Vehicle listings site CarGurus’ net income more than tripled in the third quarter on a slight dip in revenue, with the company pulling back on sales and marketing expenses during the coronavirus pandemic.
The Cambridge, Mass., company on Thursday reported net income of $32.6 million in the quarter ended Sept. 30, up 213 percent from $10.4 million in the same quarter in 2019. Revenue was $147.5 million, down 2 percent from the year-earlier quarter. Subscription revenue generated by its listings marketplace fell 4 percent to $130 million — $121.8 million of that in the U.S. — while advertising and other revenue grew 17 percent to $17.5 million.
CarGurus reported a 28 percent decline in operating costs, led by a sizable cutback in sales and marketing expenses.
“Despite the ongoing uncertainty amidst the COVID-19 pandemic, CarGurus generated strong results in the third quarter that continue to demonstrate our business’s flexibility and resilience,” CarGurus CEO Langley Steinert said in a statement. “CarGurus’ financial performance was well above both our revenue and profit guidance for the quarter driven by improved dealer retention versus Q2, and continued efficiency of our marketing investments.”
CarGurus shares rose 4 percent to $23 in after-hours trading Thursday.
Dealership services vendors, including CarGurus, were affected by the pandemic’s effect on dealerships in the spring as stay-at-home orders in some states closed showrooms. CarGurus reduced listings subscription bills for its paying dealership customers in April, May and June. The company also laid off 13 percent of its global work force and ended operations in Germany, Italy and Spain.
CarGurus also lost paying dealership subscribers during the pandemic as dealerships reduced marketing outlays, a trend that began to stabilize in May, the company has said. As of Sept. 30, the company reported having 23,659 U.S. paying dealership customers, down slightly from 23,806 as of June 30 and 26,163 as of Sept. 30, 2019. The company recently redefined a paying dealer as one “with an active, paid marketplace subscription at the end of a defined period.”
CFO Jason Trevisan told analysts on an earnings call Thursday that the decline from the second quarter is primarily the result of cancellations among its smallest, used-only dealership customers.
CarGurus on Thursday issued revised revenue guidance for the full year, with expectations of $546 million to $549 million. That is slightly higher than the $518 million to $524 million forecasted in August, but remains down from earlier revenue projections of $664 million to $676 million issued in February.
The company said its guidance does not account for the possibility of a resurgence of COVID-19, including any new stay-at-home orders, a slowdown in the vehicle sales recovery and future dealership discounts that may occur.