Good morning, ladies and gentlemen, and welcome to the Cars Third Quarter 2025 Earnings Conference Call. This call is being recorded on Thursday, November 6, 2025. I would now like to turn the conference over to Katherine Chen. Please go ahead.

Good morning, everyone, and thank you for joining us for the Cars.com Inc. Third Quarter 2025 Conference Call. With me this morning are Alex Vetter, CEO; and Sonia Jain, CFO. Alex will start by discussing the business highlights from our third quarter. Then Sonia will discuss our financial results in greater detail, along with our outlook. We'll finish the call with Q&A. Before I turn the call over to Alex, I'd like to draw your attention to our forward-looking statements and the description and the definition of non-GAAP financial measures, which can be found in our presentation. We'll be discussing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, adjusted net income and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the financial tables included with our earnings press release and in the appendix of our presentation. Any forward-looking statements are subject to risks and uncertainties. For more information, please refer to the risk factors included in our SEC filings, including those in our most recently filed 10-K, which is available on the IR section of our website. We assume no obligation to update any forward-looking statements. Now I'll turn the call over to Alex.

Thank you, Katherine. We were pleased to achieve record revenue and drive strong customer and product momentum in the third quarter on our path to reaccelerating growth. Revenue of $182 million reflected continued contribution from websites, trade and appraisal solutions, and marketplace. Dealer count increased for the third consecutive quarter as we reached a new 3-year high with marketplace, in particular, outperforming expectations. Top line strength, combined with our strong operating model, enabled investments for innovation, while also producing an adjusted EBITDA margin of 30%, up over 160 basis points year-over-year. And resulting cash generation supported another $19 million of share buybacks in Q3 for a total of $64 million year-to-date. It's clear that our consistent execution is delivering compounding benefits, and we feel confident there is more improvement to come. Our strong focus on 2025 growth initiatives continues to deliver measurable progress for the business in the third quarter. First, sales velocity and driving unit volume has lifted marketplace and solutions performance. Under new sales leadership and an enhanced go-to-market strategy, we added over 270 dealers year-over-year with subscriptions up across all our leading products. In total, we powered 19,526 dealers in Q3, our largest customer base since late 2022 and only a few hundred dealers away from an all-time record. New franchise dealer sign-ups also increased appreciably quarter-over-quarter in Q3, complementing the share gain amongst independent dealers that we achieved in the first half of the year. Dealers consistently cite our unique consumer audience, data insights, and differentiated product suite as key factors that are motivating them to join our platform. Second, our phased marketplace repackaging exercise intended to align pricing with product value and enhance platform benefits for dealers launched in early summer. By bundling media products and features in new Premium and Premium Plus packages, we are helping dealers drive up to 14% more leads per listing versus base packages. And we anticipate adoption of Premium Plus to accelerate with growing dealer awareness of these benefits. Finally, our product team remains at the forefront of helping consumers, OEMs, and dealers navigate the changing auto retail landscape. We are putting AI-powered search and recommendations in the hands of marketplace shoppers and simultaneously enhancing lead conversion for dealers through advanced analytics. Through our appraisal and wholesale capabilities, we are also directly helping dealers address used car scarcity and specifically how to profitably source attractive late model inventory. And we continue to be the only platform with integrated B2B wholesale and B2C retail capabilities, a key value proposition as dealers look for innovation and operating leverage. Our multifaceted AI-first platform makes us essential for both consumer and dealer customers. We are seeing clear signals of traction in our platform strategy. Starting with marketplace, we fired on all cylinders in Q3 with momentum carrying into October. We drew 25.4 million average monthly visitors, up 4% year-over-year, leveraging better optimization of our visitor acquisition strategy to attract strong consumer demand. Traffic year-to-date was 488 million visits through the end of Q3, setting a new record. Our leading editorial and brand expertise is evident from third-party data that shows we were the most cited public automotive marketplace across AI tools like Google AI overviews and ChatGPT with double the citations of our closest peer. We continue to leverage our strong brand and steady stream of in-demand content as an integral part of our product and marketing strategy in this evolving landscape. AI is central to our product innovation roadmap as we enhance the quality of our marketplace to deliver a best-in-class personalized shopping experience for car buyers. Carson, our newly launched natural language search assistant gives users an interactive experience more akin to a conversation you have with an AI agent to complement traditional search results. Carson currently assists 15% of searches and search refinement on web and mobile today. Compared to the average shopper, AI users also save 3 times more vehicles to revisit later, a sure sign that we're fueling deeper consumer engagement. Just like we were a pioneer with AI integration on the Cars.com website, our next milestone will be integrating Carson into our #1 most downloaded automotive marketplace app. Mobile apps are our highest converting channels, and we believe AI-powered targeted search results may lift conversion even further as we drive search efficacy and our marketplace flywheel. For dealers who subscribe to our marketplace, we continue to deliver high-performing tools for their sales and marketing teams, embedding into their tech stack to drive engagement, conversion, and ultimately, sales. Shopper alerts, which we launched in the third quarter to fast follow our new lead intelligence reports, proactively flag shopper engagement and buying indicators to dealers. Over 50% of marketplace customers have already used this feature at least once in its first 2 months of launch. As you can see from customer feedback, shopper alerts are quickly becoming a key part of dealership workflow, helping salespeople identify the best prospects to close more sales. With such an enthusiastic response, we're quickly iterating to provide richer data and AI-driven insights directly into dealer CRMs, both with incumbent players and through new investments in disruptive technologies as we unlock the full potential of our platform with more AI and SaaS-based solutions. Turning to our trading and sourcing solutions. AccuTrade and DealerClub continue to scale in Q3 as dealers increasingly gravitate towards tech-first products that advance the industry's long-term goal of improving profitability. The recent success of digital dealers who rely heavily on acquiring vehicles directly from consumers has highlighted the importance of a diversified vehicle acquisition strategy for driving up gross profits. AccuTrade grew to 1,150 subscribers in Q3, and DealerClub increased its active users by nearly 40% quarter-over-quarter. We're also pleased to share that AccuTrade surpassed 1 million quarterly appraisals, a milestone that points to enthusiastic and growing customer engagement. Importantly, over 50% of vehicles acquired via AccuTrade are between 1 and 5 years old, highlighting the attractive pool of in-demand late-model inventory that dealers access when they expand beyond traditional and physical auctions. New this quarter, dealers can now easily analyze their AccuTrade activity via profit funnel and trade capture reports, seeing how much profit is made on AccuTrade versus non-AccuTrade cars and conversion rates on appraisals. We're excited to see these products and features further scale as we continue to innovate. Lastly, total subscribers for Dealer Inspire and D2C media websites reached nearly 7,900 in Q3. We have grown website subscriptions for 5 straight years, an impressive feat that speaks to our differentiated technical capabilities and support model. Similar to marketplace, website customers are benefiting from our AI leadership. Our dealer websites also support discovery and data processing by popular AI search tools, and we are now proactively enabling customers to improve their own site visibility. By building more consultative relationships and innovating on behalf of customers, we're confident we can further expand our market share. Across marketplace, websites, and appraisal and wholesale, we delivered triple-digit dealer count growth for the second straight quarter. We also achieved ARPD growth on a sequential basis, consistent with our expectations that repackaging and cross-selling would lift performance beginning in Q3. We're on pace to surpass all-time records for both direct dealer customers and ARPD before the end of 2026, on our way towards greater targets as we expand and enhance our product offering. While dealer revenue was at its healthiest level in several quarters, we did see some variability in OEM and national revenue, which was down 5% year-over-year in Q3. Specifically, 2 OEM partners significantly adjusted their media investments during the fall due to factors like internal agency changes that are unrelated to our performance or value. I'll also note that both of these customers remain advertisers on our platform, and we're in active talks to win a greater share of their forward spending. As we discussed in prior calls, our OEM revenue pipeline is strong. Planning discussions for 2026 have been positive, and our unique ability to drive better Tier 1 to Tier 3 outcomes via our marketplace is a winning asset for automakers as they compete for consumer demand. We're confident that this segment can resume its growth trajectory in the coming quarters and continue to be a strong contributor to revenue and margin expansion. Looking at this quarter as a whole, I'm pleased that our steady execution is showing up in the P&L and in positive trends that point to more gains ahead. We're driving our business forward, growing revenue and gaining customer market share while continuously innovating. Q3 is the right step in the right direction, and we're focused on finishing the year with a healthy exit rate so that we can deliver even better results as we continue scaling our leading platform. And now I'll turn the call over to Sonia to discuss our third quarter financial results.

Thank you, Alex. We delivered a strong third quarter across multiple key financial metrics, producing record revenue, adjusted EBITDA expansion, and robust cash generation. Consistent execution of 2025 growth initiatives has been our top priority, and our new revenue trajectory reflects the positive changes we've implemented year-to-date. Starting with our revenue discussion, third quarter revenue was $181.6 million, up 1% year-over-year and in line with our expectations for low single-digit growth in the second half of the year. Dealer revenue was up 2% year-over-year, driven by favorability from repackaging activities and better customer count. Our ongoing repackaging work resulted in the successful renegotiation of additional OEM website agreements and the phased launch of new marketplace packages in Q3. As Alex mentioned, our top 2 marketplace peers now bundle more media features for better vehicle merchandising and promotion, helping dealers attract and convert in-market shoppers. Migration of legacy preferred customers into new Premium and Premium Plus packages was 100% complete as of the end of October. I'll also note that we've seen very few cancellations attributable to this exercise, another encouraging signal of the value dealers see in our marketplace. Marketplace, our most scaled solution, is also the tip of the spear for customer acquisition and cross-selling and key to winning dealer market share over time. It's therefore encouraging to see that marketplace continues to be the biggest quarter-over-quarter contributor to dealer count growth and is the linchpin for our net gain of over 300 dealer customers since the start of the year. We have multiple levers to inflect ARPD, driving new customer growth as well as upgrading package tiers and cross-selling against our installed base. This is amplified by our improved pricing. We saw early signs of these levers in action in Q3, with ARPD up 1% quarter-over-quarter, and we are optimistic that trends will improve as these positive changes gain further traction and annualize. Overall, dealer revenue growth more than offset near-term noise in OEM and national revenue, which was down just under $1 million or 5% year-over-year. As previously mentioned, lower spending by 2 customers accounted for almost the entirety of the OEM revenue decline in the quarter, and we're already at work rebuilding the revenue pipeline with those partners. More broadly speaking, media investments did taper in September as the industry digested large-scale changes like strong pull-forward demand from expiration of EV credits and continuing shifts in production as well as downward revisions in SAAR. Given last September was our best month of OEM revenue for 2024, we also had a challenging comp that accentuated this late quarter trend. We're observing that OEMs continue to prefer more flexibility in the current operating environment. As such, we expect their ad spending may fluctuate through the end of this year. However, we remain confident in our audience and value delivery and in our ability to power growth in this segment. Turning to our cost discussion, third quarter operating expenses were $165 million, down 2% year-over-year. Compared to the prior year period, cost efficiencies in headcount and lease-related expenses as well as lower depreciation and amortization fully offset new dealer club costs and slightly higher marketing and G&A spend. Adjusted operating expenses were $150 million, down 4% year-over-year for substantially similar reasons. For the following line item detail, all comparisons are on a year-over-year basis unless otherwise noted. Product and technology expenditures decreased $1.6 million on a reported basis and $1 million on an adjusted basis, fully offsetting dealer club costs through lower compensation and third-party fees. Marketing and sales increased $1 million on both a reported and adjusted basis, reflecting marketing investments. And general and administrative expense was up $2.8 million year-over-year on a reported basis but was roughly flat on an adjusted basis. The reported increase was primarily due to increased third-party costs that were partially offset by savings from the lease amendment completed in Q4 2024. Net income for the third quarter was $7.7 million or $0.12 per diluted share compared to net income of $18.7 million or $0.28 per diluted share a year ago. The difference in net income is primarily due to changes in the fair value of contingent consideration for prior acquisitions that were included in the prior year period. Adjusted net income for the third quarter was $30.4 million or $0.48 per diluted share compared to $27.7 million or $0.41 per diluted share a year ago. Adjusted EBITDA of $55 million in the third quarter grew 7% year-over-year, benefiting from both higher revenue and cost controls. Third quarter adjusted EBITDA margin of 30.1% demonstrated strong revenue flow-through benefits from the cost management initiatives described earlier and timing of certain costs. Now on to key metrics. Dealer count was up in the third quarter based on strength across all of our major product brands. Websites grew sequentially by 67 subscribers with most of the growth coming in the U.S. AccuTrade grew by 82 subscribers sequentially, about half of whom came from the enterprise deal announced last quarter. Third quarter ARPD was $2,460, up 1% quarter-over-quarter and down slightly year-over-year. Recent customer and product mix shifts like faster independent dealer growth and lower media attach rates continue to have a near-term leveling effect on this metric. However, as previously discussed, we have multiple ways to inflect ARPD over time. First, new customer acquisition and continued up-tier migration will both benefit from new marketplace and website rates. A good example is Marketplace Premium Plus adoption, which grew 50% month-over-month from September to October as dealer awareness increased. Second, moving website customers up-tier remains a substantial opportunity. Recall, roughly 70% of marketplace customers are in a premium or better subscription relative to just 50% for websites. Third, cross-selling additional products like AccuTrade or media add-ons to marketplace customers can be as much as a 60% jump relative to current ARPD. The multiplier effect is especially evident when looking at customers who utilize all 4 of our brands and have an ARPD that is 3 times higher than our reported average. With these levers at our disposal, we are confident in future ARPD improvement as we expand our platform's reach. Now over to cash flow and the balance sheet. Net cash provided by operating activities totaled $115 million for the first 9 months of the year compared to $123 million for the comparable period last year. Recall that the earn-out for the D2C acquisition has a contractual step-up from year 1 to year 2 and accounts for the majority of the variance in operating cash flow. Free cash flow was $94.5 million year-to-date, down slightly year-over-year from the acquisition items mentioned above. Year-to-date, share buybacks totaled 5.2 million shares for $64 million as we utilized more than 2/3 of free cash flow for our repurchase program. Last quarter, we raised our full year repurchase target to $70 million to $90 million, and we're pleased to be on pace to finish the year towards the high end of that range. We also paid down $5 million of our revolver in Q3, bringing debt outstanding to $455 million as of September 30, 2025, equivalent to a total net leverage ratio of 1.9 times. Notably, this is also the first time that we have sat below the low end of our target net leverage range of 2 to 2.5 times. Total liquidity was $350 million as of September 30, 2025, which provides us ample capacity for capital allocation priorities and other avenues of value creation. And now we'll conclude with outlook. We are reaffirming our expectation for low single-digit revenue growth year-over-year in the second half of 2025. We expect to achieve this target through continued execution of our growth initiatives, namely improved dealer count and product adoption and repackaging for marketplace and websites. As in the prior quarter, this outlook assumes today's macroeconomic conditions as a stable baseline for the remainder of the year. Considering third quarter trends and historical fourth quarter performance, we believe that some degree of discretionary media investment is subject to greater variability, both to the upside and the downside from factors like pull-forward consumer demand, inventory levels, new model launches, and manufacturer incentives. We are also reaffirming adjusted EBITDA margin outlook for fiscal 2025 between 29% to 31%, reflecting disciplined cost management, high contribution margin from pricing initiatives, and revenue growth. Looking ahead, we remain focused on execution and are confident we will deliver improved operating and financial results. And with that, I'd like to open the call for Q&A.

Your first question is from Tom White from D.A. Davidson.

I would like to discuss the factors contributing to revenue growth in the third quarter. It was notable that you exceeded revenue expectations despite a national decline, which many of us had hoped might not happen. Could you provide insight into dealer revenue? I know you are working on repackaging and product initiatives. Additionally, you have added dealers for the third consecutive quarter and plan to continue that trend. It seems that the marketplace is a key area for adding dealers. How would you describe the current challenges dealers are facing in the industry? Are they turning to your marketplace to seek new demand sources? Is it possible that the appeal of the new media offerings in the higher tiers is gaining attention? I apologize for the lengthy question, but I’m trying to understand this better. I also have a quick follow-up.

Tom, thanks for your question. I'll start, maybe then Sonia can give some color on the revenue mix. But I'll start. Obviously, manufacturers have got some near-term headwinds that certainly are impacting their business. We feel good about the business because overall enthusiasm for our audience, particularly the concentration of new car shoppers that we have in our marketplace, remains scaled, healthy, and strong. So the vast majority of our OEM partners are leaning in, not only this year, but also next year. We did have some pullback in the quarter from 2 OEMs that were temporary in sentiment, not performance, meaning that they had their own internal issues that delayed their investments with us in the period. That's why we feel fundamentally bullish about the business overall and our ability to continue to grow OEM revenue heading into next year and beyond. I think on the dealer side, it is a little bit of a mixed bag right now. I think dealerships are struggling with softening demand, and the vast majority of dealer investments are chasing impressions and clicks across the Internet. I think smart dealers are realizing that tapping into in-market car shoppers who are actively in market is a much surer path to sales. We’re pleased with dealer adoption not only in the quarter. As you noted, that growth continued into October. We’re feeling good about dealers realizing the strength of our scaled audience. Certainly, some of the product innovation that we're doing on the AI front has garnered dealer interest as well. But ultimately, we feel like the market is realizing our strength and our value. Sonia, do you want to comment on the revenue buildup?

Yes. Thanks for the question, Tom. Just to add a little bit more incremental color. I mean, I think we're pretty pleased to see growth across all of our dealer product lines. Repackaging was probably the most immediate benefit to the quarter as you think about revenue. We had repackaging in marketplace with upgrades into premium and then the launch of our new Premium Plus package. And also, we continue to work on optimizing our website packages. I think the new dealer customer adds we've had in kind of really since the beginning of the year, with the exception of January, we've grown dealer count month-over-month is really just adding additional fuel to how we think about the opportunity to continue growth on a go-forward basis as we upgrade and cross-sell those incremental new dealers coming into the mix.

That's really helpful. Perhaps a quick follow-up on that. I believe you mentioned that in the marketplace, about 70% of the dealers were on tiers above the base level, but that percentage was lower for websites. As you consider this, how should we view the potential products you might introduce to higher tiers for websites to encourage upgrades? Are you thinking along the lines of media add-ons, or could you provide any insights on this along with a timeline for the rollout?

Yes. Look, I think one of the strengths of our platform strategy, Tom, is that our innovation can take place on our marketplace, and then we can deploy that technology to our dealer partners on their website. So one of the big benefits that our website customers enjoy over the last year is the fortification of our cloud infrastructure to make sure dealer websites are meeting and beating core web vital standards because we're able to leverage our larger infrastructure to optimize speed and performance. That's sort of an underlying benefit of our platform model. I think if you look at what we've done on Cars.com with launching Carson and OpenText, generative AI search, we can now deploy that technology on dealer websites. So that's one of the utilities that we're looking ahead towards next year. But then obviously, just even indexing dealer websites into the LLM. We use Cloudflare technology to help index Cars.com listings into the AI models. And now that we have our dealer websites fortified with Cloudflare as well, we can do more for dealer websites and get their content indexed in the LLMs as well. So I think there's multiple benefits for dealers running on our backbone platform, but the product innovation is accelerating in the company, and we're excited to keep that going.

Your next question is from Gary Prestopino from Barrington.

Sonia, it's really interesting to hear you discuss the number of dealers that have transitioned to repackaging and the websites that have also made this shift. You mentioned some statistics regarding the increase in ARPD from these repackaging efforts, but I didn't fully grasp that.

We are quite pleased with the sequential momentum we've observed in ARPD. We experienced quarter-over-quarter growth, which positions us well as we transition from Q3 to Q4 to continue this upward trend. While we didn't provide specific details on the portion of ARPD attributed to packages, it might be useful to consider the price difference between the Premium and Premium Plus packages. A notable differentiator is that the Premium Plus package includes VIN Performance Media, which typically retails for about $1,500 a month. However, our Premium Plus customers will receive a slightly better rate because it's bundled. This illustrates how we're aiming to create differentiation in both pricing and the overall value we deliver to dealers through our packages.

Okay. I thought I heard you say something about a 3x lift. So that's why I asked the question. And maybe I just typed...

Yes. I did talk about that as an example of platform value and how as we increase product penetration, we're able to meaningfully lift ARPD. I think the stat that I shared was that dealers who use our major product pillars will have an ARPD that is 3 times higher than our reported average.

Sure, Gary. Well, first of all, we were really pleased with the growing dealer participation in AccuTrade as well as the improving appraisal volume. It's showing what we believe is a very durable trend of dealers realizing that sourcing cars directly from customers is a far more profitable strategy than traditional or legacy auctions. This realization is helping every dealer recreate the advantage of generating more inventory in their own service lane, which increases our supply. Also, it creates demand within their own dealership because now their customers need new cars. We think this is a very durable strategy that dealers are adopting. You're seeing dealers talk more at 20 groups about how they can source more cars directly. We've got the tooling to enable them to do that at scale and on a very low-cost basis. When you think about the cost of an AccuTrade subscription, it dwarfs what buying cars at auctions is costing the industry. So again, very healthy trends on dealer adoption and appraisal volume. I think DealerClub obviously complements this strategy, which is enabling dealerships to trade cars amongst themselves as a collective, instead of paying the physical auction toll booth operators. Dealer adoption on DealerClub, we're pleased with it. But as you know, it's very early stage. We're barely getting started here with DealerClub, but we're pleased with the initial momentum that the platform is generating on a very low cost basis because it's part of our platform strategy, meaning that we're leveraging the infrastructure that we have today in-house. Dealers are pleased that now we're showing them their aged inventory from our marketplace in the club, and they can immediately launch those cars to a wholesale auction with limited to no additional data entry. Stay tuned. We're going to continue to invest in the product platform and give dealers more tooling that makes their workflow easier, but very pleased with the initial momentum, both with AccuTrade and DealerClub.

Your next question is from Rajat Gupta from JPMorgan Chase.

I had one broader question on just the competitive landscape. One of your peers recently announced their intention to go private. We've had some tough results from some of our other public peers on the marketplace side, on the auction side, on the used car side. I'm just curious that if you're observing any changes in the competitive landscape, be it pricing, be it more adjacent players maybe participating in the market. And I'm curious if anything has taken a step change in recent months that you're seeing? And if anything, how are you planning to navigate that? I have a quick follow-up.

Yes. Look, Rajat, thanks for the question. I think on the competitive landscape, while there could be changes in terms of public versus private, we look at the competitive landscape a little bit differently in that dealerships are trying to drive traffic to themselves directly. They're spending inordinate amounts of capital trying to interrupt consumers while they perform other tasks to drive them into their stores. The benefit of our platform strategy is we're the largest concentration of organic car shoppers that are spending their shopping time researching and deciding what and where to buy on our platform. Savvy dealers are realizing that interruptive advertising is less efficient than native marketplace traffic that we can source and drive consumers directly to their stores, particularly as average dealers are trying to compete with Carvana and larger platforms using Cars.com as a demand engine for their business, which we think is a no-brainer. I look at the competitive landscape more about how do we get dealers to spend less on Google or in traditional media and do more digitally first and foremost. I have tons of respect for my digital peer set. I know auto is a very competitive category, but we feel very confident because, again, we source the majority of our traffic organically or directly. So we're a complement to dealers and their advertising mix. I also will say our platform strategy is differentiated. We're now powering north of 9,000 dealer websites, helping them optimize their retail presence online. We're giving them tools to operate their business more with greater self-sufficiency, which we think can help overall bring their profitability to new levels. We're excited about our innovation roadmap on AI and what that can do and help dealers add capabilities to their business. While marketplaces are competitive, we've got a much more differentiated and ambitious strategy.

Understood. That's helpful. And then within your dealer demographic, is it possible to provide a split across if it's a meaningful difference across luxury, domestic or import on the franchise dealer side? I ask only because we're starting to see some of the European brands feel the brunt of tariffs. It looks like October started off a little weak for those brands. I'm just wondering if that can have any meaningful impact on churn rates, on ARPD for your business. I'm just curious if you're hearing anything on that front.

Well, listen, I know it's a very dynamic marketplace right now. As you know about our business, we tend to skew upmarket. The bulk of our dealers are franchise dealerships. The bulk of our audience tends to be late model, even new car shoppers. That's why we have a large OEM business, unlike our peers because manufacturers know that new car shoppers are also considering late model used. We tend to skew upmarket and therefore, don't feel some of the same pressures that perhaps some of the credit-challenged or lower end of the market may experience. We feel very fortified heading into next year in that the bulk of our audience tends to be more affluent, higher household income. Our dealer base also remains on the stronger side of the market as well with franchise dealers making up the majority of our revenue mix.

Understood. I'd like to ask one last question about capital allocation. You're beginning to see a return to top-line growth, and there has been good progress with dealer additions. Can you share how you prioritize capital allocation today? Is share buyback still the top priority, or are there other options you're considering?

Yes. No, thanks for the question. I think we are still committed to share repurchases as an important portion of our overall capital allocation strategy. Pleased to see how kind of the growth in adjusted EBITDA, in particular, is helping to bring that leverage down. Our net leverage ratio continues to improve. But we're tracking towards the high end of our share repurchase range based on how we've been buying back on a year-to-date basis, and we still see the upside there.

Your next question is from Marvin Fong from BTIG.

We had a strong quarter. I want to delve deeper into AccuTrade. We've been seeing a consistent addition of 70 to 80 dealers over the last three quarters. I’d like to get more insight into the pipeline. Should we view this as a good growth pace, or is there potential for acceleration? Will the additions be uneven, particularly with larger enterprise or dealers, or do you expect something different? Also, could you remind us about the large dealer group that accounted for about half of this quarter's additions? How many more stores are still available in their system that we haven't reached yet?

Yes. Well, first of all, look, we're pleased to close an enterprise deal last quarter for AccuTrade. That was about half the dealer count growth in the quarter because we still have steady dealer adoption and growth. We're continuing to see dealer group interest in standardizing their vehicle sourcing strategy, which we think is a big tailwind for AccuTrade because we can provide dealer groups consistent tooling that puts a process in place that they can manage their vehicle sourcing strategy with tooling that gives them enterprise leverage and consistency in how they run their operation. Strong interest, continued dealer demonstrations and a healthy pipeline there. We're also hearing dealers asking us for more inventory syndication capabilities with AccuTrade. That's on our innovation roadmap, which could be another tailwind. We're overall pleased with the organic momentum we have in our dealer count. We think enterprise deals with larger dealer groups can continue to be a strong addition to our platform if we are able to secure more of these enterprise deals in Q4 and beyond. But this is a slow roll strategy that will scale over time, and it certainly adds meaningful ARPD and a high recurrence of revenue because the dealers that standardize with AccuTrade, not only does that revenue stay sticky in our platform, but it has a halo effect for our other subscription offerings as well, including DealerClub. So we're feeling good about the business.

Got it. And second question is on AI, everyone's favorite topic. I guess I'd ask it a couple of different ways. So first, are you seeing any meaningful traffic today that's coming from like a ChatGPT-type service? If so, how is the behavior of those customers? Does it convert to leads any better than other traffic?

Yes. Well, first of all, thanks for the question. On the AI front, we're very pleased. When you look at all the leading AI consumer engines, we are, in many cases, 2 times our nearest closest publicly traded peer. That's a testament to the strength of the Cars.com brand and our decade-long commitment to independent expertise and editorial depth and breadth and quality. Our strength is being played back to us by these LLMs that recognize our authority. As you know, auto is a multi-touch omnichannel experience, meaning consumers are seeking out multiple destinations prior to purchase. Our brand strength and our authority in these engines, while it may not generate a ton of traffic today, it is amplifying our brand strength, which is why we had record traffic in Q3 and feel very strong about continued momentum of our marketplace. Consumers are going to seek out trusted independent expertise in auto, and these new AI models are firming our brand strength. We feel very good about the advent of AI and what it can do for our business over time as well.

I would just maybe add in addition to what Alex was talking about in terms of how we're showing up in the various AI search tools, we're also really pleased with how leveraging AI and natural language search on our own marketplace is helping to drive increased consumer engagement. We see on the order of 3 times more vehicles saved for consumers who use Carson. They're looking at 2 times more listings. They return more frequently. We're playing this as a multipronged strategy, which we believe will leverage AI to the benefit of the business, and we're seeing it translate into real engagement numbers.

Right. That was sort of my second part of the question, I guess. To Carson, are you able to see how many people who are using Carson or your other AI-related search tools, are they purchasing or is more attribution can be given to Cars if they are using Carson compared to someone that's not using the AI tools? Or is it too early to say?

Yes. Obviously, this is still a category where the majority of time is spent online and the purchase is offline. We know dealer CRMs grossly under recognize our value delivery. There are only 5 million cars retailed every month in this country, and we know we're saturating the majority of car buyers on our platform. What I like about what we're seeing with Carson is that users are saving more vehicles in their search history. So they're coming back at 2 times the rate of other shoppers. They're generating more leads compared to people that are using directed search as opposed to more exploratory. We also know that 70% of our users are undecided on make and model selection. So we're going back to OEMs who haven't realized the power of our search engine that they can influence undecided shoppers on our platform. We're seeing a higher conversion rate of these users in terms of tangible leads to dealers. Consumer engagement is critical to thrive in any marketplace, and Carson is showing us a lot more potential what we can do on the user experience front to connect brands and dealers to our audience using AI as an advantage. I expect to see a steady quarterly stream of innovations here that both improve user experience and also drive down our operating costs.

Your next question is from Khan Naved from B. Riley Securities.

I wanted to ask about the marketplace repackaging initiative. I understand that you’ve been using opt-ins for dealers to move up to the higher tier. Are there plans to speed up that process so that more dealers can transition to the higher tiers, or do you see this continuing as an opt-in strategy? My first question is about that. The second question is regarding traffic growth. Could you discuss the mix between organic and paid traffic and the role of AI, if it has had any impact? From what I see in the headline numbers, it doesn't seem like it has made a difference. Could you share your thoughts on traffic?

Sure. First of all, let me start by saying that our sales strategy is consistently demonstrating to dealers the advantages of upgrading to our premium tiers. We have clear data indicating that as dealers invest more, they gain greater value and market share on our platform. This will be an ongoing opportunity for us to educate dealers about the benefits of higher tiers. As previously mentioned, there is still significant potential for growth in our repackaging efforts. We plan to introduce new tools and features to encourage dealers to increase their spending on our platform and to explore additional solutions. Regarding AI, we believe we are just at the beginning. We're pleased with the early feedback from consumers using AI in our marketplace. We are also happy with our organic presence among leading large language models, and our optimization strategy is still in its initial phase. Our brand strength and unique content provide us with distinct advantages over competitors. Sonia, do you have anything to add?

No, I think, Alex, you covered it really well. I was just going to add on repackaging. We continue to be focused on the opt-in model. It yields better outcomes overall with the dealers when they're bought into the rationale and the expectation of why they're moving up-tier. We've seen good traction with it, right? I think we cited a stat earlier around Premium Plus, and we saw a 50% increase in Premium Plus from September to October. We'll continue to focus on the benefits of moving up-tier in terms of the value delivery creation.

Your next question is from Joe Spak from UBS.

Sonia, first question just on the guidance. The way you guide obviously gives some decently wide ranges based on your disclosures. If I look at the past few years' seasonality, it looks like Q4 EBITDA is about 10% higher quarter-over-quarter, which would mean something around $60 million, which clearly falls within that implied range. I just want to make sure we're all level set. Is that sort of like a good level to calibrate upon? What do you think drives the higher end versus the lower end here with basically 2 months left in the year?

Yes. No, this is a great question. Thank you. I think in terms of adjusted EBITDA, the benefit that we really saw in Q3, some of it came from revenue, some of the high flow-through on revenue. Some of it came from continued cost management. A portion of it was a little bit more timing-oriented. We feel pretty comfortable with our overall adjusted EBITDA range. But I'd say getting towards the higher end of that range probably requires a little bit more of that episodic revenue to come in. That tends to be a little bit higher margin. It would require a heavier lift on, let's say, the OEM and national side of the business to get closer to the high end of the range.

Okay. And the update there was there's still some pause, and I know they committed to that spend, but it could bleed into next year. Is that still a metric?

Yes. We're seeing a little bit more like we talked about in September, some of that pressure has been continuing into October. As I mentioned, periodically, we will see as we get toward the end of the year, some of them will lean into those budgets a little bit more. I think some of the overhang production numbers, where SAAR is sitting right now are probably a little bit of a drag on expectations as well.

Okay. And then on Carson, I apologize. This might be a very ignorant question, but I'm just trying to sort of understand all the AI stuff. Is it just trained on like the data you have access to, like your dealership customers? Or is it broader? And out of curiosity, is there anything that prevents other AI agents from accessing the data you have on your site? It sounds like you actually want to feed that. But if you do, is there a way to guarantee that those other solutions almost like don't cut you out and go through your site and not around Cars.com? I don't know if that makes sense or I'm misinterpreting the technology, but if you could sort of...

No. Joe, it's a great question. Carson, we're leveraging our data infrastructure to power and train Carson. We've got millions of data signals flowing through our systems every day. Carson's intelligence continues to grow off all these automotive intentions and searches and behaviors. We let large consumer-facing LLMs train off our data as well. While there's a risk that consumers can render answers on these other environments, what they do is attribute their knowledge to Cars.com. We think that is incredible brand exposure and leverages our deep authority to make consumers aware that Cars.com has knowledge. Automotive is uniquely a multi-touch category, unlike a lot of consumer goods or low price point purchases. Consumers may only seek out 1 to 2 destinations, but buying a car is the second largest transaction in people's lives. They're going to seek out multiple sources of information prior to purchase. We certainly think the LLMs constantly referencing Cars.com as an authority is going to continue to generate traffic directly to us as consumers go to get additional information, research on which dealerships have the best reputations, what they could expect to pay and any OEM incentives that are available. There's just a lot of information consumption in this category that makes me certain that no one destination can disrupt the 20-year strength of our brand and our content expertise.

There are no further questions at this time. Please proceed with closing remarks.

Thanks, everyone, for joining the call. We'll see some of you on the road very soon, and I appreciate the support, and have a good day. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.