UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________________ to _________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading Symbol |
Name of Exchange on Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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☐ |
Non-accelerated filer |
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☐ |
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Small reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 31, 2019, the registrant had
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Table of Contents
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Page |
PART I. |
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Item 1. |
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1 |
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1 |
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2 |
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Unaudited Condensed Consolidated Statements of Comprehensive Income |
3 |
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Unaudited Condensed Consolidated Statements of Stockholders’ Equity |
4 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
Item 3. |
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35 |
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Item 4. |
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36 |
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PART II. |
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37 |
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Item 1. |
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37 |
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Item 1A. |
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37 |
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Item 6. |
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56 |
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57 |
ii
SPECIAL NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This report contains forward‑looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward‑looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward‑looking statements because they contain words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “likely,” “may,” “might,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms. Forward-looking statements contained in this report include, but are not limited to, statements about:
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our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses, ability to generate cash flow, and ability to achieve, and maintain, future profitability; |
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our anticipated growth and growth strategies and our ability to effectively manage that growth; |
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our ability to maintain and build our brand; |
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our ability to continue to expand internationally; |
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our ability to realize benefits from our acquisition of PistonHeads and successfully implement the integration strategies in connection therewith; |
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the impact of competition in our industry and innovation by our competitors; |
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the impact of accounting pronouncements; |
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the impact of litigation; |
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our ability to hire and retain necessary qualified employees to expand our operations; |
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our ability to adequately protect our intellectual property; |
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the migration of some of our data-hosting to a different third-party data-hosting facility; |
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our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business; |
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our ability to overcome challenges facing the automotive industry ecosystem, including global supply chain challenges, changes to trade policies and other macroeconomic issues; |
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failure to maintain an effective system of internal controls necessary to accurately report our financial results and prevent fraud; |
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our expectations regarding cash generation and the sufficiency of our cash to fund our operations; and |
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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 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 described in the section titled “Risk Factors” and elsewhere in this report. 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 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 report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward‑looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law.
iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CarGurus, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
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At September 30, 2019 |
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At December 31, 2018 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Investments |
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Accounts receivable, net of allowance for doubtful accounts of $ and $ |
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Prepaid expenses and prepaid income taxes |
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Deferred contract costs |
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Other current assets |
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Restricted cash |
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Total current assets |
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Property and equipment, net |
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Intangible assets |
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— |
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Goodwill |
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— |
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Operating lease right-of-use assets |
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— |
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Restricted cash |
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Deferred tax assets |
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Deferred contract costs, net of current portion |
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Other long–term assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses, accrued income taxes and other current liabilities |
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Deferred revenue |
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Operating lease liabilities |
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Total current liabilities |
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Operating lease liabilities |
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Deferred tax liabilities |
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— |
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Other non–current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 8) |
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Stockholders’ equity: |
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Class A common stock, $ authorized; at September 30, 2019 and December 31, 2018, respectively |
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Class B common stock, $ authorized; at September 30, 2019 and December 31, 2018, respectively |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive (loss) income |
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( |
) |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of revenue(1) |
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Gross profit |
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Operating expenses: |
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Sales and marketing |
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Product, technology, and development |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Income from operations |
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Other income, net: |
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Interest income |
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Other income (expense), net |
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( |
) |
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Total other income, net |
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Income before income taxes |
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Provision for (benefit from) income taxes |
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( |
) |
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( |
) |
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( |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Net income per share attributable to common stockholders: (Note 10) |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average number of shares of common stock used in computing net income per share attributable to common stockholders: |
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Basic |
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Diluted |
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(1) |
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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)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive loss: |
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Foreign currency translation adjustment |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
3
CarGurus, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
|
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Class A Common Stock |
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Class B Common Stock |
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Additional Paid–in |
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Accumulated Other Comprehensive |
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Retained Earnings (Accumulated |
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Total Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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(Loss) Income |
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Deficit) |
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Equity |
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Balance at December 31, 2018 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock–based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Payment of withholding taxes on net share settlements of equity awards |
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( |
) |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at March 31, 2019 |
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|
|
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( |
) |
|
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|
|
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Net income |
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— |
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— |
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— |
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|
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— |
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|
|
— |
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— |
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|
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Stock–based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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( |
) |
|
|
— |
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|
— |
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|
— |
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Payment of withholding taxes and option costs on net share settlement of restricted stock units and stock options |
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|
( |
) |
|
|
— |
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|
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— |
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|
|
— |
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|
|
( |
) |
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|
— |
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|
|
— |
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|
( |
) |
Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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Balance at June 30, 2019 |
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Net income |
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— |
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— |
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— |
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— |
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|
|
— |
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— |
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|
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|
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|
Stock–based compensation expense |
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— |
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— |
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|
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— |
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— |
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|
|
|
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— |
|
|
|
— |
|
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|
Issuance of common stock upon exercise of stock options |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
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— |
|
|
|
— |
|
|
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|
Issuance of common stock upon vesting of restricted stock units |
|
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|
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— |
|
|
|
— |
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|
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— |
|
|
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— |
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|
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— |
|
|
|
— |
|
|
|
— |
|
Payment of withholding taxes on net share settlements of equity awards |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
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( |
) |
|
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— |
|
|
|
— |
|
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( |
) |
Conversion of common stock |
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— |
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( |
) |
|
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— |
|
|
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— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation adjustment |
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|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at September 30, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
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|
$ |
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Balance at December 31, 2017 |
|
|
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$ |
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|
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$ |
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$ |
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$ |
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|
$ |
( |
) |
|
$ |
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Stock–based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Issuance of common stock upon exercise of stock options |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Cumulative adjustment from adoption of revenue recognition model |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Conversion of common stock |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |