CARS (CARS) Q1 2025: Dealer Club Volume Doubles as OEM Media Commitments Shift to Month-to-Month

May 8, 2025 | By EarningsIQ Research

Dealer solutions and marketplace engagement accelerated in Q1, but shifting OEM media spend patterns and suspended revenue guidance signal a more volatile revenue mix for 2025. Management’s focus on used car tools and operational discipline positions CARS to capture share as industry inventory and advertising strategies evolve throughout the year.

Summary

  • Dealer Club and AccuTrade Drive Platform Adoption: Used car sourcing tools saw record activity and dealer engagement.
  • OEM Ad Spend Uncertainty Grows: Upfront media commitments are moving to month-to-month, clouding revenue visibility.
  • Marketplace Metrics Signal Consumer Tailwind: Elevated shopper traffic and content engagement underpin core platform value.

Performance Analysis

CARS delivered Q1 revenue in line with expectations, but the real story is the divergence between robust dealer solution momentum and emerging volatility in OEM and media-related revenue. Dealer count increased to 19,250, marking the strongest sequential organic growth since mid-2022, with independent dealers now comprising roughly a third of the marketplace mix. The solutions portfolio, led by AccuTrade, vehicle appraisal software, and Dealer Club, dealer-to-dealer auction platform, offset softness in core marketplace and media products. AccuTrade appraisals surged 16% quarter-over-quarter, while Dealer Club doubled transaction volume from February to March, highlighting rapid adoption as dealers pivot to used inventory sourcing amid new car uncertainty.

Marketplace consumer engagement hit record highs, with 29 million average monthly unique visitors and traffic to editorial content up over 50% year-over-year, reflecting the impact of CARS’ investment in content and brand. OEM and national revenue grew 6% YoY, but management flagged a shift in media commitments from upfront to month-to-month, introducing timing risk for the back half. Cost discipline and lower-than-expected integration expenses for Dealer Club supported an adjusted EBITDA margin above guidance, despite targeted headcount reductions and severance costs in March.

  • Dealer Solutions Outperform: Over 100 new website customers added, with AccuTrade and Dealer Club showing accelerating adoption and usage.
  • Media and OEM Volatility Emerges: Late-quarter signs of OEMs and dealers delaying or reducing media spend, shifting to more flexible commitments.
  • Marketplace Resilience: Sequential dealer growth and record consumer traffic signal underlying demand strength despite industry macro headwinds.

While headline financials were stable, the quarter’s underlying dynamic is a pivot toward solutions and used car focus, with media and OEM revenue now more exposed to near-term swings in auto sector sentiment and policy changes.

Executive Commentary

"We gained share in each of our end markets to exit March with much stronger momentum relative to the soft start in January...Our solutions portfolio was a standout in Q1, adding over 100 new website customers and additional AccuTrade subscribers."

Alex Sutter, CEO

"First quarter adjusted operating expenses were $155 million, roughly flat to the same period a year ago...We are reaffirming our adjusted EBITDA guidance. In closing, Q1 produced many positive key takeaways that give us confidence in our ability to deliver consistent growth and long-term value creation."

Sonia Jane, CFO

Strategic Positioning

1. Solutions-Led Growth Amid Dealer Demand Shift

Dealer appetite for used car sourcing tools is driving platform engagement. AccuTrade’s 16% sequential appraisal growth and Dealer Club’s 60% monthly user increase reflect dealer urgency to secure inventory as new car supply faces tariff-driven constraints. CARS’ integration of appraisal and auction tools streamlines workflow, increasing switching costs and platform stickiness for dealers.

2. Marketplace and Content as Audience Moats

Record consumer engagement on CARS.com and editorial content reinforces the platform’s value proposition for both dealers and OEMs. Tariff news and affordability concerns are driving shoppers to seek information and inventory, with CARS’ sustained investment in news and brand marketing yielding measurable ROI and supporting advertising relevance even as spend timing fluctuates.

3. OEM and Media Revenue Becomes Variable

OEM and dealer media commitments are shifting from upfront to month-to-month, reflecting heightened caution amid industry volatility. Around one-third of OEMs increased spend in Q1, but larger partners are now demanding flexibility, introducing revenue timing risk and prompting management to suspend full-year revenue guidance until visibility improves.

4. Cost Controls and Capital Allocation Discipline

Flat adjusted operating expenses and targeted headcount reductions underscore management’s ability to flex costs in response to market conditions. Share repurchases of $22 million in Q1, well ahead of annual targets, signal confidence in cash flow durability and shareholder return priorities even as topline visibility narrows.

Key Considerations

This quarter marks a strategic inflection for CARS, with dealer solutions and consumer engagement outpacing legacy media revenue, and management proactively managing expense and capital allocation levers. Investors should weigh the durability of these growth drivers against the emerging uncertainty in OEM and media spending.

Key Considerations:

  • Dealer Technology Adoption Accelerates: AccuTrade and Dealer Club volumes signal a dealer shift to platform-based sourcing and disposals.
  • OEM Media Flexibility Increases Revenue Variance: Upfront commitments now replaced by month-to-month spending, raising back-half unpredictability.
  • Marketplace Engagement Remains a Leading Indicator: Record traffic and content consumption highlight CARS’ audience advantage as a demand aggregator.
  • Cost Structure Flexibility Demonstrated: Flat adjusted OpEx and targeted restructuring position CARS to defend margins in volatile conditions.
  • Capital Returns Front-Loaded: Aggressive share repurchases provide downside support but may limit incremental buyback capacity if volatility persists.

Risks

OEM and dealer media spend volatility, driven by tariff policy and auto production uncertainty, presents the most immediate risk to revenue growth and margin expansion. Delayed or reduced advertising commitments could pressure topline in the back half, while competitive responses in the used car sourcing space could challenge solution adoption rates. Management’s decision to suspend revenue guidance reflects these risks, and investors should monitor media mix, dealer churn, and OEM sentiment closely.

Forward Outlook

For Q2 2025, CARS guided to:

  • Revenue up year-over-year and quarter-over-quarter, with growth weighted to dealer solutions and subscription revenue.
  • Adjusted EBITDA margin between 27% and 29%, flat at the midpoint versus prior year.

For full-year 2025, management suspended revenue guidance but reaffirmed:

  • Adjusted EBITDA margin outlook of 29% to 31% for the year.

Management highlighted:

  • Subscription-based revenue (about 80% of sales) provides stability, but media and OEM spend timing remains highly variable.
  • Growth initiatives around product packaging, AccuTrade adoption, and website repackaging are expected to drive back-half revenue acceleration.

Takeaways

CARS’ Q1 reveals a business in transition, with platform and solutions adoption offsetting near-term volatility in OEM and media revenue. Dealer engagement and consumer traffic provide a foundation for growth, but topline predictability now hinges on advertising spend timing and industry macro clarity.

  • Dealer and Consumer Tailwinds: Platform usage and engagement metrics are strong, supporting the core marketplace and solutions thesis.
  • Media and OEM Revenue Now a Swing Factor: Investors should monitor ad spend timing and OEM commitment signals for signs of stabilization or further volatility.
  • Back-Half Growth Dependent on Execution: Realizing ARPD expansion, cross-selling, and new product adoption will be critical as external headwinds persist.

Conclusion

CARS enters the rest of 2025 with fundamental strengths in dealer solutions and marketplace engagement, but faces a more variable revenue mix as OEM and media commitments become less predictable. Operational discipline and a focus on platform innovation will be essential to convert audience tailwinds into sustainable growth as the auto sector navigates policy and supply uncertainty.

Industry Read-Through

CARS’ results highlight a broader industry pivot as auto marketplaces and software providers adapt to a world of shifting OEM advertising budgets and increased dealer focus on used inventory. Tariff-driven supply chain disruptions and the move to flexible media spend are likely to echo across automotive retail, impacting digital ad platforms, dealer technology vendors, and ancillary service providers. Players with embedded dealer relationships, differentiated data, and workflow integration are best positioned to capture share as OEMs and dealers seek agility and efficiency in a volatile environment.

CARS Consumer Discretionary Automotive Marketplace Dealer Solutions Advertising Tariffs Used Cars