Cars.com (CARS) Q2 EPS Misses by 2%

Cars.com (CARS 0.69%), the well-known digital automotive marketplace and technology company, released its second quarter fiscal 2025 results on August 7, 2025. According to the release, The company reported non-GAAP EPS and GAAP revenue for Q2 2025 that were just below Wall Street estimates. Non-GAAP earnings per share was $0.41, compared to the expected $0.42, while GAAP revenue was $178.7 million, missing the $179.45 million analyst consensus. Profitability was stable, but Year-over-year comparisons painted a mixed picture, with flat GAAP revenues and a notable drop in free cash flow to $41.8 million for the first six months of 2025, compared to $56.4 million in the prior year. The overall assessment for the quarter highlights disciplined cost control and customer momentum, but also continued pressure on core dealer revenue and ongoing volatility in national advertising partnerships.

Source: Analyst estimates for the quarter provided by FactSet.

About Cars.com and Its Strategic Focus

Cars.com operates as a digital marketplace where car shoppers connect with dealers and original equipment manufacturers (OEMs). Its platform helps users research vehicles, compare offerings, read reviews, and contact sellers directly. The company also delivers digital solutions to car dealers, including web hosting and digital retailing tools through its Dealer Inspire business, enhancing online buying for both dealers and consumers.

Recently, Cars.com has focused on expanding its dealer network, driving deeper technology adoption, and building out new products like AccuTrade (a trade-and-appraisal technology) and DealerClub (a dealer-to-dealer vehicle auction platform). The main success factors for the company are strong consumer traffic, organic customer growth, digital innovation, and maintaining stable relationships with both franchise and independent dealers. The company also strives to differentiate itself by offering integrated data and marketing solutions for both dealers and automotive brands.

Main Developments in the Quarter

The second quarter showed operational gains for Cars.com in key segments, even as headline financials remained largely unchanged from a year ago. Total GAAP revenue was nearly identical to the same period last year. Dealer revenue (GAAP) slipped by 1% year-over-year, while OEM & National revenue rose 5% year-over-year on a GAAP basis, partly due to strategic partnerships and targeted advertising solutions such as Cars Social, which leverages audience data for targeted advertising.

Dealer customer count reached 19,412, the best sequential organic dealer growth in over three years, driven by momentum on the core marketplace platform. Unique monthly visitors averaged 26.6 million, a 2% year-over-year increase in average monthly unique visitors, though down 8% from the previous quarter. DealerClub, the company’s dealer-to-dealer auction platform, saw transaction volumes jump 50% quarter-over-quarter, with active users were up by double digits, highlighting interest in used vehicle sourcing tools.

AccuTrade, the company's trade and appraisal tool, was integrated by a major dealer group and saw a 45% year-over-year increase in appraisals, evidence that dealers are adopting digital tools to improve inventory management. However, average revenue per dealer (ARPD) dropped by 2% from both the prior year and previous quarter. This decline reflects changes in customer and product mix, with Subscription-based dealer revenue down 1% year-over-year, primarily reflecting changes in customer and product mix.

OEM and national advertising revenues (GAAP) rose to $16.6 million, up 5% year-over-year, but remained highly variable. Management cited that automaker clients shifted ad spending strategies, moving to shorter-term, sometimes month-to-month contracts in response to increased tariff announcements and broader uncertainty related to vehicle production and affordability. This volatility limited growth visibility and put near-term pressure on the traditionally reliable media revenue stream.

On a cost basis, Total operating expenses (GAAP) dropped to $163.5 million, compared to $169.4 million for the prior year period. Adjusted operating expenses improved by 2%. Capital allocation also featured prominently: Cars.com repurchased 2.1 million shares for $23.1 million, which equaled 127% of its free cash flow. The company raised its full-year 2025 buyback target to $70–90 million. However, with non-GAAP free cash flow declining 37% year-over-year to $18.2 million, the pace of repurchases began to outpace new cash generation. No dividend is currently paid by Cars.com.

Outlook and Forward Considerations

Cars.com provided high-level guidance for the remainder of fiscal 2025. Management expects low-single-digit revenue growth in the second half of 2025, with adjusted EBITDA margin (a profitability metric that excludes certain costs) expected in the 29–31% range for FY2025, unchanged from earlier guidance. These expectations rest on compounding gains in subscription revenue, ongoing digital product rollouts, and continued operational discipline. However, the company did not issue explicit full-year revenue guidance, citing uncertainty around the timing and magnitude of OEM and national advertising spending.

Looking ahead, investors should monitor the stability of media partnership revenues, the ability to sustain or grow average revenue per dealer, and overall cash generation. Key risks include further volatility from automotive manufacturers in advertising commitments and with share repurchases now exceeding free cash flow, close attention to liquidity and capital priorities will also be important.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.