UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(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.
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☒ |
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Accelerated filer |
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☐ |
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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 ☐ No
As of July 31, 2024, the registrant had
Table of Contents
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Page |
PART I. |
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1 |
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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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4 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 |
Item 3. |
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49 |
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Item 4. |
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50 |
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PART II. |
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52 |
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Item 1. |
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52 |
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Item 1A. |
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52 |
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Item 2. |
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53 |
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Item 5. |
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54 |
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Item 6. |
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55 |
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56 |
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ii
SPECIAL NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or Quarterly 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 “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “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 Quarterly Report include statements about:
iii
You should not rely upon forward‑looking statements as predictions of future events. We have based the forward‑looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and growth prospects. The outcome of the events described in these forward‑looking statements is subject to risks, uncertainties, and other factors that are described in this Quarterly Report. We have included important risk factors in the cautionary statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission, or SEC, on February 26, 2024, or Annual Report, particularly those discussed in Part I, Item 1A, “Risk Factors,” in our Annual Report and in Part II, Item 1A, “Risk Factors,” of this Quarterly Report, that could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward‑looking statements contained in this Quarterly Report. Further, our forward‑looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, or joint ventures in which we may be involved, or investments we may make. We cannot assure you that the results, events, and circumstances reflected in the forward‑looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward‑looking statements.
The forward‑looking statements made in this Quarterly Report speak only as of the date of this Quarterly Report. We undertake no obligation to update any forward‑looking statement made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law.
NOTE REGARDING TRADEMARKS
CarGurus® is a registered trademark of CarGurus, Inc., and CarOffer® is a registered trademark of CarOffer, LLC. All other product names, trademarks, and registered trademarks are property of their respective owners. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this Quarterly Report.
iv
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CarGurus, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
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As of |
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As of |
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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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Short-term investments |
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— |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventory |
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Prepaid expenses, prepaid income taxes and other current assets |
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Deferred contract costs |
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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, net |
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Goodwill |
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Operating lease right-of-use assets |
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Deferred tax assets |
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Deferred contract costs, net of current portion |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities, redeemable noncontrolling interest 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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Other non–current liabilities |
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Total liabilities |
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(Note 9) |
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Stockholders’ equity: |
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Preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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( |
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Total stockholders’ equity |
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Total liabilities, redeemable noncontrolling interest 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 |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
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Marketplace |
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$ |
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$ |
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$ |
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$ |
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Wholesale |
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Product |
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Total revenue |
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Cost of revenue (1)(2) |
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Marketplace |
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Wholesale |
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Product |
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Total cost of revenue |
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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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Goodwill and other long-lived asset impairment |
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Depreciation and amortization |
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Total operating expenses |
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(Loss) income from operations |
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( |
) |
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( |
) |
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Other income, net |
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Interest income |
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Other income, net |
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Total other income, net |
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(Loss) income before income taxes |
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( |
) |
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( |
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(Benefit from) provision for income taxes |
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( |
) |
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( |
) |
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Consolidated net (loss) income |
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( |
) |
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( |
) |
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Net loss attributable to redeemable noncontrolling interest |
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( |
) |
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( |
) |
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Net (loss) income attributable to common stockholders |
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$ |
( |
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$ |
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$ |
( |
) |
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$ |
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Net (loss) income per share attributable to common stockholders: (Note 11) |
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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 |
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Basic |
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Diluted |
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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 |
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Six Months Ended |
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||||||||||
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2024 |
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2023 |
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2024 |
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2023 |
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Consolidated net (loss) income |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Other comprehensive income: |
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Foreign currency translation adjustment |
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( |
) |
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( |
) |
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( |
) |
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Consolidated comprehensive (loss) income |
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( |
) |
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( |
) |
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Comprehensive loss attributable to redeemable noncontrolling interests |
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— |
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( |
) |
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— |
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( |
) |
Comprehensive (loss) income attributable to common stockholders |
|
$ |
( |
) |
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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 Redeemable Noncontrolling Interest and Stockholders’ Equity
(in thousands, except share data)
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Redeemable |
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Class A |
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Class B |
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Additional |
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Retained |
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Accumulated |
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Total |
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Interest |
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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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Earnings |
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Loss |
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Equity |
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Balance as of December 31, 2023 |
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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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||||||||
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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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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— |
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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 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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— |
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( |
) |
Repurchase of common stock |
|
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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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( |
) |
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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( |
) |
|
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( |
) |
Balance as of March 31, 2024 |
|
$ |
— |
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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 loss |
|
$ |
— |
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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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— |
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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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— |
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||
Payment of withholding taxes on net share settlements of restricted stock units |
|
|
— |
|
|
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( |
) |
|
|
— |
|
|
|
— |
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— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Repurchase of common stock |
|
|
— |
|
|
|
( |
) |
|
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( |
) |
|
|
— |
|
|
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— |
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( |
) |
|
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— |
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— |
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( |
) |
Other (Note 6) |
|
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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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— |
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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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|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2024 |
|
$ |
— |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
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|||||||
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|||||||||
Balance as of December 31, 2022 |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||||
Net (loss) 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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— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of common stock upon exercise of stock options |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock upon vesting of restricted stock units |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Payment of withholding taxes on net share settlements of restricted stock units |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Repurchase of common stock |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Tax distributions to redeemable noncontrolling interest holders |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance as of March 31, 2023 |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||||
Net (loss) income |
|
$ |
( |
) |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of common stock upon exercise of stock options |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock upon vesting of restricted stock units |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Payment of withholding taxes on net share settlements of restricted stock units |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Repurchase of common stock |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Tax distributions to redeemable noncontrolling interest holders |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2023 |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
700,854 |
|
|||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
4
CarGurus, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
|
|
Six Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Operating Activities |
|
|
|
|
|
|
||
Consolidated net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Gain on sale of property and equipment |
|
|
— |
|
|
|
( |
) |
Currency loss (gain) on foreign denominated transactions |
|
|
|
|
|
( |
) |
|
Other non-cash (income) expense, net |
|
|
( |
) |
|
|
|
|
Deferred taxes |
|
|
( |
) |
|
|
( |
) |
Provision (recoveries) for doubtful accounts |
|
|
|
|
|
( |
) |
|
Stock-based compensation expense |
|
|
|
|
|
|
||
Amortization of deferred financing costs |
|
|
|
|
|
|
||
Amortization of deferred contract costs |
|
|
|
|
|
|
||
Goodwill and other long-lived asset impairment |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Inventory |
|
|
( |
) |
|
|
|
|
Prepaid expenses, prepaid income taxes, and other assets |
|
|
|
|
|
|
||
Deferred contract costs |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
||
Accrued expenses, accrued income taxes, and other liabilities |
|
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
|
|
|
|
||
Lease obligations |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
||
Investing Activities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of property and equipment |
|
|
— |
|
|
|
|
|
Capitalization of website development costs |
|
|
( |
) |
|
|
( |
) |
Purchases of short-term investments |
|
|
( |
) |
|
|
( |
) |
Sale of short-term investments |
|
|
|
|
|
|
||
Advance payments to customers, net of collections |
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing Activities |
|
|
|
|
|
|
||
Proceeds from issuance of common stock upon exercise of stock options |
|
|
|
|
|
|
||
Payment of withholding taxes on net share settlements of restricted stock units |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
Payment of finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Payment of tax distributions to redeemable noncontrolling interest holders |
|
|
— |
|
|
|
( |
) |
Change in gross advance payments received from third-party transaction processor |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Impact of foreign currency on cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
|
|
Net decrease in cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
Cash paid for operating lease liabilities |
|
$ |
|
|
$ |
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Supplemental noncash disclosure of cash flow information: |
|
|
|
|
|
|
||
Unpaid purchases of property and equipment and capitalized hosting arrangements |
|
$ |
|
|
$ |
|
||
Unpaid withholding taxes on net share settlement of restricted stock units |
|
$ |
|
|
$ |
|
||
Unpaid excise tax on repurchases of common stock |
|
$ |
|
|
$ |
|
||
Capitalized stock-based compensation expense in website development and |
|
$ |
|
|
$ |
|
||
Obtaining a right-of-use asset in exchange for an operating lease liability |
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
5
CarGurus, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in thousands, except share and per share data, unless otherwise noted)
1. Organization and Business Description
CarGurus, Inc. (the "Company") is a multinational, online automotive platform for buying and selling vehicles that is building upon its industry-leading listings marketplace with both digital retail solutions and the CarOffer, LLC ("CarOffer") online wholesale platform. The CarGurus platform gives consumers the confidence to purchase and/or sell a vehicle either online or in-person, and it gives dealerships the power to accurately price, effectively market, instantly acquire, and quickly sell vehicles, all with a nationwide reach. The Company uses proprietary technology, search algorithms, and data analytics to bring trust, transparency, and competitive pricing to the automotive shopping experience.
The Company operates principally in the United States (the "U.S."). In the U.S. it also operates as independent brands the Autolist online marketplace and the CarOffer online wholesale platform. In addition to the U.S., the Company operates online marketplaces under the CarGurus brand in Canada and the United Kingdom (the "U.K."). In the U.K. it also operates as an independent brand the PistonHeads online marketplace.
The Company has subsidiaries in the U.S., Canada, Ireland, and the U.K. and it has
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements are unaudited (the “Unaudited Condensed Consolidated Financial Statements”). The Unaudited Condensed Consolidated Financial Statements and related disclosures have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board (“FASB”).
The Unaudited Condensed Consolidated Financial Statements have also been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the Company’s financial statements for interim periods. These interim period results are not necessarily indicative of the results to be expected for any other interim period or the full year.
The Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 26, 2024 (the “Annual Report”).
While the Company disclosed unrealized gain on short-term investments and realized gain on short-term investments separately in the Unaudited Condensed Consolidated Statements of Cash Flows in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 9, 2023, the accompanying Unaudited Condensed Consolidated Statements of Cash Flows for the quarter ended June 30, 2023 present unrealized gain on short-term investments and realized gain on short-term investments consolidated within other noncash expense, net to conform to the current year presentation.
While the Company disclosed unpaid excise tax on repurchases of common stock within unpaid repurchases of common stock in the Unaudited Condensed Consolidated Statements of Cash Flows in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 9, 2023, the accompanying Unaudited Condensed Consolidated Statements of Cash Flows for the quarter ended June 30, 2023 present unpaid excise tax on repurchases of common stock separately from unpaid repurchases of common stock to conform to the current year presentation.
6
Principles of Consolidation
The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Subsequent Event Considerations
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the Unaudited Condensed Consolidated Financial Statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure.
Use of Estimates
The preparation of the Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.
Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Changes in estimates are recognized in the period in which they become known.
Critical estimates relied upon in preparing the Unaudited Condensed Consolidated Financial Statements include the determination of sales allowance and variable consideration in the Company’s revenue recognition, allowance for doubtful accounts, the impairment of long-lived assets, the capitalization of product, technology, and development costs for website development, internal-use software, and hosting arrangements, the valuation of acquired assets and liabilities, the valuation and recoverability of intangible assets and goodwill, the valuation of redeemable noncontrolling interest, the recoverability of the Company’s net deferred tax assets and related valuation allowance, the valuation of inventory, and the valuation of liability-classified compensation awards. Accordingly, the Company considers these to be its critical accounting estimates, and believes that of the Company’s significant accounting policies, these involve the greatest degree of judgment and complexity. For the three and six months ended June 30, 2024, there were no estimates related to the valuation of redeemable noncontrolling interest and the valuation of liability-classified compensation awards.
During the three months ended June 30, 2024, the Company identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and declines in the volume of the number of vehicles processed from car dealers, consumers, and other marketplaces through the CarOffer website within the applicable period within the Digital Wholesale segment ("Transactions"), which resulted in revisions to the Company’s financial projections for the CarOffer reporting unit. The Company performed an updated fair value analysis of the CarOffer reporting unit, resulting in an excess of carrying value over fair value of the CarOffer reporting unit.
Due to the partial impairment of the CarOffer reporting unit goodwill, the remaining goodwill balance related to this reporting unit is still considered to be at risk for future impairments. If projected future operating results further decline, including as a result of economic conditions or operational challenges, the Company may need to record additional impairment charges to further reduce the goodwill at the CarOffer reporting unit, which could be material and negatively affect its operations.
For further discussion of impairments related to goodwill and other long-lived assets, refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements.
Concentration of Credit Risk
7
The Company maintains its cash and cash equivalents principally with accredited financial institutions of high credit standing. Although the Company deposits its cash and cash equivalents with multiple financial institutions, its deposits with each such financial institution exceed governmental insured limits.
The Company routinely assesses the creditworthiness of its customers and does not require collateral. The Company generally has not experienced any material losses related to receivables from individual customers or groups of customers.
The Company had no material losses related to marketplace receivables as it was dispersed across a large number of customers. The Company had no material losses related to wholesale and product receivables as the third-party transaction processor does not release the title to the vehicle until successfully collecting funds from the buying dealer. Titling is handled by the Company's third-party transaction processor and titles are held in escrow until it collects funds from the buying dealer (i.e., title is legally transferred from the selling party to the buying party upon signing of bill of sale, but title is held in escrow by the third-party transaction processor until payment is received). Due to these factors, no additional credit risk beyond amounts provided for collection losses was believed by management to be probable in the Company’s accounts receivable and other receivables.
As of June 30, 2024 and December 31, 2023,
For the three and six months ended June 30, 2024 and 2023,
The Company is exposed to credit losses primarily through its trade accounts receivable, which includes receivables in transit, net of payables due, from a third-party transaction processor. The third-party transaction processor collects customer payments on the Company's behalf and remits them to the Company. Customer payments received by the third-party transaction processor, but not remitted to the Company as of period end, are deemed to be receivables in transit, net of payables due. Additionally, the third-party transaction processor provides payments in advance for certain selling dealers. If the third-party transaction processor does not receive buying dealer payments associated with the transaction paid in advance, the Company would guarantee losses incurred by the third-party transaction processor and the balance would be deducted from future remittances to the Company. To date, losses associated with these guarantees have not been material.
The Company offsets trade accounts receivables in transit, net of payables due, from the third-party transaction processor with payments received in advance from the third-party transaction processor as it has the right of offset. At any point in time, the Company could have amounts due from the third-party transaction processor for funds the third-party transaction processor has collected from buying dealers and has not yet remitted to the Company (i.e., receivables in transit, net of payables due), as well as amounts paid by the third-party transaction processor to the Company in advance of collecting payments from buying dealers (i.e., payments received in advance). Therefore, as the Company has the right to offset, the Company can either have a net receivable balance due from the third-party transaction processor which is recognized within accounts receivable, net in the Unaudited Condensed Consolidated Balance Sheets, or the Company can have a net liability which is recognized within accrued expenses, accrued income taxes, and other current liabilities in the Unaudited Condensed Consolidated Balance Sheets if the advance payments exceed the receivable position from the third-party transaction processor as of the balance sheet date. The change in payments received in advance from the third-party transaction processor is presented as cash flows from financing activities in the Unaudited Condensed Consolidated Statements of Cash Flows.
As of June 30, 2024, trade accounts receivable from receivables in transit, net of payables due, from the third-party transaction processor was $
As of June 30, 2024 and December 31, 2023, $
8
Significant Accounting Policies
The Unaudited Condensed Consolidated Financial Statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the Unaudited Condensed Consolidated Financial Statements. As of June 30, 2024, there have been no material changes in the Company’s significant accounting policies, which are detailed in the Annual Report.
Recent Accounting Pronouncements Not Yet Adopted
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company on or prior to the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. As of June 30, 2024, there are no new accounting pronouncements that the Company is considering adopting, other than those described below.
In December 2023 the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 addresses investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity should apply ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of ASU 2023-09 on its future consolidated financial statements and related disclosures.
In November 2023 the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 is intended to enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC Topic 280, Segment Reporting ("ASC 280"). ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its chief operating decision maker (“CODM”) uses to assess segment performance and to make decisions about resource allocations. ASU 2023-07 is intended to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply ASU 2023-07 retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently evaluating the impact of ASU 2023-07 on its future consolidated financial statements and related disclosures.
In October 2023 the FASB issued ASU 2023-06, Disclosure Improvements – Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). ASU 2023-06 modifies the disclosure and presentation requirements for a variety of topics in the ASC. The Company is currently evaluating the impact of ASU 2023-06 on its future consolidated financial statements and related disclosures.
3. Revenue Recognition
The following table summarizes revenue from contracts with customers by services and products for the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Marketplace |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Dealer-to-Dealer |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sell My Car - Instant Max Cash Offer |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company provides disaggregation of revenue by services and products, by income statement presentation, by segment, and by geographic region.
Revenue by services and products is disaggregated by (i) marketplace services, (ii) Dealer-to-Dealer services and products, and (iii) Sell My Car - Instant Max Cash Offer ("IMCO") services and products as disclosed above.
9
Revenue by income statement presentation is disaggregated by (i) marketplace, (ii) wholesale, and (iii) product revenue sources as disclosed in the Unaudited Condensed Consolidated Income Statements. Marketplace services are included within marketplace revenue in the Unaudited Condensed Consolidated Income Statements. Dealer-to-Dealer and IMCO services and products are included within both wholesale revenue and product revenue in the Unaudited Condensed Consolidated Income Statements.
Revenue by segment is disaggregated by (i) U.S. Marketplace and (ii) Digital Wholesale segments as disclosed in Note 13 of the Unaudited Condensed Consolidated Financial Statements. Marketplace services are included in the U.S. Marketplace segment and in the Other category of segment reporting. Dealer-to-Dealer and IMCO services and products are included in the Digital Wholesale segment.
Revenue by geographic region is disaggregated by (i) U.S. and (ii) International regions as disclosed in Note 13 of the Unaudited Condensed Consolidated Financial Statements. Marketplace services are provided in the U.S. and International regions. Dealer-to-Dealer and IMCO services and products are provided in the U.S. region.
The Company believes these categories best depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of the relevant quarter end.
For contracts with an original expected duration greater than one year, the aggregate amount of the transaction price allocated to the performance obligations that were unsatisfied as of June 30, 2024, was approximately $
For contracts with an original expected duration of one year or less, the Company has applied the practical expedient available under ASC 606 to not disclose the amount of transaction price allocated to unsatisfied performance obligations as of June 30, 2024. For performance obligations not satisfied as of June 30, 2024, and to which this expedient applies, the nature of the performance obligations, the variable consideration, and any consideration from contracts with customers not included in the transaction price is consistent with performance obligations satisfied as of June 30, 2024.
For the three months ended June 30, 2024 and 2023, revenue recognized from amounts included in deferred revenue at the beginning of the period was $
4. Fair Value of Financial Instruments
As of June 30, 2024 and December 31, 2023, assets measured at fair value on a recurring basis consist of the following:
|
|
As of June 30, 2024 |
|
|||||||||||||
|
|
Quoted Prices |
|
|
Significant Other |
|
|
Significant |
|
|
Total |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
|
|
As of December 31, 2023 |
|
|||||||||||||
|
|
Quoted Prices |
|
|
Significant Other |
|
|
Significant |
|
|
Total |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
10
For the three months ended June 30, 2024, there was
For the three months ended June 30, 2024, there was
As of June 30, 2024, the Company did not have any short-term investments as all were sold during the six months ended June 30, 2024.
5. Property and Equipment, Net
As of June 30, 2024 and December 31, 2023, property and equipment, net consist of the following:
|
|
As of |
|
|
As of |
|
||
Capitalized equipment |
|
$ |
|
|
$ |
|
||
Capitalized internal-use software |
|
|
|
|
|
|
||
Capitalized website development |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Finance lease right-of-use assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
||
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, depreciation and amortization expense, excluding amortization of intangible assets, amortization of capitalized hosting arrangements, and impairments, was $
For the three and six months ended June 30, 2024, the Company impaired $
For the three months ended June 30, 2023, the Company impaired $
During the six months ended June 30, 2024, capitalized internal-use software costs increased $
During the six months ended June 30, 2024, capitalized website development costs increased $
During the six months ended June 30, 2024, leasehold improvements costs decreased $
During the six months ended June 30, 2024, construction in progress costs increased $
11
6. Goodwill and Other Long-Lived Asset Impairment
Background
During the three months ended June 30, 2024, the Company identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to the Company’s financial projections for the CarOffer reporting unit. Prior to testing the goodwill and other long-lived assets included in the CarOffer reporting unit for impairment, the Company first evaluated current assets, inclusive of the cash and cash-equivalents, accounts receivable, inventory, prepaid expenses, and other current assets allocated to the CarOffer reporting unit, under applicable guidance and identified no impairment.
The Company then evaluated other long-lived assets included in the CarOffer reporting unit under ASC 360, Property, Plant, and Equipment (“ASC 360”). Other long-lived assets are tested for impairment at the asset group level, and the Company identified the asset group as the entire CarOffer reporting unit, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. As the CarOffer asset group did not pass the step one recoverability test on an undiscounted cash flow basis, the Company then compared the fair value of the asset group to its carrying value. To estimate the fair value of the asset group, the Company utilized an income-based valuation approach by means of a discounted cash flow method, based on market participant assumptions. The assumptions used to estimate the fair value using a discounted cash flow method included forecasted revenue and EBITDA, long term expectations for growth rates and operating profit margin, expected needs for annual capital expenditure and net working capital, and a market-participant discount rate derived via the capital asset pricing model. The excess of the carrying value of the asset group over the fair value was first allocated amongst the long-lived asset group (excluding goodwill), noting each individual long-lived asset within the group may not be impaired below its individual fair value.
As discussed below, the Company recognized impairments of CarOffer lease right-of-use assets of $
Right of Use Asset
In connection with the triggering event discussed above, the Company assessed the right-of-use assets associated with CarOffer's Addison, Texas lease for impairment.
As noted above, the carrying value of the CarOffer asset group was determined to not be recoverable. As such, the Company evaluated the fair value of the CarOffer asset group as of June 30, 2024, using a discounted cash flow method that incorporated market participant assumptions. The resulting impairment loss was then allocated to each of the long-lived assets in the asset group, including the CarOffer right-of-use assets. This fair value measurement is categorized as Level 3 within the fair value included hierarchy as there are significant unobservable inputs utilized in the valuation technique, including the selected market rental rates based upon similar office spaces, the discount rate, and other estimated replacement costs.
As of June 30, 2024, a non-cash impairment charge of $
Other Intangible Assets
In connection with the triggering event discussed above, the Company recognized an impairment to its brand intangible assets included within the CarOffer asset group as of June 30, 2024 to reduce the carrying value of the brand intangible asset to its fair value. This fair value measurement is categorized as Level 3 within the fair value hierarchy as there are significant unobservable inputs utilized in the valuation technique. The Company estimated fair value using market participant assumptions and the relief from royalty method, with key inputs including forecasted revenue, royalty rate, discount rate, and the useful life.
12
As of June 30, 2024, a non-cash impairment charge of $
As of June 30, 2024 and December 31, 2023, intangible assets consist of the following:
|
|
As of June 30, 2024 |
|
|||||||||||||||||
|
|
Weighted |
|
|
Gross |
|
|
Accumulated |
|
|
Accumulated Impairment |
|
|
Net Carrying |
|
|||||
Brand |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Customer relationships |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Developed technology |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
As of December 31, 2023 |
|
|||||||||||||||||
|
|
Weighted |
|
|
Gross |
|
|
Accumulated |
|
|
Accumulated Impairment |
|
|
Net Carrying |
|
|||||
Brand |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Customer relationships |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||||
Developed technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, amortization of intangible assets was $
For the three and the six months ended June 30, 2024, the Company wrote off $
As of June 30, 2024, estimated amortization expense of intangible assets for future periods is as follows:
Year Ending December 31, |
|
Amortization |
|
|
Remainder of 2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Goodwill
The Company determined that there were no indicators of impairment for the U.S. Marketplace or U.K. Marketplace reporting units and therefore an interim impairment assessment was not performed at June 30, 2024.
13
In connection with the triggering event discussed above, the Company evaluated the CarOffer reporting unit goodwill for impairment as of June 30, 2024, by comparing its estimated fair value to its carrying value. The Company estimated the fair value of the CarOffer reporting unit using an income-based valuation approach by means of a discounted cash flow method. This fair value measurement is categorized as Level 3 within the fair value hierarchy as there are significant unobservable inputs utilized in the valuation technique. The assumptions used to estimate the fair value of the reporting unit included forecasted revenue and EBITDA, long term expectations for growth rates and operating profit margin, expected needs for annual capital expenditure and net working capital, and a market-participant discount rate derived via the capital asset pricing model.
As of June 30, 2024, the carrying value for the CarOffer reporting unit (after adjustments for other long-lived asset impairments discussed above) exceeded its fair value, resulting in a non-cash impairment charge of $
As of June 30, 2024, changes in the carrying value of goodwill are as follows:
|
|
U.S. Marketplace |
|
|
Digital Wholesale |
|
|
Other |
|
|
Total |
|
||||
Balance as of December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Impairment of goodwill |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other (1) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of June 30, 2024, the accumulated impairment losses of goodwill were $
Due to the partial impairment of the CarOffer reporting unit goodwill, the remaining goodwill balance related to this reporting unit is still considered to be at risk for future impairments. If projected future operating results further decline, including as a result of economic conditions or operational challenges, the Company may need to record additional impairment charges to further reduce the goodwill at the CarOffer reporting unit, which could be material and negatively affect its operations.
7. Accrued Expenses, Accrued Income Taxes, and Other Current Liabilities
As of June 30, 2024 and December 31, 2023, accrued expenses, accrued income taxes, and other current liabilities consist of the following:
|
|
As of |
|
|
As of |
|
||
Accrued bonus |
|
$ |
|
|
$ |
|
||
Other accrued expenses, accrued income taxes, and other current liabilities |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
14
8. Debt
As of June 30, 2024 and December 31, 2023, the Company had
Revolving Credit Facility
On September 26, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and collateral agent and an L/C Issuer (as defined in the Credit Agreement), and the other lenders, L/C Issuers, and parties thereto from time to time. The Credit Agreement consists of a revolving credit facility (the “2022 Revolver”), which allows the Company to borrow up to $
The applicable interest rate is, at the Company's option, based on a number of different benchmark rates and applicable spreads, based on the ratio of the outstanding principal amount of the Company’s secured indebtedness to the trailing four quarters of consolidated EBITDA (as determined under the Credit Agreement, the “Consolidated Secured Net Leverage Ratio”). The Credit Agreement also requires the Company to pay a commitment fee to the lenders with respect of the unutilized revolving commitments at a rate ranging from
The 2022 Revolver is secured by a first priority lien on substantially all tangible and intangible property of the Company, as well as any future guarantors, and pledges of the equity of certain wholly-owned subsidiaries, in each case subject to certain exceptions, limitations, and exclusions from the collateral. The Credit Agreement includes customary events of default and requires the Company to comply with customary affirmative and negative covenants, including a financial covenant requiring that the Company not exceed certain Consolidated Secured Net Leverage Ratio ranges at the end of each fiscal quarter. The Company was in compliance with all covenants as of June 30, 2024.
As of June 30, 2024, there were
As of June 30, 2024 and December 31, 2023, deferred financing costs were $
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, amortization expense associated with deferred financing costs was immaterial.
9. Commitments and Contingencies
Contractual Obligations and Commitments
As of June 30, 2024, all of the Company’s property and equipment and hosting arrangements have been purchased with cash with the exception of unpaid amounts as disclosed in the Unaudited Condensed Consolidated Statements of Cash Flows.
In connection with the Company’s operating lease agreement in Boston, Massachusetts for
15
The Company is subject to a number of risks and uncertainties common to companies in its and similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, management of international activities, protection of proprietary rights, patent litigation, and dependence on key individuals.
Leases
The Company’s material lease obligations consist of various leases for office space in: Boston, Massachusetts; Cambridge, Massachusetts; Addison, Texas; and Dublin, Ireland.
As of June 30, 2024, there were no material changes in the Company’s leases from those disclosed in the Annual Report, other than those described below.
Addison, Texas
During the three months ended June 30, 2024, the Company identified an impairment of right-of-use assets associated with its Addison, Texas lease. For further information, refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements.
1001 Boylston
On April 12, 2024 and May 3, 2024, the Company entered into various change orders regarding the 1001 Boylston Street Lease and related buildout. The change orders modify the responsibilities outlined in the 1001 Boylston Street Lease, and reallocate the responsibility of certain buildout costs from the landlord to the Company. The costs related to this work are reimbursable by the landlord, effectively increasing the tenant improvement allowance from the 1001 Boylston Street Lease by $
On March 19, 2024, the Company entered into a letter agreement regarding the 1001 Boylston Street Lease (the "2024 Letter Agreement"). The 2024 Letter Agreement memorializes the Substantial Completion Date, Commencement Date, Fixed Rent Commencement Date (as each term is defined in the 1001 Boylston Street Lease), and the rental credits and holdover compensation owed to the Company per the 1001 Boylston Street Lease. The 2024 Letter Agreement also modifies the parking privileges and payments, which commenced on June 1, 2024, and provides reimbursement from the landlord to the Company for additional unexpected costs incurred. The Company accounted for the 2024 Letter Agreement as a remeasurement of the 1001 Boylston Street Lease, using an incremental borrowing rate as of the modification date, March 19, 2024. The lease remeasurement resulted in a decrease in the lease liability and right-of-use asset on the Unaudited Condensed Consolidated Balance Sheets of $
Restricted Cash
As of June 30, 2024 and December 31, 2023, restricted cash was $
Legal Matters
From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. The Company recognizes a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. The Company is not presently subject to any pending or threatened litigation that it believes, if determined adversely to the Company, individually or taken together, would reasonably be expected to have a material adverse effect on its business or financial results. However, litigation is inherently unpredictable and the future outcome of legal proceedings and other contingencies may be unexpected or differ from the Company’s estimated liabilities, which could have a material adverse effect on the Company’s future financial results.
16
Guarantees and Indemnification Obligations
In the ordinary course of business, the Company enters into agreements with its customers, partners, and service providers that include commercial provisions with respect to licensing, infringement, guarantees, indemnification, and other common provisions.
The Company
45-Day Guarantee is an arrangement through which a selling dealer lists a car on the CarOffer platform, and the Company provides an offer to purchase the vehicle listed at a specified price at any time over a 45-day period. This provides the seller with a put option, where they have the right, but not the obligation, to require the Company to purchase the vehicle during this window. OfferGuard is an arrangement through which a buying dealer purchases a car on the CarOffer platform, and the Company provides an offer to purchase the vehicle at a specified price between days 1 and 3, and days 42 and 45 if the dealer is not able to sell the vehicle after 42 days.
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, income for guarantees purchased by dealers was $
As of June 30, 2024, the maximum potential amount of future payments that the Company could be required to make under these guarantees was $
10. Stock-based Compensation and Common Stock Share Repurchases
Stock-based Compensation Expense
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, stock-based compensation expense by award type and where the stock-based compensation expense was recognized in the Unaudited Condensed Consolidated Income Statements is as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Options |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted Stock Units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
CO Incentive Units and Subject Units |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product, technology, and development expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
17
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, stock-based compensation expense excluded $
Common Stock Share Repurchases
On November 7, 2023, the Company announced that the Board of Directors authorized a share repurchase program (the "2024 Share Repurchase Program") pursuant to which the Company may, from time to time, purchase shares of its Class A common stock for an aggregate purchase price not to exceed $
On December 8, 2022, the Company announced that the Board of Directors authorized a share repurchase program (the “2022 Share Repurchase Program”) pursuant to which the Company could, from time to time, purchase shares of its Class A common stock for an aggregate purchase price not to exceed $
During the three months ended June 30, 2024, the Company repurchased and retired
During the three months ended June 30, 2023, the Company repurchased and retired
11. Earnings Per Share
The Company has two classes of common stock authorized: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to
During the three months ended June 30, 2024 and 2023 and the six months ended June 30, 2024 and 2023,
18
Basic net income per share (“Basic EPS”) is computed by dividing consolidated net income adjusted for net loss attributable to redeemable noncontrolling interest and changes in the redemption value of redeemable noncontrolling interest, if applicable, by the weighted-average number of common shares outstanding during the reporting period. The Company computes the weighted-average number of common shares outstanding during the reporting period using the total number of shares of Class A common stock and Class B common stock outstanding as of the last day of the previous year plus the weighted-average of any additional shares issued and outstanding during the reporting period, less the weighted-average of any shares repurchased during the period.
Diluted net income per share (“Diluted EPS”) gives effect to all potentially dilutive securities. Diluted EPS is computed by dividing consolidated net income adjusted for net loss attributable to redeemable noncontrolling interest and changes in the redemption value of redeemable noncontrolling interest, if applicable and dilutive, by the weighted-average number of common shares outstanding during the reporting period using (i) the number of shares of common stock used in the Basic EPS calculation as indicated above, and (ii) if dilutive, the incremental weighted-average common stock that the Company would issue upon the exercise of stock options and the vesting of restricted stock units. The dilutive effect of these common stock equivalents is reflected in diluted earnings per share by application of the treasury stock method. For previous periods, the if-converted method was used to calculate the number of shares issuable upon exercise of the 2024 Put Right (as defined in Note 2 to the consolidated financial statements contained within the Annual Report), inclusive of CarOffer noncontrolling interest and CO Incentive and Subject Units (as each term is defined in Note 2 to the consolidated financial statements contained within the Annual Report), that would have been issuable as of the end of the reporting period assuming the end of the reporting period was also the end of the contingency period.
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, a reconciliation of the numerator and denominator used in the calculation of basic and diluted net (loss) income per share is as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consolidated net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Net loss attributable to redeemable noncontrolling interest |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net (loss) income attributable to common stockholders — basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Net loss attributable to redeemable noncontrolling interest |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net (loss) income attributable to common stockholders — diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average number of shares of common stock used |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of share equivalents resulting from stock |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Dilutive effect of share equivalents resulting from |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Weighted-average number of shares of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
19
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, potentially dilutive common stock equivalents that have been excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Stock options outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
For the three and six months ended June 30, 2024, there was no effect of potentially dilutive shares as the numerator was negative and there were no contingently issuable shares as a result of the acquisition of remaining minority equity interests in CarOffer. For the three and six months ended June 30, 2023, the number of issuable shares estimated upon exercise of the 2024 Put Right was zero.
12. Income Taxes
During the three months ended June 30, 2024 and 2023, the Company recognized an income tax benefit of $
The effective tax rates for the three months ended June 30, 2024 and 2023 and the six months ended June 30, 2024 and 2023, was greater than the statutory tax rate of
The Organisation for Economic Co-operation and Development introduced an international tax framework under Pillar Two, which includes a global minimum tax of
The Company and its subsidiaries are subject to various U.S. federal, state, and foreign income tax examinations. The Company is currently not subject to income tax examination for the tax years
13. Segment and Geographic Information
The Company has
The U.S. Marketplace segment derives revenue from marketplace services from customers within the U.S. The Digital Wholesale segment derives revenue from Dealer-to-Dealer and IMCO services and products which are sold on the CarOffer platform. The Company also has two operating segments which are individually immaterial and therefore aggregated into the Other category to reconcile reportable segments to the Unaudited Condensed Consolidated Income Statements. The Other category derives revenue from marketplace services from customers outside of the U.S.
20
Revenue and costs discretely incurred by reportable segments, including depreciation and amortization, are included in the calculation of reportable segment income (loss) from operations. For the three and six months ended June 30, 2023, Digital Wholesale segment (loss) from operations also reflects certain IMCO marketing and lead generation fees allocated from the U.S. Marketplace segment. Asset information by reportable segment is not provided to the CODM as asset information is assessed and reviewed on a consolidated basis.
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, segment revenue, segment income (loss) from operations, and segment depreciation and amortization are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Segment Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Digital Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Segment Income (Loss) from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Digital Wholesale |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Segment Depreciation and Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Digital Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, a reconciliation between total segment (loss) income from operations to consolidated (loss) income before income taxes is as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Total segment (loss) income from operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consolidated (loss) income before income taxes |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
As of June 30, 2024 and December 31, 2023, segment assets are as follows:
|
|
As of |
|
|
As of |
|
||
Segment Assets: |
|
|
|
|
|
|
||
U.S. Marketplace |
|
$ |
|
|
$ |
|
||
Digital Wholesale |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
21
Digital Wholesale segment assets decreased $
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, revenue by geographical region is as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue by Geographic Region: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed consolidated financial statements, or the Unaudited Condensed Consolidated Financial Statements, and the related notes thereto, included elsewhere in this Quarterly Report, and our consolidated financial statements and the related notes and other financial information included in our Annual Report. Some of the information contained in this discussion and analysis or elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and our performance and future success, includes forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” For a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis you should review our Annual Report, including those cautionary statements set forth under Part I, Item 1A “Risk Factors,” and in Part II, Item 1A, “Risk Factors,” of this Quarterly Report. We qualify all of our forward-looking statements by such cautionary statements.
In this discussion, we use financial measures that are considered non-GAAP financial measures under SEC rules. These rules regarding non-GAAP financial measures require supplemental explanation and reconciliation, which are included elsewhere in this Quarterly Report. Investors should not consider non-GAAP financial measures in isolation from or in substitution for, financial information presented in compliance with United States, or U.S., generally accepted accounting principles, or GAAP.
This section of this Quarterly Report discusses 2024 and 2023 items and period-to-period comparisons between 2024 and 2023. The period‑to‑period comparison of financial results is not necessarily indicative of future results.
Company Overview
CarGurus, Inc. is a multinational, online automotive platform for buying and selling vehicles that is building upon its industry-leading listings marketplace with both digital retail solutions and the CarOffer online wholesale platform. The CarGurus platform gives consumers the confidence to purchase and/or sell a vehicle either online or in person, and it gives dealerships the power to accurately price, effectively market, instantly acquire, and quickly sell vehicles, all with a nationwide reach. We use proprietary technology, search algorithms, and data analytics to bring trust, transparency, and competitive pricing to the automotive shopping experience.
We operate principally in the U.S. In the U.S., we also operate as independent brands the Autolist online marketplace and the CarOffer online wholesale platform. In addition to the U.S., we operate online marketplaces under the CarGurus brand in Canada and the United Kingdom, or U.K. In the U.K., we also operate as an independent brand the PistonHeads online marketplace.
We have subsidiaries in the U.S., Canada, Ireland, and the U.K. and we have two reportable segments, U.S. Marketplace and Digital Wholesale. See Note 13 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further segment reporting and geographic information.
We derive our revenue from marketplace revenue, wholesale revenue, and product revenue. Marketplace revenue is included in the U.S. Marketplace segment and Other category of segment reporting. Wholesale revenue and product revenue are included in the Digital Wholesale segment. We generate marketplace revenue primarily from (i) dealer subscriptions to our Listings packages and Real-time Performance Marketing, or RPM, digital advertising suite, Digital Retail, and Sell My Car - Top Dealer Offers, or TDO, (ii) advertising revenue from auto manufacturers and other auto-related brand advertisers, and (iii) revenue from partnerships with financing services companies. We generate wholesale revenue primarily from (x) transaction fees earned from the purchase and sale of vehicles between dealers, or Dealer-to-Dealer transactions, (y) transaction fees earned from the sale of vehicles to dealers that we acquire at other marketplaces, and (z) transaction fees earned from performing inspection and transportation services, inclusive of Dealer-to-Dealer transactions, other marketplace-to-dealer transactions, and IMCO transactions (as defined below). We generate product revenue primarily from (A) aggregate proceeds received from the sale of vehicles to dealers that were acquired directly from customers, or Sell My Car - Instant Max Cash Offer, or IMCO transactions, and (B) proceeds received from the sale of vehicles that were acquired through arbitration.
For the three months ended June 30, 2024, we generated revenue of $218.7 million, a 9% decrease from $239.7 million of revenue for the three months ended June 30, 2023. For the three months ended June 30, 2024, we generated consolidated net loss of $68.7 million and Consolidated Adjusted EBITDA of $55.6 million, compared to consolidated net income of $13.8 million and Consolidated Adjusted EBITDA of $45.2 million for the three months ended June 30, 2023.
23
For the six months ended June 30, 2024, we generated revenue of $434.5 million, an 8% decrease from $471.7 million of revenue for the six months ended June 30, 2023. For the six months ended June 30, 2024, we generated consolidated net loss of $47.4 million and Consolidated Adjusted EBITDA of $106.0 million, compared to consolidated net income of $25.7 million and Consolidated Adjusted EBITDA of $86.0 million for the six months ended June 30, 2023.
See below for more information regarding our use and reconciliation of these non-GAAP financial measures.
Key Business Metrics
We regularly review a number of metrics, including the key metrics listed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make operating and strategic decisions. We believe it is important to evaluate these metrics for the U.S. and International geographic regions. The International region derives revenue from marketplace revenue from customers outside of the U.S. International markets perform differently from the U.S. market due to a variety of factors, including our operating history in each market, our rate of investment, market size, market maturity, competition, and other dynamics unique to each country.
Monthly Unique Users
For each of our websites (excluding the CarOffer website), we define a monthly unique user as an individual who has visited any such website 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 website within a calendar month, each such visit is counted as a separate unique user. We view our average monthly unique users as a key indicator of the quality of our user experience, the effectiveness of our advertising and traffic acquisition, and the strength of our brand awareness. Measuring unique users is important to us and we believe it provides useful information to our investors because our marketplace revenue depends, in part, on our ability to provide dealers with connections to our users and exposure to our marketplace audience. We define connections as interactions between consumers and dealers on our marketplace through phone calls, email, managed text and chat, and clicks to access the dealer’s website or map directions to the dealership.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Average Monthly Unique Users |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
United States |
|
|
30,246 |
|
|
|
31,907 |
|
|
|
32,126 |
|
|
|
31,947 |
|
International |
|
|
8,908 |
|
|
|
7,379 |
|
|
|
8,738 |
|
|
|
7,285 |
|
Total |
|
|
39,154 |
|
|
|
39,286 |
|
|
|
40,864 |
|
|
|
39,232 |
|
24
Monthly Sessions
We define monthly sessions as the number of distinct visits to our websites (excluding the CarOffer website) 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 U.S. 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 believe that measuring the volume of sessions in a time period, when considered in conjunction with the number of unique users in that time period, is an important indicator to us of consumer satisfaction and engagement with our marketplace, and we believe it provides useful information to our investors because the more satisfied and engaged consumers we have, the more valuable our service is to dealers.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Average Monthly Sessions |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
United States |
|
|
80,843 |
|
|
|
84,355 |
|
|
|
84,565 |
|
|
|
84,314 |
|
International |
|
|
20,439 |
|
|
|
17,137 |
|
|
|
20,077 |
|
|
|
16,904 |
|
Total |
|
|
101,282 |
|
|
|
101,492 |
|
|
|
104,642 |
|
|
|
101,218 |
|
Number of Paying Dealers
We define a paying dealer as a dealer account with an active, paid marketplace subscription at the end of a defined period. The number of paying dealers we have is important to us and we believe it provides valuable information to investors because it is indicative of the value proposition of our marketplace products, as well as our sales and marketing success and opportunity, including our ability to retain paying dealers and develop new dealer relationships.
|
|
As of June 30, |
|
|||||
Number of Paying Dealers |
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
United States |
|
|
24,446 |
|
|
|
24,220 |
|
International |
|
|
6,906 |
|
|
|
6,877 |
|
Total |
|
|
31,352 |
|
|
|
31,097 |
|
Transactions
We define Transactions within the Digital Wholesale segment as the number of vehicles processed from car dealers, consumers, and other marketplaces through the CarOffer website within the applicable period. Transactions consists of each unique vehicle (based on vehicle identification number) that reaches "sold and invoiced" status on the CarOffer website within the applicable period, including vehicles sold to car dealers, vehicles sold at third-party auctions, vehicles ultimately sold to a different buyer, and vehicles that are returned to their owners without completion of a sale transaction. We exclude vehicles processed within CarOffer's intra-group trading solution (Group Trade) from the definition of Transactions, and we only count any unique vehicle once even if it reaches sold status multiple times. Digital Wholesale includes Dealer-to-Dealer transactions and IMCO transactions. We view Transactions as a key business metric, and we believe it provides useful information to investors, because it provides insight into growth and revenue for the Digital Wholesale segment. Transactions drive a significant portion of Digital Wholesale segment revenue. We believe growth in Transactions demonstrates consumer and dealer utilization and our market share penetration in the Digital Wholesale segment.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Transactions |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Transactions |
|
|
8,778 |
|
|
|
20,793 |
|
|
|
19,080 |
|
|
|
38,298 |
|
25
Quarterly Average Revenue per Subscribing Dealer (QARSD)
We define QARSD, which is measured at the end of a fiscal quarter, as the marketplace revenue primarily from subscriptions to our Listings packages and RPM, our digital advertising suite, and other digital add-on products during that trailing quarter divided by the average number of paying dealers in that marketplace during the quarter. We calculate the average number of paying dealers for a period by adding the number of paying dealers at the end of such period and the end of the prior period and dividing by two. This information is important to us, and we believe it provides useful information to investors, because we believe that our ability to grow QARSD is an indicator of the value proposition of our products and the return on investment, or ROI, that our paying dealers realize from our products. In addition, increases in QARSD, which we believe reflect the value of exposure to our engaged audience in relation to subscription cost, are driven in part by our ability to grow the volume of connections to our users and the quality of those connections, which result in increased opportunity to upsell package levels and cross-sell additional products to our paying dealers.
|
|
As of June 30, |
|
|||||
Quarterly Average Revenue per Subscribing Dealer (QARSD) |
|
2024 |
|
|
2023 |
|
||
United States |
|
$ |
6,942 |
|
|
$ |
6,110 |
|
International |
|
$ |
1,935 |
|
|
$ |
1,610 |
|
Consolidated |
|
$ |
5,848 |
|
|
$ |
5,116 |
|
Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest
To provide investors with additional information regarding our financial results, we have presented within this Quarterly Report Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest, each of which is a non‑GAAP financial measure. These non‑GAAP financial measures are not based on any standardized methodology prescribed by GAAP, and are not necessarily comparable to any similarly titled measures presented by other companies.
We define Consolidated Adjusted EBITDA as consolidated net income, adjusted to exclude: depreciation and amortization, goodwill and other long-lived asset impairment, stock‑based compensation expense, stock-based compensation expense for CarOffer, LLC Units (as defined below), transaction-related expenses, other income, net, and (benefit from) provision for income taxes.
We define Adjusted EBITDA as Consolidated Adjusted EBITDA adjusted to exclude: Adjusted EBITDA attributable to redeemable noncontrolling interest.
We define Adjusted EBITDA attributable to redeemable noncontrolling interest as net loss attributable to redeemable noncontrolling interest, adjusted to exclude: depreciation and amortization, impairment of long-lived assets, stock‑based compensation expense, stock-based compensation expense for CarOffer, LLC Units, other expense, net, and (benefit from) provision for income taxes. These exclusions are adjusted for redeemable noncontrolling interest of 38% by taking the noncontrolling interest's full financial results and multiplying each line item in the reconciliation by 38%. We note that we use 38%, versus 49%, to allocate the share of loss because it represents the portion attributable to the redeemable noncontrolling interest. The 38% is exclusive of CO Incentive Units, Subject Units, and 2021 Incentive Units (as each term is defined in Note 2 to our consolidated financial statements contained within our Annual Report), which are liability-classified awards that do not participate in the share of loss. Adjusted EBITDA attributable to redeemable noncontrolling interest is reflective of our acquisition of the remaining minority equity interests in CarOffer completed on December 1, 2023, or the 2023 CarOffer Transaction. Following the 2023 CarOffer Transaction there was no redeemable noncontrolling interest as of December 1, 2023, and as a result, Consolidated Adjusted EBITDA is equivalent to Adjusted EBITDA for the three and six months ended June 30, 2024.
We have presented Consolidated Adjusted EBITDA and Adjusted EBITDA within this Quarterly Report because they are key measures used by our management and Board of Directors to understand and evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating Consolidated Adjusted EBITDA and Adjusted EBITDA can produce a useful measure for period‑to‑period comparisons of our business. We have presented Adjusted EBITDA attributable to redeemable noncontrolling interest because it is used by our management to reconcile Consolidated Adjusted EBITDA to Adjusted EBITDA. It represents the portion of Consolidated Adjusted EBITDA that is attributable to our redeemable noncontrolling interest. Adjusted EBITDA attributable to redeemable noncontrolling interest is not intended to be reviewed on its own.
26
We use Consolidated Adjusted EBITDA and Adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. We believe Consolidated Adjusted EBITDA and Adjusted EBITDA help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. Accordingly, we believe that Consolidated Adjusted EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision‑making. We use Adjusted EBITDA attributable to redeemable noncontrolling interest to reconcile Consolidated Adjusted EBITDA to Adjusted EBITDA. It enables an investor to gain a clearer understanding of the portion of Consolidated Adjusted EBITDA that is attributable to our redeemable noncontrolling interest.
Our Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest rather than consolidated net income and net loss attributable to redeemable noncontrolling interest, respectively, which are the most directly comparable GAAP equivalents. Some of these limitations are:
27
Because of these limitations, we consider, and you should consider, Consolidated Adjusted EBITDA, Adjusted EBITDA, and Adjusted EBITDA attributable to redeemable noncontrolling interest together with other operating and financial performance measures presented in accordance with GAAP.
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, the following table presents a reconciliation of Consolidated Adjusted EBITDA and Adjusted EBITDA to consolidated net (loss) income, the most directly comparable measure calculated in accordance with GAAP for each of the periods presented.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023(1) |
|
|
2024 |
|
|
2023(1) |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Reconciliation of Consolidated Adjusted EBITDA and Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consolidated net (loss) income |
|
$ |
(68,721 |
) |
|
$ |
13,817 |
|
|
$ |
(47,420 |
) |
|
$ |
25,683 |
|
Depreciation and amortization |
|
|
5,663 |
|
|
|
11,667 |
|
|
|
13,144 |
|
|
|
23,243 |
|
Goodwill and other long-lived asset impairment (2) |
|
|
127,655 |
|
|
|
9 |
|
|
|
127,655 |
|
|
|
184 |
|
Stock-based compensation expense |
|
|
15,557 |
|
|
|
14,602 |
|
|
|
31,379 |
|
|
|
29,579 |
|
Stock-based compensation expense for CarOffer, LLC Units |
|
|
— |
|
|
|
1,225 |
|
|
|
— |
|
|
|
1,225 |
|
Transaction-related expenses |
|
|
265 |
|
|
|
— |
|
|
|
1,076 |
|
|
|
— |
|
Other income, net |
|
|
(3,161 |
) |
|
|
(4,680 |
) |
|
|
(6,562 |
) |
|
|
(9,018 |
) |
(Benefit from) provision for income taxes |
|
|
(21,702 |
) |
|
|
8,601 |
|
|
|
(13,318 |
) |
|
|
15,132 |
|
Consolidated Adjusted EBITDA |
|
|
55,556 |
|
|
|
45,241 |
|
|
|
105,954 |
|
|
|
86,028 |
|
Adjusted EBITDA attributable to redeemable noncontrolling interest |
|
|
— |
|
|
|
1,590 |
|
|
|
— |
|
|
|
913 |
|
Adjusted EBITDA |
|
$ |
55,556 |
|
|
$ |
43,651 |
|
|
$ |
105,954 |
|
|
$ |
85,115 |
|
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, the following table presents a reconciliation of Adjusted EBITDA attributable to redeemable noncontrolling interest to net loss attributable to redeemable noncontrolling interest, the most directly comparable measure calculated in accordance with GAAP, for each of the periods presented.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023(2) |
|
|
2024 |
|
|
2023(2) |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Reconciliation of Adjusted EBITDA attributable to redeemable noncontrolling interest: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss attributable to redeemable noncontrolling interest |
|
$ |
— |
|
|
$ |
(2,596 |
) |
|
$ |
— |
|
|
$ |
(6,862 |
) |
Depreciation and amortization (1) |
|
|
— |
|
|
|
2,951 |
|
|
|
— |
|
|
|
5,899 |
|
Other long-lived asset impairment (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
67 |
|
Stock-based compensation expense (1) |
|
|
— |
|
|
|
208 |
|
|
|
— |
|
|
|
429 |
|
Stock-based compensation expense for CarOffer, LLC Units (1) |
|
|
— |
|
|
|
467 |
|
|
|
— |
|
|
|
467 |
|
Other expense, net (1) |
|
|
— |
|
|
|
540 |
|
|
|
— |
|
|
|
888 |
|
Provision for income taxes (1) |
|
|
— |
|
|
|
20 |
|
|
|
— |
|
|
|
25 |
|
Adjusted EBITDA attributable to redeemable noncontrolling interest |
|
$ |
— |
|
|
$ |
1,590 |
|
|
$ |
— |
|
|
$ |
913 |
|
28
Components of Unaudited Condensed Consolidated Income Statements
Revenue
We derive our revenue from marketplace revenue, wholesale revenue, and product revenue. Marketplace revenue is included in the U.S. Marketplace segment and Other category of segment reporting. Wholesale revenue and product revenue are included in the Digital Wholesale segment. We generate marketplace revenue primarily from (i) dealer subscriptions to our Listings packages, RPM, digital advertising suite, Digital Retail, and Sell My Car - TDO, (ii) advertising revenue from auto manufacturers and other auto‑related brand advertisers, and (iii) revenue from partnerships with financing services companies. We generate wholesale revenue primarily from (x) transaction fees earned from Dealer-to-Dealer transactions, (y) transaction fees earned from the sale of vehicles to dealers that we acquire at other marketplaces, and (z) transaction fees earned from performing inspection and transportation services, inclusive of Dealer-to-Dealer transactions, other marketplace-to-dealer transactions, and IMCO transactions. We generate product revenue primarily from (A) aggregate proceeds received from the sale of vehicles that were acquired through IMCO transactions, and (B) proceeds received from the sale of vehicles that were acquired through arbitration.
Marketplace Revenue
We offer multiple types of marketplace Listings packages to our dealers for our CarGurus U.S. platform (availability varies on our other marketplaces): Restricted Listings, which is free; and various levels of Listings packages, which each require a paid subscription under a monthly, quarterly, semiannual, or annual subscription basis.
Our subscriptions for customers generally auto-renew on a monthly basis and are cancellable by dealers with 30 days' advance notice prior to the commencement of the applicable renewal term. Subscription pricing is determined based on a dealer’s inventory size, region, and our assessment of the connections and ROI the platform will provide them and is subject to discounts and/or fee reductions that we may offer from time to time. We also offer all dealers on the platform access to our Dealer Dashboard, which includes a performance summary, Dealer Insights tool, and user review management platform. Only dealers subscribing to a paid Listings package have access to the Pricing Tool, Market Analysis tool, and Instant Market Value, or IMV, Scan tool. For details on the Dealer Dashboard and these merchandising tools, refer to “Our Products and Services – U.S. Marketplace and Other – Dealer Offerings – Dealer Dashboard and Merchandising Tools” in Part I, Item 1 in our Annual Report.
We also offer paid Listings packages for the Autolist and PistonHeads websites.
In addition to displaying inventory in our marketplace and providing access to the Dealer Dashboard, we offer dealers subscribing to certain of our Listings packages other subscription advertising and customer acquisition products and enhancements marketed under RPM and our digital advertising suite. Through RPM, dealers can buy advertising that appears in our marketplace, on other sites on the internet, and/or on high-converting social media platforms. Such advertisements can be targeted by the user’s geography, search history, CarGurus website activity, and a number of other targeting factors, allowing dealers to increase their visibility with in-market consumers and drive qualified traffic for dealers.
We also offer dealer advertising products for the PistonHeads website.
We also offer dealers subscribing to certain of our Listings packages other subscription advertising and customer acquisition products and enhancements such as Digital Retail, which allows shoppers to complete much of the vehicle-purchase process online through the Dealers’ Listings page. Digital Retail is comprised of (i) the Digital Deal Platform, which gives dealers higher quality leads through upfront consumer-provided information, (ii) Geo Expansion, which expands the visibility of a dealer’s inventory in the search results beyond its local market, and (iii) Hard Pull Financing, which provides loan information.
We also offer dealers subscribing to certain of our Listings packages other subscription advertising and customer acquisition products and enhancements such as TDO, which allows dealers to pay for leads to receive direct access to shoppers actively looking to sell their vehicles. Dealers can acquire inventory from shoppers who are looking to sell directly through the CarGurus Sell My Car page.
29
Marketplace revenue also consists of non-dealer advertising revenue from auto manufacturers and other auto-related brand advertisers sold on a cost-per-thousand impressions basis, or CPM basis. An impression is an advertisement loaded on a web page. In addition to advertising sold on a CPM basis, we also have advertising sold on a cost-per-click basis. Pricing is primarily based on advertisement size and position on our websites and mobile applications. Auto manufacturers and other brand advertisers can execute advertising campaigns that are targeted across a wide variety of parameters, including demographic groups, behavioral characteristics, specific auto brands, categories such as Certified Pre-Owned, and segments such as hybrid vehicles. We do not provide minimum impression guarantees or other types of minimum guarantees in our contracts with customers. Advertising is also sold indirectly through revenue sharing arrangements with advertising exchange partners.
We also offer non-dealer advertising products for the Autolist and PistonHeads websites.
Marketplace revenue also includes revenue from partnerships with certain financing services companies pursuant to which we enable eligible consumers on our CarGurus U.S. website to pre-qualify for financing on cars from dealerships that offer financing through such companies. We primarily generate revenue from these partnerships based on the number of funded loans from consumers who pre-qualify with our lending partners through our site.
Wholesale Revenue
The CarOffer Matrix enables buying dealers to create standing buy orders and provides instant offers to selling dealers. Wholesale revenue includes transaction fees earned from Dealer-to-Dealer transactions, where we collect fees from both the buying and selling dealers. We also sell vehicles to dealers that we acquire at other marketplaces, where we collect a transaction fee from the buying dealers.
Wholesale revenue also includes fees earned from performing inspection and transportation services, where we collect fees from the buying dealer. Inspection and transportation service revenue is inclusive of Dealer-to-Dealer transactions, other marketplace-to-dealer transactions, and IMCO transactions.
Wholesale revenue also includes arbitration in which the vehicle is rematched to a new buyer and not acquired by us. Arbitration is the process by which we investigate and resolve claims from buying dealers.
Wholesale revenue also includes fees earned from certain guarantees offered to dealers (which include 45-Day Guarantee and OfferGuard products), where we collect fees from the buying dealer or selling dealer, as applicable.
Product Revenue
The CarOffer Matrix enables consumers who are selling vehicles to be instantly presented with an offer. Product revenue includes the aggregate proceeds received from the sale of vehicles through IMCO transactions, including vehicle sale price and transaction fees collected from the buying dealers. Product revenue also includes proceeds received from the sale of vehicles acquired through arbitration, including vehicle sale price and transaction fees collected from buying dealers. Arbitration is the process by which we investigate and resolve claims from buying dealers. We control the vehicle in these transactions and therefore act as the principal.
Cost of Revenue
Marketplace Cost of Revenue
Marketplace cost of revenue includes expenses related to supporting and hosting marketplace service offerings. These expenses include personnel and related expenses for our customer support team, including salaries, benefits, incentive compensation, and stock-based compensation; third-party service provider expenses such as advertising, data, and hosting expenses; amortization of developed technology; amortization and impairment of capitalized website development; amortization of capitalized hosting arrangements; and allocated overhead expenses.
We allocate overhead expenses, such as rent and facility expenses, software expense, and employee benefit expense, to all departments based on headcount. As such, general overhead expenses are reflected in cost of revenue and each operating expense category.
30
Wholesale Cost of Revenue
Wholesale cost of revenue includes expenses related to supporting and hosting Digital Wholesale service offerings, including Dealer-to-Dealer transactions and vehicles sold to dealers acquired at other marketplaces on the CarOffer Matrix. These expenses include vehicle transportation and inspection expenses; net losses on vehicles related to guarantees offered to dealers through Dealer-to-Dealer transactions; personnel and related expenses for employees directly involved in the fulfillment and support of transactions, including salaries, benefits, incentive compensation, and stock-based compensation; third-party service provider expenses; amortization of developed technology; amortization and impairment of capitalized website development; and allocated overhead expenses.
We allocate overhead expenses, such as rent and facility expenses, software expense, and employee benefit expense, to all departments based on headcount. As such, general overhead expenses are reflected in cost of revenue and each operating expense category.
Product Cost of Revenue
Product cost of revenue includes expenses related to vehicles sold to dealers through IMCO transactions and vehicles sold to dealers acquired through arbitration. These expenses include the cost of the vehicle and transportation expenses.
Operating Expenses
Sales and Marketing
Sales and marketing expenses consist primarily of personnel and related expenses for our sales and marketing team, including salaries, benefits, incentive compensation, commissions, and stock-based compensation; expenses associated with consumer marketing, such as traffic acquisition, brand building, and public relations activities; expenses associated with dealer marketing, such as content marketing, customer and promotional events, and industry events; consulting services; software subscription expenses; travel expenses; amortization of capitalized hosting arrangements; and allocated overhead expenses. A portion of our commissions that are related to obtaining a new contract are capitalized and amortized over the estimated benefit period of customer relationships. All other sales and marketing expenses are expensed as incurred. We expect sales and marketing expenses to fluctuate from quarter to quarter due to seasonality and as we respond to changes in the macroeconomic and competitive landscapes affecting our existing dealers, consumer audience, and brand awareness.
Product, Technology, and Development
Product, technology, and development expenses consist primarily of personnel and related expenses for our research and development team, including salaries, benefits, incentive compensation, and stock-based compensation; software subscription expenses; consulting services; and allocated overhead expenses. Other than website development, internal-use software, and hosting arrangement expenses, research and development expenses are expensed as incurred. We expect product, technology, and development expenses to remain relatively flat for the remainder of the year.
General and Administrative
General and administrative expenses consist primarily of personnel and related expenses for our executive, finance, legal, people & talent, and administrative teams, including salaries, benefits, incentive compensation, and stock-based compensation; expenses associated with professional fees for audit, tax, external legal, and consulting services; payment processing and billing expenses; insurance expenses; software subscription expenses; and allocated overhead expenses. General and administrative expenses are expensed as incurred. We expect general and administrative expenses to remain relatively flat for the remainder of the year.
31
Goodwill and Other Long-Lived Asset Impairment
During the three months ended June 30, 2024, we identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to our financial projections for the CarOffer reporting unit. As a result, we performed an updated fair value analysis of the CarOffer reporting unit, and subsequently recognized impairment losses of $4.7 million, $7.5 million, and $115.2 million for right-of-use assets, intangible assets, and goodwill, respectively. For further discussion of impairments related to right-of-use assets, intangible assets, and goodwill in the CarOffer reporting unit, refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
Depreciation and Amortization
Depreciation and amortization expenses consist of depreciation on property and equipment and amortization of intangible assets and internal-use software.
Other Income, Net
Other income, net consists primarily of interest income earned on our cash, cash equivalents, and short-term investments and foreign exchange gains and losses.
(Benefit from) Provision for Income Taxes
We are subject to federal and state income taxes in the U.S. and taxes in foreign jurisdictions in which we operate. For the three and six months ended June 30, 2024, a benefit from income taxes was recognized as a result of the discrete tax benefit associated with the impairment charge despite our consolidated taxable income position. For the three and six months ended June 30, 2023, a provision for income taxes was recognized as a result of the consolidated taxable income position.
We recognize deferred tax assets and liabilities based on temporary differences between the financial reporting and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled.
We regularly assess the need to recognize a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2024 and December 31, 2023, valuation allowances were immaterial.
We assess our income tax positions and recognize an income tax benefit or expense based upon our evaluation of the facts, circumstances, and information available at the reporting date.
For the three and six months ended June 30, 2024, income tax expense recognized related to uncertain tax provisions was immaterial. An immaterial amount of the reserve relating to uncertain tax positions was released as we would be more-likely-than-not to prevail should these tax positions be challenged by the respective tax authorities. As of June 30, 2024, the income tax liability related to uncertain tax positions, exclusive of immaterial interest or penalties related to uncertain tax provisions, was $0.9 million, which would have favorably affected our effective tax rate, if recognized.
For the three and six months ended June 30, 2023, we did not recognize income tax expense related to uncertain tax provisions. As of December 31, 2023, the income tax liability related to uncertain tax positions, exclusive of immaterial interest or penalties related to uncertain tax provisions, was $0.8 million, which would have favorably affected our effective tax rate, if recognized.
The Organisation for Economic Co-operation and Development introduced an international tax framework under Pillar Two, which includes a global minimum tax of 15%. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions where we operate. The Pillar Two legislation became effective for our fiscal year beginning January 1, 2024. We have performed an assessment of its potential exposure to Pillar Two income taxes based on our most recent tax filings, country-by-country reporting, and financial statements for our constituent entities. Based on the assessment performed, we meet the Pillar Two transitional safe harbor effective tax rate relief as all jurisdictions in which we operate are above 15%. We do not expect any material exposure to Pillar Two income taxes in any jurisdictions.
32
Results of Operations
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, the Unaudited Condensed Consolidated Income Statements are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(dollars in thousands) |
|
|
(dollars in thousands) |
|
||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
$ |
195,167 |
|
|
$ |
170,950 |
|
|
$ |
382,386 |
|
|
$ |
338,077 |
|
Wholesale |
|
|
13,119 |
|
|
|
31,952 |
|
|
|
29,244 |
|
|
|
57,138 |
|
Product |
|
|
10,406 |
|
|
|
36,835 |
|
|
|
22,858 |
|
|
|
76,485 |
|
Total revenue |
|
|
218,692 |
|
|
|
239,737 |
|
|
|
434,488 |
|
|
|
471,700 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
|
13,145 |
|
|
|
15,474 |
|
|
|
27,530 |
|
|
|
31,007 |
|
Wholesale |
|
|
12,633 |
|
|
|
24,428 |
|
|
|
26,857 |
|
|
|
46,496 |
|
Product |
|
|
10,470 |
|
|
|
35,694 |
|
|
|
22,696 |
|
|
|
75,076 |
|
Total cost of revenue |
|
|
36,248 |
|
|
|
75,596 |
|
|
|
77,083 |
|
|
|
152,579 |
|
Gross profit |
|
|
182,444 |
|
|
|
164,141 |
|
|
|
357,405 |
|
|
|
319,121 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
82,311 |
|
|
|
77,838 |
|
|
|
164,585 |
|
|
|
153,415 |
|
Product, technology, and development |
|
|
36,580 |
|
|
|
37,391 |
|
|
|
72,125 |
|
|
|
73,998 |
|
General and administrative |
|
|
27,429 |
|
|
|
27,267 |
|
|
|
55,495 |
|
|
|
52,186 |
|
Goodwill and other long-lived asset impairment |
|
|
127,475 |
|
|
|
— |
|
|
|
127,475 |
|
|
|
— |
|
Depreciation and amortization |
|
|
2,233 |
|
|
|
3,907 |
|
|
|
5,025 |
|
|
|
7,725 |
|
Total operating expenses |
|
|
276,028 |
|
|
|
146,403 |
|
|
|
424,705 |
|
|
|
287,324 |
|
Income from operations |
|
|
(93,584 |
) |
|
|
17,738 |
|
|
|
(67,300 |
) |
|
|
31,797 |
|
Other income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
2,440 |
|
|
|
4,333 |
|
|
|
6,346 |
|
|
|
8,076 |
|
Other income, net |
|
|
721 |
|
|
|
347 |
|
|
|
216 |
|
|
|
942 |
|
Total other income, net |
|
|
3,161 |
|
|
|
4,680 |
|
|
|
6,562 |
|
|
|
9,018 |
|
(Loss) income before income taxes |
|
|
(90,423 |
) |
|
|
22,418 |
|
|
|
(60,738 |
) |
|
|
40,815 |
|
(Benefit from) provision for income taxes |
|
|
(21,702 |
) |
|
|
8,601 |
|
|
|
(13,318 |
) |
|
|
15,132 |
|
Consolidated net (loss) income |
|
|
(68,721 |
) |
|
|
13,817 |
|
|
|
(47,420 |
) |
|
|
25,683 |
|
Net loss attributable to redeemable noncontrolling interest |
|
|
— |
|
|
|
(2,596 |
) |
|
|
— |
|
|
|
(6,862 |
) |
Net (loss) income attributable to common stockholders |
|
$ |
(68,721 |
) |
|
$ |
16,413 |
|
|
$ |
(47,420 |
) |
|
$ |
32,545 |
|
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, our segment revenue and our segment income (loss) from operations are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(dollars in thousands) |
|
|
(dollars in thousands) |
|
||||||||||
Segment Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
180,052 |
|
|
$ |
158,443 |
|
|
$ |
353,040 |
|
|
$ |
314,064 |
|
Digital Wholesale |
|
|
23,525 |
|
|
|
68,787 |
|
|
|
52,102 |
|
|
|
133,623 |
|
Other |
|
|
15,115 |
|
|
|
12,507 |
|
|
|
29,346 |
|
|
|
24,013 |
|
Total |
|
$ |
218,692 |
|
|
$ |
239,737 |
|
|
$ |
434,488 |
|
|
$ |
471,700 |
|
Segment Income (Loss) from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
42,043 |
|
|
$ |
24,619 |
|
|
$ |
76,260 |
|
|
$ |
51,158 |
|
Digital Wholesale |
|
|
(138,158 |
) |
|
|
(6,307 |
) |
|
|
(148,498 |
) |
|
|
(17,532 |
) |
Other |
|
|
2,531 |
|
|
|
(574 |
) |
|
|
4,938 |
|
|
|
(1,829 |
) |
Total |
|
$ |
(93,584 |
) |
|
$ |
17,738 |
|
|
$ |
(67,300 |
) |
|
$ |
31,797 |
|
33
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, the Unaudited Condensed Consolidated Income Statements as a percentage of total revenue are as follows (amounts in the table below may not sum due to rounding):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
|
89 |
% |
|
|
71 |
% |
|
|
88 |
% |
|
|
72 |
% |
Wholesale |
|
|
6 |
|
|
|
13 |
|
|
|
7 |
|
|
|
12 |
|
Product |
|
|
5 |
|
|
|
15 |
|
|
|
5 |
|
|
|
16 |
|
Total revenue |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
7 |
|
Wholesale |
|
|
6 |
|
|
|
10 |
|
|
|
6 |
|
|
|
10 |
|
Product |
|
|
5 |
|
|
|
15 |
|
|
|
5 |
|
|
|
16 |
|
Total cost of revenue |
|
|
17 |
|
|
|
32 |
|
|
|
18 |
|
|
|
32 |
|
Gross profit |
|
|
83 |
|
|
|
68 |
|
|
|
82 |
|
|
|
68 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
38 |
|
|
|
32 |
|
|
|
38 |
|
|
|
33 |
|
Product, technology, and development |
|
|
17 |
|
|
|
16 |
|
|
|
17 |
|
|
|
16 |
|
General and administrative |
|
|
13 |
|
|
|
11 |
|
|
|
13 |
|
|
|
11 |
|
Goodwill and other long-lived asset impairment |
|
|
58 |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
Depreciation and amortization |
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
Total operating expenses |
|
|
126 |
|
|
|
61 |
|
|
|
98 |
|
|
|
61 |
|
Income from operations |
|
|
(43 |
) |
|
|
7 |
|
|
|
(15 |
) |
|
|
7 |
|
Other income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
Other income, net |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Total other income, net |
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
(Loss) income before income taxes |
|
|
(41 |
) |
|
|
9 |
|
|
|
(14 |
) |
|
|
9 |
|
(Benefit from) provision for income taxes |
|
|
(10 |
) |
|
|
4 |
|
|
|
(3 |
) |
|
|
3 |
|
Consolidated net (loss) income |
|
|
(31 |
) |
|
|
6 |
|
|
|
(11 |
) |
|
|
5 |
|
Net loss attributable to redeemable noncontrolling interest |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Net (loss) income attributable to common stockholders |
|
|
(31 |
)% |
|
|
7 |
% |
|
|
(11 |
)% |
|
|
7 |
% |
34
For the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023, our segment revenue as a percentage of total revenue and our segment income (loss) from operations as a percentage of segment revenue are as follows (amounts in the table below may not sum due to rounding):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Segment Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
|
82 |
% |
|
|
66 |
% |
|
|
81 |
% |
|
|
67 |
% |
Digital Wholesale |
|
|
11 |
|
|
|
29 |
|
|
|
12 |
|
|
|
28 |
|
Other |
|
|
7 |
|
|
|
5 |
|
|
|
7 |
|
|
|
5 |
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Segment Income (Loss) from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
|
23 |
% |
|
|
16 |
% |
|
|
22 |
% |
|
|
16 |
% |
Digital Wholesale |
|
|
(587 |
) |
|
|
(9 |
) |
|
|
(285 |
) |
|
|
(13 |
) |
Other |
|
|
17 |
|
|
|
(5 |
) |
|
|
17 |
|
|
|
(8 |
) |
Total |
|
|
(43 |
)% |
|
|
7 |
% |
|
|
(15 |
)% |
|
|
7 |
% |
For the three months ended June 30, 2024 and 2023
Revenue
Revenue by Source
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
$ |
195,167 |
|
|
$ |
170,950 |
|
|
$ |
24,217 |
|
|
|
14 |
% |
Wholesale |
|
|
13,119 |
|
|
|
31,952 |
|
|
|
(18,833 |
) |
|
|
(59 |
) |
Product |
|
|
10,406 |
|
|
|
36,835 |
|
|
|
(26,429 |
) |
|
|
(72 |
) |
Total |
|
$ |
218,692 |
|
|
$ |
239,737 |
|
|
$ |
(21,045 |
) |
|
|
(9 |
)% |
Percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
|
89 |
% |
|
|
71 |
% |
|
|
|
|
|
|
||
Wholesale |
|
|
6 |
|
|
|
13 |
|
|
|
|
|
|
|
||
Product |
|
|
5 |
|
|
|
15 |
|
|
|
|
|
|
|
||
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
||
Overall revenue decreased $21.0 million, or 9%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023.
Marketplace revenue increased $24.2 million, or 14%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 89% of total revenue for the three months ended June 30, 2024, compared to 71% of total revenue for the three months ended June 30, 2023. The increase was due to an increase in Listings revenue, inclusive of certain digital add-on products, as a result of growth in QARSD, which was driven by signing on new dealers with higher average subscription revenue and revenue expansion through product adoption or upgrades and price increases for existing dealers. The increase was additionally driven by an increase in TDO revenue as we expanded into more geographies following the completion of the pilot in the three months ended June 30, 2024.
Wholesale revenue decreased $18.8 million, or 59%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 6% of total revenue for the three months ended June 30, 2024, compared to 13% of total revenue for the three months ended June 30, 2023. The decrease was due primarily to a 58% decrease in Transactions, which includes Dealer-to-Dealer transactions and IMCO transactions, to 8,778 for the three months ended June 30, 2024, from 20,793 for the three months ended June 30, 2023.
35
Product revenue decreased $26.4 million, or 72%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 5% of total revenue for the three months ended June 30, 2024, compared to 15% of total revenue for the three months ended June 30, 2023. The decrease was due primarily to a decrease in proceeds received from the sale of vehicles through IMCO transactions, including lower average vehicle selling prices and lower transaction fees, due to the decrease in Transactions. The decrease in product revenue was offset in part by an increase in proceeds received from the sale of vehicles acquired through arbitration.
Segment Revenue
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
180,052 |
|
|
$ |
158,443 |
|
|
$ |
21,609 |
|
|
|
14 |
% |
Digital Wholesale |
|
|
23,525 |
|
|
|
68,787 |
|
|
|
(45,262 |
) |
|
|
(66 |
) |
Other |
|
|
15,115 |
|
|
|
12,507 |
|
|
|
2,608 |
|
|
|
21 |
|
Total |
|
$ |
218,692 |
|
|
$ |
239,737 |
|
|
$ |
(21,045 |
) |
|
|
(9 |
)% |
Percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
|
82 |
% |
|
|
66 |
% |
|
|
|
|
|
|
||
Digital Wholesale |
|
|
11 |
|
|
|
29 |
|
|
|
|
|
|
|
||
Other |
|
|
7 |
|
|
|
5 |
|
|
|
|
|
|
|
||
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
||
U.S. Marketplace segment revenue increased $21.6 million, or 14%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 82% of total revenue for the three months ended June 30, 2024, compared to 66% of total revenue for the three months ended June 30, 2023. The increase was due primarily to a $24.2 million increase in marketplace revenue, as described above.
Digital Wholesale segment revenue, which is comprised of wholesale revenue and product revenue, decreased $45.3 million, or 66%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 11% of total revenue for the three months ended June 30, 2024, compared to 29% of total revenue for the three months ended June 30, 2023. The decrease in Digital Wholesale segment revenue was due to an $18.8 million decrease in wholesale revenue and a $26.4 million decrease in product revenue, as described above.
Cost of Revenue
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Cost of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
$ |
13,145 |
|
|
$ |
15,474 |
|
|
$ |
(2,329 |
) |
|
|
(15 |
)% |
Wholesale |
|
|
12,633 |
|
|
|
24,428 |
|
|
|
(11,795 |
) |
|
|
(48 |
) |
Product |
|
|
10,470 |
|
|
|
35,694 |
|
|
|
(25,224 |
) |
|
|
(71 |
) |
Total |
|
$ |
36,248 |
|
|
$ |
75,596 |
|
|
$ |
(39,348 |
) |
|
|
(52 |
)% |
Percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
|
6 |
% |
|
|
6 |
% |
|
|
|
|
|
|
||
Wholesale |
|
|
6 |
|
|
|
10 |
|
|
|
|
|
|
|
||
Product |
|
|
5 |
|
|
|
15 |
|
|
|
|
|
|
|
||
Total |
|
|
17 |
% |
|
|
32 |
% |
|
|
|
|
|
|
||
Overall cost of revenue decreased $39.3 million, or 52%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023.
36
Marketplace cost of revenue decreased $2.3 million, or 15%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 6% of total revenue for both the three months ended June 30, 2024 and 2023. The decrease was due primarily to a $1.4 million decrease in fees related to provisioning advertising campaigns on our websites.
Wholesale cost of revenue decreased $11.8 million, or 48%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 6% of total revenue for the three months ended June 30, 2024, compared to 10% of total revenue for the three months ended June 30, 2023. The decrease was due primarily to a $6.0 million decrease in transportation expense and a $1.4 million decrease in inspection expense as a result of lower Transaction volume. The decrease was also due in part to a $3.8 million decrease in amortization, primarily due to the acquired developed technology intangible asset as it became fully amortized during the first quarter of 2024.
Product cost of revenue decreased $25.2 million, or 71%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 5% of total revenue for the three months ended June 30, 2024, compared to 15% of total revenue for the three months ended June 30, 2023. The decrease was due primarily to a decrease in expenses related to vehicles sold to dealers through IMCO transactions as a result of lower Transaction volume. The decrease in product cost of revenue was offset in part by an increase in expenses related to vehicles sold to dealers acquired through arbitration.
Operating Expenses
Sales and Marketing Expense
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Sales and marketing |
|
$ |
82,311 |
|
|
$ |
77,838 |
|
|
$ |
4,473 |
|
|
|
6 |
% |
Percentage of total revenue |
|
|
38 |
% |
|
|
32 |
% |
|
|
|
|
|
|
||
Sales and marketing expense increased $4.5 million, or 6%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase was due primarily to a $4.0 million increase in advertising and marketing expense for strategic advertising spend with our performance marketing vendors to maintain year-over-year lead volume and grow with the market. The increase in sales and marketing expense was further driven by our new brand campaign and marketing efforts.
Product, Technology, and Development Expense
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Product, technology, and development |
|
$ |
36,580 |
|
|
$ |
37,391 |
|
|
$ |
(811 |
) |
|
|
(2 |
)% |
Percentage of total revenue |
|
|
17 |
% |
|
|
16 |
% |
|
|
|
|
|
|
||
Product, technology, and development expense decreased $0.8 million, or 2%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The decrease was due primarily to a $2.3 million decrease in expense as a result of increased website development capitalization. The decrease was offset in part by a $1.3 million increase in salaries and employee-related expenses due primarily to merit increases.
37
General and Administrative Expense
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
General and administrative |
|
$ |
27,429 |
|
|
$ |
27,267 |
|
|
$ |
162 |
|
|
|
1 |
% |
Percentage of total revenue |
|
|
13 |
% |
|
|
11 |
% |
|
|
|
|
|
|
||
General and administrative expense remained relatively flat during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.
Goodwill and Other Long-Lived Asset Impairment
|
|
Three Months Ended |
|
|
Change |
|||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|||
|
|
(dollars in thousands) |
||||||||||||
Goodwill and other long-lived asset impairment |
|
$ |
127,475 |
|
|
$ |
— |
|
|
$ |
127,475 |
|
|
NM (1) |
Percentage of total revenue |
|
|
58 |
% |
|
|
0 |
% |
|
|
|
|
|
|
Goodwill and other long-lived asset impairment increased $127.5 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023. During the three months ended June 30, 2024, we identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to our financial projections for the CarOffer reporting unit. As a result, we performed an updated fair value analysis of the CarOffer reporting unit, and subsequently recognized impairment losses of $4.7 million, $7.5 million, and $115.2 million for right-of-use assets, intangible assets, and goodwill, respectively. For further discussion of impairments related to right-of-use assets, intangible assets, and goodwill in the CarOffer reporting unit, refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
Depreciation and Amortization Expense
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
2,233 |
|
|
$ |
3,907 |
|
|
$ |
(1,674 |
) |
|
|
(43 |
)% |
Percentage of total revenue |
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Depreciation and amortization expense decreased $1.7 million, or 43%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The decrease was due primarily to the customer relationships intangible asset related to the Digital Wholesale segment becoming fully amortized during the first quarter of 2024.
Other Income, net
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Other income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
2,440 |
|
|
$ |
4,333 |
|
|
$ |
(1,893 |
) |
|
|
(44 |
)% |
Other income, net |
|
|
721 |
|
|
|
347 |
|
|
|
374 |
|
|
|
108 |
|
Total other income, net |
|
$ |
3,161 |
|
|
$ |
4,680 |
|
|
$ |
(1,519 |
) |
|
|
(32 |
)% |
Percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Other income, net |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
||
Total other income, net |
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
38
Total other income, net decreased $1.5 million, or 32%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The $1.9 million decrease in interest income was due primarily to the decrease in cash equivalents to fund the 2024 Share Repurchase Program (as defined below). Other income, net was relatively flat for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
(Benefit from) Provision for Income Taxes
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
(Benefit from) provision for income taxes |
|
$ |
(21,702 |
) |
|
$ |
8,601 |
|
|
$ |
(30,303 |
) |
|
|
(352 |
)% |
Percentage of total revenue |
|
|
(10 |
)% |
|
|
4 |
% |
|
|
|
|
|
|
||
(Benefit from) provision for income taxes changed $30.3 million, or 352%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to increased federal and state research development tax credits and a $31.5 million discrete deferred tax benefit in association with the goodwill and long-term assets impairment charges related to the CarOffer reporting unit recognized during the three months ended June 30, 2024. This was partially offset by a net $1.2 million tax expense related to the windfalls on the taxable compensation of stock-based awards and the Section 162(m) excess officer compensation limitation recognized during the three months ended June 30, 2024, compared to an aggregated $2.6 million shortfalls on the taxable compensation of stock-based awards and the Section 162(m) excess officer compensation limitation recognized during the three months ended June 30, 2023.
Segment Income (Loss) from Operations
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Segment Income (Loss) from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
42,043 |
|
|
$ |
24,619 |
|
|
$ |
17,424 |
|
|
|
71 |
% |
Digital Wholesale |
|
|
(138,158 |
) |
|
|
(6,307 |
) |
|
|
(131,851 |
) |
|
|
(2,091 |
) |
Other |
|
|
2,531 |
|
|
|
(574 |
) |
|
|
3,105 |
|
|
|
541 |
|
Total |
|
$ |
(93,584 |
) |
|
$ |
17,738 |
|
|
$ |
(111,322 |
) |
|
|
(628 |
)% |
Percentage of segment revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
|
23 |
% |
|
|
16 |
% |
|
|
|
|
|
|
||
Digital Wholesale |
|
|
(587 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
||
Other |
|
|
17 |
|
|
|
(5 |
) |
|
|
|
|
|
|
||
Total |
|
|
(43 |
)% |
|
|
7 |
% |
|
|
|
|
|
|
||
U.S. Marketplace segment income from operations increased $17.4 million, or 71%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented 23% of U.S. Marketplace segment revenue for the three months ended June 30, 2024, compared to 16% of U.S. Marketplace segment revenue for the three months ended June 30, 2023. The increase was due to an increase in revenue of $21.6 million, a decrease in cost of revenue of $2.3 million, and an increase in operating expenses of $6.5 million.
Digital Wholesale segment loss from operations increased $131.9 million, or 2,091%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and represented (587)% of Digital Wholesale segment revenue for the three months ended June 30, 2024, compared to (9)% of Digital Wholesale segment revenue for the three months ended June 30, 2023. The increase in the loss was due to a decrease in revenue of $45.3 million, a decrease in cost of revenue of $37.0 million, and an increase in operating expenses of $123.6 million. The increase in operating expenses was inclusive of $127.5 million of impairment expense related to the CarOffer reporting unit. For further discussion of impairments related to right-of-use assets, intangible assets and goodwill in the CarOffer reporting unit, refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
39
For the six months ended June 30, 2024 and 2023
Revenue
Revenue by Source
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
$ |
382,386 |
|
|
$ |
338,077 |
|
|
$ |
44,309 |
|
|
|
13 |
% |
Wholesale |
|
|
29,244 |
|
|
|
57,138 |
|
|
|
(27,894 |
) |
|
|
(49 |
) |
Product |
|
|
22,858 |
|
|
|
76,485 |
|
|
|
(53,627 |
) |
|
|
(70 |
) |
Total |
|
$ |
434,488 |
|
|
$ |
471,700 |
|
|
$ |
(37,212 |
) |
|
|
(8 |
)% |
Percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
|
88 |
% |
|
|
72 |
% |
|
|
|
|
|
|
||
Wholesale |
|
|
7 |
|
|
|
12 |
|
|
|
|
|
|
|
||
Product |
|
|
5 |
|
|
|
16 |
|
|
|
|
|
|
|
||
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
||
Overall revenue decreased $37.2 million, or 8%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023.
Marketplace revenue increased $44.3 million, or 13%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 88% of total revenue for the six months ended June 30, 2024, compared to 72% of total revenue for the six months ended June 30, 2023. The increase was due to an increase in Listings revenue, inclusive of certain digital add-on products, as a result of growth in QARSD, which was driven by signing on new dealers with higher average subscription revenue and revenue expansion through product adoption or upgrades and price increases for existing dealers. The increase was additionally driven by an increase in TDO revenue as we expanded into more geographies following the completion of the pilot in the six months ended June 30, 2024.
Wholesale revenue decreased $27.9 million, or 49%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 7% of total revenue for the six months ended June 30, 2024, compared to 12% of total revenue for the six months ended June 30, 2023. The decrease was due primarily to a 50% decrease in Transactions, which includes Dealer-to-Dealer transactions and IMCO transactions, to 19,080 for the six months ended June 30, 2024, from 38,298 for the six months ended June 30, 2023.
Product revenue decreased $53.6 million, or 70%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 5% of total revenue for the six months ended June 30, 2024, compared to 16% of total revenue for the six months ended June 30, 2023. The decrease was due primarily to a decrease in proceeds received from the sale of vehicles through IMCO transactions, including lower average vehicle selling prices and lower transaction fees, due to the decrease in Transactions, as well as a decrease in average vehicle selling price. The decrease in product revenue was also due in part to a decrease in proceeds received from the sale of vehicles acquired through arbitration as a result of decreased arbitration claims primarily due to lower Transaction volume.
40
Segment Revenue
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
353,040 |
|
|
$ |
314,064 |
|
|
$ |
38,976 |
|
|
|
12 |
% |
Digital Wholesale |
|
|
52,102 |
|
|
|
133,623 |
|
|
|
(81,521 |
) |
|
|
(61 |
) |
Other |
|
|
29,346 |
|
|
|
24,013 |
|
|
|
5,333 |
|
|
|
22 |
|
Total |
|
$ |
434,488 |
|
|
$ |
471,700 |
|
|
$ |
(37,212 |
) |
|
|
(8 |
)% |
Percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
|
81 |
% |
|
|
67 |
% |
|
|
|
|
|
|
||
Digital Wholesale |
|
|
12 |
|
|
|
28 |
|
|
|
|
|
|
|
||
Other |
|
|
7 |
|
|
|
5 |
|
|
|
|
|
|
|
||
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
||
U.S. Marketplace segment revenue increased $39.0 million, or 12%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 81% of total revenue for the six months ended June 30, 2024, compared to 67% of total revenue for the six months ended June 30, 2023. The increase was due primarily to a $44.3 million increase in marketplace revenue, as described above.
Digital Wholesale segment revenue, which is comprised of wholesale revenue and product revenue, decreased $81.5 million, or 61%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 12% of total revenue for the six months ended June 30, 2024, compared to 28% of total revenue for the six months ended June 30, 2023. The decrease in Digital Wholesale segment revenue was due to a $27.9 million decrease in wholesale revenue and a $53.6 million decrease in product revenue, as described above.
Cost of Revenue
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Cost of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
$ |
27,530 |
|
|
$ |
31,007 |
|
|
$ |
(3,477 |
) |
|
|
(11 |
)% |
Wholesale |
|
|
26,857 |
|
|
|
46,496 |
|
|
|
(19,639 |
) |
|
|
(42 |
) |
Product |
|
|
22,696 |
|
|
|
75,076 |
|
|
|
(52,380 |
) |
|
|
(70 |
) |
Total |
|
$ |
77,083 |
|
|
$ |
152,579 |
|
|
$ |
(75,496 |
) |
|
|
(49 |
)% |
Percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
|
6 |
% |
|
|
7 |
% |
|
|
|
|
|
|
||
Wholesale |
|
|
6 |
|
|
|
10 |
|
|
|
|
|
|
|
||
Product |
|
|
5 |
|
|
|
16 |
|
|
|
|
|
|
|
||
Total |
|
|
18 |
% |
|
|
32 |
% |
|
|
|
|
|
|
||
Overall cost of revenue decreased $75.5 million, or 49%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023.
Marketplace cost of revenue decreased $3.5 million, or 11%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 6% of total revenue for the six months ended June 30, 2024, compared to 7% of total revenue for the six months ended June 30, 2023. The decrease was due primarily to a $2.6 million decrease in fees related to provisioning advertising campaigns on our websites.
41
Wholesale cost of revenue decreased $19.6 million, or 42%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 6% of total revenue for the six months ended June 30, 2024, compared to 10% of total revenue for the six months ended June 30, 2023. The decrease was due primarily to a $9.4 million decrease in transportation expense and a $2.4 million decrease in inspection expense as a result of lower Transaction volume. The decrease was also due in part to a $7.0 million decrease in amortization, primarily due to the acquired developed technology intangible asset as it became fully amortized during the first quarter of 2024.
Product cost of revenue decreased $52.4 million, or 70%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 5% of total revenue for the six months ended June 30, 2024, compared to 16% of total revenue for the six months ended June 30, 2023. The decrease was due primarily to a decrease in expenses related to vehicles sold to dealers through IMCO transactions as a result of decreased Transactions. The decrease in product cost of revenue was also due in part to a decrease in expenses related to vehicles sold to dealers acquired through arbitration as a result of decreased arbitration claims primarily due to lower Transaction volume.
Operating Expenses
Sales and Marketing Expense
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Sales and marketing |
|
$ |
164,585 |
|
|
$ |
153,415 |
|
|
$ |
11,170 |
|
|
|
7 |
% |
Percentage of total revenue |
|
|
38 |
% |
|
|
33 |
% |
|
|
|
|
|
|
||
Sales and marketing expense increased $11.2 million, or 7%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase was due primarily to a $10.7 million increase in advertising and marketing expense for strategic advertising spend with our performance marketing vendors to maintain year-over-year lead volume and grow with the market. The increase in sales and marketing expense was further driven by our new brand campaign and marketing efforts.
Product, Technology, and Development Expense
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Product, technology, and development |
|
$ |
72,125 |
|
|
$ |
73,998 |
|
|
$ |
(1,873 |
) |
|
|
(3 |
)% |
Percentage of total revenue |
|
|
17 |
% |
|
|
16 |
% |
|
|
|
|
|
|
||
Product, technology, and development expense decreased $1.9 million, or 3%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The decrease was due primarily to a $4.6 million decrease in expenses as a result of increased website development capitalization and a $1.7 million decrease in consulting services. The decrease was offset in part by a $2.5 million increase in salaries and employee-related expenses due primarily to merit increases and a $0.9 million increase in software subscriptions.
General and Administrative Expense
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
General and administrative |
|
$ |
55,495 |
|
|
$ |
52,186 |
|
|
$ |
3,309 |
|
|
|
6 |
% |
Percentage of total revenue |
|
|
13 |
% |
|
|
11 |
% |
|
|
|
|
|
|
||
General and administrative expense increased $3.3 million, or 6%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase was due primarily to a $3.4 million increase in salaries and employee-related expenses, due primarily to an 8% increase in headcount and merit increases.
42
Goodwill and Other Long-Lived Asset Impairment
|
|
Six Months Ended |
|
|
Change |
|||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|||
|
|
(dollars in thousands) |
||||||||||||
Goodwill and other long-lived asset impairment |
|
$ |
127,475 |
|
|
$ |
— |
|
|
$ |
127,475 |
|
|
NM (1) |
Percentage of total revenue |
|
|
29 |
% |
|
|
0 |
% |
|
|
|
|
|
|
Goodwill and other long-lived asset Impairment increased $127.5 million in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. During the three months ended June 30, 2024, we identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to our financial projections for the CarOffer reporting unit. As a result, we performed an updated fair value analysis of the CarOffer reporting unit, and subsequently recognized impairment losses of $4.7 million, $7.5 million, and $115.2 million for right-of-use assets, intangible assets, and goodwill, respectively. For further discussion of impairments related to right-of-use assets, intangible assets, and goodwill in the CarOffer reporting unit, refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
Depreciation and Amortization Expense
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
5,025 |
|
|
$ |
7,725 |
|
|
$ |
(2,700 |
) |
|
|
(35 |
)% |
Percentage of total revenue |
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Depreciation and amortization expense decreased $2.7 million, or 35%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The decrease was due primarily to the customer relationships intangible asset related to the Digital Wholesale segment becoming fully amortized during the first quarter of 2024.
Other Income, net
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Other income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
6,346 |
|
|
$ |
8,076 |
|
|
$ |
(1,730 |
) |
|
|
(21 |
)% |
Other income, net |
|
|
216 |
|
|
|
942 |
|
|
|
(726 |
) |
|
|
(77 |
) |
Total other income, net |
|
$ |
6,562 |
|
|
$ |
9,018 |
|
|
$ |
(2,456 |
) |
|
|
(27 |
)% |
Percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Other income, net |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
||
Total other income, net |
|
|
2 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Total other income, net decreased $2.5 million, or 27%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The $1.7 million decrease in interest income was due primarily to the decrease in cash equivalents to fund the 2024 Share Repurchase Program. The decrease in interest income was also due in part to the sale of short-term investments during the first quarter of 2024. The $0.7 million decrease in other income, net was due primarily to immaterial foreign currency losses in the current year compared to immaterial foreign currency gains in the prior year.
43
(Benefit from) Provision for Income Taxes
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
(Benefit from) provision for income taxes |
|
$ |
(13,318 |
) |
|
$ |
15,132 |
|
|
$ |
(28,450 |
) |
|
|
(188 |
)% |
Percentage of total revenue |
|
|
(3 |
)% |
|
|
3 |
% |
|
|
|
|
|
|
||
(Benefit from) provision for income taxes changed $28.5 million, or 188%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to increased federal and state research and development tax credits and a $31.5 million discrete deferred tax benefit in association with the goodwill and long-term assets impairment charges related to the CarOffer reporting unit recognized during the six months ended June 30, 2024 This was partially offset by a net $1.6 million tax expense related to the windfalls on the taxable compensation of stock-based awards and the Section 162(m) excess officer compensation limitation recognized during the six months ended June 30, 2024, compared to an aggregated $4.2 million shortfalls on the taxable compensation of stock-based awards and the Section 162(m) excess officer compensation limitation recognized during the six months ended June 30, 2023.
Segment Income (Loss) from Operations
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Segment Income (Loss) from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
$ |
76,260 |
|
|
$ |
51,158 |
|
|
$ |
25,102 |
|
|
|
49 |
% |
Digital Wholesale |
|
|
(148,498 |
) |
|
|
(17,532 |
) |
|
|
(130,966 |
) |
|
|
(747 |
) |
Other |
|
|
4,938 |
|
|
|
(1,829 |
) |
|
|
6,767 |
|
|
|
370 |
|
Total |
|
$ |
(67,300 |
) |
|
$ |
31,797 |
|
|
$ |
(99,097 |
) |
|
|
(312 |
)% |
Percentage of segment revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Marketplace |
|
|
22 |
% |
|
|
16 |
% |
|
|
|
|
|
|
||
Digital Wholesale |
|
|
(285 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
||
Other |
|
|
17 |
|
|
|
(8 |
) |
|
|
|
|
|
|
||
Total |
|
|
(15 |
)% |
|
|
7 |
% |
|
|
|
|
|
|
||
U.S. Marketplace segment income from operations increased $25.1 million, or 49%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented 22% of U.S. Marketplace segment revenue for the six months ended June 30, 2024, compared to 16% of U.S. Marketplace segment revenue for the six months ended June 30, 2023. The increase was due to an increase in revenue of $39.0 million, a decrease in cost of revenue of $3.4 million, and an increase in operating expenses of $17.3 million.
Digital Wholesale segment loss from operations increased $131.0 million, or 747%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and represented (285)% of Digital Wholesale segment revenue for the six months ended June 30, 2024, compared to (13)% of Digital Wholesale segment revenue for the six months ended June 30, 2023. The increase in the loss was due to a decrease in revenue of $81.5 million, a decrease in cost of revenue of $72.0 million, and an increase in operating expenses of $121.5 million. The increase in operating expenses was inclusive of $127.5 million of impairment expense related to the CarOffer reporting unit. For further discussion of impairments related to right-of-use assets, intangible assets and goodwill in the CarOffer reporting unit, refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
Liquidity and Capital Resources
Cash, Cash Equivalents, Short-term Investments, and Borrowing Capacity
As of June 30, 2024, our principal sources of liquidity were cash and cash equivalents of $216.2 million. As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents of $291.4 million and short-term investments of $20.7 million. As of June 30, 2024, our borrowing capacity under the 2022 Revolver (as defined below) was $390.6 million.
44
Sources and Uses of Cash
During the six months ended June 30, 2024 and 2023, our cash flows from operating, investing, and financing activities, as reflected in the Unaudited Condensed Consolidated Statements of Cash Flows, were as follows:
|
|
Six Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(dollars in thousands) |
|
|||||
Net cash provided by operating activities |
|
$ |
123,561 |
|
|
$ |
95,681 |
|
Net cash used in investing activities |
|
|
(44,373 |
) |
|
|
(104,334 |
) |
Net cash used in financing activities |
|
|
(153,975 |
) |
|
|
(101,069 |
) |
Impact of foreign currency on cash |
|
|
(774 |
) |
|
|
211 |
|
Net decrease in cash, cash equivalents, and restricted cash |
|
$ |
(75,561 |
) |
|
$ |
(109,511 |
) |
Our operations have been financed primarily from operating activities. During the six months ended June 30, 2024 and 2023, we generated cash from operating activities of $123.6 million and $95.7 million, respectively.
We believe that our existing sources of liquidity, including access to the 2022 Revolver, will be sufficient to fund our operations for at least the next 12 months from the date of the filing of this Quarterly Report. Our future capital requirements will depend on many factors, including our revenue; expenses associated with our sales and marketing activities and the support of our product, technology, and development efforts; expenses associated with our facilities buildout under our 1001 Boylston Street lease in excess of tenant improvement allowance; payments received in advance from a third-party transaction processor; activity under the 2024 Share Repurchase Program; and our investments in international markets. Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, macroeconomic effects and other risks detailed more specifically in the “Risk Factors” section in Part I, Item 1A in our Annual Report and in the “Risk Factors” section in Part II, Item 1A in this Quarterly Report.
On September 26, 2022, we entered into a Credit Agreement with PNC Bank, National Association, as administrative agent and collateral agent and an L/C Issuer (as defined in the Credit Agreement), and the other lenders, L/C Issuers and parties thereto from time to time, or the Credit Agreement. The Credit Agreement consists of a revolving credit facility, or the 2022 Revolver, which allows us to borrow up to $400.0 million, $50.0 million of which may be comprised of a letter of credit sub-facility. The borrowing capacity under the Credit Agreement may be increased in accordance with the terms and subject to the adjustments as set forth in the Credit Agreement. Specifically, the borrowing capacity may be increased by an amount up to the greater of $250.0 million or 100% of Four Quarter Consolidated EBITDA (as defined in the Credit Agreement) if certain criteria are met and subject to certain restrictions. Any such increase requires lender approval. Proceeds of any borrowings may be used for general corporate purposes. The 2022 Revolver is scheduled to mature on September 26, 2027. As of June 30, 2024, there were no borrowings and $9.4 million in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390.6 million. As of December 31, 2023, there were no borrowings and $9.6 million in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390.4 million.
In connection with the 1001 Boylston Street lease, we expect to spend an additional $16.3 million to complete our buildout, of which $11.5 million has been committed and remains unspent as of June 30, 2024. These costs will be partially reimbursable under the tenant improvement allowance.
45
On November 7, 2023, we announced that our Board of Directors authorized a share repurchase program, or the 2024 Share Repurchase Program, pursuant to which we may, from time to time, purchase shares of our Class A common stock for an aggregate purchase price not to exceed $250.0 million. Share repurchases under the 2024 Share Repurchase Program may be made through a variety of methods, including but not limited to open market purchases, privately negotiated transactions, and transactions that may be effected pursuant to one or more plans under Rule 10b5-1 and/or Rule 10b-18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The 2024 Share Repurchase Program does not obligate us to repurchase any minimum dollar amount or number of shares. The 2024 Share Repurchase Program has an effective date of January 1, 2024, and an expiration date of December 31, 2024, and prior to its expiration may be modified, suspended, or discontinued by our Board of Directors at any time without prior notice. All repurchased shares of our Class A common stock under the 2024 Share Repurchase Program will be retired. We have funded share repurchases and expect to continue to fund any additional share repurchases under the 2024 Share Repurchase Program through cash on hand and cash generated from operations. During the three months ended June 30, 2024, we repurchased and retired 2,654,807 shares for $61.4 million, exclusive of commissions and excise tax, at an average cost of $23.11 per share under the 2024 Share Repurchase Program. During the six months ended June 30, 2024, we repurchased and retired 6,193,001 shares for $142.4 million, exclusive of commissions and excise tax, at an average cost of $23.00 per share under the 2024 Share Repurchase Program. As of June 30, 2024, we had remaining authorization to purchase up to $107.6 million of our Class A common stock under the 2024 Share Repurchase Program.
To the extent that our operating income, existing cash, cash equivalents, and our borrowing capacity under the 2022 Revolver are insufficient to fund our future activities, we may need to raise additional funds through a public or private equity or debt financing. Additional funds may not be available on terms favorable to us, or at all. See “Risk Factors—Risks Related to Our Business and Industry—We may require additional capital to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances. If we are unable to generate sufficient cash flows or if capital is not available to us, our business, operating results, financial condition, and prospects could be adversely affected.” in Part I, Item 1A in our Annual Report.
Operating Activities
Net cash provided by operating activities of $123.6 million during the six months ended June 30, 2024 was due primarily to consolidated net loss of $47.4 million, adjusted for $127.7 million of goodwill and other long-lived asset impairment due to recent organizational changes and Transaction volume declines, which resulted in revisions to the Company’s financial projections for the CarOffer reporting unit, $31.2 million of stock-based compensation expense for equity classified awards to employees, $44.2 million of deferred taxes, and depreciation and amortization expense of $13.1 million. Net cash provided by operating activities was also attributable to a $27.4 million increase in lease obligations primarily related to our new headquarters at 1001 Boylston Street.
Net cash provided by operating activities of $95.7 million during the six months ended June 30, 2023 was due primarily to consolidated net income of $25.7 million, adjusted for $29.5 million of stock-based compensation expense for equity classified awards, $23.2 million of depreciation and amortization, and $5.6 million of amortization of deferred contract costs, partially offset by $16.4 million of deferred taxes and $0.5 million of gain on sale of property and equipment. Net cash provided by operating activities was also attributable to a $13.2 million decrease in accounts receivable, a $9.0 million increase in deferred revenue, a $7.6 million increase in lease obligations, a $4.7 million decrease in inventory, a $4.1 million increase in accounts payable, and a $3.5 million decrease in prepaid expenses, prepaid income taxes, and other assets. The increases in cash flow from operations were partially offset by a $9.7 million increase in deferred contract costs and a $4.1 million decrease in accrued expenses, accrued income taxes, and other liabilities.
Investing Activities
Net cash used in investing activities of $44.4 million during the six months ended June 30, 2024 was due primarily to $54.6 million in purchases of property and equipment primarily related to our new headquarters at 1001 Boylston Street and $10.7 million in capitalized website development costs due to continued investment in our product offerings, offset in part by $21.2 million in sales of short-term investments.
Net cash used in investing activities of $104.3 million during the six months ended June 30, 2023 was due to $95.5 million in purchases of short-term investments, $7.4 million of capitalization of website development costs, $4.2 million of purchases of property and equipment, and $2.6 million in advance payments to customer, offset in part by $5.0 million of sales of short-term investments and $0.5 million in proceeds from the sale of property and equipment.
46
Financing Activities
Net cash used in financing activities of $154.0 million during the six months ended June 30, 2024 was due primarily to $142.5 million related to the repurchase of our Class A common stock under the 2024 Share Repurchase Program and $11.4 million related to the payment of withholding taxes on net share settlements of restricted stock units.
Net cash used in financing activities of $101.1 million during the six months ended June 30, 2023 was due primarily to $91.5 million of payment for the repurchase of our Class A common stock under the share repurchase program announced by our Board of Directors in December 2022, pursuant to which we could, from time to time, purchase of shares of our Class A common stock for an aggregate purchase price not to exceed $250.0 million, $6.9 million of payment of withholding taxes on net share settlements of restricted stock units, and $2.7 million of change in gross advance payments received from third-party transaction processor.
Contractual Obligations and Known Future Cash Requirements
As of June 30, 2024, there were no material changes in our contractual obligations and commitments from those disclosed in our Annual Report, other than those appearing in the notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report, which are hereby incorporated by reference.
Seasonality
Across the retail automotive industry, consumer purchases are typically greatest in the first three quarters of each year, due in part to the introduction of new vehicle models from manufacturers and the seasonal nature of consumer spending. Additionally, the volume of wholesale vehicle sales can fluctuate from quarter to quarter driven by several factors, including the timing of used vehicles available for sale from selling customers, the seasonality of the retail market for used vehicles, and/or inventory challenges in the automotive industry, which affect the demand side of the wholesale industry.
Macroeconomic conditions, such as slower growth or recession, higher interest rates, unemployment, consumer confidence in the economy, consumer debt levels, labor, disruptions, work stoppages, or strikes, the ongoing military conflict between Russia and Ukraine, the conflict in Israel and surrounding areas and the possible expansion of such conflict, foreign currency exchange rate fluctuations, and other matters that influence consumer spending and preferences, can also impact the volume of wholesale vehicle sales, as was evidenced by the global semiconductor chip shortage and other supply related shortages.
The Digital Wholesale segment operating results have reflected the general seasonality of the wholesale vehicle sales market and macroeconomic conditions of the automotive industry. The U.S. Marketplace segment operating results have reflected the macroeconomic conditions of the automotive industry. However, to date, the U.S. Marketplace segment operating results have not been materially impacted by the general seasonality of the automotive industry. This could possibly change as our business and markets mature.
As a result, revenue and cost of revenue related to volume will fluctuate accordingly on a quarterly basis. Typical seasonality trends may not be observed in periods where other external factors more significantly impact the wholesale industry.
Off-Balance Sheet Arrangements
As of June 30, 2024 and December 31, 2023, we did not have any off-balance sheet arrangement or material leases that are less than 12 months in duration that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Estimates
The preparation of the Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.
47
Although we regularly assess these estimates, actual results could differ materially from these estimates. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from management's estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Changes in estimates are recognized in the period in which they become known.
Critical estimates relied upon in preparing the Unaudited Condensed Consolidated Financial Statements include the determination of sales allowance and variable consideration in our revenue recognition, allowance for doubtful accounts, the impairment of long-lived assets, the capitalization of product, technology, and development costs for website development, internal-use software and hosting arrangements, the valuation of acquired assets and liabilities, the valuation and recoverability of intangible assets and goodwill, the valuation of redeemable noncontrolling interest, the recoverability of our net deferred tax assets and related valuation allowance, the valuation of inventory, and the valuation of liability-classified compensation awards. Accordingly, we consider these to be our critical accounting estimates and believe that of our significant accounting policies, these involve the greatest degree of judgment and complexity. For the three and six months ended June 30, 2024, there were no estimates related to the valuation of redeemable noncontrolling interest and the valuation of liability-classified compensation awards.
During the three months ended June 30, 2024, we identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to our financial projections for the CarOffer reporting unit. We performed an updated fair value analysis of the CarOffer reporting unit, resulting in an excess of carrying value over fair value of the CarOffer reporting unit.
Due to the partial impairment of the CarOffer reporting unit goodwill, the remaining goodwill balance related to this reporting unit is still considered to be at risk for future impairments. If projected future operating results further decline, including as a result of economic conditions or operational challenges, we may need to record additional impairment charges to further reduce the goodwill at the CarOffer reporting unit, which could be material and negatively affect our operations.
For further discussion of impairments related to right-of-use assets, intangible assets, and goodwill in the CarOffer reporting unit, refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
For a detailed explanation of the judgments made in these areas, refer to Note 2 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.
Recently Issued Accounting Pronouncements
Information concerning recently issued accounting pronouncements may be found in Note 2 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
48
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may affect our financial position due to adverse changes in financial market prices and rates. We are exposed to market risks as described below.
Interest Rate Risk
As of June 30, 2024, our exposure to market risk associated with changes in interest rates relates primarily to the 2022 Revolver, which allows us to borrow up to $400.0 million. The applicable interest rate is, at our option, based on a number of different benchmark rates and applicable spreads, as determined by the Consolidated Secured Net Leverage Ratio (as defined in Note 8 of the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report). A fluctuation in interest rates does not have an impact on interest expense unless the 2022 Revolver is drawn upon. Such impact would also be dependent on the amount of the draw. As of June 30, 2024, there were no borrowings and $9.4 million in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390.6 million. As of December 31, 2023, there were no borrowings and $9.6 million in letters of credit outstanding under the 2022 Revolver, which reduced the borrowing capacity under the 2022 Revolver to $390.4 million.
As of June 30, 2024, we had cash and cash equivalents of $216.2 million, which consisted of bank deposits, money market accounts, and mutual funds. As of December 31, 2023, we had cash, cash equivalents, and short-term investments of $312.1 million, which consisted of bank deposits, money market accounts, and mutual funds.
Such interest-earning instruments carry a degree of interest rate risk. Given recent changes in the interest rate environment and in an effort to ensure liquidity, we expect variable returns from our cash equivalents for the foreseeable future. To date, fluctuations resulting from changes in the interest rate environment in interest income have not been material to the operations of the business.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations to date. However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, operating results, and financial condition. Additionally, inflationary pressures could negatively impact vehicle purchasing behavior, which could have an adverse impact on our financial results.
Foreign Currency Exchange Risk
As of June 30, 2024 and December 31, 2023, we had immaterial foreign currency exposures in the British pound, the Euro, and the Canadian dollar. Historically, because our operations and sales have been primarily in the U.S., we have not faced any significant foreign currency risk.
As we seek to grow our international operations in Canada and the U.K., our risks associated with fluctuation in currency rates may become greater, and we will continue to reassess our approach to managing these risks.
49
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report.
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As described below, based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report, management identified a material weakness in our internal control over financial reporting. As a result of the material weakness, our Principal Executive Officer and Principal Financial Officer have concluded that, as of such date, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized, and reported as and when required.
Notwithstanding this material weakness noted above, our management, including our Principal Executive Officer and Principal Financial Officer, has concluded that our financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with GAAP.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The control deficiencies, which, in the aggregate, were assessed as a material weakness as disclosed in our Annual Report, have not yet been fully remediated.
At December 31, 2023, we had unremediated operational control deficiencies at CarOffer associated with the operation of logical access and change management of information technology, or IT, general controls, or IT General Controls, around program change and logical access in certain IT systems. Therefore, we were not able to have consistent, effective operation of manual controls that rely on data produced by and maintained within these affected IT systems. As of June 30, 2024, management was unable to demonstrate the consistent, effective operation of IT General Controls and manual controls that rely on data produced by and maintained within affected IT systems due to the limited remediation period. As a result, we did not have effective operation of internal controls over financial reporting to address the risks of material misstatement of various financial statement accounts at June 30, 2024. Management has determined that the impact of the previously identified deficiencies continue to aggregate into a material weakness at June 30, 2024.
This material weakness did not result in a known material misstatement to our financial statements. However, the material weakness could have resulted in material misstatements in our interim or annual financial statements and disclosures which then may not have been prevented or detected. The material weakness also impacts the effectiveness of segregation of duties, impacts the effectiveness of financial controls which rely on information from relevant financial systems, and increases the reliance on corporate accounting personnel to identify errors at the CarOffer subsidiary level.
50
Remediation Plan
To address the material weaknesses in our internal control over financial reporting as of December 31, 2023, we have continued remediation efforts outlined in previous financial statements, as applicable, including enhancing our control procedures, and in some cases, increasing the frequency at which controls are performed for logical access in IT systems. In addition, until remediation steps have been completed and are operated for a sufficient period of time, and subsequent evaluation of their effectiveness is completed, the material weakness described above will continue to exist. Our ongoing remediation efforts are focused on continued employee training related to internal control over financial reporting and confirming sustained operation of effectively designed control activities, including IT General Controls.
Management is committed to successfully implementing the remediation plan as promptly as possible. As of June 30, 2024, management has implemented or enhanced certain controls to address specific issues related to the material weakness. The material weakness will not be considered remediated until our management implements effective controls that operate for a sufficient period of time and our management has concluded through testing that these controls are effective. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. See “Risk Factors—Risks Related to Our Business and Industry—We have identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the market price of our common stock.” in Part I, Item 1A in our Annual Report.
Changes in Internal Control over Financial Reporting
Except as otherwise noted above under "Remediation Plan," including the on-going remediation efforts described, there were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our plans for remediating the material weakness, described above, will constitute changes in our internal control over financial reporting, prospectively, when such remediation plans are effectively implemented.
51
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently subject to any pending or threatened litigation that we believe, if determined adversely to us, would individually, or taken together, reasonably be expected to have a material adverse effect on our business or financial results.
Item 1A. Risk Factors.
Careful consideration should be given to the factors discussed in Part I, Item 1A, “Risk Factors,” in our Annual Report, which could materially affect our business, financial condition, or future results, in addition to the information set forth in this Quarterly Report. The risk factor set forth below updates the risk factors in our Annual Report.
Our goodwill, intangible assets, and right-of-use assets have been subject to impairment and may be subject to further impairment in the future, which could have a material adverse effect on our results of operations, financial condition, or future operating results.
We evaluate the recoverability of recognized goodwill amounts and indefinite-lived intangible assets for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. These impairment tests are based on several factors requiring management’s judgment, including identification of triggering events for reassessment and determination of the fair value of related assets. If such goodwill or intangible assets are deemed to be impaired, an impairment loss equal to the amount by which the carrying amount exceeds the fair value of the assets would be recognized. Future events may cause impairments of our goodwill or intangible assets based on factors such as the price of our Class A common stock, projected cash flows, assumptions used, or other variables.
In the three months ended June 30, 2024, we recognized a partial impairment charge of $127.5 million related to the CarOffer reporting unit. We cannot accurately predict the amount and timing of any impairment of goodwill, intangible assets, or right-of-use assets. We may be required to record an additional charge during the period in which further impairment of our goodwill or intangible assets is determined, which could have a material adverse effect on our results of operations, financial condition, or future operating results.
52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities
The following table summarizes information about our purchases of our Class A common stock equity securities for each of the months during the three months ended June 30, 2024:
Period |
|
Total Number of Shares of Common Stock Purchased |
|
|
Weighted Average Price Paid per Share of Common Stock(1) |
|
|
Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs(2)(3) |
|
|
Maximum Approximate Dollar Value of Shares of Common Stock that May Yet be Purchased Under the Plans or Programs |
|
||||
April 1, 2024 through April 30, 2024 |
|
|
1,240,919 |
|
|
$ |
22.58 |
|
|
|
1,240,919 |
|
|
$ |
140,913 |
|
May 1, 2024 through May 31, 2024 |
|
|
1,294,706 |
|
|
$ |
23.54 |
|
|
|
1,294,706 |
|
|
$ |
110,436 |
|
June 1, 2024 through June 30, 2024 |
|
|
119,182 |
|
|
$ |
23.94 |
|
|
|
119,182 |
|
|
$ |
107,583 |
|
Total |
|
|
2,654,807 |
|
|
$ |
23.11 |
|
|
|
2,654,807 |
|
|
$ |
107,583 |
|
53
Item 5. Other Information
Rule 10b5-1 Plan Trading Arrangements
During the three months ended June 30, 2024, the following officer
Name & Title |
|
Date Adopted |
|
Aggregate Number of Shares of Class A Common Stock to be Purchased or Sold Pursuant to Trading Arrangement |
|
Expiration Date(1) |
|
|
|
||||
|
|
|
|
|
|
|
(1) The Rule 10b5-1 trading arrangement permits transactions through and including the earlier to occur of (a) the completion of all sales or (b) the date listed in the table. The arrangement also provides for automatic expiration in the event of liquidation, dissolution, bankruptcy, insolvency, or death of the adopting person.
(2) The Rule 10b5-1 trading arrangement includes the sale of shares to be received upon future vesting of certain outstanding equity awards, net of any shares withheld by us to satisfy applicable taxes. The number of shares to be withheld, and thus the exact number of shares to be sold pursuant to such officer’s Rule 10b5-1 trading arrangement, can only be determined upon the occurrence of the future vesting events. For purposes of this disclosure, we have reported the gross number of shares to be received upon the future vesting of such equity awards, before subtracting any shares to be withheld by us to satisfy applicable taxes in connection with such future vesting events.
On
Other than those disclosed above, none of our directors or officers
54
Item 6. Exhibits.
The exhibits listed below are filed, furnished, or incorporated by reference into this Quarterly Report.
|
|
|
|
Incorporated by Reference |
|
|||||||
Exhibit Number |
|
Exhibit Description |
|
Form |
|
File Number |
|
Filing Date |
|
Exhibit Number |
|
Filed or Furnished Herewith |
3.1 |
|
Amended and Restated Certificate of Incorporation of the Registrant. |
|
8-K |
|
001-38233 |
|
October 16, 2017 |
|
3.1 |
|
|
3.2 |
|
|
8-K |
|
001-38233 |
|
June 6, 2024 |
|
3.1 |
|
|
|
3.3 |
|
|
8-K |
|
001-38233 |
|
June 6, 2024 |
|
3.2 |
|
|
|
10.1# |
|
Offer Letter, dated September 29, 2023, by and between the Registrant and Zachary Hallowell. |
|
|
|
|
|
|
|
|
|
X |
10.2 |
|
|
|
|
|
|
|
|
|
|
X |
|
10.3 |
|
Second Amendment to Sublease, dated April 30, 2024, by and between the Registrant and HubSpot, Inc. |
|
|
|
|
|
|
|
|
|
X |
31.1 |
|
|
|
|
|
|
|
|
|
|
X |
|
31.2 |
|
|
|
|
|
|
|
|
|
|
X |
|
32.1** |
|
|
|
|
|
|
|
|
|
|
X |
|
32.2** |
|
|
|
|
|
|
|
|
|
|
X |
|
101.INS |
|
Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. |
|
|
|
|
|
|
|
|
|
X |
104 |
|
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
|
|
|
|
|
|
|
|
|
X |
# Indicates a management contract or compensatory plan.
* The exhibits and schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and the Registrant agrees to furnish supplementally a copy of any omitted schedule to the staff of the SEC upon request.
** The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report and will not be deemed “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.
55
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: August 8, 2024 |
|
By: |
/s/ Jason Trevisan |
|
|
|
Jason Trevisan |
|
|
|
Chief Executive Officer (Principal Executive Officer) |
56
Exhibit 10.1
Zachary Hallowell
[Address]
[Address]
Dear Zach,
I am very pleased to offer you the position of Head of Industry Strategy at CarGurus, Inc. (“CarGurus” or the “Company”), reporting to me, Sam Zales, President and Chief Operating Officer. This letter will clarify the terms and conditions of your at-will employment with CarGurus, should you accept our offer. Note, this offer of employment is conditioned on your satisfactory completion of certain requirements, as more fully explained in this letter. Your employment is subject to the terms and conditions set forth in this letter.
In consideration of your services:
2
This offer is contingent upon:
This offer will be withdrawn if any of the above conditions are not satisfied. The Company may terminate your employment if any of the above conditions are not satisfied
3
The amounts payable under this Section 8, to the extent taxable, will be paid out in substantially equal installments in accordance with the Company’s payroll practice over six (6) months commencing within 60 days after the Termination Date; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, the Severance Amount, to the extent it qualifies as “non-qualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), shall begin to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the initial payment will include a catch-up payment to cover amounts retroactive to the day immediately following the Termination Date. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
Your receipt of the Severance Pay and COBRA Subsidy will be conditional on your signing (and, if applicable, not revoking) a Separation Agreement and Release in a form acceptable to the Company, including a general release of claims against the Company and all related persons and entities, a reaffirmation of all of your post-employment obligations under the NDA, and, in the Company’s sole discretion, a one-year post-employment noncompetition agreement substantially similar to or the same as the noncompetition provision of the NDA. Further, the Separation Agreement and Release will provide that if you breach the NDA, all payments of the Severance Amount and COBRA Subsidy will immediately cease and be recoverable by the Company.
For purposes of this letter, “Good Reason” means you have complied with the Good Reason Process (as defined below) following the occurrence of any of the following events, without your consent: (i) a material diminution in the your title, responsibilities, authority or duties; (ii) a material diminution in your base salary or target bonus, except for across-the-board reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company; (iii) a material change in the principal geographic location at which you provide services to the Company (with the exception of travel related to your duties to the Company); or (iv) the material breach by the Company of the written employment agreement, offer letter or severance agreement between you and the Company; and “Good Reason Process” means (i) you reasonably determine in good faith that a “Good Reason” condition has occurred; (ii) you have notified the Company in writing of the first occurrence of the Good Reason condition within thirty (30) days of the first occurrence of such condition; (iii) you cooperate in good faith with the Company’s efforts, for a period not less than thirty (30) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) you terminate your employment within thirty (30) days after the end of the Cure Period. If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.
4
If you will regularly perform your duties at any of the Company’s business locations in Massachusetts, then all aspects of your employment shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, excluding choice of law rules thereof. If you reside and you will regularly perform your duties for the Company outside of Massachusetts, then all aspects of your employment (except for the NDA, which in such case would be governed by Delaware law), shall be governed by and construed in accordance with the laws of state where you reside.
Zach, we look forward to you joining our organization. In order to confirm your intention to commence employment with CarGurus on the Start Date on the terms set forth in this letter, please sign and return to me this letter and the NDA. If you have any questions, please do not hesitate to speak with me.
Sincerely,
/s/ Sam Zales
Sam Zales
President and Chief Operating Officer CarGurus, Inc.
ACKNOWLEDGEMENT AND AGREEMENT
I have read and understood and I accept all the terms of the offer of employment as set forth in the foregoing letter. I have not relied on any agreements or representations, express or implied, that are not set forth expressly in the foregoing letter, and this letter supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to the subject matter of this letter. I will commence employment on the Start Date on the terms set forth in this letter.
/s/ Zachary Hallowell 9/29/2023
Zachary Hallowell Date
5
CarGurus, Inc.
Protection of Confidential Information Agreement
Name: Zachary Hallowell
THIS Protection of Confidential Information Agreement, dated as of this 16th day of October 2023 (this "Agreement"), is between CarGurus, Inc., a Delaware corporation (the "Company"), and Zachary Hallowell (the "Signatory").
WHEREAS, the Signatory is currently, or is about to become, an officer, employee, director, and/or consultant of the Company; and
WHEREAS, it is a condition precedent to the commencement or continuation of the Signatory's association with the Company, whether as an officer, employee, director and/or consultant, that the Signatory shall enter into this Agreement with the Company.
NOW, THEREFORE, in consideration of the foregoing premises, the parties hereto hereby mutually agree as follows:
"Competitive Business" shall mean any business that offers a website that allows visitors to do any of the following: (1) research automobiles or automotive products or services, (2) obtain or provide reviews of automobiles, automobile dealers or automotive products or services, or (3) search for or purchase automobiles or automotive products or services.
"Restricted Period" shall mean the period commencing on the date of this Agreement and ending on the first anniversary of the effective date of the termination of the Signatory's association with the Company as an employee, consultant, officer or director; provided, however, that if the Signatory breaches his or her fiduciary duty to the Company and/or unlawfully takes, physically or electronically, property belonging to the Company, then the Restricted Period shall end on the second anniversary of such termination date.
(i) if to the Company, to:
CarGurus, Inc.
Two Canal Park
Cambridge, MA 02141
Attention: Chief People Officer
Email: [email address]
with a copy to:
CarGurus, Inc.
Two Canal Park
Cambridge, MA 02141
Attention: General Counsel
Email: [email address]
if to the Signatory, to:
[address]
[address]
Phone: [phone number]
Email: [email address]
All such notices, requests and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of registered or certified mail, upon receipt or on the date of rejection of receipt (iii) in the case of facsimile transmission, when confirmed by facsimile machine report, and (iv) in the case of electronic mail, upon receipt of an electronic message confirming delivery.
THE SIGNATORY HAS READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS ITS TERMS.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed and delivered this Agreement as an instrument under seal as of the date first above written.
CARGURUS, INC.
By:
/s/ Sam Zales
Name: Sam Zales
Title: President and Chief Operating Officer
/s/ Zachary Hallowell
Print Name
of Signatory: Zachary Hallowell
Exhibit 10.2
Parcel 12
Boston, MA
CarGurus Tenant Change Order #18 |
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|
|
Date: |
3/29/2024 |
CarGurus, Inc.
2 Canal Park
Cambridge, MA 02141
Mr. John Hart:
RE: Change Order - Lease by and between Cargurus, Inc. ("CarGurus") and P-12 Property LLC ("Landlord"), dated December 19, 2019, as amended
(the “Lease”)
Pursuant to the Lease, CarGurus has requested modifications to the Base Building Plans and Specifications to accomodate Tenant's design of Tenant's Work, which request requires this change order to such plans and specifications. The work to be performed as a result of this change order is summarized as follows and described in more detail on Exhibit A attached hereto:
Item |
Description |
Amount |
|
|
1 |
Landlord Credit for GWB enclosures. GWB at column enclosures at Base Buidling risers provided by Tenant as part of Tenants Interior fit-out per Lease Exhibit B. |
($50,620.00) |
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||
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||
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||
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|
OK MC |
||
|
TOTAL CO#18 |
($50,620.00) |
||
CarGurus acknowledges and agrees that (a) this change order constitutes a Tenant Change Order subject to and in accordance with the terms of the Lease; and (b) (i) it will pay to Landlord, as Additional Rent under the Lease, the actual amount of the increased costs and expenses resulting from this Tenant Change Order, and (ii) any and all delays resulting from the work contemplated by or resulting from this Tenant Change Order shall constitute a Tenant Delay under the Lease. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Lease. Please countersign this change order in the space below to confirm your agreement.
Sincerely,
P-12 Property LLC
Acknowledged and Agreed to by: |
|
CarGurus, Inc. |
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|
|
x /s/ Brandon Morrill |
|
Signtature |
|
|
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|
|
Brandon Morrill |
4/12/2024 |
1001 Boylston-Office Core/Shell Scope LOI "Exhibit B"- Revised 11-7-19 Scope Item Floor Common Area Base building mechanical/electric/tel-data rooms - flooring, wall base, painted GBW Taped and sanded GWB at Tenant side of core and mechanical rooms Type X GWB at interior face of exterior walls GW8 at column enclosures Base building doors frames,doors, and hardware Shaft enclosures for Tenant provided systems within building core Partitions, ceilings, floorings, painting, finishes, doors, millwork, and all build-out within Tenant area Base building toilet rooms - Tile or polished concrete floors, partial tile coverage on walls, finished ceiling, ADA bathroom accessories, fixtures, hand dryers, and toilet partitions {with privacy panels) Tenant kitchens, and Tenant fit-out toilet rooms including plumbing Mechanical/electric/tel-data rooms for individual Tenant systems Horizontal window blinds and/or window treatments {See LL standard shade, color,and mounting detail) Exit stairs - Finishes include painted stringer, risers, and railings, seated concrete floor and treads, vinyl base at landings, painted GWB walls {except at concrete core), no ceilings Furnish and install of a larger, dressed up stair to act as a communication stair Vestibule at freight elevator/mechanical spaces including electrified door lock to receive card reader ELEVATORS Garage passenger elevator serving garage levels Office tower passenger elevators Building common fire extinguishers Tenant fire extinguishers Tenant equipment Patio heat to extend season usage Snow/ice melting decking on patio Patio-Exterior lighting, pavers, convenience power outlets PLUMBING Underground utility piping (water, waste, gas) to main ser11ice points and base building equipment Domestic water to base building fixtures HW generation for base building toilet rooms 2' domestic cold water stubbed into Tenant area and capped for Tenant use Domestic water distribution within Tenant premi5es Waste and vent service for base building areas Responsibility Tenant X X X X X X X X X X X Landlord X X X X X X X X X X X X X X X X X As Existing Comments GWB by landlord at all column locations that BB infrastructure occurs {i.e.: rain leaders).-landlord to credit cast for gwb walls at columns with B8 infrastructure. Tenant to provide as part of Tenant Interiors work. Meet 100 SF per person Landlord to provide paint and flooring at one (1) exit stair at tenant floors to act as a communicating stair. Heat Lamps to be provided where feasible. South Terrace to be reviewed for alternative methods. No
Exhibit 2.1-1, Page 2
Parcel 12
Boston, MA
CarGurus Tenant Change Order #19 |
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|
|
Date: |
3/29/2024 |
CarGurus, Inc.
2 Canal Park
Cambridge, MA 02141
Mr. John Hart:
RE: Change Order - Lease by and between Cargurus, Inc. ("CarGurus") and P-12 Property LLC ("Landlord"), dated December 19, 2019, as amended
(the “Lease”)
Pursuant to the Lease, CarGurus has requested modifications to the Base Building Plans and Specifications to accomodate Tenant's design of Tenant's Work, which request requires this change order to such plans and specifications. The work to be performed as a result of this change order is summarized as follows and described in more detail on Exhibit A attached hereto:
Item |
Description |
Amount |
|
|
1 |
Landlord Credit for Upper Floor Elevator Lobby finishes. Finishes provided by Tenant as part of Tenants Interior fit-out per Lease Exhibit B (10 floors @ $21,000/floor) |
($210,000.00) |
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OK MC |
||
|
TOTAL CO#19 |
($210,000.00) |
||
CarGurus acknowledges and agrees that (a) this change order constitutes a Tenant Change Order subject to and in accordance with the terms of the Lease; and (b) (i) it will pay to Landlord, as Additional Rent under the Lease, the actual amount of the increased costs and expenses resulting from this Tenant Change Order, and (ii) any and all delays resulting from the work contemplated by or resulting from this Tenant Change Order shall constitute a Tenant Delay under the Lease. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Lease. Please countersign this change order in the space below to confirm your agreement.
Sincerely,
P-12 Property LLC
Acknowledged and Agreed to by: |
|
CarGurus, Inc. |
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|
|
x /s/ Brandon Morrill |
|
Signtature |
|
|
|
|
|
Brandon Morrill |
4/12/2024 |
EXHIBIT 2.1-1
LANDLORD/TENANT RESPONSIBILITY MATRIX
1001 Boylston· Office Core/Shell Scope LOI "Exhibit B" - Revised 11-7•19 Scope Item Responsibility Tenant Landlord AS existing Comments SITEWORK Utilities Pavements sidewalks and roadways Landscaping STRUCTURE Floor to Floor Height: 13'-6" typical on office floors fireproofing Design floor live load: 100 psf Tenant to reinforce floor locally if specialty program exceeds 100 PSF Framed openings for additional Tenant shafts not part of base building Provide client specified openings for communicating stair MISCELLANEOUS METALS Misc.metals for base building elements (canopies, elevators, railings, etc.) specialty misc. metals/structural work for tenant rooftop equipment misc. metals/structural steel for base building rooftop equipment concrete pads and structural modifications related to tenant fit-out egress stairs with concrete filled pan. painted steel guardrails and handrails. steel frame and glass at exterior balconies and amenity deck as shown on the contract documents BUILDING ENVELOPE Exterior walls aluminum and glass curtain wall. aluminum and glass exterior doors of similar construction to exterior glazing system mechanical penthouse: aluminum panel system penthouse louvers as required specialty tenant equipment south side window treatment for significant sun penetration office tower roof adhered PVC or TPO membrane roofing system including insulation, transitions, parapets, and accessories walkway pads to base building roofing equipment and perimeter as shown on LL drawings pedestal pavers and roof protection pads at office roof as shown on ll drawings roof penetrations and walkway pads for tenant rooftop equipment office common area main lobby-finishes wall finishes ceiling finish upper floor finishes wall finishes ceiling finish lighting X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X By tenant tenant involvement with finishes tenant involvement with finishes tenant involvement with finishes landlord to credit cost for standard C/S Tenant to provide finishes in elevator lobby. see above note see above note see above note
Exhibit 2.1-1, Page 1
Parcel 12
Boston, MA
CarGurus Tenant Change Order #20 |
||
|
||
Date: |
|
3/29/2024 |
CarGurus, Inc.
2 Canal Park
Cambridge, MA 02141
Mr. John Hart:
RE: Change Order - Lease by and between Cargurus, Inc. ("CarGurus") and P-12 Property LLC ("Landlord"), dated December 19, 2019, as amended (the “Lease”)
Pursuant to the Lease, CarGurus has requested modifications to the Base Building Plans and Specifications to accomodate Tenant's design of Tenant's Work, which request requires this change order to such plans and specifications. The work to be performed as a result of this change order is summarized as follows and described in more detail on Exhibit A attached hereto:
Item |
Description |
Amount |
|
|
1 |
Landlord Credit for Egress Stair Finish upgrades. Upgraded stair finishes agreed to be provided by Tenant as part of Tenants Interior fit-out after lease execution. |
|
|
|
|
Vinyl Flooring - Pavilion flooring credit |
($37,400.00) |
|
|
|
Paint at Accent Wall - Estimate |
($18,200.00) |
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|
|
||
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|
|
||
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|
|
||
|
|
|
||
|
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|
||
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|
OK MC |
||
|
TOTAL CO#20 |
($55,600.00) |
||
CarGurus acknowledges and agrees that (a) this change order constitutes a Tenant Change Order subject to and in accordance with the terms of the Lease; and (b) (i) it will pay to Landlord, as Additional Rent under the Lease, the actual amount of the increased costs and expenses resulting from this Tenant Change Order, and (ii) any and all delays resulting from the work contemplated by or resulting from this Tenant Change Order shall constitute a Tenant Delay under the Lease. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Lease. Please countersign this change order in the space below to confirm your agreement.
Sincerely,
P-12 Property LLC
Acknowledged and Agreed to by: |
|
CarGurus, Inc. |
|
|
|
|
|
x /s/ Brandon Morrill |
|
Signtature |
|
|
|
Brandon Morrill |
4/12/2024 |
1001 Boylston – Office Core/Shell Scope LOI “Exhibit B” – Revised 11-7-19 Scope Item Responsibility Tenant Landlord As Existing Comments Floor Common Area Base building mechanical/electric/tel-data rooms – flooring, wall base, painted GBW walls Taped and sanded GWB at Tenant side of core and mechanical rooms Type X GWB at interior face of exterior walls GWB at column enclosures X X X X GWB by landlord at all column locations that BB infrastructure occurs (i.e.: rain leaders). – Landlord to credit cost for gwb walls at columns with BB infrastructure. Tenant to provide as part of Tenant Interiors work. Base building door frames, doors, and hardware Shaft enclosures for Tenant provided systems withing building core X X X Partitions, ceilings, floorings, painting, fishers, doors, millwork, and all build-out withing Tenant area Base building toilet rooms – Title or polished concrete floors, partial tile coverage on walls, finished ceiling, ADA bathroom accessories, fixtures,, hand dryers, and toilet partitions (with privacy panels) X X X X X X X X X Meet 100 SF per person Tenant kitchens, and Tenant fit-out toilet rooms including plumbing Mechanical/electric/tel-data rooms for individual Tenant systems Horizontal window blinds and/or window treatments (See LL standard shade, color, and mounting detail) Exit stairs – finishes include painted stringer, risers, and railings, sealed concrete floor and treads, vinyl base at landings, painted GWB walls (except at concrete core), no ceilings X Furnish and install of a larger, dressed up stair to act as a communication stair X Landlord to provide paint and flooring at one (1) exit stair at tenant floors to act as a communicating stair. Vestibule at freight elevator/mechanical spaces including electrified door lock to receive cared reader ELEVATORS Garage passenger elevator serving garage levels Office tower passenger elevators Building common fire extinguishers Tenant fire extinguishers Tenant equipment Patio heat to extend season usage X X X X X X Heat Lamps to be provided where feasible. South Terrace to be reviewed for alternative methods. Snow/ice melting decking on patio X X No Patio – Exterior lighting, pavers, convenience power outlets PLUMBING Underground utility piping (water, waste, gas) to main service points and base building equipment Domestic water to base building fixtures HW generation for base building toilet rooms 2” domestic cold water stubbed into Tenant area and capped for Tenant use Domestic water distribution within Tenant premises Waste and vent service for base building areas
Exhibit 2.1-1, Page 2
Parcel 12
Boston, MA
CarGurus Tenant Change Order #21 |
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|
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Date: |
3/29/2024 |
CarGurus, Inc.
2 Canal Park
Cambridge, MA 02141
Mr. John Hart:
RE: Change Order - Lease by and between Cargurus, Inc. ("CarGurus") and P-12 Property LLC ("Landlord"), dated December 19, 2019, as amended (the “Lease”)
Pursuant to the Lease, CarGurus has requested modifications to the Base Building Plans and Specifications to accomodate Tenant's design of Tenant's Work, which request requires this change order to such plans and specifications. The work to be performed as a result of this change order is summarized as follows and described in more detail on Exhibit A attached hereto:
Item |
Description |
Amount |
|
|
1 |
Landlord Credit for South side window treatment. Window treatment at south elevation agreed to be provided by Tenant as part of Tenants Interior fit-out after lease execution. |
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|
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Window treatment - estimate |
($84,750.00) |
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OK MC |
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TOTAL CO#21 |
($84,750.00) |
||
CarGurus acknowledges and agrees that (a) this change order constitutes a Tenant Change Order subject to and in accordance with the terms of the Lease; and (b) (i) it will pay to Landlord, as Additional Rent under the Lease, the actual amount of the increased costs and expenses resulting from this Tenant Change Order, and (ii) any and all delays resulting from the work contemplated by or resulting from this Tenant Change Order shall constitute a Tenant Delay under the Lease. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Lease. Please countersign this change order in the space below to confirm your agreement.
Sincerely,
P-12 Property LLC
Acknowledged and Agreed to by: |
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CarGurus, Inc. |
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|
x /s/ Brandon Morrill |
|
Signtature |
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|
Brandon Morrill |
4/12/2024 |
EXHIBIT 2.1-1
LANDLORD/TENANT RESPONSIBILITY MATRIX
1001 Boyiston Office Core/Shell Scope LOI "Exhibit B" Revised 11-7-19 Scope Item Responsibility Tenant Landlord As Comments Existing SITEWORK Utilities x Pavements sidewalks and roadways x Landscaping x STRUCTURE Floor to Floor Height 13-6" typical on office floors x Fireproofing x Design floor live load 100 psf .xTenant to reinforce floor locally if specialty program exceeds 100 PSF x Framed openings for additional Tenant shafts not part of base building x Provide client specified openings for communicating stair x By Tenant MISCELLANEOUS METALS Mise metals for base building elements (canopies elevators railings etc.) x Specialty misc metals/structural work for Tenant rooftop equipment x Misc metals/structural steel for base building rooftop equipment x Concrete pads and structural modifications related to Tenant fit out Egress stairs with concrete filled pan. Painted steel guardrais and handrais x Steel frame and glass at esterior belconies and amenity deck as shown on the contract documents x BUILDING ENVELOPE Exterior Walls Aluminum and glass curtain wall x Aluminum and glass exterior doors of similar construction to exterior glaring system x Mechanical penthouse aluminum panel system x Penthouse louvers as required for base building common equipment x Penthouse louvers as required for specialty Tenant equipment x South side window treatment for significant sun penetration x Office Tower Roof. Per parapets, and accessories Walkway pads to base building rooftop equipment and perimeter as shown on u x drawings Pedestal pavers and roof protection pads at office roof as shown on LL drawings x Roof penetrations and walkway pads for Tenant rooftop equipment OFFICE COMMON AREA Main Lobby Finishes Lobby floor finishes x Tenant involvement with finishes Wall finishes x Tenant involvement with finishes Ceiling finish x Tenant involvement with finishes Upper Floor Elevator Lobbies Lobby floor finishes x Landlord to credit cost for standard C/S finishes Tenant to provide finishes in elewator lobby. Wall finishes x see above note Ceiling finish x see above note Lighting x see above nobe
Exhibit 2.1-1, Page 1
1001 Boyiston Office Core/Shell Scope LOI "Exhibit B" - Revised 11-7-19 Scope Item Responsibility Tenant Landlord As Comments Existing Floor Common Area Base building mechanical/ellectric/tel-data rooms flooring wall base, painted GBW X walls Taped and sanded GWB at Tenant side of core and mechanical rooms X Type x GWB at interior face of exterior walls GWB at column enclosures GWB by landlord at all column location that 88 infrastructure occurs li.e.: rain leaders) Landlord to credit cost for gwlb walls at columns with BB infrastructure Tenant to provide as part of Tenant Interiors work Base building door frames, doors, and hardware x Shaft enclosures for Tenant provided systems within building core x Partitions. ceilings, floorings, painting. finishes, doors, millwork and all build-out x within Tenant area Base building toilet rooms Tile or polished concrete floors, partial tile coverage on x Meet 100 SF per person walls, finished ceiling, ADA bathroom accessories, fixtures hand dryers, and toilet partitions (with privacy panels) Tenant kitchens, and Tenant it-out toilet rooms including plumbing Horizontal window blinds and/or window treatments (See u standard shade color, and mounting detail) Exitystairs Finishes include painted strigger risers and railings spaled.congrete floor and treads vinyl base at landings, painted GWB walls (except at concrete care) no ceilings Furnish and install of a larger, dressed up stair to act as a communication stair x Landlord to provide paint and flooring at one (1) exit stair at tenant floors to act as . communicating stair. Vestibule at freight elevator/mechanical spaces including electrified door lack to x receive card reader ELEVATORS Garage passenger elevator serving garage levels x Office tower passenger elevators x Building common fire extinguishers x Tenant fire extinguishers x Tenant equipment Patio heat to extend season usage x Heat Lamps to be provided where feasible South Terrace to be reviewed for alternative methods Snow/ice melting decking on patio x * Patio Exterior lighting pavers, convenience power outlets No PLUMBING Underground utility piping |water, waste, gas) to main service points and base x building equipment Domestic water to base building fixtures x HW generation for base building toilet rooms x 2" domestic cold water stubbed into Tenant area and capped for Tenant use x Domestic water distribution within Tenant premises Waste and vent service for base building areas x
Exhibit 2.1-1, Page 2
Parcel 12
Boston, MA
CarGurus Tenant Change Order #22 |
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Date: |
4/18/2024 |
CarGurus, Inc.
2 Canal Park
Cambridge, MA 02141
Mr. Brandon Morrill:
RE: Change Order - Lease by and between Cargurus, Inc. ("CarGurus") and P-12 Property LLC ("Landlord"), dated December 19, 2019, as amended (the “Lease”)
Pursuant to the Lease, CarGurus has requested modifications to the Base Building Plans and Specifications to accomodate Tenant's design of Tenant's Work, which request requires this change order to such plans and specifications. The work to be performed as a result of this change order is summarized as follows and described in more detail on Exhibit A attached hereto:
Item |
Description |
Amount |
|
|
1 |
Landlord Credit for Level 21 South terrace patio heater installation |
($45,104) |
OK MC |
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TOTAL CO#22 |
($45,104.00) |
||
CarGurus acknowledges and agrees that (a) this change order constitutes a Tenant Change Order subject to and in accordance with the terms of the Lease; and (b) (i) it will pay to Landlord, as Additional Rent under the Lease, the actual amount of the increased costs and expenses resulting from this Tenant Change Order, and (ii) any and all delays resulting from the work contemplated by or resulting from this Tenant Change Order shall constitute a Tenant Delay under the Lease. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Lease. Please countersign this change order in the space below to confirm your agreement.
Sincerely,
P-12 Property LLC
Acknowledged and Agreed to by: |
CarGurus, Inc.
x /s/ Brandon Morrill |
Signtature |
Brandon Morrill |
5/3/2024 |
1001 Boylston - Office Core/Shell Scope LOI "Exhibit B" - Revised 11-7-19
|
Scope Item |
Responsibility |
|
|||
Tenant |
Landlord |
As Existing |
Comments |
|||
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Floor Common Area |
|||||
|
Base building mechanical/electric/tel-data rooms - flooring, wall base, painted GBW walls |
|
X |
|
|
|
|
Taped and sanded GWB at Tenant side of core and mechanical rooms |
|
X |
|
|
|
|
Type X GWB at interior face of exterior walls |
X |
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|
|
|
GWB at column enclosures |
X |
|
|
GWB by landlord at all column locations that BB infrastructure occurs (i.e.: rain leaders).· Landlord to credit cost for gwb walls at columnswith 88 infrastructure. Tenant to provide as part of Tenant Interiors worlL |
|
|
Base building door frames, doors, and hardware |
|
X |
|
|
|
|
Shaft enclosures for Tenant provided systems within building core |
X |
|
|
|
|
|
Partitions, ceilings, floorings, painting, finishes, doors, millwork, and all build-out within Tenant area |
X |
|
|
|
|
|
Base building toilet rooms - Tile or polished concrete floors, partial tile coverage on walls, finished ceiling, ADA bathroom accessories, fixtures, hand dryers, and toilet partitions (with privacy panels) |
|
X |
|
Meet 100 SF per person |
|
|
Tenant kitchens, and Tenant fit-out toilet rooms including plumbing |
X |
|
|
|
|
|
Mechanical/electric/tel-data rooms for individual Tenant systems |
X |
|
|
|
|
|
Horizontal window blinds and/or window treatments (See LL standard shade, color, and mounting detail) |
X |
|
|
|
|
|
Exit stairs - Finishes include painted stringer, risers, and railings, sealed concrete floor and treads, vinyl base at landings, painted GWB walls (except at concrete core), no ceilings |
|
X |
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Furnish and install of a larger, dressed up stair to act as a communication stair |
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X |
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Landlord to provide paint and flooring at one (1) exit stair at tenant floors to act as a communicating stair. |
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Vestibule at freight elevator/mechanical spaces including electrified door lock to receive card reader |
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X |
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ELEVATORS |
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Garage passenger elevator serving garage levels |
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X |
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Office tower pas.senger elevators |
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X |
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Building common fire extinguishers |
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X |
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Tenant fire extinguishers |
X |
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ITPn;1nt an1•!---- |
X |
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.,.. |
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IJ"U'U/ll.t: ...... ,.... ,15 ,15 UII . , |
I " I |
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Patio - Exterior lighting, pavers, convenience power outlets |
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No |
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PLUMBING |
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Underground utility piping (water, waste, gas) to main service points and base building equipment |
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X |
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Domestic water to base building fixtures |
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X |
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HW generation for base building toilet rooms |
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X |
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2" domestic cold water stubbed into Tenant area and capped for Tenant use |
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X |
|
|
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Domestic water distribution within Tenant premises |
X |
|
|
|
|
|
Waste and vent service for base building areas |
|
X |
|
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Exhibit 2.1-1, Page 2
Parcel 12
Boston, MA
CarGurus Tenant Change Order #23 |
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Date: |
4/18/2024 |
CarGurus, Inc.
2 Canal Park
Cambridge, MA 02141
Mr. Brandon Morrill:
RE: Change Order - Lease by and between Cargurus, Inc. ("CarGurus") and P-12 Property LLC ("Landlord"), dated December 19, 2019, as amended (the “Lease”)
Pursuant to the Lease, CarGurus has requested modifications to the Base Building Plans and Specifications to accomodate Tenant's design of Tenant's Work, which request requires this change order to such plans and specifications. The work to be performed as a result of this change order is summarized as follows and described in more detail on Exhibit A attached hereto:
Item |
Description |
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Amount |
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1 |
Landlord Credit for additional Penthouse sign drilling provided by Tenant sign contractor. Agreed upon value is a lump sum value of $10,000 |
($10,000) |
OK MC |
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TOTAL CO#23 |
($10,000.00) |
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CarGurus acknowledges and agrees that (a) this change order constitutes a Tenant Change Order subject to and in accordance with the terms of the Lease; and (b) (i) it will pay to Landlord, as Additional Rent under the Lease, the actual amount of the increased costs and expenses resulting from this Tenant Change Order, and (ii) any and all delays resulting from the work contemplated by or resulting from this Tenant Change Order shall constitute a Tenant Delay under the Lease. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Lease. Please countersign this change order in the space below to confirm your agreement.
Sincerely,
P-12 Property LLC
Acknowledged and Agreed to by: |
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CarGurus, Inc. |
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x /s/ Brandon Morrill |
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Signtature |
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Brandon Morrill |
5/3/2024 |
Exhibit 10.3
SECOND AMENDMENT TO SUBLEASE
This SECOND AMENDMENT TO SUBLEASE (this “Second Amendment”) is entered into as of the 30th day of April, 2024 (the “Effective Date”) by and between HUBSPOT, INC., a Delaware corporation (“Sublandlord”), and CARGURUS, INC., a Delaware corporation (“Subtenant”).
RECITALS:
WHEREAS, Sublandlord and Subtenant entered into that certain Sublease dated as of October 6, 2021 (the “Original Sublease”), as amended by that certain First Amendment to Sublease dated as of July 31, 2022 (the “First Amendment”; the Original Sublease, as amended by the First Amendment, the “Sublease”) whereby Subtenant leases from Sublandlord certain premises consisting of approximately 48,059 rentable square feet located on the fourth (4th) floor of the building commonly known as Two Canal Park, Cambridge, Massachusetts; and
WHEREAS, the Sublease Term is currently scheduled to expire on April 30, 2024 (the “Sublease Expiration Date”); and
WHEREAS, Sublandlord and Subtenant desire to amend the Sublease on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
“(a) At the expiration or earlier termination of the Sublease, Subtenant shall quit and surrender the Subleased Premises in vacant, broom clean condition, damage by casualty excepted. Without limitation of any of the foregoing, Subtenant shall on or before the expiration or earlier termination of the Sublease (i) remove all of Subtenant’s personal property, including Subtenant’s so-called license plate wall, all Subtenant identity signage, and all art fixtures (provided that Subtenant shall not be required to remove its wiring and cabling); and (ii) remove all trash and broom sweep the Subleased Premises. Subtenant shall repair all damage to the Subleased Premises resulting from the removal of such personal property, including patching and filling holes. Notwithstanding the immediately preceding two (2) sentences, all furniture, fixtures and equipment located in the Subleased Premises upon the expiration or earlier termination of the Sublease, including without limitation, all workstations, desks, chairs, A/V equipment, couches, refrigerators, microwave ovens, and freezers (collectively, the “Remaining Property”) shall, without the necessity of further action by the parties, become the property of Sublandlord in their “as is” “where is” condition at such time, without representation or warranty by Subtenant. Upon Sublandlord’s request, Subtenant shall execute and deliver to Sublandlord a bill of sale confirming the transfer of ownership of the Remaining Property upon the foregoing terms and conditions, but any failure to do so shall not affect such transfer. If any personal property of Subtenant other than the Remaining Property shall remain in the Subleased Premises after the termination of this Sublease, then, at the election of Sublandlord, (x) such property shall be deemed to have been abandoned by Subtenant and may be retained by Sublandlord as its own property; or (y) such property may be removed and disposed of by Sublandlord at the expense of Subtenant. Subtenant’s obligation to observe or perform under this Section 17 shall survive the expiration or earlier termination of this Sublease.”
[No further text on this page; signature page immediately follows]
IN WITNESS WHEREOF, the parties have executed this Second Amendment under seal as of the Effective Date.
SUBLANDLORD: HUBSPOT, INC.,
a Delaware corporation
By: /s/ John Hart
Name: John Hart
Title: Facilities Manager
SUBTENANT:
CARGURUS, INC.,
a Delaware corporation
By: /s/ Ken Papa
Name: Ken Papa
Title: Sr. Director Global Real Estate & Facilities
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jason Trevisan, certify that:
Date: August 8, 2024 |
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By: |
/s/ Jason Trevisan |
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|
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Jason Trevisan |
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|
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Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Elisa Palazzo, certify that:
Date: August 8, 2024 |
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By: |
/s/ Elisa Palazzo |
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Elisa Palazzo |
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Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of CarGurus, Inc. (the “Company”) for the period ending June 30, 2024 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Jason Trevisan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
Date: August 8, 2024 |
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By: |
/s/ Jason Trevisan |
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|
|
Jason Trevisan |
|
|
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Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of CarGurus, Inc. (the “Company”) for the period ending June 30, 2024, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Elisa Palazzo, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
Date: August 8, 2024 |
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By: |
/s/ Elisa Palazzo |
|
|
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Elisa Palazzo |
|
|
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Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |