Second Quarter 2022 Earnings August 3, 2022 Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements include information concerning the impact of the COVID-19 pandemic on our industry, our dealer customers and our results of operations, our business strategies, strategic alternatives, plans and objectives, market pote ...

Cars.com, Inc. (NYSE:CARS) Q2 2022 Earnings Conference Call August 3, 2022 9:00 AM ET Company Participants Robbin Moore-Randolph - Director, IR Alex Vetter - CEO & Director Jeanette Tomy - Interim CFO Conference Call Participants Naved Khan - Truist Securities Marvin Fong - BTIG Gary Prestopino - Barrington Research Associates Thomas White - D.A. Davidson & Co. Operator Good morning. Thank you for attending today's Cars Second Quarter 2022 Earnings Conference Call. My name is Alexis, and I will be your mode ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Title of each class Trading Symbol Name of each exchange on which registered Common Stock CARS New York Stock Exchange FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 b For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-37869 Cars.com Inc. (Exact Name of Registrant as Speci ...

Financial Data and Key Metrics Changes - Revenue totaled $158 million, a 3% increase compared to the prior year [19] - Dealer revenue grew 6% to $140 million, driven by a 4% growth in dealer customers and a 1% growth in ARPD [19] - Net income for the quarter was $4 million or $0.06 per diluted share, compared to $5 million or $0.08 per diluted share a year ago [21] - Adjusted EBITDA was $42 million, representing 27% of revenue [21] - Total operating expenses were $147 million, up from $137 million a year ago [21] - Free cash flow was $26 million, $18 million lower than the first quarter last year [24] Business Line Data and Key Metrics Changes - Dealer Inspire revenue grew 15% year-over-year [23] - Leads to dealers grew double digits, while unique visitors increased 2% compared to a year ago [11] - The number of dealer customers reached 19,500, the highest in over three years, with an increase of 677 compared to last year [8][22] - Website customers increased to 5,500, up 800 from a year ago [22] Market Data and Key Metrics Changes - Average retail prices for new and used vehicles listed on Cars.com increased 27% and 37% respectively compared to the prior year [7] - Inventory searches for electric vehicles (EVs) were up nearly 200% year-over-year [12] - SEO traffic for the new EV landing page increased nearly 400% in March over the prior month [12] Company Strategy and Development Direction - The company is focused on expanding its dealer base and enhancing its digital solutions to meet dealer needs [8][13] - New product launches, such as Accu-Trade and CreditIQ, are expected to drive future revenue growth [15][17] - The company aims to maintain strong cash flow while investing in marketing and technology solutions [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering solid growth despite macroeconomic headwinds, including inventory shortages and inflation [20][27] - The expectation for revenue growth between 6% and 8% for the full year was reaffirmed, with double-digit growth anticipated in the fourth quarter [27] - Adjusted EBITDA margin is expected to approach 30% by the fourth quarter as revenue growth accelerates [28] Other Important Information - The company borrowed $45 million on its revolver, resulting in total debt outstanding of $520 million at quarter end [24] - The company initiated a share repurchase program, buying 338,000 shares for a total of $5 million [25] Q&A Session Summary Question: Thoughts on dealer customer growth and future strategy - Management noted strong dealer growth and the opportunity to add more dealers through a range of solutions [32] Question: Conversations with dealers in the current environment - Management confirmed constructive conversations with dealers, who are eager to shift towards technology solutions despite inventory challenges [35] Question: Differentiation of Accu-Trade from competitors - Accu-Trade offers integrated solutions that reduce the need for multiple vendors, providing precise VIN-specific valuation capabilities [42] Question: Impact of dealer inventory dynamics on marketplace revenue - Management indicated that while new car inventory is down, the used car business remains robust, which supports marketplace revenue [47] Question: Outlook for EBITDA margin and OEM ad spend - Management expects OEM revenue to stabilize rather than grow significantly, impacting EBITDA margins [49] Question: Clarification on ARPD for core listings business - Management confirmed that ARPD for the core marketplace was slightly down year-over-year, but overall ARPD was up due to growth in solutions [50]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements of Cars.com Inc. for the period ended March 31, 2022, including balance sheets, statements of income, comprehensive income, stockholders' equity, and cash flows, along with detailed notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show the company's financial position as of March 31, 2022, compared to December 31, 2021, highlighting changes in assets, liabilities, and stockholders' equity Consolidated Balance Sheets (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $30,453 | $39,069 | | Total current assets | $138,403 | $147,437 | | Goodwill | $101,763 | $26,227 | | Total assets | $1,069,217 | $1,007,205 | | Total current liabilities | $95,802 | $94,290 | | Total liabilities | $673,130 | $609,185 | | Total stockholders' equity | $396,087 | $398,020 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income present the company's financial performance for the three months ended March 31, 2022, compared to the same period in 2021, showing total revenue, operating expenses, operating income, net income, and earnings per share Consolidated Statements of Income (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenue | $158,207 | $153,295 | | Total operating expenses | $147,266 | $136,748 | | Operating income | $10,941 | $16,547 | | Income before income taxes | $1,819 | $6,584 | | Net income | $4,340 | $5,278 | | Basic Earnings per share | $0.06 | $0.08 | | Diluted Earnings per share | $0.06 | $0.08 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The Consolidated Statements of Comprehensive Income detail the net income and other comprehensive income components, such as reclassification of accumulated other comprehensive loss on interest rate swaps, to arrive at total comprehensive income Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net income | $4,340 | $5,278 | | Reclassification of accumulated other comprehensive loss on interest rate swap into Net income | $1,202 | $1,200 | | Total other comprehensive income | $1,202 | $1,200 | | Comprehensive income | $5,542 | $6,478 | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) The Consolidated Statements of Stockholders' Equity show the changes in each component of equity, including net income, other comprehensive income, common stock repurchases, and stock-based compensation, from December 31, 2021, to March 31, 2022 Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2021 | Net Income | Other Comprehensive Income | Repurchases of Common Stock | Stock-Based Compensation | Balance at Mar 31, 2022 | | :-------------------- | :---------------------- | :--------- | :------------------------- | :-------------------------- | :----------------------- | :---------------------- | | Common Stock Amount | $692 | — | — | $(3) | $9 | $698 | | Additional Paid-In Capital | $1,544,712 | — | — | $(4,997) | $(7,705) (net) | $1,537,231 | | Accumulated Deficit | $(1,145,382) | $4,340 | — | — | — | $(1,141,042) | | Accumulated Other Comprehensive Loss | $(2,002) | — | $1,202 | — | — | $(800) | | Total Stockholders' Equity | $398,020 | $4,340 | $1,202 | $(5,000) | $(7,696) (net) | $396,087 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows summarize the cash generated and used by operating, investing, and financing activities for the three months ended March 31, 2022, compared to the same period in 2021 Cash Flow Activity (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $30,358 | $50,362 | | Net cash used in investing activities | $(68,778) | $(6,219) | | Net cash provided by (used in) financing activities | $29,804 | $(58,138) | | Net decrease in cash and cash equivalents | $(8,616) | $(13,995) | | Cash and cash equivalents at end of period | $30,453 | $53,724 | [Notes to the Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide additional information and details supporting the unaudited consolidated financial statements, covering business description, accounting policies, revenue breakdown, goodwill, business combinations, debt, and income taxes [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. as a leading automotive marketplace platform offering digital solutions and lists its brand portfolio, outlining the basis of presentation for interim financial statements and a prior period correction - Cars.com Inc. is a leading automotive marketplace platform providing industry-specific digital solutions, showcasing dealer inventory, amplifying brands, connecting sellers with buyers, and empowering shoppers. Its brand portfolio includes Cars.com™, Dealer Inspire®, DealerRater®, FUEL™, Auto.com™, PickupTrucks.com™, CreditIQ™, Accu-Trade™ and NewCars.com®[30](index=30&type=chunk) Correction of Certain Amounts Relating to Previously Issued Financial Statements (as of December 31, 2021, in thousands) | Financial Statement Line Item | As Reported | Adjustment | As Adjusted | | :---------------------------- | :---------- | :--------- | :---------- | | Deferred tax liability | $31,086 | $(31,086) | $— | | Total noncurrent liabilities | $545,981 | $(31,086) | $514,895 | | Total liabilities | $640,271 | $(31,086) | $609,185 | | Accumulated deficit | $(1,176,468) | $31,086 | $(1,145,382) | | Total stockholders' equity | $366,934 | $31,086 | $398,020 | [NOTE 2. Revenue](index=9&type=section&id=NOTE%202.%20Revenue) This note disaggregates the company's total revenue by major products and services for the three months ended March 31, 2022, and 2021, indicating that the company operates as a single reportable segment Revenue by Major Products and Services (in thousands) | Major Products and Services | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Subscription advertising and digital solutions | $132,247 | $125,446 | | Display advertising | $21,049 | $21,957 | | Pay per lead | $2,417 | $3,760 | | Other | $2,494 | $2,132 | | Total revenue | $158,207 | $153,295 | [NOTE 3. Goodwill, Indefinite-lived Intangible Asset and Business Combination](index=9&type=section&id=NOTE%203.%20Goodwill,%20Indefinite-lived%20Intangible%20Asset%20and%20Business%20Combination) This note details the changes in goodwill and indefinite-lived intangible assets, primarily due to the Accu-Trade Acquisition in March 2022 and the CreditIQ Acquisition in November 2021, including their preliminary purchase price allocations Changes in Goodwill and Indefinite-lived Intangible Asset (in thousands) | Asset | December 31, 2021 | Additions | Impairment | March 31, 2022 | | :---------------------------- | :---------------- | :-------- | :--------- | :------------- | | Goodwill | $26,227 | $75,536 | $— | $101,763 | | Indefinite-lived intangible asset | $390,020 | $— | $— | $390,020 | - On March 1, 2022, the Company acquired Accu-Trade, which provides vehicle VIN-specific valuation and appraisal data, instant guaranteed offer capabilities, and logistics technology. Total acquisition costs of **$1.9 million** were expensed, with **$0.9 million** recorded in Q1 2022. Goodwill of **$75.5 million** was recorded, primarily attributable to sales growth from existing and future technology, product offerings, customers, and the value of the acquired assembled workforce, and is considered deductible for income tax purposes[42](index=42&type=chunk)[43](index=43&type=chunk)[47](index=47&type=chunk) Accu-Trade Acquisition Preliminary Purchase Price Allocation (in thousands) | Item | Preliminary Acquisition-date Fair Value | | :---------------------------- | :-------------------------------------- | | Cash consideration | $64,770 | | Other consideration | $5,300 | | Contingent consideration | $22,505 | | Total purchase consideration | $92,575 | | Assets acquired | $1,595 | | Identified intangible assets | $15,679 | | Total assets acquired | $17,274 | | Total liabilities assumed | $(235) | | Net identifiable assets | $17,039 | | Goodwill | $75,536 | - On November 5, 2021, the Company acquired CreditIQ, an automotive fintech platform providing instant online loan screening and approvals. Total acquisition costs of **$1.4 million** were expensed, with **$0.1 million** recorded in Q1 2022. Goodwill of **$26.2 million** was recorded, primarily attributable to sales growth from existing and future technology, product offerings, customers, and the value of the acquired assembled workforce, and is not considered deductible for income tax purposes[50](index=50&type=chunk)[51](index=51&type=chunk)[58](index=58&type=chunk) CreditIQ Acquisition Preliminary Purchase Price Allocation (in thousands) | Item | Acquisition-date Fair Value | | :---------------------------- | :-------------------------- | | Cash consideration | $29,965 | | Contingent consideration | $23,805 | | Cash settlement of CIQ Acquisition's unvested equity awards | $(9,626) | | Total purchase consideration | $44,144 | | Assets acquired | $193 | | Identified intangible assets | $19,900 | | Total assets acquired | $20,093 | | Total liabilities assumed | $(2,176) | | Net identifiable assets | $17,917 | | Goodwill | $26,227 | [NOTE 4. Debt](index=12&type=section&id=NOTE%204.%20Debt) This note provides details on the company's debt instruments, including the Term Loan, Revolving Loan, and Senior Unsecured Notes, their outstanding amounts, interest rates, and fair values, confirming compliance with debt covenants - As of March 31, 2022, the Company was in compliance with the covenants under its debt agreements[59](index=59&type=chunk) Debt Outstanding as of March 31, 2022 (in millions) | Debt Instrument | Outstanding Principal | Interest Rate | | :-------------------- | :-------------------- | :------------ | | Term Loan | $75.0 | 2.5% | | Revolving Loan | $45.0 | 2.5% | | Senior Unsecured Notes | $400.0 | 6.375% | | Total Indebtedness | $520.0 | 5.5% (effective) | Fair Value vs. Carrying Value of Debt (in millions) | Date | Fair Value | Carrying Value | | :------------- | :--------- | :------------- | | March 31, 2022 | $513.3 | $520.0 | | December 31, 2021 | $502.7 | $477.5 | [NOTE 5. Interest Rate Swap](index=12&type=section&id=NOTE%205.%20Interest%20Rate%20Swap) This note describes the interest rate swap used to manage floating interest rate risk on the Term Loan, detailing its fixed rate, notional amount, and the reclassification of its unrealized loss from accumulated other comprehensive income to interest expense - The Company entered into an interest rate swap effective December 31, 2018, locking into a fixed rate of **2.96%** plus an applicable margin on a notional amount of **$300 million** until May 31, 2022. Hedge accounting was discontinued in June 2020, with the accumulated loss amortized into the Consolidated Statements of Income[63](index=63&type=chunk) Interest Rate Swap Fair Value and Impact (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :------------------------------------------ | :------------- | :---------------- | | Fair value of Swap (unrealized loss) | $(1,200) | $(3,500) | | Reclassified from AOCI to Interest expense, net (Q1) | $1,400 | $1,400 | | Payments related to Swap (Q1) | $2,100 | N/A | | Reclassified tax benefit from AOCI to Income tax (benefit) expense (Q1) | $200 | N/A | [NOTE 6. Commitments and Contingencies](index=13&type=section&id=NOTE%206.%20Commitments%20and%20Contingencies) This note outlines the company's involvement in legal and administrative proceedings incidental to its business and its policy for recording liabilities when a loss is probable and estimable - The Company is involved in legal and administrative proceedings incidental to its business and records a liability when a loss is probable and reasonably estimable, with ongoing quarterly evaluations[67](index=67&type=chunk) [NOTE 7. Stockholders' Equity](index=13&type=section&id=NOTE%207.%20Stockholders%27%20Equity) This note details the share repurchase program authorized by the Board of Directors in February 2022, allowing for up to $200 million in common stock repurchases over three years, and reports the repurchase activity - In February 2022, the Board authorized a three-year share repurchase program for up to **$200 million** of common stock. During Q1 2022, the Company repurchased and retired **0.3 million** shares for **$5.0 million** at an average price of **$14.78** per share[68](index=68&type=chunk) [NOTE 8. Stock-Based Compensation](index=13&type=section&id=NOTE%208.%20Stock-Based%20Compensation) This note provides activity and fair value information for the company's stock-based compensation plans, including Restricted Share Units (RSUs), Performance Share Units (PSUs), and Stock Options Restricted Share Units (RSUs) Activity (in thousands, except for weighted-average grant date fair value) | Metric | Number of RSUs | Weighted-Average Grant Date Fair Value | | :------------------------------------ | :------------- | :------------------------------------- | | Outstanding as of December 31, 2021 | 3,683 | $10.95 | | Granted | 1,814 | $15.07 | | Vested and delivered | (1,433) | $10.28 | | Forfeited | (61) | $12.69 | | Outstanding as of March 31, 2022 | 4,003 | $13.03 | Performance Share Units (PSUs) Activity (in thousands, except for weighted-average grant date fair value) | Metric | Number of PSUs | Weighted-Average Grant Date Fair Value | | :------------------------------------ | :------------- | :------------------------------------- | | Outstanding as of December 31, 2021 | 142 | $23.98 | | Granted | 275 | $15.07 | | Vested and delivered | (142) | $23.98 | | Forfeited | — | — | | Outstanding as of March 31, 2022 | 275 | $15.07 | Stock Options Activity (in thousands, except for weighted-average grant date fair value and weighted-average remaining contractual term) | Metric | Number of Options | Weighted-Average Grant Date Fair Value | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | | :------------------------------------ | :---------------- | :------------------------------------- | :----------------------------------------------------- | :------------------------ | | Outstanding as of December 31, 2021 | 804 | $5.27 | 8.58 | $5,754 | | Granted | 263 | $9.39 | — | — | | Outstanding as of March 31, 2022 | 1,067 | $6.28 | 8.73 | $4,634 | Black-Scholes Option Pricing Model Assumptions | Assumption | 2022 | 2021 | | :-------------------------- | :-------- | :-------- | | Risk-free interest rate | 2.21 % | 1.15 % | | Weighted-average volatility | 65.22 % | 69.00 % | | Dividend yield | 0 % | 0 % | | Expected years until exercise | 6.5 | 6.5 | [NOTE 9. Earnings Per Share](index=14&type=section&id=NOTE%209.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share for the three months ended March 31, 2022, and 2021, including the impact of dilutive stock-based compensation awards Earnings Per Share Calculation (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income | $4,340 | $5,278 | | Basic weighted-average common shares outstanding | 69,463 | 67,787 | | Effect of dilutive stock-based compensation awards | 1,436 | 2,467 | | Diluted weighted-average common shares outstanding | 70,899 | 70,254 | | Earnings per share, basic | $0.06 | $0.08 | | Earnings per share, diluted | $0.06 | $0.08 | [NOTE 10. Income Taxes](index=14&type=section&id=NOTE%2010.%20Income%20Taxes) This note discusses the company's deferred tax assets, the requirement for a valuation allowance due to a history of recent losses, and the effective income tax rate for Q1 2022, explaining the variance from the statutory federal income tax rate - The Company has recorded a valuation allowance against its deferred tax assets as of March 31, 2022, due to a history of recent losses, primarily from goodwill and indefinite-lived intangible asset impairments[75](index=75&type=chunk) Effective Income Tax Rate Reconciliation (Three Months Ended March 31, 2022, in thousands, except percentages) | Item | Amount | % of Income Before Tax | | :------------------------------------------ | :------- | :--------------------- | | Income tax provision at statutory rate | $382 | 21.0 % | | State income taxes, net of federal income tax benefit | $204 | 11.2 | | Stock-based compensation | $(1,425) | (78.3) | | Uncertain tax positions | $(1,015) | (55.8) | | Valuation allowance | $(917) | (50.4) | | Other, net | $250 | 13.7 | | Income tax benefit | $(2,521) | (138.6)% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive discussion and analysis of Cars.com Inc.'s business, financial condition, and results of operations for the three months ended March 31, 2022, including an overview of its business, key highlights, operating metrics, factors affecting performance, detailed results, and liquidity [Business Overview](index=18&type=section&id=Business%20Overview) Cars.com Inc. operates as a leading automotive marketplace platform, offering a suite of industry-specific digital solutions to connect sellers with buyers and empower car-buying decisions, supported by a portfolio of brands - Cars.com Inc. is a leading automotive marketplace platform providing digital solutions to showcase dealer inventory, amplify brands, connect sellers with buyers, and empower shoppers. Its brand portfolio includes Cars.com™, Dealer Inspire®, DealerRater®, FUEL™, Auto.com™, PickupTrucks.com™, CreditIQ™, Accu-Trade™ and NewCars.com®[88](index=88&type=chunk) [2022 Highlights and Trends](index=18&type=section&id=2022%20Highlights%20and%20Trends) Key highlights for Q1 2022 include a 2% increase in Dealer Customers, the acquisition of Accu-Trade for $64.8 million cash and $5.3 million other consideration, the CreditIQ acquisition in November 2021 for $30.0 million cash, and the authorization of a $200 million share repurchase program - Dealer Customers increased by **2%** to **19,500** in Q1 2022 compared to December 31, 2021, marking seven consecutive quarters of growth, driven by high retention and strong new sales[89](index=89&type=chunk) - In March 2022, the Company acquired Accu-Trade for **$64.8 million** cash and **$5.3 million** in other consideration, gaining real-time VIN-specific appraisal and valuation data, instant guaranteed offer capabilities, and logistics technology[90](index=90&type=chunk) - In November 2021, the Company acquired CreditIQ for **$30.0 million** cash, integrating an automotive fintech platform for instant online loan screening and approvals across the CARS platform[91](index=91&type=chunk) - In February 2022, the Board authorized a three-year share repurchase program for up to **$200 million** of common stock. In Q1 2022, **0.3 million** shares were repurchased for **$5.0 million** at an average price of **$14.78** per share[92](index=92&type=chunk) [Overview of Results](index=18&type=section&id=Overview%20of%20Results) Total revenue for the three months ended March 31, 2022, increased to $158.2 million from $153.3 million in the prior year Revenue (in thousands) | Period | Revenue | | :-------------------- | :-------- | | Three Months 2022 | $158,207 | | Three Months 2021 | $153,295 | [Key Operating Metrics](index=19&type=section&id=Key%20Operating%20Metrics) The company's key operating metrics for Q1 2022 show a 5% decline in Traffic but a 2% increase in Average Monthly Unique Visitors year-over-year. Dealer Customers grew by 4% year-over-year, while Monthly Average Revenue Per Dealer (ARPD) increased by 1% year-over-year but decreased by 2% quarter-over-quarter Traffic and Average Monthly Unique Visitors (in thousands) | Metric | 2022 | 2021 | % Change | | :-------------------------- | :------ | :------ | :------- | | Traffic | 148,491 | 156,604 | (5)% | | Average Monthly Unique Visitors | 26,562 | 25,957 | 2% | - Traffic declined primarily due to elevated traffic in the prior year period related to increased consumer confidence and heightened consumer demand from the Federal economic stimulus program in Q1 2021[98](index=98&type=chunk) - The growth in Average Monthly Unique Visitors despite declining Traffic was primarily related to changes in traffic mix and a shorter shopping lifecycle for users due to continued lower vehicle inventory levels[100](index=100&type=chunk) Dealer Customers and Monthly Average Revenue Per Dealer | Metric | March 31, 2022 | March 31, 2021 | % Change (YoY) | December 31, 2021 | % Change (QoQ) | | :-------------------------- | :------------- | :------------- | :------------- | :---------------- | :------------- | | Dealer Customers | 19,500 | 18,823 | 4% | 19,179 | 2% | | Monthly Average Revenue Per Dealer | $2,291 | $2,268 | 1% | $2,333 | (2)% | - ARPD increased **1%** year-over-year driven by growth in digital solutions and FUEL revenue, but decreased **2%** quarter-over-quarter due to lower FUEL sales and changes in customer mix[102](index=102&type=chunk)[103](index=103&type=chunk) - Dealer Customers increased **4%** year-over-year and **2%** quarter-over-quarter, driven by sustained high retention rates and strong new sales[105](index=105&type=chunk) [Factors Affecting Our Performance](index=20&type=section&id=Factors%20Affecting%20Our%20Performance) The company's performance is influenced by the broader automotive ecosystem, including inventory supply disruptions, advertising trends, and macroeconomic factors. The company is focused on evolving its business towards a multi-faceted suite of digital solutions to navigate these challenges and the ongoing impacts of the COVID-19 pandemic - Business performance is impacted by changes in the automotive ecosystem, including inventory supply (semiconductor shortages), advertising trends, and macroeconomic factors. Vehicle sales volumes influence OEM and dealership investment in technology solutions[107](index=107&type=chunk) - The Company's long-term success depends on evolving towards a multi-faceted suite of digital solutions, leveraging its strong brand portfolio, growing audience, and innovative solutions to help dealers compete in an increasingly online car-buying environment[108](index=108&type=chunk) - The future effects of the COVID-19 pandemic are uncertain, but the company believes its marketplace, advertising, and digital solutions remain critical tools for customers to navigate current and future challenges[109](index=109&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) For the three months ended March 31, 2022, total revenue increased by 3% year-over-year, driven by a 6% rise in Dealer revenue, partially offset by a 16% decline in OEM and National revenue. Operating expenses increased by 8%, leading to a 34% decrease in operating income and an 18% decrease in net income Revenue (in thousands) | Revenue Source | 2022 | 2021 | $ Change | % Change | | :------------------ | :--------- | :--------- | :--------- | :------- | | Dealer | $140,416 | $132,958 | $7,458 | 6% | | OEM and National | $15,174 | $18,069 | $(2,895) | (16)% | | Other | $2,617 | $2,268 | $349 | 15% | | Total revenue | $158,207 | $153,295 | $4,912 | 3% | - Dealer revenue, the largest revenue stream (**89%** of total revenue), increased by **6%** due to a **4%** increase in Dealer Customers and a **1%** increase in ARPD[111](index=111&type=chunk) - OEM and National revenue declined by **16%** primarily due to pullbacks in OEM spending associated with fewer new model releases and continued production shortages driven by supply-chain disruptions[112](index=112&type=chunk)[113](index=113&type=chunk) Operating Expenses (in thousands) | Operating Expense | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :--------- | :--------- | :--------- | :------- | | Cost of revenue and operations | $27,752 | $27,831 | $(79) | (0)% | | Product and technology | $21,307 | $16,760 | $4,547 | 27% | | Marketing and sales | $57,094 | $53,211 | $3,883 | 7% | | General and administrative | $16,560 | $13,266 | $3,294 | 25% | | Depreciation and amortization | $24,553 | $25,680 | $(1,127) | (4)% | | Total operating expenses | $147,266 | $136,748 | $10,518 | 8% | | Operating income | $10,941 | $16,547 | $(5,606) | (34)% | | Income before income taxes | $1,819 | $6,584 | $(4,765) | (72)% | | Net income | $4,340 | $5,278 | $(938) | (18)% | - Product and technology expense increased by **27%** due to higher compensation, consulting, and licensing costs[115](index=115&type=chunk) - Marketing and sales expense increased by **7%** due to continued investment in marketing and a return to in-person industry events[116](index=116&type=chunk) - General and administrative expense increased by **25%** due to higher compensation costs (including stock-based compensation) and transaction-related costs from the Accu-Trade Acquisition[117](index=117&type=chunk) - Depreciation and amortization expense decreased by **4%** as certain assets became fully depreciated/amortized, partially offset by new asset acquisitions[118](index=118&type=chunk) - Interest expense, net, decreased by **$0.7 million** due to a reduction in total indebtedness[119](index=119&type=chunk) - The effective income tax rate was **(138.6)%** for Q1 2022, resulting in a **$2.5 million** income tax benefit, primarily due to benefits from stock-based compensation, uncertain tax positions, and a partial release of the valuation allowance[120](index=120&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash flows from operations, available cash reserves, and debt capacity. As of March 31, 2022, total liquidity was $215.5 million. Cash flows from operating activities decreased, while investing activities increased significantly due to the Accu-Trade acquisition, and financing activities shifted from a net use to a net provision of cash - Primary liquidity sources are cash flows from operations, available cash reserves, and debt capacity. As of March 31, 2022, Cash and cash equivalents were **$30.5 million**, and total liquidity (including undrawn Revolving Loan) was **$215.5 million**[122](index=122&type=chunk)[124](index=124&type=chunk) Indebtedness as of March 31, 2022 (in millions) | Debt Instrument | Outstanding Principal | Interest Rate | | :-------------------- | :-------------------- | :------------ | | Term Loan | $75.0 | 2.5% | | Revolving Loan | $45.0 | 2.5% | | Senior Unsecured Notes | $400.0 | 6.375% | | Total Indebtedness | $520.0 | 5.5% (effective) | - The interest rate swap had an unrealized loss of **$1.2 million** as of March 31, 2022, and **$1.4 million** was reclassified from Accumulated other comprehensive loss to Interest expense, net during Q1 2022[127](index=127&type=chunk) Cash Flows Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :---------- | | Net cash provided by operating activities | $30,358 | $50,362 | $(20,004) | | Net cash used in investing activities | $(68,778) | $(6,219) | $(62,559) | | Net cash provided by (used in) financing activities | $29,804 | $(58,138) | $87,942 | | Net change in cash and cash equivalents | $(8,616) | $(13,995) | $5,379 | - The decrease in operating cash flow was primarily due to changes in operating assets and liabilities, including timing of payables, and a **$9.1 million** tax refund received in Q1 2021 related to the CARES Act[128](index=128&type=chunk) - The increase in cash used in investing activities was primarily related to the Accu-Trade Acquisition[129](index=129&type=chunk) - Cash provided by financing activities in Q1 2022 was mainly from **$45.0 million** in Revolving Loan borrowings for the Accu-Trade Acquisition, partially offset by tax payments for equity awards and common stock repurchases. In Q1 2021, cash was used primarily for **$52.5 million** in debt repayments[131](index=131&type=chunk) - The company has no material off-balance sheet arrangements and no changes to critical accounting policies during the period[133](index=133&type=chunk)[134](index=134&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the company's Annual Report on Form 10-K for detailed quantitative and qualitative disclosures about market risk, stating that there have been no material changes since December 31, 2021 - The company's exposures to market risk have not changed materially since December 31, 2021, with detailed disclosures available in the Annual Report on Form 10-K[137](index=137&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the participation of the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2022, concluding they were effective. No material changes in internal control over financial reporting occurred during the period - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[138](index=138&type=chunk) - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the period[140](index=140&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 6 of the Consolidated Financial Statements for information regarding legal proceedings - Information relating to legal proceedings is provided in Note 6 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements[143](index=143&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the Annual Report on Form 10-K for a comprehensive discussion of risk factors, stating that there have been no material changes from those previously described - There have been no material changes from the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2021[144](index=144&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchase activity for the three months ended March 31, 2022, under its authorized share repurchase program Common Stock Repurchase Activity (Three Months Ended March 31, 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :------------------------------ | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :-------------------------------------------------------------------------------------------------- | | January 1 through January 31, 2022 | — | — | — | — | | February 1 through February 28, 2022 | — | — | — | 200,000 | | March 1 through March 31, 2022 | 338,243 | $14.78 | 338,243 | 195,000 | | Total | 338,243 | | 338,243 | | [Item 3. Defaults Upon Senior Securities](index=25&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[148](index=148&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[149](index=149&type=chunk) [Item 5. Other Information](index=25&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - No other information is reported[150](index=150&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including certifications from executive officers and various Inline XBRL documents - The exhibit index includes certifications of principal executive and financial officers (31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[153](index=153&type=chunk)

| --- | --- | --- | --- | |---------------------------------------------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | Fourth Quarter and Full-Year 2021 Earnings | | | | | February 24, 2022 | | | | Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements include information concerning th ...

Cars.com Inc. (NYSE:CARS) Q4 2021 Earnings Conference Call February 24, 2022 9:00 AM ET Company Participants Robbin Moore-Randolph - Director of IR Alex Vetter - CEO Sonia Jain - CFO Conference Call Participants Robert Zeller - Truist Dan Kurnos - Benchmark Company Gary Prestopino - Barrington Research Doug Arthur - Huber Research Operator Good morning, and welcome to the CARS' Fourth Quarter 2021 Earnings Conference Call. This call is being recorded, and a live webcast can be found at investor.cars.com. A ...

[Part I](index=3&type=section&id=PART%20I) [Business](index=3&type=section&id=Item%201.%20Business) Cars.com Inc. operates a leading digital automotive marketplace, connecting car shoppers with sellers through digital solutions and generating primary revenue from dealer subscriptions - The company's vision is to become the largest digital automotive marketplace platform, focusing on frictionless omni-channel transactions[9](index=9&type=chunk) - As of December 31, 2021, the company served **19,179 dealer customers** across all 50 states and nearly all OEMs selling vehicles in the U.S.[15](index=15&type=chunk)[16](index=16&type=chunk) FY2021 Revenue Breakdown | Revenue Source | Percentage of Total Revenue | | :--- | :--- | | Car Dealerships | 88.2% | | OEMs and National Advertisers | 10.4% | | Other Customers | 1.4% | - The company has expanded its offerings through key acquisitions, including DealerRater (2016), Dealer Inspire (2018), and CreditIQ (2021), to enhance its digital solutions and media offerings[13](index=13&type=chunk)[21](index=21&type=chunk) - As of December 31, 2021, CARS had approximately **1,600 full-time employees**, with **45% identifying as female** and **25% as having a racial and ethnic background other than white**[70](index=70&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, intense competition, reliance on OEMs, and evolving data privacy regulations - The COVID-19 pandemic has materially and adversely affected, and could continue to affect, the company's business, financial condition, and results of operations[73](index=73&type=chunk)[76](index=76&type=chunk) - The company faces significant competition from internet search engines (Google, Facebook), online automotive sites (AutoTrader, CarGurus), and website solution providers (Dealer.com, Sincro)[97](index=97&type=chunk) - The business depends on strong brand recognition and traffic from internet search engines like Google, where changes in algorithms could harm traffic[87](index=87&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) - Evolving data privacy laws, such as the California Consumer Privacy Act (CCPA), create uncertainty and could increase compliance costs or restrict business practices[141](index=141&type=chunk) - The company's debt agreements contain restrictive covenants that may limit operational flexibility, including restrictions on incurring additional debt and making certain payments[165](index=165&type=chunk) [Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[167](index=167&type=chunk) [Properties](index=20&type=section&id=Item%202.%20Properties) The company leases its principal executive office in Chicago, Illinois, and another office in Naperville, Illinois - The company maintains leased administrative offices in Chicago, Illinois and Naperville, Illinois[167](index=167&type=chunk) [Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) The company is occasionally involved in legal actions but does not believe any pending litigation will have a material adverse effect - The company does not have any pending litigation that is expected to have a material adverse effect on its results of operations, financial condition, or cash flows[168](index=168&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[169](index=169&type=chunk) [Part II](index=21&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=21&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is traded on the NYSE under "CARS", and it does not intend to pay cash dividends in the foreseeable future - Common stock is listed on the NYSE under the symbol **"CARS"**[172](index=172&type=chunk) - The company has never declared or paid cash dividends and does not currently intend to, as future earnings will be retained for business financing and growth[174](index=174&type=chunk) [Selected Financial Data](index=21&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is reserved and contains no information - This item is marked as [Reserved][177](index=177&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, Cars.com saw revenue grow 14% to $623.7 million, returned to profitability with $7.7 million net income, and strengthened its financial position [Overview of Results and Recent Trends](index=22&type=section&id=Overview%20of%20Results%20and%20Recent%20Trends) The company highlights key achievements in 2021, including consistent dealer customer growth, the CreditIQ acquisition, and significant debt reduction Financial Highlights (2019-2021) | (In thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Revenue** | $623,683 | $547,503 | $606,682 | | **Net income (loss)** | $7,719 | $(817,120) | $(445,324) | - Dealer Customers increased by **807**, or **4%**, to **19,179** as of December 31, 2021, marking six consecutive quarters of growth[182](index=182&type=chunk)[183](index=183&type=chunk) - Acquired CreditIQ, an automotive fintech platform, for **$30.0 million in cash upfront**, with potential for up to **$50.0 million in additional performance-based payments**[184](index=184&type=chunk) - The company made **$120.0 million of debt repayments** during 2021, of which **$110.0 million were voluntary prepayments**[186](index=186&type=chunk) [Key Operating Metrics](index=23&type=section&id=Key%20Operating%20Metrics) In 2021, key operating metrics showed strong performance, with average monthly unique visitors growing 5% and annual average revenue per dealer increasing 16% Key Operating Metrics (Annual) | Metric | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | % Change | | :--- | :--- | :--- | :--- | | Traffic (Visits, in thousands) | 591,499 | 599,807 | (1%) | | Average Monthly Unique Visitors (thousands) | 25,064 | 23,822 | 5% | | Monthly Average Revenue Per Dealer (ARPD) | $2,309 | $1,995 | 16% | Dealer Customer and Quarterly ARPD Trends | Metric | Dec 31, 2021 | Dec 31, 2020 | % Change (YoY) | Sep 30, 2021 | % Change (QoQ) | | :--- | :--- | :--- | :--- | :--- | :--- | | Dealer Customers | 19,179 | 18,372 | 4% | 19,029 | 1% | | Quarterly ARPD | $2,333 | $2,264 | 3% | $2,332 | 0% | [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Total revenue increased 14% to $623.7 million in 2021, driven by a 19% increase in Dealer revenue, leading to a significant improvement in operating income Consolidated Results of Operations (2021 vs. 2020) | (In thousands) | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | **$623,683** | **$547,503** | **$76,180** | **14%** | | Dealer revenue | $549,923 | $463,018 | $86,905 | 19% | | OEM and National revenue | $65,085 | $73,176 | $(8,091) | (11%) | | **Total operating expenses** | **$575,345** | **$1,434,830** | **$(859,485)** | **(60%)** | | Goodwill and intangible asset impairment | $— | $905,885 | $(905,885) | (100%) | | **Operating income (loss)** | **$48,338** | **$(887,327)** | **$935,665** | **N/A** | | **Net income (loss)** | **$7,719** | **$(817,120)** | **$824,839** | **N/A** | - The **19% increase in Dealer revenue** was driven by growth in FUEL and digital solutions, a **4% increase in Dealer Customers**, and the absence of approximately **$38.2 million in invoice credits** provided in 2020 due to the COVID-19 pandemic[205](index=205&type=chunk)[206](index=206&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity of $269.1 million at year-end 2021, supported by consistent operating cash flow and significant debt repayments - As of December 31, 2021, total liquidity was **$269.1 million**, including **$39.1 million in cash and cash equivalents** and **$230.0 million available** under the Revolving Loan[224](index=224&type=chunk) - Total outstanding debt principal was **$477.5 million** as of December 31, 2021, consisting of a **$77.5 million Term Loan** and **$400.0 million in senior unsecured notes**[225](index=225&type=chunk) Cash Flow Summary (2021 vs. 2020) | (In thousands) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $138,003 | $138,616 | $(613) | | Net cash used in investing activities | $(39,450) | $(16,712) | $(22,738) | | Net cash used in financing activities | $(127,203) | $(67,734) | $(59,469) | - In February 2022, the Board authorized a new three-year, **$200 million share repurchase program**[242](index=242&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management identifies critical accounting policies requiring significant judgment, including revenue recognition, goodwill impairment, and business combination accounting - Revenue Recognition: The primary revenue source, marketplace subscription advertising, is recognized ratably over the contract term, with add-on products typically combined as a single performance obligation[245](index=245&type=chunk)[247](index=247&type=chunk) - Goodwill Impairment: Goodwill is tested annually at the single reporting unit level, involving subjective estimates for future cash flows, growth rates, and discount rates in a DCF analysis, supplemented by market-based valuations[253](index=253&type=chunk)[257](index=257&type=chunk) - Business Combinations: For acquisitions like CreditIQ, the company estimates the fair value of intangible assets and contingent consideration, with the latter valued using a Monte Carlo simulation or scenario-based method[262](index=262&type=chunk)[265](index=265&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate risk, managed by a swap, and immaterial foreign currency exchange risk - The company manages interest rate risk on its variable-rate Term Loan with an interest rate swap, locking in a fixed rate of **2.96%** on a notional amount of **$300 million**[269](index=269&type=chunk) - Hedge accounting for the interest rate swap was lost in 2020; subsequent changes in the swap's fair value are recorded in Other (expense) income, net[270](index=270&type=chunk) - Foreign currency exchange risk is not significant due to operations being primarily based in the United States[272](index=272&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for the three years ended December 31, 2021, along with detailed notes [Report of Independent Registered Public Accounting Firm](index=33&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements, highlighting Revenue Recognition and the CreditIQ acquisition as critical audit matters - The auditor, Ernst & Young LLP, issued an **unqualified opinion** on the consolidated financial statements[275](index=275&type=chunk) - Critical Audit Matters identified were Revenue Recognition, due to judgment in identifying performance obligations, and the acquisition of CreditIQ, Inc., due to complex estimations for the fair value of contingent consideration and intangible assets[279](index=279&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk) [Consolidated Financial Statements](index=35&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail the company's financial position and performance, including $1.01 billion in total assets and $7.7 million net income in 2021 Consolidated Balance Sheet Highlights (As of Dec 31) | (In thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Total current assets | $147,437 | $178,081 | | Goodwill | $26,227 | $— | | Intangible assets, net | $769,424 | $835,166 | | **Total assets** | **$1,007,205** | **$1,075,712** | | Total current liabilities | $94,290 | $90,368 | | Long-term debt, net | $457,383 | $576,143 | | **Total liabilities** | **$640,271** | **$735,536** | | **Total stockholders' equity** | **$366,934** | **$340,176** | Consolidated Statement of Income (Loss) Highlights | (In thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total revenue | $623,683 | $547,503 | $606,682 | | Operating income (loss) | $48,338 | $(887,327) | $(446,060) | | Net income (loss) | $7,719 | $(817,120) | $(445,324) | | Diluted EPS | $0.11 | $(12.15) | $(6.65) | [Notes to Consolidated Financial Statements](index=40&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide critical context, detailing the CreditIQ acquisition, goodwill impairment, debt structure, and subsequent events like the Accu-Trade acquisition - Note 3: The company acquired CreditIQ, Inc. on November 5, 2021, with total purchase consideration of **$44.1 million**, including **$29.97 million in cash** and **$23.8 million in contingent consideration**[357](index=357&type=chunk)[359](index=359&type=chunk) - Note 5: Goodwill was **$26.2 million** as of Dec 31, 2021, entirely from the CreditIQ acquisition, following a **$505.9 million goodwill impairment** and **$400.0 million indefinite-lived intangible asset impairment** recorded in 2020[367](index=367&type=chunk)[375](index=375&type=chunk) - Note 7: As of Dec 31, 2021, total debt outstanding was **$477.5 million**, comprising a **$77.5 million Term Loan** and **$400.0 million in 6.375% senior unsecured notes due 2028**[392](index=392&type=chunk)[393](index=393&type=chunk)[400](index=400&type=chunk) - Note 16: In February 2022, the company signed an agreement to acquire Accu-Trade for **$65 million in cash** and authorized a new three-year, **$200 million share repurchase program**[439](index=439&type=chunk)[440](index=440&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=57&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[442](index=442&type=chunk) [Controls and Procedures](index=57&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with an unqualified auditor opinion - Management concluded that disclosure controls and procedures were **effective** as of December 31, 2021[443](index=443&type=chunk) - Management concluded that internal control over financial reporting was **effective** as of December 31, 2021, based on the COSO framework (2013)[446](index=446&type=chunk) - The independent registered public accounting firm, Ernst & Young LLP, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting[451](index=451&type=chunk) [Other Information](index=59&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[458](index=458&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=59&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) This item is not applicable to the company - Not applicable[460](index=460&type=chunk) [Part III](index=60&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=60&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[462](index=462&type=chunk) [Executive Compensation](index=60&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[462](index=462&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=60&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[463](index=463&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=60&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[464](index=464&type=chunk) [Principal Accounting Fees and Services](index=60&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding aggregate fees billed by the principal accountant, Ernst & Young LLP, is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement[465](index=465&type=chunk) [Part IV](index=61&type=section&id=PART%20IV) [Exhibits, Financial Statement Schedules](index=61&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and schedules filed with the report, along with an index of all exhibits - Lists the financial statements included in Item 8 and Financial Statement Schedule II-Valuation and Qualifying Accounts[467](index=467&type=chunk)[468](index=468&type=chunk) - An exhibit index is provided, listing key corporate and financial documents filed with the report[468](index=468&type=chunk)[470](index=470&type=chunk) [Form 10-K Summary](index=65&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for its Form 10-K - None[475](index=475&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q3 2021 totaled $156.6 million, up 8% year-over-year, with dealer revenue growing by 12% [25][14] - Adjusted EBITDA totaled $45.8 million, or 29% of revenue, compared to $49 million, or 34% of revenue for the prior year [28] - Operating expenses for Q3 were $144.5 million, an increase of 13% year-over-year [27] Business Line Data and Key Metrics Changes - Dealer Inspire revenue grew 27% year-over-year [64] - ARPD increased 7% year-over-year to $2,332, driven by increased penetration of FUEL and digital solutions [32][19] - The number of dealer customers reached 19,029, an increase of 899 compared to the prior year [29] Market Data and Key Metrics Changes - OEM and national revenue for the quarter was $15.3 million, down 14% year-over-year due to the chip shortage [26] - Certified pre-owned market sales were robust, with strong OEM interest in CTO products [26][15] - Average monthly unique visitors and visits were down 4% and 10% year-over-year, respectively, but up 5% compared to Q3 2019 [31][16] Company Strategy and Development Direction - The acquisition of CreditIQ aims to enhance the automotive technology platform and create a new revenue stream from lenders [6][12] - The company is focusing on empowering dealers with innovative digital solutions and transitioning from a legacy model to a platform strategy [22][21] - The strategy includes enhancing financing capabilities to engage consumers and benefit dealers [22][12] Management's Comments on Operating Environment and Future Outlook - Management expects continued strength in dealer business and a rebound in OEM revenue as supply chain disruptions ease [14] - The company anticipates fourth quarter revenue to be between $157.5 million and $159.5 million, representing 3% to 4% year-over-year growth [38] - Management remains cautious about OEM advertising due to ongoing supply constraints but sees potential growth in certified pre-owned programs [81][80] Other Important Information - The company ended the quarter with a cash balance of $51.5 million and total liquidity of $281.5 million [33] - Free cash flow for the nine-month period was $98.3 million, up 17% from the previous year [36] - The acquisition of CreditIQ is valued at $30 million at closing, with potential performance-based payouts of up to $50 million over three years [34] Q&A Session Summary Question: Could you talk about the fintech acquisition and its economic impact? - Management highlighted the significant opportunity in the fintech market, with 40 million vehicles financed annually, and emphasized the benefits for dealers in terms of efficiency and profitability [41][42] Question: Is the fintech product subscription-based or transaction-based? - The fintech product will primarily be transaction-based, focusing on funded loans, with a lending-as-a-service component also available [49][50] Question: How is the dealer mix evolving with the current supply constraints? - Management noted strong dealer growth, with independent dealers recognizing the efficiency of location-based marketplaces [44] Question: What is the timeline for the Ford rollout? - The Ford rollout will occur on a rolling basis, with strong interest from Ford dealerships [62] Question: What is the expected EBITDA impact from CreditIQ in Q4 and next year? - There is no material EBITDA impact expected in Q4, but investments will be made in 2022 to scale the product [76][75]

Financial Performance - Q3 2021 Adjusted EBITDA was $45772 thousand[29] - Q4 2021 revenue is expected to be between $1575 million and $1595 million[27] - Q4 2021 Adjusted EBITDA margins are projected between 285% and 305%[27] - YTD Free Cash Flow as of September 30, 2021 was $98347 thousand[31] Key Metrics - Marketplace visits reached 1424 million[10] - Average Monthly Unique Visitors were 243 million in Q3 2021[22] - Dealer customers increased to 19029 in Q3 2021, a growth of 899 year-over-year[14,22] - Monthly ARPD was $2332 in Q3 2021[22] Strategic Initiatives - CARS acquired CreditIQ, an auto finance technology platform, for $30 million at closing plus a potential $50 million earn-out[9,28] - Dealer Inspire websites grew, reaching over 5200 total websites[17]