CarGurus Inc (CARG) 2017 Q3 法說會逐字稿

Greetings and welcome to CarGurus' third-quarter 2017 earnings results conference call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Seth Potter. Thank you. You may begin.

Thank you and good afternoon and welcome to CarGurus' third-quarter 2017 earnings call. Today we will be discussing the results announced in our press release issued after the market closed.

With me on the call this afternoon is Langley Steinert, CarGurus' founder and Chief Executive Officer, and Jason Trevisan, Chief Financial Officer of CarGurus. They will begin with prepared remarks and then we will open the call for Q&A.

During the call, we will make statements related to our business that may be considered forward-looking, including statements concerning our financial guidance for the fourth quarter of 2017 and full year of 2017, our plans to execute on our growth strategy, our ability to maintain existing and acquire new customers, and other statements regarding our plans and prospects. Forward-looking statements may often be identified with words such as we expect, we anticipate, or upcoming. These statements reflect our views only as of today and should not be considered our views as of any subsequent date.

We undertake no obligation to update or revise these forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations.

For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our financial prospectus filed pursuant to Rule 424(b) on October 12, 2017, as updated by our SEC filings, all of which are available on the investors section of our website at cargurus.com and on the SEC website at sec.gov.

Finally, during the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued after the market closed today, which is located on our website at cargurus.com and the SEC website at sec.gov.

With that, let me turn the call over to Langley.

Thanks, Seth, and to each of you joining us today on our first call as a public company. Our IPO was an exciting milestone for CarGurus and the industry that we are serving. I'd like to start by thanking all our employees, dealers, and consumers that have made our tremendous success possible.

Given that this is our first earnings call, I thought it would be helpful to provide a brief overview of CarGurus. I will then summarize the operating results for the third quarter and discuss our strategic growth initiatives.

I started CarGurus 11 years ago with a simple mission: to build the world's most trusted and transparent automotive marketplace. At the heart of our mission is the concept of unbiased transparency. As a consumer shops for a car, we are providing them with detailed information on each car, including its condition and price and user-generated feedback on dealer reputation. We take all this information together and present our search results in an unbiased transparent manner.

Our marketplace is available to all eligible dealers, whether or not they pay us, because we believe it is critical to provide consumers with search results based on the largest possible base of dealer inventory. This is similar to the idea that you wouldn't use a travel search engine if they only provided you with recommendations based on half of the available flights. Everything we do is focused on delivering the best consumer experience, which is ultimately good for consumers and dealers.

Legacy online automotive listing sites typically employ a paid inclusion model, which provide search results only from paying dealers, organized in part based on who is paying them the most money. Consumers accessing these platforms have a very hard time knowing if the cars they are being shown represent a good deal or a bad deal. CarGurus is highly differentiated in that consumers tell us what they are looking for and we deliver the best deals from the top-rated dealers based on the consumer search criteria.

We are able to provide this transparency through the technology that underpins our platform. We have a data-driven mathematical approach to everything we do. Over the last seven years, we have optimized algorithms and data analytics based on millions of data points we aggregate from hundreds of data sources every day, which helps us to generate the most relevant search results for consumers.

This automotive data is notoriously messy, as there are tens of thousands of dealers selling millions of cars. And the way each dealer describes features and options of a car can vary. Our algorithm analyzes each of these data points to appraise cars on our site and for used cars to determine what we call instant market value, or IMV.

The IMV is compared to the car's asking price, and together with dealer ratings from our user community, used to come up with a simple but powerful deal rating that we use to sort the best deals from the top-rated dealers in a highly intuitive way.

The biggest testament to our differentiated approach is our website traffic growth. In the last 6 years, we've grown our total global traffic roughly 14X: from 2 million monthly unique visitors in Q3 2011 to over 28 million average monthly unique visitors in Q3 2017.

Most recently, in the last three years, in the US market we've grown our monthly visits at a compounded annual growth rate of over 40%. And now our global traffic growth includes momentum in our overseas markets as consumers in these countries learn about and experience the value of our approach.

In terms of the market opportunity, in 2016, the US auto industry spent $37 billion on marketing, a little over half of which was spent online. And by 2021, that spend is expected to increase to $47 billion, with over 70% of that spend being on digital channels.

Auto dealers, who are our primary revenue source, represented over 60% of the total marketing spend in 2016 and are expected to maintain that share as they seek local ready-to-buy consumers who are our core audience.

The shift in marketing spend to online follows the shift in consumer behavior. Consumers on average used to visit approximately five dealerships before purchasing a car and now they visit fewer than two. They do almost all of their research online, focusing in on the car they want to buy, and then visit one or two dealers to negotiate.

There are currently approximately 43,000 franchise and independent automotive dealers in the United States and another 38,000 dealers outside the US in the markets we have already launched: the UK, Canada, and Germany. In addition, there are 25,000 more dealers in the markets we plan to launch in the near term.

So in total, we will be targeting over 100,000 dealers who control a growing amount of digital marketing. This is a significant global opportunity and we are focused on leveraging our strong offering and industry-leading traffic to continue increasing our dealer share as we move forward.

In addition to dealers' marketing budgets, we also generate revenue from advertising by automotive manufacturers. We spend billions of dollars each year in digital marketing as well as revenue from other advertising of auto-related products. Outside of advertising, we have begun building dealer software products that are part of an estimated $4.5 billion market in the US alone.

Because dealers are our primary revenue source, we are highly focused on providing them with a more efficient customer acquisition channel for in-market consumers and helping them achieve an attractive ROI on their marketing spend with us. We believe we do this better than anyone, ultimately helping dealers sell more cars.

If you are an automotive dealer today, you face a number of challenges. First, you have to find in-market consumers, which is challenging because auto purchases are infrequent. We address this by delivering one of the largest and most engaged audiences of ready-to-buy consumers. Based on the survey we conducted of our users in Q2, 88% of our audience is in-market to buy a car and 48% intended to buy a car in the next 30 days.

The second challenge for a dealer is the difficulty of connecting with prospects. Our marketplace encourages consumers to connect with dealers through a variety of channels, including phone calls, email, managed text chat, links to the dealer's website, and map and directions to dealerships. In 2016, we provided over 42 million connections to dealers in the United States.

It's difficult for dealers to differentiate their brand, given the fragmentation among dealers. We offer products that help dealers build their brand, such as dealer display and our dealer search engine marketing product. And of course, we also help dealers build a strong reputation through our dealer reviews.

Lastly, it's difficult for dealers to price used-car inventory because used cars are constantly changing due to shifting supply-and-demand dynamics. We offer analytic tools that help dealers merchandise, price, and sell their cars more efficiently.

What's truly exciting is that our business model and scale in the US is now benefiting from a powerful network effect. Our transparent marketplace appeals to a large and growing audience, which attracts more dealers to subscribe to our platform. More dealers on the site grow our inventory and lead to more connections. More connections feed our algorithms with more data to improve our analytics, leading to improved transparency and a more valuable user experience.

Our strong third-quarter results are evidence that our strategy is working. Total quarterly revenue grew 56% year over year to $83 million. In Q3, our audience, as measured by average monthly unique visitors, grew 24% year over year in the US and 55% in international markets. While average monthly sessions, a measure of consumer engagement, increased 38% and 73% year over year in the US and international, respectively.

During the quarter, our consolidated adjusted EBITDA was $4 million and we generated $8.5 million in cash from operations, with $5.6 million in free cash flow. We are very proud to be a technology company that has achieved this combination of scale, rapid growth, profitability, and cash flow.

Looking forward, we are focused on continuing to grow our consumer audience and their engagement with us as we enhance our leadership position and increasingly become recognized as a trusted marketplace that connects buyers and sellers.

There are several growth levers that we believe will drive continued momentum in our business. First, we believe we will continue to add new paying dealers in the US. We have already captured over half of the dealers in the US as paying customers. And each quarter, we intend to convert more dealers from free to paid as we enhance our offering and expand our audience.

Second, an important growth driver will be the expansion of our average annual revenue per subscribing dealer, which we plan to do so by growing our audience, delivering more connections, expanding our product suite, and improving monetization. In part, through new pricing and packaging offerings over time.

Third, we will grow internationally, as we continue to see the need for an unbiased transparent marketplace in countries around the world. In addition to the US, we currently operate in Canada, the UK, and Germany. And we have identified and are doing foundational work in other viable international markets.

It is important to note that the technology platform we have built is able to be quickly modified for use in countries outside of the US. Our financial strategy is to use the profits from our US business to fund our international investments. We believe that we have a significant opportunity to offer our disruptive value proposition on a global scale.

A longer-term growth initiative is peer-to-peer or P2P, which is an emerging area for CarGurus. P2P car sales represents approximately one-third of all used car sales in the US and we believe it can benefit even more greatly from our elements of trust and transparency.

P2P activity is still nascent, but growing quickly on our platform. Over the long term, we believe that P2P could represent an attractive revenue opportunity, an important strategic differentiator, as we will continue to invest aggressively in this area.

So in summary, we are very pleased with the strong execution in the third quarter. We remain excited about our future and our ability to increase the size and engagement of our consumer audience, to grow our base of paying dealers and their spend with us, and to execute a similar playbook in international markets where our model can solve the same pain points we see here in the US.

With that, let me hand it over to Jason, who can walk you through the financial details in more detail.

Thank you very much, Langley. I will first start with a more detailed overview of the third-quarter financial performance and then provide our outlook for the fourth quarter and full year 2017. Following my closing remarks, we will open up the call to your questions.

Given that it is our first call as a public company, I wanted to provide some additional color on our business model, which is rooted in connecting our buyers with sellers, the bulk of whom are automotive dealers. While we allow dealers to list inventory on our site for free, we offer ROI-driven paid subscriptions for those dealers who want even greater benefits.

Those benefits include the paying dealers receive more connections with more complete information on the consumer through more channels like phone, managed text and chat, and direct links to the dealer's site. They have the ability to include all their dealer information with the listings, such as dealership name, location, hours of operation, and branding element, which results in brand exposure to drive walk-in traffic and increase awareness in their local market.

They gain access to more tools to merchandise and price their cars and analyze market trends. And lastly, they have the ability to advertise their dealership and inventory via display advertising and dealer search engine marketing.

A dealer subscription rate is determined based on the amount of inventory they have, the expected volume of connections we will deliver to them, and their geographic region. We also generate non-dealer advertising revenue from auto manufacturers and other auto-related brand advertisers that we typically sell on a cost per thousand impression or CPM basis.

Now let me turn to our Q3 results. We are very pleased with our third-quarter performance, highlighted by our strong growth, profitability on both a GAAP and non-GAAP basis, and our positive cash flow. As Langley mentioned earlier, our total revenues were $83 million in the third quarter, up 56% year over year.

Within total revenue, marketplace subscription revenue was $73.9 million, up 59% year over year. And advertising and other revenue contributed the remaining $9.1 million of total revenue. From a geographic perspective, international revenue represented $2.6 million of the $83 million, up from $700,000 in Q3 of 2016.

We ended the third quarter with 26,553 total paying dealers, up 37% year over year. Of the total paying dealers at the end of Q3, the US represented 24,313, up 29%, and international was 2,240, up 258% compared to the same period last year.

Average annual revenue per subscribing dealer, or AARSD, in the US was $11,526, up 16% year over year. International AARSD was $4,711 during the third quarter of 2017. As a reminder, international revenues were not generated before October 2015 and therefore, international AARSD for Q3 2016 isn't available since it is based on a trailing 12-month calculation.

I will turn now to non-GAAP expenses and profitability, which excludes stock-based compensation expense. It should be noted that while our stock-based compensation was small in Q3, the impact will be material in Q4 due to the completion of the IPO during October.

For the third quarter, gross profit was $78.3 million for a gross margin of 94.3%, relatively consistent with the same period last year. In terms of non-GAAP operating expenses, total operating expenses were $75.3 million during the third quarter, up approximately 60% from last year. The majority of our OpEx, approximately 85%, relates to sales and marketing as we invest in consumer awareness and dealer acquisition.

One of our more recent but key initiatives within this category is investing in our brand, which we believe will have a long-term positive impact on both our consumer awareness and strategic position with dealers. We are also increasing investments in product, technology, and development as we look to introduce new offerings to leverage our large and growing dealer base in addition to the G&A function, as we incur public company costs and support our business on a global scale. Taking these costs into consideration, both GAAP and non-GAAP operating income was $2.9 million and adjusted EBITDA was $4 million.

Looking at our operating profitability on a segment basis, our US operations generated a GAAP operating profit of $9.3 million, while our international operations generated a GAAP operating loss of $6.5 million. As per Langley's comments, our strategy has been to utilize the profitability of our US operations to fund our global expansion. We will remain in investment mode, as we are still in the early phase of expansion in the UK, Canada, and Germany. And in the near term, we plan to enter additional markets.

On a GAAP basis, net income attributable to common shareholders for the third quarter totaled $1 million or $0.02 per share based on 46.6 million weighted average diluted shares outstanding. Non-GAAP net income for the third quarter was $2.2 million or $0.02 per share based on 107.1 million weighted average diluted shares outstanding.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in the press release issued today, covering our financial results for the quarter ended September 30, 2017, which can be viewed on our website.

Turning to the balance sheet, as of September 30, 2017, we had $85.6 million in cash, cash equivalents, and short-term investments and no debt outstanding. Subsequent to the end of the quarter, our IPO added net proceeds of approximately $43 million.

During the third quarter, we generated $8.5 million in cash flow from operations and $5.6 million in free cash flow, which includes CapEx and capitalized software development costs of $2.8 million. We continue to be very pleased with our cash generation, which highlights our capital-efficient business where we have a very low CapEx as a percent of revenue and highly efficient working capital.

Now I'd like to finish with some thoughts regarding our financial outlook for 2017, starting with the fourth quarter. We expect total Q4 revenue to be in the range of $85 million to $86 million. Non-GAAP operating income is expected to be in the range of $1.2 million to $2.2 million, reflecting our focus to profitably grow the business. Non-GAAP EPS is expected to be in the range of $0.01 to $0.02 per diluted share.

This outlook assumes weighted average diluted shares outstanding of approximately 113.7 million, which includes the shares of Class A common stock issued by the Company in the initial public offering as well as the automatic conversion of the Company's convertible preferred stock into shares of Class A common stock that occurred concurrently with the closing of the offering.

From a full-year 2017 perspective, we expect total revenues to be in the range of $311.3 million to $312.3 million, which represents year-over-year growth of 57% at the midpoint. Non-GAAP operating income is expected to be in the range of $16.7 million to $17.7 million.

Non-GAAP EPS is expected to be in the range of $0.11 to $0.12 per diluted share. This outlook assumes weighted average diluted shares outstanding of approximately 113.7 million.

So in summary, we are very pleased with our third-quarter execution and remain excited about building the world's most-trusted and transparent automotive marketplace. CarGurus is addressing a growing global marketplace and we believe we have the opportunity to build a very large business as our technology-driven offering and transparency approach is disrupting legacy solutions and approaches.

We also believe that our success is becoming self-reinforcing. Our continued growth in scale is driving is driving network effects as we continue to expand the number of consumers and dealers on our site.

With that, I will now hand it over to the operator for Q&A.

(Operator Instructions) Heath Terry, Goldman Sachs.

Great, thanks. I was wondering if you could just give us a sense -- you touched on the incredible traffic growth that you've seen as being a big part of the Company's success. Can you give us a sense of what you've done to drive that? And maybe most relevantly, what you think contributed to the acceleration in traffic growth that you saw in the US in Q3?

And then just on AARSD, can you give us a sense of sort of how much of the growth that you are seeing in AARSD is related to like-for-like pricing leverage versus car dealers taking additional services or growing the number of cars listed on the site? Thank you.

Yes, Heath, it's Langley. So I will take the first one on traffic and then maybe Jason can handle the AARSD question. You know, on traffic, it is pretty much across-the-board traffic growth across all our channels.

As we've talked about in the prospectus at the IPO time, there's probably two areas that we tend to focus on from a proactive marketing standpoint. One is algorithmic traffic acquisition, which is -- encompasses search engine marketing, retargeting, and the like. That continues to be a focus for us.

In addition, I think while it's very early, some of our early efforts in more broad-based TV and brand advertising has shown some early results in terms of increasing awareness for the site. So I would just say in general, it's a lot of the same drivers we've seen in prior months. But the two primary ones I would attribute in Q3 is around our algorithmic traffic and some of our early TV work.

On your AARSD question, Heath, you know, the three key drivers of AARSD for us are growing our audience and connection volumes, which, as you just noted, we did a great job off in Q3. Continuing to penetrate with additional products -- penetrate our paying dealer base with additional products and also introduce new products.

And then thirdly is to -- we are always testing new pricing models and packaging levels. And so all three of those occurred in Q3. And because of our mix of dealers, it's hard to truly disaggregate which of those drove what. But all three were positive influences for us in the quarter.

Great. Thanks [very much for taking my question].

Mark Mahaney, RBC Capital Markets.

Great, thanks. Three questions, please. Would you comment on whether you saw any impact from the hurricanes on your business? Secondly, any data points on international markets? Something you've seen recently that makes you more or less convinced about the opportunity in any of those markets?

And then third, could you qualitatively comment on some of the new product introduction, whether that's SEM, reselling, or web hosting? Which of those is you are seeing better attach rates for versus others? Thank you very much.

Yes, Mark, it's Langley. I will take the first two on that. So on the hurricane, we did see some effects in the local markets. They were fairly short-lived in the sense that I think you initially are going to see a drop in demand. But sadly, and I would probably stress the word sadly, those people sadly had to buy new cars.

So again, it's not something you want to make light of, but ironically, demand functions actually increased pretty dramatically soon thereafter. So I think just to summarize, initially you saw kind of a drop in demand, but net-net in some ways, sadly, you saw kind of an increased demand function.

International. It's very -- it's early in some of those markets, but I would say in Canada and England, which are probably the two more relevant markets at the moment. As we talked about in the IPO prospectus, the characteristics -- the macro characteristics in those markets are the same ones that we faced seven, eight years ago when we started to hit our stride here in the US in the sense that you've got, in some ways actually more exacerbated, you've got a monopoly player in Canada and England that has enjoyed monopoly characteristics for many years.

The merchants they deal with in most instances are not real happy to be dealing with a monopoly player. So they are very much looking for an alternative. And on the other side of the marketplace, I think consumers are really clamoring for the level of transparency that we provide, which none of the players in those markets are providing.

So again, at a macro level, we see that both merchants and consumers are really looking for the kind of solution we are providing. And in many instances, we look at the history of our success here in the US as a pretty good indicator that we are very hopeful about those foreign markets as well.

On the new product side, Mark, so as a practice, we don't plan to talk about revenue or even consistently talk about traction at a specific product level. As you know, we break out marketplace subscriptions, which are products that our dealers subscribe to, and then advertising and other, which is more predominantly OEMs.

That said, if you think about the products we have introduced outside of listings, we had previously shared that we'd penetrated about mid-teens percent of our paying dealers with our dealer display offering, which was up from single-digit penetration in the prior year. We won't report on that regularly, but we will likely provide an update when we hit a milestone of penetration there. But we continue to be excited about the growth of dealer display.

On dealer SEM, it's very early stages. We just came out of beta in the summer, so it is premature to talk about the trajectory of that. But if you will recall, that was born out of feedback that we got from dealers and in particular our dealer council -- we have a couple dealer councils -- who had high interest and strong demand for this offering because they saw our skills in search engine marketing were so strong. So it's very, very early, but we continue to be excited about it.

And then you mentioned some other products in the software category, like websites and CRMs. Those are an inventory management. Those are all in our multiyear product roadmap. We are not going to speculate on timing for those new offerings, but we are always innovating. We are looking at opportunities in M&A in those areas as well and want to bring as many products and features to our dealer base that make sense to pair with our listings.

Thank you, Jason. Thank you, Langley. Congrats on the first quarter.

Ralph Schackart, William Blair.

Good afternoon. A couple questions, if I could, please. In the prepared remarks, you talked about as one of the growth levers to add more dealers. And within that, the opportunity to convert the free to paid. If you can sort of walk us through those efforts and how you see that playing out and how that contributed in the quarter.

And then I believe also in the prepared remarks, you talked about in the near term entering some additional markets. Any extra color you could add on that would be great, too. Thank you.

Yes, Ralph, let me take the first one. This is Langley. So whenever we talk about dealer penetration, I always like to back up and talk about the more macro picture that we think about.

When we think about dealer penetration, we think about it in the context of all the markets we are in. So it's US, Canada, England, Germany to some extent. So we feel -- let me step back from your question. We feel like we have a lot of runway to go when you think about all those different markets.

In terms of moving free dealers to paid dealers, I think the primary sales story we give to a free dealer is listen, if you are getting X in terms of connections -- and we do try to focus on connections, connections being defined as phone, email, URL clicks, clicks on map and directions, text chat, all those different communication channels is what we call connections. We try very carefully to steer away from defining the world just as what some people may historically have called leads, which is just phone and email.

But what we do is we talk to a free dealer and say listen, at the moment on our free platform, all's you are really getting is anonymized leads. So as you may remember, if you are a free dealer, the only way you are going to be able to communicate with the customers on our platform is through an anonymized email, which goes through our servers.

So it might say lstein369 at CarGurus is interested in your car. So it's a very limited way to communicate with a customer. So if you are getting maybe one anonymized email connection, if you move up to our paid platform, you are going to get probably, I don't know, five to six times or more the amount of connections, which in turn, more importantly, drives more revenue.

So it's really a matter of explaining to a free dealer that the platform you are on is A, very limited in terms of all the connection points. But B, more importantly, it's kind of a factor of maybe 1/5 the amount of revenue you possibly could make if you move up to our paid platform. So that is the primary way that we move them from free to paid.

And on the additional markets question, Ralph, similar to what Langley described in England and Canada, the same macro issues exist on both the dealer side and the consumer side in many of the markets that we have started to explore and study and consider. So that's very encouraging to us.

And also, our platform, as we've launched more countries, becomes increasingly flexible, which allows us to -- by building different modules, it allows us to have more of a foundation ready each time we enter a country. And now we also have a Dublin office, so a European headquarter office that we can leverage for other European countries. So those are all very encouraging to us as we look at new markets.

At the same time, it does take time to build two-sided marketplaces in a country and it does take time to build a global company. As we launch markets, there are multiple stages to that launch. We have to establish the site and the ontology. We have to gather inventory, gain traffic, and then establish monetized relationships with the dealers.

So we have other markets planned that we will be launching. And we are excited about the efficiency with which we can do that and the macro factors that exist there. Similar to product launches, we are not going to speculate on timing -- exact timing of country launches. But I think as we've shared in a lot of our commentary so far, we expect to be launching other countries in the near term.

One other point -- this is Langley again, Ralph. I think it's worth noting that the whole concept of having a freemium model is absolutely critical to how we see both how we deal with dealers, but probably more importantly how we deal with customers.

The analogy, which I think we talked about on the IPO prospectus, is that you can imagine a world where Google only indexed 60% of the Internet or Kayak only showed you 60% of the flights. I think people would become fairly cynical about the usefulness of any of those platforms if either of those two companies were only to index a portion of the market.

And with all due respect to our competitors, for whatever reason, they believe that it's a good business or a good way to treat a customer to only show inventory from their paying dealers. And we fundamentally believe that's the wrong way to think about the marketplace. And that if you want to be truly unbiased in your transparency, you have to start with providing ubiquity in terms of inventory coverage. So we believe it's a critical part of the value that we deliver to customers.

In many ways, to get back to Heath's original question about traffic, if you were to ask me -- I remember once someone asked me or asked Rich Barton why has Zillow been so successful or what has been your marketing credo. And his answer, which was the same answer I will give, is that you build a compelling product with a really great value to the customer and customers will flock to that type of a platform.

All right, great. Thank you very much and great start.

Aaron Kessler, Raymond James.

Congrats on the quarter. I have got a couple questions. One, if it's possible if you can quantify marketplace and advertising revenues by US and international. I can get that later if possible.

Second, can you just maybe talk about the competitiveness of the advertising market? We saw a lot of -- a couple of your competitors I think advertising during the baseball playoffs. And then thirdly, just do you expect some of your competitors to copy some of your transparency features? And how you plan to stay in front of them if they do copy? Thank you.

Yes, Aaron, it's Langley. I'm going to take the last two and then maybe Jason can follow up on the first. With regards to our competitors, yes, so we have seen both domestically and the UK a lot of our competitors picking up parts of our concept of transparency.

I guess the comment which I would make on that is that -- and this comes a little bit from my background as cofounder of TripAdvisor -- is that I think to be truly useful to consumers, you have to be unbiasedly transparent. And I think some of our competitors have put good and great monikers on their inventory, but have shied away from putting fair and overpriced. Some of them have dabbled with putting good, fair, and overpriced, but have not used any of that information to sort the inventory.

That's probably the most critical issue I would have you think about is that doing all this work in terms of providing transparency around price but not using that information to sort the inventory would be akin to Google spending years building the page rank technology and not using it to ordinate URLs. I find it's odd that one would go to the great lengths to do that analysis and not use it to inform how you rank inventory. Basically putting the great deals at the top of the search results.

All our competitors feel -- they feel that it's more appropriate to rank the cars based on essentially who pays them the most money, which goes to the core issue that I was just talking about, about being unbiased in your transparency.

So listen, we believe it's a big marketplace. We have great respect for all our competitors. And we think it's frankly a big category and everyone can make lots of money. But when push comes to shove, I think consumers are going to gravitate, as they have in the US, towards the platform that's truly unbiased. And I think using technology and our other means, I believe we are delivering on that in a far more comprehensive way.

And Aaron, can you just repeat your first question? I think I heard it, but I want to make sure I understood it correctly.

Yes, it was just if you could quantify marketplace and advertising revenues by US and international. I didn't see that in the press release.

Yes, so that's -- we are showing segment revenue in total. We are not going to break down segment revenue into those two product lines. But you see it on a consolidated basis, and subscriptions are the significant majority in both.

Got it. Okay. Thank you very much.

Ron Josey, JMP Securities.

Great. Thanks for taking the question. Congrats again on everything, guys. So two, please. Just on closing the loop, one of our key takeaways in talking with a bunch of dealers throughout this whole process is just trying to understand overall attribution, and particularly from CarGurus. And so just want to understand a little bit more about how you are thinking about attribution, maybe the opportunities here in working with dealers.

Then on AARSD, Jason, you talked about there are three key drivers of AARSD growth. I imagine those drivers continue going forward. And so maybe you can talk a little bit how you see AARSD evolving over time. That would be great. Thank you.

Yes, Ron, it's Langley I'm going to take the first one. So in terms of attribution, listen, we are constantly in search of different data sources to validate close rate. And trying to work with our dealer partners to funnel that information back to them.

As a Company, when we sell our products, we always sell and position around return on investment. We believe strongly that at the end of it all, we have to help dealers sell cars. We are not just in the business of selling impressions or audience. We understand our merchants need to make money and so we are maniacally focused on ROI.

I will admit that unlike my last life at TripAdvisor that when you are dealing with a transaction which is fundamentally off-line versus in my last life at TripAdvisor, everything could be cookied and tracked online, it gets a little more complicated. But there are sources, DMS and otherwise, that we can tap into to provide information back to our dealers. And we are always on the hunt for those data sources, and as I said, trying to really work with our dealer partners to define ROI.

And Ron, as for AARSD evolution, I think the first thing I would say is that we are playing the long ball here. We view this as an opportunity over time to establish trust with our dealers, demonstrate the value that we are delivering, and be really thoughtful partners to them to help them sell more cars in a variety of ways.

And so while we acknowledge and recognize that we began penetrating the market at an aggressive price point in order to gain -- establish a footprint and grow some awareness. And therefore, we have upside there for sure. We are not in a rush to try and capture that.

We have the three levers that I talked about: growing the audience, introducing new products, and establishing and offering new pricing models. We think there is upside on all those levers. It wouldn't be prudent for us to try and quantify or rank order those as we sit here today.

I will say that that third lever around really better aligning our pricing with the value that we are driving does hinge on attribution. So your two questions are linked. And we are investing resources and developing technology there so that we can better gain the attribution, not just for ourselves, but also for the dealer so that they can understand more about their own customers.

Great, thank you.

There are no further questions in queue at this time. I would like to turn the call back to management for closing remarks.

Yes, so it's Langley. Sorry. I just want to close up by thanking, as we did at the top of our segue, to thank both the CarGurus employees, our valued dealer customers, and our new shareholders. We are really excited about the future, both domestically and internationally. And we look forward to a great quarter coming up. Thanks for your time.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.