CarGurus (CARG) risk factors, 2025 10-K

Risks Related to Our Business and Industry

1. 01Our business is substantially dependent on our relationships with dealers. If a significant number of dealers terminate their subscription agreements with us and/or dealer closures or consolidations occur that reduce demand for our products, our business and financial results would be materially and adversely affected
2. 02If we fail to maintain or increase the number of dealers that pay subscription fees to us, or fail to maintain or increase the fees paid to us for subscriptions, our business and financial results would be materially and adversely affected
3. 03If the CarOffer business and/or our combined offerings do not grow, our revenue and business could be adversely affected
4. 04We rely, in part, on internet search engines to drive traffic to our websites, and if we fail to appear prominently in the search results, our traffic would decline and our business would be adversely affected
5. 05Our goodwill, intangible assets, and other assets have been subject to impairment in the past and may be subject to further impairment in the future, which could have a material adverse effect on our results of operations, financial condition, or future operating results
6. 06A significant disruption in service on our websites or mobile applications could damage our reputation and result in a loss of consumers, which could harm our business, brands, operating results, and financial condition
7. 08Our business is substantially dependent on our relationships with dealers. If a significant number of dealers terminate their subscription agreements with us and/or dealer closures or consolidations occur that reduce demand for our products, our business and financial results would be materially and adversely affected
8. 09Our business is subject to risks related to the larger automotive industry ecosystem, which could have a material adverse effect on our business, revenue, results of operations, and financial condition
9. 10other global economic conditions
10. 11other macroeconomic issues, including increased interest rates and inflation
11. 12successfully compete with competitors, including other online vehicle auction companies and large, national offline vehicle auction companies that are expanding into the online channel and have launched online auctions in connection with their physical auctions
12. 13We may fail to successfully integrate CarOffer and/or fail to fully realize all of the anticipated benefits of the 2023 CarOffer Transaction, which could harm our business, brands, operating results, and financial condition
13. 14If dealers or other advertisers reduce their spending with us, our advertising revenue and business and our financial results would be harmed
14. 15offer an attractive ROI to our advertisers for their advertising spend with us
15. 16If we are unable to provide a compelling experience to consumers on our marketplaces, connections between consumers and dealers using our marketplaces may decline and our business and financial results would be materially and adversely affected
16. 17advertise in our marketplaces as well as the amounts that they are willing to pay for our products, which could, in turn, negatively impact our business and financial results
17. 18We may be unable to maintain or grow relationships with data providers, or may experience interruptions in the data they provide, which may create a less valuable or transparent shopping experience and negatively affect our business and operating results
18. 19The failure to build, maintain, and protect our brands would harm our ability to attract a large consumer audience and to expand the use of our marketplaces by consumers and dealers
19. 20experience, or if we fail to overcome brand marketing competition and maintain a differentiated value proposition in consumers’ minds, our reputation and the strength of our brands may be adversely affected
20. 21other matters that influence consumer spending and preferences as well as changes to the regulatory landscape
21. 22If our revenue declines or fails to grow, investors’ perceptions of our business may be adversely affected, and the market price of our Class A common stock could decline
22. 23higher costs of doing business internationally
23. 24We depend on key personnel to operate our business, and if we are unable to retain, attract, and integrate highly qualified personnel, or if we experience turnover of our key personnel, our ability to develop and successfully grow our business could be materially and adversely affected
24. 25We are subject to a complex framework of laws and regulations, many of which are unsettled, still developing, and contradictory, which have in the past, and could in the future, subject us to claims, challenge our business model, or otherwise harm our business
25. 26Local Motor Vehicle Sales, Advertising and Brokering, and Consumer Protection Laws
26. 27Federal Laws and Regulations
27. 28We rely on third-party service providers and strategic partners for many aspects of our business, and any failure to maintain these relationships or to successfully integrate certain third-party platforms could harm our business
28. 29Our ability to attract consumers to our websites and to provide certain services to our customers depends on the collection of consumer data from various sources, which may be restricted by consumer choice, privacy restrictions, and developments in laws, regulations, and industry standards
29. 30new developments in, or new interpretations of, privacy laws, regulations, and industry standards
30. 31We have been, and may again be, subject to intellectual property disputes, which are costly to defend and could harm our business and operating results
31. 32Failure to adequately protect our intellectual property could harm our business and operating results
32. 33We may be unable to halt the operations of websites that aggregate or misappropriate our data
33. 34Seasonality and other factors may cause fluctuations in our operating results and our marketing spend
34. 35Failure to deal effectively with fraud or other illegal activity could harm our business
35. 36limit the impact of fraudulent and illegal activity on our websites could lead to potential legal liability, harm our business, cause us to lose paying dealer customers, and adversely affect our reputation, financial performance, and growth prospects
36. 37The 2022 Revolver contains certain covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our results of operations
37. 38Expectations relating to environmental, social, and governance considerations expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business

Risks Related to Our Class A Common Stock

1. 07The trading price of our Class A common stock has been and may continue to be volatile and the value of our stockholders’ investment in our stock could decline
2. 39Our founder controls a majority of the voting power of our outstanding capital stock, and, therefore, has control over key decision-making and could control our actions in a manner that conflicts with the interests of other stockholders
3. 40The multiple class structure of our common stock has the effect of concentrating voting control with our founder and certain other holders of our Class B common stock, which will limit or preclude the ability of our stockholders to influence corporate matters
4. 41Our status as a “controlled company” could make our Class A common stock less attractive to some investors or otherwise harm the trading price of our Class A common stock
5. 42There can be no assurance that we will continue to repurchase shares or that our share repurchase program will enhance stockholder value, and share repurchases could affect the price of our Class A common stock
6. 43We participate in a highly competitive market, and pressure from existing and new companies may adversely affect our business and operating results
7. 44We must maintain proper and effective internal control over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in us and, as a result, the value of our Class A common stock
8. 45We expect our results of operations to fluctuate on a quarterly and annual basis
9. 46We could be subject to adverse changes in tax laws, regulations, and interpretations, plus challenges to our tax positions
10. 47Our results could be adversely affected by events beyond our control, such as natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events