Cars Commerce Q1 2025 slides: Digital products drive growth as company exceeds margin guidance

Cars Commerce Inc. (NYSE:CARS) presented its first quarter 2025 earnings results on May 8, 2025, highlighting stable revenue performance and exceeding profitability expectations despite ongoing market challenges. The automotive marketplace company reported continued growth in its digital product offerings while maintaining disciplined cost management.

Quarterly Performance Highlights

Cars Commerce reported Q1 2025 revenue of $179 million, relatively flat compared to $180 million in the same period last year. Despite the slight revenue decline, the company’s adjusted EBITDA margin of 28.3% exceeded its guidance range of 25.5% to 27%, though it was down from 29.2% in Q1 2024. The company significantly increased its share repurchase program, buying back 1.6 million shares for $22 million, compared to $9 million in Q1 2024.

As shown in the following chart of quarterly performance metrics:

The company achieved record website traffic with 29 million average monthly unique visitors in Q1, representing the highest quarterly figure in the company’s history. Total (EPA:TTEF) traffic reached 170.1 million visits, continuing an upward trend since 2019.

"Our platform vision is differentiated and clear with best-in-class solutions that enable automotive retail and wholesale operations," said Alex Sutter, CEO, in the company’s previous earnings call, a strategy that appears to be continuing in Q1 2025.

Growth in Digital Products

A key highlight of the quarter was the strong performance of AccuTrade, the company’s vehicle appraisal tool. AccuTrade powered over 813,000 appraisals in Q1, representing growth of 16% quarter-over-quarter and 31% year-over-year. The subscriber base expanded to over 1,000 AccuTrade Connected customers, and appraisals per dealer increased 14% quarter-over-quarter, reaching a new record.

The following chart illustrates the significant growth trajectory in AccuTrade appraisals:

DealerClub, the company’s dealer-to-dealer digital wholesale auction platform, showed promising early results with approximately 60% month-over-month increase in active buyers and sellers from February to March, and approximately 90% month-over-month increase in completed transactions during the same period. The platform’s integration with AccuTrade allows dealers to push auction listings directly from AccuTrade appraisals.

The company’s website business also demonstrated solid growth, adding over 100 subscribers in Q1 and reaching almost 8,000 website customers, up from less than 5,500 in Q1 2022. This growth reflects the company’s ongoing strategy to expand its digital product offerings and increase average revenue per dealer.

Financial Analysis

Revenue performance across segments showed mixed results, with OEM and National revenue increasing by 6% year-over-year, while Dealer revenue declined by 2%. The company noted that approximately one-third of OEM customers increased their marketing and advertising investments in Cars Commerce products during Q1.

The following chart breaks down the company’s revenue performance by segment:

Cars Commerce maintained disciplined cost management, with Q1 adjusted operating expenses remaining flat year-over-year. This cost discipline helped the company achieve an adjusted EBITDA margin of 28.3%, exceeding expectations despite the slight revenue decline.

The chart below illustrates the company’s consistent adjusted EBITDA performance:

Free cash flow for Q1 2025 was $24 million, slightly down from $27 million in Q1 2024 but still representing solid cash generation. The company continued its share repurchase program, significantly increasing buybacks to $22 million in Q1 2025 compared to $9 million in the same period last year.

The following chart shows the company’s free cash flow and share repurchase trends:

Market Position and Strategy

Cars Commerce maintained its dealer customer base at 19,250, adding approximately 40 dealers quarter-over-quarter, which the company described as the "best organic QoQ growth since 2022." Average revenue per dealer was $2,473 in Q1 2025, slightly down from $2,505 in Q1 2024.

The company is focusing on enhancing its value proposition through new features, including data-driven insights for Cars.com leads, which will provide actionable data such as consumer shopping behaviors and estimated budgets. This feature is planned to launch in Q2 and will be bundled into marketplace packages.

Additionally, Cars Commerce is providing resources to help dealerships navigate tariffs, including articles, live events, and strategy guides, positioning itself as a valuable partner during challenging market conditions.

Outlook & Guidance

Looking ahead, Cars Commerce provided guidance for Q2 2025, projecting an adjusted EBITDA margin of 27% to 29%. For the full year 2025, the company expects an adjusted EBITDA margin of 29% to 31% and share repurchases of $60 to $70 million.

These projections come as the company’s stock has faced pressure in recent months, trading at $11.32 as of May 7, 2025, near its 52-week low of $9.87. The stock experienced a significant drop following the company’s Q4 2024 earnings release in February, when it missed EPS expectations.

Despite these challenges, Cars Commerce continues to focus on its digital transformation strategy, expanding its product offerings beyond the traditional marketplace model to include vehicle appraisal tools, dealer-to-dealer wholesale platforms, and website solutions. This diversification appears to be yielding positive results in specific segments, even as the company navigates a challenging automotive retail environment.

Full presentation:

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