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    CARS
    Earnings call· Jun 2026(Q2 FY26)

    Cars.com Q2 FY26 earnings call CARS

    Aug 6, 2026 Source

    Executive summary

    Cars.com Inc. Q2 FY26 — Strong Marketplace Growth and Outperforming Profitability

    Cars.com delivered a strong second quarter, marked by robust marketplace performance and expanded profitability, driven by strategic shifts to prioritize value delivery and cost efficiencies. The company is focused on an interconnected marketplace-centric ecosystem, with early product integration efforts showing positive results. Management is confident in meeting full-year financial targets and positioning the website business for renewed growth through product innovation.

    Highlights

    5

    • Q2 revenue of $179.9 million was up 1% year-over-year and within guidance, driven by dealer subscription products.

    • Adjusted EBITDA margin expanded to 29.4%, outperforming the high end of guidance for the second consecutive quarter and up nearly 100 basis points year-over-year.

    • Marketplace revenue grew over 7% year-over-year, the fastest growth rate in public company history outside of 2021, with marketplace subscribers rebounding to their highest level since 2023.

    • Year-to-date share buybacks totaled $57 million for 6.2 million shares, representing a 28% increase year-over-year and retiring over 10% of shares outstanding.

    • Carson AI shopping assistance is engaging with 20% of active searches and users are 4x more likely to submit a lead, accounting for nearly 30% of total leads in June.

    Concerns

    3

    • OEM and national revenue declined 18% year-over-year, though Q3 is anticipated to show quarter-over-quarter growth.

    • Lower uptake of add-on dealer media products remained a near-term headwind, partially offsetting gains from core marketplace adoption.

    • Website units declined year-over-year, indicating a need for product innovation to drive future growth in this segment.

    Guidance & targets

    6
    CategoryTargetConfidence
    Q3 Revenue growth
    flat to up 2% year-over-year
    high materiality
    High
    Q3 Adjusted EBITDA margin
    28.5% and 29.5%
    high materiality
    High
    Full year 2026 Revenue growth
    flat to 2%
    high materiality
    High
    Full year 2026 Adjusted EBITDA margin
    29% to 30%
    high materiality
    High
    Premium Plus adoption rate
    15% penetration rate
    medium materiality
    High
    Share repurchase target
    $90 million
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Marketplace
    Strong growth driven by dealer count improvements and ARPD progress, particularly from the Premium Plus package. This is the fastest growth rate in public company history outside of 2021's pandemic recovery.
    Subscribers: highest level since 2023ARPD: all-time high
    		—over 7%——
    Dealer Revenue
    Growth in dealer revenue more than offset the decline in OEM revenue. Robust marketplace growth was the primary driver, offsetting flat to down performance for Solutions and Media products.
    		—3%——
    OEM and National Revenue
    Anticipated decline in Q2, representing a trough. Expected quarter-over-quarter improvement in Q3 based on positive July performance and incremental spend commitments.
    		$3 million decline-18%——
    Solutions and Media products
    Performance was flat to down, partially offsetting gains from core marketplace adoption. Lower uptake of add-on dealer media products was a near-term headwind.
    		—flat to down——
    Websites
    Future growth hinges on product innovation and packaging rather than unit volume expansion. The company plans to apply the product-led approach from marketplace to websites in Q3 and Q4.
    Units: declined year-over-year
    		—declined——

    Operational metrics

    29
    Revenue
    $179.9 millionup 1% year-over-year
    Q2 FY26

    Within guidance range.

    Adjusted EBITDA
    $53 millionup 4% year-over-year
    Q2 FY26

    Healthily outpacing revenue growth.

    Adjusted EBITDA margin
    29.4%up nearly 100 basis points year-over-year
    Q2 FY26

    Outperformed the high end of guidance for a second consecutive quarter.

    Net cash provided by operating activities
    $55.6 millioncompared to $55.7 million a year ago
    YTD

    For the first half of the year.

    Debt outstanding
    $450 million
    as of June 30, 2026

    Includes a $5 million debt payment during Q2.

    Total liquidity
    $333.3 million
    as of June 30, 2026

    Ample capacity for capital allocation needs.

    New feature deployment rate
    80%increased year-over-year
    2026 YTD

    Underscores growth potential as product momentum builds.

    Carson AI active search engagement
    20%
    current

    Percentage of active searches on Cars.com engaging with Carson.

    Carson AI lead submission likelihood
    4xmore likely
    current

    Carson users are more likely to submit a lead.

    Carson AI contribution to total leads
    30%
    June

    Percentage of total leads submitted in June accounted for by Carson users.

    Organic traffic percentage
    60%
    consistent

    Organic traffic has consistently remained around 60% of total traffic.

    Direct traffic growth
    grewyear-over-year
    H1 2026

    Direct traffic is the largest organic channel.

    Lead conversion
    up double digitsyear-over-year
    Q2 FY26

    Reflects strategic shifts to prioritize value delivery and target high-intent shoppers.

    Performance marketing cost per lead
    improvedthroughout the quarter
    Q2 FY26

    Result of a more rigorous marketing investment approach.

    ARPD
    $2,500up 3% year-over-year and 1% quarter-over-quarter
    Q2 FY26

    Marketplace was the primary contributor to year-over-year improvement, setting a new record for marketplace-only ARPD.

    Premium Plus adoption
    double digitsup quarter-over-quarter
    Q2 FY26

    Fastest growing of the three marketplace packages, supporting favorable pricing mix. Target is 15% by year-end.

    AccuTrade subscribers
    roughly flatsequentially
    Q2 FY26

    Even as the company retools its offering and migrates towards a more integrated marketplace and appraisal bundle.

    Operating expenses
    $152.1 milliondown 7% year-over-year
    Q2 FY26

    Driven by operating leverage, cost discipline, and process efficiencies.

    Adjusted operating expenses
    $144.3 milliondown 6% year-over-year
    Q2 FY26

    Benefited from the same cost levers as reported operating expenses.

    Product and technology expenses (reported)
    decreased $2.7 millionyear-over-year
    Q2 FY26

    Due to lower compensation expense and improvements in capitalization rate.

    Product and technology expenses (adjusted)
    decreased $2.5 millionyear-over-year
    Q2 FY26

    Due to lower compensation expense and improvements in capitalization rate.

    Marketing and sales expenses
    increased roughly $2.7 millionyear-over-year
    Q2 FY26

    Largely driven by targeted marketing to prioritize value delivery and brand investments.

    General and administrative expense (reported)
    down $3.5 millionyear-over-year
    Q2 FY26

    Primarily due to elimination of D2C earn-out expense accrual and lower compensation expense.

    General and administrative expense (adjusted)
    down roughly $1 millionyear-over-year
    Q2 FY26

    The D2C earn-out is considered a special item and not included in adjusted operating expenses.

    Net income (GAAP)
    $14.3 millioncompared to $7 million a year ago
    Q2 FY26

    Primarily driven by improved operating income.

    Diluted EPS (GAAP)
    $0.25compared to $0.11 a year ago
    Q2 FY26

    Per diluted share.

    Adjusted net income
    $28.7 millioncompared to $26.4 million a year ago
    Q2 FY26

    Reflects non-GAAP adjustments.

    Adjusted diluted EPS
    $0.51compared to $0.41 a year ago
    Q2 FY26

    Per diluted share.

    Debt payment
    $5 million
    Q2 FY26

    Made during the second quarter.

    Industry KPIs

    2
    MetricValueDetails
    Share buyback capital returned$57 millionUSD
    Ai feature adoption monetization20%%

    Product announcements

    2
    ProductTypeDetails
    Dealer Verified Listingslaunch
    Carson's AI shopping assistanceexpansion

    Risks & headwinds

    3
    OEM and national revenue declineQ2 FY26

    down 18% year-over-year, $3 million decline

    Mitigation: Anticipate quarter-over-quarter growth in Q3 based on positive July performance and incremental spend commitments for the remainder of the year.

    Lower uptake of add-on dealer media productsnear-term

    partially offsetting gains from core marketplace adoption

    Mitigation: Focusing on delivering the 15% penetration rate for Premium Plus by year-end, and adding more features to improve interconnectivity and value proposition.

    Website units declineQ2 FY26

    declined compared to a year ago

    Mitigation: Applying the same product-led approach that worked for marketplace, bringing existing marketplace capabilities to websites in Q3 and Q4, and making further technical and product investments slated for 2027.

    What to watch in Q3 FY26

    5

    Q3 Revenue Growth

    Q3 FY26
    Current1% YoY in Q2
    Targetflat to up 2% YoY

    Why it matters

    Verifies the company's ability to sustain revenue growth, especially with anticipated OEM recovery.

    Third quarter revenue growth is expected to be flat to up 2% year-over-year based on continued dealer revenue growth and marketplace improvement and quarter-over-quarter improvement for OEM and national revenue.

    Q&A highlights

    5

    What are the key drivers behind the 7%+ marketplace revenue growth, specifically regarding premium package adoption and new products, and is this trajectory sustainable?

    Marketplace growth was driven by a combination of improved dealer count and continued ARPD progress, largely from the new Premium Plus package. The company is seeing good adoption and aims for 15% penetration by year-end, indicating sustainability.

    “it was driven by a combination of both improvements in dealer count, which really helped accelerate the marketplace flywheel and continued progress on ARPD, a chunk of which was driven by the new Premium Plus package that we rolled out last year.”

    asked by Thomas White · answered by Sonia Jain

    2 min read5 chapters

    Detailed Narrative

    01

    Marketplace Performance and Strategy

    The company's marketplace strategy is yielding positive results, with revenue growth exceeding 7% year-over-year, the fastest in its public history outside of the pandemic recovery. This growth is attributed to improvements in dealer count and ARPD, particularly from the Premium Plus package. The focus is on driving value delivery over mere audience reach, leading to better lead conversion and overall marketing efficiency.

    02

    Product Innovation and AI Integration

    Product development velocity has increased by 80% year-over-year, with new features like Dealer Verified Listings launched within months. This feature integrates AccuTrade capabilities into the marketplace, providing consumers with current vehicle condition reports as a trust signal. The Carson AI shopping assistant is also being expanded, showing strong engagement and lead conversion rates, contributing to marketing efficiency and strategic growth investments.

    03

    Website Business Turnaround

    While website units declined, the company is applying the successful product-led approach from the marketplace to its website business. This involves bringing existing marketplace capabilities, such as personalization and AI features, to websites in Q3 and Q4. The goal is to accelerate product development and enhance interconnectivity to position the website business for renewed growth in 2027.

    04

    Cost Discipline and Operating Leverage

    The company demonstrated strong cost discipline, with operating expenses down 7% year-over-year and adjusted operating expenses down 6%. This was primarily due to a meaningful decline in depreciation and amortization following the full amortization of customer lists, combined with lower compensation costs. These efficiencies contributed to the expanded adjusted EBITDA margin, which outperformed guidance.

    05

    OEM and National Revenue Outlook

    OEM and national revenue experienced an anticipated 18% year-over-year decline in Q2, which was signaled as a trough. However, positive performance in July and incremental spend commitments for the remainder of the year suggest an anticipated quarter-over-quarter growth in Q3, indicating a potential recovery in this segment.

    AI-generated summary of the company’s earnings call. Not investment advice.