It is hard to find a company these days that has stayed away from venture funding. Used car marketplace CarGurus is one such rarity. It recently went public on the Nasdaq under the ticker CARG.

CarGurus’Journey

Cambridge, Massachusetts-based CarGurus was founded in 2006 by by Langley Steinert who had earlier co-founded TripAdvisor in 2000. CarGurus started off as an automotive community forum and when dealers showed interest in advertising on the site, it pivoted to a marketplace model in 2007. Today, it has an active dealer network of over 40,000 dealers, over 5.4 million car listings, and 28.6 million monthly unique users. In addition to the United States, CarGurus operates online marketplaces in Canada, the United Kingdom and Germany. It uses its proprietary technology, search algorithms, and innovative data analytics to provide a differentiated automotive search experience for consumers.

CarGurus offers a freemium model. Dealers can list their inventory in its marketplace for free with its Basic Listing product or with a paid subscription to its Enhanced or Featured Listing products. Dealers with free listings receive anonymized email connections and access to a subset of the tools on its Dealer Dashboard at no cost. Dealers with a paid subscription get access to connections that are not anonymous and who can be contacted via phone or email. In addition, Enhanced and Featured Listing products give full access to its Dealer Dashboard and can display their dealership information to gain brand recognition.

CarGurus’ Financials

CarGurus generates marketplace subscription revenue from dealers through Listing and Dealer Display subscriptions and advertising revenue from automobile manufacturers and other auto-related brand advertisers.

In 2016, it generated revenue of $198.1 million, up 101% from $98.6 million in 2015. Net income was $6.5 million and Adjusted EBITDA was $11 million, compared to a net loss of $1.6 million and Adjusted EBITDA of $(0.4) million in 2015.

For the third quarter of 2017, CarGurus reported revenue of $83 million, up 56%. Net income was $2.4 million. Non-GAAP net income was $2.2 million and Adjusted EBITDA was $4 million.

By segment, Marketplace subscription revenue was $73.9 million, an increase of 59% compared to $46.5 million in the third quarter of 2016. Advertising and other revenue was $9.1 million, an increase of 36% compared to $6.7 million in the third quarter of 2016.

Total paying dealers increased 37% to 26,553, compared to 19,403 a year ago. U.S. accounted for 24,313 dealers or 91.5%, compared to 18,777 in Q3 2016.

Average annual revenue per subscribing dealer (AARSD) in the U.S. increased 16% to $11,526. International revenue was $2.6 million and AARSD was $1161.

US average monthly unique users increased 24% to 26 million. US average monthly sessions increased 38% to 67.4 million. International average monthly unique users increased 55% to 2.6 million and international average monthly sessions increased 73% to 5.5 million.

As of September 30, 2017, CarGurus had cash, cash equivalents, and short-term investments of $85.6 million.

For the full year 2017, CarGurus expects revenue of $311.3 -$312.3 million. Non GAAP operating income is expected to be $16.7-$17.7 million or $0.11 to $0.12 per share.

CarGurus went public in October 2017, raising more than $150 million after pricing its IPO at $16. It spiked 72% on the opening day to close at $27.58. It is currently trading at $29.98 with a market cap of $3.18 billion. The company plans to use the proceeds to grow in Canada, the United Kingdom, and Germany, expand services for dealers, and help consumers trade and sell cars to other consumers.

It is a welcome change to come across a company that has bootstrapped its way to an IPO. It proves that if you focus on the fundamentals, you can build significant sustainable businesses that do very well in the public market.