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,~~April 30, 2020, the registrant had ~~71,625,610~~67,144,823 shares of common stock, $0.01 par value per share, outstanding.

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

September 30, 2017

December 31, 2016

(unaudited)

Assets

Current assets

Cash and cash equivalents

$
27,428

$
8,896

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

Total current assets

138,803

119,541

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

Goodwill

788,107

788,107

Intangible assets, less accumulated amortization of $224,053 and $165,651, respectively

1,548,967

1,607,369

Investments and other assets

11,172

11,788

Total assets

$
2,527,924

$
2,547,266

Liabilities and equity

Current liabilities

Accounts payable

$
6,787

$
7,844

Current portion of long-term debt

21,162

—

Accrued liabilities

69,137

64,140

Total current liabilities

97,086

71,984

Noncurrent liabilities

Deferred incentive plans

1,677

3,913

Unfavorable contracts liability

25,185

44,085

Long-term debt

597,468

—

Deferred tax liability

282,504

8,325

Other noncurrent liabilities

17,532

1,674

Total noncurrent liabilities

924,366

57,997

Total liabilities

1,021,452

129,981

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

—

Additional paid-in capital

1,480,932

—

Retained earnings

24,824

—

Total stockholders' equity

1,506,472

2,417,285

Total liabilities and stockholders' equity

$
2,527,924

$
2,547,266

	March 31, 2020			December 31, 2019
	(unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	187,344		$	13,549
Accounts receivable, net		95,069			101,762
Prepaid expenses		8,092			6,526
Other current assets		782			603
Total current assets		291,287			122,440
Property and equipment, net		43,782			43,696
Goodwill		—			505,885
Intangible assets, net		904,221			1,329,499
Investments and other assets		16,634			26,471
Total assets	$	1,255,924		$	2,027,991
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	17,626		$	12,431
Accrued compensation		9,056			16,738
Current portion of long-term debt		31,425			31,391
Other accrued liabilities		40,203			38,246
Total current liabilities		98,310			98,806
Noncurrent liabilities:
Long-term debt		763,361			611,277
Deferred tax liability		—			132,996
Other noncurrent liabilities		46,363			43,844
Total noncurrent liabilities		809,724			788,117
Total liabilities		908,034			886,923
Commitments and contingencies
Stockholders' equity:
Preferred Stock at par, $0.01 par value; 5,000 shares authorized; 0 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively		—			—
Common Stock at par, $0.01 par value; 300,000 shares authorized; 66,961 and 66,764 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively		670			668
Additional paid-in capital		1,516,174			1,515,109
Accumulated deficit		(1,154,501	)		(367,067	)
Accumulated other comprehensive loss		(14,453	)		(7,642	)
Total stockholders' equity		347,890			1,141,068
Total liabilities and stockholders' equity	$	1,255,924		$	2,027,991

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

~~CONSOLIDATED AND COMBINED STATEMENTS OF INCOME~~Consolidated Statements of Loss

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenues:

Retail

$
118,825

$
119,828

$
346,780

$
343,013

Wholesale^(a)

41,074

42,467

122,917

128,421

Total

159,899

162,295

469,697

471,434

Operating expenses:

Product support, technology and operations

36,598

32,469

106,479

98,381

Marketing and sales

50,733

48,670

160,246

160,275

General and administrative

11,606

7,738

42,305

23,277

Affiliate revenue share

2,121

2,162

6,837

6,264

Amortization of intangible assets

19,467

19,088

58,402

55,416

Total

120,525

110,127

374,269

343,613

Operating income

39,374

52,168

95,428

127,821

Nonoperating (expense) income:

Interest (expense) income, net

(5,431
)

41

(7,160
)

53

Other income, net

64

88

199

142

Total nonoperating (expense) income, net

(5,367
)

129

(6,961
)

195

Income before income taxes

34,007

52,297

88,467

128,016

Provision for income taxes

13,019

452

15,782

452

Net income

$
20,988

$
51,845

$
72,685

$
127,564

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

	Three Months Ended March 31,
	2020			2019
Revenue:
Retail	$	148,094		$	139,338
Wholesale		—			14,860
Total revenue		148,094			154,198
Operating expenses:
Cost of revenue and operations		26,030			25,579
Product and technology		14,873			17,863
Marketing and sales		54,922			60,343
General and administrative		14,117			23,888
Affiliate revenue share		6,369			2,454
Depreciation and amortization		30,961			28,125
Goodwill and intangible asset impairment		905,885			—
Total operating expenses		1,053,157			158,252
Operating loss		(905,063	)		(4,054	)
Nonoperating expense:
Interest expense, net		(7,526	)		(7,566	)
Other (expense) income, net		(9,501	)		119
Total nonoperating expense, net		(17,027	)		(7,447	)
Loss before income taxes		(922,090	)		(11,501	)
Income tax benefit		(134,656	)		(2,470	)
Net loss	$	(787,434	)	$	(9,031	)
Weighted-average common shares outstanding:
Basic		66,938			67,584
Diluted		66,938			67,584
Loss per share:
Basic	$	(11.76	)	$	(0.13	)
Diluted		(11.76	)		(0.13	)

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

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

~~CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS~~Consolidated Statements of Stockholders’ Equity

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

$
—

	Preferred Stock				Common Stock				Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Stockholders'
	Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Equity
Balance at December 31, 2019		—	$	—		66,764	$	668	$	1,515,109		$	(367,067	)	$	(7,642	)	$	1,141,068
Net loss		—		—		—		—		—			(787,434	)		—			(787,434	)
Other comprehensive loss, net of tax		—		—		—		—		—			—			(6,811	)		(6,811	)
Shares issued in connection with stock-based compensation plans, net		—		—		197		2		(906	)		—			—			(904	)
Stock-based compensation		—		—		—		—		1,971			—			—			1,971
Balance at March 31, 2020		—	$	—		66,961	$	670	$	1,516,174		$	(1,154,501	)	$	(14,453	)	$	347,890

	Preferred Stock				Common Stock						Additional Paid-In			Retained			Accumulated Other Comprehensive			Stockholders'
	Shares		Amount		Shares			Amount			Capital			Earnings			Loss			Equity
Balance at December 31, 2018		—	$	—		68,262		$	683		$	1,508,001		$	118,239		$	—		$	1,626,923
Net loss		—		—		—			—			—			(9,031	)		—			(9,031	)
Other comprehensive loss, net of tax		—		—		—			—			—			—			(7,279	)		(7,279	)
Repurchases of common stock		—		—		(881	)		(9	)		—			(19,991	)		—			(20,000	)
Shares issued in connection with stock-based compensation plans, net		—		—		62			1			(744	)		—			—			(743	)
Stock-based compensation		—		—		—			—			2,981			—			—			2,981
Other		—		—		12			—			(181	)		—			—			(181	)
Balance at March 31, 2019		—	$	—		67,455		$	675		$	1,510,057		$	89,217		$	(7,279	)	$	1,592,670

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

~~CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS’ EQUITY~~Consolidated 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

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(787,434	)	$	(9,031	)
Adjustments to reconcile Net loss to Net cash provided by operating activities:
Depreciation		5,683			4,033
Amortization of intangible assets		25,278			24,092
Amortization of unfavorable contracts liability		—			(6,300	)
Goodwill and intangible asset impairment		905,885			—
Impairment of non-marketable security		9,447			—
Stock-based compensation		1,971			2,981
Deferred income taxes		(133,064	)		(2,570	)
Provision for doubtful accounts		1,606			1,055
Amortization of debt issuance costs		556			311
Other, net		75			(9	)
Changes in operating assets and liabilities:
Accounts receivable		5,087			12,274
Prepaid expenses		(1,566	)		1,847
Other current assets		(218	)		886
Other assets		458			(17,208	)
Accounts payable		5,133			574
Accrued compensation		(7,682	)		(4,075	)
Other accrued liabilities		(1,661	)		14,087
Other noncurrent liabilities		(662	)		15,442
Net cash provided by operating activities		28,892			38,389
Cash flows from investing activities:
Purchase of property and equipment		(5,755	)		(3,363	)
Other, net		—			(600	)
Net cash used in investing activities		(5,755	)		(3,963	)
Cash flows from financing activities:
Proceeds from revolving loan borrowings		165,000			—
Payments of long-term debt		(13,438	)		(10,625	)
Stock-based compensation plans, net		(904	)		(743	)
Repurchases of common stock		—			(20,000	)
Other		—			(181	)
Net cash provided by (used in) financing activities		150,658			(31,549	)
Net increase in cash and cash equivalents		173,795			2,877
Cash and cash equivalents at beginning of period		13,549			25,463
Cash and cash equivalents at end of period	$	187,344		$	28,340
Supplemental cash flow information:
Cash paid for income taxes, net of refunds	$	124		$	38
Cash paid for interest		6,956			7,413

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

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~Cars.com Inc.

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

Description of Business. Cars.com Inc., (the “Company” or CARS) is a leading digital marketplace and solutions provider for the automotive industry that connects car shoppers with sellers and original equipment manufacturers (“OEM”s). The Company’s marketplace empowers shoppers with the resources and information to make confident car buying decisions while our digital solutions and technology platform help sellers improve operational efficiency, profitability and sales. The Company’s portfolio of brands includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, PickupTrucks.com and NewCars.com.

Company History. In May 2017, the Company separated from ~~TEGNA, description of business and basis of presentation~~

~~Separation from TEGNA. On September 7, 2016,~~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 filed a Registration Statement on Form 10 relating to the Separation with the U.S. Securities and Exchange Commission~~business (the ~~“SEC”) on May 5, 2017, that was declared effective by the SEC on May 15, 2017 (the “Registration Statement on Form 10”~~“Separation”). 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~~The Company’s 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.

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., an innovative technology leader providing progressive dealer websites, digital retailing and ~~obligations (including investments, property, employee benefits~~messaging platform products, 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~~Launch Digital Marketing LLC, a provider of digital marketing services, including paid, organic, social and creative services (collectively, 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”~~“DI Acquisition”). ~~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~~The post-DI Acquisition business related to Dealer Inspire, Inc. and Launch Digital Marketing LLC is referred to collectively 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 separation and distribution agreement and the employee matters agreement we entered into with TEGNA.“Dealer Inspire”.

~~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% of DealerRater, a leading automotive dealer review website. DealerRater was included~~These accompanying unaudited interim Consolidated Financial Statements (“Consolidated Financial Statements”) have been prepared in conformity with accounting principles generally accepted in the ~~distribution to Cars.com as part~~United States of America (“U.S. GAAP”) and the rules and regulations of the ~~Separation. The accompanying financial statements combine the activity for the acquired business from the date of acquisition~~Securities and reflect the application of push down accounting. The accompanying interim financial statements are derived from the historical accounting records of TEGNA and present our financial position, results of operations and cash flows as of the periods presented as if we were a separate entity. These interim financial statements are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”Exchange Commission (the “SEC”) for interim financial statements. Accordingly, ~~the interim financial statements do not include all~~certain information and ~~footnotes~~footnote disclosures 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 insurance and other general corporate overhead expenses and were allocated based on either the actual costs incurred,GAAP have been condensed 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 relateomitted pursuant to the ~~various services that have historically been provided to Cars.com, LLC by TEGNA. However, such expenses may not be indicative~~rules and regulations 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.

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 the CondensedSEC. These Consolidated ~~and Combined~~Financial Statements ~~of Cash Flows as financing activities.~~

~~These interim financial statements~~ should be read in conjunction with the audited ~~annual financial statements,~~Consolidated Financial Statements and the notes thereto ~~as of and~~ for the year ended December 31, ~~2016~~2019, which are included in ~~our Registration Statement~~the Company's Annual Report on Form ~~10. These interim financial statements follow the same~~10-K dated February 26, 2020 (the “December 31, 2019 Financial Statements”).

The significant accounting policies ~~and methods~~used in ~~their application as~~preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in the ~~most recent audited financial statements.~~December 31, 2019 Financial Statements. In the opinion of management, the ~~interim financial statements reflect~~Consolidated Financial Statements contain all adjustments ~~(all of which are~~(consisting of a normal, ~~and~~ recurring nature)~~, which are~~ necessary to present fairly the Company's financial position, results of operations, ~~and~~ cash flows and changes in stockholders' equity as of the dates and for the ~~interim periods.~~periods indicated. The unaudited results of operations for the three months ended March 31, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020.

Use of Estimates. The preparation of the accompanying Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s 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 Consolidated Financial Statements include the accounts of Cars.com Inc. and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation.

~~Summary of significant accounting policies~~Recently Adopted Accounting Pronouncements

~~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.~~

~~The Financial Accounting Standards Board (the “FASB”) amended the FASB Accounting Standards Codification and created a new Topic 606,~~ ~~Revenue from Contracts with Customers.~~ Under the amendment, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. Cloud Computing Arrangements.In addition, the standard requires disclosure of 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. Our 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, which will continue to be recognized primarily on a straight-line basis over the contract term as the service is provided to our customers.

~~In January 2016,~~August 2018, the FASB issued Accounting Standards Update ~~No. 2016-01,~~ ~~Financial Instruments—Overall~~ ~~(Subtopic 825-10). This guidance amended several elements surrounding~~(“ASU”) 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, aligning the ~~recognition and measurement of financial instruments.~~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 requires 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 income. The new guidance is effective for us beginning in the first quarter of 2018. We are currently evaluating the effectCompany adopted this new guidance ~~will~~as of January 1, 2020. The adoption did not have a material impact on ~~our financial statements~~its Consolidated Financial Statements and related disclosures.

~~In February 2016, the FASB amended the FASB Accounting Standards Codification and created a new Topic 842,~~ ~~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.

Financial Instruments – Credit Losses.In June 2016, the FASB issued ~~Accounting Standards Update No.~~ASU 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, ~~we will be~~the Company is 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 Company adopted this new guidance as of January 1, 2020. The adoption did not have a material impact on its Consolidated Financial Statements and related disclosures.

Reference Rate Reform. In March 2020, the FASB concluded its reference rate reform project and issued ASU 2020-04. The Board undertook the reference rate reform project to address constituents’ concerns about the anticipated transition away from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The Company adopted this new guidance as of January 1, 2020. The adoption did not have a material impact on its Consolidated Financial Statements and related disclosures.

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

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

Triggering Event. In the three months ended March 31, 2020, the Company determined there was a triggering event, caused by the economic impacts of the novel coronavirus disease 2019 (“COVID-19”) pandemic and related restrictions.

In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and it continues to spread throughout the United States and the rest of the world with different geographical locations impacted more than others. The rapid spread of COVID-19 has resulted in governmental authorities around the country implementing numerous measures to contain the virus, such as quarantines, shelter-in-place orders and business shutdowns. This has had, and is expected to continue to have, a negative impact on regional and national economies and the automotive industry for an uncertain duration.

The COVID-19 pandemic and related restrictions have caused a widespread increase in unemployment and are expected to result in reduced consumer spending and an economic slowdown or recession. Automobile dealers operate in a highly competitive market and are vulnerable to both decreased demand for new and used vehicles and periods of an economic slowdown or recession. Furthermore, dealerships have temporarily or permanently closed and more may close in the near future in light of the COVID-19 pandemic and related restrictions. As a result of negative changes in the financial condition of dealers, in the second half of March 2020, the

Company’s customers began to adjust, reduce or suspend their operating activities. This has resulted and may continue to result in decreased subscription revenue and reduced demand for the Company’s services.

In an effort to assist its dealer customers impacted by the COVID-19 pandemic and related restrictions, the Company has announced, among other measures, financial relief in the form of certain invoice credits of 50% for April 2020 and 30% for May and June 2020. With respect to managing its expenses, the Company has multiple initiatives underway to adjust its expenses with changes in revenue.

The effects of the COVID-19 pandemic and the related restrictions, particularly reduced consumer spending and in light of the discounts that the Company has provided its dealer customers for the second quarter of 2020, will negatively impact the Company’s results of operations, cash flows and financial position. In addition, the extent of the impact will ~~be adopted using a modified retrospective approach. We are currently evaluating~~vary depending on the ~~effect this new guidance will have on our financial statements~~duration and severity of the economic and operational impacts of the COVID-19 pandemic and related ~~disclosures.~~ restrictions. Thus, the amount and timing of future cash flows, used in the valuation models to estimate the current fair value of the Company’s assets, has been significantly and negativity impacted by the COVID-19 pandemic and related restrictions.

Impairment Assessment. The Company performed interim quantitative impairment tests as of March 31, 2020. The results of the ~~FASB issued Accounting Standards Update No. 2017-04,~~ ~~Simplifying~~goodwill and indefinite-lived intangible asset impairment tests indicated that the ~~Test~~carrying values exceeded the estimated fair values and thus, the Company recorded an impairment of $505.9 million and $400.0 million related to its goodwill and indefinite-lived intangible asset, respectively.

Goodwill. Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible assets, net of liabilities assumed. Goodwill is tested for ~~Goodwill Impairment.~~ ~~This guidance eliminates~~impairment on an annual basis or between annual tests if events occur or circumstances change that would more likely than not reduce the ~~requirement~~fair value of a reporting unit below its carrying amount. The Company’s goodwill is tested for impairment at a level referred to ~~calculate~~as the ~~implied~~reporting unit. The level at which the Company tests goodwill for impairment requires us to determine whether the operations below the business segment level constitute a business for which discrete financial information is available and segment management regularly reviews the operating results. The Company has determined that CARS operates as a single reporting unit.

The process of estimating the fair value of goodwill ~~(i.e., Step 2 of today’s goodwill~~

~~impairment test)~~is subjective and requires us to ~~measure a goodwill impairment charge. Instead, companies will record an impairment charge based on~~make estimates that may significantly impact the ~~excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on Step 1~~outcome of the ~~impairment test). The standard has tiered effective dates, starting in 2020. Early adoption~~analysis. A qualitative assessment is ~~permitted for interim~~performed at least annually and ~~annual goodwill impairment testing dates~~considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications. If after ~~January 1, 2017. We are currently evaluating the effect~~performing 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 when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will allow~~assessment, the Company ~~to make certain changes to awards without accounting for them as modifications and does~~concludes it is more likely than not change the accounting for modifications. The new guidance should be applied prospectively 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 and related disclosures.

~~The following table displays goodwill, indefinite-lived intangibles and amortizable intangible assets at 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 are recorded in accrued liabilities, with the remainder recorded 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 and was $6.3 million and $18.9 million in the three and nine months ended September 30, 2017 and 2016, respectively.

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 under the cost method. While we believe that we have the ability 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 a substantive liquidation preference over RepairPal’s common stock. This factor precludes us from accounting for the investment under the equity method.

In May 2016, we purchased $2.2 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 through a single or series of related transactions related to any sale of preferred stock.

The aggregate carrying amount of the investment at September 30, 2017 and December 31, 2016 was $9.4 million and $9.3 million, respectively. We record these amounts in investments and other assets on the Condensed Consolidated and Combined Balance Sheets. No events or circumstances have occurred in the three and nine months ended September 30, 2017 that required us to estimate the fair value of the ~~investment.~~

~~Prior to the Separation, Cars.com LLC was a multi-member LLC that~~reporting unit is considered to be a partnership for U.S. income tax purposes. Multi-member LLCs are generally considered flow-through entities and therefore not subject to federal, state, or local income taxes. Effective with the Separation,less than its carrying amount, then the Company ~~established a corporate legal entity structure that is subject to U.S. corporate income tax on a stand-alone basis post-Separation. Income tax expense was $13.0 million for~~performs the three months ended September 30, 2017, compared to income tax expense of $0.5 million for the same period of the prior year. The prior year income tax expense represents only two months of DealerRater activity as DealerRater was acquired on August 1, 2016. The effective income tax rate, expressed by calculating the income tax expense as a percentage of income before income taxes, was 38.3% for the three months ended September 30, 2017 and differed from the U.S. federal statutory rate primarily due to state income taxes.

Income tax expense was $15.8 million for 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 period of the prior year. The prior year income tax expense represents only two months of DealerRater activity as DealerRater was acquired on August 1, 2016. The effective income 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 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.quantitative test.

With the implementation of the post-Separation legal entity structure, the Company was required to record deferred tax assets 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.

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 changed 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 contributedquantitative test, a goodwill impairment is identified 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 determiningcomparing the fair value of the ~~identified intangible assets at acquisition. The~~reporting unit to the carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value of the ~~significant identified intangible assets~~reporting unit, goodwill is ~~generally~~considered impaired and an impairment charge is recognized in an amount equal to the excess, not to exceed the carrying amount of goodwill.

The Company estimated ~~using a combination~~the fair value of the reporting unit with an income approach using the discounted cash flow (“DCF”) analysis and ~~market approach~~the Company also considered a market-based valuation methodology 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~~Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, ~~attributable~~long-term growth rates, the discount rate and relevant comparable public company earnings multiples. The cash flows employed in the DCF analysis are based on the Company’s best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance. The discount rate utilized in the DCF analysis is based on the reporting unit’s weighted-average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the ~~identified intangible assets are discounted to their present value at a rate commensurate with~~risk inherent in future cash flows of the ~~perceived risk.~~

~~Effective as of January 1, 2012, we established a Share Appreciation Rights Plan (the "SAR Plan"). Eligible participants received~~Impairment assessment inherently involves management judgments regarding a number of ~~stock appreciation rights annually that entitle~~assumptions described above. The reporting unit fair value also depends on the ~~employee~~future strength of the U.S. economy. New and developing competition as well as technological change could also adversely affect future fair value estimates. Due to ~~receive~~ the ~~appreciation~~many variables inherent in the ~~fair market value~~estimation of a ~~share from~~reporting unit’s fair value and the ~~date~~relative size of ~~grant up to~~the Company’s recorded goodwill, differences in assumptions could have a ~~specified date or dates plus an amount equal~~material effect on the estimated fair values.

Notes to the ~~distributions per share. Awards granted in a given year vest~~Consolidated Financial Statements (continued)

Indefinite-lived Intangible Asset. The Company’s indefinite-lived intangible asset relates to the ~~participant over~~Cars.com trade name and resulted from TEGNA’s 2014 acquisition of Cars.com. Intangible assets with indefinite lives are tested annually, or more often if circumstances dictate, such as in the quarter ended March 31, 2020, for impairment and written down to fair value as required. The estimates of fair value are determined using the “relief from royalty” methodology, which is a ~~three-year period. Benefits paid~~variation of the income approach. The discount rate assumption is based on an assessment of the risk inherent in the projected future cash flows generated by the trade name intangible asset.

As of March 31, 2020, the Company was in compliance with the covenants under its Credit Agreement.

Term Loan. As of March 31, 2020, the outstanding principal amount under the ~~SAR Plan were made~~Term Loan was $379.7 million and the interest rate in ~~cash, not common stock, at~~effect was 4.3%, including the ~~end~~impact of the ~~three-year vesting period from~~interest rate swap discussed below. During the ~~original grant date. Expense related~~three months ended March 31, 2020, the Company made $8.4 million in mandatory quarterly Term Loan payments.

Revolving Loan. As of March 31, 2020, the outstanding borrowings under the Revolving Loan were $420.0 million and the interest rate in effect was 2.7%. During the three months ended March 31, 2020, the Company borrowed $165.0 million. Additionally, the Company made $5.0 million in voluntary Revolving Loan payments. The Company drew down $165.0 million on the Company’s Revolving Loan for additional liquidity and flexibility, ending the quarter with $187.3 million in available cash. As of March 31, 2020, $30.0 million was available to borrow under the ~~SAR Plan has been recorded~~Revolving Loan. The Company’s borrowings are limited by its total net leverage ratio, which is calculated in accordance with the ~~accounting standards for share-based payments. Due~~Credit Agreement and was 4.1 to 1.0 as of March 31, 2020.

Fair Value. The Company's debt is classified as Level 2 in the fair value hierarchy and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments. As of March 31, 2020, the fair value of the outstanding indebtedness was approximately $658.7 million, compared to the ~~cash settlement at~~carrying value of $799.7 million. As of December 31, 2019, the ~~end~~fair value approximated the carrying value.

Credit Agreement. In October 2019, the Company entered into an amendment to its Credit Agreement to increase the total net leverage covenant during the remaining term of the ~~performance period,~~Credit Agreement while preserving the ~~awards were classified~~favorable pricing structure from the original agreement. The amendment increased the Company’s maximum total net leverage ratio from 3.75x to 4.50x with incremental step downs through the maturities of the Term Loan and the Revolving Loan on May 31, 2022.

The interest rate on borrowings under the Company’s Term Loan is floating and, therefore, subject to fluctuations. In order to manage the risk associated with changes in interest rates on its borrowing under the Term Loan, the Company entered into an interest rate swap (the “Swap”) effective December 31, 2018. Under the terms of the Swap, the Company is locked into a fixed rate of interest of 2.96% plus an applicable margin, as defined in the Company’s Credit Agreement, on a notional amount of $300 million. The Swap is designated as a ~~liability and remeasured each reporting period at~~cash flow hedge of interest rate risk. As of March 31, 2020, the fair ~~value. Cars.com recorded a liability~~value of ~~$1.1~~the Swap was an unrealized loss of $17.0 million, of which $7.8 million and ~~$10.8~~$9.2 million ~~related~~is recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets. During the three months ended March 31, 2020 and March 31, 2019, $1.0 million and $0.3 million was reclassified from Accumulated other comprehensive loss into Interest expense, net, respectively.

In connection with the October 2014 acquisition of Cars.com by TEGNA, the Company entered into affiliate agreements with the former owners of Cars.com (Belo Corporation (“Belo”), The McClatchy Company (“McClatchy”), tronc, inc. (“tronc”), and the Washington Post). Under the affiliate agreements, affiliates had the exclusive right to ~~its SAR Plan~~sell and price Cars.com’s products in their local territories, paying Cars.com a wholesale rate for the Cars.com product. The Company charged the affiliates 60% of the corresponding Cars.com retail rate for products sold to affiliate dealers and recognized revenue generated from these agreements as Wholesale revenue in the Consolidated Statements of Loss. 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. The Unfavorable contracts liability was amortized on ~~its Condensed~~a straight-line basis over the five-year contract period.

Prior to the affiliate conversions discussed below, the Company recognized $25.2 million of Wholesale revenue with a corresponding reduction of the Unfavorable contracts liability on an annual basis. After the affiliate conversions, the amortization of the Unfavorable

Notes to the Consolidated ~~and Combined Balance Sheets at~~Financial Statements (continued)

contracts liability was recorded as a reduction of Affiliate revenue share within Operating expenses in the Consolidated Statements of Loss Income. As of September 30, ~~2017~~2019, the Unfavorable contracts liability was fully amortized.

The Company amended five of its affiliate agreements (Gannett, McClatchy, TEGNA, tronc, and ~~December 31, 2016, respectively.~~the Washington Post) and as a result, has a direct relationship with these dealer customers and recognizes the revenue associated with converted dealers as Retail revenue, rather than Wholesale revenue, in the Consolidated Statements of Loss. On October 1, 2019, the Belo affiliate agreement expired and the Company now directly serves all dealer customers.

As part of the amendments to ~~employees~~the affiliate agreements, Gannett, McClatchy, TEGNA, tronc, and the Washington Post have agreed to perform certain marketing support and transition services through varying dates, the latest of which is June 29, 2020. The fees the Company pays associated with the amended affiliate agreements are recorded as Affiliate revenue share expense within Operating expenses in the Consolidated Statements of Loss.

Therefore, during the three ~~and nine~~ months ended ~~September 30, 2017. Management does not expect~~March 31, 2020 and March 31, 2019, the Company recorded 0 and $5.8 million of unfavorable contracts liability amortization as a reduction to ~~issue any new grants subsequent to~~Affiliate revenue share expense, rather than Wholesale revenue, in the ~~Separation.~~Consolidated Statements of Loss, respectively.

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~~its 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.

~~On May 31, 2017, we and certain~~In March 2018, the Company’s Board of ~~our domestic wholly-owned subsidiaries (the “Guarantors”) entered into~~Directors authorized a Credit Agreement (the “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 ofstock repurchase program to acquire up to ~~$450~~$200 million ~~(of which up~~of the Company’s common stock. The Company was allowed to ~~$25 million~~repurchase stock from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. The timing and amounts of any purchases under the stock repurchase program was based on market conditions and other factors including price. The repurchase program had a two-year duration, did 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 funded the share repurchase program principally with cash from operations. As of March 31, 2020, the repurchase program is expired. The Company repurchased and subsequently retired 0 shares during the three months ended March 31, 2020 and 0.9 million shares for $20.0 million during the three months ended March 31, 2019.

Restricted Stock 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 ~~form~~individual holder’s award agreement. RSUs are subject to graded vesting, generally ranging between one and four years and the fair value of ~~letters of credit at our request) and (b) term loans in an aggregate principal amount of $450 million. Interest~~the RSUs is equal to the Company’s common stock price on the ~~borrowings under~~date of grant. RSU activity for the ~~Credit Agreement~~three months ended March 31, 2020 is ~~payable~~as follows (in thousands, except for weighted-average grant date fair value):

Performance Stock 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. The percentage of PSUs that shall vest will range from 0% to 200% of the number of PSUs granted based on the ~~London Interbank Offered Rate~~ Company’s future performance related to certain revenue targets; adjusted earnings before interest, income taxes, depreciation and amortization targets; margin targets; and/or share price over a one to three-year performance period. These PSUs are subject to cliff vesting at the ~~alternate base rate,~~end of the respective performance period. PSU activity for the three months ended March 31, 2020 is as ~~defined~~follows (in thousands, except for weighted-average grant date fair value):

Stock Options. Stock options represent the right to purchase shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the ~~Credit Agreement, in either case plus an applicable margin~~individual holder’s award agreement. Stock options are subject to three-year cliff vesting and ~~fees which, after~~expire 10 years from the ~~second full fiscal quarter following~~grant date. Stock option activity for the ~~closing~~three months ended March 31, 2020 is as follows (in thousands, except for weighted-average grant 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 expenses related to the Separation and to fund working capital. 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.fair value):

~~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~~fair value of the ~~agent~~stock options granted during the three months ended March 31, 2020 are estimated 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 ofgrant date using the ~~Credit Agreement can be found in our Registration Statement on Form 10.~~Black-Scholes option pricing model, using the following assumptions:

Basic ~~earnings~~loss per share is calculated by dividing ~~net income~~Net loss by the weighted-average number of shares of common stock outstanding. Diluted ~~earnings~~loss per share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under ~~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~~computation 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~~Loss per share ~~for the three and nine months ended September 30, 2016,~~is 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~~follows (in thousands, except per share ~~amounts)~~data):

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.Inc.

~~Prior~~Notes 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.Consolidated Financial Statements (continued)

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):~~(Unaudited)

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

We are 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 the three and nine months ended September 30, 2017, respectively, and $2.1 million and $6.3 million for 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.

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

The following discussion and analysis of our financial condition and results of operations and quantitative and qualitative disclosures should be read in conjunction with our unaudited condensed consolidated and combined financial statements and related notes. The financial information discussed below and included elsewhere in this report may not necessarily reflect what our financial condition, results of operations and cash flow 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.

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.

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.

~~The following table presents some of the Company’s key financial metrics for each of the periods indicated:~~

On September 7, 2016, 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 digital automotive marketplace business. 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 was declared effective by the SEC on May 15, 2017 (the “Registration Statement on Form 10”). On May 31, 2017, we made a $650 million cash payment 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.

On August 1, 2016, TEGNA purchased 100% of DealerRater, a leading automotive dealer review website. DealerRater was included in the distribution to Cars.com, Inc. as part of the Separation. The accompanying financial statements combine the activity for the acquired business from the date of acquisition and reflect the application of push down accounting. The accompanying interim financial statements are derived from the historical accounting records of TEGNA and present our financial position, results of operations and cash flows as of the periods presented as if we were a separate entity. These interim financial statements are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements. Accordingly, the interim financial statements do not include all information 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 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. We believe 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 or the costs expected to be incurred in the future.

All of our internal intercompany accounts have been eliminated. All significant intercompany transactions between either (i) us and TEGNA or (ii) us and TEGNA affiliates have been included within the 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 the Condensed Consolidated and Combined Statements of Cash Flows as financing activities.

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 the transition from a wholly-owned subsidiary of TEGNA to an independent publicly traded company. In particular, the transition requires us to build out our internal infrastructure and support functions, through recruiting and hiring managers and employees to strengthen our legal, treasury, accounting, tax, investor relations and other similar functions. Similarly, we will face 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 incur in connection with the Separation will reduce our free cash flow and may limit our ability to make strategic acquisitions. We expect to manage these incremental costs and the associated increased risk by focusing on operating efficiency and continued growth in our business to drive profit margins and generate cash flow.

On August 1, 2016, TEGNA purchased 100% of DealerRater, a leading automotive dealer review website. DealerRater was included in the distribution to Cars.com, Inc. as part of the Separation. Cars.com’s financial results for the three and nine months ended September 30, 2017 include three and nine months of DealerRater activity, respectively. Cars.com’s financial results for both the three and nine months ended September 30, 2016 includes two months of DealerRater activity.

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 key metrics.

~~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 to the number of times visitors accessed Cars.com properties during the period, no matter how many visitors make up those visits. Traffic (Visits) numbers provide 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.

~~Dealer Customers~~. Our value to consumers tracks to our ability to showcase the inventory of our dealer and Original Equipment Manufacturer (“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.

~~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.

~~The following table sets forth our selected statement of operations for each of the periods indicated:~~

Three Months Ended September 30,

Increase

In thousands (except % amounts)

2017

2016

(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
)%
Total revenues

159,899

162,295

(2,396
)

(1
)%
Operating expenses:

Product support, technology and operations

36,598

32,469

4,129

13
%
Marketing and sales

50,733

48,670

2,063

4
%
General and administrative

11,606

7,738

3,868

50
%
Affiliate revenue share

2,121

2,162

(41
)

(2
)%
Amortization of intangible assets

19,467

19,088

379

2
%
Total operating expenses

120,525

110,127

10,398

9
%
Operating income

39,374

52,168

(12,794
)

(25
)%
Nonoperating (expense) income:

Interest (expense) income, net

(5,431
)

41

(5,472
)

***%

Other income, net

64

88

(24
)

(27
)%
Total nonoperating (expense) income, net

(5,367
)

129

(5,496
)

***%

Income before income taxes

34,007

52,297

(18,290
)

(35
)%
Provision for income taxes

13,019

452

12,567

***%

Net income

$
20,988

$
51,845

$
(30,857
)

(60
)%

	Three Months Ended March 31,
	2020			2019
Net loss	$	(787,434	)	$	(9,031	)
Basic weighted-average common shares outstanding		66,938			67,584
Effect of dilutive stock-based compensation awards ⁽¹⁾		—			—
Diluted weighted-average common shares outstanding		66,938			67,584
Loss per share, basic	$	(11.76	)	$	(0.13	)
Loss per share, diluted		(11.76	)		(0.13	)

~~Retail Revenue—Direct. Direct revenue represents online subscription products sold by Cars.com sales teams~~NOTE 12. Leases

Leases. The Company is obligated as a lessee under certain non-cancelable operating leases for office space, and is also obligated to ~~our local automotive dealer customers and includes DealerRater products which we acquired in August 2016. Automotive dealer customers purchase advertising packages to market their vehicle inventory~~pay insurance, maintenance and other ~~aspects~~executory costs associated with the leases. As of March 31, 2020, the ~~dealership, such as~~Company’s operating lease assets, included in Investments and other assets, were $16.5 million and operating lease liabilities were $32.9 million, the ~~service department. Direct revenue~~current maturities of which is ~~our largest revenue stream, representing 52%~~included in Other accrued liabilities and the long-term portion of ~~total revenue for~~which is included in Other noncurrent liabilities. The difference between the ~~third quarter of 2017. Direct revenue for~~operating lease assets and the ~~third quarter of 2017 decreased 3% as compared to the year-ago period reflecting a decline in average revenue per dealer, partially offset by an increase in average dealer count.~~

~~Retail Revenue—National Advertising~~. National advertising revenue consists of display advertising sold to advertising agencies and OEMs as well as leads sold to OEMs. Banner display ads are placed throughout the Cars.com websites and apps. National advertising revenue represented 20% of total revenue for the third quarter of 2017. National advertising revenue for the third quarter of 2017 rose 3% as compared to the year-ago period mainlyoperating lease liabilities is primarily due to ~~increased lead volume sold to OEMs.~~

~~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~~a lease incentive received in 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~~. Wholesale revenue represents the wholesale fees paid to Cars.com for online subscription products sold by affiliates. Wholesale revenue represented 26% of total revenue for the third quarter of 2017. Wholesale revenues for the third quarter of 2017 decreased 3% 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~~. The product support team creates and manages consumer and dealer-facing products and 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. The technology team builds consumer and dealer products and supports the Cars.com website and apps. Technology expenses include compensation, staff augmentation and outsourced development, 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 and third-party costs such as inventory processing, photo/video maintenance and trackable phone numbers to support our customers. Product support, technology and operations expenses increased 13% in the third quarter 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 third quarter of 2017 compared with 20% for the third quarter of 2016.

~~Marketing and sales~~. Marketing and sales expenses primarily consist of traffic and lead acquisition costs (including search engine management and other online marketing), TV advertising and production of ad creative, market research, sales events and compensation costs for our marketing, sales support and sales teams. Marketing and sales expenses increased 4% in the third quarter of 2017 as compared to the year-ago period due to higher spend in brand marketing, 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.

~~General and administrative~~. General and administrative expenses primarily consist of salaries, benefits and incentive compensation for our executive, finance, legal, human resources, facilities and other administrative employees. In addition, depreciation, legal and accounting services, other professional services, share-based compensation for all other eligible Company employees, transaction related costs, restructuring costs, costs related to the ~~corporate headquarters office relocation and write-off and loss on assets are included~~300 South Riverside Lease in general and administrative expenses. General and administrative expenses increased $3.9 million, or 50%, in the third quarter 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 millionChicago, Illinois. Other information 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 expenseCompany’s operating leases for the three months ended ~~September 30, 2016.~~March 31, 2020 is as follows (in thousands, except percentage):

Included in Other (expense) income, ~~taxes.~~ ~~During~~net in the three months ended ~~September 30, 2017,~~March 31, 2020 was a full impairment of $9.4 million of a non-marketable investment, triggered by the ~~tax provision was $13.0 million, or an effective rate~~COVID-19 pandemic and the related restrictions.This investment had been recorded within Investments and other assets on the Consolidated Balance Sheets.

Deferred Tax Asset and Valuation Allowance. As a result of ~~38.3%. Effective with~~ the ~~Separation,~~goodwill and indefinite-lived intangible asset impairments recorded during the three months ended March 31, 2020, the Company ~~established~~had a ~~corporate legal entity structure~~$96.5 million deferred tax asset position. The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is required to reduce the net deferred tax assets to the amount that is ~~subject~~more likely than not to ~~U.S. corporate~~be realized in future periods. Based on future taxable income projections, the Company believes it is more likely than not that the net deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance during the three months ended March 31, 2020. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

Effective Tax Rate. The effective income tax ~~on a stand-alone basis post-Separation. The Company recorded $0.5 million of~~rate, expressed by calculating the income tax expense as a percentage of Income before income tax, was 15% for the three months ended ~~September 30, 2016. See Note 5 to~~March 31, 2020. The effective tax rate differed from the ~~financial statements included in Part I, Item 1~~statutory federal income tax rate of ~~this report for additional information related to income taxes.~~

~~The following table sets forth our selected statement 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 period21%, primarily ~~reflecting an increase in average dealer count, partially offset by a decrease in average revenue per dealer.~~

~~Retail Revenues—National Advertising~~. National advertising revenue represented 18% 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 the year-ago period mainly due to increased lead volume sold to OEMs.

~~Retail Revenues—Other~~. Other revenue represented 3% of total revenue for the first nine months of 2017. Other revenue for the nine months ended September 30, 2017 increased 7%, 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~~tax impact of ~~our pay-per-lead product sales~~the goodwill and ~~the~~

~~acquisition of DealerRater in August 2016. Product support, technology~~intangible asset impairments and ~~operations expense represents 23% of revenue for~~ the ~~nine~~full valuation allowance recorded during the three months ended ~~September 30, 2017 compared with 21% for~~March 31, 2020.

Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). In recognition of 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~~significant threat to the ~~year-ago period driven~~liquidity of financial markets posed by ~~an increase in brand marketing, offset by a decline in sales expense. Marketing~~the COVID-19 pandemic and ~~sales expense represents 34% of revenue for~~related restrictions, the ~~nine months ended September 30, 2017 compared with 34% for~~U.S. government enacted into law 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~~CARES Act, which is ~~composed of $5 million related~~a sweeping stimulus bill intended to bolster the ~~Separation from TEGNA, $3.6 million related~~U.S. economy, among other things, and provide emergency assistance and tax credits or benefits to ~~the corporate headquarters office relocation, $1.7 million related to costs associated with the separation of certain employees~~qualifying businesses 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.~~

~~Interest (expense) income, net. During the nine months ended September 30, 2017, interest expense was $7.3 million related to our new Credit Agreement entered into in connection with the Separation.~~individuals. The Company ~~did not have any interest expense for the nine months ended September 30, 2016.~~is currently evaluating this new law and its impact on its Consolidated Financial Statements and related disclosures.

~~Provision for income taxes.~~ ~~During the nine months ended September 30, 2017, the tax provision was $15.8 million, or an effective rate of 17.8%. Effective with the Separation,~~

Reduction in Force. On April 29, 2020, the Company ~~established a corporate legal entity structure that is subject to U.S. corporate income tax~~announced the permanent reduction in force of approximately 170 people, the majority of whom had been placed 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.~~furlough in early April 2020. The Company ~~recorded $0.5 million of income tax expense~~estimates the pre-tax costs 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.~~

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 believeaction to be in the ~~best interests~~range of ~~our stockholders or that might increase~~approximately $4.0 to 4.75 million, substantially all of which are related to employee severance and are expected to be recorded during 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.three months ending June 30, 2020.

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, we provided funds to TEGNA and vice versa until the distribution. Accordingly, the net cash flow between us and TEGNA is presented as a financing activity and resulted in a $69.2 million cash outflow in 2017. In the third quarter 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.

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

~~See Part I, Item 1, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” in our Registration Statement on Form 10.~~

This report contains ~~certain~~“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 ~~regarding~~include information concerning the impact of the COVID-19 pandemic and related restrictions on our industry, our dealer customers and our results of operations, our business strategies, strategic alternatives, plans and objectives, market potential, outlook, trends, future financial performance, planned operational and product improvements, potential strategic transactions, liquidity, including expense reduction and draws from our revolving credit facility, and other ~~matters. The words “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project”~~matters and ~~similar expressions, among others, generally identify “forward-looking statements.” The matters discussed in these forward-looking statements~~involve known and unknown risks that are ~~subject~~difficult to ~~risks, uncertainties and other factors that could cause~~predict. As a result, our actual financial results, toperformance, achievements, strategic actions or prospects may differ materially from those ~~projected, anticipated~~expressed or implied by these forward-looking statements. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “outlook,” “intend,” “strategy,” “plan,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts,” “mission,” “strive,” “more,” “goal” or similar expressions. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, based on our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, current developments regarding the COVID-19 pandemic and other factors we think are appropriate. Such 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~~statements are necessarily based upon estimates and assumptions that, while considered reasonable by the Company and its management based on their knowledge and understanding of the ~~current plans~~business and ~~expectations of Cars.com management and is~~industry, are inherently uncertain. These statements are expressed in good faith and ~~believed to have a reasonable basis, but there can~~we believe these judgments are reasonable. However, you should understand that these statements are not guarantees of strategic action, performance or results. Our actual results and strategic actions could differ materially from those expressed in the forward-looking statements. Given these uncertainties, forward-looking statements should not be ~~no assurance that the expectation or belief will result or be achieved or accomplished.~~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 ~~Cars.com’s~~our control.

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

For a detailed discussion of many of these risks and uncertainties, see “Part I, Item ~~1A,~~1A., Risk ~~Factors,”~~Factors” and ~~Part I,~~“Part II, Item ~~2, “Management’s~~7., Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations,”~~Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and ~~the following:~~

~~There may be other factors, some of which are beyond Cars.com’s control, that may cause~~Current Reports on Form 8-K filed with the SEC and available on our ~~actual results to differ materially from the~~website at investor.cars.com or via EDGAR at www.sec.gov. All forward-looking statements contained in this ~~report.~~report are qualified by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic and related restrictions. The forward-looking statements contained in this report are based only on information currently available to us and speak only as of the date of this report. ~~Except~~We undertake no obligation, other than as may be required by law, ~~Cars.com undertakes no obligation~~ to ~~modify~~update or revise any forward-looking ~~statement~~or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise. The forward-looking statements in this report are intended to be subject to the safe harbor protection provided by the federal securities laws.

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

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

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

We are a leading digital marketplace and solutions provider for the automotive industry that connects car shoppers with sellers and original equipment manufacturers (“OEM”s). Our marketplace empowers shoppers with the resources and information to make confident car buying decisions while our digital solutions and technology platform help sellers improve operational efficiency, profitability and sales. Our portfolio of brands includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, PickupTrucks.com and NewCars.com.

In May 2017, we separated from our former parent company, TEGNA Inc. (“TEGNA”) by means of a spin-off of a newly formed company, Cars.com Inc., which now owns TEGNA’s former digital automotive marketplace business (the “Separation”). Our common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017. In February 2018, the Company acquired all of the outstanding stock of Dealer Inspire, Inc. and substantially all of the net assets of Launch Digital Marketing LLC (the “DI Acquisition”).

Coronavirus disease 2019 (“COVID-19”).In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and it continues to spread throughout the United States and the rest of the world with different geographical locations impacted more than others. The rapid spread of COVID-19 has resulted in governmental authorities around the country implementing numerous measures to contain the virus, such as quarantines, shelter-in-place orders and business shutdowns. This has had, and is expected to continue to have, a negative impact on regional and national economies and the automotive industry for an uncertain duration.

The COVID-19 pandemic and related restrictions have caused a widespread increase in unemployment and are expected to result in reduced consumer spending and an economic slowdown or recession. Dealers operate in a highly competitive market and are vulnerable to both decreased demand for new ~~information, events~~and used vehicles and periods of an economic slowdown or ~~circumstances occurring after~~recession. Furthermore, dealerships have temporarily or permanently closed and more may close in the ~~date~~near future in light of the COVID-19 pandemic and related restrictions. As a result of negative changes in the financial condition of dealers, in the second half of March 2020, our customers began to adjust, reduce or suspend their operating activities. This has resulted and may continue to result in decreased subscription revenue and reduced demand for our services.

In an effort to assist our dealer customers impacted by the COVID-19 pandemic and related restrictions, we have announced, among other measures, financial relief in the form of certain invoice credits of 50% for April 2020 and 30% for May and June 2020. We expect the COVID-19 pandemic and related restrictions will have a greater impact on our results in the second quarter of 2020 and beyond, particularly in light of these discounts. Moreover, depending upon the progress of the pandemic and the government and societal responses thereto, our customers may implement further cost-savings measures, including additional reductions of their advertising spend.

With respect to managing our expenses, we have multiple initiatives underway to adjust our expenses with changes in revenue. These steps have included an employee furlough and reduction in force, salary reductions, freezes on hiring and temporary labor, deferral of merit and promotion increases; a reduction of our marketing expense by aligning our variable marketing spend with shopper demand, while carefully maintaining consumer engagement as evidenced by our strong organic traffic; partnering with our vendors to reduce cost; and significant reductions of non-essential spending.

We remain committed to and have intensified our efforts around cash flow discipline, including the identification of significant capital expenditures that can be deferred, and working capital management.

We have taken steps to strengthen our financial position during this period of heightened uncertainty. In March 2020, we drew down $165.0 million on our Revolving Loan for additional liquidity and flexibility due to the uncertainty of the COVID-19 pandemic and related restrictions. As of March 31, 2020, we had $187.3 million in available cash and $30.0 million was available to borrow under the Revolving Loan. As of April 30, 2020, Cash and cash equivalents were approximately $190.0 million.

Webelieve our core strategic strengths, including our powerful family of brands, growing high-quality audience and suite of digital solutions for advertisers will assist us as we navigate a rapidly changing marketplace. Additionally, we are focused on equipping our customers with digital solutions to enable them to compete in an environment in which an increasing number of car-buying customers are shopping from home. These solutions include virtual showrooms, home delivery badging, online chat and our FUEL^TM In-Market Video (“FUEL IMV”) product that allows dealers to target in-market buyers on streaming platforms.

Prior to the impact of the COVID-19 pandemic and related restrictions, we believe that we were in a position to deliver a robust second half of the year and to exit the year with revenue growth. The effects of the COVID-19 pandemic and related restrictions, particularly in light of the discounts that we have provided our dealer customers for the second quarter of 2020, will negatively impact our results of operations, cash flows and financial position. However, the extent of the impact will vary depending on the duration and severity of the economic and operational impacts of the COVID-19 pandemic and related restrictions. Therefore, the results for the three months ended March 31, 2020, may not be indicative of the results for the year ending December 31, 2020.

Reduction in Force. On April 29, 2020, we announced the permanent reduction in force of approximately 170 people, the majority of whom had been placed on furlough in early April 2020. We estimate the pre-tax costs for this action to be in the range of approximately $4.0 to 4.75 million, substantially all of which are related to employee severance and is expected to be recorded during the three months ending June 30, 2020.

Traffic.Traffic provides an indication of our consumer reach. Although our consumer reach does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers and national advertisers. We have been diligently focused on growing our audience, the fundamental deliverable of any marketplace business.

Driven by our product innovations and investments in and efficiencies gained in search engine optimization, brand awareness and paid channels, we have experienced year-over-year Traffic growth since January 2018, and in January 2020, we recorded the highest level of Traffic in our history. In the first quarter of 2020, we maintained strong organic Traffic growth and achieved 20% growth in Traffic and 11% growth in Average Monthly Unique Visitors. However, due to the impact of the COVID-19 pandemic and related restrictions, our Traffic in the second half of March 2020 was negatively impacted and we only experienced slight year-over-year growth in March.

Although we experienced strong traffic growth in the first quarter of 2020, the unknown duration and economic uncertainty related to the COVID-19 pandemic and related restrictions and reduced consumer spending have impacted and may continue to impact our traffic in 2020 and beyond.

Dealer Customers. In the first quarter of 2020, Dealer Customers grew by 104, or 1%, to 18,938 as of March 31, 2020, as compared with 18,834 as of December 31, 2019. This increase was a result of growth in new solutions-only dealer customers, improved retention rates in local marketplace customers and strong sales in the local marketplace through the first half of March. Due to the impact of the COVID-19 pandemic and related restrictions, sales slowed in mid-March and overall local dealer customers declined slightly in the month of March.

Although we experienced dealer customer growth in the first quarter of 2020, the unknown duration and economic uncertainty related to the COVID-19 pandemic and related restrictions and reduced consumer spending have impacted and may continue to impact our dealer customers in 2020 and beyond.

FUEL IMV Launch. In February 2020, we announced the launch of FUEL IMV, an innovative digital video solution focused on the $9.7 billion spent on TV advertising by the U.S. auto market.The new solution helps dealers, original equipment manufacturers and regional/dealer ad associations target serious ready-to-buy shoppers with digital videos streamed across various platforms, and combat the high costs and inefficiencies of traditional television advertising. We began generating FUEL IMV revenue in the first quarter of 2020.

OEM Agreement. In 2019, we were selected as one of four preferred website providers to General Motors (“GM”). This allowed us to begin selling our website solutions to more than 4,100 GM dealers. This program is semi-exclusive and provides GM dealers a choice in provider for the first time in 15 years. GM remains on track to launch over 800 additional websites with revenue expected to begin in the second half of 2020. This new agreement provides us with the opportunity to substantially increase our current website customer base, which was approximately 3,600 as of March 31, 2020.

Technology Transformation. In February 2019, we announced a restructuring of the product and technology teams, which primarily focused on shifting our technology spend towards innovation to improve our speed of product delivery, to enable integration across current and future systems, and to migrate our systems to the cloud (the “Technology Transformation”). In connection with the Technology Transformation, we have aligned our product and technology teams with our long-term growth strategy to expand beyond listings to a digital solutions marketplace. As part of this ~~report.~~process, we have streamlined the existing teams as we modernize our technology platform and invest in a more efficient cloud-based infrastructure focused on machine learning, product innovation and growth. Although we have elected to defer the completion of the Technology Transformation due to the impact of the COVID-19 pandemic and related restrictions, we have achieved cost efficiencies and expect to achieve further cost efficiencies upon completion of the Technology Transformation.

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

Traffic (Visits). Traffic is fundamental to our business. Traffic to the CARS network of websites and mobile apps provides value to our advertisers in terms of audience, awareness, consideration and conversion. In addition to tracking traffic volume and sources, we monitor activity on our properties, allowing us to innovate and refine our consumer-facing offerings. Traffic is defined as the number of visits to CARS desktop and mobile properties (responsive sites and mobile apps), measured using Adobe Analytics. Traffic does not include traffic to Dealer Inspire websites. Visits refers to the number of times visitors accessed CARS properties during the period,

no matter how many visitors make up those visits. Traffic provides an indication of our consumer reach. Although our consumer reach does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealer customers and national advertisers.

The growth in Traffic was driven by our product innovations and investments in and efficiencies gained in search engine optimization, brand awareness and paid channels. However, due to the impact of the COVID-19 pandemic and related restrictions, our Traffic in the second half of March 2020 was negatively impacted and we only experienced slight year-over-year growth in March. For the three months ended March 31, 2020 and March 31, 2019, mobile traffic accounted for 76% and 71% of total Traffic, respectively.

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

The growth in UVs was driven by our product innovations and investments in and efficiencies gained in search engine optimization, brand awareness and paid channels.

Average Revenue Per Dealer (“ARPD”). We believe our ability to grow ARPD is an indicator of the value proposition of our products. We define ARPD as Direct retail revenue during the period divided by the average number of direct dealer customers during the same period.

ARPD declined 2% from the ARPD of $2,136 for the three months ended December 31, 2019, primarily due to upsell cancellations and selected discounts given in the second half of March as a result of the COVID-19 pandemic and related restrictions.

ARPD declined 6% from March 31, 2019, primarily due to upsell cancellations and dealer churn and discounts given in the second half of March 2020 as a result of the COVID-19 pandemic and related restrictions

Dealer Customers. Dealer Customers represent dealerships using our products as of the end of each reporting period. Each physical or virtual dealership location is counted separately, whether it is a single-location proprietorship or part of a large consolidated dealer group. Multi-franchise dealerships at a single location are counted as one dealer.

Total Dealer Customers increased 1% from December 31, 2019. This increase was a result of growth in new solutions-only dealer customers, improved retention rates in local marketplace and dealer solutions customers and strong sales in the local marketplace through the first half of March. Due to the impact of the COVID-19 pandemic and related restrictions, sales slowed in mid-March and overall local dealer customers declined slightly in the month of March.

Total Dealer Customers declined 2% from March 31, 2019. Dealer Customers declined, primarily due to cancellations of marketplace customers, partially offset by growth in digital solutions customers.

Factors Affecting Our Performance. Our business is impacted by the changes in the larger automotive environment, including consumer demand and other macroeconomic factors, and changes related to automotive digital advertising. Changes in car sales volumes in the United States and reduced dealer profitability also influence OEMs’ and dealerships’ willingness to increase spend with automotive marketplaces like Cars.com. In the later part of March 2020, we observed increased softness in car sales and dealer profitability. Due to the impact of the COVID-19 pandemic and the related restrictions, this softness has become more acute and expected to continue in the near-term.

Our long-term success will depend in part on our ability to continue to transform our business toward a multi-faceted suite of digital solutions that complement our online marketplace offerings. Webelieve our core strategic strengths, including our powerful family of

brands, growing high-quality audience and suite of digital solutions for advertisers will assist us as we navigate a rapidly changing marketplace. Additionally, we are focused on equipping our customers with digital solutions to enable them to compete in an environment in which an increasing number of car-buying customers are shopping from home. These solutions include virtual showrooms, home delivery badging, online chat and our FUEL^TM In-Market Video product that allows dealers to target in-market buyers on streaming platforms. The foundation of our continued success is the value we deliver to customers, and we believe that our large and growing audience of in-market, undecided car shoppers and innovative solutions deliver significant value to our customers.

	Three Months Ended March 31,						Increase
(In thousands, except percentages)	2020			2019			(Decrease)			% Change
Revenue:
Direct	$	125,361		$	115,094		$	10,267			9	%
National advertising		19,393			20,295			(902	)		(4	)%
Other		3,340			3,949			(609	)		(15	)%
Retail		148,094			139,338			8,756			6	%
Wholesale		—			14,860			(14,860	)		(100	)%
Total revenue		148,094			154,198			(6,104	)		(4	)%
Operating expenses:
Cost of revenue and operations		26,030			25,579			451			2	%
Product and technology		14,873			17,863			(2,990	)		(17	)%
Marketing and sales		54,922			60,343			(5,421	)		(9	)%
General and administrative		14,117			23,888			(9,771	)		(41	)%
Affiliate revenue share		6,369			2,454			3,915		***
Depreciation and amortization		30,961			28,125			2,836			10	%
Goodwill and intangible asset impairment		905,885			—			905,885		***
Total operating expenses		1,053,157			158,252			894,905		***
Operating loss		(905,063	)		(4,054	)		(901,009	)	***
Nonoperating expense:
Interest expense, net		(7,526	)		(7,566	)		40			(1	)%
Other (expense) income, net		(9,501	)		119			(9,620	)	***
Total nonoperating expense, net		(17,027	)		(7,447	)		(9,580	)	***
Loss before income taxes		(922,090	)		(11,501	)		(910,589	)	***
Income tax benefit		(134,656	)		(2,470	)		(132,186	)	***
Net loss	$	(787,434	)	$	(9,031	)	$	(778,403	)	***

Retail Revenue—Direct. Direct revenue consists of marketplace and digital solutions sold to dealer customers. Direct revenue is our largest revenue stream, representing 84.6% and 74.6% of total revenue for the three months ended March 31, 2020 and 2019, respectively.

As of October 1, 2019, we have successfully converted all affiliates to our direct control, and no longer have Wholesale revenue. We now have a direct relationship with all dealer customers and recognize the revenue associated with converted dealer customers as Retail revenue, rather than Wholesale revenue, in the Consolidated Statements of Loss. During the three months ended March 31, 2020, the affiliate market conversions contributed an incremental $17.4 million to Direct revenue. For information related to the affiliate market conversions, see Note 7 (Unfavorable Contracts Liability) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

These increases were partially offset by a 2% decline in Dealer Customers and a 6% decline in ARPD from March 31, 2019.

Retail Revenue—National Advertising. National advertising revenue consists of display advertising and other solutions sold to OEMs, advertising agencies and automotive dealer customers. National advertising revenue represents 13.1% and 13.2% of total revenue for the three months ended March 31, 2020 and 2019, respectively. National advertising revenue declined 4%, representing a stabilization of the business driven by OEMs 2020 upfront commitments in line with prior year.

Wholesale Revenue. Wholesale revenue represented the fees we charged for marketplace and digital solutions sold to dealers by affiliates. The fees represented approximately 60% of the retail value for the same online subscription products sold by our direct sales team. Wholesale revenue represented 9.6% of total revenue for the three months ended March 31, 2019. As of October 1, 2019, we successfully converted all affiliates to our direct control, and no longer have Wholesale revenue. For information related to the affiliate market conversions, see Note 7 (Unfavorable Contracts Liability) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Cost of revenue and operations. Cost of revenue and operations expense primarily consists of expenses related to our pay-per-lead products, third-party costs for processing dealer vehicle inventory, product fulfillment, customer service and compensation costs. Cost of revenue and operations expense represents 17.6% and 16.6% of total revenue for the three months ended March 31, 2020 and 2019, respectively. Cost of revenue and operations expense increased $0.5 million, primarily due to higher compensation costs, partially offset by lower third party costs.

Product and technology.The product team creates and manages consumer and dealer-facing innovation, manages consumer user experience and includes the costs associated with our editorial and data strategy teams. The technology team develops and supports our products and websites. Product and technology expense includes compensation costs, as well as license fees for vehicle specifications, search engine optimization, hardware/software maintenance, software licenses, data center and other infrastructure costs. Product and technology expense represents 10.0% and 11.6% of total revenue for the three months ended March 31, 2020 and 2019, respectively. Product and technology expense decreased primarily due to cost efficiencies as a result of the Technology Transformation.

Marketing and sales. Marketing and sales expense primarily consists of traffic and lead acquisition costs (including search engine and other online marketing), TV and digital display/video advertising and creative production, market research, trade events and compensation costs for the marketing, sales and sales support teams. Marketing and sales expenses represent 37.1% and 39.1% of total revenue for the three months ended March 31, 2020 and 2019, respectively. Marketing and sales expense decreased due to a reduction of our marketing expense by aligning our variable marketing spend with shopper demand, while carefully maintaining consumer engagement as evidenced by our strong organic traffic.

General and administrative. General and administrative expense primarily consists of compensation costs for the executive, finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expense includes office space rent, legal and accounting services, other professional services, transaction-related costs and costs related to the write-off and loss on assets, excluding the goodwill and intangible asset impairment discussed below. General and administrative expense represents 9.5% and 15.5% of total revenue for the three months ended March 31, 2020 and 2019, respectively. During the three months ended March 31, 2020 and 2019, General and administrative expense included the following costs (in thousands):

Excluding these costs, general and administrative expense was flat compared to the prior year.

Depreciation and amortization. Depreciation and amortization expense increased primarily due to depreciation and amortization on additional assets acquired.

Affiliate revenue share. Affiliate revenue share expense represents payments made to affiliates pursuant to our affiliate agreements and amortization of the Unfavorable contracts liability related to converted markets. Affiliate revenue share expense increased, primarily due to the additional markets converted during the last twelve months, partially offset by the expiration of certain affiliate agreements. A summary of Affiliate revenue share expense is as follows (in thousands):

For information related to the Unfavorable contracts liability, see Note 7 (Unfavorable Contracts Liability) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Goodwill and intangible asset impairment. We determined there was a triggering event, caused by the economic impacts of the COVID-19 pandemic and related restrictions. We performed interim quantitative impairment tests as of March 31, 2020. The results of the goodwill and indefinite-lived intangible asset impairment tests indicated that the carrying values exceeded the estimated fair values and thus, we recorded an impairment of $505.9 million and $400.0 million, respectively. For information related to the impairment, see Note 4 (Goodwill and Indefinite-lived Intangible Asset) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Interest expense, net. Interest expense, net was flat compared to the prior year. For information related to our interest rate swap, see Note 5 (Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Other (expense) income, net. Other income, net decreased, primarily due to an impairment of $9.4 million of non-marketable investment, triggered by the COVID-19 pandemic and the related restrictions. This investment had been recorded within Investments and other assets on the Consolidated Balance Sheets.

Income tax benefit. The effective income tax rate, expressed by calculating the income tax benefit as a percentage of Loss before income tax, was 15% for the three months ended March 31, 2020 and differed from the U.S. federal statutory rate of 21%, primarily due to the tax impact of the goodwill and intangible asset impairments and a full valuation allowance on the U.S. company’s net deferred tax asset position.

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 operating cash flows in 2020 and 2019 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 may raise additional funds through other public or private debt or equity financings. At this time, we do not expect the impact of the COVID-19 pandemic and related restrictions to impact our ability to meet our business needs for the foreseeable future. However, our ability to maintain adequate liquidity for our operations in the future is dependent upon a number of factors, including our revenue, macroeconomic conditions, the duration and severity of the economic and operational impacts caused by the COVID-19 pandemic and related restrictions, our ability to contain costs, including capital expenditures, and to collect accounts receivable, and various other factors, many of which are beyond our direct control. We are subject to certain financial and other covenants contained in our Credit Agreement. The impact of the COVID-19 pandemic and related restrictions may affect our ability to comply with such covenants. We will continue to monitor our liquidity position and covenant obligations and are in active conversations with our Lenders. We may seek to amend our Credit Agreement to provide greater comfort that we will be able to remain in compliance with our obligations but we may not be able to do so on terms that are acceptable or to the extent necessary to avoid a default, depending upon conditions in the credit markets, the length and depth of the market reaction to the pandemic and our ability to compete in this environment.We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all.See Part II, Item 1A., “Risk Factors” of this Quarterly Report on Form 10-Q. As of March 31, 2020, Cash and cash equivalents were $187.3 million.

Term Loan and Revolving Loan. As of March 31, 2020, the outstanding principal amount under the Term Loan was $379.7 million, with an interest rate of 4.3%, including the impact of the interest rate swap. The outstanding borrowings under the Revolving Loan were $420.0 million, with an interest rate of 2.7%. During the three months ended March 31, 2020, we made $8.4 million in mandatory Term Loan payments and $5.0 million in voluntary Revolving Loan payments. In March 2020, we drew down $165.0 million on our Revolving Loan for additional liquidity and flexibility due to the uncertainty related to the COVID-19 pandemic and related restrictions, ending the quarter with $187.3 million in available cash. As of March 31, 2020, $30.0 million was available to borrow under the Revolving Loan. As of April 30, 2020, Cash and cash equivalents were approximately $190.0 million. Our borrowings are limited by our total net leverage ratio, which is calculated in accordance with our Credit Agreement, and was 4.1 to 1.0

as of March 31, 2020. In October 2019, we entered into an amendment to our Credit Agreement to increase the total net leverage covenant during the remaining term of the Credit Agreement while preserving the favorable pricing structure from the original agreement. The amendment increased our maximum total net leverage ratio from 3.75x to 4.50x with incremental step downs through the maturities of the Term Loan and the Revolving Loan on May 31, 2022.

Interest Rate Swap. The interest rate on borrowings under our Term Loan is floating and, therefore, subject to fluctuations. In order to manage the risk associated with changes in interest rates on our borrowing, we entered into an interest rate swap agreement (the “Swap”) effective December 31, 2018. Under the terms of the Swap, we are locked into a fixed rate of interest of 2.96% plus an applicable margin, as defined in our Credit Agreement, on a notional amount of $300 million. As of March 31, 2020, the fair value of the Swap was an unrealized loss of $17.0 million. The Swap is designated as a cash flow hedge of interest rate risk and recorded at fair value in Other accrued liabilities and Other noncurrent liabilities on the Consolidated Balance Sheets. Any gains or losses on the Swap will be reported as a component of Accumulated other comprehensive (loss) income until reclassed to Interest expense, net in the same period the hedge transaction impacts earnings.

Share Repurchase Program. In March 2018, our Board of Directors authorized a stock repurchase program to acquire up to $200 million of our common stock over a two-year period. We were allowed to repurchase stock from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. The timing and amounts of any purchases under the stock repurchase program will be based on market conditions and other factors including price. The repurchase program did 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 repurchased and subsequently retired 0.9 million shares for $20.0 million for the three months ended March 31, 2019 and did not repurchase any shares for the three months ended March 31, 2020. As of March 31, 2020, the repurchase program is expired.

Operating Activities. The decrease in cash provided by operating activities was primarily related to changes in operating assets and liabilities, partially offset by the reduction of net loss, excluding the impact of non-cash items. In addition, the net loss for the three months ended March 31, 2020 and 2019 was impacted by the following costs (in thousands):

Investing Activities. The increase in cash used in investing activities is primarily due to an increase in purchases of property and equipment.

Financing Activities. During the three months ended March 31, 2020, cash used in financing activities is primarily related to $165.0 million in proceeds related to the draw on our revolver, partially offset by $13.4 million in debt repayments, of which $5.0 million was voluntarily paid. For information related to our Term and Revolving Loans, see Note 5 (Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Commitments and Contingencies. For information related to commitments and contingencies, see Note 8 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

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

Critical Accounting Policies. For information related to critical accounting policies, see “Critical Accounting Policies and Estimates” in Part II, Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of the Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on February 26, 2020 and see Note 1 (Description of Business, Company History and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q. During the three months ended March 31, 2020, there have been no changes to our critical accounting policies.

Recent Accounting Pronouncements. For information related to recent accounting pronouncements, see Note 2 (New Accounting Pronouncements) to the accompanying Consolidated 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 “Quantitative and Qualitative Disclosures About Market ~~risk represents~~Risk,” in Part II, Item 7A., 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, 2019, as filed with the Securities and ~~rates. We are exposed~~Exchange Commission (“SEC”) on February 26, 2020. 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, 2019.

Procedures. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this ~~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~~Securities and Exchange Commission’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.~~

Reporting. During the period covered by this ~~report,~~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~~Act). We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of ~~1934).~~our employees are working remotely due to the Coronavirus disease 2019 (“COVID-19”) pandemic and related restrictions. We are continually monitoring and assessing the COVID-19 pandemic and related restrictions on our internal controls to minimize the effect on their design and operating effectiveness.

For ~~a description of our material pending~~information relating to legal proceedings, ~~please refer to~~see Note ~~9, “Commitments, contingent liabilities~~8 (Commitments and ~~other matters” of the Notes~~Contingencies) to the ~~Unaudited Condensed~~accompanying Consolidated ~~and Combined~~ Financial Statements included in Part I, Item 11., “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,~~1A., “Risk Factors” in our ~~Registration Statement~~Annual Report on Form ~~10,~~10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission (“SEC”) on February 26, 2020, which could materially affect our business, financial condition, results of operations ~~financial condition~~ and future results. ~~There~~Other than as set forth below, there have been no material changes from the risk factors described in our ~~Registration Statement~~Annual Report on Form ~~10.~~10-K.

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

The novel coronavirus disease 2019 (“COVID-19”) pandemic and related restrictions have resulted in a widespread health crisis that have adversely affected businesses, economies and financial markets worldwide, and have caused significant volatility in U.S. and international debt and equity markets.

Our business, financial condition, liquidity and operating results have been, and will continue to be, adversely affected by COVID-19 and related restrictions. For example, the COVID-19 pandemic and related restrictions have caused a widespread increase in unemployment and are expected to result in reduced consumer spending and an economic slowdown or recession. Substantially all of our revenue is generated from subscription services offered to automotive dealers and our national advertising offerings to original equipment manufacturers (“OEMs") and other advertisers in or endemic to the automotive industry and our business may be negatively affected during times of low automobile sales and high unemployment. To the extent that such a weakened economy impacts our customers’ ability or willingness to pay for our services or our vendors’ ability to provide services to us, we could see our operations, liquidity and financial condition negatively impacted.

Dealers operate in a highly competitive market and are vulnerable to both decreased demand for new and used vehicles and periods of economic slowdown or recession. Furthermore, dealerships have temporarily or permanently closed and more may close in the near future in light of the COVID-19 pandemic and related restrictions. Negative changes in the financial condition of dealers has resulted and may continue to result in decreased subscription revenue and reduced demand for our services. Moreover, the impact of the COVID-19 pandemic and related restrictions on dealers may materially reduce our number of dealer customers in the future. Additionally, OEMs may reduce their advertising spend on our platforms due to the impact of the COVID-19 pandemic and related restrictions on the automotive industry. All of these factors could adversely impact our profitability and financial results.

In an effort to assist our dealer customers impacted by the COVID-19 pandemic and related restrictions, we have announced, among other measures, financial relief in the form of certain invoice credits of 50% for April 2020 and 30% for May and June 2020. These discounts and reduced consumer spending will negatively impact our revenue in the near term and may negatively impact other results of operations in the near term and, if not effective in mitigating the effect of the COVID-19 pandemic and related restrictions on our dealer customers, may adversely affect our business and results of operations more substantially over a longer period of time.

With respect to managing our expenses, we have multiple initiatives underway to adjust our expenses with changes in revenue. These steps have included an employee furlough, reduction in force, salary reductions, freezes on hiring and temporary labor, deferral of merit and promotion increases; a reduction of our marketing expense by aligning our variable marketing spend with shopper demand, while carefully maintaining consumer engagement as evidenced by our strong organic traffic; partnering with vendors to reduce cost; and significant reductions of non-essential spending. However, we cannot currently predict whether these measures will be effective in mitigating the impact of the COVID-19 pandemic and related restrictions on our operations, liquidity and financial condition or whether these measures will affect the productivity of our workforce, reduce consumer traffic to our websites or otherwise affect our operations. We may be required to implement additional expense-reduction measures or amend our debt instruments in the future if the COVID-19 pandemic and related restrictions persist over a longer period, which could further adversely impact our operations, liquidity and financial condition.

The extent to which the COVID-19 pandemic and responses to it impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including: the duration and scope of the pandemic; actions that have been and continue to be taken in response to the pandemic; the availability and cost to access the capital markets; the effect on our dealer customers’ demand

for and ability to pay for our services; the effect on consumer demand for our services; disruptions or restrictions on our employees’ ability to work and travel; and impacts on employee health and responses to it. During the period of the COVID-19 pandemic and related restrictions, we may not be able to provide the same level of customer service and product features that our dealer customers and consumers are used to, which could negatively impact their perception of our service resulting in an increase in cancellations or reduction in traffic to our website.

We are subject to certain financial and other covenants contained in our Credit Agreement. The impact of the COVID-19 pandemic and related restrictions may affect our ability to comply with such covenants. We will continue to monitor our liquidity position and covenant obligations and are in active conversations with our Lenders. We may seek to amend our Credit Agreement to provide greater comfort that we will be able to remain in compliance with our obligations but we may not be able to do so on terms that are acceptable or to the extent necessary to avoid a default, depending upon conditions in the credit markets, the length and depth of the market reaction to the pandemic and our ability to compete in this environment. We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all.

We will continue to actively monitor the issues raised by the COVID-19 pandemic and related restrictions and may take further actions that alter our business operations, as may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees, customers, partners and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our OEM and dealer customers, suppliers or vendors, consumers or on our financial results. The impact of the COVID-19 pandemic and related restrictions may also heighten other risks discussed in our Annual Report on Form 10-K, which could adversely affect our business, financial condition, liquidity and results of operations.

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.)


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

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

Large accelerated filer	☐☒	Accelerated filer	☐

Non-accelerated filer	☒ ~~(Do not check if a smaller reporting company)~~☐	Smaller reporting company	☐

Emerging growth company	☒		☐

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited):	2
	Consolidated Balance Sheets	2
	~~Condensed~~ Consolidated ~~and Combined Balance Sheets~~	2
	~~Consolidated and Combined~~ Statements of ~~Income~~Loss	3
	~~Condensed~~ Consolidated ~~and Combined~~ Statements of ~~Cash Flows~~Comprehensive Loss	4
	Consolidated ~~and Combined~~ Statements of Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited ~~Condensed~~ Consolidated ~~and Combined~~ Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1418
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2327
Item 4.	Controls and Procedures	2327
PART II.	OTHER INFORMATION	2428
Item 1.	Legal Proceedings	2428
Item 1A.	Risk Factors	2428
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	2429
Signatures		25
		31

~~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.~~

	September 30, 2017			December 31, 2016
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	27,428		$	8,896
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
Total current assets		138,803			119,541
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
Goodwill		788,107			788,107
Intangible assets, less accumulated amortization of $224,053 and $165,651, respectively		1,548,967			1,607,369
Investments and other assets		11,172			11,788
Total assets	$	2,527,924		$	2,547,266
Liabilities and equity
Current liabilities
Accounts payable	$	6,787		$	7,844
Current portion of long-term debt		21,162			—
Accrued liabilities		69,137			64,140
Total current liabilities		97,086			71,984
Noncurrent liabilities
Deferred incentive plans		1,677			3,913
Unfavorable contracts liability		25,185			44,085
Long-term debt		597,468			—
Deferred tax liability		282,504			8,325
Other noncurrent liabilities		17,532			1,674
Total noncurrent liabilities		924,366			57,997
Total liabilities		1,021,452			129,981
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			—
Additional paid-in capital		1,480,932			—
Retained earnings		24,824			—
Total stockholders' equity		1,506,472			2,417,285
Total liabilities and stockholders' equity	$	2,527,924		$	2,547,266

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
Revenues:
Retail	$	118,825		$	119,828	$	346,780		$	343,013
Wholesale^(a)		41,074			42,467		122,917			128,421
Total		159,899			162,295		469,697			471,434
Operating expenses:
Product support, technology and operations		36,598			32,469		106,479			98,381
Marketing and sales		50,733			48,670		160,246			160,275
General and administrative		11,606			7,738		42,305			23,277
Affiliate revenue share		2,121			2,162		6,837			6,264
Amortization of intangible assets		19,467			19,088		58,402			55,416
Total		120,525			110,127		374,269			343,613
Operating income		39,374			52,168		95,428			127,821
Nonoperating (expense) income:
Interest (expense) income, net		(5,431	)		41		(7,160	)		53
Other income, net		64			88		199			142
Total nonoperating (expense) income, net		(5,367	)		129		(6,961	)		195
Income before income taxes		34,007			52,297		88,467			128,016
Provision for income taxes		13,019			452		15,782			452
Net income	$	20,988		$	51,845	$	72,685		$	127,564
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

	Three Months Ended March 31,
Sales channel	2020		2019
Direct	$	125,361	$	115,094
National advertising		19,393		20,295
Other		3,340		3,949
Retail		148,094		139,338
Wholesale		—		14,860
Total revenue	$	148,094	$	154,198

Major products and services
Subscription advertising and digital solutions	$	117,263	$	121,314
Display advertising		23,359		22,289
Pay per lead		5,743		7,934
Other		1,729		2,661
Total revenue	$	148,094	$	154,198

	December 31, 2019		Additions		Impairment			March 31, 2020
Goodwill	$	505,885	$	—	$	(505,885	)	$	—
Indefinite-lived intangible asset		790,020		—		(400,000	)		390,020

	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

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

	Number of RSUs			Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2019		943		$	24.68
Granted		3,167			5.40
Vested and delivered		(220	)		24.80
Forfeited		(87	)		22.82
Outstanding as of March 31, 2020 ⁽¹⁾		3,803			8.66

	Number of PSUs			Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2019		953		$	26.60
Granted⁽¹⁾		715			5.40
Vested and delivered		—			—
Forfeited or cancelled ⁽¹⁾		(775	)		27.13
Outstanding as of March 31, 2020		893			8.78

	Number of Options		Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2019		—	$	—
Granted		513		2.80
Vested and delivered		—		—
Forfeited		—		—
Outstanding as of March 31, 2020		513		2.80

Risk-free interest rate		1.01	%
Weighted-average volatility		53.08	%
Dividend yield		0	%
Expected years until exercise	6.5

	Three Months Ended September 30,						Nine Months Ended September 30,
In thousands (except % amounts)	2017			2016			2017			2016
Revenues	$	159,899		$	162,295		$	469,697		$	471,434
Net income		20,988			51,845			72,685			127,564
Retail revenue as % of total revenue		74	%		74	%		74	%		73	%
Wholesale revenue as % of total revenue		26	%		26	%		26	%		27	%

Income statement information:
	Three Months Ended March 31,
	2020		2019
Operating lease cost	$	986	$	958
Short-term lease cost		229		381
Variable lease cost		839		994
Total lease cost	$	2,054	$	2,333

Other information:
	Three Months Ended March 31,
	2020			2019
Cash paid for operating leases	$	1,259		$	1,224
Weighted-average remaining lease term (in months)	$	130		$	139
Weighted-average discount rate		7.4	%		7.4	%

	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


	March 31, 2020		March 31, 2019		% Change			December 31, 2019		% Change
Dealer Customers		18,938		19,300		(2	)%		18,834		1	%

Exhibit Number		Description
10.1*^		Form of Employee Restricted Stock Unit Award Agreement (2020) issued under the Cars.com Inc. Omnibus Incentive Compensation Plan
10.2*^		Form of Employee Option Award Agreement issued under the Cars.com Inc. Omnibus Incentive Compensation Plan
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as ~~Adopted Pursuant~~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~~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~~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~~adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS~~Exhibit Number		~~XBRL Instance Document.~~Description
~~101.SCH~~101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL (included with Exhibit 101 attachments)

	~~Company Name~~Cars.com Inc.

Date: ~~November 8, 2017~~May 6, 2020	By:	/s/ T. Alex Vetter
		T. Alex Vetter
		President and Chief Executive Officer

Date: ~~November 8, 2017~~May 6, 2020	By:	/s/ ~~Becky A. Sheehan~~Jeanette Tomy
		~~Becky A. Sheehan~~Jeanette Tomy
		Chief Financial Officer