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United States securities and exchange commission logo
November 10, 2022
Jason Trevisan
Chief Executive Officer
CarGurus, Inc.
2 Canal Park
4th Floor
Cambridge, MA 02141
Re: CarGurus, Inc.
Form 10-K for the
Fiscal Year Ended December 31, 2021
Filed February 25,
2022
Form 10-Q for the
Quarterly Period Ended September 30, 2022
Filed November 8,
2022
File No. 001-38233
Dear Jason Trevisan:
We have reviewed your October 21, 2022 response to our comment
letter and have the
following comments. In some of our comments, we may ask you to provide
us with information
so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response to these comments, we may have
additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
September 20, 2022 letter.
Form 10-K for the Fiscal Year Ended December 31, 2021
Notes to Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Concentration of Credit Risk, page 76
1. You state in response
to prior comment 2 that you do not release the title to vehicles until
successfully collecting
funds from the buying dealer. Clarify whether this is when funds
are received by the
payment processor or the company. Also, regarding your product
offerings, tell us
whether revenue is recognized before title is transferred to the buying
dealer and, if so, how
you determined transfer of control of the vehicle has occurred.
Jason Trevisan
FirstName LastNameJason Trevisan
CarGurus, Inc.
Comapany 10,
November NameCarGurus,
2022 Inc.
November
Page 2 10, 2022 Page 2
FirstName LastName
Form 10-Q for the Quarterly Period Ended September 30, 2022
Notes to Unaudited Condensed Consolidated Financial Statements
Note 12. Segment and Geographic Information, page 17
2. Please explain the following as it relates to the information provided
in your response to
prior comment 4:
Describe further the strategic discussions in the weekly
meetings with the Executive
Team. While you state that these meetings are not intended for
the review of financial
information, tell us whether financial information is ever
received by the CODM and
discussed in the weekly Executive meetings and if so, provide us
a detailed
description of such information.
Tell us the purpose of the weekly one-on-one meetings with the
CODM s direct
reports, including whether goals and objectives are discussed. If
so, tell us whether
these are financial or performance goals and explain how you
evaluate the progress
towards meeting such goals.
Describe in detail the financial information discussed in the
weekly one-on-one
meetings between the CODM and the COO and CFO and how such
information is
used and evaluated.
Tell us whether you discuss resource allocations in these
weekly meetings and/or
how these meetings inform the CODM s consideration for making
resource
allocation decisions, even at a consolidated level.
Tell us how the disaggregated GAAP and non-GAAP income
statement information
for budget versus actual performance, which you distribute each
month to the
CODM, Executive Team and Finance department, is used in assessing
performance.
Also, explain how this information impacts any decisions related
to potentially
acquiring additional equity interests in CarOffer and why
allocation of resources for
this potential future investment is not considered in your
assessment of such
information.
Describe the financial information this is provided to the
Board of Directors for the
quarterly meeting. Tell us whether the Board receives any
financial information
between the quarterly meetings and if so, describe such
information and how often it
is provided.
Explain how the top-down and bottoms-up budgeting processes are
aligned. Tell
us whether adjustments are made at the component level in order
to meet top-down
targets or whether targets are adjusted to meet component
budgets, and who makes
such adjustments.
Jason Trevisan
FirstName LastNameJason Trevisan
CarGurus, Inc.
Comapany 10,
November NameCarGurus,
2022 Inc.
November
Page 3 10, 2022 Page 3
FirstName LastName
Explain how you manage the budget to actual performance for the
components
throughout the year. Specifically address the actions taken
should one of the
components fail to meet their revenue or operating income budget
goals in a
particular period.
3. We note your response to prior comment 5 regarding the non-GAAP
measure of Adjusted
EBTIDA for Wholesale and Product (combined). We also note the Adjusted
EBTIDA
attributable to redeemable noncontrolling interest measure and related
disclosures
included in the September 30, 2022 Form 10-Q. Please address the
following regarding
these measures:
Further explain the usefulness and relevance of these measures.
With regard to
Adjusted EBTIDA for Wholesale and Product (combined), explain how
this
performance measure addresses possible liquidity or dilution
implications for your
potential acquisition of the remaining 49% interest in CarOffer.
In this regard, it is
unclear how this current measure is correlated to the potential
purchase price to be
determined in 2024 and why it is useful or relevant information
at this time.
You refer to CarOffer's trailing 12 months EBITDA as of June
30, 2024 as calculated
in accordance with defined terms and subject to the adjustments
set forth in the
CarOffer Operating Agreement. Tell us where such calculation is
defined in the
CarOffer Operating Agreement and clarify whether the measure
presented is
calculated as defined in the Operating Agreement.
You state on page 22 that you use Adjusted EBITDA attributable
to redeemable
noncontrolling interest to evaluate your operating performance
and trends and make
planning decisions. Explain why you evaluate a portion of
CarOffer that you do not
own and how that information is useful to investors.
Further explain how you determine and calculate the adjustments
in the measures. In
this regard, you appear to exclude portions of certain expenses
and disclose that they
are adjusted to reflect the noncontrolling shareholder's 38%
share of earnings and
losses in CarOffer. Since the company owns 51% of CarOffer,
explain why the
noncontrolling interest share is not 49% and provide any
supporting
documentation.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Business Metrics, page 18
4. We note from your response to prior comment 7 that you intend to
discontinue providing
information regarding enrolled dealers and total transactions for the
CarOffer business
from your earnings materials. It remains unclear how you determined
that metrics such as
CarOffer enrolled dealers, total transactions and gross merchandise
value are not
applicable for purposes of evaluating the CarOffer business. In this
regard, you refer to
Jason Trevisan
CarGurus, Inc.
November 10, 2022
Page 4
such measures qualitatively when explaining changes in revenue and cost
of revenue for
your wholesale and product revenue streams. For example, in the June 30,
2022 Form 10-
Q, you indicate that the increase in wholesale revenue and cost of
revenue was primarily
due to an increase in transactions. In the current Form 10-Q, you
attribute the increase in
product revenue and cost of revenue to an increases in IMCO transactions
and an increase
in proceeds and buy fees received through IMCO transactions and the sale
of vehicles
acquired in arbitration. As such it would seem that providing
quantitative information
regarding the number of transactions, gross merchandise value, etc. would
be necessary
to enhance a reader's understanding of your results of operations
discussion. Please
explain further or provide us with the specific quantitative measures
that you intend to
provide as it relates to the portion of your business that comprises
approximately 64% of
total revenue to date in fiscal 2022.
General
5. We note from your disclosures on page 50 that your Chief Financial
Officer resigned on
October 3, 2022. You also state in Note 13 that Mr. Yann Gellot, the
Principal
Accounting Officer, announced his intent to resign. It does not appear
that you have filed
any Item 5.02 Forms 8-K to disclose these resignations. Please advise or
revise.
You may contact Melissa Kindelan, Senior Staff Accountant, at (202)
551-3564 or
Kathleen Collins, Accounting Branch Chief, at (202) 551-3499 with any
questions.
Sincerely,
FirstName LastNameJason Trevisan
Division of
Corporation Finance
Comapany NameCarGurus, Inc.
Office of Technology
November 10, 2022 Page 4
cc: Javier Zamora
FirstName LastName