Cars.com Inc (CARS) 2017 Q3 法說會逐字稿

Good morning, and welcome to the Cars.com Third Quarter 2017 Earnings Conference Call. Hosting the call this morning is Alex Vetter, Chief Executive Officer; and Becky Sheehan, Chief Financial Officer. This call is being recorded, and a live webcast can be found at investors.cars.com. A replay of the webcast will be available at this website until Wednesday, November 22, 2017. A copy of the accompanying slides can be found on the Cars.com IR website. (Operator Instructions)

I'd now like to turn the call over to Jandy Tomy, Vice President of Investor Relations and Treasury.

Good morning, everyone, and welcome to our third quarter 2017 earnings conference call. During our discussion today, we'll be referring to our earnings presentation, which is available on the Investor Relations portion of our website.

Before I turn the call over to Alex, I'd like to first draw your attention to our forward-looking statements and the description and definition of our non-GAAP financial measures found on Slides 2 and 3 of the presentation. We will be discussing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted net income and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure can be found in the financial tables included with our third quarter 2017 earnings press release in the appendix of the presentation.

For more information, please refer to the risk factors included in our SEC filings, including those in our registration statement and our quarterly and current report. Cars.com assumes no obligation to update any forward-looking statements or information as of their respective dates.

I'd now like to turn the call over to Alex.

Thanks, Jandy. Good morning, everyone, and welcome to our third quarter 2017 earnings call. I am proud to be reporting our first full quarter as a standalone public company.

We are making significant progress towards our strategy of winning with consumers and connecting buyers and sellers more intelligently and efficiently.

I want to start by saying thank you to our team here at Cars.com. I am proud of what we've accomplished in these last few months, specifically in 3 areas: product innovation, investing in our brand and strengthening our team.

The team is working at an incredible speed, and our pace of innovation and productivity is reflected by the quality and quantity of the product features we have launched in the last 2 months. I'm going to tell you a bit more about this progress today.

Our new platform enabled a record number of site innovations in this last quarter, such as the launch of features like Salesperson Connect, which makes the consumer experience more intelligent, impactful and unique. With nearly all of our new product developments rolling out late September and early October, we're looking forward to seeing the full benefit and uplift in the quarters ahead.

We are rapidly building and fortifying a strong long-term position. We have assets including a brand that's synonymous with car shopping and ownership, a reputation for innovation, trusted relationships with dealers and OEMs and strong, consistent free cash flow generation, all of which make us a significant force in a fragmented market.

And we are transitioning the company into a more nimble, technology-focused organization in the midst of a challenging automotive market and competitive environment.

While I'm pleased with our progress, these shifts take time to fully impact subscription revenue. And therefore, we have revised our full-year revenue target to a slight decline of 1%. I remain confident in the positive momentum we are building. I will outline for the specific actions we are taking in the past quarter that we believe are going to move the needle for growth for Cars.com, and these areas focus around 3 key areas: traffic, product innovation and attribution.

Turning now to the broader landscape. Today's automotive advertising industry provides a tremendous amount of long-term opportunity, even though this year has presented us with some near-term headwinds.

Today, only about half of the $30 billion automotive advertising dollars are spent on digital, creating a vast opportunity for us.

In fact, Borrell projects that in 5 years, the digital automotive advertising spend will reach nearly 70% as advertising dollars continue to follow consumer behavior, reflecting the fact that car sales are and will continue to be researched online.

While dealers have a preference today to spend on their own brand and are investing heavily in first-party advertising, we know that car shoppers have a strong preference to use third-party marketplaces like ours to gather research, shop and decide.

Despite significant increases in manufacture and dealer first-party spending, over the past year, consumer traffic to those destinations has declined from 40% to 35%. This underscores the durability of consumer preference for unbiased third-party sites like ours. We have confidence that over the long term, advertising spend will follow this consumer preference.

Of course, the softening SAAR environment has been a headwind that our industry has been facing throughout the summer. Hurricane Harvey and Irma added to this volatility, causing the August SAAR to be lower than anticipated.

Although new car sales do not directly impact our business, the SAAR impacts our customers. And any impact to our customer base can have an impact on our business, so this is something that we're keenly aware of and keep a close watch on.

With a bounce-back in September and October to over 18 million, the highest SAAR we've seen in over a decade, we are encouraged by what this means for our customer and the health of their businesses.

Another trend to note is the popularity of ridesharing services and how this will affect our business. While people in dense geographies and metropolitan areas can use ridesharing services as a replacement for car ownership, we believe that for the vast majority of Americans, their car is their primary mode of transportation used to drop off their children at school, commute to work and run errands.

In addition, cars are automotive purchases reflecting personality and taste. Car ownership is such an ingrained part of people's lives, one that people enjoy, and we do not think this is something that will change anytime soon.

We also get asked a lot about self-driving cars and what the impact of that trend will be on our business. First, I'll say that I do not believe that this will be something that happens quickly. But when it does, these cars will need owners, and I'm confident that we'll be able to be there to assist dealers and OEMs to support their sale strategies.

I want to now turn to our unique advantages and our competitive landscape. Cars.com is the largest, most recognized brand, synonymous with the category, and we operate in a fragmented marketplace.

While consumers are going to research and explore multiple websites, dealers do not want to spend their entire marketing budget with just one partner. Regardless of competitive dynamics, we have a unique and superior value proposition.

We are focused on the strategy of differentiation through the 4 Ps of automotive decision-making: product, price, place and person. But by providing both expert advice as well consumer opinion on both new and used vehicles, and by going into local markets with our experience, knowledgeable sales force as a business partner to sell our products and educate our customers on the evolution of consumer shopping behavior. There are cheaper alternatives in the marketplace. And in a softer automotive environment, some of the industry has gravitated towards cheaper, lower-cost providers, which has inhibited our growth. Our value return on investment is significant and meaningfully better than our competitive offerings and advertising dollars spent on first-party marketing.

While the industry may be able to buy leads or impressions at a lower cost, they are also getting less for their money.

Reaching people when they shop is more influential than interrupting someone while they are reading their email or socializing with friends, and Cars.com provides the most affluent end-market audience with more walk-in traffic than the alternatives. Dealers consistently report that walk-in leads convert to sales at much higher rates than email leads.

Ultimately, we remain confident that our model is the right one, and we are best positioned to enable our partners to connect to consumers, who rely on us to make better decisions.

Now to get a bit more detail on the specific actions we took this quarter focused on improving traffic, product and attribution.

First is traffic. We launched a new media campaign that began in the last week of September. This campaign ran during Major League Baseball playoffs as well as during Premiere Week on several major networks. Our ads highlight our new pricing tools and over 5 million reviews as well as providing persistent consumer brand awareness. We've seen a positive shift in direct traffic correlated with this investment.

Our SEO work continues, and we're seeing early indications of positive response. We are focused on optimizing pages that will be high-impact, valuable links to get better response rates.

This quarter, we've also made tremendous progress on our product innovation. Our efforts to implement a laser-like focus on lean product development that began in earlier this year has hit full stride in mid-summer, and we have finally begun to take shape.

We released a tremendous number of new features and functionality in the last several weeks, including a redesign of the search experience, which improves our search functionality with a faster homepage widget, dynamic guided navigation to help users find the right car faster and with greater accuracy.

But perhaps the most exciting part of our new and improved navigation is the best match sorting, powered by a custom algorithm that delivers search recommendations customized for each user. This algorithm utilizes 20 years of data and user experience to render dynamic results that are more relevant to our consumers.

In addition, we continue to innovate and expand our price transparency tools to match and, frankly, surpass the tools that exist today in the marketplace. Our most recent enhancement added price matching that uses vehicle-specific market demand to indicate whether a car is a great deal, a good deal, fair price or well-equipped.

We are leveraging machine learning to assess the closest comparable vehicle and consider features either in high demand for the region or those that impact the price beyond year, make, model and trend. Our tools are unique in their ability to value car options and weigh vehicle-specific market demand, making pricing more sensitive to factors users value most.

Yet another first in the industry is the launch of Salesperson Connect, which is a unique, differentiated feature on our site that personalizes the car shopping experience by allowing shoppers the opportunity to select the salespersons and the dealership to connect with.

In a recent survey of over 6,000 car shoppers, 97% of them prefer to select the salesperson before walking into the showroom. This is a game-changer. It saves time for both dealers and for consumers because these leads close faster.

It also puts people back in the driver seat, so consumers know who they'll be working with before they ever walk in the store.

Salesperson Connect, which is available only on Cars.com, helps round out the fourth P of automotive shopping, person because ultimately, people buy cars from people.

This unique feature provides a differentiated and superior experience for consumers. It also helps our dealer customers reward their best-performing salespeople with more potential business, helping solve a real business problem for dealers, employee turnover.

Salesperson Connect highlights top salespeople with those salespeople who are certified ranking first. Certified salespeople have a retention rate of 3.5x that of the national average.

Salesperson Connect is also helping us progress on our attribution journey. Since consumers can only select a salesperson through Cars.com, the dealership knows these consumers are coming to them from us. This will help combat CRM systems data, which captures only a fraction of our value.

One final note on our recent progress relates to our team and the key strategic hires we made during the quarter to grow our expertise, reinforcing the team's focus on attribution, national sales and data science.

I would like to highlight just 2 of our talented new appointments, representative of our focus on important pillars of our strategy. We welcome Darren Haygood as our Senior Vice President of Commercial Strategy, who will expand our ability to capture and demonstrate our value to our partners. Darren comes to us with nearly 20 years of industry experience and, importantly, firsthand knowledge of working with over 3,000 studies, validating the efficacy of dealer marketing and its impact on sales. Darren has seen firsthand that we are impacting dealership sales far more than the current systems indicate.

We're also pleased to have Andy Jacobson as Senior Vice President of National Sales rejoin the team to lead our national sales efforts, where he will work to expand our relationships with the auto manufacturers. He spent the last several years building expertise in digital direct and programmatic sales for clients across many industries, including automotive, retail, travel and consumer electronics. Andy's experience in digital media, ad tech, machine learning and attribution will be a great asset to our organization, as he helps our customers harness the power of online and offline data-driven insights to reach and influence consumers across devices.

Before we walk you through our specific financial results and key performance indicators for the third quarter, I would like to share with you what we're most excited about as we look ahead to several key initiatives that will allow us to accelerate growth.

First, we see an opportunity to improve our traffic and engagement. It's our top priority as we continue to come back from the downturn we faced as a result of our site replatforming last year.

We have made brand investments planned for the fourth quarter, and we continue to work closely with our research prominence and conversion.

Second, we are continuing to focus on attribution as we identify more innovative ways to clearly articulate our value to dealers. Our patented Lot Insights technology and Salesperson Connect are 2 innovative and differentiated solutions, which are receiving positive feedback from our dealer network.

And as I just mentioned, the addition of Darren to our team to focus on the important strategic area was another key step forward.

Third, we are pleased to tell you that we have partnered with one of our affiliates, McClatchy so that the Cars.com sales team will now be able to work directly with the dealerships in select incremental markets.

As a result, we will be able to capitalize on the effectiveness of our sales team 2 years earlier than the original agreement would have allowed.

Importantly, this provides us the opportunity to create direct relationships with our dealer customers in these markets to ensure that they have a full understanding of our product set, in addition to the opportunity to call on prospective dealers and sell our full suite of products.

Although the financial impact on 2017 will be small, this represents progress we are making as we seek additional opportunities to sell directly into affiliate markets.

And finally, we will pursue growth through adjacencies and extensions as we look to build out new areas of our business, both organically and through acquisitions.

Let's now turn to the specific performance results for the third quarter in 2017. We were encouraged by the 3% growth in average monthly unique visitor count this quarter. Total visits declined 1% year-over-year. While we are pleased with our competitive position, we are eager to see more recent investments translate into traffic.

In September, we substantially increased our SEO team resources. And since then, we are encouraged by the early progress around SEO visibility.

Cars.com remains focused on mobile leadership, and we continue to grow this channel with 8% growth year-over-year.

Mobile traffic at the end of the third quarter of 2017 was 59% of total traffic compared to 54% in the year prior. Mobile app traffic was 24% of our total compared to 22% in the same quarter a year ago. This shift to mobile positively enhances our ability to illustrate the impact our business has on walk-in traffic and dealership sales.

Dealer count declined slightly, driven by independent dealerships, and declined more dramatically as a percent of total within markets operated by affiliates versus the Cars.com direct territory.

Our average vehicle listings for the third quarter were 4.9 million, reflecting 6% growth compared to the prior year.

And now, I'd like to turn it over to Becky to talk about our financial results.

Thank you, Alex. Revenue for the third quarter of 2017 was $159.9 million compared to $162.3 million in the prior-year period.

Wholesale revenue declined 3.3%, and retail revenue declined 0.8%. The decline was in part due to the traffic softness as well as the SAAR environment, which has prompted some dealers to scale back their marketing spend.

Within the retail category, revenue from our national advertising business was up 2.5% year-over-year at $32.0 million in the third quarter of 2017 versus $31.2 million last year.

Total operating expenses for the third quarter of 2017 were $120.5 million compared to $110.1 million for the prior-year period. This increase can be attributed to revenue mix, $3 million of increased marketing spend since we launched our national TV campaign at the end of the third quarter as well as $3.9 million increase in G&A expense. The increase in G&A is due to $2.5 million of incremental public company costs, $0.5 million in nonrecurring costs, $0.6 million in increased share-based and deferred compensation costs and $0.4 million of increased depreciation expense.

Net income for the third quarter of 2017 was $21 million or $0.29 per diluted share. Adjusted net income for the third quarter of 2017 was $34.3 million or $0.48 per diluted share.

Keep in mind that comparisons to the prior year are impacted by the change in our capital structure, including the addition of interest expense and tax expense.

Adjusted EBITDA was $63.1 million or 39.5% of revenue compared to $73.3 million in the prior-year period. The decline was driven by the incremental operating expenses I walked through a moment ago.

For the 9-month period ending September 30, 2017, net cash provided by operating activities was $147.2 million compared to $140.4 million in the prior-year period.

Free cash flow for the same period of 2017 was $119.6 million compared to $133 million in the prior year. Included in the current period is an incremental $19.8 million of capital expenditures related to our headquarters relocation, which negatively impacted our 2017 free cash flow.

During the current-year period, we also paid $6.8 million for interest and $5.7 million for income taxes, both of which were incremental compared to the prior year.

At September 30, 2017, cash and cash equivalents were $27.4 million. And debt outstanding was $624.4 million, representing net leverage of 2.4x.

During the quarter, we repaid $50.6 million on our credit facility, $45 million of which were voluntary payments on the revolver.

Subsequent to the end of the quarter, we voluntarily repaid an additional $25 million on our revolver with our excess cash balances.

Recall that when we spun earlier this year, we borrowed $675 million. And today, just 5 months later, due to the strong, consistent cash flow nature of our business, our outstanding debt balance is just under $600 million, and we have availability under our revolver of $295 million.

As a result of our year-to-date performance and softer revenue than we anticipated, we are adjusting our outlook for 2017. Our expectation is that our fourth quarter revenue performance will look similar to Q3, resulting in full-year revenue outlook down slightly, approximately 1% compared to 2016.

We remain confident in our midterm outlook. While we also remain confident about our product development and traffic initiatives, the transition into revenue growth won't occur at the rate we initially anticipated earlier this year.

During the quarter, we strategically prioritized consumer experience initiatives, as Alex described, over national advertising initiatives because we believe the payback is greater over the long term.

Consumer initiatives translate into better quality for our dealer partners, and most of these initiatives launched at the end of the third quarter.

Additionally, we've hired a new leader to run the national business to execute on our strategy and to continue to grow the business. We are confident that he is going to build a plan to reaccelerate growth in this area.

We continue to believe in the importance of investing in our brand to support traffic and revenue growth and, as a result, expected adjusted EBITDA as a percentage of revenue to be 38% for 2017, reflecting a narrowing of the range from our earlier guidance.

As Alex mentioned, we are pleased to announce the traction we are starting to get with transitioning our affiliate partners, but the impact on 2017 will be minimal given the timing with only 2 months left in the year. We are working through the details and the impact it will have on 2018.

We expect our 2017 capital expenditures to be approximately $33 million, slightly lower than we previously reported and stock-based compensation expense for 2017 to be approximately $3 million.

Keep in mind that our full year cash flow will be impacted by our new capital structure. In addition to approximately $7 million of public company costs in 2017, we expect to have approximately $13 million in interest expense on our debt this year.

Further, as a result of establishing a corporate legal entity structure effective with the spin, we expect cash taxes in 2017 to be approximately $14 million, reflecting only a partial year as a taxpayer. This cash tax estimate also factors in the timing of when our 2017 taxes will be paid, as the final tax payment for 2017 will not be made until the first quarter of 2018.

And lastly, as it relates to 2017, as a result of a change in our corporate structure, we are also required to change our reporting of deferred tax assets and liabilities. This reporting change results in a $69 million noncash write-off of a deferred tax liability associated with nondeductible goodwill. You will see this as a credit to income tax expense in the fourth quarter of 2017.

Our size and scale is truly a differentiator for our business, and this scale drives substantial cash flow that our business generates. As Alex mentioned earlier, we're looking forward to capitalizing on this cash flow by investing in technology and marketing initiatives, pursuing acquisitions to allow us to better serve our partners and consumers and the continued deleveraging of our balance sheet.

With this unmatched ability to invest in the future of our business, we are confident that the benefits from these initiatives will be realized over time.

And now, I'll turn the call back to Alex for some closing remarks, before we move to questions.

Thank you very much for your interest in Cars.com. We continue to focus on delivering our strategy of winning with consumers and connecting buyers and sellers more intelligently and efficiently.

I remain confident in our model, our competitive position and the team we have put in place to deliver growth.

Together with our capital flexibility, we are poised to create and deliver shareholder value.

Before I wrap up the call, I want to thank our employees for working so hard through this transition. And as we look forward to Veterans Day on Saturday, I want to thank all the men and women of our Armed Forces for their service, with a special acknowledgment to the veterans who are part of the Cars.com family.

That wraps up our prepared remarks, and I'd like to open the call up to your questions. Operator?

(Operator Instructions) Our first question comes from the line of Sameet Sinha with B. Riley FBR.

Yes. A couple of questions here. Alex, if you could help us identify some of the impacts from the hurricane, and if some of that -- and I remember that you had paused billing. Did that have any impact? And does that continue into the fourth quarter? Secondly, if you can talk about this affiliate transition. I know you've indicated you'll provide more details later, but can you talk about some of the markets that you're getting back from McClatchy? And are there any associated fees with this termination?

Sure, Sameet. Thank you very much for your question. On the hurricane, we think the impact was very temporal, right? We had a one-time impact to our revenue, where we suspended billing for all our clients in the impacted region. That amount was under $1 million, but it was a one-time event, and what we felt was right to do for our customers and partners who were impacted by the storms. I think what we also believe and have seen in prior natural disasters is a strong resurgence to traffic and investment in those markets. And while it's too soon to call, obviously, consumers in those markets were even more impacted and replacement vehicles are needed. And as inventory levels rise, we typically do see an impact and a rebound in traffic that's positive. But it really was more of a onetime impact. On the affiliate side, first of all, thanks for your question there, but it's really early, and -- but very positive. We are just now starting to get information on the pricing in those markets. I can tell you that those markets were some of the lower-penetrated markets across the country, which is why we were eager to get in there and to start selling and servicing our dealers directly. And we'll keep you updated on that. But it's an exciting development, and one that allows us to reinvest in our business.

Your next question comes from the line of Steve Dyer with Craig-Hallum.

I guess, we're all trying to figure out maybe what the additional affiliate sort of means to the model next year. I guess, is it possible to say, sort of absent McClatchy, would you anticipate growing next year before you sort of consider what that means?

Sure. I think every market, Steve, is created a little bit different, depending on where they are from a penetration and a sell-through rate and, obviously, from pricing, which we don't have visibility into until we're actually able to get into the market. What I can tell you is that in these cases of the markets that we've currently got an agreement to enter in, the market share is lower, about -- only penetrated about 1/3. So we're excited about that opportunity. And the sell-through rate on our ancillary products and services is relatively low. Obviously, I don't have visibility on the pricing, which is the third part of that formula. And once we get better clarity there, we'll be able to better guide what it means.

And Steve, as you were asking about 2018 expectations, irrespective of the McClatchy transition, yes, we still would expect the business to grow.

Great. And then are you able to sort of share the terms about kind of what that early transition may mean?

So we aren't able to share the details around that. I'm sure you could appreciate the sensitive nature of that. I will tell you that the arrangement is such that we will be providing a revenue share on a limited go-forward basis as part of that transition.

Okay. Would you anticipate the opportunity for more activity with other affiliates sort of before the stated kind of sunset period?

We hope so. I think this agreement signals a full 2-year acceleration ahead of the normal transition. And so I would like to believe that we will be successful in also accelerating the transition for other markets.

Okay. And then lastly for me. You've kind of referenced SAAR's softness a little bit. I guess, my understanding would be that the subscription model would maybe be a little bit more insulated than perhaps something like a paper transaction model. What sort of dealer behavior do you see in a SAAR environment like this as it relates to a subscription model? Are they just taking a lower subscription tier or less inventory or maybe the impact that has to your subscription model?

Sure. I think you're exactly right. On our subscription business, we're slow on the uptick and also slow on the downside because of the nature of our model. I think what we've seen from a dealer behavior standpoint is more hesitation to add new product. Some of our new product launches this year, while being well received, were not getting the full take rate that we normally would like in our new product introductions because I think dealers throughout the summer, at least in Q3, were being a little bit more hesitant in terms of investing in new initiatives. But we're excited about kind of Q4 and how some of those concerns are behind us, particularly on the weather front. And dealers are now starting to realize it's going to be a great year in the industry, and that their frugality in the summer, hopefully, we see an increased spending.

Our next question comes from the line of Gary Prestopino with Barrington.

Alex, are you at liberty to tell us what markets this McClatchy deal encompasses?

We're not sharing those details at this time, Gary. I think we obviously want to maintain our anonymity there just so we can develop localized plans to enter those markets. But we're excited, obviously, at the opportunity.

And Gary, just to clarify, too. This isn't all of the markets, this is a small number of markets to start.

No, no, I understand that. But this would be all of the markets that McClatchy controls? Or just some of the markets that McClatchy controls?

No, just a small number of the markets that McClatchy controls.

Okay, okay. And then so maybe -- could you talk about your -- some of your things that you're doing with attribution? I mean, if you could maybe list a couple of the key things that you're working on with attribution to show the dealers that there's more to what Cars.com is doing for the dealership than the dealer perceives to be so.

Sure, Gary. First of all, I think our on-the-lot technology still, we're in the early innings there and continue to get extremely positive response. And what's exciting to me is now we're providing the next level of detail. We're not only showing dealers the number of people that are coming to their lots but we're able to show them what information they were looking at down to the specific cars that they're there to see. So that obviously tightens the attribution link. I think perhaps our biggest new endeavor, aside from adding Darren Haygood, who brings a wealth of experience regarding attribution to the business, is our launch of Salesperson Connect. Launching human profiles and seller profiles on our website obviously is a key differentiator for the business. We're the only platform that has this functionality embedded in our experience. But from an attribution standpoint, now consumers can directly request a specific person that they want to work with. And we're finding people now connecting with those people and asking for them by name when they come into the store. So the industry relies on CRM data that assumes that someone in the dealership is accurately sourcing sales and how to append them in their systems. We know it's a highly flawed process and data set. And now that we're creating these human connections one-to-one through Salesperson Connect, dealership personnel are starting to articulate the impact that Cars.com is having on their personal fortunes as well as their dealership overall. And so that -- we're the only one in the category doing this. We're getting extremely favorable response from both salespeople and dealerships that this is helping them tighten the attribution link. And we're excited about where this can take us.

Okay. And Lot Insights is a bundled product with a subscription, is that correct?

That's correct. There is no incremental fee for that. We want to show dealers that information up close and personal and just use it to validate their investments with us.

Okay. And then DealerRater, though, is a per charge product. And I think you had talked about that at one time or another. It hasn't totally proliferated through your dealer base, so could you give us an idea of where that stands right now or -- yes, where it stands right now as far as proliferating through the dealer base?

Sure. We're just starting the rollout and launch, and Q3 is when we introduced the product into the marketplace. And so we're just now gaining momentum. I can tell you, it's been extremely well received. We surveyed 200 of the clients who had bought the product, and 80% of them said that these employee profiles were helping them sell more cars, sped up the sales process and had a higher closing rate. So the initial entry on that has been extremely well received. We've trained our whole sales network, and have begun the sales deployment in earnest in Q3, and we're excited about where this can go.

And our next question comes from the line of Sameet Sinha with B. Riley FBR.

A couple of follow-up questions. On the Salesperson Connect, is this something that's just sold through DealerRater or can it be expanded to the core Cars.com platform as well? And secondly, can you talk about -- I understand that Darren's just moved into his new role, and attribution is the key mandate for him, but how do you think about attribution? You mentioned CRM data is not the right way to do it, but can you just philosophically talk about how do you expect to channel his experience towards creating new products for which you can get attribution?

Sure, Sameet. Thank you. Well, first of all, DealerRater is sold separately, but it's sold through our Cars.com sales force. So it is part of our core business operation, and it's not a separate business in its entirety. The team built the product, but our Cars.com sales force sells this as a bolt-on subscription to the dealership. And again, so standalone value -- and could stand on its own. As far as Darren goes in terms of the opportunity there, first of all, attribution isn't something that we're just focused on. What really excites me for the first time in our industry, this week in Florida, there's an industry-wide conference taking place today and tomorrow that's all about attribution and measurement in the auto industry. So the industry's talking about this, where I would tell you a year ago, we were the only ones kind of pushing this rock down the hill a little bit. And now I see momentum happening in the industry. And so as the industry starts to have this discussion internally, Darren's well positioned to help facilitate those conversations, leverage our rich data and analytics to help provide intelligence to feed these industry thought leadership forums, and then working internally to make sure that all our reporting, customer demonstration of value is in a language and format that dealers can actively use in their existing tools and management meetings. And so Darren's starting with an audit of all our internal systems to make sure that we're feeding our customers all of the information they need to make informed decisions. He's speaking on the industry thought leadership trail and helping take our message out to audiences. And then he's going to be working with companies like DealerRater to help us use their review data that we're getting to anchor customers that are writing reviews about their sales experience on Cars.com is a pretty strong leading indicator that we facilitated the sale. And so we're going to be attacking the reviews business as well as a way to shore up the attribution measurement. Those are just some of the examples.

Okay. If I can put in another question. You spoke about adding more resources to your SEO initiatives. Obviously, you've had several quarters of experience under your belt. How do you see the SEO progressing? I mean, where has it come from? Where is it now? And what will these additional resources do for SEO?

Well, Sameet, last quarter, I know I told you that I wasn't happy with where we were on SEO. And this quarter, while the results haven't materially changed, I can tell you I am pleased with the progress we're making. In September, we validated our strategy with outside expertise, and they affirmed where we were headed and what we were doing. From our business standpoint versus our competitive set, it's the minority of our traffic. It was only 15% of our total volume for Q3. And so while we are focused on some other channels to grow, I think the investment here is really giving us confidence that we have upside in this channel.

And I'll just add to that a little bit, too. Although it's not SEO-specific, but we've made important marketing investments which are aimed at reaching the consumer audience and, as you know, focused on our product innovation, which also has recently launched things like the review and the benefits of the reviews. Our price badging and our pricing tools are really important for consumers to be aware of. And although we are not providing guidance on traffic, what I will tell you is that we're pleased in October to see traffic up slightly and unique visitors continuing to increase on a year-over-year basis. In Q3, our unique visitors were up 3%, and we see ongoing increases in October. So really pleased with that.

There are no further questions at this time. I'll turn the call back over to Alex.

Thank you very much for your time today. We look forward to sharing more exciting news with you in the fourth quarter. Thank you.

This concludes today's conference call. You may now disconnect.