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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~October 31, 2019,~~April 30, 2020, the registrant had ~~66,762,203~~67,144,823 shares of common stock, $0.01 par value per share, outstanding.

	September 30, 2019			December 31, 2018		March 31, 2020			December 31, 2019
	(unaudited)					(unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	19,773		$	25,463	$	187,344		$	13,549
Accounts receivable, net		101,782			108,921		95,069			101,762
Prepaid expenses		7,592			9,264		8,092			6,526
Other current assets		425			10,289		782			603
Total current assets		129,572			153,937		291,287			122,440
Property and equipment, net		42,857			41,482		43,782			43,696
Goodwill		505,885			884,449		—			505,885
Intangible assets, net		1,354,777			1,510,410		904,221			1,329,499
Investments and other assets		26,788			10,271		16,634			26,471
Total assets	$	2,059,879		$	2,600,549	$	1,255,924		$	2,027,991
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	6,280		$	11,631	$	17,626		$	12,431
Accrued compensation		14,588			16,821		9,056			16,738
Unfavorable contracts liability		—			18,885
Current portion of long-term debt		32,518			26,853		31,425			31,391
Other accrued liabilities		68,419			36,520		40,203			38,246
Total current liabilities		121,805			110,710		98,310			98,806
Noncurrent liabilities:
Long-term debt		630,913			665,306		763,361			611,277
Deferred tax liability		125,175			177,916		—			132,996
Other noncurrent liabilities		40,501			19,694		46,363			43,844
Total noncurrent liabilities		796,589			862,916		809,724			788,117
Total liabilities		918,394			973,626		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 September 30, 2019 and December 31, 2018, respectively		—			—
Common Stock at par, $0.01 par value; 300,000 shares authorized; 66,678 and 68,262 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		667			683
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		1,512,713			1,508,001		1,516,174			1,515,109
(Accumulated deficit) retained earnings		(362,957	)		118,239
Accumulated deficit							(1,154,501	)		(367,067	)
Accumulated other comprehensive loss		(8,938	)		—		(14,453	)		(7,642	)
Total stockholders' equity		1,141,485			1,626,923		347,890			1,141,068
Total liabilities and stockholders' equity	$	2,059,879		$	2,600,549	$	1,255,924		$	2,027,991

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

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Revenue:
Retail	$	146,681		$	151,627		$	420,129		$	430,828		$	148,094		$	139,338
Wholesale		5,409			17,685			34,366			66,953			—			14,860
Total revenue		152,090			169,312			454,495			497,781			148,094			154,198
Operating expenses:
Cost of revenue and operations		25,089			23,808			74,987			64,293			26,030			25,579
Product and technology		14,923			15,616			48,125			51,215			14,873			17,863
Marketing and sales		50,789			55,825			164,872			180,168			54,922			60,343
General and administrative		13,414			15,131			59,265			53,704			14,117			23,888
Affiliate revenue share		5,158			4,097			9,788			11,193			6,369			2,454
Depreciation and amortization		28,970			26,504			86,761			77,154			30,961			28,125
Goodwill and intangible asset impairment		461,463			—			461,463			—			905,885			—
Total operating expenses		599,806			140,981			905,261			437,727			1,053,157			158,252
Operating (loss) income		(447,716	)		28,331			(450,766	)		60,054
Nonoperating (expense) income:
Operating loss														(905,063	)		(4,054	)
Nonoperating expense:
Interest expense, net		(7,712	)		(7,005	)		(22,989	)		(20,305	)		(7,526	)		(7,566	)
Other income, net		1,402			65			1,530			76
Other (expense) income, net														(9,501	)		119
Total nonoperating expense, net		(6,310	)		(6,940	)		(21,459	)		(20,229	)		(17,027	)		(7,447	)
(Loss) income before income taxes		(454,026	)		21,391			(472,225	)		39,825
Income tax (benefit) expense		(27,869	)		5,594			(31,011	)		10,373
Net (loss) income	$	(426,157	)	$	15,797		$	(441,214	)	$	29,452
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		66,769			69,652			67,043			70,900			66,938			67,584
Diluted		66,769			70,029			67,043			71,153			66,938			67,584
(Loss) earnings per share:
Loss per share:
Basic	$	(6.38	)	$	0.23		$	(6.58	)	$	0.42		$	(11.76	)	$	(0.13	)
Diluted		(6.38	)		0.23			(6.58	)		0.41			(11.76	)		(0.13	)

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

Preferred Stock

Common Stock

Additional
Paid-In

(Accumulated Deficit) 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

—

—

—

—

—

—

(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

Transactions with TEGNA, net ⁽¹⁾

—

—

12

—

(181
)

—

—

(181
)
Balance at March 31, 2019

—

$
—

67,455

$
675

$
1,510,057

$
89,217

$
(7,279
)

$
1,592,670

Net loss

—

—

—

—

—

(6,026
)

—

(6,026
)
Other comprehensive loss, net

—

—

—

—

—

—

(1,292
)

(1,292
)
Repurchases of common stock

—

—

(869
)

(9
)

—

(19,991
)

—

(20,000
)
Shares issued in connection with
   stock-based compensation plans, net

—

—

84

1

447

—

—

448

Stock-based compensation

—

—

—

—

3,348

—

—

3,348

Transactions with TEGNA, net ⁽¹⁾

—

—

2

—

—

—

—

—

Balance at June 30, 2019

—

$
—

66,672

$
667

$
1,513,852

$
63,200

$
(8,571
)

$
1,569,148

Net loss

—

—

—

—

—

(426,157
)

—

(426,157
)
Other comprehensive loss, net

—

—

—

—

—

—

(367
)

(367
)
Repurchases of common stock

—

—

—

—

—

—

—

—

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

—

—

6

—

(57
)

—

—

(57
)
Stock-based compensation

—

—

—

—

(1,071
)

—

—

(1,071
)
Transactions with TEGNA, net ⁽¹⁾

—

—

—

—

(11
)

—

—

(11
)
Balance at September 30, 2019

—

$
—

66,678

$
667

$
1,512,713

$
(362,957
)

$
(8,938
)

$
1,141,485

	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

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

Preferred Stock

Common Stock

Additional
Paid-In

Retained

Accumulated
Other
Comprehensive

Stockholders'

Shares

Amount

Shares

Amount

Capital

Earnings

Loss

Equity

Balance at December 31, 2017

—

$
—

71,628

$
716

$
1,501,830

$
176,582

$
—

$
1,679,128

Net income

—

—

—

—

—

929

—

929

Repurchases of common stock

—

—

—

—

—

—

—

—

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

—

—

62

1

(618
)

—

—

(617
)
Stock-based compensation

—

—

—

—

1,600

—

—

1,600

Transactions with TEGNA, net ⁽¹⁾

—

—

175

2

(2,685
)

—

—

(2,683
)
Balance at March 31, 2018

—

$
—

71,865

$
719

$
1,500,127

$
177,511

$
—

$
1,678,357

Net income

—

—

—

—

—

12,726

—

12,726

Repurchases of common stock

—

—

(2,013
)

(20
)

—

(49,980
)

—

(50,000
)
Shares issued in connection with
   stock-based compensation plans, net

—

—

21

—

142

—

—

142

Stock-based compensation

—

—

—

—

2,876

—

—

2,876

Transactions with TEGNA, net ⁽¹⁾

—

—

23

—

—

—

—

—

Balance at June 30, 2018

—

$
—

69,896

$
699

$
1,503,145

$
140,257

$
—

$
1,644,101

Net income

—

—

—

—

—

15,797

—

15,797

Other comprehensive loss, net

—

—

—

—

—

—

—

Repurchases of common stock

—

—

(973
)

(10
)

—

(27,179
)

—

(27,189
)
Shares issued in connection with
   stock-based compensation plans, net

—

—

1

—

(2
)

—

—

(2
)
Stock-based compensation

—

—

—

—

3,019

—

—

3,019

Transactions with TEGNA, net ⁽¹⁾

—

—

2

—

(883
)

—

—

(883
)
Balance at September 30, 2018

—

$
—

68,926

$
689

$
1,505,279

$
128,875

$
—

$
1,634,843

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

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Net (loss) income
$
(426,157
)

$
15,797

$
(441,214
)

$
29,452

Other comprehensive loss, net of tax:

Interest rate swap

(367
)

—

(8,938
)

—

Total other comprehensive loss

(367
)

—

(8,938
)

—

Comprehensive (loss) income
$
(426,524
)

$
15,797

$
(450,152
)

$
29,452

	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 the Consolidated Financial Statements.

	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
Cash flows from operating activities:
Net (loss) income	$	(441,214	)	$	29,452
Adjustments to reconcile Net (loss) income to Net cash provided by operating activities:
Net loss							$	(787,434	)	$	(9,031	)
Adjustments to reconcile Net loss to Net cash provided by operating activities:
Depreciation		13,427			9,195			5,683			4,033
Amortization of intangible assets		73,334			67,959			25,278			24,092
Amortization of unfavorable contracts liability		(18,885	)		(18,900	)		—			(6,300	)
Goodwill and intangible asset impairment		461,463			—			905,885			—
Impairment of non-marketable security								9,447			—
Stock-based compensation		5,258			7,495			1,971			2,981
Deferred income taxes		(52,741	)		7,137			(133,064	)		(2,570	)
Provision for doubtful accounts		3,844			3,451			1,606			1,055
Amortization of debt issuance costs		959			971			556			311
Other, net		411			762			75			(9	)
Changes in operating assets and liabilities:
Accounts receivable		3,295			1,119			5,087			12,274
Prepaid expenses		1,672			66			(1,566	)		1,847
Other current assets		9,992			330			(218	)		886
Other assets		(16,517	)		602			458			(17,208	)
Accounts payable		(5,363	)		(2,397	)		5,133			574
Accrued compensation		(2,233	)		(3,363	)		(7,682	)		(4,075	)
Other accrued liabilities		28,627			18,306			(1,661	)		14,087
Other noncurrent liabilities		15,221			(1,104	)		(662	)		15,442
Net cash provided by operating activities		80,550			121,081			28,892			38,389
Cash flows from investing activities:
Purchase of property and equipment		(15,409	)		(9,966	)		(5,755	)		(3,363	)
Payment for DI Acquisition, net		—			(157,153	)
Other, net		(599	)		—			—			(600	)
Net cash used in investing activities		(16,008	)		(167,119	)		(5,755	)		(3,963	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		10,000			195,000
Proceeds from revolving loan borrowings								165,000			—
Payments of long-term debt		(39,688	)		(71,875	)		(13,438	)		(10,625	)
Stock-based compensation plans, net		(352	)		(477	)		(904	)		(743	)
Repurchases of common stock		(40,000	)		(76,681	)		—			(20,000	)
Transactions with TEGNA, net		(192	)		(2,683	)
Net cash (used in) provided by financing activities		(70,232	)		43,284
Net decrease in cash and cash equivalents		(5,690	)		(2,754	)
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		25,463			20,563			13,549			25,463
Cash and cash equivalents at end of period	$	19,773		$	17,809		$	187,344		$	28,340
Supplemental cash flow information:
Cash paid for income taxes, net of refunds	$	168		$	500		$	124		$	38
Cash paid for interest		22,413			19,472			6,956			7,413

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

NOTE 1. 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. Through a~~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 ~~including~~includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, PickupTrucks.com and NewCars.com, the Company empowers shoppers with the data, resources and digital tools needed to make informed buying decisions and seamlessly connect with automotive retailers. In a rapidly changing market, the Company enables dealerships and manufacturers (“OEMs”) with innovative technical solutions and data-driven intelligence to better reach and influence ready-to-buy shoppers, increase inventory turn and gain market share.NewCars.com.

Company History. In May 2017, the Company separated from its 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”). On May 31, 2017, the Company made a $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 the Company’s common stock. The Company’s 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., an innovative technology leader providing progressive dealer websites, digital retailing and messaging platform products, and substantially all of the net assets of Launch Digital Marketing LLC, a provider of digital marketing services, including paid, organic, social and creative services (collectively, the “DI Acquisition”). The post-DI Acquisition business related to Dealer Inspire, Inc. and Launch Digital Marketing LLC is referred to collectively as “Dealer Inspire”.

Basis of Presentation. These accompanying unaudited interim Consolidated Financial Statements (“Consolidated Financial Statements”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated ~~and Combined~~ Financial Statements and the notes thereto for the year ended December 31, ~~2018,~~2019, which are included in the Company's Annual Report on Form 10-K dated February ~~28, 2019~~26, 2020 (the “December 31, ~~2018~~2019 Financial Statements”).

The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in the December 31, ~~2018~~2019 Financial Statements. In the opinion of management, the Consolidated Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, cash flows and changes in stockholders' equity as of the dates and for the periods indicated. The unaudited results of operations for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, ~~2019.~~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.

~~Reclassifications~~. Historically, certain costs related to severance, transformation and other exit costs; costs associated with a stockholder activist campaign; transaction-related costs; and the write-off of long-lived assets were reflected in various operating expense line items in the Consolidated Statements of (Loss) Income. Beginning on January 1, 2019, these costs are reflected within General and administrative expenses. Therefore, certain prior year balances have been reclassified to conform to the current year presentation and are summarized in the table below (in thousands). There is no change to Operating (loss) income as a result of these reclassifications.

Three Months Ended September 30, 2018

As Reported

Adjustments

As Adjusted

Cost of revenue and operations

$
24,034

$
(226
)

$
23,808

Product and technology

15,918

(302
)

15,616

Marketing and sales

56,083

(258
)

55,825

General and administrative

14,345

786

15,131

Affiliate revenue share

4,097

—

4,097

Depreciation and amortization

26,504

—

26,504

Total operating expenses

$
140,981

$
—

$
140,981

Nine Months Ended September 30, 2018

As Reported

Adjustments

As Adjusted

Cost of revenue and operations

$
65,924

$
(1,631
)

$
64,293

Product and technology

56,202

(4,987
)

51,215

Marketing and sales

181,645

(1,477
)

180,168

General and administrative

45,609

8,095

53,704

Affiliate revenue share

11,193

—

11,193

Depreciation and amortization

77,154

—

77,154

Total operating expenses

$
437,727

$
—

$
437,727

Cloud Computing Arrangements. In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, aligning the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs for internal-use software. The ~~new guidance is effective for the~~ Company ~~on January 1, 2020 and early adoption is permitted. The Company is currently evaluating~~adopted this new guidance ~~and its~~as of January 1, 2020. The adoption did not have a material impact on its Consolidated Financial Statements and related disclosures.

Financial Instruments – Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses 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 this new guidance, the Company ~~will be~~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 new guidance is effective for the Company on January 1, 2020 and will be adopted using a modified retrospective approach.~~ The Company ~~is currently evaluating~~adopted this new guidance ~~and its~~as of January 1, 2020. The adoption did not have a material impact on its Consolidated Financial Statements and related disclosures.

~~Notes~~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 ~~(continued)~~

~~Leases.~~ ~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ ~~(ASU 2016-02) in order to increase transparency~~ and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current U.S. GAAP. The new guidance requires a lessee to recognize a liability to make lease payments (the “lease liability”) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. The Company adopted ASU 2016-02 in the first quarter of 2019 utilizing the modified retrospective approach for leases existing at, or entered into after, the beginning of the first quarter of 2019 and did not recast the comparative periods presented in the Consolidated Financial Statements upon adoption. The Company elected the ‘package of practical expedients’ and did not reassess its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease recognition exemption for all leases that qualify and did not recognize right-of-use assets or lease liabilities for those leases. The Company’s lease agreements are principally related to real estate. The adoption of ASU 2016-02 resulted in the recognition of operating lease assets of $18.2 million and $35.0 million in operating lease liabilities on its Consolidated Balance Sheets. The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the 300 South Riverside Lease in Chicago, Illinois. There was no material impact to its Consolidated Statements of (Loss) Income and Consolidated Statements of Cash Flows. For further information, see Note 12 (Leases).disclosures.

Revenue Summary. In the table below (in thousands), revenue is 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.

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
Sales channel	2019		2018		2019		2018		2020		2019
Direct	$	122,878	$	119,510	$	349,162	$	336,521	$	125,361	$	115,094
National advertising		20,161		28,107		59,752		82,155		19,393		20,295
Other		3,642		4,010		11,215		12,152		3,340		3,949
Retail		146,681		151,627		420,129		430,828		148,094		139,338
Wholesale		5,409		17,685		34,366		66,953		—		14,860
Total revenue	$	152,090	$	169,312	$	454,495	$	497,781	$	148,094	$	154,198

Major products and services
Subscription advertising and digital solutions	$	119,495	$	127,965	$	357,256	$	380,218	$	117,263	$	121,314
Display advertising		23,048		30,748		67,755		86,634		23,359		22,289
Pay per lead		6,720		7,933		21,267		22,968		5,743		7,934
Other		2,827		2,666		8,217		7,961		1,729		2,661
Total revenue	$	152,090	$	169,312	$	454,495	$	497,781	$	148,094	$	154,198

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

Triggering ~~Event and Impairment Assessment.~~Event. ~~The~~In the three months ended March 31, 2020, the Company determined there was a triggering event, ~~primarily~~ 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 ~~sustained decrease~~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 ~~Company's stock price after the completion~~near future in light of the ~~strategic alternatives review process,~~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 vary depending on the duration and severity of the economic and operational impacts of the COVID-19 pandemic and related 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 ~~September 1, 2019.~~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, the Company recorded an impairment of ~~$379.2~~$505.9 million and ~~$82.3~~$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. ~~As of September 30, 2019, the substantial majority of the Company’s goodwill is the result of~~

~~TEGNA’s 2014 acquisition of Cars.com and the remainder is the result the Company’s acquisition of DealerRater and the DI Acquisition.~~

Goodwill is tested for impairment on an annual basis ~~as of November 1~~ or between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying ~~amount, such~~amount. The Company’s goodwill is tested for impairment at a level referred to as in the ~~quarter ended September 30, 2019.~~reporting unit. The level at which the Company tests goodwill for impairment requires ~~the Company~~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 itCARS operates as a single reporting unit.

The process of estimating the fair value of goodwill is subjective and requires ~~the Company~~us to make estimates that may significantly impact the outcome of the analysis.

A qualitative assessment is performed at least annually and 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 performing this assessment, ~~we conclude~~the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company performs athe quantitative test.

Under athe quantitative test, a goodwill impairment is identified by comparing the fair value of the reporting unit to the carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, goodwill is 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 ~~estimates~~estimated the fair value of the reporting unit ~~by utilizing~~with an income approach ~~which uses a~~using the discounted cash flow (“DCF”) analysis and the Company also considered a market-based valuation methodology using comparable public company trading values. Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, 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~~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 risk inherent in future cash flows of the Company’s reporting unit.

Impairment assessment inherently involves management judgments regarding a number of assumptions described above. The reporting unit fair value also depends on the 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 the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of the Company’s recorded goodwill, differences in assumptions could have a material effect on the estimated fair values.

Indefinite-lived Intangible Asset. The Company’s indefinite-lived intangible asset relates to the Cars.com trade name and resulted from TEGNA’s 2014 acquisition of Cars.com. Intangible assets with indefinite lives are tested annually, ~~as of November 1,~~ or more often if circumstances dictate, such as in the quarter ended ~~September 30, 2019,~~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 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 ~~September 30, 2019,~~March 31, 2020, the Company was in compliance with the covenants under its ~~credit agreement.~~Credit Agreement.

Term Loan. As of ~~September 30, 2019,~~March 31, 2020, the outstanding principal amount under the Term Loan was ~~$396.6~~$379.7 million and the interest rate in effect was ~~4.5%~~4.3%, including the impact of the interest rate swap discussed ~~in Note 6 (Interest Rate Swap).~~below. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company made ~~$19.7~~$8.4 million in mandatory quarterly Term Loan payments.

Revolving Loan. As of ~~September 30, 2019,~~March 31, 2020, the outstanding borrowings under the Revolving Loan were ~~$270.0~~$420.0 million and the interest rate in effect was ~~3.9%~~2.7%. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company borrowed $165.0 million. Additionally, the Company made ~~$10.0~~$5.0 million in voluntary Revolving Loan ~~payments, net of borrowings.~~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 ~~September 30, 2019, $180.0~~March 31, 2020, $30.0 million was available to borrow under the Revolving

Loan. The Company’s borrowings are limited by its total net leverage ratio, which is calculated in accordance with the ~~credit agreement~~Credit Agreement and was ~~3.4~~4.1 to 1.0 as of ~~September 30, 2019.~~March 31, 2020.

Fair Value. The ~~Company’s~~Company's debt is classified as Level 2 in the fair value hierarchy and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments. ~~The carrying amount~~As of ~~the Company’s debt approximated~~March 31, 2020, the fair value as of ~~September 30, 2019.~~the outstanding indebtedness was approximately $658.7 million, compared to the carrying value of $799.7 million. As of December 31, 2019, the fair value approximated the carrying value.

~~Subsequent Event.~~Credit Agreement. In October 2019, the Company entered into an amendment to its ~~credit agreement~~Credit Agreement to increase the total net leverage covenant during the remaining term of the ~~credit agreement~~Credit Agreement while preserving the 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~~Term Loan and the ~~revolving loan~~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,~~Credit Agreement, on a notional amount of $300 million. The Swap is designated as a cash flow hedge of interest rate risk. As of ~~September 30, 2019,~~March 31, 2020, the fair value of the Swap was an unrealized loss of ~~$11.9~~$17.0 million, of which ~~$4.5~~$7.8 million and ~~$7.4~~$9.2 million is recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets. During the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and March 31, 2019, ~~$1.2~~$1.0 million and $0.3 million was reclassified from Accumulated other comprehensive ~~(loss)~~loss into Interest expense, ~~net.~~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 ~~have~~had the exclusive right to sell and price Cars.com’s products in their local territories, paying Cars.com a wholesale rate for the Cars.com product. The Company ~~charges~~charged the affiliates 60% of the corresponding Cars.com retail rate for products sold to affiliate dealers and ~~recognizes~~recognized revenue generated from these agreements as Wholesale revenue in the Consolidated Statements of ~~(Loss) Income.~~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 ~~being~~ amortized on 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

contracts liability was recorded as a reduction of Affiliate revenue share within Operating expenses in the Consolidated Statements of Loss Income. As of ~~December 31, 2018,~~September 30, 2019, the Unfavorable contracts ~~liability~~ ~~was $18.9 million and is recorded in Current liabilities on the Consolidated Balance Sheet. The Unfavorable contracts~~ liability was fully ~~amortized as of September 30, 2019.~~amortized.

The Company amended five of its affiliate agreements (Gannett, McClatchy, TEGNA, tronc, and 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) Income.~~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 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) Income.~~

The Company no longer records the amortization of the Unfavorable contracts liability associated with the converted markets to revenue as the Company now recognizes this direct revenue at retail rates. The amortization of the Unfavorable contracts liability is now recorded as a reduction of Affiliate revenue share expense within Operating expenses in the Consolidated Statements of (Loss) Income.Loss.

Therefore, during the ~~nine~~ three months ended ~~September 30,~~March 31, 2020 and March 31, 2019, the Company recorded ~~$17.5~~0 and $5.8 million of unfavorable contracts liability amortization as a reduction to Affiliate revenue share expense, rather than Wholesale revenue, in the Consolidated Statements of Loss, respectively.

~~(Loss) Income. The reduction to Affiliate revenue share expense was more than offset by the fees associated with the marketing and support and transition services.~~

~~The Company’s Unfavorable contracts liability activity for the nine months ended September 30, 2019 is as follows (in thousands):~~

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

In March 2018, the Company’s Board of Directors authorized a stock repurchase program to acquire up to $200 million of the Company’s common stock. The Company ~~may~~was 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~~was based on market conditions and other factors including price. The repurchase program ~~has~~had a two-year duration, ~~does~~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 ~~intends to fund~~funded the share repurchase program principally with cash from operations. ~~During~~As of March 31, 2020, the ~~nine months ended~~ ~~September 30, 2019 and 2018, the~~repurchase program is expired. The Company repurchased and subsequently retired ~~1.7 million~~0 shares ~~for $40.0 million~~during the three months ended March 31, 2020 and ~~3.0~~0.9 million shares for ~~$77.2~~$20.0 million ~~respectively.~~during the three months ended March 31, 2019.

~~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. During the nine months ended September 30, 2019, the Company granted 212,000 PSUs at a weighted-average grant date fair value of $23.99 per unit. These PSUs require continued employee service. The percentage of PSUs that shall vest will range from 0% to 200% of the number of PSUs granted based on the Company’s future performance related to certain revenue and adjusted earnings before interest, income taxes, depreciation and amortization targets over a three-year performance period. These PSUs are subject to cliff vesting at the end of the three-year performance period.

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 individual holder’s award agreement. RSUs are subject to graded vesting, generally ranging between one and four years and the fair value of the RSUs is equal to the Company’s common stock price on the date of ~~grant. During~~grant. RSU activity for the ~~nine~~three months ended ~~September 30, 2019, the Company granted 572,000 RSUs at a~~March 31, 2020 is 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 ~~$23.71 per unit.~~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 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 end of the respective performance period. PSU activity for the three months ended March 31, 2020 is as 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 individual holder’s award agreement. Stock options are subject to three-year cliff vesting and expire 10 years from the grant date. Stock option activity for the three months ended March 31, 2020 is as follows (in thousands, except for weighted-average grant date fair value):

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

Basic ~~(loss) earnings~~loss per share is calculated by dividing Net ~~(loss) income~~loss by the weighted-average number of shares of common stock outstanding. Diluted ~~(loss) earnings~~loss per share is similarly calculated, except that the calculation includes the dilutive effect of the

assumed issuance of shares under stock-based compensation plans, unless the inclusion of such shares would have an anti-dilutive impact. The computation of ~~(Loss) earnings~~Loss per share is as follows (in thousands, except per share data):

Leases. The Company is obligated as a lessee under certain non-cancelable operating leases for office space, and is also obligated to pay insurance, maintenance and other executory costs associated with the leases. As of September 30, 2019, the Company’s scheduled future minimum lease payments under operating leases having initial or remaining noncancelable lease terms of more than one year, were as follows (in thousands):

~~As of September 30, 2019,~~March 31, 2020, the Company’s operating lease assets, included in Investments and other assets, were ~~$17.2~~$16.5 million and operating lease liabilities were ~~$34.2~~$32.9 million, the current maturities of which is included in Other accrued liabilities and the long-term portion of which is included in Other noncurrent liabilities. The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the 300 South Riverside Lease in Chicago, Illinois. Other information related to the Company’s operating leases for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 is as follows (in thousands, except percentage):

Included in Other (expense) income, net in the three months ended March 31, 2020 was a full impairment of $9.4 million of a 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.

Deferred Tax Asset and Valuation Allowance. As a result of the goodwill and indefinite-lived intangible asset impairments recorded during the three months ended March 31, 2020, the Company had a $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 more likely than not to 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 rate, expressed by calculating the income tax expense as a percentage of Income before income tax, was ~~6.1% and 6.6%~~15% for the three ~~and nine~~ months ended ~~September 30, 2019, respectively.~~March 31, 2020. The effective tax rate differed from the statutory federal income tax rate of 21%, primarily due to the tax impact of the goodwill and intangible asset ~~impairment.~~impairments and the full valuation allowance recorded during the three months ended March 31, 2020.

Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). In recognition of the significant threat to the liquidity of financial markets posed by the COVID-19 pandemic and related restrictions, the U.S. government enacted into law the CARES Act, which is a sweeping stimulus bill intended to bolster the U.S. economy, among other things, and provide emergency assistance and tax credits or benefits to qualifying businesses and individuals. The Company is currently evaluating this new law and its impact on its Consolidated Financial Statements and related disclosures.

Reduction in Force. On April 29, 2020, the Company announced the permanent reduction in force of approximately 170 people, the majority of whom had been placed on furlough in early April 2020. The Company estimates 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 are expected to be recorded during the three months ending June 30, 2020.

This report contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements 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, ~~review process,~~ 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 and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements, strategic actions or prospects may differ materially from those expressed or implied by these forward-looking statements. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “outlook,” “intend,” “strategy,” “plan,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts,” “mission,” “strive,” “more,” “goal” or similar expressions. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, based on our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, current developments regarding the COVID-19 pandemic and other factors we think are appropriate. Such forward-looking 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 business and industry, are inherently uncertain. These statements are expressed in good faith and we believe these judgments are reasonable. However, you should understand that these statements are not guarantees of strategic action, performance or results. Our actual results and strategic actions could differ materially from those expressed in the forward-looking statements. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. Whether or not any such forward-looking statement is in fact achieved will depend on future events, some of which are beyond our control.

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

For a detailed discussion of many of these risks and uncertainties, see “Part I, Item 1A., Risk Factors” and “Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2018, our subsequent Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and our other filings~~2019 as filed with the Securities and Exchange Commission (“SEC”), on February 26, 2020 and our

Current Reports on Form 8-K filed with the SEC and available on our website at investor.cars.com or via EDGAR at www.sec.gov. All forward-looking statements contained in this report are qualified by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic and related restrictions. The forward-looking statements contained in this report are based only on information currently available to us and speak only as of the date of this report. We undertake no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time

or otherwise. The forward-looking statements in this report are intended to be subject to the safe harbor protection provided by the federal securities laws.

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. Through a~~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 ~~including~~includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, PickupTrucks.com and NewCars.com, we empower shoppers with the data, resources and digital tools needed to make informed buying decisions and seamlessly connect with automotive retailers. In a rapidly changing market, we enable dealerships and manufacturers (“OEMs”) with innovative technical solutions and data-driven intelligence to better reach and influence ready-to-buy shoppers, increase inventory turn and gain market share. 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 the time since we became an independent company, we have developed and commenced a new, ongoing multi-year business strategy to better support sustainable long-term growth and market leadership. We believe we are making strides to transform from a traditional marketplace to a full-service marketing and technology solutions provider that is well positioned to lead in the online automotive retail sector. In 2018 and 2019, we accomplished many product, technology, sales and go-to-market changes designed to underpin a strategy aimed at achieving sustainable market leadership during an ever-changing environment in the automobile and automotive-advertising sectors.

~~In conjunction with our digital solutions strategy, in~~ February 2018, wethe 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”). The post-DI Acquisition business related to Dealer Inspire, Inc. and Launch Digital Marketing LLC is referred to collectively as “Dealer Inspire”. The results of operations for the three and nine months ended September 30, 2018 includes Dealer Inspire’s financial results for the post-DI Acquisition period of February 21, 2018 through September 30, 2018.

~~Increases~~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 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, 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 is critical to our business. Traffic to the~~ ~~Cars.com~~ ~~network of websites and mobile apps provides value to our advertisers in terms of audience, awareness, consideration and conversion.~~ 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.

~~In the third quarter of 2019, we had record organic Traffic growth. During this period, we achieved 27% growth in Traffic and 22% growth in Average Monthly Unique Visitors.~~ Driven by our product innovations and investments in and efficiencies gained in search engine optimization, brand awareness and paid channels, we have experienced ~~consistent~~ year-over-year Traffic growth since January 2018, and in ~~August~~January 2020, we recorded the ~~highest-trafficked month~~highest level of Traffic in our history. In ~~addition,~~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 ~~been taking share of unique visitors from the competition throughout 2019~~.impacted and may continue to impact our traffic in 2020 and beyond.

~~New~~ 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. ~~During the third quarter of~~In 2019, we were selected as aone of four preferred website ~~provider~~providers to General Motors (“GM”). This ~~allows~~allowed us to begin selling our website solutions to more than 4,100 GM dealers. This program is ~~non-exclusive~~semi-exclusive and provides GM dealers a choice in provider for the first time in 15 years. ~~Currently~~GM remains on track to launch over 800 additional websites with revenue expected to begin in the ~~dealer enrollment phase, we expect to launch and begin recognizing revenue from GM website customers in Q1~~second half of 2020. This new agreement provides us with the opportunity to substantially increase our current website customer base, which was approximately ~~3,000~~3,600 as of ~~September 30, 2019.~~

~~Affiliate Conversions.~~ ~~As of October 1, we have successfully converted all affiliates to our direct control. We amended five of our affiliate agreements (Gannett, the~~ ~~McClatchy Company (“McClatchy”), TEGNA, tronc, Inc. (“tronc”), and the Washington Post~~). The Belo affiliate agreement expired on October 1, 2019. We now have a direct relationship with all dealer customers and recognize the revenue associated with converted dealers as Retail revenue, rather than Wholesale revenue, in the Consolidated Statements of (Loss) Income. 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.

~~Credit Agreement Amendment.~~ 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 increases our maximum total net leverage ratio from 3.75x to 4.50x with incremental step downs through maturity on MayMarch 31, ~~2022.~~

~~Completion of Strategic Alternatives Review.~~ In August 2019, we announced the conclusion of the strategic alternatives review process first announced on January 16, 2019. The strategic alternatives review process was public, comprehensive and deliberate, lasting ten months. After extensive negotiations and discussions, no actionable proposals for a sale were available to us. As a result, our board of directors unanimously concluded that the best interests of our stockholders are served by continuing to focus on the execution of our strategic plan and opportunities to drive growth and stockholder returns as an independent public company. We remain open to all potential value-creating opportunities.2020.

Technology Transformation. In February 2019, we announced a restructuring of the product and technology teams, ~~(the “Technology Transformation”). This restructuring is~~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.~~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 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. ~~Further,~~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.

~~Sales Transformation.~~ In December 2018, we restructured the sales team (the “Sales Transformation”), with the primary goal of better serving our customers. We reorganized the sales force into teams designed to provide the full range of enhanced services to current customers and a more tailored structure to win new customers. These changes reflect the expansion of our business beyond car

listings to include value-added digital solutions such as innovations from Dealer Inspire and DealerRater. The Sales Transformation also reflects a realignment of territories following the conversion of the majority of the affiliate agreements.

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:

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

Traffic (Visits). Traffic is ~~critical~~fundamental to our business. Traffic to the ~~Cars.com~~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.com~~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.com~~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 ~~dealers~~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 ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019, mobile traffic accounted for ~~73%~~76% and ~~72%~~71% of total Traffic, respectively. ~~For~~

Although we experienced strong traffic growth in the ~~three~~first quarter of 2020, the unknown duration and ~~nine months ended September 30, 2018, mobile~~economic uncertainty related to the COVID-19 pandemic and related restrictions and reduced consumer spending have impacted and may continue to impact our traffic ~~accounted for 68%~~in 2020 and ~~66% of total Traffic, respectively.~~beyond.

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.com~~CARS property on an individual device/browser combination or installs one of our mobile apps on an individual device. If ~~an individual~~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 ~~declined~~increased 1% from ~~June 30,~~December 31, 2019. ~~Dealer Customers decreased, primarily due to~~This increase was a ~~decline in direct marketplace customers, as well as the conversion~~result of ~~affiliate customers, partially offset by~~ growth in ~~digital~~new solutions-only dealer customers, improved retention rates in local marketplace and dealer solutions ~~customers.~~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 9%2% from ~~September 30, 2018.~~March 31, 2019. Dealer Customers ~~decreased,~~declined, primarily due to ~~higher~~ cancellations of marketplace customers, partially offset by growth in digital solutions customers.

~~Average Revenue Per Dealer (“ARPD”).~~ We believe that 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. ~~Beginning~~Although we experienced dealer customer growth in the first quarter of ~~2019, this key operating metric includes revenue from dealer websites~~2020, the unknown duration and economic uncertainty related to the COVID-19 pandemic and related ~~digital solutions. ARPD prior~~restrictions and reduced consumer spending have impacted and may continue to ~~the first quarter of 2019 has not been recast to include Dealer Inspire as it would be impracticable to do so.~~

~~ARPD increased 1% from June 30, 2019,~~ ~~primarily driven by~~ ~~higher rates~~impact our dealer customers in ~~converted affiliate markets.~~

~~ARPD increased 3% from September 30, 2018, primarily driven by~~ ~~the addition of~~ ~~dealer websites~~2020 and ~~related digital solutions, as 2018 ARPD did not include dealer websites and related digital solutions~~. ~~ARPD excluding revenue from dealer websites and related digital solutions was $2,069, down 2% from the prior year.~~beyond.

Factors Affecting Our Performance. Our business is impacted by the ~~ever-changing~~changes in the larger automotive environment, including consumer demand and other macroeconomic factors, and changes related to automotive digital ~~advertising solutions. We have observed softness~~advertising. Changes in ~~new~~ car sales volumes in the United States and reduced dealer profitability ~~which has impacted~~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 ~~media offerings,~~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 continued integration of Dealer Inspire will be an important driver of our success. We are adapting our go-to-market sales and technology infrastructure, as described in the Sales and Technology Transformations discussions above,FUEL^TM In-Market Video product that allows dealers to ~~support the execution of our strategy.~~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 ~~September 30, 2019~~March 31, 2020 Compared to Three Months Ended ~~September 30, 2018~~March 31, 2019

	Three Months Ended September 30,						Increase						Three Months Ended March 31,						Increase
(In thousands, except percentages)	2019			2018			(Decrease)			% Change			2020			2019			(Decrease)			% Change
Revenue:
Direct	$	122,878		$	119,510		$	3,368			3	%	$	125,361		$	115,094		$	10,267			9	%
National advertising		20,161			28,107			(7,946	)		(28	)%		19,393			20,295			(902	)		(4	)%
Other		3,642			4,010			(368	)		(9	)%		3,340			3,949			(609	)		(15	)%
Retail		146,681			151,627			(4,946	)		(3	)%		148,094			139,338			8,756			6	%
Wholesale		5,409			17,685			(12,276	)		(69	)%		—			14,860			(14,860	)		(100	)%
Total revenue		152,090			169,312			(17,222	)		(10	)%		148,094			154,198			(6,104	)		(4	)%
Operating expenses:
Cost of revenue and operations		25,089			23,808			1,281			5	%		26,030			25,579			451			2	%
Product and technology		14,923			15,616			(693	)		(4	)%		14,873			17,863			(2,990	)		(17	)%
Marketing and sales		50,789			55,825			(5,036	)		(9	)%		54,922			60,343			(5,421	)		(9	)%
General and administrative		13,414			15,131			(1,717	)		(11	)%		14,117			23,888			(9,771	)		(41	)%
Affiliate revenue share		5,158			4,097			1,061			26	%		6,369			2,454			3,915		***
Depreciation and amortization		28,970			26,504			2,466			9	%		30,961			28,125			2,836			10	%
Goodwill and intangible asset impairment		461,463			—			461,463		***%				905,885			—			905,885		***
Total operating expenses		599,806			140,981			458,825		***%				1,053,157			158,252			894,905		***
Operating (loss) income		(447,716	)	��	28,331			(476,047	)	***%
Nonoperating (expense) income:
Operating loss														(905,063	)		(4,054	)		(901,009	)	***
Nonoperating expense:
Interest expense, net		(7,712	)		(7,005	)		(707	)		10	%		(7,526	)		(7,566	)		40			(1	)%
Other income, net		1,402			65			1,337		***%
Other (expense) income, net														(9,501	)		119			(9,620	)	***
Total nonoperating expense, net		(6,310	)		(6,940	)		630			(9	)%		(17,027	)		(7,447	)		(9,580	)	***
(Loss) income before income taxes		(454,026	)		21,391			(475,417	)	***%
Income tax (benefit) expense		(27,869	)		5,594			(33,463	)	***%
Net (loss) income	$	(426,157	)	$	15,797		$	(441,954	)	***%
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 ~~80.8%~~84.6% and ~~70.6%~~74.6% of total revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. ~~Direct revenue increased by $3.4 million, or 3%, compared to the prior year.~~

~~During 2018,~~As of October 1, 2019, we ~~amended~~have successfully converted all affiliates to our ~~affiliate agreements~~direct control, and no longer have Wholesale revenue. We now have a direct relationship with ~~McClatchy, tronc~~all dealer customers and recognize the ~~Washington Post to convert all~~revenue associated with converted dealer customers as Retail revenue, rather than Wholesale revenue, in the Consolidated Statements of ~~these affiliate markets prior to the expiration dates of the original affiliate agreements.~~Loss. During the three months ended September 30, 2019, we entered into agreements to convert the Gannett and TEGNA affiliate markets approximately one year in advance of the contracts’ expiration dates. During the three months ended September 30, 2019,March 31, 2020, the affiliate market conversions contributed an incremental ~~$14.2~~$17.4 million to Direct ~~revenue measured at the month of each of the conversions, while reducing Wholesale revenue by $9.6 million (of which $0.5 million relates to the Unfavorable contracts liability amortization).~~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.

~~Also included in Retail revenue is revenue from dealer websites and related digital solutions and digital marketing services, which together grew 25% year over year.~~

These increases were partially offset by a ~~7% decline in direct dealer customers and a~~ 2% decline in Dealer Customers and a 6% decline in ARPD ~~excluding dealer websites and related digital solutions,~~ from ~~September 30, 2018.~~March 31, 2019.

Retail Revenue—National Advertising. National advertising revenue consists of display advertising and other solutions sold to OEMs, advertising agencies and automotive ~~adjacencies.~~dealer customers. National advertising revenue represents ~~13.3%~~13.1% and ~~16.6%~~13.2% of total revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. National advertising revenue declined ~~28%~~4%, asrepresenting a stabilization of the business driven by OEMs ~~reduced their full year 2019~~2020 upfront commitments ~~reduced their advertising budgets and shifted their spending to programmatic. Incremental sales to OEMs have been lower~~ in ~~volume and rate.~~line with prior year.

Wholesale Revenue. Wholesale revenue ~~represents~~represented the fees we ~~charge~~charged for marketplace and digital solutions sold to dealers by affiliates. The fees ~~represent~~represented approximately 60% of the retail value for the same online subscription products sold by our direct sales team. Wholesale revenue ~~represents 3.6% and 10.4%~~represented 9.6% of total revenue for the three months ended ~~September 30,~~March 31, 2019. As of October 1, 2019, we successfully converted all affiliates to our direct control, and ~~2018, respectively.~~no longer have Wholesale revenue decreased $12.3 million primarily due to affiliate market conversions from Wholesale revenue ($9.6 million, which includes $0.5 million of Unfavorable contracts liability amortization) to direct revenue ($14.2 million). Excluding the affiliate market conversions, Wholesale revenue was impacted by a 17% decline in affiliate dealer customers.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 ~~16.5%~~17.6% and ~~14.1%~~16.6% of total revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Cost of revenue and operations expense increased ~~$1.3~~$0.5 million, primarily due to ~~growth in dealer websites and related digital solutions.~~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 ~~9.8%~~10.0% and ~~9.2%~~11.6% of total revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Product and technology expense decreased ~~$0.7 million,~~ primarily due to ~~lower compensation costs related 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 ~~33.4%~~37.1% and ~~33.0%~~39.1% of total revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Marketing and sales expense decreased ~~$5.0 million, primarily~~ due to ~~lower personnel-related costs~~ a reduction of our marketing expense by aligning our variable marketing spend with shopper demand, while carefully maintaining consumer engagement as ~~a result of the Sales Transformation.~~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 ~~8.8%~~9.5% and ~~8.9%~~15.5% of total revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. ~~General and administrative~~

~~expense decreased $1.7 million and 11% versus the prior year.~~ During the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ General and administrative expense included the following costs (in thousands):

Excluding these costs, general and administrative expense ~~decreased $0.8 million and 7% versus~~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, ~~$1.1 million,~~ primarily due to the additional markets converted during the last twelve ~~months.~~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.

~~Depreciation and amortization~~. ~~Depreciation and amortization expense increased 9%, primarily due to the reduction of the useful lives of certain assets related to the Technology Transformation.~~

Goodwill and intangible asset impairment. We determined there was a triggering event, ~~primarily~~ caused by ~~a sustained decrease in our stock price after~~ the ~~completion~~economic impacts of the ~~strategic alternatives review process,~~COVID-19 pandemic and related restrictions. We performed an interim quantitative impairment ~~test~~tests as of ~~September 1, 2019.~~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 ~~$379.2~~$505.9 million and ~~$82.3~~$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 ~~increased, primarily due~~was flat compared to ~~additional interest expense associated with~~ the ~~interest rate swap.~~prior year. For information related to our interest rate swap, see Note ~~6 (Interest Rate Swap)~~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) expense~~benefit. The effective income tax rate, expressed by calculating the income tax ~~(benefit) expense~~benefit as a percentage of ~~Income~~Loss before income tax, was 6%15% for the three months ended ~~September 30, 2019~~March 31, 2020 and differed from the U.S. federal statutory rate of 21%, primarily due to the ~~impairment of goodwill.~~

~~Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018~~

Nine Months Ended September 30,

Increase

(In thousands, except percentages)

2019

2018

(Decrease)

% Change

Revenue:

  Direct

$
349,162

$
336,521

$
12,641

4
%
  National advertising

59,752

82,155

(22,403
)

(27
)%
  Other

11,215

12,152

(937
)

(8
)%
    Retail

420,129

430,828

(10,699
)

(2
)%
    Wholesale

34,366

66,953

(32,587
)

(49
)%
       Total revenue

454,495

497,781

(43,286
)

(9
)%
Operating expenses:

  Cost of revenue and operations

74,987

64,293

10,694

17
%
  Product and technology

48,125

51,215

(3,090
)

(6
)%
  Marketing and sales

164,872

180,168

(15,296
)

(8
)%
  General and administrative

59,265

53,704

5,561

10
%
  Affiliate revenue share

9,788

11,193

(1,405
)

(13
)%
  Depreciation and amortization

86,761

77,154

9,607

12
%
  Goodwill and intangible asset impairment

461,463

—

461,463

***%

       Total operating expenses

905,261

437,727

467,534

***%

         Operating (loss) income

(450,766
)

60,054

(510,820
)

***%

Nonoperating (expense) income:

  Interest expense, net

(22,989
)

(20,305
)

(2,684
)

13
%
  Other income, net

1,530

76

1,454

***%

     Total nonoperating expense, net

(21,459
)

(20,229
)

(1,230
)

6
%
       (Loss) income before income taxes

(472,225
)

39,825

(512,050
)

***%

       Income tax (benefit) expense

(31,011
)

10,373

(41,384
)

***%

          Net (loss) income

$
(441,214
)

$
29,452

$
(470,666
)

***%

~~Retail Revenue—Direct~~. Direct revenue is our largest revenue stream, representing 76.8% and 67.6% of total revenue for the nine months ended September 30, 2019 and 2018, respectively. Direct revenue increased by $12.6 million, or 4%, compared to the prior year.

During 2018, we amended our affiliate agreements with McClatchy, tronc and the Washington Post to convert all of these affiliate markets prior to the expiration dates of the original affiliate agreements. During the nine months ended September 30, 2019, we entered into agreements to convert the Gannett and TEGNA affiliate markets, approximately one year in advance of the contracts’ expiration dates. During the nine months ended September 30, 2019, the affiliate market conversions contributed an incremental $33.9 million to Direct revenue measured at the month of each of the conversions, while reducing Wholesale revenue by $26.4 million (of which $4.6 million relates to the Unfavorable contracts liability amortization). 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.

Also included in Retail revenue is dealer websites and related digital solutions and digital marketing services, which grew 56% year over year or 27% on a pro forma basis, for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018.

~~These increases were partially offset by a 7% decline in direct dealer customers and a 2% decline in ARPD, excluding dealer websites and related digital solutions, from September 30, 2018.~~

~~Retail Revenue—National Advertising~~. National advertising revenue represents 13.1% and 16.5% of total revenue for the nine months ended September 30, 2019 and 2018, respectively. National advertising revenue declined 27%, as OEMs reduced their full year 2019 upfront commitments, reduced their advertising budgets and shifted their spending to programmatic. Incremental sales to OEMs have been lower in volume and rate.

~~Wholesale Revenue~~. Wholesale revenue represents 7.6% and 13.5% of total revenue for the nine months ended September 30, 2019 and 2018, respectively. Wholesale revenue decreased 49%, primarily due to affiliate market conversions from Wholesale revenue ($26.4 million, which includes $4.6 million of Unfavorable contracts liability amortization) to Direct revenue ($33.9 million). Excluding the affiliate market conversions, Wholesale revenue was impacted by a 17% decline in affiliate dealer customers. 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 represents 16.5% and 12.9% of total revenue for the nine months ended September 30, 2019 and 2018, respectively. Cost of revenue and operations expense increased $10.7 million, primarily due to product mix and higher third-party costs, principally due to growth in dealer websites and related digital solutions and new product offerings and the full nine-monthtax impact ~~of Dealer Inspire.~~

~~Product and technology.~~Product and technology expense represents 10.6% and 10.3% of total revenue for the nine months ended September 30, 2019 and 2018, respectively. Product and technology expense decreased $3.1 million, primarily due to lower compensation costs as a result of the Technology Transformation, partially offset by the full nine-month impact of Dealer Inspire.

~~Marketing and sales~~. ~~Marketing and sales expense represents 36.3% and 36.2% of total revenue~~ ~~for the nine months ended September 30, 2019 and 2018, respectively.~~ ~~Marketing and sales expense decreased $15.3 million, primarily due to lower personnel-related costs as a result of the Sales Transformation.~~

~~General and administrative~~. General and administrative expense represents 13.0% and 10.8% of total revenue for the nine months ended September 30, 2019 and 2018, respectively. General and administrative expenses increased $5.6 million and 10% versus the prior year. During the nine months ended September 30, 2019 and 2018, General and administrative expense included the following costs (in thousands):

Excluding these costs, general and administrative expense increased $3.6 million and 11% versus the prior year, primarily due to increased personnel-related costs consistent with our growth in our digital solutions business.

~~Affiliate revenue share.~~ Affiliate revenue share expense decreased $1.4 million, primarily due to a $4.6 million increase in the benefit from the amortization of the Unfavorable contracts liability related to the converted affiliate markets, which is recorded as a reduction of Affiliate revenue share expense, rather than Wholesale revenue. This was partially offset by an increase in Affiliate revenue share expense primarily due to the additional markets converted during the last twelve months.

~~Depreciation and amortization~~. Depreciation and amortization expense increased 12%, primarily due to the reduction of the useful lives of certain assets related to the Technology Transformation and the full nine-month impact of the DI Acquisition.

~~Goodwill and intangible asset impairment~~. We determined there was a triggering event, primarily caused by a sustained decrease in our stock price after the completion of the strategic alternatives review process, and performed an interim quantitative impairment test as of September 1, 2019. The results of the goodwill and ~~indefinite-lived~~ intangible asset ~~impairment tests indicated that the carrying values exceeded the estimated fair values~~impairments and thus we recorded an impairment of $379.2 million and $82.3 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 Reporta full valuation allowance on ~~Form 10-Q.~~

~~Interest expense, net~~. Interest expense, net increased, primarily due to higher rates due to the interest rate swap and the full nine-month impact of interest related to the borrowing utilized to fund the DI Acquisition. For information related to our Term and Revolving Loans and interest rate swap, see Note 5 (Debt) and Note 6 (Interest Rate Swap), respectively, to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

~~Income tax (benefit) expense~~. The effective income tax rate, expressed by calculating the income tax (benefit) expense as a percentage of Income before income tax, was 7% for the nine months ended September 30, 2019 and differed from the U.S. ~~federal statutory rate of 21%, primarily due to the impairment of goodwill.~~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 ~~2019~~2020 and ~~2018~~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 ~~September 30, 2019, cash~~March 31, 2020, Cash and cash equivalents were ~~$19.8~~$187.3 million.

Term Loan and Revolving Loan. As of ~~September 30, 2019,~~March 31, 2020, the outstanding principal amount under the Term Loan was ~~$396.6~~$379.7 million, with an interest rate of ~~4.5%~~4.3%, including the impact of the interest rate swap. The outstanding borrowings under the Revolving Loan were ~~$270.0~~$420.0 million, with an interest rate of ~~3.9%~~2.7%. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we made ~~$19.7~~$8.4 million in mandatory Term Loan payments and ~~$10.0~~$5.0 million in voluntary Revolving Loan ~~payments, net of borrowings.~~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 ~~September 30, 2019, $180.0~~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,~~Credit Agreement, and was ~~3.4~~4.1 to 1.0

as of ~~September 30, 2019.~~March 31, 2020. In October 2019, we entered into an amendment to our ~~credit agreement~~Credit Agreement to increase the total net leverage covenant during the remaining term of the ~~credit agreement~~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~~Term Loan and the ~~revolving loan~~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,~~Credit Agreement, on a notional amount of $300 million. As of ~~September 30, 2019,~~March 31, 2020, the fair value of the Swap was an unrealized loss of ~~$11.9~~$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 ~~share~~stock repurchase program to acquire up to $200 million of our common stock over a ~~two year~~two-year period. We ~~may~~were allowed to repurchase ~~shares~~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 ~~share~~stock repurchase program will be based on market conditions and other factors including price. The repurchase program ~~does~~did not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. ~~During the nine months ended September 30, 2019 and 2018, we~~ The Company repurchased and subsequently retired ~~1.7~~0.9 million shares for ~~$40.0~~$20.0 million for the three months ended March 31, 2019 and ~~3.0 million~~did not repurchase any shares for ~~$77.2 million, respectively.~~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 ~~income,~~loss, excluding the impact of non-cash ~~items, partially offset by changes in operating assets and liabilities.~~items. In addition, the net loss for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and the net income for the nine months ended September 30, 2018~~ was impacted by the following costs (in thousands):

Investing Activities. The ~~decrease~~increase in cash used in investing activities is primarily due to ~~the DI Acquisition in February 2018, partially offset by~~ an increase in purchases of property and equipment.

Financing Activities. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, cash used in financing activities is primarily related to ~~$40.0~~$165.0 million in ~~share repurchases and $29.7~~proceeds related to the draw on our revolver, partially offset by $13.4 million ~~of loan~~in debt repayments, ~~net of borrowings,~~ of which ~~$10.0~~$5.0 million was voluntarily paid. During the nine months ended September 30, 2018, cash provided by financing activities is primarily due to net revolving loan borrowings of $140.0 million, principally related to the DI Acquisition in February 2018, partially offset by $77.2 million in share repurchases. 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, ~~2018~~2019 as filed with the SEC on February ~~28, 2019~~26, 2020 and see Note 1 (Description of Business, Company History and Summary of Significant Accounting ~~Polices)~~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 ~~nine~~three months ended ~~September 30, 2019,~~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.

For quantitative and qualitative disclosures about market risk, see “Quantitative and Qualitative Disclosures About Market Risk,” in Part II, Item 7A., of the Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, as filed with the Securities and Exchange Commission (“SEC”) on February ~~28, 2019.~~26, 2020. Our exposures to market risk have not changed materially since December 31, ~~2018.~~2019.

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

Changes in Internal Control Over Financial Reporting. During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of 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 information relating to legal proceedings, 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.

Our business and the ownership of our common stock are subject to a number of risks and uncertainties, including those described in Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 as filed with the Securities and Exchange Commission (“SEC”) on February ~~28, 2019,~~26, 2020, which could materially affect our business, financial condition, results of operations and future results. Other than as set forth below, there have been no material changes from the risk factors described in our Annual Report on Form 10-K.

~~We may not effectively integrate~~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 ~~new markets obtained from the conversion~~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 ~~affiliate agreements.~~ Ifrevenue 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 ~~unable~~vulnerable to ~~integrate~~both decreased demand for new ~~markets obtained from~~and used vehicles and periods of economic slowdown or recession. Furthermore, dealerships have temporarily or permanently closed and more may close in the ~~conversion of our affiliate agreements successfully or if we realize a deterioration~~near future in light of the ~~business prospects~~COVID-19 pandemic and related restrictions. Negative changes in the financial condition of ~~or underperformance~~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 ~~markets,~~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 ~~realize~~effective in mitigating the effect of the COVID-19 pandemic and related restrictions on our ~~projected return on investment and~~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 ~~affected. Integrating these~~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 ~~more difficult than~~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 ~~anticipate and~~determine are in the ~~expansion~~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 ~~operations,~~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 ~~terms~~our Annual Report on Form 10-K, which could adversely affect our business, financial condition, liquidity and results of ~~geography or magnitude, could strain our administrative and/or operational resources.~~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

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited):	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Loss	3
	Consolidated Statements of ~~(Loss) Income~~Comprehensive Loss	34
	Consolidated Statements of Stockholders’ Equity	4
	~~Consolidated Statements of Comprehensive (Loss) Income~~	65
	Consolidated Statements of Cash Flows	76
	Notes to Unaudited Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2927
Item 4.	Controls and Procedures	2927
PART II.	OTHER INFORMATION	3028
Item 1.	Legal Proceedings	3028
Item 1A.	Risk Factors	3028
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3029
Item 3.	Defaults Upon Senior Securities	3029
Item 4.	Mine Safety Disclosures	3029
Item 5.	Other Information	3029
Item 6.	Exhibits	3029
Signatures		3231

	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

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

	Three Months Ended September 30, 2018
	As Reported		Adjustments			As Adjusted
Cost of revenue and operations	$	24,034	$	(226	)	$	23,808
Product and technology		15,918		(302	)		15,616
Marketing and sales		56,083		(258	)		55,825
General and administrative		14,345		786			15,131
Affiliate revenue share		4,097		—			4,097
Depreciation and amortization		26,504		—			26,504
Total operating expenses	$	140,981	$	—		$	140,981

	Nine Months Ended September 30, 2018
	As Reported		Adjustments			As Adjusted
Cost of revenue and operations	$	65,924	$	(1,631	)	$	64,293
Product and technology		56,202		(4,987	)		51,215
Marketing and sales		181,645		(1,477	)		180,168
General and administrative		45,609		8,095			53,704
Affiliate revenue share		11,193		—			11,193
Depreciation and amortization		77,154		—			77,154
Total operating expenses	$	437,727	$	—		$	437,727

	December 31, 2018		Additions		Impairment			Other		September 30, 2019		December 31, 2019		Additions		Impairment			March 31, 2020
Goodwill	$	884,449	$	—	$	(379,163	)	$	599	$	505,885	$	505,885	$	—	$	(505,885	)	$	—
Indefinite-lived intangible asset		872,320		—		(82,300	)		—	$	790,020		790,020		—		(400,000	)		390,020

Balance at December 31, 2018	$	18,885
Amortization into Wholesale revenue ⁽¹⁾		(1,358	)
Amortization into Affiliate revenue share expense ⁽²⁾		(17,527	)
Balance at September 30, 2019	$	—

	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

Remaining three months of 2019	$	1,255
2020		4,368
2021		4,014
2022		3,751
2023		3,850
Thereafter		35,117
Total minimum lease payments		52,355
Less: Imputed interest ⁽¹⁾		(18,155	)
Present value of the minimum lease payments		34,200
Less: Current maturities of lease obligations		(1,930	)
Long-term lease obligations	$	32,270

Income statement information:
						Three Months Ended March 31,
	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019		2020		2019
Operating lease cost	$	960		$	2,890	$	986	$	958
Short-term lease cost		298			1,018		229		381
Variable lease cost		(211	)		1,757		839		994
Total lease cost	$	1,047		$	5,665	$	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	%

	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended March 31,
	2019		2018		% Change			2019		2018		% Change			2020		2019		% Change
Traffic (Visits)		144,378,000		113,751,000		27	%		407,477,000		340,121,000		20	%		158,921,000		132,474,000		20	%
Average Monthly Unique Visitors		23,080,000		18,926,000		22	%		22,349,000		19,095,000		17	%		24,929,000		22,408,000		11	%
Direct Monthly Average Revenue Per Dealer															$	2,092	$	2,225		(6	)%


	September 30, 2019		September 30, 2018		% Change			June 30, 2019		% Change
Dealer Customers		18,635		20,407		(9	)%		18,891		(1	)%
Direct Monthly Average Revenue Per Dealer ⁽¹⁾	$	2,174	$	2,116		3	%	$	2,163		1	%


	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 to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~Exhibit~~ ~~Number~~		~~Description~~
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 ~~September 30, 2019,~~March 31, 2020, formatted in Inline XBRL (included with Exhibit 101 attachments)

	Cars.com Inc.

Date: ~~November~~May 6, ~~2019~~2020	By:	/s/ T. Alex Vetter
		T. Alex Vetter
		President and Chief Executive Officer

Date: ~~November~~May 6, ~~2019~~2020	By:	/s/ ~~Becky A. Sheehan~~Jeanette Tomy
		~~Becky A. Sheehan~~Jeanette Tomy
		Chief Financial Officer

Other information:

Cash paid for operating leases for the nine months ended September 30, 2019

Weighted-average remaining lease term (in months) as of September 30, 2019

Weighted-average discount rate as of September 30, 2019