CARS - NYSE

Good morning, ladies and gentlemen, and welcome to the Cars.com Second Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, August 7, 2025. I would now like to turn the conference over to Katherine Chen, Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for the Cars.com Inc. Second Quarter 2025 Conference Call. With me this morning are Alex Vetter, CEO; and Sonia Jain, CFO. Alex will start by discussing the business highlights from our second quarter. Then, Sonia will discuss our financial results in greater detail along with our outlook. We'll finish the call with Q&A. Before I turn the call over to Alex, I'd like to draw your attention to our forward-looking statements and the description and definition of non-GAAP financial measures, which can be found in our presentation. We will be discussing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, adjusted net income and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the financial tables included with our press release and in the appendix of our presentation. Any forward-looking statements are subject to risks and uncertainties. For more information, please refer to the risk factors included in our SEC filings, including those in our most recently filed 10-K, which is available on the IR section of our website. We assume no obligation to update any forward-looking statements. Now I'll turn the call over to Alex.

Thank you, Katherine. Our second quarter performance reflected broad-based improvements across the business and strong execution on 2025 growth initiatives. Revenue of $179 million was steady year-over-year, reflecting 5% year-over-year growth in OEM and national revenue that partially offset temporary softness in dealer revenue. That said, I'm pleased to report that we grew dealer count both year-over-year and quarter-over-quarter, signaling a strong recovery and that our new go-to-market changes are working. We delivered these positive outcomes while realizing cost efficiencies that drove adjusted EBITDA margin of 28.5% at the high end of our outlook, keeping us on track to grow profitably for the year. We also continue to pace ahead of our 2025 share buyback commitment, repurchasing $23 million of shares in Q2. Building on our healthy progress in the second quarter, our platform is poised for a reacceleration in revenue growth and incremental profitability in the second half of the year. First, our new commercial leadership rapidly increased sales velocity to drive volume growth. Dealer count of 19,412 customers was up over 160 dealers, the best sequential organic growth we've delivered in over 3 years, lifting product adoption across the board. Second, we launched enhanced marketplace repackaging in June, bundling in more media features to maximize Cars Commerce platform advantages. Website repackaging is also advancing with multiple OEM agreements successfully completed year-to-date and more to come. Third, our product innovation cycle has been gaining speed. We unveiled new consumer AI features in the spring and early summer that are ramping quickly, contributing to differentiation and driving our marketplace flywheel. And we're excited about continuous AI innovation and new enhancements we'll be launching for our customers later this year. It's also important to note that OEM growth should remain a tailwind in the coming quarters. OEM and national revenue grew 5% year-over-year in Q2, a positive result despite the uncertainty around tariffs that persisted in the quarter. Nearly half of our OEM partners increased their spending on our platform, but investment levels were variable throughout the quarter. Since OEMs can either immediately invest more or pull back in response to dynamic industry trends, we expect short lead times to continue this year. However, we're capturing upside and scattered dollars as the trade situation appears to be stabilizing, and we anticipate an upward trajectory in OEM media for the remainder of the year. With all of our growth drivers firmly in motion, we anticipate low single-digit year-over-year growth in the second half of 2025 and acceleration heading into 2026. Now let's turn to a discussion of our Q2 execution and the tailwinds that are contributing to our growth outlook. Strong Cars.com marketplace performance persisted from Q1 into Q2, and we're excited for future growth in the second half of this year. Traffic hit a new second quarter record of 162 million, up 2% year-over-year. Average monthly unique visitors totaled 26.6 million and was up year-over-year in each month of the quarter. Like other automotive players, we experienced a tariff-motivated surge of consumer demand, which we capitalized on to improve overall lead delivery. Our recently upgraded lead intelligence, which provides dealers with individualized consumer insights such as shopper history, listing views and estimated budgets, has enhanced lead quality. Over 50% of our marketplace subscribers used this feature at least once in the first 6 weeks of launch. We're now working on additional analytics and CRM integrations to make this feature even more powerful and directly linked to retail outcomes. Turning to the consumer experience. 73% of Cars.com shoppers are undecided on make, model or dealer selection when they begin their journey, and we see AI as a critical tool to drive lead volume and quality. Consumers browsing Cars.com are benefiting from a major update in the form of our new AI-powered search capabilities. In May, we began augmenting standard keyword searches with natural language recognition, converting conversational queries like new SUVs under 35,000 into tailored shopping results. It's still early days, but lead submission rates from visitors using AI search are already 2x higher than regular search and account for nearly 20% of Internet leads submitted. The feature is prominent at the top of our home page, and we encourage everyone to try it out for a more enhanced car buying experience. We have immediate plans to integrate editorial content into the search experience, further personalized results and comparisons, and enable completion of lead submissions and trade-in value requests using AI. We're committed to developing and implementing ways to leverage AI to drive performance and open up new growth vectors. Our editorial dominance supported our marketplace performance with timely content ahead of the busy summer car buying season. The annual Cars.com American-Made Index, or AMI, attracted 71% more visitors compared to a year ago to market's most successful campaign in over 5 years. You may have seen our editor in chief on Good Morning America last week, discussing our proprietary car seat safety research and reaching millions of viewers on a national scale. Unique and relevant research and shopping resources found only on Cars.com clearly remain integral to the car buying journey. Our extensive content library complements the rising use of AI agents who rely on our expertise and heavily reference our content and brand. Not to mention, we have a multi-decade advantage in building our automotive authority and consumer trust with AMI being a great example as it celebrates its 20th anniversary this year. We remain confident in maintaining our position as the #1 most recognized consumer automotive marketplace. We're pleased that this consumer momentum is being matched with dealer success. Total dealer count rose to 19,412 dealers in Q2, up 162 customers quarter-over-quarter and our best organic performance since the start of 2022. Notably, marketplace accounted for more than half of that sequential growth in addition to the strong gains posted by website and appraisal solutions. Our continued organizational and go-to-market changes are helping us move more nimbly and close more sales opportunities. The sales pipeline is strengthening, and we're excited to see continued improvements in the next few quarters. And based on our growing network of dealer partners, cross-selling and repackaging, which Sonia will discuss shortly, we also expect ARPD expansion in the second half of the year. Turning to our solutions suite. Our focus on cross-selling the Cars Commerce platform yielded strong product adoption in the second quarter. AccuTrade and DealerClub continue to garner strong customer interest and usage as dealer competition intensifies for sourcing used vehicle inventory. AccuTrade grew its subscriber base to 1,070 dealers in Q2. And today, I'm excited to share that we signed an enterprise-level deal with one of the largest independent dealer groups in the country. During a rigorous pilot program, AccuTrade's valuation software outperformed this partner's legacy provider in speed and accuracy, leading to a significant win and further expanding AccuTrade's existing penetration at the dealer group's 150 stores. More broadly, AccuTrade appraisal activity reached 925,000 appraisals in Q2, up 14% quarter-over-quarter and the second consecutive quarter of double-digit growth. Dealers also continue to acquire roughly 20 cars on average per month via AccuTrade. We're confident in this solution's transformative value for the industry, particularly as the largest dealer groups increasingly focus on acquiring vehicles from consumers in recognition of the superior profitability being unlocked by technology-driven dealerships. Our ability to disrupt legacy auctions and enable retailers to operate more independently remains central to our strategy, but we aim to disrupt traditional online auctions, too. DealerClub, after completing its first full quarter as a Cars Commerce solution, grew transaction volume 50% sequentially. As a reminder, DealerClub offers a new channel for dealer-to-dealer trading with its transparent reputation-based format. DealerClub also enhances the advantages of our platform as we develop data-driven intelligent inventory management solutions that help dealers maximize the profit potential of each vehicle through either retail or wholesale channels. DealerClub product development has moved extremely fast. In April, we turned on the ability for dealers to push AccuTrade appraisals into DealerClub auctions. In May, we launched the Cars.com-to-DealerClub direct integration, fully closing the loop between retail, wholesale and appraisal technologies to complete a comprehensive used car solution. In practice, aging retail units are now automatically surfaced to dealers and can be seamlessly transitioned to wholesale. We're the first marketplace to offer this level of analytics to empower wholesale optionality for customers, and we expect a strong positive response from dealers as they learn more about these capabilities. It's very early, but we're encouraged with our initial momentum. Finally, switching gears to Dealer Inspire and D2C Media. We grew to nearly 7,800 websites in Q2. Over the past 2 years, we have continuously invested in upgrading and modernizing the infrastructure that powers these sites. Recent developments now allow us to complete site deployment and complex updates in a matter of minutes, keeping pace with the dynamic nature of real-time dealership operations. Our innovation reinforces our ability to negotiate and repackage website agreements for which we have a strong pipeline for the remainder of 2025. With a strong exit rate in June, momentum in key performance indicators and industry tailwinds that favor our platform strategy and used car products, we feel well positioned for revenue growth in the second half of the year and beyond. And now I'll turn the call over to Sonia to discuss our second quarter financial results. Sonia?

Thank you, Alex. Second quarter revenue was steady year-over-year with underlying operational discipline producing adjusted EBITDA and adjusted EBITDA margin at the high end of expectations. Importantly, momentum in marketplace and solutions products underpins our confidence in returning to top line growth. We are also raising our full year share repurchase target to $70 million to $90 million, consistent with our commitment to return value to shareholders. With multiple levers improving across the business, we have line of sight to deliver stronger financial and operating results heading into the rest of 2025. As we communicated at the start of the year, 2025 was always expected to be a tale of 2 halves, with the first half focused on laying the groundwork for growth initiatives and the second half focused on realizing the resulting benefits in the form of revenue growth. Here at the halfway point and despite macro and tariff distractions, we have successfully achieved our first half operating objectives and expect further gains to accrete as these initiatives mature. Second quarter revenue was $178.7 million, flat year-over-year and quarter-over-quarter and generally in line with our expectations. We executed on our growth initiative to drive positive sales velocity and volume growth, albeit balanced against a slightly lower ARPD due to mix, which resulted in dealer revenue being down 1% year-over-year. Solutions was again a strong contributor with websites and AccuTrade each adding around 50 new customers sequentially in Q2. AccuTrade's penetration is now at nearly 1,100 customers. This includes 80 new and existing stores from the recently signed enterprise deal that Alex spoke to earlier. Another roughly 70 stores will be onboarded throughout the rest of 2025. Offsetting solutions growth, marketplace and media continued to rebound from a slower start to the year and customer hesitancy to commit discretionary advertising dollars. Nevertheless, total marketplace customers have grown sequentially in every month since January, now including July. And notably, marketplace was our biggest net contributor to sequential dealer count improvement in the quarter. Overall, we're pleased with the broad-based positive unit growth that we've delivered in Q2, particularly for our key focus area of marketplace. Our repackaging efforts are already underway and will deliver higher value to our customers, improving retention while supporting ARPD expansion on top of this larger installed base. Rounding off the revenue discussion, OEM and national revenue was up 5% year-over-year, inclusive of early quarter shifts in advertising investments. While Q2 OEM revenue typically trends up month-over-month, we saw fluctuations beyond normal seasonality this year. For example, sell-through rates declined nearly 1/3 year-over-year on certain display products at the start of the quarter, whereas we would have expected a stronger run rate in the normal course of business. OEMs continue to prioritize marketing and advertising flexibility, and we are staying close to our partners to capitalize opportunistically on scattered dollars where possible. Incrementals were robust in Q2, even on shorter lead times, which is a healthy sign that should be amplified as more trade resolutions are reached. We are confident that our OEM book of business will remain a revenue tailwind based on our strong marketplace traffic and scaled consumer audience. Now on to operating expenses. Second quarter expenses were $163 million compared to $169 million a year ago, down 3% year- over-year as DealerClub costs that were absent in the prior year period were fully offset by cost controls around head count and lease- related expenses as well as shifts in marketing investments. Adjusted operating expenses were $153 million, down 2% from $156 million a year ago, primarily due to the aforementioned items. Product and technology expenditures increased $1.1 million on a reported basis and $1.6 million on an adjusted basis due to the DealerClub-related investments that were absent in the prior year period. Marketing and sales costs decreased around $2.5 million year-over-year on both a reported and adjusted basis, largely due to shifts in marketing investments as our teams leveraged tariff- driven consumer demand to produce record traffic and audience metrics. General and administrative expense was down $1.3 million year-over-year on a reported basis and roughly flat on an adjusted basis. The majority of the reported decrease was attributable to the lease amendment completed in Q4 2024. Net income for the second quarter was $7 million or $0.11 per diluted share compared to net income of $11 million or $0.17 per diluted share a year ago. The difference in net income is primarily due to changes in the fair value of contingent consideration for prior acquisitions that were included in the prior year period. Adjusted net income for the second quarter was $26 million or $0.41 per diluted share compared to $0.38 per diluted share a year ago, reflecting our focus on reducing share count. Adjusted EBITDA of $51 million in the second quarter was up slightly year-over-year and adjusted EBITDA margin of 28.5% in the second quarter was at the high end of our outlook range due to prudent cost management across the organization. Turning to key metrics. We're pleased with dealer customer growth, and we believe the commercial and other changes we made earlier this year will support further sustainable growth across all of our major product lines. ARPD in the second quarter was $2,435, down around $40 both year-over-year and sequentially, largely due to mix. And as previously mentioned, ARPD can be nonlinear, particularly in periods of relatively strong dealer customer growth. That said, we have proven our ability to steadily grow customer wallet share over time through efforts like repackaging, which is a key growth initiative that we are committed to delivering in 2025. In late Q2, new marketplace Premium and Premium Plus packages were launched on a rolling basis, putting us on track to begin recognizing these pricing benefits beginning in Q3. These packages are designed to help dealers take advantage of the Cars Commerce platform through additional vehicle merchandising and media features. Website repackaging is also progressing better than planned. We completed another negotiation in June and are optimistic that additional deals can be closed by the Q4 time frame. While cross-selling is expected to provide less of a stair-step improvement to ARPD this year, it remains an important long-term growth driver for our platform. An ancillary benefit of our marketplace repackaging is that by bundling additional media features, we are efficiently surfacing our full suite of products to more customers with less friction. We are also focused on deepening integration across the platform to drive more cross-selling opportunities. Now switching to cash flow and the balance sheet. Net cash provided by operating activities totaled $56 million for the first half of the year compared to $69 million a year ago. The year-over-year variance is largely attributable to the anticipated increase in earn-out payments associated with the D2C acquisition. Free cash flow was $42 million year-to-date, down year-over-year, primarily reflecting the aforementioned items. Share buybacks totaled 3.7 million shares for $45 million year-to-date, representing close to 107% free cash flow over this period. In light of the repurchases to date, our expectations for growth and to reaffirm our strong commitment to return capital to shareholders, we are raising our full year repurchase target to $70 million to $90 million compared to the previous range of $60 million to $70 million. Debt outstanding was $460 million as of June 30, 2025, equivalent to a total net leverage ratio of 2.1x and comfortably at the low end of our target range of 2 to 2.5x. Total liquidity was $318 million as of June 30, 2025, giving us substantial capacity to thoughtfully allocate capital and pursue long-term value creation. Finally, let's conclude with our outlook for the remainder of 2025. For the second half of 2025, we anticipate low single-digit revenue growth year-over-year. This is consistent with our original view that growth would be back half weighted as midyear growth initiatives are launched and then compounded in later quarters. These initiatives include our new marketplace Premium Plus package, additional website repackaging and improved sales velocity as well as continued product integration of DealerClub. This outlook is based on the assumption that macroeconomic conditions stay relatively stable from today's baseline. Candidly, there still remains uncertainty on second half new vehicle production and pricing forecasts, which affect discretionary media spending by our customers. This means advertising revenue can shift intra-quarter to account for changes in inventory, model launches, new incentives and other activities that typically warrant promotion to consumers. However, should there be more consistency in the operating environment, that could also lead to more favorability and upside for our media offerings. We are also reaffirming adjusted EBITDA margin outlook for fiscal 2025 between 29% to 31%, reflecting ongoing cost discipline, high contribution margin from growth initiatives and overall revenue growth. We feel well positioned to deliver continued improvement in operating metrics, which will drive both top and bottom line growth and create long-term value for shareholders. And with that, I'd like to open the call for Q&A. Operator?

Your first question comes from Rajat Gupta of JPMorgan.

A lot of commentary on the call. It looks like a lot of momentum in the business. I wanted to clarify a few comments on just the outlook. I think, Sonia, you mentioned that you saw an acceleration through the quarter. I think you specifically mentioned that June saw an acceleration in the business, and then you expect further acceleration in the second half. Curious if you could quantify a bit what that means. How was June versus April? And then even the second half, should we -- does it mean that fourth quarter is an acceleration from the third quarter? And I think then Alex mentioned that you expect further acceleration in 2026. So any more quantification across those comments would be helpful. And I have a couple of quick follow-ups.

Yes. I mean I think in a subscription business like ours, you take some time to bring in dealers and then see the full revenue benefit accumulate over the course of the quarter and then to the full year. So I would expect to see acceleration from Q2 to Q3 to Q4 as part of a steady sort of addition to our subscriber base that drives revenue. And I think acceleration is driven by 2 things for us. One is obviously the unit growth. We were excited to see broad-based growth and adoption of products across the business in Q2. And that will then, in Q3 and Q4, have our repackaging efforts layered on top of that larger dealer customer base.

Got it. And in terms of the average revenue per dealer, so safe to assume that third quarter will be better than the second quarter? And is that a sequential comment? Or is that a year-over-year comment? I think you addressed it on the call.

Generally, I was making the comment as a sequential comment as repackaging kicks in, we would expect to see growth from Q2 to Q3 into Q4.

Got it. And just a broader question, zooming out a bit as it relates to agentic AI. Obviously, that continues to evolve with tools that can autonomously search, compare, like even transact on behalf of users. How are you viewing the impact to your marketplace model, just the broader marketplace industry? I mean how are you thinking about the opportunity to integrate or enable these agents within your platform versus maybe the risk of disintermediation as these agents potentially bypass some of these interfaces? Like curious which phase of the journey are you in. How are you navigating this? Like how are you using this as an opportunity? Any more color would be helpful.

Sure, Rajat. Well, we're really pleased with the product innovation that we had on the agentic side in the quarter. Our home page search queries are generating twice the engagement, twice the leads and producing a much stickier user experience, and we're going to continue to build on that capability and then even be able to deploy some of that tech to our dealer website customers as well. So we're getting a lot of leverage out of the advancements in our product set. I also would point that while the majority of our traffic comes to us directly because of the strength of our brand, both app and people typing directly our brand into their browsers, we have a much lower dependency on what I'll call technical SEO. Our competitors rely on technical SEO at a far greater level than we do because we source the majority of our traffic directly due to the strength of the brand. So it's both an opportunity, and from a threat standpoint, it's relatively minimal. I think the other opportunity, as we noted on the call, the strength of our editorial content, we're layering that into as many of the AI engines that we can, which is rendering our brand recognition and serving as a real halo for our authority. As you know, auto is a multi-touch omni-channel experience. So it doesn't have the same disruptive threat of, say, variable or arbitrage models because consumers are seeking out multiple destinations. And so we generally think our content advantage serves as a strength and a halo to get incremental brand exposure through these engines, which consumers will come to us directly to seek out more information.

Your next question comes from Tom White of D.A. Davidson.

Two, if I could. First one is just kind of on the drivers of dealer revenue growth. So you added the dealers in the quarter, which was nice to see, obviously. But I guess I'm trying to understand what's happening with ARPD. It was down a bit sequentially and then also down 2% year-over-year. I think, Sonia, you mentioned it was mix. But can you elaborate on mix of what exactly? Is it just sort of size of some of the recent dealer adds? Is it product mix? I just -- given that you guys are selling in some additional products into those dealers, just trying to understand why ARPD hasn't been a little bit more buoyant. And then I have a follow-up on AccuTrade.

Thanks for the question, Tom. I think you actually hit on the answer in your question. I mean, look, I think we're seeing some small fluctuations in ARPD. It's about a $40 delta, primarily due to 2 things, I would say, customer mix and product mix and then a little bit is -- and then on the customer mix side, franchise dealers continue to comprise about 2/3 of our customer base. But I would say we're adding indies at probably a faster clip, and so they do tend to have a slightly lower ARPD, which will bring the blended average down. That's not a bad thing. I mean we think a healthy marketplace requires a good mix of both types of dealers, but mechanically, it impacts ARPD. The second thing I would say is we have a growing base of what I'll call like solutions-first customers, which means they're coming to us as website customers only, at least initially, and then we cross-sell them into other products. And that, again, mechanically speaking, can be -- can create a little bit of initial drag on ARPD. And then within media, we have seen -- while we've seen some growth in terms of unit adoption of the products, we definitely did see a little bit of tempering in spend but not a complete pullback. But people were a little bit more cautious in the quarter, which also impacted our ARPD. Ultimately, I see revenue as moving with both dealer count and ARPD, but they won't always move linearly together. In some of the periods where we have more net dealer additions, those dealers typically come to us by buying like one product initially, and then we build up their ARPD over time. So I think that's also manifesting a little bit in the numbers as well. But bottom line is it's a little bit customer mix, a little bit product mix as you kind of suggested.

Okay. And then just to clarify, I think you mentioned the impact of media. Isn't there some media that's excluded from ARPD? Can you just remind me what sort of media services or advertising is included and not included in that number?

Yes. I think I would say probably the biggest piece of media products that are not included in ARPD would be the digital advertising suite that was part of the Dealer Inspire website. D2C has a similar business up in Canada as well, and so that is not included in our ARPD.

Okay. That's helpful. And then just lastly on AccuTrade, I think appraisal is up 14%. Alex, I think you mentioned that dealers are acquiring 20 vehicles on average per month. I guess like what -- if this thing works well and it really gets integrated into kind of the day-to-day operations of the dealerships and the service lane, like what percentage of their total -- the average dealer's kind of total used vehicle intake, do you think, this product might realistically account for? I'm just curious like how to think about that. On one hand, 20 vehicles on average per month sounds good. But what could it get to sort of for the average dealer?

Tom, I read the earnings transcript of 3 of the big publicly traded companies that recently reported, and interestingly, all 3 of them had wildly different percentages of their total volume. I think 1 was 20%. One was like 2/3. And so this is evolutionary for the industry. I think what's driving it, obviously, are -- obviously, one of the larger publicly traded digital dealerships is sourcing the majority of their inventory directly from consumers and finding that inventory turns at a faster clip. And so it's adding to their profitability per unit. And so we just held a conference in Chicago with about 70 dealer operators, and this was the #1 theme on their mind, was how do they source more used cars directly. So hard to predict in terms of where that percentage will normalize out. But without a doubt, it's a very durable proof point because dealers are looking to bypass auction fees and source more cars directly.

Your next question comes from Naved Khan of B. Riley Securities.

Maybe just on AccuTrade. Maybe, Alex, give us some color on the retention of the customers you've had. Has that been improving -- is it at a level that you would like it to be? Or is there a scope of improving it further? And then secondarily, in terms of just the marketplace repackaging effort, is it going to roll out all in Q3 or through the course of over the, say, next 6 months to a year? How should we think about the timing? And is there a risk that as you go through the exercise, some dealers might churn out? Or is that not necessarily the case? How should we be thinking about it?

Sure. I'll start on the AccuTrade theme and then turn it to Sonia for the marketplace repackaging. First of all, look, we're pleased with the growth in AccuTrade, and certainly, as Tom just asked, like from a macro picture, we know we're on the winning side of history here in terms of how dealers are going to start to source cars differently and improve their overall customer experience and sourcing strategies. Where we do have churn on AccuTrade is when the product is tied to the individual as opposed to a store-wide mandate. And so as dealership personnel moves from store to store, we'll see churn from one dealership, but then that personnel will want to re-sign up for AccuTrade at another store. So it's frustrating that so much of our success is tied to individuals as opposed to top-down mandates. I was really pleased, and as I shared on the call, to get an enterprise deal with one of the larger dealer groups in the country who, from a top-down standpoint, is standardizing AccuTrade across all their stores because they've tested it in 30 dealerships and found that their profit per unit was higher and their overall customer experience was showing much stronger satisfaction for the stores using AccuTrade. And so increasingly, I hope that more top-down decision-making will happen across the industry where they will institutionalize AccuTrade and will move beyond it being more of a personal passion. But overall, we're very pleased with the trends that we're seeing. I'll also note that DealerClub is an important part of this ingredient, where dealers will be able to buy all the cars they can from customers, and now we're giving them wholesale optionality where they can unload a car into a wholesale market so that they are inclined to buy more cars and trade them out either retail or wholesale. So Sonia, do you want to comment on the marketplace question?

Yes, sure. So on repackaging, I would say we're rolling it out over the course of the next 2 quarters. This is truly, I would say, a repackaging effort. The last time we did this, which you recall back in 2023, it was as much or more of a pricing action as it was a repackaging effort. This is really about creating a new top-tier Premium Plus package and giving dealers more added value, more access to our platform, simplifying kind of the cross-selling go-to-market motion. So we certainly model out a variety of scenarios, which are then factored into our numbers, but this is much more of an opt-in to more value. And yes, it will also help us grow our ARPD.

Your next question comes from Joe Spak of UBS.

I guess maybe just to start on the guidance. I was wondering if you could help us a little bit because I think there's some unique factors we need to think about. If I look historically, in the back half of the year, you've got a pretty even split of revenue 50-50 between third quarter and fourth quarter, but it sounds like you're saying ARPD goes quarter-over-quarter, third quarter to fourth quarter, which would imply maybe a little bit stronger fourth quarter. But then I think on a year-over-year basis, you also have a few points of an easy comp issue from the [ SDK ] in the third quarter. So when we sort of meld that all together, is there any color you could provide to sort of how you're thinking about the cadence for the rest of the year?

Yes. So I think as we kind of mentioned earlier, I think with -- particularly with repackaging and net unit adds and given that the bulk of the business is a subscription-based business, as the repackaging efforts start seasoning, we won't see the full quarter benefit of that in Q3. You really start seeing the revenue like fully accumulate in Q4 and potentially into the exit rate and into next year as well. Same with the net additions, is the net additions really accumulate in the quarter after they occur, which is why we're talking about kind of the sequential acceleration. And because of, as you point out, the way the second half last year was shaped, it will also result in higher year-over-year growth in Q4 versus Q3.

Okay. And when you talk about OEM growth as a tailwind, I just wondered if we could sort of maybe double click on that. Like are you talking again sequentially from sort of first half levels or on a year-over-year basis? Or is that really more into '26?

We're pleased with how we were able to grow OEM and national revenue in Q2 despite a little bit more of the challenging backdrop. I think, obviously, visibility isn't as high, I think, as we would like it to be, but we see OEMs still making moves. We had a strong incremental sales in Q2, and that gives us like a fairly positive view on how OEM and national can help us deliver towards our revenue goals in both Q3 and Q4. So I wouldn't say it's just a 2026 thing. Certainly, as visibility increases, we think that makes it a little bit more straightforward to go out and win those dollars, but that's also why we're staying close to all of our OEM partners because we know the scattered dollars will be there.

Okay. And then just finally, Alex, I guess I'd be remiss if I didn't sort of ask you your sort of opinions on some of the recent Amazon news with them getting more into used and CPO. And I know they've already tried or have some efforts on the new side. It seems like they're getting more into the used side. Just want to get your view on sort of how you see that competitive threat, if it is one, and if you're able to sort of share maybe any feedback you've had from your dealer customers about their initiatives.

Sure, Joe. Thanks for the question. I think, as you know, from your coverage, this is a very specialized category that has a lot of nuance within the market. And I'll certainly say there's room for many players in this category. I look at all the horizontal players as potential threats, but this is a very specialized vertical industry with multiple layers between OEMs, dealers and obviously, consumers all playing an important part. What I love about our business is that we've built a very durable, strong business that's vertically integrated deeply into the market, so we're built to withstand threats from any one trend or player. And I have talked to a lot of the dealers on the dealer council, and the feedback, thus far, has been there's a lot of effort but not a lot of traction. And so personally, I'd love to be a reseller of Amazon's solutions to the industry and shift dollars away from Google, right? Like we've got the distribution already built. And if Amazon is serious about wanting to sell advertising into the automotive industry, I think we're an established platform that could provide a lot of scale and help on that, just like we've helped dealers with Google my Business or buying traffic on Facebook using our first-party data. So it's early. We're watching it closely, but I know the business is very fortified for the long term.

Your next question comes from Gary Prestopino of Barrington Research.

Alex, I just wanted to talk about something you have in the DealerClub narrative on the deck of the direct Cars.com-to-DealerClub integration for surfacing aged marketplace inventory. I mean are -- does that automatically notify a dealer in terms of when their inventory ages to a certain amount of days that, hey, maybe you should put this thing out in the wholesale channel rather than holding on to it?

Yes. I mean the integration on the product side, I'm certainly very pleased about how quickly our teams have not only embraced DealerClub but that how fast the DealerClub team has moved to build deep product integrations. And certainly, we started with AccuTrade. But now leveraging the insights from our Cars.com marketplace, every dealer's inventory is now pre-populated in DealerClub. So when they enroll with DealerClub, they can immediately see their inventory sorted by age, with aging units being obviously the most attractive with one-click launch to wholesale capability. So this saves dealerships a ton of time. It provides them an immediate point of egress. It's obviously a free addition to their marketplace subscription and that we only charge fees on the buy side. So it's an absolutely tremendous addition to our platform. The user data is up double digits quarter-over-quarter and transactions have been growing at 50% quarter-over-quarter. So it's relatively small. It's early stage, but the market receptivity that we're getting here is tremendous. And as you know, Gary, the play here is disruptive in that we want to build this D2D trading platform without the heavy inspector costs, right? We don't want to staff a team of inspectors. And because of the reputational nature of this platform, we also are seeing that we're able to bypass the arbitration risk that a lot of the traditional online auctions are incurring. And so it's a very asset-light strategy. It enables technology to power dealers to do trading amongst themselves and disrupt the $10 billion auction industry that's largely built on a fee structure where we think we can enable dealers to operate more independently and trade more as a collective and pass that savings back to the dealer community. So again, very early stage. I hope DealerClub will contribute much more meaningful to revenue in 2026, but we're very pleased with the initial entry into the market.

Okay. Can you share anything on AccuTrade as far as the appraisals? What percentage of those appraisals are being converted at the dealer level?

Well, we know dealers, from data we can see, are acquiring about 20 cars per dealership that are using the software reliably, and that's -- obviously, you think about the auction fees on that alone, just buying one car would pay for the AccuTrade subscription. So we have no doubt to the profitability. We also know the #1 feedback we're getting from dealerships is saving them from hidden repair costs that aren't captured with more physical inspections. And so dealers are citing that the savings that they're generating from not overpaying for inventory is the other big ROI. So those are the 2 primary drivers that we're seeing dealers appreciate about our approach here. As to the specific number that you're asking for, I'll have to get back to you to give you a more accurate number. But generally, we know the feedback on the product has been tremendous. We are piloting more solutions around AccuTrade to add capabilities such as an IMS, and we hope to have more news on that shortly.

Okay. And then just real quickly, coming out of the quarter, I would assume the dealer market is still rather cautious. You had some prebuying in the quarter to try and beat tariffs. But anything that you could address there in terms of what your collective outlook may be going forward? That would be helpful.

No, I think sentiment is improving, Gary. This isn't the first cycle where the system gets shocked by larger macro news. We see dealers pull back, and then they see the durability of the consumer and return to being competitive in spending. We're certainly thrilled with the dealer growth in Q2 at over 160 dealers. We know that will translate to dealer growth in Q3. And I'll just note that we also saw strong dealer growth in July. So that dealer sentiment clearly is showing a willingness to get back in the game and compete. And I definitely -- on our market travels and time with dealers, we're seeing a much more aggressive focus on, "Okay, the world isn't falling apart. How do I compete more for volume?" And that serves us extremely well because we obviously are reaching consumers at the last mile and dealers need to be there.

Your next question comes from Marvin Fong of BTIG.

Would just like to understand a little bit better the increased sales velocity comment. I know you have a new head of -- a new person heading that effort up. I just wanted to understand a little bit better what exactly did you mean by that? And how are you changing the go to market there? And then kind of a related question, but I think I just want to confirm, you said you expect dealer count to be up sequentially kind of both quarters for the remainder of the year. Just want to confirm that. And I know that historically, Q4 has a bit of seasonal weakness. So I just want to confirm, you expect to be able to add dealers in the fourth quarter even with that seasonality. Did I understand that right?

Sure. Well, I'll point out that our go-to-market changes are more than just one person or team, although we certainly obviously have made changes at the leadership level, but we've also fortified her team with several staff that have come and brought new insights and energy that we're thrilled with the way that they've enhanced our go to market. We're also doing a lot, much more on the data and targeting front, which is helping facilitate cross-selling. I'm really pleased with how quickly this team has adopted DealerClub as part of their go-to-market motion and not weighted on that. And so the team is driving much more integration of our collective solutions into the dealer community and getting the cross-sell started at a faster rate. So there are several things that we're excited about in the improved go-to-market motion. And then, yes, certainly, Q4 always has sort of seasonal softness. I think this is a little bit different because dealers, we know we pulled back earlier in the year due to the tariff challenges. And certainly, the dealerships that are reporting record profits are the ones that are relying far more aggressively on technology forward solutions. And I think that awareness is driving behavior across the industry that gives me confidence that this won't be a seasonal issue that dealers are having to figure out how do I sustain my profitability per unit and overall and it isn't by adding head count. It's about using technology-driven solutions and being more efficient in the way they operate. And so that's beyond any one seasonal trend. So yes, we think we can continue to grow dealer count throughout the second half.

Great. If I could sneak one more in. Just wondering if you're seeing any difference in behavior by nameplate. So for instance, the one, maybe BMW and Toyota are seeing a little bit more pressure, saying they're going to have to raise prices maybe more than some other nameplates, are you seeing any differentiation among the dealerships based on sort of their tariff exposure and how they're behaving?

Not at the dealership level as much. Most of the dealerships are shifting more aggressively to used cars more broadly just to insulate their business from the macro tariff noise and issues, but we are seeing differences in OEM behavior. I think, obviously, just by looking at our website, you can see that Hyundai has been stepping up a lot more aggressively with us over the past quarter, and you're seeing that translate to greater sales. Nissan as well currently, I believe, is highly prominent throughout the experience. And importantly, we're seeing a shift in OEMs wanting to get better at measuring Tier 3 outcomes. As you know, Marvin, this has been one of the disconnects that we've seen as Cars Commerce, is that OEM marketing initiatives are trying to drive traffic to Tier 1 and dealers are trying to get consumers to convert to Tier 3. With our platform, we're working with OEMs to show them that Tier 1 investments are most successful when they drive Tier 3 sales outcomes. And the fact that we're getting great conversations started with OEMs and some tests going where we can measure not only what activities does their investment generate on our marketplace, but we can measure their dealer network websites as well to validate that these strategies are driving dealer sales. And so I told you that would be a multiyear journey to get OEMs to value us on Tier 3 outcomes. I still think we're early innings there, but the fact that the data is showing such strong response from certain OEMs that are leaning into it, I think, is a great example of what's to come.