Cars.com saw further dealership churn in its digital marketplace during the second quarter, though web traffic grew, the dealership technology company said.
Net income reached $94.1 million for the quarter ending June 30, up from $5.5 million in the period a year earlier. The company attributed the gain primarily to a one-time release of a “significant portion” of its valuation allowance — a reserve typically used to offset a deferred tax asset.
Price hikes, product expansion and more marketing helped boost average revenue per dealer and overall revenue numbers, the company said. Second-quarter revenue grew 3 percent to $168.2 million, while monthly average revenue per dealer jumped 6 percent to $2,472.
“Consumer demand remains strong,” CEO Alex Vetter said in a statement.
The company reported 18,785 dealer marketplace customers as of June 30, down from 19,186 in the first quarter and 19,517 from the second quarter of 2022. The downward change was not surprising, Vetter said during the company’s earnings call.
“As with any pricing initiatives, we experienced incremental cancellation and, as expected, this was largely confined to a segment of lower-inventory dealers with legacy rates,” Vetter said.
The dealership churn was higher than expected, but the revenue gains helped offset those challenges, analyst Marvin Fong of BTIG noted in an investor note Thursday.
Dealer revenue grew during the second quarter because of the continuing expansion of Cars.com’s various product offerings. Automaker and national revenue declined year over year but grew modestly from the first quarter because of higher pricing — dubbed the “marketplace repackaging initiative” — product expansion and more marketing, Cars.com said.
Average monthly unique visitors reached 26.9 million, down slightly from 27.1 million a year earlier. Total traffic increased 5 percent to 156 million, the company said.
Vetter also said the company is happy with the growth of Accu-Trade, a provider of vehicle appraisal and valuation data and logistics technology that it acquired in 2022.
“We are thrilled with the growth in Accu-Trade and just need to accelerate now which will naturally happen when we’re through with this marketplace repackaging effort,” Vetter said.
Cars.com acquired financial technology company CreditIQ in 2021. CreditIQ and Accu-Trade were integrated into operations last year.
Shares of Cars.com slipped just under 6 percent to $21.09 in late morning trading Thursday.
Earnings highlights:
Q2 revenue: $168.2 million, up 3 percent from a year earlier
Q2 net income: $94.1 million vs. $5.5 million a year ago
Q2 adjusted EBITDA: $45.6 million, virtually flat compared to last year
2023 guidance: Full-year revenue growth of 4 to 6 percent, based on a conservative outlook of automaker and national revenue and price increases through “marketplace repackaging”
