UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☒☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30,~~March 31, ~~2021~~2022


☐☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37869

Cars.com Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	81-3693660
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

300 S. Riverside Plaza, Suite 1000

Chicago, Illinois 60606

(Address of principal executive offices)

(312) 601-5000

~~Registrant’s~~Registrant’s telephone number, including area code


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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☒ No ☐☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒☒ No ☐☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~“large accelerated filer,~~” “accelerated~~” “accelerated filer,~~” “smaller~~” “smaller reporting company,”” and ~~“emerging~~“emerging growth ~~company”~~company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐☒	Accelerated filer	☒☐
Non-accelerated filer	☐☐	Smaller reporting company	☐☐
		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. ☐☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐☐ No ☒☒

As of ~~July 29, 2021,~~April 28, 2022, the registrant had ~~68,964,591~~69,492,015 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited):	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Income ~~(Loss~~)	3
	Consolidated Statements of Comprehensive Income ~~(Loss~~)	4
	Consolidated Statements of ~~Stockholders’~~Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to the Consolidated Financial Statements (Unaudited)	7
Item 2.	~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	1517
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2423
Item 4.	Controls and Procedures	2423
PART II.	OTHER INFORMATION	2524
Item 1.	Legal Proceedings	2524
Item 1A.	Risk Factors	2524
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2524
Item 3.	Defaults Upon Senior Securities	2524
Item 4.	Mine Safety Disclosures	2524
Item 5.	Other Information	2524
Item 6.	Exhibits	2625
Signatures		2726

PART ~~I—FINANCIAL~~I—FINANCIAL INFORMATION

Item 1. ~~Financial~~Financial Statements (unaudited).

Cars.com Inc.

Consolidated Balance Sheets

(In thousands, except per share data)


	March 31, 2022			December 31, 2021
	(unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	30,453		$	39,069
Accounts receivable, net		96,013			98,893
Prepaid expenses		8,509			7,810
Other current assets		3,428			1,665
Total current assets		138,403			147,437
Property and equipment, net		42,949			43,005
Goodwill		101,763			26,227
Intangible assets, net		764,564			769,424
Investments and other assets, net		21,538			21,112
Total assets	$	1,069,217		$	1,007,205
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	16,810		$	15,420
Accrued compensation		10,124			23,612
Current portion of long-term debt, net		10,226			8,941
Other accrued liabilities		58,642			46,317
Total current liabilities		95,802			94,290
Noncurrent liabilities:
Long-term debt, net		499,182			457,383
Other noncurrent liabilities		78,146			57,512
Total noncurrent liabilities		577,328			514,895
Total liabilities		673,130			609,185
Commitments and contingencies
Stockholders' equity:
Preferred Stock at par, $0.01 par value; 5,000 shares authorized; 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		0			0
Common Stock at par, $0.01 par value; 300,000 shares authorized; 69,803 and 69,170 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		698			692
Additional paid-in capital		1,537,231			1,544,712
Accumulated deficit		(1,141,042	)		(1,145,382	)
Accumulated other comprehensive loss		(800	)		(2,002	)
Total stockholders' equity		396,087			398,020
Total liabilities and stockholders' equity	$	1,069,217		$	1,007,205

June 30, 2021

December 31, 2020

(unaudited)

Assets:

Current assets:

Cash and cash equivalents

$
52,185

$
67,719

Accounts receivable, net

100,491

93,649

Prepaid expenses

8,303

6,491

Other current assets

1,298

10,222

Total current assets

162,277

178,081

Property and equipment, net

46,450

41,323

Intangible assets, net

792,168

835,166

Investments and other assets, net

19,989

21,142

Total assets

$
1,020,884

$
1,075,712

Liabilities and stockholders' equity:

Current liabilities:

Accounts payable

$
25,394

$
16,512

Accrued compensation

13,926

18,319

Current portion of long-term debt

7,727

7,756

Other accrued liabilities

48,925

47,781

Total current liabilities

95,972

90,368

Noncurrent liabilities:

Long-term debt

502,357

576,143

Deferred tax liability

30,792

30,800

Other noncurrent liabilities

34,321

38,225

Total noncurrent liabilities

567,470

645,168

Total liabilities

663,442

735,536

Commitments and contingencies

Stockholders' equity:

Preferred Stock at par, $0.01 par value; 5,000 shares authorized; 0 shares
   issued and outstanding as of June 30, 2021 and December 31, 2020,
   respectively

0

0

Common Stock at par, $0.01 par value; 300,000 shares authorized; 68,964 and
   67,387 shares issued and outstanding as of June 30, 2021 and
   December 31, 2020, respectively

690

674

Additional paid-in capital

1,534,098

1,530,493

Accumulated deficit

(1,172,943
)

(1,184,187
)
Accumulated other comprehensive loss

(4,403
)

(6,804
)
Total stockholders' equity

357,442

340,176

Total liabilities and stockholders' equity

$
1,020,884

$
1,075,712

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Consolidated ~~Statements~~Statements of Income ~~(Loss)~~

~~(In~~ (In thousands, except per share data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenue:

  Dealer

$
136,866

$
83,242

$
269,824

$
208,603

  OEM and National

16,329

16,021

34,398

35,414

  Other

2,335

2,746

4,603

6,086

     Total revenue

155,530

102,009

308,825

250,103

Operating expenses:

  Cost of revenue and operations

28,219

22,912

56,050

48,942

  Product and technology

19,434

12,031

36,194

26,904

  Marketing and sales

51,309

32,036

104,520

86,958

  General and administrative

15,615

16,460

28,881

30,577

  Affiliate revenue share

0

4,601

0

10,970

  Depreciation and amortization

25,298

31,193

50,978

62,154

  Goodwill and intangible asset impairment

0

0

0

905,885

     Total operating expenses

139,875

119,233

276,623

1,172,390

         Operating income (loss)

15,655

(17,224
)

32,202

(922,287
)
Nonoperating expense:

  Interest expense, net

(9,839
)

(7,924
)

(19,840
)

(15,450
)
  Other (expense) income, net

(39
)

557

(1
)

(8,944
)
     Total nonoperating expense, net

(9,878
)

(7,367
)

(19,841
)

(24,394
)
       Income (loss) before income taxes

5,777

(24,591
)

12,361

(946,681
)
       Income tax (benefit) expense

(189
)

53

1,117

(134,603
)
          Net income (loss)

$
5,966

$
(24,644
)

$
11,244

$
(812,078
)
Weighted-average common shares outstanding:

Basic

68,869

67,256

68,328

67,095

Diluted

70,694

67,256

70,790

67,095

Earnings (loss) per share:

Basic
$
0.09

$
(0.37
)

$
0.16

$
(12.10
)
Diluted

0.08

(0.37
)

0.16

(12.10
)


	Three Months Ended March 31,
	2022			2021
Revenue:
Dealer	$	140,416		$	132,958
OEM and National		15,174			18,069
Other		2,617			2,268
Total revenue		158,207			153,295
Operating expenses:
Cost of revenue and operations		27,752			27,831
Product and technology		21,307			16,760
Marketing and sales		57,094			53,211
General and administrative		16,560			13,266
Depreciation and amortization		24,553			25,680
Total operating expenses		147,266			136,748
Operating income		10,941			16,547
Nonoperating expense:
Interest expense, net		(9,330	)		(10,001	)
Other income, net		208			38
Total nonoperating expense, net		(9,122	)		(9,963	)
Income before income taxes		1,819			6,584
Income tax (benefit) expense		(2,521	)		1,306
Net income	$	4,340		$	5,278
Weighted-average common shares outstanding:
Basic		69,463			67,787
Diluted		70,899			70,254
Earnings per share:
Basic	$	0.06		$	0.08
Diluted		0.06			0.08

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Consolidated Statements of Comprehensive Income ~~(Loss)~~

(In thousands)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Net income (loss)
$
5,966

$
(24,644
)

$
11,244

$
(812,078
)
Other comprehensive income (loss), net of tax:

Interest rate swap

0

(345
)

0

6,466

Reclassification of amortization of accumulated other comprehensive loss on interest rate swap into Net income (loss)

1,201

(300
)

2,401

(300
)
Total other comprehensive income (loss)

1,201

(645
)

2,401

6,166

Comprehensive income (loss)
$
7,167

$
(25,289
)

$
13,645

$
(805,912
)


	Three Months Ended March 31,
	2022		2021
Net income	$	4,340	$	5,278
Other comprehensive income, net of tax:
Reclassification of accumulated other comprehensive loss on interest rate swap into Net income		1,202		1,200
Total other comprehensive income		1,202		1,200
Comprehensive income	$	5,542	$	6,478

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Consolidated Statements of ~~Stockholders’~~Stockholders’ Equity

(In thousands)

(Unaudited)


	Preferred Stock				Common Stock						Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Stockholders'
	Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Equity
Balance at December 31, 2021		—	$	—		69,170		$	692		$	1,544,712		$	(1,145,382	)	$	(2,002	)	$	398,020
Net income		—		—		—			—			—			4,340			—			4,340
Other comprehensive income, net of tax		—		—		—			—			—			—			1,202			1,202
Repurchases of common stock		—		—		(338	)		(3	)		(4,997	)		—			—			(5,000	)
Shares issued in connection with stock-based compensation plans, net		—		—		971			9			(7,705	)		—			—			(7,696	)
Stock-based compensation		—		—		—			—			5,221			—			—			5,221
Balance at March 31, 2022		—		—		69,803			698			1,537,231			(1,141,042	)		(800	)		396,087

	Preferred Stock				Common Stock						Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Stockholders'
	Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Equity
Balance at December 31, 2020		—	$	—		67,387		$	674		$	1,530,493		$	(1,156,173	)	$	(6,804	)	$	368,190
Net income		—		—		—			—			—			5,278			—			5,278
Other comprehensive income, net of tax		—		—		—			—			—			—			1,200			1,200
Shares issued in connection with stock-based compensation plans, net		—		—		1,144			11			(5,641	)		—			—			(5,630	)
Stock-based compensation		—		—		—			—			4,978			—			—			4,978
Balance at March 31, 2021		—		—		68,531			685			1,529,830			(1,150,895	)		(5,604	)		374,016

Preferred Stock

Common Stock

Additional
Paid-In

Accumulated

Accumulated
Other
Comprehensive

Stockholders'

Shares

Amount

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at December 31, 2020

0

$
0

67,387

$
674

$
1,530,493

$
(1,184,187
)

$
(6,804
)

$
340,176

Net income

—

—

—

—

—

5,278

—

5,278

Other comprehensive income, net of tax

—

—

—

—

—

—

1,200

1,200

Shares issued in connection with
stock-based compensation plans, net

—

—

1,144

11

(5,641
)

—

—

(5,630
)
Stock-based compensation

—

—

—

—

4,978

—

—

4,978

Balance at March 31, 2021

0

$
0

68,531

$
685

$
1,529,830

$
(1,178,909
)

$
(5,604
)

$
346,002

Net income

—

—

—

—

—

5,966

—

5,966

Other comprehensive income, net of tax

—

—

—

—

—

—

1,201

1,201

Shares issued in connection with
stock-based compensation plans, net

—

—

433

5

(1,424
)

—

—

(1,419
)
Stock-based compensation

—

—

—

—

5,692

—

—

5,692

Balance at June 30, 2021

0

$
0

68,964

$
690

$
1,534,098

$
(1,172,943
)

$
(4,403
)

$
357,442

Preferred Stock

Common Stock

Additional
Paid-In

Accumulated

Accumulated
Other
Comprehensive

Stockholders'

Shares

Amount

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at December 31, 2019

0

$
0

66,764

$
668

$
1,515,109

$
(367,067
)

$
(7,642
)

$
1,141,068

Net loss

—

—

—

—

—

(787,434
)

—

(787,434
)
Other comprehensive loss, net of tax

—

—

—

—

—

—

(6,811
)

(6,811
)
Shares issued in connection with
stock-based compensation plans, net

—

—

197

2

(906
)

—

—

(904
)
Stock-based compensation

—

—

—

—

1,971

—

—

1,971

Balance at March 31, 2020

0

$
0

66,961

$
670

$
1,516,174

$
(1,154,501
)

$
(14,453
)

$
347,890

Net loss

—

—

—

—

—

(24,644
)

—

(24,644
)
Other comprehensive income, net of tax

—

—

—

—

—

—

645

645

Shares issued in connection with
stock-based compensation plans, net

—

—

239

2

593

0

0

595

Stock-based compensation

—

—

—

—

4,295

0

0

4,295

Balance at June 30, 2020

0

$
0

67,200

$
672

$
1,521,062

$
(1,179,145
)

$
(13,808
)

$
328,781

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six Months Ended
June 30,

2021

2020

Cash flows from operating activities:

Net income (loss)

$
11,244

$
(812,078
)
Adjustments to reconcile Net income (loss) to Net cash provided by operating activities:

Depreciation

7,980

11,599

Amortization of intangible assets

42,998

50,555

Goodwill and intangible asset impairment

0

905,885

Impairment of non-marketable security

0

9,447

Unrealized gain on interest rate swap

0

(558
)
Amortization of accumulated other comprehensive loss on interest rate swap

2,835

300

Stock-based compensation

10,670

6,266

Deferred income taxes

(442
)

(133,064
)
Provision for doubtful accounts

211

2,846

Amortization of debt issuance costs

1,657

1,377

Other, net

(44
)

142

Changes in operating assets and liabilities:

Accounts receivable

(7,053
)

24,363

Prepaid expenses

(1,812
)

(540
)
Other current assets

8,951

(2,368
)
Other assets

690

589

Accounts payable

8,888

1,973

Accrued compensation

(4,393
)

(5,942
)
Other accrued liabilities

1,143

(933
)
Other noncurrent liabilities

(3,904
)

(2,230
)
Net cash provided by operating activities

79,619

57,629

Cash flows from investing activities:

     Purchase of property and equipment

(13,095
)

(8,725
)
Net cash used in investing activities

(13,095
)

(8,725
)
Cash flows from financing activities:

     Proceeds from revolving loan borrowings

0

165,000

     Payments of long-term debt

(75,000
)

(166,875
)
     Stock-based compensation plans, net

(7,049
)

(309
)
     Payments of debt issuance costs and other fees

(9
)

(3,324
)
Net cash used in financing activities

(82,058
)

(5,508
)
Net (decrease) increase in cash and cash equivalents

(15,534
)

43,396

Cash and cash equivalents at beginning of period

67,719

13,549

Cash and cash equivalents at end of period

$
52,185

$
56,945

Supplemental cash flow information:

Cash (received) paid for income taxes

$
(8,875
)

$
318

Cash paid for interest and interest rate swap

19,634

13,889


	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net income	$	4,340		$	5,278
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation		4,014			4,021
Amortization of intangible assets		20,539			21,659
Amortization of accumulated other comprehensive loss on interest rate swap		1,417			1,417
Stock-based compensation		5,221			4,978
Deferred income taxes		(374	)		(226	)
Provision for doubtful accounts		27			129
Amortization of debt issuance costs		816			834
Amortization of deferred revenue related to Accu-Trade Acquisition		(442	)		0
Other, net		87			(34	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		4,442			282
Prepaid expenses and other assets		(3,073	)		5,782
Accounts payable		1,081			6,438
Accrued compensation		(13,488	)		(9,141	)
Other liabilities		5,751			8,945
Net cash provided by operating activities		30,358			50,362
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired		(64,770	)		0
Purchase of property and equipment		(4,008	)		(6,219	)
Net cash used in investing activities		(68,778	)		(6,219	)
Cash flows from financing activities:
Proceeds from revolving loan borrowings		45,000			0
Payments of long-term debt		(2,500	)		(52,500	)
Payments for stock-based compensation plans, net		(7,696	)		(5,630	)
Repurchases of common stock		(5,000	)		0
Payments of debt issuance costs and other fees		0			(8	)
Net cash provided by (used in) financing activities		29,804			(58,138	)
Net decrease in cash and cash equivalents		(8,616	)		(13,995	)
Cash and cash equivalents at beginning of period		39,069			67,719
Cash and cash equivalents at end of period	$	30,453		$	53,724
Supplemental cash flow information:
Cash paid (received) for income taxes	$	17		$	(9,045	)
Cash paid for interest and swap		2,743			3,503

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1. Description of Business ~~Company History~~ and Summary of Significant Accounting Policies

Description of Business. Cars.com Inc. (the ~~“Company”~~“Company” or ~~“CARS”~~“CARS”) is a leading automotive marketplace platform that provides a robust set of industry specific digital ~~marketplace and solutions provider for the automotive industry, connecting car shoppers with sellers.~~solutions. Through the marketplace, dealer websites and other digital products, the Company showcases dealer inventory, elevates and amplifies ~~dealers’~~dealers’ and automotive ~~manufacturers’ (“OEMs”~~manufacturers’ (“OEMs”) brands, connects sellers with the ~~Company’s~~Company’s ready-to-buy audience and empowers shoppers with the resources and information needed to make confident car buying decisions. The ~~Company’s~~Company’s digital solutions strategy builds on the rich data and audience of its digital marketplace to offer media and solutions that drive growth and efficiency for the automotive industry. The ~~Company’s~~Company's portfolio of brands now includes Cars.com™, Dealer Inspire®, DealerRater®, FUEL ~~DealerRater,~~™, Auto.com™, PickupTrucks.com™, CreditIQ™, Accu-Trade™ and ~~NewCars.com.~~NewCars.com®.

Basis of Presentation. These accompanying unaudited interim Consolidated Financial Statements (“(“Consolidated Financial ~~Statements”~~Statements”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“(“U.S. ~~GAAP”~~GAAP”) and the rules and regulations of the Securities and Exchange Commission (the ~~“SEC”~~“SEC”) for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto for the year ended December 31, ~~2020,~~2021, which are included in the Company's Annual Report on Form 10-K dated February 25, 2022 (the “December 31, 2021 ~~(the “December 31, 2020~~ Financial ~~Statements”~~Statements”).

The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in the December 31, ~~2020~~2021 Financial Statements. In the opinion of management, the Consolidated Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, cash flows and changes in stockholders' equity as of the dates and for the periods indicated. The unaudited results of operations for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, ~~2021.~~2022.

Use of Estimates. The preparation of the accompanying Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on ~~management’s~~management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates.

~~Reclassifications~~. Certain prior year balances have been reclassified to conform to the current year presentation. In addition, effective January 1, 2021, the Company renamed its revenue categories as follows: "Direct" revenue is now "Dealer" revenue and "National advertising" revenue is now "OEM and National" revenue. This naming convention change has no impact on the components or the historical amounts of the respective revenue categories. Dealer revenue consists of marketplace and digital solutions sold to dealer customers. OEM and National revenue consists of display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses.

Principles of Consolidation. The accompanying Consolidated Financial Statements include the accounts of Cars.com Inc. and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation.

Correction of Certain Amounts Relating to Previously Issued Financial Statements. During the three months ended March 31, 2022, the Company identified a $30.8 million overstatement of the valuation allowance recorded against deferred tax assets that originated in 2020. In addition, the Company adjusted 2020 to reflect an immaterial income tax adjustment related to this prior period. The Company has concluded that these items are not material to the previously issued Consolidated Financial Statements and has therefore corrected these prior period amounts as presented in the current period Consolidated Financial Statements. The impact of correcting the items on the related financial statement line items is as follows (in thousands):

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)


Consolidated Balance Sheet
	As of December 31, 2021
Financial statement line item	As reported			Adjustment			As adjusted
Deferred tax liability	$	31,086		$	(31,086	)	$	0
Total noncurrent liabilities		545,981			(31,086	)		514,895
Total liabilities		640,271			(31,086	)		609,185

Consolidated Balance Sheet and Statement of Stockholders' Equity
	As of December 31, 2021
Financial statement line item	As reported			Adjustment			As adjusted
Accumulated deficit	$	(1,176,468	)	$	31,086		$	(1,145,382	)
Total stockholders' equity		366,934			31,086			398,020

Consolidated Statement of Stockholders' Equity
	Three Months Ended March 31, 2021
Financial statement line item	As reported			Adjustment			As adjusted
Accumulated deficit balance at December 31, 2020	$	(1,184,187	)	$	28,014		$	(1,156,173	)
Total stockholders' equity balance at December 31, 2020		340,176			28,014			368,190
Accumulated deficit balance at March 31, 2021		(1,178,909	)		28,014			(1,150,895	)
Total stockholders' equity balance at March 31, 2021		346,002			28,014			374,016

These adjustments had no impact to Net cash provided by operating activities, Net cash used in investing activities or Net cash provided by (used in) financing activities on the Consolidated Statements of Cash Flows. In addition, these adjustments had no impact to the Consolidated Statements of Income and Earnings per share for the three months ended March 31, 2021.

NOTE 2. Revenue

Revenue Summary. In the table below (in thousands), revenue is disaggregated by major products and services. The Company only has 1 reportable segment; therefore, further disaggregation is not applicable at this time.


	Three Months Ended March 31,
Major products and services	2022		2021
Subscription advertising and digital solutions	$	132,247	$	125,446
Display advertising		21,049		21,957
Pay per lead		2,417		3,760
Other		2,494		2,132
Total revenue	$	158,207	$	153,295

NOTE 3. Goodwill, Indefinite-lived Intangible Asset and Business Combination

The changes in the carrying amount of goodwill and indefinite-lived intangible asset are as follows (in thousands):


	December 31, 2021		Additions		Impairment		March 31, 2022
Goodwill	$	26,227	$	75,536	$	—	$	101,763
Indefinite-lived intangible asset		390,020		—		—		390,020

Business Combinations. The below transactions were accounted for as business combinations.

Accu-Trade Acquisition.On March 1, 2022, the Company acquired certain of the assets and assumed certain liabilities of Accu-Trade, LLC; Accu-Trade Canada, LLC; Galves Market Data; and Headstart Logistics, LLC d/b/a/ MADE Logistics (collectively, “Accu-Trade”), which provides dealers with vehicle VIN-specific valuation and appraisal data, instant guaranteed offer capabilities and logistics technology (the “Accu-Trade Acquisition”).

The Company expensed as incurred total acquisition costs of $1.9 million, of which $0.9 million were recorded during the three months ended March 31, 2022. These costs were recorded in General and administrative in the Consolidated Statements of Income.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

Preliminary Purchase Price Allocation. The preliminary fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods. These preliminary fair values are subject to change within the one-year measurement period. The Accu-Trade Acquisition purchase price allocation is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Major products and services

2021

2020

2021

2020

Subscription advertising and digital solutions

$
128,733

$
79,449

$
254,179

$
196,712

Display advertising

21,322

16,558

43,279

39,917

Pay per lead

3,280

4,769

7,040

10,512

Other

2,195

1,233

4,327

2,962

Total revenue

$
155,530

$
102,009

$
308,825

$
250,103


	Preliminary Acquisition-date Fair Value
Cash consideration	$	64,770
Other consideration (1)		5,300
Contingent consideration (2)		22,505
Total purchase consideration	$	92,575

Assets acquired (3)	$	1,595
Identified intangible assets (4)		15,679
Total assets acquired		17,274
Total liabilities assumed (5)		(235	)
Net identifiable assets		17,039
Goodwill		75,536
Total purchase consideration	$	92,575

(1)

In connection with the Accu-Trade Acquisition, the Company entered into an agreement to provide one of the former owners with a one-year license to a certain product. The preliminary fair value of the license was determined to be $6.5 million, of which the Company received $1.2 million in cash upon the close of the Accu-Trade Acquisition. The $5.3 million difference between the fair value of $6.5 million and the $1.2 million in cash was recorded as non-cash consideration and the $6.5 million license fee was recorded in Other accrued liabilities as a contract liability on the Consolidated Balance Sheets and will be amortized into Other revenue on the Consolidated Statements of Income over the one-year contract term. The current period revenue related to the non-cash consideration of $5.3 million is a non-cash reconciling item titled Amortization of deferred revenue related to Accu-Trade Acquisition on the Consolidated Statements of Cash Flows.

(2)

As part of the Accu-Trade Acquisition, the Company may be required to pay additional cash and stock consideration to the former owners based on achievement of certain financial targets, which would result in a variable number of shares being issued. The Company has the option to pay consideration in cash or stock. The actual amount to be paid will be based on the acquired business’ future performance to be attained over a three-year performance period. The contingent consideration is classified as Level 3 in the fair value hierarchy. The fair value is measured based on a Monte Carlo simulation based on the following significant inputs: volatility, discount rate and projected financial information.

(3)

Assets acquired primarily consists of accounts receivable.

(4)

Preliminary information regarding the identifiable intangible assets acquired is as follows:

(5)

Total liabilities assumed primarily consists of accounts payable.

Goodwill. In connection with the Accu-Trade Acquisition, the Company recorded goodwill in the amount of $75.5 million, which is primarily attributable to sales growth from existing and future technology, product offerings, customers and the value of the acquired assembled workforce. All of the goodwill is considered deductible for income tax purposes.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

CreditIQ Acquisition.On November 5, 2021, the Company acquired all of the outstanding stock of CreditIQ, Inc. (the “CIQ Acquisition”) a cutting-edge automotive fintech platform that provides instant online loan screening and approvals to facilitate online car buying. Through the CIQ Acquisition, the Company now provides dealers with access to advanced digital financing technology across the CARS platform.

The Company expensed as incurred total acquisition costs of $1.4 million, of which $0.1 million were recorded during the three months ended March 31, 2022. These costs were recorded in General and administrative in the Consolidated Statements of Income. In connection with the CIQ Acquisition, CreditIQ’s unvested equity awards were cash-settled for a total of $9.6 million. The fair value of these awards was based on the price paid per common share to the owners of the acquired business and recognized immediately after the CIQ Acquisition in November 2021 as compensation expense in the Company’s Consolidated Statements of Income.

Preliminary Purchase Price Allocation. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods. The preliminary fair values of all assets acquired and liabilities assumed are subject to change within the one-year measurement period. The CIQ Acquisition purchase price allocation is as follows (in thousands):


	Preliminary Acquisition-date Fair Value
Cash consideration (1)	$	29,965
Contingent consideration (2)		23,805
Cash settlement of CIQ Acquisition's unvested equity awards (3)		(9,626	)
Total purchase consideration	$	44,144

Assets acquired (4)	$	193
Identified intangible assets (5)		19,900
Total assets acquired		20,093
Total liabilities assumed (6)		(2,176	)
Net identifiable assets		17,917
Goodwill		26,227
Total purchase consideration	$	44,144

(1)

A reconciliation of cash consideration to Payments for the CIQ Acquisition, net of cash acquired is as follows (in thousands):


Cash consideration	$	29,965
Less: Cash settlement of CIQ Acquisition's unvested equity awards (3)		(9,626	)
Less: Cash acquired		(81	)
Payments for CIQ Acquisition, net of cash acquired	$	20,258

(2)

As part of the CIQ Acquisition, the Company may be required to pay up to an additional $50.0 million in cash consideration to the former owners based on two earn-out achievement objectives, including an earnings-related metric and lender market share. The actual amount to be paid will be based on the acquired business’ future performance to be attained over a three-year performance period with a mutually agreed-upon option for a fourth year. The contingent consideration is classified as Level 3 in the fair value hierarchy. The fair value is measured based on a Monte Carlo simulation or a scenario-based method based on the following significant inputs: volatility, discount rate and projected financial information. No significant changes in fair value of the contingent consideration have occurred since the CIQ Acquisition.

(3)

In connection with the CIQ Acquisition, CreditIQ’s unvested equity awards were cash-settled. The fair value of these awards was $9.6 million and was based on the price paid per common share to the owners of the acquired business and recognized immediately after the CIQ Acquisition in November 2021 as compensation expense in General and administrative expense on the Company’s Consolidated Statements of Income.

(4)

Assets acquired primarily consists of cash and cash equivalents and accounts receivable.

710

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

(5)

Preliminary information regarding the identifiable intangible assets acquired is as follows:

~~NOTE 3. Goodwill~~

(6)

Total liabilities assumed includes accounts payable, deferred income tax liabilities, net and ~~Indefinite-lived Intangible Asset~~other liabilities.

Goodwill. In ~~March 2020,~~connection with the CIQ Acquisition, the Company ~~determined there was a triggering event, caused by~~recorded goodwill in the ~~economic impacts~~amount of $26.2 million, which is primarily attributable to sales growth from existing and future technology, product offerings, customers and the value of the ~~novel coronavirus disease 2019 pandemic and related restrictions (“COVID-19”). The Company performed interim quantitative impairment tests as of March 31, 2020. The results~~acquired assembled workforce. None of the goodwill and indefinite-lived intangible asset impairment tests indicated at the time, due to the projected impacts of COVID-19, that the carrying values exceeded the estimated fair values and thus, the Company recorded an impairment of $~~505.9~~ ~~million and $400.0~~ ~~million related to its goodwill and indefinite-lived intangible asset, respectively.~~is considered deductible for income tax purposes.

NOTE 4. Debt

As of ~~June 30, 2021,~~March 31, 2022, the Company was in compliance with the covenants under its debt agreements.

Term Loan. As of ~~June 30, 2021,~~March 31, 2022, the outstanding principal amount under the Term Loan was $~~122.5~~75.0 million and the interest rate in effect was 2.5%, not including the impact of the interest rate swap. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company made $~~75.0~~2.5 million in Term Loan ~~payments, of which $70.0~~ ~~million were voluntary.~~payments.

Revolving Loan. As of ~~June 30, 2021,~~March 31, 2022, the outstanding borrowings under the Revolving Loan were $~~230.0~~45.0 million and the interest rate in effect was 2.5%. As of March 31, 2022, $185.0 million was available to borrow under the Revolving Loan. The Company ~~had zero drawdowns on the Revolving Loan during the six months ended June 30, 2021.~~’s borrowings are limited by its Senior Secured Leverage Ratio and Consolidated Interest Coverage Ratio, which are calculated in accordance with our Credit Agreement, and were 0.7x and 5.0x as of March 31, 2022, respectively.

Senior Unsecured Notes. In October 2020, the Company issued $400.0 million aggregate principal amount of ~~6.375%~~6.375% senior unsecured notes due 2028. Interest on the notes is due semi-annually on May 1 and November 1.

Fair Value. The Company's debt is classified as Level 2 in the fair value hierarchy and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments. As of ~~June 30,~~March 31, 2022, the fair value of the outstanding indebtedness was approximately $513.3 million, compared to the carrying value $520.0 million. As of December 31, 2021, the fair value of the outstanding indebtedness was approximately $~~546.9~~502.7 million, compared to the carrying value of $~~522.5~~477.5 ~~million. As of December 31, 2020, the fair value approximated the carrying value.~~million.

NOTE 5. Interest Rate Swap

The interest rate on borrowings under the ~~Company’s~~Company’s Term Loan is floating and, therefore, subject to fluctuations. In order to manage the risk associated with changes in interest rates on its borrowing under the Term Loan prior to the October 2020 refinancing, the Company entered into an interest rate swap (the ~~“Swap”~~“Swap”) effective December 31, 2018. Under the terms of the Swap, the Company is locked into a fixed rate of interest of 2.96% plus an applicable margin, as defined in the ~~Company’s~~Company’s Credit Agreement, on a notional amount of $300 ~~million. The~~million until May 31, 2022. Although the Swap was initially designated as a cash flow hedge of interest rate ~~risk.~~

~~During~~risk, hedge accounting was discontinued in June 2020. The loss on the ~~second quarter of 2020, the Company entered into the second amendment to the Credit Agreement, which triggered a quantitative~~ hedge ~~effectiveness test~~ that ~~resulted~~was in ~~the loss of hedge accounting. As a result, as of the date of the second amendment, the unrealized loss included within~~ Accumulated other comprehensive ~~loss was frozen and is now being ratably reclassified~~income at that time would be amortized into ~~Net income (loss) over the remaining life of the Swap through Interest expense, net and Income tax (benefit) expense within~~ the Consolidated Statements of Income ~~(Loss). Subsequent to~~over the ~~second amendment, any changes in the fair value of the Swap are recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).~~

During the fourth quarter of 2020, the Company entered into the third amendment to the Credit Agreement, which triggered a partial debt extinguishment, including a partial extinguishment of the underlying Term Loan. Due to the reduction in the Term Loan as compared to the notional amount of the Swap, the Company wrote-off a proportional amount of the frozen Accumulated other comprehensive loss balance as of the date of the partial extinguishment proportional to the reduction in the underlying notional amount of Term Loan. The Company will continue to amortize the remaining ~~Accumulated other comprehensive loss to Interest expense, net and Income tax (benefit) expense within the Consolidated Statements of Income (Loss) through the remainder of the~~ term of the Swap. ~~Any changes in the fair value of the Swap will continue to be recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).~~

As of ~~June 30, 2021,~~March 31, 2022, the fair value of the Swap was an unrealized loss of $~~7.9~~1.2 million, which is recorded in Other accrued liabilities on the Consolidated Balance Sheets. As of December 31, ~~2020,~~2021, the fair value of the Swap was an unrealized loss of $~~12.1~~3.5 million, of which $~~8.5~~ ~~million and $3.6~~ ~~million is~~was recorded in Other accrued liabilities ~~and Other noncurrent liabilities, respectively,~~ on the Consolidated Balance Sheets.During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ $~~2.8~~ ~~million and $0.3~~1.4 million was reclassified from Accumulated other comprehensive loss and recorded in Interest expense, ~~net, respectively.~~net. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company

~~Cars.com Inc.~~

~~Notes to the Consolidated Financial Statements (continued)~~

~~(Unaudited)~~

made payments of $~~4.3~~2.1 million related to the Swap and $~~0.4~~0.2 million was reclassified as a tax benefit from Accumulated other comprehensive loss into Income tax (benefit) expense on the Consolidated Statements of ~~Income (Loss).~~Income.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

NOTE 6. Commitments and Contingencies

The Company and its subsidiaries are parties from time to time in legal and administrative proceedings involving matters incidental to its business. These matters, whether pending, threatened or unasserted, if decided adversely to the Company or settled, may result in liabilities material to its financial position, results of operations or cash flows. The Company records a liability when it believes that it is both probable that a loss will be incurred and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both the probability and the estimated amount.

NOTE 7. Stockholders' Equity

In February 2022, the Company's Board of Directors authorized a three-year share repurchase program to acquire up to $200 million of the Company's common stock. The Company 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 the Company's blackout periods. The timing and amounts of any purchases under the share repurchase program will be based on market conditions and other factors including price. The repurchase program may be suspended or discontinued at any time and does not obligate the Company to repurchase any dollar amount or particular amount of shares. The Company funds the share repurchase program principally with cash from operations. During the three months ended March 31, 2022, the Company repurchased and subsequently retired 0.3 million shares for $5.0 million at an average price per share of $14.78.

NOTE 8. Stock-Based Compensation

Restricted ~~Stock~~Share Units ~~(“RSUs”~~(“RSUs”) ~~and Restricted Stock.~~. RSUs represent the right to receive unrestricted shares of the ~~Company’s~~Company’s common stock at the time of vesting, subject to any restrictions asas specified in the individual ~~holder’s~~holder’s award agreement. RSUs are subject to graded vesting, generally ranging between one and four ~~years~~ years and the fair value of the RSUs is equal to the Company's common stock price on the date of grant. Restricted Stock represents RSUs that have been delivered to certain non-employee directors who have elected to receive shares underlying RSUs before they vest. Restricted Stock is subject to graded vesting over one year and the fair value of the Restricted Stock is equal to the Company’sCompany’s common stock price on the date of grant. RSU ~~and Restricted Stock~~ activity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is as follows (in thousands, except for weighted-average grant date fair value):

Number
of RSUs and Restricted Stock

Weighted-Average
Grant Date
Fair Value

Outstanding as of December 31, 2020

4,061

$
8.31

Granted

1,554

15.02

Vested and delivered

(1,493
)

8.36

Forfeited

(201
)

9.13

Outstanding as of June 30, 2021 (1)

3,921

10.91


	Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2021		3,683		$	10.95
Granted		1,814			15.07
Vested and delivered		(1,433	)		10.28
Forfeited		(61	)		12.69
Outstanding as of March 31, 2022 (1)		4,003			13.03

(1)

Included in ~~“Outstanding~~“Outstanding as of ~~June 30, 2021”~~March 31, 2022” are 6463 RSUs that were vested, but not yet delivered.

Performance ~~Stock~~Share Units ~~(“PSUs”~~(“PSUs”). PSUs represent the right to receive unrestricted shares of the ~~Company’s~~Company’s common stock at the time of vesting. The fair value of the PSUs is equal to the ~~Company’s~~Company’s common stock price on the date of grant. Expense related to PSUs is recognized when the performance conditions are probable of being achieved. The percentage of PSUs that shall vest will range from 0% to 200% of the number of PSUs granted based on the ~~Company’s~~Company’s future performance related to certain revenue and adjusted earnings before interest, income taxes, depreciation and amortization targets over a three-year performance period. These PSUs are subject to cliff vesting at the end of the respective performance period. PSU activity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is as follows (in thousands, except for weighted-average grant date fair value):

Number
of PSUs

Weighted-Average
Grant Date
Fair Value

Outstanding as of December 31, 2020

730

$
9.28

Granted

0

0

Vested and delivered

(588
)

5.74

Forfeited

0

0

Outstanding as of June 30, 2021

142

23.98


	Number of PSUs			Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2021		142		$	23.98
Granted		275			15.07
Vested and delivered		(142	)		23.98
Forfeited		0			0
Outstanding as of March 31, 2022		275			15.07

~~Stock Options.~~ Stock options represent the right to purchase shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement. Stock options are subject to ~~three-year~~ ~~cliff vesting and expire~~12

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

Stock Options. Stock options represent the right to purchase shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement. Stock options are subject to three-year cliff vesting and expire 10 years from the grant date. Stock option activity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is as follows (in thousands, except for weighted-average grant date fair value and weighted-average remaining contractual term):

Number of Options

Weighted-Average
Grant Date
Fair Value

Weighted-Average Remaining Contractual Term (in years)

Aggregate Intrinsic Value

Outstanding as of December 31, 2020

513

$
2.80

9.22

$
3,028

Granted

291

9.63

—

—

Exercised

0

0

—

—

Forfeited

0

0

—

—

Outstanding as of June 30, 2021

804

5.27

9.08

4,583

Exercisable as of June 30, 2021

0

0

—

—


	Number of Options		Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2021		804	$	5.27		8.58	$	5,754
Granted		263		9.39		—		—
Vested and delivered		0		0		—		—
Forfeited		0		0		—		—
Outstanding as of March 31, 2022		1,067		6.28		8.73		4,634
Exercisable as of March 31, 2022		0		—		—		—

The fair value of the stock options granted during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and March 31, 2021 ~~and 2020~~ are estimated on the grant date using the Black-Scholes option pricing model, using the following assumptions:

2021

2020

Risk-free interest rate

1.15
%

1.01
%
Weighted-average volatility

69.00
%

53.08
%
Dividend yield

0
%

0
%
Expected years until exercise

6.5

6.5


	2022			2021
Risk-free interest rate		2.21	%		1.15	%
Weighted-average volatility		65.22	%		69.00	%
Dividend yield		0	%		0	%
Expected years until exercise		6.5			6.5

NOTE 8.9. Earnings ~~(Loss)~~ Per Share

Basic earnings ~~(loss)~~ per share is calculated by dividing Net income ~~(loss)~~ by the weighted-average number of shares of common stock outstanding. Diluted earnings ~~(loss)~~ per share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans, unless the inclusion of such shares would have an anti-dilutive effect. The computation of Earnings ~~(loss)~~ per share is as follows (in thousands, except per share data):

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Net income (loss)

$
5,966

$
(24,644
)

$
11,244

$
(812,078
)
Basic weighted-average common shares outstanding

68,869

67,256

68,328

67,095

Effect of dilutive stock-based compensation awards (1)

1,825

0

2,462

0

Diluted weighted-average common shares outstanding

70,694

67,256

70,790

67,095

Earnings (loss) per share, basic

$
0.09

$
(0.37
)

$
0.16

$
(12.10
)
Earnings (loss) per share, diluted

0.08

(0.37
)

0.16

(12.10
)


	Three Months Ended March 31,
	2022		2021
Net income	$	4,340	$	5,278
Basic weighted-average common shares outstanding		69,463		67,787
Effect of dilutive stock-based compensation awards (1)		1,436		2,467
Diluted weighted-average common shares outstanding		70,899		70,254
Earnings per share, basic	$	0.06	$	0.08
Earnings per share, diluted		0.06		0.08

(1)

There were ~~1,316~~1,738 and ~~1,829~~1,815 potential common shares excluded from diluted weighted-average common shares outstanding for the three months ended ~~June 30,~~March 31, 2022 and March 31, 2021, ~~and June 30, 2020, respectively, and~~ ~~1,362~~ ~~and~~ ~~4,885~~ ~~potential common shares for the six months ended June 30, 2021 and June 30, 2020,~~ respectively, as their inclusion would have had an anti-dilutive effect.

~~NOTE 9. Other (Expense) Income, net~~

~~Included in Other (expense) income, net in the six months ended June 30, 2020 was a full impairment of $9.4~~ ~~million of a non-marketable investment, triggered by the COVID-19 pandemic.~~

NOTE 10. Income Taxes

Deferred Tax Asset and Valuation Allowance.~~As a result of the goodwill and indefinite-lived intangible asset impairments recorded during the six months ended June 30, 2020, the~~ The Company has concluded a valuation allowance is required against its deferred tax assets as of ~~June 30, 2021.~~March 31, 2022. In reaching this conclusion, in accordance with U.S. GAAP, the Company has evaluated all available evidence, both positive and negative, and determined that the ~~Company’s~~Company’s history of recent losses, primarily due to the goodwill and indefinite-lived intangible asset impairments, was sufficient significant negative evidence to require a valuation allowance. Therefore, the Company has recorded a valuation allowance to reduce its deferred tax assets as of ~~June 30, 2021~~March 31, 2022 to the amount that is more likely than not to be realized in future periods. At each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

Effective Tax Rate. The effective income tax rate, expressed by calculating the income tax (benefit) expense as a percentage of Income before income tax, was (138.6)% for the three months ended March 31, 2022, which varied from the statutory federal income tax rate

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

~~Tax Refund.~~ ~~During the six months ended June 30, 2021, the Company received a $9.1~~ ~~million tax refund related to the carryback of federal and state income tax net operating loss as a result of the CARES Act.~~

~~Effective Tax Rate.~~ ~~The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income tax, was~~ 9~~% for the six months ended June 30, 2021, which varied from the statutory federal income tax rate~~ of 21%, primarily due to the ~~tax~~ benefit realized on stock-based compensation, ~~offset in part by~~the impact of uncertain tax positions and the tax benefits realized on a partial release of the valuation ~~allowance on the Company’s net deferred tax asset position recorded during the six months ended June 30, 2021. The effective income tax rate was~~ 14~~% for the six months ended June 30, 2020. The effective tax rate differed from the statutory federal income tax rate of~~ 21~~%, primarily due to the tax impact of the goodwill and intangible asset impairments and the valuation allowance recorded during the six months ended June 30, 2020.~~allowance.


(In thousands, except percentages)	Three Months Ended March 31, 2022
Income tax provision at statutory rate	$	382		21.0	%
State income taxes, net of federal income tax benefit		204		11.2
Stock-based compensation		(1,425	)	(78.3	)
Uncertain tax positions		(1,015	)	(55.8	)
Valuation allowance		(917	)	(50.4	)
Other, net		250		13.7
Income tax benefit	$	(2,521	)	(138.6	)%

(In thousands, except percentages)

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Income tax provision at statutory rate

$
1,213

21.0
%

$
2,596

21.0
%
State income taxes, net of federal income tax benefit

201

3.5

437

3.5

Tax credits

164

2.8

(819
)

(6.6
)
Stock-based compensation

(223
)

(3.9
)

(2,902
)

(23.5
)
Uncertain tax positions

22

0.4

1,211

9.8

Valuation allowance

(1,186
)

(20.5
)

1,227

9.9

Other, net

(380
)

(6.6
)

(633
)

(5.1
)
Income tax (benefit) expense

$
(189
)

(3.3
)%

$
1,117

9.0
%

Note About Forward-Looking Statements

This report contains ~~“forward-looking statements”~~“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~~ These statements often include information concerning the economic impacts of the novel coronavirus disease 2019 pandemic and related restrictions (“COVID-19”) on our industry, our dealer customers and our results of operations, our business strategies, strategic alternatives, plans and objectives, market potential, words such as “believe,” “expect,” “project,” “anticipate,” “outlook, trends, future financial performance, planned operational and product improvements, potential strategic transactions, liquidity, including draws from our revolving loan, expense management and other matters and involve known and unknown risks that are difficult to predict.” “intend,” “strategy,” “plan,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts,” “mission,” “strive,” “more,” “goal” or similar expressions. 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. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections, and assumptions, based on our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, current developments regarding the COVID-19 pandemic, global supply chain shortages, rising fuel prices and other factors we think are appropriate. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management based on our knowledge and understanding of the business and industry, including the supply chain, are inherently uncertain. These statements are expressed in good faith and we believe these judgments are ~~reasonable. However,~~reasonable; however, you should understand that these statements are not guarantees of strategic action, performance or results. Our actual results and strategic actions could differ materially from those expressed in the forward-looking statements. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed 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.

Important factors that could cause actual results or events to differ materially from those anticipated include, among others:

•

The COVID-19 pandemic and related restrictions have materially and adversely affected, and could continue to materially and adversely affect, our business, financial condition, liquidity and results of operations.

•

~~We participate in~~Market acceptance of and influence over certain of our products and services is concentrated with a ~~highly competitive market,~~limited number of automobile OEMs and ~~pressure from existing~~dealership associations, and ~~new competitors~~we may ~~materially and adversely affect our business, results of operations or financial condition.~~



~~We compete with other consumer automotive websites and mobile applications and other digital content providers for share of automotive-related digital display advertising spending and may~~not be ~~unable~~able to maintain or grow these relationships.

•

Dealer closures or consolidation among dealers or OEMs could reduce demand for, and negatively affect the pricing of, our ~~base of advertising customers or increase our revenue from existing advertisers.~~marketing and solutions offerings, thereby leading to decreased earnings.

•

Our business is subject to risks related to the larger automotive ecosystem, including consumer demand and other macroeconomic issues.

•

Our business depends on our strong brand recognition, and any failure to maintain, protect and enhance our brands could hurt our ability to retain or expand our base of consumers, dealers and advertisers, and our ability to increase the frequency with which consumers, dealers and advertisers use our services.

•

We rely in part on Internet search engines and mobile application stores to drive traffic to the CARS sites and increase downloads of our mobile applications. If the CARS sites and mobile applications fail to appear prominently in these search results, traffic to the CARS sites and mobile applications would decline and our business, results of operations or financial condition may be materially and adversely affected.

•

~~If we fail~~We rely on in-house content creation and development to ~~maintain or increase our base of subscribing dealers that purchase our solutions or~~drive organic traffic to ~~increase our revenue~~the CARS sites and mobile applications.

•

We participate in a highly competitive market, and pressure from ~~subscribing dealers,~~existing and new competitors may materially and adversely affect our business, results of operations or financial ~~condition~~condition.

•

We compete with other consumer automotive websites and mobile applications and other digital content providers for share of automotive-related digital display advertising spending and may be ~~materially and~~unable to maintain or grow our base of advertising customers or increase our revenue from existing advertisers.

•

If we do not adapt to automated buying strategies quickly, our display advertising revenue could be adversely affected.

•

We may face difficulties in developing and launching new solution offerings ~~as a full-service solutions provider~~or growing our complementary offerings that help automotive brands and dealers create enduring customer relationships.

•

~~We cannot assure you that we will be able~~Strategic acquisitions, investments and partnerships could pose various risks, including integration risks, increase our leverage, dilute existing stockholders and significantly impact our ability to ~~continue to successfully develop and launch new products or grow~~expand our ~~complementary product offerings.~~overall profitability.

•

The value of our assets or operations may be diminished if our information technology systems fail to perform adequately.

•

Our business is dependent on keeping pace with advances in technology. If we are unable to keep pace with advances in technology, consumers may stop using our services and our revenue may decrease.



We rely on technology systems’ availability and ability to prevent unauthorized access. If our security and resiliency measures fail to prevent incidents, it could result in damage to our reputation, incur costs, loss of customers and create liabilities.



Market acceptance of and influence over certain of our products and services is concentrated with a limited number of automobile OEMs and dealership associations, and we may not be able to maintain or grow these relationships.

1215

•

We rely on third-party service providers for many aspects of our business, including inventory information and sales of our product through social media, and interruptions in the services or data they provide or any failure to maintain these relationships could harm our business.

•

~~We rely on in-house content creation and development to drive organic traffic to the CARS sites and mobile applications.~~



Our ability to attract and retain dealer customers depends on our ability to collect and use data and develop tools to enable us to effectively deliver and accurately measure advertisements on our platform.



We rely on third-party services to track and calculate certain of our key metrics, including unique visitors and traffic and any errors or interruptions in the services or data they provide or any failure to maintain these relationships could harm our business.

•

•

Our ~~business is subject~~ability to ~~risks related~~attract and retain customers depends on our ability to ~~the larger automotive ecosystem, including consumer demand~~collect and ~~other macroeconomic issues.~~use data and develop tools to enable us to effectively deliver and accurately measure advertisements on our platform.

•

If growth in the digital automotive advertising market or automotive digital solutions market stagnates or declines, our business, results of operations or financial condition could be materially and adversely affected.



~~Dealer closures or consolidation among dealers or OEMs could reduce demand for, and the pricing of, our marketing and solutions offerings, thereby leading to decreased earnings.~~



Uncertainty exists in the application and interpretation of various laws and regulations related to our business, including privacy laws such as the California Consumer Privacy Act and the upcoming California Privacy Rights Act. New privacy concerns or laws or regulations applicable to our business, or the expansion or interpretation of existing laws and regulations that apply to our business, could reduce the effectiveness of our offerings or subject us to use restrictions, licensing requirements, claims, judgments and remedies including sales and use taxes, other monetary liabilities and limitations on our business practices, and could increase administrative costs.

•

~~If we do not adapt to automated buying strategies quickly, our display advertising revenue could be adversely affected.~~



If our mobile applications do not continue to meet consumer demands or we are unable to successfully monetize our mobile advertising solutions, our business, results of operations or financial condition may be materially and adversely affected.



~~Our ability to operate effectively could be impaired if we fail to attract and retain our key employees.~~



Misappropriation or infringement of our intellectual property and proprietary rights, enforcement actions to protect our intellectual property and claims from third parties relating to intellectual property could materially and adversely affect our business, results of operations or financial condition.

•

~~Strategic acquisitions, investments and partnerships could pose various risks, increase our leverage, dilute existing stockholders and significantly impact our~~Our ability to ~~expand~~operate effectively could be impaired if we fail to attract and retain our ~~overall profitability.~~key employees.

•

Adverse results from litigation or governmental investigations could impact our business practices and operating results.

•

The value of our existing intangible assets may become impaired depending upon future operating results.

•

~~If we expand into new geographic markets, we may be prevented from using our brands in such markets.~~



~~Seasonality may cause fluctuations in our revenue and operating results.~~



We do not expect to pay any cash dividends for the foreseeable future.

•

Your percentage of ownership in the Company may be diluted in the future.

•

Certain provisions of our Amended and Restated Certificate of Incorporation, By-laws, and Delaware law may discourage takeovers and limit our ability to use, acquire, or develop certain competing businesses.

•

Our Amended and Restated Certificate of Incorporation designates the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us and our directors and officers.

•

Our business could be negatively affected as a result of actions of activist stockholders, and such activism could impact the trading value of our common stock.

•

Our debt agreements contain restrictions that may limit our flexibility in operating our business.

•

Increases in interest rates could increase interest payable under our variable rate indebtedness.



Uncertainty relating to the London Interbank Offered Rate (“LIBOR”) calculation process, potential phasing out of LIBOR and any transition to the Secured Overnight Financing Rate may adversely affect the market value of our current or future debt obligations, including our long-term debt instruments and our bank credit facilities.

For a detailed discussion of many of these risks and uncertainties, see ~~“Part~~“Part I, Item 1A., Risk ~~Factors”~~Factors” and ~~“Part~~“Part II, Item 7., ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021, as filed with the Securities and Exchange Commission ~~(“SEC”~~(“SEC”) on February 25, ~~2021,~~2022, our Current Reports on Form 8-K and our other filings filed with the SEC and available on our website at investor.cars.com or via EDGAR at www.sec.gov. All forward-looking statements contained in this report are qualified by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic and related restrictions. The forward-looking statements contained in this report are based only on information currently available to us and speak only as of the date of this report. 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.

1416

Item 2. ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our business, financial condition, results of operations and quantitative and qualitative disclosures should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis also contains forward-looking statements and should be read in conjunction with the disclosures and information contained in ~~“Note~~“Note About Forward-Looking ~~Statements”~~Statements” in this Quarterly Report on Form 10-Q. The financial information discussed below and included elsewhere in this Quarterly Report on Form 10-Q may not necessarily reflect what our financial condition, results of operations and cash flows may be in the future.

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

Business Overview

We are a leading automotive marketplace platform that provides a robust set of industry-specific digital ~~marketplace and solutions provider for the automotive industry, connecting car shoppers with sellers.~~solutions. Through our marketplace, dealer websites and other digital products, we showcase dealer inventory, elevate and amplify ~~dealers’~~dealers’ and automotive ~~manufacturers’ (“OEMs”~~manufacturers’ (“OEMs”) brands, connect sellers with our ready-to-buy audience and empower shoppers with the resources and information needed to make confident ~~car buying~~car-buying decisions. Our digital solutions strategy builds on the rich data and audience of our digital marketplace to offer media and solutions that drive growth and efficiency for the automotive industry. Our portfolio of brands now includes Cars.com™, Dealer Inspire®, DealerRater®, FUEL ~~DealerRater,~~™, Auto.com™, PickupTrucks.com™, CreditIQ™, Accu-Trade™ and ~~NewCars.com.~~NewCars.com®.

Overview of Results

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

2021

2020

2021

2020

Revenue (1)

$
155,530

$
102,009

$
308,825

$
250,103

Net income (loss) (2)

5,966

(24,644
)

11,244

(812,078
)


	Three Months Ended March 31,
(in thousands)	2022		2021
Revenue	$	158,207	$	153,295
Net income		4,340		5,278

~~(1)~~

The increase in revenue for the three and six months ended June 30, 2021 was primarily due to lower revenue in the second quarter of 2020, resulting from approximately $38.2 million of COVID-19 pandemic-related invoice credits that we issued to our marketplace dealer customers during the second quarter of 2020.

~~(2)~~

The net loss for the three months ended June 30, 2020 was primarily attributed to the decline in revenue, partially offset by our management of expenses to adjust to changes in revenue due to the COVID-19 pandemic. The net loss for the six months ended June 30, 2020 was primarily attributed to the goodwill and intangible asset impairment of $905.9 million, or $757.1 million net of tax, as well as the impact of the COVID-19 pandemic.

~~2021~~2022 Highlights and Trends

Dealer Customers. In the ~~second~~first quarter of ~~2021,~~2022, Dealer Customers increased by ~~22,~~2%, to 19,500 Dealer Customers, as compared with ~~March~~December 31, 2021, continuing ~~four~~seven consecutive quarters of growth in Dealer Customers.

~~Total~~ Year over year, Dealer Customers increased by ~~812, as compared with June 30, 2020. This increase was a result of~~677. These increases were driven by sustained high retention rates and strong new sales to ~~dealer customers following~~Dealer Customers.

Accu-Trade Acquisition. In March 2022, we acquired certain assets and assumed certain liabilities of Accu-Trade, LLC; Accu-Trade Canada, LLC; Galves Market Data; and Headstart Logistics, LLC d/b/a MADE Logistics (collectively, “Accu-Trade”), which includes real-time, VIN-specific appraisal and valuation data, instant guaranteed offer capabilities and logistics technology (the “Accu-Trade Acquisition”). Consideration for the ~~higher cancellations~~transaction was composed of ~~marketplace customers~~$64.8 million of cash and $5.3 million in other consideration. As part of the ~~second quarter~~transaction, upon achievement of ~~2020, principally due~~certain financial targets, we may be required to pay additional cash and stock consideration to the ~~COVID-19 pandemic.~~former owners.

~~FUEL.~~CreditIQ Acquisition. ~~Launched in early 2020, FUEL is~~In November 2021, we acquired all the outstanding stock of CreditIQ, Inc. (the "CIQ Acquisition"), a ~~unique, high ROI, targeted video advertising solution~~cutting edge automotive fintech platform that ~~generates superior returns than high-cost broadcast television,~~provides instant online loan screening and approvals to facilitate online car buying. Through the CIQ Acquisition, we are now able to make advanced digital financing technology available to dealers across the CARS platform. Using cash on ~~which~~hand, we paid $30.0 million at the ~~auto industry spends approximately $10 billion per year, in addition~~closing excluding transaction fees and expenses. As part of the transaction, we may be required to ~~what is spent~~pay additional cash consideration of up to $50.0 million based on other expensive advertising mediums. FUEL continues to be one of our fastest growing products. FUEL enables dealerships and OEMs to target and reach in-market car shoppers by leveraging the power of Cars.com's exclusive first-party audience data.future performance over a three-year period with a mutually agreed upon option for a fourth year.

~~FordDirect Agreement.~~ Share Repurchase Program.In ~~April 2021, we announced that we were selected by FordDirect as~~February 2022, our Board of Directors authorized a ~~preferred website~~three-year share repurchase program to acquire up to $200 million of the Company's common stock. 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 ~~technology platform provider~~other applicable legal requirements, and subject to our blackout periods. We will fund the share repurchase program principally with cash from operations. During the three months ended March 31, 2022, the Company repurchased and subsequently retired 0.3 million shares for ~~its approximately 3,000 local U.S. dealerships.~~$5.0 million at an average price per share of $14.78.

~~Technology Transformation.~~ In June 2021, we announced the completion of our transformed online platform and mobile app for our users. Our new Cars.com site offers load times up to 80% faster and real-time inventory updates of over 50,000 cars added to the site daily - an especially important feature in today's car-inventory-starved environment. The upgraded Cars.com, built on cloud-based technology, now delivers a more streamlined and dynamic experience for both car shoppers and sellers. Our updated site experience builds on its wealth of content and offers even more advanced tools, interactive features and personalized content combined with a vibrant, intuitive and accelerated path to purchase.17

~~Debt Repayments.~~ ~~During the six months ended June 30, 2021, we made $75.0 million of debt repayments, of which $70.0 million were voluntary pre-payments.~~

~~Impact of COVID-19 on our business.~~ In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and it has since spread throughout the United States and the rest of the world with different geographical locations impacted more than others. The pandemic resulted in governmental authorities around the country implementing numerous measures to contain the virus, such as quarantines, shelter-in-place orders and business shutdowns (the “related restrictions”). As cases of COVID-19 persist in various regions around the globe and new COVID-19 variants emerge, these related restrictions may still be enforced or be renewed in certain markets. During the year ended December 31, 2020 and to a lesser extent during the six months ended June 30, 2021, our business, financial condition, liquidity and operating results were adversely affected by the COVID-19 pandemic, as a widespread increase in unemployment and reduced consumer spending impacted the greater macroeconomic automotive industry.

Key Operating Metrics

We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make operating and strategic decisions. Information regarding Traffic and Average Monthly Unique Visitors is as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

% Change

2021

2020

% Change
Traffic

158,438,000

143,972,000

10%

315,042,000

302,893,000

4%
Average Monthly Unique Visitors

26,391,000

22,810,000

16%

26,174,000

23,869,000

10%


	Three Months Ended March 31,
(in thousands)	2022		2021		% Change
Traffic		148,491		156,604		(5	)%
Average Monthly Unique Visitors		26,562		25,957		2	%

Information regarding Dealer Customers and Monthly Average Revenue Per Dealer is as follows:

June 30, 2021

June 30, 2020

% Change

March 31, 2021

% Change

Dealer Customers

18,845

18,033

5
%

18,823

0
%
Monthly Average Revenue Per Dealer

$
2,299

$
1,442

59
%

$
2,268

1
%



	March 31, 2022		March 31, 2021		% Change			December 31, 2021		% Change
Dealer Customers		19,500		18,823		4	%		19,179		2	%
Monthly Average Revenue Per Dealer	$	2,291	$	2,268		1	%	$	2,333		(2	)%

~~Traffic.~~Traffic ("Visits"). Traffic is fundamental to our business. Traffic to the CARS network of websites and mobile apps provides value to our advertisers in terms of audience, awareness, consideration and conversion. In addition to tracking traffic volume and sources, we monitor activity on our properties, allowing us to innovate and refine our consumer-facing offerings. Traffic is defined as the number of visits to CARS desktop and mobile properties (responsive sites and mobile apps), measured using Adobe Analytics. Traffic does not include traffic to Dealer Inspire websites. Traffic provides an indication of our consumer reach. Although our consumer reach does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealer customers and national advertisers.

~~We believe~~Traffic for the ~~growth~~three months ended March 31, 2022 declined primarily due to elevated traffic in ~~Traffic was driven by heightened consumer demand resulting from~~the prior year period related to an increase in consumer confidence ~~due to~~and heightened consumer demand from the Federal economic stimulus ~~and~~program that ran during the ~~further re-opening of the economy, as well as investment in and efficiencies gained in performance media channels and search engine optimization ("SEO").~~three months ended March 31, 2021.

Average Monthly Unique Visitors ~~(“UVs”~~(“UVs”). Growth in unique visitors and consumer traffic to our network of websites and mobile apps increases the number of impressions, clicks, leads and other events we can monetize to generate revenue. We define UVs in a given month as the number of distinct visitors that engage with our platform during that month. Visitors are identified when a user first visits an individual CARS property on an individual device/browser combination or installs one of our mobile apps on an individual device. If a visitor accesses more than one of our 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. UVs do not include Dealer Inspire UVs. We measure UVs using Adobe Analytics.

The growth in UVs for the three months ended March 31, 2022 as compared to the decline in Traffic was ~~driven by heightened consumer demand resulting from an increase~~primarily related to changes in ~~consumer confidence~~our traffic mix. In addition, due to the ~~economic stimulus~~continued lower vehicle inventory levels, we believe our users now have a shorter shopping lifecycle and ~~the further re-opening of the economy, as well as investment in and efficiencies gained in performance media channels and SEO.~~are purchasing cars with fewer visits.

Average Revenue Per Dealer ~~(“ARPD”~~(“ARPD”). We believe that our ability to grow ARPD is an indicator of the value proposition of our ~~products.~~platform. We define ARPD as Dealer revenue, excluding digital advertising services, during the period divided by the monthly average number of Dealer Customers during the same period. ARPD does not include Accu-Trade as it would be impracticable to do so.

ARPD increased 1% from the quarter ended March 31, 2021 primarily driven by growth in ~~FUEL revenue, which was launched in early 2020.~~

ARPD increased 59% from June 30, 2020, primarily driven by lower revenue in the second quarter of 2020 resulting from the COVID-19 pandemic-related invoice credits we provided to our marketplace dealer customers during the second quarter of 2020,digital solutions, as well as ~~continued~~ growth in ~~revenue across our portfolio of products.~~FUEL revenue.

ARPD decreased 2% from the quarter ended December 31, 2021 primarily due to lower FUEL sales and changes in customer mix.

Dealer Customers. Dealer Customers represent dealerships using our 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. All Dealer Customer metrics do not include Accu-Trade as it would be impracticable to do so.

~~Although total~~ Dealer Customers ~~was flat on a percentage basis as compared to~~increased 2% from December 31, 2021, and 4% from March 31, 2021 ~~Dealer Customers increased slightly~~driven by ~~22.~~

~~Total Dealer Customers increased 5% from June 30, 2020. This increase was a result of~~ sustained high retention rates and strong new sales to ~~dealer customers following the higher cancellations of marketplace customers in the second quarter of 2020, principally due to the COVID-19 pandemic.~~Dealer Customers.

Factors Affecting Our Performance. Our business is impacted by the changes in the larger automotive ecosystem, including inventory supply and supply-chain disruptions, which isare currently under pressure due to semiconductor shortages, and changes related to automotive advertising as well as other macroeconomic factors. Changes in vehicle sales volumes in the United States also influence ~~OEMs’~~OEMs’ and ~~dealerships’~~dealerships’ willingness to increase investments in technology solutions and automotive marketplaces like Cars.com and could impact our pricing strategies and/or revenue mix.

Our long-term success will depend in part on our ability to continue to ~~transform~~evolve our business toward a multi-faceted suite of digital solutions that complement our online marketplace offerings. We believe our core strategic strengths, including our ~~powerful family of brands,~~strong brand portfolio, growing high-quality audience and suite of digital solutions for advertisers, will assist us as we navigate a rapidly changing automotive environment. Additionally, we are focused on equipping our dealer customers with digital solutions to enable them to compete in an environment in which an increasing number of car-buying customers are shopping online. These solutions include virtual showrooms, home delivery, online chat and our FUEL product that allows dealers to target in-market buyers on streaming platforms. The foundation of our continued success is the value we deliver to customers, and we believe that our large audience of in-market car shoppers and innovative solutions deliver significant value to our customers.

The future effects of the COVID-19 pandemic are unknown and depend on numerous factors outside of our control. However, we believe our marketplace, advertising and digital solutions remain critical in helping our customers navigate certain challenges of the ~~pandemic and related restrictions.~~pandemic. We also believe our solutions will continue to be important tools for our customers in the future and, in particular, may help mitigate potential future impacts of the ~~pandemic and related restrictions.~~pandemic.

Results of Operations

Three Months Ended ~~June 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~June 30, 2020~~March 31, 2021

Three Months Ended June 30,

(In thousands, except percentages)

2021

2020

$ Change

% Change

Revenue:

  Dealer

$
136,866

$
83,242

$
53,624

64
%
  OEM and National

16,329

16,021

308

2
%
  Other

2,335

2,746

(411
)

(15
)%
       Total revenue

155,530

102,009

53,521

52
%
Operating expenses:

  Cost of revenue and operations

28,219

22,912

5,307

23
%
  Product and technology

19,434

12,031

7,403

62
%
  Marketing and sales

51,309

32,036

19,273

60
%
  General and administrative

15,615

16,460

(845
)

(5
)%
  Affiliate revenue share

—

4,601

(4,601
)

***%

  Depreciation and amortization

25,298

31,193

(5,895
)

(19
)%
     Total operating expenses

139,875

119,233

20,642

17
%
        Operating income (loss)

15,655

(17,224
)

32,879

***%

Nonoperating expense:

  Interest expense, net

(9,839
)

(7,924
)

(1,915
)

(24
)%
  Other (expense) income, net

(39
)

557

(596
)

***%

     Total nonoperating expense, net

(9,878
)

(7,367
)

(2,511
)

(34
)%
       Income (loss) before income taxes

5,777

(24,591
)

30,368

***%

       Income tax (benefit) expense

(189
)

53

(242
)

***%

          Net income (loss)

$
5,966

$
(24,644
)

$
30,610

***%


	Three Months Ended March 31,
(In thousands, except percentages)	2022			2021			$ Change			% Change
Revenue:
Dealer	$	140,416		$	132,958		$	7,458			6	%
OEM and National		15,174			18,069			(2,895	)		(16	)%
Other		2,617			2,268			349			15	%
Total revenue		158,207			153,295			4,912			3	%
Operating expenses:
Cost of revenue and operations		27,752			27,831			(79	)		(0	)%
Product and technology		21,307			16,760			4,547			27	%
Marketing and sales		57,094			53,211			3,883			7	%
General and administrative		16,560			13,266			3,294			25	%
Depreciation and amortization		24,553			25,680			(1,127	)		(4	)%
Total operating expenses		147,266			136,748			10,518			8	%
Operating income		10,941			16,547			(5,606	)		(34	)%
Nonoperating expense:
Interest expense, net		(9,330	)		(10,001	)		671			(7	)%
Other income, net		208			38			170		***
Total nonoperating expense, net		(9,122	)		(9,963	)		841			(8	)%
Income before income taxes		1,819			6,584			(4,765	)		(72	)%
Income tax (benefit) expense		(2,521	)		1,306			(3,827	)	***
Net income	$	4,340		$	5,278		$	(938	)		(18	)%

*** Not meaningful

Dealer revenue. Dealer revenue consists of marketplace and digital solutions sold to dealer customers. Dealer revenue is our largest revenue stream, representing ~~88.0%~~89% and ~~81.6%~~87% of total revenue for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. For the three months ended June 30, 2020, Dealer revenue was impacted significantly by our response to the COVID-19 pandemic. In an effort to assist our dealer customers impacted by the COVID-19 pandemic and related restrictions, we provided, among other measures, approximately $38.2 million of financial relief in the form of certain invoice credits of 50% for April 2020 and 30% for May and June 2020. Dealer revenue increased ~~$53.6~~$7.5 million or ~~64%~~6% compared to the three months ended ~~June 30, 2020,~~March 31, 2021, driven ~~primarily~~ by a ~~59%~~4% increase in Dealer Customers as a result of sustained high retention rates and new sales to Dealer Customers, as well as a 1% increase in ARPD from ~~June 30, 2020, primarily due the COVID-19 pandemic-related invoice credits. In addition, we experienced continued growth in our solutions products, as well as a 5% increase in Dealer Customers.~~March 31, 2021.

OEM and National revenue. OEM and National revenue consists of display advertising and other solutions sold to OEMs, certain advertising agencies, automotive dealer associations and auto adjacent businesses. OEM and National revenue represents ~~10.5%~~10% and ~~15.7%~~12% of total revenue for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. OEM and National revenue ~~increased by 2%~~declined 16%, primarily ~~due to increased spending relative to the impact of COVID-19 in the second quarter of 2020, partially offset by continued OEM production slowdowns in the second quarter of 2021.~~

~~Operating expenses.~~ ~~For the three months ended June 30, 2020, several of the financial statement line items described below were significantly lower as compared to the three months ended June 30, 2021,~~ due to ~~our management of expenses~~pullbacks in ~~2020 in response to the COVID-19 pandemic. With respect to managing our expenses, we implemented multiple initiatives to align our expenses~~OEM spending associated with ~~the lower revenue resulting from our invoice credits. These steps included an employee furlough~~fewer new model releases and reduction in force, salary reductions, freezes on hiring and temporary labor, deferral of merit and promotion increases; a reduction of our marketing expense; partnering with our vendors to temporarily reduce cost; and significant reductions of non-essential spending in categories such as travel and entertainment ("COVID-19 pandemic expense adjustments").continued production shortages, both driven by supply-chain disruptions.

Cost of revenue and operations. Cost of revenue and operations expense primarily consists of ~~expenses~~costs related to our pay-per-lead products, third-party costs for processing dealer vehicle inventory, product fulfillment and compensation costs for the product fulfillment and customer service teams. Cost of revenue and operations expense represents ~~18.1% and 22.5%~~18% of total revenue for the three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020, respectively.~~2021. Cost of revenue and operations expense ~~increased, primarily due~~was essentially flat compared to the prior ~~year COVID-19 pandemic expense adjustments, as well as growth in digital solutions, which have an inherently higher cost of revenue.~~year.

Product and technology. The product team creates and manages consumer and dealer-facing innovation ~~manages consumer~~and user ~~experience and includes the costs associated with our editorial, data strategy and search engine optimization teams.~~experience. The technology team develops and supports our products and websites. Product and technology expense includes compensation costs, ~~hardware/~~consulting costs, hardware and software maintenance, software licenses, data center and other infrastructure costs. Product and technology expense represents ~~12.5%~~13% and ~~11.8%~~11% of total revenue for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Product and technology expense increased, primarily due to ~~the prior year's COVID-19 pandemic expense adjustments, as well as timing of software license~~higher compensation, consulting and licensing costs.

Marketing and sales. Marketing and sales expense primarily consists of traffic and lead acquisition costs (including search engine and other online marketing), TV and digital display/video advertising and creative production, market research, trade events and 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 represents ~~33.0%~~36% and ~~31.4%~~35% of total revenue for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Marketing and sales expense increased, primarily due continued investment in marketing in 2022, including a return to in-person industry events that had been curtailed due to the ~~prior year's COVID-19 pandemic expense reductions.~~pandemic.

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 office space rent, legal, accounting and other professional services, transaction-related costs, severance, transformation and other exit costs and ~~costs~~costs related to the write-off and loss on ~~assets, excluding the goodwill and intangible asset impairment discussed below.~~assets. General and administrative expense represents ~~10.0%~~10% and ~~16.1%~~9% of total revenue for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. General and administrative expense ~~decreased,~~increased, primarily due to higher compensation costs, including stock-based compensation, as well as transaction-related costs related to the ~~impact of the COVID-19 pandemic expense adjustments in the second quarter of 2020.~~Accu-Trade Acquisition.

~~Affiliate revenue share.~~ Affiliate revenue share expense represented payments made to affiliates pursuant to our affiliate agreements. Affiliate revenue share expense ended in June 2020. For information related to affiliates, see Note 7 (Unfavorable Contracts Liability) in Part II, Item 8., “Financial Statements and Supplementary Data”, of our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 25, 2021.

Depreciation and ~~amortization~~amortization.. Depreciation and amortization expense decreased, primarily due to certain assets being fully depreciated and amortized as compared to the ~~prior year~~prior-year period, partially offset by depreciation and amortization on additional assets acquired.

Interest expense, net. Interest expense, net ~~increased~~decreased by ~~$1.9~~$0.7 million compared to the prior year period due to a ~~higher overall interest rate on our outstanding debt, partially offset by lower debt outstanding.~~reduction in total indebtedness. For information related to our debt, see Note 4 (Debt) and Note 5 (Interest Rate Swap) to the accompanying Consolidated Financial Statements included in Part I, Item 1., ~~“Financial Statements”~~“Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

~~Other (expense) income, net~~. The change in Other (expense) income, net was primarily due to the unrealized gain on the mark-to-market adjustment related to the interest rate swap in the second quarter of 2020. For information related to the Swap, see Note 5 (Interest Rate Swap) to the accompanying Consolidated Financial Statements included in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.

Income tax (benefit) expense. The effective income tax rate, expressed by calculating the ~~income~~Income tax (benefit) expense as a percentage of Income ~~(loss)~~ before income taxes, was ~~(3%)~~(138.6)% for the three months ended ~~June 30, 2021,~~March 31, 2022, and the Income tax benefit was $2.5 million. The effective income tax rate was lower than the statutory federal income tax rate of 21%, primarily due to the ~~release of a portion of our valuation allowance, as well as the tax~~ benefit realized on stock-based compensation, ~~during~~ the ~~three months ended June 30, 2021.~~impact of uncertain tax positions and the tax benefits realized on a partial release of the valuation allowance.

~~Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020~~20

Six Months Ended June 30,

(In thousands, except percentages)

2021

2020

$ Change

% Change

Revenue:

  Dealer

$
269,824

$
208,603

$
61,221

29
%
  OEM and National

34,398

35,414

(1,016
)

(3
)%
  Other

4,603

6,086

(1,483
)

(24
)%
       Total revenue

308,825

250,103

58,722

23
%
Operating expenses:

  Cost of revenue and operations

56,050

48,942

7,108

15
%
  Product and technology

36,194

26,904

9,290

35
%
  Marketing and sales

104,520

86,958

17,562

20
%
  General and administrative

28,881

30,577

(1,696
)

(6
)%
  Affiliate revenue share

—

10,970

(10,970
)

***%

  Depreciation and amortization

50,978

62,154

(11,176
)

(18
)%
  Goodwill and intangible asset impairment

—

905,885

(905,885
)

***%

     Total operating expenses

276,623

1,172,390

(895,767
)

(76
)%
        Operating income (loss)

32,202

(922,287
)

954,489

***%

Nonoperating expense:

  Interest expense, net

(19,840
)

(15,450
)

(4,390
)

(28
)%
  Other expense, net

(1
)

(8,944
)

8,943

***%

     Total nonoperating expense, net

(19,841
)

(24,394
)

4,553

19
%
       Income (loss) before income taxes

12,361

(946,681
)

959,042

***%

       Income tax expense (benefit)

1,117

(134,603
)

135,720

***%

          Net income (loss)

$
11,244

$
(812,078
)

$
823,322

***%

*** Not meaningful

~~Dealer revenue.~~ Dealer revenue represents 87.4% and 83.4% of total revenue for the six months ended June 30, 2021 and 2020, respectively. Dealer revenue increased $61.2 million, or 29%, compared to the six months ended June 30, 2020. Dealer revenue was impacted significantly by our response to the COVID-19 pandemic. In an effort to assist our dealer customers impacted by the COVID-19 pandemic and related restrictions, we provided, among other measures, approximately $38.2 million of financial relief in the form of certain invoice credits of 50% for April 2020 and 30% for May and June 2020. In addition, we experienced continued growth in our solutions products, as well as a 5% increase in Dealer Customers.

~~OEM and National revenue.~~ OEM and National revenue represents 11.1% and 14.2% of total revenue for the six months ended June 30, 2021 and 2020, respectively. OEM and National revenue declined 3%, primarily due to less spending by the OEMs due to the continued OEM production slowdowns in the second quarter of 2021.

~~Operating expenses.~~ For the six months ended June 30, 2020, several of the financial statement line items described below were significantly lower as compared to the six months ended June 30, 2021, due to our management of expenses in 2020 in response to the COVID-19 pandemic, as described above.

~~Cost of revenue and operations~~. Cost of revenue and operations expense represents 18.1% and 19.6% of total revenue for the six months ended June 30, 2021 and 2020, respectively. Cost of revenue and operations expense increased, primarily due to the prior year's COVID-19 pandemic expense adjustments, as well as growth in digital solutions, which have an inherently higher cost of revenue.

~~Product and technology.~~Product and technology expense represents 11.7% and 10.8% of total revenue for the six months ended June 30, 2021 and 2020, respectively. Product and technology expense increased, primarily due to the prior year's COVID-19 pandemic expense adjustments as well as certain increased technology costs.

~~Marketing and sales~~. Marketing and sales expense represents 33.8% and 34.8% of total revenue for the six months ended June 30, 2021 and 2020, respectively. Marketing and sales expense increased, primarily due to the prior year's COVID-19 pandemic expense adjustments.

~~General and administrative~~. General and administrative expense represents 9.4% and 12.2% of total revenue for the six months ended June 30, 2021 and 2020, respectively. General and administrative expense decreased, primarily due to the prior year's COVID-19 pandemic expense adjustments.

~~Affiliate revenue share.~~ Affiliate revenue share expense ended in June 2020. For information related to affiliates, see Note 7 (Unfavorable Contracts Liability) in Part II, Item 8., “Financial Statements and Supplementary Data”, of our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 25, 2021.

~~Depreciation and amortization~~. Depreciation and amortization expense decreased, primarily due to certain assets being fully depreciated and amortized as compared to the prior year period, partially offset by depreciation and amortization on additional assets acquired.

~~Goodwill and intangible asset impairment~~. As of March 31, 2020, we determined there was a triggering event, caused by the economic impacts of the COVID-19 pandemic. We performed interim quantitative impairment tests as of March 31, 2020. The results of the goodwill and indefinite-lived intangible asset impairment tests indicated that the carrying values exceeded the estimated fair values and thus, we recorded an impairment of $505.9 million and $400.0 million, respectively.

~~Interest expense, net~~. Interest expense, net increased by $4.4 million compared to the prior year period, due to a higher overall interest rate on our outstanding debt, partially offset by lower debt outstanding. For information related to our debt, see Note 4 (Debt) and Note 5 (Interest Rate Swap) to the accompanying Consolidated Financial Statements included in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.

~~Other expense, net~~. Other expense, net decreased, primarily due to the $9.4 million impairment of a non-marketable investment, triggered by the COVID-19 pandemic during the first quarter of 2020. For information related to the impairment, see Note 9 (Other (Expense) Income, net) to the accompan~~ying Consolidated Financial Statements included in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.~~

~~Income tax expense (benefit)~~. The effective income tax rate, expressed by calculating the income tax expense (benefit) as a percentage of Income (loss) before income taxes, was 9% for the six months ended June 30, 2021, lower than the statutory federal income tax rate of 21%, primarily due to the tax benefit realized on stock-based compensation, offset in part by the full valuation allowance on our net deferred tax asset position recorded during the six months ended June 30, 2021.

Liquidity and Capital Resources

Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and debt capacity available under our credit facilities. Our positive operating cash flow, along with ~~the Term Loan,~~our Revolving Loan ~~and the Senior Unsecured Notes~~ described below, provide adequate liquidity to meet our business needs, including those for investments and strategic acquisitions. However, our ability to maintain adequate liquidity for our operations in the future is dependent upon a number of factors, including our revenue, macroeconomic conditions, ~~the duration and severity of the economic and operational impacts caused by the COVID-19 pandemic,~~ our ability to contain costs, including capital expenditures, and to collect accounts receivable, and various other factors, many of which are beyond our direct control.

As discussed below, we are subject to certain financial and other covenants contained in our debt agreements, as amended, including by the Third Amendment to the Credit Agreement. For information related to the Credit Amendment, as amended, see Note 87 (Debt) in Part II, Item 8., ~~“Financial~~“Financial Statements and Supplementary ~~Data”~~Data”, of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 as filed with the SEC on February 25, ~~2021.~~2022.

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, 2021,~~March 31, 2022, Cash and cash equivalents were ~~$52.2~~$30.5 million and including ~~the~~our undrawn Revolving Loan, our total liquidity was ~~$282.2~~$215.5 million.

~~Term Loan, Revolving Loan and Senior Unsecured Notes.~~Indebtedness. As of ~~June 30, 2021,~~March 31, 2022, the outstanding aggregate principal amount of our debt was ~~$522.5~~$520.0 million, at an effective interest rate of 5.5%, including ~~$122.5~~$75.0 million of outstanding principal under ~~the~~our Term Loan, with an ~~effective~~interest rate of 2.5%, $45.0 million of outstanding borrowings on our Revolving Loan, with an interest rate of 2.5% and outstanding Senior Unsecured Notes of $400.0 million, at an ~~effective~~ interest rate of 6.375%. These ~~effective~~ rates do not include the impact of the interest rate swap. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we made ~~$75.0~~a $2.5 million inmandatory Term Loan ~~payments, of which $70.0 million were voluntary pre-payments.~~payment. As of ~~June 30, 2021,~~March 31, 2022, we had ~~$230.0~~$185.0 million available to borrow under ~~the~~our Revolving Loan. Our borrowings are limited by our ~~senior secured leverage ratio~~Senior Secured Leverage Ratio and ~~consolidated interest coverage ratio,~~Consolidated Interest Coverage Ratio, which are calculated in accordance with our Credit Agreement, and were ~~0.63x~~0.7x and ~~6.23x~~5.0x as of ~~June 30, 2021, respectively and our total net leverage ratio, which is calculated in accordance with our bond indenture, and was 2.42x.~~March 31, 2022, respectively.

Interest Rate Swap. The interest rate on borrowings under our Term Loan and Revolving Loan is floating and, therefore, subject to fluctuations. In order to manage the risk associated with changes in interest rates on our borrowing under the Term Loan prior to the October 2020 refinancing, we entered into an interest rate swap (the ~~“Swap”~~“Swap”) effective December 31, 2018. Under the terms of the Swap, we are locked into a fixed rate of interest of 2.96% plus an applicable margin, on a notional amount of $300 ~~million. The~~million until May 31, 2022. Although the Swap was initially designated as a cash flow hedge of interest rate ~~risk.~~

~~During~~risk, hedge accounting was discontinued in June 2020. The loss on the ~~second quarter of 2020, we entered into the second amendment to the Credit Agreement, which triggered a quantitative~~ hedge ~~effectiveness test~~ that ~~resulted~~was in ~~the loss of hedge accounting. As a result, as of the date of the second amendment, the unrealized loss included within~~ Accumulated other comprehensive ~~loss was frozen and is now being ratably reclassified~~income at that time would be amortized into ~~Net income (loss) over the remaining life of the Swap through Interest expense, net and Income tax (benefit) expense within~~ the Consolidated Statements of Income ~~(Loss). Subsequent to~~over the ~~second amendment, any change in the fair value of the Swap is recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).~~

During the fourth quarter of 2020, we entered into the third amendment to the Credit Agreement, which triggered a partial debt extinguishment, including a partial extinguishment of the underlying Term Loan. Due to the reduction in the Term Loan as compared to the notional amount of the Swap, we wrote-off a proportional amount of the frozen Accumulated other comprehensive loss balance as of the date of the partial extinguishment proportional to the reduction in the underlying notional amount of Term Loan. We will continue to amortize the remaining ~~Accumulated other comprehensive loss to Interest expense, net and Income tax (benefit) expense within the Consolidated Statements of Income (Loss) through the remainder of the~~ term of the Swap. ~~Any changes in the fair value of the Swap will continue to be recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).~~

As of ~~June 30, 2021,~~March 31, 2022, the fair value of the Swap was an unrealized loss of ~~$7.9~~$1.2 million, which is recorded in Other accrued liabilities on the Consolidated Balance Sheets. As of December 31, ~~2020,~~2021, the fair value of the Swap was an unrealized loss of ~~$12.1~~$3.5 million, of which ~~$8.5 million and $3.6 million is~~was recorded in Other accrued liabilities ~~and Other noncurrent liabilities, respectively,~~ on the Consolidated Balance Sheets. During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, $2.8 million and $0.3~~$1.4 million was reclassified from Accumulated other comprehensive loss and recorded in Interest expense, ~~net, respectively.~~net. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we made payments of ~~$4.3~~$2.1 million related to the Swap and ~~$0.4~~$0.2 million was reclassified as a tax benefit from Accumulated other comprehensive loss into Income tax (benefit) expense on the Consolidated Statements of ~~Income (Loss).~~Income.

Cash Flows. Details of our cash flows are as follows (in thousands):

Six Months Ended June 30,

2021

2020

Change

Net cash provided by (used in):

      Operating activities

$
79,619

$
57,629

$
21,990

      Investing activities

(13,095
)

(8,725
)

(4,370
)
      Financing activities

(82,058
)

(5,508
)

(76,550
)
Net change in cash and cash equivalents

$
(15,534
)

$
43,396

$
(58,930
)


	Three Months Ended March 31,
	2022			2021			Change
Net cash provided by (used in):
Operating activities	$	30,358		$	50,362		$	(20,004	)
Investing activities		(68,778	)		(6,219	)		(62,559	)
Financing activities		29,804			(58,138	)		87,942
Net change in cash and cash equivalents	$	(8,616	)	$	(13,995	)	$	5,379

Operating Activities. The ~~increase~~decrease in cash provided by operating activities was primarily related to ~~the increase~~changes in ~~Net income (loss), excluding the impact of non-cash items,~~operating assets and liabilities related primarily due to ~~higher revenue~~timing of certain payables and in 2021 resulting from the COVID-19 pandemic related invoice credits we provided to our marketplace dealer customers during the second quarter of 2020, offset by our actions to align expenses with lower revenue in the uncertain COVID-19 environment. In addition, during the ~~six~~three months ended ~~June 30,~~March 31, 2021, we received a $9.1 million tax refund related to the carryback of federal and state income tax net operating loss as a result of the CARES Act.

Investing Activities. The increase in cash used in investing activities ~~is due~~was primarily related to ~~an increase in purchases of property and equipment.~~the Accu-Trade Acquisition.

Financing Activities. During the ~~six~~three months ended ~~June 30,~~March 31, 2022, cash provided by financing activities was primarily related to $45.0 million of proceeds from Revolving Loan borrowings related to the Accu-Trade Acquisition, partially offset by tax payments made in connection with equity award vestings and repurchases of common stock. During the three months ended March 31, 2021, cash used in financing activities ~~was~~is primarily related to ~~$75.0~~$52.5 million of debt repayments, of which ~~$70.0~~$50.0 million were voluntary, ~~pre-payments. During the six months ended June 30, 2020, cash used~~and tax payments made in ~~financing activities was primarily related to $166.9 million in debt repayments. The debt repayments were primarily associated~~connection with ~~the $165.0 million in proceeds related to our draw on our Revolving Loan during the first quarter of 2020.~~equity award vestings. For information related to our debt, see Note 4 (Debt) and Note 7 (Stockholders' Equity) to the accompanying Consolidated Financial Statements included in Part I, Item 1., ~~“Financial Statements”~~“Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

Commitments and Contingencies. For information related to commitments and contingencies, see Note 6 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., ~~“Financial Statements”~~“Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements. We do not have any material off-balance sheet arrangements.

Critical Accounting Policies. For information related to critical accounting policies, see ~~“Critical~~“Critical Accounting Policies and ~~Estimates”~~Estimates” in Part II, Item 7., ~~“Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations”, of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 as filed with the SEC on February 25, ~~2021~~2022 and see Note 1 (Description of ~~Business, Company History and Summary of Significant Accounting Policies)~~Business) to the accompanying Consolidated Financial Statements included in Part I, Item 1., ~~“Financial Statements”~~“Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, there have been no changes to our critical accounting policies.

Recent Accounting Pronouncements. There were no significant new accounting pronouncements applicable to us in the period.

2322

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, see ~~“Quantitative~~“Quantitative and Qualitative Disclosures About Market Risk,”” in Part II, Item 7A., of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the Securities and Exchange Commission ~~(“SEC”~~(“SEC”) on February 25, ~~2021.~~2022. Our exposures to market risk have not changed materially since December 31, ~~2020.~~2021.

Item 4. ~~Controls~~Controls and Procedures

Disclosure Controls and Procedures. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control Over Financial Reporting. During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

~~PART II—OTHER INFORMATION~~

PART II—OTHER INFORMATION

Item 1. ~~Legal~~Legal Proceedings

For information relating to legal proceedings, see Note 6 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., ~~“Financial Statements”~~“Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

Item 1A. ~~Risk~~Risk Factors

Our business and the ownership of our common stock are subject to a number of risks and uncertainties, including those described in Part I, Item 1A., ~~“Risk Factors”~~“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 as filed with the Securities and Exchange Commission ~~(“SEC”~~(“SEC”) on February 25, ~~2021,~~2022, which could materially affect our business, financial condition, results of operations and future results. There have been no material changes from the risk factors described in our Annual Report on Form 10-K.

Item 2. Unregistered Sales of ~~Equity~~Equity Securities and Use of Proceeds

Sales of Unregistered Securities by Issuer

None.

Purchases of Equity Securities by Issuer

~~Item~~Our stock repurchase activity for the three months ended March 31, 2022 is as follows:


Period	Total Number of Shares Purchased (1)		Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (3)
January 1 through January 31, 2022		—	$	—		—	$	—
February 1 through February 28, 2022		—		—		—		200,000
March 1 through March 31, 2022		338,243		14.78		338,243		195,000
		338,243				338,243

(1)

The total number of shares purchased and subsequently retired and the average price paid per share reflects shares purchased pursuant to the share repurchase program. Our stock repurchases may occur through open market purchases or pursuant to a Rule 10b5-1 trading plan.

(2)

(3)

The amounts presented represent the remaining Board of Directors’ authorized value to be spent after each month's repurchases.

Item 3. Defaults Upon Senior Securities

None.

~~Item~~Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

2524

Item 6. ~~Exhibits~~Exhibits

Exhibit Index


Exhibit Number		Description
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document –– the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		The cover page from this Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021,~~March 31, 2022, formatted inwith Inline XBRL (included with Exhibit 101 attachments)

* Filed herewith.

~~SIGNATURES~~

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 thereunto duly authorized.


	Cars.com Inc.

Date: ~~August 5, 2021~~May 6, 2022	By:	/s/ T. Alex Vetter
		T. Alex Vetter
		President and Chief Executive Officer

Date: ~~August 5, 2021~~May 6, 2022	By:	/s/ ~~Sonia Jain~~Jeanette Tomy
		~~Sonia Jain~~Jeanette Tomy
		Chief Financial Officer

2726


	June 30, 2021			December 31, 2020
	(unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	52,185		$	67,719
Accounts receivable, net		100,491			93,649
Prepaid expenses		8,303			6,491
Other current assets		1,298			10,222
Total current assets		162,277			178,081
Property and equipment, net		46,450			41,323
Intangible assets, net		792,168			835,166
Investments and other assets, net		19,989			21,142
Total assets	$	1,020,884		$	1,075,712
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	25,394		$	16,512
Accrued compensation		13,926			18,319
Current portion of long-term debt		7,727			7,756
Other accrued liabilities		48,925			47,781
Total current liabilities		95,972			90,368
Noncurrent liabilities:
Long-term debt		502,357			576,143
Deferred tax liability		30,792			30,800
Other noncurrent liabilities		34,321			38,225
Total noncurrent liabilities		567,470			645,168
Total liabilities		663,442			735,536
Commitments and contingencies
Stockholders' equity:
Preferred Stock at par, $0.01 par value; 5,000 shares authorized; 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		0			0
Common Stock at par, $0.01 par value; 300,000 shares authorized; 68,964 and 67,387 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		690			674
Additional paid-in capital		1,534,098			1,530,493
Accumulated deficit		(1,172,943	)		(1,184,187	)
Accumulated other comprehensive loss		(4,403	)		(6,804	)
Total stockholders' equity		357,442			340,176
Total liabilities and stockholders' equity	$	1,020,884		$	1,075,712


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenue:
Dealer	$	136,866		$	83,242		$	269,824		$	208,603
OEM and National		16,329			16,021			34,398			35,414
Other		2,335			2,746			4,603			6,086
Total revenue		155,530			102,009			308,825			250,103
Operating expenses:
Cost of revenue and operations		28,219			22,912			56,050			48,942
Product and technology		19,434			12,031			36,194			26,904
Marketing and sales		51,309			32,036			104,520			86,958
General and administrative		15,615			16,460			28,881			30,577
Affiliate revenue share		0			4,601			0			10,970
Depreciation and amortization		25,298			31,193			50,978			62,154
Goodwill and intangible asset impairment		0			0			0			905,885
Total operating expenses		139,875			119,233			276,623			1,172,390
Operating income (loss)		15,655			(17,224	)		32,202			(922,287	)
Nonoperating expense:
Interest expense, net		(9,839	)		(7,924	)		(19,840	)		(15,450	)
Other (expense) income, net		(39	)		557			(1	)		(8,944	)
Total nonoperating expense, net		(9,878	)		(7,367	)		(19,841	)		(24,394	)
Income (loss) before income taxes		5,777			(24,591	)		12,361			(946,681	)
Income tax (benefit) expense		(189	)		53			1,117			(134,603	)
Net income (loss)	$	5,966		$	(24,644	)	$	11,244		$	(812,078	)
Weighted-average common shares outstanding:
Basic		68,869			67,256			68,328			67,095
Diluted		70,694			67,256			70,790			67,095
Earnings (loss) per share:
Basic	$	0.09		$	(0.37	)	$	0.16		$	(12.10	)
Diluted		0.08			(0.37	)		0.16			(12.10	)


	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	11,244		$	(812,078	)
Adjustments to reconcile Net income (loss) to Net cash provided by operating activities:
Depreciation		7,980			11,599
Amortization of intangible assets		42,998			50,555
Goodwill and intangible asset impairment		0			905,885
Impairment of non-marketable security		0			9,447
Unrealized gain on interest rate swap		0			(558	)
Amortization of accumulated other comprehensive loss on interest rate swap		2,835			300
Stock-based compensation		10,670			6,266
Deferred income taxes		(442	)		(133,064	)
Provision for doubtful accounts		211			2,846
Amortization of debt issuance costs		1,657			1,377
Other, net		(44	)		142
Changes in operating assets and liabilities:
Accounts receivable		(7,053	)		24,363
Prepaid expenses		(1,812	)		(540	)
Other current assets		8,951			(2,368	)
Other assets		690			589
Accounts payable		8,888			1,973
Accrued compensation		(4,393	)		(5,942	)
Other accrued liabilities		1,143			(933	)
Other noncurrent liabilities		(3,904	)		(2,230	)
Net cash provided by operating activities		79,619			57,629
Cash flows from investing activities:
Purchase of property and equipment		(13,095	)		(8,725	)
Net cash used in investing activities		(13,095	)		(8,725	)
Cash flows from financing activities:
Proceeds from revolving loan borrowings		0			165,000
Payments of long-term debt		(75,000	)		(166,875	)
Stock-based compensation plans, net		(7,049	)		(309	)
Payments of debt issuance costs and other fees		(9	)		(3,324	)
Net cash used in financing activities		(82,058	)		(5,508	)
Net (decrease) increase in cash and cash equivalents		(15,534	)		43,396
Cash and cash equivalents at beginning of period		67,719			13,549
Cash and cash equivalents at end of period	$	52,185		$	56,945
Supplemental cash flow information:
Cash (received) paid for income taxes	$	(8,875	)	$	318
Cash paid for interest and interest rate swap		19,634			13,889


	Number of RSUs and Restricted Stock			Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2020		4,061		$	8.31
Granted		1,554			15.02
Vested and delivered		(1,493	)		8.36
Forfeited		(201	)		9.13
Outstanding as of June 30, 2021 (1)		3,921			10.91


(In thousands, except percentages)	Three Months Ended June 30, 2021					Six Months Ended June 30, 2021
Income tax provision at statutory rate	$	1,213		21.0	%	$	2,596		21.0	%
State income taxes, net of federal income tax benefit		201		3.5			437		3.5
Tax credits		164		2.8			(819	)	(6.6	)
Stock-based compensation		(223	)	(3.9	)		(2,902	)	(23.5	)
Uncertain tax positions		22		0.4			1,211		9.8
Valuation allowance		(1,186	)	(20.5	)		1,227		9.9
Other, net		(380	)	(6.6	)		(633	)	(5.1	)
Income tax (benefit) expense	$	(189	)	(3.3	)%	$	1,117		9.0	%


	Three Months Ended June 30,			Six Months Ended June 30,
	2021	2020	% Change	2021	2020	% Change
Traffic	158,438,000	143,972,000	10%	315,042,000	302,893,000	4%
Average Monthly Unique Visitors	26,391,000	22,810,000	16%	26,174,000	23,869,000	10%



	June 30, 2021		June 30, 2020		% Change			March 31, 2021		% Change
Dealer Customers		18,845		18,033		5	%		18,823		0	%
Monthly Average Revenue Per Dealer	$	2,299	$	1,442		59	%	$	2,268		1	%

Acquisition-Date
Fair Value
(in thousands)

Weighted-Average
Amortization Period
(in years)

Acquired software

Trade name

Customer relationships