sophisticated dealers here, but I want to understand more about what's needed to really, you know, get beyond those 68 metrics and go more nationally.

Jason Trevisan: Thank you. Sure Ron, I can take the first. So yeah, we've invested a lot in our consumer experience and you heard us talk about some of it on the in the script, but that's both in the app as well as on the, in the web on the web. And that's in a few different ways. There's some pretty strong themes of personalization starting to come through that we've been working on. And then certainly AI is helping us get a better sort order and search recommendation in a few different ways.

Jason Trevisan: We're doing it through conversational search to help with upper final customers looking who are still trying to decide on a type of car. And then we're doing it in the sort order itself. Once someone is in a search, starting to apply that to help and facilitate the consumer and dealer interaction and engagement itself. And so we, and that sounds like a lot of sophistication. It is, but it what it's ultimately resulting in is a simpler experience for the consumer.

Jason Trevisan: And that's helping with our conversion rate. That's also helping with lead quality, which is then helping dealers convert. And so we do consider ourselves a search company and we've started to invest quite a bit more over the past. I would say year to two on how we make those that search process much smarter, much simpler. Very much better. Sam, do you want to talk about TDO expansion? Yeah, sure. Ron, thanks for the question.

Jason Trevisan: And again, I'm going to say I'm really proud of the expansion of the TDO business. We've only been on what you'd call not national. I hear why you're saying that the 68% of the country or so that we're covering right now for about three, four months. And so we're really pleased with the take rate. On the dealer side, which is fueling a lot of consumer demand for sell my car. I think we've also said, you know, it's great to know that anybody coming in to sell my cars in many cases looking to buy a car so it submits leads for us as well.

Jason Trevisan: The challenge here, as you've known us over the years, Ron is to balance consumer experience with dealer experience. So getting this product up and running and, you know, adopted in the marketplace was is the consumer having the experience where the offer and then that offer to what is finalized in the store is consistent and values driven and done very well for the consumer leaves saying I had a great experience. Or if I didn't sell my car there, I at least got a fair offering.

Jason Trevisan: We do things differently than our competitors in the marketplace where we're not shipping the lead out to multiple dealers so the consumer is overwhelmed by the responsiveness. And the dealer doesn't know if they're getting their fair share at the exclusive opportunity. So we've tried to really balance how fast we grow this experience to give us the best customer satisfying result overall. And to expand our car. So we're really proud of where car is going with that product take rate with TD out now.

Jason Trevisan: We've only been out as we've said to about 400 dealer so far. The question is how much faster do we want to push that? I think we have pent up demand in some markets and then we have to open up demand in other markets. So we're going to be balancing that as always with ensuring this continues to be a great consumer experience. Because you know if you look at our numbers overall in the business, the marketplace numbers for our consumers coming in blows away the competition. You know, as I said, 47% of consumers don't go to other competitive sites. We want to keep the TDO experience similar to that. So it keeps customers coming back to carvers and continuing with us.

Jason Trevisan: Super helpful guys. Thank you, Jason. Thank you, Jim.

Jason Trevisan: It includes our question and answer session. I would like to turn the conference back over to Jason Trevison for any closing remarks. Thank you. So I just like to thank everyone for your interest in car gurus and especially thank all of our employees or customers and our shareholders.

Operator: I hope everyone has a great evening. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Good bye.

Speaker: Thank you.

Speaker: A.

Q2 2024 CarGurus Inc Earnings Call

Request a DemoDemo

CARG

CarGurus

Earnings