Cars.com Automotive Experts Call This Year's Feature-Filled Winners "Pin-You-to-Your-Seat Fun," "Massive Marriage Saver" and "A New Bar for What Consumers Should Expect" CHICAGO, Feb. 7, 2024 /PRNewswire/ -- Car-shopping marketplace Cars.com® (NYSE: CARS) today announced the winners of its annual Best Of Awards, which recognize the top vehicles in six categories: Best Family Car, Best Luxury Car, Best SUV, Best Electric Vehicle, Best Pickup Truck and the highest honor: Best Car of the Year. This year, Chevr ...

CHICAGO, Jan. 30, 2024 /PRNewswire/ -- Cars.com Inc. (NYSE: CARS) (d/b/a "Cars Commerce Inc."), an audience-driven technology company empowering automotive, today shared the top three dealer pain points in 2024 and how the company plans to help its customers solve these challenges to unleash growth. This news comes ahead of the 2024 NADA Show in Las Vegas Feb. 2-4, where dealers and partners can experience the Cars Commerce platform and its connected solutions live in booth #3421W. "The challenges our indus ...

CHICAGO, Jan. 24, 2024 /PRNewswire/ -- Cars.com Inc. (NYSE: CARS) (d/b/a "Cars Commerce Inc."), an audience-driven technology company empowering automotive, today announced that FordDirect has selected AccuTrade, a Cars Commerce solution, as its preferred vehicle acquisition and trade and appraisal solution for The Shop, a newly launched e-commerce platform for 3000+ Ford dealers and Lincoln retailers. More than half of car buyers plan to trade-in a vehicle prior to purchase, and AccuTrade speeds transactio ...

Financial Data and Key Metrics Changes - Revenue for Q3 2023 totaled $174 million, a 6% increase year-over-year, driven by dealer revenue growth of 8% to $157 million [58] - Net income for the quarter was $4.5 million or $0.07 per diluted share, compared to a net loss of $0.04 per diluted share a year ago [32] - Adjusted EBITDA was $49 million, representing 28.4% of revenue, with a sequential margin expansion of 125 basis points [32][36] - Cash provided by operating activities for the nine-month period ended September 30, 2023, was $92 million, and free cash flow was $76 million [35] Business Line Data and Key Metrics Changes - The company launched Cars Commerce, a new B2B brand aimed at simplifying the car buying and selling process [12][17] - The traffic to Cars.com increased to 151 million visits, with organic traffic remaining strong at 62% [18] - The average new vehicle price on the marketplace increased by 29%, and used car prices rose by 40% compared to 2019 [49] - The number of dealer customers stabilized at 18,715, with over 80% of repackaged customers upgrading to higher-tier packages [21][62] Market Data and Key Metrics Changes - The company reported a 12% year-over-year increase in revenue from OEM advertising customers, with a sequential growth of $2.1 million [30] - The acquisition of D2C Media is expected to expand the company's geographical footprint and add approximately 1,000 new dealer customers in Canada [16][27] - The company noted that 90% of OEM advertising dollars are currently spent on audiences not in the market to buy a car, indicating a significant opportunity for growth [91] Company Strategy and Development Direction - The company aims to enhance its platform strategy through the integration of D2C Media and the expansion of its digital solutions into Canada [55][120] - The focus remains on delivering value to customers through improved traffic, SEO, and a robust service network [106] - The company plans to continue its balanced capital allocation strategy, including debt repayment and share repurchases [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in driving growth despite a mature market, citing the high engagement of the Cars.com audience [47] - The company anticipates continued growth in dealer revenue driven by the adoption of dealer solutions and media products [85] - Management highlighted the potential for OEM revenue to recover as inventory levels improve, with expectations for a sequential increase in Q4 [90] Other Important Information - The company was recognized as one of US News & World Report's Best Companies to Work for in 2024 [28] - The fourth quarter guidance includes two months of revenue from the D2C Media acquisition, expected to contribute approximately 1.5% to total revenue [65] Q&A Session Summary Question: Can you discuss the competitive landscape in the Canadian market? - Management noted that the Canadian market is similar to the US, with confidence in driving growth through established relationships and innovative solutions [106] Question: What are the key drivers of growth going forward? - Management highlighted diversified growth vectors, including dealer count expansion, OEM revenue recovery, and the introduction of new digital solutions [89] Question: How do you plan to increase OEM endorsements in Canada? - The company plans to leverage existing relationships and capabilities to expand OEM endorsements, aiming for a healthier mix of full OEM inclusion [120]

Financial Performance - Net income for the three months ended September 30, 2023, was $4,491 thousand, compared to a net loss of $2,941 thousand for the same period in 2022, representing a significant turnaround [9]. - For the nine months ended September 30, 2023, net income was $110,096 thousand, a substantial increase from $6,944 thousand in the same period of 2022 [9]. - Comprehensive income for the nine months ended September 30, 2023, was $110,096 thousand, compared to $8,229 thousand for the same period in 2022, indicating strong performance [9]. - Total revenue for the three months ended September 30, 2023, was $174.3 million, a 5.3% increase from $164.6 million in the same period of 2022 [24]. - For the nine months ended September 30, 2023, total revenue was $509.6 million, an increase of $23.9 million or 5% compared to $485.7 million for the same period in 2022 [126]. - The company’s diluted earnings per share for the nine months ended September 30, 2023, was $1.61, compared to $0.10 for the same period in 2022 [179]. - The company’s basic earnings per share for the nine months ended September 30, 2023, was $1.65, compared to $0.10 in the same period of 2022 [203]. Cash Flow and Liquidity - Cash provided by operating activities for the nine months ended September 30, 2023, was $91,580 thousand, slightly up from $91,291 thousand in the same period of 2022 [13]. - The company reported a net cash used in investing activities of $15,575 thousand for the nine months ended September 30, 2023, compared to $79,169 thousand in the same period of 2022, showing improved cash management [13]. - Cash and cash equivalents at the end of the period were $49,085 thousand, up from $31,920 thousand at the end of September 30, 2022 [13]. - The company had cash and cash equivalents of $49.1 million and total liquidity of $279.1 million as of September 30, 2023 [134]. - The company reported a net change in cash and cash equivalents of $17.37 million for the nine months ended September 30, 2023, compared to a decrease of $7.15 million for the same period in 2022 [158]. Expenses and Costs - Stock-based compensation for the nine months ended September 30, 2023, was $20,930 thousand, an increase from $17,103 thousand in the same period of 2022 [13]. - Total operating expenses increased by $15.3 million or 11% to $160.0 million, primarily due to higher costs in marketing and sales, product and technology, and depreciation [119]. - Marketing and sales expense represented 35% of total revenue for the nine months ended September 30, 2023, up from 34% in the same period of 2022, driven by higher compensation and marketing costs [101]. - Product and technology expenses represented 15% of total revenue for the nine months ended September 30, 2023, increasing due to higher compensation and third-party costs [129]. Revenue Breakdown - Subscription advertising and digital solutions revenue for the nine months ended September 30, 2023, reached $419.9 million, up 4.0% from $403.1 million in 2022 [24]. - Dealer revenue, which represents 90% of total revenue, increased by $11.7 million or 8% to $157.1 million, driven by growth in solutions revenue and marketplace initiatives [119]. - Display advertising revenue increased by 18.9% to $26.8 million for the three months ended September 30, 2023, compared to $22.7 million in 2022 [24]. - Other revenue decreased by $2.8 million or 24% to $8.8 million, primarily due to the expiration of an Accu-Trade license agreement [128]. Acquisitions and Goodwill - The company recorded goodwill of $76.9 million from the Accu-Trade acquisition, primarily due to expected sales growth and the value of the acquired workforce [37]. - The company acquired D2C Media Inc. for CA$105 million (approximately USD $76 million) and may pay an additional CA$35 million (approximately USD $25 million) based on performance [78]. - The company incurred total acquisition costs of $2.0 million for the nine months ended September 30, 2023, with $1.1 million recorded in the same period of 2022 [34]. Debt and Financing - As of September 30, 2023, the company had total indebtedness of $455.0 million, with an effective interest rate of 6.5% [106]. - The Company issued $400.0 million aggregate principal amount of 6.375% Senior Unsecured Notes due 2028 [58]. - The company entered into a Fourth Amendment to its Credit Agreement in Q2 2023, replacing LIBOR with SOFR and adjusting credit spread terms [42]. - As of September 30, 2023, the outstanding principal amount under the Term Loan was $55.0 million with an interest rate of 7.4% [57]. - The Company made $11.3 million in Term Loan payments during the nine months ended September 30, 2023 [57]. - The company reported a total of $1,103.188 million in assets as of September 30, 2023, an increase from $1,024.870 million as of December 31, 2022 [197]. Taxation - The effective income tax rate differed from the statutory federal income tax rate of 21% due to the release of a valuation allowance of $103.3 million as of December 31, 2022 [77]. - The income tax benefit for the nine months ended September 30, 2023, was $93.9 million, primarily due to the release of a significant portion of the valuation allowance for deferred tax assets [132]. - The net income for the nine months ended September 30, 2023, was primarily related to the release of a significant portion of the valuation allowance for deferred tax assets [85]. Share Repurchase - The company repurchased 1.3 million shares for $23.6 million at an average price of $18.30 during the nine months ended September 30, 2023, as part of its $200 million share repurchase program [107]. - The total number of shares that may yet be purchased under the announced share repurchase program is approximately $127.42 million [167]. - For the nine months ended September 30, 2023, the company repurchased 1.3 million shares for $23.6 million at an average price of $18.30 per share, compared to 3.5 million shares for $40.0 million at an average price of $11.47 per share in the same period of 2022 [185].

Cars.com Inc. (NYSE:CARS) Q2 2023 Earnings Conference Call August 3, 2023 9:00 AM ET Company Participants Robbin Moore-Randolph - Director, IR Alex Vetter - CEO Sonia Jain - CFO Conference Call Participants Tom White - D.A. Davidson Marvin Fong - BTIG Rajat Gupta - JPMorgan Gary Prestopino - Barrington Research Operator Good morning, and welcome to the Cars Second Quarter 2023 Earnings Conference Call. This call is being recorded, and a live webcast and the accompanying slides can be found at investor.cars. ...

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents Cars.com Inc.'s unaudited interim consolidated financial statements, prepared in conformity with U.S. GAAP and SEC rules for interim reporting [Consolidated Balance Sheets](index=2&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets present the company's financial position as of June 30, 2023, compared to December 31, 2022 | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :--------------------------- | :------------------------------- | | Total Assets | $1,085,543 | $1,024,870 | | Total Liabilities | $608,086 | $640,440 | | Total Current Assets | $157,309 | $148,627 | | Total Current Liabilities | $120,563 | $106,012 | - Total assets increased by **$60.7 million**, primarily driven by a significant increase in deferred tax assets from **$48 thousand** to **$91.3 million**[44](index=44&type=chunk) - Total liabilities decreased by **$32.3 million**, mainly due to a reduction in long-term debt and other noncurrent liabilities[44](index=44&type=chunk) [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income detail the company's revenues, operating expenses, and net income for the three and six months ended June 30, 2023 and 2022 | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | | Total Revenue | $168,176 | $162,873 | | Total Operating Expenses | $155,842 | $147,488 | | Operating Income | $12,334 | $15,385 | | Income Before Income Taxes | $1,051 | $6,284 | | Income Tax (Benefit) Expense| $(93,075) | $739 | | Net Income | $94,126 | $5,545 | | Basic EPS | $1.41 | $0.08 | | Diluted EPS | $1.37 | $0.08 | | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $335,244 | $321,080 | | Total Operating Expenses | $310,381 | $294,754 | | Operating Income | $24,863 | $26,326 | | Income Before Income Taxes | $13,575 | $8,103 | | Income Tax (Benefit) Expense| $(92,030) | $(1,782) | | Net Income | $105,605 | $9,885 | | Basic EPS | $1.58 | $0.14 | | Diluted EPS | $1.55 | $0.14 | - Net income for the three and six months ended June 30, 2023, significantly increased primarily due to the release of a substantial portion of the valuation allowance for deferred tax assets[48](index=48&type=chunk)[101](index=101&type=chunk)[121](index=121&type=chunk) [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents net income and other comprehensive income components, leading to total comprehensive income for the periods ended June 30, 2023 and 2022 | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :---------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Net income | $94,126 | $5,545 | | Reclassification of Accumulated other comprehensive loss on interest rate swap into Net income | — | $800 | | Total other comprehensive income | — | $800 | | Comprehensive income | $94,126 | $6,345 | | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net income | $105,605 | $9,885 | | Reclassification of Accumulated other comprehensive loss on interest rate swap into Net income | — | $2,002 | | Total other comprehensive income | — | $2,002 | | Comprehensive income | $105,605 | $11,887 | - The reclassification of Accumulated other comprehensive loss on interest rate swap into Net income ceased in 2023 as the swap expired on May 31, 2022[73](index=73&type=chunk) [Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This statement outlines changes in stockholders' equity for the six months ended June 30, 2023 and 2022 | Metric (in thousands) | Balance at Dec 31, 2022 | Balance at June 30, 2023 | | :-------------------------------------------------- | :---------------------- | :----------------------- | | Stockholders' Equity | $384,430 | $477,457 | | Net income (Q1 2023) | $11,479 | - | | Repurchases of common stock (Q1 2023) | $(7,174) | - | | Stock-based compensation (Q1 2023) | $6,049 | - | | Net income (Q2 2023) | - | $94,126 | | Repurchases of common stock (Q2 2023) | - | $(9,992) | | Stock-based compensation (Q2 2023) | - | $7,608 | - Stockholders' equity increased from **$384.4 million** at December 31, 2022, to **$477.5 million** at June 30, 2023, primarily driven by net income[35](index=35&type=chunk) - The company repurchased **0.9 million shares** for **$17.2 million** during the six months ended June 30, 2023, as part of its share repurchase program[49](index=49&type=chunk)[76](index=76&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement details cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $56,182 | $42,280 | | Net cash used in investing activities | $(10,569) | $(73,325) | | Net cash (used in) provided by financing activities | $(48,723) | $10,110 | | Net decrease in cash and cash equivalents | $(3,110) | $(20,935) | | Cash and cash equivalents at end of period | $28,605 | $18,134 | - Net cash provided by operating activities increased by **$13.9 million**, primarily due to changes in operating assets and liabilities[154](index=154&type=chunk) - Net cash used in investing activities significantly decreased by **$62.8 million**, mainly due to the payment for the Accu-Trade Acquisition in 2022 not recurring in 2023[50](index=50&type=chunk)[154](index=154&type=chunk) - Net cash used in financing activities was **$48.7 million** in 2023, compared to cash provided of **$10.1 million** in 2022, primarily due to debt repayments and common stock repurchases in 2023, versus Revolving Loan borrowings in 2022[155](index=155&type=chunk) [Notes to the Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide essential additional information and disclosures for understanding the unaudited interim consolidated financial statements [NOTE 1. Description of Business and Summary of Significant Accounting Policies](index=8&type=section&id=NOTE%201.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes Cars.com Inc.'s business, brands, and significant accounting policies applied in preparing the consolidated financial statements - Cars.com Inc. is a leading automotive marketplace platform connecting car shoppers with sellers through digital solutions[12](index=12&type=chunk) - The company's brand portfolio includes Cars.com™, Dealer Inspire®, FUEL™, DealerRater®, CreditIQ®, Accu-Trade™, and NewCars.com®[13](index=13&type=chunk) - The unaudited interim consolidated financial statements are prepared in conformity with U.S. GAAP and SEC rules for interim financial statements, with certain information condensed or omitted[14](index=14&type=chunk) [NOTE 2. Revenue](index=8&type=section&id=NOTE%202.%20Revenue) This note disaggregates revenue by major products and services for the three and six months ended June 30, 2023 and 2022 | Major products and services (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :----------------------------------------- | :------------------------------- | :------------------------------- | | Subscription advertising and digital solutions | $139,935 | $135,432 | | Display advertising | $23,621 | $20,859 | | Pay per lead | $2,236 | $2,129 | | Other | $2,384 | $4,453 | | Total revenue | $168,176 | $162,873 | | Major products and services (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------------- | :----------------------------- | :----------------------------- | | Subscription advertising and digital solutions | $277,269 | $267,679 | | Display advertising | $47,478 | $41,908 | | Pay per lead | $4,511 | $4,546 | | Other | $5,986 | $6,947 | | Total revenue | $335,244 | $321,080 | - Subscription advertising and digital solutions remain the largest revenue stream, showing consistent growth[19](index=19&type=chunk) [NOTE 3. Business Combinations](index=9&type=section&id=NOTE%203.%20Business%20Combinations) This note details the Accu-Trade Acquisition, including purchase price allocation, identified intangible assets, and goodwill recognized - On March 1, 2022, the Company acquired Accu-Trade, which provides VIN-specific vehicle valuation and appraisal data, instant offer capabilities, and logistics technology[22](index=22&type=chunk) | Purchase Consideration (in thousands) | Fair Value | | :------------------------------------ | :--------- | | Cash consideration | $64,663 | | Other consideration | $5,300 | | Contingent consideration | $23,936 | | Total purchase consideration | $93,899 | | Identified Intangible Assets Acquired (in thousands) | Acquisition-Date Fair Value | Weighted-Average Amortization Period (in years) | | :--------------------------------------------------- | :-------------------------- | :---------------------------------------------- | | Acquired software | $12,926 | 5 | | Trade name | $1,446 | 10 | | Customer relationships | $1,307 | 7 | | Total | $15,679 | | - Goodwill of **$76.9 million** was recorded, primarily attributed to sales growth from existing and future technology, product offerings, customers, and the value of the acquired assembled workforce[6](index=6&type=chunk) [NOTE 4. Fair Value Measurements](index=10&type=section&id=NOTE%204.%20Fair%20Value%20Measurements) This note details the fair value measurement of contingent consideration liabilities, including changes and significant unobservable inputs | Contingent Consideration (in thousands) | As of December 31, 2022 | Adjustment | As of June 30, 2023 | | :-------------------------------------- | :---------------------- | :--------- | :------------------ | | Contingent consideration | $55,871 | $(5,182) | $50,689 | - The fair value of contingent consideration decreased by **$5.2 million** from December 31, 2022, to June 30, 2023[8](index=8&type=chunk) - Contingent consideration is classified as Level 3 in the fair value hierarchy and measured using a Monte Carlo simulation or scenario-based method, with volatility (**25% to 50%**) and projected financial information as significant inputs[26](index=26&type=chunk)[27](index=27&type=chunk) - The Company expects to make payments on contingent consideration in 2023, 2024, and 2025[30](index=30&type=chunk) [NOTE 5. Debt](index=11&type=section&id=NOTE%205.%20Debt) This note provides information on the company's debt instruments, including Term Loan, Revolving Loan, Senior Unsecured Notes, and debt covenant compliance - As of June 30, 2023, the outstanding principal amount under the Term Loan was **$58.8 million** with an interest rate of **7.3%**[70](index=70&type=chunk) - As of June 30, 2023, **$230.0 million** was available to borrow under the Revolving Loan, with the company paying down **$15.0 million** during the six months ended June 30, 2023[71](index=71&type=chunk) - The company issued **$400.0 million** aggregate principal amount of **6.375% Senior Unsecured Notes** due 2028[91](index=91&type=chunk) - In Q2 2023, the Credit Agreement was amended (Fourth Amendment) to replace LIBOR with SOFR as the benchmark provision and included a more favorable credit spread adjustment[90](index=90&type=chunk) - The company was in compliance with all debt covenants as of June 30, 2023[54](index=54&type=chunk) [NOTE 6. Interest Rate Swap](index=11&type=section&id=NOTE%206.%20Interest%20Rate%20Swap) This note discusses the expired interest rate swap, its use in managing interest rate risk, and its financial impact - The interest rate swap expired on May 31, 2022, and is no longer recorded on the Consolidated Balance Sheets[73](index=73&type=chunk) - During the six months ended June 30, 2022, **$2.4 million** was reclassified from Accumulated other comprehensive loss and recorded in Interest expense, net[73](index=73&type=chunk) [NOTE 7. Commitments and Contingencies](index=11&type=section&id=NOTE%207.%20Commitments%20and%20Contingencies) This note addresses the company's involvement in legal proceedings and other commitments and contingencies - The company is not currently involved in any pending or threatened litigation or claims that would have a material adverse impact on its financial position, results of operations, or cash flows[75](index=75&type=chunk) [NOTE 8. Stockholders' Equity](index=12&type=section&id=NOTE%208.%20Stockholders%27%20Equity) This note details the company's share repurchase program and its activity during the period - On February 24, 2022, the Board authorized a three-year share repurchase program to acquire up to **$200 million** of common stock[76](index=76&type=chunk) - During the six months ended June 30, 2023, the company repurchased and retired **0.9 million shares** for **$17.2 million** at an average price of **$18.17 per share**[76](index=76&type=chunk) - During the six months ended June 30, 2022, the company repurchased and retired **2.1 million shares** for **$23.3 million** at an average price of **$11.34 per share**[76](index=76&type=chunk) [NOTE 9. Stock-Based Compensation](index=12&type=section&id=NOTE%209.%20Stock-Based%20Compensation) This note provides information on Restricted Share Units, Performance Share Units, and Stock Options, including activity and valuation assumptions | RSU Activity (in thousands) | Number of RSUs | Weighted-Average Grant Date Value | | :-------------------------- | :------------- | :-------------------------------- | | Outstanding as of Dec 31, 2022 | 3,771 | $12.88 | | Granted | 1,804 | $16.66 | | Vested and delivered | (1,587) | $10.52 | | Forfeited | (107) | $15.59 | | Outstanding as of June 30, 2023 | 3,881 | $15.52 | | PSU Activity (in thousands) | Number of PSUs | Weighted-Average Grant Date Fair Value | | :-------------------------- | :------------- | :------------------------------------- | | Outstanding as of Dec 31, 2022 | 245 | $14.78 | | Granted | 267 | $16.47 | | Outstanding as of June 30, 2023 | 512 | $15.66 | | Stock Option Activity (in thousands) | Number of Options | Weighted-Average Grant Date Fair Value | Weighted-Average Remaining Contractual Term (in years) | | :----------------------------------- | :---------------- | :------------------------------------- | :----------------------------------------------------- | | Outstanding as of Dec 31, 2022 | 1,067 | $6.28 | 7.98 | | Outstanding as of June 30, 2023 | 1,067 | $6.28 | 7.48 | | Exercisable as of June 30, 2023 | 513 | $2.80 | 6.72 | - Stock options granted in 2022 were valued using the Black-Scholes model with a risk-free interest rate of **2.21%**, volatility of **65.22%**, **0% dividend yield**, and an expected exercise period of **6.5 years**[80](index=80&type=chunk) [NOTE 10. Earnings Per Share](index=13&type=section&id=NOTE%2010.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share and the impact of the deferred tax asset valuation allowance release | EPS Metric (in thousands, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | | Net income | $94,126 | $5,545 | | Basic weighted-average common shares outstanding | 66,762 | 69,194 | | Diluted weighted-average common shares outstanding | 68,493 | 70,257 | | Earnings per share, basic | $1.41 | $0.08 | | Earnings per share, diluted | $1.37 | $0.08 | | EPS Metric (in thousands, except per share data) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------------------- | :----------------------------- | :----------------------------- | | Net income | $105,605 | $9,885 | | Basic weighted-average common shares outstanding | 66,646 | 69,329 | | Diluted weighted-average common shares outstanding | 68,118 | 70,505 | | Earnings per share, basic | $1.58 | $0.14 | | Earnings per share, diluted | $1.55 | $0.14 | - The significant increase in Net income and EPS for the three and six months ended June 30, 2023, is primarily due to the release of a substantial portion of the valuation allowance for deferred tax assets[101](index=101&type=chunk) [NOTE 11. Income Taxes](index=14&type=section&id=NOTE%2011.%20Income%20Taxes) This note explains the company's income tax benefit, deferred tax assets, and the release of a significant valuation allowance portion - The income tax benefit was **$92.0 million** for the six months ended June 30, 2023, primarily due to the release of a significant portion of the valuation allowance for deferred tax assets[48](index=48&type=chunk)[121](index=121&type=chunk) - The valuation allowance was previously recorded due to a history of recent losses, but recent performance and future projections enabled its release as of June 30, 2023[83](index=83&type=chunk)[125](index=125&type=chunk) - The effective income tax rate substantially differed from the statutory federal income tax rate of **21%** due to the **$103.3 million** valuation allowance release[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, cash flows, business overview, key operating metrics, and performance factors [Note About Forward-Looking Statements](index=15&type=section&id=Note%20About%20Forward-Looking%20Statements) This section provides a cautionary statement regarding forward-looking statements, emphasizing that actual results may differ materially due to various risks and uncertainties - The report contains forward-looking statements based on current expectations, beliefs, and assumptions, which are subject to inherent uncertainties[127](index=127&type=chunk) - Actual results, performance, or strategic actions could differ materially from those expressed or implied by these statements due to numerous risks and factors beyond the company's control[127](index=127&type=chunk) - Readers are advised not to rely on forward-looking statements for investment decisions and to evaluate them in the context of detailed risks outlined in the Annual Report on Form 10-K[106](index=106&type=chunk)[127](index=127&type=chunk) [Business Overview](index=17&type=section&id=Business%20Overview) This section reiterates the company's core business as a leading automotive marketplace platform connecting car shoppers with sellers through digital solutions - Cars.com Inc. is a leading automotive marketplace platform providing digital solutions to connect car shoppers with automotive retailers, OEMs, and other advertisers[130](index=130&type=chunk) - The company's brands include Cars.com™, Dealer Inspire®, FUEL™, DealerRater®, CreditIQ®, Accu-Trade™, and NewCars.com®[131](index=131&type=chunk) - The strategic focus is on transforming the business towards a multi-faceted suite of digital solutions that complement online marketplace offerings, enabling dealers to compete in an online car-buying environment[137](index=137&type=chunk) [Overview of Results](index=17&type=section&id=Overview%20of%20Results) This section provides a high-level summary of the company's financial performance for the three and six months ended June 30, 2023, compared to the prior year | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :-------------------- | :------------------------------- | :------------------------------- | | Revenue | $168,176 | $162,873 | | Net income | $94,126 | $5,545 | | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------- | :----------------------------- | :----------------------------- | | Revenue | $335,244 | $321,080 | | Net income | $105,605 | $9,885 | - Net income for both periods in 2023 saw a substantial increase, primarily driven by the release of a significant portion of the valuation allowance for deferred tax assets[108](index=108&type=chunk) [Key Operating Metrics](index=17&type=section&id=Key%20Operating%20Metrics) This section analyzes key operating metrics including Traffic, Unique Visitors, Dealer Customers, and Monthly Average Revenue Per Dealer, and their trends | Metric (in thousands, except percentages) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change | | :---------------------------------------- | :------------------------------- | :------------------------------- | :------- | | Traffic | 155,957 | 148,010 | 5% | | Average Monthly Unique Visitors | 26,949 | 27,079 | —% | | Metric (in thousands, except percentages) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change | | :---------------------------------------- | :----------------------------- | :----------------------------- | :------- | | Traffic | 320,739 | 296,500 | 8% | | Average Monthly Unique Visitors | 27,714 | 26,820 | 3% | - Traffic increased by **5% YoY** for the three months and **8% YoY** for the six months, driven by increased consumer demand, shifts in paid user acquisition strategy, and enhancements in app/website experiences[109](index=109&type=chunk)[134](index=134&type=chunk) | Metric (in thousands, except percentages) | June 30, 2023 | June 30, 2022 | % Change (YoY) | March 31, 2023 | QoQ % Change | | :---------------------------------------- | :------------ | :------------ | :------------- | :------------- | :----------- | | Dealer Customers | 18,785 | 19,517 | (4)% | 19,186 | (2)% | | Monthly Average Revenue Per Dealer (ARPD) | $2,472 | $2,326 | 6% | $2,386 | 4% | - Dealer Customers decreased by **4% YoY** and **2% QoQ**, attributed to anticipated churn from the 2023 marketplace repackaging initiative and a pullback by digital dealers[113](index=113&type=chunk) - ARPD increased by **6% YoY** and **4% QoQ**, primarily driven by the marketplace repackaging initiative, including the adoption of higher tier packages, and growth in digital solutions[136](index=136&type=chunk) [Factors Affecting Our Performance](index=18&type=section&id=Factors%20Affecting%20Our%20Performance) This section discusses various external and internal factors influencing the company's business performance, including macroeconomic conditions and industry challenges - Business performance is impacted by changes in the broader automotive ecosystem, such as inventory supply, supply chain disruptions, semiconductor shortages, vehicle acquisition costs, and electric vehicle adoption[114](index=114&type=chunk) - Changes in vehicle sales volumes in the United States influence OEMs' and dealerships' investment decisions in technology solutions and automotive marketplaces, potentially affecting pricing strategies and revenue mix[114](index=114&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenue and operating expenses for the three and six months ended June 30, 2023 and 2022 [Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022](index=19&type=section&id=Three%20Months%20Ended%20June%2030%2C%202023%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202022) This sub-section provides a detailed comparison of revenue and operating expenses for the three months ended June 30, 2023 and 2022 | Revenue Source (in thousands) | 2023 | 2022 | $ Change | % Change | | :---------------------------- | :---------- | :---------- | :---------- | :------- | | Dealer | $153,309 | $143,987 | $9,322 | 6% | | OEM and National | $12,402 | $14,144 | $(1,742) | (12)% | | Other | $2,465 | $4,742 | $(2,277) | (48)% | | Total Revenue | $168,176 | $162,873 | $5,303 | 3% | - Dealer revenue, the largest stream, increased by **6%** due to growth in solutions revenue and marketplace repackaging initiatives, partially offset by a reduction from digital dealers[139](index=139&type=chunk) - OEM and National revenue decreased by **12%** due to pullbacks in spending from some OEM and insurance customers[140](index=140&type=chunk) - Other revenue decreased by **48%** primarily due to the anticipated expiration of the Accu-Trade license agreement[62](index=62&type=chunk) | Operating Expense (in thousands) | 2023 | 2022 | $ Change | % Change | | :------------------------------- | :---------- | :---------- | :---------- | :------- | | Cost of revenue and operations | $30,415 | $29,504 | $911 | 3% | | Product and technology | $24,956 | $23,117 | $1,839 | 8% | | Marketing and sales | $58,153 | $54,655 | $3,498 | 6% | | General and administrative | $17,649 | $17,211 | $438 | 3% | | Depreciation and amortization | $24,669 | $23,001 | $1,668 | 7% | | Total Operating Expenses | $155,842 | $147,488 | $8,354 | 6% | - Operating income decreased by **20%** to **$12.3 million**, while net income significantly increased to **$94.1 million** due to a large income tax benefit[121](index=121&type=chunk)[139](index=139&type=chunk) [Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022](index=20&type=section&id=Six%20Months%20Ended%20June%2030%2C%202023%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202022) This sub-section provides a detailed comparison of revenue and operating expenses for the six months ended June 30, 2023 and 2022 | Revenue Source (in thousands) | 2023 | 2022 | $ Change | % Change | | :---------------------------- | :---------- | :---------- | :---------- | :------- | | Dealer | $303,152 | $284,403 | $18,749 | 7% | | OEM and National | $25,945 | $29,318 | $(3,373) | (12)% | | Other | $6,147 | $7,359 | $(1,212) | (16)% | | Total Revenue | $335,244 | $321,080 | $14,164 | 4% | - Dealer revenue increased by **7%**, driven by growth in solutions revenue and the marketplace repackaging initiative[145](index=145&type=chunk)[164](index=164&type=chunk) - OEM and National revenue decreased by **12%** due to reduced spending from OEM and insurance customers[146](index=146&type=chunk) - Other revenue decreased by **16%** due to the expiration of the Accu-Trade license agreement[165](index=165&type=chunk) | Operating Expense (in thousands) | 2023 | 2022 | $ Change | % Change | | :------------------------------- | :---------- | :---------- | :---------- | :------- | | Cost of revenue and operations | $60,210 | $57,256 | $2,954 | 5% | | Product and technology | $49,057 | $44,424 | $4,633 | 10% | | Marketing and sales | $116,450 | $111,749 | $4,701 | 4% | | General and administrative | $35,953 | $33,771 | $2,182 | 6% | | Depreciation and amortization | $48,711 | $47,554 | $1,157 | 2% | | Total Operating Expenses | $310,381 | $294,754 | $15,627 | 5% | - Net income for the six months ended June 30, 2023, was **$105.6 million**, a significant increase from **$9.9 million** in the prior year, primarily due to the income tax benefit from the valuation allowance release[48](index=48&type=chunk)[122](index=122&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's primary liquidity sources, debt obligations, contingent consideration, cash flow activities, and share repurchase program - Primary liquidity sources include cash flows from operations, available cash reserves, and borrowing capacity under credit facilities[150](index=150&type=chunk) - As of June 30, 2023, cash and cash equivalents were **$28.6 million**, and total liquidity, including the undrawn Revolving Loan, was **$258.6 million**[64](index=64&type=chunk) - The outstanding aggregate principal amount of indebtedness was **$458.8 million** as of June 30, 2023, with an effective interest rate of **6.5%**[170](index=170&type=chunk) - The fair value of contingent consideration related to the CreditIQ and Accu-Trade acquisitions was **$50.7 million** as of June 30, 2023, with **$30.9 million** expected to be paid within the next twelve months[171](index=171&type=chunk) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Operating activities | $56,182 | $42,280 | $13,902 | | Investing activities | $(10,569) | $(73,325) | $62,756 | | Financing activities | $(48,723) | $10,110 | $(58,833) | - During the six months ended June 30, 2023, the company made **$7.5 million** in Term Loan payments and repaid **$15.0 million** on its Revolving Loan[151](index=151&type=chunk) [Critical Accounting Policies](index=24&type=section&id=Critical%20Accounting%20Policies) This section refers to the company's critical accounting policies and any changes during the period - There have been no changes to the company's critical accounting policies during the six months ended June 30, 2023[157](index=157&type=chunk) [Recent Accounting Pronouncements](index=24&type=section&id=Recent%20Accounting%20Pronouncements) This section reports on any significant new accounting pronouncements applicable to the company - There were no significant new accounting pronouncements applicable to the company in the period[66](index=66&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section provides disclosures about the company's exposure to market risks - The company's exposures to market risk have not changed materially since December 31, 2022[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the effectiveness of disclosure controls and procedures and internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[159](index=159&type=chunk) - There were no changes in internal control over financial reporting during the period that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[189](index=189&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) This section provides an update on any legal proceedings involving the company - The company is not currently involved in any material legal proceedings[67](index=67&type=chunk)[179](index=179&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section refers to risk factors that could materially affect the company's business, financial condition, and results of operations - There have been no material changes from the risk factors described in the company's Annual Report on Form 10-K for the year ended December 31, 2022[180](index=180&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activity during the quarter | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share (1) | Maximum Dollar Value of Shares Yet to Be Purchased (in thousands) (3) | | :-------------------------- | :----------------------------------- | :------------------------------- | :-------------------------------------------------------------------- | | April 1 through April 30, 2023 | 154,193 | $19.36 | $140,858 | | May 1 through May 31, 2023 | 199,420 | $18.36 | $137,196 | | June 1 through June 30, 2023 | 178,602 | $18.73 | $133,852 | - The company's Board of Directors authorized a three-year share repurchase program on February 24, 2022, to acquire up to **$200 million** of common stock[161](index=161&type=chunk) - All shares purchased were part of the publicly announced share repurchase program and may occur through open market purchases or Rule 10b5-1 trading plans[161](index=161&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports on any defaults upon senior securities - The company reported no defaults upon senior securities[162](index=162&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section addresses mine safety disclosures - Mine safety disclosures are not applicable to the company[193](index=193&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) This section includes other material information not covered elsewhere, such as executive trading plans and credit agreement amendments - On May 24, 2023, CEO Alex Vetter adopted a Rule 10b5-1 trading plan to sell up to **212,000 shares** of common stock between August 24, 2023, and August 26, 2024, for estate and family financial planning and asset diversification[51](index=51&type=chunk)[182](index=182&type=chunk) - On June 23, 2023, the company entered into the Fourth Amendment to the Credit Agreement, replacing LIBOR with SOFR as the benchmark provision and including a more favorable credit spread adjustment[183](index=183&type=chunk)[194](index=194&type=chunk) - J.P. Morgan Chase Bank, N.A. serves as a lender and administrative agent under the Credit Agreement and has various financial relationships with the company[68](index=68&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q | Exhibit Number | Description | | :------------- | :--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | 3.1** | Amended and Restated Certificate of Incorporation of Cars.com Inc. | | 3.2** | Amended and Restated Bylaws of Cars.com Inc. | | 10.1* | Fourth Amendment to Credit Agreement dated as of June 23, 2023 | | 31.1* | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) | | 31.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) | | 32.1* | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 | | 32.2* | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | The cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted with Inline XBRL | [Signatures](index=29&type=section&id=Signatures) This section contains the required signatures of the company's authorized officers, certifying the report's accuracy - The report was signed by T. Alex Vetter, Chief Executive Officer, and Sonia Jain, Chief Financial Officer, on August 3, 2023[188](index=188&type=chunk)

Cars.com Inc. (NYSE:CARS) Q1 2023 Results Conference Call May 4, 2023 9:00 AM ET Company Participants Robbin Moore-Randolph - Director, IR Alex Vetter - CEO Sonia Jain - CFO Conference Call Participants Thomas White - D.A. Davidson Gary Prestopino - Barrington Research Marvin Fong - BTIG Doug Arthur - Huber Research Operator Good morning, and welcome to the Cars First Quarter 2023 Earnings Conference Call. This call is being recorded, and a live webcast and the accompanying slides can be found at investor.c ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Cars.com Inc., including balance sheets, statements of income, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, business combinations, fair value measurements, debt, equity, and income taxes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (vs. Dec 31, 2022) | | :----------------------------- | :---------------------------- | :----------------------------- | :------------------------ | | Cash and cash equivalents | $18,838 | $31,715 | -$12,877 | | Accounts receivable, net | $114,035 | $107,930 | +$6,105 | | Total current assets | $144,651 | $148,627 | -$3,976 | | Intangible assets, net | $687,930 | $707,088 | -$19,158 | | Total assets | $1,002,221 | $1,024,870 | -$22,649 | | Total current liabilities | $107,348 | $106,012 | +$1,336 | | Long-term debt, net | $438,739 | $458,249 | -$19,510 | | Total liabilities | $617,234 | $640,440 | -$23,206 | | Stockholders' equity | $384,987 | $384,430 | +$557 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | % Change (YoY) | | :----------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :------------- | | Total revenue | $167,068 | $158,207 | +$8,861 | 6% | | Operating income | $12,529 | $10,941 | +$1,588 | 15% | | Nonoperating expense, net | ($5) | ($9,122) | +$9,117 | ***% | | Income before income taxes | $12,524 | $1,819 | +$10,705 | ***% | | Net income | $11,479 | $4,340 | +$7,139 | ***% | | Basic EPS | $0.17 | $0.06 | +$0.11 | 183% | | Diluted EPS | $0.17 | $0.06 | +$0.11 | 183% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :----------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net income | $11,479 | $4,340 | +$7,139 | | Total other comprehensive income | — | $1,202 | -$1,202 | | Comprehensive income | $11,479 | $5,542 | +$5,937 | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Consolidated Statements of Stockholders' Equity | Metric | Balance at Dec 31, 2022 (in thousands) | Net Income (in thousands) | Repurchases of common stock (in thousands) | Stock-based compensation (in thousands) | Balance at Mar 31, 2023 (in thousands) | | :--------------------- | :------------------------------------- | :------------------------ | :----------------------------------------- | :-------------------------------------- | :------------------------------------- | | Stockholders' Equity | $384,430 | $11,479 | ($7,174) | $6,049 | $384,987 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net cash provided by operating activities | $28,141 | $30,358 | -$2,217 | | Net cash used in investing activities | ($5,371) | ($68,778) | +$63,407 | | Net cash (used in) provided by financing activities | ($35,647) | $29,804 | -$65,451 | | Net decrease in cash and cash equivalents | ($12,877) | ($8,616) | -$4,261 | | Cash and cash equivalents at end of period | $18,838 | $30,453 | -$11,615 | [Notes to the Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20(Unaudited)) [NOTE 1. Description of Business and Summary of Significant Accounting Policies](index=8&type=section&id=NOTE%201.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) - Cars.com Inc. (CARS) is a leading automotive marketplace platform providing digital solutions connecting car shoppers with sellers, empowering shoppers with data and tools, and enabling dealers and OEMs with innovative technical solutions and data-driven intelligence[38](index=38&type=chunk)[103](index=103&type=chunk) - The Company's brands include Cars.com™, Dealer Inspire®, FUEL™, DealerRater®, CreditIQ®, Accu-Trade™, and NewCars.com®[15](index=15&type=chunk)[104](index=104&type=chunk) - Significant accounting policies are consistent with those in the December 31, 2022 Financial Statements, prepared in conformity with U.S. GAAP and SEC rules for interim financial statements[16](index=16&type=chunk)[39](index=39&type=chunk) [NOTE 2. Revenue](index=8&type=section&id=NOTE%202.%20Revenue) Revenue by Major Products and Services | Major products and services | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | % Change (YoY) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :------------- | | Subscription advertising and digital solutions | $137,334 | $132,247 | +$5,087 | 4% | | Display advertising | $23,857 | $21,049 | +$2,808 | 13% | | Pay per lead | $2,275 | $2,417 | -$142 | (6%) | | Other | $3,602 | $2,494 | +$1,108 | 44% | | Total revenue | $167,068 | $158,207 | +$8,861 | 6% | [NOTE 3. Business Combinations](index=9&type=section&id=NOTE%203.%20Business%20Combinations) - On March 1, 2022, the Company acquired Accu-Trade, LLC and related entities, which provide VIN-specific vehicle valuation, appraisal data, instant offer capabilities, and logistics technology[63](index=63&type=chunk) Accu-Trade Acquisition Fair Value | Item | Fair Value (in thousands) | | :----------------------------- | :------------------------ | | Cash consideration | $64,663 | | Other consideration | $5,300 | | Contingent consideration | $23,936 | | **Total purchase consideration** | **$93,899** | | Assets acquired | $1,595 | | Identified intangible assets | $15,679 | | Liabilities assumed | ($235) | | **Net identifiable assets** | **$17,039** | | Goodwill | $76,860 | - Goodwill of **$76.9 million** was recorded, primarily attributable to sales growth from existing and future technology, product offerings, customers, and the value of the acquired assembled workforce[65](index=65&type=chunk) - The Company may pay up to **$63.0 million** in additional contingent consideration based on future performance over a three-year period, with a maximum of **$15.0 million** potentially in stock[64](index=64&type=chunk) [NOTE 4. Fair Value Measurements](index=10&type=section&id=NOTE%204.%20Fair%20Value%20Measurements) Contingent Consideration Fair Value | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------- | :---------------------------- | :----------------------------- | | Contingent consideration | $47,612 | $55,871 | - A fair value adjustment of **($8.3 million)** was recorded for contingent consideration during the three months ended March 31, 2023, reflected in Other income, net[48](index=48&type=chunk)[66](index=66&type=chunk) - The Company expects to make payments on contingent consideration in 2023, 2024, and 2025, with **$6.2 million** classified as current and **$41.4 million** as noncurrent as of March 31, 2023[48](index=48&type=chunk)[49](index=49&type=chunk) [NOTE 5. Debt](index=10&type=section&id=NOTE%205.%20Debt) - As of March 31, 2023, the outstanding aggregate principal amount of indebtedness was **$462.5 million** at an effective interest rate of **6.5%**[124](index=124&type=chunk) - Debt components include **$400.0 million** of **6.375%** Senior Unsecured Notes due 2028 and **$62.5 million** outstanding under the Term Loan (**7.2%** interest rate at March 31, 2023)[70](index=70&type=chunk)[68](index=68&type=chunk)[124](index=124&type=chunk) - During Q1 2023, the Company made **$3.8 million** in Term Loan payments and repaid **$15.0 million** on the Revolving Loan[68](index=68&type=chunk)[52](index=52&type=chunk)[125](index=125&type=chunk) - **$230.0 million** was available to borrow under the Revolving Loan as of March 31, 2023[52](index=52&type=chunk)[125](index=125&type=chunk) - The Company was in compliance with debt covenants as of March 31, 2023, with a Senior Secured Leverage Ratio of **0.3x** and a Consolidated Interest Coverage Ratio of **5.7x**[50](index=50&type=chunk)[52](index=52&type=chunk)[125](index=125&type=chunk) [NOTE 6. Interest Rate Swap](index=11&type=section&id=NOTE%206.%20Interest%20Rate%20Swap) - The interest rate swap expired on May 31, 2022, and is no longer recorded on the Consolidated Balance Sheets[73](index=73&type=chunk) - Zero was reclassified from Accumulated other comprehensive loss to Interest expense, net in Q1 2023, compared to **$1.4 million** in Q1 2022[73](index=73&type=chunk) [NOTE 7. Commitments and Contingencies](index=11&type=section&id=NOTE%207.%20Commitments%20and%20Contingencies) - The Company is not currently involved in any pending or threatened litigation that would have a material adverse impact on its financial position, results of operations, or cash flows[74](index=74&type=chunk) - A liability is recorded when a loss is both probable and the amount can be reasonably estimated[74](index=74&type=chunk) [NOTE 8. Stockholders' Equity](index=11&type=section&id=NOTE%208.%20Stockholders'%20Equity) - A three-year share repurchase program of up to **$200 million** was authorized by the Board of Directors on February 24, 2022, funded principally by cash from operations[75](index=75&type=chunk)[126](index=126&type=chunk)[168](index=168&type=chunk) - During Q1 2023, the Company repurchased **0.4 million** shares for **$7.2 million** at an average price of **$17.38** per share[75](index=75&type=chunk)[126](index=126&type=chunk) - During Q1 2022, the Company repurchased **0.3 million** shares for **$5.0 million** at an average price of **$14.78** per share[76](index=76&type=chunk) [NOTE 9. Stock-Based Compensation](index=12&type=section&id=NOTE%209.%20Stock-Based%20Compensation) Restricted Stock Units (RSUs) Activity | Metric | Number of RSUs (in thousands) | Weighted-Average Grant Date Fair Value | | :----------------------------- | :---------------------------- | :------------------------------------- | | Outstanding as of Dec 31, 2022 | 3,771 | $12.88 | | Granted | 1,676 | $16.47 | | Vested and delivered | (1,496) | $10.53 | | Forfeited | (26) | $14.92 | | Outstanding as of Mar 31, 2023 | 3,925 | $15.29 | Performance Stock Units (PSUs) Activity | Metric | Number of PSUs (in thousands) | Weighted-Average Grant Date Fair Value | | :----------------------------- | :---------------------------- | :------------------------------------- | | Outstanding as of Dec 31, 2022 | 245 | $14.78 | | Granted | 267 | $16.47 | | Outstanding as of Mar 31, 2023 | 512 | $15.66 | - No stock options were granted during the three months ended March 31, 2023[92](index=92&type=chunk) [NOTE 10. Earnings Per Share](index=13&type=section&id=NOTE%2010.%20Earnings%20Per%20Share) Earnings Per Share Calculation | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (in thousands) | $11,479 | $4,340 | | Basic weighted-average common shares outstanding (in thousands) | 66,530 | 69,463 | | Diluted weighted-average common shares outstanding (in thousands) | 67,747 | 70,899 | | Earnings per share, basic | $0.17 | $0.06 | | Earnings per share, diluted | $0.17 | $0.06 | - **554 thousand** potential common shares were excluded from diluted EPS in Q1 2023 due to their anti-dilutive effect, compared to **1,738 thousand** in Q1 2022[93](index=93&type=chunk) [NOTE 11. Income Taxes](index=13&type=section&id=NOTE%2011.%20Income%20Taxes) - The effective income tax rate for Q1 2023 was **8.3%**, primarily due to the incremental tax deduction from equity award vesting, compared to the statutory federal rate of **21%**[83](index=83&type=chunk)[147](index=147&type=chunk) - Income tax expense for Q1 2023 was **$1.0 million**[95](index=95&type=chunk) - A valuation allowance is required against deferred tax assets due to the Company's history of recent losses, primarily from goodwill and indefinite-lived intangible asset impairments[94](index=94&type=chunk) [Note About Forward-Looking Statements](index=14&type=section&id=Note%20About%20Forward-Looking%20Statements) This section provides a cautionary statement regarding forward-looking statements in the report, emphasizing that actual results may differ materially due to various risks and uncertainties beyond the company's control - All statements other than historical facts are forward-looking, using words such as "believe," "expect," "project," "anticipate," etc[85](index=85&type=chunk) - Forward-looking statements are based on current expectations, beliefs, strategies, estimates, and assumptions, but are inherently uncertain[85](index=85&type=chunk) - Actual results could differ materially due to various risks, including those related to the automotive ecosystem, market competition, technological advancements, data privacy, strategic acquisitions, and debt agreements[85](index=85&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - The company undertakes no obligation to update or revise any forward-looking statements, other than as may be required by law[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an in-depth analysis of Cars.com Inc.'s business, financial condition, and results of operations for the three months ended March 31, 2023, compared to the prior-year period [Business Overview](index=17&type=section&id=Business%20Overview) - Cars.com Inc. is a leading automotive marketplace platform providing digital solutions to connect car shoppers with sellers[103](index=103&type=chunk) - The platform empowers shoppers with data and tools for informed buying decisions and connects them with automotive retailers, OEMs, and lenders[103](index=103&type=chunk) - The Company's brand portfolio includes Cars.com™, Dealer Inspire®, FUEL™, DealerRater®, CreditIQ®, Accu-Trade™, and NewCars.com®[104](index=104&type=chunk) [Overview of Results](index=17&type=section&id=Overview%20of%20Results) Key Operating Metrics | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | % Change (YoY) | | :----------------------------- | :--------------------------------------- | :--------------------------------------- | :------------- | | Traffic | 164,782 | 148,491 | 11% | | Average Monthly Unique Visitors | 28,478 | 26,562 | 7% | | Dealer Customers (as of Mar 31) | 19,186 | 19,500 | (2%) | | Monthly Average Revenue Per Dealer (ARPD) | $2,386 | $2,291 | 4% | - Traffic and Average Monthly Unique Visitors (UVs) growth were driven by increased consumer demand, shifts in paid user acquisition strategy, and enhancements in App and Website experiences[136](index=136&type=chunk) - Dealer Customers decreased **2%** year-over-year and quarter-over-quarter due to elevated cancellations from digital dealers[115](index=115&type=chunk) - Monthly Average Revenue Per Dealer (ARPD) increased **4%** year-over-year, primarily driven by growth in digital solutions, offset by a reduction in FUEL revenue[138](index=138&type=chunk) - Business performance is impacted by changes in the larger automotive ecosystem, including inventory supply, supply chain disruptions, vehicle acquisition costs, and OEM/dealership investment in technology solutions[116](index=116&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Revenue by Segment | Revenue Segment | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | % Change (YoY) | | :---------------------- | :--------------------- | :--------------------- | :----------- | :------------- | | Dealer | $149,843 | $140,416 | +$9,427 | 7% | | OEM and National | $13,543 | $15,174 | -$1,631 | (11%) | | Other | $3,682 | $2,617 | +$1,065 | 41% | | **Total Revenue** | **$167,068** | **$158,207** | **+$8,861** | **6%** | - Dealer revenue increased **7%** year-over-year, primarily driven by an increase in digital solutions revenue[109](index=109&type=chunk) - OEM and National revenue decreased **11%** year-over-year due to pullbacks in spending from some insurance customers[141](index=141&type=chunk) Operating Expenses by Category | Expense Category | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | % Change (YoY) | | :----------------------------- | :--------------------- | :--------------------- | :----------- | :------------- | | Cost of revenue and operations | $29,795 | $27,752 | +$2,043 | 7% | | Product and technology | $24,101 | $21,307 | +$2,794 | 13% | | Marketing and sales | $58,297 | $57,094 | +$1,203 | 2% | | General and administrative | $18,304 | $16,560 | +$1,744 | 11% | | Depreciation and amortization | $24,042 | $24,553 | -$511 | (2%) | | **Total Operating Expenses** | **$154,539** | **$147,266** | **+$7,273** | **5%** | - Net income significantly increased to **$11.5 million** in Q1 2023 from **$4.3 million** in Q1 2022[140](index=140&type=chunk) - Interest expense, net, decreased by **$1.1 million** year-over-year due to the maturity of the interest rate swap and reduced indebtedness, partially offset by higher interest rates[145](index=145&type=chunk) - Other income, net, increased significantly due to the change in fair value of contingent consideration associated with the CreditIQ and Accu-Trade acquisitions[146](index=146&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary liquidity sources are cash flows from operations, available cash reserves, and borrowing capacity under credit facilities[149](index=149&type=chunk) - Total liquidity as of March 31, 2023, was **$248.8 million**, including **$18.8 million** in cash and cash equivalents and **$230.0 million** available under the Revolving Loan[123](index=123&type=chunk) - Outstanding aggregate principal amount of indebtedness was **$462.5 million** as of March 31, 2023[124](index=124&type=chunk) - During Q1 2023, the Company made **$3.8 million** in Term Loan payments and repaid **$15.0 million** on its Revolving Loan[125](index=125&type=chunk) - The Company repurchased **0.4 million** shares for **$7.2 million** in Q1 2023 as part of its share repurchase program[126](index=126&type=chunk) - The fair value of contingent consideration was **$47.6 million** as of March 31, 2023, with **$6.7 million** expected to be paid within the next twelve months[127](index=127&type=chunk) [Off-Balance Sheet Arrangements](index=22&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company does not have any material off-balance sheet arrangements[151](index=151&type=chunk) [Commitments and Contingencies](index=22&type=section&id=Commitments%20and%20Contingencies) - Information related to commitments and contingencies is detailed in Note 7 to the Consolidated Financial Statements[132](index=132&type=chunk)[165](index=165&type=chunk) [Critical Accounting Policies](index=22&type=section&id=Critical%20Accounting%20Policies) - There have been no changes to the Company's critical accounting policies during the three months ended March 31, 2023[159](index=159&type=chunk) [Recent Accounting Pronouncements](index=22&type=section&id=Recent%20Accounting%20Pronouncements) - There were no significant new accounting pronouncements applicable to the Company in the period[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that the company's exposures to market risk have not materially changed since December 31, 2022, with further details available in the Annual Report on Form 10-K - The Company's exposures to market risk have not materially changed since December 31, 2022[134](index=134&type=chunk) - Further quantitative and qualitative disclosures about market risk are available in Part II, Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2022[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance for timely and accurate information reporting - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2023[135](index=135&type=chunk) - Disclosure controls and procedures provide reasonable assurance that information required to be disclosed is recorded, processed, summarized, and reported within specified time periods[135](index=135&type=chunk)[161](index=161&type=chunk) - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period[162](index=162&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 7 (Commitments and Contingencies) in the Consolidated Financial Statements for information relating to legal proceedings - Information relating to legal proceedings is detailed in Note 7 (Commitments and Contingencies) to the Consolidated Financial Statements[165](index=165&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes from the risk factors previously described in its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes from the risk factors described in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2022[166](index=166&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities and repurchased 412,759 shares of common stock for $7.2 million during Q1 2023 as part of its share repurchase program - There were no unregistered sales of equity securities by the issuer[167](index=167&type=chunk) Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value Remaining (in thousands) | | :-------------------------------- | :------------------------------- | :--------------------------- | :-------------------------------------------- | | January 1 - January 31, 2023 | 83,171 | $15.81 | $149,702 | | February 1 - February 28, 2023 | 111,934 | $17.80 | $147,710 | | March 1 - March 31, 2023 | 217,654 | $17.77 | $143,843 | | **Total for Q1 2023** | **412,759** | | | - The share repurchases were conducted under a three-year program authorized for up to **$200 million** on February 24, 2022[168](index=168&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[169](index=169&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the Company[174](index=174&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) This section indicates that no other information was reported - This section contains no additional information[170](index=170&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including various certifications, Inline XBRL documents, and corporate governance documents incorporated by reference - The exhibit list includes certifications (31.1, 31.2, 32.1, 32.2), Inline XBRL instance and taxonomy documents (101.INS, SCH, CAL, DEF, LAB, PRE), and the cover page (104)[176](index=176&type=chunk) - Amended and Restated Certificate of Incorporation and Bylaws are incorporated by reference[176](index=176&type=chunk) [Signatures](index=26&type=section&id=Signatures) - The report was signed on May 4, 2023, by T. Alex Vetter, Chief Executive Officer, and Sonia Jain, Chief Financial Officer[178](index=178&type=chunk)

Cars.com Inc. (NYSE:CARS) Q4 2022 Earnings Conference Call February 23, 2023 9:00 AM ET Company Participants Robbin Moore-Randolph - Director of Investor Relations. Alex Vetter - Chief Executive Officer Sonia Jain - Chief Financial Officer Conference Call Participants Tom White - D.A. Davidson Gary Prestopino - Barrington Research Marvin Fong - BTIG Doug Arthur - Huber Research Operator Good morning, and welcome to the CARS Fourth Quarter 2022 Earnings Conference Call. This call is being recorded, and a liv ...