Growth, yes, in the rearview mirror, and growth is still ahead for CarGurus — certainly on the top line of the company.
But the question for the online auto platform is what’s happening to margins, and what’s also happening with what appears to be a declining user base — at least in terms of headcount and where wholesale prices have been volatile.
CEO Jason Trevisan said consumer demand continues to weaken due to higher prices and rising auto loans.
Trevisan noted that “macroeconomic factors continue to challenge the auto industry.”
But in signals showing the broader digital transformation in auto buying and sourcing, the company’s dealer-to-dealer business generated revenue of $105 million in the first quarter and grew about 12% quarter-on-quarter and from by over 575% year on year.
Quarterly revenue from the Company’s CarOffer business, including the dealer-to-dealer business and Instant Max Cash offering, was $267 million, representing growth of 50% quarter-on-quarter and over 1600% year-over-year is equivalent to. Supplemental materials released by the company show that the total number of paying merchants worldwide was 30,900, compared to 31,210 last year.
On the consumer side of the business, according to the 2021 report, the average US monthly unique user fell 15% to 31.1 million, while the international monthly unique user fell 13%. And in the US, monthly sessions grew 6% year over year to 84.9 million.
As they continue to cope with the continued shortage of semiconductor chips, two factors led to relatively more subdued wholesale behavior from dealers in the first quarter. According to the CEO, “We had an increase in revenue from transportation services, which represents low-margin revenue compared to transactions.” That growth came as CarGurus took over transportation for a large client, “despite the continued unpredictability of the impact of the global pandemic and supply chain issues in the used and new vehicle markets has a significant backlog of vehicle pickups.”
But in signs of the big digital shift, management noted on the conference call that its online appointment scheduling system — which gives customers the ability to schedule driveway pickups online — was used by 85% of consumers.
During the fourth quarter, as disclosed in the conference call comments, the Company tested and launched new digital retail deposit and hard-pull funding pilots, allowing consumers even more flexibility and choice in completing their purchase.
Headwinds from macroeconomic uncertainty and tailwinds from pricing held back some of the growth. CFO Scott Fredo said that first-quarter marketplace revenue was $163.3 million, up 2% sequentially and 5% up from $155.8 million a year earlier.
And looking ahead, the company is increasing marketing spend to increase consumer awareness, which will impact its bottom line.
Management seemed confident about long-term trends.
Trevisan told analysts, “We continue to see a stock shift from physical to digital — and that’s by and large still early days, but it’s quite a steep transition now and we think that’s going to continue for some time.”
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