Thank you, Alex. While first quarter revenue was down slightly year over year, we are pleased that we made progress on multiple growth drivers. We outperformed Adjusted EBITDA on margin expectations and supported strong capital return initiatives during the first quarter. First quarter revenue of $179 million was within our range of expectations based on the exit rate from Q4 into Q1 and also reflected a handful of discrete timing shifts primarily stemming from customers reacting to the tear up environment.
Dealer revenue was down 2% year over year from a softer than normal start to the year for marketplace and some pressure on media products such as in market video.
Re accelerating marketplace performance remains a key focus area, and we saw growing signs of improvement throughout the quarter. We were pleased to grow total marketplace customers month over month in February and March, driven by strength in winning independent dealers. Additionally, we improved on the slightly elevated churn that we called out in December and have seen levels improve since January.
Alex already pointed out our accomplishments around audience strength in Q1, which we believe is a leading indicator of underlying marketplace health and growth potential.
Our solutions portfolio demonstrated strong performance in the quarter, helping offset some of the pressure on marketplace and media. We added over 100 new website customers in Q1, with over 70% of those wins coming from dealer Inspire.
As previously discussed, renegotiating legacy agreements that govern DI packages is a growth initiative for 2025. We completed three of these negotiations during Q1, a strong start to the year that helps us better compete for and win subscribers. Furthermore, we are optimistic that we can favourably revise 2 to 3 additional agreements by year end.
Accutrade also steadily expanded its user base, crossing the 1,000-subscriber mark during Q1, as we noted in our February earnings call.
Sourcing used vehicle inventory is once again in sharp focus after production forecasts were slashed due to recent policy changes, and our new commercial leadership has prioritized converting this influx of interest to drive greater Accutrade and Dealer club growth for 2025.
Turning to OEM and National, revenue was up 6% year over year, delivering a solid first quarter performance in what is typically a seasonally slower period. Incremental spending also reached its highest Q1 level since 2018 across a broad spectrum of automakers. However, as is to be expected when uncertainty rises, we also saw early indicators that OEMs are more closely managing their marketing and advertising investments.
Sell through rates of our media products remained high but stepped down modestly from February to March as more tariffs were announced.
In general, both OEMs and dealers are signaling that they prefer more flexibility on the timing of media investments to match the faster news cycle as macro factors continue to evolve. We're confident that our value delivery and consumer scale will continue to draw strong spending from our partners, despite decreased visibility into the specific timing of investments in this part of our business in the short term.
Now switching to operating expenses, first quarter expenses were $173 million compared to $167 million a year ago, up 3% year over year, primarily from higher severance related costs and the inclusion of new dealer club expenses and partially offset by lower lease costs.
First quarter, adjusted operating expenses were $155 million roughly flat, to the same period a year ago.
Product and technology expenditures increased less than a million dollars year over year on both a reported and adjusted basis. The majority of this increase was attributable to compensation expense, partially offset by lower software licensing costs.
Marketing and sales costs increased a million dollars year over year on a reported basis, primarily driven by compensation expense and was roughly flat on an adjusted basis as we supported our scaled and growing consumer marketplace with efficient investments in paid and brand marketing.
General and administrative expense was up $3 million year over year on a reported basis and down $1 million on an adjusted basis. The majority of the reported increase was attributable to severance-related costs, resulting from a targeted headcount reduction in March to optimize marketing, technical operations, and commercial teams. In addition, we simplified organizational structure and increased focus on core strategic initiatives.
Net loss for the first quarter was $2 million or negative $0.03 per diluted share compared to net income of $1 million or $0.01 per diluted share a year ago, with the variance primarily attributable to the severance-related costs just described above. Adjusted net income for the first quarter was $24 million or $0.37 per diluted share compared to $29 million or $0.43 per diluted share a year ago.
Adjusted EBITDA performance of $51 million in the first quarter was down slightly year over year. We delivered adjusted EBITDA margin of 28.3% in the first quarter, exceeding our outlook and a result of continued cost discipline coupled with lower than anticipated integration costs associated with the dealer club acquisition.
Moving to key metrics, dealer counts of 19,250 customers, not including dealer club users, was up more than 40 dealers quarter over quarter, growing well to start the year. Solutions growth was a bright spot, particularly on websites. In addition, we saw sequential independent dealer growth within the marketplace, a known opportunity for us and when we actively repositioned resources to drive.
Looking ahead, we expect to drive dealer account growth from additional solution sales, improve demand for marketplace, and converting and cross-selling dealer club users into our subscription-based products.
For ARPD, first quarter performance of $2,473 was roughly flat quarter over quarter and down $32 year over year, primarily reflecting changes in our customer mix. We continue to believe we can return to ARPD expansion in 2025 based on multiple growth initiatives that we previously laid out. First, packaging more value into our marketplace subscriptions, such as with media products which we will begin to roll out around mid-year as planned. Second, driving more Accutrade subscriptions through product differentiation and by leveraging OEM endorsements. As more dealers pivot to acquiring used vehicles due to tariff-related production constraints, our sales team reported a notable increase in dealers asking to demo and trial both our Accutrade and Dealer Club solutions in late Q1.
Repackaging legacy agreements for websites is also an uplift for ARPD, and our success to start the year gives us confidence we can complete more of these negotiations, which will help align pricing with value delivery.
Shifting to our cash flow and balance sheet, net cash provided by operating activities totaled $29 million for the first quarter. Free cash flow was $24 million during the period, down slightly year over year and reflecting adjusted EBITDA performance.
We repurchased approximately 1.6 million shares for $22 million in the first quarter, a strong demonstration of our commitment to return capital to shareholders. Recall in February we announced a share repurchase target of $60 million to $70 million for 2025, and we're substantially overachieving this target on an average quarterly basis in Q1.
Then outstanding remains at $460 million as of March 30, 2025, bringing total net leverage to 2.1 times, still at the low end of our target range of 2 times to 2.5 times. Total liquidity was $321 million as of March 301, 2025, which provides ample future capacity to invest in our growth strategy and pursue thoughtful capital allocation to create long-term value.
Now let's conclude with second quarter and full year 2025 guidance.
As touched upon in the earlier revenue discussion, we are seeing signs that the magnitude and timing of some media investments may continue to shift, given greater near-term macro and tariff-driven uncertainty.
This uncertainty is pressuring the new car market, where we are more indexed than other players due to our diversified revenue and strong relationships with OEM and franchise dealers. While our business is fundamentally strong and we have confidence in the growth opportunities ahead, particularly around the dealer business, we believe it is prudent to adjust our approach to guidance to reflect changing market conditions. As such, we are suspending full year revenue guidance until visibility improves.
To give some color in the absence of an outlook range, we do expect Q2 revenue to be up year over year and quarter over quarter. We also continue to expect full year revenue to be up year over year, driven by growth initiatives related to greater product adoption, repackaging, and product innovation, including Deer Club.
Growth for the year is expected to be that half weighted as subscription-based revenue compounds in later quarters.
Setting aside external volatility, we remain firmly in control of our cost structure and operational levers. Adjusted its margin for the 2nd quarter of 2025 is expected to be between 27% and 29%, roughly flat year over year at the midpoint, reflecting revenue mix and marginally higher investments in our stated growth initiatives.
We are also reaffirming an adjusted EBITDA margin outlook for fiscal 2025 between 29% and 31%.
Consumers and dealers are increasingly gravitating to our platform, and upcoming product releases and enhancements to our commercial approach should further amplify our platform differentiation and appeal. Despite some market uncertainty, our business remains strong, and we are confident in our ability to deliver full year growth.
And with that, I'd like to open the call for Q&A operator.
Operator
Thank you, ladies and gentlemen.
(Operator Instructions)
Your first question comes from Naved Khan of B.Riley Securities. Your line is already open.
Great, thank you very much. I have two questions. One, Understanding, that the tariffs have created a ton of uncertainty for the different players including the OEMs, the dealers, and the marketplaces. I'm just trying to sort of understand the impact and it seems like it's, it could be twofold. One is obviously the dealer, and OEM ad spending on the platform and the second, is maybe driven by how they use car volumes. Might be affect, may or may not be affected right because of the tariff. So, trying to understand, the relative magnitude and the uncertainty in these two buckets, and then the second question I have is around Accutrade, but I'll save it after you answer the first one.
Sure, Naved, thanks for the questions. Well, first of all, on the consumer side, certainly the tariff news has pulled forward a lot of pent-up demand of consumers flocking to the marketplace, looking for deals and looking to lock in purchases before tariffs are impacted, and so we are seeing very favourable consumer traffic trends. We think with inventory shortages like we saw during the COVID pandemic when there's limited supply, marketplaces also get elevated traffic levels because consumers search far wider radius. So we have a ton of degree of confidence that, organic traffic trends we think are going to persist throughout this year and give us a tailwind of natural consumer usage and value delivery for our customers. I think obviously on the dealer side we're feeling very front footed. We grew marketplace in February and March.
We see positive sentiment from dealers that are leaning into technologies like Accutrade and using Dealer Club to source used cars, fearing that they won't be able to get new car supplies. So, fundamentally on the dealer side, we see a lot of health.
On the OEM side, I think that's where it's much harder to predict. We had a large OEM say that their upfront commitment. They're no longer committed. They think they'll spend the money, but they want to move to month to month until they get better visibility. And so, it's really that that uncertainty on the OEM side that gives us pause on our on our full year view because that had been a nice growth engine for the business all of last year and even this year, we grew OEM revenue. In the first quarter, 6%, so we feel good about the business, but the signals that we're getting give us less certainty on their commitment.
Okay, great. And so, my follow up question was, around Accutrade
I think you, on the last call had announced some endorsements and you were, optimistic of winning even more endorsements through the course of 2025. So, wanted to get a sense of how we should think about the growth in in customer accounts sequentially. I think, the numbers look flat wondering.
If there's a, if there's a lag, there's there in terms of endorsements translating into dealer, wins or, maybe, is there something, in terms of elevated churn that might be eating away into the basis? Any color would be helpful thanks.
No, I first of all, I think we feel very confident about Accutrade and our growth potential. We flagged the numbers in terms of usage growth over the quarter, which fundamentally signals dealers' behavioral change is shifting aggressively to sourcing inventory differently. From their service lane customers and also sourcing from marketplaces like Cars.com. So, we've actually seen elevated interest in both Accutrade and Dealer Club in the current period because dealers are not confident that they're going to get steady new car supply. So, it's slower to ramp on solutions because of the onboarding training and Engagement that we need from the dealership to install Accutrade and get them using it, but fundamentally we feel very good about the inbound interest that we're getting with Accutrade and the sentiment we're getting from the dealers who are using, particularly the power dealers, right? We fly to the top quartile of dealerships are acquiring 50 cars a month using our software. So, as word of that spreads to other dealers, we anticipate more adoption.
And maybe one other thing to just add related to the endorsements. Those do take kind of a little bit of time to see in the market, so we were expecting to see more impact from those endorsements rolling into our Q2 numbers versus Q1. And I think from where we sit today looking at kind of April and the way April shook out, we're feeling good about kind of that that upward trajectory in terms of net Accutrade units in addition to the utilization metrics that Alex talked about which really supports strong long-term retention.
Very helpful. Thank.
Operator
You.
Your next question comes from Rajat Gupta of J.P. Morgan. Your line is already open.
Great. Thanks for taking the question. I just have like a couple, firstly, on the first quarter results, clearly good progress here, on several fronts, the account going up as well.
I mean, you, you're pretty much in line with, your guidance for revenue, but clearly well ahead on, the I was curious, was there like some proactive measures that you had started to take. Maybe like in March, around cost and investments, as the tariff news, we started to gain traction. I was just curious like what drove the margin upside versus your initial expectation and just have a quick follow up.
Yeah, no, thanks for the question, Rajat. I think in terms of EBITDA, we've always really focused on managing the cost structure of the business. Of the business, well, I'd point out to a couple of different things related to where just the Don Martins landed. I think number one, we're excited about the progress we've made in Dealer club integration process, but the cost did come in a little bit lower than we'd originally planned, so we've been able to move quickly and efficiently.
A OpEx was, just generally flat on a year over year basis, on an adjusted basis, so that's just general cost discipline. We did make some adjustments late in the quarter. These are actually unrelated to tariffs, more focused around how we want to run the business and tighten up our areas of focus. We did make a targeted headcount reduction.
That's less of an impact to one in terms of a benefit from a cost structure perspective, more something that you would see in the following quarters.
Understood that that's very helpful, and you mentioned, a couple things around, you, you're starting to see some signals from dealers and OEMs, on maybe, just changing spending patterns on media, you, but you also guided to second quarter revenue being up, could you help us, tie up those comments? I mean.
Are you still expecting dealer up and OEM down? Just trying to understand the mix of that, and what are you actually seeing on the ground today like in April in terms of.
Just incremental customers, what exactly are the customers seeing, in terms of, have you already started to see a drop in spending or is it something you just expect, in the second half?
Thanks.
Yeah, I think that's part of the reason why it's a little bit harder to predict because we are getting mixed signals from both segments. I'd say on the dealer side, we've seen some pullback in media commitments like dealers have said, I'm not going to run.
Video advertising this quarter. I'm staying on Marketplace. In fact, as I mentioned, we grew Marketplace in February and March, so we're seeing dealers understand the importance of getting their inventory found on our marketplace, but we are seeing a pullback in terms of discretionary or ancillary media solutions running alongside or on top, and it's the same on the OEM side, I think we're seeing.
Steady commitment. A third of our OEMs actually increased their spending with us in the quarter, but equally we saw some of our bigger OEM clients signal to us that they want to move to month to month as opposed to lock in, quarterly or 6-month commitments until they see a clearer picture. So, I guess the positive is, they still are seeing opportunities with us. They're just unwilling to make the same media commitments. Again, our software solutions rock solid. Websites were up over 100. Dealers aren't pulling back on their websites in any, macro environment and then our software tools like Accutrade and Dealer Club continue to get strong organic growth.
It's really the media side that's harder to predict and it's.
The visibility on the media side. It's not as though OEMs and dealers don't see the value in the product and don't want to get in front of consumers. It's really become, I think, a bit more of a timing question as to when they deploy those funds to maximize kind of impact on the inventory they in fact have available to sell.
Understood. Great.
Thanks for all the color and good luck.
Operator
Your next question comes from Tom White of Davidson. Your line is already open.
Great, thank you for taking my questions. Maybe hoping you guys could just double click on the comments just about the improvement in the marketplace business over the course of the quarter kind of relative to, how things were trending exiting last year. I'm just, I guess I'm just trying to understand like the comments around February and March being better sequentially, is that. Is that mostly some of the progress with the independent Dealers that you touched on and what are sort of the drivers of that is it sort of sales outreach? I guess I'm just trying to put that commentary with, maybe some of the comments you just made about, dealers generally being strong but they're being a little bit of trepidation maybe on some of the media stuff kind of on the side, so yeah, just trying to understand the sequential improvement in marketplace over the course of the quarter.
Sure, Tom, this is, we've seen this behaviour before and the dealer environment where you know seasonal or macro events can trigger reactionary behaviour. Q4 typically is relatively soft. This year, Q4 for us was much softer than we were anticipating as dealers began pulling back rather aggressively, and that persisted into January. However, when you saw the consumer demand. And consumer traffic levels remained elevated. We started to see dealers blink and realize, wait a minute, the market's continuing to grow. I don't have to overreact here, and we've even seen some of the dealers that we lost in Q4 come back. So, we saw growth in marketplace in February. We saw growth in marketplace in March, and we continue to see positive trends there heading into Q2. Again, I think where we're seeing more of the softness is saying I just want to run the base marketplace. I'm not going for, the $10,000 to $15,000 a month media campaign on top of that, but core marketplace metrics, both on the consumer and the dealer side remain strong.
Maybe one clarifying comment because we do have a marketplace package that's called the base package is we still see we haven't seen any material change in the tier distribution of our packages to Alex's point. They want marketplace. They want to be in the package they're in on Marketplace. We continue to skew up tier from a package perspective. It's just those ancillary media attached rates feel like they're under a little bit more pressure.
Okay, that's very helpful and then maybe just one little housekeeping follow up the reported dealer account, is dealer club included in that and will it be included in it going forward doesn't sound like it, but I just want to make sure. I understand.
It's not included in the number right now. I think it's still a little bit on the smaller side, transparently, relative to our subscription business, Dealer Club is a transactional business. It doesn't mean that at some point we won't think about these dealer account numbers together, but for now, we're trying to present you kind of a clean more subscription-based number.
Okay, thank you very much.
Operator
Your next question comes from Marvin Fong of BTIG. Your line is already open.
Great, good morning. Thanks for taking my questions. First question, just on, all the positive activity around Accutrade and Dealer Club, so maybe two part question, just, the 2,500 prospects, I believe that was for dealer clubs specifically, how quickly, does that that clothes, it would seem to me that that's something that could be done a lot faster than the Accutrade product, and the second part of that question is just on monetization, right? I think Dealer Club is currently, you're not really charging for that on the seller side.
What are your thoughts there of, given the interest you're seeing? Do you see now as the time to continue to build market share or is there a monetization opportunity that you can sort of accelerate there and have a follow up?
Sure, Marvin. Well, first of all, obviously the immediate growth to dealer Club, I think underscores the synergy that the cars commerce platform can help bring to the club and enable dealer volume. We've had over 2,500 prospects reach out to inquire more and register for dealer club. And so, we've been onboarding dealerships aggressively each and every month and we're excited about that volume. I think obviously it's a subset of that that are actually transacting on the platform, but those numbers are growing at 60%.
Per month, and so we're excited to see that volume. Increasingly in this environment, sourcing used cars is a real pain point and the fact that dealers can do this far more cost effectively than the traditional marketplaces that are now charging premiums because of elevated wholesale prices. So, there's multiple economic benefits here for dealerships to change their sourcing strategy and Dealer Club is well positioned. In the quarter we really focused on integration to benefit our Accutrade subscribers so that it strengthens Accutrade.
We shared on the call that now dealers can one click, appraise the vehicle, and if they're not interested in retailing it, they can launch it for sale in Dealer Club, and that workflow improvement creates a lot of efficiency because dealers have to manually enter cars into the other marketplaces. So, we think that will strengthen both Accutrade and dealer club volume as well. So, we've got more initiatives planned on the integration, but preliminary, I think we've had a very solid double out of the gates with dealer club with momentum to come.
That's great. Great to hear. And second question just on OEM and National, obviously understand why that's under pressure. Can you help us understand, I mean, we had previously talked about the strength in the upfront. I think you made a comment though that upfront may not be actually a firm commitment. So, as we think about, how much of this is a timing modulation versus essentially.
Some might actually, some commitments might not actually get spent. You know how much of the upfront commitments are actually at risk, and can you just remind us kind of how much of the of the total ad spent in a year is typically attributable to the upfront? That'd be that'd be very helpful. Thanks.
Sure.
Marvin, I think this is more timing than it is, anything else. We've even had OEM signal to us as soon as they get clarity that they can give us equal clarity, but right now they're operating week to week and therefore, their commitments to us, at best are month to month. So, I'm empathetic to their plight and certainly. Have a ton of respect for the challenges that they're dealing with and so to me it's purely timing and we even saw this with some of the dealer pullback in Q4 and even January, the fact that we're now seeing those same customers reassume.
Work with us because the consumer demand persists and even is elevated gives me confidence that we'll see a similar behaviour once the macro news settles down and the picture is clear for our clients.
Sonia, do you want to comment on what percentage of total ad spend is attributable to upfronts? Yeah.
It's 50/50 right now, but I think what I would reiterate what Alex said, I think the challenge at the moment is not that we're getting spend pulled, it's that we're seeing spend shift and so just from a visibility perspective as we look to give you guys insight into business performance that certainly creates like a little bit more challenge than normal. But again, the quality of the audience wanting to get in front of our in-market audience that that remains of interest. It's really just the timing question of when those dollars come into play.
And when you say timing just a follow up, I mean, you're saying it would still be.
Spent this calendar year or do you think the shift could move into next year?
It's hard like unfortunately that's like the crux of the challenge. It's hard to say. So like as an example, we saw, some OEMs who had been planned in April shift some of that spend into June and July. And so you're starting to see a little bit of shifting like that, as Alex kind of mentioned instead of they they're trying, they're going more month to month management of their spend, but generally. Speaking, what I would say is based on what we know today, based on our Q1 numbers, which were, roughly at the midpoint of our guidance range and the growth driver's performance, we feel good about where we are and the progress we've made. We expect to be, up on revenue on a year over year basis. We expect to deliver a solid Q2. It's just the visibility and the specificity are a little bit harder to nail down right now.
Okay, that's perfectly understandable. Thanks so much.
Operator
Your next question comes from Joseph Spak of UBS.
Your line is already open.
Great, thank you. I actually wanted to pick up right there on the visibility because you know I think as you sort of describe the environment it's understandable about, the guidance for the year, especially it sounds like there's way more uncertainty in the back half, but I do want to, I guess, get a better sense of your true visibility in the near term and I know you ended up providing a little bit more color into, but if you've got a little bit over a month and a half left, I thought the subscription stuff, which is. Like 80% of sales is pretty low variance in the short term. It doesn't sound like there's any real change there. So, like just maybe you could sort of, go over this again, but like how much visibility do you really have on the ad side because you've even said a couple times like they're going month to month, but it would seem like you should have a pretty good sense of that even by now and the and you know as we're in May.
So, I think on the subscription side of the business, like we said, marketplace is growing. We feel confident in our ability to deliver dealer websites. So, we're up 100 in the quarter, Accutrade is showing strong signals, from Q1 rolling in Q2. I think where there's a little bit of uncertainty continues to be on media and some.
Relatively discreet shifts in spend can have an impact on how those overall numbers do tend to roll up.
I mean, if you look at OEM and National individually and think about that on an annual basis in terms of total revenue or even on a quarterly basis in terms of total revenue, you can kind of do a little bit of math on, what a small, relatively small change on that number could do to a guidance range.
Okay, I mean, is it possible, if not possible that OEM national number is down this year?
We still feel good about the ability to deliver year over year growth in the business, which I think would be contingent on seeing growth in both dealer revenue and OEM revenue. I think what's a little bit harder to say right now is a specificity on the range of what that growth is going. To look like and in what time frame that growth is going to be delivered. But on the media side of the business, when you think about some of the audience metrics that we put up for Q1, that gives us confidence. That's what drives that media portion of the business, that high quality in market audience, and all the signals are green.
Okay, and then just the second question. I know you've talked about your exposure to new versus used and in the past you've given us that franchise versus independent dealers, which is a good proxy for that I guess maybe you could just remind us of that split, but I'm also just curious if you can or are willing to provide your estimated revenue split just as it relates to new versus used if that's even possible.
Yeah, we don't break it out just because our subscription includes new and used exposure and so we don't segment it out, but we do mirror the market, right? Like 15% to 20% of our revenue is anchored more on new car-oriented traffic and the bulk of it is on you, so you can infer it, but it mimics sort of vehicle sales volumes between new and used. I think on the franchise in split, we don't break that out, but I will say there's been increased interest from independent dealers because consumers clearly are looking for more affordable vehicles and more cost-effective options than some of the higher priced new cars, and so, we are seeing steady pick up on independent dealer volume in the current quarter.
I say in these are roughly call it like a third of the of the marketplace mix.
Sorry, what was that?
Roughly 1/3 of the marketplace.
The current mix is about 13% independent.
Operator
Okay, thank you.
Ladies and gentlemen, as a reminder, if you have a question, please press star one.
There are no further questions at this time, ladies and gentlemen. This concludes today's conference call.
Thank you for your participation and you may now disconnect.
Goodbye.
