Q2 2025 CarGurus Inc Earnings Call
Good day, and welcome to the car gurus earnings conference call.
Please note this event is being recorded.
I would now like to turn the conference over to Karen deep Singh, vice president and head of investor relations. Please go ahead.
Thank you, operator. Good afternoon. I'm delighted to welcome you to CarGurus second quarter 2025 earnings call with me on the call today are Jason Travis chief executive officer and Sam, zel's president and chief operating 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, information concerning those risks and uncertainties is disclosed in our SEC filings which can be found on the fcc'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.
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 and 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
Thank you Kandy and thanks to everyone joining us today.
We are innovating at a greater scale for our customers, delivering data-driven differentiated solutions that help dealers run, smarter more profitable businesses and make the car buying Journey more seamless for consumers.
These efforts have continued to drive better engagement and outcomes for our customers, which is translated in a stronger financial performance for our business. It has reinforced our Market leadership.
We ended the second quarter of the midpoint of our forecasts and guidance range for total revenue and adjusted even top.
Marketplace performance was a key contributor.
Revenue group 14% year-over-year adding 27 million driven, by the addition of 1,743, net new dealers globally.
Continued Wallace share expansion among existing customers and improved retention.
Marketplace adjusted Eva dog. Grew 31% year-over-year. Underscoring continued strong operating Leverage.
Our international business sustained, outstanding, Revenue, growth of 28% year-over-year with momentum in both Canada and the UK.
We added 711 net, new dealers, year-over-year across the regions while driving greater adoption of add-on products and listings upgrades.
We delivered substantial year-over-year lead, volume growth in both markets, driven by higher intent, consumer traffic, that further reinforced, our Roi advantage and strengthened our competitive position.
In the UK, we were the number 1, most downloaded Automotive app in Q2 underscoring Rising consumer engagement and brand traction.
In Canada, our significant and growing scale was further reinforced by a multi-year deal with auto Canada 1 of the country's largest multi-location dealership groups, which made CarGurus, its preferred digital retail and listings partner.
Their commitment, reflects the value of our performance-driven marketing, proprietary, insights, and Hands-On dealer support.
Last quarter, we announced a strategic reassessment at Carle.
That effort was prompted by the fact that rising market volatility continued to expose structural limitations in the car, offer instant trade transaction model, despite the advancements we've made with Predictive Analytics, AI driven insights, in the many operational improvements.
After that thorough assessment of strategic Alternatives, we've made the decision to wind down the car offer transactions business.
2 car offers wholesale Focus, we build intelligent AI driven technology and Predictive Analytics that Empower dealers to make smarter sourcing decisions. And we saw that dealers who leverage our insights and enjoy disproportionately better performance.
Going forward while we will no longer operate, the car offer transactions business, we will retain and continue to build on the underlying technology we created for it.
Capabilities that we believe remain Central to Cargo sourcing strategy.
Our priority in CarGurus remains providing dealers with data driven scalable solutions, that not only help them manage their businesses more intelligently, but also have strong unit economics and clear competitive advantages.
Therefore our Focus going forward will be to provide our dealers with technology and analytics. That enable smarter sourcing appraisal stocking and pricing, but not facilitating the transactions themselves.
We believe this will continue to position us as a valuable partner to our dealers serving an increasing set of their needs and focus us on the types of products. We have a strong track record of delivery.
This decision follows, extensive effort in a thoughtful evaluation of Alternatives by our team and will grateful to the car offer and CarGurus teams who built and supported these capabilities.
We're working closely with the dealers, who relied on car offer to ensure a smooth transition. And more importantly, we're excited about the opportunity to partner with them on the next chapter of our sourcing strategy.
With this foundational decision behind us and solid execution, in Q2, we've continued to advance. Our 3 drivers of value creation.
I'll now walk through our progress in each.
Driver 1, expanding our suite of data driven Solutions across dealers workflows to help them drive more profitable businesses.
A core focus of our platform strategy is giving dealers, more granular control over, how they manage price and promote inventory to help them run more profitable businesses.
1 of the clearest signals of that is the strong sustained engagement with our dealer data Insight Suite.
Dealers are not just accessing this data. Frequently, they're actioning our insights across pricing inventory, mix and marketing strategy.
As of the end of Q2, nearly 18,500 dealers were subscribed to next best deal rating. Our most widely adopted report.
Our more specialized reports are scaling even faster in part driven by successful International launches.
To 8,175 dealers, Max margin grew approximately 70% quarter over quarter to 4,300 deals.
Just as importantly, we saw a notable uptick in actions taken per dealer with usage intensity Rising across every report type
that growing engagement is translated into stronger dealer performance.
Historically dealers, using these insights have seen higher audience, reach via vdps, more prospects from Leeds and faster, turns leading to higher profit potential.
We believe this kind of measurable impact is driving more dealer engagement and higher attention by giving our listings customers, the competitive advantage in their markets
An actionable example of giving dealers more sophisticated control of their marketing is our introduction of Vin level targeting. For both our highlight and real-time Performance Marketing products, giving dealers greater Precision over how they promote inventory.
This added level of recommendations, coupled with granular control is driving results. Highlighted option is up, 33% year-over-year and real-time Performance Marketing is seeing stronger engagement and improved retention.
While still early, we believe the momentum underscores, clear demand for precision marketing tools.
Building even further on giving greater control to dealers is our launch of new car advantage in Q2 our first product specifically designed for new inventory.
While the majority of our leads still go to used cars. We have the largest inventory of new vehicles when compared to other Market places with over 2 million listings,
This market-leading new car inventory asset matters because 53% of shoppers begin their search undecided between new and used. According to a 2024 CLA voice study of U.S.-based new car shoppers, over half of all new car shoppers visited CarGurus during their shopping journey.
New car Advantage gives dealers, precise control to promote new inventory. In the most relevant high-traffic used searches. While also surfacing monthly payments to Spotlight, affordability, a key factor among used car shoppers
Early results. Show a 34% increase in VDP views, a double-digit lift in new car leads and 33% more new car searches from Shoppers who engage with the top.
As we advance our existing dealer products and introduce new ones. We're also making it much easier for dealers to access the growing value or platform offers the major upgrades to our dealer mobile app.
A key workflow tool designed to support dealers, wherever they work whether pricing cars on the lot or monitoring performance. Offsite
In addition to core dealer app, functionality, such as monthly connections data, pricing notifications, Vin scanning and real-time lead alerts. In Q2, we added 2, more capabilities barcode IMD scanning to facilitate pricing vehicles at auction and access to top dealer offers to enable mobile inventory intake.
Our rapid expansion of dealer app, functionality has driven impressive dealer. Adoption, with daily active, users of 71% year-over-year. Illustrating the car gurus app's role as a go-to workflow tool.
Together these Innovations are deepening dealer engagement across our platform.
By giving dealers more control intelligence and flexibility in how they manage and Market inventory. We're helping them run more efficient, more profitable businesses
That value has translated into higher usage, stronger customer acquisition and retention, and a growing reliance on CarGurus tools as part of their day-to-day workflow.
Driver 2 meeting the evolving needs of car Shoppers by powering a more intelligent and seamless Journey.
We continued extending our reach across more stages of the car shopping Journey from early research to postl engagement.
In Q1, we launched CG Discover, our AI-driven conversational experience designed to guide consumers toward more confident decisions.
Users who engage with Discover Now spend three times more time on the site compared to those who do not, and usage has grown over 70% month over month in the second quarter.
Building on that momentum. We integrated CarGurus produced video reviews into CG discover in Q2 give me Shoppers richer content to move from consideration to decision with greater confidence.
to further, support early stage research, we launched our first sponsored content Hub in partnership with a major OEM,
The Hub provides trusted resources to demystify the car buying process for model comparisons, and financing insights to broader Automotive trends.
We believe this format builds trust and influences brand consideration at the point when consumers begin exploring their options.
70 fold year-over-year.
we also continue to invest, in high impact user experience product enhancements that make the shopping experience, more intuitive and personalized,
In Q2 we launched multi make and model search on web enabling broader exploration without narrowing the search too early which drove a measurable increase in Mobile conversion.
On the app which now drives 1 third of our leads. We introduced several usability improvements, including a full design and performance overall, a redesigned, save cards and searches experience. And the launch of dark mode. 1 of our most requested features
Your innovating across the consumer journey and it is translated into deeper engagement and higher intent.
Cargo is Remain. The number 1, most visited listing site in the US and had nearly 85 million average, monthly sessions in 34 million, monthly unique visitors.
But our advantage goes beyond scale.
Consumers. Now spend 74% more total minutes on our site than our closest competitor and 47% of our monthly unique visitors. Do not visit our competitor sites,
That engagement is driven performance. Parker's LED sales, continue to grow year-over-year, supported by lead growth and sustained, close range.
These gains were flying progress. In addressing more consumer needs from Discovery through transactions and earning their time and Trust as a result.
Driver 3 enabling dealers and consumers to complete more of the transaction online streamlining. The final steps of the deal.
In Q2 digital deal reinforced its role as a high impact online to offline solution, enabling consumers, to complete more of the transaction online before visiting the dealership.
This creates a more seamless shopping experience for consumers and delivers more efficient, higher intent opportunities for dealers.
Adoption is grown to approximately 12,000 dealers globally. And today digital deal leads account for over 27% of the Dealer's, email leads.
By inventing high-end 10 actions. Such as applying for financing placing a deposit for scheduling an appointment directly into the core site experience. We're driving a higher volume of quality leads.
This growth reflects Rising consumer demand to do more online and dealer preference for leads that signals stronger down, funnel in 10.
Appointments are up 60% year-over-year 47% of digital deal leads. Now include at least 1 high-value action.
and we've seen a 68% year-over-year increase in Shoppers that complete the full digital deal, submission flow,
We introduced a pre-qualified. Finance-based shopping experience that helps consumers discover Vehicles. They're already approved to finance.
This allows Shoppers to stay within budget and move forward with greater confidence.
Combined with our recently built capability allowing dealers to receive full. Shopper credit applications directly in their Finance Management. These features are driving higher financing activities nearly 30% of digital deals leads now include financing
Collectively by embedding more financing scheduling and decision-making tools directly into the shopping flow. We're driving stronger intent, signals higher, quality leads and improved close rates for dealers.
Supporting more comprehensive transaction. Enablement, in Q2 involves significantly bolstering digital deals role in powering online to offline transactions.
As well as assessing how we support dealers, wholesale sourcing and fulfillment.
That latter focus is what led to our decision. To wind down the car offer transactions business, including both dealer to dealer wholesale and instant Max cash offer but still support their sourcing through technology, analytics and insights
The car off for instant trade transactions platform performed exceptionally well during the price Rising chip shortage period.
However, it has struggled in today's more volatile and unpredictable pricing environment where dealers require more flexibility and broader automation to streamline fulfillment.
We believe the underlying technology analytics and intelligence developed to support those transactions, remain valuable capabilities.
Sourcing is a foundational part of the dealer workflow deeply linked to a dealer's retail success and 1 where we believe CarGurus. Can deliver a competitively, advantaged Solution, by continuing to provide the data connectivity and predictive intelligence, that is only made possible by connecting retail and sourcing activities.
We plan to concentrate our future sourcing offerings in two key areas, which, together, we believe offer a differentiated market solution and the opportunity to create long-term value.
These insights drove the highest usage and customer satisfaction across the car offer platform.
And 2, we will continue to enable consumer vehicle sourcing at scale through top. Dealer offers the Preferred channel for both consumers and dealers.
These decisions will allow us to leverage our retail and wholesale data to provide differentiated sourcing offerings to dealers that we believe have proven product Market fit and clear alignment with our platform capabilities.
In Q2, we delivered strong performance. While realigning our focus around our core capabilities and our ability to differentiate where our data technology and audience enable us to deliver tremendous value to customers, we believe this will help drive predictable and growing financial results.
We're building with greater precision across the platform to help dealers operate more efficiently across their workflows and empower consumers to navigate their journey with greater clarity and control.
As we enter the second half of the year, we plan to execute against a clear set of priorities aligned Capital to our strongest product foundations and invest in the parts of the platform positioned to drive durable profitable growth.
Now, let me walk through our second quarter Financial results followed by our guidance. For the third quarter of 2025
second quarter, total revenue was 234 million up 7% year-over-year, just above the midpoint of our guidance range has double-digit year-over-year growth in our Marketplace. Business was partly offset by declining wholesaling product volumes.
Marketplace Revenue was 222 million for the second quarter of 14% year-over-year in line with the midpoint of our guidance range.
Marketplace, Revenue growth was driven by strength in our subscription-based listings Revenue.
In Q2 us, Carson grew, 9% year-over-year.
We added 1,032, paying us dealers, year-over-year marking, 6 Straight, quarters of positive, net dealer ads, as well as the second consecutive quarter of the highest year-over-year dealer growth since before the pandemic.
While this rapid dealer growth can moderate the pace of Carson expansion, these Trends underscore our ability to grow our footprint, while increasing wall and share our expanding base, driven by upgrades broader, adoption of add-on products, like for like price increases and higher lead quantity and quality.
Our international business continued to demonstrate strong growth. In the second quarter with Revenue up, 28% year-over-year and International Car. Sit up, 19% year-over-year.
Revenue was approximately $6 million for the second quarter, down 52% year-over-year, and product revenue was roughly $6 million for the second quarter, down 45% year-over-year.
Declines were driven by transaction, volume decreasing 55% year-over-year.
Now, to discuss our profitability and expenses on a non-gaap basis.
Second quarter, non-gaap grows, profit was 207 million up 14% year-over-year.
Growth margin was 89% of approximately 510 basis points year-over-year.
With margin expansion, continued to be driven primarily by the revenue mix shift toward our higher margin Marketplace business.
Marketplace, non-gaap grows. Profit was up 13% year-over-year and non-gaap growth margin was roughly flat at 93%.
And our digital wholesale segment, non gas gross. Margin was up about 460 basis points year-over-year.
On a Consolidated basis, adjusted evaa was above the midpoint of our guidance range at approximately 77 million of 39% year-over-year.
in was 33% up about 760 basis points, year-over-year reflecting the strong Revenue growth and operating Leverage
Marketplace. Adjusted evaa grew 31% year-over-year to approximately 80 million with margin of about 470 basis points year-over-year.
To higher margins were driven by leverage across our operating cost base.
Digital wholesale adjusted. Even dial loss was approximately 3 million.
The decline was driven by the year-over-year decline in transaction volumes and deteriorating unit, margins.
moving to acts our second quarter, Consolidated non-gaap operating expenses totaled, 136 million up, 3%, year-over-year,
Change, primarily reflects higher, General and administrative, and sales and marketing expenses. Partly offset by modestly lower product and Technology expense.
During the second quarter, we recorded 32.6 million in total impairment charges associated with our car offer business.
Segment.
Non-gaap diluted earnings per share attributable. To Common stockholders was 57 cents for the second quarter of 18 cents, or 46% year-over-year reflecting primarily the increase in adjusted Ava and lower diluting, share count.
We ended the second quarter with 231 million in cash and cash equivalents, an increase of 58 million from the end of the first quarter.
The higher cash balance was primarily driven by higher adjusted Eva as well as working capital inflows of about 4 million, partly offset by 8 million in capex and capitalized website, development costs.
I will now close my compare remarks, with our guidance, and outlook for the third quarter 2025.
Due to the wind down of car offer, we will no longer be guiding to Consolidated revenue, and Consolidated adjusted, even dogs. Instead, we are guiding to Marketplace Revenue in Marketplace, adjusted, even dog, as that is representative of our go forward operations.
We expect third quarter Marketplace, Revenue to be in the range of 228 to 233 million up between 12 and 14% year-over-year respectively.
Last quarter, we guide it to exit the year at a low double digit growth rate. We are now tracking modestly ahead of where we previously expected. We'd be
For the third quarter, we expect our non-GAAP Marketplace adjusted EVA to be in the range of $76.5 million to $84.5 million, up between 9% and 20% year-over-year, respectively.
Our guide reflects Marketplace absorbing approximately 1 million in ongoing quarterly car offer expenses as a result of the wind down
At the midpoint of the Eva range, we expect margins to contract modestly on a sequential basis.
As we explained last quarter, Q3 will include sequentially higher investments in sales and marketing International and product innovation.
We still expect annualized margin expansion in 2025, relative to 2024.
We expect to substantially complete, the wind down activities related to the car offer transactions business in the second half of 2025.
We expect to incur total wind down related charges in the range of 14 million to 19 million.
We expect third quarter, non-GAAP consolidated earnings per share to be in the range of $0.50 to $0.58, up between 14% and 32% year-over-year, respectively. Diluted weighted average common shares outstanding are expected to be approximately 101 million.
Finally, I'm pleased to share that with only 15.5 million remaining under our 200 million 2025, share. We purchase authorization, the board has approved a 150 million increase to the existing program reinforcing our commitment to returning Capital to stockholders and our confidence in the strength of our performance, balance sheet and discipline Capital allocation strategy.
The authorization is available through July 31st 2026.
Since the fourth quarter of 2022, we have repurchased nearly 25 million, shares at an average price of 22.39, for a total of about 553 million.
With that, let's open the call for Q&A.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
If you would like to ask a question, please press star and 1 on your telephone keypad.
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you may press star and 2 if you would like to remove your question from the queue,
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
We request you to limit to 1 question and a follow-up question per participant.
Ladies and gentlemen, we will wait for a moment while we Poll for questions.
Our first question comes from Chris Pierce with neim and Company. Please go ahead.
Hey, good afternoon, everyone.
Uh, I was just curious. How should we think about dealer count revenue for dealer that the way it lines up into Marketplace, you know, Revenue growth with your existing products Suite or the need to kind of Drive adoption of yet to be introduced products. Like I just want to get a sense of the white space available and you sort of hit on it with digital deal, being taken up, take up, 12,000 dealers versus 33,000 total, but I just kind of want to get a sense of white space with your current product Suite.
Uh, we have given some cross-sell penetration data, uh, around some of our products, but among our core, but and not brothers, and so among our core, you know, 26,000 paying dealers in the US, you know, there's certainly runway for that among the 42 or so thousand, total rooftops in the country, just on a, on a core product basis and then among our other products, or other alacarte, uh, monetizable products.
We have a lot of Runway. I mean, over 50% runway on on most of our crosselle products, from a DDI perspective and just getting dealers to use and engage with and get addicted to our insights and Analytics.
We gave some of those numbers in the call today and and next best deal rating, is the highest at 18,000 and the others are much lower. So you have a good sense of Runway there and then as we introduce new uh, both products and features, but also new data and insights.
Those that, that we, you know, we feel good about the pipeline of those. Uh, We've shown that we can gain adoption. And so, we're excited about the product pipeline coupled with
Just how much engagement we're seeing from dealers. Now, I think in this market, they are very eager and hungry for things that can help them navigate the market. So Predictive Analytics, which we're delivering to them.
And, uh, and things like, you know, VIN-level targeting and new cars. So all of these are very, uh, welcome opportunities for them.
Okay perfect. And then just 1 on macro you know you can kind of I appreciate it to Chris. No 1 has a crystal ball but what's the right way to think about increasing use Supply as Off Lease units, come back and sort of, it's definitely gotten more competitive out there for dealers. But how do you think about what the future might look like as you have these products to help dealers get smarter? And there's a overall pool of growing pool of vehicles, for them to finally sell
Yeah, totally. I mean used inventory is up year-over-year, but it's not where it was pre Co. And so, we think there's still runway for it and as you've heard us, often say the best way to make money, selling a car is to to buy it, right? And so,
that's why we're so excited about the sourcing intelligence that we talked about having built the car offer because the the car offer dealers that used it there
Showed that how much they appreciated it and and how well it worked for them and so if we can parlay that into the much broader base of the 26,000 paying dealers, then we think there's huge upside there.
Okay, I'll pass the law. Thank you.
You bet.
Thank you.
Our next question comes from rajat Gupta with JP Morgan. Please go ahead.
Uh great uh thanks for taking the question. Um I just wanted to ask 1. Let me just following up on Chris's question, just a little more broader macro type. Uh question um give give me have a little more certainty around, you know, the tariffs, you know, the manufacturers have some certainty, you know the dealers perhaps have more certainty. Are you seeing um some easing in terms of anxiety when it comes to, you know, how your customers are viewing? The bankrupt.
Um, you know, going forward, you know, are they more willing to open up their budgets and just have more clarity on those budgets. Um, and so, are you starting to see that, you know, with your sales force on the ground, uh, that they're more willing to, you know, have those conversations? Um, and you know,
Just go ahead with the subscriptions. I was just curious to get your thoughts on what your customers are telling you, and I have a quick follow-up. Thanks.
There, thanks for that. For the question there, there might be a little more certainty on tariffs that might ease some anxiety. But I, I wouldn't say that.
Use that elevated inventory. Uh, our, our days on Market are pretty steady and so dealers, certainly feel as though there's still remaining uncertainty and new, and they've got a lot of views and their price high, and so they need to move those. And so I think that's
Those are some of the macro factors that are driving some of the adoption of DDI. And and then as we've talked about here, uh, you know, when dealers feel that it will be hard to sell cars, they will work with marketing Partners like us.
And we think we're in a good spot as the market leader, as we're growing engagement, in our Insight, with our insights, and we continue to base our the core of our value proposition on Roi that uh, we're in a really good spot for dealers. Given the, the macro, and I think the macro will remain somewhat
Uncertain for a while.
Got it, got it. Um, know that that's helpful. Uh, and just again zooming out even more, um, you know, wanted to talk about, you know, a genetic AI.
you know, you know, gb5 launched today, uh, you know, just because the rise of, you know, these tools
You know, that can Surge and transact and B of users, I mean, how do you see this affecting, you know, your Marketplace model?
Or other plans to integrate or partner, um, you know, with, with such tools. Uh, you know, just to stay Central in the carbine Journey. Um, just curious to get your thoughts. Um, you know how you see yourself participating navigating, um, you know, as this evolves thanks.
Sure. Uh, so a lot of thoughts on this, you know, I would say first of all that our CG discover that that we talked about and you can use on our site
is certainly a step in that direction. Uh, it is, you know, it is far more than taking free form search and applying it to SRP filters. I mean, our AI discovers or CG discover rather is truly autonomous. It's conversational. It uses reasoning. It it sticks with the user across multiple steps. And so that is starting to get to more of an advisor to a consumer doing a search.
More more. Broadly speaking, how AI plays into what we're doing.
In particular, say with audience Acquisitions. So we're using Ai and
Um, embracing it deeply on our existing channels and it's that's leading to terrific efficiency for us. We're honing our generative engine optimization and that involves, you know, both tactical and mechanical things, as well as making our data more accessible. And then AI on our site and coupled with direct traffic.
Uh, is, you know, we think all about the consumer experience and an important part about the consumer experience.
Which includes having content for upper funnel and AI discover as well as you know, improving the the point of decision and reaching out to a dealer, uh, an important part of that is actually engagement from dealers.
And so the trust that dealers have with us and the engagement they have with us the data they provide us that we wrap into our whole user experience creates a lot of a lot of trust with consumers.
And that's really important that it's hard to get in horizontal even, agentic Ai. And then the last piece I'd say is that there is an important human layer to shopping for something like a car, there is a motion to it. There is
You know, bespoke opinions and feelings about cars and houses and things like that that is is hard to capture in an AI experience and we've seen that on dlas at Google for a while. It serves a certain purpose, but the really deep embedded, emotional experience, that a customer goes through on our site is tough to replicate.
Got it. Great. Thanks a lot there. And good luck.
Thank you.
Our next question comes from Joe, SPAC with UBS. Please go ahead.
um, thanks just um,
First 1 uh just a clarification. The so all the costs related to the wind down of of um our offer our excluded and and not to Parts words. But I think you said 14 to 19 million of expense in the second half and then there's language about a significant portion of the cash payments but are the cash payments equal to that expense or are there also some non-cash write Downs uh and that number and then that million dollars quarterly you talked about being absorbed into the remaining business. Is that can that be brought down over time?
so,
That will be absorbed in the marketplace business.
And so think of that as recurring. I mean, there are some things in there that have an end date in the future, but for now, think of them as recurring.
uh, in terms of the, the breakdown of the estimated, 14 to 19 million,
Approximately 5 to 7 million of that is 1 time restructuring costs that runs and other related costs.
Another $8 to $10 million is actual wind-down operations, so think of that as near-term.
Uh burn that we've said and we expect to be substantially wrapped up in the second half of this year and then the final 1 to 2 million is in non-cash charges like Brands amortization cap, Dev inventory, Etc.
Super helpful. Thank you. Um, and and Jason, um, when I first asked about Amazon, I think all the way back on your fourth quarter, 24 call, you said, you would never underestimate them as a formal competitor, but that you found it understandable that they'd focus on new vehicles to start, and that's a cleaner market value chain and without users quite different. And so, you know, with the recent news that they're moving into use in CPO, just wondering, uh, if we could get your updated thoughts there on them as competitive threat or change the competitive landscape and maybe if you have any feedback you can share from from dealers or customers that you've heard from on their initiatives. Thanks
Sure, I'll I'll take the start of this and then Sam if you want to share what we've heard from some of our dealer, uh, Partners. So uh, yeah, I will continue to say that.
We nor anyone else should underestimate Amazon ever. Uh, we do though think that we have some really strong modes and and we're we're clearly watching what they're doing uh and and are aware that they've launched used cars in in the LA region. Um, we do think that we have some really strong modes in a 2-sided Marketplace,
That include our selection, our data and as I was talking about in the last question uh that just trust from dealers and engagement from dealers and and that creates really sort of a mutually beneficial experience in both dealers and consumers feeling as though it's trusted and what they're getting is is quality and and high quality leads and high quality introductions to dealers. Uh so building up the dealer ecosystem is not insignificant and it requires them to to want to buy in and and to be willing to trust for consumers. You know a vehicle purchase is as I also just said very emotional and time intensive iterative process and uh and we think we have done a really good job of that with
Practical, things like selection and transparency and data, but also having, you know, been doing this for a long time. We know how consumers shop and so, we're increasingly personalizing, The Experience, uh, personalizing the journey and, uh, and, and just making it a good overall experience with really high NPS. And so, uh, while we would never discount any competitor. We also think that by leaning into that experience and the, the 2 sides, the trust between the 2 sides that we feel good about where we stand today, but we will continue to watch them. And, and every other consumer and we've long known that they're going to, they've said they're going to move into used and so we were we were expecting this Sam. Do you want to talk much about? Uh what we've heard from dealers or do? I'm going to keep going.
I I would only Joe, I'd only add that. Um, we do obviously are very Vigilant about the competition. We're really proud of where we are in the marketplace right now. Jason said it. Well, the liquidity of our Marketplace because of that consumer and dealer trust that we've created in the constant use of data to make each side more effective and efficient in this purchase process, is what makes us different customers that we've talked to when we keep very tight to the Hyundai community that is working with Amazon have said, it's low volume. Um, and that's the feedback we're getting so far, but we'll remain Vigilant to watch out for it. Reminder, too. That consumers want both online and in-store experience.
Experiences. So the push to, uh, you know, partnering with dealers is what we've honed over the years and you see the digital deal, uh, effort in our business, it drives the consumer down funnel, but then into the dealership more ready for the purchase, I think that's the typical process. We've honed to feel very strong about our competitive position in the marketplace.
Thanks, I appreciate it.
Thank you.
The next question comes from Marvin form with BPI. Please go ahead.
uh, great, uh, thanks for taking
My questions. Um,
I apologize. I hopped on a little bit late but, um, you know, understand that you're winding down car offer and the, you know, the the limitations of that platform. Um, just uh, would love to know though, how you know you do? You plan to kind of continue to attack uh, the dealer, the dealer side of the business. I understand you'll still have top dealer offer, but um, uh, in terms of sort of addressing the day-to-day space, um, is that something you will be finding an alternative um, way to do
Um, that's my first question and I have a follow.
Marvin thanks. It's Sam Zales. I'll I'll jump in and then let Jason follow on. We absolutely do plan to provide uh day-to-day capabilities so that we already have been providing in the sourcing Arena. You said it. Well we're uh providing top dealer offer which we're really proud of the growth of that business and expect that that will continue to be or believe that that will continue to be an important channel for dealers to uh, access consumer vehicles. But in the arena of um, sourcing the biggest learnings out of the car offer platform for us was we truly believe we have differentiation in the uh data driven Tech.
Technology, tools and insights. We provide in the sourcing Arena which allows you to help dealers provide insights for inventory management and pricing which ties very directly from wholesale to retail our Core Business. And I think the real differentiation here is Predictive Analytics and that's what we see is differentiated in the marketplace, why predictive 1? We provide more information on consumer demand than any other Marketplace in the in the industry. So where is that consumer demand going in a local market. What are the turn times and Market day supply in those markets. So we can optimize stocking experiences for our dealers and help them find the vehicles that that will make the biggest difference in their profitability.
Number 2 retail pricing. So we have more information with more inventory on retail pricing than any Marketplace. And so uh the effort there is to help dealers get the spread that they need or loss mitigation on the vehicles. They're holding to know what they can do with those vehicles in the market and price them effectively to win. So we think that Inventory management and pricing in our intelligence and our Predictive Analytics is going to be differentiated and continue to be uh an important part of our offering in the sourcing Arena.
Got it. And, um,
You know, I think I actually asked Jake, you Jason this a couple of years ago, but now that you're seeing so much success in the international business. I mean, is it would you, um, ever reconsider going into, um, you know, beyond just Canada and UK, um, or is that kind of the remaining the focus uh, of your International efforts?
That Remains the focus for now. Marvin. Uh, we are doing as you heard really well in those markets. We think we're at pretty interesting points in time. In those markets, in terms of our lead, volume relative to some of our competitors, our lead quality our dealer satisfaction or consumer NPS. And so we want to stay focused there because those are big markets and have a lot of Enterprise Value to go to go get and uh and we feel extremely good about about those countries for now.
Okay, great. That makes total sense. Appreciate the insight.
Thank you.
The next question comes from Andrew bun with JMP Securities. Please go ahead.
Thanks so much for taking the question. Um, I wanted to go back to AI search, but instead of talking about a Gentech, I just wanted to talk more about today. As we do Transition to Ai overviews and eventually AI mode, what are you guys seeing in terms of a change in in traffic? Is there anything that we should be aware of is, is Google makes that transition? Thank you.
Sure, thanks for the question, Andrew nice to connect. Um,
so, we are seeing
There is still low, relatively low adoption of AI search among our target audience base.
Ides. The AI responds. There's a much lower. Click rate on it because it's typically a user getting the answer in that response and they don't need to go further with auto, it's different. They do need to enter demonstrating, they typically uh, even if they're engaging with vlass,
Or AI. Uh they want to go to a destination where they can compare and contrast they can do research, they can truly shop in a pretty deep environment. So, uh, we're what we're seeing.
Seeing growth of that was Google. We're seeing growth of that with chat GPT and other AI based platforms. But, uh, but not in a way that is impacting our audience acquisition yet.
See that, or or, or regardless of that though, we are continuing to invest pretty heavily as I mentioned earlier, in in creating the the best leverage of AI in our own experience.
uh, and the other dimension, too, is
That Google in particular as well as meta uh and Amazon to some extent have built some really incredible AI tools for their what you would call traditional search. And so that is helping us get more efficient where we still have, you know, 98% Plus or so of the search activity that's relevant to our audience, which tends to be people who are mid to low funnels. They they're in the market for a car and they are getting a pretty good.
Sense of what they want.
Thanks. And then, just as a follow-up, you guys highlighted retention rates that improved last quarter. Can you just double-click on that and update us for this quarter? How is retention with dealers? Are you guys seeing any changes there? Thank you.
Sure. I'll I'll
Maybe give a disappointing start, which is to say we don't we don't give uh, actual retention data, but we did give the trend that we're improving. But Sam. Do you want to talk about some of the things that we think are driving the improved retention? You know, largely
From sort of based in engagement.
Uh, happy to Andrew. Thanks the results. Continue to improve. We look at our monthly recurring revenue and say we got to acquire business. We've got to expand existing business and we got to retain business. All those levers have been really successful for us. As you've seen the growth of the marketplace business, we're really proud of those results. I'd say that the engagement. Jason alludes to is really the dealer Data Insights. We've brought something very different to the market. We're providing an opportunity for dealers to run their business with more profitability, and that's what every dealer is looking for. So how can we use data and information? Help me price? Most effectively in some cases? That's priced down to win more audience. As we've said, terrific results on that front.
Some places I might bid up the price and stay in a great deal segment of our search results and win more business and profits to the business. So that the car offer acquisition insights report. How do I use that to Source the right vehicles that will map to market trends and, uh, opportunity for increased turn times all of these are ones and merchandise, Health, how am I merchandising? Am I doing it at an effective job marketing? My vehicles, against the competition. All of those put you in a, uh, consultative partner to dealers and that's what's growing both, the new acquisition numbers, the the dealer ads are expansion of car, Sid, and the, uh, record results on retention, which we think is really a testament to what kind of, uh, consultative, uh, feedback. We're providing to those dealers. I'll add also that we've got a um, in-market, um, engagement team that goes out to our dealers and says, I'm looking at Best Practices across this particular region. Let me
Go into the market and share those best practices with another set of dealers in their lead management, their marketing, their merchandising, and their pricing. That creates wins for the entire industry with more liquidity. The more liquidity means more ROI, which means dealers will flock to our marketplace and keep that fuel going with our marketplace revenue growth.
And not to I'll just maybe summarize a little bit on top of that, not to be the dead horse, but it this the notion of Engagement which we talk a lot about is really key. I mean, it's the difference between a dealer feeling as though.
Very difficult and they don't have, they're not inclined at all to separate and you then see that translate into longer term contracts. Which uh, were were seeing grow as well. You also see that translate into app usage which uh is growing. I think we talked about that in the call as well. And app usage is highly frequent and and as we add capabilities there, we're getting significant growth in adoption there. So it really is all about uh creating habits and behaviors at dealers that get them much more uh embedded with us.
Appreciate that. Thank you.
Thank you.
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Jason Trev for the closing the CEO for the closing remarks.
Thank you very much. So I just like to thank everyone for joining the call today and for your interest in CarGurus. As always, I want to give special, thanks to our employees and their passion and commitment every day, as well as do, our customers who put their trust in us. Thanks very much everyone. Have a great evening.
Thank you. Ladies and gentlemen, welcome to the conference of CarGurus. Everyone else has left the call. Thank you for your participation. You may now disconnect your lines.
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