Cars.com Q2 2025 Earnings Report

Cars.com EPS Results

• Actual EPS: $0.41
• Consensus EPS: $0.45
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: $0.38

Cars.com Revenue Results

• Actual Revenue: $178.74 million
• Expected Revenue: $179.43 million
• Beat/Miss: Missed by -$692.00 thousand
• YoY Revenue Growth: -0.10%

Cars.com Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 9:00AM ET

Cars.com (NYSE:CARS), through its subsidiaries, operates as a digital automotive marketplace that connects local car dealers to consumers in the United States. The company offers a suite of digital solutions that creates connections between individuals researching cars or looking to purchase a car with car dealerships and automotive original equipment manufacturers. It also sells online subscription advertising products to car dealerships by its direct sales force, as well as through its affiliate sales channel. In addition, the company sells display advertising to national advertisers. Further, it offers online automotive marketplace service that connects buyers and sellers through Cars.com, Auto.com, DealerRater.com, NewCars.com, PickupTrucks.com, DealerInspire.com, and LaunchDigitalMarketing.com Websites. Its platform hosts approximately 4.9 million new and used vehicle listings and serves approximately 20,000 franchise and independent car dealers. Cars.com Inc. was founded in 1998 and is headquartered in Chicago, Illinois.

Cars.com Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Our dealer count grew by 162 quarter-over-quarter to 19,412, marking the best organic growth in over three years after implementing new go-to-market changes.
• Neutral Sentiment: Second quarter revenue was flat at $178.7 million year-over-year, as 5% OEM and national growth partially offset temporary dealer revenue softness.
• Positive Sentiment: We delivered a 28.5% adjusted EBITDA margin in Q2, hitting the high end of our outlook through disciplined cost efficiencies.
• Negative Sentiment: Average revenue per dealer declined by about $40 year-over-year and sequentially, driven by shifts in customer mix and cautious media spending.
• Positive Sentiment: The new AI-powered natural language search launched in May has already doubled lead submission rates and accounts for nearly 20% of internet leads.

Presentation

[Operator]

Morning, ladies and gentlemen, and welcome to the cars.com Second Quarter twenty twenty five Earnings Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 08/07/2025. I would now like to turn the conference over to Katherine Chen, Vice President of Investor Relations. Please go ahead.

[Katherine Chen, VP - IR at Cars.com]

Good morning, everyone, and thank you for joining us for the Cars dot com Inc. Second quarter twenty twenty five conference call. With me this morning are Alex Vetter, CEO and Sonia Jain, 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.

[Katherine Chen, VP - IR at Cars.com]

We'll finish the call with Q and 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 cash flow. Reconciliations 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.

[Katherine Chen, VP - IR at Cars.com]

For more information, please refer to the risk factors included in our SEC filings, including those in our most recently filed 10 ks, 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.

[Alex Vetter, Director, President & CEO at Cars.com]

Thank you, Katherine. Our second quarter performance reflected broad based improvements across the business and strong execution on twenty twenty five growth initiatives. Revenue of $179,000,000 was steady year over year, reflecting 5% year 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 year over year and quarter over quarter, signaling a strong recovery and that our new go to market changes are working. We delivered these positive outcomes while realizing cost efficiencies that drove adjusted EBITDA margin of 28.5 at the high end of our outlook, keeping us on track to grow profitably for the year.

[Alex Vetter, Director, President & CEO at Cars.com]

We also continue to pace ahead of our 2025 share buyback commitment, repurchasing $23,000,000 of shares in Q2. Building on our healthy progress in the second quarter, our platform is poised for reacceleration 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 media features to maximize Cars Commerce platform advantages.

[Alex Vetter, Director, President & CEO at Cars.com]

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.

[Alex Vetter, Director, President & CEO at Cars.com]

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 2025 and acceleration heading into 2026.

[Alex Vetter, Director, President & CEO at Cars.com]

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 162,000,000, up 2% year over year. Average monthly unique visitors totaled 26,600,000 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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.

[Alex Vetter, Director, President & CEO at Cars.com]

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 in value requests using AI. We're committed to developing and implementing ways to leverage AI to drive performance and open up new growth vectors.

[Alex Vetter, Director, President & CEO at Cars.com]

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 editor 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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 twentieth 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.

[Alex Vetter, Director, President & CEO at Cars.com]

Our continued organizational and go 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 Sonia will discuss shortly, we also expect ARPD expansion in the second half of the year. Turning to our solutions suite, our focus on cross selling the CarsCommerce platform yielded strong product adoption in the second quarter. Accu Trade and Dealer Club continue to garner strong customer interest and usage as dealer competition intensifies for sourcing used vehicle inventory.

[Alex Vetter, Director, President & CEO at Cars.com]

Accu Trade grew its subscriber base to ten seventy 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 Accu Trade.

[Alex Vetter, Director, President & CEO at Cars.com]

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 dealer 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.

[Alex Vetter, Director, President & CEO at Cars.com]

Dealer Club product development has moved extremely fast. In April, we turned on the ability for dealers to push Accu Trade 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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.

[Alex Vetter, Director, President & CEO at Cars.com]

With a strong exit rate in June, momentum in 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 Sonya to discuss our second quarter financial results. Sonya?

[Sonia Jain, CFO at Cars.com]

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 70,000,000 to $90,000,000 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.

[Sonia Jain, CFO at Cars.com]

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 objectives and expect further gains to accrete as these initiatives mature. Second quarter revenue was $178,700,000 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.

[Sonia Jain, CFO at Cars.com]

AccuTrace 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. Another roughly 70 stores will be onboarded throughout the rest of 2025. Offsetting solutions growth, Marketplace and Media continued 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.

[Sonia Jain, CFO at Cars.com]

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.

[Sonia Jain, CFO at Cars.com]

For example, sell through rates declined nearly onethree 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 scatter 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.

[Sonia Jain, CFO at Cars.com]

Second quarter expenses were $163,000,000 compared to $169,000,000 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 $153,000,000 down 2% from $156,000,000 a year ago, primarily due to the aforementioned items. Products and technology expenditures increased $1,100,000 on a reported basis and $1,600,000 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 $2,500,000 year over year on both a reported and adjusted basis, largely due to shifts in marketing investments as our teams leveraged tariff driven consumer demand to produce record traffic and audience metrics. General and administrative expense was down $1,300,000 year over year on a reported basis and roughly flat on an adjusted basis.

[Sonia Jain, CFO at Cars.com]

The majority of the reported decrease was attributable to the lease amendment completed in Q4 twenty twenty four. Net income for the second quarter was $7,000,000 or $0.11 per diluted share, compared to net income of $11,000,000 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 $26,000,000 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 $51,000,000 in the second quarter was up slightly year over year, and adjusted EBITDA margin of 28.5 in the second quarter was at the high end of our outlook range due to prudent cost management across the organization.

[Sonia Jain, CFO at Cars.com]

Turning to key metrics, we're pleased to feel our 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 repackaging, 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.

[Sonia Jain, CFO at Cars.com]

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.

[Sonia Jain, CFO at Cars.com]

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 $56,000,000 for the first half of the year compared to $69,000,000 a year ago. The year over year variance is largely attributable to the anticipated increase in earn out payments associated with the D2C acquisition. Free cash flow was $42,000,000 year to date, down year over year, primarily reflecting the aforementioned items.

[Sonia Jain, CFO at Cars.com]

Share buybacks totaled 3,700,000.0 shares for $45,000,000 year 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 $70,000,000 to $90,000,000 compared to the previous range of 60,000,000 to $70,000,000 Debt outstanding was four sixty million dollars as of 06/30/2025, equivalent to a total net leverage ratio of 2.1 times and comfortably at the low end of our target range of two to 2.5 times. Total liquidity was $318,000,000 as of 06/30/2025, 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 2025, we anticipate low single digit revenue growth year over year.

[Sonia Jain, CFO at Cars.com]

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.

[Sonia Jain, CFO at Cars.com]

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 twenty twenty five 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 and A. Operator?

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Rajat Gupta of JPMorgan. Please go ahead.

[Rajat Gupta, Executive Director - Autos at JP Morgan Chase & Co]

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 you saw an acceleration through the quarter. I think you specifically mentioned that June saw an acceleration in the business and then you expect further acceleration in the second half.

[Rajat Gupta, Executive Director - Autos at JP Morgan Chase & Co]

Curious if you could quantify a bit what that means, how was June versus April? And then even in the second half, does it mean that fourth quarter is an 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. And I have a couple of quick follow ups. Thanks.

[Sonia Jain, CFO at Cars.com]

Yeah, I mean, 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 steady sort of addition 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.

[Rajat Gupta, Executive Director - Autos at JP Morgan Chase & Co]

Got it. And in terms of the average revenue per dealer, 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 over year comment? I think you're roughly two on the call.

[Sonia Jain, CFO at Cars.com]

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.

[Rajat Gupta, Executive Director - Autos at JP Morgan Chase & Co]

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 the 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?

[Rajat Gupta, Executive Director - Autos at JP Morgan Chase & Co]

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.

[Alex Vetter, Director, President & CEO at Cars.com]

Sure, Rajat. We're really pleased with the product innovation that we had on the AgenTeq 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 gonna 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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 their 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, 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 sync out more information.

[Rajat Gupta, Executive Director - Autos at JP Morgan Chase & Co]

Understood, understood. Great, thanks for all the color and I'll get back in queue.

[Operator]

Your next question comes from Tom White of D. A. Davidson. Please go ahead.

[Tom white, MD & Senior Equity Research Analyst at D.A. Davidson Companies]

Great. Thanks. Good morning. Two, if I could. First one is just kind of on the drivers of dealer revenue growth.

[Tom white, MD & Senior Equity Research Analyst at D.A. Davidson Companies]

So you added the dealers in the quarter, which was nice to see obviously. But I guess, so 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 mix, but can you just elaborate on mix of what exactly? Is it just sort of size of some of the recent dealer ads?

[Tom white, MD & Senior Equity Research Analyst at D.A. Davidson Companies]

Is it product mix? 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 Accutrade.

[Sonia Jain, CFO at Cars.com]

Thanks for the question, Tom. I think you actually hit 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, franchise dealers continue to comprise about twothree of our customer base.

[Sonia Jain, CFO at Cars.com]

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 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.

[Sonia Jain, CFO at Cars.com]

That again, mechanically speaking, can create a little bit of initial drag on ARPD. And then within media, while 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 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. In some of the periods where we have more net dealer addition, 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.

[Sonia Jain, CFO at Cars.com]

But bottom line is it's a little bit customer mix, a little bit product mix as you kind of suggested.

[Tom white, MD & Senior Equity Research Analyst at D.A. Davidson Companies]

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?

[Sonia Jain, CFO at Cars.com]

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 Inspire website. And B2C has similar business up in Canada as well. And so that is not included in our ARPD.

[Tom white, MD & Senior Equity Research Analyst at D.A. Davidson Companies]

Okay. That's helpful. Thanks. And then just lastly on AccuTrade, I think appraisal is up 14%. Alex, I think you mentioned that dealers are acquiring 20 vehicles on average per month. I guess what what like if this thing works well and it really gets integrated into kind of the day to day operations of the dealerships and the service lane, like, what percentage of, you know, the their total their you know, the average dealer's kind of total used vehicle intake do you think this product might realistically account for? Just curious like how to think about that. On one hand, 20 vehicles on average per month sounds good, but what could it get to sort of for the average dealer? Thanks.

[Alex Vetter, Director, President & CEO at Cars.com]

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, obviously one of the larger publicly traded digital dealerships is sourcing the majority of their inventory directly from consumers and finding that inventory turns at a faster clip.

[Alex Vetter, Director, President & CEO at Cars.com]

And so it's adding to their profitability per unit. And 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.

[Tom white, MD & Senior Equity Research Analyst at D.A. Davidson Companies]

Okay. Thank you very much. Appreciate it.

[Alex Vetter, Director, President & CEO at Cars.com]

Thank you.

[Operator]

Your next question comes from Naved Khan of B. Riley Securities. Please go ahead.

[Naved Khan, Managing Director at B. Riley Securities]

Thank you very much. Maybe maybe just on the AccuClay, maybe, Alex, give us some color on 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 marketplace repackaging effort, is it going to roll out all in Q3 or through the course of, say, six months to a year?

[Naved Khan, Managing Director at B. Riley Securities]

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.

[Alex Vetter, Director, President & CEO at Cars.com]

Sure, I'll start on the Accu Trade theme and then turn it to Sonya for the marketplace repackaging. First of all, look, we're pleased with the growth in Accu Trade and certainly as Tom just asked, like 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 Accu 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 wanna re sign up for Accu Trade at another store. So it's frustrating that so much of our success is tied to individuals as opposed to top down mandates.

[Alex Vetter, Director, President & CEO at Cars.com]

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 Accu Trade across all their stores because they've tested it in 30 dealerships and found that their profit per unit was higher and their overall 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 we'll 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 being 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.

[Alex Vetter, Director, President & CEO at Cars.com]

So Sonia, do you want to comment on the marketplace question?

[Sonia Jain, CFO at Cars.com]

Yeah, sure. So on repackaging, I would say we're rolling it out over the course of the 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 go 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.

[Naved Khan, Managing Director at B. Riley Securities]

Awesome. Thank you.

[Operator]

Your next question comes from Joe Spak of UBS. Please go ahead.

[Joseph Spak, Managing Director at UBS Group]

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 unique factors we need to think about. If I look historically, in the back half of the year, you've got a pretty even split of revenue fiftyfifty 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 maybe a little bit stronger fourth quarter.

[Joseph Spak, Managing Director at UBS Group]

But then I think on a year 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?

[Sonia Jain, CFO at Cars.com]

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 fully accumulate 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 year over year growth in Q4 versus Q3.

[Joseph Spak, Managing Director at UBS Group]

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

[Sonia Jain, CFO at Cars.com]

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, 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 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 scatter dollars will be there.

[Joseph Spak, Managing Director at UBS Group]

Okay. And then just finally, Alex, guess I'd be remiss if I didn't ask you your opinions on some of the recent Amazon use with them getting more into used and CPO. And I know they've already 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.

[Joseph Spak, Managing Director at UBS Group]

And if you're able to sort of share maybe any feedback you've had from your dealer customers about their initiatives.

[Alex Vetter, Director, President & CEO at Cars.com]

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.

[Alex Vetter, Director, President & CEO at Cars.com]

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 threats from any one 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, 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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.

[Joseph Spak, Managing Director at UBS Group]

Appreciate it. Thanks.

[Operator]

Your next question comes from Gary Prestopino of Barrington Research. Please go ahead.

[Gary Prestopino, Managing Director at Barrington Research Associates]

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, are does that automatically notify a dealer in terms of 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?

[Alex Vetter, Director, President & CEO at Cars.com]

Yes. I mean, the integration on the product side, I'm certainly very pleased about how quickly our teams have not only embraced Dealer Club, but that how fast the Dealer Club team has moved to build deep product integrations. And certainly we started with Accu Trade, but now leveraging the insights from our cars.com marketplace, every dealers 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.

[Alex Vetter, Director, President & CEO at Cars.com]

It provides them an immediate point of egress. It's obviously a free addition to their marketplace subscription, and then we only charge fees on the buy side. So it's an absolutely tremendous addition to our platform. The 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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 staff a team of inspectors and because of the 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 $10,000,000,000 auction industry that's largely beat built 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.

[Gary Prestopino, Managing Director at Barrington Research Associates]

Okay. Can you share anything on Accu Trade as far as the appraisals, what percentage of those appraisals are being converted at the dealer level?

[Alex Vetter, Director, President & CEO at Cars.com]

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 buying one car would pay for the Accu Trade 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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 Accu Trade to add capabilities such as an IMS, and we hope to have more news on that shortly.

[Gary Prestopino, Managing Director at Barrington Research Associates]

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.

[Alex Vetter, Director, President & CEO at Cars.com]

I think sentiment is improving, Gary. And 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 and spending. And we're certainly thrilled with the dealer growth in Q2 at over 160 dealers. We know that will translate to dealer growth in Q3. And I'll just note that we also saw a strong dealer growth in July. So that dealer sentiment clearly is showing a willingness to get back in the game and compete.

[Alex Vetter, Director, President & CEO at Cars.com]

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 obviously are reaching consumers at the last mile and dealers need to be there.

[Gary Prestopino, Managing Director at Barrington Research Associates]

Okay. Thank you.

[Operator]

Your next question comes from Marvin Fong of BTIG. Please go ahead.

[Marvin Fong, Director at BTIG]

Good morning. Thanks for taking my questions here. Would just like to understand a little bit better the increased sales velocity comment. And I know you have a new new head of a new person heading that effort up. And just wanted to understand a little bit better what what exactly did you mean by that and, you know, how are you changing the go to market there?

[Marvin Fong, Director at BTIG]

And then kind of a related question, but I think I just wanna confirm, 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. 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.

[Alex Vetter, Director, President & CEO at Cars.com]

Sure. Well, I'll point out that our go to market changes 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 go 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 go to market motion and not waited 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.

[Alex Vetter, Director, President & CEO at Cars.com]

So there's several things that we're excited about in the improved go to market motion. And then, yes, 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 adding headcount, it's about using technology driven solutions and being more efficient in the way they operate.

[Alex Vetter, Director, President & CEO at Cars.com]

And so that's beyond any one seasonal trend. So yes, we think we can continue to grow dealer count throughout the second half.

[Marvin Fong, Director at BTIG]

Great, if I could sneak one more in, just wondering if you're seeing any difference in behavior by nameplates. 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 nameplates. Are you seeing any differentiation among the dealerships based on sort of their tariff exposure and how they're behaving?

[Alex Vetter, Director, President & CEO at Cars.com]

Not at the dealership level as much. Most of the dealerships are shifting more aggressively to used cars, more broadly just to insulate their business from the macro tariff noise and issues, but we are seeing differences in OEM behavior. I think obviously, just by looking at our website, you can see that Hyundai has 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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 going, 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.

[Alex Vetter, Director, President & CEO at Cars.com]

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, think is a great example of what's to come.

[Marvin Fong, Director at BTIG]

Okay, that's perfect. Thanks so much, Alex.

[Operator]

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

[Katherine Chen, VP - IR at Cars.com]

Goodbye.

Participants

Executives

• Katherine Chen, VP - IR
• Alex Vetter, Director, President & CEO
• Sonia Jain, CFO

Analysts

• Rajat Gupta, Executive Director - Autos at JP Morgan Chase & Co
• Tom white, MD & Senior Equity Research Analyst at D.A. Davidson Companies
• Naved Khan, Managing Director at B. Riley Securities
• Joseph Spak, Managing Director at UBS Group
• Gary Prestopino, Managing Director at Barrington Research Associates
• Marvin Fong, Director at BTIG