Cars.com Inc.

Previous wording

References in this discussion and analysis to "we," "us," "our," "Cars Commerce" and similar terms refer to Cars.com Inc. and its subsidiaries, collectively, unless the context indicates otherwise.

Current wording

References in this discussion and analysis to "we," "us," "our" and similar terms refer to Cars.com Inc. and its subsidiaries, collectively, unless the context indicates otherwise.

Previous wording

Average Monthly Unique Visitors ("UVs") and Traffic. UVs and Traffic are fundamental to our business. They are indicative of our consumer reach and the level of engagement consumers have with our platform. Although our consumer engagement does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers, OEMs and national customers and a primary reason they do business with us. We believe we have achieved audience scale as measured by UVs and Traffic. Traffic is driven by a combination of UVs visiting our properties and repeat visitation and engagement. We monetize impressions, clicks and other connections that result from traffic to our site via our products and services.

Current wording

Average Monthly Unique Visitors ("UVs") and Traffic. UVs and Traffic are fundamental to our business. They are indicative of our consumer reach and the level of engagement consumers have with our platform. Although our consumer engagement does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers, OEMs and national customers and a primary reason they do business with us. We believe we have achieved audience scale as measured by UVs and Traffic. Traffic is driven by a combination of UVs visiting our properties, repeat visitation and engagement. We monetize impressions, clicks and other connections that result from traffic to our site via our products and services.

Previous wording

For the three months ended September 30, 2025, ARPD increased 1% compared to the three months ended June 30, 2025, primarily due to marketplace repackaging, partially offset by changes in our customer mix.

Current wording

For the three months ended March 31, 2026, Dealer Customers increased 1% compared to the three months ended March 31, 2025, primarily due to an increase in marketplace customers, partially offset by a decrease in digital solutions customers.

Previous wording

For the three months ended September 30, 2025, ARPD decreased 1% compared to the three months ended September 30, 2024, primarily due to changes in our customer and product mix.

Current wording

For the three months ended March 31, 2026, Dealer Customers decreased 1% compared to the three months ended December 31, 2025, primarily due to decrease in digital solutions customers.

Previous wording

Factors Affecting Our Performance. Our business is impacted by changes in the larger automotive ecosystem, including supply and demand for new and used vehicle inventory, global supply chain and information systems disruptions, semiconductor and raw material shortages, vehicle acquisition cost, vehicle retail prices, the rate of electric vehicle adoption, employee retention and changes related to automotive advertising, among other macroeconomic factors including the political environment, inflationary pressures, tariffs and prevailing interest rates. Changes in vehicle sales volumes in the United States and Canada also influence OEMs’ and dealerships’ willingness to increase investments in technology solutions and automotive marketplaces like Cars.com and could impact our pricing strategies and/or revenue mix.

Current wording

Factors Affecting Our Performance. Our business is impacted by changes in the larger automotive ecosystem, including supply and demand for new and used vehicle inventory, geopolitical incidents, global supply chain and information systems disruptions, semiconductor and raw material shortages, vehicle acquisition cost, vehicle retail prices, the rate of electric vehicle adoption, employee retention and changes related to automotive advertising, among other macroeconomic factors including the political environment, inflationary and affordability pressures, tariffs and prevailing interest rates. Changes in vehicle sales volumes in the United States and Canada also influence OEMs’ and dealerships’ willingness to increase investments in marketing spend and technology solutions and could impact our pricing strategies and/or revenue mix.

Previous wording

Dealer revenue. Dealer revenue is typically subscription-oriented and consists of marketplace, digital experience, including website solutions, AccuTrade and media products sold to dealer customers. Dealer revenue is our largest revenue stream, representing 89% of total revenue for both the three months ended September 30, 2025 and 2024. Dealer revenue increased $2.5 million or 2%, primarily due to growth in solutions.

Current wording

Dealer revenue. Dealer revenue is typically subscription-oriented and consists of marketplace, digital experience, including website solutions, trade and appraisal and media products sold to dealer customers. Dealer revenue is our largest revenue stream, representing 90% and 89% of total revenue for the three months ended March 31, 2026 and 2025, respectively. Dealer revenue increased $3.9 million or 2%, primarily due to reflecting ongoing improvements in value delivery, upgrades in website offerings and growth in marketplace customers, partially offset by changes in our product mix.

Previous wording

OEM and National revenue. OEM and National revenue largely consists of Cars Commerce Media Network products, including display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies. OEM and National revenue represented 9% of total revenue for both the three months ended September 30, 2025 and 2024. OEM and National revenue decreased $0.8 million or 5%, which we believe is primarily due to temporary shifts in spending by certain OEM partners.

Current wording

OEM and National revenue. OEM and National revenue largely consists of media solutions products, including display advertising and other solutions to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies. OEM and National revenue represented 8% and 9% of total revenue for the three months ended March 31, 2026 and 2025, respectively. OEM and National revenue decreased $2.0 million or 12%, which is primarily due to shifts in spending by OEM partners.

Previous wording

Other revenue. Other revenue primarily consists of revenue related to vehicle listing data sold to third parties and pay per lead products. Other revenue represented 2% of total revenue for both the three months ended September 30, 2025 and 2024. Other revenue increased $0.3 million or 8%.

Current wording

Other revenue. Other revenue primarily consists of revenue related to vehicle listing data sold to third parties. Other revenue represented 2% of total revenue for both the three months ended March 31, 2026 and 2025. Other revenue decreased $0.7 million or 18%.

Previous wording

Cost of revenue and operations. Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment, pay per lead products and compensation costs for the product fulfillment and customer service teams. Cost of revenue and operations expense represented 17% and 18% of total revenue for the three months ended September 30, 2025 and 2024, respectively. Cost of revenue and operations decreased $1.5 million or 5%, primarily due to lower compensation expense.

Current wording

Cost of revenue and operations. Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment and compensation and severance costs for the product fulfillment and customer service teams. Cost of revenue and operations expense represented 18% of total revenue for both the three months ended March 31, 2026 and 2025. Cost of revenue and operations increased $0.3 million or 1%, primarily due to higher compensation and severance-related costs, partially offset by lower third-party costs associated with certain products driven by slight shifts in product mix.

Previous wording

Product and technology. The product team creates and manages consumer and customer-facing innovation and consumer and customer experience. The technology team develops and supports our products, websites and mobile apps. Product and technology expense includes compensation costs, consulting and contractor costs, hardware and software maintenance, software licenses and other infrastructure costs. Product and technology expense represented 15% and 16% of total revenue for the three months ended September 30, 2025 and 2024, respectively. Product and technology expense decreased $1.6 million or 6%, primarily due to lower compensation, including stock-based compensation.

Current wording

Product and technology. The product team creates and manages consumer and customer-facing innovation and consumer and customer experience. The technology team develops and supports our products, websites and mobile apps. Product and technology expense includes compensation costs, consulting and contractor costs, hardware and software maintenance, software licenses, other infrastructure costs, severance costs and costs related to the write-off of assets. Product and technology expense represented 17% of total revenue for both the three months ended March 31, 2026 and 2025. Product and technology expense increased $0.9 million or 3%, primarily due to higher severance-related costs, partially offset by lower compensation.

Previous wording

Marketing and sales. Marketing and sales expense primarily consists of traffic and lead acquisition costs, performance and brand marketing, trade events, compensation costs and travel for the marketing, sales and sales support teams, as well as bad debt expense related to the allowance for doubtful accounts. Marketing and sales expense represented 33% and 32% of total revenue for the three months ended September 30, 2025 and 2024, respectively. Marketing and sales expense increased $1.0 million or 2%, primarily due to increased investment in marketing.

Current wording

Marketing and sales. Marketing and sales expense primarily consists of traffic and lead acquisition costs, performance and brand marketing, trade events, compensation costs and travel for the marketing, sales and sales support teams, severance costs and bad debt expense related to the allowance for doubtful accounts. Marketing and sales expense represented 34% and 35% of total revenue for the three months ended March 31, 2026 and 2025, respectively. Marketing and sales expense decreased $0.7 million or 1%, primarily due to marketing efficiencies to more effectively capture high-intent consumer demand.

Previous wording

General and administrative. General and administrative expense primarily consists of compensation costs for certain of the executive, finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expense includes the cost of office space, legal, accounting and other professional services, transaction-related costs, severance, transformation and other exit costs and costs related to the write-off of assets. General and administrative expense represented 13% and 12% of total revenue for the three months ended September 30, 2025 and 2024, respectively. General and administrative expense increased $2.8 million or 13%, primarily due to third-party costs, partially offset by lower costs associated with our amended headquarters office lease.

Current wording

General and administrative. General and administrative expense primarily consists of compensation costs for certain of the executive, finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expense includes the cost of legal, accounting and other professional services, severance costs, office space, transformation and other exit costs and transaction-related costs. General and administrative expense represented 12% of total revenue for both the three months ended March 31, 2026 and 2025. General and administrative expense increased $0.9 million or 4%, primarily due to higher severance-related costs, compensation and third-party costs, partially offset by a reduction in costs as a result of the conclusion of the D2C Media earnout period. For more information on the D2C Media earnout, see the "Liquidity and Capital Resources" section below.

Previous wording

Depreciation and amortization. Depreciation and amortization expense decreased $7.1 million or 9%, primarily due to certain assets being fully depreciated and amortized as compared to the prior-year period, partially offset by accelerated depreciation associated with our amended headquarters office lease.

Current wording

Depreciation and amortization. Depreciation and amortization expense decreased $10.3 million or 38%, primarily due to certain intangible assets being fully amortized as compared to the prior-year period and the accelerated depreciation associated with our amended headquarters office lease in the prior-year period.

Previous wording

Interest expense, net. Interest expense, net decreased $0.4 million or 5%, primarily due to a reduction in total indebtedness compared to the prior-year period and lower interest rates. For information related to our debt, see Note 5 (Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Current wording

Interest expense, net. Interest expense, net decreased $0.4 million or 6%, primarily due to higher interest income and a reduction in total indebtedness compared to the prior-year period and lower interest rates. For information related to our debt, see Note 5 (Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Previous wording

Income tax expense. The effective income tax rate differed from the statutory federal income tax rate of 21%, primarily due to the tax expense on stock-based compensation and nondeductible items.

Current wording

Income tax expense. The effective income tax rate differed from the statutory federal income tax rate of 21%, primarily due to the tax expense on stock-based compensation.

Previous wording

Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and borrowing capacity available under our credit facility. We believe our positive operating cash flow, along with our Revolving Loan, provide adequate liquidity to meet our business needs for the next twelve months and beyond, including those for investments, debt service, share repurchases, contingent consideration payments and strategic acquisitions. However, our ability to maintain adequate liquidity in the future is dependent upon a number of factors, including our revenue, our ability to contain costs, including capital expenditures, and to collect accounts receivable and various other macroeconomic factors, many of which are beyond our direct control.

Current wording

Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and borrowing capacity available under our Credit Agreement dated as of May 31, 2017, as amended from time to time ("Credit Agreement"). We believe our positive operating cash flow, along with our $350.0 million revolving loan due in 2029 ("Revolving Loan"), provide adequate liquidity to meet our business needs for the next twelve months and beyond, including those for investments, debt service, share repurchases and strategic acquisitions. However, our ability to maintain adequate liquidity in the future is dependent upon a number of factors, including our revenue, our ability to contain costs, including capital expenditures, and to collect accounts receivable and various other macroeconomic factors, many of which are beyond our direct control.

Previous wording

We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. As of September 30, 2025, Cash and cash equivalents were $55.1 million and including our undrawn Revolving Loan, our total liquidity was $350.1 million.

Current wording

We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. As of March 31, 2026, Cash and cash equivalents were $64.6 million and including our undrawn Revolving Loan, our total liquidity was $359.6 million.

Previous wording

Indebtedness. As of September 30, 2025, the outstanding aggregate principal amount of our indebtedness was $455.0 million, at an average interest rate of 6.3%, including $400.0 million of outstanding aggregate principal under the 6.375% Senior Unsecured Notes due in 2028 and $55.0 million of outstanding principal under the Revolving Loan which had an interest rate of 6.1%.

Current wording

Indebtedness. As of March 31, 2026, the outstanding aggregate principal amount of our indebtedness was $455.0 million, at an average interest rate of 6.3%, including $400.0 million of outstanding aggregate principal under the 6.375% Senior Unsecured Notes due in 2028 and $55.0 million of outstanding principal under the Revolving Loan which had an interest rate of 5.8%. During the three months ended March 31, 2026, there were no borrowings or payments on our Revolving Loan. As of March 31, 2026, $295.0 million was available to borrow under the Revolving Loan.

Previous wording

Share Repurchase Program. On February 27, 2025, we announced that our Board of Directors had authorized a three-year share repurchase program to acquire up to $250.0 million of our common stock. The repurchase program may be suspended or discontinued at any time and does not obligate us to repurchase any specific amount or number of shares. We may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and other applicable legal requirements, and subject to our blackout periods. We intend to fund the share repurchase program principally with cash from operations. During the nine months ended September 30, 2025, we repurchased and subsequently retired 5.2 million shares for $63.9 million at an average price paid per share of $12.39.

Current wording

Share Repurchase Program. On February 27, 2025, we announced that our Board of Directors had authorized a three-year share repurchase program to acquire up to $250.0 million of our common stock. The repurchase program may be suspended or discontinued at any time and does not obligate us to repurchase any specific amount or number of shares. We may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and other applicable legal requirements, and subject to our blackout periods. We intend to fund the share repurchase program principally with cash from operations. During the three months ended March 31, 2026, we repurchased and subsequently retired 2.5 million shares for $20.2 million at an average price paid per share of $8.02.

Previous wording

As part of the D2C Media acquisition, we may be required to pay additional cash consideration to certain former owners who are now employees of Cars Commerce based on the achievement of a revenue performance metric. The amount to be paid will be determined by the acquired business’ future achievement of certain revenue-related financial targets through December 31, 2025 and expensed over each performance period. In April 2025, we paid CAD$15.0 million (approximately USD$10.8 million) associated with the earnout for the year ended December 31, 2024. For the year ending December 31, 2025, we may expense up to CAD$15.0 million (approximately USD$10.8 million as of September 30, 2025) associated with the remaining portion of the earnout.

Current wording

As part of the D2C Media acquisition, we are required to pay additional cash consideration to certain former owners who are now employees of the Company based on the achievement of a revenue performance metric. The amount to be paid was determined by the acquired business’ achievement of certain revenue-related financial targets through December 31, 2025 and expensed over each performance period. In April 2026, we paid CAD$15.0 million (approximately USD$10.9 million) associated with the earnout for the year ended December 31, 2025, which is the final installment of the earnout.

Previous wording

As part of the DealerClub acquisition, we may be required to pay additional performance-based consideration of up to $88.0 million, which may be paid in cash, or stock if mutually agreed upon, to certain former owners who are now employees of Cars Commerce. The amount to be paid will be determined by DealerClub's future achievement of certain revenue-related financial targets through December 31, 2028, and will be expensed over the relevant performance periods.

Current wording

As part of the DealerClub acquisition, we may be required to pay additional performance-based consideration of up to $88.0 million, which may be paid in cash, or stock if mutually agreed upon, to certain former owners who are now employees of the Company. The amount to be paid will be determined by DealerClub's future achievement of certain revenue-related financial targets through December 31, 2028, and will be expensed over the relevant performance periods. Based on current performance trends, no such consideration was expensed during the three months ended March 31, 2026.

Previous wording

Operating Activities. Cash provided by operating activities for the nine months ended September 30, 2025 decreased as compared to the nine months ended September 30, 2024 primarily due to an increase of $7.8 million of earnout payments related to the D2C acquisition, as well as lower Net income and the related adjustments on the Consolidated Statement of Cash Flows. For further information, see the Consolidated Statements of Cash Flows included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Current wording

Operating Activities. Cash provided by operating activities for the three months ended March 31, 2026 increased as compared to the three months ended March 31, 2025 primarily due to favorable working capital changes. For further information, see the Consolidated Statements of Cash Flows included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Previous wording

Investing Activities. The increase in cash used in investing activities during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily due to the impact of the DealerClub Acquisition, partially offset by the proceeds collected from the sale of the RepairPal equity investment in the current year.

Current wording

Investing Activities. The decrease in cash used in investing activities during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily due to the impact of the prior year period DealerClub acquisition, partially offset by the proceeds collected from the sale of the RepairPal equity investment in the prior year period. For further information on these items, see Note 3 (Business Combinations) and Note 4 (RepairPal Equity Investment) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Previous wording

Financing Activities. During the nine months ended September 30, 2025, cash used in financing activities was primarily related to repurchases of common stock, tax payments made in connection with the vesting of certain equity awards and net debt repayments. During the nine months ended September 30, 2024, cash used in financing activities was primarily related to repurchases of common stock, payments of contingent consideration, debt repayments and tax payments made in connection with the vesting of certain equity awards. For information related to our debt, repurchases of common stock and contingent consideration, see Note 5 (Debt) and Note 7 (Stockholders' Equity) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q, and "Liquidity and Capital Resources" in Part II, Item 7., "Management’s Discussion and Analysis of Financial Condition and Results of Operations", of our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on February 27, 2025.

Current wording

Financing Activities. During the three months ended March 31, 2026, cash used in financing activities was primarily related to repurchases of our common stock and tax payments made in connection with the vesting of certain equity awards. During the three months ended March 31, 2025, cash used in financing activities was primarily related to repurchases of our common stock, debt repayments and tax payments made in connection with the vesting of certain equity awards, partially offset by proceeds from Revolving Loan borrowings. For information related to our debt and repurchases of our common stock, see Note 5 (Debt) and Note 7 (Stockholders' Equity) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Previous wording

Critical Accounting Policies. For information related to critical accounting policies, see "Critical Accounting Policies and Estimates" in Part II, Item 7., "Management’s Discussion and Analysis of Financial Condition and Results of Operations", of our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on February 27, 2025 and see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q. During the nine months ended September 30, 2025, there have been no changes to our critical accounting policies.

Current wording

Critical Accounting Policies. For information related to critical accounting policies, see "Critical Accounting Policies and Estimates" in Part II, Item 7., "Management’s Discussion and Analysis of Financial Condition and Results of Operations", of our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 26, 2026 and see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q. During the three months ended March 31, 2026, there have been no changes to our critical accounting policies.