Cars.com Q2 Earnings Call Highlights

Cars.com NYSE: CARS reported second-quarter revenue growth and higher profitability as marketplace subscription gains offset a decline in OEM and national advertising revenue, while management reaffirmed its full-year outlook. Revenue for the quarter totaled $179.9 million, up 1% from a year earlier and within the company’s guidance range. Dealer revenue increased 3% year over year, supported by more than 7% growth in marketplace revenue. That growth more than offset an 18% decline in OEM and national revenue, which fell by $3 million from the prior-year period. Marketplace subscribers rebounded to their highest level since 2023, and marketplace ARPD reached an all-time high. Cars.com generated adjusted EBITDA of $53 million in the second quarter, up 4% year over year. Adjusted EBITDA margin expanded nearly 100 basis points to 29.4%, exceeding the high end of the company’s guidance range for a second consecutive quarter. Net income rose to $14.3 million, or $0.25 per diluted share, from $7 million, or $0.11 per diluted share, a year earlier. Adjusted net income was $28.7 million, or $0.51 per diluted share, compared with $26.4 million, or $0.41 per diluted share, in the prior-year quarter. Operating expenses declined 7% to $152.1 million. CFO Sonia Jain said the decline was driven primarily by the full amortization of customer lists associated with the company’s 2017 spinoff, as well as lower compensation expense. Adjusted operating expenses fell 6% to $144.3 million. Product and technology expense declined by $2.7 million on a reported basis, while marketing and sales expense increased by roughly $2.7 million as the company invested in targeted marketing. General and administrative expense fell by $3.5 million, including the elimination of a direct-to-consumer earn-out accrual and lower compensation costs. Management said the company has intentionally reduced emphasis on lower-quality website traffic in favor of attracting and converting higher-intent shoppers. While traffic and unique visitors declined year over year in the second quarter, lead conversion increased by double digits and performance marketing cost per lead improved during the quarter. “We are intentionally shifting to prioritize the value delivery versus the pure audience reach,” Hartmann said during the question-and-answer se...