CarGurus acquired a 51 percent interest in CarOffer in 2021.
CarGurus CEO Jason Trevisan told analysts and investors that the digital wholesale business suffered from “difficulties” in the second half of 2022 as the wholesale market declined, particularly amid diminishing wholesale prices and lower conversation rates.
“These challenges were identified in October and we worked quickly to optimize reporting systems and processes to counteract the decline,” Trevisan said.
Zales said CarGurus has focused on improving CarOffer functions such as the inspection process.
“It’s all about the operations that will improve this business and get it back to profitability and expand what we’re doing,” Zales said.
The changes are designed to help move vehicles in a declining market while considering that dealers are using CarOffer to make vehicle purchases sight unseen, he added.
“We’re giving dealers an opportunity to take more [of a] look at the features of the vehicle in the inspection report, with photos, allowing them to see a little bit more of the purchase before they want to make an end commit to that purchase,” Zales said. “That’s an important element of this process.”
The company revised its segment reporting from one reportable segment to two reportable segments, U.S. marketplace and digital wholesale, in 2022’s fourth quarter.
Meanwhile, revenue for the U.S. marketplace, showed steady gains, reaching $155.1 million in the fourth quarter, up 4 percent. Operating income for the segment in the quarter rose 14 percent to $34.8 million compared with $30.4 million a year earlier.
Total paying dealers were at 31,307 as of Dec. 31, up 2 percent from a year earlier, including 24,567 in the U.S. and 6,740 internationally.
Average revenue per subscribing dealer in the U.S. for a quarter was $5,842 at the end of December, up 3.6 percent from a year earlier.
Transactions fell 75 percent in the fourth quarter to 18,405.
Net income fell 31 percent to $23.2 million in the fourth quarter, compared to $34.2 million a year earlier. For all of 2022, net income was $79 million, down from $110.4 million in 2021.
