Cars.com(CARS) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights This section provides an overview of Cars.com's Q2 2025 financial and operational performance, including key metrics and CEO insights on growth initiatives Q2 2025 Financial Highlights Cars.com reported Q2 2025 financial results with total revenue remaining flat year-over-year, net income decreased significantly, while adjusted net income and adjusted EBITDA saw slight increases | Metric | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Change % | | :----------------------------- | :-------------------------- | :-------------------------- | :------- | | Total Revenue | $178,739 | $178,894 | NM | | Net income | $7,009 | $11,381 | (38%) | | Adjusted net income | $26,412 | $26,048 | 1% | | Adjusted EBITDA | $50,898 | $50,425 | 1% | | Net income per diluted share | $0.11 | $0.17 | (35%) | | Adjusted net income per diluted share | $0.41 | $0.38 | 8% | Q2 2025 Key Metrics and Operational Highlights The company achieved significant sequential growth in dealer customers and maintained strong unique visitor numbers, reflecting positive operational trends despite a slight decline in average revenue per dealer | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | Q/Q Change % | Y/Y Change % | | :---------------------------------- | :------------ | :------------- | :------------ | :----------- | :----------- | | Average Monthly Unique Visitors (MM) | 26.6 | 29.0 | 26.1 | (8%) | 2% | | Traffic ("Visits") (MM) | 162.0 | 170.1 | 158.1 | (5%) | 2% | | Monthly Average Revenue Per Dealer ("ARPD") | $2,435 | $2,473 | $2,474 | (2%) | (2%) | | Dealer Customers | 19,412 | 19,250 | 19,390 | 1% | NM | - Dealer Customers grew to 19,412, up over 160 dealers quarter-over-quarter, representing the best sequential customer growth in over three years (excluding the Q4 2023 acquisition of D2C Media)[4][5] - Average Monthly Unique Visitors were up 2% year-over-year, driven by strong consumer demand, tariff-motivated shopping behavior, and strategic marketing investments[4] CEO Commentary CEO Alex Vetter highlighted positive customer and product trends, leading to confidence in improved revenue momentum for the second half of the year, driven by strong sequential organic customer growth and progress in key initiatives like AI product innovation and DealerClub - CEO noted "best sequential organic customer growth in over three years" and expansion across major product lines, with the Cars.com marketplace accounting for more than half of that growth[2] - Key growth initiatives, including repackaging, AI product innovation, and the continued ramp of the DealerClub auction platform, are in progress and on-track[2] - First half operating results, coupled with new commercial leadership, support expectations of an "upward trajectory in the second half of the year"[2] Detailed Q2 2025 Results This section provides a detailed breakdown of the company's Q2 2025 financial performance, including revenue by segment, operating expenses, and profitability metrics Revenue Performance Total revenue for Q2 2025 was $178.7 million, flat year-over-year, dealer revenue saw a slight decline due to mix changes, while OEM and National revenue increased, partly influenced by temporary shifts related to tariff announcements | Revenue Type | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Y/Y Change | | :---------------- | :--------------------- | :--------------------- | :--------- | | Total Revenue | $178,739 | $178,894 | Roughly flat | | Dealer Revenue | $158,477 | $159,843 | (1%) | | OEM and National Revenue | $16,637 | $15,828 | 5% | - Subscription-based Dealer revenue was down 1% year-over-year, primarily reflecting changes in customer and product mix, with marketplace performance offsetting growth across websites and appraisal technology[5] - OEM and National revenue was up 5% year-over-year, inclusive of temporary shifts in media investments, primarily at the start of the quarter, as automakers adjusted to tariff announcements and impacts[5] Operating Expenses Total operating expenses decreased to $163.5 million in Q2 2025 from $169.4 million in Q2 2024, this reduction was achieved through cost streamlining actions, including headcount and lease-related expenses, offsetting costs from the DealerClub acquisition, adjusted operating expenses also decreased by 2% | Expense Type | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Y/Y Change | | :-------------------------- | :--------------------- | :--------------------- | :--------- | | Total operating expenses | $163,493 | $169,377 | (3.5%) | | Adjusted operating expenses | $152,714 | $156,040 | (2%) | - Operating expenses included costs associated with the January 2025 acquisition of DealerClub, which were fully offset by actions taken to streamline costs, including headcount and lease-related expenses, as well as shifts in marketing investments[6] Net Income and Adjusted EBITDA Net income for Q2 2025 was $7.0 million ($0.11 per diluted share), a 38% decrease from Q2 2024, primarily due to changes in the fair value of contingent consideration, adjusted net income increased 1% to $26.4 million ($0.41 per diluted share), and Adjusted EBITDA rose 1% to $50.9 million, representing 28.5% of revenue | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Y/Y Change | | :----------------------------- | :--------------------- | :--------------------- | :--------- | | Net income | $7,009 | $11,381 | (38%) | | Net income per diluted share | $0.11 | $0.17 | (35%) | | Adjusted net income | $26,412 | $26,048 | 1% | | Adjusted net income per diluted share | $0.41 | $0.38 | 8% | | Adjusted EBITDA | $50,898 | $50,425 | 1% | | Adjusted EBITDA margin | 28.5% | N/A | N/A | - The change in Net income is primarily attributable to changes in the fair value of contingent consideration in the prior-year period associated with prior acquisitions[7] Financial Position & Capital Allocation This section details the company's financial health, including cash flow, balance sheet metrics, capital allocation strategies, and insights from the CFO Cash Flow and Balance Sheet Net cash provided by operating activities for the first half of 2025 decreased to $55.7 million from $68.7 million in the prior year, primarily due to increased earnout payments, free cash flow also declined, the company's total debt was $460.0 million, with net leverage at 2.1x, within the target range, and total liquidity of $317.7 million | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Y/Y Change | | :---------------------------------- | :--------------------- | :--------------------- | :--------- | | Net cash provided by operating activities | $55,683 | $68,722 | (19%) | | Free cash flow | $41,847 | $56,447 | (26%) | - The decrease in free cash flow is largely attributable to the anticipated increase in earnout payments associated with D2C Media[8] | Metric | Amount (as of June 30, 2025) | | :-------------------- | :--------------------------- | | Total debt outstanding | $460.0 million | | Total net leverage | 2.1x | | Total liquidity | $317.7 million | | Cash and cash equivalents | $27.7 million | | Revolver capacity | $290.0 million | - The Company's total net leverage of 2.1x is within its target range of 2.0x to 2.5x[9] Share Repurchases Cars.com repurchased 2.1 million shares for $23.1 million in Q2 2025, bringing the first-half total to 3.7 million shares for $44.6 million, the company raised its full-year 2025 share repurchase target to $70-$90 million, reaffirming its commitment to returning capital to shareholders - Repurchased 2.1 million shares of common stock for $23.1 million in the second quarter[10] - Total repurchases for the first half of 2025 amounted to 3.7 million shares for $44.6 million[10] - The Company is raising its target for share repurchases for 2025 to a range of $70 to $90 million[10] CFO Commentary CFO Sonia Jain emphasized the execution of growth initiatives alongside meaningful operational efficiencies, leading to reduced operating expenses and an Adjusted EBITDA margin at the high end of expectations, she also highlighted exceeding capital return commitments and the raised full-year share repurchase target - Achieved an Adjusted EBITDA margin of 28.5% in Q2, at the high end of expectations, due to judicious cost management that reduced operating expenses by 3% year-over-year[12] - Exceeded capital return commitment by buying back 2.1 million shares in Q2, equivalent to 127% of free cash flow[12] - AccuTrade was selected as the enterprise trade and appraisal solution by a leading dealer group, expanding its technology into roughly 150 total stores by end of 2025[11] - AccuTrade appraisals grew 45% year-over-year, and DealerClub transaction volume was up 50% quarter-over-quarter alongside double-digit active user growth[11] Business Outlook & Strategic Initiatives This section outlines the company's forward-looking guidance for the second half of 2025, details the earnings call, and provides an overview of Cars Commerce's business model and brands Outlook for H2 2025 The company anticipates low-single digit revenue growth for the second half of 2025, driven by ongoing growth initiatives like product adoption, innovation, and broad-based repackaging, however, market factors such as vehicle production and affordability may introduce volatility, full-year Adjusted EBITDA margin guidance remains at 29% to 31% - The Company anticipates low-single digit revenue growth for the second half of 2025[13] - Growth initiatives include driving product adoption and innovation, and broad-based repackaging[13] - Market factors like vehicle production levels and affordability have been volatile year-to-date and are subject to impact customer spending[13] - The Company is reaffirming Full Year Adjusted EBITDA margin guidance of 29% to 31%[14] Earnings Call Information Management held a conference call and webcast on August 7, 2025, at 8:00 a.m. CT, with an archive available on the Cars Commerce Investor Relations website - Management held a conference call and webcast on August 7, 2025, at 8:00 a.m. CT[15] - An archive of the webcast will be available at investor.cars.com following the conclusion of the call[15] About Cars Commerce Cars Commerce is an audience-driven technology company that simplifies car buying and selling through AI-driven products and solutions across pretail, retail, and post-sale activities, its platform includes leading brands like Cars.com, Dealer Inspire, AccuTrade, DealerClub, and Cars Commerce Media Network - Cars Commerce is an audience-driven technology company empowering the automotive industry, simplifying car buying and selling with powerful products, solutions and AI-driven technologies[16] - The Cars Commerce platform is organized around four industry-leading brands: Cars.com, Dealer Inspire, AccuTrade, DealerClub, and Cars Commerce Media Network[16] Non-GAAP Financial Measures & Definitions This section provides detailed definitions for the company's non-GAAP financial measures and key operational metrics, along with important disclosures regarding forward-looking statements Non-GAAP Definitions This section defines several non-GAAP financial measures used by the company, including Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Adjusted Operating Expenses, explaining their components and adjustments, these measures are presented to provide supplemental information on operating performance and are used for internal targets and credit agreements - Non-GAAP financial measures (Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Free Cash Flow, and Adjusted Operating Expenses) are presented as supplemental measures of operating performance[17] - Adjusted EBITDA is defined as net income (loss) before interest expense, income tax, depreciation, amortization, stock-based compensation, unrealized mark-to-market adjustments, foreign currency gains/losses, and certain other items (transaction-related, severance, write-offs)[21] - Adjusted Net Income is GAAP net (loss) income excluding, net of their related tax effects: amortization of intangible assets, stock-based compensation expense, unrealized mark-to-market adjustments, foreign currency exchange gains and losses, and certain other items[23] - Free Cash Flow is net cash provided by operating activities less capital expenditures, including purchases of property and equipment and capitalization of internally developed technology[24] - Adjusted Operating Expenses are total operating expenses adjusted to exclude stock-based compensation, write-off and impairments of goodwill, intangible assets, long-lived assets, severance, transformation and other exit costs and transaction-related items[24] Key Metric Definitions This section provides definitions for key operational metrics: Average Monthly Unique Visitors (UVs), Traffic (Visits), Monthly Average Revenue Per Dealer (ARPD), and Dealer Customers, clarifying how each is measured and what it represents for the company's performance - Average Monthly Unique Visitors ("UVs") are defined as the number of distinct visitors that engage with the platform during that month, identified by unique device/browser combinations or app installations[25] - Traffic ("Visits") is defined as the number of visits to Cars.com desktop and mobile properties (responsive sites and mobile apps)[25] - Monthly Average Revenue Per Dealer ("ARPD") is defined as Dealer revenue (excluding digital advertising services and DealerClub) during the period divided by the monthly average number of Dealer Customers, indicating the value proposition of its platform[26] - Dealer Customers represent dealerships using the Company's products as of the end of each reporting period, with each physical or virtual dealership location counted separately[27] Forward-Looking Statements The report includes forward-looking statements based on current expectations and beliefs, which are subject to inherent uncertainties, risks, and important factors beyond the company's control, investors are cautioned not to rely solely on these statements, and the company undertakes no obligation to update them, except as required by law - Forward-looking statements are based on current expectations, beliefs, strategies, estimates, projections, and assumptions, but are inherently uncertain and not guarantees of future strategic action, performance, or results[28] - Actual results, performance, achievements, strategic actions or prospects could differ materially from those expressed or implied by these forward-looking statements due to a number of risks, uncertainties and other important factors, many of which are beyond our control[28][29] - The Company undertakes no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements[30] Consolidated Financial Statements This section presents the company's official consolidated financial statements, including statements of income, balance sheets, and cash flows for the reported periods Consolidated Statements of Income The Consolidated Statements of Income present the company's revenues, operating expenses, and net income for the three and six months ended June 30, 2025, compared to the prior year periods, key figures show a slight decrease in total revenue for the six-month period and a notable decline in net income | Metric (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | | Total Revenue | $178,739 | $178,894 | $357,763 | $359,070 | | Operating income | $15,246 | $9,517 | $21,705 | $22,261 | | Net income | $7,009 | $11,381 | $4,996 | $12,165 | | Diluted EPS | $0.11 | $0.17 | $0.08 | $0.18 | Consolidated Balance Sheets The Consolidated Balance Sheets provide a snapshot of the company's assets, liabilities, and stockholders' equity as of June 30, 2025, compared to December 31, 2024, total assets and total liabilities both decreased, while stockholders' equity also saw a reduction | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Total current assets | $179,645 | $214,330 | | Total assets | $1,064,654 | $1,111,865 | | Total current liabilities | $98,926 | $116,885 | | Total liabilities | $581,437 | $600,380 | | Total stockholders' equity | $483,217 | $511,485 | Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows detail the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, compared to the prior year, net cash provided by operating activities decreased, while net cash used in investing activities increased significantly, and net cash used in financing activities decreased | Metric (in thousands) | H1 2025 | H1 2024 | | :---------------------------------- | :-------- | :-------- | | Net cash provided by operating activities | $55,683 | $68,722 | | Net cash used in investing activities | $(29,124) | $(12,493) | | Net cash used in financing activities | $(49,343) | $(66,223) | | Net decrease in Cash and cash equivalents | $(22,969) | $(10,127) | | Cash and cash equivalents at end of period | $27,704 | $29,071 | - Payments for acquisitions, net of cash acquired, significantly increased cash used in investing activities to $24.8 million in H1 2025 from $0.2 million in H1 2024[38] - Repurchases of common stock increased to $44.6 million in H1 2025 from $14.4 million in H1 2024[38] Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP financial measures to their corresponding non-GAAP counterparts, including Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Adjusted Operating Expenses Reconciliation of Net income to Adjusted EBITDA This section provides a reconciliation of GAAP Net income to Adjusted EBITDA for the three and six months ended June 30, 2025, and 2024, detailing the specific adjustments made, such as interest expense, income tax, depreciation, amortization, stock-based compensation, and transaction-related items | Metric (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :-------- | :-------- | :-------- | :-------- | | Net income | $7,009 | $11,381 | $4,996 | $12,165 | | Interest expense, net | $7,644 | $8,109 | $15,312 | $16,430 | | Income tax expense | $2,959 | $5,017 | $3,739 | $5,053 | | Depreciation and amortization | $24,873 | $27,571 | $51,912 | $54,936 | | Stock-based compensation, including related payroll tax expense | $6,758 | $8,813 | $15,461 | $16,763 | | Transaction-related and other one-time items | $4,022 | $(10,853) | $12,541 | $(3,684) | | Non-operating foreign exchange (gain) loss | $(2,367) | $387 | $(2,342) | $1,435 | | Adjusted EBITDA | $50,898 | $50,425 | $101,619 | $103,098 | Reconciliation of Net income to Adjusted Net income This reconciliation details the adjustments from GAAP Net income to Adjusted Net income for the three and six months ended June 30, 2025, and 2024, including stock-based compensation, amortization of intangible assets, transaction-related items, and their tax impacts | Metric (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :-------- | :-------- | :-------- | :-------- | | Net income | $7,009 | $11,381 | $4,996 | $12,165 | | Stock-based compensation, including related payroll tax expense | $6,758 | $8,813 | $15,461 | $16,763 | | Amortization of intangible assets | $17,458 | $21,209 | $34,836 | $42,214 | | Transaction-related items | $2,736 | $(12,668) | $5,666 | $(6,525) | | Non-operating foreign exchange (gain) loss | $(2,367) | $387 | $(2,342) | $1,435 | | Other one-time items | $1,286 | $1,815 | $6,875 | $2,841 | | Income tax impact of adjustments | $(6,468) | $(4,889) | $(15,124) | $(14,182) | | Adjusted net income | $26,412 | $26,048 | $50,368 | $54,711 | | Adjusted net income per share, diluted | $0.41 | $0.38 | $0.78 | $0.81 | Reconciliation of Net cash provided by operating activities to Free cash flow This section reconciles Net cash provided by operating activities to Free cash flow for the three and six months ended June 30, 2025, and 2024, by subtracting capitalization of internally developed technology and purchase of property and equipment | Metric (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :-------- | :-------- | :-------- | :-------- | | Net cash provided by operating activities | $26,228 | $35,254 | $55,683 | $68,722 | | Capitalization of internally developed technology | $(5,510) | $(5,871) | $(10,494) | $(11,176) | | Purchase of property and equipment | $(2,531) | $(391) | $(3,342) | $(1,099) | | Free cash flow | $18,187 | $28,992 | $41,847 | $56,447 | Reconciliation of Operating expenses to Adjusted operating expenses This section provides detailed reconciliations of GAAP Operating expenses to Adjusted operating expenses for the three and six months ended June 30, 2025, and 2024, breaking down adjustments by expense category and highlighting the impact of transaction-related items and stock-based compensation | Expense Type | As Reported (Q2 2025) | Adjustments (1) | Stock-Based Compensation | As Adjusted | | :-------------------------- | :-------------------- | :-------------- | :----------------------- | :---------- | | Cost of revenue and operations | $30,547 | $0 | $(225) | $30,322 | | Product and technology | $28,634 | $0 | $(2,467) | $26,167 | | Marketing and sales | $57,757 | $(43) | $(1,583) | $56,131 | | General and administrative | $21,682 | $(3,978) | $(2,483) | $15,221 | | Depreciation and amortization | $24,873 | $0 | $0 | $24,873 | | Total operating expenses | $163,493 | $(4,021) | $(6,758) | $152,714 | | Expense Type | As Reported (H1 2025) | Adjustments (1) | Stock-Based Compensation | As Adjusted | | :-------------------------- | :-------------------- | :-------------- | :----------------------- | :---------- | | Cost of revenue and operations | $61,486 | $0 | $(403) | $61,083 | | Product and technology | $57,112 | $0 | $(4,980) | $52,132 | | Marketing and sales | $117,982 | $(85) | $(3,770) | $114,127 | | General and administrative | $47,566 | $(12,456) | $(6,308) | $28,802 | | Depreciation and amortization | $51,912 | $0 | $0 | $51,912 | | Total operating expenses | $336,058 | $(12,541) | $(15,461) | $308,056 | - Adjustments (1) include transaction-related items, unrealized gains and losses on foreign currency denominated transactions, severance, transformation and other exit costs, and write-off of long-lived assets and other[43][46]