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

Form 10-Q Filing Information Cars.com Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025, detailing its registrant status and outstanding common stock - Cars.com Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025 [2] Registrant Status | Status | Indicator | | :-------------------- | :-------- | | Large accelerated filer | ☒ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | | Smaller reporting company | ☐ | | Emerging growth company | ☐ | - As of July 31, 2025, the registrant had 61,445,496 shares of common stock outstanding [4] Table of Contents This section provides an organized listing of all chapters and sub-sections within the Form 10-Q report PART I. FINANCIAL INFORMATION This part presents the company's unaudited consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Financial Statements This section presents the unaudited consolidated financial statements and detailed notes for the reporting periods Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and stockholders' equity as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (in thousands) | Metric | 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 | - Total assets decreased by $47.211 million from December 31, 2024, to June 30, 2025, primarily driven by a decrease in cash and cash equivalents and intangible assets [9] - Total stockholders' equity decreased by $28.268 million, from $511.485 million to $483.217 million, reflecting net loss and share repurchases [9][16] Consolidated Statements of Income This section details the company's revenues, expenses, and net income for the three and six months ended June 30, 2025, and 2024 Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 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 | | Basic EPS | $0.11 | $0.17 | $0.08 | $0.18 | | Diluted EPS | $0.11 | $0.17 | $0.08 | $0.18 | - Net income for the three months ended June 30, 2025, decreased by 38% to $7.009 million from $11.381 million in the prior-year period [11] - For the six months ended June 30, 2025, net income decreased by 59% to $4.996 million from $12.165 million in the prior-year period [11] Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income items, for the specified periods Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $7,009 | $11,381 | $4,996 | $12,165 | | Foreign currency translation adjustments | $1,793 | $(338) | $1,337 | $(1,076) | | Comprehensive income | $8,802 | $11,043 | $6,333 | $11,089 | - Comprehensive income for the three months ended June 30, 2025, was $8.802 million, a decrease from $11.043 million in the prior-year period, primarily due to lower net income [14] Consolidated Statements of Stockholders' Equity This section outlines changes in the company's stockholders' equity, including net income, share repurchases, and stock-based compensation Stockholders' Equity Changes (in thousands) | Item | Six Months Ended June 30, 2025 | | :------------------------------------------ | :----------------------------- | | Balance at December 31, 2024 | $511,485 | | Net loss (Q1 2025) | $(2,013) | | Net income (Q2 2025) | $7,009 | | Repurchases of common stock | $(44,967) | | Stock-based compensation | $15,065 | | Balance at June 30, 2025 | $483,217 | - The company repurchased 3.7 million shares for $44.6 million during the six months ended June 30, 2025, at an average price of $12.17 per share [48] Consolidated Statements of Cash Flows This section reports the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :----------------- | :-------- | :-------- | :-------- | | Operating activities | $55,683 | $68,722 | $(13,039) | | Investing activities | $(29,124) | $(12,493) | $(16,631) | | Financing activities | $(49,343) | $(66,223) | $16,880 | | Net decrease in Cash | $(22,969) | $(10,127) | $(12,842) | - Net cash provided by operating activities decreased by $13.039 million, primarily due to lower net income and increased earnout payments related to the D2C acquisition [105] - Cash used in investing activities increased by $16.631 million, mainly due to the DealerClub Acquisition, partially offset by proceeds from the sale of the RepairPal equity investment [106] Notes to the Consolidated Financial Statements (Unaudited) This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements NOTE 1. Description of Business and Summary of Significant Accounting Policies This note describes Cars.com Inc.'s business operations and outlines the significant accounting policies applied in preparing the financial statements - Cars.com Inc., d/b/a Cars Commerce Inc., is an audience-driven technology company empowering the automotive industry, simplifying car buying and selling with data and machine learning-powered products [21] - The Cars Commerce platform includes Cars.com, Dealer Inspire, D2C Media, AccuTrade, DealerClub, and Cars Commerce Media Network [21] - The company is evaluating new FASB guidance (ASU 2024-03 and ASU 2023-09) on expense disaggregation and income tax disclosures, effective for fiscal years beginning after December 15, 2026, and December 15, 2024, respectively [26][27] NOTE 2. Revenue This note provides disaggregated revenue information by source and discusses factors influencing revenue trends Disaggregated Revenue Information (in thousands) | Revenue Source | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Dealer | $158,477 | $159,843 | $317,621 | $321,658 | | OEM and National | $16,637 | $15,828 | $32,916 | $31,135 | | Other | $3,625 | $3,223 | $7,226 | $6,277 | | Total revenue | $178,739 | $178,894 | $357,763 | $359,070 | - Dealer revenue, the largest stream, decreased by 1% for both the three and six months ended June 30, 2025, primarily due to lower average dealer count and customer mix changes, partially offset by solutions growth [73][86] - OEM and National revenue increased by 5% and 6% for the three and six months, respectively, driven by increased OEM spending and higher on-the-lot inventory levels [74][87] NOTE 3. Business Combinations This note details recent acquisition activities, including the purchase of DealerClub Inc. and related financial considerations - In January 2025, Cars.com Inc. acquired DealerClub Inc., a dealer-to-dealer digital wholesale auction platform, for a total purchase consideration of $25.3 million [30] - The acquisition included a preliminary goodwill allocation of $22.0 million, primarily attributed to expected sales growth and the value of the acquired workforce [32][38] - The acquisition also includes potential performance-based consideration of up to $88.0 million, contingent on DealerClub's revenue targets through December 31, 2028 [31] NOTE 4. RepairPal Equity Investment This note describes the sale of the RepairPal equity investment and the proceeds received - During Q4 2024, the Company sold its RepairPal equity investment, receiving $9.5 million in closing proceeds during Q1 2025, reflected in investing activities [40] NOTE 5. Debt This note provides information on the company's debt structure, compliance with covenants, and available borrowing capacity - As of June 30, 2025, the Company was in compliance with all debt covenants, with a Senior Secured Net Leverage Ratio of 0.2x and a Consolidated Interest Coverage Ratio of 6.7x [41] - The Company amended its Credit Agreement in May 2024, resulting in a new $350.0 million Revolving Loan due in 2029, with $290.0 million available to borrow as of June 30, 2025 [42][43] - Outstanding indebtedness as of June 30, 2025, included $400.0 million in 6.375% Senior Unsecured Notes due 2028 and $60.0 million under the Revolving Loan [43][44][99] NOTE 6. Commitments and Contingencies This note outlines the company's legal proceedings and other commitments and contingencies - The Company is involved in various legal proceedings in the ordinary course of business but does not expect their ultimate resolution to have a material adverse effect on its financial position, results of operations, or cash flows [47] NOTE 7. Stockholders' Equity This note details changes in stockholders' equity, including share repurchase programs and activity - The Board of Directors authorized a three-year share repurchase program on February 27, 2025, to acquire up to $250.0 million of common stock [48][101] - During the six months ended June 30, 2025, the Company repurchased 3.7 million shares for $44.6 million at an average price of $12.17 per share [48][101] NOTE 8. Stock-Based Compensation This note describes the company's stock-based compensation plans and activity for restricted and performance share units - Stockholders approved amendments to the Omnibus Plan on June 4, 2025, increasing authorized shares by 4.0 million to a total of 22.0 million and extending the plan term to June 4, 2035 [49] Restricted Share Units (RSUs) Activity (in thousands) | RSU Activity | Number of RSUs | Weighted-Average Grant Date Fair Value | | :-------------------------- | :------------- | :------------------------------------- | | Outstanding as of Dec 31, 2024 | 3,637 | $16.52 | | Granted | 2,738 | $11.60 | | Vested and delivered | (1,401) | $16.23 | | Forfeited | (284) | $15.42 | | Outstanding as of June 30, 2025 | 4,690 | $13.80 | Performance Share Units (PSUs) Activity (in thousands) | PSU Activity | Number of PSUs | Weighted-Average Grant Date Fair Value | | :-------------------------- | :------------- | :------------------------------------- | | Outstanding as of Dec 31, 2024 | 931 | $16.37 | | Granted | 542 | $12.94 | | Vested and delivered | (245) | $14.78 | | Forfeited | (44) | $16.94 | | Outstanding as of June 30, 2025 | 1,184 | $15.10 | NOTE 9. Earnings Per Share This note presents the calculation of basic and diluted earnings per share for the reporting periods Earnings Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $7,009 | $11,381 | $4,996 | $12,165 | | Basic weighted-average common shares | 63,163 | 66,534 | 63,859 | 66,426 | | Diluted weighted-average common shares | 63,842 | 67,821 | 64,476 | 67,514 | | Earnings per share, basic | $0.11 | $0.17 | $0.08 | $0.18 | | Earnings per share, diluted | $0.11 | $0.17 | $0.08 | $0.18 | - Potential shares from the DealerClub Acquisition's contingent consideration were excluded from diluted EPS calculations as the contingency for issuance was not met [54] NOTE 10. Income Taxes This note explains the effective income tax rate and its reconciliation to the statutory federal rate - The effective income tax rate for the six months ended June 30, 2025, differed from the statutory federal rate of 21% primarily due to tax expense on stock-based compensation and nondeductible items [55][95] NOTE 11. Segment Information This note clarifies that the company operates as a single operating and reportable segment - The Company operates as a single operating and reportable segment, with the CEO making resource allocation decisions to maximize consolidated financial results [56] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition, results of operations, key metrics, and capital resources Business Overview This section describes Cars Commerce's role as an audience-driven technology company simplifying car buying and selling through its integrated platform - Cars Commerce is an audience-driven technology company that simplifies car buying and selling through data and machine learning-powered products across pretail, retail, and post-sale activities [62] - The platform integrates five key capabilities: Cars.com marketplace, Dealer Inspire and D2C Media for digital retail, AccuTrade for trade-ins, DealerClub for wholesale auctions, and Cars Commerce Media Network for in-market media solutions [62] Overview of Results This section provides a high-level summary of the company's financial performance, including revenue and net income trends Financial Performance Overview (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $178,739 | $178,894 | $357,763 | $359,070 | | Net income | $7,009 | $11,381 | $4,996 | $12,165 | - Total revenue remained relatively flat for both the three and six months ended June 30, 2025, compared to the prior-year periods [63] - Net income saw a significant decrease for both the three-month (-38%) and six-month (-59%) periods year-over-year [63] Key Operating Metrics This section presents key performance indicators such as traffic, unique visitors, dealer customers, and average revenue per dealer Key Operating Metrics (Traffic and Average Monthly Unique Visitors in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Traffic | 162,036 | 158,117 | 2% | 332,123 | 329,554 | 1% | | Average Monthly Unique Visitors | 26,649 | 26,107 | 2% | 27,848 | 27,220 | 2% | | Dealer Customers (June 30) | 19,412 | 19,390 | 0% | N/A | N/A | N/A | | Monthly Average Revenue Per Dealer (ARPD) | $2,435 | $2,474 | (2)% | N/A | N/A | N/A | - Traffic and Average Monthly Unique Visitors increased by 1-2% year-over-year, driven by increased consumer demand in anticipation of rising automotive tariffs and strategic marketing shifts [64][66] - Dealer Customers increased slightly by 1% from March 31, 2025, while Monthly Average Revenue Per Dealer (ARPD) decreased by 2% for the three months ended June 30, 2025, primarily due to changes in customer mix [64][68][69] Factors Affecting Our Performance This section discusses internal and external factors influencing the company's business performance and long-term success - Business performance is influenced by the broader automotive ecosystem, including supply/demand for vehicles, global supply chain disruptions, vehicle costs, retail prices, EV adoption rates, and macroeconomic factors like inflation, tariffs, and interest rates [70] - Long-term success depends on executing a platform strategy, including growing an engaged audience, expanding dealer relationships, transforming OEM partnerships, and leveraging digital solutions like AI to help customers compete in the online car-shopping environment [71] Results of Operations - Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 This section analyzes the company's revenue and operating expenses for the three-month period, highlighting changes and their drivers Revenue and Operating Expenses (Three Months Ended June 30, in thousands) | Category | 2025 | 2024 | $ Change | % Change | | :-------------------------- | :-------- | :-------- | :-------- | :------- | | Total revenue | $178,739 | $178,894 | $(155) | (0)% | | Cost of revenue and operations | $30,547 | $31,030 | $(483) | (2)% | | Product and technology | $28,634 | $27,583 | $1,051 | 4% | | Marketing and sales | $57,757 | $60,213 | $(2,456) | (4)% | | General and administrative | $21,682 | $22,980 | $(1,298) | (6)% | | Depreciation and amortization | $24,873 | $27,571 | $(2,698) | (10)% | | Total operating expenses | $163,493 | $169,377 | $(5,884) | (3)% | | Operating income | $15,246 | $9,517 | $5,729 | 60% | | Net income | $7,009 | $11,381 | $(4,372) | (38)% | - Operating income increased by 60% to $15.246 million, driven by a 3% decrease in total operating expenses, particularly in marketing and sales, and depreciation and amortization [73][79][81] - Net income decreased by 38% due to a significant reduction in 'Other income, net' (down 84%), primarily from changes in the fair value of contingent consideration in the prior year [73][83] Results of Operations - Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 This section analyzes the company's revenue and operating expenses for the six-month period, highlighting changes and their drivers Revenue and Operating Expenses (Six Months Ended June 30, in thousands) | Category | 2025 | 2024 | $ Change | % Change | | :-------------------------- | :-------- | :-------- | :-------- | :------- | | Total revenue | $357,763 | $359,070 | $(1,307) | (0)% | | Cost of revenue and operations | $61,486 | $60,992 | $494 | 1% | | Product and technology | $57,112 | $55,668 | $1,444 | 3% | | Marketing and sales | $117,982 | $119,376 | $(1,394) | (1)% | | General and administrative | $47,566 | $45,837 | $1,729 | 4% | | Depreciation and amortization | $51,912 | $54,936 | $(3,024) | (6)% | | Total operating expenses | $336,058 | $336,809 | $(751) | (0)% | | Operating income | $21,705 | $22,261 | $(556) | (2)% | | Net income | $4,996 | $12,165 | $(7,169) | (59)% | - Operating income decreased by 2% to $21.705 million, while total operating expenses remained relatively flat [86] - Net income decreased by 59% to $4.996 million, primarily due to a significant decrease in 'Other income, net' (down 79%) compared to the prior-year period [86][94] Liquidity and Capital Resources This section discusses the company's sources of liquidity, cash position, debt, and capital commitments - Primary liquidity sources are cash flows from operations, available cash reserves, and borrowing capacity under the credit facility, which are believed to be adequate for the next 12 months [97] - As of June 30, 2025, Cash and cash equivalents were $27.7 million, and total liquidity, including the undrawn Revolving Loan, was $317.7 million [98] - The Company has potential earnout payments, including CAD$15.0 million (approx. USD$10.8 million) paid in April 2025 for the D2C Media acquisition and up to $88.0 million for the DealerClub acquisition [104] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that the company's market risk exposures have not materially changed since the previous annual report - The Company's market risk exposures have not materially changed since December 31, 2024 [111] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance of timely and accurate financial reporting [112] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control during the quarter [114] PART II. OTHER INFORMATION This part includes additional information not covered in the financial statements, such as legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section refers to Note 6 for details on the company's legal proceedings - Information on legal proceedings is provided in Note 6 (Commitments and Contingencies) of the Consolidated Financial Statements [117] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the annual report - No material changes to the risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024 [118] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchase activity under its publicly announced program for the quarter Common Stock Repurchase Activity (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value of Shares that May Yet Be Purchased (in thousands) | | :-------------------------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------- | | April 1 through April 30, 2025 | 823,942 | $11.24 | $229,013 | | May 1 through May 31, 2025 | 730,494 | $10.69 | $221,201 | | June 1 through June 30, 2025 | 558,888 | $10.79 | $215,168 | | Total | 2,113,324 | | | - The Company repurchased 2,113,324 shares during the quarter, with $215.168 million remaining under the $250.0 million share repurchase program as of June 30, 2025 [120][123] Item 3. Defaults Upon Senior Securities This section confirms that the company reported no defaults upon senior securities during the period - There were no defaults upon senior securities [121] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable to the Company [122] Item 5. Other Information This section confirms no directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements - None of the Company's directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2025 [124] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents and certifications - Key exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, and the Amended and Restated Omnibus Incentive Compensation Plan [126] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are also filed [126] Signatures This section provides the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report - The report was signed on August 7, 2025, by T. Alex Vetter, Chief Executive Officer, and Sonia Jain, Chief Financial Officer [132]