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CST: 19/07/2019 00:54:10   

CarGurus Announces Fourth Quarter 2018 and Full Year 2018 Results

140 Days ago

Fourth Quarter Highlights:

  • Total revenue of $126.1 million, an increase of 39% year-over-year
  • GAAP operating income of $6.9 million; non-GAAP operating income of $12.7 million
  • GAAP net income of $12.5 million; non-GAAP net income of $12.2 million
  • Adjusted EBITDA of $14.0 million

Full Year 2018 Highlights:

  • Total revenue of $454.1 million, an increase of 43% year-over-year
  • GAAP operating income of $23.2 million; non-GAAP operating income of $44.0 million
  • GAAP net income of $65.2 million; non-GAAP net income of $40.8 million
  • Adjusted EBITDA of $49.0 million

CAMBRIDGE, Mass., Feb. 28, 2019 (GLOBE NEWSWIRE) -- CarGurus, Inc. (Nasdaq: CARG), a leading global automotive marketplace, today announced financial results for the fourth quarter and full year ended December 31, 2018.

“I’m pleased to share we had a strong fourth quarter that was marked by several key developments,” said Langley Steinert, Founder and Chief Executive Officer of CarGurus. “We generated strong audience growth across both our US and International segments, added audience retargeting to our digital marketing product portfolio, announced our intent to purchase PistonHeads, and we exceeded our revenue, operating profit, and earnings per share guidance for the fourth quarter and fiscal year.”

Revenue

Fourth Quarter 2018:

  • Total revenue was $126.1 million, an increase of 39% compared to $90.6 million in the fourth quarter of 2017.
  • Marketplace subscription revenue was $113.0 million, an increase of 40% compared to $80.8 million in the fourth quarter of 2017.
  • Advertising and other revenue was $13.1 million, an increase of 34% compared to $9.8 million in the fourth quarter of 2017.

Full Year 2018:

  • Total revenue was $454.1 million, an increase of 43% compared to $316.9 million in 2017.
  • Marketplace subscription revenue was $405.8 million, an increase of 44% compared to $282.7 million in 2017.
  • Advertising and other revenue was $48.3 million, an increase of 41% compared to $34.2 million in 2017.

Operating Income

Fourth Quarter 2018:

  • GAAP operating income was $6.9 million, or 5% of total revenue, compared to approximately break-even, or less than 1% of total revenue, in the fourth quarter of 2017.
  • Non-GAAP operating income was $12.7 million, or 10% of total revenue, compared to $4.8 million, or 5% of total revenue, in the fourth quarter of 2017.

Full Year 2018:

  • GAAP operating income was $23.2 million, or 5% of total revenue, compared to $15.3 million, or 5% of total revenue, in 2017.
  • Non-GAAP operating income was $44.0 million, or 10% of total revenue, compared to $20.3 million, or 6% of total revenue, in 2017.

Net Income & Adjusted EBITDA

Fourth Quarter 2018:

  • GAAP net income was $12.5 million, or $0.11 per share based on 113.4 million weighted-average diluted shares outstanding during the fourth quarter ended December 31, 2018, as compared to net income of $2.3 million, or $0.02 per share based on 103.2 million weighted-average diluted shares outstanding during the fourth quarter ended December 31, 2017.
  • Non-GAAP net income was $12.2 million, or $0.11 per share based on 113.4 million non-GAAP weighted-average diluted shares outstanding during the fourth quarter ended December 31, 2018, compared to $5.3 million, or $0.05 per share based on 113.7 million non-GAAP weighted-average diluted shares outstanding during the fourth quarter ended December 31, 2017.
  • Adjusted EBITDA, a non-GAAP metric, was $14.0 million, compared to $6.0 million in the fourth quarter of 2017.

Full Year 2018:

  • GAAP net income was $65.2 million, or $0.57 per share based on 113.4 million weighted-average diluted shares outstanding, as compared to net income of $13.2 million, or $0.12 per share based on 60.6 million weighted-average diluted shares outstanding in 2017.
  • Non-GAAP net income was $40.8 million, or $0.36 per share based on 113.4 million non-GAAP weighted-average diluted shares outstanding, compared to $15.8 million, or $0.15 per share based on 108.6 million non-GAAP weighted-average diluted shares outstanding in 2017.
  • Adjusted EBITDA, a non-GAAP metric, was $49.0 million, compared to $24.1 million in 2017.  

Balance Sheet and Cash Flow

  • As of December 31, 2018, CarGurus had cash, cash equivalents, and short-term investments of $157.7 million and no debt. 
  • The Company generated $17.1 million in cash from operations and $12.5 million in free cash flow, a non-GAAP metric, during the fourth quarter of 2018 compared to generating $7.1 million in cash from operations and $5.5 million in free cash flow during the fourth quarter of 2017.  For the full year of 2018, the Company generated $51.7 million in cash from operations and $44.2 million in free cash flow compared to generating $25.7 million in cash from operations and $18.3 million in free cash flow in 2017. 

Fourth Quarter Business Metrics

  • U.S. revenue was $121.1 million in the fourth quarter of 2018, an increase of 38% compared to $87.5 million in the fourth quarter of 2017. GAAP operating income in the U.S. was $18.0 million, an increase of 126% compared to $8.0 million in the fourth quarter of 2017.
  • International revenue was $5.0 million in the fourth quarter of 2018, an increase of 63% compared to $3.1 million in the fourth quarter of 2017. GAAP operating loss in International markets was ($11.1) million, an increase of 40% compared to a loss of ($7.9) million in the fourth quarter of 2017.
  • Total paying dealers were 31,472 at December 31, 2018, an increase of 14% compared to 27,670 at December 31, 2017.  Of the total paying dealers at December 31, 2018, U.S. and International accounted for 27,534 and 3,938, respectively, compared to 25,122 and 2,548, respectively, at December 31, 2017.
  • Average annual revenue per subscribing dealer (AARSD) in the U.S. was $14,819 as of December 31, 2018, an increase of 23% compared to $12,055 as of December 31, 2017.
  • AARSD in International markets was $4,778 as of December 31, 2018, a decrease of 3% compared to $4,904 as of December 31, 2017.
  • Website traffic and consumer engagement metrics for the fourth quarter of 2018 were as follows:
    ° U.S. average monthly unique users were 33.2 million, an increase of 29% compared to 25.7 million in the fourth quarter of 2017. U.S. average monthly sessions were 88.5 million, an increase of 29% compared to 68.5 million in the fourth quarter of 2017.
    ° International average monthly unique users were 5.7 million, an increase of 103% compared to 2.8 million in the fourth quarter of 2017. International average monthly sessions were 13.0 million, an increase of 112% compared to 6.1 million in the fourth quarter of 2017.

First Quarter and Full-Year 2019 Guidance

CarGurus anticipates total revenue, non-GAAP operating income, and non-GAAP earnings per share to be in the following ranges:

First Quarter 2019:

 • Total revenue $127 to $130 million
 • Non-GAAP operating income $7.5 to $9.5 million
 • Non-GAAP EPS $0.06 to $0.07

The first quarter 2019 non-GAAP earnings per share calculation assumes 114.6 million diluted weighted-average common shares outstanding.

Full-Year 2019:

 • Total revenue $554 to $566 million
 • Non-GAAP operating income $46 to $54 million
 • Non-GAAP EPS $0.35 to $0.40

The full-year non-GAAP earnings per share calculation assumes 115.1 million diluted weighted-average common shares outstanding.  Guidance for the first quarter and full-year 2019 does not include any potential impact of foreign currency exchange gains or losses.

CarGurus has not reconciled its non-GAAP operating income guidance to GAAP operating income, or its non-GAAP EPS guidance to GAAP EPS, because stock-based compensation, the reconciling item between such GAAP and non-GAAP financial measures, cannot be reasonably predicted due to timing, amount, valuation and number of future employee awards and therefore is not available without unreasonable effort.  For more information regarding the non-GAAP financial measures discussed in this release, please see the reconciliations of GAAP financial measures to non-GAAP financial measures and the section titled “Non-GAAP Financial Measures and Other Business Metrics” below.

Conference Call and Webcast Information

CarGurus will host a conference call and live webcast to discuss its fourth quarter and full fiscal year 2018 financial results and first quarter and full fiscal year 2019 financial guidance at 5:00 p.m. Eastern Time today, February 28, 2019. To access the conference call, dial (877) 451-6152 for callers in the U.S. or Canada, or (201) 389-0879 for international callers. The webcast will be available live on the Investors section of the Company's website at https://investors.cargurus.com.

An audio replay of the call will also be available to investors beginning at approximately 8:00 p.m. Eastern Time on February 28, 2019, until 11:59 p.m. Eastern Time on March 14, 2019, by dialing (844) 512-2921 for callers in the U.S. or Canada, or (412) 317-6671 for international callers, and entering passcode 13687454. In addition, an archived webcast will be available on the Investors section of the Company’s website at https://investors.cargurus.com.

About CarGurus

Founded in 2006, CarGurus (Nasdaq: CARG) is a global, online automotive marketplace connecting buyers and sellers of new and used cars. The Company uses proprietary technology, search algorithms and data analytics to bring trust and transparency to the automotive search experience and help users find great deals from top-rated dealers. CarGurus is the largest automotive shopping site in the U.S. by unique monthly visitors (source: Comscore Media Metrix® Multi-Platform, Automotive – Information/Resources, Total Audience, Q4 2018, U.S. (Competitive set includes: CarGurus.com, Autotrader.com, Cars.com, TrueCar.com)).  In addition to the United States, CarGurus operates online marketplaces in Canada, the United Kingdom, Germany, Italy, and Spain. To learn more about CarGurus, visit www.cargurus.com.  CarGurus® is a registered trademark of CarGurus, Inc.

Cautionary Language Concerning Forward-Looking Statements

This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance for the first quarter 2019 and full-year 2019, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “guide,” “intend,” “likely,” “may,” “will” and similar expressions and their negatives are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, risks related to our rapid growth and ability to sustain our revenue growth rate, our relationships with dealers, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, our ability to expand effectively into new markets, our ability to realize benefits from our acquisition of PistonHeads and successfully implement the integration strategies in connection therewith, our ability to operate in compliance with applicable laws as well as other risks and uncertainties set forth in the “Risk Factors” section of our Annual Report on Form 10-K, filed on February 28, 2019 with the Securities and Exchange Commission (SEC), and subsequent reports that we file with the SEC.  Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.

 

Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

    At December 31,  
    2018     2017  
Assets                
Current assets:                
Cash and cash equivalents   $ 34,887     $ 87,709  
Investments     122,800       50,000  
Accounts receivable, net of allowance for doubtful accounts of $479 and
  $494, respectively
    13,614       12,577  
Prepaid expenses and prepaid income taxes     10,144       5,313  
Deferred contract costs     5,253        
Other current assets     7,410       1,605  
Restricted cash     750        
Total current assets     194,858       157,204  
Property and equipment, net     24,269       16,563  
Restricted cash     1,921       1,843  
Deferred tax assets     38,886       825  
Deferred contract costs, net of current portion     7,252        
Other long–term assets     1,104       159  
Total assets   $ 268,290     $ 176,594  
Liabilities and stockholders equity                
Current liabilities:                
Accounts payable   $ 34,345     $ 23,908  
Accrued expenses, accrued income taxes and other current liabilities     18,654       13,588  
Deferred revenue     8,811       4,305  
Deferred rent     1,693       1,165  
Total current liabilities     63,503       42,966  
Deferred rent, net of current portion     9,395       5,648  
Other non–current liabilities     1,281       955  
Total liabilities     74,179       49,569  
Stockholders’ equity:                
Preferred stock, $0.001 par value; 10,000,000 shares authorized;
  no shares issued and outstanding
           
Class A common stock, $0.001 par value; 500,000,000 shares authorized;
  89,728,223 and 77,884,754 shares issued and outstanding at
  December 31, 2018 and 2017, respectively
    90       78  
Class B common stock, $0.001 par value; 100,000,000 shares authorized;
  20,702,084 and 28,226,104 shares issued and outstanding at
  December 31, 2018 and 2017, respectively
    21       28  
Additional paid–in capital     184,216       185,190  
Retained earnings (accumulated deficit)     9,713       (58,499 )
Accumulated other comprehensive income     71       228  
Total stockholders’ equity     194,111       127,025  
Total liabilities and stockholders’ equity   $ 268,290     $ 176,594  
                 
                 

Unaudited Condensed Consolidated Income Statements
(in thousands, except share and per share data)

    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
Revenue   $ 126,090     $ 90,597     $ 454,086     $ 316,861  
Cost of revenue(1)     6,871       5,242       24,811       17,609  
Gross profit     119,219       85,355       429,275       299,252  
Operating expenses:                                
Sales and marketing     85,991       67,670       315,939       236,165  
Product, technology, and development     14,153       8,317       47,866       22,470  
General and administrative     11,433       8,590       39,475       22,688  
Depreciation and amortization     740       746       2,804       2,655  
Total operating expenses     112,317       85,323       406,084       283,978  
Income from operations     6,902       32       23,191       15,274  
 Other income, net:                                
Interest income     712       303       2,283       869  
Other (expense) income     (5 )     (63 )     10       (306 )
Total other income, net     707       240       2,293       563  
Income before income taxes     7,609       272       25,484       15,837  
(Benefit from) provision for income taxes     (4,841 )     (1,995 )     (39,686 )     2,638  
Net income   $ 12,450     $ 2,267     $ 65,170     $ 13,199  
Reconciliation of net income to net income attributable to common stockholders:                                
Net income   $ 12,450     $ 2,267     $ 65,170     $ 13,199  
Deemed dividend to preferred stockholders                        
Net income attributable to participating securities           (223 )           (6,098 )
Net income attributable to common stockholders — basic   $ 12,450     $ 2,044     $ 65,170     $ 7,101  
Net income   $ 12,450     $ 2,267     $ 65,170     $ 13,199  
Deemed dividend to preferred stockholders                        
Net income attributable to participating securities           (210 )           (5,829 )
Net income attributable to common stockholders — diluted   $ 12,450     $ 2,057     $ 65,170     $ 7,370  
Net income per share attributable to common stockholders:                                
Basic   $ 0.11     $ 0.02     $ 0.60     $ 0.13  
Diluted   $ 0.11     $ 0.02     $ 0.57     $ 0.12  
Weighted–average number of shares of common stock
  used in computing net income per share
  attributable to common stockholders:
                               
Basic     110,215,116       96,385,889       108,833,028       55,835,265  
Diluted     113,390,212       103,169,987       113,364,712       60,637,584  
(1) Includes depreciation and amortization expense for the three months ended December 31, 2018 and 2017 and for the year ended December 31, 2018 and 2017 of $524, $379, $2,225 and $1,140, respectively.  
   
   
   

Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
Operating Activities                                
Net income   $ 12,450     $ 2,267     $ 65,170     $ 13,199  
Adjustments to reconcile net income to net cash provided by
  operating activities:
                               
Depreciation and amortization     1,264       1,125       5,029       3,795  
Unrealized currency (gain) loss on foreign denominated transactions     (134 )     32       (190 )     128  
Deferred taxes     (4,497 )     (454 )     (39,040 )     (1,117 )
Provision for doubtful accounts     434       573       1,680       1,117  
Stock–based compensation expense     5,843       4,804       20,794       5,028  
Amortization of deferred contract costs     1,334             3,689        
Excess tax benefit related to exercise of stock options                                
Changes in operating assets and liabilities:                                
Accounts receivable, net     (743 )     (3,026 )     (1,911 )     (7,039 )
Prepaid expenses, prepaid income taxes, and other assets     (3,105 )     (3,430 )     (11,753 )     (2,287 )
Deferred contracts costs     (3,272 )           (12,987 )      
Accounts payable     (2,117 )     (165 )     9,345       6,244  
Accrued expenses, accrued income taxes and other current liabilities     5,659       5,776       2,695       5,191  
Deferred revenue     1,127       (303 )     4,508       962  
Deferred rent     2,823       (35 )     4,289       227  
Other non–current liabilities     58       (15 )     405       243  
Net cash provided by operating activities     17,124       7,149       51,723       25,691  
Investing Activities                                
Purchases of property and equipment     (4,083 )     (910 )     (5,956 )     (5,157 )
Capitalization of website development costs     (544 )     (728 )     (1,522 )     (2,215 )
Investments in certificates of deposit     (82,800 )           (212,800 )     (50,000 )
Maturities of certificates of deposit     30,000       10,000       140,000       44,774  
Net cash (used in) provided by investing activities     (57,427 )     8,362       (80,278 )     (12,598 )
Financing Activities                                
Initial public offering proceeds           47,690             47,690  
Payment of initial public offering costs           (1,180 )     (1,142 )     (3,308 )
Proceeds from issuance of preferred stock                        
Proceeds from exercise of stock options     571       110       3,632       398  
Excess tax benefit related to exercise of stock options                        
Cash paid for repurchase of preferred stock, common stock, and
  vested options
                       
Payment of withholding taxes on net share settlements of equity awards     (4,018 )           (25,885 )      
Net cash (used in) provided by financing activities     (3,447 )     46,620       (23,395 )     44,780  
Impact of foreign currency on cash, cash equivalents, and
  restricted cash
    10       2       (44 )     159  
Net (decrease) increase in cash, cash equivalents, and restricted cash     (43,740 )     62,133       (51,994 )     58,032  
Cash, cash equivalents, and restricted cash at beginning of period     81,298       27,419       89,552       31,520  
Cash, cash equivalents, and restricted cash at end of period   $ 37,558     $ 89,552     $ 37,558     $ 89,552  
                                 
                                 
                                 

Unaudited Reconciliation of GAAP Operating Income to Non-GAAP Operating Income and GAAP Operating Margin to Non-GAAP Operating Margin
(in thousands, except percentages)

    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
GAAP operating income   $ 6,902     $ 32     $ 23,191     $ 15,274  
Stock-based compensation expense     5,843       4,804       20,794       5,028  
Non-GAAP operating income   $ 12,745     $ 4,836     $ 43,985     $ 20,302  
                                 
GAAP operating margin     5 %     0 %     5 %     5 %
Non-GAAP operating margin     10 %     5 %     10 %     6 %
                                 
                                 
                                 

Unaudited Reconciliation of GAAP Net Income to Non-GAAP Net Income
(in thousands, except per share data)

    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
GAAP net income   $ 12,450     $ 2,267     $ 65,170     $ 13,199  
Stock-based compensation expense, net of tax(1)     4,616       3,123       16,427       3,268  
Change in tax provision from stock-based compensation expense(2)     (4,853 )     (41 )     (40,765 )     (681 )
Non-GAAP net income   $ 12,213     $ 5,349     $ 40,832     $ 15,786  
Non-GAAP net income attributable to common stockholders   $ 12,213     $ 5,349     $ 40,832     $ 15,786  
Non-GAAP net income attributable to common stockholders per share:                                
Basic   $ 0.11     $ 0.05     $ 0.38     $ 0.15  
Diluted   $ 0.11     $ 0.05     $ 0.36     $ 0.15  
Weighted-average number of shares of common stock
  used in computing non-GAAP net income per share
  attributable to common stockholders:
                               
GAAP Basic Shares     110,215       96,386       108,833       55,835  
Preferred Shares assuming conversion           10,533             47,954  
Total Non-GAAP Basic Shares     110,215       106,919       108,833       103,789  
GAAP Diluted Shares     113,390       103,170       113,365       60,638  
Preferred Shares assuming conversion           10,533             47,954  
Total Non-GAAP Diluted Shares     113,390       113,703       113,365       108,592  
(1) The stock-based compensation amounts reflected in the table above, for 2018 and 2017, are tax effected at the U.S. federal statutory tax rates of 21% and 35%, respectively.  
(2) This adjustment reflects the tax effect of differences between tax deductions related to stock compensation and the corresponding financial statement expense.  
   
   
   

Unaudited Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit and GAAP Gross Profit Margin to Non-GAAP Gross Profit Margin
(in thousands, except percentages)

    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
Revenue   $ 126,090     $ 90,597     $ 454,086     $ 316,861  
Cost of revenue     6,871       5,242       24,811       17,609  
Gross profit     119,219       85,355       429,275       299,252  
Stock-based compensation expense included in Cost of revenue     90       135       354       151  
Non-GAAP gross profit   $ 119,309     $ 85,490     $ 429,629     $ 299,403  
                                 
GAAP gross profit margin     95 %     94 %     95 %     94 %
Non-GAAP gross profit margin     95 %     94 %     95 %     94 %
                                 
                                 
                                 

Unaudited Reconciliation of GAAP Expense to Non-GAAP Expense and GAAP Expense as a Percentage of Revenue to Non-GAAP Expense as a Percentage of Revenue 
(in thousands, except percentages)

    Three Months Ended
December 31,
 
    2018     2017  
    GAAP
expense
  Stock-based compensation expense     Non-GAAP expense     GAAP
expense as a percentage of revenue
    Non-GAAP
expense as a percentage of
revenue
    GAAP expense   Stock-based compensation expense     Non-GAAP expense   GAAP
expense as a percentage of revenue
    Non-GAAP
expense as a percentage of revenue
 
Cost of revenue   $ 6,871   $ (90 )   $ 6,781       5 %     5 %   $ 5,242   $ (135 )   $ 5,107   6 %     6 %
S&M     85,991     (1,349 )     84,642       69 %     67 %     67,670     (1,803 )     65,867   75 %     73 %
P,T&D(1)     14,153     (2,962 )     11,191       11 %     9 %     8,317     (1,565 )     6,752   9 %     7 %
G&A     11,433     (1,442 )     9,991       9 %     8 %     8,590     (1,301 )     7,289   9 %     8 %
Depreciation & amortization     740           740       1 %     1 %     746           746   1 %     1 %
Operating expenses(2)   $ 112,317   $ (5,753 )   $ 106,564       89 %     85 %   $ 85,323   $ (4,669 )   $ 80,654   94 %     89 %
Total expenses   $ 119,188   $ (5,843 )   $ 113,345       95 %     90 %   $ 90,565   $ (4,804 )   $ 85,761   100 %     95 %
(1) Product, Technology, & Development  
(2) Operating expenses include S&M, P,T&D, G&A, and depreciation & amortization  
                                                                         
    Year Ended
December 31,
 
    2018     2017  
    GAAP
expense
  Stock-based compensation expense     Non-GAAP expense     GAAP
expense as a percentage of revenue
    Non-GAAP
expense as a percentage of revenue
    GAAP expense   Stock-based compensation expense     Non-GAAP expense   GAAP
expense as a percentage of revenue
    Non-GAAP
expense as a percentage of revenue
 
Cost of revenue   $ 24,811   $ (354 )   $ 24,457       5 %     5 %   $ 17,609   $ (151 )   $ 17,458   6 %     6 %
S&M     315,939     (5,111 )     310,828       69 %     68 %   $ 236,165     (1,911 )     234,254   75 %     74 %
P,T&D(1)     47,866     (9,865 )     38,001       11 %     8 %   $ 22,470     (1,637 )     20,833   7 %     7 %
G&A     39,475     (5,464 )     34,011       9 %     8 %   $ 22,688     (1,329 )     21,359   7 %     7 %
Depreciation & amortization     2,804           2,804       1 %     1 %   $ 2,655           2,655   1 %     1 %
Operating expenses(2)   $ 406,084   $ (20,440 )   $ 385,644       89 %     85 %   $ 283,978   $ (4,877 )   $ 279,101   90 %     88 %
Total expenses   $ 430,895   $ (20,794 )   $ 410,101       95 %     90 %   $ 301,587   $ (5,028 )   $ 296,559   95 %     94 %
(1) Product, Technology, & Development  
(2) Operating expenses include S&M, P,T&D, G&A, and depreciation & amortization  
   
   
   

Unaudited Reconciliation of GAAP Net Income to Adjusted EBITDA
(in thousands)

    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
GAAP net income   $ 12,450     $ 2,267     $ 65,170     $ 13,199  
Depreciation and amortization     1,265       1,125       5,029       3,795  
Stock-based compensation expense     5,843       4,804       20,794       5,028  
Other (income), net     (707 )     (240 )     (2,293 )     (563 )
(Benefit from) provision for income taxes     (4,841 )     (1,995 )     (39,686 )     2,638  
Adjusted EBITDA   $ 14,010     $ 5,961     $ 49,014     $ 24,097  
                                 
                                 
                                 

Unaudited Reconciliation of GAAP Net Cash and Cash Equivalents Provided by Operating Activities to Non-GAAP Free Cash Flow
(in thousands)

    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
GAAP net cash and cash equivalents provided by operating
  activities
  $ 17,124     $ 7,149     $ 51,723     $ 25,691  
Purchases of property and equipment     (4,083 )     (910 )     (5,956 )     (5,157 )
Capitalization of website development costs     (544 )     (728 )     (1,522 )     (2,215 )
Non-GAAP free cash flow   $ 12,497     $ 5,511     $ 44,245     $ 18,319  
                                 

Non-GAAP Financial Measures and Other Business Metrics

To supplement our consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP), we provide investors with certain non-GAAP financial measures and other business metrics, which we believe are helpful to our investors. We use these non-GAAP financial measures and other business metrics for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures and other business metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

The presentation of non-GAAP financial information and other business metrics is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.  While our non-GAAP financial measures and other business metrics are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, we urge investors to review the reconciliation of these financial measures to the comparable GAAP financial measures included above, and not to rely on any single financial measure to evaluate our business.

We define Adjusted EBITDA as GAAP net income, adjusted to exclude: depreciation and amortization, stock-based compensation expense, other (income), net, the (benefit from) provision for income taxes, and other one-time, non-recurring items, when applicable. We have presented Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating Adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business.

We define Free Cash Flow as cash flow from operations, adjusted to include purchases of property and equipment and capitalization of website development costs. We have presented Free Cash Flow because it is a measure of the Company’s financial performance that represents the cash that the Company is able to generate after expenditures required to maintain or expand our asset base.

We also monitor operating measures of certain non-GAAP items including non-GAAP gross margin, non-GAAP expense, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share.  These non-GAAP financial measures exclude the effect of stock-based compensation expense.  Non-GAAP net income and non-GAAP income per share also exclude the change in tax provision from stock-based compensation expense. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

While a reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort as a result of the uncertainty regarding, and the potential variability of, stock-based compensation expenses that we may incur in the future, we have provided a reconciliation of non-GAAP financial measures and other business metrics to the nearest comparable GAAP measures in the accompanying financial statement tables included in this press release.

We define a paying dealer as a dealer, based on a distinct associated inventory feed, that subscribes to our Enhanced or Featured Listing product at the end of a defined period.

We define AARSD, which is measured at the end of a defined period, as the total marketplace subscription revenue during the trailing 12 months divided by the average number of paying dealers during the same trailing 12-month period.

For each of our websites, we define a monthly unique user as an individual who visited such website within a calendar month, based on data as measured by Google Analytics. We calculate average monthly unique users as the sum of the monthly unique users in a given period, divided by the number of months in that period. We count a unique user the first time a computer or mobile device with a unique device identifier accesses one of our websites during a calendar month. If an individual accesses one of our websites using a different device within a given month, the first access by each such device is counted as a separate unique user.

We define monthly sessions as the number of distinct visits to our websites that take place each month within a given time frame, as measured and defined by Google Analytics. We calculate average monthly sessions as the sum of the monthly sessions in a given period, divided by the number of months in that period. A session is defined as beginning with the first page view from a computer or mobile device and ending at the earliest of when a user closes their browser window, after 30 minutes of inactivity, or at midnight Eastern Time each night. A session can be made up of multiple page views and visitor actions, such as performing a search, visiting vehicle detail pages, and connecting with a dealer.

Investor Contact:
Rodney Nelson
Director, Investor Relations
888-508-1190
investors@cargurus.com

 

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