Cars.com Inc. (NYSE:CARS) Q3 2023 Earnings Call Transcript

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Sonia Jain: Yes. No, I mean I think we believe D2C is a really attractive way for us to expand our geography and also sort of extend the reach of our solutions. I think we continue to be open-minded around M&A as an opportunity to accelerate our growth, either geographically or as you’ve seen in other cases, where it helped us really leapfrog our product portfolio and product development. So it will continue to be interesting. But we have been very committed to maintaining and operating within our target leverage range. I think the great news for us as a business is just getting the cash flow profile of the business. We can do a little bit of everything. So we can, in fact, go out and do deals like this that are really accretive to our portfolio. And we do believe we’ll be able to sort of swiftly pay down debt while continuing to be out there in the market from a share repurchase perspective.

Marvin Fong: Great. Thanks, Sonia. And maybe just a two part question on D2C operationally. So just so I understand, basically, because of the way the OEM endorsements work like these, D2C and Dealer Inspire basically have to operate separately, and Dealer Inspire can’t like go into D2C’s endorsements, right? And I just want to clarify how the two are going to kind of operate side by side until you can kind of integrate the road maps? And then the second part of the question is just like how — what’s sort of the visibility in terms of sort of like getting that 60% endorsements higher like our approval window by the OEMs opening up in the next year or so or how do you plan on getting that 60% up? Thanks.

Alex Vetter: Great question, Marvin. Thank you. So the way the OEM dealer business works for websites is that in Canada as in the US, you need to be certified as preferred provider in order to bring a franchise dealer on board. Certainly, any independent operator, which, again, D2C Media has got over 200 independent dealers in their current customer count. So I’m speaking only to franchise, but you need that OEM endorsement. And D2C has been building that up in Canada to 12 endorsements, but they didn’t have some of the key ones that Dealer Inspire currently has in Canada. We only have had six in Canada, because it hasn’t been a primary focus for us. Now the team locally can sell significantly more dealers in Canada than before, because they can sell DI’s solution now that they’re part of the Cars Commerce family.

And so, we immediately open up D2C Media’s TAM just by the sheer fact that they can sell on-program dealers for OEMs that they currently didn’t have. I think over time, we’re going to consolidate our efforts under Cars Commerce, negotiate to get preferred relationships with all OEMs, like we successfully have done in the US. We know that those relationships are easily brokered into a Canadian expansion. And so, we feel very confident working with our OEM partners that will rapidly expand the number of OEMs that we’re eligible for. Because what they’re really looking for is capability. And we have shown that we have the capabilities to meet all of their technical product and operational needs. And so, it will take us a little time. But I hope by this time next year, we’re at a much healthier mix of full OEM inclusion and no limitations to our distribution in Canada.

Marvin Fong: Terrific. That’s very helpful. Thanks so much, Alex.

Operator: Thank you. And seeing no further questions. I’ll turn the call back over to our host, Robbin Moore-Randolph for final comments.

Robbin Moore-Randolph: Thank you all for your questions. We continue to share our story, and we look forward to seeing many of you as part of our upcoming IR engagements. On November 15th, we’ll participate in RBC Capital’s Conference in New York; November 16th, we’ll participate in D.A. Davidson’s Technology Summit also in New York; and on November 20th, we’ll participate in Needham’s Consumer Tech E-commerce Virtual Conference. Details about these events are available on the Events section of our IR website. This concludes our call, and thank you for your time today.

Operator: The meeting has now concluded. Thank you for joining and have a great day.

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