carg-8k_20191105.htm
false 0001494259 0001494259 2019-11-05 2019-11-05

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2019

 

CarGurus, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-38233

04-3843478

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

2 Canal Park, 4th Floor

Cambridge, Massachusetts 02141

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 354-0068

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock,
par value $0.001 per share

 

CARG

 

The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

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. 

 

 

 

 


 

Item 2.02

Results of Operations and Financial Condition.

On November 5, 2019, CarGurus, Inc. (the “Company”) announced its financial results for the quarter ended September 30, 2019. The full text of the press release issued by the Company in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Item 2.02 and in the press release attached as Exhibit 99.1 hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

No.

  

Description

99.1

 

Press Release of CarGurus, Inc. dated November 5, 2019, reporting its financial results for the quarter ended September 30, 2019, furnished hereto.

104

 

Cover Page Interactive Data File (embedded with the Inline XBRL document).

 

1


 

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 5, 2019

 

By:

/s/ Jason Trevisan

 

 

 

Name: Jason Trevisan

 

 

 

Title: Chief Financial Officer and Treasurer

 

2

carg-ex991_19.htm

 

Exhibit 99.1

 

CarGurus Announces Third Quarter 2019 Results

Third Quarter Highlights:

 

Total revenue of $150.5 million, an increase of 26% year-over-year

 

GAAP operating income of $9.7 million; non-GAAP operating income of $18.6 million

 

GAAP net income of $10.4 million; non-GAAP net income of $15.5 million

 

Adjusted EBITDA of $20.6 million

CAMBRIDGE, MA:  November 5, 2019 — CarGurus, Inc. (Nasdaq: CARG), a leading global automotive marketplace, today announced financial results for the third quarter ended September 30, 2019.

CarGurus delivered a strong third quarter featuring several important accomplishments. We grew our industry-leading U.S. audience and generated year-over-year U.S. leads growth of 13%, providing strong value to our dealers and aiding growth in our core listings business,” said Langley Steinert, Founder and Chief Executive Officer of CarGurus. “Our brand investments are driving more direct traffic, and our new “My Car, My Deal” campaign that launched in Q3 highlights CarGurus’ unique consumer benefits. Finally, our international business continues to deliver strong growth, evidenced by our highest total international net dealer additions and triple-digit year-over-year audience growth.”

Revenue

 

Total revenue was $150.5 million, an increase of 26% compared to $119.1 million in the third quarter of 2018.

 

Marketplace subscription revenue was $135.5 million, an increase of 28% compared to $105.9 million in the third quarter of 2018.

 

Advertising and other revenue was $14.9 million, an increase of 13% compared to $13.2 million in the third quarter of 2018.

Operating Income

 

GAAP operating income was $9.7 million, or 6% of total revenue, compared to $5.9 million, or 5% of total revenue, in the third quarter of 2018.

 

Non-GAAP operating income was $18.6 million, or 12% of total revenue, compared to $11.4 million, or 10% of total revenue, in the third quarter of 2018.

Net Income & Adjusted EBITDA

 

GAAP net income was $10.4 million, or $0.09 per fully diluted share during the third quarter ended September 30, 2019, compared to $13.9 million, or $0.12 per fully diluted share during the third quarter ended September 30, 2018.

 

Non-GAAP net income was $15.5 million, or $0.14 per fully diluted share during the third quarter ended September 30, 2019, compared to $11.3 million, or $0.10 per fully diluted share during the third quarter ended September 30, 2018.

 

Adjusted EBITDA, a non-GAAP metric, was $20.6 million, compared to $12.7 million in the third quarter of 2018.


Balance Sheet and Cash Flow

 

As of September 30, 2019, CarGurus had cash, cash equivalents, and short-term investments of $164.3 million and no debt.  

 

The Company generated $23.8 million in cash from operations and $21.1 million in free cash flow, a non-GAAP metric, during the third quarter of 2019 compared to generating $10.8 million in cash from operations and $9.6 million in free cash flow during the third quarter of 2018.  

Third Quarter Business Metrics

 

U.S. revenue was $141.6 million in the third quarter of 2019, an increase of 24% compared to $114.7 million in the third quarter of 2018. GAAP operating income in the U.S. was $20.0 million, an increase of 38% compared to $14.5 million in the third quarter of 2018.

 

International revenue was $8.8 million in the third quarter of 2019, an increase of 98% compared to $4.4 million in the third quarter of 2018. GAAP operating loss in International markets was ($10.3) million, an increase of 20% compared to a loss of ($8.6) million in the third quarter of 2018.

 

Total paying dealers were 35,199(1) at September 30, 2019, an increase of 15% compared to 30,593 at September 30, 2018. Of the total paying dealers at September 30, 2019, U.S. and International accounted for 28,692 and 6,507(1), respectively, compared to 27,128 and 3,465, respectively, at September 30, 2018.

 

Average annual revenue per subscribing dealer (AARSD) in the U.S. was $16,967 as of September 30, 2019, an increase of 21% compared to $13,993 as of September 30, 2018.

 

AARSD in International markets was $5,079(2) as of September 30, 2019, an increase of 5% compared to $4,820 as of September 30, 2018.

 

Website traffic and consumer engagement metrics for the third quarter of 2019 were as follows:

 

o

U.S. average monthly unique users were 38.1 million, an increase of 3% compared to 37.0 million in the third quarter of 2018. U.S. average monthly sessions were 103.5 million, an increase of 3% compared to 100.5 million in the third quarter of 2018.

 

o

International average monthly unique users were 10.2 million(3), an increase of 129% compared to 4.4 million in the third quarter of 2018. International average monthly sessions were 26.2 million(4), an increase of 151% compared to 10.4 million in the third quarter of 2018.

 

 

(1)

Includes paying dealers from the PistonHeads website.

 

(2)

Excludes AARSD from both the (i) PistonHeads website as it was acquired on January 8, 2019, and therefore, data for the trailing 12-month revenue calculation is not available and (ii) Italy website as it began earning marketplace subscription revenue in April 2019, and therefore, data for the trailing 12-month revenue calculation is not available.

 

(3)

Includes users from the PistonHeads website.

 

(4)

Includes sessions from the PistonHeads website.



Fourth Quarter and Full-Year 2019 Guidance

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

Fourth Quarter 2019:

 

Total revenue

$152.2 to $155.2 million

Non-GAAP operating income

$17.1 to $19.1 million

Non-GAAP EPS

$0.12 to $0.13

 

The fourth quarter 2019 non-GAAP earnings per share calculation assumes 113.8 million diluted weighted-average common shares outstanding.

Full-Year 2019:

 

Total revenue

$583.0 to $586.0 million

Non-GAAP operating income

$63.6 to $65.6 million

Non-GAAP EPS

$0.47 to $0.48

 

The full-year non-GAAP earnings per share calculation assumes 113.5 million diluted weighted-average common shares outstanding. Guidance for the fourth quarter and full-year 2019 does not include any potential impact of foreign currency exchange gains or losses.

CarGurus has not reconciled its non-GAAP operating income guidance to GAAP operating income, or its non-GAAP EPS guidance to GAAP EPS, because stock-based compensation and amortization of intangible assets, 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 occurrence of acquisitions 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 2019 financial results and fourth quarter and full-year 2019 financial guidance at 5:00 p.m. Eastern Time today, November 5, 2019. 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 the Company’s 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 on November 5, 2019, until 11:59 p.m. Eastern Time on November 19, 2019, by dialing (844) 512-2921 for callers in the U.S. or Canada, or (412) 317-6671 for international callers, and entering passcode 13694866. In addition, an archived webcast will be available on the Investors section of the Company’s website at https://investors.cargurus.com.

About CarGurus

Founded in 2006, CarGurus (Nasdaq: CARG) is a global, online automotive marketplace connecting buyers and sellers of new and used cars. The Company uses proprietary technology, search algorithms and data analytics to bring trust and transparency to the automotive search experience and help users find great deals from top-rated dealers. CarGurus is the most visited automotive shopping site in the U.S. (source: Comscore Media Metrix® Multi-Platform, Automotive – Information/Resources, Total Audience, Q3 2019, U.S. (Competitive set includes: CarGurus.com, Autotrader.com, Cars.com, TrueCar.com)).  In addition to the United States, CarGurus operates online marketplaces in Canada, the United Kingdom, Germany, Italy and Spain. To learn more about CarGurus, visit www.cargurus.com.  CarGurus® is a registered trademark of CarGurus, Inc.


© 2019 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 2019 and full-year 2019, our business and growth strategy, including in international markets, and the ability of our brand awareness efforts to drive direct traffic, 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 rapid growth and ability to sustain our revenue growth rate, our relationships with dealers, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, our ability to expand effectively into new markets, our ability to realize benefits from our acquisition of PistonHeads and successfully implement the integration strategies in connection therewith, our ability to operate in compliance with applicable laws, as well as other risks and uncertainties set forth in the “Risk Factors” section of our Quarterly Report on Form 10-Q, filed on November 5, 2019 with the Securities and Exchange Commission (SEC), and subsequent reports that we file with the SEC.  Moreover, we operate in a very competitive and rapidly changing environment. 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 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,

2019

 

 

At

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

29,514

 

 

$

34,887

 

Investments

 

 

134,808

 

 

 

122,800

 

Accounts receivable, net of allowance for doubtful accounts of $216

   and $479 at September 30, 2019 and December 31, 2018, respectively

 

 

17,892

 

 

 

13,614

 

Prepaid expenses and prepaid income taxes

 

 

8,381

 

 

 

10,144

 

Deferred contract costs

 

 

8,170

 

 

 

5,253

 

Other current assets

 

 

7,167

 

 

 

7,410

 

Restricted cash

 

 

250

 

 

 

750

 

Total current assets

 

 

206,182

 

 

 

194,858

 

Property and equipment, net

 

 

27,568

 

 

 

24,269

 

Intangible assets

 

 

3,982

 

 

 

 

Goodwill

 

 

14,828

 

 

 

 

Operating lease right-of-use assets

 

 

56,439

 

 

 

 

Restricted cash

 

 

1,914

 

 

 

1,921

 

Deferred tax assets

 

 

44,200

 

 

 

38,886

 

Deferred contract costs, net of current portion

 

 

9,944

 

 

 

7,252

 

Other long–term assets

 

 

4,326

 

 

 

1,104

 

Total assets

 

$

369,383

 

 

$

268,290

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

42,752

 

 

$

34,345

 

Accrued expenses, accrued income taxes and other current liabilities

 

 

14,022

 

 

 

18,654

 

Deferred revenue

 

 

7,781

 

 

 

8,811

 

Operating lease liabilities

 

 

7,823

 

 

 

1,693

 

Total current liabilities

 

 

72,378

 

 

 

63,503

 

Operating lease liabilities

 

 

57,806

 

 

 

9,395

 

Deferred tax liabilities

 

 

289

 

 

 

 

Other non–current liabilities

 

 

1,808

 

 

 

1,281

 

Total liabilities

 

 

132,281

 

 

 

74,179

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Class A common stock, $0.001 par value per share; 500,000,000 shares

   authorized; 91,312,647 and 89,728,223 shares issued and outstanding

   at September 30, 2019 and December 31, 2018, respectively

 

 

91

 

 

 

90

 

Class B common stock, $0.001 par value per share; 100,000,000 shares

   authorized; 20,502,084 and 20,702,084 shares issued and outstanding

   at September 30, 2019 and December 31, 2018, respectively

 

 

21

 

 

 

21

 

Additional paid-in capital

 

 

199,228

 

 

 

184,216

 

Retained earnings

 

 

38,688

 

 

 

9,713

 

Accumulated other comprehensive (loss) income

 

 

(926

)

 

 

71

 

Total stockholders’ equity

 

 

237,102

 

 

 

194,111

 

Total liabilities and stockholders’ equity

 

$

369,383

 

 

$

268,290

 

 


Unaudited Condensed Consolidated Income Statements

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

$

150,462

 

 

$

119,125

 

 

$

430,763

 

 

$

327,996

 

Cost of revenue(1)

 

 

9,392

 

 

 

6,412

 

 

 

25,740

 

 

 

17,940

 

Gross profit

 

 

141,070

 

 

 

112,713

 

 

 

405,023

 

 

 

310,056

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

100,133

 

 

 

82,708

 

 

 

293,238

 

 

 

229,948

 

Product, technology, and development

 

 

17,745

 

 

 

12,771

 

 

 

51,063

 

 

 

33,713

 

General and administrative

 

 

12,322

 

 

 

10,630

 

 

 

36,622

 

 

 

28,042

 

Depreciation and amortization

 

 

1,166

 

 

 

727

 

 

 

3,413

 

 

 

2,064

 

Total operating expenses

 

 

131,366

 

 

 

106,836

 

 

 

384,336

 

 

 

293,767

 

Income from operations

 

 

9,704

 

 

 

5,877

 

 

 

20,687

 

 

 

16,289

 

Other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

759

 

 

 

639

 

 

 

2,247

 

 

 

1,571

 

Other income (expense), net

 

 

251

 

 

 

(38

)

 

 

1,258

 

 

 

15

 

Total other income, net

 

 

1,010

 

 

 

601

 

 

 

3,505

 

 

 

1,586

 

Income before income taxes

 

 

10,714

 

 

 

6,478

 

 

 

24,192

 

 

 

17,875

 

Provision for (benefit from) income taxes

 

 

330

 

 

 

(7,404

)

 

 

(4,783

)

 

 

(34,845

)

Net income

 

$

10,384

 

 

$

13,882

 

 

$

28,975

 

 

$

52,720

 

Net income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.09

 

 

$

0.13

 

 

$

0.26

 

 

$

0.49

 

Diluted

 

$

0.09

 

 

$

0.12

 

 

$

0.26

 

 

$

0.47

 

Weighted-average number of shares of common

stock used in computing net income per share

attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

111,662,949

 

 

 

109,628,692

 

 

 

111,257,271

 

 

 

108,367,270

 

Diluted

 

 

113,364,775

 

 

 

113,601,415

 

 

 

113,389,695

 

 

 

113,351,150

 

(1) Includes depreciation and amortization expense for the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2019 and 2018 of $952, $581, $2,246 and $1,701, respectively.

 

 


Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

10,384

 

 

$

13,882

 

 

$

28,975

 

 

$

52,720

 

Adjustments to reconcile net income to net cash provided

   by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,118

 

 

 

1,308

 

 

 

5,659

 

 

 

3,765

 

Currency gain on foreign denominated transactions

 

 

(87

)

 

 

(37

)

 

 

(927

)

 

 

(56

)

Deferred taxes

 

 

291

 

 

 

(7,443

)

 

 

(5,025

)

 

 

(34,543

)

Provision for doubtful accounts

 

 

327

 

 

 

524

 

 

 

695

 

 

 

1,246

 

Stock-based compensation expense

 

 

8,761

 

 

 

5,528

 

 

 

25,390

 

 

 

14,951

 

Amortization of deferred contract costs

 

 

2,163

 

 

 

1,054

 

 

 

5,797

 

 

 

2,355

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,146

)

 

 

(1,741

)

 

 

(4,984

)

 

 

(1,168

)

Prepaid expenses, prepaid income taxes, and other assets

 

 

1,200

 

 

 

(4,336

)

 

 

(871

)

 

 

(8,648

)

Deferred contract costs

 

 

(3,674

)

 

 

(3,213

)

 

 

(11,442

)

 

 

(9,715

)

Accounts payable

 

 

4,708

 

 

 

4,124

 

 

 

10,740

 

 

 

11,462

 

Accrued expenses, accrued income taxes, and other

   current liabilities

 

 

(738

)

 

 

(973

)

 

 

(2,047

)

 

 

(2,964

)

Deferred revenue

 

 

(695

)

 

 

66

 

 

 

(1,027

)

 

 

3,381

 

Lease obligations

 

 

(2

)

 

 

1,900

 

 

 

(1,882

)

 

 

1,466

 

Other non-current liabilities

 

 

212

 

 

 

108

 

 

 

500

 

 

 

347

 

Net cash provided by operating activities

 

 

23,822

 

 

 

10,751

 

 

 

49,551

 

 

 

34,599

 

Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,181

)

 

 

(892

)

 

 

(10,765

)

 

 

(1,873

)

Capitalization of website development costs

 

 

(547

)

 

 

(253

)

 

 

(2,074

)

 

 

(978

)

Cash paid for acquisition

 

 

 

 

 

 

 

 

(19,139

)

 

 

 

Investments in certificates of deposit

 

 

(38,281

)

 

 

 

 

 

(134,808

)

 

 

(130,000

)

Maturities of certificates of deposit

 

 

22,800

 

 

 

40,000

 

 

 

122,800

 

 

 

110,000

 

Net cash (used in) provided by investing activities

 

 

(18,209

)

 

 

38,855

 

 

 

(43,986

)

 

 

(22,851

)

Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

368

 

 

 

676

 

 

 

1,456

 

 

 

3,061

 

Financing cash flows from finance leases

 

 

(9

)

 

 

 

 

 

(21

)

 

 

 

Payment of initial public offering costs

 

 

 

 

 

 

 

 

 

 

 

(1,142

)

Payment of withholding taxes and option costs on net share

   settlement of restricted stock units and stock options

 

 

(4,192

)

 

 

(4,379

)

 

 

(12,783

)

 

 

(21,867

)

Net cash used in financing activities

 

 

(3,833

)

 

 

(3,703

)

 

 

(11,348

)

 

 

(19,948

)

Impact of foreign currency on cash, cash equivalents,

   and restricted cash

 

 

(114

)

 

 

29

 

 

 

(97

)

 

 

(54

)

Net increase (decrease) in cash, cash equivalents, and

   restricted cash

 

 

1,666

 

 

 

45,932

 

 

 

(5,880

)

 

 

(8,254

)

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

 

 

30,012

 

 

 

35,366

 

 

 

37,558

 

 

 

89,552

 

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

 

$

31,678

 

 

$

81,298

 

 

$

31,678

 

 

$

81,298

 

 


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,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

GAAP operating income

 

$

9,704

 

 

$

5,877

 

 

$

20,687

 

 

$

16,289

 

Stock-based compensation expense

 

 

8,761

 

 

 

5,528

 

 

 

25,390

 

 

 

14,951

 

Amortization of intangible assets

 

 

167

 

 

 

 

 

 

486

 

 

 

 

Non-GAAP operating income

 

$

18,632

 

 

$

11,405

 

 

$

46,563

 

 

$

31,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

 

6

%

 

 

5

%

 

 

5

%

 

 

5

%

Non-GAAP operating margin

 

 

12

%

 

 

10

%

 

 

11

%

 

 

10

%

 

Unaudited Reconciliation of GAAP Net Income to Non-GAAP Net Income

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

GAAP net income

 

$

10,384

 

 

$

13,882

 

 

$

28,975

 

 

$

52,720

 

Stock-based compensation expense, net of tax(1)

 

 

6,921

 

 

 

4,367

 

 

 

20,058

 

 

 

11,811

 

Change in tax provision from stock-based compensation expense(2)

 

 

(1,943

)

 

 

(6,970

)

 

 

(9,632

)

 

 

(35,912

)

Amortization of intangible assets

 

 

167

 

 

 

 

 

 

486

 

 

 

 

Non-GAAP net income

 

$

15,529

 

 

$

11,279

 

 

$

39,887

 

 

$

28,619

 

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.14

 

 

$

0.10

 

 

$

0.36

 

 

$

0.26

 

Diluted

 

$

0.14

 

 

$

0.10

 

 

$

0.35

 

 

$

0.25

 

Shares used in non-GAAP per share calculations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

111,663

 

 

 

109,629

 

 

 

111,257

 

 

 

108,367

 

Diluted

 

 

113,365

 

 

 

113,601

 

 

 

113,390

 

 

 

113,351

 

(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.

 

 

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,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

$

150,462

 

 

$

119,125

 

 

$

430,763

 

 

$

327,996

 

Cost of revenue

 

 

9,392

 

 

 

6,412

 

 

 

25,740

 

 

 

17,940

 

Gross profit

 

 

141,070

 

 

 

112,713

 

 

 

405,023

 

 

 

310,056

 

Stock-based compensation expense included in Cost of revenue

 

 

92

 

 

 

83

 

 

 

268

 

 

 

264

 

Non-GAAP gross profit

 

$

141,162

 

 

$

112,796

 

 

$

405,291

 

 

$

310,320

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit margin

 

 

94

%

 

 

95

%

 

 

94

%

 

 

95

%

Non-GAAP gross profit margin

 

 

94

%

 

 

95

%

 

 

94

%

 

 

95

%

 

 

 


Unaudited Reconciliation of GAAP Expense to Non-GAAP Expense

(in thousands)

 

 

 

Three Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

 

GAAP expense

 

 

Stock-based

compensation

expense

 

 

Amortization of

intangible assets

 

 

Non-GAAP

expense

 

 

GAAP expense

 

 

Stock-based

compensation

expense

 

 

Amortization of

intangible assets

 

 

Non-GAAP

expense

 

Cost of revenue

 

$

9,392

 

 

$

(92

)

 

$

 

 

$

9,300

 

 

$

6,412

 

 

$

(83

)

 

$

 

 

$

6,329

 

S&M

 

 

100,133

 

 

 

(2,520

)

 

 

 

 

 

97,613

 

 

 

82,708

 

 

 

(1,216

)

 

 

 

 

 

81,492

 

P,T&D(1)

 

 

17,745

 

 

 

(3,938

)

 

 

 

 

 

13,807

 

 

 

12,771

 

 

 

(2,584

)

 

 

 

 

 

10,187

 

G&A

 

 

12,322

 

 

 

(2,211

)

 

 

 

 

 

10,111

 

 

 

10,630

 

 

 

(1,645

)

 

 

 

 

 

8,985

 

Depreciation & amortization

 

 

1,166

 

 

 

 

 

 

(167

)

 

 

999

 

 

 

727

 

 

 

 

 

 

 

 

 

727

 

Operating expenses(2)

 

$

131,366

 

 

$

(8,669

)

 

$

(167

)

 

$

122,530

 

 

$

106,836

 

 

$

(5,445

)

 

$

 

 

$

101,391

 

Total expenses

 

$

140,758

 

 

$

(8,761

)

 

$

(167

)

 

$

131,830

 

 

$

113,248

 

 

$

(5,528

)

 

$

 

 

$

107,720

 

(1) Product, Technology, & Development

 

(2) Operating expenses include S&M, P,T&D, G&A, and depreciation & amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

 

GAAP expense

 

 

Stock-based

compensation

expense

 

 

Amortization of

intangible assets

 

 

Non-GAAP

expense

 

 

GAAP expense

 

 

Stock-based

compensation

expense

 

 

Amortization of

intangible assets

 

 

Non-GAAP

expense

 

Cost of revenue

 

$

25,740

 

 

$

(268

)

 

$

 

 

$

25,472

 

 

$

17,940

 

 

$

(264

)

 

$

 

 

$

17,676

 

S&M

 

 

293,238

 

 

 

(7,392

)

 

 

 

 

 

285,846

 

 

 

229,948

 

 

 

(3,762

)

 

 

 

 

 

226,186

 

P,T&D(1)

 

 

51,063

 

 

 

(11,118

)

 

 

 

 

 

39,945

 

 

 

33,713

 

 

 

(6,903

)

 

 

 

 

 

26,810

 

G&A

 

 

36,622

 

 

 

(6,612

)

 

 

 

 

 

30,010

 

 

 

28,042

 

 

 

(4,022

)

 

 

 

 

 

24,020

 

Depreciation & amortization

 

 

3,413

 

 

 

 

 

 

(486

)

 

 

2,927

 

 

 

2,064

 

 

 

 

 

 

 

 

 

2,064

 

Operating expenses(2)

 

$

384,336

 

 

$

(25,122

)

 

$

(486

)

 

$

358,728

 

 

$

293,767

 

 

$

(14,687

)

 

$

 

 

$

279,080

 

Total expenses

 

$

410,076

 

 

$

(25,390

)

 

$

(486

)

 

$

384,200

 

 

$

311,707

 

 

$

(14,951

)

 

$

 

 

$

296,756

 

(1) Product, Technology, & Development

 

(2) Operating expenses include S&M, P,T&D, G&A, and depreciation & amortization

 

 

 

 


Unaudited Reconciliation of GAAP Net Income to Adjusted EBITDA

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

GAAP net income

 

$

10,384

 

 

$

13,882

 

 

$

28,975

 

 

$

52,720

 

Depreciation and amortization(1)

 

 

2,118

 

 

 

1,308

 

 

 

5,659

 

 

 

3,765

 

Stock-based compensation expense

 

 

8,761

 

 

 

5,528

 

 

 

25,390

 

 

 

14,951

 

Other income, net

 

 

(1,010

)

 

 

(601

)

 

 

(3,505

)

 

 

(1,586

)

Provision for (benefit from) income taxes

 

 

330

 

 

 

(7,404

)

 

 

(4,783

)

 

 

(34,845

)

Adjusted EBITDA

 

$

20,583

 

 

$

12,713

 

 

$

51,736

 

 

$

35,005

 

(1) The Company did not have intangible assets prior to the closing of the PistonHeads acquisition on January 8, 2019. The Company recorded amortization expense related to intangible assets of $167 and $486 for the three and nine months ended September 30, 2019, respectively.

 

 

Unaudited Reconciliation of GAAP Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

GAAP net cash provided by operating activities

 

$

23,822

 

 

$

10,751

 

 

$

49,551

 

 

$

34,599

 

Purchases of property and equipment

 

 

(2,181

)

 

 

(892

)

 

 

(10,765

)

 

 

(1,873

)

Capitalization of website development costs

 

 

(547

)

 

 

(253

)

 

 

(2,074

)

 

 

(978

)

Non-GAAP free cash flow

 

$

21,094

 

 

$

9,606

 

 

$

36,712

 

 

$

31,748

 

 

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 Adjusted EBITDA as GAAP net income, adjusted to exclude: depreciation and amortization, stock-based compensation expense, other income, net, the (benefit from) provision for income taxes, and certain one-time, non-recurring items, if and when applicable. We have presented Adjusted EBITDA because it is a key measure 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 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 margin, non-GAAP expense, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share.  These non-GAAP financial measures exclude the effect of stock-based compensation expense and amortization of intangible assets. Non-GAAP net income and non-GAAP income per share also exclude the change in tax provision from stock-based compensation expense. 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 as a result of the uncertainty regarding, and the potential variability of, stock-based compensation expenses and amortization of intangible assets that we may incur in the future, 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, based on a distinct associated inventory feed, that subscribes to one of our paid listing or display products at the end of a defined period.

We define AARSD, which is measured at the end of a defined period, as the total marketplace subscription revenue during the trailing 12 months divided by the average number of paying dealers during the same trailing 12-month period.

For each of our websites, we define a monthly unique user as an individual who visited 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 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 one of our websites during a calendar month. If an individual accesses one of our websites using a different device within a given month, the first access by each such device is counted as a separate 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, (ii) Greenwich Mean Time for our UK websites and (iii) Central European Time (or Central European Summer Time when daylight savings is observed) for our Germany, Italy and Spain websites, as applicable. 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 call, email, or managed text and chat.

 

Investor Contact:

Rodney Nelson

Head of Investor Relations, CarGurus

888-508-1190

investors@cargurus.com