Vehicle listings company CarGurus avoided a revenue and profit tumble in the first quarter as the economic fallout from the coronavirus outbreak began to escalate.
The Cambridge, Mass., company on Thursday reported revenue of $157.7 million in the quarter that ended March 31, up 17 percent from the same quarter a year earlier. Revenue from dealership subscriptions on its vehicle marketplace increased 18 percent to $141.9 million for the quarter.
Net income essentially was flat, with CarGurus reporting a profit of $12.7 million in the first quarter, compared with $12.6 million a year earlier.
To counter a drop in dealership customers, the company began discounting subscription rates and imposing cost-cutting measures in the second quarter.
"The human and economic toll of the COVID-19 pandemic is staggering, and yet even in the face of these current challenges, I have seen incredible resolve and collaborative spirit from our employees and our dealer customers for which I am deeply grateful," CarGurus CEO Langley Steinert said in a statement.
CarGurus said Thursday it was in a strong financial position through February and was on track to meet or beat earlier guidance. That changed in March, CarGurus said, as states began to shut down business activity to help slow transmission of COVID-19, the illness caused by the virus. Many dealerships were forced to close showrooms and sell vehicles online only, with vehicle sales falling in the first quarter.
The company said it lost 1,107 U.S. dealership customers in the first quarter compared with the end of 2019. The number of paying U.S. dealership customers as of April 30 was down roughly 6 percent from 27,883 as of March 31, it said. CarGurus did not disclose the number of dealerships paying to subscribe to its listing services as of April 30.
Steinert told analysts Thursday that the cancellation rate stabilized after peaking in early April, and some dealerships that had canceled services have returned to paid status.
The company discounted dealerships' listings subscription rates by half for April and May and by 20 percent for June to help offset the financial toll on customers.
Yet the company expects more financial challenges in the second quarter from discounted fees and lower advertising spending from automakers, CFO Jason Trevisan told analysts. In April, CarGurus said it would lay off 13 percent of its global work force as well as end operations in Germany, Italy and Spain. The company also plans to suspend any additional expansion into international markets.
CarGurus employed 921 people full time as of Dec. 31, according to its most recent annual report, filed in February.
Several top executives are taking a temporary 50 percent salary cut, which started April 16 and lasts for three months. Board members' compensation also will be cut in half for three months, and hiring was put on hold.
The company in March suspended its 2020 fiscal-year revenue and profit outlook. CarGurus said it had $155.7 million in cash as of March 31.
