CarGurus Announces Third Quarter 2021 Results

November 9, 2021
PDF Version

Third Quarter Highlights:

  • Total revenue of $222.9 million, an increase of 51% year-over-year
  • GAAP operating income of $40.1 million; non-GAAP operating income of $63.1 million
  • GAAP consolidated net income of $29.3 million; non-GAAP consolidated net income of $49.5 million
  • GAAP net income attributable to common stockholders of $29.2 million; non-GAAP net income attributable to common stockholders of $46.3 million
  • Cash, cash equivalents and short-term investments of $321.1 million
  • Consolidated Adjusted EBITDA of $65.9 million; Adjusted EBITDA of $62.5 million

CAMBRIDGE, Mass., Nov. 09, 2021 (GLOBE NEWSWIRE) -- CarGurus, Inc. (Nasdaq: CARG), a multinational, online automotive platform for buying and selling vehicles, today announced financial results for the third quarter ended September 30, 2021.

"We are thrilled to have exceeded our guidance for the quarter," said Jason Trevisan, Chief Executive Officer of CarGurus. "Performance this quarter was driven by three key factors: our ongoing evolution from a listings business to an end-to-end transaction-enabled marketplace, our partnership with dealers to develop innovative digitally initiated solutions, and finally, our ability to provide consumers a self-selective digital retail journey when buying or selling a vehicle. With these three areas driving our performance during the third quarter, we were pleased to see strong dealer penetration of our CarOffer platform, swift execution and rapid expansion of CarGurus Instant Max Cash Offer, and continued innovation as we bring digitally initiated capabilities to our consumer audience and dealer partners."

Revenue

  • Total revenue was $222.9 million, an increase of 51% compared to $147.5 million in the third quarter of 2020.
  • Marketplace subscription revenue was $144.6 million, an increase of 11% compared to $130.0 million in the third quarter of 2020.
  • Wholesale and other revenue was $78.3 million, an increase of 347% compared to $17.5 million in the third quarter of 2020.

Operating Income

  • GAAP operating income was $40.1 million, or 18% of total revenue, compared to $43.6 million, or 30% of total revenue, in the third quarter of 2020.
  • Non-GAAP operating income was $63.1 million, or 28% of total revenue, compared to $55.1 million, or 37% of total revenue, in the third quarter of 2020.

Consolidated Net Income, Net Income Attributable to Common Stockholders, Consolidated Adjusted EBITDA, & Adjusted EBITDA

  • GAAP consolidated net income was $29.3 million during the third quarter ended September 30, 2021, compared to $32.6 million during the third quarter ended September 30, 2020.
  • Non-GAAP consolidated net income was $49.5 million during the third quarter ended September 30, 2021, compared to $41.9 million during the third quarter ended September 30, 2020.
  • GAAP net income attributable to common stockholders was $29.2 million, or $0.24 per fully diluted share, during the third quarter ended September 30, 2021, compared to $32.6 million, or $0.29 per fully diluted share, during the third quarter ended September 30, 2020.
  • Non-GAAP net income attributable to common stockholders was $46.3 million, or $0.38 per fully diluted share, during the third quarter ended September 30, 2021, compared to $41.9 million, or $0.37 per fully diluted share, during the third quarter ended September 30, 2020.
  • Consolidated Adjusted EBITDA, a non-GAAP metric, was $65.9 million for the third quarter ended September 30, 2021, compared to $57.0 million for the third quarter ended September 30, 2020.
  • Adjusted EBITDA, a non-GAAP metric, was $62.5 million for the third quarter ended September 30, 2021, compared to $57.0 million for the third quarter ended September 30, 2020.

Balance Sheet and Cash Flow

  • As of September 30, 2021, CarGurus had cash, cash equivalents and short-term investments of $321.1 million and no debt.
  • CarGurus generated $53.7 million in cash from operations and $51.4 million in free cash flow, a non-GAAP metric, during the third quarter of 2021, compared to having generated $73.9 million in cash from operations and $72.4 million in free cash flow during the third quarter of 2020.

Third Quarter Business Metrics(1)

  • U.S. revenue was $211.6 million in the third quarter of 2021, an increase of 53% compared to $138.4 million in the third quarter of 2020. U.S. marketplace subscription revenue was $134.3 million in the third quarter of 2021, an increase of 10% compared to $121.8 million in the third quarter of 2020. U.S. wholesale and other revenue was $77.3 million in the third quarter of 2021, an increase of 366% compared to $16.6 million in the third quarter of 2020. GAAP operating income in the U.S. was $41.9 million, a decrease of (10%) compared to $46.5 million in the third quarter of 2020.
  • International revenue was $11.4 million in the third quarter of 2021, an increase of 25% compared to $9.1 million in the third quarter of 2020. International marketplace subscription revenue was $10.3 million in the third quarter of 2021, an increase of 27% compared to $8.1 million in the third quarter of 2020. International wholesale and other revenue was $1.0 million in the third quarter of 2021, an increase of 12% compared to $0.9 million in the third quarter of 2020. GAAP operating loss in International markets was ($1.9) million, a reduction in loss of 36% compared to a loss of ($2.9) million in the third quarter of 2020.
  • Total paying dealers were 30,754 at September 30, 2021, an increase of 2% compared to 30,162 at September 30, 2020. Of the total paying dealers at September 30, 2021, U.S. and International accounted for 23,979 and 6,775, respectively, compared to 23,659 and 6,503, respectively, at September 30, 2020.
  • Quarterly Average Revenue per Subscribing Dealer (“QARSD”) in the U.S. was $5,602 as of September 30, 2021, an increase of 9% compared to $5,133 as of September 30, 2020.
  • QARSD in International markets was $1,524 as of September 30, 2021, an increase of 21% compared to $1,256 as of September 30, 2020.
  • Website traffic and consumer engagement metrics for the third quarter of 2021 were as follows:
    • U.S. average monthly unique users were 28.8 million, a decrease of (25%) compared to 38.7 million in the third quarter of 2020. U.S. average monthly sessions were 71.2 million, a decrease of (25%) compared to 94.3 million in the third quarter of 2020.
    • International average monthly unique users were 7.5 million, a decrease of (4%) compared to 7.8 million in the third quarter of 2020. International average monthly sessions were 17.1 million, a decrease of (6%) compared to 18.3 million in the third quarter of 2020.

(1) CarOffer is excluded from the metrics presented for paying dealers, QARSD, users and sessions.

Fourth Quarter and Full-Year 2021 Guidance

CarGurus anticipates total revenue, non-GAAP operating income, and non-GAAP earnings per share to be in the following ranges:

Fourth Quarter 2021:

  • Total revenue $273 million to $285 million
  • Non-GAAP operating income $44 million to $50 million
  • Non-GAAP EPS $0.28 to $0.30

The fourth quarter 2021 non-GAAP earnings per share calculation assumes 120.5 million diluted weighted-average common shares outstanding.

Full-Year 2021:

  • Total revenue $885 million to $897 million
  • Non-GAAP operating income $224.4 million to $230.4 million
  • Non-GAAP EPS $1.41 to $1.43

The full-year non-GAAP earnings per share calculation assumes 119.4 million diluted weighted-average common shares outstanding.

The assumptions that are built into guidance for the fourth quarter and full-year 2021 regarding our pace of paid dealer acquisition, churn, and expansion activity for the relevant period are based on recent market behaviors and industry conditions. Guidance for the fourth quarter and full-year 2021 excludes the effects of significant COVID-19 resurgences, including the reintroduction of lockdowns and/or a slowed pace of recovery, or other macro-level industry issues that result in dealers and consumers materially changing their recent market behaviors or that cause us to enact measures to assist dealers, such as offering fee reductions or waivers as we have done from time to time during the COVID-19 pandemic. Guidance also excludes adjustments to the carrying value of redeemable noncontrolling interests resulting from potential changes in the redemption value of such interests, and any potential impact of foreign currency exchange gains or losses.

CarGurus has not reconciled its guidance for non-GAAP operating income to GAAP operating income or non-GAAP consolidated EPS to GAAP consolidated EPS because stock-based compensation, amortization of intangible assets, acquisition-related expenses, and adjustments to the carrying value of redeemable noncontrolling interests resulting from changes in the redemption value of such interests, the reconciling items between such GAAP and non-GAAP financial measures, cannot be reasonably predicted due to, as applicable, the timing, amount, valuation and number of future employee equity awards, and the uncertainty relating to the timing, frequency and effect of acquisitions and the significance of the resulting acquisition-related expenses, including adjustments to the carrying value of redeemable noncontrolling interests resulting from potential changes in the redemption value of such interests, and therefore cannot be determined without unreasonable effort. For more information regarding the non-GAAP financial measures discussed in this release, please see the reconciliations of GAAP financial measures to non-GAAP financial measures and the section titled “Non-GAAP Financial Measures and Other Business Metrics” below.

Conference Call and Webcast Information

CarGurus will host a conference call and live webcast to discuss its third quarter 2021 financial results and business outlook at 5:00 p.m. Eastern Time today, November 9, 2021. To access the conference call, dial (877) 451-6152 for callers in the U.S. or Canada, or (201) 389-0879 for international callers. The webcast will be available live on the Investors section of CarGurus’ website at https://investors.cargurus.com.

An audio replay of the call will also be available to investors beginning at approximately 8:00 p.m. Eastern Time today, November 9, 2021, until 11:59 p.m. Eastern Time on November 23, 2021, by dialing (844) 512-2921 for callers in the U.S. or Canada, or (412) 317-6671 for international callers, and entering passcode 13722924. In addition, an archived webcast will be available on the Investors section of CarGurus’ website at https://investors.cargurus.com.

About CarGurus

CarGurus (Nasdaq: CARG) 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 marketplace gives consumers the confidence to purchase or sell a vehicle either online or in-person; and 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. CarGurus is the most visited automotive shopping site in the U.S. (source: Comscore Media Metrix® Multi-Platform, Automotive – Information/Resources, Total Visits, Q3 2021, U.S.).

CarGurus also operates online marketplaces under the CarGurus brand in Canada and the United Kingdom. In the United States and the United Kingdom, CarGurus also operates the Autolist and PistonHeads online marketplaces, respectively, as independent brands.

To learn more about CarGurus, visit www.cargurus.com and for more information about CarOffer, visit www.caroffer.com.

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.

© 2021 CarGurus, Inc., All Rights Reserved.

Cautionary Language Concerning Forward-Looking Statements

This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance for the fourth quarter and full-year 2021, our belief that the presentation of non-GAAP financial measures and other business metrics is helpful to our investors, our business and strategy and the impact of the COVID-19 pandemic and other macro-level issues on our industry, business and financial results, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “guide,” “intend,” “likely,” “may,” “will” and similar expressions and their negatives are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, risks related to our growth and ability to grow our revenue, our relationships with dealers, competition in the markets in which we operate, market growth, our ability to innovate, our ability to realize benefits from our acquisitions and successfully implement the integration strategies in connection therewith, natural disasters, epidemics or pandemics, like COVID-19 that has negatively impacted our business, our ability to operate in compliance with applicable laws, as well as other risks and uncertainties as may be detailed from time to time in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and other reports we file with the Securities and Exchange Commission. Moreover, we operate in very competitive and rapidly changing environments. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee that future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.


Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

    At
September 30,
2021		     At
December 31,
2020		  
Assets            
Current assets            
Cash and cash equivalents   $ 231,091     $ 190,299  
Investments     90,000       100,000  
Accounts receivable, net of allowance for doubtful accounts of $602
and $616, respectively		     85,182       18,235  
Inventory     6,395       —  
Prepaid expenses, prepaid income taxes and other current assets     13,183       12,385  
Deferred contract costs     9,905       10,807  
Restricted cash     5,753       250  
Total current assets     441,509       331,976  
Property and equipment, net     29,569       27,483  
Intangible assets, net     92,421       10,862  
Goodwill     155,707       29,129  
Operating lease right-of-use assets     63,841       60,835  
Restricted cash     10,377       10,377  
Deferred tax assets     13,741       19,774  
Deferred contract costs, net of current portion     6,866       9,189  
Other non-current assets     5,886       2,673  
Total assets   $ 819,917     $ 502,298  
Liabilities, redeemable noncontrolling interest and stockholders’ equity            
Current liabilities            
Accounts payable   $ 55,340     $ 21,563  
Accrued expenses, accrued income taxes and other current liabilities     21,922       24,751  
Deferred revenue     12,517       9,137  
Operating lease liabilities     12,671       11,085  
Total current liabilities     102,450       66,536  
Operating lease liabilities     61,013       58,810  
Deferred tax liabilities     19       291  
Other non–current liabilities     12,546       3,075  
Total liabilities     176,028       128,712  
Redeemable noncontrolling interest     54,633       —  
Stockholders’ equity:            
Preferred stock, $0.001 par value; 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; 101,003,874 and 94,310,309 shares issued and outstanding
at September 30, 2021 and December 31, 2020, respectively		     101       94  
Class B common stock, $0.001 par value per share; 100,000,000 shares
authorized; 16,470,842 and 19,076,500 shares issued and outstanding
at September 30, 2021 and December 31, 2020, respectively		     16       19  
Additional paid-in capital     379,808       242,181  
Retained earnings     209,024       129,412  
Accumulated other comprehensive income     307       1,880  
Total stockholders’ equity     589,256       373,586  
Total liabilities, redeemable noncontrolling interest and stockholders’ equity   $ 819,917     $ 502,298  


Unaudited Condensed Consolidated Income Statements
(in thousands, except share and per share data)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
Revenue   $ 222,915     $ 147,472     $ 612,031     $ 399,898  
Cost of revenue(1)     60,033       9,762       134,408       31,252  
Gross profit     162,882       137,710       477,623       368,646  
Operating expenses:                        
Sales and marketing     66,626       57,618       200,935       189,796  
Product, technology, and development     26,539       20,758       79,333       65,729  
General and administrative     20,414       14,279       67,095       44,297  
Depreciation and amortization     9,227       1,488       25,916       4,529  
Total operating expenses     122,806       94,143       373,279       304,351  
Income from operations     40,076       43,567       104,344       64,295  
Other income, net     143       205       426       1,407  
Income before income taxes     40,219       43,772       104,770       65,702  
Provision for income taxes     10,952       11,209       28,556       13,312  
Consolidated net income     29,267       32,563       76,214       52,390  
Net income (loss) attributable to redeemable noncontrolling interest     68       —       (3,398 )     —  
Net income attributable to common stockholders   $ 29,199     $ 32,563     $ 79,612     $ 52,390  
Net income per share attributable to common stockholders:                        
Basic   $ 0.25     $ 0.29     $ 0.68     $ 0.46  
Diluted   $ 0.24     $ 0.29     $ 0.66     $ 0.46  
Weighted-average number of shares of common stock used in computing net income per share attributable to common stockholders:                        
Basic     117,412,164       113,027,995       116,955,188       112,707,003  
Diluted     120,438,373       113,966,863       119,051,228       113,732,616  
(1) Includes depreciation and amortization expense for the three months ended September 30, 2021 and 2020 and for the nine months ended September 30, 2021 and 2020 of $1,429, $944, $3,571 and $4,250, respectively.  


Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
Operating Activities                        
Consolidated net income   $ 29,267     $ 32,563     $ 76,214     $ 52,390  
Adjustments to reconcile consolidated net income to net cash provided by operating activities:                        
Depreciation and amortization     10,656       2,432       29,487       8,779  
Currency (gain) loss on foreign denominated transactions     (42 )     59       (72 )     (32 )
Deferred taxes     3,438       10,074       5,774       14,769  
Provision for doubtful accounts     277       84       727       1,742  
Stock-based compensation expense     13,804       11,028       42,551       34,403  
Amortization of deferred contract costs     3,189       2,954       9,643       8,595  
Impairment of website development costs     2,351       —       2,351       —  
Changes in operating assets and liabilities:                        
Accounts receivable, net     (3,613 )     301       (51,595 )     5,954  
Inventory     (4,057 )     —       (4,057 )     —  
Prepaid expenses, prepaid income taxes, and other assets     1,048       4,269       (2,970 )     7,104  
Deferred contract costs     (1,424 )     (2,848 )     (6,522 )     (6,922 )
Accounts payable     9,215       6,169       24,548       (19,745 )
Accrued expenses, accrued income taxes, and other liabilities     (10,772 )     5,860       4,808       1,726  
Deferred revenue     (599 )     1,475       3,390       (313 )
Lease obligations     990       (542 )     786       356  
Net cash provided by operating activities     53,728       73,878       135,063       108,806  
Investing Activities                        
Purchases of property and equipment     (263 )     (161 )     (4,935 )     (2,732 )
Capitalization of website development costs     (2,036 )     (1,350 )     (4,145 )     (3,045 )
Cash paid for acquisitions, net of cash acquired     —       (52 )     (64,273 )     (21,056 )
Investments in certificates of deposit     (45,000 )     —       (90,000 )     —  
Maturities of certificates of deposit     40,000       43,000       100,000       111,692  
Net cash (used in) provided by investing activities     (7,299 )     41,437       (63,353 )     84,859  
Financing Activities                        
Proceeds from exercise of stock options     139       66       537       995  
Payment of finance lease obligations     (16 )     (10 )     (29 )     (28 )
Payment of withholding taxes and option costs on net share settlement of restricted stock units and stock options     (3,106 )     (2,922 )     (11,314 )     (8,708 )
Repayment of line of credit     —       —       (14,250 )     —  
Net cash used in financing activities     (2,983 )     (2,866 )     (25,056 )     (7,741 )
Impact of foreign currency on cash, cash equivalents, and restricted cash     (224 )     147       (359 )     171  
Net increase in cash, cash equivalents, and restricted cash     43,222       112,596       46,295       186,095  
Cash, cash equivalents, and restricted cash at beginning of period     203,999       144,222       200,926       70,723  
Cash, cash equivalents, and restricted cash at end of period   $ 247,221     $ 256,818     $ 247,221     $ 256,818  


Unaudited Reconciliation of Marketplace Subscription Revenue
(in thousands)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
United States   $ 134,261     $ 121,814     $ 400,377     $ 330,295  
International     10,328       8,139       28,017       21,477  
Total   $ 144,589     $ 129,953     $ 428,394     $ 351,772  

Unaudited Reconciliation of GAAP Operating Income to Non-GAAP Operating Income and GAAP Operating Margin to Non-GAAP Operating Margin
(in thousands, except percentages)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
GAAP operating income   $ 40,076     $ 43,567     $ 104,344     $ 64,295  
Stock-based compensation expense     15,169       11,030       53,102       34,634  
Amortization of intangible assets     7,854       495       22,358       1,412  
Acquisition-related expenses     —       —       709       968  
Restructuring expenses(1)     —       —       —       3,514  
Non-GAAP operating income   $ 63,099     $ 55,092     $ 180,513     $ 104,823  
                         
GAAP operating margin     18 %     30 %     17 %     16 %
Non-GAAP operating margin     28 %     37 %     29 %     26 %
(1) Excludes stock-based compensation expense of $753 for the nine months ended September 30, 2020 related to the expense reduction plan approved by our Board of Directors on April 13, 2020 to address the impact of the COVID-19 pandemic on our business (the “Expense Reduction Plan”), as the amount is already included within the stock-based compensation line item.  

Unaudited Reconciliation of GAAP Consolidated Net Income to Non-GAAP Net Income Attributable to Common Stockholders
(in thousands, except per share data)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
GAAP consolidated net income   $ 29,267     $ 32,563     $ 76,214     $ 52,390  
Stock-based compensation expense, net of tax(1)     11,984       8,714       41,951       27,361  
Change in tax provision from stock-based compensation expense(2)     410       175       1,033       (311 )
Amortization of intangible assets     7,854       495       22,358       1,412  
Acquisition-related expenses     —       —       709       968  
Restructuring expenses(3)     —       —       —       3,514  
Non-GAAP consolidated net income     49,515       41,947       142,265       85,334  
Net income attributable to redeemable noncontrolling interest     (3,172 )     —       (7,311 )     —  
Non-GAAP net income attributable to common stockholders   $ 46,343     $ 41,947     $ 134,954     $ 85,334  
Non-GAAP net income per share attributable to common stockholders:                        
Basic   $ 0.39     $ 0.37     $ 1.15     $ 0.76  
Diluted   $ 0.38     $ 0.37     $ 1.13     $ 0.75  
GAAP Shares used in non-GAAP per share calculations                        
Basic     117,412       113,028       116,955       112,707  
Diluted     120,438       113,967       119,051       113,733  
(1) The stock-based compensation amounts reflected in the table above are tax effected at the U.S. federal statutory tax rate of 21%.  
(2) This adjustment reflects the tax effect of differences between tax deductions related to stock compensation and the corresponding financial statement expense.  
(3) Excludes stock-based compensation expense related to the Expense Reduction Plan of $753 for the nine months ended September 30, 2020 as the amount is already included within the stock-based compensation line items.  

Unaudited Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit and GAAP Gross Profit Margin to Non-GAAP Gross Profit Margin
(in thousands, except percentages)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
Revenue   $ 222,915     $ 147,472     $ 612,031     $ 399,898  
Cost of revenue     60,033       9,762       134,408       31,252  
Gross profit     162,882       137,710       477,623       368,646  
Stock-based compensation expense included in Cost of revenue     110       57       311       241  
Acquisition-related expenses included in Cost of revenue     —       —       —       22  
Restructuring expenses included in Cost of revenue     —       —       —       1,051  
Non-GAAP gross profit   $ 162,992     $ 137,767     $ 477,934     $ 369,960  
                         
GAAP gross profit margin     73 %     93 %     78 %     92 %
Non-GAAP gross profit margin     73 %     93 %     78 %     93 %

Unaudited Reconciliation of GAAP Expense to Non-GAAP Expense
(in thousands)

  Three Months Ended
September 30,
  
  2021     2020  
  GAAP expense     Stock-based
compensation
expense		     Amortization of
intangible assets		     Acquisition-related expenses     Restructuring expenses     Non-GAAP
expense		     GAAP expense     Stock-based
compensation
expense		     Amortization of
intangible assets		     Acquisition-related expenses     Restructuring expenses     Non-GAAP
expense		  
Cost of revenue $ 60,033     $ (110 )   $ —     $ —     $ —     $ 59,923     $ 9,762     $ (57 )   $ —     $ —     $ —     $ 9,705  
S&M   66,626       (2,717 )     —       —       —       63,909       57,618       (2,450 )     —       —       —       55,168  
P,T&D(1)   26,539       (5,583 )     —       —       —       20,956       20,758       (5,140 )     —       —       —       15,618  
G&A   20,414       (6,759 )     —       —       —       13,655       14,279       (3,383 )     —       —       —       10,896  
Depreciation & amortization   9,227       —       (7,854 )     —       —       1,373       1,488       —       (495 )     —       —       993  
Operating expenses(2) $ 122,806     $ (15,059 )   $ (7,854 )   $ —     $ —     $ 99,893     $ 94,143     $ (10,973 )   $ (495 )   $ —     $ —       82,675  
Total expenses $ 182,839     $ (15,169 )   $ (7,854 )   $ —     $ —     $ 159,816     $ 103,905     $ (11,030 )   $ (495 )   $ —     $ —     $ 92,380  
(1) Product, Technology, & Development  
(2) Operating expenses include S&M, P,T&D, G&A, and depreciation & amortization  
   
   
  Nine Months Ended
September 30,
  
  2021     2020  
  GAAP expense     Stock-based
compensation
expense		     Amortization of
intangible assets		     Acquisition-related expenses     Restructuring expenses     Non-GAAP
expense		     GAAP expense     Stock-based
compensation
expense		     Amortization of
intangible assets		     Acquisition-related expenses     Restructuring expenses(3)     Non-GAAP
expense		  
Cost of revenue $ 134,408     $ (311 )   $ —     $ —     $ —     $ 134,097     $ 31,252     $ (241 )   $ —     $ (22 )   $ (1,051 )   $ 29,938  
S&M   200,935       (9,040 )     —       —       —       191,895       189,796       (8,206 )     —       (152 )     (1,668 )     179,770  
P,T&D(1)   79,333       (17,585 )     —       —       —       61,748       65,729       (15,861 )     —       (527 )     (679 )     48,662  
G&A   67,095       (26,166 )     —       (709 )     —       40,220       44,297       (10,326 )     —       (267 )     (116 )     33,588  
Depreciation & amortization   25,916       —       (22,358 )     —       —       3,558       4,529       —       (1,412 )     —       —       3,117  
Operating expenses(2) $ 373,279     $ (52,791 )   $ (22,358 )   $ (709 )   $ —     $ 297,421     $ 304,351     $ (34,393 )   $ (1,412 )   $ (946 )   $ (2,463 )   $ 265,137  
Total expenses $ 507,687     $ (53,102 )   $ (22,358 )   $ (709 )   $ —     $ 431,518     $ 335,603     $ (34,634 )   $ (1,412 )   $ (968 )   $ (3,514 )   $ 295,075  
(1) Product, Technology, & Development  
(2) Operating expenses include S&M, P,T&D, G&A, and depreciation & amortization  
(3) Excludes stock-based compensation expense related to the Expense Reduction Plan of $753 for the nine months ended September 30, 2020 as the amount is already included within the stock-based compensation line items.  

Unaudited Reconciliation of GAAP Consolidated Net Income to Consolidated Adjusted EBITDA and Adjusted EBITDA
(in thousands)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
Consolidated net income   $ 29,267     $ 32,563     $ 76,214     $ 52,390  
Depreciation and amortization     10,656       2,432       29,487       8,779  
Stock-based compensation expense     15,169       11,030       53,102       34,634  
Acquisition-related expenses     —       —       709       968  
Restructuring expenses(1)     —       —       —       3,514  
Other income, net     (143 )     (205 )     (426 )     (1,407 )
Provision for income taxes     10,952       11,209       28,556       13,312  
Consolidated Adjusted EBITDA     65,901       57,029       187,642       112,190  
Net income attributable to redeemable noncontrolling interest     (3,357 )     —       (8,094 )     —  
Adjusted EBITDA   $ 62,544     $ 57,029     $ 179,548     $ 112,190  
(1) Excludes stock-based compensation expense related to the Expense Reduction Plan of $753 for the nine months ended September 30, 2020 as the amount is already included within the stock-based compensation line items.  

Unaudited Reconciliation of GAAP Net Cash and Cash Equivalents Provided by Operating Activities to Non-GAAP Free Cash Flow
(in thousands)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
GAAP net cash and cash equivalents provided by operating
activities		   $ 53,728     $ 73,878     $ 135,063     $ 108,806  
Purchases of property and equipment     (263 )     (161 )     (4,935 )     (2,732 )
Capitalization of website development costs     (2,036 )     (1,350 )     (4,145 )     (3,045 )
Non-GAAP free cash flow   $ 51,429     $ 72,367     $ 125,983     $ 103,029  

Non-GAAP Financial Measures and Other Business Metrics

To supplement our consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP), we provide investors with certain non-GAAP financial measures and other business metrics, which we believe are helpful to our investors. We use these non-GAAP financial measures and other business metrics for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures and other business metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

The presentation of non-GAAP financial information and other business metrics is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. While our non-GAAP financial measures and other business metrics are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, we urge investors to review the reconciliation of these financial measures to the comparable GAAP financial measures included above, and not to rely on any single financial measure to evaluate our business.

We define Consolidated Adjusted EBITDA as consolidated net income, adjusted to exclude: depreciation and amortization, stock-based compensation expense, acquisition-related expenses, restructuring expenses, other income, net, and the provision for income taxes. We define Adjusted EBITDA as Consolidated Adjusted EBITDA adjusted to exclude net income attributable to the minority interest in acquired entities, adjusted for all prior limitations to Adjusted EBITDA as previously described. We have presented Consolidated Adjusted EBITDA and Adjusted EBITDA 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 each of Consolidated Adjusted EBITDA and Adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business.

We define Free Cash Flow as cash flow from operations, adjusted to include purchases of property and equipment and capitalization of website development costs. We have presented Free Cash Flow because it is a measure of the Company’s financial performance that represents the cash that the Company is able to generate after expenditures required to maintain or expand our asset base.

We also monitor operating measures of certain non-GAAP items including non-GAAP gross profit, non-GAAP gross margin, non-GAAP expense, non-GAAP operating income, non-GAAP operating margin, non-GAAP consolidated net income, non-GAAP net income attributable to common stockholders, and non-GAAP net income attributable to common stockholders per share. These non-GAAP financial measures exclude the effect of stock-based compensation expense, amortization of intangible assets, restructuring expenses, acquisition-related expenses, and net income attributable to redeemable noncontrolling interests. Non-GAAP consolidated net income, non-GAAP net income attributable to common stockholders, and non-GAAP net income attributable to common stockholders per share also exclude the change in tax provision from stock-based compensation expense. Our calculations of non-GAAP net income attributable to common stockholders per share utilize applicable GAAP share counts as included in the accompanying financial statement tables included in this press release. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

While a reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to, as applicable, the timing, amount, valuation and number of future employee equity awards, and the uncertainty relating to the timing, frequency and effect of acquisitions as well as restructuring and the significance of the resulting acquisition-related expenses, restructuring expenses, or associated income or losses attributable to redeemable noncontrolling interests, we have provided a reconciliation of non-GAAP financial measures and other business metrics to the nearest comparable GAAP measures in the accompanying financial statement tables included in this press release.

We define a paying dealer as a dealer account with an active, paid marketplace subscription at the end of a defined period.

We define QARSD, which is measured at the end of a fiscal quarter, as the marketplace subscription revenue 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.

For each of our websites, we define a monthly unique user as an individual who has visited any such website within a calendar month, based on data as measured by Google Analytics. 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. We count a unique user the first time a computer or mobile device with a unique device identifier accesses any of our websites during a calendar month. If an individual accesses a website using a different device within a given month, the first access 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 site within a calendar month, we count each such visit as a unique user.

We define monthly sessions as the number of distinct visits to our websites that take place each month within a given time frame, as measured and defined by Google Analytics. 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. A session is defined as beginning with the first page view from a computer or mobile device and ending at the earliest of when a user closes their browser window, after 30 minutes of inactivity, or each night at midnight (i) Eastern Time for our United States and Canada websites, other than the Autolist website, (ii) Pacific Time for the Autolist website, and (iii) Greenwich Mean Time for our U.K. websites. A session can be made up of multiple page views and visitor actions, such as performing a search, visiting vehicle detail pages, and connecting with a dealer.

We define leads as user inquiries via our marketplace to dealers by phone calls, email, or managed text and chat.

Investor Contact:
Kirndeep Singh
Vice President, Investor Relations
investors@cargurus.com

 


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Source: CarGurus, Inc.