Q4 2023 Cars.com Inc Earnings Call
Participants
Robin Randolph; Director of IR; Cars.com Inc.
Alex Vetter; CEO; Cars.com Inc.
Sonia Jain; CFO; Cars.com Inc.
Rajat Gupta; Analyst; J.P. Morgan
Thomas White; Analyst; D.A. Davidson
Naved Khan; Analyst; B. Riley Securities
Kunal Madhukar; Analyst; UBS
Doug Arthur; Analyst; Huber Research Partners, LLC
Gary Prestopino; Analyst; Barrington Research Associates, Inc.
Marvin Fong; Analyst; BTIG
Presentation
Operator
Good morning, and welcome to Cars.com Inc's Fourth Quarter and Full Year 2023 Earnings Conference Call. This call is being recorded and a live webcast and accompanying slides can be found at investor.carters.com. An archive of the webcast will be available at Cars.com, Investor Relations website.
I'd now like to turn the call over to Robin Randolph, Director of Investor Relations. Thank you. Please go ahead.
Robin Randolph
Good morning, everyone, and thank you for joining us. It's my pleasure to welcome you to the Cars.com Inc's fourth quarter and full year 2023 conference call. With me this morning are Alex Vetter, CYO., and so NeuGene CFO. Alex will start by discussing the business highlights from our fourth quarter and full year. Then Sonia will discuss our financial results in greater detail, along with our 2024 outlook. We'll finish the call with Q&A.
Before I turn the call over to Alex, I'd like to draw your attention to our forward-looking statements and the description and definition of non-GAAP financial measures, which can be found in our presentation, we will be discussing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses and free cash flow.
Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the financial tables included with our earnings press release and in the appendix of our presentation. Any forward-looking statements are subject to risks and uncertainties.
For more information, please refer to the risk factors included in our SEC filings, including those in our most recently filed 10-K, which is available on the IR section of our website. We assume no obligation to update any forward looking statements. Now I'll turn the call over to Alex.
Alex Vetter
Thank you, Rob, and welcome to our fourth quarter and full year 2023 earnings call. 2023 was a strong year of growth as we executed on our strategy to enable our industry. We delivered another quarter of solid performance exceeding our guidance.
We grew revenue sequentially across marketplace digital experience, trade and appraisal and media solutions. For the year, ARPD grew 7%, resulting in $689 million in revenue, a 5% increase year over year. Our reoccurring revenue model supports our strong adjusted EBITDA, which was $195 million, representing a 28% margin. And we ended the year with more than 19,500 dealer customers and rebounding OEM interest in our retail media network.
2023 also marked a year of significant strategic progress. Our team executed on meaningful initiatives that advanced our platform strategy, and we continue to invest in innovation for both consumers and partners to drive further growth for our partners.We United our B2B brands under CARS commerce, making it easier for them to do business with us and reinforcing our commitment to simplifying everything about buying and selling cars.
This underscores our differentiated platform with a powerful combination of audience technology and data. During the fourth quarter, we also expanded the Cars.com geographic footprint into Canada with the acquisition of D. two C. Media, a leading automotive technology and digital solutions provider.
The integration of technology and teams is well underway. And throughout 2023, we introduced new simplified marketplace subscription packages, enabling customers to seamlessly leverage our platform capabilities.
This resulted in nearly 70% of repackaged marketplace customers opting for a higher tier subscription package that will drive continued growth in both revenue and adjusted EBITDA.
We're actively helping our customers drive commerce by consulting them on how to win the customer journey. Our dealer experience report helps dealers improve and differentiate their retail experience. For example, George Lawton, The Martin Marketing Operations Manager of shop automotive.
A 12 store dealer group in the greater Denver area has been actively monitoring the experience report each month to manage the reputation of the stores. Since leveraging this report, shops dealerships are trending up and every experience category.
Importantly, we had a record year for customers submitted reviews now totaling more than $13 million. We continue to have the largest number reviews in the industry, cementing our leadership position and reputation management.
Moving on to enhancements, we made on our consumer experience on Cars.com, we debuted a new feature called your garage, enabling consumers to track and trend the real-time trade-in value of their car with Cars.com instant market value. Initial results have been positive.
Consumers leveraging your garage visit our marketplace 70% more frequently, reducing our reliance on paid media. We also launched the all new new car hub to help consumers and brands connect with new car inventory up 36% in January and was approximately 70 new model launches planned for 2024, including a record number of EV.s
OEMs and dealers need to stay in front of undecided shoppers and new-car hub combines Cars.com's proprietary research with OEM.s branded content and why buy messages directly into our marketplace. OEM.s showcasing their vehicles on new car hub, see increased consumer engagement in their make and models with increases in share of search volume traffic and leads helping OEMs and dealers work together to promote inventory and drive commerce this quarter, what we do, but we're also leveraging technology to make our industry more efficient.
We continue to lead with innovation in our early adopters of AI. We've expanded the use of generative AI to support the user experience in our marketplace. And we're also in market with several tools such as auto corrected, which identifies and highlights important features and seller notes and our conversations tool powered by antibody that helps our customers streamline and improve their operating efficiency and user experience.
Our ongoing investment in AI technology reflects our commitment to innovation and the enhancement of our services. In addition to enhancing our consumer and customer experiences we continue to innovate and promote our original content and number one marketplace brand Cars.com. recall that the majority of our traffic comes to us organically.
Unlike others, we don't rent our traffic, we own it a true differentiator amongst our competitive set and to further our advantage. Cars.com has the number one most downloaded auto marketplace app, where organic traffic increased 10% year over year, investing in our brand, generating great content and leveraging our editorial expertise.
I'm pleased to report that we set a new all-time Company record for total traffic in 2023, reaching $615 million visits, a 5% increase from the prior year. Our platform offers a winning combination of demand generation and industry leading tech solutions that deliver significant value.
Our website business continues to grow, and at year end, we powered approximately 7,300 dealer websites, including DTC with the expansion into Canada. Our TAM expands as more dealers are interested in our website solutions that are supported by the cars' commerce platform, dealer usage of active trade or trade and appraisal solution. Also continues decline.
We ended the year with more than 880 active trade connected customers. For the quarter, dealers conducted more than 590,000 appraisals, a 15% sequential increase. Our technology enables dealers to quickly and efficiently buy and sell inventory while helping maximize profits and improving the customer experience.
As used car inventory becomes more constrained and used car profits come under pressure. It's more important than ever for dealers to reduce their dependence on the expensive options and source cars more cost effectively.
Acute trade enables dealers to save on average $1,300 per vehicle in costly auction and transportation fees by enabling them to buy cars directly from their customers, unlike other services to generate leads that don't close or run auctions without sufficient buyers or sellers active traders, a complete buying solution that enables dealers to source cars from the show room Service Lane website and the Cars.com marketplace.
Acute trade also offers the most accurate pricing and value for vehicles because we leverage not only Cars.com's robust retail supply and demand data, but we also have in-house industry experts who make real-time market adjustments.
And so while the rest of the industry relies on historical trends and broad category wholesale data for ranges, we accurately price every car our OBD scanner automatically syncs detailed mechanical findings from the customer's vehicle to inform the appraisal in real time, accurate trade doesn't just focus on the history of the vehicle.
We focus on its health uncovering needed repairs that saved dealers on average $650 per vehicle, while also providing consumers with greater transparency of the data powering the cash offer thereby reducing negotiation friction between the buyer and the seller dealers to now buy more cars from our own customers.
Which drives greater profitability as they can now avoid the costly auction all together, we are proud that for direct selected active traders, their brands, preferred trade and appraisal solution for the shop, a newly launched preferred vendor selection program for their more than 3,000 Ford and Lincoln retailers.
Oem endorsements help speed adoption, and we are excited about helping Ford and Lincoln dealers take advantage of our technology. Par's commerce has deep data and analytical capabilities. We recently launched our new industry insights report, which analyzes supply demand, pricing and consumer behavior data from across the cars commerce platform.
The January 2024 report revealed that the automotive industry is shifting to a buyer's market with more affordable new cars and increased new car inventory, up 36% year over year. Used Car scarcity is also increasing with used vehicle listings down 4% compared to the prior year, indicating increased volatility in the used car market this year.
While many marketplaces are solely focused on used cars, our new car content and expert insights, coupled with improving new car inventory, best positioned us to help OEMs and dealers stimulate demand and move inventory. We recently gathered at the National Auto Dealers Association Conference, the largest annual gathering of US dealers and industry leaders.
This show provides an opportunity for us to consult with tthousands of current and prospective customers gather their feedback and demonstrate our newest solutions. I want to thank those of you who were able to join us for our first-ever NADA investor breakfast.
It was great, many seeing many of you in person as we were able to provide a more hands-on experience of our cars, commerce solutions like Jackie trade and bean Performance Media, a new advertising solution that dynamically positioned retailers, then specific inventory in front of the right shoppers across search, social and display.
Single solution approach saves time and money while maximizing ad performance and operational efficiency and a DA clearly showed that our strategy is working and we remain focused on simplifying everything about buying and selling cars and creating exceptional value for consumers, dealers and OEMs.
Looking ahead, we remain squarely focused on five growth drivers, grow and sustain engagement with our market-leading audience, grow dealers and cross sell our solutions to generate more leverage for our customers. Great careless experiences for OEM.s and create more platform advantages.
Our momentum is strong. We are growing demand for our connected platform and empowering our consumers and customers unlocking both top and bottom line growth.
Now for more details on our solid results and 2024 outlook. I'll turn the call over to Sonia. Sonia.
Sonia Jain
Thank you, Alex. We ended the year with robust Q4 revenue growth and adjusted EBITDA margins that exceeded our guidance.
Revenue grew sequentially throughout the year, reaching $180 million for the quarter, a 7% increase over the prior year, including the two months of DTC media revenue, revenue increased 5% year over year, and we delivered our 12th consecutive quarter of year-over-year revenue growth.
Our strong quarterly performance was driven by dealer revenue, which grew 8% year over year to $161 million. Our OEM and national revenue also increased to $15 million, up 8% compared to the prior year and up 6% sequentially.
Notably, the OEM portion of OEM and national revenue increased significantly by 24% year over year, indicative of increased production new model launches and a year end lift as OEMs invested the balance of their advertising budgets.
Other revenue was down approximately $2 million compared to the prior year due to the planned expiration of a noncash active trade license agreements with another marketplace participant that expired in early 2023.
Turning to expenses. For the quarter, total operating expenses were $165 million compared to $148 million a year ago. It is worth noting that unlike credit acute and accurate trade, the earn out associated with DTV runs through operating expenses, primarily in G&A and as a partial driver of the year-over-year increase at $3 million.
On an adjusted basis, operating expenses were $151 million, $10 million higher than a year ago, primarily due to our continued investment in people, a $3 million increase in depreciation and amortization and investments in marketing to support the launch of our B2B brand card commerce.
Net income for the quarter totaled $8 million or $0.12 per diluted share, compared to $10 million or $0.15 per diluted share in the prior year.
The change in net income is primarily attributable to changes in the fair value contingent consideration associated with our prior acquisitions, specifically, credit IQ and attaches adjusted EBITDA for the quarter was $55 million or 31% of revenue, exceeding our guidance.
Additionally, our margin expanded approximately 250 basis points and year over year, our adjusted EBITDA increased 12% or $6 million.
Now moving to our full year 2023 performance revenue totaled $689 million, up 5% year over year dealer revenue increased 7% to $622 million, driven by growth in websites, active trade, our 2023 marketplace repackaging initiative and media sales. Our international revenue was $56 million or 5% lower compared to the prior year.
The strength in our OEM revenue was offset by continued softness in national revenue, largely related to a significant pullback from our insurance customers due to macro and environmental factors.
Additionally, other revenue was down approximately $4.5 million, primarily related to the aforementioned noncash equity trade agreements.
Turning to expenses. Full year total operating expenses were $635 million compared to $588 million in the prior year. On an adjusted basis, operating expenses were $38 million higher compared to last year, largely driven by increased compensation and employee related expenses, particularly in marketing and sales and product and technology.
In addition, as we've accelerated product development and technology investments. Depreciation and amortization expense was also up year over year. In addition to compensation, marketing expenses were also slightly higher year over year as we invested in both our consumer and B2B brands with our cars.com possibilities campaign and the launch of the card commerce go-to-market brand.
Net income for the year totaled $118 million or $1.74 per diluted share compared to $17 million or $0.25 per diluted share in the prior year prior year. Net income was primarily related to the release of a significant portion of the Company's valuation allowance for deferred tax assets that was recorded in 2020.
Adjusted EBITDA for the full year was $195 million or 28.3% of revenue compared to $187 million or 28.6% of revenue in the prior year. Now turning to our key metrics. While we experienced some variance in our dealer customer count related to the impacts of our 2023 marketplace repackaging initiative and the sunset of digital dealers.
We added 950 new dealer customers through the acquisition of Data theme media and ended the quarter with 19,504 dealer customers compared to 18,715 dealer customers for the third quarter of 2023. As you can see, our platform strategy is working.
ARPD. grew 7% or $162 to $2,523, driven by the strategic decision to include more of our platform offering in higher tiers of marketplace packages and increased dealer adoption of digital solutions. Our platform strategy ultimately drives higher customer lifetime value by improving both ARPD.
And retention through our enhanced value delivery as an audience driven tech company, our ability to deliver a large and engaged audience to our customers is critical to the value we provide them for the quarter. We delivered $143 million visits, a 2% increase compared to the prior year, and average monthly unique visitors were $24 million for the quarter.
Our asset-light business model consistently generates attractive free cash flow conversion. Net cash provided by operating activities totaled $137 million for the year. Free cash flow was $116 million, $7 million higher compared to the prior year, driven primarily by an $8 million increase in adjusted EBITDA and favorable changes to working capital, partially offset by an increase in cash taxes of $17 million.
Our strong financial profile enabled us to execute a balanced capital allocation strategy, which includes value-accretive investments in the business, a thoughtful acquisition strategy and return of capital to shareholders all while maintaining modest leverage.
In 2023, we repurchased $1.7 million shares or nearly 3% of total shares outstanding at the start of the year. As of December 31st, 2023, we have $120 million remaining on our share repurchase authorization. Total debt outstanding at year end was $490 million.
And our net leverage of 2.3 times remains squarely in the middle of our target range of 2 to 2.5 times. We have ample liquidity at $234 million, which includes $39 million of cash and cash equivalents and $195 million of revolver capacity.
Now turning to our guidance, we expect to deliver another year of strong growth. Market conditions for our end market solutions are improving with increased OEM production, new model launches and rising dealer inventory, coupled with a still cautious consumer, our end market solutions are more valuable than ever.
With that as a backdrop, we expect to deliver first quarter revenue of $179 million to $181 million or year-over-year revenue growth of 7% to 8%, which reflects continued growth in dealer revenue, driven by ongoing adoption of our suite of products the DTC acquisition and the full period impact of the 2023 marketplace repackaging initiative.
OEM and national advertising revenue is also expected to be up year over year, but historically it has experienced some seasonality from the fourth quarter to the first quarter.
For the full year, we anticipate continued dealer and OEM adoption of our platform, which is reflected in our revenue growth guidance of 6% to 8%. As we continue to make strategic investments that support our growth.
We anticipate adjusted EBITDA margins for the first quarter to be between 27% and 29%. Recall, we usually make seasonally higher investments in marketing and sales in the first quarter due to the timing of in-person industry events and 2024 is no different.
We expect margins to improve over the course of the year and anticipate delivering full year adjusted EBITDA margin between 28% and 30%.
Capital expenditures for the year are expected to range between $23 million and $25 million. Cash taxes are expected to increase slightly to approximately $20 million. And overall, we anticipate delivering another year of free cash flow growth.
In summary, we delivered strong results for 2023, driven by our focused execution. And looking ahead, we are well positioned to deliver sustained value for consumer customers and our shareholders.
And with that, I'd like to open the call for Q&A. Operator?
Question and Answer Session
Operator
Okay. Ladies and gentlemen, we will now begin the question and answer session. (Operator Instructions)
Rajat Gupta, J.P. Morgan. Please go ahead.
Rajat Gupta
Great. Good morning. Thanks for taking the questions and congrats on the quarter as well. And have a first question just on the 2024 guidance of the 6% to 8% revenue guidance, could you give us a little more granularity on what's the breakup of that?
How much is RBT versus, you know, just like for like price increases versus just product mix and how much a dealer count, OEM revenue, et cetera, or any more granularity would be helpful. I have a follow-up.
Sonia Jain
Yes, thanks for the question. Just on its own. Yes, maybe I can I'll start by giving a little more color, and let's see if that helps a little bit. One of the things that factored into our full year guidance is the acquisition of D. two c. So if you recall, we bought that business in November and captured two months of revenue in 2023, and we'll get the full benefit of that acquisition in 2024.
Along with sort of our efforts to continue to integrate that business which means more sales of active trade in Canada, leveraging kind of the combined OEM endorsements that exist between our two companies to go faster.
In terms of Canadian expansion, we're also positive on OEM and national revenue. We saw some positive performance in that business in Q4 that we're really excited about. And while there may be a little bit of lumpiness from Q4 to Q1.
Just in terms of how in terms of how OEMs spend their budget. We expect a good year with inventory levels, rising new model launches, easy releases that require consumer education.
And then you know, lastly, on dealer revenue, that's been just a really strong portion of our business over the last several quarters. And I don't think anything has changed our focus is really on trying to grow ARPD there on an organic basis.
And we think we have the ability to do that just given the suite of products that we have and the continued penetration at NADA, we saw a lot of really positive interest in our new media product, as Alex was just talking about in Performance Media.
In addition, we saw a lot of really strong interest in active trades. You may have noticed we got it and endorsement from Ford. We have a lot of other OEMs that are excited to partner with us, particularly given some of the used car pricing volatility that's out there. So we generally see our are optimistic about the growth trajectory for 2024 across all of our lines of business.
Rajat Gupta
Got it.Got it. Okay. That's helpful color. And then just on the dealer count, I noticed that excluding the two C. media it was it was down sequentially or maybe a little more than what we would have expected. I know one of your peers talked about some continued pressure on the independent used-car dealer side of things.
Curious, how should we think about that for 2024 in terms of implications, you know, what's kind of like embedded in your guidance in terms of behavior from those customers and you, Utah, you also mentioned in the presentation that, you know, you essentially have no digital dealers on the platform anymore. I'm curious like are you seeing or expecting any of that to change just on the digital side as well in 2021?
Alex Vetter
George, great question. Well, first of all, as I've seen this cycle, a number of times in my tenure in this space. And what I will tell you is that Q4 tends to be a softer period in terms of dealer net adds, and then we're seeing that spill over into Q1.
And I think it's largely attributable to the macro environment where profitability concerns regarding the price of used cars, lower inventory levels available in the market, but new cars not selling as fast as and dealers take a general reactive stance where they cut expenses dramatically in the short term and then revisit whether or not they should bring them back and we see that too in our business.
I wish it wasn't RBA the behavior of our industry, but it but it happens the good news with our strong traffic trends. Our organic concentration or traffic concentration, organic traffic. We've proven that we win a lot of these dealers back even when they do Blink because of the current trends. I think broader forecast for this year are healthy and strong.
So we feel very good about the full year view. But I know we're feeling some choppiness right now because dealers are panicked about the current environment. And so we're out working with dealers on this. But the good news is that when you look at the bulk of where our growth is coming from, it's on technology solutions that actually directly help the profitability concerns the dealers are feeling.
And so yes, it's a slower sales cycle to sell in our solutions. But once we get those solutions sold it has a halo effect and has been a stickiness effect for the whole platform. And so those would be the big headlines.
I think. Finally, I'd just also echo what Sonia said, like we look at the new car side of the business, the bulk of our business is the franchise dealer community. We don't index heavily in the independent dealer community like some of our peers.
And so they are also looking at us for media solutions that can help them move those new cars as well. And I think that gives us some some strong footing heading into this year.
Rajat Gupta
Got you. And on the digital independent side and anything that's changed or you expect to change out of that, not many digital, you still have left, but we're not seeing we're not expecting that to be a growth driver in the business.
Alex Vetter
And as you noted, we have none of those dealers in our current accounts we don't have any downside exposure to those those operations and there certainly should be upside. I mean, I generally believe that anybody that's trying to sell or buy or sell cars and the auto industry needs to be with our platform, but we're not needing those segments to come back in order to deliver our guide data.
Rajat Gupta
Got it. Great. Thanks for the color.
Operator
Thank you.
Thomas White, D.A. Davidson. Please proceed.
Thomas White
Great. Thanks for taking my questions. I guess first off on OEM, I guess the OEM component of the OEM and national entity, you said up 24% in the quarter. So when you are asked, can you remind us when like insurance some advertisers that kind of cut spending, when do we fully lap that? And and how can we think about OEM. kind of continuing on that trajectory for the balance of 2024?
And then I guess maybe a slightly bigger picture when I think you should be good traffic 5% last year, revenues also grew 5%.
Can you just talk a little bit about your ability to kind of grow the business in excess of traffic growth in 24 and the years beyond as you kind of build up some of these products that are that are less dependent on traffic.
Sonia Jain
Thanks, Sami. I'll thank you for the question. Tom, maybe I'll take the first one on sort of that insurance component I think that really sort of spiked as an issue at the beginning of 2023. And to a large extent, we should be lapping some of those challenges as you look to 2024, I do think the Q4 year-over-year growth that we saw in OEM., I wouldn't necessarily use that as like the run rate going forward.
We do see more investments sometimes come into Q4 just based on the timing of releases, timing and phasing of their spend and investment in advertising. But lead out, we think we think 2024 has a really promising outlook when it comes to the OEM and national side of that side of the business.
Alex Vetter
And I'd echo that if you look at the past 12 quarters, we've been steadily growing the dealer revenue and the total revenue for the business despite OEM headwinds. And so the correlation between traffic and revenue I think is more coincidental because such a bulk of our revenue growth has come in through non traffic and dependent solutions like active trader, our Dealer Inspire websites.
These don't have a traffic dependence and so we've been out running the declines in national for a few years now with strong dealer growth and ARPD. growth, now that the E new car production levels have returned.
We're seeing in increased interest in our solutions like there's generally a healthy picture forming here, Tom, I think the opportunity for us to sustain our traffic levels. We believe it's there because we've got the brand, we've got the content, we can sustain healthy traffic levels.
We're not expecting big traffic gains in 2024. In fact, we our goals more of getting credit for all the value that we're delivering through.
Things like showing a better in dealer CRMs, capturing the value of the traffic that we're delivering directly to dealer websites, the amount of phone calls that Arena stores like we just need to tighten up the conversion funnel and the dealers performance, which is why we highlighted the dealer experience report on the call because the values there, it's just retailers don't always connect the dots as clearly as we'd like.
Thomas White
Okay. Maybe just one last one, if I could slip it in Alex, when you're talking about the five growth pillars, I think you mentioned unlocking more platform advantages. Could you just elaborate a bit on kind of what you meant there?
Alex Vetter
Sure. I mean, I think there's two things. One, we're trying to create more leverage for our dealer partners. And so they're looking for fewer point solutions and more connected tech. So that clearly is a thread. When we when we say we want platform efficiencies, we want to be able to deliver more product and solutions to dealers at lower cost because we're leveraging a common backbone or the infrastructure of Cars.com and giving that power to our dealers.
But specifically, when we lay it out on the slide that you're referring to, it's really about driving those internal operating efficiencies here as well. And as you know, last year, we started really in earnest beginning to cross sell our solutions and integrating our sales teams from our various platforms that was part of the rebrand towards cars.
Commerce is getting our sales teams to be able to sell all of our capabilities as opposed to one or another and then finally, tightening up back-end operations, right, consolidating our support teams so that we can deliver faster turnaround times for our customers, consolidating point vendors and negotiating preferred agreements for enterprise-wide use cases for various things like Slack or consolidating AWS accounts for DTC with the Corus commerce platform.
There are dozens of opportunities inside the Company where we can find synergy and create leverage for investors in the business.
Thomas White
Great. Thank you.
Operator
Thank you.
Naved Khan, B. Riley Securities. Proceed.
Yes, hi.
Naved Khan
Thank you. A couple of questions from me. And maybe just on that. As I think about your 2024 sort of ad spending on marketing activities, how should I be thinking about that relative to 2023? And how should that grow or not?
And the second question I have is just on the from the wind performance media. So demo at the at the NADA show was pretty impressive. What are you baking in in terms of contribution from this in your annual guidance?
Sonia Jain
So I think in terms of marketing expense, which I think you were asking about, we expect to see some modest increases in marketing expense on a year-over-year basis.
But I don't think anything particularly dramatic Akeena. We continue to be focused on trying to deliver that engaged consumer audience to our dealer and OEM partners.
And then also, you know, continue to be focused on how to think about elevating and continuing to elevate our brand in both the minds of the dealer as well as the consumer. Think in terms.
I think your second question was on been performance media and just for now the guidance that we have. We have some, I guess, for lack of a better word. It's baked into the guidance that we've provided. We've only just launched at NADA.
We've done a very small pilot kind of prior to that. So the benefit of that is going to roll in throughout the year. And you should think about it in some ways as a little bit of an extension to the existing media buy that dealers are already 40 making with us. So it'll have it'll be a benefit to our numbers. It's baked into our guide.
Naved Khan
Got it. And so Sonia, just to clarify earlier in your answer on the first question on that spending. So as a percentage of revenue or not, it shouldn't really change in '24 versus '23? Or how should I think about that?
Sonia Jain
It has been pretty consistent on a percentage of revenue basis now, and so it will stay in that theme ballpark.
Understood. Thank you.
You.
Operator
Thank you.
Kunal Madhukar, UBS. Please go ahead.
Kunal Madhukar
Thank you for taking my questions. A couple from me one on the of the the cookie-less world that we may be going into. I don't know how quickly that gets rolled out, but have you at the Investor Day investor breakfast at NADA.
You've talked about how a significant proportion of your traffic comes direct and is organic that you don't need to pay for.
So can you help us understand how you intend to capitalize on the on the brand and the the loyalty of consumers that you have kind of built on?
And the second question on the accurate side so one of the things that's been that was evident from the NADA show was everybody seems to have a similar kind of going to offering to help dealers with used cars are getting used cars on their dealerships. So why should I do dealer use you and I use accurate trade versus some other service and what stops them from using multiple services Thank you.
Great.
Alex Vetter
Great questions. Can I thank you. First of all, the demise of the cookie has been talked about for years, and I think it's proving to move a lot slower than a lot of their early projections in terms of when it would actually crumble, but we do see it as a tailwind for us.
The absence of cookie tracking technology being more prevalent is that brands have got to spend more money in first-party audiences, of which we have the largest original retail media network of any of our peer group.
That's heavily content that solely in-market car shoppers, 90% of our audience is undecided. And nearly all of them are in market right now. And so the opportunity for brands who use third party technology companies or inferred audiences.
Those conversion rates in those programs are going to weaken with the collapse of the cookie in favor of those brands having to spend more with first party marketplaces to your point, like what do we do to generate loyalty?
Well, the average consumer in the US is only in the market once every several years and so having a brand that's synonymous with car shopping naturally is one of our wow factors because we generate a lot of our traffic, as you said, organically or directly coming direct to Cars.com.
But you also noted in the call that we rolled out things like your garage, which allows consumers now to register their car long before their end market and then we send them real-time updates on what their car is worth and then can recommend trade and solutions to them on always developing that organic relationship with our platform and our brands.
So I think we've got a number of ways that we keep our audience healthy and strong. It's a testament that after 25 years, we still are setting records for traffic growth. And so I think we've demonstrated that we have a great formula for value capture and delivery.
Your second question was about accurate trade and the notion that everybody has a similar solution. And I would challenge that assertion because, yes, there are no less than well different dealer-to-dealer trading platforms.
Many of them have some have tons of sellers. No buyers. Others have tons of buyers, no inventory. And so you've got all these digital wholesale platforms that tend not to have a true network effect.
And then on the instant cash offer side, you've got a lot of marketplaces selling leads to dealers about buying cars. That is not what accurate trade is. If you look at active trade, we are giving dealers the ability and the power to buy cars directly from their own customers when those customers walk in the store are considering a traded in their service lane off their website and yes, you can also source private seller opportunities from the Cars.com marketplace.
But the power of our technology is that we don't give generic ranges. We give precise valuation tied to the health of the vehicle. This is saving dealers' tons of money. It's speeding appraisals from hours to minutes, and it's also so much more cost advantageous than buying cars at the auction and with used car scarcity a being a predominant theme this year, we know that auction prices are going to go up
We know fees, both auction fees and transportation fees are hefty to the tune of $1,500 per vehicle sold contrasted to accurate tray, which is 1,500 a month. And you can buy hundreds of cars directly from customers in your own backyard. So we think the differentiate of active trade is vast from what we see out in the industry and the dealers that have adopted actually trade have said it's an absolute game changer to both their top and bottom line.
Kunal Madhukar
Thank you.
Alex Vetter
Thank you, Kunal.
Operator
Thank you. (Operator Instructions)
Doug Arthur, Huber Research. Please proceed.
Doug Arthur
Yes, good morning.
Sonia, did you mention anything about Dealer Inspire in terms of growth in the quarter and number of dealers in the system.
Sonia Jain
And I didn't I don't think I gave the growth. We had another another year of double-digit year-over-year revenue growth associated with that portion of the business. But I will tell you that like increasingly on a go forward basis as we continue to integrate products across the platform being really precise on that number becomes a little bit a little bit more challenging as we continue to focus on cross-selling in terms of total website customers.
I think Alex may have mentioned, and we ended the year with about 7300, and that includes to be clear, includes customers acquired through D2C price.
Doug Arthur
So that's 950 in the fourth quarter. Okay. Because I think you I think the number you've given out on Q. three for website management, it was 63 hundred and below 5300, sorry.
Sonia Jain
Okay. So so did the group I don't mean to harp on this. Did the growth slow a little bit as the comps get tougher in the fourth quarter or or continuing on a very strong trajectory, a Dealer Inspire Fiat that know kind of like a one-time bump from the addition like bringing the to be onto our platform.
And then we also saw continued growth at both the IND. two B. in the fourth quarter in terms of in terms of new website launches, we've talked a little about it, you know, particularly maybe a couple of quarters ago that we're going to continue to add websites as part of the Dealer Inspire business.
But we've largely secured all of the endorsements that are out there so the pace of which the websites getting added is good. The cadence is going to change a little bit because it's not as though you suddenly win, you know, a big piece of business with 800 customers that you can go after.
We're adding customers. We're also very focused on cross-selling upselling, moving moving folks up the Dealer Inspire package level to get them more features and options that help them drive their business. And that would show up in ARPD.
Doug Arthur
Okay. And I guess actually on ARPD. I mean, obviously up 7%, very solid, although sequentially it looked a little lower. Is that the DTC impact Got it?
Sonia Jain
Yes. I mean what have been we would have been basically at sort of 9%. If you adjusted out DTC, they just come in with a slightly lower ARPD.
Doug Arthur
Right. Okay. Thank you.
Operator
Thank you.
Gary Prestopino, Barrington Research. Please go ahead.
Gary Prestopino
Hey, good morning, everyone. A couple of questions, Alex, or sign you what amount of credit IQ, what how many dealers have now signed up for credit IQ by year end.
Alex Vetter
We have to get back to you with an exact number. As you know, we folded the credit IQ solutions into our top tier packages. So I would say north of over 11,000 houses at north of 10, but north of 11,000.
Gary Prestopino
Okay, that's fine. And then in terms of this marketplace, repackaging, you said about 76% of dealers had opted for a higher tier at this point.
Alex Vetter
But yes, over 70%.
Okay.
Gary Prestopino
Is that about the peak of where you think you're going to get it at this point or you still think there's room to move that needle higher in terms of the dealers on premium packages or yell at that are opting for higher tier packages? Yes.
Yes.
Alex Vetter
I mean, I think it's it's very clear to us that the inventory turn rate of dealers in our premium tiers is significantly faster than dealers that participate at the basic tiers. So yes, I see a path for us to continue to demonstrate to dealers that when they spend more with us their business is improved.
And so I do at the same time, we are rolling out additional new solutions like bin performance media that I think that premium tier will continue to buy which will further create up-tier dealer group, who's all in versus maybe dealers that run with just more marketplaces?
They're only Ben.
So there's but there's growth for both.
Gary, I guess would be the point. And so we might always still have a 20% of the dealers that are in the lowest cohort of spending. But it doesn't mean that they're that they can't grow, too.
Gary Prestopino
Okay. That's great. And then, Alex, maybe I know, Tom, it's a very different company than it was years ago, but what but in the period of 2009 to 2010, where we were coming off a real big trough in auto sales.
What going into [11,000] where sales were up pretty nicely. What was the dealer behavior and knowing and believe we're at that point, was it to kind of en masse go for more services that the Company offered or or is it basically a slow ramp that that moves with increase in car sales over time.
Alex Vetter
At some point, it's hard to compare the past with the president because so much has changed. Gary, particularly, I would say the level of digital sophistication by the industry is significantly higher. And so we were doing far more education in those earlier periods than we are today.
I think what is exciting to me now is that not only were the OEM upfronts, you know, much more engaging by the car companies, but now the interest from EV automakers and dealers that previously were on the sideline with us, the level of inbound interest to, hey, my vehicles aren't selling as quickly as they used to.
What can you do for me is much more inbound today than it has been in prior years. We've always had to go out and educate, and now I feel that shift is happening. I also will tell you that word of mouth in some of our digital solutions is also gaining steam.
And I think that is a tailwind, particularly for active trade because the dealers that have moved fully to buying cars from the public as opposed to the auction are the ones that are acquiring other stores and consolidating dealerships. And so they're doing something that gives them a lot more confidence in their ability to generate leverage or synergy from acquisitions. And as you know, our bread and butter are those large dealer groups and regional chains.
Gary Prestopino
Okay. And then just lastly--
Alex Vetter
Looking at trends. I'd say there, those are the big differences, I would say from the periods that you talked about to what I see today.
Okay.
Gary Prestopino
And then just lastly, with this endorsement by Ford for actually trade up. What do you have to do to do you have to do anything to prepare to sell more into Ford with active trade?
Alex Vetter
Or does that endorsement just really help with dealer uptake on the product, but really helps dealers who say I can't spend anymore in this environment because I'm trying to cut back. It allows us to point to the co-op funds that are available for the dealer to use from Ford.
And I think so that it removes price. I think Gary has an objection. It's not going to change on the rate of sell sales in the sense that we're not going to have huge volumes coming at us.
But I do think it gives us a lot of reason to go to for dealers above all else because take prices a objection off the table.
Gary Prestopino
So what Ford gives this co-op a incentive? What percentage of equity trades they end up paying for, can you make that public or is that not something you can share?
Alex Vetter
No, we don't we don't disclose Ford's allocations to their dealers, but this is nominal 90, I mean nominal.
Gary Prestopino
Okay. Thank you.
Operator
Thank you, (Operator Instructions)
Marvin Fong, BTIG. Please proceed.
Marvin Fong
Good morning. Thanks for squeezing me in here on. So apologies, I missed the prepared remarks. But Tom, I did have a follow-up on that for direct endorsement. And just curious, you know, how should we think about that adoption curve on now that you're part of the shop platform?
Do you should we think about it as sort of on all burst of adoption is in the next quarter or two? Or should be more of a gradual build in addition to your normal on client wins?
And then second question, just on lowering the full-year guide calling for 20% to 30% adjusted EBITDA margins. I guess that's the similar margin that we've seen in the past few years, and it's a very, very strong margin.
But just curious, I know you guys ever foresee them and on breaking above 30% or do you sort of think that this is a margin that's appropriate for the firm in order to drive continued top line growth? Thanks.
Alex Vetter
So a couple of comments there, and thanks for the questions. I think you should look at before direct selection of accurate trade as more affirmation to a product that's in its nascent stages of market entry.
Right? I think a lot of people have not fully understood the power of active trade and the Ford team did tons of due diligence and homework to the various offerings and selected us. And so I think it's first and foremost is validation of what they believe will help their dealers the most.
And I also think that done this shouldn't be the last OEM endorsement that we achieve because many more OEMs are now being asked to help their dealers do more digitally. And as you've seen with our Dealer Inspire business, we were able to secure endorsements from all OEMs.
And that does help dealers narrow the field of vendors that they would be willing to consider. And so I do think it mostly is about affirmation.
Yes, I hope it will accelerate sales rates for Ford dealers in the summer months of this year as we get the education out there because we still have to educate dealers as to what this is and why it will benefit them. But I'd look at it more as affirmation and then a windfall of customers.
I think the second thing on the guide, I certainly know that we have tons of opportunity to invest and grow. I mean, I think our hardest job as stewards of capital is picking the right things that will generate the most growth, but there's a so we don't have opportunity to invest in areas that we currently don't have that would add to our platform and add to our value. And so could the business get over 30%?
Sure. But we always want to keep positioning the business for sustained growth over the mid to long term. And so it's a balance between harvest or continuing to set the business up for sustained growth? I don't know, Sonia, if you'd add anything to that.
Sonia Jain
I mean only thing I would add is I think we are seeing progress on margins. If you look at the guide that we've given for the full year or honestly, even the guide we gave for Q1 on adjusted EBITDA margin relative to what we delivered last year, you're starting to see that progress. I think we do want to ultimately continue to grow this business in a profitable way.
So there is the question around how you think about making incremental investments to drive long-term growth in the business, long term, profitable growth in the business and short term margins. But I think you are starting to see that improvement come through in the numbers.
Marvin Fong
Okay, that's terrific. Thanks, guys.
Operator
Thank you. There are no further questions at this time. I will now turn the call over to Mr. Alex Vetter, CYO. Please go ahead.
Alex Vetter
I just wanted to thank everybody for their interest in cars commerce. We're going to continue to share our story and look forward to seeing many of you as part of our upcoming IR engagements.
Quick notes on February 26th, we're going to be at the JPMorgan High Yield Conference in Miami on February 28th, we're going to host investor meetings in Minneapolis with Barrington Research.
Details about these events as well as a recording of our investor breakfast at NADA is available on the Events section of our IR website, and you can also download our industry insights report, which we've posted there as well. This concludes our call for today, and thank you and have a great day. Thank you.
Operator
Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all disconnect.
