Earnings Call Transcript - CARG Q4 2025

Operator, Operator

Good day, and welcome to the CarGurus Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the call over to Kirndeep Singh, Vice President and Head of Investor Relations. Please go ahead.

Kirndeep Singh, Vice President and Head of Investor Relations

Good afternoon, and thank you for joining us. With me on the call today are Jason Trevisan, Chief Executive Officer; and Sam Zales, President and Chief Operating Officer. We will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to risks and uncertainties, and our actual results may differ materially. Information concerning those risks and uncertainties is discussed in our SEC filings. We undertake no obligation to update forward-looking statements, except as required by law. Please refer to our press release and our investor presentation on the Investor Relations section of our website for a reconciliation of GAAP to non-GAAP measures. I'll now turn the call over to Jason.

Jason Trevisan, Chief Executive Officer

Good afternoon, and thank you for joining us. 2025 was a pivotal year for CarGurus. We accelerated product innovation, expanding how we serve dealers and consumers as a marketplace, software and data company, drove significant growth and profitability and returned capital through disciplined share repurchases. Revenue from continuing operations grew 14% for the full year, our second consecutive year of mid-teens growth and adjusted EBITDA from continuing operations grew 25% year-over-year. Wallet share expanded, retention reached its highest level in three years, new dealer additions accelerated and consumer traffic growth translated into increased lead volume. Internationally, we delivered 27% year-over-year revenue growth, driven by accelerated dealer acquisition, wallet share expansion and strong lead growth. Our performance was supported by faster, more prolific AI-driven innovation, which increased product velocity and strengthened our differentiation among both dealers and consumers. We launched more new products in 2025 than in any prior year, embedding data and intelligence directly into dealer workflows and consumer decision-making. Key launches included dealer solutions like PriceVantage and new car exposure and consumer features like CG Discover and Dealership Mode. We continued bolstering our support of dealer workflows across inventory, marketing, conversion and data. This product innovation further cements our role beyond lead generation into daily operating workflows, expanding our addressable market into adjacent software and data categories. Early traction validates demand, engagement and differentiation. Our consumer launches expanded our role across the shopping journey from research through in-dealership decision-making and purchase, driving higher intent engagement and higher converting leads. Our broader portfolio of consumer functionality, combined with the largest inventory selection and a foundation of trust and transparency reinforces our leadership position as the most visited automotive shopping platform in the U.S. We also executed with discipline. We made the prudent decision to wind down CarOffer while retaining its sourcing technology and data to strengthen our inventory products. Those learnings have informed better pricing and inventory technology solutions that both drive high incremental margins and reinforce the value and performance of our marketplace. Now I'll walk through our progress across our 2025 Drivers of Value Creation. Driver number one, expanding our suite of data-driven solutions across dealers' workflows to help them drive more profitable businesses. In 2025, our most critical dealer metrics achieved impressive growth. Consolidated QARSD grew 8% year-over-year. Global paying dealer count increased by 2,399, Add-on product adoption rose nearly 25% year-over-year, engagement and platform usage grew and retention strengthened. Underpinning the products and intelligence we deliver to dealers is a growing body of data that we're translating into higher fidelity insights through AI. On average, last year, we ingested approximately 0.5 billion first-party shopper signals each day, translating them into real-time consumer demand, pricing and inventory insights our dealer customers are leveraging for measurably improved performance. In 2025, dealer data insights became central to dealer workflow with 60% of global paying dealers using these insights across their operations. What began as validation of the value dealers ascribe to our data is now embedded in how they make more profitable data-driven decisions. Building on this foundation, we launched PriceVantage in October, our first specialized software product designed to move dealers from passive data consumption to action-oriented pricing decisions. Early results demonstrated accelerating inventory turnover and increasing VDP views. Engagement has been strong with nearly 80% of adopting dealers active weekly on the PriceVantage suite of products. Compared with their prior usage of our free pricing tool, PriceVantage users execute 66% more price changes and log more sessions per day, all clear indicators of deeper reliance on data-driven pricing workflows. Collectively, these efforts embed CarGurus more deeply into dealer operations and decision-making, driving stronger adoption, more consistent action and clear evidence that our intelligence-led solutions improve efficiency and profitability. Driver number two, meeting the evolving needs of car shoppers by powering a more intelligent and seamless journey. In 2025, we strengthened the consumer side of our marketplace by increasing our reach and the quality of shopper engagement. Traffic grew faster than our primary competitors year-over-year, reinforcing our position as the number one most visited automotive marketplace. Nearly half of monthly visitors shopped exclusively on CarGurus, indicating a high degree of reliance on the platform. That behavior translated into results, fueled by lead growth in the U.S., CarGurus-led sales grew year-over-year. And according to a 2025 Clarivoy study, CarGurus influenced 55% of all attributed vehicle sales. We believe that scale and influence create a stronger foundation to introduce new consumer experiences that deepen engagement and generate richer signals. Our generative AI search experience, CG Discover, continued to scale. Unlike other tools that simply repackage search results, Discover responds in real time and acts as the decisioning copilot using live marketplace inventory, deep automotive expertise and demand signals to quickly and flexibly answer consumer requests. Discover traffic grew 3.5x and leads grew 10x quarter-over-quarter. Depth of engagement also strengthened with average session time up nearly 20% and Discover users spending 4.4x more time than regular visitors. Each interaction generates richer demand and pricing signals, strengthening our data and intelligence layer. We also extended our trusted user support into later stages of the purchase process. CarGurus was the number one car shopping app in 2025 by downloads, monthly active users and time spent, giving us scale at the point of purchase. Dealership Mode now live across all consumer app users moves our role beyond discovery and further into the transaction funnel by assisting consumers on dealer lots. In just the first few months, thousands of shoppers on average open Dealership Mode on dealer lots each day. Eighty percent of app users who visit a dealership lot have not submitted a lead in advance. That means four out of five high-intent shoppers using our app on dealer lots are not attributable to us. We believe that Dealership Mode creates a clear opportunity to increase pre-visit lead submissions and drive measurable traffic to dealers. These investments delivered greater transparency and broader support to consumers for a more seamless shopping experience. We entered 2026 with a more differentiated consumer experience and a stronger foundation to meet shoppers where they are in their journey. Driver number three, enabling dealers and consumers to complete more of the transaction online, streamlining the final steps of the deal. We scaled digital deal to 13,500 dealers globally, adding nearly 3,800 dealers year-over-year. This growth reflects growing consumer demand for and dealer reliance on workflows that move more of the transaction online and generate higher intent prospects. We embedded high-value transactional capabilities earlier in the shopping journey, including expanded financing, trade-ins, deposits and appointments. Digital Deal leads with high-value actions increased 78% year-over-year in 2025 and represented approximately 70% of Digital Deal leads, while financing-related leads grew 86% year-over-year, reflecting deeper shopper progression into the transaction and stronger purchase intent. Overall, Digital Deal leads convert up to 4.7x higher than standard marketplace leads with even greater lift for shoppers located farther from the dealership, delivering higher quality and higher converting shoppers to dealers. Collectively, these changes are shifting more of the transaction online while preserving the in-person experience that the vast majority of consumers still want. While 86% of buyers ultimately see the car in person, 83% say they want to complete more of the shopping process from home according to our 2025 Consumer Insights Report. By meeting that demand, we improve consumer engagement and offer more transaction support for dealers. That's especially important given the nature of the car buying journey, which remains a high consideration decision and often the second largest purchase a consumer makes in their lifetime. Shoppers want to research and compare options, understand pricing, availability and trade-offs and still negotiate price and test drive vehicles in person before committing. Confidence and trust matter at every step of the journey. That reality continues to shape how we invest in our platform, brand and own channels and how we show up as discovery paths evolve. Following the performance of the 2025 Big Deal campaign, we are extending the campaign into 2026 with product-led spots highlighting dealership mode and CG Discover. We believe these experiences bring clarity and confidence to the car shopping process and reinforce the trust consumers place in CarGurus as the number one most visited automotive marketplace. We expanded our impressions by 50% year-over-year and direct and owned channels are our fastest-growing traffic sources with direct visits up 16% year-over-year and the app contributing 34% of leads. We're also leading automotive marketplace competitors in the emerging AI-driven discovery landscape. While AI remains a small share of overall traffic today, in Q4, CarGurus generated more AI-driven traffic than our closest competitors, and these users convert at higher rates, submitting leads at nearly 50% higher rates than traditional SEO in Q4. To date, AI traffic has been additive to our overall acquisition mix, increasing visibility rather than displacing existing channels. AI is reshaping discovery across many categories. In automotive, the shift has been more measured. However, we are not waiting for it to accelerate. We are expanding AI-driven traffic across both paid and non-paid channels. On the paid side, we've been early adopters of new AI-powered tools with Google, Bing and Meta with promising initial performance results. We plan to test emerging AI search ad formats, including those introduced by OpenAI as they become available. On the non-paid side, we have strengthened and will continue to evolve technical platform best practices and scaling proprietary content so it is discoverable across LLM environments, not just traditional organic search. We believe our depth of experience and success in audience acquisition across many channels, combined with a disciplined test-and-learn approach positions us well as this landscape evolves. While AI may shape how shoppers begin their journey, it does not change what they need in a major purchase, clarity and confidence. Even when journeys start in AI environments, consumers still come to CarGurus to validate listings, confirm availability and make data-driven decisions. As discovery paths evolve, platforms with the deepest inventory, broadest dealer coverage, most comprehensive retail data and highest ROI will be best positioned to remain central to the transaction. We believe our market leadership, data depth and dealer integrations position us to continue serving that role. Stepping back, 2025 was an outstanding year for CarGurus. We delivered strong financial results while deepening dealer and consumer reliance on our products across more steps in the car buying and selling process. More decisions are informed by our data and AI, more workflows run through our platform and more of the car shopping journey now takes place with CarGurus involved. It was also a year of strong product innovation. The many products we launched in 2025 have shown promising signs of engagement and scaling, giving us confidence in our investments in new product innovation. For example, we expect the monetized dealer products we launched in 2025 to grow approximately 15x in 2026 and achieve eight-figure revenue levels and exciting exit rates. Entering 2026, our platform is firmly embedded in dealer operations and now serves a larger TAM than a year ago. With disciplined execution and continued investment in AI-driven innovation and proven products to support both our customers, our focus remains straightforward. We intend to execute with rigor, build products to strengthen the dealer workflow and consumer journey while further differentiating CarGurus. Before turning to our results, I want to address two reporting updates. First, we completed the CarOffer wind down in the fourth quarter of 2025. We have presented CarOffer's financial results as discontinued operations in our consolidated financial statements for all periods presented, except for the statements of comprehensive income, redeemable non-controlling interest and stockholders' equity and cash flows. Unless indicated, the fourth quarter and full year 2025 results we will be discussing on this call relate to our continuing operations. Second, beginning in the fourth quarter of 2025, we report our financial results as a single segment following the CarOffer wind down. Now let me walk through our financial results, followed by our guidance for the first quarter and full year 2026. Fourth quarter revenue grew 15% year-over-year to $241 million at the high end of our guidance range, driven by strength in our subscription-based listings revenue as well as overperformance in advertising and strength in our international business. Full year 2025 revenue was $907 million, up 14% year-over-year, our second straight year of mid-teens revenue growth. In the fourth quarter, U.S. QARSD grew 8% year-over-year, and we added 1,357 paying U.S. dealers year-over-year. We continue to expand our dealer base while taking greater wallet share, driven primarily by upgrades and broader adoption of add-on products with modest contribution from like-for-like price increases and higher lead quantity and quality. Robust revenue growth continued in our international business with fourth quarter revenue up 32% year-over-year and full year revenue up 27% year-over-year, driven by new dealer additions along with a modest tailwind from favorable FX. International QARSD grew 16% year-over-year in the fourth quarter. International dealer count growth surged 14% year-over-year to 8,360 dealers. I will now discuss our profitability and expenses on a non-GAAP basis. Fourth quarter and full year non-GAAP gross profit was $223 million and $842 million, respectively, representing 14% year-over-year growth in each period. Fourth quarter non-GAAP gross margin was 92%, down about 90 basis points year-over-year. For the full year, non-GAAP gross margin increased by about 40 basis points to 93%. Fourth quarter non-GAAP adjusted EBITDA grew 13% year-over-year to $88 million, above the midpoint of our fourth quarter guidance range. Adjusted EBITDA margin was about 60 basis points lower year-over-year at 37%. Full year 2025 non-GAAP adjusted EBITDA grew 25% year-over-year to $319 million, and adjusted EBITDA margin rose by approximately 310 basis points year-over-year to 35%. Fourth quarter and full year non-GAAP operating expenses totaled $141 million and $547 million, up 15% and 10% year-over-year, respectively. The increase in the fourth quarter reflected higher sales and marketing expense and investment in new product innovation, as mentioned earlier. As a result of the CarOffer wind down, we incurred and paid $13.3 million in total expenditures, of which we incurred and paid $5.4 million in one-time cash restructuring charges attributable to discontinued operations. This was at the low end of our previous $13 million to $15 million wind-down estimate. Fourth quarter and full year GAAP net income per diluted share attributable to common stockholders was $0.56 and $1.96, up 24% and 62% year-over-year, respectively. From 2023 to 2025, this measure has grown at a 56% two-year CAGR. Fourth quarter and full year non-GAAP net income per diluted share attributable to common stockholders was $0.63 and $2.28, up 17% and 31% year-over-year, respectively. We ended the year with $191 million in cash and cash equivalents, an increase of $12 million from the end of the third quarter, primarily driven by higher adjusted EBITDA, partly offset by $57 million in share repurchases in the quarter. In 2025, we repurchased about $350 million in shares, completing our 2025 share repurchase program. Since the fourth quarter of 2022, we have repurchased about $721 million in shares or about 25% of our outstanding shares. Additionally, I'm pleased to share that our Board has authorized a new $250 million share repurchase program, which will be available through December 31st, 2026, highlighting our commitment to return value to shareholders. I will now turn to our guidance for the first quarter and full year 2026. We expect our first quarter revenue to be in the range of $240.5 million to $245.5 million, up between 13% and 16% year-over-year, respectively. For the first quarter, we expect our non-GAAP adjusted EBITDA to be in the range of $72 million to $80 million, up between 5% and 16% year-over-year, respectively. As a reminder, our guide reflects our continuing operations absorbing approximately $1 million in ongoing quarterly CarOffer expenses following the wind down. We expect first quarter non-GAAP earnings per share to be in the range of $0.52 to $0.58 and diluted weighted average common shares outstanding to be approximately 94 million. Turning to the full year. We expect 2026 revenue to grow in the range of 10% to 13% year-over-year. We expect full year non-GAAP adjusted EBITDA margins to compress approximately 1.5 to 2.5 percentage points in 2026 relative to 2025. We believe that the adjusted EBITDA margin implied by the midpoint of first quarter guidance is a reasonable proxy for the first three quarters of the year, with fourth quarter margins expected to be higher due to seasonality. This reflects increased investment in products, technology and development as we plan to continue our accelerated pace of AI product introductions for both dealers and consumers. With that, let's open the call for Q&A.

Operator, Operator

Our first question comes from Ralph Schackart with William Blair.

Ralph Schackart, Analyst

Jason, with the strong guide outlook of, I think, 10% to 13%, maybe talk about sort of the visibility and durability of that growth rate. I think it's sort of a key investor question, sustaining these high growth rates in the marketplace business. And then maybe if you could add some perspective as you layer on new products with this reinvestment cycle that you'll go through in 2026, maybe provide some perspective on how those new products will be additive to growth over the long term.

Jason Trevisan, Chief Executive Officer

Sure. The strong growth can be attributed to several factors, primarily our two growth levers of QARSD and new dealers in all our markets. We have good visibility globally, without any customer concentration issues. We are effectively utilizing various levers that have consistently driven QARSD and dealer additions. This includes new products, upsells, and an increase in lead volume and quality. We've also seen improvements with our Dealership Mode, which now demonstrates to dealers that we are sending them more consumers who were not previously submitting leads. Our value proposition continues to strengthen both absolutely and relatively compared to competitors who aren’t experiencing similar growth rates. Additionally, we have introduced new products, and we've shared insights on some launched in 2025 and their expected contributions. We still have several products that are performing well and differentiate us; many are not directly monetized, but they enhance retention and engagement, allowing us to expand our dealer base and increase pricing power. This overall situation is healthy and robust, giving us long-term potential in both the U.S. and international markets. A significant focus for us is on software and data across dealer workflow areas such as inventory, conversion, and marketing, which could effectively double our total addressable market. As indicated in our remarks, while these new offerings may start small, they are rapidly growing and displaying impressive engagement. New products are a key driver of QARSD and have continued to strengthen our position.

Operator, Operator

Our next question comes from the line of Chris Pierce with Needham & Company.

Christopher Pierce, Analyst

I know you had some stats in there about new products and eight figures, but I just want to understand, is PriceVantage part of the full year revenue guide? Or is that still such a small portion? But I guess I just want to understand if the new TAM is in the revenue guide or something that is further down the road or what's the best way to think about it?

Jason Trevisan, Chief Executive Officer

Yes. No, it's certainly part of it because we've launched it. And so we've included it in our operating plan. And new car exposure was also launched in '25. So that's also included, and that's part of our marketing vertical. So the new TAM that we talk about, the doubling is in the non-marketing verticals, and we're obviously just scratching the surface of it, but we think there's huge potential because, again, as a reminder, all of the products that we build in those areas are reinforced by and reinforce our marketplace. And so it's not like with PriceVantage, we're not just another start-up offering a pricing tool to dealers. We are obviously established, but we're a company that has a relationship with the dealer who's coming to them and saying we have the most data, we have the most intelligence. Here's pricing software, and here's what it will do to your performance on our marketplace. Nobody else can say that. As the largest marketplace, that carries a lot of weight. And so the same applies with conversion, the same applies with data.

Christopher Pierce, Analyst

Okay. And then just as a follow-up, how should we think about this new margin range? Is this a year of investment specifically as you land in this new TAM and kind of want to have momentum in new products as you try to penetrate this new TAM? Or is this sort of a new normal and we should think about you guys consistently wanting to plow money back into the business to leverage your leadership position?

Jason Trevisan, Chief Executive Officer

I don't know if it's binary. I mean, I think we absolutely want to continue investing in product. In marketplace models, it tends to be a winner takes most. Scale matters. Scale helps create a deeper, broader platform that drives stickiness and engagement. We are not focused on maximizing margins; instead, we aim for sustainable long-term growth and healthy margins. The guidance for '26 is specifically not indicating a new normal nor suggesting it's a one-time event. The most helpful perspective is that we are working to optimize long-term growth, customer stickiness, and a healthy margin business. If you look at Rule of 40 type metrics, we have been performing well over the last couple of years and expect to do so this year as well.

Operator, Operator

Our next question comes from the line of Naved Khan with B. Riley Securities.

Naved Khan, Analyst

Yes, I have a question about the margin outlook for 2026. I understand your strategy of investing for growth while achieving a Rule of 40 or better. Could you elaborate on the areas of investment, particularly if there will be a greater focus on marketing? You mentioned investing in paid channels; will that be part of it? How should we expect those expenses to increase? Additionally, could you provide details about the pricing for PriceVantage? Are you marketing it at a higher tier, or is it an add-on? What is the latest uptake on this product?

Jason Trevisan, Chief Executive Officer

Sure. Regarding our investments, much of what I say will echo what we shared last quarter. In 2025, a significant portion of our growth in investments will focus on sales, marketing, and account management. As we look toward 2026 and the latter half of 2025 in our marketplace business, we are directing more resources towards building new products. This includes investments in product development and technology. To elaborate, we're prioritizing the introduction of new products. We've gained significant efficiencies from AI and are converting these efficiencies into higher productivity. We're not just introducing products and marketing; we're expanding into new verticals with dealers, enhancing how they convert leads and customers we provide, as well as strengthening our marketing and data intelligence. We're launching new software and data products and entering new areas within the dealership sector. Competing effectively in these areas requires building strong products, and we're adopting a product-driven growth strategy. Initially, we measure success through product adoption and engagement, followed by retention and revenue metrics. Regarding the PriceVantage pricing, we haven't disclosed specifics. What we shared last quarter still stands: we're testing various price points. It's offered as a standalone product, not bundled. To access it, one must be a marketplace customer. You also mentioned paid AI marketing. Currently, our AI-sourced audience is relatively small. However, measurements from third parties indicate we're well-positioned as this channel grows, though most currently do not have paid models. Consequently, nearly all traffic from LLMs at this point is organic.

Operator, Operator

Our next question comes from the line of John Colantuoni with Jefferies.

John Colantuoni, Analyst

I have two. First, when thinking about your outlook for revenue for the quarter and the year, can you talk to your expectations for the relative contribution of Dealer Count and QARSD? And second, I believe you mentioned that retention reached a three-year high. Can you talk about what's helped drive improved dealer satisfaction? And how does that elevated retention fit into your outlook for customer gains and monetization?

Jason Trevisan, Chief Executive Officer

Sure, I'll start, and then Sam will discuss retention. We don't provide a breakdown of the revenue outlook between QARSD and rooftops. However, if you look at the last few years, you'll notice fairly consistent trends. What we've emphasized in the past is the relationship between these two metrics. When we increase rooftops rapidly, it tends to dampen QARSD, even when all the factors affecting QARSD are just as strong as they have been. We have numerous models and benchmarks internally that analyze these metrics. Externally, we focus on and communicate about monthly recurring revenue and actual revenue. Sam, do you want to share more? Retention is a crucial component of this. Retaining as much of your installed base as possible is one of the best ways to grow rooftops. Sam will address those factors.

Samuel Zales, President and Chief Operating Officer

Thanks, John, for the question. Really proud of that retention. You know that our focus with our sales and account management teams is new business growth from the existing base and then retention. It's all part of what we call net monthly recurring revenue. It's happening because, number one, the ROI is clear to our customers. When you look at lead growth, both quantity and quality, we're in an advantaged position, and we are producing a tremendous set of results. And you've seen lead growth in both our global markets, U.S. and Canadian and U.K. markets have been phenomenal. We've added, as Jason said, this account management function. What we've done specifically on that one is added this dealer performance partner group. What they do is come from an industry background. They're retail professionals who join the CarGurus team and then go in and share best practices across our leading national providers all the way down to best practices at a small independent dealer. That kind of investment has made massive changes to the lead management practices our dealers are following, and they're, in turn, growing their close rates even further than where they were previously. And then finally, you embed in that the new software and data tools we're providing and you suddenly become a profit maximization engine for our dealers. So you look at that and say, as dealers have said, PriceVantage is advantaged in the marketplace because you are number one in consumer demand signals for me. And number two, you have more inventory in your sites, you can help me price to maximize my profitability. That, plus the data we're providing in dealer data insights literally makes you a part of the operating system at dealerships. And I think that's the biggest reason you're seeing us today with the record retention of our customer base.

Operator, Operator

Our next question comes from the line of Brad Erickson with RBC Capital Markets.

Bradley Erickson, Analyst

I guess two for me. One, when you think about kind of the content provided to the LLMs, your content, I mean, how should we think about kind of the moat there and maintaining the direct relationship with the customer just philosophically? And then second, the monthly uniques in the U.S. have really inflected kind of in the past three or so quarters versus '24 that was maybe a little bit more flattish, plus or minus. Can you share just kind of what's been driving that higher growth here in the monthly uniques in the U.S.?

Jason Trevisan, Chief Executive Officer

Sure, Brad. It's Jason. I'll take the content to the LLM. LLMs represent a new type of search. While their behavior differs significantly from traditional search, structurally they aren't that different. Consumers are seeking guidance, direction, and answers. The key is whether the search engine can provide sufficient answers for them to take the next steps or if they need to consult a specialist. Our research indicates that a small but growing percentage of consumers are beginning their journey with LLMs, using them as a starting point before coming to us for the confidence, trust, validation, context, and workflow necessary for their shopping journey. We aim to position ourselves effectively in this expanding channel by sharing our data with LLMs in a controlled manner, providing access to select information. We strive to enhance the consumer experience, leveraging our extensive industry data while controlling what content we share. However, the experience they receive from LLMs is just a fraction of what they find on our site. We're mindful of the overall consumer experience, which is typically a multi-month journey. It's about the data as well as the experience and context. As a company nearing 20 years, we've evolved through various technological changes, each unique, including the current AI landscape. We've adapted through the transitions from SEO to SEM, the rise of social media, video, and mobile apps, and continue to provide great service. So, Sam, do you want to discuss traffic trends? I can add more if needed.

Samuel Zales, President and Chief Operating Officer

Brad, thanks for the question. We're really proud of two aspects that are driving that kind of traffic growth for our business. The first is the consumer experience and continuing to invest in that, particularly with AI at the center of that. Number two is broadening our reach to consumers in different elements of their purchase cycle. So moving back to research and decision-making as well as the purchase process, as you've seen with products we've launched and our brand campaign is taking us there. I'm really proud of the Big Deal campaign. We just announced this week that we launched our newest Big Deal campaign for TV and online and social advertising. You're going to see more from us on that. And that highlights Discover, as Jason talked about, our AI-driven, very differentiated conversational search tool as well as Dealership Mode, which we talked about as well. So I think the two things you're seeing from that are one, app downloads and monthly active users and traffic and leads coming from that for us as a very important own channel for us, really important that, that comes directly to us. And number two is our direct traffic up 16% because those brand campaigns have reached a broader audience in the marketplace and then taking them down through Discover or Dealership Mode on their app and making them real live purchasing customers for our dealers to see with full attribution. We're really proud of that growth.

Operator, Operator

Our next question comes from the line of Andrew Boone with Citizens Bank.

Andrew Boone, Analyst

I'd like to follow-up on the last question. And what I'm trying to get at is the proprietary information that's available to you guys. As I think about certainly franchise dealers, but I really want you to focus on kind of the independents. Can you talk about the long tail of what may be available to CarGurus that won't be able to be scraped or picked up by an agent in the future that really does make your information proprietary rather than what could be built by an LLM in the future? And then as I think about your own AI products and AI consumer mode with Discover, can you help us understand whether that's improving conversion? Or how does it actually change the consumer action on the site as it relates to improving financials or leads or whatever you want to highlight?

Jason Trevisan, Chief Executive Officer

Sure. And the second part of your question was specific to Discover. Is that right, Andrew?

Andrew Boone, Analyst

Yes, sir.

Jason Trevisan, Chief Executive Officer

Certainly. On the first part, I want to emphasize that we have strong connections with over half of the dealer market and reach tens of millions of consumers every month. Both sides of our marketplace trust us due to our established relationships. While data is critical, the surrounding infrastructure built on these relationships also plays a significant role. We've developed a deep understanding of consumer needs when shopping for cars over the years, allowing us to create a user experience that includes tools like IMV, deal ratings, dealer ratings, and personalized recommendations for relevant searches. We provide valuable data that helps dealers improve their businesses. It's about leveraging all these elements to create competitive advantages. We could also choose to limit access to certain data segments, a decision we're continuously evaluating in this dynamic environment. It's essential to consider the relationships and the workflow context, along with trust in our tools like IMV and Deal ratings. With significant purchases like cars, consumers need trust and confidence in the information they receive. Regarding Discover, we're actively integrating AI into our products. Discover's Dealer Mode is an excellent example. It's enhancing our reach to potential customers who may not know what car they want. Previously, users faced a cumbersome search process; now, we can assist those who are uncertain about their choices, which is a significant improvement. Additionally, the conversational, personalized approach helps users articulate their preferences more effectively, leading to better answers. We're also seeing increased engagement, with more users interacting with our platform. Recently, we experienced a 3.5 times increase in traffic and a tenfold jump in leads quarter-over-quarter, indicating that we're resonating well with our audience. As we observe how these leads convert at dealerships, we confirm that providing more information results in more qualified leads.

Operator, Operator

Our next question comes from the line of Rajat Gupta with J.P. Morgan.

Rajat Gupta, Analyst

I just had a couple of quick ones. You mentioned earlier, Jason, that the industry is consolidating towards fewer providers over time. I'm curious if you can give us any update on that, how that trend has progressed? Has that accelerated in any meaningful way recently? What are you baking in, in your outlook in terms of that shift in the industry? I'd love to hear your thoughts. And I have a quick follow-up.

Jason Trevisan, Chief Executive Officer

And Rajat, consolidating. I mean, the dealers are consolidating towards like fewer marketplace options. Yes, the statistic we provided, which may be a bit outdated now, indicated that dealers used to subscribe to an average of three or more marketplaces, but that number has now decreased to below two, specifically around 1.8 or 1.7. This information comes from self-reported data from the dealers. When speaking with them, they also emphasize the necessity to streamline their partners and vendors across various areas of their business, not just in consumer marketplaces. This serves as another indicator of the overall trend. Additionally, if you examine the spending and wallet share, it's clear that we continue to outpace market growth, which signifies that we are gaining market share. While there is market growth, particularly in the adoption of digital marketing among dealers compared to traditional marketing, we are not experiencing a growth market of 14% or 15%. We are actively capturing market share. Moreover, particularly over the last year or two, our pace of innovation has accelerated, which is enhancing the consumer experience, as shown by improvements like Discover and Dealership Mode, further solidifying our leadership position.

Rajat Gupta, Analyst

Understood. And a quick follow-up. We were at NADA where we encountered many new and upcoming DMS providers, both cloud-based and some of the legacy ones transitioning from single-tenant to multi-tenant. I'm curious if any of this is facilitating the consolidation and making it easier for you to penetrate the market, given that you have more advanced tools and technology internally. Is any of this contributing to the shift in market share?

Jason Trevisan, Chief Executive Officer

I don't believe that the increasing number of start-ups is causing a faster consolidation. One of the areas we've recently focused on is collaborating with other technology providers. This development has come from both sides. We've been approached by them looking for our data, recognizing that we have the largest marketplace. At the same time, we have been encouraged by dealers who express their appreciation for CarGurus and inform us that they also value other providers. They wish for us to collaborate. Through these partnerships and integrations, we are becoming more connected with leading and future providers, which ultimately benefits our customers.

Operator, Operator

Our next questions come from the line of Ron Josey with Citigroup.

Jamesmichael Sherman-Lewis, Analyst

This is Jamesmichael Sherman-Lewis on for Ron. Two, if I may. First, great to see the traction with DDI and PriceVantage in the eight-figure revenue level target for monetized dealer products. But at a higher level, how are you balancing monetizing these newer analytics via subscriptions versus passing on greater value to dealers, particularly as we think about newer offerings like the instant market value model coming online soon? And then I have a follow-up.

Jason Trevisan, Chief Executive Officer

Yes, that's a topic we could discuss for a long time, and there isn't a straightforward answer. As our data and its applications continue to expand, particularly with DDI providing greater insights and intelligence for products like PriceVantage, we need to adopt a more sophisticated approach in how we price, package, bundle, deliver, and onboard our customers. This is why we've made investments in account management. There isn't a single solution or formula for determining when to bundle, offer freemium options, give away services, or charge a la carte. Our goal is to increase engagement, as we have found that when dealers engage more with our products, their performance on our platform improves. We are continually balancing the art and science of product rollout, analyzing behaviors to understand what will drive long-term engagement.

Jamesmichael Sherman-Lewis, Analyst

Great. I appreciate the color. My follow-up, I know we've hit on the margin trajectory a few times on this call. But could you add more color on relative investment intensity across product offerings, brand investments, international expansion or other areas? Any way to rank order the magnitude here as where you might lean in more this year?

Jason Trevisan, Chief Executive Officer

It's what I said before that number one is in product and tech; number two, international; number three, account management.

Operator, Operator

Our next question comes from the line of Tom White with D.A. Davidson.

Wyatt Swanson, Analyst

This is Wyatt on for Tom. I'd like to hear more about international ambitions over the course of 2026, given that you're the number two, three, four player in your international markets. What are you doing this year to continue grabbing share from your competitors internationally?

Samuel Zales, President and Chief Operating Officer

Thanks, Wyatt. It's Sam. I'll take the call. We’re currently in the second position and quickly moving up on the first. I apologize for not being more specific. These businesses, which you may not have heard of before, were small, slow-growing, and unprofitable, but they have now become significant, fast-growing, and profitable. This transformation is happening due to our substantial lead growth and improvement in lead quality. Our dealers have ranked us first in return on investment in these markets compared to all other competitors. We are nearing our tenth anniversary in both Canada and the U.K., and we are proud of our achievements over the years. The growth in both dealer additions in international markets and the QARSD reflects the potential market available for many, if not all, of these dealers. These are the conversations I'm having regularly. They want to diversify their expenditures from the partner they originally worked with, who is currently the largest market player and has become ineffective for them. They are dissatisfied with some developments in those markets. You might have heard about a competitor's fourth-quarter initiatives in the U.K. that attempted to pressure products onto our dealers and increase prices, which prompted them to consider switching to other providers. They are seeking options that offer better ROI. This shift has led to numerous discussions about adding dealers and growth in our QARSD. You don’t achieve 27% growth in an international market in the fourth quarter without these dynamics. We feel very confident about this. As Jason mentioned, this is our second-largest area of investment. We are differentiating ourselves. Consider the products we are launching in the U.S. like Discover and Dealership Mode. These innovations offer distinct advantages for consumers and dealers that our competitors have yet to develop. Our plan is to create a product roadmap similar to what we have established here and expand it to international markets. That is our strategy. Thank you for your question. We are genuinely excited about the growth and potential ahead.

Wyatt Swanson, Analyst

Got it. Yes, that's fair. And that's really helpful. And on the topic of international, could you maybe quantify the EBITDA drag related to international expansion that's reflected in the margin outlook for the full year?

Jason Trevisan, Chief Executive Officer

Yes. We don't provide a breakdown. As Sam mentioned, we're currently one segment. There are high-growth profitable businesses, and the statistics shared in the script regarding Q4 indicate strong growth. That's all the detail we can share.

Operator, Operator

Our next question comes from the line of Joseph Spak with UBS.

Unknown Analyst, Analyst

It's Alejandro on for Joe. Maybe could you help us sort of disaggregate the QARSD growth for the year for pricing versus the addition of new products and how that's compared to the year prior?

Jason Trevisan, Chief Executive Officer

'25 versus '24?

Samuel Zales, President and Chief Operating Officer

It actually does.

Jason Trevisan, Chief Executive Officer

Pricing is one of the weaker levers we have, as we don't utilize it very aggressively. Improving the product is our primary focus, followed by encouraging the adoption of add-on products. Price increases and the quality and quantity of leads come next. Additionally, we are continuously enhancing our products with free features that also aid in price increases and upgrades. We're not trying to extract value without justification; rather, we are adding more value to our offerings to drive growth.

Unknown Analyst, Analyst

Understood. And then maybe just as a follow-up, like given the high level of investments that you're expecting, like how should we think about the capital allocation repurchases going forward?

Jason Trevisan, Chief Executive Officer

How should you think about the stock repurchases you said?

Unknown Analyst, Analyst

Correct.

Jason Trevisan, Chief Executive Officer

The high investments we are projecting give an indication of our margins. Our EBITDA margins remain very strong compared to industry benchmarks. Additionally, our investment in areas such as technology and R&D aligns well with those expectations. When we refer to high, it's more of a relative observation or a trend, rather than a direct comparison. Regarding share repurchases, we recently announced a new program valued at $250 million, which I see as a potential opportunity. Our approach involves considering investments in the business that impact our EBITDA, evaluating M&A opportunities continuously, and focusing on returning capital to shareholders, which is reflected in the share repurchase program.

Operator, Operator

Our next question comes from the line of Marvin Fong with BTIG.

Marvin Fong, Analyst

I have a housekeeping question. I wanted to follow up on your comment about new products reaching the 8-figure revenue level. Is that expected for the entire year of 2026, or do you anticipate achieving eight figures in any specific quarter? Also, how should we consider the revenue growth trajectory for these new products? Does the upper end of your revenue guidance suggest that you could still be experiencing double-digit growth by the end of 2026?

Jason Trevisan, Chief Executive Officer

It's a full year reference concerning the 8-figure comment. We haven't commented on exit rates. Based on the Q1 guide and the full year guidance, along with historical data, you can infer how they might play out quarterly, but we haven't provided specifics on quarters to indicate exit rates. Sorry. Okay. Yes. So we knew that was the end. So thanks, everyone, for your time this evening. Thanks so much for the questions. We're extremely proud of a really strong 2025. So huge thanks to our team and our customers, and we're extremely excited for 2026 and the momentum behind us. Thanks, everyone. Have a good night.

Operator, Operator

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.