Financial Performance - Total revenue for the three months ended September 30, 2021, was $156,553 thousand, an increase of 8.0% from $144,392 thousand in the same period of 2020[14]. - Net income for the three months ended September 30, 2021, was $2,431 thousand, compared to a net loss of $12,261 thousand in the same period of 2020[17]. - Operating income for the three months ended September 30, 2021, was $12,074 thousand, down from $19,063 thousand in the same period of 2020[14]. - Total revenue for the third quarter of 2021 was $156.6 million, a 8.0% increase from $144.4 million in the same quarter of 2020[34]. - The company reported a comprehensive income of $3,633 thousand for the three months ended September 30, 2021, compared to a comprehensive loss of $9,170 thousand in the same period of 2020[17]. - Net income for the nine months ended September 30, 2021, was $13.675 million, a significant improvement compared to a net loss of $824.339 million for the same period in 2020[24]. - For the nine months ended September 30, 2021, revenue reached $465.4 million, compared to $394.5 million in the same period of 2020, marking an 18.0% increase[91]. - The net income for the nine months ended September 30, 2021, was $13.7 million, contrasting with a net loss of $824.3 million in the same period of 2020, primarily due to a goodwill impairment[91]. Assets and Liabilities - Total current assets decreased to $161,710 thousand as of September 30, 2021, from $178,081 thousand as of December 31, 2020, representing a decline of 9.2%[11]. - Total liabilities decreased to $631,567 thousand as of September 30, 2021, from $735,536 thousand as of December 31, 2020, a reduction of 14.1%[11]. - Long-term debt decreased to $470,520 thousand as of September 30, 2021, from $576,143 thousand as of December 31, 2020, a decrease of 18.3%[11]. - The balance of accumulated deficit as of September 30, 2021, was $(1,170.512) million, reflecting ongoing challenges in profitability[24]. - Cash and cash equivalents at the end of the period were $51.507 million, compared to $43.769 million at the end of the same period in 2020[24]. - The outstanding aggregate principal amount of debt was $490.0 million as of September 30, 2021, with an effective interest rate of 5.7%[147]. Cash Flow - Cash provided by operating activities for the nine months ended September 30, 2021, was $116.226 million, compared to $96.866 million for the same period in 2020[24]. - The company reported a net cash decrease of $16.212 million for the nine months ended September 30, 2021, compared to an increase of $30.220 million in the same period of 2020[24]. - The company made $107.500 million in payments of long-term debt during the nine months ended September 30, 2021, compared to $215.312 million in the same period of 2020[24]. - Cash used in investing activities increased to $(17.9) million in 2021 from $(12.6) million in 2020, a change of $(5.3) million[153]. - Cash used in financing activities was $(114.6) million in 2021, primarily due to $107.5 million of debt repayments, compared to $(54.0) million in 2020[155]. Stockholders' Equity - Total stockholders' equity increased to $366,560 thousand as of September 30, 2021, from $340,176 thousand as of December 31, 2020, an increase of 7.8%[11]. - The company reported a stockholders' equity of $366.560 million as of September 30, 2021, indicating a slight increase from previous periods[24]. Digital Solutions and Strategy - The company has a diverse portfolio of brands including Cars.com, Dealer Inspire, and Auto.com, focusing on digital solutions for the automotive marketplace[27]. - The company’s digital solutions strategy aims to enhance dealer inventory visibility and connect sellers with potential buyers, leveraging rich data from its marketplace[27]. - The company’s digital solutions strategy leverages rich data and audience engagement to drive growth and efficiency in the automotive industry[90]. Customer Metrics - Dealer Customers increased by 1% to 19,029 as of September 30, 2021, compared to 18,845 as of June 30, 2021, and up 5% from 18,130 as of September 30, 2020[100][109]. - Dealer revenue, which represents 89.0% of total revenue, increased by $15.4 million or 12% year-over-year, driven by a 7% increase in Average Revenue Per Dealer (ARPD) and a 5% increase in Dealer Customers[115]. - Average Revenue Per Dealer (ARPD) increased by 1% from June 30, 2021, and by 7% from September 30, 2020, primarily due to growth in FUEL revenue and digital solutions[107]. Expenses - Operating expenses for the three months ended September 30, 2021, totaled $144,479 thousand, an increase of 15.3% from $125,329 thousand in the same period of 2020[14]. - Marketing and sales expense represented 33.6% of total revenue for the nine months ended September 30, 2021, reflecting continued investment in marketing[135]. - General and administrative expense increased to 10.1% of total revenue for the nine months ended September 30, 2021, due to increased compensation costs[136]. - Product and technology expense increased to 12.1% of total revenue for the nine months ended September 30, 2021, due to continued investment in the business[134]. Tax and Refunds - The effective income tax rate for the nine months ended September 30, 2021, was 8.4%, down from 12.0% in the same period of 2020[60]. - The company received a $9.1 million tax refund during the nine months ended September 30, 2021, related to the carryback of federal and state income tax net operating loss due to the CARES Act[59]. Acquisitions - In November 2021, the company signed an agreement to acquire CreditIQ, Inc. for $30 million, with potential additional payments of up to $50 million based on future performance[62].

Q2 2021 Earnings August 5, 2021 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 potential, outlo ...

Cars.com Inc. (NYSE:CARS) Q2 2021 Earnings Conference Call August 5, 2021 10:00 AM ET Company Participants Robbin Moore-Randolph - Director of Investor Relations Alex Vetter - Chief Executive Officer Sonia Jain - Chief Financial Officer Conference Call Participants Tom White - D.A. Davidson Matt Wegner - Craig-Hallum Capital Nick Jones - Citi Marvin Fong - BTIG Doug Arthur - Huber Research Operator Good morning and welcome to the Cars Second Quarter 2021 Earnings Conference Call. This call is being recorded ...

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 Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ 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, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15( ...

Cars.com, Inc. (NYSE:CARS) Q1 2021 Earnings Conference Call May 6, 2021 10:00 AM ET Company Participants Robin Randolf - Director of IR Alex Vetter - CEO Sonia Jain - CFO Conference Call Participants Marvin Fong - BTIG Dan Kurnos - The Benchmark Company Nick Jones - Citi Operator Good morning, and welcome to the Cars First Quarter 2021 Earnings Conference Call. This call is being recorded, and a live webcast can be found at investor.cars.com. A replay of the webcast will be available until May 20. A copy of ...

Q1 2021 Earnings May 6, 2021 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 potential, outlook, ...

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 March 31, 2021 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 Spec ...

| --- | --- | --- | |-------------------------------------------|-------|-------| | | | | | | | | | | | | | | | | | | | | | Fourth Quarter & Full Year 2020 Earnings | | | | February 25, 2021 | | | 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 pandemi ...

Financial Data and Key Metrics Changes - Revenue for Q4 2020 was $153 million, up 1% year-over-year, driven by higher ARPD from solution sales [42] - GAAP net income for Q4 2020 was $7.2 million or $0.10 per diluted share, compared to a GAAP net loss of $4.1 million or $0.06 per diluted share in the prior year [44] - Adjusted EBITDA for Q4 2020 was $48.5 million or 32% of revenue, compared to $39.3 million or 26% of revenue for the prior year period [45] - Full year 2020 revenue was $547.5 million, down from $606.7 million in 2019, primarily due to invoice credits given to dealers during COVID-19 [54] - Free cash flow in 2020 was $121.9 million, up 52% from $80.2 million in 2019 [59] Business Line Data and Key Metrics Changes - Dealer Inspire revenues grew 22% year-over-year in Q4 2020 [42] - The number of dealer customers increased to 18,372 as of December 31, 2020, marking a 1% increase from the previous quarter [46] - The company added 1,200 new website customers in 2020, bringing the total to 4,400, a 38% increase year-over-year [46] Market Data and Key Metrics Changes - Organic traffic grew 10% and mobile traffic grew 12% year-over-year [17] - Traffic visits in Q4 2020 were 138.1 million, down 6% year-over-year, while unique visitors were 22.2 million, down 5% year-over-year [47] - The December SAAR was 16.3 million, marking the fourth best December for sales [31] Company Strategy and Development Direction - The company aims to empower consumers with unique content and data to make informed car buying decisions while supporting dealers with efficient digital solutions [40] - The strategy includes long-term investments in brand and digital solutions to drive dealer adoption and enhance profitability [65] - The company plans to continue focusing on cross-selling existing digital solutions to increase dealer penetration and revenue [53] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2021, citing strong consumer preference for car ownership and favorable credit conditions [69] - The company expects continued strong growth in solution sales, including website products and FUEL, positively impacting revenue and ARPD growth in 2021 [63] - Management noted that the first quarter of 2021 will face tough comparisons due to the previous year's performance during COVID-19 [61] Other Important Information - The company ended 2020 with $68 million in cash and cash equivalents and a strong balance sheet [41] - The company has a capital structure that allows flexibility for organic growth and potential M&A opportunities [58] - The company is committed to diversity, equity, and inclusion (DEI) initiatives, linking executive compensation to DEI progress [36][37] Q&A Session Summary Question: How does the dealer addition break down between franchise and independent segments? - Management noted solid growth in both franchise and independent dealers, with most growth in solution sales coming from franchised dealers [74] Question: What are the penetration rates for online shopper and conversations? - Management indicated that both platforms have low penetration rates but see significant growth opportunities as website sales increase [77] Question: How is the marketing mix shifting towards brand-centric spending? - Management confirmed a shift towards brand investment to support sustained performance and organic traffic growth [85][87] Question: What is the outlook for the Dealer Inspire business and GM dealer onboarding? - Management stated that there are still GM dealers in the onboarding pipeline for 2021, and they expect substantial growth opportunities in the DI business [116] Question: How is the company addressing channel conflict with dealers developing their own digital tools? - Management emphasized that they are a demand generation platform for dealers, helping them convert sales on their own properties [101]

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) CARS operates as a leading digital marketplace and solutions provider for the automotive industry, connecting car shoppers with sellers - **CARS** is a leading digital marketplace and solutions provider for the automotive industry, aiming to be the largest digital automotive marketplace and platform[8](index=8&type=chunk) - In 2020, **85% of revenue** was generated from car dealerships, **13%** from OEMs and other national advertisers[13](index=13&type=chunk) - As of December 31, 2020, CARS served **18,372 dealer customers** and nearly all major automakers in the U.S[14](index=14&type=chunk)[15](index=15&type=chunk) - The company attracts over **20 million unique visitors monthly**, with approximately **85%** intending to purchase a vehicle within six months[10](index=10&type=chunk)[11](index=11&type=chunk) - In response to COVID-19, CARS launched new digital products in 2020, including Home Delivery and Virtual Appointment badges, and Virtual Test Drives, to meet increased demand for online car shopping[17](index=17&type=chunk) - The U.S. auto advertising industry is projected to grow to **$36 billion by 2023**, with digital advertising expected to reach approximately **74%** of the overall market spend[20](index=20&type=chunk) - Key products include marketplace subscription advertising, social selling (Cars Social), digital solutions (Dealer Inspire website platform, AI chat tool Conversations, Online Shopper, DealerRater review management), and advertising (Display advertising, Digital advertising services, FUEL in-market video)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - As of December 31, 2020, CARS had approximately **1,500 full-time employees**, with **46.3%** identifying as female and **22.7%** as having a racial and ethnic background other than white[61](index=61&type=chunk) [Item 1A. Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks that could materially and adversely affect CARS' business, financial condition, and results of operations - The COVID-19 pandemic has materially and adversely affected CARS' business, financial condition, liquidity, and operating results, leading to increased unemployment, reduced consumer spending, and economic recession[65](index=65&type=chunk)[67](index=67&type=chunk) - CARS operates in a highly competitive market, facing competition from various online automotive sites, OEM sites, website/solution providers, and digital advertising providers[74](index=74&type=chunk) - The business relies on strong brand recognition and prominent appearance in internet search engine results and mobile application stores; negative changes could reduce traffic and revenue[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk) - Failure to maintain or increase the base of subscribing dealers or revenue from existing dealers could materially and adversely affect financial performance[90](index=90&type=chunk)[91](index=91&type=chunk) - The value of assets or operations may be diminished if information technology systems fail or if security and resiliency measures are breached, leading to reputational damage, costs, and liabilities[96](index=96&type=chunk)[97](index=97&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - Changes by web and mobile browser developers (e.g., Apple's ITP, Google Chrome's third-party cookie phase-out) limiting tracking technologies could impair CARS' ability to measure ad effectiveness and attract/retain dealer customers[115](index=115&type=chunk)[117](index=117&type=chunk) - The company's intangible assets were approximately **$835.2 million** as of December 31, 2020, representing about **78% of total assets**, and are subject to impairment risk[146](index=146&type=chunk)[298](index=298&type=chunk) - Debt agreements contain various covenants that limit operational flexibility, and approximately **33.1% of outstanding indebtedness** as of December 31, 2020, is variable rate, exposing the company to interest rate risk[161](index=161&type=chunk)[163](index=163&type=chunk) - The company does not expect to pay cash dividends for the foreseeable future, intending to retain future earnings for business growth[151](index=151&type=chunk) [Item 1B. Unresolved Staff Comments](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC [Item 2. Properties](index=21&type=section&id=Item%202.%20Properties) CARS maintains administrative offices in Chicago, Illinois, Naperville, Illinois, and Appleton, Wisconsin - CARS maintains administrative offices in Chicago, Illinois (principal executive office), Naperville, Illinois, and Appleton, Wisconsin[168](index=168&type=chunk) [Item 3. Legal Proceedings](index=21&type=section&id=Item%203.%20Legal%20Proceedings) CARS is occasionally involved in legal and administrative proceedings, but none are expected to have a material adverse effect [Item 4. Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Cars.com Inc PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) CARS common stock is listed on the NYSE, with no cash dividends paid or intended for the foreseeable future, and no equity repurchases in the period - CARS common stock is listed on the NYSE under the symbol "**CARS**"[173](index=173&type=chunk) - As of February 18, 2021, there were **4,914 holders of record** of common stock[173](index=173&type=chunk) - The company has never declared or paid cash dividends and does not intend to for the foreseeable future, planning to retain future earnings for business development and growth[175](index=175&type=chunk) - No purchases of equity securities were made by the issuer during the reported period[175](index=175&type=chunk) [Item 6. Selected Financial Data](index=23&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes key financial data for CARS from 2016 to 2020, highlighting revenue, operating income, net income, and asset changes Selected Financial Data (2016-2020) (In thousands, except per share amounts) | (In thousands, except per share amounts) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--------------------------------------- | :---------- | :---------- | :-------- | :---------- | :---------- | | **Statement of (Loss) Income Data** | | | | | | | Total revenue | $ 547,503 | $ 606,682 | $ 662,127 | $ 626,262 | $ 633,106 | | Operating (loss) income | $ (887,327) | $ (446,060) | $ 83,924 | $ 134,256 | $ 176,650 | | Net (loss) income | $ (817,120) | $ (445,324) | $ 38,809 | $ 224,443 | $ 176,370 | | (Loss) earnings per share, basic | $ (12.15) | $ (6.65) | $ 0.55 | $ 3.13 | $ 2.46 | | (Loss) earnings per share, diluted | $ (12.15) | $ (6.65) | $ 0.55 | $ 3.13 | $ 2.46 | | **Balance Sheet Data** | | | | | | | Cash and cash equivalents | $ 67,719 | $ 13,549 | $ 25,463 | $ 20,563 | $ 8,896 | | Total assets | $ 1,075,712 | $ 2,027,991 | $ 2,600,549 | $ 2,511,039 | $ 2,547,266 | - The operating loss in 2020 was primarily due to a **$905.9 million goodwill and intangible asset impairment** and the impact of the COVID-19 pandemic[178](index=178&type=chunk) - The operating loss in 2019 was primarily due to a **$461.5 million goodwill and indefinite-lived intangible asset impairment**[178](index=178&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section details CARS' financial condition and results for 2020 vs. 2019, covering business, COVID-19 impact, revenue, expenses, liquidity, and accounting policies [Business Overview](index=24&type=section&id=Business%20Overview) CARS is a leading digital marketplace and solutions provider for the automotive industry, connecting car shoppers with sellers - **CARS** is a leading digital marketplace and solutions provider for the automotive industry, connecting car shoppers with sellers through its marketplace, dealer websites, and other digital products[182](index=182&type=chunk) - The company's portfolio of brands includes Cars.com, Dealer Inspire, DealerRater, FUEL, Auto.com, PickupTrucks.com, and NewCars.com[182](index=182&type=chunk) [Overview of Results](index=24&type=section&id=Overview%20of%20Results) CARS reported decreased revenue and a significant net loss in 2020, primarily due to impairment charges and COVID-19 impacts Revenue and Net (Loss) Income (2018-2020) (In thousands, except percentages) | (In thousands, except percentages) | 2020 | 2019 | 2018 | | :--------------------------------- | :---------- | :---------- | :-------- | | Revenue | $ 547,503 | $ 606,682 | $ 662,127 | | Net (loss) income | $ (817,120) | $ (445,324) | $ 38,809 | | Retail revenue as % of total | 100% | 94% | 87% | | Wholesale revenue as % of total | 0% | 6% | 13% | - The net loss for 2020 was primarily due to a **$905.9 million goodwill and intangible asset impairment** and the impact of the COVID-19 pandemic[183](index=183&type=chunk) [2020 and Recent Highlights](index=24&type=section&id=2020%20and%20Recent%20Highlights) CARS saw increased traffic and dealer customers in 2020, launched new digital solutions, and strengthened its financial position through refinancing - **Average Monthly Unique Visitors grew 5%** and total traffic grew **8%** in 2020 compared to the prior year, with organic traffic accounting for **73% of total traffic** and growing **10% year-over-year**[186](index=186&type=chunk) - **Dealer Customers increased by 242, or 1%, to 18,372** as of December 31, 2020, compared to September 30, 2020[188](index=188&type=chunk) - CARS launched **FUEL**, a digital video solution, in 2020, leveraging audience data to target car shoppers efficiently[189](index=189&type=chunk)[191](index=191&type=chunk) - In 2019, CARS was selected as a preferred website provider for General Motors, launching approximately half of **800+ GM websites** in 2020[192](index=192&type=chunk) - The Technology Transformation, initiated in February 2019, focused on shifting technology spend towards innovation, cloud migration, and machine learning, achieving cost efficiencies with further efficiencies expected in 2021[193](index=193&type=chunk) - In October 2020, CARS issued **$400.0 million in 6.375% senior unsecured notes due 2028** and amended its credit facility, refinancing to a **$230.0 million Revolving Credit Facility** and **$200.0 million Term Loan**, extending maturity to May 31, 2025[194](index=194&type=chunk)[195](index=195&type=chunk) - As of December 31, 2020, liquidity stood at **$297.7 million**, including cash and cash equivalents and available Revolving Credit Facility[196](index=196&type=chunk) [Impact of COVID-19 on our business](index=25&type=section&id=Impact%20of%20COVID-19%20on%20our%20business) The COVID-19 pandemic significantly impacted CARS' business, leading to financial relief for dealers and a focus on digital solutions - The COVID-19 pandemic adversely affected CARS' business, financial condition, liquidity, and operating results in 2020, causing increased unemployment and reduced consumer spending[197](index=197&type=chunk)[198](index=198&type=chunk) - CARS provided financial relief to dealer customers with invoice credits of **50% in April** and **30% in May and June 2020**[198](index=198&type=chunk) - The company implemented permanent and temporary expense reduction measures in response to revenue changes[198](index=198&type=chunk) - CARS focused on equipping dealer customers with digital solutions like virtual showrooms, home delivery badging, online chat, and FUEL to support online car shopping during the pandemic[199](index=199&type=chunk)[200](index=200&type=chunk) [Key Operating Metrics](index=26&type=section&id=Key%20Operating%20Metrics) CARS monitors traffic, unique visitors, average revenue per dealer, and dealer customers, showing mixed trends in 2020 due to pandemic effects Key Operating Metrics (2019-2020) (In thousands, except percentages) | Metric | 2020 | 2019 | % Change | | :-------------------------------------- | :------------ | :------------ | :------- | | Traffic | 599,807,000 | 553,660,000 | 8% | | Average Monthly Unique Visitors | 23,822,000 | 22,629,000 | 5% | | Direct Monthly Average Revenue Per Dealer - Annual | $ 1,995 | $ 2,179 | (8)% | Dealer Customers and Quarterly ARPD (2019-2020) (In thousands, except percentages) | Metric | Dec 31, 2020 | Dec 31, 2019 | % Change (YoY) | Sep 30, 2020 | % Change (QoQ) | | :-------------------------------------- | :----------- | :----------- | :------------- | :----------- | :------------- | | Dealer Customers | 18,372 | 18,834 | (2)% | 18,130 | 1% | | Direct Monthly Average Revenue Per Dealer - Quarterly | $ 2,264 | $ 2,136 | 6% | $ 2,183 | 4% | - **Mobile traffic accounted for 75% of total Traffic** in 2020, up from 72% in 2019[203](index=203&type=chunk) - The annual ARPD decrease was primarily due to Q2 2020 invoice credits provided to dealer customers due to COVID-19[207](index=207&type=chunk) - The year-over-year decline in Dealer Customers was mainly due to lower new sales and higher cancellations in Q2 2020, offset by growth in other quarters[211](index=211&type=chunk) [Factors Affecting Our Performance](index=27&type=section&id=Factors%20Affecting%20Our%20Performance) CARS' performance is influenced by the automotive environment, consumer demand, macroeconomic conditions, and digital advertising trends - CARS' business is impacted by changes in the automotive environment, including consumer demand, macroeconomic factors, and automotive digital advertising trends[212](index=212&type=chunk) - In the second half of 2020, increased dealer profitability was observed, driven by reduced inventory levels and accelerated dealer adoption of digital solutions[212](index=212&type=chunk) - The company's success depends on offering a multi-faceted suite of digital solutions that complement advertising, and navigating the impact of the COVID-19 pandemic[213](index=213&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) CARS' 2020 results show a 10% revenue decrease and a substantial net loss due to goodwill and intangible asset impairments Results of Operations (2019-2020) (In thousands, except percentages) | (In thousands, except percentages) | 2020 | 2019 | $ Change | % Change | | :--------------------------------- | :---------- | :---------- | :---------- | :------- | | **Revenue:** | | | | | | Direct | $ 463,018 | $ 477,095 | $ (14,077) | (3)% | | National advertising | $ 73,176 | $ 80,774 | $ (7,598) | (9)% | | Other | $ 11,309 | $ 14,442 | $ (3,133) | (22)% | | Retail | $ 547,503 | $ 572,311 | $ (24,808) | (4)% | | Wholesale | $ — | $ 34,371 | $ (34,371) | (100)% | | Total revenue | $ 547,503 | $ 606,682 | $ (59,179) | (10)% | | **Operating expenses:** | | | | | | Cost of revenue and operations | $ 101,536 | $ 99,549 | $ 1,987 | 2% | | Product and technology | $ 60,664 | $ 62,859 | $ (2,195) | (3)% | | Marketing and sales | $ 183,448 | $ 217,432 | $ (33,984) | (16)% | | General and administrative | $ 59,051 | $ 73,772 | $ (14,721) | (20)% | | Affiliate revenue share | $ 10,970 | $ 20,790 | $ (9,820) | (47)% | | Depreciation and amortization | $ 113,276 | $ 116,877 | $ (3,601) | (3)% | | Goodwill and intangible asset impairment | $ 905,885 | $ 461,463 | $ 444,422 | 96% | | Total operating expenses | $ 1,434,830 | $ 1,052,742 | $ 382,088 | 36% | | Operating loss | $ (887,327) | $ (446,060) | $ (441,267) | 99% | | Net loss | $ (817,120) | $ (445,324) | $ (371,796) | 83% | - Direct revenue decreased by **3%** due to COVID-19 invoice credits and a decline in dealer customers, partially offset by affiliate conversions and growth in digital solutions and FUEL[218](index=218&type=chunk) - Wholesale revenue was eliminated in 2020 as all affiliates were converted to direct control by October 2019[220](index=220&type=chunk) - Marketing and sales expense decreased by **$34.0 million (16%)** due to reduced marketing spend and a consumer shift to virtual car shopping[224](index=224&type=chunk) - Goodwill and intangible asset impairment charges totaled **$905.9 million in 2020**, up from **$461.5 million in 2019**, primarily triggered by the economic impacts of the COVID-19 pandemic[231](index=231&type=chunk)[232](index=232&type=chunk) - Interest expense, net, increased by **23%** due to higher interest rates paid and reclassifications from accumulated other comprehensive loss[233](index=233&type=chunk) - The effective income tax rate was **13% in 2020**, differing from the U.S. federal statutory rate due to goodwill and intangible asset impairments and the establishment of valuation allowances[235](index=235&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) CARS' liquidity is from operating cash flows, cash reserves, and credit facilities, strengthened by a $400 million bond offering and credit facility refinancing - Primary sources of liquidity are cash flows from operations, available cash reserves, and debt capacity under credit facilities[237](index=237&type=chunk) - As of December 31, 2020, Cash and cash equivalents were **$67.7 million**, and total liquidity was **$297.7 million**[240](index=240&type=chunk)[196](index=196&type=chunk) - All affiliate agreements were converted to direct control by October 2019, eliminating wholesale revenue and realizing incremental cash flow in 2021[241](index=241&type=chunk) - As of December 31, 2020, outstanding aggregate principal debt was **$597.5 million** (effective interest rate **5.2%**), comprising a **$197.5 million Term Loan (2.8%)** and **$400.0 million in bonds (6.375%)**[242](index=242&type=chunk) - In October 2020, CARS issued **$400.0 million in senior unsecured notes** and refinanced its credit facility to a **$230.0 million Revolving Credit Facility** and **$200.0 million Term Loan**, with a revised maturity of May 31, 2025[243](index=243&type=chunk)[244](index=244&type=chunk) Cash Flows (2019-2020) (In thousands) | (In thousands) | 2020 | 2019 | Change | | :---------------------------------------- | :---------- | :---------- | :--------- | | Net cash provided by operating activities | $ 138,616 | $ 101,484 | $ 37,132 | | Net cash used in investing activities | $ (16,712) | $ (21,856) | $ 5,144 | | Net cash (used in) provided by financing activities | $ (67,734) | $ (91,542) | $ 23,808 | Contractual Obligations as of December 31, 2020 (In thousands) | (In thousands) | Total | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | | :-------------------- | :---------- | :-------- | :-------- | :-------- | :-------- | :---------- | :---------- | | Operating leases | $ 48,533 | $ 4,872 | $ 4,470 | $ 4,042 | $ 4,154 | $ 4,570 | $ 26,425 | | Long-term debt | $ 597,500 | $ 10,000 | $ 11,250 | $ 16,250 | $ 20,000 | $ 140,000 | $ 400,000 | | Interest on debt and swap | $ 240,664 | $ 40,155 | $ 34,913 | $ 31,058 | $ 30,609 | $ 27,429 | $ 76,500 | | Other obligations | $ 14,697 | $ 9,448 | $ 5,249 | $ — | $ — | $ — | $ — | | Total | $ 901,394 | $ 64,475 | $ 55,882 | $ 51,350 | $ 54,763 | $ 171,999 | $ 502,925 | [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines CARS' critical accounting policies and estimates, including revenue recognition and goodwill/intangible asset impairment testing - Revenue is recognized when performance obligations are satisfied, including marketplace subscription advertising, digital solutions (hosting, digital retailing), display advertising, and pay-per-lead services[259](index=259&type=chunk)[260](index=260&type=chunk)[262](index=262&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment annually or when triggering events occur; fair value is estimated using discounted cash flow analysis and market-based valuation[269](index=269&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[276](index=276&type=chunk) - In Q1 2020, a **$505.9 million goodwill impairment** and a **$400.0 million indefinite-lived intangible asset impairment** were recorded, triggered by the economic impacts of the COVID-19 pandemic[231](index=231&type=chunk)[392](index=392&type=chunk) - Definite-lived amortizable intangible assets (customer relationships, acquired software, other trade names) are amortized on a straight-line basis over their estimated useful lives (**2-14 years**)[347](index=347&type=chunk) [Recent Accounting Pronouncements](index=35&type=section&id=Recent%20Accounting%20Pronouncements) CARS adopted new accounting guidance on cloud computing and credit losses in 2020, with no material impact on financial statements - CARS adopted ASU 2018-15 (Cloud Computing Arrangements) and ASU 2016-13 (Financial Instruments—Credit Losses) as of January 1, 2020[365](index=365&type=chunk)[366](index=366&type=chunk) - The adoption of these new accounting pronouncements did not have a material impact on the Consolidated Financial Statements[365](index=365&type=chunk)[366](index=366&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) CARS is exposed to interest rate risk from variable-rate debt, managed by an interest rate swap, and immaterial foreign currency risk - CARS is exposed to interest rate risk due to floating interest rates on its Term Loan and Revolving Credit Facility[281](index=281&type=chunk) - An interest rate swap, effective December 31, 2018, fixed the interest rate at **2.96%** plus an applicable margin on a notional amount of **$300 million**[281](index=281&type=chunk) - The Second Amendment to the Credit Agreement triggered a loss of hedge accounting for the swap, leading to reclassification of unrealized losses into net income[282](index=282&type=chunk) - As of December 31, 2020, the fair value of the swap was an unrealized loss of **$12.1 million**[283](index=283&type=chunk) - Foreign currency exchange risk is currently immaterial due to primarily U.S. operations, with a limited number of Canadian dealer customers[284](index=284&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=35&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents CARS' audited consolidated financial statements for 2018-2020, including balance sheets, income statements, cash flows, and detailed notes [Report of Independent Registered Public Accounting Firm](index=36&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued unqualified opinions on CARS' 2020 consolidated financial statements and internal control over financial reporting - Ernst & Young LLP issued an **unqualified opinion** on the Consolidated Financial Statements for the period ended December 31, 2020[287](index=287&type=chunk) - An **unqualified opinion** was also expressed on the effectiveness of the company's internal control over financial reporting as of December 31, 2020[288](index=288&type=chunk) [Critical Audit Matters](index=36&type=section&id=Critical%20Audit%20Matters) Critical audit matters included the complex valuation of goodwill and indefinite-lived intangible assets, leading to significant impairment charges in 2020 - Auditing the valuation of goodwill and indefinite-lived intangible assets was complex due to significant judgment in determining fair value, which is sensitive to assumptions like future cash flows, growth rates, and discount rates[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) - A full impairment charge of **$505.9 million for goodwill** and **$400.0 million for the Cars.com trade name** (indefinite-lived intangible asset) was recorded in Q1 2020[292](index=292&type=chunk)[294](index=294&type=chunk) [Consolidated Balance Sheets](index=38&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets show a significant decrease in total assets and stockholders' equity in 2020, primarily due to goodwill and intangible asset impairments Consolidated Balance Sheet Data (2019-2020) (In thousands) | (In thousands) | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | **Assets:** | | | | Cash and cash equivalents | $ 67,719 | $ 13,549 | | Accounts receivable, net | $ 93,649 | $ 101,762 | | Total current assets | $ 178,081 | $ 122,440 | | Property and equipment, net | $ 41,323 | $ 43,696 | | Goodwill | $ — | $ 505,885 | | Intangible assets, net | $ 835,166 | $ 1,329,499 | | Total assets | $ 1,075,712 | $ 2,027,991 | | **Liabilities and stockholders' equity:** | | | | Total current liabilities | $ 90,368 | $ 98,806 | | Long-term debt | $ 576,143 | $ 611,277 | | Deferred tax liability | $ 30,800 | $ 132,996 | | Total liabilities | $ 735,536 | $ 886,923 | | Total stockholders' equity | $ 340,176 | $ 1,141,068 | - **Goodwill was fully impaired to $0** as of December 31, 2020, down from **$505.9 million** in 2019[298](index=298&type=chunk) - Intangible assets, net, decreased by **$494.3 million** from **$1,329.5 million** in 2019 to **$835.2 million** in 2020[298](index=298&type=chunk) [Consolidated Statements of (Loss) Income](index=39&type=section&id=Consolidated%20Statements%20of%20%28Loss%29%20Income) The income statements show a 10% revenue decrease and an $817.1 million net loss in 2020, driven by substantial impairment charges Consolidated Statements of (Loss) Income (2018-2020) (In thousands, except per share data) | (In thousands, except per share data) | 2020 | 2019 | 2018 | | :------------------------------------ | :---------- | :---------- | :-------- | | Total revenue | $ 547,503 | $ 606,682 | $ 662,127 | | Total operating expenses | $ 1,434,830 | $ 1,052,742 | $ 578,203 | | Operating (loss) income | $ (887,327) | $ (446,060) | $ 83,924 | | Net (loss) income | $ (817,120) | $ (445,324) | $ 38,809 | | (Loss) earnings per share, basic | $ (12.15) | $ (6.65) | $ 0.55 | | (Loss) earnings per share, diluted | $ (12.15) | $ (6.65) | $ 0.55 | - Goodwill and intangible asset impairment was **$905.9 million in 2020**, compared to **$461.5 million in 2019**[302](index=302&type=chunk) [Consolidated Statements of Comprehensive (Loss) Income](index=40&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%20Income) The comprehensive income statements report an $816.3 million comprehensive loss in 2020, including net loss and interest rate swap adjustments Consolidated Statements of Comprehensive (Loss) Income (2018-2020) (In thousands) | (In thousands) | 2020 | 2019 | 2018 | | :--------------------------------------------------------------------------- | :---------- | :---------- | :------- | | Net (loss) income | $ (817,120) | $ (445,324) | $ 38,809 | | Other comprehensive income (loss), net of tax: | | | | | Interest rate swap | $ (8,910) | $ (9,174) | $ — | | Reclassification of accumulated other comprehensive loss on interest rate swap into net income | $ 9,748 | $ 1,532 | $ — | | Total other comprehensive income (loss) | $ 838 | $ (7,642) | $ — | | Comprehensive (loss) income | $ (816,282) | $ (452,966) | $ 38,809 | [Consolidated Statements of Stockholders' Equity](index=41&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity significantly decreased in 2020 to $340.2 million, primarily due to the $817.1 million net loss Consolidated Statements of Stockholders' Equity (2018-2020) (In thousands) | (In thousands) | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | | :--------------------------------------------------------------------------- | :----------- | :----------- | :----------- | | Balance at December 31 | $ 340,176 | $ 1,141,068 | $ 1,626,923 | | Net (loss) income | $ (817,120) | $ (445,324) | $ 38,809 | | Other comprehensive (loss) gain, net | $ 838 | $ (7,642) | $ — | | Repurchases of common stock | $ — | $ (40,000) | $ (97,190) | | Stock-based compensation | $ 15,155 | $ 7,588 | $ 9,423 | - The significant decrease in stockholders' equity in 2020 was primarily driven by the **net loss of $817.1 million**[308](index=308&type=chunk) [Consolidated Statements of Cash Flows](index=42&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash provided by operating activities increased to $138.6 million in 2020, while cash used in investing and financing activities decreased Consolidated Statements of Cash Flows (2018-2020) (In thousands) | (In thousands) | 2020 | 2019 | 2018 | | :---------------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $ 138,616 | $ 101,484 | $ 163,548 | | Net cash used in investing activities | $ (16,712) | $ (21,856) | $ (171,375) | | Net cash (used in) provided by financing activities | $ (67,734) | $ (91,542) | $ 12,727 | | Net increase (decrease) in cash and cash equivalents | $ 54,170 | $ (11,914) | $ 4,900 | | Cash and cash equivalents at end of period | $ 67,719 | $ 13,549 | $ 25,463 | - The increase in cash provided by operating activities was primarily related to the reduction of net loss, excluding non-cash items[32](index=32&type=chunk) - Cash used in financing activities in 2020 primarily related to **$50.6 million of net debt repayments**, including **$615.6 million in debt repayments** offset by **$565.0 million in proceeds** from bond issuance and Revolving Credit Facility draw[253](index=253&type=chunk) [Notes to Consolidated Financial Statements](index=43&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail CARS' accounting policies, significant impairments, debt structure, and segment information, confirming a single reportable segment - CARS operates as a **single operating and reportable segment**[457](index=457&type=chunk) - Goodwill and indefinite-lived intangible asset impairments totaled **$905.9 million** and **$400.0 million**, respectively, in 2020, triggered by the COVID-19 pandemic[392](index=392&type=chunk) - As of December 31, 2020, **goodwill was fully impaired to zero**[393](index=393&type=chunk) - The company issued **$400.0 million aggregate principal amount of 6.375% senior unsecured notes due 2028** in October 2020 and refinanced its credit facility[411](index=411&type=chunk)[408](index=408&type=chunk) - An interest rate swap, initially a cash flow hedge, lost hedge accounting in 2020 due to credit agreement amendments, leading to reclassification of unrealized losses[419](index=419&type=chunk)[420](index=420&type=chunk) - Stock-based compensation expense was **$15.2 million in 2020**, up from **$7.6 million in 2019**[432](index=432&type=chunk) - The CARES Act allowed for NOL carrybacks, resulting in an estimated net tax refund of **$9.9 million** for the company[450](index=450&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=62&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure matters - No changes in or disagreements with accountants on accounting and financial disclosure[460](index=460&type=chunk) [Item 9A. Controls and Procedures](index=62&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, 2020 - Management concluded that disclosure controls and procedures were effective as of December 31, 2020[461](index=461&type=chunk) - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[464](index=464&type=chunk) - Ernst & Young LLP issued an **unqualified attestation report** on the effectiveness of internal control over financial reporting[465](index=465&type=chunk)[469](index=469&type=chunk) - No material changes in internal control over financial reporting occurred during the period covered by the report[466](index=466&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=64&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[477](index=477&type=chunk) [Item 11. Executive Compensation](index=64&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[477](index=477&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=64&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[478](index=478&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=64&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[479](index=479&type=chunk) [Item 14. Principal Accounting Fees and Services](index=64&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[479](index=479&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=65&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and a comprehensive index of exhibits filed with the Form 10-K - Financial statements required by Item 8 are included in Part II[481](index=481&type=chunk) - Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2020, 2019, and 2018 is included[482](index=482&type=chunk) - A comprehensive Exhibit Index lists various agreements, certifications, and XBRL documents[482](index=482&type=chunk)[485](index=485&type=chunk)[487](index=487&type=chunk) [Item 16. Form 10-K Summary](index=67&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[489](index=489&type=chunk)