Cars.com Inc. (CARS) Q2 2022 Earnings Call Transcript

Cars.com Inc. (CARS 0.84%)
Q2 2022 Earnings Call
Aug 03, 2022, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. Thank you for attending today's Cars second quarter 2022 earnings conference call. My name is Alexis, and I will be your moderator for today's call. [Operator instructions] I would now like to pass the conference over to the management team.

You may proceed.

Robbin Moore-Randolph -- Director, Investor Relations

Good morning, everyone, and thank you for joining us. It's my pleasure to welcome you to Car's second quarter 2022 conference call. With me this morning are Alex Vetter, CEO; and Jandy Tomy, interim CFO. Alex will start by discussing business highlights from our second quarter, and Jandy will discuss our financial results in greater detail, along with our 2022 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 and adjusted EBITDA margin, adjusted operating expenses and free cash flow. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure can be found in our financial tables included with our earnings press release and in the appendix of the presentation.

For more information, please refer to our risk factors included in our SEC filings, including those in our annual, quarterly, and current reports, which are 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.

Alex Vetter -- Chief Executive Officer

Thank you, Robbin, and welcome to our second quarter 2022 earnings call. We delivered another quarter of solid results at the high end of our guidance range, demonstrating the strength of our solution strategy and the value of our marketplace. Total revenue and dealer revenue both grew at 5% compared to the prior year. Revenue growth is attributable to ongoing product adoption and strengthening customer retention, which offset unsurprising decreases in OEM and national revenue, which are a direct reflection of the continued production challenges.

Despite the macroeconomic uncertainty, consumer demand persists albeit in an environment with limited supply. In a recent Cars.com poll, users suggested they may delay their purchase due to a mix of factors, including limited inventory, elevated vehicle and gas prices and rising interest rates. We expect these trends to continue for the remainder of this year, as reflected in our second-half guidance. At the same time, we are also seeing the benefits of pent-up consumer demand and the growing strength of our durable solutions strategy.

As a result of the production challenges, OEMs are limiting their advertising and promotional spending for the remainder of 2022. We still plan to grow at 6% to 8% in the second half of this year driven by dealer solutions, which will accelerate into 2023 while maintaining strong EBITDA margins. We are well-positioned to meet the changing needs of both consumers and dealers as we continue to deliver relevant digital solutions and advance our platform strategy. As a reminder, our strategy is about connecting buyers and sellers across a range of solutions built from a common tech platform that reinforces our value.

There are three key drivers to our success this quarter: audience, content, and technology, which I'll highlight before turning the call over to Jandy for more details on our financial performance. First, for the quarter, unique visitors to the Cars.com marketplace increased 3% compared to a year ago. This is driven by the strength in our original content and brand authority. Our trusted editorial content is an established area of strength and expertise.

Not only does editorial content provide the most relevant shopping advice, but it's an efficient way to engage with shoppers early in their purchase journey. In June, we released our 2022 American Made Index where Tesla claimed the most American-made vehicle for the second year in a row. This is especially relevant for shoppers given high gas prices and the growing demand for EVs. The American Made Index delivered a 44% traffic increase compared to the prior year, supporting our strong SEO position, and has strengthened our brand leadership with more than 500 press placements.

We believe that the combination of end-market shoppers and a contextually relevant environment will help Cars flourish despite many of the challenges affecting the broader media industry and position us to grow OEM revenue when production levels normalize. Let's turn to our Technology Solutions. The rollout of Accu-Trade is well timed in this lean inventory environment and is reflected in robust demand by dealers. Accu-Trade's valuation and exceptional vehicle operate capabilities enhanced transparency and speed transactions for our industry.

A far more profitable way for dealers to acquire cars is to buy them directly from the general public, bypassing the bidding wars in traditional auctions. This week, we announced the nationwide launch of Instant Offer on Cars.com that lets private parties get a competitive cash offer from a local dealership, sell their used car, and pick up a check in the same day. Since piloting Instant Offer in May, we've generated more than 5,000 qualified cash offers to individuals looking to sell their vehicle quickly and efficiently. We've experienced tremendous inbound interest in Accu-Trade.

And there's no better way to demonstrate the value to dealers than to have one of their own leading the way. I'm pleased to welcome Brian Kramer to the Cars.com leadership team. Brian brings deep industry and operational experience coming to us directly from the Germain Automotive Group, a well-respected and successful operator, where he leveraged Accu-Trade to transform the wholesale operations into one of the most profitable parts of the business. Since our rollout of Accu-Trade at NADA, our dealer customers are seeing improvements in three critical areas: operational efficiency, increased gross profit and vehicle acquisition.

Two of our early adopters, Jay Alvarrez of Hendrick Automotive Group and David Simches of Crown Automotive Group, shared some other tremendous success with Accu-Trade. Hendrick is reporting a 58% increase in used car margin and acquired 130 vehicles in the first 60 days of using our solution. And Crown has moved appraise vehicles in minutes, saving consumers and dealer staff considerable time by bringing transparency to vehicle valuation. As dealers start to see and discuss what Accu-Trade is doing for their dealership profitability, we are confident that interest and demand will continue to scale.

The financial contribution from this subscription product in 2022 is relatively low, but it will have a more material impact in 2023 and beyond as we roll out and ramp throughout the second half of this year. We also continue to expand our Dealer Inspire website. At quarter end, we powered 5,650 dealer sites. And I'm excited to share that Subaru of America has named Dealer Inspire as a certified website and technology provider, giving us the opportunity to potentially service more than 570 dealerships in the U.S.

We will expand our website market share and anticipate deploying our first Subaru website during the third quarter of this year. Even with the overall advertising budget reductions across the entire automotive industry, our website solutions are growing, proving the power of our diversified solutions portfolio. In total, we are seeing our platform strategy pay off in dealer growth and growth in average revenue per dealer. At quarter end, Cars had 19,517 dealer customers, a 672-customer increase compared to the prior year and up 17 sequentially.

And ARPD also grew both sequentially and year over year. ARPD increases were driven by the ongoing success of our digital solutions. In summary, we delivered another quarter of solid results at the high end of our quarterly guidance. We are well-positioned to further our growth in the second half of this year and beyond through the continued realization of our platform strategy.

And now I'll turn the call over to Jandy.

Jandy Tomy -- Interim Chief Financial Officer

Thank you, Alex. Like Alex, I'm pleased with our continued momentum. We delivered strong results in the second quarter. Revenue and adjusted EBITDA were very strong and both were at the high end of our guidance, setting us up well for continued growth and margin expansion for the remainder of 2022 and setting up a great starting off point for our subscription business in 2023.

Total revenue for the quarter was $163 million, representing 5% growth compared to the prior year. Performance was driven by growth in dealer revenue, which grew 5% year over year to $144 million as a result of 4% growth in dealer customers and 1% growth in ARPD, which was driven by continued adoption of our digital solutions. OEM and national revenue, which is closely correlated with the ongoing production challenges was 13% down compared to a year ago. Note that Accu-Trade also contributed to our growth in the quarter, which you'll see primarily in the other revenue line items.

As we launch our new Accu-Trade connected product, this subscription revenue will show up in dealer revenue and continue driving our ARPD growth. Despite the ongoing inventory shortages, inflation, rising gas prices and interest rates, our products, our diversified business model, and the value we deliver to our customers gives us confidence that we will continue to deliver solid growth. Moving on to expenses. For the quarter, adjusted operating expenses were $139 million, $6 million higher compared to the prior year.

This increase was primarily due to higher product and technology expenses, including compensation and consulting costs related to the Accu-Trade and CreditIQ acquisition. As planned, marketing and sales investments increased to help drive traffic and grow solutions revenue. Partially offsetting these increases was a decrease in depreciation and amortization expense. Net income for the second quarter totaled $6 million or $0.08 per diluted share, essentially flat compared to a year ago.

We delivered adjusted EBITDA of $45 million or 28% of revenue, again, the high end of our guidance. Sequentially, margin expanded by 120 basis points. Now turning to our key metrics, which are the foundation of these solid quarterly results. Our business is underpinned by strong fundamentals.

The value we deliver attracts and retains dealers, evidenced by growth of 672 dealers or 4% year over year, putting us at 19,517 dealer customers at quarter end. This represents sequential growth of 17. Results for the quarter also reflect 180 Accu-Trade only customers and cancellations related to a single digital dealer with financial and operational position prohibited them from continuing to partner with us. Excluding these two items, dealer customers would have still grown during the quarter.

We continue to push for growth in the universe of approximately 40,000 dealers in the U.S. The continued adoption and growth in our digital solutions fueled 1% year-over-year ARPD growth and 2% sequentially. Our website business also continues to grow. At June 30, we had 5,650 website customers, up 650 from a year ago and up 150 sequentially.

Dealer Inspire revenue in total grew 14% compared to the prior year. Generating unique high-quality traffic and an engaged audience is something we've consistently delivered for our dealer and OEM customers. For the quarter, we had 27 million average UVs and 148 million visits. We grew our UVs, which best represents in-market car shoppers by 3% year over year.

However, traffic was down 7% due to elevated traffic in the prior year related to strong consumer confidence and heightened consumer demand from the 2021 federal economic stimulus plan. Our performance and strong execution continued to enable substantial cash generation, which we have been investing back into our business, strengthening our financial profile, and returning to shareholders through our share repurchase program. Cash provided by operating activities for the six-month period ending June 30, 2022, was $42 million and free cash flow was $34 million. Cash flow in the current year period was down year over year due to three primary reasons: first, timing of payables.

We had one extra payment run in the current year period. Second, lower year-over-year EBITDA. And third, recall that last year, we had a $9 million income tax refund associated with the CARES Act and our ability to carry back our NOL. Net leverage at quarter end was 2.8 times, slightly above 2.4 times a year ago and our target range of two to 2.5 times.

As a reminder, this temporary step-up reflects last quarter's borrowing to fund the Accu-Trade acquisition. While we're comfortable at this level due to our strong, consistent cash generation, we anticipate getting back within our target range in coming quarters. We continue to maintain ample liquidity with $185 million available on our revolver, supplementing our cash on hand. Further, our strong balance sheet provides us with the financial flexibility to return capital to shareholders.

During the quarter, we repurchased 1.7 million shares for $18 million, bringing our total shares repurchased this year to 2.1 million, representing 3% of our shares outstanding. Now turning to guidance. For the third quarter of 2022, we expect to deliver revenue of approximately $163.5 million to $165.5 million, representing continued solid year-over-year growth, as well as sequential growth. Our guidance reflects our strong first-half 2022 performance balanced against the continuing industrywide inventory shortages and a challenging macroeconomic environment.

We expect our adjusted EBITDA margin for the third quarter to be between 29% and 31%, reflecting sequential margin expansion and our focus on profitability and expense management optimizing for growth. For the second half of 2022, we expect revenue growth of 6% to 8% year over year, assuming that inventory does not recover before 2023. While we are encouraged by the OEM sentiment about our value, our guidance does not assume a recovery in this customer segment this year. Our guidance reflects continued momentum and sequential revenue growth based on performance of a well-executed and integrated solution strategy.

In conclusion, as we look to the second half of the year, our strong financial position leaves us poised to execute and deliver value and profitable growth for this year and beyond. With that, I'd like to turn the call back over to Alex.

Alex Vetter -- Chief Executive Officer

Thank you, Jandy. Our platform strategy is working. Revenue is growing and diversifying, and margins are expanding. The business continues to prove resilient and sustainable in many market conditions.

And despite the challenges of the current environment, we have confidence in our ability to continue our growth as we rapidly accelerate our solution strategy. Operator, we're ready to begin the Q&A.

Questions & Answers:

Operator

Absolutely. [Operator instructions] The first question comes from the line of Naved Khan with Truist Securities. You may proceed.

Naved Khan -- Truist Securities -- Analyst

Yeah. Thanks a lot. Just a couple of questions. So one on the Instant Offer, maybe you can provide some color on the interest level you're seeing from the dealers.

It looks like -- the data test or early test runs and it was positive. If you can talk about the demand there from the dealers. And in terms of the Accu-Trade, I think right now you're having a subscription model. Maybe can you touch on like what the opportunities are? Can you move to a usage-based monetization as adoption continues to grow? Thank you.

Alex Vetter -- Chief Executive Officer

Naved, thank you. Well, since our debut at NADA with Accu-Trade connected to Cars.com, to say response has been overwhelming would be an understatement. We've launched a lot of products in this industry. And Accu-Trade has got the year of a lot of dealers.

We've done over 1,000 demos since that time. As you know, we are selling a subscription product, so it's not that you can sign up and configure something for free. It's going to take us a lot more time to get to 10,000 dealers. We're looking for billable dealers, and we've got to ramp and onboard them.

So average onboarding time for a dealer with Accu-Trade takes more than a few weeks where, say, our marketplace takes 48 hours. And so there will be a slower ramp here as we get dealers on board. But as we shared on the call, there's been meaningful step changes in dealer profitability moving to our Accu-Trade solution, both on vehicle acquisition, time efficiency in the dealership and overall more accurate vehicle valuation, which is saving the dealer money and reducing friction between buyers and sellers. And so we know we're going to end this year with a really strong exit rate.

And then this is adding meaningful subscription revenue. Our introductory pricing is $1,500 a month. I see a lot of upside room to take that further. But we want to build some critical mass and market share because I think dealer voices will be our best marketing and testimonial.

Then we will look at a D2D trading model, where it will be variable pricing based on transactions, but that will be Phase 2.

Naved Khan -- Truist Securities -- Analyst

Got it. And then just on the Instant Offer, can you maybe go over like what the initial uptake is looking like and go from here, give us some color?

Alex Vetter -- Chief Executive Officer

Yeah. Well, we just launched the consumer utility nationally. And that was largely because we got to a pretty healthy base of dealers across the country. We've got dealers in almost every city now already using Accu-Trade.

And so we felt that we could turn on the consumer functionality on Cars.com nationally. We made a press announcement this week and we'll begin marketing that directly to consumers. Ironically, we don't need to do much marketing because, as you know, we get the propensity of our traffic through organic means. And so we're already seeing significant consumer volume on both vehicle appraisal and instant cash offer without any incremental marketing spend.

I think as we scale dealers, that may change because we're going to have to support a much bigger space of dealers. But I'm just sharing that at the onset, just turning this functionality on, we're getting sufficient volume to support the dealers that we've got. And importantly, Accu-Trade is more than just the opportunities that we generate. Dealers are using this to appraise vehicles in their service lines, in their showrooms during the trade-in process.

And so dealers, like we shared in the call, in some cases, they're processing hundreds of appraisals using Accu-Trade technology in addition to the opportunities that we're generating for them through Cars.

Naved Khan -- Truist Securities -- Analyst

Got it. A quick follow-up, if I may. Maybe just talk about Google Vehicle Ads. I think it was launched early this year.

Has there been any kind of impact either on Cars or on other participants?

Alex Vetter -- Chief Executive Officer

Sure. So we're, of course, monitoring Google's move closely and both as a longtime advertiser on Google and then also across our dealer business as a solutions provider. And so I'll just share that we've seen both positive and negative impacts. I think first on the B2C side, global vehicle ads are making our paid search investments more efficient.

We're seeing our own participation in the channel generate cost per action lower than historical SEM because we're providing larger ad forms and actual content into the environment. I think the downside is that it's pushing down organic results for the whole industry. I guess the upshot for that is we're watching our competitors to be far more negatively impacted than we are, and we're maintaining our Page 1 strength because of our original content and operating model. And so there's -- it's a mixed bag there.

The channel is definitely being consumed mostly by the larger participants in the market. And again, most of our competitors are having to bid a lot more there because they fall into Page 2 or in some cases, three in organic ranking. And that's not an issue that we're seeing at this time for our brand. I think on the dealer customer side, we also are hearing, frankly, lukewarm feedback.

We're buying DLAs on behalf of dealers. And let's face it, Google's search bar is not high intention in the moment. It's very preliminary research, even more so than Cars.com, which is a research destination for auto. And so they're less likely to convert coming off the Google search bar than they are from Cars.com.

In fact, we're seeing that our vehicle exposure on Cars.com is generating almost 5x more efficiency for the dealer than the Google Vehicle Ads. So I think we feel really good about the strength of our subscription offering relative to this open auction. But we're watching it closely.

Naved Khan -- Truist Securities -- Analyst

Great. Thank you.

Operator

Thank you, Mr. Khan. The next question comes from the line of Marvin Fong with BTIG. You may proceed.

Marvin Fong -- BTIG -- Analyst

Great. Good morning. Thanks for taking my questions. Another question on Instant Offer.

You covered that quite well already. But how many of your 20,000 -- almost 20,000 dealer base do you believe would be good customers for Instant Offer? And a follow-up question just on EBITDA margin. The guidance for the third quarter was quite strong, almost 30%, which I think previously, you said it would be more like fourth quarter, you would get there. Is this a sustainable level? Or is this just a function of pulling back on marketing spend or other expense items? If you could just comment on how you see EBITDA margins performing, that would be great.

Thank you.

Alex Vetter -- Chief Executive Officer

Sure. Well, first of all, from a TAM standpoint, if you think about the way dealers buy cars today, 40,000 dealers are sourcing cars at auction. I mean they all have legacy systems. And then the digital auction, again, 30,000 dealers minimum buying cars through these dealer auctions.

So I look at Accu-Trade and say like this TAM can be larger than any of our other solutions that we've introduced because it's got universal utility. Even if you're not a Cars.com customer, using Accu-Trade to appraise vehicles accurately and quickly and reducing friction between your customers is a benefit into itself. And so I do think Accu-Trade has a potential that could be wider than our marketplace. But at the same time, we are integrating these things so that dealers see the benefit of both being on our marketplace and using Accu-Trade.

For instance, the Accurate dealers also get this trade-in functionality on their vehicle detail pages on Cars.com. So when they're marketing to consumers shopping for a car, they can begin the trade-in process online directly from their Cars.com vehicle listing ads. I do think it's going to take time to ramp Accu-Trade because, again, it's not just signing up for free and configuring what you want to buy. So the dealers are going to have to do a little bit more due diligence to understand what does it take to use Accu-Trade to appraise their cars.

But we're ramping our onboarding teams. And we've got more subscriptions now that we need to get launched and live with growing demos coming throughout the second half of this year.

Jandy Tomy -- Interim Chief Financial Officer

From a margin perspective, Marvin, it's actually a combination of both incremental revenue. So as our subscription revenue continues to build and grow, we're getting nice flow-throughs to the bottom line in connection with also careful cost management. Marketing is about 25% of our total operating expense and we're planning on that being at about the same level as it was in the second quarter, but that's the lever. But across the whole business, we're definitely watching expenses and optimizing for growth.

But it's a combination of both nice flow-through from the revenue perspective, as well as the expense management.

Marvin Fong -- BTIG -- Analyst

Terrific. Thanks, Alex and Jandy. Appreciate it.

Alex Vetter -- Chief Executive Officer

Thanks, Marvin.

Operator

Thank you, Mr. Fong. The next question comes from the line of Gary Prestopino with Barrington Research. You may proceed.

Gary Prestopino -- Barrington Research -- Analyst

Good morning, all. I've got a number of questions here that I just want to clear up one thing with Accu-Trade and this Instant Offer. Does the dealer have to be a marketplace customer to get Accu-Trade?

Alex Vetter -- Chief Executive Officer

No. They can actually buy Accu-Trade for their own website for a lower fee, Gary, and use the Accu-Trade functionality in their own website and the store. If they want to get the connected package which brings incremental vehicle buying opportunities direct from our marketplace, that does require them to be part of our marketplace.

Gary Prestopino -- Barrington Research -- Analyst

OK. So in other words, most of them are --

Alex Vetter -- Chief Executive Officer

Yeah, most of them are, Gary. Like we're seeing 100% desire to be a part of sourcing inventory from the open market.

Gary Prestopino -- Barrington Research -- Analyst

OK. So in other -- well, what I'm trying to understand is Instant Offer has kind of worked through Accu-Trade. Is that correct? Or is that just a separate product?

Alex Vetter -- Chief Executive Officer

It works through Accu-Trade. So the Instant Offer, the dealers can go in the Accu-Trade tool, appraise the car, put the number on it, get the instant guarantee from us and buy the car directly from the consumer. But the opportunity flow directly into Accu-Trade.

Gary Prestopino -- Barrington Research -- Analyst

So that's what I'm saying is they still, no matter what a dealer in order to do Instant Offer, is still going to have to pay something to be on the Accu-Trade platform. It might not be the same as a marketplace guy, but they're still going to have to pay, right? Or am I wrong there?

Alex Vetter -- Chief Executive Officer

Correct. No, that's correct.

Gary Prestopino -- Barrington Research -- Analyst

OK, OK. That's fine. And then with the Subaru business, are they also offering their dealers co-op advertising or co-op dollars to sign up for you on the website side?

Alex Vetter -- Chief Executive Officer

I don't believe there's co-op dollars eligible for the website. They negotiated with us on partner pricing, so that partnership established with set pricing terms between us and Subaru. A lot of our OEMs do offer co-op dollars for marketing services that go above and beyond the base website. But I just don't know off the top of my head if Subaru is eligible.

We'll check and get back to you if we can today.

Gary Prestopino -- Barrington Research -- Analyst

OK. That's fine. And then lastly, I just want to clear something up here. You said you had a net increase of 17 dealers.

Along with -- and that includes 180 Accu-Trade dealers. So it looks like if you do the math, it's a net loss of 163 dealers. And then it's the cancellations related to a single digital dealer. Could you kind of clear up that? Or maybe -- or am I right with my math there? Because it's just a single digital dealer.

How did you lose some -- lose so many dealers?

Jandy Tomy -- Interim Chief Financial Officer

So the single customer has multiple locations. So the subscriptions are based on the locations where their advertising inventory. So with that, with that cancellation, that more than offset the addition of the Accu-Trade dealers, the 180 Accu-Trade dealers.

Gary Prestopino -- Barrington Research -- Analyst

What I'm trying to understand, Jandy, if they're a digital dealer, they don't -- they shouldn't have locations. They should just be all done on the web. So that's what I'm trying to understand.

Alex Vetter -- Chief Executive Officer

Gary, so our subscription prices, we charge based on the DMA. So if a digital dealer wants to sell cars in San Antonio, in order for those cars to appear in San Antonio zip codes, they need to pay for access to that market. And so whether -- physical dealers don't have to think about this and worry about this. But the virtual dealership certainly, every time they want to expand their reach and have their searches appear more in various cities, we're charging them incremental fees.

Gary Prestopino -- Barrington Research -- Analyst

OK. That clears it up. Thank you very much.

Operator

Thank you, Mr. Prestopino. [Operator instructions] The next question comes from the line of Tom White with D.A. Davidson.

You may proceed.

Tom White -- D.A. Davidson -- Analyst

Great. Thanks for taking my question, and good morning. I guess on ARPD growth was up 1%, it was up 1% last quarter. I was hoping you could just maybe disaggregate a little bit kind of the different moving pieces there between, I guess, maybe pricing and product mix? And how should we think about ARPD growth kind of in the back half of this year? And then I have a follow-up on the Subaru deal.

Jandy Tomy -- Interim Chief Financial Officer

Yeah, yeah. So from a solutions perspective, that's really what's driving the growth in ARPD, both Dealer Inspire solutions and FUEL. We also, as you probably remember, have been doing very targeted rate increases across the dealer base that also contributed nicely to the ARPD growth. But offsetting that are downgrades related to lower inventory levels.

So as you know, our -- part of our pricing is dependent upon how many cars dealers have on their lots. And with the significant declines over the last two years, well, six quarters, I suppose, that put pressure on the marketplace -- on the marketplace ARPD. The other piece in there as well is mix. So as we continue to grow our dealer customers, dealers are typically coming in at slightly lower rates than existing customers.

So that's also putting pressure on marketplace.

Tom White -- D.A. Davidson -- Analyst

OK. That's super helpful. And I know you guys don't guide to ARPD. But I mean given kind of all those moving pieces and kind of what's going on in the macro, I mean do you think that ARPD can kind of continue to grow at a similar level here over the back half? Or is there a reason to maybe be a bit more conservative on modeling that piece?

Jandy Tomy -- Interim Chief Financial Officer

Yeah, yeah. Tom, we really expect ARPD to be the growth -- the driver of our growth here with the solutions that we're rolling out with Accu-Trade, with continued growth in DI and even the stability in the marketplace dealer customers and the core business. We do think that ARPD can continue to grow and will continue to grow, particularly because this Accu-Trade connected package is being sold to dealers. And that's what is going -- we'll see that come through in dealer revenue and come through in ARPD.

Tom White -- D.A. Davidson -- Analyst

OK. Sounds good. And then on the Subaru deal, I remember I think it was with the GM deal, there was sort of like a -- you could only kind of go after one tranche of the dealers at a time. Just curious if there's a similar dynamic here? Or can you kind of go out and try and tackle 750 or whatever the number was, all those dealers at once? Just how should we think about kind of the phasing potentially there?

Alex Vetter -- Chief Executive Officer

Yeah. So Subaru being a smaller OEM than GM was when we rolled out, GM has no staging. And so basically, it's more of a jump ball and we've seen strong inbound interest from Subaru dealers nationally. And then importantly, I did confirm that there is co-op eligibility for dealers on digi ad spending, so we can support more of the dealers marketing spend that's co-opable by Subaru.

Jandy Tomy -- Interim Chief Financial Officer

And the website, yes.

Tom White -- D.A. Davidson -- Analyst

OK. Thanks, guys.

Jandy Tomy -- Interim Chief Financial Officer

Thanks, Tom.

Alex Vetter -- Chief Executive Officer

Thank you.

Operator

Thank you, Mr. White. There are currently no further questions registered at this time. [Operator instructions] There are no additional questions waiting at this time.

So I will now pass the conference back to Alex Vetter for closing or additional remarks.

Alex Vetter -- Chief Executive Officer

Just wanted to say thank you for your interest in Cars and joining us today, and that concludes our call. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Robbin Moore-Randolph -- Director, Investor Relations

Alex Vetter -- Chief Executive Officer

Jandy Tomy -- Interim Chief Financial Officer

Naved Khan -- Truist Securities -- Analyst

Marvin Fong -- BTIG -- Analyst

Gary Prestopino -- Barrington Research -- Analyst

Tom White -- D.A. Davidson -- Analyst

More CARS analysis

All earnings call transcripts