Q1 2025 CarGurus Inc Earnings Call
We're dedicating a higher percentage of resources to net new products and investing in AI to accelerate innovation.
Our strategy for 2025 centers on three value creation drivers.
One expanding our suite of data driven solutions across dealers workflows to help them drive more profitable businesses.
Two meeting the evolving needs of car shoppers by powering a more intelligent and seamless journey.
And three <unk>.
Enabling dealers and consumers to complete more of the transaction online streamlining the final steps of the deal.
These drivers have fueled meaningful progress in how we operate and the results we deliver.
Now turning to our first quarter performance.
Marketplace revenue grew 13% year over year, adding $25 million driven by dealer count growth subscription tier upgrades increased adoption of value added products and services and strong lead growth.
Marketplace, adjusted EBITDA grew 27% year over year with margins improving more than 340 basis points to nearly 33%.
International revenue expanded 20% year over year, driven by steady traffic growth approximately 22% year over year aggregate lead growth in Canada, and the U K and continued product innovation.
In Canada. These factors supported accelerated dealer adoption.
In a recent survey of a select group of cargo, whose dealers, 90% reported seeing better ROI on cargo routes compared to alternative platforms.
Consumer engagement also remained strong Carter.
<unk> was Canada's most downloaded auto app in Q1 contributing to an 85% year over year increase in direct traffic and reinforcing the strength brand.
In the U K, a recent survey of a select group of cargo as dealers ranks cargo who's number one an ROI compared to alternative platforms.
Input as we scale and grow market share.
Double digit year over year lead growth was underpinned by an 82% year over year increase in direct traffic while lead quality also improved with stronger buyer signals.
OEM advertising sustained healthy revenue growth in Q1, delivering double digit gains year over year.
This performance was driven by strong annual upfront commitments, which also grew at double digit rates year over year and set a solid foundation for a moment.
Our continued impressive results demonstrate our leadership in the marketplace business and highlight the traction we're gaining across new areas of innovation, which we believe positions us to build on this momentum throughout the year.
I will now outline our progress against each strategic driver.
Driver number one expanding our suite of data driven solutions across dealers workflows to help them drive more profitable businesses.
In Q1, we advanced our existing tools to give dealers greater inventory control and predictive intelligence.
Empowering them to make more informed decisions.
Backed by the industry's largest retail data and consumer insights mode. We are also delivering actionable recommendations that improved performance across the dealer workflow.
We introduced Vin level targeting to give dealers more granular control over how they price manage and promote inventory.
This capability first launched with highlight enabling dealers to apply customizable strategies to feature their most compelling listings to more end market shoppers.
Highlight adoption grew 32% year over year and average leads per day increased 115% year over year. Following the introduction of Vin level targeting alongside further product optimizations.
We're now extending this capability to a real time performance marketing solution, allowing dealers to promote specific vehicles, such as new arrivals aged units or high value listings directly from their dashboards.
Collectively these enhancements enabled dealers to respond rapidly to market changes and move inventory with greater speed and precision.
Adoption across the dealer data insight suite accelerated.
Next best deal rating, our first product is now used by over 17000 dealers globally with 74% taking action on our pricing recommendations in Q1.
Merchandising health optimized approximately 34500 inventory units for nearly 6400 dealers.
And maximize margin usage rose, 64% quarter over quarter.
Speaker Change: <unk> is using it increased average listing prices by $747 with nearly half of those vehicles still turning within two weeks.
Speaker Change: Internationally after introducing next best deal rating in Canada, and the U K at the end of last year. We're now rolling out additional dealer data insights tools in these markets.
Speaker Change: In parallel our in person dealer engagement program expanded.
Speaker Change: Given by measurable performance improvements and strong satisfaction among U S dealers.
Speaker Change: All national accounts now receive dedicated support focused on maximizing platform value emphasizing practical guidance and data driven best practices for systems integration.
Speaker Change: <unk> lead management and customer experience, including customer connections.
Speaker Change: This approach has resulted in improvements across many dealerships for example, a multi franchise group increased cargo whose lead conversion by 200%.
Speaker Change: Our medium sized franchise doubled its digital deal conversion rate.
Speaker Change: In another multi franchise group achieved over a 650% increase in consumer connection rates through sell my car.
Speaker Change: Following this success, we recently launched the same engagement model in Canada, and the U K.
Speaker Change: These efforts coupled with seven consecutive quarters of global year over year lead growth supported nearly 1200 net new global dealer additions year over year.
Speaker Change: Full acceleration in platform adoption.
Speaker Change: Dealers have been adopting value added products and services.
Speaker Change: Grating to higher subscription tiers and extending contract durations.
Speaker Change: Retention rates have continued to improve over 40% of new contracts signed this quarter are classified as long term commitments underscoring dealer reliance on our platform despite macroeconomic uncertainty.
Speaker Change: Driver number two meeting the evolving needs of car shoppers by powering a more intelligent and seamless journey.
Speaker Change: We are helping consumers navigate the car shopping journey with greater confidence through more intelligent personalized experiences extending our product capabilities from initial discovery to vehicle ownership.
Speaker Change: It's an early stage discovery, we launched cargo Roos dotcom backslash discover a conversational research in search AI experience that allows shoppers to describe what they want in a car and receive personalized recommendations tied directly to live inventory.
Speaker Change: This supports upper funnel discovery it makes it easier for shoppers to decide which cars right for them and improves our understanding of consumer intent by feeding Richard behavioral data back into our systems.
Speaker Change: While we're still in the initial stages of expanding this new experience users to engage with the experience are spending two times more time on site.
Speaker Change: We focused on two key areas of optimization to improve usability and consistency across the platform.
Speaker Change: First enhancing the App with features like upgraded filtering and sorting type ahead search on a search results page and streamlined lead form submission.
Speaker Change: The App now accounts for over 30% of total leads and monthly active users have grown 25% year over year.
Speaker Change: Second refreshing the homepage and core shopping pages in Canada, and the U K to align with the U S experience.
Speaker Change: These changes are making it easier for shoppers to navigate and find the right vehicle.
Speaker Change: We expanded our reach further into the car ownership lifecycle.
Speaker Change: In Q1, we launched our redesigned car value experience now integrated into sell my car.
Speaker Change: Consumers can view real time valuations.
Speaker Change: Monthly car estimate updates and receive offers creating an ongoing connection with Carter's that extends beyond the initial shopping phase.
Speaker Change: With continued product improvements and a more consistent user experience, we're giving consumers more reasons to come directly to Carter's.
Speaker Change: Combined with ongoing brand investments this contributed to nearly 20% year over year growth in direct traffic and better lead conversion.
Speaker Change: This momentum continues to reinforce our position as the most visited listing site with 60% more traffic than our closest competitor.
Speaker Change: Driver number three enabling dealers and consumers to complete more of the transaction online streamlining the final steps of the deal.
Speaker Change: In Q1, we advanced our transaction capabilities through continued progress across digital deal top dealer offers and car offer.
Speaker Change: These offerings are delivering a more seamless online to offline journey for shoppers, while giving dealers more efficient ways to acquire and sell inventory.
Speaker Change: Digital transaction enablement lens online convenience with in person engagement, helping dealers connect with more qualified shoppers.
Speaker Change: Digital deal now supports over 11000 dealers globally with nearly 1 million vehicle listings enabled.
Speaker Change: Following strong pilot results, we broadly released a digital deal feature integrating credit applications directly into dealer Finance management systems.
Speaker Change: Dresses dealers challenges of overlapping lenders eliminates manual data reentry and provides immediate visibility into shopper financing eligibility, resulting in a faster more streamlined workflow.
Speaker Change: Adoption reached 1100 dealers at the end of the first quarter.
Speaker Change: Given the healthy uptake and higher consumer satisfaction relative to other financing options. This is now the default financing experience within digital deal.
Speaker Change: Through our digital deal flow shoppers can take high value steps like applying for financing, placing a deposit or scheduling an appointment before visiting the dealership, helping them move further down the funnel with greater confidence.
Speaker Change: To drive more of these actions across the platform, we've embedded key digital deal capabilities directly into core site experiences, including trade in and financing options within the lead submission flow.
Speaker Change: And are piloting a post lead appointment scheduler designed to help dealers engaged faster with high intent buyers.
Speaker Change: As these enhancements rollout, we've seen encouraging improvements in consumer NPS and dealer responsiveness reinforcing the value of more qualified transaction ready leads.
Speaker Change: Digital deal now accounts for over 25% of a dealer's email leads with a growing share coming from shoppers further along in their decision, making process, resulting in higher quality engagement.
Speaker Change: Giving dealers better tools to source inventory more efficiently is critical to facilitating transactions in.
Speaker Change: In Q1, we grew dealer adoption of top dealer offers which enables dealers to acquire inventory directly from consumers.
Speaker Change: Demand remains strong and our measured rollout has driven healthy growth and high consumer engagement.
Speaker Change: To support better dealer execution or in person engagement team provides onboarding and lead handling support.
Speaker Change: Dealers, who complete this training have recently doubled lead conversion improving outcomes for both dealers and consumers.
Speaker Change: At car offer the continued rollout of insights driven by cargo routes proprietary consumer demand data drove higher engagement and demonstrated the value of our retail demand signals pricing trends and appraisal intelligence and enabling smarter wholesale decisions.
Speaker Change: This helped reactivate previously inactive dealers attract new ones and led to the first year over year increase in both buying and selling dealers in over a year.
Speaker Change: Despite this progress overall transaction volume declined as several large buyers and sellers, we're less active or off the platform.
Speaker Change: The car off our platform, which at its core is a matrix rules engine lacks the flexibility for dealers to adapt to rapidly shifting market conditions and requires broader automation to streamline fulfillment and improve operational efficiency.
Speaker Change: While we made meaningful operational progress rising market volatility has raised the bar and those changes have not been sufficient in this environment.
Speaker Change: Over the past year, we focused on three areas of improvement operations product market fit and go to market and we made progress in each.
Speaker Change: However, the pace of macro change continues to expose structural limitations in the model.
Speaker Change: At the same time, our insights capabilities are delivering clear value by helping dealers make more intelligent wholesale decisions.
Speaker Change: As a result, we have initiated a broader strategic assessment of our cargo Rus wholesale business model that would have more sustainable growth and profitability potential.
Speaker Change: This work includes assessing business models to identify core product functionality and revenue strategies that have the potential to support a more profitable scalable wholesale business across market cycles.
Speaker Change: To conclude the first quarter marked a strong start to our year of transformative innovation continuing the momentum we built throughout 2024.
Speaker Change: We delivered solid financial results and made measurable progress across our three value creation drivers.
Speaker Change: These efforts are deepening engagement expanding adoption and reinforcing our market leadership in the U S. While internationally our growth signals meaningful share gains.
Speaker Change: As we look ahead, we remain focused on disciplined execution strategic investment in innovation and embedding our products more deeply across the consumer and dealer journey.
Speaker Change: Now, let me walk through our financial results, followed by our guidance for the second quarter of 2025.
Speaker Change: First quarter revenue was $225 million up 4% year over year, just below the midpoint of our guidance range as double digit year over year growth in our marketplace business was partly offset by lower wholesale and product volumes.
Speaker Change: Marketplace revenue was $212 million for the first quarter up 13% year over year, and just above the midpoint of our guidance range.
Speaker Change: Marketplace revenue growth was driven by continued strength in our subscription base listings revenue bolstered by robust double digit year over year growth in OEM advertising revenue.
Speaker Change: We grow revenue through two primary levers, adding paying dealers and increasing revenue per dealer both of which contributed to our marketplace growth.
Speaker Change: The mix between these levers will vary over time.
Speaker Change: In Q1, we added 734 paying U S dealers year over year, marking our highest dealer growth since pre pandemic.
Speaker Change: Because carson is subscription revenue divided by average dealer count and net dealer count adds more than doubled our recent historical average.
Speaker Change: <unk> dealer growth can moderate the pace of cars that expansion.
Speaker Change: Still U S car said grew 10% year over year, driven by new dealers joining at market rates subscription tier upgrades broader adoption of value added products and services.
Speaker Change: Price increases and higher lead quantity and quality all contributing to strong revenue growth.
Speaker Change: The robust growth in our international business continued in the first quarter with revenue up 20% year over year and international car side up 10% year over year.
Speaker Change: Wholesale revenue was about $8 million for the first quarter down 52% year over year and down 21% sequentially driven by a 26% sequential decline in total digital wholesale segment transaction volumes below our expectations.
Speaker Change: Lastly, product revenue was $5 million for the first quarter down 58% year over year and down 39% sequentially.
Speaker Change: I will now discuss our profitability and expenses on a non-GAAP basis.
Speaker Change: First quarter non-GAAP gross profit was $200 million up 14% year over year.
Speaker Change: non-GAAP gross margin was 89% up approximately 720 basis points year over year and up about 170 basis points sequentially.
Speaker Change: The meaningful margin expansion in both comparison periods was primarily due to the ongoing revenue mix shift towards our high margin marketplace business.
Speaker Change: Marketplace non-GAAP gross profit was up 15% year over year and non-GAAP gross margin expanded by about 100 basis points year over year to 93% driven by modest operating efficiencies.
Speaker Change: And our digital wholesale business non-GAAP gross margin was flat sequentially as we continued to make improvements to the platform.
Speaker Change: On a consolidated basis, adjusted EBITDA was $66 3 million up 32% year over year.
Speaker Change: Margin was 29% up about 610 basis points year over year, reflecting primarily the favorable mix shift to high margin marketplace revenue and operating leverage on our fixed cost base.
Speaker Change: Marketplace, adjusted EBITDA grew 27% year over year to $69 5 million with margin up.
Speaker Change: With 350 basis points year over year, but down about 490 basis points sequentially.
Speaker Change: The sequentially lower margins were driven by seasonally higher media spend in the first quarter related to the February launch of our big deal AD campaign.
Speaker Change: Digital wholesale adjusted EBITDA loss was approximately $3 2 million.
Speaker Change: Eight 0.4 million sequential decline driven primarily by lower volumes, partly offset by lower opex.
Speaker Change: Moving to Opex, our first quarter consolidated non-GAAP operating expenses totaled $140 million up 6% year over year, and 8% sequentially, primarily reflecting the seasonally higher sales and marketing expenses.
Speaker Change: non-GAAP diluted earnings per share attributable to common stockholders was <unk> 46 for the first quarter up 12, or 35% year over year, reflecting primarily the increase in adjusted EBITDA and lower diluted share count.
Speaker Change: We ended the first quarter with $173 million in cash and cash equivalents, a decrease of $131 million from the end of the fourth quarter.
Speaker Change: The lower cash balance was primarily driven by $183 million in share repurchases and $8 million in Capex capitalized website development costs.
Speaker Change: Offset by adjusted EBITDA, and net working capital inflows of about $9 million.
Speaker Change: I will now close my prepared remarks, with our guidance and outlook for the second quarter 2025.
Speaker Change: As always our guidance factors in the most up to date information, we have on our business and the evolving macro landscape.
Speaker Change: At present, while the market remains highly volatile we have not seen a material impact on our business related to tariffs.
Speaker Change: We expect our second quarter total revenue to be in the range of $222 million to $242 million.
Speaker Change: Between 2% and 11% year over year, respectively.
Speaker Change: We expect our second quarter marketplace revenue to be in the range of $219 five to $224 5 million.
Speaker Change: Up between 12% and 15% year over year, respectively.
Speaker Change: Looking ahead, given the momentum we have experienced year to date, we are more positive about our growth outlook for the remainder of the year.
Speaker Change: While we still expect growth to moderate in the second half of the year, we anticipate exiting the year at a low double digit year over year growth rate.
Speaker Change: That said shifts in market conditions may influence the exit rate.
Speaker Change: Moving to digital wholesale we expect second quarter volumes to decrease sequentially.
Speaker Change: We expect our second quarter non-GAAP adjusted EBITDA to be in the range of $71 5 million $79 5 million.
Speaker Change: Between 29% and 43% year over year, respectively.
Speaker Change: For digital wholesale we expect segment EBITDA losses to be relatively flat sequentially as we expect lower transaction volumes to be in part offset by lower operating expenses.
Speaker Change: At the midpoint of guidance, we expect our Q2 adjusted EBITDA margin to be elevated driven by stronger than expected growth in a deliberate pacing of commensurate marketing investments.
Speaker Change: Based on our current expectations, we are choosing to reinvest behind that momentum, particularly in marketing international product innovation. So we do not expect the same sequential margin expansion trends through 2025, as we have seen over the past two years.
Speaker Change: That said, we do expect annualized margin expansion in 2025 relative to 2024.
Speaker Change: Finally, we expect second quarter non-GAAP earnings per share to be in the range of 52 to 58 cents and.
Speaker Change: Diluted weighted average common shares outstanding to be approximately $100 million with that let's open the call for Q&A.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: I'd like to ask a question. Please press star and one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if you'd like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith.
Speaker Change: Ladies and gentlemen, we request you to limit to one question and one follow up question bump participant.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: The first question comes from the line of thumb White from D. A Davidson. Please go ahead.
Why Swanson: Hey, this is why it swanson on for Tom Thanks for taking the questions.
Why Swanson: First question is about Amazon. The recent reports that Amazon is planning to display used vehicles from dealers on its marketplace.
Why Swanson: As an extension of what they've launched with an eye on the new car side.
Why Swanson: I'm curious how you might view their entry into this space and then secondly, I'm curious whether you've seen any difference in trends with new Honda vehicles, either consumer engagement or leads on your site since Amazon went live but theyre offering thanks.
Why Swanson: Yeah. Thanks, Brian This is Jason.
Why Swanson: So.
Speaker Change: We're certainly familiar with Amazon is working on in auto and.
Speaker Change: I think we won't speak for Amazon I think it makes sense that they started in new and some more organized segment of the market.
Speaker Change: Used is where we are predominantly more active is a much different arena, it's much less structured data.
Speaker Change: And you need to have much.
Speaker Change: <unk> systems integrations with the dealers.
Speaker Change: And much more entrust honestly with dealers.
Speaker Change: Been established.
Speaker Change: No.
Speaker Change: We think that what we do in used is quite difficult and is.
Speaker Change: Messenger area the new.
Speaker Change: As a result, we think it is harder and we think the trust we have built with dealers over the last 20 years.
Speaker Change: Really good strength for us in terms of new <unk>, our undying franchise trends, we have not seen a change there.
Speaker Change: Got it thank you very much Jason.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of <unk> Khan from <unk> Securities. Please go ahead.
Speaker Change: Great.
Speaker Change: Very much two questions for me.
Speaker Change: On the on the OEM ad spending.
Speaker Change: To see this trend to you.
Speaker Change: You had in your Q1 of those.
Speaker Change: Having some although.
Speaker Change: Although commentary from other players.
Speaker Change: About.
Speaker Change: Some maybe hesitation from the Oems lack of clarity in terms of how the edge.
Speaker Change: AD spending could come.
Speaker Change: A couple of months.
Speaker Change: Given tariffs and everything so I just wanted to get your thoughts on how youre thinking about it.
Speaker Change: Within your guidance.
Speaker Change: And then.
Speaker Change: I had a question on the.
Speaker Change: On car offer.
Speaker Change: I think you talked about.
Speaker Change: <unk>.
Speaker Change: More work that needs to be done in order to.
Speaker Change: Adapter product too.
Speaker Change: No.
Speaker Change: One of the entity and this kind of environment. So just maybe some examples there would be good put us to understand.
Speaker Change:
Speaker Change: What kind of changes.
Speaker Change: Hey, Ken and maybe the amount of effort in.
Speaker Change: Time.
Speaker Change: No that it's Sam Zales, I'll take I'll try and take a shot at both of them and then ask Jason for follow on.
Speaker Change: The OEM <unk> business, we're really proud of the first quarter results I think you'd see them there.
Speaker Change: Tremendously strong we came out of the year and into the upfront cycle because of our growth on the consumer and Youre seeing the number one positioning we've got our.
Speaker Change: Audience is growing we're bringing it down funnel shoppers, we're really proud of that and that has translated into that reacceleration of the OEM advertising business for us. So we're really proud of the results I think obviously with the tariff situation manufacturers are being careful and cautious.
Speaker Change: I think thats gauging us to say much different about our pathway forward, but we're going to be careful because we know the macro industry. The first place.
Speaker Change: Get caught in a tough environment might be advertising, but we're really proud of where we are right now let me switch to car offer for you where youre asking a good question.
Speaker Change: Our strategy to really review the revenue and business models, there I'm going to start with the first one which is a positive which is we've talked about go to market for the last period of time and that we were pushing for some new ways to show dealers that we had something different we really latched onto something with this insights capability. It is <unk>.
Speaker Change: <unk> car gurus consumer demands.
Speaker Change: And putting it into the dealer insights to see that in my local market. There may be more purchase activity and more search activity going on for a particular type of vehicle that matched against the market days supply gives that deal or a leg up on the industry, where they told US there is no predicted.
Speaker Change: Predictive analytics tool set in the marketplace that does this and compelled us to sign more dealers from the car gurus platform onto the car offered platform. So you saw net dealer adds on the car awkward platform first time in over a year, which is one good sign to our business, but let me be real Frank with you.
Speaker Change: As I have been over the last several quarters.
Speaker Change: <unk>.
Speaker Change: This business not achieving the path to profitability profitability. We wanted it to so we're looking very carefully at the platform itself and our business model to try to achieve that pathway for the future and I'll give you two examples to your good question one would be operational how are we thinking about the business a little bit differently and that is the.
Speaker Change: Flow of operations, which includes inspection title transportation, how do we do that more effectively and efficiently and with that the things. We're examining what does <unk> do and what are we best and serving our customers doing when should we allow our clients to deal with so many cases clients will say I wanted to.
Speaker Change: Transport that vehicle myself and the dealer 37 store group dealer in this week.
Speaker Change: Can I just pick up the vehicle, but it's close enough to my Midwest Regional office. So there was a question can we get more efficient doing that shouldnt third parties do more or less of that operational activity for us. It's another question, we're asking on the product market fit side I'll just be upfront to say as we said in the prepared remarks.
Speaker Change: The structure of our platform our matrix platform needs to be more flexible needs to have more throughput and needs to be automation at a higher level for two days very fluid pricing model. So we're looking at a couple of things on that front from a from a product market fit perspective, the data I talked about.
Speaker Change: Insights can it be a revenue model for our business can we use predictive analytics to being part of the package that we offer as a distinct and unique tool in the marketplace can we be more seller focused with tools that we provide to sellers, which don't exist in todays market when should I sell a product what is the best path for that.
Speaker Change: Right to be sold either to another dealer or to a consumer and helping in that kind of model revenue wise. So we're looking at the entire spectrum of.
Speaker Change: What the platform does today and saying can we look at it differently than we had previously to make this business run profitably for the long term and hope Youll have bought us for finally, saying, we're going to look differently at the business that we have over the last several quarters.
Sam Zales: I appreciate the detailed answer Sam Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Rajat Gupta from Jpmorgan. Please go ahead.
Speaker Change: Great. Thanks.
Speaker Change: For taking the question I had one.
Speaker Change: Question initially on just you know.
Speaker Change: The revenue algorithm.
Speaker Change: You've given us second quarter guidance, you know you mentioned exiting low double digits.
Speaker Change: Curious if you could help us with what's gonna be integration there in terms of.
Speaker Change: Dealer count towards food of course it is.
Speaker Change: One going to be a bigger driver than the other.
Speaker Change: Similar.
Speaker Change: Any more color you can add no it would be helpful.
Speaker Change: A follow up on tariffs.
Speaker Change: Sure. Thanks for the guidance Jason So we're.
Speaker Change: Obviously very proud of the strong revenue growth that we had this quarter and the momentum that we're seeing in our business.
Speaker Change: No.
Speaker Change: And I think one way to look at it is the growth rate in other way to look at it is the nominal dollars added in our marketplace business, both of which were really strong so.
Speaker Change: To really oversimplify it aside from OEM advertising, we grow revenue through June two primary levers paying dealers and dealer count and revenue.
Speaker Change: <unk> per dealer cars in the mix between these levers is going to vary over time.
Speaker Change: You've seen that.
Speaker Change: Recently, we have been.
Speaker Change: Adding net positive dealers each quarter. This quarter was a significant increase in the number of dealers that we added.
Speaker Change: And so since Carr stated.
Speaker Change: The Formula is subscription revenue divided by average dealer count than when we have a really big dealer count border like you did which is two to three times higher than the last several quarters.
Speaker Change: That could moderate the pace and parse it expansion, but no. There was really no change in the trajectory of harvested drivers like Upselling.
Speaker Change: Packaging cross selling lead quality and volumes and so forth.
Speaker Change: And so there was there was really no change in that going forward. We don't as you know we don't guide to.
Speaker Change: Two.
Speaker Change: And those two drivers, but the guide for Q2 for marketplace is 12% to 15%, which again is.
Speaker Change: It is quite strong and consistent with where it's been.
Speaker Change: Understood.
Speaker Change: Hum.
Speaker Change: And in terms of just on the tariff stuff.
Speaker Change: Any insight you can give us in terms of you know what.
Speaker Change: Your conversations with dealers are suggesting or signaling.
Speaker Change: Are you sensing any sort of uncertainty if at all you know.
Speaker Change: On future spending.
Speaker Change: When used car market, probably looks great right now I mean, there is abundant rambus and pre buy.
Speaker Change: But was curious if there was any signaled around.
Speaker Change: Behavior might look like in the second half or for the dealers are just not concern irrespective of what turns out to be.
Speaker Change: What the industrial turns out to do.
Speaker Change: Due to the affordability of blockbusters.
Speaker Change: Sure I mean, I would say the prevailing theme related to tariffs is just how fluid it is.
Speaker Change: There have been announcements nearly every day.
Speaker Change: Related to new cars and parts that have been changed and so.
Speaker Change: Number one is just I think.
Speaker Change: Learning to live with that new dynamism, and I think with that dynamism com's future uncertainty I don't think many ourselves included are trying to predict exactly what will happen but in that.
Speaker Change: <unk> and uncertainty the dealers and others are feeling there does tend to be a flight to quality and that's what we offer with R. R.
Speaker Change: Our volume and our lead quality in particular, a lot of the dealer data insights that we're delivering to them because if if if and as those give them more clarity.
Speaker Change: More understanding more ability to predict than those.
Speaker Change: <unk>, Inc. Those increase in value with the more uncertainty than there is in terms of what's actually happened I mean consumer sentiment.
Speaker Change: <unk> pulled forward a lot of purchases towards the end of Q1 and into April and then and then that surge sort of abated and that was followed with a pretty significant precipitous fall in consumer sentiment, which is just another another contributor to that uncertainty.
Speaker Change: When there is uncertainty in the market larger sophisticated dealers tend to market more and do tend to.
Speaker Change: Organized around the leader and a smaller set of partners smaller dealers is more of a mixed bag in terms of how they area. Some of them trying to preserve spend some of them act more like doors or franchise and try and get ahead of it.
Speaker Change: And so.
Speaker Change: From a from a dealer perspective, I think they are particularly concerned about new and the uncertainty that comes with new.
Speaker Change: And as far as used goes I think theyre just trying to navigate that uncertainty has been were.
Speaker Change: The partner that they I think are leaning into more heavily to do that.
Speaker Change: Understood.
Speaker Change: The exit rate comment that you made.
Speaker Change: There's not a deal.
Speaker Change: Change in spending patterns did you Jos.
Speaker Change: If I understood. The question correctly, we have not seen a change in spending patterns because of terms.
Speaker Change: I forgot about your outlook does not assume any future change in spending patterns. Fortunately, what you would expect.
Speaker Change: Yeah Yeah.
Speaker Change: I would just point you to the commentary you made on that on the full year exit rate.
Speaker Change: Understood Okay, great. Thanks for all the color and good luck.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, if you wish to ask a question. Please press star one.
Speaker Change: We take the next question from the line of Jed Kelly from Oppenheimer. Please go ahead.
Jed Kelly: Hey, great. Thanks for taking my question.
Speaker Change: Joining a little late but Jason I caught the tail end of your comments thinking.
Speaker Change: You're choosing to reinvest not not to take one key was the high end of margin expansion. So can you just expound on that why invest and then just going back to car offer.
Speaker Change: Do you ever contemplate, making it more or making it more.
Speaker Change: Like an auction to drive up higher dealer or more like an auction to drive up higher higher dealer adoption.
That would be great. If you can answer that too. Thanks.
Speaker Change: Sure So hey, Jan on.
Speaker Change: The first one yes, I mean, it's.
Speaker Change: We're having a lot of success right now and we are growing both sides of our marketplace in consumer time spent in traffic and engagement and clearly on the dealer side, we're growing at double digits as well and number on rooftops as well so.
Speaker Change: In a two sided marketplace when you have that type of momentum.
Speaker Change: <unk> benefits to.
Speaker Change: Not double down on that but to invest behind that.
Speaker Change: Continue the momentum and gain more of a relative market share leadership, and so our market share and market gains over the past several quarters. If we look at the growth rates in the rooftops or our competitors.
Speaker Change: Gaining steam substantially and our lead has been growing substantially.
Speaker Change: And it seems that the marketplace. When you have more liquidity you become more and more valuable.
Speaker Change: So the.
Speaker Change: Right.
Speaker Change: Reinvestment.
Speaker Change: Perfect term, it's basically continuing to invest in the things that are working really well for us like product innovation marketing branding investing in our app.
Speaker Change: Investing in account management to have the team the small but mighty team that goes into the dealerships to help them improve their performance on our platform.
Speaker Change: And we want to continue to embed ourselves deeper and deeper in a broader spectrum.
Speaker Change: The dealer workflow and a broader.
Speaker Change: <unk>.
Speaker Change: Percentage of the consumer journey as well so.
Speaker Change: It's things that are paying off and we're going to do more.
Sam Zales: Ken It's Sam Zales I'll take the car off for questions a thoughtful one then.
Sam Zales: I think I'd answer it by saying we're open to considering the next revenue business models for our business, but I wanted to stay in an arena, where we have competitive advantage. So my comment I am not sure. If you heard it earlier was the really nice bump that we've seen with new customers joining the platform.
Sam Zales: Car offer at a greater extent than we've seen in more than a year and I think that's it.
Sam Zales: Lately due to this new offering of insights and what I'd call them as predictive insights and a dealer regional level to see whereas carters consumer demand data, suggesting there are more purchase opportunities and acquisition opportunities, but those dealers. So we're looking at is completely differentiated so.
Sam Zales: Yeah.
Sam Zales: That as a capability sits on top of whatever we build from a transaction model longer term.
Sam Zales: The question about building an auction capability is less for me about should we just do what everybody else does in an auction. It's the question that I mentioned earlier, what parts of the transaction process should car offer own and manage themselves versus third parties or versus other partners, we might work with <unk>.
Sam Zales: Longer term so.
Sam Zales: I'd, rather not build a me too out there in the market I'd, rather build to our strengths and things, we do differently and so you'll see us look at something like a seller focused capability. It's interesting to note. When you go out to customers. They are really no.
Sam Zales: Market tools for sellers.
Sam Zales: The wholesale arena to say, here's predictive analytics to think about when that you should sell to so again, there is something different on the data analytics front, but on the operational how does the transaction work.
Sam Zales: Tell you today, we're going to rebuild that and auction capabilities that seems farther away from using our own key strengths, but we will be looking that at that transaction model that comes from our matrix today, how do we rebuild something that becomes more profitable and scalable for the business.
Sam Zales: Thank you.
Sam Zales: Thank you.
Sam Zales: Ladies and gentlemen asked I don't know if further questions I'll now hand, the conference silver to Jason Trevathan seal for his closing comments.
Sam Zales: Thank you and just like to thank everyone for joining us. This evening special thanks to our global team Who's working hard working commitment is what's driving all of our success and we look forward to seeing investors and analysts on the conference circuit.
Sam Zales: One.
Sam Zales: Thank you, ladies and gentlemen, the conference of cargo to the thing.
Sam Zales: On the call and give you a participation you may now disconnect your lines.
Sam Zales: [music].