CARS (CARS) Q3 2024: OEM Revenue Jumps 17% as Platform Strategy Drives Dealer Monetization
OEM demand surged and product-led growth powered CARS to record Q3 revenue, despite dealer headwinds and DMS disruption. Strategic investments in AccuTrade and digital solutions are reshaping dealer profitability and platform stickiness, while management signals confidence in margin expansion into year-end. The company’s evolving mix and OEM momentum set the stage for differentiated growth as inventory cycles shift in 2025.
Summary
- OEM Momentum Accelerates: New partnerships and product innovation fueled a multi-year high in OEM revenue.
- Dealer Technology Adoption Deepens: AccuTrade and digital solutions are driving measurable dealer profitability gains.
- Margin Expansion Signals Discipline: Cost control and product mix improvements support high-end margin guidance for Q4.
Business Overview
CARS.com operates a digital automotive marketplace and technology platform connecting car buyers with dealers and OEMs. The company monetizes through dealer subscriptions, advertising, and a suite of digital tools including AccuTrade, vehicle appraisal and acquisition software, digital retail, and media solutions. Its business is split between dealer revenue, OEM and national advertising, and technology-driven services, with a growing presence in Canada through D2C Media.
Performance Analysis
Q3 marked CARS’ 16th consecutive quarter of revenue growth, led by OEM and product solutions strength. Dealer revenue, which remains the core of the business, grew modestly as macro pressures weighed on dealer budgets and a third-party DMS (Dealer Management System) outage disrupted sales momentum early in the quarter. Notably, OEM and national revenue climbed 17% year-over-year, hitting a three-year high and reflecting strong demand for new car marketing and data-driven solutions.
Product innovation is translating into tangible dealer value and platform monetization. AccuTrade’s quarter-over-quarter subscriber growth and a 5% rise in appraisal volumes signal growing adoption, while digital website and media solutions saw robust expansion—most visibly in Canada, where CARS became the number one franchise dealer website provider. The company’s new VIN Performance Media (VPM) product quadrupled its subscriber base since Q1 and is delivering measurable improvements in inventory turn and dealer profitability.
- OEM Revenue Surges: OEM and national revenue exceeded $17 million, with over half of OEM partners increasing spend, and CARS capturing a record set of incremental wins in Q3.
- AccuTrade Drives Dealer Profitability: Dealers using AccuTrade acquired nearly 40% more vehicles per month and saw up to 87% higher per-sale profit in case studies.
- Marketplace and Digital Solutions Scale: Over 7,650 dealer websites powered, with premium package penetration rising to 75% from 68% a year ago, indicating sustained demand for higher-value offerings.
Adjusted EBITDA margin reached 28.5%, at the high end of guidance, reflecting disciplined cost management and a structural shift toward premium product mix. Free cash flow generation remains robust, supporting ongoing share repurchases and debt reduction. Dealer customer count dipped due to temporary DMS outage effects, but rebounded in October—a leading indicator for Q4 stability.
Executive Commentary
"Product adoption expanded in all of our solutions, and most notably, AccuTrade returned a positive quarter over quarter subscriber growth. OEM revenue grew 17% year-over-year to exceed $17 million, a new three-year high based on broad demand from our partners."
Alex Sutter, Chief Executive Officer
"Our diversified platform strategy and strong operating disciplines produced both year-over-year revenue growth and strong adjusted EBITDA margin in the third quarter... We increased the penetration rate of higher tier premium and preferred marketplace packages from 68% last year to 75% this year, a sustained structural shift that we attribute to strong customer demand for our services."
Sonia James, Chief Financial Officer
Strategic Positioning
1. OEM Channel Expansion and Product Differentiation
CARS is aggressively leveraging OEM partnerships and endorsements to drive platform adoption and revenue mix shift. The 17% OEM revenue growth was fueled by new wins, expanded spend from existing partners, and the rollout of solutions like New Car Hub and AccuTrade web applications. Management highlighted the upfront process for 2025 as affirming, with OEMs seeking differentiated digital tools unavailable from competitors.
2. AccuTrade as a Dealer Profit Engine
AccuTrade’s integration into dealer workflows is reshaping inventory sourcing economics. Dealers using AccuTrade are acquiring more vehicles directly from customers, bypassing profit-eroding wholesale auctions. This shift is driving higher gross profit per unit and is increasingly being recognized by large dealer groups as a key margin lever. OEM endorsements are accelerating AccuTrade’s reach, with nearly 50% of new dealer onboardings in Q3 coming from OEM-affiliated dealers.
3. Digital Solutions Scale and Premiumization
Premium product mix is structurally improving monetization and retention. The penetration of higher-tier marketplace packages continues to rise, and digital website solutions have expanded rapidly, especially in Canada. The company’s VIN Performance Media product is proving its value by reducing inventory age and lifting turn rates, supporting dealers’ evolving needs as inventory levels rise.
4. Platform Stickiness and Data Advantage
CARS’ marketplace generates high-intent leads, with 84% of site visitors planning to purchase within six months, and its attribution data shows influence over 30% of dealer unit sales. Enhanced personalization, AI-driven translation, and content investments are deepening consumer engagement and reinforcing CARS’ position as the most recognized automotive marketplace.
Key Considerations
Q3 showcased the durability of CARS’ platform strategy as OEM and product innovation offset near-term dealer headwinds. The company’s ability to cross-sell and premiumize its dealer base is supporting margin expansion, while OEM growth is emerging as a critical countercyclical lever. However, macro pressures, dealer profit normalization, and technology disruption remain real factors shaping near-term results.
Key Considerations:
- Dealer Customer Count Volatility: Temporary DMS outages muted dealer growth in Q3, but October saw a rebound—a key metric for Q4 and beyond.
- OEM Revenue as a Growth Lever: OEM channel success is diversifying revenue streams and may help offset cyclical dealer softness.
- Premium Product Penetration: Sustained shift to higher-tier packages is driving ARPD stability and margin resilience.
- Product-Led Upside: AccuTrade and VIN Performance Media adoption are generating measurable dealer ROI and loyalty.
- Cost Discipline and Capital Returns: Free cash flow strength supports share repurchases and debt reduction, reinforcing shareholder alignment.
Risks
The primary risks for CARS remain macro-driven dealer spending cuts, continued profit normalization in the dealer channel, and potential competitive encroachment as digital retail evolves. Lumpy OEM revenue, seasonality, and exposure to technology system outages (such as DMS disruptions) introduce operational unpredictability. Management’s bullish tone on platform adoption must be balanced against persistent industry cyclicality and the risk of slower-than-expected dealer technology uptake.
Forward Outlook
For Q4, CARS guided to:
- High single-digit year-over-year OEM and national revenue growth
- Modest year-over-year dealer revenue growth, with continued product adoption
For full-year 2024, management reaffirmed guidance:
- Revenue growth of 4.5% to 5.5%
- Adjusted EBITDA margin of 28% to 30%, with an exit Q4 margin near 30%
Management cited positive October dealer growth, robust OEM pipeline, and continued cost discipline as drivers for Q4 and 2025 positioning.
- OEM contract visibility and product innovation underpin confidence in 2025 momentum
- Dealer technology adoption and premiumization expected to support monetization and margin improvement
Takeaways
- OEM Channel Emerges as Growth Anchor: OEM revenue’s 17% surge and multi-year high signals a durable, countercyclical growth lever as dealer budgets remain pressured.
- Dealer Tech Adoption Drives Monetization: AccuTrade and digital solutions are translating into higher dealer profitability and stickier platform relationships, with premium package mix at record levels.
- Margin Upside Supported by Product Mix: Cost discipline and a shift toward premium solutions position CARS to exit the year at the top end of margin guidance, providing a buffer against industry volatility.
Conclusion
CARS’ Q3 results highlight the growing strategic value of OEM partnerships and product-led innovation in driving platform monetization and margin expansion. While dealer headwinds and market cyclicality persist, the company’s execution on technology adoption, premiumization, and capital returns enhances its long-term positioning as inventory cycles shift and digital retail matures.
Industry Read-Through
CARS’ Q3 underscores a broader industry pivot toward platform-driven monetization and OEM partnership as dealer channel volatility rises. The success of products like AccuTrade and VIN Performance Media highlights a growing demand for data-driven inventory management and direct-to-consumer sourcing, themes likely to influence digital retail and automotive SaaS peers. OEMs’ willingness to increase digital spend and seek differentiated solutions may signal a shift in marketing budgets across the auto ecosystem, while the company’s premiumization trend reflects a wider move toward higher-value, stickier digital toolsets. Competitors and adjacent players should watch for continued dealer technology adoption and OEM channel innovation as key industry growth vectors into 2025.