AP NEWS

CarGurus Announces Second Quarter 2018 Results

August 7, 2018

Second Quarter Highlights:

-- Total revenue of $110.3 million, an increase of 45% year-over-year -- GAAP operating income of $1.4 million; non-GAAP operating income of $7.0 million -- GAAP net income of $31.3 million; non-GAAP net income of $6.9 million -- Adjusted EBITDA of $8.3 million

CAMBRIDGE, Mass., Aug. 07, 2018 (GLOBE NEWSWIRE) -- CarGurus, Inc. (Nasdaq:CARG), a leading global automotive marketplace, today announced financial results for the second quarter ended June 30, 2018.

“The second quarter’s results built upon the momentum we delivered in Q1, resulting in both revenue and profitability above our guidance,” said Langley Steinert, Founder and Chief Executive Officer of CarGurus. “In addition to our strong financial results, we also continued to grow our global consumer audience and install base of paying dealers, providing trust and transparency to auto shoppers and increasing the value we deliver to dealers.”

Revenue

Second Quarter 2018:

-- Total revenue was $110.3 million, an increase of 45% compared to $76.2 million in the second quarter of 2017. -- Marketplace subscription revenue was $97.7 million, an increase of 44% compared to $67.8 million in the second quarter of 2017. -- Advertising and other revenue was $12.6 million, an increase of 49% compared to $8.5 million in the second quarter of 2017.

Operating Income

Second Quarter 2018:

-- GAAP operating income was $1.4 million, or 1% of total revenue, compared to $6.0 million, or 8% of total revenue, in the second quarter of 2017. -- Non-GAAP operating income was $7.0 million, or 6% of total revenue, compared to $6.1 million, or 8% of total revenue, in the second quarter of 2017.

Net Income & Adjusted EBITDA

Second Quarter 2018:

-- GAAP net income was $31.3 million, or $0.28 per share based on 113.1 million weighted-average diluted shares outstanding as of June 30, 2018, as compared to net income of $4.3 million, or $0.04 per share based on 46.1 million weighted-average diluted shares outstanding as of June 30, 2017, in the second quarter of 2017. -- Non-GAAP net income was $6.9 million, or $0.06 per share based on 113.1 million weighted-average diluted shares outstanding as of June 30, 2018, compared to $4.1 million or $0.04 per share based on 106.7 million weighted-average diluted shares outstanding as of June 30, 2017, in the second quarter of 2017. -- Adjusted EBITDA, a non-GAAP metric, was $8.3 million, compared to $7.0 million in the second quarter of 2017.

Balance Sheet and Cash Flow

-- As of June 30, 2018, CarGurus had cash, cash equivalents, and short-term investments of $141.8 million and no debt. -- The Company generated $17.5 million in cash from operations and $16.8 million in free cash flow, which is a non-GAAP metric, during the second quarter of 2018 compared to generating $4.8 million in cash from operations and $2.6 million in free cash flow during the second quarter of 2017.

Second Quarter Business Metrics

-- U.S. revenue was $106.4 million in the second quarter of 2018, an increase of 44% compared to $74.1 million in the second quarter of 2017. GAAP operating income in the U.S. was $9.7 million, a decrease of 21% compared to $12.2 million in the second quarter of 2017. The decrease in GAAP operating income from the second quarter of 2017 to the second quarter of 2018 was primarily due to a $5.2 million increase in stock-based compensation expense. -- International revenue was $3.9 million in the second quarter of 2018, an increase of 87% compared to $2.1 million in the second quarter of 2017. GAAP operating loss in International markets was ($8.2) million, an increase of 33% compared to a loss of ($6.2) million in the second quarter of 2017. -- Total paying dealers were 29,969 at June 30, 2018, an increase of 20% compared to 25,041 at June 30, 2017. Of the total paying dealers at June 30, 2018, U.S. and International accounted for 26,871 and 3,098, respectively, compared to 23,347 and 1,694, respectively, at June 30, 2017. -- Average annual revenue per subscribing dealer (AARSD) in the U.S. was $13,130 as of June 30, 2018, an increase of 19% compared to $11,048 as of June 30, 2017. -- AARSD in International markets was $5,037 as of June 30, 2018, an increase of 2% compared to $4,944 as of June 30, 2017. -- Website traffic and consumer engagement metrics for the second quarter of 2018 grew as follows: o U.S. average monthly unique users were 36.0 million, an increase of 56% compared to 23.1 million in the second quarter of 2017. U.S. average monthly sessions were 93.3 million, an increase of 52% compared to 61.3 million in the second quarter of 2017. o International average monthly unique users were 3.5 million, an increase of 54% compared to 2.3 million in the second quarter of 2017. International average monthly sessions were 8.0 million, an increase of 60% compared to 5.0 million in the second quarter of 2017.

Third Quarter and Full-Year 2018 Guidance

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

Third Quarter 2018:

• Total revenue $112 to $113 million • Non-GAAP operating income $5.5 to $6.5 million • Non-GAAP EPS $0.04 to $0.05

The third quarter 2018 non-GAAP earnings per share calculation assumes 113.6 million diluted weighted-average common shares outstanding.

Full-Year 2018:

• Total revenue $436 to $438 million • Non-GAAP operating income $28.5 to $30.5 million • Non-GAAP EPS $0.22 to $0.23

The full-year non-GAAP earnings per share calculation assumes 113.5 million diluted weighted-average common shares outstanding. Guidance for the third quarter and full-year 2018 does not include any potential impact of foreign 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 second quarter 2018 financial results and third quarter and full fiscal year 2018 financial guidance at 5:00 p.m. Eastern Time today, August 7, 2018. To access the conference call, dial (877) 451-6152 for 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 August 7, 2018, until 11:59 p.m. Eastern Time on August 21, 2018, by dialing (844) 512-2921 for the U.S. or Canada, or (412) 317-6671 for international callers, and entering passcode 13681306. 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, June 2018). 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 third quarter 2018 and full-year 2018, attractiveness of our product offerings and platform, the value proposition of our products and our market awareness, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “guide,” “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 operate in compliance with applicable laws as well as other risks and uncertainties set forth in the “Risk Factors” section of our Quarterly Report on Form 10-Q, filed on August 7, 2018 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 At June30, December31 2018 , 2017 --------- --------- Assets Current assets Cash and cash equivalents $ 31,762 $ 87,709 Investments 110,000 50,000 Accounts receivable, net of allowance for doubtful accounts of $551 11,432 12,577 and $494, respectively Prepaid expenses, prepaid income taxes and other current assets 11,090 6,918 - ------- - ------- Total current assets 164,284 157,204 Property and equipment, net 16,221 16,563 Restricted cash 3,604 1,843 Deferred tax assets 29,049 825 Other long–term assets 143 159 - ------- - ------- Total assets $ 213,301 $ 176,594 - ------- - ------- Liabilities and Stockholders’Equity Current liabilities Accounts payable $ 30,476 $ 23,908 Accrued expenses, accrued income taxes and other current liabilities 11,290 13,588 Deferred revenue 7,577 4,305 Deferred rent 1,206 1,165 - ------- - ------- Total current liabilities 50,549 42,966 Deferred rent, net of current portion 5,206 5,648 Other non–current liabilities 1,155 955 - ------- - ------- Total liabilities 56,910 49,569 Stockholders’ equity: Class A common stock, $0.001 par value per share; 500,000,000 shares authorized; 88,682,807 and 77,884,754 shares issued and outstanding 89 78 at June 30, 2018 and December 31, 2017, respectively. Class B common stock, $0.001 par value per share; 100,000,000 shares authorized; 20,702,084 and 28,226,104 shares issued and outstanding 21 28 at June 30, 2018 and December 31, 2017, respectively. Additional paid-in capital 179,716 185,190 Accumulated deficit (23,583 ) (58,499 ) Accumulated other comprehensive income 148 228 - ------- - ------- Total stockholders’ equity 156,391 127,025 - ------- - ------- Total liabilities and stockholders’ equity $ 213,301 $ 176,594 - ------- - -------

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

Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ----------------------------- 2018 2017 2018 2017 ------------- ------------ ------------- ------------ Revenue $ 110,325 $ 76,240 $ 209,026 $ 143,275 Cost of revenue(1) 5,959 4,322 11,528 7,647 - ----------- - ---------- - ----------- - ---------- Gross profit 104,366 71,918 197,498 135,628 Operating expenses: Sales and marketing 80,933 55,533 152,441 104,604 Product, technology, and development 11,844 4,709 20,942 8,357 General and administrative 9,541 5,033 17,412 9,092 Depreciation and amortization 604 648 1,337 1,196 - ----------- - ---------- - ----------- - ---------- Total operating expenses 102,922 65,923 192,132 123,249 - ----------- - ---------- - ----------- - ---------- Income from operations 1,444 5,995 5,366 12,379 Other income, net 703 53 985 217 - ----------- - ---------- - ----------- - ---------- Income before income taxes 2,147 6,048 6,351 12,596 (Benefit from) provision for income taxes (29,118 ) 1,702 (28,565 ) 4,043 - ----------- - ---------- - ----------- - ---------- Net income $ 31,265 $ 4,346 $ 34,916 $ 8,553 - ----------- - ---------- - ----------- - ---------- Reconciliation of net income to net income attributable to common stockholders: Net income $ 31,265 $ 4,346 $ 34,916 $ 8,553 Net income attributable to participating — (2,563 ) — (5,045 ) securities - ----------- - ---------- - ----------- - ---------- Net income attributable to common $ 31,265 $ 1,783 $ 34,916 $ 3,508 stockholders — basic - ----------- - ---------- - ----------- - ---------- Net income $ 31,265 $ 4,346 $ 34,916 $ 8,553 Net income attributable to participating — (2,468 ) — (4,853 ) securities - ----------- - ---------- - ----------- - ---------- Net income attributable to common $ 31,265 $ 1,878 $ 34,916 $ 3,700 stockholders — diluted - ----------- - ---------- - ----------- - ---------- Net income per share attributable to common stockholders: Basic $ 0.29 $ 0.04 $ 0.32 $ 0.08 - ----------- - ---------- - ----------- - ---------- Diluted $ 0.28 $ 0.04 $ 0.31 $ 0.08 - ----------- - ---------- - ----------- - ---------- Weighted–average number of shares of common stock used in computing net income per share attributable to common stockholders: Basic 108,500,802 42,162,718 107,726,105 42,122,339 Diluted 113,081,209 46,097,163 113,215,564 46,182,359 (1) Includes depreciation and amortization expense for the three months ended June 30, 2018 and 2017 and for the six months ended June 30, 2018 and 2017 of $616, $269, $1,120 and $391, respectively.

Unaudited Condensed Consolidated Statements of Cash Flows(in thousands)

Three Months Ended Six Months Ended June 30, June 30, --------------------- ----------------------- 2018 2017 2018 2017 --------- -------- ---------- --------- Operating Activities Net income $ 31,265 $ 4,346 $ 34,916 $ 8,553 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,220 917 2,457 1,587 Unrealized currency (gain) loss on foreign denominated (72 ) 128 (19 ) 128 transactions Deferred taxes (26,214 ) 435 (28,224 ) 410 Provision for doubtful accounts 345 221 722 380 Stock-based compensation expense 5,605 74 9,423 150 Changes in operating assets and liabilities: Accounts receivable 411 (1,693 ) 418 (2,720 ) Prepaid expenses, prepaid income taxes, and other assets (3,805 ) (2,487 ) (4,312 ) (890 ) Accounts payable 6,689 1,156 7,338 1,200 Accrued expenses, accrued income taxes, and other current 1,660 502 (1,991 ) (784 ) liabilities Deferred revenue 504 217 3,315 1,251 Deferred rent (219 ) 938 (434 ) 668 Other non-current liabilities 85 91 239 157 - ------- - ------ - -------- - ------- Net cash provided by operating activities 17,474 4,845 23,848 10,090 - ------- - ------ - -------- - ------- Investing Activities Purchases of property and equipment (547 ) (1,817 ) (981 ) (1,976 ) Capitalization of website development costs (144 ) (385 ) (725 ) (947 ) Investments in certificates of deposit (70,000 ) — (130,000 ) (30,000 ) Maturities of certificates of deposit 40,000 — 70,000 26,774 - ------- - ------ - -------- - ------- Net cash used in investing activities (30,691 ) (2,202 ) (61,706 ) (6,149 ) - ------- - ------ - -------- - ------- Financing Activities Proceeds from exercise of stock options 2,305 59 2,385 168 Payment of initial public offering costs — (305 ) (1,142 ) (305 ) Payment of withholding taxes on net share settlements of (17,488 ) — (17,488 ) — equity awards - ------- - ------ - -------- - ------- Net cash used in financing activities (15,183 ) (246 ) (16,245 ) (137 ) - ------- - ------ - -------- - ------- Impact of foreign currency on cash, cash equivalents, and (107 ) 3 (83 ) 29 restricted cash Net (decrease) increase in cash, cash equivalents, and (28,507 ) 2,400 (54,186 ) 3,833 restricted cash Cash, cash equivalents, and restricted cash at beginning 63,873 32,953 89,552 31,520 of period - ------- - ------ - -------- - ------- Cash, cash equivalents, and restricted cash at end of $ 35,366 $ 35,353 $ 35,366 $ 35,353 period - ------- - ------ - -------- - ------- Supplemental disclosure of cash flow information: Cash paid for income taxes $ 2,275 $ 600 $ 2,280 $ 647 - ------- - ------ - -------- - ------- Cash paid for interest $ 5 $ 6 $ 10 $ 12 - ------- - ------ - -------- - ------- Supplemental disclosure of non-cash investing and financing activities: Unpaid purchases of property and equipment $ 712 $ 2,271 $ 712 $ 2,271 - ------- - ------ - -------- - ------- Capitalized stockholders’ compensation in website $ 61 $ — $ 210 $ — development costs - ------- - ------ - -------- - ------- Unpaid deferred initial public offering costs $ — $ 1,549 $ — $ 1,549 - ------- - ------ - -------- - -------

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 Six Months Ended June 30, June 30, ------------------ -------------------- 2018 2017 2018 2017 ------- ------- -------- -------- GAAP operating income $ 1,444 $ 5,995 $ 5,366 $ 12,379 Stock-based compensation expense 5,605 74 9,423 150 - ----- - ----- - ------ - ------ Non-GAAP operating income $ 7,049 $ 6,069 $ 14,789 $ 12,529 - ----- - ----- - ------ - ------ GAAP operating margin 1 % 8 % 3 % 9 % Non-GAAP operating margin 6 % 8 % 7 % 9 %

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

Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2018 2017 2018 2017 --------- --------- --------- --------- GAAP net income $ 31,265 $ 4,346 $ 34,916 $ 8,553 Stock-based compensation expense, net of tax(1) 4,428 48 7,444 98 Change in tax provision from stock-based compensation (28,828 ) (264 ) (28,941 ) (373 ) expense(2) - ------- - ------- - ------- - ------- Non-GAAP net income $ 6,865 $ 4,130 $ 13,419 $ 8,278 - ------- - ------- - ------- - ------- Non-GAAP net income attributable to common stockholders $ 6,865 $ 4,130 $ 13,419 $ 8,278 - ------- - ------- - ------- - ------- Non-GAAP net income attributable to common stockholders per share: Basic $ 0.06 $ 0.04 $ 0.12 $ 0.08 - ------- - ------- - ------- - ------- Diluted $ 0.06 $ 0.04 $ 0.12 $ 0.08 - ------- - ------- - ------- - ------- Weighted-average number of shares of common stock used in computing non-GAAP net income per share to common stockholders: GAAP Basic Shares 108,501 42,163 107,726 42,122 Preferred Shares assuming conversion — 60,565 — 60,565 - ------- - ------- - ------- - ------- Total Non-GAAP Basic Shares 108,501 102,728 107,726 102,687 - ------- - ------- - ------- - ------- GAAP Diluted Shares 113,081 46,097 113,216 46,182 Preferred Shares assuming conversion — 60,565 — 60,565 - ------- - ------- - ------- - ------- Total Non-GAAP Diluted Shares 113,081 106,662 113,216 106,747 - ------- - ------- - ------- - ------- (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 Six Months Ended June 30, June 30, --------------------- ---------------------- 2018 2017 2018 2017 --------- -------- --------- --------- Revenue $ 110,325 $ 76,240 $ 209,026 $ 143,275 Cost of revenue 5,959 4,322 11,528 7,647 - ------- - ------ - ------- - ------- Gross profit 104,366 71,918 197,498 135,628 Stock-based compensation expense included in Cost of 92 5 181 10 revenue - ------- - ------ - ------- - ------- Non-GAAP gross profit $ 104,458 $ 71,923 $ 197,679 $ 135,638 - ------- - ------ - ------- - ------- GAAP gross profit margin 95 % 94 % 94 % 95 % Non-GAAP gross profit margin 95 % 94 % 95 % 95 %

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 June 30, ---------------------------------------------------------------------------------------------- 2018 2017 ---------------------------------------------- -------------------------------------------- GAAP Non- GAAP Non- GAAP GAAP expe expe nse expe nse expe Stock-bas as nse Stock-b as nse GAAP ed Non-GAAP a as GAAP ased Non-GAAP a as expense compensat expense perc a expense compens expense perc a ion enta perc ation enta perc expense ge enta expense ge enta of ge of ge reve of reve of nue reve nue reve nue nue --------- -------- --------- --- --- --------- ------ --------- --- --- Cost of $ 5,959 $ (92 ) $ 5,867 5 % 5 % $ 4,322 $ (5 ) $ 4,317 6 % 6 % revenue S&M 80,933 (1,536 ) 79,397 73 % 72 % 55,533 (35 ) 55,498 72 % 72 % P,T&D(1) 11,844 (2,658 ) 9,186 11 % 8 % 4,709 (23 ) 4,686 6 % 6 % G&A 9,541 (1,319 ) 8,222 9 % 8 % 5,033 (11 ) 5,022 7 % 7 % Depreciation & 604 — 604 1 % 1 % 648 — 648 1 % 1 % amortization - ------- - ------ - ------- -- -- - ------- - ---- - ------- -- -- Operating $ 102,922 $ (5,513 ) $ 97,409 94 % 89 % $ 65,923 $ (69 ) $ 65,854 86 % 86 % expenses(2) - ------- - ------ - ------- -- -- - ------- - ---- - ------- -- -- Total $ 108,881 $ (5,605 ) $ 103,276 99 % 94 % $ 70,245 $ (74 ) $ 70,171 92 % 92 % expenses - ------- - ------ - ------- -- -- - ------- - ---- - ------- -- -- (1) Product, Technology, & Development (2) Operating expenses include S&M, P,T&D, G&A, and depreciation & amortization Six Months Ended June 30, ---------------------------------------------------------------------------------------------- 2018 2017 ---------------------------------------------- -------------------------------------------- GAAP Non- GAAP Non- GAAP GAAP expe expe nse expe nse expe Stock-bas as nse Stock-b as nse GAAP ed Non-GAAP a as GAAP ased Non-GAAP a as expense compensat expense perc a expense compens expense perc a ion enta perc ation enta perc expense ge enta expense ge enta of ge of ge reve of reve of nue reve nue reve nue nue --------- -------- --------- --- --- --------- ------ --------- --- --- Cost of $ 11,528 $ (181 ) $ 11,347 6 % 5 % $ 7,647 $ (10 ) $ 7,637 5 % 5 % revenue S&M 152,441 (2,546 ) 149,895 72 % 72 % 104,604 (73 ) 104,531 73 % 73 % P,T&D(1) 20,942 (4,319 ) 16,623 10 % 8 % 8,357 (48 ) 8,309 6 % 6 % G&A 17,412 (2,377 ) 15,035 8 % 7 % 9,092 (19 ) 9,073 6 % 6 % Depreciation & 1,337 — 1,337 1 % 1 % 1,196 — 1,196 1 % 1 % amortization - ------- - ------ - ------- -- -- - ------- - ---- - ------- -- -- Operating $ 192,132 $ (9,242 ) $ 182,890 91 % 88 % $ 123,249 $ (140 ) $ 123,109 86 % 86 % expenses(2) - ------- - ------ - ------- -- -- - ------- - ---- - ------- -- -- Total $ 203,660 $ (9,423 ) $ 194,237 97 % 93 % $ 130,896 $ (150 ) $ 130,746 91 % 91 % expenses - ------- - ------ - ------- -- -- - ------- - ---- - ------- -- -- (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 Six Months Ended June 30, June 30, -------------------- --------------------- 2018 2017 2018 2017 --------- ------- - ------- - ------ GAAP net income $ 31,265 $ 4,346 $ 34,916 $ 8,553 Depreciation and amortization 1,220 917 2,457 1,587 Stock-based compensation expense 5,605 74 9,423 150 Other (income), net (703 ) (53 ) (985 ) (217 ) (Benefit from) provision for income taxes (29,118 ) 1,702 (28,565 ) 4,043 - ------- - ----- - ------- - ------ Adjusted EBITDA $ 8,269 $ 6,986 $ 17,246 $ 14,116 - ------- - ----- - ------- - ------

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

Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2018 2017 2018 2017 -------- -------- -------- -------- GAAP net cash and cash equivalents provided by operating $ 17,474 $ 4,845 $ 23,848 $ 10,090 activities Purchases of property and equipment (547 ) (1,817 ) (981 ) (1,976 ) Capitalization of website development costs (144 ) (385 ) (725 ) (947 ) - ------ - ------ - ------ - ------ Non-GAAP free cash flow $ 16,783 $ 2,643 $ 22,142 $ 7,167 - ------ - ------ - ------ - ------

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 net income, adjusted to exclude: depreciation and amortization, stock-based compensation expense, other (income) expense, 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 has 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 a website during a calendar month. If an individual accesses a website 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 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 NelsonDirector, Investor Relations888-508-1190 investors@cargurus.com

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