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Online new and used car marketplace Cars.com (NYSE:CARS) missed analysts' expectations in Q2 CY2024, with revenue up 6.4% year on year to $178.9 million. Next quarter's revenue guidance of $179.5 million also underwhelmed, coming in 3.4% below analysts' estimates. It made a GAAP profit of $0.17 per share, down from its profit of $1.37 per share in the same quarter last year.
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Cars.com (CARS) Q2 CY2024 Highlights:
- Revenue: $178.9 million vs analyst estimates of $181.8 million (1.6% miss)
- EPS: $0.17 vs analyst estimates of $0.11 ($0.06 beat)
- Revenue Guidance for Q3 CY2024 is $179.5 million at the midpoint, below analyst estimates of $185.9 million
- EBITDA Margin: 28.2%, up from 27.1% in the same quarter last year
- Free Cash Flow of $28.99 million, similar to the previous quarter
- Dealer Customers: 19,390, up 605 year on year
- Market Capitalization: $1.18 billion
Originally started as a joint venture between several media companies including The Washington Post (NYSE:POST) and The New York Times, Cars.com (NYSE:CARS) is a digital marketplace that connects new and used car buyers and sellers.
Online MarketplaceMarketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.
Sales GrowthCars.com's revenue growth over the last three years has been unimpressive, averaging 5.6% annually. This quarter, Cars.com reported mediocre 6.4% year-on-year revenue growth, missing Wall Street's expectations.
Guidance for the next quarter indicates Cars.com is expecting revenue to grow 3% year on year to $179.5 million, slowing from the 5.9% year-on-year increase it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 6.1% over the next 12 months.
Usage Growth As an online marketplace, Cars.com generates revenue growth by increasing both the number of buyers on its platform and the average order size in dollars.
Cars.com has been struggling to grow its active buyers, a key performance metric for the company. Over the last two years, its buyers have declined 0.1% annually to 19,390. This is one of the lowest rates of growth in the consumer internet sector.
Luckily, Cars.com added 605 active buyers in Q2, leading to 3.2% year-on-year growth.
Key Takeaways from Cars.com's Q2 Results We struggled to find many strong positives in these results. Its revenue guidance for next quarter missed analysts' expectations and its revenue missed Wall Street's estimates. Overall, this was a weaker quarter for Cars.com. The stock traded down 10.6% to $16 immediately following the results.
