Q1 2025 Cars.com Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the CARS.com first quarter 2025 earnings conference call. At this time, all lines are in listen-only mode.
Following the presentation, we will conduct the question and answer session.
If at any time during this call, you require immediate assistance.
Please press star zero for the operator.
The school is being recorded on Thursday, May 8th of 2025.
Speaker Change: I would now like to turn the conference over to Katherine Chen, President of Investor Relations.
Please, go ahead.
Speaker Change: Good morning, everyone, and thank you for joining us. It's my pleasure to welcome you to the Cars.com Inc. First Quarter 2025 Conference Call.
Speaker Change: With me today are Alex Butter, CEO and Sonia Jain, CFO .
Alice: Alex will start by discussing the business highlights from our first quarter.
Alice: Then, Sonia will discuss our financial results in greater detail, along with our outlook.
We will finish the call with Q&A.
Alice: Before I turn the call over to Alex, I'd like to draw your attention to our four focuses statements and the description and definition of non-gas financial measures which could be found in our presentation.
Alice: We will be discussing certain non-GAF financial measures today, including Adjusted Ibadah, Adjusted Ibadah Margin, Adjusted Operating Expenses, Adjusted Head Income, and Free Cash Flow.
Alice: Reconciliation of these non-gas financial measures, the most directly comparable GAAP measures , can be found in the financial tables included with our earnings press release and in the appendix of our presentation.
Any form of statements are subject to risks and uncertainties.
Alice: For more information, please refer to the risk factors included in our FCC filing, including those in our most recently filed 10K, which is available on the IR section of our website.
Alice: We assume no obligations to update any forward-looking statements. And now I'll turn the call over to Alex.
Thank you, Katherine.
Alice: We delivered a solid first quarter, making important progress on growth initiatives while also strengthening our bottom line.
Alice: Revenue of $179 million was within our guidance range, and adjusted the event it was a highlight for the quarter, exceeding the high end of our expected range by more than a point.
Alice: Drong Free Cash Flow also enabled us to repurchase 22 million of shares during the quarter, which pays well ahead of our capital return commitment for the year.
Alice: Before we get further into Q1 results, let's take a step back to ground our long-term strategy in light of the changes happening in automotive.
Alice: Our platform strategy, which combines the leading and scaled consumer marketplace with dealer software tools, has been key to our diversified growth.
Alice: There is still significant opportunity to deepen product penetration and we are seeing elevated interest and act to trade in dealer club as the industry focuses on used cars.
Alice: thoughtful product innovation, leveraging AI and data intelligence, positions us well to meet industry demand, to simplify car buying and selling.
Alice: And the same is true for consumers, where our sustained investment in shopping tools and brand leadership are translating into record marketplace metrics.
Alice: While we're not immune to a near-term uncertainty that has affected the automotive outlook, the core value proposition of our platform remains incredibly strong and arguably even more relevant for the industry today.
Alice: We gain share in each of our markets to exit March with much stronger momentum relative to the soft start in January that we discussed on our last call. Dealer count rose to 19,250 dealers, the best quarter of sequential organic customer growth since mid-2022.
Alice: Our Solutions portfolio was a standout in Q1, adding over 100 new website customers and additional active trade subscribers.
Alice: For consumers, our in-depth editorial and news coverage of tariffs is resonating with shoppers, helping set a new record for unique visitors in Q1.
Alice: As a result, OEM business also grew 6% year-over-year, reflecting the value automakers placed in our high-quality and market audience. These broad-based improvements from unit growth to operational efficiency are strong signals that dealer revenue will return to year-over-year growth.
Alice: We are also particularly well-placed to benefit from the emerging tailwinds in the marketplace and use-car solutions.
Alice: The Cars.com marketplace is supporting a surge in consumer interest that peaked in March and stayed strong through April , reflecting a better user experience as well as incremental demand from pair of motivated shoppers.
Alice: A record 29 million average monthly unique visitors utilize Cars.com to browse, research, and
Alice: Overall, traffic of 170 million visits was also at 1% year after adjusting for an extra leap day in 2024.
Alice: Specifically, traffic to our news and editorial content was up more than 50% year over year, driven by resources like our American-made index.
Alice: Multi-year investments in brand marketing and editorial, producing clear and strong ROI for our marketplace. And we expect to sustain engagement with content like our for-ability report and the next American Made Index update due in June .
Alice: Attribution and marketplace analytics also remain at the forefront of our engineering and product development roadmap. In the second quarter, we'll be incorporating additional data intelligence into Cars.com leads, expanding dealer's access to important and actual insights like consumer shopping behavior and estimated budget.
Alice: We expect this enhancement to improve link quality and also boost long-term dealer satisfaction.
Alice: This feature will be bundled in a marketplace packages and another example of our commitment to enhancing value delivery.
Alice: We're optimistic that audience strength and proud innovation combined with new commercial leadership will help marketplace contribute to overall dealer revenue growth in 2025.
Alice: Turning to the supply side, we are well positioned to drive adoption of Accutrade and Dealer Club, as the market focuses on acquiring used vehicle inventory.
Alice: Back-E-Trade appraisal volume was up over 813,000 appraisals in Q1 of a substantial 16% quarter over quarter and putting us well on our way to over 1,000,000 quarterly appraisals.
Alice: On an appraisal for dealer basis, the 14% quarter of recorded increase in Q1 was the best sequential road we've seen to starting to track this metric.
Alice: This strong activity points to not only the success of our redesigned sales on-boarding and account management support model, but also the increasing importance of acquiring in demand, late model, high quality vehicles directly from consumers.
Alice: On average, the top quartile of Accutrade users acquired nearly 50 cars through the service slain in February and March, demonstrating the importance and scale of Accutrade's impact.
Alice: Dealer Club, the latest addition to our platform, also opens up a new channel for use vehicle acquisition or disposal via transparent reputation based dealer dealer options.
Alice: In its first two months of integration with the Cars Commerce platform, dealer clubs increased active users by 50% and nearly doubled its volume of completed transactions from February to March.
Alice: dealer club users have already benefited from early integration with the Cars Commerce platform.
Alice: which I also know has been some of our fastest development work to date. In Q1, we updated dealer club options with accurate pricing data, providing real-time insights to empower and form buying and selling decisions.
Alice: Just last week, we also turned on the one flickability for dealers to push acutrator praises directly into dealer club auctions.
Alice: Looking ahead, we plan to use our inventory intelligence to help dealers identify aging inventory on our marketplace or retail website to manage inventory light cycle within our platform.
Alice: Shifting to progress on websites, dealer-inspire and DTC media, we're up nicely in Q1, adding over 100 new customers quarter over quarter.
Alice: Shorten website time to launch and improve website speed and performance both contributed to the neck growth we achieved in the quarter.
Alice: Moving to our OEM and National Business, Q1 revenue was up 6% year-over-year and around one-third of our OEM partners increased their spending on cars, commerce, media.
Alice: However, laid in the quarter, there were early signs from a handful of OEMs looking to more closely manage their media commitments.
Alice: With auto industry outlook being revised down for the year, we need to operate on the basis that that media spending trend may persist. Putting pressure on new car sales for OEMs and franchise dealers.
Alice: Based on those trends, we believe it's prudent to suspend full-year revenue guidance until external visibility improves.
Alice: However, the value of our platform remains clear and we're focused on driving commercial improvements, platform innovation, and product adoption, and we remain confident our ability to drive full-year new growth.
We have also consistently demonstrated to stay in cost discipline.
Alice: Our existing cost controls are performing well, and we have additional operating levers to manage the business across a range of macroeconomic scenarios.
As such, we are reaffirming our adjusted unit to guidance.
Alice: In closing, Q1 produced many positive key takeaways that give us confidence in our ability to deliver consistent growth and long-term value creation.
Alice: Our business is fundamentally strong and resilient, and we believe that we're poised for growth in the current cycle. We're confident that we can execute through dynamic external conditions and re-accelerate our growth trajectory.
Alice: Now, I'll turn the call to Sonia to discuss first quarter financial performance and our outlook, Sonia.
Sonia Jain: Thank you, Alex. While first-quarter revenue was down slightly year-over-year, we are pleased that we made progress on multiple growth drivers. We outperformed adjusted EBITDA margin expectations and supported strong capital return initiatives during the first quarter.
Alice: First quarter revenue of $179 million was within our range of expectations based on the exit rate from Q4 into Q1 and also reflected a handful of discrete timing shifts, primarily stemming from customers reacting to the tariff environment.
Alice: Dealer Revenue was down 2% year over year from a softer than normal start to the year for market plate and some pressure on media products such as end market video.
Alice: Re accelerating marketplace performance remains a key focus area and we found growing signs of improvement throughout the quarter. We were pleased to grow total marketplace customers month over month in February and March driven by strength in winning independent dealer. Additionally, we improved on the slightly elevated churn that we called out in December.
Alice: And I've seen level of improved since January.
Alice: Alex already pointed out our accomplishments around audience strength in Q1, which we believe is a leading indicator of underlying market place health and growth potential.
Alice: Our solutions portfolio demonstrated strong performance in the quarter, helping offset some of the pressure on marketplace and media. We added over 800, new customers in Q1 with over 70% of those wins coming from dealer inspire.
Alice: Previously Scott Renegotiating legacy agreements that govern die packages to the growth initiatives for 2025, we completed three of these negotiations during Q1.
Alice: Strong start to the year that helps us better compete for and win subscribers. Furthermore, we are optimistic that we can favorably revised two to three additional agreement by year end.
Alice: <unk> also steadily expanded its user base crossing that thousand subscriber Mark during Q1 as we noted in our February earnings call.
Alice: Sourcing used vehicle inventory is once again in sharp focus after production forecast were slashed due to recent policy changes and our new commercial leadership has prioritized converting this influx of interest.
Alice: Greater accu trade and dealer club growth for 2025.
Alice: Turning to OEM and National revenue was up 6% year over year, delivering a solid first quarter performance in what is typically a seasonally slower period incremental funding also reached its highest Q1 level since 2018 across a broad spectrum of automakers.
Alice: Ever as is to be expected when uncertainty rising. We also early indicators that Oems are more closely managing their marketing and advertising investment.
Alice: Sell through rates of our media products remained high.
Alice: Down modestly from February to March as more tariffs were announced.
Alice: In general both Oems and dealers are signaling that they prefer more flexibility on the timing of media investment to match the faster new cycle as macro factors continue to evolve we're confident that our value delivery and consumer scale will continue to drive strong spending from our partners.
Alice: <unk> decreased visibility into the specific timing of investments in this part of our business in the short term.
Alice: Now switching to operating expenses.
Alice: First quarter expenses were $173 million compared.
Alice: Compared to $167 million, a year ago up 3% year over year, primarily from higher severance related costs and the inclusion of new dealer club expenses, and partially offset by lower lease costs.
Alice: First quarter adjusted operating expenses were $155 million roughly flat to the same period a year ago.
Alice: And technology expenditures increased less than $1 million year over year on both a reported and adjusted basis. The majority of this increase was attributable to compensation expense, partially offset by lower software licensing costs.
Alice: Marketing and sales costs increased $1 million year over year on a reported basis, primarily driven by compensation expense and was roughly flat on an adjusted basis as we supported our scaled and growing consumer marketplace with efficient investments and paid in brand marketing.
Alice: General and administrative expense was up $3 million year over year on a reported basis and down $1 million on an adjusted basis.
Alice: Majority of the reported increase was attributable to severance related costs, resulting from a targeted head count reduction in March to optimize marketing technical operations and commercial teams. In addition, we simplified organizational structure and increased focus on core strategic initiatives.
Speaker Change: Net loss for the first quarter was $2 million or negative <unk> <unk> per diluted share compared to net income of $1 million or <unk> <unk> per diluted share a year ago with the various primarily attributable to the severance related costs just described Bob.
Speaker Change: Adjusted net income for the first quarter was $24 million or <unk> 37 per diluted share compared to $29 million or <unk> 43 per diluted share a year ago.
Speaker Change: Adjusted EBITDA performance of $51 million in the first quarter was down slightly year over year, we delivered adjusted EBITDA margin of 28, 3% in the first quarter exceeding our outlook and a result of continued cost discipline, coupled with lower than anticipated integration cost associated with the dealer club acquisition.
Speaker Change: Moving to key metrics.
Speaker Change: Accounts of 19250 customers not including dealer Quanta users was up more than 40 dealers quarter over quarter growing well to start the year.
Speaker Change: <unk> growth was a bright spot, particularly on website. In addition, we saw sequential independent dealer growth within marketplace unknown opportunity for us and one we actively repositioned resources to drive.
Speaker Change: Looking ahead, we expect to drive dealer count growth from additional solution sales.
Speaker Change: Room demand for marketplace, and converting and cross selling dealer club users into our subscription based products.
Speaker Change: For AARP D first quarter performance of $2473 with roughly flat quarter over quarter and down $32 year over year, primarily reflecting changes in our customer mix.
Speaker Change: Continue to believe we can return to <unk> expansion in 2025 based on multiple growth initiatives that we previously laid out.
Speaker Change: Packaging more value into our marketplace subscription such as with media products, which will begin to rollout around mid year as planned.
Speaker Change: Driving more accurately subscription through product differentiation and by leveraging OEM endorsement.
Speaker Change: As more dealers pivot to acquiring used vehicles due to tariff related production constrained our sales team reported a notable increase in dealers asking to demo and trials, both our etsy trade and dealer club solutions in late Q1.
Speaker Change: We packaging legacy agreements for web site is also an uplift for AARP and our success to start the year gives us confidence we can complete more upbeat negotiation, which will help align pricing with value delivery.
Speaker Change: Shifting to our cash flow and balance sheet net cash provided by operating activities totaled $29 million for the first quarter free cash flow was $24 million during the period down slightly year over year, and reflecting adjusted EBITDA performance.
Speaker Change: We purchased approximately one 6 million shares for $22 million in the first quarter, a strong demonstration of our commitment to return capital to shareholders.
Speaker Change: Call in February we announced the share repurchase target of $60 million to $70 million for 2025, and we're substantially over achieving this target on an average quarterly basis in Q1.
Speaker Change: Debt outstanding remained at $460 million.
Speaker Change: As of March 31, 2025, bringing total net leverage to $2. One time still at the low end of our target range of two to two five times.
Speaker Change: Total liquidity was $321 million as of March 31, 2025, which provides ample future capacity to invest in our growth strategy and pursue thoughtful capital allocation to create long term value.
Speaker Change: Now, let's conclude with second quarter and full year 2025 guidance.
Speaker Change: As touched upon in the earlier revenue discussion, we are seeing signs that the magnitude and timing of some media investments may continue to ship given greater near term macro and tariff driven uncertainty.
Speaker Change: Uncertainty is pressuring the new car market, where we are more index than other players due to our diversified revenue and strong relationships with Oems and franchise dealers.
Speaker Change: Business is fundamentally strong and we have confidence in the growth opportunities ahead, particularly around the dealer business. We believe it is prudent to adjust our approach to guidance to reflect changing market conditions.
Speaker Change: As such we are suspending full year revenue guidance until visibility improves.
Speaker Change: To give some color in the absence of an outlook range. We do expect Q2 revenue to be up year over year and quarter over quarter. We also continue to expect full year revenue to be up year over year, driven by growth initiatives related to greater product adoption repackaging and product innovation, including deal.
Speaker Change: Club.
Speaker Change: Growth for the year is expected to be back half weighted as subscription based revenue compound in later quarters.
Speaker Change: Setting aside external volatility we remain firmly in control of our cost structure and operational levers adjusted EBITA margin for the second quarter of 2025 is expected to be between 27, and 29% roughly flat year over year at the midpoint, reflecting revenue mix and marginally higher investments in our states.
Speaker Change: Growth initiatives.
Speaker Change: We are also reaffirming and adjusted EBITA margin outlook for fiscal 2025 between 29 and 31%.
Speaker Change: Consumers and dealers are increasingly gravitating to our platform and upcoming product releases and enhancements to our commercial approach should further amplify our platform differentiation and appeal.
Speaker Change: Some market uncertainty our business remains strong and we are confident in our ability to deliver full year growth.
Speaker Change: And with that I'd like to open the call for Q&A operator.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question. Please press star one on your Touchtone phone.
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Speaker Change: One moment. Please for your first question.
Ken: Your first question comes from now said Ken.
Speaker Change: B Riley Securities. Your line is already open.
Ken: Okay.
Ken: So very much ask two questions.
Ken: One.
Ken: Understanding that the tariffs, okay, there's a ton of uncertainty for the.
Ken: The different players, including the Oems and dealers in the marketplaces.
Ken: Trying to sort of understand the impact.
Ken: Yes.
Ken: It seems like it could be twofold, one is obviously the dealer.
Ken: And OEM AD spending on the platform in the second.
Ken: As a.
Ken: Maybe driven by how they used car volumes.
Ken: Might be may or may not be affected because of the tariff so trying to understand.
Ken: The magnitude relative magnitude and the uncertainty in these two buckets.
Ken: And then the second question I have is that an accurate trade with.
Ken: I would say we'd have to actually go after you answer the first one.
Ken: Sure. Thanks, Thanks for the questions well first of all on the consumer side certainly the tariff.
Ken: News is pulled forward a lot of pent up demand of consumers flocking to the marketplace looking for deals and looking to lock in purchases before tariffs are impacted and so we are seeing very favorable consumer traffic trends, we think with inventory shortages likely.
Ken: <unk> during the Covid pandemic.
Ken: When there is limited supply marketplaces also get elevated traffic levels, because consumers search far wider radius. So we have a ton of degree of confidence that.
Ken: Organic traffic trends, we think are going to persist throughout this year and give us a tailwind of natural consumer usage and value delivery for our customers I think obviously on the dealer side, we're feeling very front footed we grew marketplace in February and March.
Ken: We see positive sentiment from dealers that are leaning into technologies like accu trade using dealer club the source used cars, fearing that they won't be able to get new car supply so far.
Ken: Mentally on the dealer side, we see a lot of health.
Ken: On the OEM side, I think that's where it's much harder to predict we had a large OEM say that their upfront commitment they're no longer committed they think they'll spend the money, but they want to move to month to month until they get better visibility and so it's really that that uncertainty on the OEM side.
Ken: Gives us pause on our on our full year view because that had been a nice growth engine for the business all of last year and even this year. We grew OEM revenue in the first quarter, 6%. So we feel good about the business, but the signals that we're getting give us less certainty on their commitment.
Ken: Okay great.
Speaker Change: So my follow up question was.
Ken: Around active trade.
Ken: Thank you.
Ken: On the last call had announced some endorsements and you were.
Ken: Optimistic opening even more investments through the course of 2025, so I wanted to get a sense of how we should think about the growth in.
Ken: And customer count sequentially a tank.
Ken: The numbers look flat wondering.
Ken: If the Mag.
Ken: In terms of endorsements translating into dealer wins or maybe.
Ken: Is there something.
Ken: In terms of elevated churn that might be eating away into the basis any color would be helpful. Thanks.
Ken: No first of all I think we feel very.
Ken: Confident about accu trade and our growth potential we flagged the numbers in terms of usage growth over the quarter, which fundamentally signals dealers.
Ken: Behavioral changes shifting aggressively to sourcing inventory differently from their service lane customers and also sourcing for marketplaces like cars Dot com. So we've actually seen elevated interest in both accu trade and dealer club in the current period because dealers are not confident.
Ken: That they're going to get steady new car supply. So it's slower to ramp on solutions because of the Onboarding training and engagement that we need from the dealership to install accu trade and get them using it but fundamentally we feel very good about the inbound interest that we're getting with accu trade in and.
Ken: Sentiment than we're getting from the dealers are using particularly the powered power dealers right. We flagged at the top.
Ken: Quartile of dealerships or acquiring 50 cars a month using our software so as word of that spreads to other dealers, we anticipate more adoption and maybe one other thing to just add related to the endorsement those do take kind of a little bit of time to season and the market. So we were expecting to see more impact from that.
Ken: Endorsements rolling into our Q2 numbers versus Q1, and I think from where we sit today looking at kind of April and the way April shook out we're feeling good about kind of that that upward trajectory in terms of net new accu trade units. In addition to the utilization metric that Alex talked about which released.
Ken: Port strong long term retention.
Ken: Very helpful. Thank you.
Ken: Your next question comes from Rajat Gupta of Jpmorgan. Your line is already open.
Speaker Change: Great. Thanks for taking the questions I just have a couple.
Ken: Firstly on the first quarter results.
Speaker Change: Sure.
Speaker Change: Clearly good progress here.
Speaker Change: On several fronts.
Speaker Change: Going up as well.
Speaker Change: I mean, you were pretty much in line with your guidance for revenue.
Speaker Change: Security railhead.
Speaker Change: EBITDA.
Speaker Change: I was curious.
Speaker Change: Was there like some proactive measures that you had started to take.
Speaker Change: No.
Speaker Change: Maybe like March around cost of investments as the tariff.
Speaker Change: News.
Speaker Change: We are starting to gain traction I was just curious like what drove the.
Speaker Change: The margin upside versus your initial expectation.
Speaker Change: Just have a quick follow up.
Speaker Change: Okay.
Speaker Change: Yeah no.
Speaker Change: Thanks for the thanks for the question Raj I think in terms of in terms of EBITDA, we've always.
Speaker Change: Really focused on managing the cost structure of the business of the business well I would point out too coupled with my things related to where adjusted EBITDA margins landed I think number one we're in.
Speaker Change: Cited about the progress we've made in dealer and in India.
Speaker Change: The dealer club integration process, but the cost did come in a little bit lower than we'd originally planned. So we have been able to move quickly and efficiently.
Speaker Change: Opex was generally flat on a year over year basis on an adjusted basis. So that's just a general cost discipline, we did make some adjustments late in the quarter. These are actually unrelated to tariff.
Speaker Change: More focused around how we want to run the business and tighten up our areas of focus we did make a targeted head count reduction.
Speaker Change: That's less of an impact to Q1 in terms of a benefit from a cost structure perspective, more something that you would see in following quarters.
Speaker Change: Understood that's very helpful.
Speaker Change: You mentioned the.
Speaker Change: A couple of things around.
Speaker Change: Starting to see some signals from dealers and Oems.
Speaker Change: Maybe.
Speaker Change: Just changing spending bedrooms and media.
Speaker Change: But you also guided to second quarter revenue being up.
Speaker Change: Help us.
Speaker Change: Those comments.
Speaker Change: Are you still expecting dealer up and OEM down just trying to understand the mix of that.
Speaker Change: What are you actually seeing on the ground today like in April in terms of.
Speaker Change: Sure.
Speaker Change: This incremental customers.
Speaker Change: What exactly.
Speaker Change: The customer is seeing.
Speaker Change: Tim Gokey Mary spend have you already started to see a drop in spending or is it something you would expect in the second half.
Speaker Change: Yes, I think thats part of the reason why it's a little bit harder to predict because we are getting mixed signals from both segments.
Speaker Change: I'd say on the dealer side, we've seen some pullback in media commitments like dealers have said I'm not going to run.
Speaker Change: Video advertising this quarter I'm staying on marketplace in fact, as I mentioned, we grew marketplace.
Speaker Change: In February and March so, we're seeing dealers understand the importance of getting their inventory.
Speaker Change: <unk> on our marketplace, but we are seeing a pullback in terms of discretionary or ancillary media solutions running alongside her on top and then same on the OEM side I think we're seeing.
Speaker Change: Steady commitment with a third of our Oems has actually increased their spending with us in the quarter, but equally we saw some of our bigger OEM clients signaled to us that they want to move to month to month as opposed to lock in.
Speaker Change: Quarterly or six month commitments until they see a clearer picture. So I guess the positive is.
Speaker Change: They still are seeing opportunities with us.
Speaker Change: Unwilling to make the same media commitments again, our software solutions rock solid websites were up over 100 dealers arent pulling back on their websites and any.
Speaker Change: Macro environment, and then in our software tools like Accu trade and dealer club continue to get strong organic growth.
Speaker Change: It's really the media side, that's harder to predict and it's the visibility on the media side, it's not as though Oems and dealers don't see the value in the product and don't want to get in front of consumers. It's really become I think a bit more of a timing question as to when they deploy those funds to maximize kind of impact on the inventory.
Speaker Change: <unk> in fact have available to sell.
Speaker Change: Understood great. Thanks for all the color and good luck.
Speaker Change: Your next question comes from Tom White of Davidson.
Speaker Change: Your line is already open.
Tom White: Great. Thank you for taking my questions.
Speaker Change: Maybe hoping you guys could just double click.
Speaker Change: On the comments just about the improvement in the marketplace business over the course of the quarter kind of relative to.
Speaker Change: How things were trending exiting last year.
Speaker Change: I guess I'm just trying to understand the comments on February and March being better sequentially.
Speaker Change: Is that is that mostly some of the progress with the independent.
Speaker Change: Dealers that you touched on and what are sort of the drivers of that is it sort of sales outreach.
Speaker Change: Just trying to put that commentary with.
Speaker Change: Maybe some of the comments you just made about the.
Speaker Change: Dealers generally being strong, but theyre being a little bit of trepidation, maybe on some of the media stuff kind of on the side.
Speaker Change: So just trying to understand.
Speaker Change: The sequential improvement in <unk>.
Speaker Change: Marketplace over the course of the quarter.
Tom White: Sure Tom.
Tom White: We've seen this behavior before in.
Tom White: The dealer environment, where.
Tom White: Seasonal or macro events can trigger a reactionary behavior Q4, typically is relatively soft this year Q4 for us was much softer than than we were anticipating as dealers began pulling back rather aggressively and that persisted into January however, when you saw.
Tom White: The consumer demand and consumer traffic levels remained elevated we started to see dealers blank and realized wait a minute the markets continuing to grow I don't have to overreact here and we've even seen some of the dealers that we lost in Q4 come back. So we saw growth in marketplace in February we saw growth in market.
Tom White: Place in.
Tom White: In March and we continue to see positive trends there heading into Q2 again, I think where we're seeing more of the softness is saying I just went around the base marketplace I'm not going for the.
Tom White: The $10 $15000 a month media campaign on top of that.
Tom White: But core marketplace metrics, both on the consumer and the dealer side remains strong.
Speaker Change: Maybe one clarifying comment because we do have a marketplace package that called the base package, because we still see we haven't seen any material change in the tiered distribution of our packages to Alex's point, they want marketplace. They want to be in the package there in our marketplace. We continue to skew up tier from a package perspective, it's just.
Speaker Change: Those ancillary media attach rates feel like they are under a little bit more pressure.
Speaker Change: Okay. That's very helpful. And then maybe just one little housekeeping follow up.
Speaker Change: The reported dealer count is dealer club.
Speaker Change: Included in that and will it be included going forward. It doesn't sound like it but I just want to make sure I understand it is not included in the number right now I think it's still it's still a little bit on the on the smaller side chat transparently rare.
Speaker Change: Relative to our subscription business dealer club is a transactional business. It doesn't mean that at some point, we won't think about these dealer count numbers together, but for now we're trying to present you kind of.
Speaker Change: Clearly a more subscription based number.
Speaker Change: Okay. Thank you very much.
Moderator: Your next question comes from Marvin Fong.
Speaker Change: <unk> Your line is already open.
Marvin Fong: Great. Good morning, Thanks for taking my questions. The first question.
Marvin Fong: On all the positive activity around around accu trade and dealer to club.
Marvin Fong: So maybe two part question.
Marvin Fong: The 2500 prospects I believe that was for.
Marvin Fong: <unk> cloud specifically.
Marvin Fong: <unk>.
Marvin Fong: That.
Marvin Fong: That close it would seem to me that thats.
Marvin Fong: Something that could be done a lot faster than the accu trade product in the second part of that question is just on monetization rate I think daily club is currently youre not really charging for that.
Marvin Fong: On the on the seller side.
Speaker Change: What are your thoughts there given the interest Youre seeing do you feed now at the time that continue to build market share or or is there a monetization opportunity that you can sort of accelerate there and I have a follow up.
Marvin Fong: Sure Marvin well first of all obviously the immediate growth to dealer club I think underscores the synergy that that the cars commerce platform can help bring to the club and enable dealer volume we've had over 2500 prospects reach out to inquire more.
Speaker Change: And register for dealer club.
Speaker Change: So we've been Onboarding dealerships aggressively each and every month and we're excited about that volume I think obviously, it's a subset of that that are actually transacting on the platform, but those numbers are growing at 60%.
Speaker Change: Right.
Speaker Change: Per month, and so we're excited to see that volume increasingly in this environment sourcing used cars is a real pain point and the fact that dealers can do this far more cost effectively than the traditional marketplaces that are now charging premiums because of elevated wholesale prices. So.
Speaker Change: <unk>.
Speaker Change: Multiple economic benefits here for dealerships to change their sourcing strategy and dealer club is well positioned.
Speaker Change: In the quarter, we really focused on integration to benefit our accu trade subscribers, so that it strengthens accu trade.
Speaker Change: We shared on the call that now dealers can one click appraised the vehicle and if theyre not interested in retailing as they can launch it for sale in dealer club in that workflow improvement creates a lot of efficiency because dealers have to manually enter cars into the other marketplaces. So we think that will strengthen both accu trade.
Speaker Change: And dealer club volume as well so we've got more initiatives planned on the integration, but preliminary I think we've had a very solid double out of the gates with dealer club with momentum to come.
Speaker Change: That's great.
Speaker Change: And second question, just on OEM and National obviously understand why why that's under pressure.
Speaker Change: Can you just help us understand I mean, you had previously talked about the strength you had in the upfront.
Speaker Change: You made a comment though that upfront may not be actually a firm commitment.
Speaker Change: As we think about.
Speaker Change: How much of this is a timing module leasing versus <unk>.
Speaker Change: <unk>.
Speaker Change: Wow.
Speaker Change: Some might actually commitments might not actually gets spent and how much how much of the upfront commitments are actually at risk and can you just remind us kind of how much of the total AD spend in a year is typically attributable to the upfront that'd be that'd be very helpful. Thanks.
Speaker Change: Sure.
Speaker Change: Bob.
Marvin Fong: Marvin I think this is more timing than it is.
Marvin Fong: Anything else, we've even had Oems signaled to us as soon as they get clarity that they can give us equal clarity, but right now they're operating week to week and therefore their commitments to us at best or month to month.
Marvin Fong: So I'm empathetic to their play and certainly have a ton of respect for the challenges that they're dealing with and so to me, it's purely timing and we even saw this with some of the dealer pullback in Q4 and even January the fact that we're now seeing those same customers reassume.
Marvin Fong: Work with us because the consumer demand persists and even as elevated gives me confidence that we'll see a similar behavior. Once once the macro news settles settles down and the picture is clear for our clients.
Speaker Change: Tony do you want to comment on what percentage of total AD spend is attributable to upfront.
Speaker Change: 50, 50, right now, but I think what I would I would reiterate.
Speaker Change: Alex that I think the challenge at the moment is not that we're getting.
Speaker Change: And pulled it is that we're seeing some shift and so just from a visibility perspective as we look to give you guys insight into business performance that certainly creates a little bit more challenged than normal, but again the quality of the audience wanting to get in front of our in market audience that that remain.
Speaker Change: Of interest it's really just the timing question of when those dollars come into play.
Speaker Change: And when you say timing just a follow up I mean, youre, saying it would still be.
Speaker Change: This calendar year or do you think the shift could move into next year, it's hard like Unfortunately, that's like the crux of the challenge it's hard to say like as an example, we fall.
Speaker Change: Some Oems who had been planned in April shift some of that spend into June and July and so you are starting to see a little bit of shifting like that as Alex kind of mentioned instead of their try theyre going more a month to month management of their spend but generally speaking what I would say is based on what we know today.
Speaker Change: Based on our Q1 numbers, which were roughly at the midpoint of our guidance range and the growth drivers performance. We feel good about where we are and the progress. We've made we expect to be up on revenue on a year over year basis, we expect to deliver a solid Q2, it's just the.
Speaker Change: Visibility in the specificity is it a little bit harder to nail down right now.
Speaker Change: Okay, that's perfectly understandable. Thanks, so much.
Speaker Change: Your next question comes from Joe Spak of UBS.
Speaker Change: Your line is already open.
Joe Spak: Great. Thank you I actually wanted to pick up right. There on the visibility because I think as you sort of describe the environment. It's understandable about the guidance for the year, especially it sounds like there's way more uncertainty in the back half, but I do want to I guess get a better sense of your true visibility in the near term.
Joe Spak: And I know you ended up providing a little bit more color on <unk>, but you have got a little bit over a month and a half left I thought the subscription stuff, which is like 80% of sales is pretty low variance. The short term it doesn't sound like there's any any real change there so like.
Joe Spak: Just maybe you could sort of.
Joe Spak: No.
Go over this again, but like how much visibility do you really have on the AD side, because you've even said a couple of times like theyre going month to month, but.
Joe Spak: It would seem like you should have a pretty good sense of that even by now.
Joe Spak: As we are in May.
Joe Spak: So I think on the subscription side of the business like we said marketplaces growing we feel confident in our ability to deliver our dealer websites. Those were up 100 in the quarter you know accu.
Joe Spak: <unk> is showing strong signals.
Joe Spak: From Q1 Rolling into Q2, I think where there is a little bit of uncertainty continues to be on an on media.
Joe Spak: And.
Speaker Change: Tom thumb.
Joe Spak: Relatively discrete shifts.
Speaker Change: <unk> can have an impact on how those overall numbers do you intend.
Joe Spak: To rollout.
Joe Spak: I mean, if you look at if you look at OEM and National individually and think about think about that on an annual basis in terms of total revenue or even on a quarterly basis in terms of total revenue you can kind of do a little bit of math.
Joe Spak: On.
Joe Spak: A small relatively small change on that number could do to our guidance range.
Joe Spak: Okay.
Joe Spak: Is it possible if not plausible that OEM national number is down this year.
Joe Spak: We still feel good about the ability to deliver year over year growth in the business, which I think would be contingent upon seeing growth in both dealer revenue and OEM revenue I think what's a little bit harder to say right now is a specificity on the rate.
Joe Spak: <unk> of what that growth is going to look like and in what timeframe that growth is going to be delivered but on the media side of the business. You know when you think about some of the audience metrics that we put up for Q1 that gives us confidence that's what drives that media portion of the business that high quality end market audience and all of this.
Joe Spak: Signals are green.
Joe Spak: Okay and then just the second question I know you've talked.
Speaker Change: About your exposure to new versus used in the past you've given us that franchise for us independent dealers, which is a good proxy for that I guess, maybe you can just remind us of that split but I'm also just curious.
Joe Spak: If you can or are willing to provide.
Joe Spak: Your estimated revenue split just as it relates to new versus used if that's even possible.
Joe Spak: Yeah, we don't we don't break it out just because our subscription includes new and used.
Joe Spak: Exposure and so we don't segment it out, but we do mirror the market rate like 15% to 20% of our revenue is anchored more on new car oriented traffic and the bulk of it is on us. So you can infer it but it mimics sort of vehicle sales volumes between new and used.
Joe Spak: Think on the franchise and then split we don't break that out, but I will say there has been increased interest from independent dealers because consumers clearly are looking for more affordable vehicles and more cost effective.
Joe Spak: Options than some of the higher priced new cars and so we are seeing steady pick up an independent dealer.
Joe Spak: <unk> in the current quarter.
Speaker Change: Okay I appreciate it and these are roughly call it like a third of the of the marketplace mix.
Joe Spak: Sorry, what was that.
Joe Spak: Roughly a third of the marketplace Mcbrien mix is about a third independent.
Joe Spak: Okay. Thank you.
Speaker Change: Ladies and gentlemen, as a reminder, if you have a question. Please press star one.
Speaker Change: There are no further questions at this time, ladies and gentlemen. This concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Goodbye.
Speaker Change: [noise].