CHICAGO and SACRAMENTO, Calif., Jan. 4, 2018 /PRNewswire/ -- Cars.com Inc.
(NYSE: CARS), a leading online automotive marketplace, and
McClatchy (NYSE American: MNI), a news media company, today
announced an agreement to convert the remaining 17 affiliate
markets into the Cars.com direct sales channel prior to the
October 2019 affiliate agreement
expiration date. The agreement follows an earlier November 2017 initial accord to convert five
markets.
The new agreement includes marketing support payments through
2019 reflecting a continuing relationship between Cars.com and
McClatchy, a smooth transition and an opportunity to immediately
introduce digital advertising solutions for the benefit of dealer
customers. McClatchy also will continue to partner
with Cars.com, promoting Cars.com in its markets
while also acting as a premier digital marketing partner for other
digital solutions through its excelerate™ Auto brand.
"We are pleased to accelerate the conversion of these markets
into our direct sales channel so that we can work directly with the
dealers in each market to provide more value and give Cars.com a
new platform to increase market share," said Alex Vetter, Cars.com President and Chief
Executive Officer. "Our experienced sales team will be on the
ground, deepening relationships with local retailers to help them
optimize their businesses with the full breadth of Cars.com's
innovative solutions. As we continue to execute on our plan to
increase revenue, profitability and enhance value for all
shareholders, pursuing accelerated transitions with the remaining
affiliates is a top priority."
"We're delighted that Cars.com can continue to grow
its business with our local dealers through its direct sales force
while the McClatchy sales team can focus on and grow our suite
of automotive products and services through our excelerate™ brand,"
said Craig Forman, McClatchy's President and Chief Executive
Officer.
The transitions will occur throughout 2018 and include markets
in Fort Worth, Texas; Charlotte, N.C.; Fresno, Sacramento and Modesto, Calif.; Kansas City, Mo.; Miami and Bradenton,
Fla.; Lexington, Ky;
Boise, Idaho; Columbus and Macon,
Ga.; Columbia, S.C.; and
Belleville, Ill. As previously
announced in November 2017, Cars.com
has already commenced the conversion of Raleigh, N.C.; Tacoma, Bellingham, and Olympia, Wash.; and Myrtle Beach, S.C.
Benefit to Revenue Beginning in 2018 – Cars.com Inc.
As a result of the absence of amortization and phasing of
increased direct sales revenue, the early transition is expected to
increase 2018 revenue by approximately 1 percent (2 percent
excluding the impact of the reduction in revenue amortization),
with full uplift expected to be realized by the end of 2019. In
2016, McClatchy represented $33
million, or 20 percent, of the company's wholesale revenue,
including $8 million of unfavorable
contracts liability amortization, described below.
Sales Strategy in Phased Transition Period
The transition will occur in three phases on or before
April 1, July
1, and October 1, 2018. In
advance of each phase, Cars.com will dedicate new sales team
members to serve these markets and build relationships with dealers
in these geographies. Dealer customers located within the McClatchy
markets will benefit from the dedicated and specialized Cars.com
salesforce and access to the full suite of Cars.com product
offerings in addition to other digital solutions offered by
McClatchy.
Background on Affiliate Relationships
The affiliates are the former owners of Cars.com. In 2016,
$170 million, or 27 percent, of
Cars.com's revenue was generated through the wholesale channel,
where the Cars.com products were sold by affiliate sales teams
under six affiliate agreements covering nearly 100 markets. The
affiliates have the exclusive right to sell and price Cars.com's
products and services in their local territories, paying Cars.com a
wholesale rate for each Cars.com product sold. Under these
agreements, Cars.com charges the affiliates 60 percent of the
corresponding Cars.com retail rate for products sold to affiliate
dealers. Four of the affiliate agreements expire in the fourth
quarter of 2019 and two expire in June
2020. Related to these agreements is an unfavorable
contracts liability on Cars.com's balance sheet, which is currently
being amortized into revenue in an annual amount of $25 million until October
1, 2019. The Company continues to explore potential
additional early transitions with the remaining affiliates.
About Cars.com
Cars.com™ is a leading two-sided digital automotive marketplace
that creates meaningful connections between buyers and sellers.
Launched in 1998 and headquartered in Chicago, the company
empowers consumers with resources and information to make informed
buying decisions around The 4Ps of Automotive Marketing™: Product,
Price, Place and Person, by connecting advertising partners with
in-market car shoppers and providing data-driven intelligence to
increase inventory turn and gain market share. A pioneer in online
automotive classifieds, the company has evolved into one of the
largest digital automotive platforms, connecting thousands of local
dealers across the country with millions of consumers. Through
trusted expert content, on-the-lot mobile features and
intelligence, millions of new and used vehicle listings, a
comprehensive set of pricing and research tools, and the largest
database of consumer reviews in the industry, Cars.com is
transforming the car shopping experience.
Cars.com properties
include DealerRater®, Auto.com™, PickupTrucks.com®
and NewCars.com®. For more information,
visit www.Cars.com.
About McClatchy
McClatchy operates 30 media companies in 14 states, providing
each of its communities with high-quality news and advertising
services in a wide array of digital and print formats. McClatchy is
a publisher of iconic brands such as the Miami Herald, The
Kansas City Star, The Sacramento Bee, The Charlotte Observer,
The (Raleigh) News &
Observer, and the (Fort Worth)
Star-Telegram. McClatchy is headquartered in Sacramento, Calif., and listed on the New York
Stock Exchange American under the symbol MNI.
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SOURCE Cars.com Inc.; McClatchy