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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 October ~~25, 2017,~~31, 2018, the registrant had ~~71,625,610~~68,568,102 shares of common stock, $0.01 par value per share, outstanding.

~~CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS~~Consolidated and Combined Balance Sheets

	September 30, 2017			December 31, 2016			September 30, 2018		December 31, 2017
	(unaudited)						(unaudited)
Assets
Current assets
Current assets:
Cash and cash equivalents	$	27,428		$	8,896		$	17,809	$	20,563
Accounts receivable, less allowance of $3,437 and $3,527, respectively		93,077			98,303
Prepaid expenses and other current assets		18,298			12,342
Accounts receivable, net								107,687		100,857
Prepaid expenses								11,662		11,408
Other current assets								9,558		9,811
Total current assets		138,803			119,541			146,716		142,639
Property and equipment
Cost		61,783			37,190
Less accumulated depreciation		(20,908	)		(16,729	)
Net property and equipment		40,875			20,461
Intangible and other assets
Property and equipment, net								40,850		39,740
Goodwill		788,107			788,107			884,339		788,107
Intangible assets, less accumulated amortization of $224,053 and $165,651, respectively		1,548,967			1,607,369
Intangible assets, net								1,533,442		1,529,500
Investments and other assets		11,172			11,788			10,451		11,053
Total assets	$	2,527,924		$	2,547,266		$	2,615,798	$	2,511,039
Liabilities and equity
Current liabilities
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,787		$	7,844		$	8,040	$	6,581
Accrued compensation								10,889		14,185
Unfavorable contracts liability								25,185		25,200
Current portion of long-term debt		21,162			—			24,022		21,158
Accrued liabilities		69,137			64,140
Other accrued liabilities								45,736		23,025
Total current liabilities		97,086			71,984			113,872		90,149
Noncurrent liabilities
Deferred incentive plans		1,677			3,913
Noncurrent liabilities:
Unfavorable contracts liability		25,185			44,085			—		18,885
Long-term debt		597,468			—			678,426		557,194
Deferred tax liability		282,504			8,325			168,360		146,482
Other noncurrent liabilities		17,532			1,674			20,297		19,201
Total noncurrent liabilities		924,366			57,997			867,083		741,762
Total liabilities		1,021,452			129,981			980,955		831,911
Commitments and contingent liabilities
Stockholders' equity
TEGNA's investment, net		—			2,417,285
Common Stock at par, $0.01 par value; authorized 300,000,000 shares; issued and outstanding 71,625,405 shares at September 30, 2017; no shares authorized, issued and outstanding at December 31, 2016		716			—
Commitments and contingencies
Stockholders' equity:
Preferred Stock at par, $0.01 par value; 5,000 shares authorized; no shares issued and outstanding as of September 30, 2018 and December 31, 2017								—		—
Common Stock at par, $0.01 par value; 300,000 shares authorized; 68,926 and 71,628 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively								689		716
Additional paid-in capital		1,480,932			—			1,505,279		1,501,830
Retained earnings		24,824			—			128,875		176,582
Total stockholders' equity		1,506,472			2,417,285			1,634,843		1,679,128
Total liabilities and stockholders' equity	$	2,527,924		$	2,547,266		$	2,615,798	$	2,511,039

The accompanying notes are an integral part of ~~these condensed consolidated~~the Consolidated and ~~combined financial statements.~~Combined Financial Statements.

~~CONSOLIDATED AND COMBINED STATEMENTS OF INCOME~~Consolidated and Combined Statements of Income

	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016		2017			2016		2018			2017			2018			2017
Revenues:
Retail	$	118,825		$	119,828	$	346,780		$	343,013	$	151,627		$	118,825		$	430,828		$	346,780
Wholesale^(a)(1)		41,074			42,467		122,917			128,421		17,685			41,074			66,953			122,917
Total		159,899			162,295		469,697			471,434
Total revenues												169,312			159,899			497,781			469,697
Operating expenses:
Product support, technology and operations		36,598			32,469		106,479			98,381
Cost of revenues and operations												24,034			18,176			65,924			49,618
Product and technology												15,918			18,422			56,202			56,861
Marketing and sales		50,733			48,670		160,246			160,275		56,083			50,733			181,645			160,246
General and administrative		11,606			7,738		42,305			23,277		14,345			9,180			45,609			34,364
Affiliate revenue share		2,121			2,162		6,837			6,264		4,097			2,121			11,193			6,837
Amortization of intangible assets		19,467			19,088		58,402			55,416
Total		120,525			110,127		374,269			343,613
Depreciation and amortization												26,504			21,893			77,154			66,343
Total operating expenses												140,981			120,525			437,727			374,269
Operating income		39,374			52,168		95,428			127,821		28,331			39,374			60,054			95,428
Nonoperating (expense) income:
Interest (expense) income, net		(5,431	)		41		(7,160	)		53
Interest expense, net												(7,005	)		(5,431	)		(20,305	)		(7,160	)
Other income, net		64			88		199			142		65			64			76			199
Total nonoperating (expense) income, net		(5,367	)		129		(6,961	)		195
Total nonoperating expense, net												(6,940	)		(5,367	)		(20,229	)		(6,961	)
Income before income taxes		34,007			52,297		88,467			128,016		21,391			34,007			39,825			88,467
Provision for income taxes		13,019			452		15,782			452
Income tax expense												5,594			13,019			10,373			15,782
Net income	$	20,988		$	51,845	$	72,685		$	127,564	$	15,797		$	20,988		$	29,452		$	72,685
Earnings per share, basic	$	0.29		$	0.72	$	1.01		$	1.78
Weighted-average common shares outstanding, basic		71,699			71,588		71,693			71,588
Earnings per share, diluted	$	0.29		$	0.72	$	1.01		$	1.78
Weighted-average common shares outstanding, diluted		71,767			71,588		71,763			71,588
Weighted-average common shares outstanding:
Basic												69,652			71,699			70,900			71,693
Diluted												70,029			71,767			71,153			71,763
Earnings per share:
Basic											$	0.23		$	0.29		$	0.42		$	1.01
Diluted												0.23			0.29			0.41			1.01

The accompanying notes are an integral part of ~~these condensed consolidated~~the Consolidated and ~~combined financial statements.~~Combined Financial Statements.

	Preferred Stock				Common Stock						Additional
	Shares		Amount		Shares			Amount			Paid-in Capital			Retained Earnings			Stockholders' Equity

Balance at December 31, 2017		—	$	—		71,628		$	716		$	1,501,830		$	176,582		$	1,679,128
Net income		—		—		—			—			—			29,452			29,452
Transactions with TEGNA, net ⁽¹⁾		—		—		200			2			(3,568	)		—			(3,566	)
Repurchases of common stock		—		—		(2,986	)		(30	)		—			(77,159	)		(77,189	)
Shares issued in connection with stock-based compensation plans, net		—		—		84			1			(478	)		—			(477	)
Stock-based compensation expense		—		—		—			—			7,495			—			7,495
Balance at September 30, 2018		—	$	—		68,926		$	689		$	1,505,279		$	128,875		$	1,634,843

Nine Months Ended September 30,

2017

2016

Cash flows from operating activities:

Net income

$
72,685

$
127,564

Adjustments to reconcile net income to operating cash flows:

Depreciation and amortization

66,343

61,549

Amortization of unfavorable contracts liability

(18,900
)

(18,900
)
Write-off and loss on assets

1,446

111

Gain on trading securities related to deferred compensation

(199
)

(143
)
Provision for doubtful accounts receivable

2,561

2,177

Deferred income taxes

8,388

(34
)
Share-based compensation

1,493

—

Amortization of debt issuance costs

463

—

Increase (decrease) in operating assets and liabilities

12,916

(31,888
)
Net cash flow provided by operating activities

147,196

140,436

Cash flows from investing activities:

Purchase of property and equipment

(27,631
)

(7,387
)
Purchase of investments

—

(2,216
)
Payment for acquisition, net of cash acquired

—

(114,945
)
Proceeds from sale of property and equipment

—

15

Net cash used in investing activities

(27,631
)

(124,533
)
Cash flows from financing activities:

Proceeds from issuance of long-term debt

675,000

—

Payments of debt issuance costs and other fees

(6,208
)

—

Payments of long-term debt

(50,625
)

—

Cash distribution to TEGNA related to Separation

(650,000
)

—

Transactions with TEGNA, net

(69,200
)

(11,283
)
Net cash used in financing activities

(101,033
)

(11,283
)
Increase in cash and cash equivalents

18,532

4,620

Cash and cash equivalents at beginning of period

8,896

100

Cash and cash equivalents at end of period

$
27,428

$
4,720

Supplemental non-cash information:

Purchases of property and equipment in accrued liabilities and accounts payable

$
3,050

$
50

Supplemental cash flow information:

Cash paid for income taxes, net of refunds

$
5,726

$
—

Cash paid for interest

$
6,826

$
—

The accompanying notes are an integral part of ~~these condensed consolidated~~the Consolidated and ~~combined financial statements.~~

~~CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS’ EQUITY~~Consolidated and Combined Statements of Cash Flows

Common Stock

Shares

Amount

Additional Paid in Capital

TEGNA's Investment, net

Retained Earnings

Stockholders' Equity

Balance at December 31, 2016

—

$
—

$
—

$
2,417,285

$
—

$
2,417,285

Net income

—

—

—

47,861

24,824

72,685

Transactions with TEGNA, net

—

—

—

(69,200
)

—

(69,200
)
Cash distribution to TEGNA related to Separation

—

—

—

(650,000
)

—

(650,000
)
Deferred taxes related to Separation

—

—

—

(265,791
)

—

(265,791
)
Distribution by TEGNA

71,588

716

1,479,439

(1,480,155
)

—

—

Issuance of share-based compensation awards

37

—

—

—

—

—

Share-based compensation

—

—

1,493

—

—

1,493

Balance at September 30, 2017

71,625

$
716

$
1,480,932

$
—

$
24,824

$
1,506,472

Balance at December 31, 2015

—

$
—

$
—

$
2,304,519

$
—

$
2,304,519

Net income

—

—

—

127,564

—

127,564

Transactions with TEGNA, net

—

—

—

(11,283
)

—

(11,283
)
Balance at September 30, 2016

—

$
—

$
—

$
2,420,800

$
—

$
2,420,800

	Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities:
Net income	$	29,452		$	72,685
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation		9,195			7,941
Amortization of intangible assets		67,959			58,402
Amortization of unfavorable contracts liability		(18,900	)		(18,900	)
Stock-based compensation expense		7,495			1,493
Deferred income taxes		7,137			8,388
Provision for doubtful accounts		3,451			2,561
Amortization of debt issuance costs		971			463
Other, net		762			1,247
Changes in operating assets and liabilities, net of Acquisition:
Accounts receivable		1,119			2,665
Prepaid expenses		66			(238	)
Other current assets		330			(5,519	)
Other assets		602			616
Accounts payable		(2,397	)		(209	)
Accrued compensation		(3,363	)		(8,451	)
Other accrued liabilities		18,306			10,430
Other noncurrent liabilities		(1,104	)		3,652
Cash received from lessor for lease incentives		—			9,970
Net cash provided by operating activities		121,081			147,196
Cash flows from investing activities:
Payment for Acquisition, net ⁽¹⁾		(157,153	)		—
Purchase of property and equipment		(9,966	)		(27,631	)
Net cash used in investing activities		(167,119	)		(27,631	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		195,000			675,000
Payments of debt issuance costs and other fees		—			(6,208	)
Payments of long-term debt		(71,875	)		(50,625	)
Payments related to stock-based compensation plans, net		(477	)		—
Repurchases of common stock		(76,681	)		—
Cash distribution to TEGNA related to Separation		—			(650,000	)
Transactions with TEGNA, net		(2,683	)		(69,200	)
Net cash provided by (used in) financing activities		43,284			(101,033	)
Net (decrease) increase in cash and cash equivalents		(2,754	)		18,532
Cash and cash equivalents at beginning of period		20,563			8,896
Cash and cash equivalents at end of period	$	17,809		$	27,428

Supplemental cash flow information:
Cash paid for income taxes, net of refunds	$	500		$	5,726
Cash paid for interest		19,472			6,826

The accompanying notes are an integral part of ~~these condensed consolidated~~the Consolidated and ~~combined financial statements.~~Combined Financial Statements.

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~Notes to the Consolidated and Combined Financial Statements

NOTE 11. Description of Business, Company History and Summary of Significant Accounting Policies

~~Separation from TEGNA, description~~Description of ~~business~~Business and ~~basis of presentation~~

~~Separation from TEGNA~~Company History. ~~On September 7, 2016,~~Cars.com (“the Company”) is a leading two-sided digital automotive marketplace that creates meaningful connections between consumers (individuals researching cars or looking to purchase a car) and partners, dealer customers and automotive original equipment manufacturers (“OEMs”). While connecting advertising partners with in-market car shoppers and providing data-driven intelligence to increase inventory turn and gain market share, the Company empowers consumers with resources and information to assist them in making better informed buying decisions around The 4Ps of Automotive Marketing^TM: Product, Price, Place and Person. The Company has evolved into one of the largest digital automotive platforms, connecting tens of thousands of local dealers across the country with millions of consumers. Through trusted expert content, on-the-lot mobile features and intelligence, millions of new and used vehicle listings, a comprehensive set of pricing and research tools, and the largest database of consumer reviews in the industry, the Company believes Cars.com is transforming the car shopping experience.

In May 2017, the Company separated from its former parent company, TEGNA Inc. (“TEGNA”), our former parent company, announced its plan to separate its digital automotive marketplace business, including Cars.com, LLC, the principal entity through which TEGNA’s digital automotive marketplace business has historically been operated, and DMR Holdings, Inc. (“DealerRater”), a leading automotive dealer review website, from its other digital businesses (the “Separation”). The Separation occurred on May 31, 2017 by means of a spin-off of a newly formed company, ~~named~~ Cars.com Inc. ~~(“Cars.com,” the “Company,” “our,” “us” or “we”)~~, which now owns ~~the~~TEGNA’s former digital automotive marketplace ~~business. We~~business (the “Separation”). The Company filed a Registration Statement on Form 10 relating to the Separation with the U.S. Securities and Exchange Commission (the “SEC”) ~~on May 5, 2017, that~~, which was declared effective ~~by the SEC~~ on May 15, ~~2017 (the “Registration Statement on Form 10”).~~2017. On May 31, 2017, wethe Company made a ~~$650~~$650.0 million cash transfer to TEGNA and TEGNA completed the Separation through a pro rata distribution to its stockholders of all of the outstanding shares of ~~our~~the Company’s common stock. ~~Our common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017.~~ Each holder of TEGNA common stock received one share of ~~our~~the Company’s common stock for every three shares of TEGNA common stock held on May 18, 2017, the record date for the distribution. TEGNA structured the distribution to be tax-free to its U.S. stockholders for U.S. federal income tax purposes. The Company’s common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017.

In ~~connection with~~February 2018, the Separation and prior to the distribution, we entered into various agreements to effect the Separation and provide a framework for our relationship with TEGNA after the Separation and distribution. These agreements include a separation and distribution agreement, a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements provide for the allocation between Cars.com and TEGNACompany acquired all of the ~~assets, employees, liabilities~~outstanding stock of Dealer Inspire Inc. (“DI”) and obligations (including investments, property, employee benefits and tax-related assets and liabilities) of TEGNA and its subsidiaries attributable to periods prior to, at and after the Separation and govern the relationship between Cars.com and TEGNA subsequent to the completionsubstantially all of the ~~Separation. A summary~~net assets of ~~these agreements can be found in our Registration Statement on Form 10.~~

In connection with the Separation and distribution, on May 30, 2017, we adopted several compensation and benefit plans, including the Cars.com Inc. Omnibus Incentive Compensation Plan (the “Omnibus Plan”Launch Digital Marketing LLC (“LDM”). A summary of each of these plans can be found in the Registration Statement on Form 10. At the time of the distribution, we issued equity awards under the Omnibus Plan as a result of the conversion of certain outstanding share-based awards previously granted by TEGNA into awards denominated in our shares in accordance with the terms of the separationFor additional information, see Note 3 (Business Combination and ~~distribution agreement and the employee matters agreement we entered into with TEGNA.~~Goodwill).

~~Description of business~~. Cars.com is a leading online destination that helps car shoppers and owners navigate every turn of car ownership. A pioneer in automotive classifieds, the Company has evolved into one of the largest digital automotive platforms, connecting consumers with local dealers across the country anytime, anywhere. Through trusted expert content, on-the-lot mobile app features, millions of new and used vehicle listings, a comprehensive set of research tools and the largest database of consumer reviews in the industry, Cars.com helps shoppers buy, sell and service their vehicles. Cars.com properties include DealerRater®, Auto.com™, PickupTrucks.com™ and NewCars.com®. The Company was founded in 1998 and is headquartered in Chicago, Illinois.

Basis of Presentation. ~~On August 1, 2016, TEGNA purchased 100%~~These accompanying unaudited interim Consolidated and Combined Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of ~~DealerRater, a leading automotive dealer review website. DealerRater was~~America (“U.S. GAAP”) and the rules and regulations of the 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 and Combined Financial Statements should be read in conjunction with the audited Consolidated and Combined Financial Statements and the notes thereto for the year ended December 31, 2017, which are included in the ~~distribution~~Company's Annual Report on Form 10-K dated March 6, 2018 (the “December 31, 2017 Consolidated and Combined Financial Statements”).

The significant accounting policies used in preparing these Consolidated and Combined Financial Statements were applied on a basis consistent with those reflected in the December 31, 2017 Consolidated and Combined Financial Statements. In the opinion of management, the Consolidated and Combined Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to ~~Cars.com~~present fairly the Company's financial position, results of operations, cash flows and changes in stockholders' equity as ~~part~~ of the ~~Separation.~~dates and for the periods indicated. The unaudited results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of results that may be expected for the year ended December 31, 2018.

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

Principles of Consolidation. The accompanying ~~financial statements combine~~unaudited Consolidated and Combined Financial Statements include the ~~activity~~accounts of Cars.com Inc. and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation. The accompanying unaudited Consolidated and Combined Financial Statements for the ~~acquired business from~~period prior to the ~~date of acquisition and reflect the application of push down accounting. The accompanying interim financial statements~~Separation are derived from the historical accounting records of TEGNA and present ~~our~~its financial position, results of operations and cash flows as ofif the ~~periods presented as if we~~Company were a separate ~~entity. These interim financial statements are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)~~entity for ~~interim financial statements. Accordingly,~~ the ~~interim financial statements do not include all information~~period prior to the Separation and ~~footnotes normally included in annual financial statements prepared in accordance with U.S. GAAP.~~

~~Since TEGNA’s acquisition of Cars.com, LLC in 2014, Cars.com, LLC has primarily operated as a standalone entity within TEGNA’s broader corporate organization. The historical financial statements~~ include allocations of certain TEGNA corporate ~~expenses. Such costs primarily include~~expenses, such as insurance and other general corporate overhead expenses and were allocated based on either the actual costs incurred, or Cars.com, LLC’s headcount relative to TEGNA’s consolidated headcount. The historical allocated corporate costs, through the Separation, were $0 million and $2.5 million during the three and nine months ended September 30, 2017, respectively, and $0.3 million and $0.5 million during the three and nine months ended September 30, 2016, respectively. Our management believes that such allocations are reasonable. These allocated expenses relate to the various services that have historically been provided to Cars.com, LLC by TEGNA. However, such expenses may not be indicative of the actual level of expense that would have been incurred by Cars.com, LLC if it had operated as an independent, publicly-traded company prior to the Separation or the costs expected to be incurred in the future.

~~All of our internal intercompany accounts have been eliminated.~~expenses. All significant intercompany transactions between either (i) usthe Company and TEGNA or (ii) usthe Company and TEGNA affiliates have been included within the ~~financial statements~~Consolidated and Combined Financial Statements and are considered to be effectively

settled through equity contributions or distributions at the time the transactions were recorded. The ~~accumulated net effect of intercompany transactions between either (i) us and TEGNA or (ii) us and TEGNA affiliates are included in “TEGNA’s investment, net.” The~~ total net effect of these intercompany transactions is reflected in “Transactions with TEGNA, net” in the ~~Condensed~~ Consolidated and Combined Statements of Cash Flows as financing activities.

Notes to the ~~audited annual financial statements,~~Consolidated and ~~notes thereto, as~~Combined Financial Statements (continued)

Reclassifications. Certain prior year balances have been reclassified to conform to the current year presentation. Cost of revenues and ~~for~~operations have been reclassified from the ~~year ended December 31, 2016 included in our Registration Statement on Form 10. These interim financial statements follow~~product support, technology and operations line item into a separate line item. Depreciation expense amounts have also been reclassified from the ~~same accounting policies~~General and ~~methods in their application as~~administrative line item into the ~~most recent audited financial statements. In the opinion~~amortization of ~~management, the interim financial statements reflect all adjustments (all of~~intangible assets line item, which has been renamed Depreciation and amortization. There are ~~of a normal and recurring nature), which are necessary~~no changes to ~~present fairly the financial position, results of operations and cash flows for the interim periods.~~total Operating expenses, Operating income or Net income.

~~See Note 2, “Summary of significant accounting policies” in Part I, Item 13 of our Registration Statement on Form 10 for a discussion of Cars.com’s significant accounting policies.~~

Revenue Recognition. The Financial Accounting Standards Board (the “FASB”) amended the FASB Accounting Standards Codification (“ASC”) and created ~~a new~~ Topic 606, Revenue from Contracts with ~~Customers.~~Customers (“ASC 606”). Under ~~the amendment,~~ASC 606, revenue recognition ~~of revenue~~ occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration which the ~~entity~~Company expects to receive in exchange for those goods or services. In addition, ~~the standard~~ASC 606 requires ~~disclosure of~~additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The required adoption date of the standard is January 1, 2018. The two permitted transition methods are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown; and the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We will adopt the standard using the modified retrospective method. OurCompany’s primary source of revenue is ~~through~~ the sale of online subscription advertising products ~~to car dealerships. We currently do not expect the standard to have a material impact on this revenue stream,~~and services, which will continue to be recognized ~~primarily on a straight-line basis~~ratably over the contract term as the service is provided to ~~our customers.~~the customer. Effective January 1, 2018, the Company adopted ASC 606 using the modified retrospective method. The adoption did not have a material impact on its Consolidated and Combined Financial Statements. For further information, see Note 10 (Revenues).

Financial Instruments – Equity Investments.In January 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments—Overall ~~(Subtopic 825-10). This guidance amended~~, amending several elements surrounding the recognition and measurement of financial ~~instruments. The new guidance requires~~instruments and requiring equity investments (except those accounted for under the equity method of accounting or those that result in consolidation) to be measured at fair value with changes in fair value recognized in ~~Net~~net income. Effective January 1, 2018, the Company adopted this ASU on a prospective basis. The ~~new guidance is effective for us beginning in the first quarter of 2018. We are currently evaluating the effect this new guidance will~~adoption did not have a material impact on ~~our financial statements~~its Consolidated and Combined Financial Statements and related disclosures.

~~In February 2016, the FASB amended the FASB Accounting Standards Codification and created a new Topic 842,~~ Financial Instruments – Credit Losses.~~Leases~~. This guidance related to leases which will require lessees to recognize assets and liabilities on the Condensed Consolidated and Combined Balance Sheets for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current U.S. GAAP—which requires only capital leases to be recognized on the Condensed Consolidated and Combined Balance Sheets—the new guidance will require both types of leases to be recognized on the Condensed Consolidated and Combined Balance Sheets. The new guidance is effective for us beginning in the first quarter of 2019 and will be adopted using a modified retrospective approach. We are currently evaluating the effect it is expected to have on our financial statements and related disclosures.

In June 2016, the FASB issued ~~Accounting Standards Update~~ASU No. 2016-13, Financial Instruments—Credit Losses ~~(Topic 326).~~ ~~This guidance related to the measurement of credit losses on financial instruments. The new guidance changes~~ changing the way credit losses on accounts receivable are estimated. Under current U.S. GAAP, credit losses on trade accounts receivable are recognized once it is probable that such losses will occur. Under ~~the~~this new guidance, wethe Company will be required to estimate credit losses based on the expected amount of future collections which may result in earlier recognition of allowance for doubtful accounts. The new guidance is effective for ~~public companies beginning in~~ the ~~first quarter of~~Company on January 1, 2020 and will be adopted using a modified retrospective approach. ~~We are~~The Company is currently evaluating ~~the effect~~ this new guidance ~~will~~and does not expect it to have a material impact on ~~our financial statements~~its Consolidated and Combined Financial Statements and related disclosures.

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-04,~~ Stock-Based Compensation.~~Simplifying the Test for Goodwill Impairment.~~ ~~This guidance eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill~~

impairment test) to measure a goodwill impairment charge. Instead, companies will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on Step 1 of the impairment test). The standard has tiered effective dates, starting in 2020. Early adoption is permitted for interim and annual goodwill impairment testing dates after January 1, 2017. We are currently evaluating the effect this new guidance will have on our financial statements and related disclosures.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation, ~~(Topic 718).~~ ~~This guidance clarifies~~clarifying when changes to the terms or conditions of a ~~share-based~~stock-based payment award must be accounted for as ~~modifications. The new guidance will allow the Company to make~~modifications and allowing for certain changes to awards without accounting for them as ~~modifications~~modifications. Effective January 1, 2018, the Company adopted the ASU on a prospective basis. The adoption did not have a material impact on its Consolidated and Combined Financial Statements and related disclosures.

Definition of a Business. In January 2017, the FASB issued ASU 2017-01, Business Combinations, clarifying the definition of a business with the objective of adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Effective January 1, 2018, the Company adopted this ASU on a prospective basis. The adoption did not have a material impact on its Consolidated and Combined Financial Statements and related disclosures.

Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) requiring lessees to recognize assets and liabilities on the Consolidated and Combined Balance Sheets for leases with lease terms of more than 12 months and to disclose additional quantitative and qualitative information about leasing arrangements. The new guidance is effective for the Company on January 1, 2019. The Company plans to utilize the package of practical expedients and to initially apply Topic 842 as of January 1, 2019 and recognize a cumulative-effect adjustment to the opening balance of retained earnings. Although the Company is currently evaluating the provisions of the ASU to determine its full impact on the Company’s Consolidated and Combined Financial Statements, the primary impact will be to record assets and liabilities for current operating leases, which are principally related to real estate.

Cloud Computing Arrangements. In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, aligning the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs for internal-use software. The new guidance is effective for the Company on January 1, 2020 and early adoption is permitted. The

Company is currently evaluating this new guidance and does not ~~change the accounting for modifications. The new guidance should be applied prospectively~~expect it to have a material impact on its Consolidated and ~~is effective for us beginning in the first quarter of 2018. We are currently evaluating the effect this new guidance will have on our financial statements~~Combined Financial Statements and related disclosures.

On February 21, 2018, the Company acquired all of the outstanding stock of DI, an innovative technology leader providing progressive dealer websites, digital retailing and ~~other intangible~~messaging platform products, and substantially all of the net assets of LDM, a provider of digital marketing services, including paid, organic, social and ~~liabilities~~creative services (collectively, the “Acquisition”). The Acquisition consists of proprietary solutions that are complementary extensions of the Company’s online marketplace platform and current suite of dealer solutions.

The ~~following table displays goodwill, indefinite-lived intangibles and amortizable intangible assets at~~Company expensed as incurred total acquisition costs of $4.9 million, of which $4.3 million was recorded during the nine months ended September 30, ~~2017 and December 31, 2016 (in thousands):~~

Gross

Accumulated
Amortization

Net

September 30, 2017

Goodwill

$
788,107

$
—

$
788,107

Indefinite-lived intangibles:

Trade name

872,320

—

872,320

Amortizable intangible assets:

Customer relationships

814,240

(189,090
)

625,150

Acquired software

71,700

(31,069
)

40,631

Trade name

9,800

(953
)

8,847

Non-compete agreements

2,860

(1,716
)

1,144

Content library

2,100

(1,225
)

875

Total amortizable intangible assets

900,700

(224,053
)

676,647

Total

$
2,561,127

$
(224,053
)

$
2,337,074

December 31, 2016

Goodwill

$
788,107

$
—

$
788,107

Indefinite-lived intangibles:

Trade name

872,320

—

872,320

Amortizable intangible assets:

Customer relationships

814,240

(140,788
)

673,452

Acquired software

71,700

(22,798
)

48,902

Trade name

9,800

(340
)

9,460

Non-compete agreements

2,860

(1,287
)

1,573

Content library

2,100

(438
)

1,662

Total amortizable intangible assets

900,700

(165,651
)

735,049

Total

$
2,561,127

$
(165,651
)

$
2,395,476

We also have an intangible liability related to unfavorable wholesale contracts that Cars.com, LLC entered into as part of the acquisition by TEGNA in October 2014. The unfavorable contracts liability at September 30, 2017 and December 31, 2016 was $50.4 million and $69.3 million, respectively. Liabilities that will be amortized in the next twelve months are2018. These costs were recorded in ~~accrued liabilities, with the remainder recorded~~General and administrative in ~~unfavorable contracts liability on the Condensed Consolidated and Combined Balance Sheets. Amortization of the liability is recognized as wholesale revenue on~~ the Consolidated and Combined Statements of ~~Income~~Income. In connection with the Acquisition, DI’s unvested equity awards were cash settled for a total of $5.7 million. The fair value of these awards was based on the price paid per common share to the owners of the acquired businesses and ~~was $6.3 million~~recognized immediately after the Acquisition as compensation expense in the Company’s Consolidated and ~~$18.9~~Combined Statements of Income.

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 income approach. These preliminary fair values are subject to change within the one-year measurement period. The Acquisition purchase price allocation is as follows (in thousands):

In addition to the total consideration of $160.8 million, the Company granted stock-based compensation awards, worth up to $25.5 million, to certain employees. These awards require continued employee service and are based on DI’s and LDM’s future performance related to certain revenue targets to be attained over a three-year performance period. For further information, see Note 9 (Stock-Based Compensation).

Goodwill. In connection with the Acquisition, the Company recorded goodwill in the amount of $96.2 million, which is primarily attributable to sales growth from existing and future technology, product offerings and customers and the value of the acquired assembled workforce. Of the total goodwill recorded in connection with the Acquisition, approximately $15.0 million is deductible for income tax purposes. The Company’s goodwill activity for the nine months ended September 30, 2018 is as follows (in thousands):

Pro forma Financial Information (unaudited). The unaudited pro forma information presented below summarizes the combined revenues and net income of the Company and DI and LDM, as if the Acquisition had been completed on January 1, 2017 and gives effect to pro forma events that are factually supportable and directly attributable to the transaction. The unaudited pro forma results reflect adjustments for incremental intangible asset amortization based on the fair values of each identifiable intangible asset, interest expense on the borrowings under the revolving loan to fund the Acquisition, certain other compensation related costs including stock-based compensation and retention bonuses, and integration costs. Pro forma adjustments were tax-affected at the Company’s corporate blended statutory tax rate applicable during the respective periods presented.

This unaudited pro forma information is presented for informational purposes only and may not be indicative of the historical results of operations that would have been obtained if the Acquisition had taken place on January 1, 2017, nor the results that may be obtained in the future. The unaudited pro forma information does not reflect future synergies or other such costs or savings.

Selected unaudited pro forma information for the three months ended September 30, 2018 and 2017, respectively, is as follows (in thousands):

From the date of the Acquisition, the Company included DI’s and LDM’s financial results in its Consolidated and Combined Statements of Income for the three and nine months ended September 30, ~~2017~~2018. A summary of DI and ~~2016, respectively.~~LDM contributed revenues and net loss is as follows:

We have a 21% ownership interest in RepairPal, Inc. (“RepairPal”), an online marketplace offering consumers a price estimator for car repairs and an ability to research repair shop reviews. We account for our investment underIn connection with the ~~cost method. While we believe that we~~October 2014 acquisition of Cars.com by TEGNA, the Company entered into affiliate agreements with the former owners of Cars.com. Under the affiliate agreements, affiliates have the ~~ability~~exclusive right to ~~exercise significant influence, it has been determined that our investment is not substantially similar to common stock on the acquisition date because it has~~sell and price Cars.com’s products and services in their local territories, paying Cars.com a ~~substantive liquidation preference over RepairPal’s common stock. This factor precludes us from accounting~~wholesale rate for the ~~investment under~~Cars.com product. The Company charges the ~~equity method.~~affiliates 60% of the corresponding Cars.com retail rate for products sold to affiliate dealers and recognizes revenue generated from these agreements as Wholesale revenues in the Consolidated and Combined Statements of Income. The unfavorable contracts liability was established as a result of these unfavorable affiliate agreements that the Company entered into as part of TEGNA’s acquisition of the Company in 2014.

Prior to the affiliate conversions discussed below, over the annual contract period, the Company recognized $25.2 million of convertible debt issued by RepairPal. The debt accrues interest at an annual rate of 7% and matures in May 2018. The debt converts into shares of preferred stock upon the earlier of May 2018 or the date on which RepairPal raises proceeds of at least $5 million throughWholesale revenues with a ~~single or series of related transactions related to any sale of preferred stock.~~

~~The aggregate carrying amount~~corresponding reduction of the ~~investment at~~unfavorable contracts liability. As of September 30, ~~2017~~2018 and December 31, ~~2016 was $9.4 million and $9.3 million, respectively. We record these amounts in investments and other assets~~2017, the unfavorable contracts liability on the ~~Condensed~~ Consolidated and Combined Balance ~~Sheets. No events~~Sheets was $25.2 million and $44.1 million, respectively. Of the total unfavorable contracts liability balances, $25.2 million was recorded in current liabilities on the Consolidated and Combined Balance Sheet as of September 30, 2018 and December 31, 2017.

In January 2018, the Company announced it amended its affiliate agreement with The McClatchy Company (“McClatchy”) to convert McClatchy’s 22 affiliate markets into the Company’s direct sales channel in phases, on or ~~circumstances have occurred~~before October 2018, prior to the original October 2019 affiliate agreement expiration date. As of October 1, 2018, the Company has completed the McClatchy affiliate market conversions.

In January 2018, the Company amended its affiliate agreement with tronc, Inc. (“tronc”) to convert tronc’s eight affiliate markets into the Company’s direct sales channel, effective February 1, 2018.

In July 2018, the Company amended its affiliate agreement with the Washington Post and agreed to convert the Washington, DC market into the Company’s direct sales channel, effective August 1, 2018, which was prior to the October 2019 expiration of the original agreement.

The Company now has a direct relationship with the dealer customers and recognizes the revenue associated with converted markets as Retail revenues, rather than Wholesale revenues, in the Consolidated and Combined Statements of Income. In addition, as part of the recent changes in the structure of the affiliate agreements, the Company engaged McClatchy, tronc and the Washington Post to perform certain marketing support and transition services through December 31, 2019, March 31, 2020 and October 1, 2019, respectively. The fees associated with the amended affiliate agreements are recorded as Affiliate revenue share within Operating expenses in the Consolidated and Combined Statements of Income.

The Company no longer records the amortization of the unfavorable contracts liability associated with the converted markets to revenues as the Company is recognizing this direct revenue at retail rates. The amortization of the unfavorable contracts liability is now recorded as a reduction of Affiliate revenue share within Operating expenses in the Consolidated and Combined Statements of Income.

Therefore, during the three and nine months ended September 30, ~~2017 that required us~~2018, the Company recorded $5.4 million and $12.9 million, respectively, as a reduction to ~~estimate~~Affiliate revenue share, rather than Wholesale revenues, in the Consolidated and Combined Statements of Income. The reduction to Affiliate revenue share was partially offset by the fees associated with the marketing support and transition services.

The Company’s unfavorable contracts liability activity for the nine months ended September 30, 2018 is as follows (in thousands):

As of September 30, 2018, the Company is in compliance with the covenants under its various credit agreements.

Term Loan. As of September 30, 2018, the outstanding principal amount under the term loan was $421.9 million and the interest rate in effect was 3.9%. During the nine months ended September 30, 2018, the Company made $16.9 million in quarterly term loan payments.

Revolving Loan. As of September 30, 2018, the outstanding borrowings under the revolving loan was $285.0 million and the interest rate in effect was 3.8%. During the nine months ended September 30, 2018, the Company borrowed $165.0 million to fund the Acquisition and $30.0 million to fund share repurchases. The Company also made $55.0 million in voluntary revolving loan payments. As of September 30, 2018, the Company was permitted to borrow an additional $165.0 million under the revolving loan. The Company’s borrowings are limited by its net leverage ratio, which was 2.9 to 1.0 as of September 30, 2018.

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. The carrying amount of the ~~investment.~~Company’s debt approximated the fair value as of September 30, 2018.

Prior to the Separation, Cars.com LLC was a multi-member LLC that iswas considered ~~to be~~ a partnership for U.S. income tax purposes. Multi-member LLCs are generally considered flow-through entities and therefore are not subject to federal, state or local income taxes. Effective with the Separation, the Company established a corporate legal entity structure that is subject to U.S. corporate income tax on a stand-alone basis post-Separation.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law. The new legislation contains several key tax provisions that impact the Company, including the reduction of the corporate income tax rate to 21% effective January 1, 2018. The Company continues to evaluate the impacts of the Tax Cuts and Jobs Act and will consider additional guidance from the U.S. Treasury Department, Internal Revenue Service or other standard-setting bodies. Further adjustments, if any, will be recorded by the Company during the measurement period in 2018 as permitted by SEC Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act.

A summary of income tax expense (dollars in thousands) and the effective tax rate for the three and nine months ended September 30, 2018 and 2017, respectively, is as follows:

Income tax expense was ~~$13.0~~$5.6 million and $10.4 million for the three and nine months ended September 30, 2018, respectively, compared to $13.0 million and $15.8 million for the three and nine months ended September 30, 2017, ~~compared to~~respectively. The current period income tax expense reflects the financial activity for Cars.com and DMR Holdings, Inc. (“DealerRater”), the Company’s only subsidiary prior to the Acquisition, and the financial results of ~~$0.5 million~~DI and LDM for the ~~same~~post-acquisition period of ~~the prior year.~~February 21, 2018 through September 30, 2018. The prior ~~year~~period income tax expense represents ~~only two months~~the financial activity of DealerRater ~~activity as DealerRater was acquired~~and corporate income tax for the Company upon its Separation from TEGNA on ~~August~~June 1, ~~2016.~~2017. The effective income tax rate, expressed by calculating the income tax expense as a percentage of income before income taxes, was ~~38.3%~~26.2% and 26.0% for the three and nine months ended September 30, ~~2017~~2018, respectively, and differed from the U.S. federal statutory rate primarily due to state income ~~taxes.~~

~~Income tax expense was $15.8 million for~~taxes, nondeductible transaction costs and the nine months ended September 30, 2017, based upon four months of Cars.com, LLC information and nine months of DealerRater information, compared to income tax expense of $0.5 million for the same periodimpact of the ~~prior year. The prior year income~~Tax Cuts and Jobs Act, partially offset by certain tax ~~expense represents only two months of DealerRater activity as DealerRater was acquired on August 1, 2016. The effective income~~credits and excess tax ~~rate, expressed by calculating the income tax expense as a percentage of income before income taxes, was 17.8% for the nine months ended September 30, 2017 and differed~~benefits from ~~the U.S. federal statutory rate primarily due to pre-Separation income generated by a flow-through entity not subject to federal, state or local income taxes.~~stock-based compensation.

~~With the implementation of the post-Separation legal entity structure, the Company was required to record deferred tax assets~~NOTE 7. Commitments and liabilities for temporary differences between financial accounting and tax reporting. Accordingly, the Company recorded $267 million of net deferred tax liability associated with the outside basis difference in the Cars.com, LLC flow-through entity with the offset recorded in TEGNA’s investment net. Separately, the Company recorded $8 million of net deferred tax asset associated with the DealerRater corporate entity during 2017.Contingencies

To achieve a tax qualified Employee Share Purchase Program (“ESPP”), participating employees of Cars.com, LLC must be employed by an entity taxed as a C corporation. Consequently, in October 2017, Cars.com, LLC prospectively changedThe Company and its corporate structure to convert from being taxed as a partnership to being taxed as a C corporation. As a result of the change in corporate structure, Cars.com, LLC was also required to change its reporting of deferred tax assets and liabilities. This reporting change results in a $69 million non-cash write-off of the deferred tax liability associated with non-deductible goodwill which Cars.com, LLC will record through a credit to income tax expense in the fourth quarter of 2017.

In June 2001, we established a long-term incentive plan (“LTIP”). Under the plan, at our discretion, we may designate employees to participate and may make annual contributions to the participants’ account. In the nine months ended September 30, 2017, we contributed $0.3 million. For full-year 2016, we contributed $0.6 million. The total amount contributed by us is marked to market quarterly and any unrealized gains (losses) are recognized in other income, net on the Consolidated and Combined Statements of Income. Management will not make any new contributions to the LTIP subsequent to the Separation.

~~Under this plan, deferred compensation expense was not material in the three months ended September 30, 2017~~and $0.3 million in the nine months ended September 30, 2017, and $0.2 million and $0.7 million in the three and nine months ended September 30, 2016, respectively. The deferred compensation liability was $2.0 million and $3.1 million at September 30, 2017 and December 31, 2016, respectively.

We measure and record certain assets at fair value in the accompanying financial statements. U.S. GAAP establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:

~~Financial assets that are carried at fair value on a recurring basis in the balance sheet consist of marketable securities held as LTIP investments.~~

The following table presents the LTIP investments carried at fair value as of September 30, 2017 and December 31, 2016, by category on the Condensed Consolidated and Combined Balance Sheets in accordance with the valuation hierarchy defined above (in thousands):

Fair value for mutual funds is measured using Level 1 inputs and quoted market prices at the reporting date multiplied by the quantity held. Our fixed income fund investment consists of a commingled fund for which quoted market prices are not available. The fair value of the investment represents the net asset value as provided by the trustee.

In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and cash equivalents, receivables and accounts payable. The carrying amounts for these balances approximated their fair values.

Certain assets and liabilities are measured at fair value on a nonrecurring basis, and therefore, not included in the tables above. These assets include goodwill and intangible assets and result as acquisitions occur. The amounts assigned to intangible assets and goodwill as they relate to our acquisitions are based on our best estimate of the fair value. We use an independent valuation specialist to assist in determining the fair value of the identified intangible assets at acquisition. The fair value of the significant identified intangible assets is generally estimated using a combination of an income approach using the discounted cash flow analysis and market approach using the guideline public company analysis, which represents a Level 3 fair value measurement. The income approach includes a forecast of direct revenues and costs associated with the respective intangible assets and charges for economic returns on tangible and intangible assets utilized in cash flow generation. The market approach also uses forecasted revenue and earnings, as well as comparable public company trading values. Net cash flows attributable to the identified intangible assets are discounted to their present value at a rate commensurate with the perceived risk.

Effective as of January 1, 2012, we established a Share Appreciation Rights Plan (the "SAR Plan"). Eligible participants received a number of stock appreciation rights annually that entitle the employee to receive the appreciation in the fair market value of a share from the date of grant up to a specified date or dates plus an amount equal to the distributions per share. Awards granted in a given year vest to the participant over a three-year period. Benefits paid under the SAR Plan were made in cash, not common stock, at the end of the three-year vesting period from the original grant date. Expense related to the SAR Plan has been recorded in accordance with the accounting standards for share-based payments. Due to the cash settlement at the end of the performance period, the awards were classified as a liability and remeasured each reporting period at fair value. Cars.com recorded a liability of $1.1 million and $10.8 million related to its SAR Plan on its Condensed Consolidated and Combined Balance Sheets at September 30, 2017 and December 31, 2016, respectively.

~~No stock appreciation rights were granted to employees during the three and nine months ended September 30, 2017. Management does not expect to issue any new grants subsequent to the Separation.~~

In May 2016, we entered into a new lease of office space in Chicago, Illinois. The lease extends through June 2031 and monthly rental payments under the lease escalate by 2.5% each year throughout the lease. Total minimum payments throughout the remaining life of the lease are $56.8 million.

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

In March 2018, the Company’s Board of Directors authorized a 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. The timing and ~~revolving credit facility~~amounts of any purchases under the share repurchase program will be based on market conditions and other factors including price. The repurchase program has a two-year duration, does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. The Company intends to fund the share repurchase program principally with cash from operations. During the nine months ended September 30, 2018, the Company repurchased and subsequently retired 3.0 million shares for $77.2 million.

Performance Share Units (“PSUs”). PSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting. The fair value of the PSUs is equal to the Company’s common stock price on the date of grant. During the nine months ended September 30, 2018, the Company granted 780,000 PSUs at a weighted average grant date fair value of $27.41 per unit. Of the total PSUs granted, 632,000 PSUs were granted to certain ~~of our domestic wholly-owned subsidiaries (the “Guarantors”) entered into a Credit Agreement (the “Credit Agreement”)~~employees in connection with the ~~lenders named therein.~~Acquisition and require continued employee service. The ~~Credit Agreement matures~~percentage of PSUs that shall vest will range from 0% to 150% of the number of PSUs granted based on ~~May 31, 2022~~DI’s and LDM’s future performance related to certain revenue targets over a three-year performance period. These PSUs are subject to graded vesting over three years. The remaining PSUs granted during the nine months ended September 30, 2018 require continued employee service. The percentage of these PSUs that shall vest will range from 0% to 200% of the number of PSUs granted based on the Company’s future performance related to certain revenue and adjusted earnings before interest, income taxes, depreciation and amortization targets over a two-year performance period. These PSUs are subject to graded vesting over three years.

Restricted Share Units (“RSUs”). RSUs represent the right to receive unrestricted 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. RSU’s are subject to graded vesting, generally ranging between one and four years and the fair value of the RSUs is equal to the Company’s common stock price on the

date of grant. During the nine months ended September 30, 2018, the Company granted 519,000 RSUs at a weighted-average grant-date fair value of $26.74 per unit.

Employee Stock Purchase Plan (“ESPP”). During the nine months ended September 30, 2018, the Company issued 21,000 shares of the Company’s common stock in connection with the first ESPP offering period. In September 2018, the Company completed its second ESPP offering period and will issue 36,000 shares of the Company’s common stock during the fourth quarter of 2018.

The Company accounts for a customer arrangement when the Company and the customer have an approved contract that specifies the rights and obligations of each party and the payment terms, and the Company believes it is probable it will collect substantially all of the consideration to which it will be entitled in exchange for the services that will be provided to the customer. The Company allocates the contractual transaction price to each distinct performance obligation and recognizes revenue when it satisfies a performance obligation by providing a service to a customer. Revenue is generated through the Company’s direct sales force (Retail revenues) and affiliate sales channels (Wholesale revenues).

Online Subscription Advertising Products and Services Revenue. The Company’s primary source of Retail and Wholesale revenues is through the sale of online subscription advertising products to dealer customers through varying levels of subscription packages. The Company’s subscription packages provide the dealer customer’s available new and used vehicle inventory to in-market shoppers on the Cars.com website. The subscription packages are generally a fixed price arrangement with a one-year contract term that is automatically renewed, typically on a month-to-month basis. The Company recognizes subscription package revenues ratably as the service is provided over the contract term. Online subscription advertising products and services revenue is recorded in Retail revenues and Wholesale revenues in the Consolidated and Combined Statements of Income.

The Company also offers its customers several add-on products to the subscription packages. Add-on products include premium advertising products that can be uniquely tailored to an individual dealer customer’s current needs. The Company does not sell add-on products separately from the subscription packages as the customer cannot benefit from add-on products on their own. Therefore, the subscription packages and add-on products are combined as a single performance obligation and the Company recognizes the related revenue ratably as the services are provided over the contract term.

As part of the acquisition of DI, the Company also provides services related to flexible, custom designed website platforms supporting highly personalized digital marketing campaigns, digital retailing and messaging platform products. The Company recognizes revenue related to these services ratably as the services are provided over the contract term. The related revenue is recorded in Retail revenues in the Consolidated and Combined Statements of Income.

The Company’s affiliates also sell online subscription advertising products to dealer customers and the Company earns Wholesale revenues through its affiliate agreements. Affiliates are assigned certain sales territories in which they sell the Company’s products. Under these agreements, the Company charges the affiliates 60% of the corresponding Cars.com retail rate for products sold to affiliate dealers. The Company recognizes Wholesale revenues ratably as the service is provided over the contract term. In situations where the Company’s direct sales force sells the Company’s products within an affiliate’s assigned territory, the Company pays the affiliate a revenue share which is classified as “Affiliate revenue share” in the Consolidated and Combined Statements of Income. Wholesale revenues also includes ~~(a) revolving loan commitments~~a portion of the amortization of the unfavorable contracts liability. For information related to the unfavorable contracts liability, see Note 4 (Unfavorable Contracts Liability).

Display Advertising Products and Services Revenue. The Company also earns revenue through the sale of display advertising on the Company’s website to national advertisers, pursuant to transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements. An impression is the display of an advertisement to an end-user on the website and is a measure of volume. A click-through occurs when an end-user clicks on an impression. The Company recognizes revenue as the impressions or click-throughs are delivered. If the impressions or click-throughs delivered are less than the amount invoiced to the customer, the difference is recorded as deferred revenue and recognized as revenue when earned. Display advertising products revenue is recorded in ~~an aggregate principal amount~~Retail revenues in the Consolidated and Combined Statements of upIncome.

As part of the acquisition of LDM, the Company also provides services related to ~~$450 million (of~~customized digital marketing and customer acquisition services, including paid, organic, social and creative services. The Company recognizes revenue related to these services

primarily at the point in time the service is provided. The related revenue is recorded in Retail revenues in the Consolidated and Combined Statements of Income.

Pay Per Lead Revenue. The Company also sells certain leads, which upare connections from consumers to ~~$25 million may be~~dealer customers in the form of ~~letters of credit~~phone calls, emails and text messages, to dealer customers, OEMs and third-party resellers. The Company recognizes pay per lead revenue primarily on a per-lead basis at ~~our request)~~the point in time in which the lead has been delivered. Revenue related to pay per leads is recorded in Retail revenues and (b) term loans in an aggregate principal amount of $450 million. Interest on the borrowings under the Credit Agreement is payable based on the London Interbank Offered Rate or the alternate base rate, as definedWholesale revenues in the ~~Credit Agreement, in either case plus an applicable margin~~Consolidated and fees which, after the second full fiscal quarter following the closing date, is based upon our total net leverage ratio. On May 31, 2017, we borrowed $675 million to fund a $650 million cash payment to TEGNA immediately prior to the distribution, to pay fees and expensesCombined Statements of Income.

Other Revenue. Other revenue primarily includes revenues related to vehicle listing data sold to third-parties and peer-to-peer vehicle advertising. The Company recognizes Other revenue either ratably as the ~~Separation~~services are provided or at the point in time the services have been performed. Other revenue is recorded in Retail revenues in the Consolidated and ~~to fund working capital. The term loan requires quarterly amortization payments which commenced on September 30, 2017. In the third quarter~~Combined Statements of 2017, we made $5.6 million of term loan quarterly amortization payments and voluntarily paid down $45 million on the revolving loan. As of September 30, 2017, the Company had $624.4 million of debt outstanding and $270 million available under the revolving loan. Debt issuance costs were $5.7 million at September 30, 2017 and are being amortized over the term of the Credit Agreement.Income.

~~On October 31, 2017, we voluntarily paid down an additional $25 million on~~Revenue Summary. In the ~~revolving loan.~~table below (in thousands), revenue is disaggregated by sales channel and major products and services. The Company only has one reportable segment; therefore, further disaggregation is not applicable at this time.

	Three Months Ended September 30,				Nine Months Ended September 30,
Sales channel	2018		2017		2018		2017
Direct	$	119,510	$	82,504	$	336,521	$	249,412
National advertising		28,107		32,002		82,155		85,379
Other		4,010		4,319		12,152		11,989
Retail		151,627		118,825		430,828		346,780
Wholesale		17,685		41,074		66,953		122,917
Total revenues	$	169,312	$	159,899	$	497,781	$	469,697

Major products and services
Online subscription advertising	$	127,965	$	120,144	$	380,218	$	362,328
Display advertising		30,748		28,155		86,634		76,422
Pay per lead		7,933		9,141		22,968		23,952
Other		2,666		2,459		7,961		6,995
Total revenues	$	169,312	$	159,899	$	497,781	$	469,697

Practical Expedient and Exemption. The Company does not disclose the value of unsatisfied performance obligations ~~under the Credit Agreement are guaranteed by the Guarantors and the Company and the Guarantors secured their respective obligations under the Credit Agreement by granting liens in favor~~for contracts with an original expected length of the agent on substantially all of their assets. The terms of the Credit Agreement include representations and warranties, affirmative and negative covenants (including certain financial covenants) and events of default that are customary for credit facilities of this nature. A summary of the Credit Agreement can be found in our Registration Statement on Form 10.one year or less.

Basic earnings per share is calculated by dividing ~~net~~Net income by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under ~~equity-based~~stock-based compensation plans, unless the inclusion of such shares would have an anti-dilutive impact.

The total shares outstanding on May 31, 2017, the date of Separation, was 71.6 million. The total number of shares outstanding at that date is being utilized for the calculation of both basic and diluted earnings per share for the three and nine months ended September 30, 2016, as no equity-based awards were outstanding prior to the Separation date.

~~The computations of our basic and diluted earnings per share are set forth below (in thousands, except per share amounts):~~

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Net income	$	20,988	$	51,845	$	72,685	$	127,564	$	15,797	$	20,988	$	29,452	$	72,685
Basic weighted-average shares outstanding		71,699		71,588		71,693		71,588
Effect of dilutive share-based compensation awards		68		—		70		—
Diluted weighted-average shares outstanding		71,767		71,588		71,763		71,588
Basic weighted-average common shares outstanding										69,652		71,699		70,900		71,693
Effect of dilutive stock-based compensation awards										377		68		253		70
Diluted weighted-average common shares outstanding										70,029		71,767		71,153		71,763
Earnings per share, basic	$	0.29	$	0.72	$	1.01	$	1.78	$	0.23	$	0.29	$	0.42	$	1.01
Earnings per share, diluted	$	0.29	$	0.72	$	1.01	$	1.78		0.23		0.29		0.41		1.01

In May 2017, the Cars.com Board of Directors approved the Omnibus Plan. The Omnibus Plan provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares and other equity-based and cash based awards of Cars.com.

Prior to the Separation and distribution from TEGNA, certain Cars.com employees received TEGNA RSUs based on TEGNA common stock. Due to the spin-off from TEGNA, all outstanding TEGNA RSUs granted in 2016 or later held by certain Cars.com employees following the Separation or certain former employees of the Cars.com business, were converted into an award denominated in shares of Cars.com common stock, with the number of shares subject to the award adjusted in a manner intended to preserve the aggregate intrinsic value of the original TEGNA RSUs award as measured immediately before and immediately after the Separation.

The Company granted approximately 13,000 and 265,000 RSUs during the three and nine months ended September 30, 2017, respectively, at a weighted-average share price of $26.55 and $25.85, respectively.

~~The table below presents information related to share-based compensation (in thousands):~~

~~The unrecognized share-based compensation is expected to be recognized over a weighted-average period of 3.1 years.~~

~~We are~~As a result of the Separation, certain stock-based awards previously granted by TEGNA to its employees were converted into stock of both TEGNA and Cars.com. The Company is responsible for any employee payroll taxes related to awards settled in Cars.com common stock for which stock was withheld for payroll tax purposes. During the nine months ended September 30, 2018, the

Company withheld $3.6 million, which is recorded as a reduction of Additional paid-in capital on the Consolidated and Combined Balance Sheets.

The Company is party to a commercial agreement with TEGNA, who was considered a related party through the Separation date of May 31, 2017. ~~Related party revenue earned from this agreement was $0 million and $3.4 million for~~During the three and nine months ended September 30, 2017, ~~respectively,~~related party revenue generated with this agreement was zero and ~~$2.1~~$3.4 million, ~~and $6.3 million for~~respectively. Although TEGNA is no longer a related party, the ~~three and nine months ended September 30, 2016, respectively. The~~ commercial agreement with TEGNA is still effective after the Separation.

Prior to the Separation and distribution, TEGNA utilized a centralized approach to cash management and the financing of its operations, providing funds to its subsidiaries as needed. These transactions were recorded in “TEGNA’s investment, net” when advanced. Accordingly, none of TEGNA’s cash and cash equivalents were assigned to us in TEGNA’s financial statements. Cash and cash equivalents in our Condensed Consolidated and Combined Balance Sheets represent cash held locally by us.

Equity in the Condensed Consolidated and Combined Balance Sheets represents the accumulated balance of transactions between us and TEGNA, our paid-in-capital, and TEGNA’s interest in our cumulative retained earnings, and are presented within “TEGNA’s investment, net.” The amounts comprising the accumulated balance of transactions between us and TEGNA and TEGNA affiliates include (i) the cumulative net assets attributed to us by TEGNA and TEGNA affiliates and (ii) the cumulative net advances to TEGNA representing our cumulative funds swept (net of funding provided by TEGNA and TEGNA affiliates to us) as part of the centralized cash management program. See Note 1 of this report for additional information.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements include information concerning our business strategies, plans and objectives, market potential, future financial performance, planned operational and product improvements, liquidity and other matters. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “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, estimates, projections and assumptions, based on our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we think are appropriate. 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 performance or results. Our actual results 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:

For a detailed discussion of these risks and uncertainties, see Part I, Item 1A— “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”) on March 6, 2018. All forward-looking statements made in this this Quarterly Report on Form 10-Q are qualified by these cautionary statements. The forward-looking statements contained herein are based only on information currently available to us and speak only as of the date of this this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q are intended to be subject to the safe harbor protection provided by the Federal securities laws.

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

The following discussion and analysis of our business, financial condition, ~~and~~ results of operations and quantitative and qualitative disclosures should be read in conjunction with our ~~unaudited condensed consolidated~~Consolidated and ~~combined financial~~Combined 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 ~~related notes.~~should also be read in conjunction with the disclosures and information contained in “Note About Forward-Looking Information” in this Quarterly Report on Form 10-Q. The financial information discussed below and included elsewhere in this ~~report~~Quarterly Report on Form 10-Q may not necessarily reflect what our financial condition, results of operations and cash ~~flow~~flows would have been had we been a stand-alone company during the applicable periods presented or what our financial condition, results of operations and cash flows may be in the ~~future~~.future.

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

We are a leading ~~online destination~~two-sided digital automotive marketplace that ~~helps~~creates meaningful connections between consumers (individuals researching cars or looking to purchase a car) and partners, dealer customers and automotive original equipment manufacturers (“OEMs”). While connecting advertising partners with in-market car shoppers and ~~owners navigate every~~providing data-driven intelligence to increase inventory turn and gain market share, we empower consumers with resources and information to assist them in making better- informed buying decisions around The 4Ps of ~~car ownership. A pioneer in automotive classifieds, the Company has~~Automotive Marketing^TM: Product, Price, Place and Person. We have evolved into one of the largest digital automotive platforms, connecting ~~consumers with~~tens of thousands of local dealers across the country ~~anytime, anywhere.~~with millions of consumers. Through trusted expert content, on-the-lot mobile ~~app~~ features and intelligence, millions of new and used vehicle listings, a comprehensive set of pricing and research tools, and the largest database of consumer reviews in the industry, we believe Cars.com ~~helps shoppers buy, sell and service their vehicles. Cars.com properties include DealerRater®, Auto.com™, PickupTrucks.com™ and NewCars.com®. The Company was founded in 1998 and~~ is ~~headquartered in Chicago, Illinois.~~

~~The following table presents some of~~transforming the ~~Company’s key financial metrics for each of the periods indicated:~~car shopping experience.

~~On September 7, 2016,~~our former parent company, TEGNA Inc. (“TEGNA”), our former parent company, announced its plan to separate its digital automotive marketplace business, including Cars.com, LLC, the principal entity through which TEGNA’s digital automotive marketplace business has historically been operated, and DMR Holdings, Inc. (“DealerRater”), a leading automotive dealer review website, from its other digital businesses (the “Separation”). The Separation occurred on May 31, 2017 by means of a spin-off of a newly formed company, ~~named~~ Cars.com Inc., which now owns ~~the~~TEGNA’s former digital automotive marketplace ~~business.~~business (the “Separation”). We filed a Registration Statement on Form 10 relating to the Separation with the U.S. Securities and Exchange Commission (the “SEC”) ~~on May 5, 2017, that~~, which was declared effective ~~by the SEC~~ on May 15, ~~2017 (the “Registration Statement on Form 10”).~~2017. On May 31, 2017, we made a ~~$650~~$650.0 million cash ~~payment~~transfer to TEGNA and TEGNA completed the Separation through a pro rata distribution to its stockholders of all of the outstanding shares of our common stock. ~~Our common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017.~~ Each holder of TEGNA common stock received one share of our common stock for every three shares of TEGNA common stock held on May 18, 2017, the record date for the distribution. TEGNA structured the distribution to be tax-free to its U.S. stockholders for U.S. federal income tax purposes. Our common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017.

~~On August 1, 2016, TEGNA purchased 100%~~In February 2018, we acquired all of ~~DealerRater, a leading automotive dealer review website. DealerRater was~~the outstanding stock of Dealer Inspire Inc. (“DI”) and substantially all of the net assets of Launch Digital Marketing LLC (“LDM”) (collectively, “the Acquisition”). For additional information, see Note 3 (Business Combination and Goodwill) to the accompanying Consolidated and Combined Financial Statements included in ~~the distribution to Cars.com, Inc. as part~~Part I, Item 1 “Financial Statements” of ~~the Separation. The accompanying financial statements combine the activity for the acquired business from the date~~this Quarterly Report on Form 10-Q.

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 following table presents certain of these~~We also review other key ~~metrics.~~metrics including: unique visitors, average revenue per dealer and dealer customer and consumer satisfaction statistics.

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,							Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		% Change			2018		2017		% Change
Traffic (Visits)		101,698,000		102,723,000		311,612,000		321,577,000		113,751,000		101,698,000		12	%		340,121,000		311,612,000		9	%
Dealer Customers		21,307		21,743		21,307		21,743
Average Vehicle Listings		4,869,000		4,614,000		4,956,000		4,698,000		4,655,000		4,869,000		(4	)%		4,785,000		4,956,000		(3	)%

Traffic (Visits).Traffic ~~(Visits)~~ and our ability to generate traffic are key to our business. Tracking our traffic performance is a critical measure. Traffic to the Cars.com 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 an internal metric representing the number of visits to Cars.com desktop and mobile properties (web browser and apps). Visits ~~refer~~refers to the number of times visitors accessed Cars.com properties during the period, no matter how many visitors make up those visits. We measure traffic using Adobe Analytics. Traffic ~~(Visits) numbers provide~~provides an indication of our consumer reach. Although our consumer reach does not directly result in revenue, we believe our ability to reach diverse demographic audiences is attractive to our dealers and national advertisers.

Traffic increases were primarily driven by an increase in search engine optimization and planned strategic marketing investments aimed at consumer acquisition, engagement and brand awareness amongst auto shopping audiences. Mobile traffic accounted for 68% and 66% of total Traffic for the three and nine months ended September 30, 2018, respectively. Average monthly unique visitors increased 10% and 9% for the three and nine months ended September 30, 2018, respectively.

Dealer Customers. Our value to consumers tracks to our ability to showcase the inventory of our dealer and ~~Original Equipment Manufacturer (“OEM”)~~OEM customers. The larger the advertiser base, the more inventory and options that are available for

consumers to review. Dealer Customers represents the car dealerships using our products as of the end of each reporting period. Each dealership location is counted separately, whether it is a single-location proprietorship or part of a large consolidated dealer group. Multi-franchise dealerships at a single location are counted as one dealer. Beginning June 30, 2018, this key operating metric includes DI and LDM customers.

Total Dealer Customers declined 2% from June 30, 2018. Direct dealer customers increased 419, resulting from dealer customers converted from affiliate markets, partially offset by higher cancellations in previously converted affiliate markets and lower overall sales.

Total Dealer Customers declined 4% from September 30, 2017. Direct dealer customers increased 3,048, resulting from dealer customers converted from affiliate markets and the addition of incremental customers from the Acquisition, partially offset by higher cancellations in previously converted affiliate markets and due to the sunsetting of a lower priced, legacy DealerRater baseline product.

Average Vehicle Listings.Our value to consumers tracks to our ability to showcase the inventory of our dealer and OEM customers. The more vehicle listings that are available for consumers to review, the more traffic we attract and the higher the consumer engagement. Average Vehicle Listings represents the daily average of vehicles listed for sale on Cars.com properties. The daily average is calculated on a monthly basis and averaged for the reporting period.

Declines in Average Vehicle Listings for the three and nine months ended September 30, 2018 were due to fewer new car listings, primarily related to fewer dealer customers. For the three and nine months ended September 30, 2018, used car listings were flat and increased 3%, respectively.

Our continued success will depend in part on our ability to address and successfully manage challenges, both specific to our business and in the digital advertising marketplace generally. In the near term, we may experience compressed margins as a result of our transition from a wholly-owned subsidiary of TEGNA to an independent publicly traded company. Due to the transition, we have further developed our internal infrastructure and support functions through the recruiting and hiring of managers and employees required to strengthen our legal, treasury, finance, tax, investor relations and other similar functions. Similarly, we will incur ongoing public company costs, including those related to an independent board of directors, compliance with regulatory and stock exchange requirements and increased auditing and insurance fees. Further, the indebtedness we incurred in connection with the Separation from TEGNA in May 2017 and the Acquisition in February 2018, has reduced our free cash flow, which may limit our ability to make strategic acquisitions or other transactions that we believe to be in the best interests of our stockholders or that might increase the value of our business. We expect to manage these incremental costs and the associated increased risk by focusing on improving our operating efficiency and continued growth in our business to drive operating margins and generate free cash flow. In addition, our business is subject to risks related to the larger automotive ecosystem, including consumer demand and other macroeconomic factors. We have recently observed the beginning of a cyclical downturn in the United States auto market, which has impacted new car sales and thus OEMs’ and dealers’ spending. While our customers may weigh lower-priced and other options in the market, we believe that the value we deliver will provide continuity as they evaluate their spend.

~~The following table sets forth our selected statement of operations for each of the periods indicated:~~Three Months Ended September 30, 2017

	Three Months Ended September 30,					Increase						Three Months Ended September 30,						Increase
In thousands (except % amounts)	2017			2016		(Decrease)			% Change
In thousands (except percentages)												2018			2017			(Decrease)			% Change
Revenues:
Direct revenue	$	82,504		$	84,651	$	(2,147	)		(3	)%
National advertising revenue		32,002			31,214		788			3	%
Other revenue		4,319			3,963		356			9	%
Retail revenue		118,825			119,828		(1,003	)		(1	)%
Wholesale revenue		41,074			42,467		(1,393	)		(3	)%
Direct												$	119,510		$	82,504		$	37,006			45	%
National advertising													28,107			32,002			(3,895	)		(12	)%
Other													4,010			4,319			(309	)		(7	)%
Retail													151,627			118,825			32,802			28	%
Wholesale													17,685			41,074			(23,389	)		(57	)%
Total revenues		159,899			162,295		(2,396	)		(1	)%		169,312			159,899			9,413			6	%
Operating expenses:
Product support, technology and operations		36,598			32,469		4,129			13	%
Cost of revenues and operations													24,034			18,176			5,858			32	%
Product and technology													15,918			18,422			(2,504	)		(14	)%
Marketing and sales		50,733			48,670		2,063			4	%		56,083			50,733			5,350			11	%
General and administrative		11,606			7,738		3,868			50	%		14,345			9,180			5,165			56	%
Affiliate revenue share		2,121			2,162		(41	)		(2	)%		4,097			2,121			1,976			93	%
Amortization of intangible assets		19,467			19,088		379			2	%
Depreciation and amortization													26,504			21,893			4,611			21	%
Total operating expenses		120,525			110,127		10,398			9	%		140,981			120,525			20,456			17	%
Operating income		39,374			52,168		(12,794	)		(25	)%		28,331			39,374			(11,043	)		(28	)%
Nonoperating (expense) income:
Interest (expense) income, net		(5,431	)		41		(5,472	)	***%
Interest expense, net													(7,005	)		(5,431	)		(1,574	)		29	%
Other income, net		64			88		(24	)		(27	)%		65			64			1			2	%
Total nonoperating (expense) income, net		(5,367	)		129		(5,496	)	***%
Total nonoperating expense, net													(6,940	)		(5,367	)		(1,573	)		29	%
Income before income taxes		34,007			52,297		(18,290	)		(35	)%		21,391			34,007			(12,616	)		(37	)%
Provision for income taxes		13,019			452		12,567		***%
Income tax expense													5,594			13,019			(7,425	)		(57	)%
Net income	$	20,988		$	51,845	$	(30,857	)		(60	)%	$	15,797		$	20,988		$	(5,191	)		(25	)%

Retail ~~Revenue—~~Revenues—Direct. Direct ~~revenue represents~~revenues primarily represent online subscription products sold ~~by Cars.com sales teams~~ to ~~our local automotive~~ dealer customers ~~and includes DealerRater products which we acquired in August 2016. Automotive dealer customers~~who purchase advertising packages to market their vehicle inventory and other aspects of ~~the dealership, such as the service department.~~their dealership. Direct ~~revenue~~revenues is our largest revenue stream, representing ~~52%~~70.6% of total ~~revenue~~revenues for the ~~third quarter~~three months ended September 30, 2018. The addition of ~~2017. Direct revenue for the third quarter of 2017 decreased 3% as compared~~DI’s and LDM’s business contributed $15.8 million to the ~~year-ago period reflecting~~direct revenue increase. The affiliate market conversions contributed $25.6 million to direct revenue, while reducing wholesale revenues $22.6 million ($5.4 million relates to the unfavorable contracts liability amortization). Excluding the impact of the Acquisition and affiliate market conversions, direct revenues declined $4.4 million, primarily due to a 7% decline in ~~average revenue per~~ dealer ~~partially offset by an increase~~customers. Direct dealer customers decreased 2% from June 30, 2018. For information related to the affiliate market conversions, see Note 4 (Unfavorable Contracts Liability) to the accompanying Consolidated and Combined Financial Statements included in ~~average dealer count.~~Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Retail ~~Revenue—~~Revenues—National Advertising. National advertising ~~revenue~~revenues consists of display advertising sold to advertising agencies and OEMs, as well as leads sold to OEMs. ~~Banner display~~Display ads are placed throughout the Cars.com ~~websites~~website and apps. National advertising ~~revenue~~revenues represented ~~20%~~16.6% of total ~~revenue~~revenues for the ~~third quarter of 2017.~~three months ended September 30, 2018. National advertising revenue ~~for the third quarter of 2017 rose 3%~~declined 12%, as ~~compared~~OEMs reduced their spending on display ads mostly due to the ~~year-ago period mainly due to increased lead volume sold to OEMs.~~cyclical nature of the auto industry.

~~Retail Revenue—Other~~. Other revenue includes revenue from (1) vehicle listing data sold to third-parties, (2) new-car leads sold to third-parties and (3) products such as Sell It Yourself/For Sale By Owner. Other revenue represented 2% of total revenue for

the third quarter of 2017. Other revenue for the third quarter of 2017 increased 9% as compared to the year-ago period mainly due to an increase in volume of data sales and higher lead volume sold to third-party lead resellers.

Wholesale ~~Revenue~~Revenues. Wholesale ~~revenue represents~~revenues represent the ~~wholesale~~ fees ~~paid to Cars.com~~we charge for online subscription products sold to dealers by affiliates. Wholesale ~~revenue~~revenues represented ~~26%~~10.4% of total ~~revenue for the third quarter of 2017. Wholesale~~ revenues for the ~~third quarter of 2017~~three months ended September 30, 2018. Wholesale revenues decreased ~~3% as compared~~primarily due to the ~~year-ago period reflecting~~affiliate market conversions from wholesale revenues ($22.6 million, which includes $5.4 million of unfavorable contracts liability amortization) to direct revenues ($25.6 million). In addition, excluding the affiliate market conversions, wholesale revenues was impacted by a 7% decline in ~~average~~ dealer ~~count, partially offset by an increase~~customers. For information related to the affiliate market conversions, see Note 4 (Unfavorable Contracts Liability) to the accompanying Consolidated and Combined Financial Statements included in ~~average revenue per dealer.~~Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

~~Product support, technology~~Cost of revenues and operations. Cost of revenues and operations primarily consist of expenses related to our pay-per-lead products, third-party costs for processing dealer vehicle inventory, product fulfillment, customer service and related compensation costs. Cost of revenues and operations represents 14.2% and 11.4% of total revenues for the three months ended September 30, 2018 and 2017,

respectively. The addition of DI’s and LDM’s business contributed $6.5 million to the overall increase. Excluding the impact of the Acquisition, cost of revenues and operations decreased $0.7 million and 4%, primarily due to reduced compensation.

Product and technology. The product ~~support~~ team creates and manages consumer and dealer-facing ~~products~~innovation, manages consumer user experience and includes the costs associated with our editorial ~~content (i.e. vehicle reviews, “Best of Awards”~~ and ~~video content pertinent to consumers). Primary costs include compensation and content license fees for third-party content such as vehicle specifications.~~data strategy teams. The technology team ~~builds consumer and dealer products~~develops and supports the Cars.com ~~website~~products and ~~apps. Technology~~website. Product and technology expenses include compensation ~~staff augmentation and outsourced development,~~costs, as well as license fees for vehicle specifications, search engine optimization, hardware/software maintenance, software licenses, data center and other infrastructure costs. ~~Operations includes product fulfillment, customer service, traffic acquisition costs related to our pay-per-lead products~~Product and ~~third-party costs such as inventory processing, photo/video maintenance~~technology expenses represent 9.4% and ~~trackable phone numbers to support our customers.~~11.5% of total revenues for the three months ended September 30, 2018 and 2017, respectively. Product ~~support,~~and technology ~~and operations~~ expenses ~~increased 13% in the third quarter of 2017 as compared to the year-ago period~~decreased 14%, primarily due to reduced compensation costs associated with lower headcount, partially offset by the ~~higher volume~~addition of ~~our pay-per-lead product sales~~DI’s and the acquisition of DealerRater in August 2016. Product support, technology and operations expense represents 23% of revenue for the third quarter of 2017 compared with 20% for the third quarter of 2016.LDM’s business.

Marketing and sales. Marketing and sales expenses primarily consist of traffic and lead acquisition costs (including search engine management and other online marketing), TV and online advertising and production of ad creative, market research, ~~sales~~trade events and compensation costs for ~~our~~the marketing, sales support and sales teams. Marketing and sales expenses ~~increased 4% in~~represent 33.1% and 31.7% of total revenues for the ~~third quarter~~three months ended September 30, 2018 and 2017, respectively. The addition of ~~2017 as compared~~DI’s and LDM’s business contributed $4.2 million to the ~~year-ago period~~overall increase, as we expanded the salesforce to support our new product offerings. Excluding the impact of the Acquisition, marketing and sales expenses increased $1.2 million and 2%, primarily due to ~~higher spend in~~planned strategic marketing investments aimed at consumer engagement, brand ~~marketing,~~awareness amongst auto shopping audiences and search engine optimization, partially offset by ~~savings resulting from elimination of third-quarter sales meetings. Marketing and sales expense represents 32% of revenue for the third quarter of 2017 compared with 30% for the third quarter of 2016.~~cost efficiencies related to investments aimed at consumer acquisition.

General and administrative. General and administrative expenses primarily consist of ~~salaries, benefits and incentive~~ compensation costs for ~~our executive,~~the finance, legal, human resources, facilities and other administrative employees. In addition, ~~depreciation,~~general and administrative expenses include office space rent, legal and accounting services, other professional services, ~~share-based compensation for all other eligible Company employees, transaction related~~transaction-related costs ~~restructuring costs,~~and costs related to the ~~corporate headquarters office relocation and~~ write-off and loss on ~~assets are included in general and administrative expenses.~~assets. General and administrative expenses ~~increased $3.9 million, or 50%, in the third quarter~~represent 8.5% and 5.7% of 2017 as compared to the year-ago period mainly due to $0.5 million in non-recurring items which is composed of $0.3 million related to the Separation from TEGNA and $0.2 million related to the corporate headquarters office relocation. In addition, $2.5 million of the increase in general and administrative costs is related to the incremental cost of being a public company, $0.6 million of the increase is due to share-based and deferred compensation awards and $0.4 million of the increase is due to additional depreciation expense in the third quarter of 2017 as compared to the year-ago period.

~~Amortization of intangibles~~. As a result of TEGNA’s acquisition of Cars.com, LLC in October 2014 and the acquisition of DealerRater in August 2016, we recorded amortizable intangible assets for customer relationships, acquired software, trade-names, non-compete agreements and a content library. This expense category reflects the amortization of these assets.

~~Interest (expense) income, net~~. During the three months ended September 30, 2017, interest expense was $5.5 million related to our new Credit Agreement (the “Credit Agreement”) entered into in connection with the Separation. The Company did not have any interest expensetotal revenues for the three months ended September 30, ~~2016.~~2018 and 2017, respectively. General and administrative expenses increased $5.2 million and 56%, primarily due to $2.9 million in costs related to consulting services incurred as part of our settlement agreement with our stockholder activist, $0.8 million in incremental stock-based compensation and the addition of DI’s and LDM’s business.

Affiliate revenue share. ~~Provision for~~Affiliate revenue share expenses primarily represent payments made to affiliates pursuant to our affiliate agreements. Affiliate revenue share expenses increased 93%, primarily due to increase in costs associated with the early conversions of the McClatchy, tronc and Washington Post markets, partially offset by amortization of the unfavorable contracts liability which was previously recorded in wholesale revenues. For information related to the unfavorable contracts liability, see Note 4 (Unfavorable Contracts Liability) to the accompanying Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Depreciation and amortization. Depreciation and amortization expense increased 21%, primarily due to the incremental amortization expense related to the Acquisition.

Interest expense, net. Interest expense increased due to interest associated with the Credit Agreement principally utilized to fund the Separation and the Acquisition. For information related to our term and revolving loans, see Note 5 (Debt) to the accompanying Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Income tax expense. The effective income ~~taxes.~~ ~~During~~tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 26.2% for the three months ended September 30, ~~2017,~~2018 and differed from the ~~tax provision was $13.0 million, or an effective~~U.S. federal statutory rate of ~~38.3%~~21%, primarily due to state income taxes, nondeductible transaction costs and the impact of the Tax Cuts and Jobs Act, partially offset by certain tax credits and excess tax benefits from stock-based compensation. For information related to income taxes, see Note 6 (Income Taxes) to the Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017

	Nine Months Ended September 30,						Increase
In thousands (except percentages)	2018			2017			(Decrease)			% Change
Revenues:
Direct	$	336,521		$	249,412		$	87,109			35	%
National advertising		82,155			85,379			(3,224	)		(4	)%
Other		12,152			11,989			163			1	%
Retail		430,828			346,780			84,048			24	%
Wholesale		66,953			122,917			(55,964	)		(46	)%
Total revenues		497,781			469,697			28,084			6	%
Operating expenses:
Cost of revenues and operations		65,924			49,618			16,306			33	%
Product and technology		56,202			56,861			(659	)		(1	)%
Marketing and sales		181,645			160,246			21,399			13	%
General and administrative		45,609			34,364			11,245			33	%
Affiliate revenue share		11,193			6,837			4,356			64	%
Depreciation and amortization		77,154			66,343			10,811			16	%
Total operating expenses		437,727			374,269			63,458			17	%
Operating income		60,054			95,428			(35,374	)		(37	)%
Nonoperating (expense) income:
Interest expense, net		(20,305	)		(7,160	)		(13,145	)		184	%
Other income, net		76			199			(123	)		(62	)%
Total nonoperating expense, net		(20,229	)		(6,961	)		(13,268	)		191	%
Income before income taxes		39,825			88,467			(48,642	)		(55	)%
Income tax expense		10,373			15,782			(5,409	)		(34	)%
Net income	$	29,452		$	72,685		$	(43,233	)		(59	)%

Retail Revenues—Direct. Direct revenues is our largest revenue stream, representing 67.6% of total revenues for the nine months ended September 30, 2018. The addition of DI’s and LDM’s business since the date of the Acquisition contributed $36.0 million to the direct revenue increase. The affiliate market conversions contributed $61.3 million to direct revenue, while reducing wholesale revenues $54.5 million ($12.9 million relates to the unfavorable contracts liability amortization). Excluding the impact of the Acquisition and affiliate market conversions, direct revenues declined $10.2 million, primarily due to a 7% decline in dealer customers. Direct dealer customers decreased 2% from June 30, 2018. For information related to the affiliate market conversions, see Note 4 (Unfavorable Contracts Liability) to the accompanying Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Retail Revenues—National Advertising. National advertising revenues represented 16.5% of total revenues for the nine months ended September 30, 2018. National advertising revenue decreased 4%, as OEMs reduced their spending on display ads mostly due to the cyclical nature of the auto industry.

Wholesale Revenues. Wholesale revenues represented 13.5% of total revenues for the nine months ended September 30, 2018. Wholesale revenues decreased primarily due to the affiliate market conversions from wholesale revenues ($54.5 million, which includes $12.9 million of unfavorable contracts liability amortization) to direct revenues ($61.3 million). In addition, excluding the affiliate market conversions, wholesale revenues was impacted by a 7% decline in dealer customers. For information related to the affiliate market conversions, see Note 4 (Unfavorable Contracts Liability) to the accompanying Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Cost of revenues and operations. Cost of revenues and operations represents 13.2% and 10.6% of total revenues for the nine months ended September 30, 2018 and 2017, respectively. The addition of DI’s and LDM’s business contributed $16.5 million to the overall increase. Excluding the impact of the Acquisition, cost of revenues and operations was flat, primarily due to reduced compensation costs associated with lower headcount, offset by higher third-party costs related to new product offerings.

Product and technology. Product and technology expenses represent 11.3% and 12.1% of total revenues for the nine months ended September 30, 2018 and 2017, respectively. Product and technology expenses decreased 1%, primarily due to reduced compensation costs associated with lower headcount and lower third-party costs, partially offset by the addition of DI’s and LDM’s business.

Marketing and sales. Marketing and sales expenses represent 36.5% and 34.1% of total revenues for the nine months ended September 30, 2018 and 2017, respectively. The addition of DI’s and LDM’s business contributed $11.0 million to the overall increase, as we expanded our salesforce to support our new product offerings. Excluding the impact of the Acquisition, marketing and sales expenses increased $10.4 million and 6%, primarily due to planned strategic marketing investments aimed at consumer acquisition, consumer engagement, brand awareness amongst auto shopping audiences and search engine optimization. Sales compensation costs were flat despite serving an incremental 3,400 dealer customers from converted markets.

General and administrative. General and administrative expenses represent 9.2% and 7.3% of total revenues for the nine months ended September 30, 2018 and 2017, respectively. General and administrative expenses increased $11.2 million and 33%, primarily due to $7.8 million in consulting services and other costs incurred as part of our settlement agreement with our stockholder activist, $5.0 million in costs related to the Acquisition, $3.1 million in incremental stock-based compensation, $2.8 million in incremental costs of being a public company and the addition of DI’s and LDM’s business since the date of the Acquisition. These increases were partially offset by $1.6 million in lower costs associated with the separation of certain employees and the prior year impacts of $5.0 million related to the Separation and $3.6 million related to the move to our new corporate headquarters location.

Affiliate revenue share. Affiliate revenue share expenses increased 64%, primarily due to increase in costs associated with the early conversions of the McClatchy, tronc and Washington Post markets, partially offset by amortization of the unfavorable contracts liability. For information related to the unfavorable contracts liability, see Note 4 (Unfavorable Contracts Liability) to the accompanying Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Depreciation and amortization. Depreciation and amortization expense increased 16%, primarily due to the incremental amortization expense related to the Acquisition.

Income tax expense. Effective with the Separation, ~~the Company~~we established a corporate legal entity structure that is subject to U.S. corporate income tax on a stand-alone basis post-Separation. The ~~Company~~effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 26.0% for the nine months ended September 30, 2018 and differed from the U.S. federal statutory rate of 21%, primarily due to state income taxes, nondeductible transaction costs and the impact of the Tax Cuts and Jobs Act, partially offset by certain tax credits and excess tax benefits from stock-based compensation. We recorded ~~$0.5~~$15.8 million of income tax expense for the ~~three months ended September 30, 2016. See~~same period 2017 related to DealerRater.com LLC and corporate income tax upon our Separation from TEGNA on June 1, 2017. For information related to income taxes, see Note 56 (Income Taxes) to the ~~financial statements~~Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this ~~report~~Quarterly Report on Form 10-Q.

Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and debt capacity available under our credit facilities. Our operations have generated positive cash flows in 2018 and 2017 which, along with our term and revolving loans described below, provides adequate liquidity to meet our business needs, including those for investments and strategic acquisitions. In addition, we could raise additional ~~information related to income taxes.~~

~~The following table sets forth our selected statement~~funds through other public or private debt or equity financings. As of ~~operations for each of the periods indicated:~~

Nine Months Ended September 30,

Increase

In thousands (except % amounts)

2017

2016

(Decrease)

Change

Revenues:

Direct revenue

$
249,412

$
248,579

$
833

0
%
National advertising revenue

85,379

83,221

2,158

3
%
Other revenue

11,989

11,213

776

7
%
Retail revenue

346,780

343,013

3,767

1
%
Wholesale revenue

122,917

128,421

(5,504
)

(4
)%
Total revenues

469,697

471,434

(1,737
)

(0
)%
Operating expenses:

Product support, technology and operations

106,479

98,381

8,098

8
%
Marketing and sales

160,246

160,275

(29
)

(0
)%
General and administrative

42,305

23,277

19,028

82
%
Affiliate revenue share

6,837

6,264

573

9
%
Amortization of intangible assets

58,402

55,416

2,986

5
%
Total operating expenses

374,269

343,613

30,656

9
%
Operating income

95,428

127,821

(32,393
)

(25
)%
Nonoperating (expense) income:

Interest (expense) income, net

(7,160
)

53

(7,213
)

***%

Other income, net

199

142

57

40
%
Total nonoperating (expense) income, net

(6,961
)

195

(7,156
)

***%

Income before income taxes

88,467

128,016

(39,549
)

(31
)%
Provision for income taxes

15,782

452

15,330

***%

Net income

$
72,685

$
127,564

$
(54,879
)

(43
)%

~~Retail Revenues—Direct. Direct revenue is our largest revenue stream, representing 53% of total revenue for the first nine months of 2017. Direct revenue for the nine months ended~~ September 30, ~~2017 was flat as compared to the year-ago period primarily reflecting an increase in average dealer count, partially offset by a decrease in average revenue per dealer.~~2018, cash and cash equivalents were $17.8 million.

Term Loan and Revolving Loan. ~~. National advertising revenue represented 18%~~As of ~~total revenue for the first nine months of 2017. National advertising revenue for the nine months ended~~ September 30, ~~2017 increased 3% as compared to~~2018, the ~~year-ago period mainly due to increased lead volume sold to OEMs.~~

~~Retail Revenues—Other. Other revenue represented 3%~~outstanding principal amount under the term loan was $421.9 million, with an interest rate of ~~total revenue for the first nine months of 2017. Other revenue for the nine months ended September 30, 2017 increased 7%~~3.9%, ~~as compared to the year-ago period mainly due to increased lead volume sold to third-party lead resellers and higher volume of data sales.~~

~~Wholesale Revenues~~. Wholesale revenue represented 26% of total revenue for the first nine months of 2017. Wholesale revenues for the nine months ended September 30, 2017 decreased 4% as compared to the year-ago period reflecting a decline in average dealer count, partially offset by an increase in average revenue per dealer.

~~Product support, technology and operations~~. Product support, technology and operations expenses increased 8% in the first nine months of 2017 as compared to the year-ago period due to the higher volume of our pay-per-lead product sales and the

acquisition of DealerRater in August 2016. Product support, technology and operations expense represents 23% of revenue for the nine months ended September 30, 2017 compared with 21% for the nine months ended September 30, 2016.

~~Marketing and sales~~. Marketing and sales expenses remained flat in the first nine months of 2017 as compared to the year-ago period driven by an increase in brand marketing, offset by a decline in sales expense. Marketing and sales expense represents 34% of revenue for the nine months ended September 30, 2017 compared with 34% for the nine months ended September 30, 2016.

~~General and administrative~~. General and administrative expenses increased $19 million, or 82%, in the first nine months of 2017 as compared to the year-ago period mainly due to $11.7 million in non-recurring items which is composed of $5 million related to the Separation from TEGNA, $3.6 million related to the corporate headquarters office relocation, $1.7 million related to costs associated with the separation of certain employees and $1.4 million due to the write-off or loss on certain assets disposed of in the first nine months of 2017. In addition, $5.3 million of the increase in general and administrative costs is related to the incremental cost of being a public company, $1.8 million of the increase is due to additional depreciation expense in the first nine months of 2017 as compared to the year-ago period primarily related to the acceleration of depreciation of assets in our former corporate headquarters location and $0.4 million of the increase is due to share-based and deferred compensation awards.

~~Affiliate revenue share. Affiliate revenue share costs increased 9% in the first nine months of 2017 as compared to the year-ago period primarily due to more dealer customers subject to revenue share.~~

~~Amortization of intangibles. As a result of TEGNA’s acquisition of Cars.com, LLC in October 2014~~ and the ~~acquisition~~outstanding borrowings under the revolving loan were $285.0 million, with an interest rate of DealerRater in August 2016, we recorded amortizable intangible assets for customer relationships, acquired software, trade-names, non-compete agreements and a content library. This expense category reflects the amortization of these assets.

~~Interest (expense) income, net~~3.8%. During the nine months ended September 30, ~~2017, interest expense~~2018, we borrowed $165.0 million under the revolving loan to fund the Acquisition and $30.0 million to fund share repurchases. We also made $55.0 million in voluntary revolving loan payments and $16.9 million in quarterly term loan payments. As of September 30, 2018, we were permitted to borrow an aggregate of $165.0 million under the revolving loan. Our borrowings are limited by our net leverage ratio, which was ~~$7.3~~2.9 to 1.0 as of September 30, 2018.

Share Repurchase Program. In March 2018, our Board of Directors authorized a share repurchase program to acquire up to $200 million ~~related~~of our common stock. We may repurchase shares from time to ~~our new Credit Agreement entered into~~time in ~~connection~~open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. The timing and amounts of any purchases under the ~~Separation.~~share repurchase program will be based on market conditions and other factors including price. The ~~Company did~~repurchase program has a two-year duration, does not ~~have~~require the purchase of any ~~interest expense for~~minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. We intend to fund the share repurchase program principally with cash from operations. During the nine months ended September 30, ~~2016.~~2018, the Company repurchased and subsequently retired 3.0 million shares for $77.2 million.

Operating Activities. The decrease in cash provided by operating activities is primarily due to higher interest payments related to our term and revolving loans, costs associated with the stockholder activist campaign, the cash settlement of DI’s unvested equity awards, costs related to the Acquisition and higher incremental costs of being a public company, partially offset by other changes in operating assets and liabilities and lower cash tax payments. During the nine months ended September30, 2017, we also received $10.0 million in cash from the lessor for ~~income taxes.~~ lease incentives related to the move to our new corporate headquarters location.

Investing Activities. The increase in cash used in investing activities is primarily due to the Acquisition. For information related to the Acquisition, see Note 3 (Business Combination and Goodwill) to the Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Financing Activities. The increase in cash provided by financing activities is primarily driven by net revolving loan borrowings of $140.0 million to fund the Acquisition and share repurchases and $16.9 million in quarterly term loan payments. During the nine months ended September 30, 2017, ~~the tax provision~~cash used in financing activities was ~~$15.8 million, or an effective rate of 17.8%. Effective~~primarily driven by transactions with the Separation, the Company established a corporate legal entity structure that is subject to U.S. corporate income tax on a stand-alone basis post-Separation. Tax expense for the period is based upon four months of Cars.com, LLC information and nine months of DealerRater information. The Company recorded $0.5 million of income tax expense for the nine months ended September 30, 2016. See Note 5 to the financial statements included in Part I, Item 1 of this report for additional information related to income taxes.

TEGNA. Prior to the Separation, we had access to TEGNA’s program of maintaining bank revolving credit availability as a component of our liquidity. Following the Separation, we will no longer participate in capital management with TEGNA and our ability to fund our future cash needs will depend on our ongoing ability to generate and raise cash in the future.

Our operations have historically generated strong positive cash flow which, along with our term loan and credit facility described below, we believe provide adequate liquidity to meet our requirements, including those for investments, and strategic acquisitions.

On May 31, 2017, we and certain of our domestic wholly-owned subsidiaries (the “Guarantors”) entered into a Credit Agreement with the lenders named therein. The Credit Agreement matures on May 31, 2022 and includes (a) revolving loan commitments in an aggregate principal amount of up to $450 million (of which up to $25 million may be in the form of letters of credit at the request of the Company) and (b) term loans in an aggregate principal amount of $450 million. Interest on the borrowings under the Credit Agreement is payable based on the London Interbank Offered Rate (“LIBOR”) or the alternate base rate, as defined in the Credit Agreement, in either case plus an applicable margin and fees which, after the second full fiscal quarter following the closing date, is based upon our total net leverage ratio. Borrowings under the Credit Agreement were used to fund the payment of a cash payment to TEGNA immediately prior to the distribution, to pay fees and expenses related to the Separation and distribution and related transactions. The term loan requires quarterly amortization payments which commenced on September 30, 2017. In the third quarter of 2017, we made $5.6 million of term loan quarterly amortization payments and voluntarily paid down $45 million on the revolving loan. As of September 30, 2017, the Company had $624.4 million of debt outstanding and $270 million available under the revolving loan. Debt issuance costs were $5.7 million at September 30, 2017 and are being amortized over the term of the Credit Agreement.

~~On October 31, 2017, we voluntarily paid down an additional $25 million on the revolving loan.~~

The obligations under the Credit Agreement are guaranteed by the Guarantors and the Company and the Guarantors secured their respective obligations under the Credit Agreement by granting liens in favor of the agent on substantially all of their assets. The terms of the Credit Agreement include representations and warranties, affirmative and negative covenants (including certain financial covenants) and events of default that are customary for credit facilities of this nature. A summary of the Credit Agreement can be found in our Registration Statement on Form 10.

The tax matters agreement that TEGNA and Cars.com entered into prior to the distribution included restrictions that may limit our ability to pursue certain strategic transactions or other transactions that we may believe to be in the best interests of our stockholders or that might increase the value of our business. Under the tax matters agreement, for the two-year period following the distribution, Cars.com is prohibited, except in certain circumstances, from: entering into any transaction resulting in the acquisition of all or a portion of its stock or assets, whether by merger or otherwise; merging, consolidating or liquidating; issuing equity securities beyond certain thresholds; repurchasing its capital stock beyond certain thresholds; and ceasing to actively conduct its business. See Part II, Item 1A, “Risk Factors” of this report for additional information.

Net cash flow from operating activities was $147.2 million in the first nine months of 2017 as compared to the year-ago period of $140.4 million. This increase is due to changes in working capital, primarily due to the timing of the settlement of costs in accrued liabilities and the collection of accounts receivable, as well as cash received from tenant improvement allowances. These increases were mostly offset by lower net income in the first nine months of 2017 as compared to the year-ago period.

Net cash used in investing activities was $27.6 million in the first nine months of 2017 as compared to the year-ago period of $124.5 million. 2017 investing activities were all capital expenditures, of which $19.8 million related to the corporate headquarters office relocation. Net cash used in investing activities in 2016 were primarily due to $114.9 million of cash used to acquire DealerRater.

Net cash used for financing activities was $101.0 million in the first nine months of 2017 as compared to the year-ago period of $11.3 million. Prior to the Separation, cash used for financing activities was related to transactions with TEGNA. TEGNA utilized a centralized approach to cash management and the financing of its operations. Under this ~~centralized cash management program,~~approach, we provided funds to TEGNA and vice versa until the ~~distribution. Accordingly,~~cash distribution to TEGNA at the time of the Separation. Thus, the net cash flow between TEGNA and us ~~and TEGNA is~~was presented as a financing ~~activity~~activity. For information related to our term and ~~resulted~~revolving loans, see Note 5 (Debt) to the accompanying Consolidated and Combined Financial Statements included in ~~a $69.2 million cash outflow~~Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

For information related to commitments and contingencies, see Note 7 (Commitments and Contingencies) to the accompanying Consolidated and Combined Financial Statements included in ~~2017. In the third quarter~~Part I, Item 1 “Financial Statements” of 2017, we made $5.6 million of term loan quarterly amortization payments and voluntarily paid down $45 million of revolving loan commitments. In addition, during 2017 we made a $650 million cash transfer to TEGNA, and TEGNA completed the Separation through a pro rata distribution to its stockholders of all of the outstanding shares of our common stock. We borrowed $675 million to fund the cash transfer to TEGNA and provide additional working capital.this Quarterly Report on Form 10-Q.

~~Our results of operations and financial condition have not been significantly affected by inflation.~~

For information related to critical accounting policies, see “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations-Critical Accounting Policies and Estimates”~~Operations” in ~~our Registration Statement~~Part II, Item 7 of the Annual Report on Form ~~10.~~

10-K for the year ended December 31, 2017 as filed with the SEC on March 6, 2018 and see Note ~~About Forward-Looking Information~~

~~This report contains certain forward-looking statements regarding business strategies, market potential, future financial performance~~2 (Recent Accounting Pronouncements) to the accompanying Consolidated and other matters. The words “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project” and similar expressions, among others, generally identify “forward-looking statements.” The matters discussedCombined Financial Statements included in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Cars.com management and is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. 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 Cars.com’s control.

~~Important factors that could cause actual results or events to differ materially from those anticipated include, among others, those set forth under~~ Part I, Item ~~1A, Risk Factors,” and Part I, Item 2, “Management’s Discussion and Analysis~~1 “Financial Statements” of ~~Financial Condition and Results of Operations,” and~~this Quarterly Report on Form 10-Q. During the ~~following:~~

There may be other factors, some of which are beyond Cars.com’s control, that may cause our actual results to differ materially from the forward-looking statements contained in this report. 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 speak only asadoption of the date of this report. Except as may be required by law, Cars.com undertakes no obligation to modify or revise any forward-looking statement to reflect new information, events or circumstances occurring after the date of this report.Financial Accounting Standards Oversight Board Accounting Standards Codification 606, Revenue from Contracts with Customers.

Revenue Recognition. We account for a customer arrangement when we and the customer have an approved contract that specifies the rights and obligations of each party and the payment terms, and we believe it is probable we will collect substantially all of the consideration to which we will be entitled in exchange for the services that will be provided to the customer. We allocate the contractual transaction price to each distinct performance obligation and recognize revenue when it satisfies a performance obligation by providing a service to a customer. Revenue is generated through our direct sales force (Retail revenues) and affiliate sales channels (Wholesale revenues).

Online Subscription Advertising Products and Services Revenue. Our primary source of Retail and Wholesale revenues is through the sale of online subscription advertising products to dealer customers through varying levels of subscription packages. Our subscription packages provide the dealer customer’s available new and used vehicle inventory to in-market shoppers on the Cars.com website. The subscription packages are generally a fixed price arrangement with a one-year contract term that is automatically renewed, typically on a month-to month basis. We recognize subscription package revenues ratably as the service is provided over the contract term. Online subscription advertising products and services revenue is recorded in Retail revenues and Wholesale revenues in the Consolidated and Combined Statements of Income.

We also offer our customers several add-on products to the subscription packages. Add-on products include premium advertising products that can be uniquely tailored to an individual dealer customer’s current needs. We do not sell add-on products separately from the subscription packages as the customer cannot benefit from add-on products on their own. Therefore, the subscription packages and add-on products are combined as a single performance obligation and we recognize the related revenue ratably as the services are provided over the contract term.

As part of the acquisition of DI, we also provide services related to flexible, custom designed website platforms supporting highly personalized digital marketing campaigns, digital retailing and messaging platform products. We recognize revenue related to these services ratably as the service is provided over the contract term. The related revenue is recorded in Retail revenues in the Consolidated and Combined Statements of Income.

Our affiliates also sell online subscription advertising products to dealer customers and we earn wholesale revenues through our affiliate agreements. Affiliates are assigned certain sales territories in which they sell our products. Under these agreements, we charge the affiliates 60% of the corresponding Cars.com retail rate for products sold to affiliate dealers. We recognize wholesale revenue ratably as the service is provided over the contract term. In situations where our direct sales force sells our products within an affiliate’s assigned territory, we pay the affiliate a revenue share which is classified as “Affiliate revenue share” within Operating Expenses in the Consolidated and Combined Statements of Income. Wholesale revenues also includes the amortization of the unfavorable contracts liability. For information related to the unfavorable contracts liability, see Note 4 (Unfavorable Contracts Liability) to the accompanying Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Display Advertising Products and Services Revenue. We also earn revenue through the sale of display advertising on our website to national advertisers, pursuant to transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements. An impression is the display of an advertisement to an end-user on the website and is a measure of volume. A click-through occurs when an end-user clicks on an impression. We recognize revenue as the impressions or click-throughs are delivered. If the impressions or click-throughs delivered are less than the amount invoiced to the customer, the difference is recorded as deferred revenue and recognized as revenue when earned. Display advertising products revenue is recorded in Retail revenues in the Consolidated and Combined Statements of Income.

As part of the acquisition of LDM, we also provide services related to customized digital marketing and customer acquisition services, including paid, organic, social and creative services. We recognize revenue related to these services primarily at the point in time the service is provided. The related revenue is recorded in Retail revenues in the Consolidated and Combined Statements of Income.

Pay Per Lead Revenue. We also sell leads, which are connections from consumers to dealer customers in the form of phone calls, emails and text messages, to dealer customers, OEMs and third-party resellers. We recognize pay per lead revenue primarily on a per-lead basis at the point in time in which the lead has been delivered. Revenue related to pay per leads is recorded in Retail revenues and Wholesale revenues in the Consolidated and Combined Statements of Income.

Other Revenue. Other revenue primarily includes revenues related to vehicle listing data sold to third-parties and peer-to-peer vehicle advertising. We recognize other revenue either ratably as the services are provided or at the point in time the services have been performed. Other revenue is recorded in Retail revenues in the Consolidated and Combined Statements of Income.

For information related to recent accounting pronouncements, see Note 2 (Recent Accounting Pronouncements) to the accompanying Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

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

For quantitative and qualitative disclosures about market risk, see Item 7A “Quantitative and Qualitative Disclosures About Market ~~risk represents~~Risk,” of the ~~risk of loss that may affect our financial position due to adverse changes in financial market prices~~Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and ~~rates. We are exposed~~Exchange Commission (“SEC”) on March 6, 2018. Our exposures to market ~~risks related to changes in interest rates.~~

A substantial portion of our debt facilities bear interest at floating rates, based on LIBOR or the alternate base rate, as defined in the Credit Agreement. Accordingly, we are exposed to fluctuations in interest rates. We manage our interest rate exposure by monitoring the effects of market changes in interest rates. Based on the value of our indebtedness at September 30, 2017, a 100-basis point increase in interest rates would result in a corresponding increase in our interest expense of $6.2 million annually.

~~Historically, as our operations and sales have been primarily in the United States, we~~risk have not faced any significant foreign currency risk. With the acquisition of DealerRater in August 2016, Cars.com acquired a limited number of Canadian customers, some of which are billed in Canadian dollars. Any foreign currency exchange rate fluctuations have been and are anticipated to be immaterial. If we plan for additional international expansion, our risks associated with fluctuation in currency rates will become greater, and we will continue to reassess our approach to managing this risk.changed materially since December 31, 2017.

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 ~~report.~~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. To assist management, we have established an internal audit function to verify and monitor our internal controls and procedures. Our internal control system is supported by written policies and procedures, contains self-monitoring mechanisms and is audited by the internal audit function.

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 Exchange Act Rules 13a-15(f) and 15d-15(f) under the ~~Securities~~ Exchange ~~Act of 1934)~~Act).

For ~~a description of our material pending~~information relating to legal proceedings, ~~please refer to~~see Note ~~9, “Commitments, contingent liabilities~~7 (Commitments and ~~other matters” of the Notes~~Contingencies) to the ~~Unaudited Condensed~~accompanying Consolidated and Combined Financial Statements included in Part I, Item 1 “Financial Statements” of this ~~report, which is incorporated herein by reference.~~Quarterly Report on Form 10-Q.

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 ~~Registration Statement~~Annual Report on Form ~~10,~~10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (“SEC”) on March 6, 2018, which could materially affect our business, financial condition, results of operations ~~financial condition~~ and future results. There have been no material changes from the risk factors described in our ~~Registration Statement~~Annual Report on Form ~~10.~~10-K.

Our stock repurchase activity for the three months ended September 30, 2018 was as follows:

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.

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

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited):	2
	~~Condensed~~ Consolidated and Combined Balance Sheets	2
	Consolidated and Combined Statements of Income	3
	~~Condensed~~ Consolidated and Combined Statements of ~~Cash Flows~~Stockholders’ Equity	4
	Consolidated and Combined Statements of ~~Stockholders’ Equity~~Cash Flows	5
	Notes to Unaudited ~~Condensed~~ Consolidated and Combined Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1419
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2328
Item 4.	Controls and Procedures	2328
PART II.	OTHER INFORMATION	2429
Item 1.	Legal Proceedings	2429
Item 1A.	Risk Factors	2429
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	2430
Signatures		25
		31


	Acquisition-date Fair Value
Cash consideration ⁽¹⁾	$	164,333
Contingent consideration ⁽²⁾		2,200
Cash settlement of DI's unvested equity awards ⁽³⁾		(5,700	)
Total consideration	$	160,833

Cash	$	1,480
Accounts receivable		11,400
Property and equipment		1,215
Other assets		320
Identified intangible assets ⁽⁴⁾		71,900
Total assets acquired		86,315
Accounts payable		(2,514	)
Deferred tax liability		(14,741	)
Other liabilities		(4,459	)
Total liabilities assumed		(21,714	)
Net identifiable assets		64,601
Goodwill		96,232
Total consideration	$	160,833

Cash consideration	$	164,333
Less: Cash settlement of DI's unvested equity awards ⁽³⁾		(5,700	)
Less: Cash acquired		(1,480	)
Payment for Acquisition, net	$	157,153

	Gross		Accumulated Amortization			Net
September 30, 2017
Goodwill	$	788,107	$	—		$	788,107
Indefinite-lived intangibles:
Trade name		872,320		—			872,320
Amortizable intangible assets:
Customer relationships		814,240		(189,090	)		625,150
Acquired software		71,700		(31,069	)		40,631
Trade name		9,800		(953	)		8,847
Non-compete agreements		2,860		(1,716	)		1,144
Content library		2,100		(1,225	)		875
Total amortizable intangible assets		900,700		(224,053	)		676,647
Total	$	2,561,127	$	(224,053	)	$	2,337,074
December 31, 2016
Goodwill	$	788,107	$	—		$	788,107
Indefinite-lived intangibles:
Trade name		872,320		—			872,320
Amortizable intangible assets:
Customer relationships		814,240		(140,788	)		673,452
Acquired software		71,700		(22,798	)		48,902
Trade name		9,800		(340	)		9,460
Non-compete agreements		2,860		(1,287	)		1,573
Content library		2,100		(438	)		1,662
Total amortizable intangible assets		900,700		(165,651	)		735,049
Total	$	2,561,127	$	(165,651	)	$	2,395,476

	Acquisition-Date Fair Value (in thousands)		Weighted-Average Amortization Period (in years)
Acquired software	$	39,500	4
Customer relationships		18,300	4
Trade names		14,100	10
Total	$	71,900

December 31, 2017	$	788,107
Additions		96,232
September 30, 2018	$	884,339

Balance at December 31, 2017	$	44,085
Amortization into Wholesale revenues ⁽¹⁾		(5,992	)
Amortization into Affiliate revenue share ⁽²⁾		(12,908	)
Balance at September 30, 2018	$	25,185

~~Level 1—~~	~~Quoted market prices in active markets for identical assets or liabilities;~~

~~Level 2—~~	~~Inputs other than Level 1 inputs that are either directly or indirectly observable; and~~

~~Level 3—~~	~~Unobservable inputs developed using our own estimates and assumptions, which reflect those that a market participant would use.~~

Fair value measurement as of September 30, 2017	Level 1		Level 2		Level 3		Total
Assets:
Mutual funds	$	1,687	$	—	$	—	$	1,687
Fixed income fund								606
Total investments at fair value							$	2,293

Fair value measurement as of December 31, 2016	Level 1		Level 2		Level 3		Total
Assets:
Mutual funds	$	2,228	$	—	$	—	$	2,228
Fixed income fund								1,031
Total investments at fair value							$	3,259

	September 30, 2018		June 30, 2018		% Change			September 30, 2017		% Change
Direct		17,011		16,592		3	%		13,963		22	%
Affiliate		3,396		4,128		(18	)%		7,344		(54	)%
Total		20,407		20,720		(2	)%		21,307		(4	)%

	Nine Months Ended September 30,
In thousands of dollars	2017			2016
Net cash provided by operating activities	$	147,196		$	140,436
Net cash used in investing activities		(27,631	)		(124,533	)
Net cash used in financing activities		(101,033	)		(11,283	)
Net change in cash and cash equivalents	$	18,532		$	4,620

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 ⁽³⁾ (in thousands)
July 1 through July 31, 2018		192,574	$	30.06		192,574	$	144,211
August 1 through August 31, 2018		310,131		27.31		310,131		135,741
September 1 through September 30, 2018		489,339		26.43		489,339		122,810
Total		992,044				992,044

Exhibit Number		Description
3.2		Amended and Restated Bylaws of Cars.com Inc. (incorporated by reference to Exhibit 3.2 to the Company’s current Report on Form 8-K filed with the SEC on October 22, 2018, 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		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

	~~Company Name~~Cars.com Inc.

Date: November ~~8, 2017~~7, 2018	By:	/s/ T. Alex Vetter
		T. Alex Vetter
		President and Chief Executive Officer

Date: November ~~8, 2017~~7, 2018	By:	/s/ Becky A. Sheehan
		Becky A. Sheehan
		Chief Financial Officer

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