Cars.com posted a third consecutive quarter of accelerated revenue growth buoyed by increased sales to car dealers and car makers in the U.S. and a budding retail-technology business in Canada.

The Chicago-based used-car site posted Q1 2024 revenue of $180.2 million, up $13.1 million, or 8% year-over-year (y-o-y).

Net income came to $0.8 million, down from $11.5 million in the prior-year quarter, mainly due to earnout payments from recent acquisitions. The company didn’t name the acquisitions, but it had agreed to performance-based additional payments when it acquired Montreal-based D2C Media in November 2023 and Miami-based wholesale platform Accu-Trade in February 2022. 

Cars.com posted adjusted net income of $28.7 million versus $26.2 million Q1 2023.

Although the used-car market has suffered in recent quarters, a rise in new-car inventory  drove increased ad spending by car makers.

“We believe dealers and OEMs (car makers) will increasingly need our industry-leading solutions to connect with in-market shoppers and drive greater efficiency while managing rising inventory levels,” Cars.com CEO Alex Vetter wrote in the earnings announcement. “As our product adoption continues to grow, we are well-positioned to deliver our full-year guidance.” 

Other key business metrics included:

  • Average monthly unique visitors  of 28.3 million, down slightly from 28.5 million in the prior-year quarter
  • Quarterly visits of 171.4 million, up 4% year-over-year
  • Monthly average revenue per dealer of $2,505, up 5% year-over-year
  • Dealer customers of 19,381 at the end of March, down from 19,504 at the end of December 2023.

In Q1, Cars.com began winding down a “repackaging initiative” that had managed to move about 70% of dealer customers onto steeper subscription tiers by the end of last year. The effort also scared some customers off the platform, with Q1 marking the five out of the last six quarters of dealer count decline. (Q4 2023 was the exception, when Cars.com acquired 1,000 Canadian dealers in the D2C acquisition.)

Vetter blamed Q1’s attrition on a “knee-jerk reaction” among dealers to depressed profits amid rising inventories. He predicted dealers will eventually return to the company to keep their inventories from growing further.

Sales  to car makers were a bright spot, with the company’s “National and OEM” segment growing more than 13% y-o-y after four years of decline. The company noted car makers are more eager to advertise now that manufacturing is back in full swing, and cars are piling up on dealer lots (In January, the U.S. industry reported 80 days of supply, the highest it had been since June 2020, according to Cox Automotive). However, the segment was still down 25% from five years earlier. Vetter predicted those sales would rebound to pre-pandemic levels though he admitted it was a “difficult question” when that would happen.

The company touted continued strength of its Dealer Inspire business, which creates websites and other technology for auto retailers, and Accu-Trade, a subscription service to dealers that includes vehicle appraisal and valuation data; instant guaranteed offer capabilities; and logistics.

Both businesses achieved a step-change in sales with the integration of D2C Media in Q4 2023, and both showed continued, but more modest, growth in Q1.

For Q2, Cars.com forecast revenue of $181 million to $183 million, representing y-o-y growth of 7% to 9%. For the full year, it maintained its earlier forecasted gain of 6% to 8%.

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