Dealership technology company Cars.com Inc. swung to a net loss in the third quarter, citing higher valuations of earnout payments for its acquisitions of automotive financial technology company CreditIQ and Accu-Trade, a provider of vehicle appraisal and valuation data and logistics technology.
Cars.com, of Chicago, said Thursday that it posted a net loss of $2.9 million in the quarter ended Sept. 30, compared with net income of $2.4 million a year earlier.
Quarterly revenue rose 5.1 percent to $164.6 million, with dealership revenue up 4.4 percent, the company said. It saw growth in its Dealer Inspire digital business, which offers websites and digital retailing tools, and in Accu-Trade. Dealership customers grew to 19,585 as of Sept. 30, up 556 from a year earlier and up 68 from June 30. Monthly average revenue per dealership was stable at $2,334, compared with $2,332 a year earlier.
“We’re particularly pleased with our steady and sustained performance in an operating environment that has been challenging for so many in our industry,” CEO Alex Vetter said Thursday on a conference call with analysts.
In a sign that vehicle inventory levels are beginning to recover, Vetter said, daily average listings on the Cars.com marketplace grew 11 percent from the third quarter of 2021 for new vehicles and 9 percent for used vehicles. Website traffic rose 6 percent in the quarter to 150.4 million visits, with average monthly unique visitors up 12 percent.
Cars.com said adjusted earnings before interest, taxes, depreciation and amortization in the third quarter rose 9 percent to $49.9 million.
CFO Sonia Jain said the company saw a net $13.4 million increase in the fair value of the earnouts related to the acquisition of CreditIQ in November 2021 and of Accu-Trade in March as a result of the businesses exceeding initial performance targets. The company expects to pay $10 million associated with the earnouts during the next 12 months, Jain said.
“This reflects our momentum in driving market acceptance and our integration efforts,” she said on the call. “Overall, we believe the earnout structures associated with these acquisitions are an attractive way to align incentives and provide us upside as we continue to integrate, scale and sell these solutions.”
Cars.com shares rose 7.7 percent to $13.88 in midday trading.
Q3 revenue: $164.6 million, up 5.1% from a year earlier
Q3 net loss: $2.9 million, compared with net income of $2.4 million a year earlier
Q3 adjusted EBITDA: $49.9 million, up 9% from a year earlier
Guidance: Fourth-quarter revenue, $165 million to $167 million
