Vehicle listings site CarGurus posted higher profits in 2020 as the company cut costs to withstand the financial effects of the coronavirus pandemic.
The Cambridge, Mass., company on Thursday reported net income of $25.2 million in the fourth quarter that ended Dec. 31, up 91 percent from the year-earlier period. Revenue was down 4 percent $151.6 million. Subscription revenue generated by its listings marketplace fell 5 percent to $133.2 million — $126.2 million of that in the U.S. — while advertising and other revenue rose 4 percent to $18.4 million.
CarGurus reported a 20 percent drop in operating costs in the fourth quarter, led by a reduction in sales and marketing expenses of roughly a third from the same period a year ago.
“Our performance demonstrates the durability of our market leadership position and the flexibility and resilience of our business model,” CarGurus CEO Jason Trevisan said in a statement.
“With most forecasts for 2021 indicating improved year-over-year car sales, we believe dealers’ marketing spend will continue trending up — eventually returning to pre-COVID levels — and we remain confident that our advantaged ROI for dealers and our engaged, ready-to-buy audience will make us an attractive option for dealers at such time.”
Shares of CarGurus were trading down nearly 6.6 percent to $32.45 after hours.
For the full year, CarGurus reported revenue of $551.5 million, sliding 6 percent from 2019. Subscription revenue to its vehicle marketplace fell 8 percent to $485 million.
But profit soared by 84 percent for the full year, to $77.6 million, as the company pulled back on sales and marketing expenses. Total operating expenses were down by 21 percent.
The pandemic took a toll last year not only on dealerships, but also on their technology vendors, including listings sites. CarGurus reduced subscription bills for its paying dealership listings customers over three months in 2020. The company also cut 13 percent of its global work force and ended operations in Germany, Italy and Spain.
CarGurus’ paying dealership subscriber base also declined during the pandemic as dealerships reduced their own marketing spending, though that trend later stabilized. As of Dec. 31, the company reported having 23,934 U.S. paying dealership customers, up slightly from 23,659 as of Sept. 30, 2020, but down from 26,289 as of as of Dec. 31, 2019. The company last year redefined a paying dealer as one “with an active, paid marketplace subscription at the end of a defined period.”
“We are excited about the momentum we have exiting 2020, especially in the U.S., where we saw quarter-over-quarter growth in net paying dealer additions,” Trevisan said in a statement.
CarGurus on Thursday issued revenue guidance for the first quarter of 2021 ranging from $156 million to $160 million.
The company last month promoted Trevisan, 46, to be the company’s CEO from his prior role as CFO. Company founder Langley Steinert stepped back from the CEO post to become executive chairman and no longer leads its day-to-day operations.
In January, CarGurus completed its acquisition of a 51 percent stake in wholesale trading platform CarOffer for $140 million in cash and stock. The purchase gives CarGurus’ dealership customers access to wholesale functionality on top of its existing retail products, which include vehicle listings and financing partnerships.