Cars.com Inc.

Previous wording

During the three months ended March 31, 2026, we recorded $8.5 million of expense associated with a plan to reduce our operating expenses and realign our resources via an 11% reduction in workforce. These costs are comprised of one-time termination benefits, substantially all of which is related to employee severance and is expected to be paid during the three months ended June 30, 2026.

Current wording

During the three months ended March 31, 2026, we recorded $8.5 million of expense associated with a plan to reduce our operating expenses and realign our resources via an 11% reduction in workforce. These costs are comprised of one-time termination benefits, substantially all of which is related to employee severance and substantially all of which was paid during the three months ended June 30, 2026.

Previous 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.

Current wording

For the three months ended June 30, 2026, Dealer Customers remained flat compared to each of the three months ended June 30, 2025 and March 31, 2026, as an increase in marketplace customers was offset by a decrease in digital solutions customers.

Previous wording

For the three months ended March 31, 2026, ARPD remained flat compared to each of the three months ended March 31, 2025 and December 31, 2025, primarily reflecting ongoing improvements in value delivery, including upgrades in website offerings, and adoption of new marketplace packages, partially offset by declines in dealer media.

Current wording

For the three months ended June 30, 2026, ARPD increased 3% compared to the three months ended June 30, 2025, primarily reflecting the adoption of new marketplace packages and ongoing improvements in value delivery, partially offset by declines in dealer media.

Previous 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.

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 91% and 89% of total revenue for the three months ended June 30, 2026 and 2025, respectively. Dealer revenue increased $4.9 million or 3%, primarily due to growth in marketplace customers, partially offset by a decline in our media products.

Previous 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.

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 7% and 9% of total revenue for the three months ended June 30, 2026 and 2025, respectively. OEM and National revenue decreased $3.0 million or 18%, 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. 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%.

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 each of the three months ended June 30, 2026 and 2025. Other revenue decreased $0.7 million or 19%.

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 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.

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 17% of total revenue for each of the three months ended June 30, 2026 and 2025. Cost of revenue and operations decreased $0.3 million or 1%, primarily due to lower compensation, partially offset by higher third-party costs.

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, 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.

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 15% and 16% of total revenue for the three months ended June 30, 2026 and 2025, respectively. Product and technology expense decreased $2.7 million or 9%, primarily due to 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, 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.

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 32% of total revenue for the three months ended June 30, 2026 and 2025, respectively. Marketing and sales expense increased $2.7 million or 5%, primarily due to higher spend, building consumer awareness to more effectively capture high-intent 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 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.

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 9% and 11% of total revenue for the three months ended June 30, 2026 and 2025, respectively. General and administrative expense decreased $3.5 million or 17%, primarily due to a reduction in costs as a result of the conclusion of the D2C Media earnout period and lower compensation, partially offset by higher third-party costs. 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 $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.

Current wording

Depreciation and amortization. Depreciation and amortization expense decreased $7.5 million or 30%, 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 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.

Current wording

Interest expense, net. Interest expense, net decreased $0.2 million or 3%, primarily due to a reduction in total indebtedness compared to the prior-year period and lower interest rates as well as higher interest income. 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

Other expense, net. Other expense, net changed primarily due to unrealized losses on foreign currency denominated transactions.

Current wording

Other (expense) income, net. Other (expense) income, net changed primarily due to unrealized losses on foreign currency denominated transactions.

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 March 31, 2026, Cash and cash equivalents were $64.6 million and including our undrawn Revolving Loan, our total liquidity was $359.6 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 June 30, 2026, Cash and cash equivalents were $33.3 million and including our undrawn Revolving Loan, our total liquidity was $333.3 million.

Previous 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.

Current wording

Indebtedness. As of June 30, 2026, the outstanding aggregate principal amount of our indebtedness was $450.0 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 $50.0 million of outstanding principal under the Revolving Loan which had an interest rate of 5.8%. During the six months ended June 30, 2026, we made $5.0 million in cash payments on our Revolving Loan, and there were no additional borrowings. As of June 30, 2026, $300.0 million was available to borrow under the Revolving Loan.

Previous wording

As of March 31, 2026, we were in compliance with the covenants under our debt agreements. Our borrowings are limited primarily by: 1) Senior Secured Net Leverage Ratio (as defined in our Credit Agreement) not to exceed 3.5x; and 2) Consolidated Interest Coverage Ratio (as defined in our Credit Agreement) not to be below 3.0x. As of March 31, 2026, our Senior Secured Net Leverage Ratio was (0.05)x, due to our senior secured net debt balance being $(9.6) million, and our Consolidated Interest Coverage Ratio was 7.08x. As of March 31, 2026, our total net leverage ratio was 1.84x. For further information, 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

As of June 30, 2026, we were in compliance with the covenants under our debt agreements. Our borrowings are limited primarily by: 1) Senior Secured Net Leverage Ratio (as defined in our Credit Agreement) not to exceed 3.5x; and 2) Consolidated Interest Coverage Ratio (as defined in our Credit Agreement) not to be below 3.0x. As of June 30, 2026, our Senior Secured Net Leverage Ratio was 0.08x and our Consolidated Interest Coverage Ratio was 7.20x. As of March 31, 2026, our Total Net Leverage Ratio (as defined in the Credit Agreement) was 1.95x. For further information, 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

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.

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 six months ended June 30, 2026, we repurchased and subsequently retired 6.2 million shares for $57.3 million at an average price paid per share of $9.23.

Previous 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.

Current wording

As part of the D2C Media acquisition, we were 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 was 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 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.

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 six months ended June 30, 2026.

Previous 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.

Current wording

Operating Activities. Cash provided by operating activities for the six months ended June 30, 2026 decreased as compared to the six months ended June 30, 2025 primarily due to unfavorable working capital changes, partially offset by higher Net income and related adjustments in 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.

Previous 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.

Current wording

Investing Activities. The decrease in cash used in investing activities during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily due to the impact of the DealerClub acquisition, partially offset by the proceeds collected from the sale of the RepairPal equity investment, both of which occurred 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 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.

Current wording

Financing Activities. During the six months ended June 30, 2026, 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. During the six months ended June 30, 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, 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.

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 six months ended June 30, 2026, there have been no changes to our critical accounting policies.