CARS Cars com Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 02, 2023

 

 

Cars.com Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-37869	81-3693660
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
300 S. Riverside Plaza
Chicago, Illinois				60606
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: 312 601-5000

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		CARS		The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On November 2, 2023, Cars.com Inc. d/b/a Cars Commerce (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2023. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information furnished in this Item 2.02, including Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed to be incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly set forth by specific reference in such filing.

Item 7.01 Regulation FD Disclosure.

On November 2, 2023, the Company issued a press release announcing that the Company entered into a Share Purchase Agreement (the "Share Purchase Agreement") to acquire all of the of all the issued and outstanding shares in the capital of D2C Media Inc. on November 1, 2023. Under the terms of the Share Purchase Agreement, the Company paid CAD $105 million in cash (Approximately USD $76 million) at closing which was funded by a combination of cash on hand and borrowings under the Company's existing revolving credit facility. A copy of the press release is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.

The information furnished in this Item 7.01, including Exhibit 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed to be incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.		Exhibit
99.1		Cars.com Inc. Press Release, dated November 2, 2023, announcing financial results
99.2		Cars.com Inc. Press Release, dated November 2, 2023, announcing Share Purchase Agreement
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			Cars.com Inc.
Date:	November 2, 2023	By:	/s/ Sonia Jain
			Sonia Jain Chief Financial Officer

 

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Exhibit 99.1

 

Cars.com Inc. Reports Third Quarter 2023 Results

Launched Cars Commerce, Uniting the Company’s B2B Brands

Delivered 6% Total Revenue Growth and 9% ARPD Year-Over-Year Growth

Acquired D2C Media Inc., Further Expanding the Cars Commerce Platform Into Canada

 

CHICAGO, Nov. 2, 2023 -- Cars.com Inc. (NYSE: CARS) (d/b/a “Cars Commerce” or “the “Company”), an audience-driven technology company empowering the automotive industry, today released its financial results for the third quarter ended September 30, 2023.

Q3 2023 Financial and Key Metric Highlights

Operational Highlights

“During the quarter, we made strong strategic moves that advanced our platform strategy and unlocked future growth. We launched Cars Commerce, our new B2B brand, reflecting our commitment to unite the industry by simplifying car buying and selling for consumers, dealers, OEMs and lenders. We delivered strong results for the quarter driven by increased market adoption of our products. We are also excited about our acquisition of D2C Media Inc., which further extends our Canadian presence and growth opportunities,” said Alex Vetter, Chief Executive Officer of Cars Commerce.

1 The decline of the digital dealer industry negatively impacted our Dealer Customer count by over 650 cancellations which started in the second quarter of 2022. There are effectively no digital dealers in the Company’s Dealer Customer count.

2 Links to the website are provided solely for convenience purposes. Content on the Company’s website, is not, and shall not be deemed to be, incorporated by reference herein.

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Q3 2023 Results

Revenue for the third quarter totaled $174.3 million, an increase of $9.7 million, or 6%, compared to the prior year period. Dealer revenue grew 8% year-over-year, driven by continued growth in solutions and media products, and the 2023 Marketplace Repackaging initiative. OEM and National revenue totaled $14.5 million, 2% lower compared to the prior year. However, OEM customer revenue increased 12% year-over-year. And sequentially, OEM and National revenue increased 17%.

Third quarter ARPD grew 9%, or $213, year-over-year to $2,548, primarily driven by the 2023 Marketplace Repackaging initiative which concluded this quarter. Dealer Customers also stabilized. As of September 30, 2023, Dealer Customers totaled 18,715, compared to 18,785 at the end of the second quarter of 2023.

Total operating expenses for the third quarter were $160.0 million, compared to $144.7 million for the prior year period. Adjusted operating expenses for the third quarter were $150.5 million, a $14.3 million increase compared to the prior year period. The change in adjusted operating expenses is primarily due to increased investments to support the Company’s revenue growth. Marketing and sales costs increased largely due to investments in Brand Media to support the Cars.com Possibilities advertising campaign, in person events, as well as higher compensation. Product and technology increased due to higher compensation and third-party costs, including licenses and consulting.

Net income for the quarter was $4.5 million, or $0.07 per diluted share, compared to a Net loss of $2.9 million, or $0.04 per diluted share, in the third quarter of 2022. The change in Net income is primarily attributable to the change in the fair value of contingent consideration associated with the Company’s prior acquisitions.

Adjusted EBITDA for the quarter totaled $49.5 million, or 28% of revenue, compared to $49.9 million, or 30% of revenue, for the prior year period.

The Company remains focused on driving high-quality traffic at scale. Organic traffic remained strong at 62% for the quarter. Average Monthly Unique Visitors were 26.0 million and total Traffic increased to 151.4 million.

Cash Flow and Balance Sheet

Net cash provided by operating activities for the nine-month period ended September 30, 2023 was $91.6 million, compared to $91.3 million in the prior year. Free Cash Flow for the nine-month period ended September 30, 2023 was $76.0 million compared to $76.9 million in the prior year. The variance in free cash flow was primarily due to a year-over-year increase in cash taxes of $16.4 million, the majority of which was offset by favorable changes in working capital.

During the first nine months of 2023, the Company paid down $26.3 million of debt, reducing total debt outstanding to $455.0 million, as of September 30, 2023. At quarter-end, the Company’s net leverage ratio (as defined in the Company’s credit facility) was 2.1x, at the low end of its target net leverage

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range of 2.0x to 2.5x. Total liquidity remains strong at $279.1 million, including cash and cash equivalents of $49.1 million and $230.0 million of undrawn revolver capacity, as of September 30, 2023.

Year-to-date, the Company repurchased 1.3 million of its common shares for $23.6 million.

The Company funded the acquisition of D2C Media Inc. through a combination of cash on hand and borrowings under the Company’s existing revolving credit facility. Pro forma for the acquisition, net leverage as of September 30, 2023 would have been 2.5x, at the high end, but still within the Company’s target net leverage range.

“Our strong third quarter results demonstrate the depth and strength of our platform strategy, which creates great value for our customers and supports our strong cash flow generation. This strong cash flow, coupled with our flexible capital structure, enables us to repay debt, repurchase shares and to invest in organic and inorganic growth opportunities like D2C Media Inc.,” said Sonia Jain, Chief Financial Officer of Cars Commerce.

2023 Outlook

The Company is well-positioned to deliver profitable growth through continued dealer and OEM adoption of the Cars Commerce Platform. Fourth quarter revenue is expected to be between $177 million and $179 million, reflecting continued year-over-year revenue growth of 5.2% to 6.4%. The Company’s guidance reflects anticipated continued growth in its Dealer Revenue driven by adoption of dealer solutions and media products, as well as modest sequential improvement expected in OEM and National Revenue. Additionally, guidance includes revenue associated with the acquisition of D2C Media Inc., which the Company expects will contribute approximately 1.5% of its total revenue dollars in the fourth quarter. Year-over-year revenue growth rates reflect the launch of Accu-Trade Connected and favorable renegotiation of key website agreements in the prior year period.

For the full year, the Company’s fourth quarter guidance coupled with performance to date, places the Company within its previously shared revenue guidance range. Full year performance reflects the benefit of this year’s 2023 Marketplace Repackaging Initiative, growth in its portfolio of dealer products, and modest improvement in OEM Revenue offset by a challenging environment for auto adjacent advertisers, including insurance companies.

Adjusted EBITDA margin for the fourth quarter is expected to be between 29.5% and 30.5%, reflecting fourth quarter revenue guidance and sequential changes in investment mix.

Q3 2023 Earnings Call

As previously announced, management will hold a conference call and webcast today at 8:00 a.m. CT. This webcast may be accessed at the Cars Commerce Investor Relations website, investor.cars.com. An archive of the webcast will be available at investor.cars.com following the conclusion of the call.

 

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About Cars Commerce

Cars Commerce is an audience-driven technology company empowering automotive that simplifies everything about buying and selling cars. The Cars Commerce platform includes the flagship automotive marketplace and dealer reputation site Cars.com, innovative digital marketing technology and services from Dealer Inspire, industry-leading trade-in and appraisal technology from Accu-Trade, an exclusive in-market media network, and powerful and predictive AI technologies that enable more efficient and profitable retail operations. Cars Commerce is the essential partner to stay one step ahead in automotive. Learn more at www.carscommerce.inc.

 

Non-GAAP Financial Measures

 

This earnings release discusses Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow and Adjusted Operating Expenses. These financial measures are not prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). These financial measures are presented as supplemental measures of operating performance because the Company believes they provide meaningful information regarding the Company’s performance and provide a basis to compare operating results between periods. In addition, the Company uses Adjusted EBITDA as a measure for determining incentive compensation targets. Adjusted EBITDA also is used as a performance measure under the Company’s credit agreement and includes adjustments such as the items defined below and other further adjustments, which are defined in the credit agreement. These non-GAAP financial measures are frequently used by the Company’s lenders, securities analysts, investors and other interested parties to evaluate companies in the Company’s industry. For a reconciliation of the non-GAAP measures presented in this earnings release to their most directly comparable financial measure prepared in accordance with GAAP, see "Non-GAAP Reconciliations" below.

 

Other companies may define or calculate these measures differently, limiting their usefulness as comparative measures. Because of these limitations, non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Definitions of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are presented in the tables below.

 

The Company defines Adjusted EBITDA as net income (loss) before (1) interest expense, net, (2) income tax (benefit) expense, (3) depreciation, (4) amortization of intangible assets, (5) stock-based compensation expense, (6) unrealized mark-to-market adjustments and cash transactions related to derivative instruments, and (7) certain other items, such as transaction-related items, severance, transformation and other exit costs and write-off and impairments of goodwill, intangible assets and other long-lived assets.

 

Transaction-related items result from actual or potential transactions such as business combinations, mergers, acquisitions, dispositions, spin-offs, financing transactions, and other strategic transactions, including, without limitation, (1) transaction-related bonuses and (2) expenses for advisors and representatives such as investment bankers, consultants, attorneys and accounting firms. Transaction-related items may also include, without limitation, transition and integration costs such as retention

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bonuses and acquisition-related milestone payments to acquired employees, consulting, compensation and other incremental costs associated with integration projects, fair value changes to contingent considerations and amortization of deferred revenue related to the Accu-Trade acquisition.

 

The Company defines Free Cash Flow as net cash provided by operating activities less capital expenditures, including purchases of property and equipment and capitalization of internally developed technology.

 

The Company defines Adjusted Operating Expenses as 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.

 

Key Metric Definitions

 

Average Monthly Unique Visitors (“UVs”) and Traffic (“Visits”). The Company defines UVs in a given month as the number of distinct visitors that engage with its platform during that month. Visitors are identified when a user first visits an individual Cars Commerce property on an individual device/browser combination or installs one of its mobile apps on an individual device. If a visitor accesses more than one of its web properties or apps or uses more than one device or browser, each of those unique property/browser/app/device combinations counts toward the number of UVs. Traffic is defined as the number of visits to Cars Commerce desktop and mobile properties (responsive sites and mobile apps). The Company measures UVs and Traffic via Adobe Analytics. These metrics do not include traffic to Dealer Inspire websites.

 

Monthly Average Revenue Per Dealer ("ARPD"). The Company believes that its ability to grow ARPD is an indicator of the value proposition of its platform. The Company defines ARPD as Dealer revenue, excluding digital advertising services, during the period divided by the monthly average number of Dealer Customers during the same period. Beginning with the three months ended June 30, 2022, Accu-Trade is included in our ARPD metric. No prior period has been recast as it would be impracticable to do so and the inclusion of Accu-Trade would have had an immaterial impact on ARPD for prior periods

 

Dealer Customers. Dealer Customers represent dealerships using the Company’s products as of the end of each reporting period. Each physical or virtual dealership location is counted separately, whether it is a single-location proprietorship or part of a large, consolidated dealer group. Multi-franchise dealerships at a single location are counted as one dealer. Beginning June 30, 2022, this key operating metric includes Accu-Trade; however, no prior period has been recast as it would be impracticable to do so.

Forward-Looking Statements

 

This press release contains "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements include information concerning goals, plans, expectations, projections regarding the expected benefits of the transaction, management’s plans, projections and objectives for the

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transaction, future operations, scale and performance, integration plans and expected synergies therefrom, and our financial position, results of operations, market position, capital allocation strategy, initiatives, business strategy and expectations of our management and other matters and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements, strategic actions or prospects may differ materially from those expressed or implied by these forward-looking statements. These statements often include words such as "believe," "expect," "project," "anticipate," "outlook," "intend," "strategy," "plan," "estimate," "target," "seek," "will," "may," "would," "should," "could," "forecasts," "mission," "strive," "more," "goal" or similar expressions. All forward-looking statements contained in this press release are qualified by these cautionary statements. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, global supply chain shortages, fluctuating fuel prices, rising interest rates, inflation and other factors we think are appropriate. Such forward-looking statements are based on estimates and assumptions that, while considered reasonable by the Company and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. While the Company and its management make such statements in good faith and believe such judgments are reasonable, you should understand that these statements are not guarantees of future strategic action, performance or results. Our actual results, performance, achievements, strategic actions, or prospects could differ materially from those expressed or implied by these forward-looking statements. Given these uncertainties, you should not rely on forward-looking statements in making investment decisions. When we make comparisons of results between current and prior periods, we do not intend to express any future trends, or indications of future performance, unless expressed as such, and you should view such comparisons as historical data. Whether or not any such forward-looking statement is in fact achieved will depend on future events, some of which are beyond our control.

 

Forward-looking statements are subject to a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results and strategic actions to differ materially from those expressed in the forward-looking statements contained in this press release. For a detailed discussion of many of these and other risks and uncertainties, see “Part I, Item 1A., Risk Factors” and “Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023 and our other filings filed with the SEC and available on our website at investor.cars.com or via EDGAR at www.sec.gov.

You should evaluate all forward-looking statements made in this press release in the context of these risks and uncertainties. The forward-looking statements contained in this press release are based only on information currently available to us and speak only as of the date of this press release. We undertake no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise. The forward-looking statements in this report are intended to be subject to the safe harbor protection provided by the federal securities laws.

 

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Cars Commerce Investor Relations Contact:

Robbin Moore-Randolph

rmr@carscommerce.com

312.601.5929

 

Cars Commerce Media Contact:

Marita Thomas

mthomas@carscommerce.com

312.601.5692

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Cars.com Inc.

Consolidated Statements of Income (Loss)

(In thousands, except per share data)

(Unaudited)

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenue:
Dealer		$	157,116			$	145,395			$	460,268			$	429,798
OEM and National			14,549				14,909				40,494				44,227
Other			2,668				4,291				8,815				11,650
Total revenue			174,333				164,595				509,577				485,675
Operating expenses:
Cost of revenue and operations			31,077				28,828				91,287				86,084
Product and technology			25,297				21,425				74,354				65,849
Marketing and sales			60,186				53,615				176,636				165,364
General and administrative			17,785				17,694				53,738				51,465
Depreciation and amortization			25,670				23,134				74,381				70,688
Total operating expenses			160,015				144,696				470,396				439,450
Operating income			14,318				19,899				39,181				46,225
Nonoperating expense:
Interest expense, net			(7,777	)			(8,501	)			(24,171	)			(26,878	)
Other (expense) income, net			(3,902	)			(13,387	)			1,204				(13,233	)
Total nonoperating expense, net			(11,679	)			(21,888	)			(22,967	)			(40,111	)
Income (loss) before income taxes			2,639				(1,989	)			16,214				6,114
Income tax (benefit) expense			(1,852	)			952				(93,882	)			(830	)
Net income (loss)		$	4,491			$	(2,941	)		$	110,096			$	6,944
Weighted-average common shares outstanding:
Basic			66,773				67,680				66,820				68,775
Diluted			68,508				67,680				68,199				70,023
Earnings (loss) per share:
Basic		$	0.07			$	(0.04	)		$	1.65			$	0.10
Diluted			0.07				(0.04	)			1.61				0.10

 

 

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Cars.com Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

 

		September 30, 2023				December 31, 2022
Assets:		(unaudited)
Current assets:
Cash and cash equivalents		$	49,085			$	31,715
Accounts receivable, net			118,285				107,930
Prepaid expenses			13,537				8,377
Other current assets			8,429				605
Total current assets			189,336				148,627
Property and equipment, net			44,005				45,218
Goodwill			102,856				102,856
Intangible assets, net			649,074				707,088
Deferred tax assets, net			97,490				48
Investments and other assets, net			20,427				21,033
Total assets		$	1,103,188			$	1,024,870
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable		$	18,703			$	18,230
Accrued compensation			21,057				19,316
Current portion of long-term debt, net			18,062				14,134
Other accrued liabilities			73,143				54,332
Total current liabilities			130,965				106,012
Noncurrent liabilities:
Long-term debt, net			429,679				458,249
Other noncurrent liabilities			59,534				76,179
Total noncurrent liabilities			489,213				534,428
Total liabilities			620,178				640,440
Commitments and contingencies
Stockholders' equity:
Preferred Stock at par, $0.01 par value; 5,000 shares authorized; no shares    issued and outstanding as of September 30, 2023 and December 31, 2022,    respectively			—				—
Common Stock at par, $0.01 par value; 300,000 shares authorized; 66,189    and 66,287 shares issued and outstanding as of September 30, 2023 and    December 31, 2022, respectively			662				662
Additional paid-in capital			1,500,428				1,511,944
Accumulated deficit			(1,018,080	)			(1,128,176	)
Total stockholders' equity			483,010				384,430
Total liabilities and stockholders' equity		$	1,103,188			$	1,024,870

 

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Cars.com Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

		Nine Months Ended September 30,
		2023				2022
Cash flows from operating activities:
Net income		$	110,096			$	6,944
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation			16,367				11,833
Amortization of intangible assets			58,014				58,855
Amortization of Accumulated other comprehensive loss on interest rate swap			—				2,362
Changes in fair value of contingent consideration			(1,280	)			13,360
Stock-based compensation			20,930				17,103
Deferred income taxes			(98,821	)			676
Provision for doubtful accounts			2,117				1,047
Amortization of debt issuance costs			2,303				2,440
Amortization of deferred revenue related to Accu-Trade Acquisition			(883	)			(3,092	)
Other, net			640				279
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			(12,472	)			(7,532	)
Prepaid expenses and other assets			(13,073	)			(7,279	)
Accounts payable			473				2,882
Accrued compensation			1,741				(7,885	)
Other liabilities			5,428				(702	)
Net cash provided by operating activities			91,580				91,291
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired			—				(64,770	)
Capitalization of internally developed technology			(14,838	)			(13,147	)
Purchase of property and equipment			(737	)			(1,252	)
Net cash used in investing activities			(15,575	)			(79,169	)
Cash flows from financing activities:
Proceeds from Revolving Loan borrowings			—				45,000
Payments of long-term debt			(26,250	)			(17,500	)
Payments for stock-based compensation plans, net			(9,069	)			(6,838	)
Repurchases of common stock			(23,316	)			(39,933	)
Net cash used in financing activities			(58,635	)			(19,271	)
Net increase (decrease) in cash and cash equivalents			17,370				(7,149	)
Cash and cash equivalents at beginning of period			31,715				39,069
Cash and cash equivalents at end of period		$	49,085			$	31,920
Supplemental cash flow information:
Cash paid for income taxes		$	17,107			$	741
Cash paid for interest and swap			16,806				19,041

 

 

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Cars.com Inc.

Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Reconciliation of Net income (loss) to Adjusted EBITDA
Net income (loss)		$	4,491			$	(2,941	)		$	110,096			$	6,944
Interest expense, net			7,777				8,501				24,171				26,878
Income tax (benefit) expense			(1,852	)			952				(93,882	)			(830	)
Depreciation and amortization			25,670				23,134				74,381				70,688
Stock-based compensation			7,611				5,578				22,283				17,576
Write-off of long-lived assets and other			308				100				638				70
Severance, transformation and other exit costs			470				1,558				2,348				3,369
Transaction-related items			5,019				13,001				(555	)			12,514
Adjusted EBITDA		$	49,494			$	49,883			$	139,480			$	137,209
Reconciliation of Net cash provided by operating activities to Free cash flow
Net cash provided by operating activities		$	35,398			$	49,011			$	91,580			$	91,291
Capitalization of internally developed technology			(4,777	)			(5,523	)			(14,838	)			(13,147	)
Purchase of property and equipment			(229	)			(321	)			(737	)			(1,252	)
Free cash flow		$	30,392			$	43,167			$	76,005			$	76,892

 

 

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Reconciliation of Operating expenses to Adjusted operating expenses for the Three Months Ended September 30, 2023:
		As Reported				Adjustments (1)				Stock-Based Compensation				As Adjusted
Cost of revenue and operations		$	31,077			$	—			$	(425	)		$	30,652
Product and technology			25,297				—				(2,413	)			22,884
Marketing and sales			60,186				—				(1,548	)			58,638
General and administrative			17,785				(1,895	)			(3,225	)			12,665
Depreciation and amortization			25,670				—				—				25,670
Total operating expenses		$	160,015			$	(1,895	)		$	(7,611	)		$	150,509
Total nonoperating expense, net		$	(11,679	)		$	3,902			$	—			$	(7,777	)
(1) Includes transaction related items, severance, transformation and other exit costs, and write-off of long-lived assets and other.
Reconciliation of Operating expenses to Adjusted operating expenses for the Three Months Ended September 30, 2022:
		As Reported				Adjustments (1)				Stock-Based Compensation				As Adjusted
Cost of revenue and operations		$	28,828			$	—			$	(240	)		$	28,588
Product and technology			21,425				—				(1,754	)			19,671
Marketing and sales			53,615				—				(1,132	)			52,483
General and administrative			17,694				(2,924	)			(2,452	)			12,318
Depreciation and amortization			23,134				—				—				23,134
Total operating expenses		$	144,696			$	(2,924	)		$	(5,578	)		$	136,194
Total nonoperating expense, net		$	(21,888	)		$	13,360			$	—			$	(8,528	)
(1) Includes transaction related items, severance, transformation and other exit costs, and write-off of long-lived assets and other.

 

 

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Reconciliation of Operating expenses to Adjusted operating expenses for the Nine Months Ended September 30, 2023:
		As Reported				Adjustments (1)				Stock-Based Compensation				As Adjusted
Cost of revenue and operations		$	91,287			$	—			$	(1,175	)		$	90,112
Product and technology			74,354				—				(6,842	)			67,512
Marketing and sales			176,636				—				(4,512	)			172,124
General and administrative			53,738				(4,794	)			(9,754	)			39,190
Depreciation and amortization			74,381				—				—				74,381
Total operating expenses		$	470,396			$	(4,794	)		$	(22,283	)		$	443,319
Total nonoperating expense, net		$	(22,967	)		$	(1,280	)		$	—			$	(24,247	)
(1) Includes transaction related items, severance, transformation and other exit costs, and write-off of long-lived assets and other.
Reconciliation of Operating expenses to Adjusted operating expenses for the Nine Months Ended September 30, 2022:
		As Reported				Adjustments (1)				Stock-Based Compensation				As Adjusted
Cost of revenue and operations		$	86,084			$	—			$	(759	)		$	85,325
Product and technology			65,849				—				(5,086	)			60,763
Marketing and sales			165,364				—				(3,904	)			161,460
General and administrative			51,465				(6,570	)			(7,827	)			37,068
Depreciation and amortization			70,688				—				—				70,688
Total operating expenses		$	439,450			$	(6,570	)		$	(17,576	)		$	415,304
Total nonoperating expense, net		$	(40,111	)		$	13,175			$	—			$	(26,936	)
(1) Includes transaction related items, severance, transformation and other exit costs, and write-off of long-lived assets and other.

 

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Exhibit 99.2

 

Cars.com Inc. Acquires D2C Media Inc.,

Expanding Cars Commerce Platform into Canada in Accretive Transaction

 

CHICAGO (November 2, 2023) — Cars.com Inc. (NYSE: CARS) (d/b/a “Cars Commerce” or the “Company”), an audience-driven technology company empowering the automotive industry, today announced the acquisition of D2C Media Inc. (“D2C”), a leading automotive technology and digital solutions provider in Canada. The Company paid CAD $105 million in cash (USD $76 million) at closing, which was funded by a combination of cash on hand and borrowings under the Company’s existing revolving credit facility. There is also the potential for additional performance-based consideration of up to CAD $35 million (approximately USD $25 million as of the closing date) based on achievement of certain financial thresholds. The transaction closed on November 1, 2023.

 

Transaction Highlights

 

D2C Media serves approximately 1,000 dealer customers throughout Canada with website, media services, and other technology solutions that help dealers increase sales velocity and measure impact. The company generates revenue primarily through subscription fees of its products and services. Historically, OEM program endorsement expansion has enabled incremental customer additions and profitable revenue growth for the company.

 

“The acquisition of D2C Media presents an exciting opportunity to expand Cars Commerce further across North America. With D2C Media’s deep local relationships and established infrastructure, we will be able to tap into a new market with dozens of OEMs and thousands of retailers to fuel accelerated growth,” said Alex Vetter, chief executive officer of Cars Commerce. “I’m thrilled to welcome the D2C Media team, and, together, we look forward to creating tremendous value for Canadian retailers through our ongoing commitment to enabling local automotive retail and simplifying everything about buying and selling cars.”

 

As a result of the acquisition, Cars Commerce will materially expand from its existing base of approximately 250 Dealer Inspire Canadian website customers. In addition, with this acquisition Cars Commerce will now be endorsed by approximately 60% of OEMs operating in Canada, with significant runway for additional growth. The combination of D2C’s local experience and knowledge with the Cars Commerce product portfolio will enable increased distribution for the Dealer Inspire and Accu-Trade brands in Canada; and deeper relationships with OEMs, many of whom seek complete coverage of North America.

 

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Based in Montreal, D2C Media was founded in 2003 and has approximately 95 employees distributed throughout Canada. More information on the transaction will be provided on Cars Commerce’s third quarter earnings call.

 

About Cars Commerce

Cars Commerce is an audience-driven technology company empowering automotive that simplifies everything about buying and selling cars. The Cars Commerce platform includes the flagship automotive marketplace and dealer reputation site Cars.com, innovative digital marketing technology and services from Dealer Inspire, industry-leading trade-in and appraisal technology from Accu-Trade, an exclusive in-market media network, and powerful and predictive AI technologies that enable more efficient and profitable retail operations. Cars Commerce is the essential partner to stay one step ahead in automotive. Learn more at www.carscommerce.inc.

 

About D2C Media Inc.

Founded in 2003, D2C Media Inc. provides automotive dealerships with technology and digital solutions, including websites, media services, customer relationship management software, outsourced virtual business development centers, and reputation management services. D2C Media is consistently recognized as one of Canada’s fastest growing companies, and is committed to pushing the limits of what's currently possible with innovative solutions that drive online conversions and help automotive dealers measure the success of their investments. For more information, please visit www.D2CMedia.ca

 

###

Forward-Looking Statements

 

This press release contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements include information concerning goals, plans, expectations, projections regarding the expected benefits of the transaction, management’s plans, projections and objectives for the transaction, future operations, scale and performance, integration plans and expected synergies therefrom, and our financial position, results of operations, market position, capital allocation strategy, initiatives, business strategy and expectations of our management, and other matters and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements, strategic actions or prospects may differ materially from those expressed or implied by these forward-looking statements. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “outlook,” “intend,” “strategy,” “plan,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts,” “mission,” “strive,” “more,” “goal” or similar expressions. All forward-looking statements contained in this press release are qualified by these cautionary statements. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, global supply chain shortages, fluctuating fuel prices, rising interest rates, inflation and and other factors we think are appropriate. Such forward-looking statements are based on estimates and assumptions that, while considered reasonable by the Company and its management based on their knowledge and understanding of the

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business and industry, are inherently uncertain. While the Company and its management make such statements in good faith and believe such judgments are reasonable, you should understand that these statements are not guarantees of future strategic action, performance or results. Our actual results, performance, achievements, strategic actions, or prospects could differ materially from those expressed or implied by these forward-looking statements. Given these uncertainties, you should not rely on forward-looking statements in making investment decisions. When we make comparisons of results between current and prior periods, we do not intend to express any future trends, or indications of future performance, unless expressed as such, and you should view such comparisons as historical data. Whether or not any such forward-looking statement is in fact achieved will depend on future events, some of which are beyond our control.

 

Forward-looking statements are subject to a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results and strategic actions to differ materially from those expressed in the forward-looking statements contained in this press release. For a detailed discussion of many of these and other risks and uncertainties, see “Part I, Item 1A., Risk Factors” and “Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023 and our other filings filed with the SEC and available on our website at investor.cars.com or via EDGAR at www.sec.gov. You should evaluate all forward-looking statements made in this press release in the context of these risks and uncertainties. The forward-looking statements contained in this press release are based only on information currently available to us and speak only as of the date of this press release. We undertake no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise. The forward-looking statements in this press release are intended to be subject to the safe harbor protection provided by the federal securities laws.

 

Investor Contact:

Robbin Moore-Randolph

312.601.5929

ir@carscommerce.com

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v3.23.3

Document And Entity Information	Nov. 02, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 02, 2023
Entity Registrant Name	Cars.com Inc.
Entity Central Index Key	0001683606
Entity Emerging Growth Company	false
Securities Act File Number	001-37869
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	81-3693660
Entity Address, Address Line One	300 S. Riverside Plaza
Entity Address, City or Town	Chicago
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60606
City Area Code	312
Local Phone Number	601-5000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	CARS
Security Exchange Name	NYSE

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