The economic toll of the coronavirus pandemic contributed to lower revenue and profit for Cars.com in the second quarter, as the company offered discounts to dealerships and cut costs to offset the revenue hit.
The Chicago company, which provides dealership technology and vehicle listings services, reported Thursday that it posted a deeper net loss in the quarter ended June 30 than a year ago — $24.6 million, compared with $6 million in the second quarter of 2019.
Revenue fell 31 percent in the second quarter to $102 million, which the company said mostly was attributed to billing discounts to its dealership listings customers worth 50 percent in April and 30 percent in May and June. National advertising revenue also fell 17 percent, Cars.com said, as restrictions meant to slow the spread of COVID-19 led to more cancellations.
The company’s adjusted net income in the quarter was $8 million, down from $20 million in the second quarter last year. The adjusted figure excludes several charges, including amortization of intangible assets, stock-based compensation and severance costs.
Cars.com’s second-quarter results beat analysts’ estimates, and its stock price surged more than 14 percent to $7.90 in early trading on Wall Street.
“We executed extremely well in a difficult period by continuing to deliver efficient vehicle sales, industry-leading digital solutions, high-value organic traffic and an essential online marketplace as consumers and dealers gravitate online,” Cars.com CEO Alex Vetter said in a statement. “This quarter’s results also benefited from swift management actions taken to reduce operating expenses and strengthen our liquidity, while still providing our dealers meaningful financial support, aligned with our longstanding dealer advocacy.”
Cars.com reported that its operating expenses were 19 percent below the same quarter in 2019. The company took a series of cost-cutting steps as the pandemic spread across the U.S. this spring. Many dealerships pulled back on marketing expenses, including subscriptions to vehicle shopping sites such as Cars.com.
The company said Thursday it lost 905 dealership customers between the first and second quarters, bringing its count to 18,033 as of June 30. The decline was attributed to dealership cancellations and fewer sales of its marketplace product, but Cars.com said the customer losses were partly offset by the addition of customers for its digital products.
Monthly average revenue per dealership fell 33 percent to $1,442 from the prior-year quarter because of its billing discounts, Cars.com reported.
About 250 employees were furloughed in April, and 170 jobs were permanently eliminated in May. Vetter said in a conference call that 50 furloughed employees have returned to work.
Cars.com suspended its 2020 fiscal-year guidance in March, citing uncertainty about the pandemic and its effect on the economy.
Vetter, in a statement, said that Cars.com remains confident that demand for vehicle sales will continue to increase, despite the current uncertain economic climate, if consumers opt more for private vehicles over public transportation and ride-hailing services.
The company’s second-quarter data shows vehicle shoppers haven’t stayed away. Average monthly unique visitors to Cars.com improved 6 percent compared with the same quarter a year ago, while website visits grew 10 percent in the same period. Cars.com said leads rose 17 percent during the quarter from a year ago.
“We believe that the operating environment may remain uncertain given the continuing COVID-19 pandemic,” Cars.com CFO Sonia Jain said in a statement. “We demonstrated a commitment to implementing cost efficiencies in Q2 and remain focused on maximizing free cash flow. However, we will reinvest in the business through increased marketing spend and selective hiring to drive growth in the second half.”
The company maintained $56.9 million in cash and cash equivalents as of June 30, along with total liquidity of $232.2 million including a revolving credit facility.