Cars.com Inc. Common Stock

Ladies and gentlemen, and welcome to the CARS.com second quarter 2025 earnings call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 7, 2025. I would now like to turn the conference over to Catherine Chen, Vice President of Investor Relations. Please go ahead.

Good morning everyone and thank you for joining us for

the CARS.com Inc. second quarter 2025 conference call. With me this morning are Alex Sutter, CEO, and Sonia Jane, CFO. Alex will start by discussing the business highlights from our second quarter. Then Sonia will discuss our financial results in greater detail along with our outlook. We'll finish the call with Q&A. Before I turn the call over to Alex, I'd like to draw your attention to our forward-looking statements and the description and definition of non-GAAP financial measures, which can be found in our presentation. We will be discussing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, adjusted net income, and free cashflow. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the financial tables included with our press release and in the appendix of our presentation. Any forward-looking statements are subject to risks and uncertainties. For more information, please refer to the risk factors included in our SEC filing, including those in our most recently filed 10-K, which is available on the IR section of our website. We assume no obligation to update any forward-looking statements. Now, I'll turn the call over to Alex.

Thank you, Kathryn. Our second quarter performance reflected broad-based improvements across the business and strong execution on 2025 growth initiatives. Revenue of $179 million was steady -over-year, reflecting 5% -over-year growth in OEM and national revenue that partially offset temporary softness in dealer revenue. That said, I'm pleased to report that we grew dealer count both -over-year and -over-quarter, signaling a strong recovery and that our new -to-market changes are working. We deliver these positive outcomes while realizing cost efficiencies that drove adjusted EBITDA margin of .5% at the high end of our outlook, keeping us on track to grow profitably for the year. We also continue to pace ahead of our 2025 share buyback commitment, repurchasing $23 million of shares in Q2. Building on our healthy progress in the second quarter, our platform is poised for a re-acceleration in revenue growth and incremental profitability in the second half of the year. First, our new commercial leadership rapidly increased sales velocity to drive volume growth. Dealer count of 19,412 customers was up over 160 dealers, the best sequential organic growth we've delivered in over three years, lifting product adoption across the board. Second, we launched enhanced marketplace repackaging in June, bundling in more immediate features to maximize cars' commerce platform advantages. Website repackaging is also advancing, with multiple OEM agreements successfully completed year to date and more to come. Third, our product innovation cycle has been gaining speed. We unveiled new consumer AI features in the spring and early summer that are ramping quickly, contributing to differentiation, and driving our marketplace flywheel. And we're excited about continuous AI innovation and new enhancements we'll be launching for our customers later this year. It's also important to note that OEM growth should remain a tailwind in the coming quarters. OEM and national revenue grew 5% year over year in Q2, a positive result despite the uncertainty around tariffs that persisted in the quarter. Nearly half of our OEM partners increased their spending on our platform, but investment levels were variable throughout the quarter. Since OEMs can either immediately invest more or pull back in response to dynamic industry trends, we expect short lead times to continue this year. However, we're capturing upside and scatter dollars as the trade situation appears to be stabilizing, and we anticipate an upward trajectory in OEM media for the remainder of the year. With all of our growth drivers firmly in motion, we anticipate low single-digit year over year growth in the second half of 2025 and acceleration heading into 2026. Now let's turn to a discussion of our Q2 execution and the tailwinds that are contributing to our growth outlook. Strongcars.com marketplace performance persisted from Q1 into Q2 and we're excited for future growth in the second half of this year. Traffic hit a new second quarter record of 162 million, up 2% year over year. Average monthly unique visitors totaled 26.6 million and was up year over year in each month of the quarter. Like other automotive players, we experienced a tariff-motivated surge of consumer demand, which we capitalized on to improve overall lead delivery. Our recently upgraded Lead Intelligence, which provides dealers with individualized consumer insights such as shopper history, listing views, and estimated budgets, has enhanced lead quality. Over 50% of our marketplace subscribers used this feature at least once in the first six weeks of launch. We're now working on additional analytics and CRM integrations to make this feature even more powerful and directly linked to retail outcomes. Turning to the consumer experience, 73% of Cars.com shoppers are undecided on make, model, or dealer selection when they begin their journey and we see AI as a critical tool to drive lead volume and quality. Consumers browsing Cars.com are benefiting from a major update in the form of our new AI-powered search capabilities. In May, we began augmenting standard keyword searches with natural language recognition, converting conversational queries like, new SUVs under $35,000, into tailored shopping results. It's still early days, but lead submission rates from visitors using AI search are already two times higher than regular search and account for nearly 20% of internet leads submitted. The feature is prominent at the top of our homepage and we encourage everyone to try it out for a more enhanced car buying experience. We have immediate plans to integrate editorial content into the search experience for the personalized results and comparisons and enable completion of lead submissions and trade and value requests using AI. We're committed to developing and implementing ways to leverage AI to drive performance and open up new growth vectors. Our editorial dominance supported our marketplace performance with timely content ahead of the busy summer car buying season. The annual Cars.com American-Made Index, or AMI, attracted 71% more visitors compared to a year ago to market's most successful campaign in over five years. You may have seen our -in-chief on Good Morning America last week discussing our proprietary car seat safety research and reaching millions of viewers on a national scale. Unique and relevant research and shopping resources found only on Cars.com clearly remain integral to the car buying journey. Our extensive content library complements the rising use of AI agents who rely on our expertise and heavily reference our content and brand. Not to mention, we have a multi-decade advantage in building our automotive authority and consumer trust, with AMI being a great example as it celebrates its 20th anniversary this year. We remain confident in maintaining our position as the number one most recognized consumer automotive marketplace. We're pleased that this consumer momentum is being matched with dealer success. Total dealer count rose to 19,412 dealers in Q2, up 162 customers quarter over quarter, and our best organic performance since the start of 2022. Notably, Marketplace accounted for more than half of that sequential growth, in addition to the strong gains posted by website and appraisal solutions. Our continued organizational and -to-market changes are helping us move more nimbly and close more sales opportunities. The sales pipeline is strengthening and we're excited to see continued improvements in the next few quarters. And based on our growing network of dealer partners, cross-selling and repackaging, which Sonya will discuss shortly, we also expect ARPD expansion in the second half of the year. Turning to our solution suite, our focus on cross-selling the Cars Commerce platform yielded strong product adoption in the second quarter. Accutrade and Dealer Club continue to garner strong customer interest and usage as dealer competition intensifies for sourcing used vehicle inventory. Accutrade grew its subscriber base to 1,070 dealers in Q2. And today, I'm excited to share that we signed an enterprise-level deal with one of the largest independent dealer groups in the country. During a rigorous pilot program, Accutrade's valuation software outperformed this partner's legacy provider in speed and accuracy, leading to a significant win and further expanding Accutrade's existing penetration at the dealer group's 150 stores. More broadly, Accutrade appraisal activity reached 925,000 appraisals in Q2, up 14% quarter over quarter, and the second consecutive quarter of double-digit growth. Dealers also continue to acquire roughly 20 cars on average per month via Accutrade. We're confident in this solution's transformative value for the industry, particularly as the largest dealer groups increasingly focus on acquiring vehicles from consumers in recognition of the superior profitability being unlocked by technology-driven dealerships. Our ability to disrupt legacy auctions and enable retailers to operate more independently remains central to our strategy, but we aim to disrupt traditional online auctions, too. Dealer Club, after completing its first full quarter as a cars commerce solution, grew transaction volume 50% sequentially. As a reminder, Dealer Club offers a new channel for -to-dealer trading with its transparent, reputation-based format. Dealer Club also enhances the advantages of our platform as we develop data-driven, intelligent inventory management solutions that help dealers maximize the profit potential of each vehicle through either retail or wholesale channels. Dealer Club product development has moved extremely fast. In April, we turned on the ability for dealers to push Accutrade appraisals into Dealer Club auctions. In May, we launched a cars.com to Dealer Club direct integration, fully closing the loop between retail, wholesale, and appraisal technologies to complete a comprehensive used car solution. In practice, aging retail units are now automatically surfaced to dealers and can be seamlessly transitioned to wholesale. We're the first marketplace to offer this level of analytics to empower wholesale optionality for customers, and we expect a strong, positive response from dealers as they learn more about these capabilities. It's very early, but we're encouraged with our initial momentum. Finally, switching gears to dealer-inspire and D2C media, we grew to nearly 7,800 websites in Q2. Over the past two years, we've continuously invested in upgrading and modernizing the infrastructure that powers these sites. Recent developments now allow us to complete site deployment and complex updates in a matter of minutes, keeping pace with the dynamic nature of real-time dealership operations. Our innovation reinforces our ability to negotiate and repackage website agreements, for which we have a strong pipeline for the remainder of 2025. With a strong exit rate in June, momentum and key performance indicators, and industry tailwinds that favor our platform strategy and used car products, we feel well positioned for revenue growth in the second half of the year and beyond. And now, I'll turn the call over to Sonja to discuss our second quarter financial results. Sonja?

Thank you, Alex. Second quarter revenue was steady year over year, with underlying operational discipline producing adjusted EBITDA and adjusted EBITDA margin at the high end of expectations. Importantly, momentum in marketplace and solutions products underpins our confidence in returning to top-line growth. We are also raising our full-year share repurchase target to $70 to $90 million, consistent with our commitment to return value to shareholders. With multiple levers improving across the business, we have line of sight to deliver stronger financial and operating results heading into the rest of 2025. As we communicated at the start of the year, 2025 was always expected to be a tale of two halves, with the first half focused on laying the groundwork for growth initiatives and the second half focused on realizing the resulting benefits in the form of revenue growth. Here at the halfway point, and despite macro and tariff distractions, we have successfully achieved our first half operating objective and expect further gains to accrete as these initiatives mature. Second quarter revenue was $178.7 million, flat year over year and quarter over quarter, and generally in line with our expectations. We executed on our growth initiative to drive positive sales velocity and volume growth, albeit balanced against a slightly lower ARPD due to mix, which resulted in dealer revenue being down 1% year over year. Solutions was again a strong contributor, with websites and Accutrade each adding around 50 new customers sequentially in Q2. Accutrade's penetration is now at nearly 1,100 customers. This includes 80 new and existing stores from the recently signed enterprise deal that Alex spoke to earlier, and other roughly 70 stores will be onboarded throughout the rest of 2025. Offsetting solutions growth, Marketplace and media continue to rebound from a slower start to the year, and customer hesitancy to commit discretionary advertising dollars. Nevertheless, total Marketplace customers have grown sequentially in every month since January, now including July. And notably, Marketplace was our biggest net contributor to sequential dealer count improvement in the quarter. Overall, we're pleased with the broad-based positive unit growth that we've delivered in Q2, particularly for our key focus area of Marketplace. Our repackaging efforts are already underway, and will deliver higher value to our customers, improving retention while supporting ARPD expansion on top of this larger installed base. Rounding off the revenue discussion, OEM and national revenue was up 5% year over year, inclusive of early quarter shifts in advertising investments. While Q2 OEM revenue typically trends up month over month, we saw fluctuations beyond normal seasonality this year. For example, sell-through rates declined nearly a third year over year on certain display products at the start of the quarter, whereas we would have expected a stronger run rate in the normal course of business. OEMs continue to prioritize marketing and advertising flexibility, and we are staying close to our partners to capitalize opportunistically on scattered dollars where possible. Incrementals were robust in Q2, even on shorter lead times, which is a healthy sign that should be amplified as more trade resolutions are reached. We are confident that our OEM book of business will remain a revenue tailwind based on our strong Marketplace traffic and scaled consumer audience. Now on to operating expenses. Second quarter expenses were $163 million compared to $169 million a year ago, down 3% year over year, as dealer club costs that were absent in the prior year period were fully offset by cost controls around headcount and lease related expenses, as well as shifts in marketing investments. Adjusted operating expenses were $153 million, down 2% from $156 million a year ago, primarily due to the aforementioned items. Products and technology expenditures increased $1.1 million on a reported basis and $1.6 million on an adjusted basis due to the dealer club related investments that were absent in the prior year period. Marketing and sales costs decreased around $2.5 million year over year on both a reported and adjusted basis, largely due to shifts in marketing investments as our teams leverage tariff driven consumer demand to produce record traffic and audience metrics. General and administrative expense was down $1.3 million year over year on a reported basis and roughly flat on an adjusted basis. The majority of the reported decrease was attributable to the lease amendment completed in Q4 2024. Net income for the second quarter was $7 million or $0.11 per diluted share compared to net income of $11 million or $0.17 per diluted share a year ago. The difference in net income is primarily due to changes in the fair value of contingent consideration for prior acquisitions that were included in the prior year period. Adjusted net income for the second quarter was $26 million or $0.41 per diluted share compared to $0.38 per diluted share a year ago, reflecting our focus on reducing share count. Adjusted EBITDA of $51 million in the second quarter was up slightly year over year and adjusted EBITDA margin of .5% in the second quarter was at the high end of our outlook range due to prudent cost management across the organization. Turning to key metrics, we're pleased with dealer customer growth and we believe the commercial and other changes we made earlier this year will support further sustainable growth across all of our major product lines. ARPD in the second quarter was $2,435, down around $40 both year over year and sequentially, largely due to mix. And as previously mentioned, ARPD can be non-linear, particularly in periods of relatively strong dealer customer growth. That said, we have proven our ability to steadily grow customer wallet share over time through efforts like re-packaging, which is a key growth initiative that we are committed to delivering in 2025. In late Q2, new Marketplace Premium and Premium Plus packages were launched on a rolling basis, putting us on track to begin recognizing these pricing benefits beginning in Q3. These packages are designed to help dealers take advantage of the cars commerce platform through additional vehicle merchandising and media features. Website repackaging is also progressing better than planned. We completed another negotiation in June and are optimistic that additional deals can be closed by the Q4 timeframe. While cross-selling is expected to provide less of a stair-step improvement to ARPD this year, it remains an important long-term growth driver for our platform. An ancillary benefit of our Marketplace repackaging is that by bundling additional media features, we are efficiently surfacing our full suite of products to more customers with less friction. We are also focused on deepening integration across the platform to drive more cross-selling opportunities. Now switching to cash flow and the balance sheet, net cash provided by operating activities totaled $56 million for the first half of the year, compared to $69 million a year ago. The -over-year variance is largely attributable to the anticipated increase in earn-out payments associated with the -to-C acquisition. Free cash flow was $42 million -to-date, down -over-year, primarily reflecting the aforementioned items. Share buybacks totaled $3.7 million shares for $45 million -to-date, representing close to 107% free cash flow over this period. In light of the repurchases to date, our expectations for growth and to reaffirm our strong commitment to return capital to shareholders, we are raising our full year repurchase target to -$90 million, compared to the previous range of -$70 million. That outstanding was $460 million as of June 30, 2025, equivalent to a total net leverage ratio of 2.1 times, and comfortably at the low end of our target range of 2 to 2.5 times. Total liquidity was $318 million as of June 30, 2025, giving us substantial capacity to thoughtfully allocate capital and pursue long-term value creation. Finally, let's conclude with our outlook for the remainder of 2025. For the second half of 2025, we anticipate low single-digit revenue growth -over-year. This is consistent with our original view that growth would be back half-weighted, as mid-year growth initiatives are launched and then compounded in later quarters. These initiatives include our new Marketplace Premium Plus package, additional website repackaging, and improved sales velocity, as well as continued product integration of Dealer Club. This outlook is based on the assumption that macroeconomic conditions stay relatively stable from today's baseline. Candidly, there still remains uncertainty on second half new vehicle production and pricing forecasts, which affects discretionary media spending by our customers. This means advertising revenue can shift inter-quarter to account for changes in inventory, model launches, new incentives, and other activities that typically warrant promotion to consumers. However, should there be more consistency in the operating environment that could also lead to more favorability and upside for our media offerings? We are also reaffirming adjusted EBITDA margin outlook for fiscal 2025 between 29 to 31%, reflecting ongoing cost discipline, high contribution margin from growth initiatives, and overall revenue growth. We feel well positioned to deliver continued improvement in operating metrics, which will drive both top and bottom line growth and create long-term value for shareholders. And with that, I'd like to open the call for Q&A.

Operator? Thank you. Ladies and gentlemen, we will now begin

the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please leave the handset before pressing any keys. Your first question comes from

JP

Morgan.

Please go ahead. A lot of commentary on the call.

Looks like a lot of momentum in the business. I wanted to clarify a few comments on just the outlook. I think Sonia, you mentioned that so in acceleration through the quarter, I think you specifically mentioned the June so in acceleration in the business and then you expect further acceleration in the second half. Curious if you could quantify a bit what that means, how was June versus April. And then even the second half, does it mean that both quarters in acceleration from the third quarter? And I think that Alex mentioned that you expect further acceleration in 2026. Any more quantification across those comments would be helpful. I have a couple quick follow-ups.

I think in a subscription business like ours, you take some time to bring in dealers and then see the full revenue benefit accumulate over the course of the quarter and then to the full year. So I would expect to see acceleration from Q2 to Q3 to Q4 as part of a to our subscriber base that drives revenue. And I think acceleration is driven by two things for us. One is obviously the unit growth. We were excited to see broad-based growth and adoption of products across the business in Q2. And that will then in Q3 and Q4 have our repackaging efforts layered on top of that larger dealer customer base.

Got it. And in terms of the average revenue per dealer, so it's safe to assume that third quarter will be better than the second quarter? And is that a sequential comment or is that a year after year comment? I think you're rough with two on the call.

Generally, I was making the comment as a sequential comment as repackaging kicks in, we would expect to see growth from Q2 to Q3 into Q4. Got

it. And just a broader question zooming out a bit as it relates to agentic AI. Obviously that continues to evolve with tools that can autonomously search, compare, like even transact on behalf of users. How are you viewing the impact to your marketplace model, just broader marketplace industry? How are you thinking about the opportunity to integrate or enable these agents within your platform versus maybe the risk of disintermediation as these agents potentially bypass some of these interfaces? I'm curious which phase of the journey are you in? How are you navigating this? How are you using this as an opportunity? Any more color would be helpful. Thanks.

Sure, Roger. Well, we're really pleased with the product innovation that we had on the agentic side in the quarter. Our homepage search queries are generating twice the engagement, twice the leads and producing a much stickier user experience. And we're going to continue to build on that capability and then even be able to deploy some of that tech to our dealer website customers as well. So we're getting a lot of leverage out of the advancements in our product set. I also would point that while the majority of our traffic comes to us directly because of the strength of our brand, both app and people typing directly our brand into the browsers, we have a much lower dependency on what I'll call technical SEO. Our competitors rely on technical SEO at a far greater level than we do because we source the majority of our traffic directly due to the strength of the brand. So it's both an opportunity and from a threat standpoint, it's relatively minimal. I think the other opportunity, as we noted on the call, the strength of our editorial content, we're layering that into as many of the AI engines that we can, which is rendering our brand recognition and serving as a real halo for our authority. As you know, auto is a multi-touch, omni-channel experience. So it doesn't have the same disruptive threat of say, you know, variable or arbitrage models because consumers are seeking out multiple destinations. And so we generally think our content advantage serves as a strength and a halo to get incremental brand exposure through these engines, which consumers will come to us directly to think out more information.

Understood. Great. Thanks for the call, and I'll get back in here. Your next question comes from Tom White of

the A. Davidson. Please go ahead.

Great. Thanks. Good morning. Two, if I could. First one's just kind of on the drivers of dealer revenue growth. So you added the dealers in the quarter, which was nice to see, obviously. But I guess, you know, I'm trying to understand what's happening with ARPD. It was down a bit sequentially and then also down 2% year over year. I think, Sonia, you mentioned it was mixed, but can you just elaborate on mix of what exactly? Is it just sort of size of some of the recent dealer ads? Is it product mix? You know, I just, given that you guys are selling in some additional products into those dealers, just trying to understand why ARPD hasn't been a little bit more buoyant. And then I have a follow-up on Accutre.

Sure. Thanks. Thanks for the question, Tom. I you actually get on the answer in your question. I mean, look, I think we're seeing some small fluctuations in ARPD. It's about a $40 Delta, primarily due to two things, I would say, customer mix and product mix. And then a little bit is, on the customer mix side, you know, franchise dealers continue to comprise about two thirds of our customer base. But I would say we're adding Indies at probably a faster clip. And so they do tend to have a slightly lower ARPD, which will bring the blended average down. That's not a bad thing. I mean, we think a healthy marketplace requires a good mix of both types of dealers, but mechanically it impacts ARPD. The second thing I would say is we have a growing base of what I will call like solutions first customers, which means they're coming to us as website customers only, at least initially. And then we cross-sell them into other products. And that, again, mechanically speaking, can be can create a little bit of initial drag on ARPD. And then within media, we have seen, well, we've seen some growth in terms of unit adoption of the products. We definitely did see a little bit of tempering in spend. So not a complete pullback, but, you know, people were a little bit more cautious in the quarter, which also impacted our ARPD. Ultimately, I see revenue as moving with both dealer count and ARPD, but they won't always move linearly together. And some of the periods where we have more net dealer additions, those dealers typically come to us by buying like one product initially, and then we build up their ARPD over time. So I think that's also manifesting a little bit in the numbers as well. But bottom line is it's a little bit customer mix, a little bit product mix, as you kind of suggested.

Okay. And then just to clarify, I think you mentioned the impact of media. Isn't there some media that's excluded from ARPD? Can you just remind me what sort of media services or advertising is included and not included in that number?

Yeah, I think I would say probably the biggest piece of media products that are not included in ARPD would be the digital advertising suite that was part of the dealer-inspired website. SEDC has a similar business up in Canada as well. And so that is not included in our ARPD.

Okay, that's helpful. Thanks. And then just lastly on accu trades, I think appraisals up 14%. Alex, I think you mentioned that dealers are acquiring 20 vehicles on average per month. I guess, if this thing works well and it really gets integrated into kind of the -to-day percentage of their total, the average dealer's kind of total used vehicle intake, do you think this product might realistically account for? I'm just curious how to think about that. I want to hit 20 vehicles on average per month. Sounds good. But what could it get to sort of for the average dealer?

Thanks. You know, Tom, I read the earnings transcript of three of the big publicly traded companies that recently reported. And interestingly, all three of them had wildly different percentages of their total volume. I think one was 20%. One was like two-thirds. And so this is evolutionary for the industry. I think what's driving it obviously are, you know, obviously one of the majorities of their inventory directly from consumers and finding that that inventory turns at a faster clip. And so it's adding to their profitability per unit. And so, you know, we just held a conference in Chicago with about 70 dealer operators. And this was the number one theme on their mind was how do they source more used cars directly. So hard to predict in terms of where that percentage will normalize out. But without a doubt, it's a very durable proof point because dealers are looking to bypass auction fees and source more cars directly.

Okay. Thank you very much. Appreciate it. Thank you. Your next question comes from the VADCAN of B. Riley Securities. Please go ahead. Thank you very much.

Maybe just on the active trade, maybe give us some color on the retention of the customers you've had. Has that been improving? Is it at a level that you would like it to be or is there a scope of improving it further? And then, secondarily, in terms of just the market-phase repackaging effort, is it going to roll out all in Q3 or through the course of, say, the next six months to a year? How should we think about the timing? And is there a risk that as you go through the exercise, some dealers might churn out or is that not necessarily the case? How should we be thinking about it? Thank you.

Sure. I'll start on the active trade theme and then turn it to Sonja for the marketplace repackaging. First of all, look, we're pleased with the growth in active trade and certainly, as Tom just asked, from a macro picture, we know we're on the winning side of history here in terms of how dealers are going to start to source cars differently and improve their overall customer experience and sourcing strategies. Where we do have churn on active trade is when the product is tied to the individual as opposed to a store-wide mandate. And so, as dealership personnel moves from store to store, we'll see churn from one dealership, but then that personnel will want to re-sign up for active trade at another store. So, it's frustrating that so much of our success is tied to individuals as opposed to top-down mandates. I was really pleased and as I shared on the call to get an enterprise deal with one of the larger dealer groups in the country, who from a top-down standpoint is standardizing active trade across all their stores because they've tested it in 30 dealerships and found that their profit per unit was higher and their customer experience was showing much stronger satisfaction for the stores using accu-trade. And so, increasingly, I hope that more top-down decision-making will happen across the industry where they will institutionalize accu-trade and will move beyond it being more of a personal passion. But overall, we're very pleased with the trends that we're seeing. I'll also note that Dealer Club is an important part of this ingredient where dealers are able to buy all the cars they can from customers and now we're giving them wholesale optionality where they can unload a car into a wholesale market so that they are inclined to buy more cars and trade them out either retail or wholesale. So, Sonia, do you want to comment on the marketplace question?

Yeah, sure. So, on repackaging, I would say we're rolling it out over the course of, you know, the next two quarters. This repackage, this is truly, I would say, a repackaging effort. The last time we did this, which you recall back in 2023, it was as much or more of a pricing action as it was a repackaging effort. This is really about creating a new top-tier premium plus package and giving dealers more added value, more access to our platform, simplifying kind of the cross-selling -to-market motion. So, we certainly model out a variety of scenarios which are then factored into our numbers, but this is much more of an opt-in to more value and, yes, it will also help us grow our ARPD.

Awesome. Thank you. Your next question comes from Joe Spack of

UBS. Please go ahead.

Thanks so much for the question. I guess maybe just to start on the guidance, I was wondering if you could help us a little bit because I think there's some, you know, historically, you know, in the back half of the year, you've got a pretty even split of revenue, 50-50 between third quarter and fourth quarter, but it sounds like you're saying ARPD goes quarter over quarter, third quarter to fourth quarter, which would imply, you know, maybe a little bit stronger fourth quarter, but then I think on a -over-year basis, you also have a few points of an easy comp issue from the SDK in the third quarter. So, when we sort of meld that all together, is there any color you could provide? Just sort of how you're thinking about

the cadence for the rest of the year? Yeah, so

I think as we kind of mentioned earlier, I think with particularly with repackaging and net unit adds and given that the bulk of the business is a subscription-based business, as the repackaging efforts start seasoning, we won't see the full quarter benefit of that in Q3. You really start seeing the revenue like fully accumulate in Q4 and potentially into the exit rate and into next year as well. Same with the net additions, is the net additions really accumulate in the quarter after they occur, which is why we're talking about kind of the sequential acceleration. And because of, as you point out, the way the second half last year was shaped, it will also result in higher -over-year growth in Q4 versus Q3.

Okay, thank you. And when you talk about OEM growth as a tailwind, I just wanted if we could sort of maybe double click on that, like are you talking again sequentially or from sort of first half levels or on a -over-year basis or is that really more into 26?

Um, you know, we're pleased with how we were able to grow OEM and national revenue in Q2 despite a little bit more of the challenging backdrop. I think, you know, obviously visibility isn't as high, I think, as we would like it to be, but we see OEM still making moves. We had a strong, incremental sales in Q2 and that gives us like a fairly positive view on how OEM and national can help us deliver towards our revenue goals in both Q3 and Q4. So I wouldn't say it's just a 2026 thing. Certainly as visibility increases, we think that makes it a little bit more straightforward to go out and win those dollars, but that's also why we're staying close to all of our OEM partners because we know the scattered dollars will be there.

Okay, and then just finally, Alex, I guess I'd be remiss if I didn't sort of ask you your sort of opinions on some of the recent, you know, Amazon news with them getting more into used and CPO and, you know, I know they've already, you know, tried or have some efforts on the new side. It seems like they're getting more into the used side. Just want to get your view on sort of how you see that competitive threat, if it is one, and if you're able to sort of share maybe any feedback you've had from your deal or customers about their initiatives.

Sure, Joe. Thanks for the question. I think as you know from your coverage, this is a very specialized category that has a lot of nuance within the market and I'll certainly say there's room for many players in this category. I look at all the horizontal players as potential threats, but this is a very specialized vertical industry with multiple layers between OEMs, dealers, and obviously consumers all playing an important part. What I love about our business is that we've built a very durable, strong business that's vertically integrated deeply into the market. So we're built to withstand, you know, threats from anyone trend or player. And I have talked to a lot of the dealers on the dealer council and the feedback thus far has been there's a lot of effort but not a lot of traction. And so, you know, personally I'd love to be a reseller of Amazon's solutions to the industry and ship dollars away from Google, right? Like we've got the distribution already built and if Amazon's serious about wanting to sell advertising into the automotive industry, I think we're an established platform that could provide a lot of scale and help on that just like we've helped dealers with Google My Business or buying traffic on Facebook using our first party data. So it's early, we're watching it closely, but I know the business is very

fortified for the long term. Appreciate it. Thanks.

Your

next question comes from

Gary Prestopino of Barrington Research. Please go ahead.

Hi, good morning all. Alex, I just wanted to talk about something you have in the dealer club narrative on the deck of the directcars.com, the dealer club integration for surfacing age marketplace inventory. I mean, does that automatically notify a dealer in terms of, you know, when their inventory ages to a certain amount of days that hey, maybe you should put this thing out in the wholesale channel rather than holding on to it?

Yes, I mean the integration on the product side, I'm certainly very pleased about how our teams have not only embraced dealer club, but how fast the dealer club team has moved to build deep product integrations. And certainly we started with Accutrade, but now leveraging the insights from our cars.com marketplace, every dealer's inventory is now pre-populated in dealer club. So when they enroll with dealer club, they can immediately see their inventory sorted by age, with aging units being obviously the most attractive with one-click launch to wholesale capability. So this saves dealerships a ton of time. It provides them an immediate point of egress. It's obviously a free addition to their marketplace subscription, you know, and we only charge fees on the buy side. So it's an absolutely tremendous addition to our platform. You know, user data is up double digits, quarter over quarter, and transactions have been growing at 50% quarter over quarter. So it's relatively small, it's early stage, but the market receptivity that we're getting here is tremendous. And as you know, Gary, the play here is disruptive in that we want to build this D2D trading platform without the heavy inspector costs, right? We don't want to reputational nature of this platform. We also are seeing that we're able to bypass the arbitration risk that a lot of the traditional online auctions are incurring. And so it's a very asset light strategy. It enables technology to power dealers to do trading amongst themselves and disrupt the $10 billion auction industry that's largely beat bills on a fee structure where we think we can enable dealers to operate more independently and trade more as a collective and pass that savings back to the dealer community. So again, very early stage, I hope Dealer Club will contribute much more meaningful to revenue in 2026, but we're very pleased with the initial entry into the market.

Okay, can you share anything on Accutrade as far as the appraisals? What percentage of those appraisals are being converted at the dealer level?

Well, we know dealers from data we can see are

acquiring about 20 cars per dealership that are using the software reliably. And that's obviously you think about the auction fees on that alone, just by one car would pay for the Accutrade subscription. So we have no doubt to the profitability. We also know the number one feedback we're getting from dealerships is saving them from hidden repair costs that aren't captured with more physical inspections. And so dealers are citing that the savings that they're generating from not overpaying for inventory is the other big ROI. So those are the two primary drivers that we're seeing dealers appreciate about our approach here. As to the specific number that you're asking for, I'll have to get back to you to give you a more accurate number. But generally, we know the feedback on the product has been tremendous. We are piloting more solutions around Accutrade to add capabilities such as an IMS, and we hope to have more news on that shortly. Okay.

And then just real quickly, coming out of the quarter, I would assume the dealer market is still rather cautious. You had some pre-buying in the quarter to try and beat tariffs, but anything that you could address there in terms of what their collective outlook may be going forward, that would be helpful.

I think sentiment's improving, Gary. This isn't the first cycle where the system gets shocked by larger macro news. We see dealers pull back, and then they see the durability of the consumer and return to being competitive in spending. And we're certainly thrilled with the dealer growth in Q2 at over 160 dealers. We know that'll translate to dealer growth in Q3. And I'll just note that we also saw strong dealer growth in July. So that dealer sentiment clearly is showing a willingness to get back in the game and compete. And I definitely, on our market travels and time with dealers, we're seeing a much more aggressive focus on, okay, the world isn't falling apart. How do I compete more for volume? And that serves us extremely well because we're obviously reaching consumers at the last mile, and

dealers need to be there. Okay, thank you. Your next question comes from Marvin Fong of

BTIG. Please go ahead.

Good morning. Thanks for taking my questions here. We'd just like to understand a bit better the increased sales velocity comment. I know you have a new person heading that effort up, and just wanted to understand a little bit better what exactly did you mean by that and how are you changing the -to-market there? And then kind of a related question, but I think I just want to confirm you said you expect dealer count to be up sequentially, kind of both quarters for the remainder of the year. Just want to confirm that. And I know that historically Q4 has a bit of seasonal weakness. So I just want to confirm you expect to be able to add dealers in the fourth quarter even with that seasonality. Did I understand that right? Thanks.

Sure. Well, I'll point out that our -to-market changes are more than just one person or team, although we certainly obviously have made changes at the leadership level, but we've also fortified her team with several staff that have come and brought new insights and energy that we're thrilled with the way that they've enhanced our -to-market. We're also doing a lot much more on the data and targeting front, which is helping facilitate cross-selling. I'm really pleased with how quickly this team has adopted Dealer Club as part of their -to-market motion. And not, you know, weighted on that. And so the team is driving much more integration of our collective solutions into the dealer community and getting the cross-sell started at a faster rate. So there's several things that we're excited about in the improve -to-market motion. And then, yeah, certainly Q4 always has sort of seasonal softness. I think this is a little bit different because dealers we know pulled back earlier in the year due to the tariff challenges. And certainly the dealerships that are reporting record profits are the ones that are relying far more aggressively on technology forward solutions. And I think that awareness is driving behavior across the industry that gives me confidence that this won't be a seasonal issue that dealers are having to figure out how do I sustain my profitability per unit and overall. And it isn't by, you know, adding headcount. It's about using technology-driven solutions and being more efficient in the way they operate. And so that's beyond anyone's seasonal trend. So yes, we think we can continue to grow dealer count throughout the second half.

Great. And if I could sneak one more in, just wondering if you're seeing any difference in behavior by nameplate. So for instance, the one maybe BMW and Toyota are seeing a little bit more pressure saying they're going to have to raise prices maybe more than some other nameplate. Are you seeing any differentiation among the dealerships based on sort of their tariff exposure and how they're behaving?

You know, not at the dealership level as much. Most of the dealerships are shifting more aggressively to use cars more broadly just to insulate their business from the macro tariff noise and issues. But we are seeing differences in OEM behavior. You know, I think obviously, you know, just by looking at our website, you can see that Hyundai's been stepping up a lot more aggressively with us over the past quarter, and you're seeing that translate to greater sales. Nissan as well currently, I believe, is highly prominent throughout the experience. And importantly, we're seeing a shift in OEMs wanting to get better at measuring tier three outcomes. As you know, Marvin, this has been one of the disconnects that we've seen as Cars Commerce is that OEM marketing initiatives are trying to drive traffic to tier one and dealers are trying to get consumers to convert to tier three. With our platform, we're working with OEMs to show them that tier one investments are most successful when they drive tier three sales outcomes. And the fact that we're getting great conversations started with OEMs and some tests where we can measure not only what activities does their investment generate on our marketplace, but we can measure their dealer network websites as well to validate that these strategies are driving dealer sales. And so I told you that would be a multi-year journey to get OEMs to value us on tier three outcomes. I still think we're early innings there, but the fact that the data is showing such strong response from certain OEMs that are leaning into it, I think is a great example of what's

to come. Okay, that's terrific. Thanks so much, Alex.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for attending. You may now disconnect your lines.

Goodbye.