Financial Performance - Full Year 2022 Revenue reached $653.9 million, a 5% year-over-year increase compared to $623.7 million in 2021[61] - Full Year 2022 Dealer Revenue was $579.2 million, up from $549.9 million in 2021[61] - Adjusted EBITDA for 2022 was $186.728 million, compared to $189.202 million in 2021[7] - Free Cash Flow for 2022 was $108.797 million, compared to $118.811 million in 2021[7] - The company anticipates Q1 2023 revenue between $166 million and $168 million, representing a 5% to 6% year-over-year growth[75] Key Metrics - Dealer Customers increased to 19,506 in Q4 2022, compared to 19,179 in Q4 2021[2, 49] - Website Customers reached 6,050 in Q4 2022, an increase of 700 customers year-over-year[39] - Monthly Average Revenue Per Dealer (ARPD) was $2,361 in Q4 2022[49] - Average Monthly Unique Visitors were 24.6 million in Q4 2022, compared to 23.6 million in Q4 2021[49] - Total Visits (Traffic) were 587 million for the full year 2022[37] Strategic Initiatives - The company has expanded its Total Addressable Market (TAM) to $50 billion[27] - Over 2,200 dealers have opted-in for CreditIQ instant financing since its nationwide launch in September 2022[53] - Accu-Trade has connected with over 500 customers, appraised over 600,000 vehicles, and generated over 80,000 instant offers for consumers[40]

[PART I](index=3&type=section&id=PART%20I) This section provides an overview of Cars.com Inc.'s business operations, strategic focus, and key risk factors impacting its performance and outlook [Business Overview](index=3&type=section&id=Item%201.%20Business) Cars.com Inc. (CARS) is a leading automotive marketplace platform connecting car shoppers with sellers, offering digital solutions through various brands - The company operates as a leading automotive marketplace and digital solutions provider, with a portfolio of brands including Cars.com, Dealer Inspire, FUEL, DealerRater, CreditIQ, and Accu-Trade[283](index=283&type=chunk)[284](index=284&type=chunk)[312](index=312&type=chunk) - In 2022, the company attracted an average of **26 million monthly unique visitors**, with approximately **85% of visitors** intending to purchase a vehicle within six months[285](index=285&type=chunk) - The primary customers are car dealers and OEMs; as of December 31, 2022, the company served **19,506 dealer customers** and nearly all OEMs in the United States[287](index=287&type=chunk)[315](index=315&type=chunk) - The company's growth strategy focuses on expanding its dealer network, increasing revenue per dealer by cross-selling solutions like Accu-Trade, enhancing shopper engagement, and innovating on its platform[304](index=304&type=chunk) - As of December 31, 2022, CARS had approximately **1,700 full-time employees**, none of whom are represented by a labor union[338](index=338&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to the automotive ecosystem, including economic downturns, supply chain disruptions, and changes in consumer demand - Business is subject to macroeconomic risks, including recession, inflation, and interest rate hikes, which can reduce consumer demand for automobiles and affect dealer spending on advertising[340](index=340&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk) - The company faces intense competition from internet search engines, other online marketplaces (e.g., AutoTrader, CarGurus), and website solution providers; consolidation among dealers or OEMs could reduce demand for services[360](index=360&type=chunk)[374](index=374&type=chunk)[384](index=384&type=chunk) - Reliance on internet search engines (like Google) for traffic and the potential for algorithm changes pose a significant risk; a failure to appear prominently in search results could adversely affect traffic[348](index=348&type=chunk)[379](index=379&type=chunk) - Technology and data security are critical; the business is vulnerable to system failures, cyber-attacks, and data breaches, which could damage its reputation and result in financial liabilities; changes in data privacy laws (e.g., related to cookies) could also impact advertising effectiveness[419](index=419&type=chunk)[433](index=433&type=chunk)[435](index=435&type=chunk) - As of December 31, 2022, goodwill and other intangible assets were approximately **$809.9 million** (**79% of total assets**), which are subject to impairment risk[425](index=425&type=chunk) - Debt agreements contain restrictive covenants that limit operational flexibility, including restrictions on incurring additional debt, making distributions, and other corporate transactions[457](index=457&type=chunk)[487](index=487&type=chunk) [PART II](index=23&type=section&id=PART%20II) This section provides a detailed discussion and analysis of the company's financial condition, results of operations, market risks, and financial statements [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=25&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, Cars.com Inc. saw a 5% increase in total revenue to $653.9 million, driven by a 5% growth in Dealer revenue, with operating income rising 37% to $66.0 million [Overview of Results](index=25&type=section&id=Overview%20of%20Results) The company's performance in 2022 was marked by strategic acquisitions and steady growth in key metrics, including a 5% increase in average monthly unique visitors - In March 2022, the company acquired Accu-Trade for **$64.7 million in cash** and **$5.3 million in other consideration** to add vehicle appraisal, valuation, and logistics technology to its product suite[3](index=3&type=chunk) - In November 2021, the company acquired CreditIQ, an automotive fintech platform, for **$30.0 million in cash** at closing, with potential additional consideration based on future performance[469](index=469&type=chunk) - A three-year, **$200 million share repurchase program** was authorized in February 2022; during 2022, **4.2 million shares** were repurchased for **$49.0 million**[532](index=532&type=chunk)[544](index=544&type=chunk) Key Operating Metrics (2022 vs. 2021) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Traffic (in thousands) | 587,388 | 591,499 | (1)% | | Average Monthly Unique Visitors (in thousands) | 26,400 | 25,064 | 5% | | Annual ARPD | $2,329 | $2,309 | 1% | Dealer Customer and Quarterly ARPD Trends | Metric | Dec 31, 2022 | Dec 31, 2021 | YoY % Change | Sep 30, 2022 | QoQ % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Dealer Customers | 19,506 | 19,179 | 2% | 19,585 | 0% | | Quarterly ARPD | $2,361 | $2,333 | 1% | $2,334 | 1% | [Results of Operations (2022 vs 2021)](index=27&type=section&id=Results%20of%20Operations) For the year ended December 31, 2022, total revenue increased by 5% to $653.9 million, primarily due to a 5% rise in Dealer revenue, leading to a 37% increase in operating income Consolidated Results of Operations (in thousands) | Line Item | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | **$653,876** | **$623,683** | **$30,193** | **5%** | | Dealer | $579,222 | $549,923 | $29,299 | 5% | | OEM and National | $58,557 | $65,085 | ($6,528) | (10)% | | Other | $16,097 | $8,675 | $7,422 | 86% | | **Total operating expenses** | **$587,840** | **$575,345** | **$12,495** | **2%** | | **Operating income** | **$66,036** | **$48,338** | **$17,698** | **37%** | | Income before income taxes | $22,576 | $9,483 | $13,093 | *** | | **Net income** | **$17,206** | **$10,791** | **$6,415** | **59%** | - Dealer revenue, representing **88.6% of total revenue**, grew by **5%** due to an increase in dealer customers and growth in digital solutions and advertising[505](index=505&type=chunk) - OEM and National revenue decreased by **10%** primarily due to pullbacks in OEM spending associated with production delays and supply-chain disruptions[9](index=9&type=chunk) - Product and technology expenses increased by **15%** due to investments related to recent acquisitions, talent acquisition, and other fees[539](index=539&type=chunk) - General and administrative expenses decreased by **8%**, mainly because 2021 included **$9.6 million** in compensation expense related to the CreditIQ Acquisition[11](index=11&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash from operations and its credit facilities, with total liquidity of $246.7 million as of December 31, 2022 - As of December 31, 2022, the company had **$31.7 million** in cash and cash equivalents and **$215.0 million** available under its Revolving Loan, for a total liquidity of **$246.7 million**[15](index=15&type=chunk)[16](index=16&type=chunk) Cash Flow Summary (in thousands) | Activity | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $128,511 | $138,003 | ($9,492) | | Net cash used in investing activities | ($84,377) | ($39,450) | ($44,927) | | Net cash used in financing activities | ($51,488) | ($127,203) | $75,715 | - The decrease in operating cash flow was mainly due to changes in working capital and the non-recurrence of a **$9.1 million tax refund** received in 2021[19](index=19&type=chunk) - The company has potential future contingent consideration payments related to the CIQ and Accu-Trade acquisitions, with a maximum of **$50.0 million** for CIQ (cash) and **$63.0 million** for Accu-Trade (cash or stock)[17](index=17&type=chunk)[18](index=18&type=chunk)[517](index=517&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant management judgment and estimates, particularly in revenue recognition and business combinations - Revenue from marketplace subscription packages and add-on products is typically combined as a single performance obligation and recognized ratably over the contract term[22](index=22&type=chunk)[519](index=519&type=chunk) - Pay-per-lead revenue is recognized at the point in time the lead is delivered to the customer[23](index=23&type=chunk)[119](index=119&type=chunk) - Contingent consideration from acquisitions is measured at fair value using Level 3 inputs (e.g., Monte Carlo simulation) and is re-assessed at each reporting period, with changes recognized in earnings[54](index=54&type=chunk)[143](index=143&type=chunk)[553](index=553&type=chunk) - Intangible assets from acquisitions are recorded at fair value, determined using methods like multi-period excess earnings and relief-from-royalty, and are amortized over their useful lives (typically **5-10 years**)[53](index=53&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are related to changes in interest rates on its variable-rate debt and immaterial foreign currency exchange exposure - The company is exposed to interest rate risk on its variable-rate Term Loan and Revolving Loan; as of Dec 31, 2022, the Term Loan had an outstanding principal of **$66.3 million** at **6.7%** and the Revolving Loan had **$15.0 million** outstanding at **6.4%**[554](index=554&type=chunk) - Foreign currency exchange risk is currently immaterial, arising from a limited number of Canadian customers acquired through DealerRater, Dealer Inspire, and Accu-Trade[55](index=55&type=chunk) [Financial Statements and Supplementary Data](index=33&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements, audited by Ernst & Young LLP, present the company's financial position, results of operations, and cash flows for the three years ended December 31, 2022 - The independent auditor, Ernst & Young LLP, issued an unqualified opinion, stating that the financial statements are presented fairly in conformity with U.S. GAAP[56](index=56&type=chunk) - The auditor also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2022, based on the COSO 2013 framework[67](index=67&type=chunk)[525](index=525&type=chunk) Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $31,715 | $39,069 | | Goodwill | $102,856 | $26,227 | | Intangible assets, net | $707,088 | $769,424 | | **Total assets** | **$1,024,870** | **$1,007,205** | | Long-term debt, net | $458,249 | $457,383 | | **Total liabilities** | **$640,440** | **$609,185** | | **Total stockholders' equity** | **$384,430** | **$398,020** | Consolidated Income Statement Data (in thousands) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total revenue | $653,876 | $623,683 | $547,503 | | Operating income (loss) | $66,036 | $48,338 | ($887,327) | | Net income (loss) | $17,206 | $10,791 | ($789,106) | | Diluted EPS | $0.25 | $0.15 | ($11.74) | Consolidated Cash Flow Data (in thousands) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $128,511 | $138,003 | $138,616 | | Net cash used in investing activities | ($84,377) | ($39,450) | ($16,712) | | Net cash used in financing activities | ($51,488) | ($127,203) | ($67,734) | | Net (decrease) increase in cash | ($7,354) | ($28,650) | $54,170 | [Controls and Procedures](index=62&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[246](index=246&type=chunk) - Based on the COSO 2013 framework, management concluded that internal control over financial reporting was effective as of December 31, 2022[247](index=247&type=chunk) - The independent registered public accounting firm, Ernst & Young LLP, issued an unqualified audit report on the effectiveness of the company's internal control over financial reporting[219](index=219&type=chunk)[249](index=249&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, these controls[248](index=248&type=chunk) [PART III](index=65&type=section&id=PART%20III) This section incorporates by reference information regarding directors, executive compensation, security ownership, and related party transactions from the company's proxy statement [Director and Executive Information, Compensation, and Corporate Governance](index=65&type=section&id=Items%2010-14) Information for Items 10 through 14 of the Form 10-K is incorporated by reference from the company's definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the Company's definitive proxy statement, to be filed within **120 days** of the fiscal year-end[40](index=40&type=chunk)[229](index=229&type=chunk)[255](index=255&type=chunk) [PART IV](index=66&type=section&id=PART%20IV) This section details the financial statements, schedules, and exhibits filed as part of the Form 10-K, including the Credit Agreement and compensation plans [Exhibits and Financial Statement Schedules](index=66&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K, with required statements in Item 8 - The financial statements required by this item are listed in Part II, Item 8 of the report[265](index=265&type=chunk) - The report includes Schedule II - Valuation and Qualifying Accounts, which details the allowance for doubtful accounts for 2020, 2021, and 2022[69](index=69&type=chunk)[613](index=613&type=chunk) - The Exhibit Index lists numerous documents filed with the report, including the Credit Agreement and its amendments, indentures, and various executive and employee compensation plans[266](index=266&type=chunk)[566](index=566&type=chunk)

Cars.com Inc. (NYSE:CARS) Q3 2022 Earnings Conference Call November 3, 2022 9:00 AM ET Company Participants Alex Vetter - CEO Sonia Jain - CFO Jandy Tomy - EVP, Finance & Treasurer Robbin Moore-Randolph - Director, IR Conference Call Participants Tom White - D.A. Davidson & Co. Naved Khan - Truist Securities Marvin Fong - BTIG Doug Arthur - Huber Research Partners Operator Good morning, and welcome to the CARS Third Quarter 2022 Earnings Conference Call. This call is being recorded, and a live webcast can b ...

Third Quarter 2022 Earnings November 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 pot ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and management's discussion and analysis [Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and accompanying notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets increased to $1.05 billion, primarily due to goodwill, while total liabilities grew to $673.6 million Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$1,050,168** | **$1,007,205** | | Cash and cash equivalents | $31,920 | $39,069 | | Goodwill | $102,477 | $26,227 | | Intangible assets, net | $726,247 | $769,424 | | **Total Liabilities** | **$673,641** | **$609,185** | | Long-term debt, net | $482,740 | $457,383 | | **Total Stockholders' Equity** | **$376,527** | **$398,020** | [Consolidated Statements of (Loss) Income](index=4&type=section&id=Consolidated%20Statements%20of%20(Loss)%20Income) The company reported a Q3 2022 net loss of $2.9 million, a shift from prior year net income, primarily due to a nonoperating expense Income Statement Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$164,595** | **$156,553** | **$485,675** | **$465,378** | | Operating Income | $19,899 | $12,074 | $46,225 | $44,276 | | **Net (Loss) Income** | **($2,941)** | **$2,431** | **$6,944** | **$13,675** | | Diluted (Loss) EPS | ($0.04) | $0.03 | $0.10 | $0.19 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2022, operating cash flow decreased to $91.3 million, while investing activities significantly increased due to an acquisition Cash Flow Summary for Nine Months Ended Sept 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $91,291 | $116,226 | | Net cash used in investing activities | ($79,169) | ($17,879) | | Net cash used in financing activities | ($19,271) | ($114,559) | | **Net decrease in cash** | **($7,149)** | **($16,212)** | [Notes to the Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes detail revenue breakdown, significant acquisitions, debt structure, and the company's share repurchase program Revenue by Major Products and Services (in thousands) | Product/Service | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Subscription advertising and digital solutions | $135,433 | $131,293 | $403,112 | $385,472 | | Display advertising | $22,699 | $20,766 | $64,607 | $64,045 | | **Total Revenue** | **$164,595** | **$156,553** | **$485,675** | **$465,378** | - The company acquired Accu-Trade on March 1, 2022, for a total purchase consideration of **$94.0 million**, which included **$77.0 million in goodwill**[40](index=40&type=chunk)[42](index=42&type=chunk)[46](index=46&type=chunk) - In February 2022, the Board of Directors authorized a three-year, **$200 million** share repurchase program, with the company repurchasing **3.5 million shares** for **$40.0 million** during the first nine months of 2022[68](index=68&type=chunk)[70](index=70&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, key operating metrics, the impact of acquisitions, and reviews liquidity and capital resources [Key Operating Metrics](index=20&type=section&id=Key%20Operating%20Metrics) In Q3 2022, Average Monthly Unique Visitors grew 12% year-over-year, while Dealer Customers increased 3% and Monthly ARPD remained flat Key Operating Metrics Comparison | Metric | Q3 2022 | Q3 2021 | % Change YoY | Q2 2022 | % Change QoQ | | :--- | :--- | :--- | :--- | :--- | :--- | | Traffic (Visits, thousands) | 150,449 | 142,418 | 6% | N/A | N/A | | Average Monthly UVs (thousands) | 27,309 | 24,341 | 12% | N/A | N/A | | Dealer Customers | 19,585 | 19,029 | 3% | 19,517 | 0% | | Monthly ARPD | $2,334 | $2,332 | 0% | $2,326 | 0% | [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q3 2022 total revenue increased 5% year-over-year, but a net loss was recorded primarily due to contingent consideration remeasurement - Q3 2022 Dealer revenue increased by **$6.1 million (4%)** year-over-year, primarily due to a **3% increase in Dealer Customers**[113](index=113&type=chunk) - Q3 2022 OEM and National revenue decreased **2%** due to spending pullbacks by certain OEMs related to production delays and supply-chain disruptions[114](index=114&type=chunk) - The significant change in 'Other (expense) income, net' for both the three and nine-month periods was primarily due to the remeasurement of the fair value of contingent consideration from the CreditIQ and Accu-Trade acquisitions[122](index=122&type=chunk)[135](index=135&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2022, total liquidity was $226.9 million, with outstanding debt of $505.0 million, and operating cash flow decreased year-over-year - Total liquidity as of September 30, 2022, was **$226.9 million**, including **$31.9 million** in cash and cash equivalents and **$195.0 million** available under the Revolving Loan[140](index=140&type=chunk) - Total outstanding debt principal was **$505.0 million** as of September 30, 2022, composed of a Term Loan, Revolving Loan borrowings, and Senior Unsecured Notes[141](index=141&type=chunk) - The decrease in operating cash flow for the nine months ended September 30, 2022, was primarily due to changes in working capital and the non-recurrence of a **$9.1 million** tax refund received in the prior-year period[145](index=145&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in its market risk exposures since December 31, 2021 - There have been no material changes in the company's market risk exposures since December 31, 2021[154](index=154&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[155](index=155&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[157](index=157&type=chunk) [PART II. OTHER INFORMATION](index=28&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information on legal proceedings, risk factors, and equity security sales [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is contained in Note 7 of the Consolidated Financial Statements, with no new material developments - Information regarding legal proceedings is contained in Note 7 (Commitments and Contingencies) of the Consolidated Financial Statements[160](index=160&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes from the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021[161](index=161&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2022, the company repurchased 1.43 million shares as part of its $200 million share repurchase program Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Remaining Authorization (in thousands) | | :--- | :--- | :--- | :--- | | July 2022 | 479,836 | $10.41 | $171,697 | | August 2022 | 432,819 | $13.09 | $166,033 | | September 2022 | 519,995 | $11.58 | $160,012 | | **Total** | **1,432,650** | **N/A** | **$160,012** | - In February 2022, the Board of Directors authorized a three-year share repurchase program for up to **$200 million** of the company's common stock[164](index=164&type=chunk)

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)