CarGurus Inc.’s first-quarter net income tumbled 37 percent to $11.9 million as its digital wholesale division revenue plunged 76 percent, contributing to a worsening loss for that segment vs. a year earlier.

The vehicle listings company insists that its wholesale digital trading platform, CarOffer — which is a big part of digital wholesale — has turned a corner, along with overall operations.

“While we recently faced operational challenges with our CarOffer business, progress this quarter demonstrates our agility in responding promptly and effectively to navigate the year ahead,” CEO Jason Trevisan said during the company’s Tuesday earnings call.

CarOffer’s “strong execution” helped it exceed forecast guidance for the quarter and focus on overall growth goals, Trevisan said.

Wall Street seemed pleased with the results. CarGurus’ stock price traded at $18.94 late Wednesday afternoon, up nearly 16 percent from the previous day’s close.

CarGurus, of Cambridge, Mass., began reporting digital wholesale as a separate segment in the fourth quarter. It includes dealer-to-dealer and Instant Max Cash Offer services and products sold via CarOffer, in which CarGurus acquired a 51 percent stake in 2021.

CarGurus reported $64.8 million in digital wholesale revenue in the first quarter, down from $267.3 million a year earlier. The segment booked an $11.2 million operating loss, compared with a $2.1 million operating loss a year earlier.

The digital wholesale business struggled in the second half of 2022 with the decline of the wholesale market, but Trevisan said steps taken to reverse troubles in the segment last year continued in the first quarter. That included plans to “intentionally reduce volumes sequentially” and improve some “operational aspects” of the business “to better handle price and volatility” in recent months.

“We have aggressively addressed these issues to build a more stable and predictable business that can thrive in all market conditions,” Trevisan said.

One of the biggest areas targeted for reversing CarOffer’s troubles involves upgrading inspection capabilities along with corresponding policies and procedures to boost quality and reduce “non-revenue generating costs,” Trevisan said.

Revenue for the quarter dropped 46 percent to $232 million, and operating income fell 47 percent to $14.1 million.

CarGurus’ U.S. marketplace revenue, its other reporting segment, landed at $155.6 million for the quarter, up 2.4 percent from the previous year.

The company reported 31,291 paying dealers as of March 31, up 1.4 percent from the year before. The 2023 figure covers 24,394 in the U.S. and 6,897 internationally.

Average revenue per subscribing dealer in the U.S. was $5,943 at the end of March, up 4 percent from a year earlier.

Transactions tumbled 75 percent in the first quarter to 17,505.

Q1 net income: $11.9 million, down 37 percent from a year earlier

Q1 revenue: $232 million, down 46 percent from a year earlier

Guidance: For the second quarter, the company expects revenue of $220 million to $240 million, product revenue of $26 million to $36 million and non-GAAP consolidated adjusted earnings before interest, taxes, depreciation and amortization of $34 million to $42 million.