Cars.com(CARS) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company's total assets decreased to $1.14 billion as of March 31, 2024, from $1.17 billion at year-end 2023, while total revenue increased to $180.2 million from $167.1 million year-over-year, but net income significantly dropped to $0.8 million from $11.5 million, primarily due to a large swing in 'Other (expense) income, net', with net cash provided by operating activities increasing to $33.5 million Consolidated Balance Sheets Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,143,131 | $1,172,449 | | Total current assets | $177,171 | $178,438 | | Goodwill | $146,104 | $147,058 | | Intangible assets, net | $647,302 | $669,167 | | Total Liabilities | $661,681 | $680,341 | | Long-term debt, net | $473,755 | $460,119 | | Total Stockholders' Equity | $481,450 | $492,108 | Consolidated Statements of Income Consolidated Income Statement Summary (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenue | $180,176 | $167,068 | | Dealer Revenue | $161,815 | $149,843 | | OEM and National Revenue | $15,307 | $13,543 | | Operating Income | $12,744 | $12,529 | | Net Income | $784 | $11,479 | | Diluted EPS | $0.01 | $0.17 | - The significant decrease in Net Income from $11.5 million in Q1 2023 to $0.8 million in Q1 2024 was primarily driven by a shift in 'Other (expense) income, net' from an income of $8.2 million to an expense of $3.6 million[11] Consolidated Statements of Cash Flows Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $33,468 | $28,141 | | Net cash used in investing activities | ($6,013) | ($5,371) | | Net cash used in financing activities | ($35,203) | ($35,647) | | Net decrease in Cash and cash equivalents | ($7,835) | ($12,877) | | Cash and cash equivalents at end of period | $31,363 | $18,838 | Notes to the Consolidated Financial Statements The notes detail the company's accounting policies, revenue streams, recent acquisitions, debt structure, and subsequent events, highlighting an 8% increase in Dealer revenue, details of the D2C Media acquisition, a contingent consideration liability of $56.2 million, and a significant debt refinancing subsequent to the quarter's end Disaggregated Revenue (in thousands) | Revenue Source | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Dealer | $161,815 | $149,843 | | OEM and National | $15,307 | $13,543 | | Other | $3,054 | $3,682 | | Total Revenue | $180,176 | $167,068 | - On November 1, 2023, the company acquired D2C Media Inc. and EZResults Inc. for $79.8 million, including a potential cash earnout of up to CAD$35.0 million treated as compensation expense[29][31] - As of March 31, 2024, the company had a contingent consideration liability of $56.2 million, measured at fair value on a recurring basis using Level 3 inputs, arising from acquisitions and contingent on achieving certain financial or operational metrics[38][40] - On May 6, 2024, the company amended and extended its Credit Agreement, resulting in a new $350.0 million Revolving Loan due in 2029, with $80.0 million borrowed on the new loan to pay off and extinguish existing Term Loan and Revolving Loan balances[61] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 8% year-over-year revenue growth to the D2C Media acquisition and strength in digital experience and marketplace revenue, with key operating metrics showing a 1% increase in dealer customers and a 5% increase in monthly average revenue per dealer (ARPD), while operating expenses rose 8% in line with revenue growth, driven by costs from the D2C acquisition and higher compensation, maintaining a strong liquidity position with $226.4 million available as of March 31, 2024 Key Operating Metrics Key Operating Metrics (Q1 2024) | Metric | Q1 2024 | Q1 2023 | % Change (YoY) | Q4 2023 | % Change (QoQ) | | :--- | :--- | :--- | :--- | :--- | :--- | | Traffic (in thousands) | 171,438 | 164,782 | 4% | N/A | N/A | | Average Monthly UVs (in thousands) | 28,332 | 28,478 | (1)% | N/A | N/A | | Dealer Customers | 19,381 | 19,186 | 1% | 19,504 | (1)% | | Monthly ARPD | $2,505 | $2,386 | 5% | $2,523 | (1)% | - The 5% YoY increase in ARPD was primarily driven by the marketplace repackaging initiative and adoption of higher-tier packages, slightly offset by the inclusion of lower-ARPD customers from the D2C Media acquisition[81] - The company transitioned its traffic measurement from Adobe Analytics to RudderStack as of January 1, 2024, which contributed to the 4% increase in reported Traffic[73][75][76] Results of Operations Results of Operations Summary (in thousands) | Line Item | Q1 2024 | Q1 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $180,176 | $167,068 | $13,108 | 8% | | Dealer Revenue | $161,815 | $149,843 | $11,972 | 8% | | OEM and National Revenue | $15,307 | $13,543 | $1,764 | 13% | | Total Operating Expenses | $167,432 | $154,539 | $12,893 | 8% | | Operating Income | $12,744 | $12,529 | $215 | 2% | | Net Income | $784 | $11,479 | ($10,695) | (93)% | - Dealer revenue increased by 8% ($12.0 million), driven by the D2C Media acquisition, growth in digital experience revenue, and the marketplace repackaging initiative[86] - OEM and National revenue grew 13% ($1.8 million) as OEMs increased spending to raise consumer awareness amid rising on-the-lot inventory[87] - General and administrative expenses increased by 25% ($4.6 million), primarily due to incremental costs from the D2C Media business, including compensation expense related to the D2C Media earnout[93] Liquidity and Capital Resources - As of March 31, 2024, the company had total liquidity of $226.4 million, consisting of $31.4 million in cash and cash equivalents and $195.0 million available under its Revolving Loan[100] - Total outstanding debt was $480.0 million as of March 31, 2024, with an average interest rate of 6.6%[101] - During Q1 2024, the company repurchased 0.5 million shares for $9.5 million under its authorized $200 million share repurchase program[104] - The company expects to pay $19.8 million of contingent consideration and earnout amounts within the next twelve months, having paid $7.8 million for contingent consideration in Q1 2024[105] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that its exposures to market risk have not changed materially since December 31, 2023, as detailed in its Annual Report on Form 10-K - There have been no material changes in the company's market risk exposures since the end of the last fiscal year[117] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[118] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[120] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any pending or threatened litigation that would have a material adverse impact on its financial position, results of operations, or cash flows - According to management, the company is not currently involved in any legal proceedings that would have a material adverse impact on its financials[49][123] Item 1A. Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to the risk factors described in the company's 2023 Form 10-K have occurred[124] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2024, the company repurchased a total of 532,635 shares of its common stock for approximately $9.5 million, with approximately $110.2 million remaining available for future repurchases under the authorized program as of March 31, 2024 Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Value Remaining for Purchase (in thousands) | | :--- | :--- | :--- | :--- | | January 2024 | 135,250 | $17.75 | $117,324 | | February 2024 | 184,730 | $18.30 | $113,944 | | March 2024 | 212,655 | $17.47 | $110,229 | | Total Q1 | 532,635 | N/A | $110,229 | - The share repurchases are part of a three-year, $200 million program authorized on February 24, 2022[129] Item 5. Other Information During the fiscal quarter ended March 31, 2024, none of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the first quarter of 2024[130] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Fifth Amendment to the Credit Agreement and various officer certifications as required by the Sarbanes-Oxley Act - Key exhibits filed include the Fifth Amendment to the Credit Agreement, CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and Inline XBRL data files[132]