CARS Reports Fourth Quarter and Full Year 2019 Results

2019 cars.com report Dealer Vehicles in Stock. Brand New Cars Awaiting Clients on the Dealer Parking Lot. New Cars Section.

CARS dot com LogoCars.com Inc., a leading digital marketplace and solutions provider for the automotive industry, today released its financial results for the fourth quarter and full year ended December 31, 2019.

  • Achieved 2019 Guidance and Fourth-Quarter Growth in Dealer Customers
  • Category-Leading Gains in Traffic, Driven by Organic Momentum
  • 2020 Exit Rate Anticipated to Yield Solid Growth in Revenue and Adjusted EBITDA
  • 2019 Full Year Financial and Key Metric Highlights
  • Revenue of $606.7 million, down $55.4 million, or 8%, year-over-year, in line with expectations
  • Non-cash goodwill and intangible asset impairment charge recorded in the third quarter of $461.5 million, or $427.3 million net of tax, triggered by a decline in share price following the completion of our strategic alternatives review process, resulted in a GAAP net loss of $445.3 million, or $6.65 per diluted share
  • Adjusted Net Income of $104.2 million, or $1.55 per diluted share, compared to Adjusted Net Income of $135.3 million, or $1.92 per diluted share, in the prior year
  • Adjusted EBITDA of $167.3 million, or 28% of revenue, down $60.3 million year-over-year, in line with expectations
  • Net cash provided by operating activities of $101.5 million, with Free Cash Flow of $80.2 million
  • Average Monthly Unique Visitors of 22.6 million, up 21% year-over-year
  • Traffic (visits) of 553.7 million, up 24% year-over-year
  • Mobile Traffic accounted for 72% of total traffic compared to 67% in 2018
  • Dealer customers of 18,834 as of December 31, 2019, up 199, compared to 18,635 as of September 30, 2019, driven by both retention and growth in new dealer customers, and down 1,087, compared to December 31, 2018
  • Direct monthly average revenue per dealer (“ARPD”) was $2,070, down 1% year-over-year, excluding revenue from dealer websites and related digital solutions from Dealer Inspire; when revenue from dealer websites and related digital solutions is included, ARPD was $2,179
  • Q4 Financial and Key Metric Highlights
  • Revenue of $152.2 million, down $12.2 million, or 7.4% year-over-year
  • GAAP net loss of $4.1 million, or $0.06 per diluted share, compared to GAAP net income of $9.4 million, or $0.14 per diluted share, in the prior year
  • Adjusted Net Income of $42.2 million, or $0.63 per diluted share, compared to Adjusted Net Income of $34.1 million, or $0.50 per diluted share, in the prior year
  • Adjusted EBITDA of $39.3 million, or 26% of revenue, down $21.8 million year-over-year
  • Average monthly unique visitors of 23.5 million, up 32% year-over-year
  • Traffic (visits) of 146.2 million, up 39% year-over-year
  • Mobile traffic accounted for 74% of total traffic compared to 67% in the fourth quarter of 2018
  • Direct monthly ARPD was $2,031, down 5% year-over-year, excluding revenue from dealer websites and related digital solutions from Dealer Inspire; when revenue from dealer websites and related digital solutions is included, ARPD was $2,136 for the fourth quarter of 2019
  • Operational Highlights
  • Grew dealer customers by 199 in the fourth quarter, which is traditionally the seasonally weakest quarter, by achieving higher new customer sales volume as well as continued improvement in retention rates
  • Fourth quarter national advertising revenue was the highest revenue quarter of the year at $21 million
  • Dealer Inspire momentum continues, with 3,200 website customers as of December 31, 2019. In addition we achieved over 800 GM website enrollments, which we expect to begin launching mid-year 2020
  • Continued to gain market share and marketing category leadership driven by organic momentum and achieved a new record level of monthly traffic at 56.9 million visits in January 2020, substantially surpassing the prior record of 50.3 million visits achieved in August 2019
  • “We exited 2019 with momentum and fundamental strength. We increased dealer count by nearly 200 customers in the fourth quarter, delivered strong cash flow and performance in line with expectations, and accelerated category-leading traffic gains. Despite entering 2020 with a lower dealer base, by mid-year we will have completely re-architected the business in the three years since going public: we turned around SEO and reestablished our leadership in traffic, we stabilized our dealer base, we transformed our go-to market strategy and we are set to have fully completed the conversion of our affiliate channel and the technology transformation mid-year 2020. These accomplishments position us to realize the full benefits from our shift to an online marketplace with an integrated solutions strategy and the value of our GM agreements, both of which we expect to contribute to strong growth in the second half of 2020 and beyond,” said Alex Vetter, President and Chief Executive Officer of CARS.
  • 2019 Full Year Results
  • Revenue for 2019 was $606.7 million, compared to $662.1 million in 2018. This decrease was primarily due to a decline in dealer customers and national advertising revenue.
  • In the third quarter, the Company recorded a non-cash goodwill and intangible asset impairment charge of $461.5 million, based on an assessment triggered by a decline in share price following the completion of the strategic alternatives review process. The Company does not expect the impairment charge to have any impact on future operations, affect its liquidity, affect cash flows from operating activities, or affect compliance with the financial covenants set forth in its credit agreement. The cash benefit from the deductible goodwill for tax purposes remains intact.
  • Total operating expenses for 2019 were $1.1 billion, or $591.3 million excluding the impairment charge, compared to $578.2 million for the prior year. The increase in expenses was primarily due to increased depreciation and amortization due to the reduction of useful lives of certain assets related to the technology transformation, an increase in costs associated with growth in our solutions business, an increase in affiliate revenue share payments as a result of the early conversions, partially offset by a reduction in expenses as a result of the Company’s focus on operating efficiencies.
  • GAAP net loss for 2019 was $445.3 million, or $6.65 per diluted share, compared to GAAP net income of $38.8 million, or $0.55 per diluted share, in 2018. Adjusted Net Income for the year was $104.2 million, or $1.55 per diluted share, compared to $135.3 million, or $1.92 per diluted share in the prior year period.
  • Adjusted EBITDA for 2019 was $167.3 million, or 28% of revenue, compared to $227.6 million, or 34% of revenue, in the prior year period.
  • In 2019, average monthly unique visitors grew 21%, total traffic grew 24%, and SEO grew 42% year-over-year. Mobile traffic grew 35% year-over-year and accounted for 72% of total traffic, compared to 67% in the prior year.
  • Direct monthly ARPD was $2,070 in 2019, down 1% year-over-year, excluding revenue from dealer websites and related digital solutions from Dealer Inspire; when revenue from dealer websites and related digital solutions is included, ARPD was $2,179.
  • Dealer customers were 18,834 at the end of 2019, 199 higher than dealer customers of 18,635 at the end of the third quarter of 2019. Compared to December 31, 2018, dealer customers were down 1,087.
  • Q4 Results
  • Revenue for the fourth quarter of 2019 was $152.2 million, compared to $164.3 million in the prior year period.
  • Total operating expenses for the fourth quarter of 2019 were $147.5 million, compared to $140.5 million for the prior year period. This increase was driven by cost increases related to the affiliate conversions, the lack of a benefit from the amortization of the unfavorable contract liability, which ended September 30, 2019, planned marketing investments and increased depreciation and amortization due to the reduction of useful lives of certain assets related to our technology transformation, partially offset by a reduction in expenses as a result of the Company’s focus on operating efficiencies.
  • GAAP net loss for the fourth quarter of 2019 was $4.1 million, or $0.06 per diluted share, compared to GAAP net income of $9.4 million, or $0.14 per diluted share, in the fourth quarter of 2018. Adjusted net income for the fourth quarter of 2019 was $42.2 million compared to $34.1 million in the fourth quarter of 2018, the increase driven by the change in the full year effective tax rate.
  • Adjusted EBITDA for the fourth quarter was $39.3 million, or 26% of revenue, compared to $61.1 million, or 37% of revenue, for the prior year period.
  • Average Monthly Unique Visitors in the fourth quarter grew 32% year-over-year. Total Traffic grew 39% from the fourth quarter of 2018, and SEO grew 40% year-over-year. Mobile Traffic grew 54% year-over-year and accounted for 74% of total traffic in the fourth quarter of 2019 compared to 67% for the fourth quarter of 2018.
  • Direct monthly ARPD was $2,136 in the fourth quarter of 2019. ARPD excluding revenue from dealer websites and related digital solutions from Dealer Inspire was $2,031, down 5% year-over-year.
  • Cash Flow and Balance Sheet
  • Net cash provided by operating activities in 2019 was $101.5 million, compared to $163.5 million in the prior year. Free Cash Flow in 2019 was $80.2 million, compared to $149.3 million in 2018.
  • Cash and cash equivalents was $13.5 million and debt outstanding was $648.1 million as of December 31, 2019. The Company made $48.1 million in debt repayments during 2019, net of borrowings. Net leverage at December 31, 2019 was 3.8x, compared to maximum leverage of 4.5x, in accordance with the Company’s credit agreement, as recently amended.
  • “We delivered 2019 full-year results in line with our guidance and by mid-2020 we will begin to benefit from positive organic revenue growth trends and our decisive actions taken to streamline our operating structure. In the second half of 2020 we expect to benefit from the impact of the sales transformation on new dealer sales and retention, the cost savings associated with the technology transformation, our continued focus on operational efficiencies, and the cash flow uplift following the completion of the affiliate revenue share payments. These initiatives support our bold shift in business strategy laid out nearly three years ago and give us confidence that we will exit the year with sustainable growth momentum,” said Jandy Tomy, Interim Chief Financial Officer of CARS. “While our balance sheet remains strong, we are focused on reducing our net leverage in the near term and we look forward to the completion of the affiliate payments in mid-2020, which we expect will materially benefit our second half cash flow.”
  • 2020 Outlook
  • For 2020, the Company expects a sequential build of quarterly dealer revenue yielding revenue ranging from a year over year decline of 4% to flat for the full year and a positive year-over-year growth rate to exit the year. The first half of 2020 is expected to be negatively impacted by 1,087 fewer dealers than the prior year, but in the second half of 2020 the Company will benefit from the sequential subscription revenue build as well as growth in ARPD from the rollout of the GM websites and the launch of the new in-market video offering, FUELTM.
  • The Company expects Adjusted EBITDA margins between 25 and 27% for full year 2020, and EBITDA growth by the fourth quarter of 2020. The first half of 2020 will be impacted by the costs to develop and serve the new GM website customers in advance of the revenue build, as well as lower year-over-year dealer customers at the start of 2020 compared to 2019. In the second half of 2020 the Company will benefit from the sequential subscription revenue build as well as the completion of the affiliate revenue share payments on June 30, 2020. The Company expects Free Cash Flow to be flat to up 25% in 2020 driven by the completion of the affiliate revenue share payments mid-year associated with the early conversion of the affiliate markets.
  • Q4 Earnings Call
  • As previously announced, management will hold a conference call and webcast today at 9:00 a.m. CST. This webcast may be accessed at investor.cars.com. A replay of the webcast will be available at this website following the conclusion of the call until March 11, 2020.

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