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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 27,~~October 26, 2022, the registrant had ~~67,864,260~~66,610,408 shares of common stock, $0.01 par value per share, outstanding.

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021
Revenue:
Dealer	$	143,987		$	136,866		$	284,403		$	269,824		$	145,395		$	139,321		$	429,798		$	409,145
OEM and National		14,144			16,329			29,318			34,398			14,909			15,273			44,227			49,671
Other		4,742			2,335			7,359			4,603			4,291			1,959			11,650			6,562
Total revenue		162,873			155,530			321,080			308,825			164,595			156,553			485,675			465,378
Operating expenses:
Cost of revenue and operations		29,504			28,219			57,256			56,050			28,828			28,928			86,084			84,978
Product and technology		23,117			19,434			44,424			36,194			21,425			20,132			65,849			56,326
Marketing and sales		54,655			51,309			111,749			104,520			53,615			51,948			165,364			156,468
General and administrative		17,211			15,615			33,771			28,881			17,694			17,919			51,465			46,800
Depreciation and amortization		23,001			25,298			47,554			50,978			23,134			25,552			70,688			76,530
Total operating expenses		147,488			139,875			294,754			276,623			144,696			144,479			439,450			421,102
Operating income		15,385			15,655			26,326			32,202			19,899			12,074			46,225			44,276
Nonoperating expense:
Interest expense, net		(9,047	)		(9,839	)		(18,377	)		(19,840	)		(8,501	)		(9,522	)		(26,878	)		(29,362	)
Other (expense) income, net		(54	)		(39	)		154			(1	)		(13,387	)		19			(13,233	)		18
Total nonoperating expense, net		(9,101	)		(9,878	)		(18,223	)		(19,841	)		(21,888	)		(9,503	)		(40,111	)		(29,344	)
Income before income taxes		6,284			5,777			8,103			12,361
(Loss) income before income taxes														(1,989	)		2,571			6,114			14,932
Income tax expense (benefit)		739			(189	)		(1,782	)		1,117			952			140			(830	)		1,257
Net income	$	5,545		$	5,966		$	9,885		$	11,244
Net (loss) income													$	(2,941	)	$	2,431		$	6,944		$	13,675
Weighted-average common shares outstanding:
Basic		69,194			68,869			69,329			68,328			67,680			69,067			68,775			68,576
Diluted		70,257			70,694			70,505			70,790			67,680			70,945			70,023			71,065
Earnings per share:
(Loss) earnings per share:
Basic	$	0.08		$	0.09		$	0.14		$	0.16		$	(0.04	)	$	0.04		$	0.10		$	0.20
Diluted		0.08			0.08			0.14			0.16			(0.04	)		0.03			0.10			0.19

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


	Preferred Stock				Common Stock						Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Stockholders'			Preferred Stock				Common Stock						Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Stockholders'
	Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Equity			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			—	$	—		69,170		$	692		$	1,544,712		$	(1,145,382	)	$	(2,002	)	$	398,020
Net income		—		—		—			—			—			4,340			—			4,340			—		—		—			—			—			4,340			—			4,340
Other comprehensive income, net of tax		—		—		—			—			—			—			1,202			1,202			—		—		—			—			—			—			1,202			1,202
Repurchases of common stock		—		—		(338	)		(3	)		(4,997	)		—			—			(5,000	)		—		—		(338	)		(3	)		(4,997	)		—			—			(5,000	)
Shares issued in connection with stock-based compensation plans, net		—		—		971			9			(7,705	)		—			—			(7,696	)		—		—		971			9			(7,705	)		—			—			(7,696	)
Stock-based compensation		—		—		—			—			5,221			—			—			5,221			—		—		—			—			5,221			—			—			5,221
Balance at March 31, 2022		—		—		69,803			698			1,537,231			(1,141,042	)		(800	)		396,087			—		—		69,803			698			1,537,231			(1,141,042	)		(800	)		396,087
Net income		—		—		—			—			—			5,545			—			5,545			—		—		—			—			—			5,545			—			5,545
Other comprehensive income, net of tax		—		—		—			—			—			—			800			800			—		—		—			—			—			—			800			800
Repurchases of common stock		—		—		(1,717	)		(17	)		(18,292	)		—			—			(18,309	)		—		—		(1,717	)		(17	)		(18,292	)		—			—			(18,309	)
Shares issued in connection with stock-based compensation plans, net		—		—		158			1			857			—			—			858			—		—		158			1			857			—			—			858
Stock-based compensation		—		—		—			—			6,407			—			—			6,407			—		—		—			—			6,407			—			—			6,407
Balance at June 30, 2022		—	$	—		68,244		$	682		$	1,526,203		$	(1,135,497	)	$	—		$	391,388			—		—		68,244			682			1,526,203			(1,135,497	)		—			391,388

	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
Net loss																								—		—		—			—			—			(2,941	)		—			(2,941	)
Other comprehensive loss, net of tax																								—		—		—			—			—			—			(717	)		(717	)
Repurchases of common stock																								—		—		(1,433	)		(14	)		(16,664	)		—			—			(16,678	)
Shares issued in connection with stock-based compensation plans, net		—		—		1,144			11			(5,641	)		—			—			(5,630	)		—		—		39			—			—			—			—			—
Stock-based compensation		—		—		—			—			4,978			—			—			4,978			—		—		—			—			5,475			—			—			5,475
Balance at March 31, 2021		—		—		68,531			685			1,529,830			(1,150,895	)		(5,604	)		374,016
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		—	$	—		68,964		$	690		$	1,534,098		$	(1,144,929	)	$	(4,403	)	$	385,456
Balance at September 30, 2022																								—	$	—		66,850		$	668		$	1,515,014		$	(1,138,438	)	$	(717	)	$	376,527

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

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

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

December 31, 2021

Additions

Adjustment (1)

Impairment

June 30, 2022

Goodwill
$
26,227

$
75,536

$
1,431

$
—

$
103,194

Indefinite-lived intangible asset

390,020

—

—

—

390,020

~~(1)~~

~~During the quarter ended June 30, 2022, the Company recorded a purchase accounting adjustment related to contingent consideration.~~


	December 31, 2021		Additions		Foreign Currency Translation			September 30, 2022
Goodwill	$	26,227	$	76,967	$	(717	)	$	102,477
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,

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

“Accu-Trade”), which provides dealers with VIN-specific 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 $~~2.0~~2.1 million, of which $~~1.0~~1.1 million were recorded during the ~~six~~nine months ended ~~June~~September 30, 2022. These costs were recorded in General and administrative expenses in the Consolidated Statements of (Loss) Income.

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):


	Preliminary Acquisition-date Fair Value			Preliminary Acquisition-date Fair Value
Cash consideration	$	64,770		$	64,770
Other consideration (1)		5,300			5,300
Contingent consideration (2) (3)		23,936
Total purchase consideration (3)	$	94,006
Contingent consideration (2)					23,936
Total purchase consideration				$	94,006

Assets acquired ~~(4)~~(3)	$	1,595		$	1,595
Identified intangible assets ~~(5)~~(4)		15,679			15,679
Total assets acquired		17,274			17,274
Total liabilities assumed ~~(6)~~(5)		(235	)		(235	)
Net identifiable assets		17,039			17,039
Goodwill ~~(3)~~		76,967			76,967
Total purchase consideration (3)	$	94,006
Total purchase consideration				$	94,006

(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~~is being amortized into Other revenue on the Consolidated Statements of (Loss) 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 consideration to the former owners based on achievement of certain financial ~~targets,~~targets. The Company has the option to pay consideration in cash or stock, 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~~determined by the acquired business’ future performance to be attained over a three-year performance ~~period.~~period; based on certain tiered performance metrics the maximum amount to be paid is $63.0 million, with additional upside for performance that exceeds the tiered performance metrics. 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. ~~Any changes in~~This amount represents the estimated fair value at the time of the acquisition. During the nine months ended September 30, 2022, the Company recorded a remeasurement to the fair value ~~will be recorded~~of contingent consideration for Accu-Trade within the ~~General and Administrative~~Other (expense) income, net line on the Consolidated Statements of (Loss) Income. For more information on the fair value of the Accu-Trade contingent consideration, see Note 4 (Fair Value Measurements).

(3)

~~During the quarter ended June 30, 2022, the Company recorded a $1.4~~ ~~million purchase accounting adjustment.~~

~~(4)~~

Assets acquired primarily consist of accounts receivable.

~~(5)~~(4)

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

Acquisition-Date
Fair Value
(in thousands)

Amortization Period
(in years)
Acquired software

$
12,926

5
Trade name

1,446

10
Customer relationships

1,307

7
Total

$
15,679

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

~~(6)~~(5)

Total liabilities assumed primarily consist of accounts payable.

Goodwill. In connection with the Accu-Trade Acquisition, the Company recorded goodwill in the amount of $77.0 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.

CreditIQ Acquisition. On November 5, 2021, the Company acquired all of the outstanding stock of CreditIQ, Inc. (the “CIQ Acquisition”), an automotive fintech platform that provides instant online loan screening and approvals to facilitate online car buying. Through the CIQ Acquisition, the Company will provide dealers and car shoppers 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 $0.2 million were recorded during the ~~six~~nine months ended ~~June~~September 30, 2022. These costs were recorded in General and administrative in the Consolidated Statements of (Loss) 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 (Loss) 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

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

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~~This amount represents the estimated fair value at the time of the acquisition. During the nine months ended September 30, 2022, the Company recorded a remeasurement to the fair value of ~~the~~ contingent consideration ~~have occurred since the CIQ Acquisition. Any changes in the fair value will be recorded~~for CreditIQ within the ~~General and Administrative~~Other (expense) income, net line on the Consolidated Statements of (Loss) Income. For more information on the fair value of the CreditIQ contingent consideration, see Note 4 (Fair Value Measurements).

~~Cars.com Inc.~~

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

~~(Unaudited)~~

(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 (Loss) Income.

(4)

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

(5)

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

(6)

Total liabilities assumed includes accounts payable, deferred income tax liabilities, net and other liabilities.

Goodwill. In connection with the CIQ Acquisition, the Company recorded goodwill in the 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 acquired assembled workforce. None of the goodwill is considered deductible for income tax purposes.

NOTE ~~10.~~11. Income Taxes

Deferred Tax Asset and Valuation Allowance. The Company has concluded a valuation allowance is required against its deferred tax assets as of ~~June~~September 30, 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 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~~September 30, 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.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

Effective Tax Rate. The effective income tax rate, expressed by calculating the income tax expense (benefit) as a percentage of ~~Income~~(Loss) income before income tax, was (~~22.0~~13.6)% for the ~~six~~nine months ended ~~June~~September 30, 2022, which varied from the statutory federal income tax rate of 21%, primarily due to the tax benefits realized on ~~a partial release of the valuation allowance,~~ stock-based compensation and the impact of uncertain tax positions.

(In thousands, except percentages)

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Income tax provision at statutory rate

$
1,319

21.0
%

$
1,701

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

342

5.4

546

6.7

Stock-based compensation

214

3.4

(1,211
)

(14.9
)
Uncertain tax positions

—

—

(1,015
)

(12.5
)
Valuation allowance

(1,530
)

(24.3
)

(2,447
)

(30.2
)
Other, net

394

6.3

644

7.9

Income tax expense (benefit)

$
739

11.8
%

$
(1,782
)

(22.0
)%


(In thousands, except percentages)	Three Months Ended September 30, 2022					Nine Months Ended September 30, 2022
Income tax provision at statutory rate	$	(417	)	21.0	%	$	1,284		21.0	%
State income taxes, net of federal income tax benefit		523		(26.3	)		1,069		17.5
Stock-based compensation		29		(1.5	)		(1,182	)	(19.3	)
Uncertain tax positions		52		(2.6	)		(963	)	(15.8	)
Valuation allowance		2,482		(124.8	)		35		0.6
Other, net		(1,717	)	86.3			(1,073	)	(17.6	)
Income tax expense (benefit)	$	952		(47.9	)%	$	(830	)	(13.6	)%

1415

Note About Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts are 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. 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. 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 prolonged effects of 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, 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.

•

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.

•

Dealer closures or consolidation among dealers or OEMs could reduce demand for, and negatively affect the pricing of, our 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.

•

We rely on in-house content creation and development to drive organic traffic to the CARS sites and mobile applications. If we are unable to continue to develop our in-house content, we may be required to rely more heavily on third-party content providers, which could lead to less distinctive content on our sites and increased operating costs, including increased traffic acquisition costs.

•

We participate in a highly competitive market, and pressure from existing and new competitors 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 be 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 or growing our complementary offerings that help automotive brands and dealers create enduring customer relationships.

•

Strategic acquisitions, investments and partnerships could pose various risks, including integration risks, increase our leverage, dilute existing stockholders and significantly impact our ability to expand our overall profitability.

•

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

1516

•

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 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 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.

•

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 and create liabilities.

•

Our ability to attract and retain 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.

•

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.

•

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.

•

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

•

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.

For a detailed discussion of many of these risks and uncertainties, see “Part I, Item 1A., Risk Factors” and “Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on February 25, 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. 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 in this report 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.

1617

Item 2. 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 About Forward-Looking 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” 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 digital solutions that connect car shoppers with sellers. We empower shoppers with the data, resources and digital tools needed to make informed buying decisions and seamlessly connect with automotive retailers. In a rapidly changing market, we enable dealerships and automotive manufacturers (“OEMs”), with innovative technical solutions and data-driven intelligence, to better reach and influence ready-to-buy shoppers, increase inventory turn and gain market share.

In addition to Cars.com™, our brands include Dealer Inspire®, a website and digital solutions provider enabling dealerships to be more efficient through connected digital experiences; FUEL™, an advertising solution providing dealers and OEMs the benefit of leveraging targeted digital video and display marketing to Cars.com’s audience of in-market car shoppers; DealerRater®, a leading car dealer review and reputation management technology solution; CreditIQ™, digital financing technology and Accu-Trade™, vehicle valuation and appraisal technology. Our portfolio of brands also includes Auto.com™, PickupTrucks.com™ and NewCars.com®.

Overview of Results


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021		2022			2021		2022		2021
Revenue	$	162,873	$	155,530	$	321,080	$	308,825	$	164,595		$	156,553	$	485,675	$	465,378
Net income		5,545		5,966		9,885		11,244
Net (loss) income										(2,941	)		2,431		6,944		13,675

2022 Highlights and Trends

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 vehicle appraisal and valuation data, instant guaranteed offer capabilities and logistics technology (the “Accu-Trade Acquisition”). Consideration for the transaction was composed of $64.8 million of cash and $5.3 million in other consideration. As part of the transaction, upon achievement of certain financial targets, we may be required to pay additional cash and stock consideration to the former ~~owners~~.owners.

CreditIQ Acquisition. In November 2021, we acquired all the outstanding stock of CreditIQ, Inc. (the "CIQ Acquisition"), an automotive fintech platform that provides instant online loan screening and approvals to facilitate online car buying. Through the CIQ Acquisition, we ~~will~~ provide dealers and consumers with access to advanced digital financing technology across the CARS platform. Using cash on hand, we paid $30.0 million at the closing excluding transaction fees and expenses. As part of the transaction, we may be required to pay additional cash consideration of up to $50.0 million based on future performance over a three-year period with a mutually agreed upon option for a fourth year.

Share Repurchase Program. In February 2022, our Board of Directors authorized a 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 other applicable legal requirements, and subject to our blackout periods. We will fund the share repurchase program principally with cash from operations. During the ~~six~~nine months ended ~~June~~September 30, 2022, ~~the Company~~we repurchased and subsequently retired ~~2.1~~3.5 million shares for ~~$23.3~~$40.0 million at an average price paid per share of ~~$11.34.~~$11.47.

1718

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. The most critical of these key metrics are as follows:


	Three Months Ended June 30,							Six Months Ended June 30,							Three Months Ended September 30,							Nine Months Ended September 30,
(in thousands)	2022		2021		% Change			2022		2021		% Change			2022		2021		% Change			2022		2021		% Change
Traffic		148,010		158,438		(7	)%		296,500		315,042		(6	)%		150,449		142,418		6	%		446,949		457,460		(2	)%
Average Monthly Unique Visitors		27,079		26,391		3	%		26,820		26,174		2	%		27,309		24,341		12	%		26,983		25,563		6	%



	June 30, 2022		June 30, 2021		% Change			March 31, 2022		% Change			September 30, 2022		September 30, 2021		% Change			June 30, 2022		QoQ % Change
Dealer Customers		19,517		18,845		4	%		19,500		0	%		19,585		19,029		3	%		19,517		0	%
Monthly Average Revenue Per Dealer	$	2,326	$	2,299		1	%	$	2,291		2	%	$	2,334	$	2,332		0	%	$	2,326		0	%

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.

The increase in traffic for the three months ended September 30, 2022 was primarily driven by efficiencies in performance media and optimization of our user acquisition strategy.

The decline in traffic for the ~~three and six~~nine months ended ~~June~~September 30, 2022 was primarily due to elevated traffic in the prior year period related to an increase in consumer confidence and heightened consumer demand from the federal economic stimulus program that ran during the ~~six months ended June 30, 2021.~~first half of 2021, and a decrease in mobile app and SEO traffic following our technology transformation. This was partially offset by efficiencies gained and user acquisition strategy shifts in 2022.

Average Monthly Unique Visitors (“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 UVs associated with Dealer Inspire ~~UVs.~~hosted websites. We measure UVs using Adobe Analytics.

The growth in UVs for the three ~~and six~~ months ended ~~June~~September 30, 2022 was primarily driven by efficiencies in performance media and optimization of our user acquisition strategy.

The growth in UVs for the nine months ended September 30, 2022 as compared to the decline in Traffic ~~was primarily related~~can be attributed to changes in our ~~traffic~~Traffic mix and ~~and to shifts in our marketing strategy to drive greater growth in market share~~the~~. In addition, due to the~~ continued lower vehicle inventory levels, which we believe ~~our~~are resulting in users ~~now have a shorter shopping lifecycle and are~~ purchasing cars with fewer visits.

~~Average Revenue Per Dealer (“ARPD”).~~ ~~We believe that our ability~~ In addition, browser and data privacy policies may make it more difficult to ~~grow ARPD is an indicator of the value proposition of our platform. We define ARPD as Dealer revenue, excluding digital advertising services, during the period divided~~resolve users across sessions. This growth was partially offset by ~~the monthly average number of Dealer Customers during the same period. For the three months ended June 30, 2022, Accu-Trade is included~~a decrease in ~~our ARPD metric, which had an immaterial impact on ARPD; however, no prior period has been recast as it would be impracticable to do so.~~

~~For the three months ended June 30, 2022, ARPD increased 1%~~SEO and ~~2% compared to the three months ended June 30, 2021 and March 31, 2022, respectively, primarily driven by growth in digital solutions, as well as growth in FUEL revenue.~~mobile app traffic.

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. ~~As of~~Beginning June 30, 2022, this key operating metric includes Accu-Trade; however, no prior period has been recast as it would be impracticable to do so.

Dealer Customers increased 4%3% from ~~June~~September 30, 2021, driven by sustained high retention rates, ~~strong~~ new sales to Dealer Customers, as well as the inclusion of ~~180~~ Accu-Trade only dealers. Dealer Customers slightly increased by 68 from June 30, 2022.

18Average Revenue Per Dealer (“ARPD”). We believe that our ability to grow ARPD is an indicator of the value proposition of our 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. Beginning with the three months ended June 30, 2022, Accu-Trade is included in our ARPD metric, which had an immaterial impact on ARPD; however, no prior period has been recast as it would be impracticable to do so.

For the three months ended September 30, 2022, ARPD was essentially flat ~~from March 31, 2022 as~~compared to the ~~inclusion of 180 Accu-Trade only dealers was offset bycancellations related to a single digital dealer. Excluding~~three months ended September 30, 2021 and for the ~~impact of the inclusion of Accu-Trade and cancellations related to a single digital dealer, Dealer Customers would have slightly increased in the period.~~three months ended June 30, 2022.

Factors Affecting Our Performance. Our business is impacted by ~~the~~ changes in the larger automotive ecosystem, including inventory supply and supply-chain disruptions, which continue to be under pressure due to ~~shortages of~~ key ~~materials,~~material and labor shortages, and changes related to automotive advertising as well as other macroeconomic factors including inflation, rising interest rates and a potential recession. Changes in vehicle sales volumes in the United States also influence OEMs’ and dealerships’ willingness to increase investments in technology solutions and automotive marketplaces like Cars.com and could impact our pricing strategies and/or revenue mix.

Our long-term success will depend in part on our ability to continue to evolve our business toward a multi-faceted suite of digital solutions that complement our online marketplace offerings. Webelieve our core strategic strengths, including our strong brand portfolio, growing high-quality audience, and suite of specialized digital solutions for advertisers and sales and service teams 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 digital financing, vehicle appraisal, virtual showrooms and digital advertising ~~product~~products targeting in-market buyers. 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~~prolonged effects of the COVID-19 pandemic continue to be 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~~a new way of shopping as a result of the 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.

Results of Operations

Three Months Ended ~~June~~September 30, 2022 Compared to Three Months Ended ~~June~~September 30, 2021


	Three Months Ended June 30,												Three Months Ended September 30,
(In thousands, except percentages)	2022			2021			$ Change			% Change			2022			2021			$ Change			% Change
Revenue:
Dealer	$	143,987		$	136,866		$	7,121			5	%	$	145,395		$	139,321		$	6,074			4	%
OEM and National		14,144			16,329			(2,185	)		(13	)%		14,909			15,273			(364	)		(2	)%
Other		4,742			2,335			2,407			103	%		4,291			1,959			2,332			119	%
Total revenue		162,873			155,530			7,343			5	%		164,595			156,553			8,042			5	%
Operating expenses:
Cost of revenue and operations		29,504			28,219			1,285			5	%		28,828			28,928			(100	)		0	%
Product and technology		23,117			19,434			3,683			19	%		21,425			20,132			1,293			6	%
Marketing and sales		54,655			51,309			3,346			7	%		53,615			51,948			1,667			3	%
General and administrative		17,211			15,615			1,596			10	%		17,694			17,919			(225	)		(1	)%
Depreciation and amortization		23,001			25,298			(2,297	)		(9	)%		23,134			25,552			(2,418	)		(9	)%
Total operating expenses		147,488			139,875			7,613			5	%		144,696			144,479			217			0	%
Operating income		15,385			15,655			(270	)		(2	)%		19,899			12,074			7,825			65	%
Nonoperating expense:
Interest expense, net		(9,047	)		(9,839	)		792			(8	)%		(8,501	)		(9,522	)		1,021			(11	)%
Other expense, net		(54	)		(39	)		(15	)		38	%
Other (expense) income, net														(13,387	)		19			(13,406	)	***%
Total nonoperating expense, net		(9,101	)		(9,878	)		777			(8	)%		(21,888	)		(9,503	)		(12,385	)	***%
Income before income taxes		6,284			5,777			507			9	%
Income tax expense (benefit)		739			(189	)		928		***
Net income	$	5,545		$	5,966		$	(421	)		(7	)%
(Loss) income before income taxes														(1,989	)		2,571			(4,560	)	***%
Income tax expense														952			140			812		***%
Net (loss) income													$	(2,941	)	$	2,431		$	(5,372	)	***%

*** Not meaningful

Dealer revenue. Dealer revenue consists of marketplace and digital solutions sold to dealer ~~customers.~~customers, which includes Accu-Trade revenue except for the Accu-Trade license included in Other revenue. Dealer revenue is our largest revenue stream, representing 88%

and 89% of total revenue for the three months ended ~~June~~September 30, 2022 and ~~2021.~~2021, respectively. Dealer revenue increased ~~$7.1~~$6.1 million or 5%4% compared to the three months ended ~~June~~September 30, 2021, driven primarily by a 4%3% increase in Dealer Customers ~~as well as a 1% increase in ARPD~~ from ~~June~~September 30, 2021.

OEM and National revenue. OEM and National revenue consists of display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses. OEM and National revenue represents 9% and 10% of total revenue for the three months ended ~~June~~September 30, 2022 and 2021, respectively. OEM and National revenue decreased ~~13%~~2%, primarily due to pullbacks in certain OEM spending associated with production delays and shortages, both driven by supply-chain disruptions.

Other revenue. Other revenue consists of revenue related to the Accu-Trade license agreement and vehicle listing data sold to third parties and pay-per lead and peer-to-peer vehicle advertising. Other revenue represents 3% and 1% of total revenue for the three months ended September 30, 2022 and 2021, respectively. Other revenue increased $2.3 million or 119%, primarily due to the Accu-Trade license agreement. For more information, see Note 3 (Goodwill, Indefinite-Lived Intangible Asset, and Business Combinations).

Cost of revenue and operations. Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, pay-per-lead products, product fulfillment and compensation costs for the product fulfillment and customer service teams. Cost of revenue and operations expense represents 18% of total revenue for the three months ended ~~June~~September 30, 2022 and 2021. Cost of revenue and operations expense ~~increased, primarily due to higher compensation costs.~~was essentially flat.

Product and technology. The product team creates and manages consumer and dealer-facing innovation and user experience. The technology team develops and supports our products, websites and mobile apps. Product and technology expense includes compensation costs, consulting costs, hardware and software maintenance, software licenses, data center and other infrastructure costs. Product and technology expense represents ~~14% and 12%~~13% of total revenue for the three months ended ~~June~~September 30, 2022 and ~~2021, respectively.~~2021. Product and technology expense increased, primarily due to ~~higher compensation and consulting costs, including~~incremental costs related to ~~the~~ Accu-Trade and CreditIQ ~~Acquisitions.~~and higher compensation, including stock-based compensation.

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 and video advertising and creative production, market research, trade events, compensation costs and travel for the marketing, sales and sales support teams, as well as bad debt expense related to the allowance for doubtful accounts. Marketing and sales expense represents ~~34% and~~ 33% of total revenue for the three months ended ~~June~~September 30, 2022 and ~~2021, respectively.~~2021. Marketing and sales expense increased, primarily due to ~~continued investment in~~higher compensation, partially offset by reduced spend related to traffic ~~generationin 2022.~~generation.

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 related to the write-off and loss on assets. General and administrative expense represents 11% ~~and 10%~~ of total revenue for the three months ended ~~June~~September 30, 2022 and ~~2021, respectively.~~2021. General and administrative expense ~~increased, primarily due to higher third-party costs and higher compensation costs.~~was essentially flat, down 1% from the prior year.

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.

Interest expense, net. Interest expense, net decreased by ~~$0.8~~$1.0 million compared to the prior year period due to the maturity of the interest rate swap and a reduction in total ~~indebtedness.~~indebtedness, partially offset by slightly higher interest rates in 2022. For information related to our debt, see Note 45 (Debt) and Note 56 (Interest Rate Swap) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

Other (expense) income, net. Other (expense) income, net changed primarily due to the change in the fair value of contingent consideration associated with the CreditIQ and Accu-Trade acquisitions. For more information related to contingent consideration, see Note 3 (Goodwill, Indefinite-lived Intangible Asset and Business Combinations) and Note 4 (Fair Value Measurements).

Income tax expense ~~(benefit)~~. The effective income tax rate, expressed by calculating the Income tax expense ~~(benefit)~~ as a percentage of ~~Income~~(Loss) income before income taxes, was ~~11.8%~~(47.9)% for the three months ended ~~June~~September 30, 2022, and the Income tax expense was ~~$0.7~~$1.0 million. The effective income tax rate was ~~lower than~~different from the statutory federal income tax rate of 21%, primarily due to the ~~tax benefits realized on a partial release of~~change in the valuation allowance ~~partially offset by the impact~~and an aggregate of ~~state income taxes.~~other individually insignificant items.

2021

~~Six~~Nine Months Ended ~~June~~September 30, 2022 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2021


	Six Months Ended June 30,												Nine Months Ended September 30,
(In thousands, except percentages)	2022			2021			$ Change			% Change			2022			2021			$ Change			% Change
Revenue:
Dealer	$	284,403		$	269,824		$	14,579			5	%	$	429,798		$	409,145		$	20,653			5	%
OEM and National		29,318			34,398			(5,080	)		(15	)%		44,227			49,671			(5,444	)		(11	)%
Other		7,359			4,603			2,756			60	%		11,650			6,562			5,088			78	%
Total revenue		321,080			308,825			12,255			4	%		485,675			465,378			20,297			4	%
Operating expenses:
Cost of revenue and operations		57,256			56,050			1,206			2	%		86,084			84,978			1,106			1	%
Product and technology		44,424			36,194			8,230			23	%		65,849			56,326			9,523			17	%
Marketing and sales		111,749			104,520			7,229			7	%		165,364			156,468			8,896			6	%
General and administrative		33,771			28,881			4,890			17	%		51,465			46,800			4,665			10	%
Depreciation and amortization		47,554			50,978			(3,424	)		(7	)%		70,688			76,530			(5,842	)		(8	)%
Total operating expenses		294,754			276,623			18,131			7	%		439,450			421,102			18,348			4	%
Operating income		26,326			32,202			(5,876	)		(18	)%		46,225			44,276			1,949			4	%
Nonoperating expense:
Interest expense, net		(18,377	)		(19,840	)		1,463			(7	)%		(26,878	)		(29,362	)		2,484			(8	)%
Other income (expense), net		154			(1	)		155		***
Other (expense) income, net														(13,233	)		18			(13,251	)	***
Total nonoperating expense, net		(18,223	)		(19,841	)		1,618			(8	)%		(40,111	)		(29,344	)		(10,767	)		37	%
Income before income taxes		8,103			12,361			(4,258	)		(34	)%		6,114			14,932			(8,818	)		(59	)%
Income tax (benefit) expense		(1,782	)		1,117			(2,899	)	***				(830	)		1,257			(2,087	)	***
Net income	$	9,885		$	11,244		$	(1,359	)		(12	)%	$	6,944		$	13,675		$	(6,731	)		(49	)%

*** Not meaningful

Dealer revenue. Dealer revenue is our largest revenue stream, representing ~~89% and 87%~~88% of total revenue for the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~2021, respectively.~~2021. Dealer revenue increased ~~$14.6~~$20.7 million or 5% compared to the ~~six~~nine months ended ~~June~~September 30, 2021, driven by a 4%3% increase in Dealer Customers ~~as well as a 1% increase in ARPD~~ from ~~June~~September 30, 2021.

OEM and National revenue. OEM and National revenue represents 9% and 11% of total revenue for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. OEM and National revenue decreased ~~15%~~11%, primarily due to pullbacks in certain OEM spending associated with continued production delays and shortages, both driven by supply-chain disruptions.

Other revenue. Other revenue represents 3% and 1% of total revenue for the nine months ended September 30, 2022 and 2021, respectively. Other revenue increased $5.1 million or 78%, primarily due to the Accu-Trade license agreement. For more information, see Note 3 (Goodwill, Indefinite-Lived Intangible Asset, and Business Combinations).

Cost of revenue and operations. Cost of revenue and operations expense represents 18% of total revenue for the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~2021, respectively.~~2021. Cost of revenue and operations expense increased, primarily due to higher compensation costs, partially offset by lower third-party ~~costs.~~costs associated with certain products.

Product and technology. Product and technology expense represents 14% and 12% of total revenue for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. Product and technology expense increased, primarily due to higher compensation and consulting costs, including costs associated with the Accu-Trade and CreditIQ Acquisitions, as well as higher licensing and other technology costs.

Marketing and sales. Marketing and sales expense represents ~~35% and~~ 34% of total revenue for the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~2021, respectively.~~2021. Marketing and sales expense increased, primarily due to continued investment in marketing in 2022, including a return to in-person industry events that had been curtailed due to the ~~pandemic.~~pandemic, as well as higher compensation costs.

General and administrative. General and administrative expense represents 11% and 9%10% of total revenue for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. General and administrative expense increased, primarily due to ~~higher compensation costs, including stock-based compensation, as well as third-party costs~~professional fees and transaction-related costs related to the Accu-Trade ~~Acquisition.~~Acquisition, as well as higher compensation costs, including stock-based compensation.

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.

Interest expense, net. Interest expense, net decreased by ~~$1.5~~$2.5 million compared to the prior year period due to the maturity of the interest rate swap and a reduction in total indebtedness, ~~and the expiration of the Swap.~~partially offset by slightly higher interest rates in 2022. For information related to our debt, see Note 45 (Debt) and Note 56 (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.

21Other (expense) income, net. Other (expense) income, net changed primarily due to the change in the fair value of contingent consideration associated with the CreditIQ and Accu-Trade acquisitions. For more information related to contingent consideration, see Note 3 (Goodwill, Indefinite-lived Intangible Asset and Business Combinations) and Note 4 (Fair Value Measurements).

Income tax (benefit) expense. The effective income tax rate, expressed by calculating the Income tax (benefit) expense as a percentage of (Loss) Income before income taxes, was ~~(22.0)~~(13.6)% for the ~~six~~nine months ended ~~June~~September 30, 2022, and the Income tax benefit was ~~$1.8~~$0.8 million. The effective income tax rate was lower than the statutory federal income tax rate of 21%, primarily due to the tax benefits realized on ~~a partial release of the valuation allowance,~~ stock-based compensation and the impact of uncertain tax positions.

2223

Liquidity and Capital Resources

Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and ~~debt~~borrowing capacity available under our credit facilities. Our positive operating cash flow, along with our Revolving Loan described below, provide adequate liquidity to meet our business needs, including those for investments, debt service, share repurchases 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, 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 7 (Debt) in Part II, Item 8., “Financial Statements and Supplementary Data”, of our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on February 25, 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~~September 30, 2022, Cash and cash equivalents were ~~$18.1~~$31.9 million and including our undrawn Revolving Loan, our total liquidity was ~~$203.1~~$226.9 million.

Indebtedness. As of ~~June~~September 30, 2022, the outstanding aggregate principal amount of our debt was ~~$517.5~~$505.0 million, with an interest rate of ~~5.8%~~6.2%, including ~~$72.5~~$70.0 million of outstanding principal under our Term Loan, with an interest rate of ~~4.3%~~5.7%, ~~$45.0~~$35.0 million of outstanding borrowings on our Revolving Loan, with an interest rate of ~~3.7%~~5.1% and outstanding Senior Unsecured Notes of $400.0 million, with an interest rate of 6.375%. During the ~~six~~nine months ended ~~June~~September 30, 2022, we made ~~$5.0~~$7.5 million in mandatory Term Loan payments. During the nine months ended September 30, 2022 we borrowed $45.0 million on our Revolving Loan and repaid $10.0 million. As of ~~June~~September 30, 2022, we had ~~$185.0~~$195.0 million available to borrow under our Revolving Loan. Our borrowings are limited by our Senior Secured Leverage Ratio and Consolidated Interest Coverage Ratio, which are calculated in accordance with our Credit Agreement, and were ~~0.7x~~0.6x and ~~5.2x~~5.7x as of ~~June~~September 30, 2022, respectively.

~~Interest Rate Swap.~~ Contingent Consideration.The ~~interest rate on borrowings under our Term Loan and Revolving Loan is floating and, therefore, subject to fluctuations. In order to manage~~fair value as of September 30, 2022 for the ~~risk associated with changes in interest rates on our borrowing under the Term Loan prior~~contingent consideration related to the ~~October 2020 refinancing,~~CreditIQ and Accu-Trade acquisitions was $61.1 million. Within the next twelve months, we ~~entered into an interest rate swap (the “Swap”) effective December 31, 2018. Under the terms~~expect to pay $10.0 million of the Swap, we were locked into a fixed rate of interest of 2.96% plus an applicable margin, on a notional amount of $300 million until May 31, 2022. Although the Swap was initially designated as a cash flow hedge of interest rate risk, hedge accounting was discontinued in June 2020. The loss on the hedge that was recorded in Accumulated other comprehensive loss at that time was amortized into the Consolidated Statements of Income over the remaining term of the Swap.potential contingent consideration amounts discussed below.

As part of the Accu-Trade Acquisition, we may be required to pay additional consideration to the former owners based on achievement of certain financial targets. For the Accu-Trade contingent consideration we have the option to pay consideration in cash or stock, which may result in a variable number of shares being issued. The ~~Swap expired on May 31, 2022 and, as such, is no longer recorded~~actual amount to be paid will be based on the ~~Consolidated Balance Sheets.~~ acquired business’ future performance to be attained over a three-year performance period.

As ~~of December 31, 2021, the fair value~~part of the ~~Swap was~~CreditIQ Acquisition, we may be required to pay up to an ~~unrealized loss of $3.5~~additional $50.0 million ~~which was recorded~~ in ~~Other accrued liabilities~~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 Consolidated Balance Sheets. During the six months ended June 30, 2022 and 2021, $2.4 million and $2.8 million was reclassified from Accumulated other comprehensive loss and recorded in Interest expense, net, respectively. During the six months ended June 30, 2022, we made payments of $3.3 millionacquired business’ future performance to be attained over a three-year performance period with a mutually agreed-upon option for a fourth year. For information related to the ~~Swap~~contingent consideration, see Note 3 (Goodwill, Indefinite-lived Intangible Asset and ~~$0.4 million was reclassified as a tax benefit from Accumulated other comprehensive loss into Income tax expense (benefit) on the Consolidated Statements of Income.~~Business Combinations) and Note 4 (Fair Value Measurements).

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


	Six Months Ended June 30,									Nine Months Ended September 30,
	2022			2021			Change			2022			2021			Change
Net cash provided by (used in):
Operating activities	$	42,280		$	79,619		$	(37,339	)	$	91,291		$	116,226		$	(24,935	)
Investing activities		(73,325	)		(13,095	)		(60,230	)		(79,169	)		(17,879	)		(61,290	)
Financing activities		10,110			(82,058	)		92,168			(19,271	)		(114,559	)		95,288
Net change in cash and cash equivalents	$	(20,935	)	$	(15,534	)	$	(5,401	)	$	(7,149	)	$	(16,212	)	$	9,063

Operating Activities. The ~~change~~decrease in cash provided by operating activities was primarily related to changes in operating assets and liabilities, ~~particularly due~~including fluctuations in working capital during the nine months ended September 30, 2022 in addition to the ~~timing~~receipt of vendor payments, in that the six months ended June 30, 2022 included an additional week of vendor payments as compared to the six months ended June 30, 2021. In addition, during the six months ended June 30, 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.~~Act during the nine months ended September 30, 2021.

2324

Investing Activities. The ~~change~~increase in cash used in investing activities was primarily related to the Accu-Trade Acquisition in 2022, partially offset by lower capital expenditures in the current year period.

Financing Activities. During the ~~six~~nine months ended ~~June~~September 30, 2022, cash ~~provided by~~used in financing activities was primarily related to repurchases of common stock and payments on our Term Loan and Revolving Loan, partially offset by $45.0 million of proceeds from Revolving Loan borrowings related to the Accu-Trade ~~Acquisition, partially offset by repurchases of common stock and tax payments made in connection with equity award vestings.~~Acquisition. During the ~~six~~nine months ended ~~June~~September 30, 2021, cash used in financing activities was primarily related to ~~$75.0~~$107.5 million of debt repayments, of which ~~$70.0~~$100.0 million were voluntary pre-payments. For information related to our debt and repurchases of common stock, see Note 45 (Debt) and Note 78 (Stockholders' Equity) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

Commitments and Contingencies. For information related to commitments and contingencies, see Note 67 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “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 Accounting Policies and Estimates” in Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on February 25, 2022 and see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q. During the ~~six~~nine months ended ~~June~~September 30, 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.

2425

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, see “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, 2021, as filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022. Our exposures to market risk have not changed materially since December 31, 2021.

Item 4. 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 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).

2526

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

For information relating to legal proceedings, see Note 67 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

Item 1A. 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” in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (“SEC”) on February 25, 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 Securities and Use of Proceeds

Sales of Unregistered Securities by Issuer

None.

Purchases of Equity Securities by Issuer

Our stock repurchase activity for the three months ended ~~June~~September 30, 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)

April 1 through April 30, 2022

472,006

$
12.62

472,006

$
189,043

May 1 through May 31, 2022

628,874

10.11

628,874

182,685

June 1 through June 30, 2022

616,031

9.73

616,031

176,691

1,716,911

1,716,911


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)
July 1 through July 31, 2022		479,836	$	10.41		479,836	$	171,697
August 1 through August 31, 2022		432,819		13.09		432,819		166,033
September 1 through September 30, 2022		519,995		11.58		519,995		160,012
		1,432,650				1,432,650

(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)

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.

(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 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

2627

Item 6. Exhibits

Exhibit Index


Exhibit Number		Description
10.1**		Letter Agreement, dated ~~February 25,~~September 7, 2022, between Cars.com LLC and ~~Angelique Strong Marks~~Sonia Jain (incorporated by reference to
10.2*		~~Letter Agreement dated March 30,~~Exhibit 10.1 to Cars.com Inc.’s Form 8-K filed on October 4, 2022, ~~between Cars.com LLC and Jeanette Tomy~~
10.3*		~~Letter Agreement dated April 30, 2022 between Cars.com LLC and James Rogers~~File No. 001-37869).
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~~September 30, 2022, formatted with Inline XBRL (included with Exhibit 101 attachments)

* Filed herewith.

** Previously filed.

2728

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~~November 3, 2022	By:	/s/ T. Alex Vetter
		T. Alex Vetter
		Chief Executive Officer

Date: ~~August~~November 3, 2022	By:	/s/ ~~Jeanette Tomy~~Sonia Jain
		~~Jeanette Tomy~~Sonia Jain
		Chief Financial Officer

2829


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


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


	June 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021
	(unaudited)						(unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	18,134		$	39,069		$	31,920		$	39,069
Accounts receivable, net		104,402			98,893			106,966			98,893
Prepaid expenses		11,330			7,810			10,539			7,810
Other current assets		3,796			1,665			5,093			1,665
Total current assets		137,662			147,437			154,518			147,437
Property and equipment, net		43,529			43,005			45,403			43,005
Goodwill		103,194			26,227			102,477			26,227
Intangible assets, net		745,405			769,424			726,247			769,424
Investments and other assets, net		21,669			21,112			21,523			21,112
Total assets	$	1,051,459		$	1,007,205		$	1,050,168		$	1,007,205
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	13,212		$	15,420		$	18,622		$	15,420
Accrued compensation		13,708			23,612			15,727			23,612
Current portion of long-term debt, net		11,522			8,941			12,829			8,941
Other accrued liabilities		46,383			46,317			59,051			46,317
Total current liabilities		84,825			94,290			106,229			94,290
Noncurrent liabilities:
Long-term debt, net		495,968			457,383			482,740			457,383
Other noncurrent liabilities		79,278			57,512			84,672			57,512
Total noncurrent liabilities		575,246			514,895			567,412			514,895
Total liabilities		660,071			609,185			673,641			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 June 30, 2022 and December 31, 2021, respectively		0			0
Common Stock at par, $0.01 par value; 300,000 shares authorized; 68,244 and 69,170 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		682			692
Preferred Stock at par, $0.01 par value; 5,000 shares authorized; no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively								—			—
Common Stock at par, $0.01 par value; 300,000 shares authorized; 66,850 and 69,170 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively								668			692
Additional paid-in capital		1,526,203			1,544,712			1,515,014			1,544,712
Accumulated deficit		(1,135,497	)		(1,145,382	)		(1,138,438	)		(1,145,382	)
Accumulated other comprehensive loss		—			(2,002	)		(717	)		(2,002	)
Total stockholders' equity		391,388			398,020			376,527			398,020
Total liabilities and stockholders' equity	$	1,051,459		$	1,007,205		$	1,050,168		$	1,007,205


	Six Months Ended June 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Cash flows from operating activities:
Net income	$	9,885		$	11,244		$	6,944		$	13,675
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation		7,857			7,980			11,833			12,193
Amortization of intangible assets		39,697			42,998			58,855			64,337
Amortization of Accumulated other comprehensive loss on interest rate swap		2,362			2,835			2,362			4,252
Changes in fair value of contingent consideration								13,360			—
Stock-based compensation		11,628			10,670			17,103			16,156
Deferred income taxes		(92	)		(442	)		676			(659	)
Provision for doubtful accounts		463			211			1,047			350
Amortization of debt issuance costs		1,630			1,657			2,440			2,513
Amortization of deferred revenue related to Accu-Trade Acquisition		(1,767	)		0			(3,092	)		—
Other, net		173			(44	)		279			722
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(4,383	)		(7,053	)		(7,532	)		(5,933	)
Prepaid expenses and other assets		(6,683	)		7,829			(7,279	)		6,911
Accounts payable		(2,422	)		8,888			2,882			(796	)
Accrued compensation		(9,904	)		(4,393	)		(7,885	)		(367	)
Other liabilities		(6,164	)		(2,761	)		(702	)		2,872
Net cash provided by operating activities		42,280			79,619			91,291			116,226
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired		(64,770	)		0			(64,770	)		—
Purchase of property and equipment		(8,555	)		(13,095	)		(14,399	)		(17,879	)
Net cash used in investing activities		(73,325	)		(13,095	)		(79,169	)		(17,879	)
Cash flows from financing activities:
Proceeds from Revolving Loan borrowings		45,000			0			45,000			—
Payments of long-term debt		(5,000	)		(75,000	)		(17,500	)		(107,500	)
Payments for stock-based compensation plans, net		(6,838	)		(7,049	)		(6,838	)		(7,050	)
Repurchases of common stock		(23,052	)		0			(39,933	)		—
Payments of debt issuance costs and other fees		0			(9	)		—			(9	)
Net cash provided by (used in) financing activities		10,110			(82,058	)
Net cash used in financing activities								(19,271	)		(114,559	)
Net decrease in cash and cash equivalents		(20,935	)		(15,534	)		(7,149	)		(16,212	)
Cash and cash equivalents at beginning of period		39,069			67,719			39,069			67,719
Cash and cash equivalents at end of period	$	18,134		$	52,185		$	31,920		$	51,507
Supplemental cash flow information:
Cash paid (received) for income taxes	$	629		$	(8,875	)	$	741		$	(8,392	)
Cash paid for interest and swap		17,664			19,634			19,041			22,687


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

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

Consolidated Statement of Stockholders' Equity	Consolidated Statement of Stockholders' Equity									Consolidated Statement of Stockholders' Equity
	Six Months Ended June 30, 2021									Nine Months Ended September 30, 2021
Financial statement line item	As reported			Adjustment			As adjusted			As reported			Adjustment			As adjusted
Accumulated deficit balance at December 31, 2020	$	(1,184,187	)	$	28,014		$	(1,156,173	)	$	(1,184,187	)	$	28,014		$	(1,156,173	)
Total stockholders' equity balance at December 31, 2020		340,176			28,014			368,190			340,176			28,014			368,190
Accumulated deficit balance at March 31, 2021		(1,178,909	)		28,014			(1,150,895	)		(1,178,909	)		28,014			(1,150,895	)
Total stockholders' equity balance at March 31, 2021		346,002			28,014			374,016			346,002			28,014			374,016
Accumulated deficit balance at June 30, 2021		(1,172,943	)		28,014			(1,144,929	)		(1,172,943	)		28,014			(1,144,929	)
Total stockholders' equity balance at June 30, 2021		357,442			28,014			385,456			357,442			28,014			385,456
Accumulated deficit balance at September 30, 2021											(1,170,512	)		28,014			(1,142,498	)
Total stockholders' equity balance at September 30, 2021											366,560			28,014			394,574


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


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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited):	2
	Consolidated Balance Sheets	2
	Consolidated Statements of (Loss) Income	3
	Consolidated Statements of Comprehensive (Loss) Income	4
	Consolidated Statements of Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to the Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1718
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2526
Item 4.	Controls and Procedures	2526
PART II.	OTHER INFORMATION	2627
Item 1.	Legal Proceedings	2627
Item 1A.	Risk Factors	2627
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2627
Item 3.	Defaults Upon Senior Securities	2627
Item 4.	Mine Safety Disclosures	2627
Item 5.	Other Information	2627
Item 6.	Exhibits	2728
Signatures		2829


	December 31, 2021		Additions		Adjustment (1)		Impairment		June 30, 2022
Goodwill	$	26,227	$	75,536	$	1,431	$	—	$	103,194
Indefinite-lived intangible asset		390,020		—		—		—		390,020


			Fair value measurement at reporting date
	Total as of September 30, 2022		Level 1		Level 2		Level 3
Contingent consideration	$	61,100	$	—	$	—	$	61,100
Total	$	61,100	$	—	$	—	$	61,100


			Fair value measurement at reporting date
	Total as of December 31, 2021		Level 1		Level 2		Level 3
Contingent consideration	$	23,805	$	—	$	—	$	23,805
Total	$	23,805	$	—	$	—	$	23,805


	As of December 31, 2021		Addition Related to Accu-Trade Acquisition		Fair Value Adjustment (1)		As of September 30, 2022
Contingent consideration	$	23,805	$	23,936	$	13,359	$	61,100


	September 30, 2022		December 31, 2021
Fair value	$	439.0	$	502.7
Carrying value		505.0		477.5


	Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2021		3,683		$	10.95
Granted		2,115			14.38
Vested and delivered		(1,517	)		10.55
Forfeited		(471	)		12.45
Outstanding as of June 30, 2022 (1)		3,810			12.83


	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


	Number of PSUs			Weighted-Average Grant Date Fair Value		Number of PSUs			Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2021		142		$	23.98		142		$	23.98
Granted		275			15.07		275			15.07
Vested and delivered		(142	)		23.98		(142	)		23.98
Forfeited		(59	)		15.07		(59	)		15.07
Outstanding as of June 30, 2022		216			15.07
Outstanding as of September 30, 2022							216			15.07


	Number of Options		Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value		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		804	$	5.27		8.58	$	5,754
Granted		263		9.39						263		9.39
Vested and delivered		0		0						—		—
Forfeited		0		0						—		—
Outstanding as of June 30, 2022		1,067		6.28		8.48		2,068
Exercisable as of June 30, 2022		0		—		—		—
Outstanding as of September 30, 2022										1,067		6.28		8.23		3,131
Exercisable as of September 30, 2022										—		—		—		—


(In thousands, except percentages)	Three Months Ended June 30, 2022					Six Months Ended June 30, 2022
Income tax provision at statutory rate	$	1,319		21.0	%	$	1,701		21.0	%
State income taxes, net of federal income tax benefit		342		5.4			546		6.7
Stock-based compensation		214		3.4			(1,211	)	(14.9	)
Uncertain tax positions		—		—			(1,015	)	(12.5	)
Valuation allowance		(1,530	)	(24.3	)		(2,447	)	(30.2	)
Other, net		394		6.3			644		7.9
Income tax expense (benefit)	$	739		11.8	%	$	(1,782	)	(22.0	)%

Acquisition-Date
Fair Value
(in thousands)

Amortization Period
(in years)

Acquired software

Trade name

Customer relationships