CarGurus, Inc. (NASDAQ:CARG) Q3 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 05:00 pm ET


CarGurus, Inc. (NASDAQ:CARG) Q3 2019 Earnings Conference Call - Final Transcript


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Langley Steinert

the first three quarters of 2018. Our brand initiatives are a strategic imperative for our business and our recently launched My Car, My Deal campaign highlights our platform's unique consumer value proposition, which we believe will fuel long-term consumer attention and even better acquisition economics.

But it's not just to scale our audience that matters, it's the quality of the shoppers we attract that generates what we are confident is the industry's leading return on investment for our dealer partners. We have always focused our traffic acquisition efforts on down-funnel consumers. And in turn, we provide users with a robust platform to conduct their car shopping process, premised on three tenets, more inventory, more information transparency, sorted in a more consumer-oriented way. Our US audience can choose from an average of over 5.5 million listings from our more than 40,000 dealers, an experience that they cannot find from any of our major competitors, which we believe obviates the need to use other car shopping sites.

We aid their process with tools such as our instant market value, dealer ratings and deal rating-driven search results, and we're helping them gain more transparency on the buying process with our consumer finance offering. Simply put, we are delivering to dealers scale, quality and value through our massive audience of informed ready-to-buy shoppers. To that end, we grew leads to US dealers 13% year-over-year in the third quarter. Year-to-date, leads have grown 16% year-over-year compared with sessions and unique visitor growth of 10% and 9% respectively.

Bottom, line leads, connections and quality matter most to dealers. Our technology team is always focused on delivering high-quality leads and connections through our traffic acquisition and onsite conversion efforts. And we will always prioritize initiatives to do so. This objective is our North Star in each product decision we make, even if it means passing on short-term revenue opportunities.

For instance, we may forgo revenue in our OEM ad business if instead we can deliver a better consumer experience, more quality, consumer leads and connections, walk-in traffic, strong dealer ROI, and incremental recurring subscription revenue down the road. While we do not plan to provide lead level detail every quarter going forward, we believe this highlights our ability to grow our platform's value and our core listings business even when traffic growth is muted. That growth in platform value is reflected in our US AARSD performance.

US AARSD eclipsed 20% growth for the fifth consecutive quarter rising 21% year-over-year. Connection and lead volume growth was the leading driver of AARSD growth in the quarter. However, it's important to note that new product posted its best-ever contribution to AARSD growth. In addition, our US paying dealer base continues to grow as we added 261 paying dealers in the third quarter, bringing our US -- our total US paying dealer count to 28,692. Despite our high dealer market penetration, our growth runway remains long and we are still bringing more dealers onto our core US listings platform, upselling dealers