CarGurus, Inc.

we will be making forward-looking statements which are based on our current expectations and beliefs. These statements are subject to risks and uncertainties which could cause our actual results to differ materially from those reflected in such statements. Information concerning those risks and uncertainties is discussed in our SEC filings, which can be found on the SEC's website and in the Investor Relations section of our website. We undertake no obligation to update or revise forward-looking statements except as required by law. Further, during the course of our call today, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to comparable non-GAAP measures is included in our press release issued today, as well as in our updated investor presentation, which can be found on the investor relations section of our website. We believe that these non-GAAP financial measures and other business metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency as it relates to metrics used by our management in its financial and operational decision-making. With that, I'll now turn the call over to Jason.

Thank you, Kerndape, and thanks to everyone joining us today. In the third quarter, we delivered double-digit, year-over-year marketplace revenue growth while also expanding profitability across our U.S. and international businesses. Marketplace revenue and marketplace EBITDA both finished above the midpoint of our guidance range. reflecting focused investment to drive sustainable top-line growth and disciplined execution of our strategic priorities. Marketplace revenue grew approximately 14% year-over-year, or $28 million, and Marketplace adjusted EBITDA was up 18% during the same period. Growth was driven by continued expansion in CARSID, led by dealer upgrades to higher tiers, broader adoption of our add-on products, like-for-like price increases, and higher lead quantity and quality. We also added 1,989 net new dealers globally year-over-year, supported by stronger retention. Our international operations contributed meaningfully, with revenue up 27% year-over-year, driven by momentum in both Canada and the UK. CarSID grew 15%, and we added 807 net new dealers year-over-year. At the foundation of these results is the strength of our market-leading two-sided marketplace. Built on trust and transparency, CarGurus connects the largest audience of car shoppers with the broadest network of dealers, giving consumers confidence and dealers high quality demand and intelligence, both of which bolster marketplace liquidity through rising engagement and adoption. As our marketplace continues to scale, it generates vast proprietary data and machine learning signals that fuel a uniquely advantaged analytics and intelligence platform for dealers. With this expanding data set and our accelerating AI capabilities, we turn data into intelligence, delivering predictive tools and insights that help dealers make faster, smarter decisions and achieve stronger outcomes. These dynamics reinforce two durable advantages, scale and data intelligence. Scale delivers reach and liquidity. With the broadest dealer network and deepest inventory, our marketplace offers car shoppers unmatched selection and transparency, attracting the largest consumer audience and, in turn, more dealers. That flywheel has supported faster growth and share gains from our primary competitors. Data intelligence transforms that scale into smarter products. We believe our growing size generates the most comprehensive retail demand and pricing signals in the markets where we operate, which we productize into solutions that improve dealer profitability. For example, our retail demand analysis recommends vehicles aligned with local shopper interest. And when dealers follow those recommendations, we've proven their inventory turns faster. Our pricing models enable dealers to price with precision, improve margins, and outperform competitors, while behavioral and intent data enriches leads to improve conversion and ROI. This creates a virtuous cycle in which scale drives richer data, and intelligence derived from that data improves dealer performance and the consumer experience, which in turn we believe drives ever-increasing adoption and engagement. Building on our position is the number one most visited automotive marketplace. We've continued to expand our platform with software and data products that help dealers make more intelligent decisions across four key workflows, inventory, marketing, conversion, and data. We've already introduced a variety of offerings in each of these four pillars. In inventory, products like Sell My Car, Acquisition Insights, and Next Best Deal Rating help dealers source the right vehicles, merchandise, and price each inventory unit with precision. In marketing, solutions such as our core listings packages, Highlight, RPM, and new car exposure connect dealers with high-quality, ready-to-purchase shoppers efficiently and generate significant dealer awareness and walk-in traffic. In conversion, offerings like Lead AI, our in-person engagement team, and Digital Deal help dealers convert leads into sales, driving better attribution and higher close rates. And in data, our Dealer Data Insight Suite delivers local market intelligence that powers smarter, more profitable decisions. Over the past few years, we have built a strong foundation and garnered dealer engagement across these pillars and are now advancing from add-in features in these areas to differentiated software and data products, each with a clear value proposition and measurable ROI. We believe these products will expand our addressable market from the current $3.5 billion spent by U.S. dealers on marketplaces by roughly an additional $4 billion U.S. dealers spend on software and data products in these segments. We believe that our growing product suite positions CarGurus as an intelligence-driven partner that helps dealers optimize every stage of their workflow beyond simply marketplaces. We plan to deepen monetization across these pillars through scalable software and data solutions, and we're excited to share that we've begun that this quarter with our newly launched PriceVantage, which I will cover shortly. Much like we've done for our dealer partners, we're expanding our offerings along the consumer journey, continuing to lead the market in trust and transparency while broadening our role more upstream with research and downstream to purchase. With the largest selection and a seamless online to offline experience, shoppers can research with confidence, connect with dealers, and complete the transaction on our platform or at the dealership in the way that works best for them. We believe this expansion of our product suite on top of our market-leading marketplace will continue to reinforce our scale and data intelligence flywheels. and result in us capturing more dealer wallet share and deepening consumer engagement to support long-term growth. With that context, I'll now walk through our progress across our three drivers of value creation. Driver number one, expanding our suite of data-driven solutions across dealers' workflows to help them drive more profitable businesses. Core to our mission of helping dealers make more profitable decisions, we recently launched PriceVantage, a major machine learning-based evolution of our pricing tool. It is the only used vehicle pricing solution powered by real-time consumer demand from the number one most visited car shopping marketplace, giving dealers an edge to predict the market rather than just react to it, enabling smarter pricing, faster turns, and improved profitability. Built on the industry's largest dataset of shopper behavior and market supply, PriceVantage leverages AI to deliver VIN-level activity, turn-time predictions, lead potential, market day supply, and visibility into comparable listings, all within a single unified workflow that directly syndicates into dealers' inventory management systems. It translates live market dynamics into data-driven pricing recommendations aligned with each dealer's goals, giving dealers greater speed, control, and confidence in every pricing decision. Early beta results demonstrate the power of the software. The most engaged dealers using PriceVantage saw a 5x improvement in turn time compared to their top five competitors on CarGurus. Taking price drop recommendations drove a 68% median increase in daily VDP views, and 77% of recommendations met or exceeded predicted sales velocity outcomes. We launched a Chrome-based browser extension that embeds these insights into the platforms where dealers already operate, such as their IMS or auction sites. Dealers can access real-time price recommendations without leaving their workflow, with future releases planned to extend into sourcing and merchandising. PriceVantage is the latest and most substantial addition to CarGuru's expanding suite of dealer intelligence software solutions. Other offerings continue to grow, especially our Dealer Data Insights suite, which strengthens dealers' predictive capabilities, delivering greater efficiency and faster sales. Next Best Deal rating is now used by nearly 20,000 dealers, growing over 70% year-over-year. Merchandising Insights adoption grew to 9,791 dealers, while Max Margin Insights adoption rose to 5,032 dealers. In the third quarter alone, dealers made over 700,000 price changes through Next Best Deal Rating. We've seen a median 48% increase in VDP views and faster turn times for vehicles using our recommendations. Engagement remains high, with next best deal rating driving nearly 50 price changes per dealer in Q3, and dealer data insights reports overall driving 75 price and inventory changes per dealer. Over two-thirds of recommendations we send to dealers are being opened and read, indicating the value of these insights. Last quarter, we also introduced new car exposure to give dealers more sophisticated control of their new vehicle marketing. New car exposure continues its rollout across markets, now reaching 94 DMAs and brand combinations. To date, it has driven 31% of new car VDP views and 13% of new car leads, with participating dealers capturing a greater share of new car leads than those relying solely on organic placements. Innovations like this are deepening dealer engagement by enabling smarter decisions across inventory, marketing, conversion, and data. Dealers are upgrading into premium tiers more frequently they're adopting our products and solutions at higher rates, and they're signing long-term contracts. Together, we believe these factors support our ability to grow Carson. Carson growth has been manifesting in three trends. First, customers who remain on our platform consistently increase their spend over time. Second, new customers are joining at higher average order sizes than in prior years. Third, newer customers are ramping their spend faster than prior new customers did. On all these observable dimensions, we're seeing clear evidence that the growing quality and breadth of our products have been driving measurable Carson growth. Driver number two, meeting the evolving needs of car shoppers by powering a more intelligent and seamless journey. As I said earlier, we're expanding the CarGurus experience across the full car buying journey from research through consideration and purchase. This quarter, we advanced two key innovations that bring that vision to life. First, consideration. we expanded CG Discover, our GenAI-powered shopping assistant. Unlike others that use GenAI to repackage traditional filters, Discover uses conversational understanding and real-time reasoning to interpret a shopper's intent and curate the best-fit vehicles from millions of listings. It helps consumers refine choices and explore inventory with greater speed and clarity, while giving car gurus richer demand signals and pricing insights to strengthen the data intelligence flywheel. Early engagement has been strong, and we have since expanded Discover to our homepage and app, creating more prominent entry points that have driven higher traffic into the experience. Research shows 80% of consumers are open to using AI in their car buying journey, underscoring the scale of this opportunity. Traffic to CG Discover has nearly tripled quarter over quarter, and leads have grown 3.3x. Discover VDP to lead conversion is 6,000 basis points higher than standard VDP to lead conversion. As Discover scales, Every interaction generates signals and insights, making the platform smarter and strengthening both dealer and consumer experiences. Next, purchase. Car shoppers want confidence at every step, from discovery to purchase. Research shows consumers feel the hardest part of car buying happens in the dealership, when shoppers feel anxious about pricing, alternatives, and making a rushed decision. Our goal is to reduce that anxiety with transparent dealership ratings and reviews and by extending the CarGurus experience into the dealership where support matters most. We're excited to introduce Dealership Mode, a major innovation in the purchase step, designed to deliver real-time support at the exact moment shoppers need it. When a CarGurus user visits a participating dealer lot, the app activates through geofencing and push notifications to provide VIN level pricing and ratings, reduce payment anxiety with a financing calculator, compare cars on the lot or highlight alternatives at the dealership, and surface reviews to validate quality. Dealership mode gives consumers clarity and confidence at the most stressful point of the process. For dealers, dealership mode strengthens attribution and ROI. While we already maintain significant attribution on closed sales data through DMS integrations and third-party data providers, dealership mode now enables us to close the purchase loop more fully, connecting online engagement to in-store activity which we believe demonstrates clear ROI and higher quality leads. With millions of monthly app users making hundreds of thousands of lot visits, we believe the opportunity is significant. Based on an early analysis, 56% of consumers who see dealership mode in the app navigation have clicked into the experience, and over half of our users have opted in for push notifications. Over time, we expect dealership mode will drive even greater app adoption build consumer trust, and help dealers convert more sales. By improving the consumer experience and extending our brand awareness, we are giving shoppers more reasons to start and end with CarGurus. This deeper engagement is translating into higher intent activity, with CarGurus-led sales growing year over year the past two years. Separately, as we implement changes to comply with cookie consent regulations across markets, Reported unique concessions are expected to decline as some users do not opt into tracking. This represents a change in how traffic is measured rather than an indication of an underlying change in site traffic or in the leads and connections we believe we're delivering to our dealer partners. Driver number three, enabling dealers and consumers to complete more of the transaction online, streamlining the final steps of the deal. In the third quarter, we advanced our transaction capabilities through continued progress across Digital Deal and Sell My Car. These offerings are delivering a seamless online to offline journey for shoppers. Digital Deal adoption surpassed 12,500 dealers this quarter, with over 1 million listings digitally enabled. With more Digital Deal listings and improved user experience, we have driven 45% year-over-year growth in high-value actions, such as financing applications, appointment scheduling, and deposits. Users who complete these high-value actions close at up to a 3x higher rate than standard email leads. In fact, our strongest close rate comes from reservations. Reservations close at nearly 16x the rate of standard leads for out-of-market shoppers and 9x for in-market shoppers. Appointments are up approximately 20% year over year. Financing adoption is also strengthening, supported by direct credit applications pre-qualification, and SRP filters that surface vehicles consumers are already approved to finance. Digital deal leads with a financing element have grown 77% year-over-year. We also embedded high-value actions into the core site experience. This quarter, we introduced a post-lead high-value action menu that surfaces additional steps, such as scheduling an appointment or submitting a deposit, immediately after a shopper submits a core lead. This creates a natural ramp for consumers and provides dealers with even stronger intent signals. Alongside a broader redesign of the digital deal experience, initial testing shows several hundred thousand incremental leads from the new experience. We now expect that by year end, nearly 30% of a digital deal enabled dealer's email leads will come through digital deal. These leads include verified contact information, full name, email, and phone number, and around 45% of them historically carry at least one high value action. Beyond enabling more of the transaction online, we're helping dealers source inventory with greater efficiency. Sell My Car adoption has continued to grow and is now live in 115 markets, reaching roughly 75% of our eligible traffic. Lead quality and conversion have continued to strengthen. A growing share of Sell My Car acquired vehicles are listed on our marketplace soon after purchase, demonstrating that these are high-quality, retail-ready leads. Collectively, these advancements are streamlining the transaction for both dealers and consumers, improving lead quality, accelerating conversions, and reinforcing our ability to meet customers wherever they are in their journey. Across all of our value creation levers, I'd like to discuss the accelerating use of agentic AI. AI has been foundational to CarGurus since our inception and continues to power innovation across the platform. We're embedding agentic AI in numerous places throughout our products and systems to create smarter, faster, and more intuitive experiences for both consumers and dealers. CarGurus Discover, our conversational GenAI-powered shopping assistant, uses large language models to help consumers refine choices and explore inventory with greater speed and clarity. In our mobile app, dealership mode activates when a shopper visits a participating dealership lot, providing AI-generated comparisons and summaries of vehicles. In our dealer dashboard, PriceVantage extends these capabilities to dealers by using predictive AI and real-time demand data to deliver VIN-level pricing insights, turn time forecasts, and competitive benchmarking directly into their workflows. We also continue to scale AI-driven content and quality improvements across the platform to drive consumer traffic and reduce operational overhead across internal teams. SEO content generation, powered by generative AI and guided by our editorial expertise, has expanded high-quality content roughly tenfold across CarGurus and our core channels, driving a 60% increase in top and mid-funnel sessions year-to-date. Price and compliance monitoring now also uses AI to identify inconsistencies and ensure data integrity across millions of listings. Internally, AI is transforming how teams work. Over the past year, we've deployed numerous solutions that have improved speed, precision, and efficiency across nearly every function. Our GenAI sales tools have provided account summaries, tailored recommendations, and predictive insights that have helped teams identify opportunities to strengthen retention and deepen dealer relationships. Nearly 80% of managed leads in October, chat and text, were handled and closed by AI. This automation has enabled us to reduce the outsourced team by over 40%, driving meaningful efficiency gains and cost reduction. Engineering productivity has risen by nearly 25% in the past year through the use of AI coding tools and code review agents. Our LLM Gateway democratizes LLM integration, allowing teams to embed new use cases directly into workflows and bring ideas to market faster, while our enterprise LLM-based search platform enhances knowledge retrieval and workflow automation. AI also strengthens fraud detection and prevention, enhancing data integrity and platform trust. Adoption is broad and disciplined. 91% of employees report using AI Weekly, driving faster execution, sharper insights, and greater collaboration across the company. Looking ahead, we believe that the combination of proprietary data, machine learning, predictive analytics, and agentic AI positions CarGurus to deliver new levels of intelligence, automation, and efficiency to both dealers and consumers. AI remains central to how we innovate, operate, and lead in automotive technology. In Q3, we delivered strong revenue growth, healthy margins, and disciplined executions. We advance products that give dealers greater control, efficiency, and intelligence, while creating more confidence and clarity for consumers. These innovations are expanding our reach beyond the 3.5 billion U.S. marketplace segment into an additional 4 billion dealer software and data products TAM, which we believe broadens our long-term growth opportunity. Innovation remains at the center of this progress. We're extending our platform across each of our four pillars, inventory, marketing, conversion, and data. with scalable software and intelligent solutions that address more of the dealer workflow and consumer journey. These advancements reinforce our leadership as a data and technology-driven company, which we believe unlocks new sources of growth and value creation. Across every initiative, our focus remains on measurable value, capturing more dealer wallet share, deepening consumer engagement, and strengthening our platform's foundation. With that momentum, we believe that we're scaling solutions that reinforce our leadership support durable growth, and create long-term value for our customers and stockholders. Now let me walk through our third quarter financial results, followed by our guidance for the fourth quarter and full year 2025. Third quarter consolidated revenue was $239 million, up 3% year over year. Marketplace revenue was $232 million for the third quarter, up 14% year over year, toward the high end of our guidance range. Marketplace revenue growth was driven by strength in our subscription-based listings revenue. In the third quarter, U.S. car SID grew 8% a year, and we added 1,182 paying U.S. dealers year-over-year, marking our seventh consecutive quarter with positive net dealer ads and our fourth straight quarter of accelerating year-over-year dealer account growth. We continue to expand our footprint while taking greater wallet share in our growing base, driven by upgrades, broader adoption of add-on products, like-for-like price increases, and higher lead quantity and quality. Our international business had yet another strong quarter, with revenue up 27% year-over-year and international car sit up 15% year-over-year, the ninth consecutive quarter of double-digit year-over-year international car sit growth. Wholesale revenue was approximately $2 million for the third quarter, and product revenue was roughly $5 million for the third quarter, as we ceased facilitating transactions in the quarter as a result of our decision in August to wind down the car offer transactions business. As a reminder, we expect to account for the wind down of car offer as a discontinued operation in the fourth quarter. As such, we do not expect there to be revenue associated with digital wholesale going forward. I'll now discuss our profitability and expenses on a non-GAAP basis. Third quarter non-GAAP gross profit was $214 million, up 11% year over year. Non-GAAP gross margin was 90%, up about 650 basis points year over year. Marketplace non-GAAP gross profit was up 13% year over year, and non-GAAP gross margin was stable at 93%. On a consolidated basis, adjusted EBITDA was approximately $79 million, up 21% year over year. Adjusted EBITDA margin was 33%, up about 490 basis points year-over-year. Marketplace adjusted EBITDA grew 18% year-over-year to approximately $82 million, above the midpoint of our guidance range. As a reminder, we guided to Marketplace EBITDA only this quarter as we sunset the car offer transactions business. Margin rose about 120 basis points year-over-year to 36%, but declined slightly quarter over quarter due to investments in new product innovation and sequentially higher sales and marketing expense. Digital wholesale adjusted EBITDA loss of approximately 4 million was modestly higher quarter over quarter as expected. The sequentially larger loss was driven by lower volumes due to the cessation of transactions in the third quarter as a result of our decision to wind down the car offer transactions business. Moving to OpEx, Our third quarter consolidated non-GAAP operating expenses totaled $142 million, up 7% year over year and 4% quarter over quarter, reflecting sequentially higher sales and marketing expense and investment in new product innovation, as I mentioned earlier. During the third quarter, we incurred $3.8 million in one-time cash restructuring charges, and we expect remaining cash restructuring charges of $2 million in the fourth quarter. Accordingly, we have narrowed our previously estimated range from $5 to $7 million to $5 to $6 million. We still expect to substantially complete the car offer wind down by year end, with total wind down related charges expected to be in the range of $13 to $15 million, which is lower than the original range of $14 to $19 million. Non-GAAP diluted earnings per share attributable to common stockholders was $0.57 for the third quarter, up $0.13 or 30% year over year. reflecting primarily the increase in adjusted EBITDA and lower diluted share count. We continued to generate strong free cash flow, and we ended the quarter with $179 million in cash and cash equivalents, a decrease of $52 million from the end of the second quarter, primarily driven by $111 million in share repurchases in the quarter, partly offset by higher adjusted EBITDA. As of September 30th, we have approximately $55 million remaining on our share repurchase authorizations. I will now close my prepared remarks with our guidance and outlook for the fourth quarter and full year 2025. As a reminder, due to the wind down of car offer, last quarter we stopped guiding to consolidated revenue and consolidated adjusted EBITDA and instead will guide to marketplace revenue and marketplace adjusted EBITDA as that is representative of our go forward operations. We expect our fourth quarter marketplace revenue to be in the range of $236 to $241 million up between 12 and 15% year-over-year, respectively. And we expect full-year Marketplace revenue to be in the range of $902 to $907 million, up between 13 and 14% year-over-year, respectively. For the fourth quarter, we expect our non-GAAP Marketplace adjusted EBITDA to be in the range of $83 to $91 million, up between 5% and 15% year-over-year, respectively. and we expect full-year marketplace adjusted EBITDA to be in the range of $313 to $321 million, up between 18% and 21% year-over-year, respectively. We expect to meet the discontinued operations criteria in the fourth quarter. As a result, we expect our full-year guidance, similar to the third and fourth quarters, to reflect marketplace absorbing approximately $1 million in ongoing quarterly car offer expenses as a result of the wind-down. Accordingly, we've included about $2 million of first-half costs that we expect to be recast to continuing operations once the criteria are met. These estimates are preliminary and subject to change. The midpoint of our Q4 guidance implies a full-year marketplace EBITDA margin of approximately 35%. We're pleased with the strength and growth of our marketplace and excited by the early results of our various new product investments. That innovation has delivered growing adoption across more dealer pillars and deeper consumer engagement across their shopping journey. That success reinforces our confidence to continue growing our investments in new, primarily AI-centric innovation across our dealer and consumer product suites that we believe will drive long-term growth. We expect fourth quarter non-GAAP consolidated earnings per share to be in the range of 61 cents to 67 cents, up between 13% and 24% year-over-year, respectively, and full-year consolidated earnings per share to be in the range of $2.19 to $2.25, up between 29% and 32% year-over-year, respectively. And we expect fourth quarter and full-year diluted weighted average common shares outstanding to be approximately $97 million and $101 million, respectively. With that, let's open the call for Q&A.

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We request participants please limit to one question and one follow-up. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question comes from the line of Chris Pierce with Needham and Company. Please go ahead.