0001494259錯誤--12-31Q3http://fasb.org/us-gaap/2024#MutualFundMemberhttp://fasb.org/us-gaap/2024#MutualFundMemberhttp://fasb.org/us-gaap/2024#MutualFundMember1003652804753630001494259us-gaap：受限制股票單位RSU成員2023-01-012023-09-300001494259us-gaap:CommonClassAMember2023-01-012023-09-300001494259us-gaap:CommonClassAMemberus-gaap:SubsequentEventMembersrt：最大成員2024-11-070001494259us-gaap：產品會員2024-07-012024-09-300001494259us-gaap:CommonClassAMember2024-01-012024-09-300001494259us-gaap:RetainedEarningsMember2024-09-300001494259us-gaap：SoftwareDevelopmentMember2023-12-310001494259Carg：出售我的汽車，即時最高現金優惠！2024-07-012024-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2024-07-012024-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2024-09-300001494259us-gaap:境外成員us-gaap:AllOtherSegmentsMember2024-01-012024-09-300001494259US-GAAP：額外股本成員2024-04-012024-06-300001494259US-GAAP：軟件和軟件開發成本成員2023-12-310001494259us-gaap:RetainedEarningsMember2024-07-012024-09-300001494259us-gaap：在建工程成員2024-01-012024-09-300001494259carg：Langley Steinert成員2024-07-012024-09-300001494259us-gaap：普通股成員us-gaap：普通B類股份成員2023-03-310001494259us-gaap：循環信貸設施成員us-gaap:信用狀成員2024-09-300001494259us-gaap：普通股成員us-gaap：普通B類股份成員2024-09-300001494259carg：美國市場成員國家: 美國2023-12-310001494259us-gaap：普通股成員us-gaap：普通B類股份成員2023-06-300001494259us-gaap：受限制股票單位RSU成員2023-07-012023-09-3000014942592024-07-012024-09-300001494259US-GAAP：額外股本成員2024-07-012024-09-300001494259carg：波士頓麻薩諸塞州1001 Boylston會員2024-09-300001494259us-gaap:CommonClassAMembersrt：最大成員2022-12-080001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001494259us-gaap:銷售和營銷費用會員2023-07-012023-09-3000014942592023-07-012023-09-300001494259CARG：第10條B 51交易安排兩名成員CARG：扎卡里·哈洛威爾成員2024-09-300001494259us-gaap:境外成員US-GAAP：其他所有部門成員2024-09-300001494259CARG：數字批發成員2024-01-012024-09-300001494259us-gaap：開發技術權利會員2023-01-012023-12-310001494259us-gaap：普通B類股份成員2024-09-300001494259US-GAAP：租賃改良會員2023-12-310001494259美元指數：成本費用支出會員2023-01-012023-09-300001494259us-gaap：普通股成員us-gaap：普通B類股份成員2022-12-310001494259us-gaap：受限制股票單位RSU成員2023-07-012023-09-300001494259us-gaap：員工股票期權（股東權益類目）2024-01-012024-09-300001494259us-gaap:RetainedEarningsMember2023-12-310001494259carg: 第 10 B 51條交易安排成員carg: Langley Steinert成員2024-09-300001494259us-gaap：顧客關係會員2023-01-012023-12-310001494259us-gaap：顧客關係會員2024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001494259us-gaap: 產品成員2023-01-012023-09-300001494259us-gaap: 其他所有部門成員2023-07-012023-09-300001494259carg: 廣告客戶成員美元指數:應收帳款成員2024-09-300001494259carg：CG線上購買地塊會員2024-01-012024-09-300001494259us-gaap：顧客關係會員2023-12-310001494259carg：市場會員2024-07-012024-09-300001494259carg：Zachary Hallowell 會員2024-07-012024-09-300001494259us-gaap:境外成員us-gaap：所有其他部門會員2023-12-310001494259carg：市場會員2023-07-012023-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2024-04-012024-06-300001494259carg: 經銷商至經銷商會員2024-07-012024-09-300001494259美元指數:研發支出成員2023-07-012023-09-300001494259us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-09-300001494259US-GAAP：額外股本成員2023-01-012023-03-310001494259carg: 彗星基金會會員carg: 規則10 B 51交易安排會員2024-09-300001494259us-gaap:RevenueCommissionersIrelandMember美元指數:外國國家成員2024-01-012024-09-300001494259us-gaap：循環信貸設施成員srt：最低成員2022-09-262022-09-260001494259us-gaap：受限制股票單位RSU成員2024-07-012024-09-300001494259US-GAAP：軟件和軟件開發成本成員2024-09-300001494259carg : Boston Massachusetts One Zero Zero One Boylston Member2024-01-012024-09-300001494259carg : Samuel Zales Member2024-09-300001494259us-gaap:RetainedEarningsMember2024-06-300001494259us-gaap：在建工程成員2024-09-300001494259us-gaap：普通股成員us-gaap：普通B類股份成員2023-12-310001494259carg：已授與及未授與的股票期權股份成員carg：Samuel Zales成員2024-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2023-12-310001494259us-gaap：員工股票期權（股東權益類目）2023-07-012023-09-300001494259Carg：美國市場會員2023-12-310001494259US-GAAP：額外股本成員2024-06-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2024-03-310001494259us-gaap：普通股成員us-gaap：普通B類股份成員2024-03-310001494259us-gaap:RetainedEarningsMember2023-01-012023-03-310001494259us-gaap:RetainedEarningsMember2024-01-012024-03-310001494259carg：其他董事與高級職員成員2024-07-012024-09-300001494259us-gaap：循環信貸設施成員2022-09-262022-09-260001494259美元指數:應收帳款成員us-gaap：客户集中度风险成员2023-01-012023-12-310001494259國家: 美國2024-07-012024-09-300001494259us-gaap：普通股成員us-gaap：普通B類股份成員2024-07-012024-09-300001494259us-gaap:RetainedEarningsMember2023-07-012023-09-300001494259carg：車輛提供獎勵單元和客戶單元2023-07-012023-09-300001494259carg：Samuel Zales 會員2024-07-012024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300001494259us-gaap：員工股票期權（股東權益類目）2024-07-012024-09-300001494259carg：批發會員2023-01-012023-09-300001494259國家: 美國2023-07-012023-09-300001494259us-gaap:RetainedEarningsMember2024-04-012024-06-300001494259us-gaap：销售净收入成员us-gaap：客户集中度风险成员2024-01-012024-09-300001494259carg：斯坦尼特信托成員carg：第10條B 51規則交易安排成員2024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-3100014942592024-03-310001494259carg：美國市場成員2023-07-012023-09-300001494259美元指數：成本費用支出會員2023-07-012023-09-300001494259us-gaap：循環信貸設施成員us-gaap:信用狀成員2023-12-310001494259us-gaap：普通B類股份成員2023-12-310001494259us-gaap:RetainedEarningsMember2022-12-310001494259US-GAAP：租賃改良會員2024-09-300001494259carg：數碼批發會員2024-09-300001494259us-gaap：家具和固定資產成員2024-09-300001494259carg：美國市場會員2024-01-012024-09-300001494259carg：租賃重新計量會員2024-01-012024-09-300001494259carg：美元指數市場成員2024-07-012024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001494259carg：美元指數市場成員2023-01-012023-09-300001494259us-gaap:境外成員2023-07-012023-09-300001494259us-gaap：員工股票期權（股東權益類目）2024-01-012024-09-3000014942592023-01-012023-09-300001494259us-gaap：受限制股票單位RSU成員2024-01-012024-09-300001494259us-gaap:SubsequentEventMember2024-11-072024-11-070001494259carg：品牌成員2023-01-012023-12-310001494259卡爾司：Samuel Zales成員卡爾司：未售出的根據第10B條51款交易安排成員2024-09-3000014942592023-12-310001494259美國通用會計原則：軟體開發成員2024-09-300001494259卡爾司：汽車優惠成員2024-09-300001494259US-GAAP：額外股本成員2023-03-3100014942592023-09-300001494259US-GAAP：額外股本成員2024-03-310001494259US-GAAP：額外股本成員2022-12-310001494259卡爾司：數位批發成員us-gaap:境外成員2024-01-012024-09-300001494259美元指數：成本費用支出會員2024-07-012024-09-300001494259美元指數：總部管理費用成員2024-07-012024-09-300001494259美元指數:研發支出成員2024-01-012024-09-300001494259carg：數位批發成員carg：汽車優惠成員2024-04-012024-06-300001494259us-gaap：設備成員2024-09-300001494259carg：Zachary Hallowell成員2024-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2023-04-012023-06-3000014942592024-01-012024-09-300001494259carg：數字批發會員2023-12-310001494259carg：希拉里和朗利·史泰納特會員carg：規則10B-51交易協定會員2024-09-300001494259carg：美國市場會員國家: 美國2024-09-300001494259us-gaap：受限制股票單位RSU成員2024-07-012024-09-300001494259us-gaap:銷售和營銷費用會員2024-01-012024-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2023-09-300001494259us-gaap：家具和固定資產成員2023-12-310001494259us-gaap:銷售和營銷費用會員2023-01-012023-09-300001494259us-gaap：在建工程成員2023-12-310001494259US-GAAP：應收帳款成員2023-12-310001494259us-gaap：循環信貸設施成員us-gaap:信用狀成員2022-09-260001494259carg：出售我的汽車即時最高現金报价会员2023-01-012023-09-300001494259carg：汽車报价会员2024-07-012024-09-300001494259US-GAAP：額外股本成員2023-09-300001494259carg：市場會員2024-01-012024-09-300001494259US-GAAP：軟件和軟件開發成本成員2024-01-012024-09-300001494259carg：廣告客戶會員美元指數:應收帳款成員2023-12-310001494259美元指數：所有其他部門成員2023-12-310001494259us-gaap:RetainedEarningsMember2023-06-300001494259US-GAAP：額外股本成員2023-04-012023-06-300001494259美元指數：產品成員2024-01-012024-09-300001494259us-gaap:CommonClassAMember2023-12-310001494259carg：經銷商之間成員2023-07-012023-09-300001494259carg：Samuel Zales成員carg：第10 B 51條規定的交易安排三成員2024-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2023-07-012023-09-300001494259us-gaap：設備成員2024-01-012024-09-300001494259us-gaap:AllOtherSegmentsMember2024-09-300001494259carg：Pillar Two Legislation Member2024-01-012024-09-300001494259us-gaap:CommonClassAMembersrt：最大成員2023-11-070001494259carg：Langley Steinert Member2024-09-300001494259美元指數：成本費用支出會員2024-01-012024-09-300001494259US-GAAP：應收帳款成員2024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-300001494259carg：數字批發會員2024-07-012024-09-300001494259us-gaap：循環信貸設施成員srt：最大成員2022-09-262022-09-260001494259srt：最低成員美元指數:應收帳款成員us-gaap：客户集中度风险成员2024-01-012024-09-300001494259us-gaap:所有其他部分成員2024-07-012024-09-300001494259國家: 美國2023-01-012023-09-300001494259美元指數:應收帳款成員carg：客戶一成員us-gaap：客户集中度风险成员2024-01-012024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2022-12-310001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-07-012024-09-300001494259us-gaap：普通B類股份成員2024-10-310001494259Carg：數碼批發會員Carg：汽車優惠會員2024-01-012024-06-300001494259US-GAAP：額外股本成員2024-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2024-06-300001494259美元指數：產品成員2023-07-012023-09-300001494259carg：品牌成員2023-12-310001494259us-gaap：销售净收入成员us-gaap：客户集中度风险成员2023-01-012023-09-300001494259us-gaap：循環信貸設施成員2022-09-2600014942592023-06-300001494259carg：數位批發成員us-gaap:境外成員2024-09-300001494259carg：即時以最高現金報價銷售我的車輛成員2024-01-012024-09-3000014942592023-11-072023-11-070001494259carg：規則10 B 51交易安排成員carg：Langley Steinert成員2024-07-012024-09-300001494259美國會計準則：公允價值輸入層級1成員us-gaap:FairValueMeasurementsRecurringMember2023-12-310001494259carg：數位批發成員2023-01-012023-09-300001494259us-gaap：員工股票期權（股東權益類目）2023-01-012023-09-300001494259carg：汽車優惠成員2024-04-012024-06-300001494259us-gaap：開發技術權利會員2023-12-310001494259us-gaap:境外成員2023-01-012023-09-300001494259us-gaap:境外成員2024-07-012024-09-300001494259美元指數：軟件開發成員2024-01-012024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001494259US-GAAP：額外股本成員2023-06-300001494259carg：數字批發成員2023-07-012023-09-300001494259carg：批發成員2023-07-012023-09-300001494259美元指數:研發支出成員2024-07-012024-09-300001494259美元指數:應收帳款成員us-gaap：客户集中度风险成员2024-01-012024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001494259us-gaap：普通B類股份成員2024-01-012024-09-300001494259us-gaap：普通股成員us-gaap：普通B類股份成員2024-06-300001494259us-gaap:境外成員2024-01-012024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001494259us-gaap：家具和固定資產成員2024-01-012024-09-300001494259us-gaap：普通股成員us-gaap：普通B類股份成員2023-09-300001494259us-gaap:CommonClassAMember2024-10-310001494259carg：美元指數市場會員2024-09-300001494259carg：數碼批發會員us-gaap:境外成員2023-12-310001494259carg：數碼批發會員車輛：汽車優惠會員2024-06-300001494259us-gaap:CommonClassAMembersrt：最大成員2024-09-300001494259車輛：經銷商間成員2024-01-012024-09-300001494259車輛：顧客一成員美元指數:應收帳款成員us-gaap：客户集中度风险成员2023-01-012023-12-310001494259us-gaap：受限制股票單位RSU成員2023-01-012023-09-3000014942592024-09-300001494259us-gaap：循環信貸設施成員2024-09-300001494259carg: 車輛優惠會員2024-01-012024-09-300001494259us-gaap:RetainedEarningsMember2023-04-012023-06-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2023-03-310001494259US-GAAP：額外股本成員2023-07-012023-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2023-01-012023-03-310001494259us-gaap:RetainedEarningsMember2024-03-310001494259US-GAAP：額外股本成員2023-12-3100014942592022-12-310001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300001494259貨物：融資租賃使用權資產成員2024-09-300001494259us-gaap:FairValueMeasurementsRecurringMember2024-09-300001494259美國通用會計原則：內部稅收局（IRS）成員2024-01-012024-09-300001494259美國通用會計原則：總務及行政費用成員2023-01-012023-09-3000014942592024-06-300001494259us-gaap：销售净收入成员us-gaap：客户集中度风险成员2024-07-012024-09-300001494259美元指數:研發支出成員2023-01-012023-09-3000014942592023-04-012023-06-300001494259美元指數：其他所有部門成員2024-01-012024-09-300001494259us-gaap：销售净收入成员us-gaap：客户集中度风险成员2023-07-012023-09-300001494259us-gaap:RetainedEarningsMember2023-03-310001494259carg：品牌成員2024-01-012024-09-300001494259us-gaap：員工股票期權（股東權益類目）2024-07-012024-09-300001494259美國會計準則：公允價值輸入層級1成員us-gaap:FairValueMeasurementsRecurringMember2024-09-300001494259國家: 美國2024-01-012024-09-300001494259us-gaap:CommonClassAMember2024-07-012024-09-300001494259貨物：金融租賃使用權資產成員2023-12-310001494259srt：最低成員美元指數:應收帳款成員us-gaap：客户集中度风险成员2023-01-012023-12-310001494259us-gaap:CommonClassAMember2024-09-300001494259us-gaap:RetainedEarningsMember2023-09-3000014942592023-01-012023-03-310001494259carg：品牌成員2024-09-300001494259carg：市場成員2023-01-012023-09-300001494259us-gaap:CommonClassAMember2023-07-012023-09-300001494259us-gaap:銷售和營銷費用會員2024-07-012024-09-300001494259US-GAAP：租賃改良會員2024-01-012024-09-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300001494259us-gaap：循環信貸設施成員2023-12-310001494259carg：賣出我的汽車即時最高現金報價會員2023-07-012023-09-300001494259us-gaap：設備成員2023-12-310001494259carg：批發會員2024-01-012024-09-3000014942592024-01-012024-03-3100014942592023-03-310001494259us-gaap：普通股成員us-gaap:CommonClassAMember2023-06-300001494259us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300001494259us-gaap：所有其他部門會員2023-01-012023-09-300001494259繼續：經銷商至經銷商成員2023-01-012023-09-3000014942592024-04-012024-06-300001494259us-gaap：開發技術權利會員2024-09-300001494259us-gaap：員工股票期權（股東權益類目）2023-07-012023-09-300001494259美元指數：一般和行政費用成員2023-07-012023-09-300001494259us-gaap：普通股成員us-gaap:CommonClassAMember2024-01-012024-03-310001494259繼續：10 B 51規則交易安排一成員繼續：Zachary Hallowell成員2024-09-300001494259us-gaap:FairValueMeasurementsRecurringMember2023-12-310001494259us-gaap：員工股票期權（股東權益類目）2023-01-012023-09-300001494259US-GAAP：額外股本成員2024-01-012024-03-310001494259carg：批發會員2024-07-012024-09-300001494259us-gaap：受限制股票單位RSU成員2024-01-012024-09-30純種成員carg：部門iso4217:美元指數xbrli:股份平方英尺xbrli:股份carg:Votecarg:Customeriso4217:美元指數carg:Days

 

美國

證券交易委員會

華盛頓特區20549

 

表格 10-Q

 

(Mark One)

 

☒

根據1934年證券交易法第13或15(d)條款的季度報告。

 

截至2024年6月30日季度結束 九月三十日， 2024

或

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

從 _________________ 到 _________________ 的過渡期間

委員會檔案編號： 001-38233

 

img198340768_0.jpg

加爾車GURUS，INC。

（根據其章程所指定的正式名稱）

 

 

特拉華州

04-3843478

(依據所在地或其他管轄區)

的註冊地或組織地點)

(國稅局雇主識別號碼)

識別號碼)

1001 Boylston Street, 16th 地址：3 Park Ave，33樓

波士頓, 麻薩諸塞州

02115

(總部辦公地址)

（郵政編碼）

(617) 354-0068

(註冊人電話號碼，包括區號)

Securities registered pursuant to Section 12(b) of the Act:

 

每個班級的標題

交易符號

註冊於交易所名稱

A類普通股，單張面額為$0.001

CARG

納斯達克股票交易所 LLC　(納斯達克全球貨幣精選市場)

 

 

 

 

 

請在核對標記上打勾，確認申報人（1）已在前12個月（或申報人被要求提交此類申報的縮短期間）內提交證券交易所法案第13條或第15(d)條要求申報的所有報告，以及（2）過去90天一直處於此類申報要求的範圍內。 是 ☒ 否 ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

勾選表示登記人是大型加速申報人、加速申報人、非加速申報人、較小型申報公司或新興成長公司。詳細定義請參閱《交易所法》第1202條中“大型加速申報人”、“加速申報人”、“較小型申報公司”和“新興成長公司”的定義。

 

大型加速歸檔人

☒

加速歸檔人

☐

非加速歸檔人

☐

小型報告公司

☐

 

 

 

新興成長型企業

 

☐

 

如果是新興成長公司，請用勾選表示該註冊人已選擇不使用根據《交易所法》第13(a)條提供的任何新的或修訂的財務會計標準的擴展過渡期來遵守。 ☐

請用勾號表示公司是否為殼公司（如《交易所法》第1202條所定義）。 是 ☐ 否 ☒

As of October 31, 2024, the registrant had 87,950,796 shares of Class A common stock, $0.001 par value per share, and 15,757,238 shares of Class B common stock, par value $0.001 per share, outstanding.

 

 

 

目錄

 

 

頁面

第一部分。

 

財務信息

1

項目 1。

 

基本報表

1

 

未經審核的簡化合併資產負債表

1

 

未經審計的簡明綜合收入表

2

 

 

未經審計的綜合收益簡明合併損益表

3

 

未經審核的有限公司贖回性非控股權及股東權益簡明合併基本報表

4

 

 

未經審核之現金流量表

5

 

基本報表未經審核簡明合併財務報表註腳

6

项目2。

 

管理層對財務狀況和業績的討論與分析

25

项目3。

 

市場風險的定量和定性披露。

52

項目 4。

 

內部控制及程序

53

 

 

 

 

第二部分。

 

其他信息

55

項目 1。

 

法律訴訟

55

项目1A。

 

風險因素

55

项目2。

 

股票權益的未註冊銷售和資金用途

56

项目5。

 

其他信息

57

第6項。

 

展品

58

簽名

59

 

 

ii

 

SPECIAL NOTE REGARDING FORWARD‑LOOKING STATEMENTS

本季度報告表10-Q，或季度報告，包含根據聯邦證券法解釋的前瞻性陳述，該等陳述涉及重大風險和不確定性。前瞻性陳述一般涉及未來事件或我們的未來財務或營運表現。在某些情況下，您可以辨識前瞻性陳述，因為它們包含「旨在」、「預期」、「相信」、「可能」、「估計」、「期望」、「目標」、「打算」、「可能」、「或許」、「計劃」、「潛在」、「預測」、「項目」、「尋求」、「應該」、「目標」、「將」、「將會」或類似表達方式，以及這些詞的否定形式。本季度報告中包含的前瞻性陳述包括以下內容：

•
我們未來的財務表現，包括我們對營業收入、營業成本、毛利潤或毛利率、營業費用、現金流生成能力，以及實現和維持未來盈利能力的期望；
•
我們的成長策略和有效管理任何成長的能力；
•
我們產品供應對經銷商和消費者的價值主張;
•
我們所有板塊的綜合提供能力，可以提高經銷商的投資回報率，為我們的市場網路增加規模，帶動強大的網路效應，為經銷商創造強大的協同效應，轉變汽車購物對消費者和經銷商的旅程，成為車輛取得和銷售流程的所有步驟的市場板塊；
•
我們逐漸演變成一個可進行交易的平台，消費者可以購物、購買、尋求融資，並賣出他們的汽車，經銷商可以預測、徵求、行銷和賣出他們的汽車；
•
our belief that certain of our strengths, including our trusted marketplace for consumers, our strong value proposition for dealers, and our data-driven approach, among other things, will lead to an advantage over our competitors;
•
the value proposition of the CarOffer, LLC, or CarOffer, online wholesale platform, including our belief that as dealer enrollments increase, dealers will see a corresponding increase in inventory on the platform, further enabling liquidity, selection, choice, and business efficiencies;
•
our ability to deliver quality leads at a high volume for our dealer customers and to provide the highest return on a dealer’s investment;
•
our expectations for CarGurus Sell My Car (Instant Max Cash Offer and Top Dealer Offers) as well as our digital retail offerings and continued investments;
•
our ability to maintain and acquire new customers;
•
our ability to maintain and build our brand;
•
our belief that our partnerships with automotive lending companies provide more transparency to car shoppers and deliver highly qualified car shopper leads to participating dealers;
•
our belief that our Geo Expansion offering promotes participating dealers’ delivery capabilities and increases non-local vehicle detail page views;
•
our outlook for our Restricted Listings product;
•
the impact of competition in our industry and innovation by our competitors;
•
our ability to adapt to technological change and effectively enhance, innovate, and scale our platform and offerings;
•
our ability to realize benefits from our acquisitions and successfully implement the integration strategies in connection therewith;
•
impairment of the carrying value of our goodwill or other assets;
•
our ability to overcome challenges facing the automotive industry ecosystem, including inventory supply problems, global supply chain challenges, changes to trade policies, and other macroeconomic issues;
•
our expectations regarding cash generation and the sufficiency of our cash to fund our operations;
•
our expected returns on investments;
•
our expectations regarding our deferred tax assets;
•
the impact of changes in tax law and related guidance and regulations that may be implemented, including on tax rates;

iii

 

•
our expectations regarding our expenses generally, including our general and administrative, our product, technology, and development, and our sales and marketing expenses;
•
domestic and global economic conditions affecting us or our customers;
•
our expectations regarding the funding of our share repurchase programs;
•
our revolving credit facility;
•
our ability to adequately protect our intellectual property;
•
our ability to hire and retain necessary qualified employees to expand our operations;
•
the material weakness in our internal control over financial reporting that we have identified, and our ability to remediate such weakness and enhance our internal control environment;
•
our ability to maintain an effective system of internal controls necessary to accurately report our financial results and prevent fraud;
•
the impact of accounting pronouncements;
•
our ability to stay abreast of, and effectively comply with, new or modified laws and regulations that currently apply or become applicable to our business and our beliefs regarding our compliance therewith;
•
the impact of litigation; and
•
the future trading prices of our Class A common stock.

You should not rely upon forward‑looking statements as predictions of future events. We have based the forward‑looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and growth prospects. The outcome of the events described in these forward‑looking statements is subject to risks, uncertainties, and other factors that are described in this Quarterly Report. We have included important risk factors in the cautionary statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission, or SEC, on February 26, 2024, or Annual Report, particularly those discussed in Part I, Item 1A, “Risk Factors,” in our Annual Report and in Part II, Item 1A, “Risk Factors,” of this Quarterly Report, that could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward‑looking statements contained in this Quarterly Report. Further, our forward‑looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, or joint ventures in which we may be involved, or investments we may make. We cannot assure you that the results, events, and circumstances reflected in the forward‑looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward‑looking statements.

The forward‑looking statements made in this Quarterly Report speak only as of the date of this Quarterly Report. We undertake no obligation to update any forward‑looking statement made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law.

NOTE REGARDING TRADEMARKS

CarGurus® is a registered trademark of CarGurus, Inc., and CarOffer® is a registered trademark of CarOffer, LLC. All other product names, trademarks, and registered trademarks are property of their respective owners. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this Quarterly Report.

 

iv

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CarGurus, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

As of
September 30,
2024

 

 

As of
December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

246,748

 

 

$

291,363

 

Short-term investments

 

 

—

 

 

 

20,724

 

Accounts receivable, net of allowance for doubtful accounts of $826
   and $610, respectively

 

 

44,542

 

 

 

39,963

 

Inventory

 

 

345

 

 

 

331

 

Prepaid expenses, prepaid income taxes and other current assets

 

 

19,085

 

 

 

25,152

 

Deferred contract costs

 

 

11,924

 

 

 

11,095

 

Restricted cash

 

 

3,993

 

 

 

2,563

 

Total current assets

 

 

326,637

 

 

 

391,191

 

Property and equipment, net

 

 

126,612

 

 

 

83,370

 

Intangible assets, net

 

 

12,389

 

 

 

23,056

 

Goodwill

 

 

47,220

 

 

 

157,898

 

Operating lease right-of-use assets

 

 

127,125

 

 

 

169,682

 

Deferred tax assets

 

 

120,642

 

 

 

73,356

 

Deferred contract costs, net of current portion

 

 

13,274

 

 

 

12,998

 

Other non-current assets

 

 

4,262

 

 

 

7,376

 

Total assets

 

$

778,161

 

 

$

918,927

 

Liabilities, redeemable noncontrolling interest and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

47,238

 

 

$

47,854

 

Accrued expenses, accrued income taxes and other current liabilities

 

 

31,582

 

 

 

33,718

 

Deferred revenue

 

 

21,882

 

 

 

21,322

 

Operating lease liabilities

 

 

9,886

 

 

 

12,284

 

Total current liabilities

 

 

110,588

 

 

 

115,178

 

Operating lease liabilities

 

 

178,909

 

 

 

182,106

 

Deferred tax liabilities

 

 

—

 

 

 

58

 

Other non–current liabilities

 

 

5,191

 

 

 

4,733

 

Total liabilities

 

 

294,688

 

 

 

302,075

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 10,000,000 shares authorized;
   no shares issued and outstanding

 

 

—

 

 

 

—

 

Class A common stock, $0.001 par value per share; 500,000,000 shares
   authorized; 87,582,147 and 92,175,243 shares issued and outstanding
   at September 30, 2024 and December 31, 2023, respectively

 

 

88

 

 

 

92

 

Class B common stock, $0.001 par value per share; 100,000,000 shares
   authorized; 15,757,238 and 15,999,173 shares issued and outstanding
   at September 30, 2024 and December 31, 2023, respectively

 

 

16

 

 

 

16

 

Additional paid-in capital

 

 

154,452

 

 

 

263,498

 

Retained earnings

 

 

329,238

 

 

 

354,147

 

Accumulated other comprehensive loss

 

 

(321

)

 

 

(901

)

Total stockholders’ equity

 

 

483,473

 

 

 

616,852

 

Total liabilities, redeemable noncontrolling interest and stockholders’ equity

 

$

778,161

 

 

$

918,927

 

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

1

 

CarGurus, Inc.

Unaudited Condensed Consolidated Income Statements

(in thousands, except share and per share data)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

$

204,019

 

 

$

177,909

 

 

$

586,405

 

 

$

515,986

 

Wholesale

 

 

12,107

 

 

 

21,735

 

 

 

41,351

 

 

 

78,873

 

Product

 

 

15,232

 

 

 

19,775

 

 

 

38,090

 

 

 

96,260

 

Total revenue

 

 

231,358

 

 

 

219,419

 

 

 

665,846

 

 

 

691,119

 

Cost of revenue (1)

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

 

13,521

 

 

 

14,823

 

 

 

41,051

 

 

 

45,830

 

Wholesale (2)

 

 

20,415

 

 

 

21,284

 

 

 

47,272

 

 

 

67,780

 

Product

 

 

14,871

 

 

 

19,014

 

 

 

37,567

 

 

 

94,090

 

Total cost of revenue

 

 

48,807

 

 

 

55,121

 

 

 

125,890

 

 

 

207,700

 

Gross profit

 

 

182,551

 

 

 

164,298

 

 

 

539,956

 

 

 

483,419

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

81,216

 

 

 

76,828

 

 

 

245,801

 

 

 

230,243

 

Product, technology, and development

 

 

36,359

 

 

 

35,434

 

 

 

108,484

 

 

 

109,432

 

General and administrative

 

 

28,187

 

 

 

24,904

 

 

 

83,682

 

 

 

77,090

 

Goodwill and other asset impairment

 

 

7,026

 

 

 

—

 

 

 

134,501

 

 

 

—

 

Depreciation and amortization

 

 

2,329

 

 

 

4,037

 

 

 

7,354

 

 

 

11,762

 

Total operating expenses

 

 

155,117

 

 

 

141,203

 

 

 

579,822

 

 

 

428,527

 

Income (loss) from operations

 

 

27,434

 

 

 

23,095

 

 

 

(39,866

)

 

 

54,892

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,717

 

 

 

5,261

 

 

 

9,063

 

 

 

13,337

 

Other (expense) income, net

 

 

(94

)

 

 

(1,094

)

 

 

122

 

 

 

(152

)

Total other income, net

 

 

2,623

 

 

 

4,167

 

 

 

9,185

 

 

 

13,185

 

Income (loss) before income taxes

 

 

30,057

 

 

 

27,262

 

 

 

(30,681

)

 

 

68,077

 

Provision for (benefit from) income taxes

 

 

7,546

 

 

 

8,289

 

 

 

(5,772

)

 

 

23,421

 

Consolidated net income (loss)

 

 

22,511

 

 

 

18,973

 

 

 

(24,909

)

 

 

44,656

 

Net loss attributable to redeemable noncontrolling interest

 

 

—

 

 

 

(3,329

)

 

 

—

 

 

 

(10,191

)

Net income (loss) attributable to common stockholders

 

$

22,511

 

 

$

22,302

 

 

$

(24,909

)

 

$

54,847

 

Net income (loss) per share attributable to common stockholders: (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

$

0.20

 

 

$

(0.24

)

 

$

0.48

 

Diluted

 

$

0.21

 

 

$

0.17

 

 

$

(0.24

)

 

$

0.39

 

Weighted-average number of shares of common stock used in
   computing net income (loss) per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

103,321,988

 

 

 

113,223,711

 

 

 

104,769,518

 

 

 

113,998,928

 

Diluted

 

 

105,059,283

 

 

 

114,322,279

 

 

 

104,769,518

 

 

 

114,901,736

 
(1)
Includes depreciation and amortization expense for the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023 of $2,849, $8,433, $10,968, and $23,951, respectively.
(2)
Includes impairment of other assets for the three months ended September 30, 2024 of $9,750. There was no impairment of other assets for the three months ended September 30, 2023. Includes impairment of other assets for the nine months ended September 30, 2024 and 2023 of $9,930 and $184, respectively.

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

2

 

CarGurus, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in thousands)

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Consolidated net income (loss)

 

$

22,511

 

 

$

18,973

 

 

$

(24,909

)

 

$

44,656

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

1,382

 

 

 

(778

)

 

 

580

 

 

 

(475

)

Consolidated comprehensive income (loss)

 

 

23,893

 

 

 

18,195

 

 

 

(24,329

)

 

 

44,181

 

Comprehensive loss attributable to redeemable noncontrolling interests

 

 

—

 

 

 

(3,329

)

 

 

—

 

 

 

(10,191

)

Comprehensive income (loss) attributable to common stockholders

 

$

23,893

 

 

$

21,524

 

 

$

(24,329

)

 

$

54,372

 

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

3

 

CarGurus, Inc.

Unaudited Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity

(in thousands, except share data)

 

 

Redeemable
Noncontrolling

 

 

Class A
Common Stock

 

 

Class B
Common Stock

 

 

Additional
Paid–in

 

 

Retained

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Interest

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance as of December 31, 2023

 

$

—

 

 

 

92,175,243

 

 

$

92

 

 

 

15,999,173

 

 

$

16

 

 

$

263,498

 

 

$

354,147

 

 

$

(901

)

 

$

616,852

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

21,301

 

 

 

—

 

 

 

21,301

 

Stock–based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17,649

 

 

 

—

 

 

 

—

 

 

 

17,649

 

Issuance of common stock upon exercise of stock options

 

 

—

 

 

 

36,455

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11

 

 

 

—

 

 

 

—

 

 

 

11

 

Issuance of common stock upon vesting of restricted stock units

 

 

—

 

 

 

615,383

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

Payment of withholding taxes on net share settlements of restricted stock units

 

 

—

 

 

 

(213,042

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,097

)

 

 

—

 

 

 

—

 

 

 

(5,097

)

Repurchase of common stock

 

 

—

 

 

 

(3,538,194

)

 

 

(4

)

 

 

—

 

 

 

—

 

 

 

(81,751

)

 

 

—

 

 

 

—

 

 

 

(81,755

)

Foreign currency translation adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(599

)

 

 

(599

)

Balance as of March 31, 2024

 

$

—

 

 

 

89,075,845

 

 

$

89

 

 

 

15,999,173

 

 

$

16

 

 

$

194,309

 

 

$

375,448

 

 

$

(1,500

)

 

$

568,362

 

Net loss

 

$

—

 

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

 

$

—

 

 

$

(68,721

)

 

$

—

 

 

$

(68,721

)

Stock–based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17,198

 

 

 

—

 

 

 

—

 

 

 

17,198

 

Issuance of common stock upon exercise of stock options

 

 

—

 

 

 

54,382

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15

 

 

 

—

 

 

 

—

 

 

 

15

 

Issuance of common stock upon vesting of restricted stock units

 

 

—

 

 

 

803,405

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

Payment of withholding taxes on net share settlements of restricted stock units

 

 

—

 

 

 

(273,422

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(6,291

)

 

 

—

 

 

 

—

 

 

 

(6,291

)

Repurchase of common stock

 

 

—

 

 

 

(2,654,807

)

 

 

(3

)

 

 

—

 

 

 

—

 

 

 

(61,791

)

 

 

—

 

 

 

—

 

 

 

(61,794

)

Other (Note 6)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,507

 

 

 

—

 

 

 

—

 

 

 

3,507

 

Foreign currency translation adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(203

)

 

 

(203

)

Balance as of June 30, 2024

 

$

—

 

 

 

87,005,403

 

 

$

87

 

 

 

15,999,173

 

 

$

16

 

 

$

146,946

 

 

$

306,727

 

 

$

(1,703

)

 

$

452,073

 

Net income

 

$

—

 

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

 

$

—

 

 

$

22,511

 

 

$

—

 

 

$

22,511

 

Stock–based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,994

 

 

 

—

 

 

 

—

 

 

 

16,994

 

Issuance of common stock upon exercise of stock options

 

 

—

 

 

 

58,922

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

49

 

 

 

—

 

 

 

—

 

 

 

49

 

Issuance of common stock upon vesting of restricted stock units

 

 

—

 

 

 

676,910

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

Payment of withholding taxes on net share settlements of restricted stock units

 

 

—

 

 

 

(236,722

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,986

)

 

 

—

 

 

 

—

 

 

 

(5,986

)

Repurchase of common stock

 

 

—

 

 

 

(164,301

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,550

)

 

 

—

 

 

 

—

 

 

 

(3,550

)

Conversion of common stock

 

 

—

 

 

 

241,935

 

 

 

—

 

 

 

(241,935

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency translation adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,382

 

 

 

1,382

 

Balance as of September 31, 2024

 

$

—

 

 

 

87,582,147

 

 

$

88

 

 

 

15,757,238

 

 

$

16

 

 

$

154,452

 

 

$

329,238

 

 

$

(321

)

 

$

483,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

$

36,749

 

 

 

101,636,649

 

 

$

102

 

 

 

15,999,173

 

 

$

16

 

 

$

413,092

 

 

$

323,043

 

 

$

(1,644

)

 

$

734,609

 

Net (loss) income

 

 

(4,266

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,132

 

 

 

—

 

 

 

16,132

 

Stock–based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,049

 

 

 

—

 

 

 

—

 

 

 

16,049

 

Issuance of common stock upon exercise of stock options

 

 

—

 

 

 

7,700

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19

 

 

 

—

 

 

 

—

 

 

 

19

 

Issuance of common stock upon vesting of restricted stock units

 

 

—

 

 

 

959,935

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Payment of withholding taxes on net share settlements of restricted stock units

 

 

—

 

 

 

(335,448

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,652

)

 

 

—

 

 

 

—

 

 

 

(5,652

)

Repurchase of common stock

 

 

—

 

 

 

(3,989,861

)

 

 

(4

)

 

 

—

 

 

 

—

 

 

 

(65,760

)

 

 

—

 

 

 

—

 

 

 

(65,764

)

Tax distributions to redeemable noncontrolling interest holders

 

 

(8

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency translation adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

415

 

 

 

415

 

Balance as of March 31, 2023

 

$

32,475

 

 

 

98,278,975

 

 

$

98

 

 

 

15,999,173

 

 

$

16

 

 

$

357,748

 

 

$

339,175

 

 

$

(1,229

)

 

$

695,808

 

Net (loss) income

 

$

(2,596

)

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

 

$

—

 

 

$

16,413

 

 

$

—

 

 

$

16,413

 

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15,895

 

 

 

—

 

 

 

—

 

 

 

15,895

 

Issuance of common stock upon exercise of stock options

 

 

—

 

 

 

1,480

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

10

 

 

 

—

 

 

 

—

 

 

 

10

 

Issuance of common stock upon vesting of restricted stock units

 

 

—

 

 

 

697,879

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Payment of withholding taxes on net share settlements of restricted stock units

 

 

—

 

 

 

(240,674

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,196

)

 

 

—

 

 

 

—

 

 

 

(5,196

)

Repurchase of common stock

 

 

—

 

 

 

(1,311,387

)

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

(21,963

)

 

 

—

 

 

 

—

 

 

 

(21,964

)

Tax distributions to redeemable noncontrolling interest holders

 

 

(14

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency translation adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(112

)

 

 

(112

)

Balance at June 30, 2023

 

$

29,865

 

 

 

97,426,273

 

 

$

97

 

 

 

15,999,173

 

 

$

16

 

 

$

346,494

 

 

$

355,588

 

 

$

(1,341

)

 

$

700,854

 

Net (loss) income

 

$

(3,329

)

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

 

$

—

 

 

$

22,302

 

 

$

—

 

 

$

22,302

 

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15,668

 

 

 

—

 

 

 

—

 

 

 

15,668

 

Issuance of common stock upon exercise of stock options

 

 

—

 

 

 

6,654

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

45

 

 

 

—

 

 

 

—

 

 

 

45

 

Issuance of common stock upon vesting of restricted stock units

 

 

—

 

 

 

615,273

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

Payment of withholding taxes on net share settlements of restricted stock units

 

 

—

 

 

 

(214,187

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,915

)

 

 

—

 

 

 

—

 

 

 

(3,915

)

Repurchase of common stock

 

 

—

 

 

 

(956,248

)

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

(17,181

)

 

 

—

 

 

 

—

 

 

 

(17,182

)

Tax distributions to redeemable noncontrolling interest holders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency translation adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(778

)

 

 

(778

)

Balance at September 30, 2023

 

$

26,536

 

 

 

96,877,765

 

 

$

97

 

 

 

15,999,173

 

 

$

16

 

 

$

341,110

 

 

$

377,890

 

 

$

(2,119

)

 

$

716,994

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

4

 

CarGurus, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

Operating Activities

 

 

 

 

 

 

Consolidated net (loss) income

 

$

(24,909

)

 

$

44,656

 

Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

18,322

 

 

 

35,713

 

Gain on sale of property and equipment

 

 

—

 

 

 

(460

)

Currency (gain) loss on foreign denominated transactions

 

 

(234

)

 

 

249

 

Other non-cash (income) expense, net

 

 

(816

)

 

 

168

 

Deferred taxes

 

 

(47,344

)

 

 

(32,129

)

Provision for doubtful accounts

 

 

1,534

 

 

 

247

 

Stock-based compensation expense

 

 

46,614

 

 

 

43,769

 

Amortization of deferred financing costs

 

 

387

 

 

 

387

 

Amortization of deferred contract costs

 

 

10,241

 

 

 

8,629

 

Goodwill and other asset impairment

 

 

144,431

 

 

 

184

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(5,393

)

 

 

337

 

Inventory

 

 

149

 

 

 

4,959

 

Prepaid expenses, prepaid income taxes, and other assets

 

 

7,093

 

 

 

6,027

 

Deferred contract costs

 

 

(11,307

)

 

 

(13,688

)

Accounts payable

 

 

10,770

 

 

 

1,177

 

Accrued expenses, accrued income taxes, and other liabilities

 

 

(2,568

)

 

 

1,016

 

Deferred revenue

 

 

555

 

 

 

8,797

 

Lease obligations

 

 

32,232

 

 

 

11,993

 

Net cash provided by operating activities

 

 

179,757

 

 

 

122,031

 

Investing Activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(64,937

)

 

 

(9,048

)

Proceeds from sale of property and equipment

 

 

—

 

 

 

460

 

Capitalization of website development costs

 

 

(15,314

)

 

 

(11,773

)

Purchases of short-term investments

 

 

(494

)

 

 

(96,748

)

Sale of short-term investments

 

 

21,218

 

 

 

5,000

 

Advance payments to customers, net of collections

 

 

259

 

 

 

(2,908

)

Net cash used in investing activities

 

 

(59,268

)

 

 

(115,017

)

Financing Activities

 

 

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

75

 

 

 

74

 

Payment of withholding taxes on net share settlements of restricted stock units

 

 

(17,391

)

 

 

(11,738

)

Repurchases of common stock

 

 

(146,180

)

 

 

(107,409

)

Payment of finance lease obligations

 

 

(56

)

 

 

(52

)

Payment of tax distributions to redeemable noncontrolling interest holders

 

 

—

 

 

 

(38

)

Change in gross advance payments received from third-party transaction processor

 

 

(704

)

 

 

(4,523

)

Net cash used in financing activities

 

 

(164,256

)

 

 

(123,686

)

Impact of foreign currency on cash, cash equivalents, and restricted cash

 

 

582

 

 

 

(506

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(43,185

)

 

 

(117,178

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

293,926

 

 

 

484,132

 

Cash, cash equivalents, and restricted cash at end of period

 

$

250,741

 

 

$

366,954

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for income taxes

 

$

36,959

 

 

$

48,933

 

Cash paid for operating lease liabilities

 

$

11,213

 

 

$

14,762

 

Cash paid for interest

 

$

611

 

 

$

411

 

Supplemental noncash disclosure of cash flow information:

 

 

 

 

 

 

Unpaid purchases of property and equipment and capitalized hosting arrangements

 

$

6,592

 

 

$

5,706

 

Unpaid withholding taxes on net share settlement of restricted stock units

 

$

120

 

 

$

3,029

 

Unpaid repurchases of common stock

 

$

—

 

 

$

1,173

 

Unpaid excise tax on repurchases of common stock

 

$

2,503

 

 

$

617

 

Capitalized stock-based compensation expense in website development and
   internal-use software costs and hosting arrangements

 

$

5,227

 

 

$

3,843

 

Obtaining a right-of-use asset in exchange for an operating lease liability

 

$

(5,029

)

 

$

145,607

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

5

 

CarGurus, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(dollars in thousands, except share and per share data, unless otherwise noted)

1. Organization and Business Description

CarGurus, Inc. (the "Company") is a multinational, online automotive platform for buying and selling vehicles that is building upon its industry-leading listings marketplace with both digital retail solutions and the CarOffer, LLC ("CarOffer") online wholesale platform. The CarGurus platform gives consumers the confidence to purchase and/or sell a vehicle either online or in-person, and it gives dealerships the power to accurately price, effectively market, instantly acquire, and quickly sell vehicles, all with a nationwide reach. The Company uses proprietary technology, search algorithms, and data analytics to bring trust, transparency, and competitive pricing to the automotive shopping experience.

The Company operates principally in the United States (the "U.S."). In the U.S. it also operates as independent brands the Autolist online marketplace and the CarOffer online wholesale platform. In addition to the U.S., the Company operates online marketplaces under the CarGurus brand in Canada and the United Kingdom (the "U.K."). In the U.K. it also operates as an independent brand the PistonHeads online marketplace.

The Company has subsidiaries in the U.S., Canada, Ireland, and the U.K. and it has two reportable segments, U.S. Marketplace and Digital Wholesale. See Note 13 of the Unaudited Condensed Consolidated Financial Statements (as defined in Note 2 of the Unaudited Condensed Consolidated Financial Statements) for further segment reporting and geographic information.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited (the “Unaudited Condensed Consolidated Financial Statements”). The Unaudited Condensed Consolidated Financial Statements and related disclosures have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board (“FASB”).

The Unaudited Condensed Consolidated Financial Statements have also been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the Company’s financial statements for interim periods. These interim period results are not necessarily indicative of the results to be expected for any other interim period or the full year.

The Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 26, 2024 (the “Annual Report”).

While the Company disclosed unpaid excise tax on repurchases of common stock within unpaid repurchases of common stock in the Unaudited Condensed Consolidated Statements of Cash Flows in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, filed with the SEC on November 7, 2023, the accompanying Unaudited Condensed Consolidated Statements of Cash Flows for the quarterly period ended September 30, 2023, present unpaid excise tax on repurchases of common stock separately from unpaid repurchases of common stock to conform to the current year presentation.

Principles of Consolidation

The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

6

 

Subsequent Event Considerations

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the Unaudited Condensed Consolidated Financial Statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure, other than those described in Note 14 of these Unaudited Condensed Consolidated Financial Statements.

Use of Estimates

The preparation of the Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Changes in estimates are recognized in the period in which they become known.

Critical estimates relied upon in preparing the Unaudited Condensed Consolidated Financial Statements include the determination of sales allowance and variable consideration in the Company’s revenue recognition, allowance for doubtful accounts, the impairment of long-lived assets, the capitalization of product, technology, and development costs for website development, internal-use software, and hosting arrangements, the valuation of acquired assets and liabilities, the valuation and recoverability of intangible assets and goodwill, the valuation of redeemable noncontrolling interest, the recoverability of the Company’s net deferred tax assets and related valuation allowance, the valuation of inventory and the valuation of liability-classified compensation awards. Accordingly, the Company considers these to be its critical accounting estimates, and believes that of the Company’s significant accounting policies, these involve the greatest degree of judgment and complexity. For the three and nine months ended September 30, 2024, there were no estimates related to the valuation of redeemable noncontrolling interest.

During the three months ended June 30, 2024, the Company identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and declines in the volume of the number of vehicles processed from car dealers, consumers, and other marketplaces through the CarOffer website within the applicable period within the Digital Wholesale segment ("Transactions"), which resulted in revisions to the Company’s financial projections for the CarOffer reporting unit. During the three months ended June 30, 2024, the Company performed an updated fair value analysis of the CarOffer reporting unit, resulting in an excess of carrying value over fair value of the CarOffer reporting unit, which led to the impairment of the CarOffer reporting unit, as discussed in Note 6 of the Unaudited Condensed Consolidated Financial Statements.

During the three months ended September 30, 2024, there was no additional impairment related to the CarOffer reporting unit.

Due to the partial impairment of the CarOffer reporting unit goodwill and other long-term assets during the three months ended June 30, 2024, in which the CarOffer reporting unit was reduced to its fair value, there remains a risk for future impairment charges if projected future operating results further decline, including as a result of economic conditions or operational challenges, which could be material and negatively affect its operations.

For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements.

Concentration of Credit Risk

The Company has no significant off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments, trade accounts receivable, and other receivables.

7

 

The Company maintains its cash and cash equivalents principally with accredited financial institutions of high credit standing. Although the Company deposits its cash and cash equivalents with multiple financial institutions, its deposits with each such financial institution exceed governmental insured limits.

The Company routinely assesses the creditworthiness of its customers and does not require collateral. The Company generally has not experienced any material losses related to receivables from individual customers or groups of customers.

The Company had no material losses related to marketplace receivables as it was dispersed across a large number of customers. The Company had no material losses related to wholesale and product receivables as the third-party transaction processor does not release the title to the vehicle until successfully collecting funds from the buying dealer. Titling is handled by the Company's third-party transaction processor and titles are held in escrow until it collects funds from the buying dealer (i.e., title is legally transferred from the selling party to the buying party upon signing of bill of sale, but title is held in escrow by the third-party transaction processor until payment is received). Due to these factors, no additional credit risk beyond amounts provided for collection losses was believed by management to be probable in the Company’s accounts receivable and other receivables.

As of September 30, 2024 and December 31, 2023, no customer accounted for more than 10% of net accounts receivable and other receivables. All of accounts receivable was dispersed among more than 1,000 customers. Therefore, there is no significant credit risk with respect to accounts receivable because credit risk is dispersed due to the large number of customers.

For the three and nine months ended September 30, 2024 and 2023, no customer accounted for more than 10% of total revenue.

The Company is exposed to credit losses primarily through its trade accounts receivable, which includes receivables in transit, net of payables due, from a third-party transaction processor. The third-party transaction processor collects customer payments on the Company's behalf and remits them to the Company. Customer payments received by the third-party transaction processor, but not remitted to the Company as of period end, are deemed to be receivables in transit, net of payables due. Additionally, the third-party transaction processor provides payments in advance for certain selling dealers. If the third-party transaction processor does not receive buying dealer payments associated with the transaction paid in advance, the Company would guarantee losses incurred by the third-party transaction processor and the balance would be deducted from future remittances to the Company. To date, losses associated with these guarantees have not been material.

The Company offsets trade accounts receivables in transit, net of payables due, from the third-party transaction processor with payments received in advance from the third-party transaction processor as it has the right of offset. At any point in time, the Company could have amounts due from the third-party transaction processor for funds the third-party transaction processor has collected from buying dealers and has not yet remitted to the Company (i.e., receivables in transit, net of payables due), as well as amounts paid by the third-party transaction processor to the Company in advance of collecting payments from buying dealers (i.e., payments received in advance). Therefore, as the Company has the right to offset, the Company can either have a net receivable balance due from the third-party transaction processor which is recognized within accounts receivable, net in the Unaudited Condensed Consolidated Balance Sheets, or the Company can have a net liability which is recognized within accrued expenses, accrued income taxes, and other current liabilities in the Unaudited Condensed Consolidated Balance Sheets if the advance payments exceed the receivable position from the third-party transaction processor as of the balance sheet date. The change in payments received in advance from the third-party transaction processor is presented as cash flows from financing activities in the Unaudited Condensed Consolidated Statements of Cash Flows.

As of September 30, 2024, trade accounts receivable from receivables in transit, net of payables due, from the third-party transaction processor was $2,216, offset by payments received in advance of $1,311, which resulted in a net receivable of $905 recognized within accounts receivable in the Unaudited Condensed Consolidated Balance Sheets. As of December 31, 2023, trade accounts receivable from receivables in transit, net of payables due, from the third-party transaction processor was $2,868, offset by payments received in advance of $2,015, which resulted in a net receivable of $853 recognized within accounts receivable, net in the consolidated balance sheets.

As of September 30, 2024 and December 31, 2023, $11,795 and $9,581, respectively, was included in net accounts receivable, representing unbilled accounts receivable relating primarily to both advertising customers and dealers invoiced in the period subsequent to services rendered and revenue recognition adjustments for Company offered discounts given to dealers in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606").

8

 

Significant Accounting Policies

The Unaudited Condensed Consolidated Financial Statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the Unaudited Condensed Consolidated Financial Statements. As of September 30, 2024, there have been no material changes in the Company’s significant accounting policies, which are detailed in the Annual Report.

Recent Accounting Pronouncements Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company on or prior to the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. As of September 30, 2024, there are no new accounting pronouncements that the Company is considering adopting, other than those described below.

In December 2023 the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 addresses investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity should apply ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of ASU 2023-09 on its future consolidated financial statements and related disclosures.

In November 2023 the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 is intended to enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC Topic 280, Segment Reporting ("ASC 280"). ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its chief operating decision maker (“CODM”) uses to assess segment performance and to make decisions about resource allocations. ASU 2023-07 is intended to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply ASU 2023-07 retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently evaluating the impact of ASU 2023-07 on its future consolidated financial statements and related disclosures.

In October 2023 the FASB issued ASU 2023-06, Disclosure Improvements – Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). ASU 2023-06 modifies the disclosure and presentation requirements for a variety of topics in the ASC. The Company is currently evaluating the impact of ASU 2023-06 on its future consolidated financial statements and related disclosures.

3. Revenue Recognition

 

The following table summarizes revenue from contracts with customers by services and products for the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Marketplace

 

$

204,019

 

 

$

177,909

 

 

$

586,405

 

 

$

515,986

 

Dealer-to-Dealer

 

 

13,876

 

 

 

23,290

 

 

 

47,867

 

 

 

84,945

 

Sell My Car - Instant Max Cash Offer

 

 

13,463

 

 

 

18,220

 

 

 

31,574

 

 

 

90,188

 

Total

 

$

231,358

 

 

$

219,419

 

 

$

665,846

 

 

$

691,119

 

The Company provides disaggregation of revenue by services and products, by income statement presentation, by segment, and by geographic region.

Revenue by services and products is disaggregated by (i) marketplace services, (ii) Dealer-to-Dealer services and products, and (iii) Sell My Car - Instant Max Cash Offer ("IMCO") services and products as disclosed above.

9

 

Revenue by income statement presentation is disaggregated by (i) marketplace, (ii) wholesale, and (iii) product revenue sources as disclosed in the Unaudited Condensed Consolidated Income Statements. Marketplace services are included within marketplace revenue in the Unaudited Condensed Consolidated Income Statements. Dealer-to-Dealer and IMCO services and products are included within both wholesale revenue and product revenue in the Unaudited Condensed Consolidated Income Statements.

Revenue by segment is disaggregated by (i) U.S. Marketplace and (ii) Digital Wholesale segments as disclosed in Note 13 of the Unaudited Condensed Consolidated Financial Statements. Marketplace services are included in the U.S. Marketplace segment and in the Other category of segment reporting. Dealer-to-Dealer and IMCO services and products are included in the Digital Wholesale segment.

Revenue by geographic region is disaggregated by (i) U.S. and (ii) International regions as disclosed in Note 13 of the Unaudited Condensed Consolidated Financial Statements. Marketplace services are provided in the U.S. and International regions. Dealer-to-Dealer and IMCO services and products are provided in the U.S. region.

The Company believes these categories best depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of the relevant quarter end.

For contracts with an original expected duration greater than one year, the aggregate amount of the transaction price allocated to the performance obligations that were unsatisfied as of September 30, 2024, was approximately $57.6 million, which the Company expects to recognize over the next twelve months.

For contracts with an original expected duration of one year or less, the Company has applied the practical expedient available under ASC 606 to not disclose the amount of transaction price allocated to unsatisfied performance obligations as of September 30, 2024. For performance obligations not satisfied as of September 30, 2024, and to which this expedient applies, the nature of the performance obligations, the variable consideration, and any consideration from contracts with customers not included in the transaction price is consistent with performance obligations satisfied as of September 30, 2024.

For the three months ended September 30, 2024 and 2023, revenue recognized from amounts included in deferred revenue at the beginning of the period was $21,785 and $21,267, respectively. For the nine months ended September 30, 2024 and 2023, revenue recognized from amounts included in deferred revenue at the beginning of the period was $21,322 and $12,249, respectively.

4. Fair Value of Financial Instruments

As of September 30, 2024 and December 31, 2023, assets measured at fair value on a recurring basis consist of the following:

 

 

 

As of September 30, 2024

 

 

 

Quoted Prices
in Active Markets
for Identical Assets
(Level 1 Inputs)

 

 

Significant Other
Observable Inputs
(Level 2 Inputs)

 

 

Significant
Unobservable Inputs
(Level 3 Inputs)

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$

137,781

 

 

$

—

 

 

$

—

 

 

$

137,781

 

Total

 

$

137,781

 

 

$

—

 

 

$

—

 

 

$

137,781

 

 

 

 

As of December 31, 2023

 

 

 

Quoted Prices
in Active Markets
for Identical Assets
(Level 1 Inputs)

 

 

Significant Other
Observable Inputs
(Level 2 Inputs)

 

 

Significant
Unobservable Inputs
(Level 3 Inputs)

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$

73,449

 

 

$

—

 

 

$

—

 

 

$

73,449

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

 

20,724

 

 

 

—

 

 

 

—

 

 

 

20,724

 

Total

 

$

94,173

 

 

$

—

 

 

$

—

 

 

$

94,173

 

 

10

 

For the three months ended September 30, 2024, there was no dividend income recognized within interest income in the Unaudited Condensed Consolidated Income Statements. For the three months ended September 30, 2023 and for the nine months ended September 30, 2024 and 2023, dividend income recognized within interest income in the Unaudited Condensed Consolidated Income Statement was immaterial.

For the three months ended September 30, 2024, there was no unrealized and realized gain on short-term investments in equity securities. For the three months ended September 30, 2023 and for the nine months ended September 30, 2024 and 2023, unrealized and realized gain on short-term investments in equity securities was immaterial.

As of September 30, 2024, the Company did not have any short-term investments as all were sold during the nine months ended September 30, 2024.

5. Property and Equipment, Net

As of September 30, 2024 and December 31, 2023, property and equipment, net consist of the following:

 

 

 

As of
September 30,
2024

 

 

As of
December 31,
2023

 

Capitalized equipment

 

$

7,769

 

 

$

1,326

 

Capitalized internal-use software

 

 

18,280

 

 

 

12,279

 

Capitalized website development

 

 

57,258

 

 

 

57,158

 

Furniture and fixtures

 

 

13,660

 

 

 

8,149

 

Leasehold improvements

 

 

92,952

 

 

 

23,308

 

Construction in progress

 

 

—

 

 

 

39,835

 

Finance lease right-of-use assets

 

 

188

 

 

 

288

 

 

 

 

190,107

 

 

 

142,343

 

Less accumulated depreciation and amortization

 

 

(63,495

)

 

 

(58,973

)

Total

 

$

126,612

 

 

$

83,370

 

 

During the nine months ended September 30, 2024, capitalized website development increased $100 due primarily to continued net investment in the Company's product offerings of $19,153, which was offset in part by a $15,583 impairment of capitalized website development costs due to the end of the CG Buy Online pilot which allowed consumers to purchase vehicles online, as well as a $3,470 disposal of fully depreciated assets for the Company's peer-to-peer product which the Company is no longer offering. For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements.

During the nine months ended September 30, 2024, capitalized equipment, furniture and fixtures, and leasehold improvements increased $6,443, $5,511, and $69,644, respectively, due primarily to assets being transferred out of construction in progress and placed into service, as well as additional buildout costs, as the Company began occupying 1001 Boylston Street. The Company also impaired $219 of furniture and fixtures due to the end of the CG Buy Online pilot. For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements.

During the nine months ended September 30, 2024, capitalized internal-use software increased $6,001, due primarily to continued net investment in the Company's software projects.

During the nine months ended September 30, 2024, construction in progress decreased $39,835 due primarily to assets being transferred out of construction in progress and placed into service in their respective categories as the Company began occupying 1001 Boylston Street.

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, depreciation and amortization expense, excluding amortization of intangible assets, amortization of capitalized hosting arrangements, and impairments, was $4,669, $4,962, $15,174, and $13,164, respectively.

11

 

6. Goodwill and Other Asset Impairments

CarOffer Impairment

Background

During the three months ended June 30, 2024, the Company identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to the Company’s financial projections for the CarOffer reporting unit.

Prior to testing the goodwill and other long-lived assets included in the CarOffer reporting unit for impairment, the Company first evaluated current assets, inclusive of the cash and cash-equivalents, accounts receivable, inventory, prepaid expenses, and other current assets allocated to the CarOffer reporting unit, under applicable guidance and identified no impairment.

The Company then evaluated other long-lived assets included in the CarOffer reporting unit under ASC 360, Property, Plant, and Equipment (“ASC 360”). Other long-lived assets were tested for impairment at the asset group level. The Company identified the asset group as the entire CarOffer reporting unit, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. As the CarOffer asset group did not pass the step one recoverability test on an undiscounted cash flow basis, the Company then compared the fair value of the asset group to its carrying value. To estimate the fair value of the asset group, the Company utilized an income-based valuation approach by means of a discounted cash flow method, based on market participant assumptions. The assumptions used to estimate the fair value using a discounted cash flow method included forecasted revenue and EBITDA, long term expectations for growth rates and operating profit margin, expected needs for annual capital expenditure and net working capital, and a market-participant discount rate derived via the capital asset pricing model. The excess of the carrying value of the asset group over the fair value was first allocated amongst the long-lived asset group (excluding goodwill), noting each individual long-lived asset within the group may not be impaired below its individual fair value.

As discussed below, the Company recognized impairments of CarOffer right-of-use assets of $4,731 and the CarOffer brand intangible asset of $7,538 to bring the long-lived assets’ carrying value to fair value. All other long-lived assets’ carrying value were at or below fair value. Subsequent to performing the impairment assessment of its long-lived assets, the Company then assessed goodwill included in the CarOffer reporting unit, resulting in an impairment charge of $115,206, inclusive of the deferred tax impact of $28,437 due to the goodwill being tax deductible. Refer below for further details of each impairment charge.

Accordingly, during the three months ended June 30, 2024, the Company recognized a $127,475 impairment to the CarOffer reporting unit, reducing its carrying value to its fair value. During the three months ended September 30, 2024, there was no additional impairment related to the CarOffer reporting unit.

Due to the partial impairment of the CarOffer reporting unit goodwill and other assets during the three months ended June 30, 2024, in which the CarOffer reporting unit was reduced to its fair value, there remains a risk for future impairment charges if projected future operating results further decline, including as a result of economic conditions or operational challenges, which could be material and negatively affect its operations.

Right-of-Use Asset

In connection with the triggering event discussed above, the Company assessed the right-of-use assets associated with CarOffer's Addison, Texas lease for impairment.

As noted above, the carrying value of the CarOffer asset group was determined to not be recoverable. As such, the Company evaluated the fair value of the CarOffer asset group as of June 30, 2024, using a discounted cash flow method that incorporated market participant assumptions. The resulting impairment loss was then allocated to each of the long-lived assets in the asset group, including the CarOffer right-of-use assets. The fair value measurement is categorized as Level 3 within the fair value hierarchy as there are significant unobservable inputs utilized in the valuation technique. The Company estimated fair value using the discounted cash flow method, with key inputs including the selected market rental rates based upon similar office spaces, the discount rate, and other estimated replacement costs.

12

 

As of June 30, 2024, a non-cash impairment charge of $4,731 was allocated to the right-of-use assets in the CarOffer asset group, which was recognized within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements in the Digital Wholesale segment.

Other Intangible Assets

In connection with the triggering event discussed above, the Company recognized an impairment to its brand intangible assets included within the CarOffer asset group as of June 30, 2024 to reduce the carrying value of the brand intangible asset to its fair value. This fair value measurement is categorized as Level 3 within the fair value hierarchy as there are significant unobservable inputs utilized in the valuation technique. The Company estimated fair value using market participant assumptions and the relief from royalty method, with key inputs including forecasted revenue, royalty rate, discount rate, and the useful life.

As of June 30, 2024, a non-cash impairment charge of $7,538 was allocated to the brand intangible asset for the CarOffer asset group, which was recognized within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements in the Digital Wholesale segment.

As of September 30, 2024 and December 31, 2023, intangible assets consist of the following:

 

 

 

As of September 30, 2024

 

 

 

Weighted
Average
Remaining
Useful Life
(years)

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Accumulated Impairment

 

 

Net Carrying
Amount

 

Brand

 

 

6.4

 

 

$

32,212

 

 

$

12,285

 

 

$

7,538

 

 

$

12,389

 

Customer relationships

 

 

—

 

 

 

19,870

 

 

 

19,870

 

 

 

—

 

 

 

—

 

Developed technology

 

 

—

 

 

 

65,212

 

 

 

64,565

 

 

 

647

 

 

 

—

 

Total

 

 

 

 

$

117,294

 

 

$

96,720

 

 

$

8,185

 

 

$

12,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2023

 

 

 

Weighted
Average
Remaining
Useful Life
(years)

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Accumulated Impairment

 

 

Net Carrying
Amount

 

Brand

 

 

7.4

 

 

$

32,193

 

 

$

10,262

 

 

$

—

 

 

$

21,931

 

Customer relationships

 

0.0

 

 

 

19,870

 

 

 

19,620

 

 

 

—

 

 

 

250

 

Developed technology

 

0.0

 

 

 

65,212

 

 

 

63,690

 

 

 

647

 

 

 

875

 

Total

 

 

 

 

$

117,275

 

 

$

93,572

 

 

$

647

 

 

$

23,056

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, amortization of intangible assets was $509, $7,508, $3,148, and $22,549, respectively.

For the three months ended September 30, 2024, there was no impairment for intangible assets. For the nine months ended September 30, 2024, the Company impaired $7,538 of Digital Wholesale segment intangible assets within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements related to the impairment discussed above.

13

 

 

As of September 30, 2024, estimated amortization expense of intangible assets for future periods is as follows:

 

Year Ending December 31,

 

Amortization
Expense

 

Remainder of 2024

 

$

509

 

2025

 

 

2,035

 

2026

 

 

2,035

 

2027

 

 

2,035

 

2028

 

 

2,035

 

2029

 

 

1,410

 

Thereafter

 

 

2,330

 

Total

 

$

12,389

 

 

Goodwill

The Company determined that there were no indicators of impairment for the U.S. Marketplace or U.K. Marketplace reporting units and therefore an interim impairment assessment was not performed at June 30, 2024.

In connection with the triggering event discussed above, the Company evaluated the CarOffer reporting unit goodwill for impairment as of June 30, 2024, by comparing its estimated fair value to its carrying value. The Company estimated the fair value of the CarOffer reporting unit using an income-based valuation approach by means of a discounted cash flow method. This fair value measurement is categorized as Level 3 within the fair value hierarchy as there are significant unobservable inputs utilized in the valuation technique. The assumptions used to estimate the fair value of the reporting unit included forecasted revenue and EBITDA, long term expectations for growth rates and operating profit margin, expected needs for annual capital expenditure and net working capital, and a market-participant discount rate derived via the capital asset pricing model.

As of June 30, 2024, the carrying value for the CarOffer reporting unit (after adjustments for other long-lived asset impairments discussed above) exceeded its fair value, resulting in a non-cash impairment charge of $86,769, which was recognized within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements in the Digital Wholesale segment. As the goodwill for the CarOffer reporting unit is tax deductible, the Company then calculated the deferred tax effect of the goodwill impairment charge using the simultaneous equation method. This resulted in additional goodwill impairment and deferred tax assets of $28,437, for a total goodwill impairment of $115,206 recognized within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements in the Digital Wholesale segment.

During the three months ended September 30, 2024, there was no additional impairment related to the CarOffer reporting unit goodwill.

As of September 30, 2024, changes in the carrying value of goodwill are as follows:

 

 

 

U.S. Marketplace

 

 

Digital Wholesale

 

 

Other

 

 

Total

 

Balance as of December 31, 2023

 

$

12,477

 

 

$

130,451

 

 

$

14,970

 

 

$

157,898

 

Impairment of goodwill

 

 

—

 

 

 

(115,206

)

 

 

—

 

 

 

(115,206

)

Other (1)

 

 

—

 

 

 

4,323

 

 

 

—

 

 

 

4,323

 

Foreign currency translation adjustment

 

 

—

 

 

 

—

 

 

 

205

 

 

 

205

 

Balance as of September 30, 2024

 

$

12,477

 

 

$

19,568

 

 

$

15,175

 

 

$

47,220

 
(1)
As of September 30, 2024, the Company recognized an immaterial adjustment to goodwill and additional paid-in-capital, associated with the acquisitions of its equity interests in CarOffer.

As of September 30, 2024, the accumulated impairment losses of goodwill were $115,206. As of December 31, 2023, there were no accumulated impairment losses of goodwill.

14

 

CG Buy Online Impairment

During the three months ended September 30, 2024, the Company decided to end its CG Buy Online pilot in order to redirect those resources toward other investment opportunities, including continued product innovation and development across the business. The CG Buy Online pilot was one of the initiatives that allowed consumers to purchase vehicles online. The pilot ended on October 31, 2024.

This was identified as a triggering event for long-lived asset impairment testing under ASC 360. Other long-lived assets are tested for impairment at the asset group level, and the Company identified the asset group as the CG Buy Online Pilot assets, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. These assets were included in the CG Buy Online reporting unit. As the asset group did not pass the step one recoverability test on an undiscounted cash flow basis, the Company then compared the fair value of the asset group to its carrying value. As the Company has decided to end this pilot, the estimated future cash flows, and related fair value are both $0. There is no goodwill associated with this asset group.

During the three months ended September 30, 2024, the Company impaired $15,583 and $219 of Digital Wholesale segment capitalized website development costs and furniture and fixtures, respectively, within property and equipment, net in the Unaudited Condensed Consolidated Balance Sheets. Additionally, the Company impaired $527 and $447 of capitalized hosting arrangements within prepaid expenses, prepaid income taxes and other current assets, and other non-current assets, respectively, in the Unaudited Condensed Consolidated Balance Sheets. These costs were included in the CG Buy Online reporting unit. There is an immaterial remaining balance of these assets, that amortized until the end of the pilot on October 31, 2024.

For both the three and nine months ended September 30, 2024, the Company recognized $9,750 and $7,026 of Digital Wholesale segment impairment charges, related to the CG Buy Online pilot, as wholesale cost of revenue and goodwill and other asset impairment operating expense, respectively, in the Unaudited Condensed Consolidated Income Statement.

For the nine months ended September 30, 2024, the Company recognized $16,766 of Digital Wholesale segment impairment charges as goodwill and other asset impairment adjustment to reconcile net income to net cash in the Unaudited Condensed Consolidated Statements of Cash Flows.

7. Accrued Expenses, Accrued Income Taxes, and Other Current Liabilities

As of September 30, 2024 and December 31, 2023, accrued expenses, accrued income taxes, and other current liabilities consist of the following:

 

 

 

As of
September 30,
2024

 

 

As of
December 31,
2023

 

Accrued bonus

 

$

11,685

 

 

$

15,247

 

Other accrued expenses, accrued income taxes, and other current liabilities

 

 

19,897

 

 

 

18,471

 

Total

 

$

31,582

 

 

$

33,718

 

The decrease of $3,562 in accrued bonus was due primarily to the midyear payout of the fiscal year 2024 bonuses in third quarter of 2024.

 

15

 

8. Debt

As of September 30, 2024 and December 31, 2023, the Company had no long-term debt outstanding.

Revolving Credit Facility

On September 26, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and collateral agent and an L/C Issuer (as defined in the Credit Agreement), and the other lenders, L/C Issuers, and parties thereto from time to time. The Credit Agreement consists of a revolving credit facility (the “2022 Revolver”), which allows the Company to borrow up to $400.0 million, $50.0 million of which may be comprised of a letter of credit sub-facility (the "2022 Revolver Sub-facility"). The borrowing capacity under the Credit Agreement may be increased in accordance with the terms and subject to the adjustments as set forth in the Credit Agreement. Specifically, the borrowing capacity may be increased by an amount up to the greater of $250.0 million or 100% of Four Quarter Consolidated EBITDA (as defined in the Credit Agreement) if certain criteria are met and subject to certain restrictions. Any such increase requires lender approval. Proceeds of any borrowings may be used for general corporate purposes. The 2022 Revolver is scheduled to mature on September 26, 2027.

The applicable interest rate is, at the Company's option, based on a number of different benchmark rates and applicable spreads, based on the ratio of the outstanding principal amount of the Company’s secured indebtedness to the trailing four quarters of consolidated EBITDA (as determined under the Credit Agreement, the “Consolidated Secured Net Leverage Ratio”). The Credit Agreement also requires the Company to pay a commitment fee to the lenders with respect of the unutilized revolving commitments at a rate ranging from 0.125% to 0.175% per annum based on the Consolidated Secured Net Leverage Ratio, as determined on a quarterly basis.

The 2022 Revolver is secured by a first priority lien on substantially all tangible and intangible property of the Company, as well as any future guarantors, and pledges of the equity of certain wholly-owned subsidiaries, in each case subject to certain exceptions, limitations, and exclusions from the collateral. The Credit Agreement includes customary events of default and requires the Company to comply with customary affirmative and negative covenants, including a financial covenant requiring that the Company not exceed certain Consolidated Secured Net Leverage Ratio ranges at the end of each fiscal quarter. The Company was in compliance with all covenants as of September 30, 2024.

As of September 30, 2024, there were no borrowings and $9,907 in letters of credit outstanding under the 2022 Revolver associated with the Company's leases, which reduced the borrowing capacity under the 2022 Revolver to $390,093. As of December 31, 2023, there were no borrowings and $9,627 in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390,373.

As of September 30, 2024 and December 31, 2023, deferred financing costs were $1,540 and $1,927, respectively.

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, amortization expense associated with deferred financing costs was immaterial.

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, commitment fees under the 2022 Revolver were immaterial.

9. Commitments and Contingencies

Contractual Obligations and Commitments

As of September 30, 2024, all of the Company’s property and equipment and hosting arrangements have been purchased with cash with the exception of unpaid amounts as disclosed in the Unaudited Condensed Consolidated Statements of Cash Flows.

In connection with the Company’s operating lease agreement in Boston, Massachusetts for 225,428 square feet at 1001 Boylston Street (the “1001 Boylston Street Lease"), the Company expects to incur an additional $5,580 of costs to complete its buildout, of which $4,581 has been committed but not incurred as of September 30, 2024. The Company expects the future costs to complete the buildout to be less than the remaining tenant improvement allowance.

16

 

The Company is subject to a number of risks and uncertainties common to companies in its and similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, management of international activities, protection of proprietary rights, patent litigation, and dependence on key individuals.

Leases

The Company’s material lease obligations consist of various leases for office space in: Boston, Massachusetts; Cambridge, Massachusetts; Addison, Texas; and Dublin, Ireland.

As of September 30, 2024, there were no material changes in the Company’s leases from those disclosed in the Annual Report, other than those described below.

Addison, Texas

During the three months ended June 30, 2024, the Company identified an impairment of right-of-use assets associated with its Addison, Texas lease. For further information on goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements.

1001 Boylston Street

During the three months ended September 30, 2024, the Company began occupying 1001 Boylston Street. As of September 30, 2024, all assets associated with the 1001 Boylston Street lease were placed into service.

On April 12, 2024 and May 3, 2024, the Company entered into various change orders regarding the 1001 Boylston Street Lease and related buildout. The change orders modify the responsibilities outlined in the 1001 Boylston Street Lease and reallocate the responsibility of certain buildout costs from the landlord to the Company. The costs related to this work are reimbursable by the landlord, effectively increasing the tenant improvement allowance from the 1001 Boylston Street Lease by $456. The Company accounted for these change orders as a remeasurement of the 1001 Boylston Street Lease, using an incremental borrowing rate as of the modification date, May 3, 2024. The lease remeasurement resulted in a decrease in the lease liability and right-of-use asset on the Unaudited Condensed Consolidated Balance Sheets of $1,493. There was not a material impact on the Unaudited Condensed Consolidated Income Statement or future minimum lease payments.

On March 19, 2024, the Company entered into a letter agreement regarding the 1001 Boylston Street Lease (the "2024 Letter Agreement"). The 2024 Letter Agreement memorializes the Substantial Completion Date, Commencement Date, Fixed Rent Commencement Date (as each term is defined in the 1001 Boylston Street Lease), and the rental credits and holdover compensation owed to the Company per the 1001 Boylston Street Lease. The 2024 Letter Agreement also modifies the parking privileges and payments, which commenced on June 1, 2024, and provides reimbursement from the landlord to the Company for additional unexpected costs incurred. The Company accounted for the 2024 Letter Agreement as a remeasurement of the 1001 Boylston Street Lease, using an incremental borrowing rate as of the modification date, March 19, 2024. The lease remeasurement resulted in a decrease in the lease liability and right-of-use asset on the Unaudited Condensed Consolidated Balance Sheets of $3,536. There was not a material impact on the Unaudited Condensed Consolidated Income Statement or future minimum lease payments.

Restricted Cash

As of September 30, 2024 and December 31, 2023, restricted cash was $3,993 and $2,563, respectively, and in each case related to pass-through payments from customers related to the Company’s Digital Wholesale business.

17

 

Legal Matters

From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. The Company recognizes a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. The Company is not presently subject to any pending or threatened litigation that it believes, if determined adversely to the Company, individually or taken together, would reasonably be expected to have a material adverse effect on its business or financial results. However, litigation is inherently unpredictable and the future outcome of legal proceedings and other contingencies may be unexpected or differ from the Company’s estimated liabilities, which could have a material adverse effect on the Company’s future financial results.

Guarantees and Indemnification Obligations

In the ordinary course of business, the Company enters into agreements with its customers, partners, and service providers that include commercial provisions with respect to licensing, infringement, guarantees, indemnification, and other common provisions.

The Company provides certain guarantees to dealers through products such as its 45-Day Guarantee and OfferGuard service offerings on the CarOffer platform, which are accounted for under ASC Topic 460, Guarantees.

45-Day Guarantee is an arrangement through which a selling dealer lists a car on the CarOffer platform, and the Company provides an offer to purchase the vehicle listed at a specified price at any time over a 45-day period. This provides the seller with a put option, where they have the right, but not the obligation, to require the Company to purchase the vehicle during this window. OfferGuard is an arrangement through which a buying dealer purchases a car on the CarOffer platform, and the Company provides an offer to purchase the vehicle at a specified price between days 1 and 3, and days 42 and 45 if the dealer is not able to sell the vehicle after 42 days.

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, income for guarantees purchased by dealers was $118, $348, $481, and $1,508, respectively. For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, the net gains or losses recognized within cost of revenue in the Unaudited Condensed Consolidated Income Statements resulting from dealers' exercise of guarantees was immaterial.

As of September 30, 2024, the maximum potential amount of future payments that the Company could be required to make under these guarantees was $3,780. Of the maximum potential amount of future payments, the losses that were probable were not material. As such, as of September 30, 2024, the Company had no material contingent loss liabilities.

As of December 31, 2023, the maximum potential amount of future payments that the Company could be required to make under these guarantees was $10,158. Of the maximum potential amount of future payments, the losses that were probable were not material. As such, as of December 31, 2023, the Company had no material contingent loss liabilities.

10. Stock-based Compensation and Common Stock Share Repurchases

Stock-based Compensation Expense

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, stock-based compensation expense by award type and where the stock-based compensation expense was recognized in the Unaudited Condensed Consolidated Income Statements is as follows:

18

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Options

 

$

556

 

 

$

591

 

 

$

1,702

 

 

$

1,795

 

Restricted Stock Units

 

 

14,899

 

 

 

13,672

 

 

 

45,132

 

 

 

42,047

 

CO Incentive Units and Subject Units (1)

 

 

—

 

 

 

(1,225

)

 

 

—

 

 

 

—

 

Total

 

$

15,455

 

 

$

13,038

 

 

$

46,834

 

 

$

43,842

 

(1) As each term is defined in Note 2 to the consolidated financial statements contained within the Annual Report.

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Cost of revenue

 

$

96

 

 

$

185

 

 

$

387

 

 

$

513

 

Sales and marketing expense

 

 

3,017

 

 

 

2,780

 

 

 

9,141

 

 

 

8,736

 

Product, technology, and development expense

 

 

6,164

 

 

 

5,745

 

 

 

18,165

 

 

 

18,068

 

General and administrative expense

 

 

6,178

 

 

 

4,328

 

 

 

19,141

 

 

 

16,525

 

Total

 

$

15,455

 

 

$

13,038

 

 

$

46,834

 

 

$

43,842

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, stock-based compensation expense excluded $1,539, $1,406, $5,227, and $3,843, respectively, of capitalized website development costs, capitalized internal-use software costs, and capitalized hosting arrangements.

Common Stock Share Repurchases

On November 7, 2023, the Company announced that the Board of Directors authorized a share repurchase program (the "2024 Share Repurchase Program") pursuant to which the Company may, from time to time, purchase shares of its Class A common stock for an aggregate purchase price not to exceed $250.0 million. Share repurchases under the 2024 Share Repurchase Program may be made through a variety of methods, including but not limited to open market purchases, privately negotiated transactions, and transactions that may be effected pursuant to one or more plans under Rule 10b5-1 and/or Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The 2024 Share Repurchase Program does not obligate the Company to repurchase any minimum dollar amount or number of shares. The 2024 Share Repurchase Program has an effective date of January 1, 2024, and an expiration date of December 31, 2024, and prior to its expiration may be modified, suspended, or discontinued by the Board of Directors at any time without prior notice. All repurchased shares of Class A common stock under the 2024 Share Repurchase Program will be retired. The Company has funded and expects to continue to fund any additional share repurchases under the 2024 Share Repurchase Program through cash on hand and cash generated from operations.

On December 8, 2022, the Company announced that the Board of Directors authorized a share repurchase program (the “2022 Share Repurchase Program”) pursuant to which the Company could, from time to time, purchase shares of its Class A common stock for an aggregate purchase price not to exceed $250.0 million. The 2022 Share Repurchase Program expired on December 31, 2023. The 2022 Share Repurchase Program did not obligate the Company to repurchase any minimum dollar amount or number of shares. All repurchased shares of Class A common stock under the 2022 Share Repurchase Program were retired. The Company funded share repurchases under the 2022 Share Repurchase Program through cash on hand and cash generated from operations.

On November 7, 2024, the Company announced that the Board of Directors authorized a share repurchase program with an effective date of January 1, 2025, and an expiration date of December 31, 2025. See Note 14 of these Unaudited Condensed Consolidated Financial Statements for additional information.

During the three months ended September 30, 2024, the Company repurchased and retired 164,301 shares for $3,700, exclusive of commissions and excise tax, at an average cost of $22.52 per share, under the 2024 Share Repurchase Program. During the nine months ended September 30, 2024, the Company repurchased and retired 6,357,302 shares for $146,117, exclusive of commissions and excise tax, at an average cost of $22.98 per share, under the 2024 Share Repurchase Program. As of September 30, 2024, the Company had remaining authorization to purchase up to $103,883 of the Company's Class A common stock under the 2024 Share Repurchase Program.

19

 

During the three months ended September 30, 2023, the Company repurchased and retired 956,248 shares for $17,115, exclusive of commissions and excise tax, at an average cost of $17.90 per share, under the 2022 Share Repurchase Program. During the nine months ended September 30, 2023, the Company repurchased and retired 6,257,496 shares for $104,234, exclusive of commissions and excise tax, at an average cost of $16.66 per share, under the 2022 Share Repurchase Program.

11. Earnings Per Share

The Company has two classes of common stock authorized: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible into one share of Class A common stock at the option of the holder at any time or automatically upon certain events described in the Company’s fourth amended and restated certificate of incorporation, including upon either the death or voluntary termination of the Company’s Executive Chair. The Company allocates undistributed earnings attributable to common stock between the common stock classes on a one‑to‑one basis when computing net income per share. As a result, basic and diluted net income per share of Class A common stock and per share of Class B common stock are equivalent.

During the three and nine months ended September 30, 2024, 241,935 shares of Class B common stock were converted into Class A common stock. During the three and nine months ended September 30, 2023, no shares of Class B common stock were converted into Class A common stock.

Basic net income (loss) per share (“Basic EPS”) is computed by dividing consolidated net income adjusted for net loss attributable to redeemable noncontrolling interest and changes in the redemption value of redeemable noncontrolling interest, if applicable, by the weighted-average number of common shares outstanding during the reporting period. The Company computes the weighted-average number of common shares outstanding during the reporting period using the total number of shares of Class A common stock and Class B common stock outstanding as of the last day of the previous year plus the weighted-average of any additional shares issued and outstanding during the reporting period, less the weighted-average of any shares repurchased during the period.

Diluted net income (loss) per share (“Diluted EPS”) gives effect to all potentially dilutive securities. Diluted EPS is computed by dividing consolidated net income adjusted for net loss attributable to redeemable noncontrolling interest and changes in the redemption value of redeemable noncontrolling interest, if applicable and dilutive, by the weighted-average number of common shares outstanding during the reporting period using (i) the number of shares of common stock used in the Basic EPS calculation as indicated above, and (ii) if dilutive, the incremental weighted-average common stock that the Company would issue upon the exercise of stock options and the vesting of restricted stock units. The dilutive effect of these common stock equivalents is reflected in diluted earnings per share by application of the treasury stock method. For previous periods, the if-converted method was used to calculate the number of shares issuable upon exercise of the 2024 Put Right (as defined in Note 2 to the consolidated financial statements contained within the Annual Report), inclusive of CarOffer noncontrolling interest and CO Incentive and Subject Units (as each term is defined in Note 2 to the consolidated financial statements contained within the Annual Report), that would have been issuable as of the end of the reporting period assuming the end of the reporting period was also the end of the contingency period.

20

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income (loss) per share is as follows:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income (loss)

 

$

22,511

 

 

$

18,973

 

 

$

(24,909

)

 

$

44,656

 

Net loss attributable to redeemable noncontrolling interest

 

 

—

 

 

 

(3,329

)

 

 

—

 

 

 

(10,191

)

Net income (loss) attributable to common stockholders — basic

 

$

22,511

 

 

$

22,302

 

 

$

(24,909

)

 

$

54,847

 

Net loss attributable to redeemable noncontrolling interest

 

 

—

 

 

 

(3,329

)

 

 

—

 

 

 

(10,191

)

Net income (loss) attributable to common stockholders — diluted

 

$

22,511

 

 

$

18,973

 

 

$

(24,909

)

 

$

44,656

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares of common stock used
   in computing net income (loss) per share attributable to
   common stockholders — basic

 

 

103,321,988

 

 

 

113,223,711

 

 

 

104,769,518

 

 

 

113,998,928

 

Dilutive effect of share equivalents resulting from stock
   options

 

 

108,869

 

 

 

224,061

 

 

 

—

 

 

 

226,715

 

Dilutive effect of share equivalents resulting from
   unvested restricted stock units

 

 

1,628,426

 

 

 

874,507

 

 

 

—

 

 

 

676,093

 

Weighted-average number of shares of common stock
   used in computing net income per share attributable to
   common stockholders — diluted

 

 

105,059,283

 

 

 

114,322,279

 

 

 

104,769,518

 

 

 

114,901,736

 

Net income (loss) per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

$

0.20

 

 

$

(0.24

)

 

$

0.48

 

Diluted

 

$

0.21

 

 

$

0.17

 

 

$

(0.24

)

 

$

0.39

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, potentially dilutive common stock equivalents that have been excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive are as follows:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Stock options outstanding

 

 

506,554

 

 

 

548,695

 

 

 

701,884

 

 

 

555,601

 

Restricted stock units outstanding

 

 

512,198

 

 

 

2,035,557

 

 

 

6,264,428

 

 

 

2,511,429

 

For the nine months ended September 30, 2024, there was no effect of potentially dilutive shares as the numerator was negative and there were no contingently issuable shares as a result of the acquisition of remaining minority equity interests in CarOffer in 2023. For the three and nine months ended September 30, 2023, the number of issuable shares estimated upon exercise of the 2024 Put Right was zero.

12. Income Taxes

During the three months ended September 30, 2024 and 2023, the Company recognized an income tax provision of $7,546 and $8,289, respectively, representing an effective tax rate of 25.1% and 27.1%, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized an income tax benefit of $5,772 and income tax provision of $23,421, representing an effective tax rate of 18.8%, and 29.9%, respectively.

21

 

The effective tax rates for the three months ended September 30, 2024 and 2023 and the nine months ended September 30, 2023, was greater than the statutory tax rate of 21%, principally due to state and local income taxes, the Section 162(m) excess officer compensation limitation, and non-deductible meals and commuter fringe benefits, partially offset by federal and state research and development tax credits. The effective tax rate for the nine months ended September 30, 2024, was less than the statutory tax rate of 21% principally due to federal and state research and development tax credits, stock-based compensation windfalls, and the discrete tax benefit associated with the impairment charges, partially offset by state and local income taxes, the Section 162(m) excess officer compensation limitation, and non-deductible meals and commuter fringe benefits.

The Organisation for Economic Co-operation and Development introduced an international tax framework under Pillar Two, which includes a global minimum tax of 15%. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions where the Company operates. The Pillar Two legislation became effective for the Company's fiscal year beginning January 1, 2024. The Company performed an assessment of its potential exposure to Pillar Two income taxes based on the Company's most recent tax filings, country-by-country reporting, and financial statements for the constituent entities within the Company. Based on the assessment performed, the Company meets the Pillar Two transitional safe harbor effective tax rate relief as all jurisdictions in which the Company operates are above 15%. The Company does not expect any exposure to Pillar Two income taxes in any jurisdictions.

The Company and its subsidiaries are subject to various U.S. federal, state, and foreign income tax examinations. The Company is currently not subject to income tax examination for the tax years 2019 and prior as a result of applicable statute of limitations of the Internal Revenue Service and a majority of applicable state jurisdictions. The Company is currently not subject to examination in its foreign jurisdictions for the tax years 2018 and prior.

13. Segment and Geographic Information

The Company has two reportable segments, U.S. Marketplace and Digital Wholesale. Segment information is presented in the same manner as the Company’s CODM reviews the Company’s operating results in assessing performance and allocating resources. The CODM reviews segment revenue and segment operating income (loss) as a proxy for the performance of the Company's operations. The Company’s Chief Executive Officer is the CODM on behalf of both reportable segments.

The U.S. Marketplace segment derives revenue from marketplace services from customers within the U.S. The Digital Wholesale segment primarily derives revenue from Dealer-to-Dealer and IMCO services and products which are sold on the CarOffer platform. The Company also has two operating segments which are individually immaterial and therefore aggregated into the Other category to reconcile reportable segments to the Unaudited Condensed Consolidated Income Statements. The Other category derives revenue from marketplace services from customers outside of the U.S.

Revenue and costs discretely incurred by reportable segments, including depreciation and amortization, are included in the calculation of reportable segment income (loss) from operations. For the three and nine months ended September 30, 2023, Digital Wholesale segment loss from operations also reflects certain IMCO marketing and lead generation fees allocated from the U.S. Marketplace segment. Asset information by reportable segment is not provided to the CODM as asset information is assessed and reviewed on a consolidated basis.

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, segment revenue, segment income (loss) from operations, and segment depreciation and amortization are as follows:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Segment Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

187,253

 

 

$

164,323

 

 

$

540,293

 

 

$

478,387

 

Digital Wholesale

 

 

27,339

 

 

 

41,510

 

 

 

79,441

 

 

 

175,133

 

Other

 

 

16,766

 

 

 

13,586

 

 

 

46,112

 

 

 

37,599

 

Total

 

$

231,358

 

 

$

219,419

 

 

$

665,846

 

 

$

691,119

 

 

22

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Segment Income (Loss) from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

50,410

 

 

$

33,285

 

 

$

126,670

 

 

$

84,443

 

Digital Wholesale

 

 

(25,317

)

 

$

(11,652

)

 

 

(173,815

)

 

$

(29,184

)

Other

 

 

2,341

 

 

$

1,462

 

 

 

7,279

 

 

$

(367

)

Total

 

$

27,434

 

 

$

23,095

 

 

$

(39,866

)

 

$

54,892

 

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Segment Depreciation and Amortization:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

2,594

 

 

$

2,971

 

 

$

7,578

 

 

$

8,534

 

Digital Wholesale

 

 

2,286

 

 

 

9,334

 

 

 

10,003

 

 

 

26,728

 

Other

 

 

298

 

 

 

165

 

 

 

741

 

 

 

451

 

Total

 

$

5,178

 

 

$

12,470

 

 

$

18,322

 

 

$

35,713

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, a reconciliation between total segment income (loss) from operations to consolidated income (loss) before income taxes is as follows:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Total segment income (loss) from operations

 

$

27,434

 

 

$

23,095

 

 

$

(39,866

)

 

$

54,892

 

Total other income, net

 

 

2,623

 

 

 

4,167

 

 

 

9,185

 

 

 

13,185

 

Consolidated income (loss) before income taxes

 

$

30,057

 

 

$

27,262

 

 

$

(30,681

)

 

$

68,077

 

As of September 30, 2024 and December 31, 2023, segment assets are as follows:

 

 

 

As of
September 30,
2024

 

 

As of
December 31,
2023

 

Segment Assets:

 

 

 

 

 

 

U.S. Marketplace

 

$

615,771

 

 

$

607,307

 

Digital Wholesale

 

 

118,839

 

 

 

258,458

 

Other

 

 

43,551

 

 

 

53,162

 

Total

 

$

778,161

 

 

$

918,927

 

 

Digital Wholesale segment assets decreased $139,619, due primarily to goodwill and other asset impairments. As of September 30, 2024, the Company recognized a $127,475 CarOffer reporting unit impairment and a $16,776 CG Buy Online reporting unit impairment due to the end of the CG Buy Online pilot. For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements.

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, revenue by geographical region is as follows:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue by Geographic Region:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

214,592

 

 

$

205,833

 

 

$

619,734

 

 

$

653,520

 

International

 

 

16,766

 

 

 

13,586

 

 

 

46,112

 

 

 

37,599

 

Total

 

$

231,358

 

 

$

219,419

 

 

$

665,846

 

 

$

691,119

 

 

23

 

14. Subsequent Events

2025 Share Repurchase Program

On November 7, 2024, the Company announced that the Board of Directors authorized a share repurchase program (the “2025 Share Repurchase Program”), pursuant to which the Company may, from time to time, purchase shares of its Class A common stock for an aggregate purchase price not to exceed $200.0 million. Share repurchases under the 2025 Share Repurchase Program may be made through a variety of methods, including but not limited to open market purchases, privately negotiated transactions, and transactions that may be effected pursuant to one or more plans under Rule 10b5-1 and/or Rule 10b-18 of the Exchange Act. The 2025 Share Repurchase Program does not obligate the Company to repurchase any minimum dollar amount or number of shares. The 2025 Share Repurchase Program has an effective date of January 1, 2025, and an expiration date of December 31, 2025, and prior to its expiration may be modified, suspended, or discontinued by the Board of Directors at any time without prior notice. All repurchased shares under the 2025 Share Repurchase Program will be retired. The Company expects to fund share repurchases under the 2025 Share Repurchase Program through cash on hand and cash generated from operations.

24

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed consolidated financial statements, or the Unaudited Condensed Consolidated Financial Statements, and the related notes thereto, included elsewhere in this Quarterly Report, and our consolidated financial statements and the related notes and other financial information included in our Annual Report. Some of the information contained in this discussion and analysis or elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and our performance and future success, includes forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” For a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis you should review our Annual Report, including those cautionary statements set forth under Part I, Item 1A “Risk Factors,” and in Part II, Item 1A, “Risk Factors,” of this Quarterly Report. We qualify all of our forward-looking statements by such cautionary statements.

In this discussion, we use financial measures that are considered non-GAAP financial measures under SEC rules. These rules regarding non-GAAP financial measures require supplemental explanation and reconciliation, which are included elsewhere in this Quarterly Report. Investors should not consider non-GAAP financial measures in isolation from or in substitution for, financial information presented in compliance with United States, or U.S., generally accepted accounting principles, or GAAP.

This section of this Quarterly Report discusses 2024 and 2023 items and period-to-period comparisons between 2024 and 2023. The period‑to‑period comparison of financial results is not necessarily indicative of future results.

Company Overview

CarGurus, Inc. is a multinational, online automotive platform for buying and selling vehicles that is building upon its industry-leading listings marketplace with both digital retail solutions and the CarOffer online wholesale platform. The CarGurus platform gives consumers the confidence to purchase and/or sell a vehicle either online or in person, and it gives dealerships the power to accurately price, effectively market, instantly acquire, and quickly sell vehicles, all with a nationwide reach. We use proprietary technology, search algorithms, and data analytics to bring trust, transparency, and competitive pricing to the automotive shopping experience.

We operate principally in the U.S. In the U.S., we also operate as independent brands the Autolist online marketplace and the CarOffer online wholesale platform. In addition to the U.S., we operate online marketplaces under the CarGurus brand in Canada and the United Kingdom, or U.K. In the U.K., we also operate as an independent brand the PistonHeads online marketplace.

We have subsidiaries in the U.S., Canada, Ireland, and the U.K. and we have two reportable segments, U.S. Marketplace and Digital Wholesale. See Note 13 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further segment reporting and geographic information.

We derive our revenue from marketplace revenue, wholesale revenue, and product revenue. Marketplace revenue is included in the U.S. Marketplace segment and Other category of segment reporting. Wholesale revenue and product revenue are included in the Digital Wholesale segment. We generate marketplace revenue primarily from (i) dealer subscriptions to our Listings packages and Real-time Performance Marketing, or RPM, digital advertising suite, Digital Retail, and Sell My Car - Top Dealer Offers, or TDO, (ii) advertising revenue from auto manufacturers and other auto-related brand advertisers, and (iii) revenue from partnerships with financing services companies. We generate wholesale revenue primarily from (x) transaction fees earned from the purchase and sale of vehicles between dealers, or Dealer-to-Dealer transactions, (y) transaction fees earned from the sale of vehicles to dealers that we acquire at other marketplaces, and (z) transaction fees earned from performing inspection and transportation services, inclusive of Dealer-to-Dealer transactions, other marketplace-to-dealer transactions, and IMCO transactions (as defined below). We generate product revenue primarily from (A) aggregate proceeds received from the sale of vehicles to dealers that were acquired directly from customers, or Sell My Car - Instant Max Cash Offer, or IMCO transactions and (B) proceeds received from the sale of vehicles that were acquired through arbitration.

For the three months ended September 30, 2024, we generated revenue of $231.4 million, a 5% increase from $219.4 million of revenue for the three months ended September 30, 2023. For the three months ended September 30, 2024, we generated consolidated net income of $22.5 million and Consolidated Adjusted EBITDA of $64.9 million, compared to consolidated net income of $19.0 million and Consolidated Adjusted EBITDA of $48.6 million for the three months ended September 30, 2023.

25

 

For the nine months ended September 30, 2024, we generated revenue of $665.8 million, a 4% decrease from $691.1 million of revenue for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, we generated consolidated net loss of $24.9 million and Consolidated Adjusted EBITDA of $170.8 million, compared to consolidated net income of $44.7 million and Consolidated Adjusted EBITDA of $134.6 million for the nine months ended September 30, 2023.

See below for more information regarding our use and reconciliation of these non-GAAP financial measures.

Key Business Metrics

We regularly review a number of metrics, including the key metrics listed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make operating and strategic decisions. We believe it is important to evaluate these metrics for the U.S. and International geographic regions. The International region derives revenue from marketplace revenue from customers outside of the U.S. International markets perform differently from the U.S. market due to a variety of factors, including our operating history in each market, our rate of investment, market size, market maturity, competition, and other dynamics unique to each country.

Historically, we have used data from Google Universal Analytics, or Google Analytics, to measure two of our key business metrics: monthly unique users and monthly sessions. Effective July 1, 2024, Google Analytics 4, or GA4, replaced Google Analytics. The methodologies used in GA4 are different and not comparable to the methodologies used in Google Analytics. As discussed below, we also make certain adjustments to the GA4 data in order to improve the accuracy of the reported monthly unique users and monthly sessions. Due to this change in methodology, we are unable to provide comparable monthly unique user and monthly session information for prior periods, including any periods prior to June 30, 2024.

Monthly Unique Users

For each of our websites (excluding the CarOffer website), we define a monthly unique user as an individual who has visited any such website and taken a visitor action (as defined below) within a calendar month, based on data as measured by GA4. We calculate average monthly unique users as the sum of the monthly unique users of each of our websites in a given period, divided by the number of months in that period. Effective July 1, 2024, we count a unique user the first time a computer or mobile device with a unique device identifier accesses any of our websites or application during a calendar month and takes an action on such website or in such application, such as performing a search, visiting vehicle detail pages, and connecting with a dealer, which we refer to as a visitor action. If an individual accesses a website or application using a different device within a given month, the first visitor action taken by each such device is counted as a separate unique user. If an individual uses multiple browsers on a single device and/or clears their cookies and returns to our website or application and takes a visitor action within a calendar month, each such visitor action is counted as a separate unique user. We eliminate any duplicate unique users that may arise when users visit a webview within our native application. We view our average monthly unique users as a key indicator of the quality of our user experience, the effectiveness of our advertising and traffic acquisition, and the strength of our brand awareness. Measuring unique users is important to us and we believe it provides useful information to our investors because our marketplace revenue depends, in part, on our ability to provide dealers with connections to our users and exposure to our marketplace audience. We define connections as interactions between consumers and dealers on our marketplace through phone calls, email, managed text and chat, and clicks to access the dealer’s website or map directions to the dealership.

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

Average Monthly Unique Users

 

2024

 

 

2023(1)

 

2024(1)

 

2023(1)

 

 

(in thousands)

 

(in thousands)

United States

 

 

32,279

 

 

N/A

 

N/A

 

N/A

International

 

 

9,861

 

 

N/A

 

N/A

 

N/A

Total

 

 

42,140

 

 

N/A

 

N/A

 

N/A

(1) As a result of the change from Google Analytics to GA4, we are unable to provide comparable monthly unique user information for this period.

26

 

Monthly Sessions

We define monthly sessions as the number of distinct visits to our websites (excluding the CarOffer website) that include a visitor action that take place each month within a given time frame, as measured and defined by GA4. We calculate average monthly sessions as the sum of the monthly sessions in a given period, divided by the number of months in that period. Effective July 1, 2024, a session is defined as beginning with the first visitor action from a computer or mobile device and ending at the earliest of when a user closes their browser window or after 30 minutes of inactivity. We eliminate any duplicate monthly sessions that may arise when users visit a webview within our native application. We believe that measuring the volume of sessions in a time period, when considered in conjunction with the number of unique users in that time period, is an important indicator to us of consumer satisfaction and engagement with our marketplace, and we believe it provides useful information to our investors because the more satisfied and engaged consumers we have, the more valuable our service is to dealers.

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

Average Monthly Sessions

 

2024

 

 

2023(1)

 

2024(1)

 

2023(1)

 

 

(in thousands)

 

(in thousands)

United States

 

 

80,370

 

 

N/A

 

N/A

 

N/A

International

 

 

20,423

 

 

N/A

 

N/A

 

N/A

Total

 

 

100,793

 

 

N/A

 

N/A

 

N/A

(1) As a result of the change from Google Analytics to GA4, we are unable to provide comparable monthly sessions information for this period.

Number of Paying Dealers

We define a paying dealer as a dealer account with an active, paid marketplace subscription at the end of a defined period. The number of paying dealers we have is important to us and we believe it provides valuable information to investors because it is indicative of the value proposition of our marketplace products, as well as our sales and marketing success and opportunity, including our ability to retain paying dealers and develop new dealer relationships.

 

 

 

As of September 30,

 

Number of Paying Dealers

 

2024

 

 

2023

 

 

 

 

 

 

 

 

United States

 

 

24,561

 

 

 

24,368

 

International

 

 

7,123

 

 

 

6,823

 

Total

 

 

31,684

 

 

 

31,191

 

Transactions

We define Transactions within the Digital Wholesale segment as the number of vehicles processed from car dealers, consumers, and other marketplaces through the CarOffer website within the applicable period. Transactions consists of each unique vehicle (based on vehicle identification number) that reaches "sold and invoiced" status on the CarOffer website within the applicable period, including vehicles sold to car dealers, vehicles sold at third-party auctions, vehicles ultimately sold to a different buyer, and vehicles that are returned to their owners without completion of a sale transaction. We exclude vehicles processed within CarOffer's intra-group trading solution (Group Trade) from the definition of Transactions, and we only count any unique vehicle once even if it reaches sold status multiple times. Digital Wholesale includes Dealer-to-Dealer transactions and IMCO transactions. We view Transactions as a key business metric, and we believe it provides useful information to investors, because it provides insight into growth and revenue for the Digital Wholesale segment. Transactions drive a significant portion of Digital Wholesale segment revenue. We believe growth in Transactions demonstrates consumer and dealer utilization and our market share penetration in the Digital Wholesale segment.

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

Transactions

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Transactions

 

 

8,249

 

 

 

13,562

 

 

 

27,329

 

 

 

51,860

 

 

27

 

Quarterly Average Revenue per Subscribing Dealer (QARSD)

We define QARSD, which is measured at the end of a fiscal quarter, as the marketplace revenue primarily from subscriptions to our Listings packages and RPM, our digital advertising suite, and other digital add-on products during that trailing quarter divided by the average number of paying dealers in that marketplace during the quarter. We calculate the average number of paying dealers for a period by adding the number of paying dealers at the end of such period and the end of the prior period and dividing by two. This information is important to us, and we believe it provides useful information to investors, because we believe that our ability to grow QARSD is an indicator of the value proposition of our products and the return on investment, or ROI, that our paying dealers realize from our products. In addition, increases in QARSD, which we believe reflect the value of exposure to our engaged audience in relation to subscription cost, are driven in part by our ability to grow the volume of connections to our users and the quality of those connections, which result in increased opportunity to upsell package levels and cross-sell additional products to our paying dealers.

 

 

 

As of September 30,

 

Quarterly Average Revenue per Subscribing Dealer (QARSD)

 

2024

 

 

2023

 

United States

 

$

7,177

 

 

$

6,332

 

International

 

$

2,057

 

 

$

1,721

 

Consolidated

 

$

6,038

 

 

$

5,317

 

Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest

To provide investors with additional information regarding our financial results, we have presented within this Quarterly Report Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest, each of which is a non‑GAAP financial measure. These non‑GAAP financial measures are not based on any standardized methodology prescribed by GAAP, and are not necessarily comparable to any similarly titled measures presented by other companies.

We define Consolidated Adjusted EBITDA as consolidated net income (loss), adjusted to exclude: depreciation and amortization, goodwill and other asset impairment, stock‑based compensation expense, stock-based compensation expense for CarOffer, LLC Units (as defined below), transaction-related expenses, other income, net, and provision for (benefit from) income taxes.

We define Adjusted EBITDA as Consolidated Adjusted EBITDA adjusted to exclude: Adjusted EBITDA attributable to redeemable noncontrolling interest.

We define Adjusted EBITDA attributable to redeemable noncontrolling interest as net loss attributable to redeemable noncontrolling interest, adjusted to exclude: depreciation and amortization, other long-lived asset impairment, stock‑based compensation expense, stock-based compensation expense for CarOffer, LLC Units, other expense, net, and provision for income taxes. These exclusions are adjusted for redeemable noncontrolling interest of 38% by taking the noncontrolling interest's full financial results and multiplying each line item in the reconciliation by 38%. We note that we use 38%, versus 49%, to allocate the share of loss because it represents the portion attributable to the redeemable noncontrolling interest. The 38% is exclusive of CO Incentive Units, Subject Units, and 2021 Incentive Units (as each term is defined in Note 2 to our consolidated financial statements contained within our Annual Report), which are liability-classified awards that do not participate in the share of loss. Adjusted EBITDA attributable to redeemable noncontrolling interest is reflective of our acquisition of the remaining minority equity interests in CarOffer completed on December 1, 2023, or the 2023 CarOffer Transaction. Following the 2023 CarOffer Transaction there was no redeemable noncontrolling interest as of December 1, 2023, and as a result, Consolidated Adjusted EBITDA is equivalent to Adjusted EBITDA for the three and nine months ended September 30, 2024.

We have presented Consolidated Adjusted EBITDA and Adjusted EBITDA within this Quarterly Report because they are key measures used by our management and Board of Directors to understand and evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating Consolidated Adjusted EBITDA and Adjusted EBITDA can produce a useful measure for period‑to‑period comparisons of our business. We have presented Adjusted EBITDA attributable to redeemable noncontrolling interest because it is used by our management to reconcile Consolidated Adjusted EBITDA to Adjusted EBITDA. It represents the portion of Consolidated Adjusted EBITDA that is attributable to our redeemable noncontrolling interest. Adjusted EBITDA attributable to redeemable noncontrolling interest is not intended to be reviewed on its own.

28

 

We use Consolidated Adjusted EBITDA and Adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. We believe Consolidated Adjusted EBITDA and Adjusted EBITDA help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. Accordingly, we believe that Consolidated Adjusted EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision‑making. We use Adjusted EBITDA attributable to redeemable noncontrolling interest to reconcile Consolidated Adjusted EBITDA to Adjusted EBITDA. It enables an investor to gain a clearer understanding of the portion of Consolidated Adjusted EBITDA that is attributable to our redeemable noncontrolling interest.

Our Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest rather than consolidated net income and net loss attributable to redeemable noncontrolling interest, respectively, which are the most directly comparable GAAP equivalents. Some of these limitations are:

•
Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest exclude depreciation and amortization expense and, although these are non‑cash expenses, the assets being depreciated may have to be replaced in the future;
•
Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest exclude goodwill and other asset impairment, which include non-cash one-time expenses associated with the impairment of the CarOffer reporting unit as well as other long-lived asset impairments, certain of which may have to be replaced in the future;
•
Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest exclude stock‑based compensation expense, which will be, for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy;
•
Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest exclude stock‑based compensation expense for CarOffer, LLC Units, which consists of one-time modifications and expense associated with our CO Incentive Units and Subject Units (as defined in Note 2 to the consolidated financial statements contained within our Annual Report) and Noncontrolling Interest Units (as defined in Note 4 to the consolidated financial statements contained within our Annual Report);
•
Consolidated Adjusted EBITDA and Adjusted EBITDA exclude transaction-related expenses incurred by us during a reporting period, which are inclusive of certain transaction and integration costs associated with the 2023 CarOffer Transaction and which may not be reflective of our operational performance during such period, for acquisitions that have been completed as of the filing date of our annual or quarterly report (as applicable) relating to such period;
•
Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest exclude other income, net, which consists primarily of interest income earned on our cash, cash equivalents, and short-term investments, and foreign exchange gains and losses;
•
Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest exclude the provision for (benefit from) income taxes;
•
Adjusted EBITDA excludes Adjusted EBITDA attributable to redeemable noncontrolling interest, which is calculated as the net loss attributable to redeemable noncontrolling interest, adjusted for all exclusions used to calculate Consolidated Adjusted EBITDA as described above; and
•
other companies, including companies in our industry, may calculate Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest differently, which reduces their usefulness as a comparative measure.

29

 

Because of these limitations, we consider, and you should consider, Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest together with other operating and financial performance measures presented in accordance with GAAP.

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, the following table presents a reconciliation of Consolidated Adjusted EBITDA and Adjusted EBITDA to consolidated net (loss) income, the most directly comparable measure calculated in accordance with GAAP for each of the periods presented.

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023(1)

 

 

2024

 

 

2023(1)

 

 

 

(in thousands)

 

 

(in thousands)

 

Reconciliation of Consolidated Adjusted EBITDA and Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income (loss)

 

$

22,511

 

 

$

18,973

 

 

$

(24,909

)

 

$

44,656

 

Depreciation and amortization

 

 

5,178

 

 

 

12,470

 

 

 

18,322

 

 

 

35,713

 

Goodwill and other asset impairment (2)

 

 

16,776

 

 

 

—

 

 

 

144,431

 

 

 

184

 

Stock-based compensation expense

 

 

15,455

 

 

 

14,263

 

 

 

46,834

 

 

 

43,842

 

Stock-based compensation expense for CarOffer, LLC Units

 

 

—

 

 

 

(1,225

)

 

 

—

 

 

 

—

 

Transaction-related expenses

 

 

39

 

 

 

—

 

 

 

1,115

 

 

 

—

 

Other income, net

 

 

(2,623

)

 

 

(4,167

)

 

 

(9,185

)

 

 

(13,185

)

Provision for (benefit from) income taxes

 

 

7,546

 

 

 

8,289

 

 

 

(5,772

)

 

 

23,421

 

Consolidated Adjusted EBITDA

 

 

64,882

 

 

 

48,603

 

 

 

170,836

 

 

 

134,631

 

Adjusted EBITDA attributable to redeemable noncontrolling interest

 

 

—

 

 

 

(527

)

 

 

—

 

 

 

386

 

Adjusted EBITDA

 

$

64,882

 

 

$

49,130

 

 

$

170,836

 

 

$

134,245

 
(1)
During the three months ended December 31, 2023, we updated the table to separately disclose the stock-based compensation expense for CarOffer, LLC Units; the three and nine months ended September 30, 2023 have been updated for comparison purposes.
(2)
During the nine months ended September 30, 2024, we recognized a goodwill impairment charge of $127.5 million and presented it with other asset impairments. The remaining charges related to other asset impairments. During the three months ended September 30, 2024 and the three and nine months ended September 30, 2023, we did not have a goodwill impairment.

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, the following table presents a reconciliation of Adjusted EBITDA attributable to redeemable noncontrolling interest to net loss attributable to redeemable noncontrolling interest, the most directly comparable measure calculated in accordance with GAAP, for each of the periods presented.

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023(2)

 

 

2024

 

 

2023(2)

 

 

 

(in thousands)

 

 

(in thousands)

 

Reconciliation of Adjusted EBITDA attributable to redeemable noncontrolling interest:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to redeemable noncontrolling interest

 

$

—

 

 

$

(3,329

)

 

$

—

 

 

$

(10,191

)

Depreciation and amortization (1)

 

 

—

 

 

 

2,975

 

 

 

—

 

 

 

8,874

 

Other long-lived asset impairment (1)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

67

 

Stock-based compensation expense (1)

 

 

—

 

 

 

210

 

 

 

—

 

 

 

639

 

Stock-based compensation expense for CarOffer, LLC Units (1)

 

 

—

 

 

 

(467

)

 

 

—

 

 

 

—

 

Other expense, net (1)

 

 

—

 

 

 

84

 

 

 

—

 

 

 

972

 

Provision for income taxes (1)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

25

 

Adjusted EBITDA attributable to redeemable noncontrolling interest

 

$

—

 

 

$

(527

)

 

$

—

 

 

$

386

 
(1)
These exclusions are adjusted to reflect the noncontrolling interest of 38% for the period prior to the 2023 CarOffer Transaction.
(2)
During the three months ended December 31, 2023, we updated the table to separately disclose the stock-based compensation expense for CarOffer, LLC Units; the three and nine months ended September 30, 2023 have been updated for comparison purposes.

30

 

Components of Unaudited Condensed Consolidated Income Statements

Revenue

We derive our revenue from marketplace revenue, wholesale revenue, and product revenue. Marketplace revenue is included in the U.S. Marketplace segment and Other category of segment reporting. Wholesale revenue and product revenue are included in the Digital Wholesale segment. We generate marketplace revenue primarily from (i) dealer subscriptions to our Listings packages, RPM, digital advertising suite, Digital Retail, and TDO, (ii) advertising revenue from auto manufacturers and other auto‑related brand advertisers, and (iii) revenue from partnerships with financing services companies. We generate wholesale revenue primarily from (x) transaction fees earned from Dealer-to-Dealer transactions, (y) transaction fees earned from the sale of vehicles to dealers that we acquire at other marketplaces, and (z) transaction fees earned from performing inspection and transportation services, inclusive of Dealer-to-Dealer transactions, other marketplace-to-dealer transactions, and IMCO transactions. We generate product revenue primarily from (A) aggregate proceeds received from the sale of vehicles that were acquired through IMCO transactions and (B) proceeds received from the sale of vehicles that were acquired through arbitration.

Marketplace Revenue

We offer multiple types of marketplace Listings packages to our dealers for our CarGurus U.S. platform (availability varies on our other marketplaces): Restricted Listings, which is free; and various levels of Listings packages, which each require a paid subscription under a monthly, quarterly, semiannual, or annual subscription basis.

Our subscriptions for customers generally auto-renew on a monthly basis and are cancellable by dealers with 30 days' advance notice prior to the commencement of the applicable renewal term. Subscription pricing is determined based on a dealer’s inventory size, region, and our assessment of the connections and ROI the platform will provide them and is subject to discounts and/or fee reductions that we may offer from time to time. We also offer all dealers on the platform access to our Dealer Dashboard, which includes a performance summary, Dealer Insights tool, and user review management platform. Only dealers subscribing to a paid Listings package have access to the Pricing Tool, Market Analysis tool, and Instant Market Value, or IMV, Scan tool. For details on the Dealer Dashboard and these merchandising tools, refer to “Our Products and Services – U.S. Marketplace and Other – Dealer Offerings – Dealer Dashboard and Merchandising Tools” in Part I, Item 1 in our Annual Report.

We also offer paid Listings packages for the Autolist and PistonHeads websites.

In addition to displaying inventory in our marketplace and providing access to the Dealer Dashboard, we offer dealers subscribing to certain of our Listings packages other subscription advertising and customer acquisition products and enhancements marketed under RPM and our digital advertising suite. Through RPM, dealers can buy advertising that appears in our marketplace, on other sites on the internet, and/or on high-converting social media platforms. Such advertisements can be targeted by the user’s geography, search history, CarGurus website activity, and a number of other targeting factors, allowing dealers to increase their visibility with in-market consumers and drive qualified traffic for dealers.

We also offer dealer advertising products for the PistonHeads website.

We also offer dealers subscribing to certain of our Listings packages other subscription advertising and customer acquisition products and enhancements such as Digital Retail, which allows shoppers to complete much of the vehicle-purchase process online through the Dealers’ Listings page. Digital Retail is comprised of (i) the Digital Deal Platform, which gives dealers higher quality leads through upfront consumer-provided information, (ii) Geo Expansion, which expands the visibility of a dealer’s inventory in the search results beyond its local market, and (iii) Hard Pull Financing, which provides loan information.

We also offer dealers subscribing to certain of our Listings packages other subscription advertising and customer acquisition products and enhancements such as TDO, which allows dealers to pay for leads to receive direct access to shoppers actively looking to sell their vehicles. Dealers can acquire inventory from shoppers who are looking to sell directly through the CarGurus Sell My Car page.

31

 

Marketplace revenue also consists of non-dealer advertising revenue from auto manufacturers and other auto-related brand advertisers sold on a cost-per-thousand impressions basis, or CPM basis. An impression is an advertisement loaded on a web page. In addition to advertising sold on a CPM basis, we also have advertising sold on a cost-per-click basis. Pricing is primarily based on advertisement size and position on our websites and mobile applications. Auto manufacturers and other brand advertisers can execute advertising campaigns that are targeted across a wide variety of parameters, including demographic groups, behavioral characteristics, specific auto brands, categories such as Certified Pre-Owned, and segments such as hybrid vehicles. We do not provide minimum impression guarantees or other types of minimum guarantees in our contracts with customers. Advertising is also sold indirectly through revenue sharing arrangements with advertising exchange partners.

We also offer non-dealer advertising products for the Autolist and PistonHeads websites.

Marketplace revenue also includes revenue from partnerships with certain financing services companies pursuant to which we enable eligible consumers on our CarGurus U.S. website to pre-qualify for financing on cars from dealerships that offer financing through such companies. We primarily generate revenue from these partnerships based on the number of funded loans from consumers who pre-qualify with our lending partners through our site.

Wholesale Revenue

The CarOffer Matrix enables buying dealers to create standing buy orders and provides instant offers to selling dealers. Wholesale revenue includes transaction fees earned from Dealer-to-Dealer transactions, where we collect fees from both the buying and selling dealers. We also sell vehicles to dealers that we acquire at other marketplaces, where we collect a transaction fee from the buying dealers.

Wholesale revenue also includes fees earned from performing inspection and transportation services, where we collect fees from the buying dealer. Inspection and transportation service revenue is inclusive of Dealer-to-Dealer transactions, other marketplace-to-dealer transactions, and IMCO transactions.

Wholesale revenue also includes arbitration in which the vehicle is rematched to a new buyer and not acquired by us. Arbitration is the process by which we investigate and resolve claims from buying dealers.

Wholesale revenue also includes fees earned from certain guarantees offered to dealers (which include 45-Day Guarantee and OfferGuard products), where we collect fees from the buying dealer or selling dealer, as applicable.

Product Revenue

The CarOffer Matrix enables consumers who are selling vehicles to be instantly presented with an offer. Product revenue includes the aggregate proceeds received from the sale of vehicles through IMCO transactions, including vehicle sale price and transaction fees collected from the buying dealers. Product revenue also includes proceeds received from the sale of vehicles acquired through arbitration, including vehicle sale price and transaction fees collected from buying dealers. Arbitration is the process by which we investigate and resolve claims from buying dealers. We control the vehicle in these transactions and therefore act as the principal.

Cost of Revenue

Marketplace Cost of Revenue

Marketplace cost of revenue includes expenses related to supporting and hosting marketplace service offerings. These expenses include personnel and related expenses for our customer support team, including salaries, benefits, incentive compensation, and stock-based compensation; third-party service provider expenses such as advertising, data, and hosting expenses; amortization of developed technology; amortization and impairment of capitalized website development; amortization of capitalized hosting arrangements; and allocated overhead expenses.

We allocate overhead expenses, such as rent and facility expenses, software expense, and employee benefit expense, to all departments based on headcount. As such, general overhead expenses are reflected in cost of revenue and each operating expense category.

32

 

Wholesale Cost of Revenue

Wholesale cost of revenue includes expenses related to supporting and hosting Digital Wholesale service offerings, including Dealer-to-Dealer transactions and vehicles sold to dealers acquired at other marketplaces on the CarOffer Matrix. These expenses include vehicle transportation and inspection expenses; net losses on vehicles related to guarantees offered to dealers through Dealer-to-Dealer transactions; personnel and related expenses for employees directly involved in the fulfillment and support of transactions, including salaries, benefits, incentive compensation, and stock-based compensation; third-party service provider expenses; amortization of developed technology; amortization and impairment of capitalized website development; and allocated overhead expenses.

We allocate overhead expenses, such as rent and facility expenses, software expense, and employee benefit expense, to all departments based on headcount. As such, general overhead expenses are reflected in cost of revenue and each operating expense category.

Product Cost of Revenue

Product cost of revenue includes expenses related to vehicles sold to dealers through IMCO transactions and vehicles sold to dealers acquired through arbitration. These expenses include the cost of the vehicle and transportation expenses.

Operating Expenses

Sales and Marketing

Sales and marketing expenses consist primarily of personnel and related expenses for our sales and marketing team, including salaries, benefits, incentive compensation, commissions, and stock-based compensation; expenses associated with consumer marketing, such as traffic acquisition, brand building, and public relations activities; expenses associated with dealer marketing, such as content marketing, customer and promotional events, and industry events; consulting services; software subscription expenses; travel expenses; amortization of capitalized hosting arrangements; and allocated overhead expenses. A portion of our commissions that are related to obtaining a new contract are capitalized and amortized over the estimated benefit period of customer relationships. All other sales and marketing expenses are expensed as incurred. We expect sales and marketing expenses to fluctuate from quarter to quarter due to seasonality and as we respond to changes in the macroeconomic and competitive landscapes affecting our existing dealers, consumer audience, and brand awareness.

Product, Technology, and Development

Product, technology, and development expenses consist primarily of personnel and related expenses for our research and development team, including salaries, benefits, incentive compensation, and stock-based compensation; software subscription expenses; consulting services; and allocated overhead expenses. Other than website development, internal-use software, and hosting arrangement expenses, research and development expenses are expensed as incurred. We expect product, technology, and development expenses to remain relatively flat for the remainder of the year.

General and Administrative

General and administrative expenses consist primarily of personnel and related expenses for our executive, finance, legal, people & talent, and administrative teams, including salaries, benefits, incentive compensation, and stock-based compensation; expenses associated with professional fees for audit, tax, external legal, and consulting services; payment processing and billing expenses; insurance expenses; software subscription expenses; and allocated overhead expenses. General and administrative expenses are expensed as incurred. We expect general and administrative expenses to remain relatively flat for the remainder of the year.

33

 

Goodwill and Other Asset Impairment

During the three months ended June 30, 2024, we identified a triggering event for goodwill and other assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to our financial projections for the CarOffer reporting unit. As a result, we performed an updated fair value analysis of the CarOffer reporting unit, and subsequently recognized impairment losses of $4.7 million, $7.6 million, and $115.2 million for right-of-use assets, intangible assets, and goodwill, respectively. For the three months ended September 30, 2024, there were no impairment losses recognized related to the CarOffer reporting unit. For the nine months ended September 30, 2024, we recognized Digital Wholesale segment impairment charges related to the CarOffer reporting unit of $127.5 million as goodwill and other asset impairment operating expense.

During the three months ended September 30, 2024, we decided to end our CG Buy Online pilot in order to redirect those resources toward other investment opportunities, including continued product innovation and development across our business. The CG Buy Online pilot was a one of the initiatives that allowed consumers to purchase vehicles online. As a result, we recognized impairment losses of $15.8 million, $0.5 million and $0.5 million for property and equipment, net, prepaid expenses, prepaid income taxes and other current assets, and other non-current assets, respectively. For both the three and nine months ended September 30, 2024, we recognized Digital Wholesale segment impairment charges related to the CG Buy Online reporting unit of $9.8 million and $7.0 million as wholesale cost of revenue and goodwill and other asset impairment operating expense, respectively.

For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Depreciation and Amortization

Depreciation and amortization expenses consist of depreciation on property and equipment and amortization of intangible assets and internal-use software.

Other Income, Net

Other income, net consists primarily of interest income earned on our cash, cash equivalents, and short-term investments and foreign exchange gains and losses.

Provision for (Benefit from) Income Taxes

We are subject to federal and state income taxes in the U.S. and taxes in foreign jurisdictions in which we operate. For the three months ended September 30, 2024, a provision for income taxes was recognized as a result of the consolidated taxable income position. For the nine months ended September 30, 2024, a benefit from income taxes was recognized as a result of the discrete tax benefit associated with the impairment charges and our consolidated taxable loss position. For the three and nine months ended September 30, 2023, a provision for income taxes was recognized as a result of the consolidated taxable income position.

We recognize deferred tax assets and liabilities based on temporary differences between the financial reporting and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled.

We regularly assess the need to recognize a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of September 30, 2024 and December 31, 2023, valuation allowances were immaterial.

We assess our income tax positions and recognize an income tax benefit or expense based upon our evaluation of the facts, circumstances, and information available at the reporting date.

For the three and nine months ended September 30, 2024, income tax expense recognized related to uncertain tax provisions was immaterial. An immaterial amount of the reserve relating to uncertain tax positions was released as we would be more-likely-than-not to prevail should these tax positions be challenged by the respective tax authorities. As of September 30, 2024, the income tax liability related to uncertain tax positions, exclusive of immaterial interest or penalties related to uncertain tax provisions, was $0.9 million, which would have favorably affected our effective tax rate, if recognized.

34

 

For the three and nine months ended September 30, 2023, we did not recognize income tax expense related to uncertain tax provisions. As of December 31, 2023, the income tax liability related to uncertain tax positions, exclusive of immaterial interest or penalties related to uncertain tax provisions, was $0.8 million, which would have favorably affected our effective tax rate, if recognized.

The Organisation for Economic Co-operation and Development introduced an international tax framework under Pillar Two, which includes a global minimum tax of 15%. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions where we operate. The Pillar Two legislation became effective for our fiscal year beginning January 1, 2024. We have performed an assessment of its potential exposure to Pillar Two income taxes based on our most recent tax filings, country-by-country reporting, and financial statements for our constituent entities. Based on the assessment performed, we meet the Pillar Two transitional safe harbor effective tax rate relief as all jurisdictions in which we operate are above 15%. We do not expect any material exposure to Pillar Two income taxes in any jurisdictions.

Results of Operations

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, the Unaudited Condensed Consolidated Income Statements are as follows:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(dollars in thousands)

 

 

(dollars in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

$

204,019

 

 

$

177,909

 

 

$

586,405

 

 

$

515,986

 

Wholesale

 

 

12,107

 

 

 

21,735

 

 

 

41,351

 

 

 

78,873

 

Product

 

 

15,232

 

 

 

19,775

 

 

 

38,090

 

 

 

96,260

 

Total revenue

 

 

231,358

 

 

 

219,419

 

 

 

665,846

 

 

 

691,119

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

 

13,521

 

 

 

14,823

 

 

 

41,051

 

 

 

45,830

 

Wholesale

 

 

20,415

 

 

 

21,284

 

 

 

47,272

 

 

 

67,780

 

Product

 

 

14,871

 

 

 

19,014

 

 

 

37,567

 

 

 

94,090

 

Total cost of revenue

 

 

48,807

 

 

 

55,121

 

 

 

125,890

 

 

 

207,700

 

Gross profit

 

 

182,551

 

 

 

164,298

 

 

 

539,956

 

 

 

483,419

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

81,216

 

 

 

76,828

 

 

 

245,801

 

 

 

230,243

 

Product, technology, and development

 

 

36,359

 

 

 

35,434

 

 

 

108,484

 

 

 

109,432

 

General and administrative

 

 

28,187

 

 

 

24,904

 

 

 

83,682

 

 

 

77,090

 

Goodwill and other asset impairment

 

 

7,026

 

 

 

—

 

 

 

134,501

 

 

 

—

 

Depreciation and amortization

 

 

2,329

 

 

 

4,037

 

 

 

7,354

 

 

 

11,762

 

Total operating expenses

 

 

155,117

 

 

 

141,203

 

 

 

579,822

 

 

 

428,527

 

Income from operations

 

 

27,434

 

 

 

23,095

 

 

 

(39,866

)

 

 

54,892

 

Other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,717

 

 

 

5,261

 

 

 

9,063

 

 

 

13,337

 

Other income, net

 

 

(94

)

 

 

(1,094

)

 

 

122

 

 

 

(152

)

Total other income, net

 

 

2,623

 

 

 

4,167

 

 

 

9,185

 

 

 

13,185

 

Income (loss) before income taxes

 

 

30,057

 

 

 

27,262

 

 

 

(30,681

)

 

 

68,077

 

Provision for (benefit from) income taxes

 

 

7,546

 

 

 

8,289

 

 

 

(5,772

)

 

 

23,421

 

Consolidated net income (loss)

 

 

22,511

 

 

 

18,973

 

 

 

(24,909

)

 

 

44,656

 

Net loss attributable to redeemable noncontrolling interest

 

 

—

 

 

 

(3,329

)

 

 

—

 

 

 

(10,191

)

Net income (loss) attributable to common stockholders

 

$

22,511

 

 

$

22,302

 

 

$

(24,909

)

 

$

54,847

 

 

35

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, our segment revenue and our segment income (loss) from operations are as follows:

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(dollars in thousands)

 

 

(dollars in thousands)

 

Segment Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

187,253

 

 

$

164,323

 

 

$

540,293

 

 

$

478,387

 

Digital Wholesale

 

 

27,339

 

 

 

41,510

 

 

 

79,441

 

 

 

175,133

 

Other

 

 

16,766

 

 

 

13,586

 

 

 

46,112

 

 

 

37,599

 

Total

 

$

231,358

 

 

$

219,419

 

 

$

665,846

 

 

$

691,119

 

Segment Income (Loss) from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

50,410

 

 

$

33,285

 

 

$

126,670

 

 

$

84,443

 

Digital Wholesale

 

 

(25,317

)

 

 

(11,652

)

 

 

(173,815

)

 

 

(29,184

)

Other

 

 

2,341

 

 

 

1,462

 

 

 

7,279

 

 

 

(367

)

Total

 

$

27,434

 

 

$

23,095

 

 

$

(39,866

)

 

$

54,892

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, the Unaudited Condensed Consolidated Income Statements as a percentage of total revenue are as follows (amounts in the table below may not sum due to rounding):

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

 

88

%

 

 

81

%

 

 

88

%

 

 

75

%

Wholesale

 

 

5

 

 

 

10

 

 

 

6

 

 

 

11

 

Product

 

 

7

 

 

 

9

 

 

 

6

 

 

 

14

 

Total revenue

 

 

100

 

 

 

100

 

 

 

100

 

 

 

100

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

 

6

 

 

 

7

 

 

 

6

 

 

 

7

 

Wholesale

 

 

9

 

 

 

10

 

 

 

7

 

 

 

10

 

Product

 

 

6

 

 

 

9

 

 

 

6

 

 

 

14

 

Total cost of revenue

 

 

21

 

 

 

25

 

 

 

19

 

 

 

30

 

Gross profit

 

 

79

 

 

 

75

 

 

 

81

 

 

 

70

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

35

 

 

 

35

 

 

 

37

 

 

 

33

 

Product, technology, and development

 

 

16

 

 

 

16

 

 

 

16

 

 

 

16

 

General and administrative

 

 

12

 

 

 

11

 

 

 

13

 

 

 

11

 

Goodwill and other asset impairment

 

 

3

 

 

 

—

 

 

 

20

 

 

 

—

 

Depreciation and amortization

 

 

1

 

 

 

2

 

 

 

1

 

 

 

2

 

Total operating expenses

 

 

67

 

 

 

64

 

 

 

87

 

 

 

62

 

Income from operations

 

 

12

 

 

 

11

 

 

 

(6

)

 

 

8

 

Other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

 

 

 

2

 

 

 

1

 

 

 

2

 

Other income, net

 

 

(0

)

 

 

(0

)

 

 

0

 

 

 

(0

)

Total other income, net

 

 

1

 

 

 

2

 

 

 

1

 

 

 

2

 

Income (loss) before income taxes

 

 

13

 

 

 

12

 

 

 

(5

)

 

 

10

 

Provision for (benefit from)income taxes

 

 

3

 

 

 

4

 

 

 

(1

)

 

 

3

 

Consolidated net income (loss)

 

 

10

 

 

 

9

 

 

 

(4

)

 

 

6

 

Net loss attributable to redeemable noncontrolling interest

 

 

—

 

 

 

(2

)

 

 

—

 

 

 

(1

)

Net income (loss) attributable to common stockholders

 

 

10

%

 

 

10

%

 

 

(4

)%

 

 

8

%

 

36

 

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, our segment revenue as a percentage of total revenue and our segment income (loss) from operations as a percentage of segment revenue are as follows (amounts in the table below may not sum due to rounding):

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Segment Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

 

81

%

 

 

75

%

 

 

81

%

 

 

69

%

Digital Wholesale

 

 

12

 

 

 

19

 

 

 

12

 

 

 

25

 

Other

 

 

7

 

 

 

6

 

 

 

7

 

 

 

5

 

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Segment Income (Loss) from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

 

27

%

 

 

20

%

 

 

23

%

 

 

18

%

Digital Wholesale

 

 

(93

)

 

 

(28

)

 

 

(219

)

 

 

(17

)

Other

 

 

14

 

 

 

11

 

 

 

16

 

 

 

(1

)

Total

 

 

12

%

 

 

11

%

 

 

(6

)%

 

 

8

%

For the three months ended September 30, 2024 and 2023

Revenue

Revenue by Source

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

$

204,019

 

 

$

177,909

 

 

$

26,110

 

 

 

15

%

Wholesale

 

 

12,107

 

 

 

21,735

 

 

 

(9,628

)

 

 

(44

)

Product

 

 

15,232

 

 

 

19,775

 

 

 

(4,543

)

 

 

(23

)

Total

 

$

231,358

 

 

$

219,419

 

 

$

11,939

 

 

 

5

%

Percentage of total revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

 

88

%

 

 

81

%

 

 

 

 

 

 

Wholesale

 

 

5

 

 

 

10

 

 

 

 

 

 

 

Product

 

 

7

 

 

 

9

 

 

 

 

 

 

 

Total

 

 

100

%

 

 

100

%

 

 

 

 

 

 

Overall revenue increased $11.9 million, or 5%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Marketplace revenue increased $26.1 million, or 15%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 88% of total revenue for the three months ended September 30, 2024, compared to 81% of total revenue for the three months ended September 30, 2023. The increase was due primarily to an increase in Listings revenue, inclusive of certain digital add-on products, as a result of growth in QARSD, which was driven by signing on new dealers with higher average subscription revenue and revenue expansion through product adoption or upgrades and price increases for existing dealers. The increase was also due in part to an increase in TDO revenue as we expanded into more geographies following the completion of the TDO pilot and an increase in advertising revenue due primarily to increased spend by advertisers related to new and existing campaigns.

Wholesale revenue decreased $9.6 million, or 44%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 5% of total revenue for the three months ended September 30, 2024, compared to 10% of total revenue for the three months ended September 30, 2023. The decrease was due primarily to a 39% decrease in Transactions, which includes Dealer-to-Dealer transactions and IMCO transactions, to 8,249 for the three months ended September 30, 2024, from 13,562 for the three months ended September 30, 2023.

37

 

Product revenue decreased $4.5 million, or 23%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 7% of total revenue for the three months ended September 30, 2024, compared to 9% of total revenue for the three months ended September 30, 2023. The decrease was due primarily to a decrease in proceeds received from the sale of vehicles through IMCO transactions, driven by a decrease in Transactions. The decrease in product revenue was offset in part by an increase in proceeds received from the sale of vehicles acquired through arbitration.

Segment Revenue

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

187,253

 

 

$

164,323

 

 

$

22,930

 

 

 

14

%

Digital Wholesale

 

 

27,339

 

 

 

41,510

 

 

 

(14,171

)

 

 

(34

)

Other

 

 

16,766

 

 

 

13,586

 

 

 

3,180

 

 

 

23

 

Total

 

$

231,358

 

 

$

219,419

 

 

$

11,939

 

 

 

5

%

Percentage of total revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

 

81

%

 

 

75

%

 

 

 

 

 

 

Digital Wholesale

 

 

12

 

 

 

19

 

 

 

 

 

 

 

Other

 

 

7

 

 

 

6

 

 

 

 

 

 

 

Total

 

 

100

%

 

 

100

%

 

 

 

 

 

 

U.S. Marketplace segment revenue increased $22.9 million, or 14%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 81% of total revenue for the three months ended September 30, 2024, compared to 75% of total revenue for the three months ended September 30, 2023. The increase was due primarily to a $26.1 million increase in marketplace revenue, as described above.

Digital Wholesale segment revenue, which is comprised of wholesale revenue and product revenue, decreased $14.2 million, or 34%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 12% of total revenue for the three months ended September 30, 2024, compared to 19% of total revenue for the three months ended September 30, 2023. The decrease in Digital Wholesale segment revenue was due to a $9.6 million decrease in wholesale revenue and a $4.5 million decrease in product revenue, as described above.

Cost of Revenue

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Cost of Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

$

13,521

 

 

$

14,823

 

 

$

(1,302

)

 

 

(9

)%

Wholesale

 

 

20,415

 

 

 

21,284

 

 

 

(869

)

 

 

(4

)

Product

 

 

14,871

 

 

 

19,014

 

 

 

(4,143

)

 

 

(22

)

Total

 

$

48,807

 

 

$

55,121

 

 

$

(6,314

)

 

 

(11

)%

Percentage of total revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

 

6

%

 

 

7

%

 

 

 

 

 

 

Wholesale

 

 

9

 

 

 

10

 

 

 

 

 

 

 

Product

 

 

6

 

 

 

9

 

 

 

 

 

 

 

Total

 

 

21

%

 

 

25

%

 

 

 

 

 

 

Overall cost of revenue decreased $6.3 million, or 11%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

38

 

Marketplace cost of revenue decreased $1.3 million, or 9%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 6% of total revenue for the three months ended September 30, 2024, compared to 7% of total revenue for the three months ended September 30, 2023. The decrease was due primarily to a $1.4 million decrease in fees related to provisioning advertising campaigns on our websites.

Wholesale cost of revenue decreased $0.9 million, or 4%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 9% of total revenue for the three months ended September 30, 2024, compared to 10% of total revenue for the three months ended September 30, 2023. The decrease was due primarily to a $5.2 million decrease in amortization related to the CarOffer acquired developed technology intangible asset as it became fully amortized during the first quarter of 2024. The decrease was also due in part to a $3.6 million decrease in transportation expense and a $0.8 million decrease in inspection expense as a result of lower Transaction volume, and a $0.5 million decrease in employee-related expenses. The decrease in wholesale cost of revenue was offset in part by a $9.8 million increase in impairment of capitalized website development costs due to the end of the CG Buy Online pilot.

Product cost of revenue decreased $4.1 million, or 22%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 6% of total revenue for the three months ended September 30, 2024, compared to 9% of total revenue for the three months ended September 30, 2023. The decrease was due primarily to a decrease in expenses related to vehicles sold to dealers through IMCO transactions as a result of lower Transaction volume. The decrease in product cost of revenue was offset in part by an increase in expenses related to vehicles sold to dealers acquired through arbitration.

Operating Expenses

Sales and Marketing Expense

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Sales and marketing

 

$

81,216

 

 

$

76,828

 

 

$

4,388

 

 

 

6

%

Percentage of total revenue

 

 

35

%

 

 

35

%

 

 

 

 

 

 

Sales and marketing expense increased $4.4 million, or 6%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was due primarily to a $3.3 million increase in advertising and marketing expense for strategic advertising spend with our performance marketing vendors to maintain year-over-year lead volume and grow with the market, as well as our brand awareness campaigns. The increase in sales and marketing expense was also due in part to a $1.1 million increase in salaries and employee-related expenses due primarily to an increase in commissions expense as a result of higher sales, and merit increases.

Product, Technology, and Development Expense

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Product, technology, and development

 

$

36,359

 

 

$

35,434

 

 

$

925

 

 

 

3

%

Percentage of total revenue

 

 

16

%

 

 

16

%

 

 

 

 

 

 

Product, technology, and development expense increased $0.9 million, or 3%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was due primarily to a $1.9 million increase in salaries and employee-related expenses due primarily to merit increases. The increase in product, technology, and development expense was offset in part by a $0.8 million decrease in expense as a result of increased capitalized website development and a $0.8 million decrease in rent and facilities expense due to the expiration of the lease of office space at 2 Canal Park and a portion of our office space at 55 Cambridge Parkway.

39

 

General and Administrative Expense

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

General and administrative

 

$

28,187

 

 

$

24,904

 

 

$

3,283

 

 

 

13

%

Percentage of total revenue

 

 

12

%

 

 

11

%

 

 

 

 

 

 

General and administrative expense increased $3.3 million, or 13%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was due primarily to a $3.6 million increase in salaries and employee-related expenses, inclusive of a $1.9 million increase in stock-based compensation expense, due primarily to an 8% increase in headcount and merit increases. The increase was also due in part to a $0.5 million increase in tax expense related to the accrual for the non-income tax-related expense. The increase in general and administrative expense was offset in part by a $1.3 million decrease in legal expenses.

Goodwill and Other Asset Impairment

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

(dollars in thousands)

Goodwill and other asset impairment

 

$

7,026

 

 

$

—

 

 

$

7,026

 

 

NM (1)

Percentage of total revenue

 

 

3

%

 

 

0

%

 

 

 

 

 
(1)
Not meaningful

Goodwill and other asset impairment increased $7.0 million in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was due to a $7.0 impairment due to the end of the CG Buy Online pilot. For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Depreciation and Amortization Expense

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Depreciation and amortization

 

$

2,329

 

 

$

4,037

 

 

$

(1,708

)

 

 

(42

)%

Percentage of total revenue

 

 

1

%

 

 

2

%

 

 

 

 

 

 

Depreciation and amortization expense decreased $1.7 million, or 42%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The decrease was due primarily to the CarOffer customer relationships intangible asset becoming fully amortized during the first quarter of 2024.

Other Income, net

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

2,717

 

 

$

5,261

 

 

$

(2,544

)

 

 

(48

)%

Other expense, net

 

 

(94

)

 

 

(1,094

)

 

 

1,000

 

 

 

91

 

Total other income, net

 

$

2,623

 

 

$

4,167

 

 

$

(1,544

)

 

 

(37

)%

Percentage of total revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

%

 

 

2

%

 

 

 

 

 

 

Other expense, net

 

 

(0

)

 

 

(0

)

 

 

 

 

 

 

Total other income, net

 

 

1

%

 

 

2

%

 

 

 

 

 

 

 

40

 

Total other income, net decreased $1.5 million, or 37%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The $2.5 million decrease in interest income was due primarily to the sale of interest-bearing short-term investments during the first quarter of 2024 as well as a decrease in cash equivalents to fund the share repurchase program pursuant to which we may, from time to time, purchase shares of our Class A common stock for an aggregate purchase price not to exceed $250.0 million, which we refer to as the 2024 Share Repurchase Program. The $1.0 million decrease in other expense, net was due primarily to an increase in foreign currency gains in the current year compared to foreign currency losses in the prior year.

Provision for Income Taxes

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Provision for income taxes

 

$

7,546

 

 

$

8,289

 

 

$

(743

)

 

 

(9

)%

Percentage of total revenue

 

 

3

%

 

 

4

%

 

 

 

 

 

 

Provision for income taxes decreased $0.7 million, or 9%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The decrease was due primarily to increased federal and state research development tax credits and a $4.1 million discrete deferred tax benefit in association with the CG Buy Online reporting unit impairment charges recognized during the three months ended September 30, 2024 offset by the higher tax expense as a result of the prorated pre-tax profit as determined under Accounting Standards Codification Topic 740, Income Taxes.

Segment Income (Loss) from Operations

 

 

 

Three Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Segment Income (Loss) from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

50,410

 

 

$

33,285

 

 

$

17,125

 

 

 

51

%

Digital Wholesale

 

 

(25,317

)

 

 

(11,652

)

 

 

(13,665

)

 

 

(117

)

Other

 

 

2,341

 

 

 

1,462

 

 

 

879

 

 

 

60

 

Total

 

$

27,434

 

 

$

23,095

 

 

$

4,339

 

 

 

19

%

Percentage of segment revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

 

27

%

 

 

20

%

 

 

 

 

 

 

Digital Wholesale

 

 

(93

)

 

 

(28

)

 

 

 

 

 

 

Other

 

 

14

 

 

 

11

 

 

 

 

 

 

 

Total

 

 

12

%

 

 

11

%

 

 

 

 

 

 

U.S. Marketplace segment income from operations increased $17.1 million, or 51%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented 27% of U.S. Marketplace segment revenue for the three months ended September 30, 2024, compared to 20% of U.S. Marketplace segment revenue for the three months ended September 30, 2023. The increase was due to an increase in revenue of $22.9 million, a decrease in cost of revenue of $1.9 million, and an increase in operating expenses of $7.7 million.

Digital Wholesale segment loss from operations increased $13.7 million, or 117%, in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and represented (93)% of Digital Wholesale segment revenue for the three months ended September 30, 2024, compared to (28)% of Digital Wholesale segment revenue for the three months ended September 30, 2023. The increase was due primarily to a $16.8 million impairment due to the end of the CG Buy Online pilot. For further discussion of goodwill and other asset impairments see Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

41

 

For the nine months ended September 30, 2024 and 2023

Revenue

Revenue by Source

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

$

586,405

 

 

$

515,986

 

 

$

70,419

 

 

 

14

%

Wholesale

 

 

41,351

 

 

 

78,873

 

 

 

(37,522

)

 

 

(48

)

Product

 

 

38,090

 

 

 

96,260

 

 

 

(58,170

)

 

 

(60

)

Total

 

$

665,846

 

 

$

691,119

 

 

$

(25,273

)

 

 

(4

)%

Percentage of total revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

 

88

%

 

 

75

%

 

 

 

 

 

 

Wholesale

 

 

6

 

 

 

11

 

 

 

 

 

 

 

Product

 

 

6

 

 

 

14

 

 

 

 

 

 

 

Total

 

 

100

%

 

 

100

%

 

 

 

 

 

 

Overall revenue decreased $25.3 million, or 4%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Marketplace revenue increased $70.4 million, or 14%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 88% of total revenue for the nine months ended September 30, 2024, compared to 75% of total revenue for the nine months ended September 30, 2023. The increase was due primarily to an increase in Listings revenue, inclusive of certain digital add-on products, as a result of growth in QARSD, which was driven by signing on new dealers with higher average subscription revenue and revenue expansion through product adoption or upgrades and price increases for existing dealers. The increase was also due in part to an increase in TDO revenue as we expanded into more geographies following the completion of the TDO pilot and an increase in advertising revenue due primarily to increased spend by advertisers related to new and existing campaigns.

Wholesale revenue decreased $37.5 million, or 48%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 6% of total revenue for the nine months ended September 30, 2024, compared to 11% of total revenue for the nine months ended September 30, 2023. The decrease was due primarily to a 47% decrease in Transactions, which includes Dealer-to-Dealer transactions and IMCO transactions, to 27,329 for the nine months ended September 30, 2024, from 51,860 for the nine months ended September 30, 2023.

Product revenue decreased $58.2 million, or 60%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 6% of total revenue for the nine months ended September 30, 2024, compared to 14% of total revenue for the nine months ended September 30, 2023. The decrease was due primarily to a decrease in proceeds received from the sale of vehicles through IMCO transactions, driven by a decrease in Transactions. The decrease in product revenue was also due in part to a decrease in proceeds received from the sale of vehicles acquired through arbitration as a result of decreased arbitration claims due primarily to lower Transaction volume.

42

 

Segment Revenue

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

540,293

 

 

$

478,387

 

 

$

61,906

 

 

 

13

%

Digital Wholesale

 

 

79,441

 

 

 

175,133

 

 

 

(95,692

)

 

 

(55

)

Other

 

 

46,112

 

 

 

37,599

 

 

 

8,513

 

 

 

23

 

Total

 

$

665,846

 

 

$

691,119

 

 

$

(25,273

)

 

 

(4

)%

Percentage of total revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

 

81

%

 

 

69

%

 

 

 

 

 

 

Digital Wholesale

 

 

12

 

 

 

25

 

 

 

 

 

 

 

Other

 

 

7

 

 

 

5

 

 

 

 

 

 

 

Total

 

 

100

%

 

 

100

%

 

 

 

 

 

 

U.S. Marketplace segment revenue increased $61.9 million, or 13%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 81% of total revenue for the nine months ended September 30, 2024, compared to 69% of total revenue for the nine months ended September 30, 2023. The increase was due primarily to a $70.4 million increase in marketplace revenue, as described above.

Digital Wholesale segment revenue, which is comprised of wholesale revenue and product revenue, decreased $95.7 million, or 55%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 12% of total revenue for the nine months ended September 30, 2024, compared to 25% of total revenue for the nine months ended September 30, 2023. The decrease in Digital Wholesale segment revenue was due to a $37.5 million decrease in wholesale revenue and a $58.2 million decrease in product revenue, as described above.

Cost of Revenue

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Cost of Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

$

41,051

 

 

$

45,830

 

 

$

(4,779

)

 

 

(10

)%

Wholesale

 

 

47,272

 

 

 

67,780

 

 

 

(20,508

)

 

 

(30

)

Product

 

 

37,567

 

 

 

94,090

 

 

 

(56,523

)

 

 

(60

)

Total

 

$

125,890

 

 

$

207,700

 

 

$

(81,810

)

 

 

(39

)%

Percentage of total revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Marketplace

 

 

6

%

 

 

7

%

 

 

 

 

 

 

Wholesale

 

 

7

 

 

 

10

 

 

 

 

 

 

 

Product

 

 

6

 

 

 

14

 

 

 

 

 

 

 

Total

 

 

19

%

 

 

30

%

 

 

 

 

 

 

Overall cost of revenue decreased $81.8 million, or 39%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Marketplace cost of revenue decreased $4.8 million, or 10%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 6% of total revenue for the nine months ended September 30, 2024, compared to 7% of total revenue for the nine months ended September 30, 2023. The decrease was due primarily to a $3.9 million decrease in fees related to provisioning advertising campaigns on our websites.

43

 

Wholesale cost of revenue decreased $20.5 million, or 30%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 7% of total revenue for the nine months ended September 30, 2024, compared to 10% of total revenue for the nine months ended September 30, 2023. The decrease was due primarily to a $12.9 million decrease in transportation expense and a $3.3 million decrease in inspection expense as a result of lower Transaction volume. The decrease was also due in part to a $12.2 million decrease in amortization related to the CarOffer acquired developed technology intangible asset as it became fully amortized during the first quarter of 2024 and a $1.6 million decrease in employee-related expenses. The decrease in wholesale cost of revenue was offset in part by a $9.8 million increase in impairment of capitalized website development costs due to the end of the CG Buy Online pilot.

Product cost of revenue decreased $56.5 million, or 60%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 6% of total revenue for the nine months ended September 30, 2024, compared to 14% of total revenue for the nine months ended September 30, 2023. The decrease was due primarily to a decrease in expenses related to vehicles sold to dealers through IMCO transactions as a result of lower Transaction volume. The decrease in product cost of revenue was also due in part to a decrease in expenses related to vehicles sold to dealers acquired through arbitration as a result of decreased arbitration claims due primarily to lower Transaction volume.

Operating Expenses

Sales and Marketing Expense

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Sales and marketing

 

$

245,801

 

 

$

230,243

 

 

$

15,558

 

 

 

7

%

Percentage of total revenue

 

 

37

%

 

 

33

%

 

 

 

 

 

 

Sales and marketing expense increased $15.6 million, or 7%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was due primarily to a $14.0 million increase in advertising and marketing expense for strategic advertising spend with our performance marketing vendors to maintain year-over-year lead volume and grow with the market, as well as our brand awareness campaigns. The increase in sales and marketing expense was also due in part to a $1.2 million increase in software subscriptions.

Product, Technology, and Development Expense

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Product, technology, and development

 

$

108,484

 

 

$

109,432

 

 

$

(948

)

 

 

(1

)%

Percentage of total revenue

 

 

16

%

 

 

16

%

 

 

 

 

 

 

Product, technology, and development expense decreased $0.9 million, or 1%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The decrease was due primarily to a $5.4 million decrease in expenses as a result of increased capitalized website development, and a $1.5 million decrease in consulting expenses due to the conclusion of consulting services. The decrease in product, technology, and development expense was offset in part by a $4.4 million increase in salaries and employee-related expenses due primarily to merit increases and a $1.2 million increase in software subscriptions.

44

 

General and Administrative Expense

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

General and administrative

 

$

83,682

 

 

$

77,090

 

 

$

6,592

 

 

 

9

%

Percentage of total revenue

 

 

13

%

 

 

11

%

 

 

 

 

 

 

General and administrative expense increased $6.6 million, or 9%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was due primarily to a $7.0 million increase in salaries and employee-related expenses, inclusive of a $2.6 million increase in stock-based compensation expense, due primarily to an 8% increase in headcount and merit increases. The increase was also due in part to a $1.3 million increase in bad debt expense and a $1.0 million increase in payment processing expenses. The increase in general and administrative expense was offset in part by a $1.7 million decrease in legal expenses and a $1.5 million decrease in consulting and recruiting expenses.

Goodwill and Other Asset Impairment

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

(dollars in thousands)

Goodwill and other asset impairment

 

$

134,501

 

 

$

—

 

 

$

134,501

 

 

NM (1)

Percentage of total revenue

 

 

20

%

 

 

0

%

 

 

 

 

 
(1)
Not meaningful

Goodwill and other asset impairment increased $134.5 million in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was due to a $127.5 million CarOffer reporting unit impairment and a $7.0 million impairment due to the end of the CG Buy Online pilot. For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

 

Depreciation and Amortization Expense

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Depreciation and amortization

 

$

7,354

 

 

$

11,762

 

 

$

(4,408

)

 

 

(37

)%

Percentage of total revenue

 

 

1

%

 

 

2

%

 

 

 

 

 

 

Depreciation and amortization expense decreased $4.4 million, or 37%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The decrease was due primarily to the CarOffer customer relationships intangible asset becoming fully amortized during the first quarter of 2024.

45

 

Other Income, net

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

9,063

 

 

$

13,337

 

 

$

(4,274

)

 

 

(32

)%

Other income (expense), net

 

 

122

 

 

 

(152

)

 

 

274

 

 

 

180

 

Total other income, net

 

$

9,185

 

 

$

13,185

 

 

$

(4,000

)

 

 

(30

)%

Percentage of total revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

%

 

 

2

%

 

 

 

 

 

 

Other income, net

 

 

0

 

 

 

(0

)

 

 

 

 

 

 

Total other income, net

 

 

1

%

 

 

2

%

 

 

 

 

 

 

Total other income, net decreased $4.0 million, or 30%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The $4.3 million decrease in interest income was due primarily to the sale of interest-bearing short-term investments during the first quarter of 2024 as well as a decrease in cash equivalents to fund the 2024 Share Repurchase Program. Other income (expense), net was relatively flat during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

(Benefit from) Provision for Income Taxes

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

(Benefit from) provision for income taxes

 

$

(5,772

)

 

$

23,421

 

 

$

(29,193

)

 

 

(125

)%

Percentage of total revenue

 

 

(1

)%

 

 

3

%

 

 

 

 

 

 

(Benefit from) provision for income taxes changed $29.2 million, or 125%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The change was due primarily to increased federal and state research and development tax credits, a $31.5 million discrete deferred tax benefit in association with the goodwill and long-term asset impairment charges related to the CarOffer reporting unit, and a $4.1 million discrete deferred tax benefit in association with the CG Buy Online reporting unit impairment charges, offset by an aggregated $0.9 million shortfalls on the taxable compensation of stock-based awards and the Section 162(m) excess officer compensation limitation recognized during the nine months ended September 30, 2024, compared to an aggregated $4.4 million shortfalls on the taxable compensation of stock-based awards and the Section 162(m) excess officer compensation limitation recognized during the nine months ended September 30, 2023.

Segment Income (Loss) from Operations

 

 

 

Nine Months Ended
September 30,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

%

 

 

 

(dollars in thousands)

 

Segment Income (Loss) from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

$

126,670

 

 

$

84,443

 

 

$

42,227

 

 

 

50

%

Digital Wholesale

 

 

(173,815

)

 

 

(29,184

)

 

 

(144,631

)

 

 

(496

)

Other

 

 

7,279

 

 

 

(367

)

 

 

7,646

 

 

 

2,083

 

Total

 

$

(39,866

)

 

$

54,892

 

 

$

(94,758

)

 

 

(173

)%

Percentage of segment revenue:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Marketplace

 

 

23

%

 

 

18

%

 

 

 

 

 

 

Digital Wholesale

 

 

(219

)

 

 

(17

)

 

 

 

 

 

 

Other

 

 

16

 

 

 

(1

)

 

 

 

 

 

 

Total

 

 

(6

)%

 

 

8

%

 

 

 

 

 

 

 

46

 

U.S. Marketplace segment income from operations increased $42.2 million, or 50%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented 23% of U.S. Marketplace segment revenue for the nine months ended September 30, 2024, compared to 18% of U.S. Marketplace segment revenue for the nine months ended September 30, 2023. The increase was due to an increase in revenue of $61.9 million, a decrease in cost of revenue of $5.3 million, and an increase in operating expenses of $25.0 million.

Digital Wholesale segment loss from operations increased $144.6 million, or 496%, in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and represented (219)% of Digital Wholesale segment revenue for the nine months ended September 30, 2024, compared to (17)% of Digital Wholesale segment revenue for the nine months ended September 30, 2023. The increase was due primarily to a $127.5 million CarOffer reporting unit impairment and a $16.8 million impairment due to the end of the CG Buy Online pilot. For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Liquidity and Capital Resources

Cash, Cash Equivalents, Short-term Investments, and Borrowing Capacity

As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents of $246.7 million. As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents of $291.4 million and short-term investments of $20.7 million. As of September 30, 2024, our borrowing capacity under the 2022 Revolver (as defined below) was $390.1 million.

Sources and Uses of Cash

During the nine months ended September 30, 2024 and 2023, our cash flows from operating, investing, and financing activities, as reflected in the Unaudited Condensed Consolidated Statements of Cash Flows, were as follows:

 

 

 

Nine Months Ended
September 30,

 

 

 

2024

 

 

2023

 

 

 

(dollars in thousands)

 

Net cash provided by operating activities

 

$

179,757

 

 

$

122,031

 

Net cash used in investing activities

 

 

(59,268

)

 

 

(115,017

)

Net cash used in financing activities

 

 

(164,256

)

 

 

(123,686

)

Impact of foreign currency on cash

 

 

582

 

 

 

(506

)

Net decrease in cash, cash equivalents, and restricted cash

 

$

(43,185

)

 

$

(117,178

)

Our operations have been financed primarily from operating activities. During the nine months ended September 30, 2024 and 2023, we generated cash from operating activities of $179.8 million and $122.0 million, respectively.

We believe that our existing sources of liquidity, including access to the 2022 Revolver, will be sufficient to fund our operations for at least the next 12 months from the date of the filing of this Quarterly Report. Our future capital requirements will depend on many factors, including our revenue; expenses associated with our sales and marketing activities and the support of our product, technology, and development efforts; expenses associated with the completion of our facilities buildout under our 1001 Boylston Street lease in excess of tenant improvement allowance; payments received in advance from a third-party transaction processor; activity under the 2024 Share Repurchase Program; and our investments in international markets. Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, macroeconomic effects and other risks detailed more specifically in the “Risk Factors” section in Part I, Item 1A in our Annual Report and in the “Risk Factors” section in Part II, Item 1A in this Quarterly Report.

47

 

On September 26, 2022, we entered into a Credit Agreement with PNC Bank, National Association, as administrative agent and collateral agent and an L/C Issuer (as defined in the Credit Agreement), and the other lenders, L/C Issuers and parties thereto from time to time, or the Credit Agreement. The Credit Agreement consists of a revolving credit facility, or the 2022 Revolver, which allows us to borrow up to $400.0 million, $50.0 million of which may be comprised of a letter of credit sub-facility. The borrowing capacity under the Credit Agreement may be increased in accordance with the terms and subject to the adjustments as set forth in the Credit Agreement. Specifically, the borrowing capacity may be increased by an amount up to the greater of $250.0 million or 100% of Four Quarter Consolidated EBITDA (as defined in the Credit Agreement) if certain criteria are met and subject to certain restrictions. Any such increase requires lender approval. Proceeds of any borrowings may be used for general corporate purposes. The 2022 Revolver is scheduled to mature on September 26, 2027. As of September 30, 2024, there were no borrowings and $9.9 million in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390.1 million. As of December 31, 2023, there were no borrowings and $9.6 million in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390.4 million.

In connection with the 1001 Boylston Street lease, we expect to incur an additional $5.6 million of costs to complete our buildout, of which $4.6 million has been committed, but not incurred, as of September 30, 2024. We expect future costs to complete the buildout to be less than the remaining tenant improvement allowance.

On November 7, 2023, we announced that our Board of Directors authorized the 2024 Share Repurchase Program, pursuant to which we may, from time to time, purchase shares of our Class A common stock for an aggregate purchase price not to exceed $250.0 million. Share repurchases under the 2024 Share Repurchase Program may be made through a variety of methods, including but not limited to open market purchases, privately negotiated transactions, and transactions that may be effected pursuant to one or more plans under Rule 10b5-1 and/or Rule 10b-18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The 2024 Share Repurchase Program does not obligate us to repurchase any minimum dollar amount or number of shares. The 2024 Share Repurchase Program has an effective date of January 1, 2024, and an expiration date of December 31, 2024, and prior to its expiration may be modified, suspended, or discontinued by our Board of Directors at any time without prior notice. All repurchased shares of our Class A common stock under the 2024 Share Repurchase Program will be retired. We have funded share repurchases and expect to continue to fund any additional share repurchases under the 2024 Share Repurchase Program through cash on hand and cash generated from operations. During the three months ended September 30, 2024, we repurchased and retired 164,301 shares for $3.7 million, exclusive of commissions and excise tax, at an average cost of $22.52 per share under the 2024 Share Repurchase Program. During the nine months ended September 30, 2024, we repurchased and retired 6,357,302 shares for $146.1 million, exclusive of commissions and excise tax, at an average cost of $22.98 per share under the 2024 Share Repurchase Program. As of September 30, 2024, we had remaining authorization to purchase up to $103.9 million of our Class A common stock under the 2024 Share Repurchase Program.

On November 7, 2024, we announced that our Board of Directors authorized a share repurchase program, or the 2025 Share Repurchase Program, pursuant to which we may, from time to time, purchase shares of our Class A common stock for an aggregate purchase price not to exceed $200.0 million. Share repurchases under the 2025 Share Repurchase Program may be made through a variety of methods, including but not limited to open market purchases, privately negotiated transactions, and transactions that may be effected pursuant to one or more plans under Rule 10b5-1 and/or Rule 10b-18 of the Exchange Act. The 2025 Share Repurchase Program does not obligate us to repurchase any minimum dollar amount or number of shares. The 2025 Share Repurchase Program has an effective date of January 1, 2025, and an expiration date of December 31, 2025, and prior to its expiration may be modified, suspended, or discontinued by our Board of Directors at any time without prior notice. All repurchased shares under the 2025 Share Repurchase Program will be retired. We expect to fund share repurchases under the 2025 Share Repurchase Program through cash on hand and cash generated from operations.

To the extent that our operating income, existing cash, cash equivalents, and our borrowing capacity under the 2022 Revolver are insufficient to fund our future activities, we may need to raise additional funds through a public or private equity or debt financing. Additional funds may not be available on terms favorable to us, or at all. See “Risk Factors—Risks Related to Our Business and Industry—We may require additional capital to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances. If we are unable to generate sufficient cash flows or if capital is not available to us, our business, operating results, financial condition, and prospects could be adversely affected.” in Part I, Item 1A in our Annual Report.

48

 

Operating Activities

Net cash provided by operating activities of $179.8 million during the nine months ended September 30, 2024 was due primarily to consolidated net loss of $24.9 million, adjusted for $144.4 million of goodwill and other asset impairment due to the CarOffer reporting unit impairment and the end of the CG Buy Online pilot, as discussed in Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report, $47.3 million of deferred taxes, $46.6 million of stock-based compensation expense for equity classified awards to employees, and depreciation and amortization expense of $18.3 million. Net cash provided by operating activities was also attributable to a $32.2 million increase in lease obligations primarily related to tenant improvement allowance costs incurred and amortization reducing the right-of-use asset related to 1001 Boylston Street, partially offset by typical rent payments decreasing the lease liability.

Net cash provided by operating activities of 122.0 million during the nine months ended September 30, 2023 was due primarily to consolidated net income of $44.7 million, adjusted for $43.8 million of stock-based compensation expense for equity classified awards, $35.7 million of depreciation and amortization, and $8.6 million of amortization of deferred contract costs, partially offset by $32.1 million of deferred taxes. Net cash provided by operating activities was also attributable to a $12.0 million increase in lease obligations, a $8.8 million increase in deferred revenue, a $6.0 million decrease in prepaid expenses, prepaid income taxes, and other assets, a $5.0 million decrease in inventory, a $1.2 million increase in accounts payable, and a $1.0 million increase in accrued expenses, accrued income taxes, and other liabilities. The increase in cash flow from operations was partially offset by a $13.7 million increase in deferred contract costs.

Investing Activities

Net cash used in investing activities of $59.3 million during the nine months ended September 30, 2024 was due primarily to $64.9 million in purchases of property and equipment primarily related to our new headquarters at 1001 Boylston Street and $15.3 million in capitalized website development costs due to continued investment on our product offerings, offset in part by $21.2 million in sales of short-term investments.

Net cash used in investing activities of $115.0 million during the nine months ended September 30, 2023 was due to $96.7 million in purchases of short-term investments, $11.8 million of capitalization of website development costs, $9.0 million of purchases of property and equipment, and $2.9 million in advance payments to customers, offset in part by $5.0 million of sales of short-term investments and $0.5 million in proceeds from the sale of property and equipment.

Financing Activities

Net cash used in financing activities of $164.3 million during the nine months ended September 30, 2024 was due primarily to $146.2 million related to the repurchase of our Class A common stock under the 2024 Share Repurchase Program and $17.4 million related to the payment of withholding taxes on net share settlements of restricted stock units.

Net cash used in financing activities of $123.7 million during the nine months ended September 30, 2023 was due primarily to $107.4 million of payment for the repurchase of our Class A common stock under the share repurchase program announced by our Board of Directors in December 2022, pursuant to which we could, from time to time, purchase of shares of our Class A common stock for an aggregate purchase price not to exceed $250.0 million, $11.7 million of payment of withholding taxes on net share settlements of restricted stock units, and $4.5 million of change in gross advance payments received from third-party transaction processor.

Contractual Obligations and Known Future Cash Requirements

As of September 30, 2024, there were no material changes in our contractual obligations and commitments from those disclosed in our Annual Report, other than those appearing in the notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report, which are hereby incorporated by reference.

49

 

Seasonality

Across the retail automotive industry, consumer purchases are typically greatest in the first three quarters of each year, due in part to the introduction of new vehicle models from manufacturers and the seasonal nature of consumer spending. Additionally, the volume of wholesale vehicle sales can fluctuate from quarter to quarter driven by several factors, including the timing of used vehicles available for sale from selling customers, the seasonality of the retail market for used vehicles, and/or inventory challenges in the automotive industry, which affect the demand side of the wholesale industry.

Macroeconomic conditions, such as slower growth or recession, higher interest rates, unemployment, consumer confidence in the economy, consumer debt levels, labor, disruptions, work stoppages, or strikes, the ongoing military conflict between Russia and Ukraine, the conflict in Israel and surrounding areas and the possible expansion of such conflict, foreign currency exchange rate fluctuations, and other matters that influence consumer spending and preferences, can also impact the volume of wholesale vehicle sales, as was evidenced by the global semiconductor chip shortage and other supply related shortages.

The Digital Wholesale segment operating results have reflected the general seasonality of the wholesale vehicle sales market and macroeconomic conditions of the automotive industry. The U.S. Marketplace segment operating results have reflected the macroeconomic conditions of the automotive industry. However, to date, the U.S. Marketplace segment operating results have not been materially impacted by the general seasonality of the automotive industry. This could possibly change as our business and markets mature.

As a result, revenue and cost of revenue related to volume will fluctuate accordingly on a quarterly basis. Typical seasonality trends may not be observed in periods where other external factors more significantly impact the wholesale industry.

Off-Balance Sheet Arrangements

As of September 30, 2024 and December 31, 2023, we did not have any off-balance sheet arrangement or material leases that are less than 12 months in duration that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Estimates

The preparation of the Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

Although we regularly assess these estimates, actual results could differ materially from these estimates. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from management's estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Changes in estimates are recognized in the period in which they become known.

Critical estimates relied upon in preparing the Unaudited Condensed Consolidated Financial Statements include the determination of sales allowance and variable consideration in our revenue recognition, allowance for doubtful accounts, the impairment of assets, the capitalization of product, technology, and development costs for website development, internal-use software and hosting arrangements, the valuation of acquired assets and liabilities, the valuation and recoverability of intangible assets and goodwill, the valuation of redeemable noncontrolling interest, the recoverability of our net deferred tax assets and related valuation allowance, the valuation of inventory, and the valuation of liability-classified compensation awards. Accordingly, we consider these to be our critical accounting estimates and believe that of our significant accounting policies, these involve the greatest degree of judgment and complexity. For the three and nine months ended September 30, 2024, there were no estimates related to the valuation of redeemable noncontrolling interest.

50

 

During the three months ended June 30, 2024, we identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to our financial projections for the CarOffer reporting unit. During the three months ended June 30, 2024, we performed an updated fair value analysis of the CarOffer reporting unit, resulting in an excess of carrying value over fair value of the CarOffer reporting unit, which led to the impairment of the CarOffer reporting unit, as discussed in Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

During the three months ended September 30, 2024, there was no additional impairment related to the CarOffer reporting unit.

Due to the partial impairment of the CarOffer reporting unit goodwill and other long-term assets during the three months ended June 30, 2024, in which the CarOffer reporting unit was reduced to its fair value, there remains a risk for future impairment charges if projected future operating results further decline, including as a result of economic conditions or operational challenges, which could be material and negatively affect our operations.

For further discussion of goodwill and other asset impairments, see Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

For a detailed explanation of the judgments made in these areas, see Note 2 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

Recently Issued Accounting Pronouncements

Information concerning recently issued accounting pronouncements may be found in Note 2 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

51

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of loss that may affect our financial position due to adverse changes in financial market prices and rates. We are exposed to market risks as described below.

Interest Rate Risk

As of September 30, 2024, our exposure to market risk associated with changes in interest rates relates primarily to the 2022 Revolver, which allows us to borrow up to $400.0 million. The applicable interest rate is, at our option, based on a number of different benchmark rates and applicable spreads, as determined by the Consolidated Secured Net Leverage Ratio (as defined in Note 8 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report). A fluctuation in interest rates does not have an impact on interest expense unless the 2022 Revolver is drawn upon. Such impact would also be dependent on the amount of the draw. As of September 30, 2024, there were no borrowings and $9.9 million in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390.1 million. As of December 31, 2023, there were no borrowings and $9.6 million in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390.4 million.

As of September 30, 2024, we had cash and cash equivalents of $246.7 million, which consisted of bank deposits, money market accounts, and mutual funds. As of December 31, 2023, we had cash, cash equivalents, and short-term investments of $312.1 million, which consisted of bank deposits, money market accounts, and mutual funds.

Such interest-earning instruments carry a degree of interest rate risk. Given recent changes in the interest rate environment and in an effort to ensure liquidity, we expect variable returns from our cash equivalents for the foreseeable future. For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, fluctuations resulting from changes in the interest rate environment in interest income have not been material to the operations of the business.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition, or results of operations to date. However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, operating results, and financial condition. Additionally, inflationary pressures could negatively impact vehicle purchasing behavior, which could have an adverse impact on our financial results.

Foreign Currency Exchange Risk

As of September 30, 2024 and December 31, 2023, we had immaterial foreign currency exposures in the British pound, the Euro, and the Canadian dollar. Historically, because our operations and sales have been primarily in the U.S., we have not faced any material foreign currency risk.

As we seek to grow our international operations in Canada and the U.K., our risks associated with fluctuation in currency rates may become greater, and we will continue to reassess our approach to managing these risks.

52

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As described below, based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report, management identified a material weakness in our internal control over financial reporting. As a result of the material weakness, our Principal Executive Officer and Principal Financial Officer have concluded that, as of such date, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized, and reported as and when required.

Notwithstanding this material weakness noted above, our management, including our Principal Executive Officer and Principal Financial Officer, has concluded that our financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with GAAP.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The control deficiencies, which, in the aggregate, were assessed as a material weakness as disclosed in our Annual Report, have not yet been fully remediated.

At December 31, 2023, we had unremediated operational control deficiencies at CarOffer associated with the operation of logical access and change management of information technology, or IT General Controls, around program change and logical access in certain IT systems. Therefore, we were not able to demonstrate consistent, effective operation of manual controls that rely on data produced by and maintained within these affected IT systems. As of September 30, 2024, management has not concluded on the consistent, effective operation of IT General Controls and manual controls that rely on data produced by and maintained within affected IT systems. As a result, we did not have effective operation of internal controls over financial reporting to address the risks of material misstatement of various financial statement accounts at September 30, 2024. Management has determined that the impact of the previously identified deficiencies continue to aggregate into a material weakness at September 30, 2024.

This material weakness did not result in a known material misstatement to our financial statements. However, the material weakness could have resulted in material misstatements in our interim or annual financial statements and disclosures which then may not have been prevented or detected. The material weakness also impacts the effectiveness of segregation of duties, impacts the effectiveness of financial controls which rely on information from relevant financial systems, and increases the reliance on corporate accounting personnel to identify errors at the CarOffer subsidiary level.

 

 

53

 

Remediation Plan

To address the material weaknesses in our internal control over financial reporting as of December 31, 2023, we have continued remediation efforts outlined in previous financial statements, as applicable, including enhancing our control procedures, and in some cases, increasing the frequency at which controls are performed for logical access in IT systems. In addition, until remediation steps have been completed and are operated for a sufficient period of time, and subsequent evaluation of their effectiveness is completed, the material weakness described above will continue to exist. Our ongoing remediation efforts are focused on continued employee training related to internal control over financial reporting and confirming sustained operation of effectively designed control activities, including IT General Controls.

Management is committed to successfully implementing the remediation plan as promptly as possible. As of September 30, 2024, management has implemented or enhanced certain controls to address specific issues related to the material weakness. The material weakness will not be considered remediated until our management implements effective controls that operate for a sufficient period of time and our management has concluded through testing that these controls are effective. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. See “Risk Factors—Risks Related to Our Business and Industry—We have identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the market price of our common stock.” in Part I, Item 1A in our Annual Report.

Changes in Internal Control over Financial Reporting

Except as otherwise noted above under "Remediation Plan," including the on-going remediation efforts described, there were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our plans for remediating the material weakness, described above, will constitute changes in our internal control over financial reporting, prospectively, when such remediation plans are effectively implemented.

54

 

PART II—OTHER INFORMATION

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently subject to any pending or threatened litigation that we believe, if determined adversely to us, would individually, or taken together, reasonably be expected to have a material adverse effect on our business or financial results.

Item 1A. Risk Factors.

Careful consideration should be given to the factors discussed in Part I, Item 1A, “Risk Factors,” in our Annual Report, which could materially affect our business, financial condition, or future results, in addition to the information set forth in this Quarterly Report. The risk factor set forth below updates the risk factors in our Annual Report.

 

Our goodwill, intangible assets, right-of-use assets, and other assets have been subject to impairment and may be subject to further impairment in the future, which could have a material adverse effect on our results of operations, financial condition, or future operating results.

We evaluate the recoverability of recognized goodwill amounts and indefinite-lived intangible assets for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. These impairment tests are based on several factors requiring management’s judgment, including identification of triggering events for reassessment and determination of the fair value of related assets. If such goodwill or intangible assets are deemed to be impaired, an impairment loss equal to the amount by which the carrying amount exceeds the fair value of the assets would be recognized. Future events may cause impairments of our goodwill or intangible assets based on factors such as the price of our Class A common stock, projected cash flows, assumptions used, or other variables.

 

In the three months ended June 30, 2024, we recognized a partial impairment charge of $127.5 million related to the CarOffer reporting unit. We cannot accurately predict the amount and timing of any impairment of goodwill, intangible assets, right-of-use assets, or other assets. We may be required to record an additional charge during the period in which further impairment of our goodwill or intangible assets is determined, which could have a material adverse effect on our results of operations, financial condition, or future operating results.

55

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities

The following table summarizes information about our purchases of our Class A common stock equity securities for each of the months during the three months ended September 30, 2024:

 

Period

 

Total Number of Shares of Common Stock Purchased

 

 

Weighted Average Price Paid per Share of Common Stock(1)

 

 

Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs(2)(3)

 

 

Maximum Approximate Dollar Value of Shares of Common Stock that May Yet be Purchased Under the Plans or Programs
(in thousands)(2)

 

 July 1, 2024 through July 31, 2024

 

 

—

 

 

$

—

 

 

 

—

 

 

$

107,583

 

 August 1, 2024 through August 31, 2024

 

 

164,301

 

 

$

22.52

 

 

 

164,301

 

 

$

103,883

 

 September 1, 2024 through September 30, 2024

 

 

—

 

 

$

—

 

 

 

—

 

 

$

103,883

 

 Total

 

 

164,301

 

 

$

22.52

 

 

 

164,301

 

 

$

103,883

 
(1)
The weighted average price paid per share of our Class A common stock does not include cost of commissions.
(2)
On November 7, 2023, we announced that our Board of Directors authorized the 2024 Share Repurchase Program, pursuant to which we may, from time to time, purchase shares of our Class A common stock for an aggregate purchase price not to exceed $250.0 million. Share repurchases under the 2024 Share Repurchase Program may be made through a variety of methods, including but not limited to open market purchases, privately negotiated transactions, and transactions that may be effected pursuant to one or more plans under Rule 10b5-1 and/or Rule 10b-18 of the Exchange Act. The 2024 Share Repurchase Program does not obligate us to repurchase any minimum dollar amount or number of shares. The 2024 Share Repurchase Program has an effective date of January 1, 2024, and an expiration date of December 31, 2024, and prior to its expiration may be modified, suspended, or discontinued by our Board of Directors at any time without prior notice. All repurchased shares of our Class A common stock under the 2024 Share Repurchase Program will be retired. We have funded share repurchases and expect to continue to fund any additional share repurchases under the 2024 Share Repurchase Program through cash on hand and cash generated from operations. On November 7, 2024, we announced that our Board of Directors authorized the 2025 Share Repurchase Program, pursuant to which we may, from time to time, purchase shares of our Class A common stock for an aggregate purchase price not to exceed $200.0 million. Share repurchases under the 2025 Share Repurchase Program may be made through a variety of methods, including but not limited to open market purchases, privately negotiated transactions, and transactions that may be effected pursuant to one or more plans under Rule 10b5-1 and/or Rule 10b-18 of the Exchange Act. The 2025 Share Repurchase Program does not obligate us to repurchase any minimum dollar amount or number of shares. The 2025 Share Repurchase Program has an effective date of January 1, 2025, and an expiration date of December 31, 2025, and prior to its expiration may be modified, suspended, or discontinued by our Board of Directors at any time without prior notice. All repurchased shares under the 2025 Share Repurchase Program will be retired. We expect to fund share repurchases under the 2025 Share Repurchase Program through cash on hand and cash generated from operations.
(3)
The total number of shares of our Class A common stock purchased as part of the 2024 Share Repurchase Program was inclusive of any shares purchased but not settled as of September 30, 2024.

 

56

 

Item 5. Other Information

 

Rule 10b5-1 Plan Trading Arrangements

During the three months ended September 30, 2024, the following officer adopted a “Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K) that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and our policies on insider trading:

 

 

 

Name & Title

 

Date Adopted

Aggregate Number of Shares of Class A Common Stock to be Purchased or Sold Pursuant to Trading Arrangement

 

Expiration Date

Zachary Hallowell,

Chief Executive Officer, CarOffer

August 16, 2024

Up to 78,915 shares to be sold(1)

August 15, 2025(2)

 

 

 

 

 

 

 

Langley Steinert,

Executive Chair and Chair of the Board of Directors(3)

 

September 12, 2024

 

1,782,923 shares to be sold(3)

 

June 18, 2025(4)

 

Samuel Zales,

President and Chief Operating Officer

 

September 13, 2024

 

Up to 264,374 shares to be sold(5)

 

December 31, 2025(2)

 

(1) The Rule 10b5-1 trading arrangement includes the sale of shares to be received upon future vesting of certain outstanding equity awards, net of any shares withheld by us to satisfy applicable taxes. The number of shares to be withheld, and thus the exact number of shares to be sold pursuant to Mr. Hallowell’s Rule 10b5-1 trading arrangement, can only be determined upon the occurrence of the future vesting events. For purposes of this disclosure, we have reported the gross number of shares to be received upon the future vesting of such equity awards, before subtracting any shares to be withheld by us to satisfy applicable taxes in connection with such future vesting events. Furthermore, the Rule 10b5-1 trading arrangement provides for the sale of 7,148 shares directly held by Mr. Hallowell and the sale of up to 50% of the net shares that vest on certain applicable vesting dates, up to 71,767 shares.

 

(2) The Rule 10b5-1 trading arrangement permits transactions through and including the earlier to occur of (a) the completion of all sales or (b) the date listed in the table. The arrangement also provides for automatic expiration in the event of liquidation, dissolution, bankruptcy, insolvency, or death of the adopting person.

 

(3) The Rule 10b5-1 trading arrangement was entered into among Hilary and Langley Steinert, acting jointly; Langley Steinert Irrevocable Family Trust dated June 21, 2024, or the Steinert Trust; and Comet Foundation, which we collectively refer to as the Steinert Sellers. Of the 1,782,923 shares to be sold pursuant to this Rule 10b5-1 trading arrangement, Hilary and Langley Steinert, acting jointly, contributed 1,386,889 shares, the Steinert Trust contributed 154,099 shares, and the Comet Foundation contributed 241,935 shares.

 

(4) The Rule 10b5-1 trading arrangement permits transactions through June 18, 2025, subject to early termination for certain specified events set forth in the Rule 10b5-1 trading arrangement, or earlier if all transactions under the Rule 10b5-1 trading arrangement are completed.

 

(5) The Rule 10b5-1 trading arrangement includes the sale of 120,000 shares directly held by Mr. Zales and an aggregate of 19,714 shares underlying vested and unvested stock options, plus additional shares that remain unsold under Mr. Zales’ existing Rule 10b5-1 trading arrangement up to 124,660 shares.

Other than those disclosed above, none of our directors or officers adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” in each case as defined in Item 408 of Regulation S-K.

 

57

 

Item 6. Exhibits.

The exhibits listed below are filed, furnished, or incorporated by reference into this Quarterly Report.

 

 

 

 

 

Incorporated by Reference

 

Exhibit

Number

 

Exhibit Description

 

Form

 

File

Number

 

Filing

Date

 

Exhibit

Number

 

Filed or Furnished

Herewith

10.1

 

Fourth Amendment to Lease, dated as of July 11, 2024, between 55 Cambridge Parkway, LLC and the Registrant.*

 

 

 

 

 

 

 

 

 

X

31.1

 

Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

X

31.2

 

Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

X

32.1**

 

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

X

32.2**

 

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

X

101.INS

 

Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

 

 

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.

 

 

 

 

 

 

 

 

 

X

104

 

Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

 

 

 

 

 

 

 

 

 

X

 

 

* The exhibits and schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and the Registrant agrees to furnish supplementally a copy of any omitted schedule to the staff of the SEC upon request.

 

** The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report and will not be deemed “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

58

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

CarGurus, Inc.

Date: November 7, 2024

By:

/s/ Jason Trevisan

Jason Trevisan

Chief Executive Officer

(Principal Executive Officer)

 

59