CarGurus, Inc.

Thank you for standing by. This is the conference operator. Welcome to the CarGurus Inc. 3rd Quarter 2020 Earnings Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press the 1 followed by the 4 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Scott Spretto, Senior Vice President of Financial Planning and Analysis. Please go ahead.

Thank you, Operator. Good afternoon and welcome to Cargurus' third quarter 2020 earnings call. We'll be discussing the results announced in our press release issued today after the market closed and posted on our investor relations website. With me on the call today are Langley Steinert, Cargurus founder and Chief Executive Officer, Jason Treveson, Chief Financial Officer and President, International, and Sam Zales, President and Chief Operating Officer. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements concerning our outlook for the fourth quarter and full year 2020, management's expectations for our future financial and operational performance, our business growth and international strategies, the potential impact of the COVID pandemic on our business and financial results, and other statements regarding our plans, prospects, and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after the market closed today, and in our most recent reports on Forms 10-K and 10-Q, which, along with other SEC filings, can be found on the SEC's website and in the Investor Relations section of our website. We undertake no obligation to update forward-looking statements except as required by law. Further, during the course of today's call, we will refer to certain non-GAAP financial measures, A reconciliation of GAAP to non-GAAP measures is included in our press release issued today. Our updated investor presentation can also be found on the investor relations section of our website. With that, I'll turn it over to Langley.

Thank you very much, Scott, and thank you to all for joining us today. I'm pleased to share that Cargill has generated strong results in the third quarter. Despite the ongoing uncertainty amidst the COVID pandemic, our performance demonstrates the durability of our market leadership position and the flexibility and resilience of our business model. Since March, our employees have navigated work from home in often challenging circumstances, and I want to thank them for their tremendous effort and dedication. As a result of their hard work, Cargur's financial performance was well above both our revenue and profit guidance for the quarter, driven by improved dealer retention versus Q2 and outstanding audience acquisition efficiency. Before I discuss the business results, I also want to recognize our events marketing team for orchestrating our second annual automotive industry conference, Navigate. Needless to say, this year, it was a virtual conference. We had over 2,000 registrants from across the U.S., Canada, and the United Kingdom. Feedback has been extremely positive from attendees, and I want to thank all the gurus who supported this event for our dealer community. I look forward to Navigate 21 when we can hopefully convene in person again. Now onto the business performance. Back in Q2, consumer demand in the market was volatile and uncertain, so we led the way with proactive discounts for dealers and introduced contactless services on our platform to enable consumers and dealers to connect in a safe manner. We had over 8,000 U.S. dealers offering contactless services in Q2, which grew to over 9,500 dealers in Q3 plus over 2,700 dealers in our international markets. Through innovation like this, in addition to our continued audience leadership, deep account engagement, and consistently high ROI, we were able to retain dealers better during Q3 than we forecasted in our guidance for the quarter. As a result, in Q3, we grew the count of our subscribing franchise and large medium independent dealers, while declines among our smallest dealers created a slight overall decline. At the same time in Q3, there were macro factors affecting the U.S. dealer market in unique ways, and I'd like to take a moment to describe them. Early in the year when COVID lockdowns went into effect, sales for both new and used cars declined by well over 50% year over year. Additionally, OEM production of new vehicles stalled as factories were shut down. As the country emerged from lockdowns in Q2, several factors contributed to heightened demand for cars, including pent-up demand, an aversion to public transportation, suburban migration, and government stimulus checks. With new car inventory down, used car demand in the U.S. rebounded quickly and has grown stronger in Q3. That demand, coupled with a lingering bottleneck in the wholesale sector, has reduced for many dealers the number of cars that they typically have on their lots. This constrained supply amidst a high-demand environment has created a strong sales dynamic for dealers, leading some dealers, especially smaller dealers, with more volatile inventory levels to reduce their marketing budgets or, at a minimum, refrain from entering new marketing channels. We believe this is a temporary phenomenon that will abate when inventories return to more normal levels and dealers will place a higher value on the scale and ROI of our platform. Whether dealers are spending heavily or more modestly during this time, we remain confident that we offer the best combination of scale and value we're delivering ready-to-buy shoppers. Despite COVID-related market volatility, we're driving increasing value to our paying dealers, with U.S. leads to paying dealers up 10% sequentially from Q2 and up 15% versus Q3 2019. Furthermore, our lead growth skewed disproportionately to our franchise and large-medium independent segments, which grew over 21% year-over-year. These are far more valuable to our dealer customers than audience alone. So we optimized our site experience and marketing efforts to acquire high-quality leads. With this focus on maximizing leads of our audience, we are pleased with our lead growth, but we'll also note that on a consolidated basis, we grew monthly unique to 11% and monthly sessions 9% sequentially from QT. While monthly uniques were down 4% and sessions were down 13% year over year. Perhaps the most favorable development in Q3 has been our ability to drive this the strong lead growth to our dealers while spending considerably less than forecasted on consumer marketing. We aim to strike an appropriate balance between lead generation efficiency with quality lead growth to our paying dealers, delivering low funnel, high intent leads that drive high ROI for dealers. The efficiency of our consumer marketing spend in both Q2 and Q3 has been outstanding and is the primary driver in yielding profits that have significantly increased exceeded our guidance. Certainly, COVID has heightened consumer use of online sources and reinforced the value that a market-leading automotive shopping marketplace like ours offers consumers who may be reluctant to visit stores. At the same time, this positive trend is the manifestation of years of ongoing investment to optimize our data-driven consumer acquisition program, brand investment, and user experience. We believe that while COVID has accelerated some yield improvements, many of these factors will continue and contribute to a sustainable improvement in our business model efficiency. While our fourth quarter guidance indicates lower profitability than the third quarter, as we expect some of the COVID-related expense reductions to abate, we're optimistic about continued consumer marketing efficiency moving forward. We believe the continued improvement in user acquisition efficiency will allow us to accelerate our investment our platform and enable more elements of the complicated car buying process to occur on our site. In the current environment, these digital retail-oriented features are particularly valuable because they help consumers and dealers transact in safe and socially distanced ways. Our Area Boost product, formerly called Delivery, continues to gain traction, evidenced by higher attach rates in Q3 than last quarter. Additionally, consumer financing allows consumers to connect with a dealer as an already pre-qualified car buyer. This is a win-win as these consumers convert at higher rates for dealers and the shopper saves time at the dealership. More than 85% of our US paying dealer inventory is covered with at least one of our lending partners and more than 9% of our email leads are now pre-qualified. The growing consumer adoption of online financing and total loan funding is evidence that both consumers and dealers value this capability. So in Q3, we made the process even more seamless by populating existing dealer systems with the consumer's information before they enter the dealership. We're delivering this through an integration with Route 1, a leading F&I technology provider, which simplifies the dealer's ability to access pre-qualified applications submitted on CarGurus and eliminates a consumer's need to fill out a credit application in the dealership. These are unprecedented times for the automotive industry and the world at large. Amidst this market volatility and uncertainty, I'm so proud of how well our business is executing. It's a testament to our people, our passion, our products, the flexibility of our business model, and the commitment we make to dealers and consumers alike to offer the most transparent automotive marketplace in the world. Through these uncertain times, we continue producing strong financial results on both the top and bottom lines. Many efficiencies in our audience acquisition and user engagement are materializing. We're making strategic investments in digital retail and other product adjacencies, and we're continuing to prove our value to our paying dealers with innovation, scale, and superior return on investment. With that, I'll turn the call over to Jason to discuss our financial results.

Thank you, Langley. I will provide a detailed overview of our third quarter performance. followed by our guidance for the fourth quarter and updated outlook for the full year 2020. Total third quarter revenue was $147.5 million, down 2% year-over-year, though nearly $13 million ahead of the high end of our guidance range. Our marketplace subscription revenue fell 4% versus the year-ago period to $130 million, reflecting the impact of COVID on our business and our dealers. Advertising and other revenue grew 17% year over year to $17.5 million, as OEM advertising rebounded after the second quarter, which reflected COVID-induced cancellations. The U.S. accounted for 94% of total revenue in the third quarter. U.S. revenue declined 2% versus the year-ago period to $138.4 million, while international revenue grew 3% year over year to $9.1 million. The growth of our international revenue reflects the earlier stage of this segment, enabling faster backfill of lost revenue due to COVID, supported by strong execution from our increased focus in Canada and the U.K. Our U.S. business generated $121.8 million in marketplace subscription revenue in the third quarter. Our international business generated $8.1 million in marketplace subscription revenues. Turning to paying dealer count, we ended Q3 with 30,162 total paying dealers, representing a decrease of 96 dealers from Q2 and a decrease of 2,924 versus the year-ago period. In the U.S., we finished the quarter with 23,659 paying dealers, which is a decrease of 147 from the end of the second quarter. In our international business, We finished the third quarter with 6,503 international paying dealers, up 51 from the end of the second quarter. Our U.S. paying dealer count decline of 147 dealers from the prior quarter is primarily driven by cancellations within our smallest dealer segment, which we call emerging independent dealers, defined as dealers with fewer than 35 units of inventories. Even in normal economic times, that segment exhibits higher churn than our franchise and large-medium independent dealers. And we believe the emerging independent segment has struggled disproportionately during COVID for three primary reasons. One, as a small dealer, they were less able to quickly adapt to remote selling. Two, smaller dealers were more dramatically affected by supply constraints like we described earlier. And three, emerging independent dealers typically carry lower-priced inventories. and as less affluent consumers have been hardest hit by the pandemic, we've seen demand for those cars rebound more slowly than other segments. On an encouraging note, both our franchise and large-medium independent dealer segments saw positive net dealer growth for the quarter and show continued positive net momentum fueled by strong retention of existing dealers, reacquisition of dealers who churned during peak COVID months, and acquisition of new dealers. In the third quarter, U.S. quarterly average revenue per subscribing dealer was $5,133, representing a 68% increase compared to the prior quarter and a 6% increase compared to the prior quarter on a non-GAAP pro forma basis, net of COVID-related discounts we offered to all dealers. International quarterly average revenue per subscribing dealer was $1,256, representing a 95% increase compared to the prior quarter and and a 22% increase compared to the prior quarter on a non-GAAP pro forma basis. Our strong CAR-SID results, in particular compared to our Q2 non-GAAP pro forma, reflect that since emerging from our discounting in Q2, we have maintained integrity on our packaging and unit pricing, which are underpinned by our strong ROI. I will discuss our expenses and profitability on a non-GAAP basis, which backs out our stock-based compensation expense. amortization of acquired intangible assets, acquisition-related expenses, and restructuring charges. Third quarter non-GAAP gross margin was 93.4%, down roughly 40 basis points versus the year-ago quarter. The contraction in gross margin percentage is primarily attributed to the increase in the cost associated with our off-site display product, including our social product, RPM, which had a strong performance in the quarter. Since these products have a lower gross margin, as they scale, they will create a modest headwind to our overall gross margins. Second, technology investments in our data center and cloud hosting expenses also contributed to the year-over-year gross margin contraction, as those costs grew versus Q3 2019, but our revenue is lower than last year, as noted. Total third-quarter non-GAAP operating expenses were $82.7 million, down 33% year-over-year. Non-GAAP sales and marketing expense fell 43% year-over-year to $55.2 million and represented 37% of revenue, down from 65% of revenue in the year-ago period. The increased operating leverage from sales and marketing is the result of ongoing buoyancy of consumer Internet usage coupled with efficiency gains in our consumer acquisitions. Our third quarter non-GAAP product technology and development expenses grew 13% versus the year-ago period to $15.6 million. As we've noted previously, our product and engineering organization supports both our core business and emerging products, such as consumer financing, trade-in, and other digital retail initiatives, which are generating de minimis revenue today. However, we believe these initiatives will unlock new revenue streams in large total addressable markets, and represent future growth levers to our business, and we will invest prudently yet aggressively in pursuit of these growth opportunities. We generated non-GAAP operating income of $55.1 million, representing a margin of 37% and roughly $24 million ahead of the high end of our guidance range. Our strong operating income performance was driven by efficiency gains in traffic acquisition. Non-GAAP diluted earnings per share were $0.37 for the third quarter 14 cents above the high end of our guidance range. On a GAAP basis, we generated third quarter gross margin of 93% and incurred total operating expenses of $94.1 million, down roughly 28% year over year. The decline in operating expenses was primarily driven by a decrease in our variable consumer marketing expenses. Third quarter GAAP operating incomes increased 349% year-over-year to 43.6 million. Third quarter GAAP net income attributable to common shareholders totaled 32.6 million. Geographically, third quarter U.S. GAAP operating income was 46.5 million, up 133% year-over-year. We had a GAAP operating loss of 2.9 million in our international business compared to a 10.3 million loss in the year-ago quarter. We ended the third quarter with $245.9 million in cash and investment, an increase of $69.7 million from the end of the second quarter. The increase in our cash balance was driven primarily by our continued reduction in our expenses during the quarter, which yielded positive cash generation. We generated $73.9 million in cash from operations in the third quarter and $72.4 million of non-GAAP free cash flow, which includes capital expenditures, and capitalized website development costs of $1.5 million. I'll close my prepared remarks with our outlook for the fourth quarter and full year 2020. As good as we feel about our third quarter results, it's hard to deny the uncertainty looming with COVID resurgence. Some European countries are initiating lockdowns, and in Massachusetts, where the majority of our employees live, the governor just issued new COVID restrictions. It continues to be difficult to look ahead with confidence while considering the potential impact of a COVID resurgence to consumers, our dealer customers, and our employees. With these factors in mind, as we look at the fourth quarter, we expect total revenue to be in the range of $146.1 to $149.1 million, non-GAAP operating income in the range of $38.7 to $40.7 million, and non-GAAP earnings per share in the range of $0.26 to $0.28. Please note that our guidance does not include the potential impact of widespread COVID-induced lockdowns and the potential impact on our dealers and consumers. Incorporating our third quarter results and our fourth quarter guidance into our full-year projections, we are raising our full-year revenue outlook to a range of $546 to $549 million, implying a roughly 7% year-over-year decline at the midpoint. This compares to our prior guidance of $518 to $524 million. We are raising our non-GAAP operating income to a range of 143.5 million to 145.5 million, up from 89 to 93 million, implying a 26% operating margin at the midpoint of our operating income and revenue guidance ranges. We are raising our full-year non-GAAP earnings per share guidance to a range of $1.01 to $1.03 per share, up from 66 to 69 cents previously. Once again, on behalf of Langley, Sam, and our executive team, I'd like to thank all of our employees for their exceptional dedication and hard work through these unusual and unprecedented circumstances. We believe our business will emerge from this crisis stronger than ever as a result. With that, we'll open up the call for Q&A.

Thank you. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a prompt, three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Again, to register for a question, that is the one followed by the four on your telephone. One moment, please, for the first question. Our first question comes from the line of Dan Kernoff with the Benchmark Company. Please proceed. Your line is open.

Great. Thanks. Good evening, and thanks for mixing it up with the 1-4. Make it different than normal. Just a quick question maybe for, you know, I don't know, whoever wants to take this, just on renewals. Obviously, kind of a big focal point right now given the tight inventory. You touched on it a little bit. Nice kind of growth in traffic even without the incremental spend, and the lead commentary color you gave, Langley, was appreciated. I'm just curious, as you go back to dealers, you know, demand for leads at this point, how you're kind of viewing that evolve over the coming quarters and sort of the receptivity that you're getting, understanding that you've been able to do some pretty good optimization work here. Any thoughts there would be helpful. Thanks.

Hey, Dan, it's Sam Zales. Thanks for the question. It's thoughtful. I think Langley really outlined the combination of macro factors in the industry that are affecting dealers. And I think we always have to look at these, you know, renewals and anything, customer acquisition and pricing on a basis of customer segment. We clearly outlined what we call our emerging independent segment, which is the smallest independent dealers facing the biggest challenges. They can't acquire inventory as effectively as the franchise and what we call our medium and large independent dealers. The demand for products on the vehicle side, on the consumer end, is really a higher-end product than the lower end, which reflects a lot of what's going on in the economy. We said that we were going back to full pricing in third quarter in July. As you know, we were very thoughtful about listening to the market through the toughest months of the second quarter. We went back to full pricing, and we're being very thoughtful. We'll always be deliberate, looking at the markets that have the best elasticity and the best concurrent market conditions right now, which is the franchise and independent medium and large accounts versus the small independents. So we're going to be thoughtful about that. Yes, renewals will continue on as we go forward, but we're going to be measured and thoughtful about that effort based on those macro factors, based on what's going on with our lead volume. It's certainly been a significant volume of leads that we've driven into that medium, large, independent, and large franchise account. So we're going to be thoughtful there. We'll be smart about it, and it will tell us on a segment-by-segment basis Yes, we can start up renewals, but we'll do it in a thoughtful way as we go forward. And we think those results are coming in exactly where we had expected. We're going to be thoughtful and not push it in the tougher hit segments of our marketplace.

Got it. That's really helpful. And then maybe just one on marketing. You know, you already called out, obviously, a little bit less profitability in Q4. We kind of heard that, you know, marketing starts to come back, some incremental investment. I'm sure you guys are keeping – The situation is relatively fluid at this point, right? So obviously there's a lot of variability in that number, but maybe you could just talk about where you think you have the opportunity to start, you know, pulling some levers here with an eye on increasing sort of traffic and lead volume growth heading into 21, you know, barring some kind of, you know, major COVID return.

Hey, Dan, it's Langley. So I think we referenced it in the earnings transcript that A couple of things we feel good about going forward in addition to the quarter that we just had. Number one, just the general efficiency of our marketing work. And I think we highlighted in the earnings transcript that our focus really is not on unique visitors. It's more on driving traffic that generates leads and in turn leads to paying dealers. And even within that segment of paying dealers, trying where we can to drive leads to franchise dealers because they generally have a bigger marketing budget than independents. There's a lot of work our team has done to make our marketing spend as efficient as possible. I think you've seen some of the wins, if you will, from that work in this last quarter. I think there are also just some tailwinds that we benefited from last You know, organic traffic's been strong. Our brand traffic's been strong. So, you know, I think, you know, Jason alluded to the fact that we're not sure that all these macro factors will continue to hold so well in our favor going forward. But I do think that a significant portion of them will. And so, you know, we do think that our earnings will probably continue to be pretty strong going forward.

Can I just press you a little bit on that, Langley, just in terms of your thoughts around, you know, where you're at from a funnel optimization perspective? I'm just, you know, obviously it's a different environment and who knows how long the organic traffic tailwinds stick around. But, I mean, you guys have clearly taken a pretty, you know, aggressive is probably the wrong word, but a pretty effective and strong approach to, you know, focus on, putting leads in the right place and focusing on kind of higher LTV customer acquisition. So I'm just curious where you think you are in kind of that stage and when that process starts to level out.

You know, so in my prior life at TripAdvisor with Steve Coffer, you know, we were always surprised that we were always able to find continued efficiencies. It's Some of these efficiencies can be small numbers, but small ratios on big numbers can generate large earnings. I would say that we think we will continue to find continued wins in conversion optimization, merchandising on the site to try to drive, as I said, not necessarily unique visitors, but visitors that are going to generate leads and, in fact, leads to paying dealers and, within that context, leads to franchise dealers because we think that generates the best economics for our business.

Thank you for your questions. As a reminder, to register for a question, please press the 1 followed by the 4 on your telephone. One moment, please, for the next question. And our next question comes from the line of Navid Khan with Trust. Please proceed. Your line is open.

Hi. Thanks a lot. I don't know if I missed it, but did you guys break out the growth in traffic from organic sources and the growth in lead from organic sources? And then I have a follow-up.

Hey, Navid. It's Jason. Thanks for the question. No, we did not break out. Excuse me. breakout traffic growth by channel. We did say that, you know, organic and direct was much stronger. It's sort of, I guess, obviously because we spent less and still generated, you know, really nice traffic trends. So it would have to have come from those two, but no, we didn't get specific on numbers.

Okay, and then... Maybe a question on the other line, which is OEM as well as financing. How much of the strength is from OEM and then financing? How meaningful has it become in terms of the driver of growth? Give us some sense of that.

Nived, it's Sam Zales. I'll jump in first on OEM, and I think Jason may take consumer financing. That line is strong for us. I think on the OEM front we saw very strong results in our advertising business. I think that comes because we're the largest endemic advertiser with down funnel shoppers who take action, and I think our OEMs at a time that they're now spending again are excited about working with our business and doing more with us at a time we were curious as to what the COVID environment would mean to them. So solid results, and we're proud of what we're doing with the OEMs and hope that continues. Jason, did you want to jump in on consumer finance? Sure.

So on consumer finance, it was not a big lever in growth from Q3 to Q2. We continue to do quite a bit of work on it, and you heard about some of the developments that – Langley mentioned in terms of making it even more seamless for the consumer when they walk into the dealer, making it even more seamless for the dealer so they have the information ahead of time. But the consumer financing, the auto financing industry started to face some macro kind of market level issues, I guess, around consumer credit. And so the market itself was quite a bit softer in Q3 than it was in Q2. We are a tiny, tiny fraction of the total market. So, you know, it's not like a direct correlation because we believe optimizing and growing through a lot of that. But nevertheless, in a softer market, it didn't contribute to a lot of growth.

Thank you for your questions. Our next question comes from the line of Nick Jones with Citigroup. Please proceed. Your line is open.

Great. Thanks for taking the questions. I guess first, with your focus on leads, can you touch on how you're generating? I guess the leads you're generating versus which leads are actually converting to actual car purchases, I guess that leads to dealers paying. Is the conversion of the lead to an actual purchase kind of stable or is the supply constraints kind of showing up where you're delivering leads but the dealers can't really sell a car? And then a quick follow-up.

Yeah, and it's Langley. I mean, I think there are confluence of issues going on, and we tried to allude to that in the earnings transcript. I think, you know, one macro factor is, in fact, the supply issue, but we think that's abating quite a bit. Well, it's abating. You know, OEMs are ramping up production again. Some of the wholesale auctions, a lot of the wholesale auctions are coming back online. So, you know, we believe the supply factor will kind of, you know, play itself out. That's kind of being a temporary issue. I do think our benefit, I don't want to make light of COVID because COVID has certainly been a horrible, horrible event for our entire country, if not the whole world. But dealers, I do think have seen or put a premium on online leads from partners like ourselves because of the fact that just the general walk-in traffic has you know, substantially dropped. So I think that that is a huge plus for us. As for, you know, the percentage of cars that are converting, I think it's been pretty well documented in the press that dealers are doing quite well, especially in the used car space because of a whole bunch of factors. And again, we alluded to some of these in the earnings announcement around, you know, the flight to suburbs, people buying cars that previously didn't own a car because they may have been living in the city. people's aversion to, for the foreseeable future, taking public transportation. So dealers are doing well, and I think their close rates on the leads we send them, I think, continue to hold up quite well. So overall, as we alluded to earlier, we're quite pleased with where the business is tracking.

Great. Thank you. And just one follow-up, but kind of maybe an increased focus on franchise dealers. I think historically Cargurus has had the more used car inventory on the site? Should we expect that to shift as these smaller dealers are more constrained and are struggling to adapt and there's an increased focus on franchise? Does the unit mix change on the site?

Listen, we want to have all dealers on our site because all dealers means more inventory, more inventory means more choice for the consumer at all price points. Independent dealers have clearly lower price point cards than a franchise dealer will, for the most part will. Having said that, as a business, we are skewing a lot of our efforts towards franchise dealers, probably disproportionately more towards a franchise dealer because they have larger budgets They tend to acquire more additional add-on products like our RPM product. I mean, some Indies do, but a lot of independents don't have – they just don't have the marketing budgets that a franchise dealer has. So, you know, it's a balancing act, and we need to make sure that we don't exclude Indie dealers at the detriment of our consumers, the people that are using our site. But where appropriate, if we can merchandise a car from a franchise dealer – to a consumer, we will probably do that because it generates a higher, you know, generally generates a higher paying customer for us.

Great. Thanks for taking the questions.

Thank you for your questions. Our next questions come from the line of Marvin Fong with BTIG. Please proceed. Your line is open.

Great. Thanks for taking my questions. Just two for me. Just curious, I noticed again, I think for the second quarter in a row, that, you know, there's sessions is diverging more than the user growth, so that sessions per user is trending down. Just curious if you can attribute that to anything in particular with the website or just user behavior, what might be causing that? And then second question, just on the larger dealers that, you know, that did churn out in the past couple of quarters, what's your view on what might be holding them back from returning to the platform? That'd be great, thanks.

Marvin, hi, it's Sam Zales. The first part of your question on sessions per user, I think our focus continues to be on driving leads. I think Langley and Jason's comments at the beginning of the of the commentary really set up how our business is focused. We're looking to drive consumers in a down funnel way into a lead generation effort for our dealers. So our effort continues to be a focus there. I probably won't comment specifically on session per user. I think our effort is find the down funnel shoppers, the focus on leads that we can drive to our dealers and that being the effort that we're focusing most on. And so I hope that's answering the question for you, specifically on sessions per user. I'll probably take a look at that afterwards and see if there's any details on that. We still hold a phenomenal lead in the marketplace in terms of consumers' repeat usage, their time on site, the down funnel experience. And I think that's what's driving our lead growth. And so our effort will always be look at the results on a lead basis as opposed to specific visitor statistics. And I think that's driven what we think is a big success for our dealers.

Great.

Sorry, did I miss the second half of the question?

Yeah, I had a question just on like I appreciate the comments you had about the emerging dealers having trouble. Just curious on If there were larger dealers that had churned out, you know, in the last quarter or two that still hadn't returned to the platform, what's your view on what their main concerns are for not returning to the platform yet? Thanks.

Yeah, thanks, Marvin. The results for the franchise, what we call our independent medium and large segments, are moving in all the directions we want them to, partly driven by that consumer demand for higher-end vehicles and their ability to acquire inventory in this very difficult market. So both the acquisition and retention of those two segments has been terrific for us, and we'll continue to focus there. The small independent dealer segment is one that naturally churns. more than those other two segments. I think in COVID times that's been hit worse. And we're making a deliberate effort to sort of be careful about that, you know, what we call the 1 to 35 vehicle segment and saying let's be thoughtful about taking risks to acquire some of those customers. Let's be smart about the new customers we bring on. So both the new business and the retention of the franchised An independent, medium, large segment has been solid for us both because of the boost and the tailwinds of the market and macro factors and because we drive a great ROI to those dealers. The small independent is the one that we're being thoughtful about acquiring because of the risk factor and their difficult standing in today's market.

Thank you for your questions. That does conclude the question and answer session. I'll turn it back to Mr. Steiner for any closing remarks. Mr. Steiner?

Langley, are you there?

Yeah, I just wanted to thank everyone for dialing in tonight. I also wanted to put in a special thanks to Cargill's employees for all their hard work during these challenging times. With that, I'll say goodnight. Thanks.

That does conclude today's conference call. We thank you for your participation and ask that you please disconnect your lines.