Cars Commerce helped dealers cope in wake of CDK cyberattacks

Cars Commerce CEO Alex Vetter credited his company's employees with devising creative solutions to support dealers affected by the June 19 CDK Global cyberattacks. But these actions took place even as the massive ransomware event created short-term challenges for his own company.

"I'm proud of our team who creatively stepped up to support dealers whose systems were down, both in sending leads to dealers directly and updating inventory manually," Vetter said during the company's Aug. 8 second-quarter investor call. "While we made strong efforts to support our retail partners, we also lost considerable sales momentum."

The company's priority for the third quarter will be to "re-ramp" those engagements, particularly products from Cars Commerce unit AccuTrade, "which require a longer sales cycle and hands-on dealership engagement," Vetter said.

AccuTrade provides vehicle appraisal and valuation data and logistics products. Cars Commerce's product portfolio includes the Cars.com marketplace, digital experience, trade and appraisal and media operations.

The CDK cyberattacks led to a shutdown of its dealership management system for 15,000 customers across North America for two weeks. CDK said it "has a high concentration" of franchised dealership customers who use CDK. As a result, it paused many of its sales conversations and product launches.

CDK's name was mentioned at least 22 times during the Cars Commerce earnings call to explain its impact and address analyst questions on the topic. Vetter insisted the impacts, while noteworthy, were finite and that Cars Commerce is moving past them.

"We have made substantial progress on several initiatives that maintain our confidence for continued growth," Vetter said. "Strategic initiatives that are underway help lift engagement and appraisal volume, which we view as the No. 1 predictor of customer satisfaction and ultimately retention."

For example, Vetter said new AccuTrade users that started in April generated an average 31 percent more appraisals per dealership than those who started in March because of improvements the company made in its onboarding process. In addition, the company said it has retained nearly all users who enrolled in AccuTrade in April and May.

"These trends, plus positive feedback from new customers, are strong signals that our AccuTrade subscriber base should expand over time," Vetter said.

The company achieved sequential dealership customer growth in the second quarter despite June sales interruptions from the CDK shutdown, Vetter said. Cars Commerce reported 19,390 dealership marketplace customers as of June 30 compared with 19,381 in the first quarter and 18,785 a year earlier.

At the same time, Cars Commerce's July dealership customer count was impacted by the CDK event. Cars Commerce CFO Sonia Jain said during the call that the impact should be temporary.

Still, effects from the CDK cyberattacks will likely linger through at least part of the third quarter. Cars Commerce, based in Chicago, lowered its guidance to 4.5 to 5.5 percent revenue growth for 2024 from the previous projection of 6 to 8 percent, in part because of post-attack challenges.

"Embedded in our guidance is also the impact of the CDK cyber incident, which widely disrupted our industry, our customers and our business in June and July, not only with our sales momentum at the end of June severely curtailed, but this continued into July, and has an accruing effect on third quarter revenues," Jain said during the earnings call.

She said that lost sales and product launch delays should cause a 1 to 2 percent impact on subscription-related revenue.