Cars.com Inc 10-Q for FY2023 Q1
Cars.com Inc. (CARS)
About this 10-Q
Cars.com Inc filed this 10-Q on May 4, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $167.07M
- up 5.6% from $158.21M a year earlier
- Net income
- $11.48M
- up 164.5% from net income of $4.34M a year earlier
- Diluted EPS
- $0.17
- up 183.3% from $0.06 a year earlier
j
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
b
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
(Address of principal executive offices)
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: |
||||
|
|
|
|
|
Title of each class |
|
Trading Symbol |
|
Name of each exchange on which registered |
|
|
|||
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.
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).
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.
|
☒ |
|
Accelerated filer |
|
☐ |
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
|
|
|
|
Emerging growth company |
|
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 April 27, 2023, the registrant had
Table of Contents
|
|
Page |
PART I. |
2 |
|
Item 1. |
2 |
|
|
2 |
|
|
3 |
|
|
4 |
|
|
5 |
|
|
6 |
|
|
Notes to the Consolidated Financial Statements (Unaudited) |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
Item 3. |
22 |
|
Item 4. |
22 |
|
PART II. |
23 |
|
Item 1. |
23 |
|
Item 1A. |
23 |
|
Item 2. |
23 |
|
Item 3. |
23 |
|
Item 4. |
23 |
|
Item 5. |
23 |
|
Item 6. |
24 |
|
25 |
||
1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Cars.com Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
|
|
(unaudited) |
|
|
|
|
||
Assets: |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Investments and other assets, net |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and stockholders' equity: |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued compensation |
|
|
|
|
|
|
||
Current portion of long-term debt, net |
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Noncurrent liabilities: |
|
|
|
|
|
|
||
Long-term debt, net |
|
|
|
|
|
|
||
Other noncurrent liabilities |
|
|
|
|
|
|
||
Total noncurrent liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders' equity: |
|
|
|
|
|
|
||
Preferred Stock at par, $ |
|
|
|
|
|
|
||
Common Stock at par, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders' equity |
|
|
|
|
|
|
||
Total liabilities and stockholders' equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of the Consolidated Financial Statements.
2
Cars.com Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Revenue: |
|
|
|
|
|
|
||
Dealer |
|
$ |
|
|
$ |
|
||
OEM and National |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total revenue |
|
|
|
|
|
|
||
Operating expenses: |
|
|
|
|
|
|
||
Cost of revenue and operations |
|
|
|
|
|
|
||
Product and technology |
|
|
|
|
|
|
||
Marketing and sales |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
|
||
Operating income |
|
|
|
|
|
|
||
Nonoperating expense: |
|
|
|
|
|
|
||
Interest expense, net |
|
|
( |
) |
|
|
( |
) |
Other income, net |
|
|
|
|
|
|
||
Total nonoperating expense, net |
|
|
( |
) |
|
|
( |
) |
Income before income taxes |
|
|
|
|
|
|
||
Income tax expense (benefit) |
|
|
|
|
|
( |
) |
|
Net income |
|
$ |
|
|
$ |
|
||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
||
Basic |
|
|
|
|
|
|
||
Diluted |
|
|
|
|
|
|
||
Earnings per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
|
|
$ |
|
||
Diluted |
|
|
|
|
|
|
||
The accompanying notes are an integral part of the Consolidated Financial Statements.
3
Cars.com Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Net income |
$ |
|
|
$ |
|
||
Other comprehensive income, net of tax: |
|
|
|
|
|
||
Reclassification of Accumulated other comprehensive loss on interest |
|
|
|
|
|
||
Total other comprehensive income |
|
|
|
|
|
||
Comprehensive income |
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of the Consolidated Financial Statements.
4
Cars.com Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||||||||
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||||
Balance at December 31, 2022 |
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other comprehensive income, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Repurchases of common stock |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Shares issued in connection with |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at March 31, 2023 |
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||||||||
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||||
Balance at December 31, 2021 |
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other comprehensive income, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Repurchases of common stock |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Shares issued in connection with |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at March 31, 2022 |
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of the Consolidated Financial Statements.
5
Cars.com Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile Net income to Net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization of intangible assets |
|
|
|
|
|
|
||
Amortization of Accumulated other comprehensive loss on interest rate swap |
|
|
|
|
|
|
||
Changes in fair value of contingent consideration |
|
|
( |
) |
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Provision for doubtful accounts |
|
|
|
|
|
|
||
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Amortization of deferred revenue related to Accu-Trade Acquisition |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
|
|
|
|
||
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
( |
) |
|
|
|
|
Accrued compensation |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Payments for acquisitions, net of cash acquired |
|
|
|
|
|
( |
) |
|
Capitalization of internally developed technology |
|
|
( |
) |
|
|
( |
) |
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from Revolving Loan borrowings |
|
|
|
|
|
|
||
Payments of long-term debt |
|
|
( |
) |
|
|
( |
) |
Payments for stock-based compensation plans, net |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
Cash paid for interest and swap |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
The accompanying notes are an integral part of the Consolidated Financial Statements.
6
Cars.com Inc.
Notes to the Consolidated Financial Statements
(Unaudited)
NOTE 1. Description of Business and Summary of Significant Accounting Policies
Description of Business. Cars.com Inc. (the “Company” or “CARS”) is a leading automotive marketplace platform that provides a robust set of digital solutions that connect car shoppers with sellers. 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, CARS enables dealers and automotive manufacturers (“OEMs”), with innovative technical solutions and data-driven intelligence, to better reach and influence ready-to-buy shoppers, increase inventory turn and gain market share.
In addition to Cars.com™, the Company’s brands include Dealer Inspire®, a website and digital solutions provider enabling dealers to be more efficient through connected digital experiences; FUEL™, an advertising solution providing dealers and OEMs the benefit of leveraging targeted digital video and display marketing to Cars.com’s audience of in-market car shoppers; DealerRater®, a leading car dealer review and reputation management technology solution; CreditIQ®, digital financing technology and Accu-Trade™, vehicle valuation and appraisal technology. The Company's portfolio of brands also includes NewCars.com®.
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 Financial Statements and the notes thereto for the year ended December 31, 2022, which are included in the Company's Annual Report on Form 10-K as filed with the SEC on February 23, 2023 (the “December 31, 2022 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, 2022 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 months ended March 31, 2023 are not necessarily indicative of results that may be expected for the year ending December 31, 2023.
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 knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates.
Reclassifications. Certain prior year balances have been reclassified to conform to the current year presentation.
NOTE 2. Revenue
Revenue Summary. In the table below (in thousands), revenue is disaggregated by major products and services. The Company only has
|
|
Three Months Ended March 31, |
|
|||||
Major products and services |
|
2023 |
|
|
2022 |
|
||
Subscription advertising and digital solutions |
|
$ |
|
|
$ |
|
||
Display advertising |
|
|
|
|
|
|
||
Pay per lead |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
7
Cars.com Inc.
Notes to the Consolidated Financial Statements (continued)
(Unaudited)
NOTE 3. Business Combinations
Accu-Trade Acquisition. On March 1, 2022, the Company acquired certain of the assets and assumed certain liabilities of Accu-Trade, LLC; Accu-Trade Canada, LLC; Galves Market Data; and Headstart Logistics, LLC d/b/a MADE Logistics (collectively, “Accu-Trade”), which provides dealers with VIN-specific vehicle valuation and appraisal data, instant offer capabilities and logistics technology (the “Accu-Trade Acquisition”).
The Company expensed as incurred total acquisition costs of $
Purchase Price Allocation. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods. The Accu-Trade Acquisition purchase price allocation is as follows (in thousands):
|
|
Acquisition-date |
|
|
Cash consideration |
|
$ |
|
|
Other consideration (1) |
|
|
|
|
Contingent consideration (2) |
|
|
|
|
Total purchase consideration |
|
$ |
|
|
|
|
|
|
|
Assets acquired (3) |
|
$ |
|
|
Identified intangible assets (4) |
|
|
|
|
Total assets acquired |
|
|
|
|
Total liabilities assumed (5) |
|
|
( |
) |
Net identifiable assets |
|
|
|
|
Goodwill |
|
|
|
|
Total purchase consideration |
|
$ |
|
|
8
Cars.com Inc.
Notes to the Consolidated Financial Statements (continued)
(Unaudited)
|
|
Acquisition-Date |
|
|
Weighted-Average Amortization Period |
|
Acquired software |
|
$ |
|
|
||
Trade name |
|
|
|
|
||
Customer relationships |
|
|
|
|
||
Total |
|
$ |
|
|
|
|
In connection with the Accu-Trade Acquisition, the Company recorded goodwill in the amount of $
NOTE 4. Fair Value Measurements
The Company's liabilities measured at fair value on a recurring basis consisted of the following (in thousands):
|
|
|
|
Fair value measurement at reporting date |
|
||||||||||
|
Total as of |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Contingent consideration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
Fair value measurement at reporting date |
|
||||||||||
|
Total as of |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Contingent consideration |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The roll-forward of the Level 3 contingent consideration from December 31, 2022 is as follows (in thousands):
|
As of |
|
|
Fair Value |
|
|
As of |
|
|||
Contingent consideration |
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The contingent consideration is classified on the Consolidated Balance Sheets based on expected payment dates. As of March 31, 2023, $
As of March 31, 2023, other than projected financial information, volatility was the only significant input and assumption in the contingent consideration valuations. The volatility input ranged from
We expect to make payments on the contingent consideration in 2023, 2024 and 2025. For more information relating to contingent consideration, see Note 3 (Business Combinations).
NOTE 5. Debt
As of March 31, 2023, the Company was in compliance with the covenants under its debt agreements.
Term Loan. As of March 31, 2023, the outstanding principal amount under the Term Loan was $
9
Cars.com Inc.
Notes to the Consolidated Financial Statements (continued)
(Unaudited)
Revolving Loan. As of March 31, 2023, $
Senior Unsecured Notes. In October 2020, the Company issued $
Fair Value. The Company's debt is classified as Level 2 in the fair value hierarchy and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments.
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Fair value |
$ |
|
|
$ |
|
||
Carrying value |
|
|
|
|
|
||
NOTE 6. Interest Rate Swap
The interest rate on borrowings under the Company’s Term Loan and Revolving 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 and Revolving Loan prior to the October 2020 refinancing, the Company entered into an interest rate swap (the “Swap”) effective December 31, 2018. Under the terms of the Swap, the Company was locked into a fixed rate of interest of
The Swap expired on May 31, 2022 and, as such, is no longer recorded on the Consolidated Balance Sheets. During the three months ended March 31, 2023 and 2022,
NOTE 7. Commitments and Contingencies
From time to time, the Company may become involved in actions, claims, suits or other legal or administrative proceedings arising in the ordinary course of business. The Company is currently not involved in any pending or threatened litigation or claim that if determined adversely against the Company, individually or in the aggregate, would have a material adverse impact on the Company’s 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 commitments and contingencies that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate.
NOTE 8. Stockholders' Equity
On February 24, 2022, the Company announced that its Board of Directors authorized a
10
Cars.com Inc.
Notes to the Consolidated Financial Statements (continued)
(Unaudited)
March 31, 2022, the Company repurchased and subsequently retired
NOTE 9. Stock-Based Compensation
Restricted Share Units (“RSUs”). RSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement. RSUs are subject to graded vesting, generally ranging between and years and the fair value of the RSUs is equal to the Company's common stock price on the date of grant.
|
|
Number |
|
|
Weighted-Average |
|
||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested and delivered |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding as of March 31, 2023 (1) |
|
|
|
|
$ |
|
||
Performance Share Units (“PSUs”). PSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting. The fair value of the PSUs is equal to the Company’s common stock price on the date of grant. Expense related to PSUs is recognized when the performance conditions are probable of being achieved. The percentage of PSUs that shall vest will range from
|
|
Number |
|
|
Weighted-Average |
|
||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested and delivered |
|
|
|
|
|
|
||
Forfeited |
|
|
|
|
|
|
||
Outstanding as of March 31, 2023 |
|
|
|
|
$ |
|
||
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
|
|
Number of Options |
|
|
Weighted-Average |
|
|
Weighted-Average Remaining Contractual Term (in years) |
|
|
Aggregate |
|
||||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Exercised |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Forfeited |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Outstanding as of March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable as of March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
11
Cars.com Inc.
Notes to the Consolidated Financial Statements (continued)
(Unaudited)
There were no stock options granted during the three months ended March 31, 2023.
|
2022 |
|
|
Risk-free interest rate |
|
% |
|
Weighted-average volatility |
|
% |
|
Dividend yield |
|
% |
|
Expected years until exercise |
|
|
|
NOTE 10. Earnings Per Share
Basic earnings per share is calculated by dividing Net income by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans, unless the inclusion of such shares would have an anti-dilutive impact. As part of the Accu-Trade Acquisition, the Company may pay up to $
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net income |
|
$ |
|
|
$ |
|
||
Basic weighted-average common shares outstanding |
|
|
|
|
|
|
||
Effect of dilutive stock-based compensation awards (1) |
|
|
|
|
|
|
||
Diluted weighted-average common shares outstanding |
|
|
|
|
|
|
||
Earnings per share, basic |
|
$ |
|
|
$ |
|
||
Earnings per share, diluted |
|
|
|
|
|
|
||
NOTE 11. Income Taxes
Deferred Tax Asset and Valuation Allowance. The Company has concluded a valuation allowance is required against its deferred tax assets as of March 31, 2023. In reaching this conclusion, in accordance with U.S. GAAP, the Company has evaluated all available evidence, both positive and negative, and determined that the Company’s history of recent losses, primarily due to the goodwill and indefinite-lived intangible asset impairments, was sufficient significant negative evidence to require a valuation allowance. Therefore, the Company has recorded a valuation allowance to reduce its deferred tax assets as of March 31, 2023 to the amount that is more likely than not to be realized in future periods. At each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.
Effective Tax Rate.
(In thousands, except percentages) |
|
Three Months Ended March 31, 2023 |
|
|||||
Income tax provision at statutory rate |
|
$ |
|
|
|
% |
||
State income taxes, net of federal income tax benefit |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
( |
) |
|
|
( |
) |
Uncertain tax positions |
|
|
|
|
|
|
||
Valuation allowance |
|
|
|
|
|
|
||
Other, net |
|
|
( |
) |
|
|
( |
) |
Income tax expense |
|
$ |
|
|
|
% |
||
12
Note About Forward-Looking Statements
This report contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. These statements often use 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. All forward-looking statements contained in this report are qualified by these cautionary statements. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, continuing developments regarding the COVID-19 pandemic, global supply chain shortages, fluctuating fuel prices, rising interest rates, inflation and other factors we think are appropriate. Such forward-looking statements are based on 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. While the Company and its management make such statements in good faith and believe such judgments are reasonable, you should understand that these statements are not guarantees of future strategic action, performance or results. Our actual results, performance, achievements, strategic actions or prospects could differ materially from those expressed or implied by these forward-looking statements. Given these uncertainties, you should not rely on forward-looking statements in making investment decisions. When we make comparisons of results between current and prior periods, we do not intend to express any future trends, or indications of future performance, unless expressed as such, and you should only view such comparisons as historical data. Forward-looking statements are subject to a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results and strategic actions to differ materially from those expressed in the forward-looking statements contained in this report. Factors that might cause such differences include, but are not limited to:
13
For a detailed discussion 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, 2022, as filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023, our Current Reports on Form 8-K and our other filings filed with the SEC and available on our website at investor.cars.com or via EDGAR at www.sec.gov. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. The forward-looking statements contained in this report are based only on information currently available to us and speak only as of the date of this report. We undertake no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements in this report to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results
14
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.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our business, financial condition, results of operations and quantitative and qualitative disclosures should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis also contains forward-looking statements and should be read in conjunction with the disclosures and information contained in “Note About Forward-Looking Statements” in this Quarterly Report on Form 10-Q. The financial information discussed below and included elsewhere in this Quarterly Report on Form 10-Q may not necessarily reflect what our financial condition, results of operations and cash flows may be in the future.
References in this discussion and analysis to “we,” “us,” “our” and similar terms refer to Cars.com Inc. and its subsidiaries, collectively, unless the context indicates otherwise.
Business Overview
We are a leading automotive marketplace platform that provides a robust set of digital solutions that connect car shoppers with sellers. We empower shoppers with the data, resources and digital tools needed to make informed buying decisions and seamlessly connect with automotive retailers, automotive manufacturers (“OEMs”), other national advertisers and lenders. In a rapidly changing market, we enable dealers and OEMs with innovative technical solutions and data-driven intelligence, to better reach and influence ready-to-buy shoppers, increase inventory turn and operating efficiencies and gain market share.
In addition to Cars.com™, our brands include Dealer Inspire®, a website and digital solutions provider enabling dealers to be more efficient through connected digital experiences; FUEL™, an advertising solution providing dealers and OEMs the benefit of leveraging targeted digital video and display marketing to Cars.com’s audience of in-market car shoppers; DealerRater®, a leading car dealer review and reputation management technology solution; CreditIQ®, digital financing technology; and Accu-Trade™, vehicle valuation and appraisal technology. Our portfolio of brands also includes NewCars.com®.
Overview of Results
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2023 |
|
|
2022 |
|
||
Revenue |
|
$ |
167,068 |
|
|
$ |
158,207 |
|
Net income |
|
|
11,479 |
|
|
|
4,340 |
|
Key Operating Metrics
We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make operating and strategic decisions. Key Operating Metrics are as follows (in thousands, except for ARPD and percentages):
|
|
Three Months Ended March 31, |
|
|
|
|
||||||
|
|
2023 |
|
|
2022 |
|
|
% Change |
|
|||
Traffic |
|
|
164,782 |
|
|
|
148,491 |
|
|
|
11 |
% |
Average Monthly Unique Visitors |
|
|
28,478 |
|
|
|
26,562 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
March 31, 2023 |
|
|
March 31, 2022 |
|
|
% Change |
|
|
December 31, 2022 |
|
|
QoQ |
|
|||||
Dealer Customers |
|
|
19,186 |
|
|
|
19,500 |
|
|
|
(2 |
)% |
|
|
19,506 |
|
|
|
(2 |
)% |
Monthly Average Revenue Per Dealer |
|
$ |
2,386 |
|
|
$ |
2,291 |
|
|
|
4 |
% |
|
$ |
2,361 |
|
|
|
1 |
% |
Average Monthly Unique Visitors (“UVs”) and Traffic ("Visits"). UVs and Traffic are fundamental to our business. They are indicative of our consumer reach and the level of engagement they have with our platform.
Although our consumer engagement does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers, OEMs and national advertisers and a primary reason they do business with us. We have achieved audience scale as measured by UVs and Traffic, and we drive increased Traffic through a combination of continued growth in UVs and higher repeat visitation and engagement. Traffic increases can result in increased impressions, clicks and other lead events that we can ultimately monetize through our products and services.
The growth in UVs and Traffic for the first three months ended March 31, 2023, was driven by increased consumer demand that we capitalized on as a result of shifts in paid user acquisition strategy and enhancements in our App and Website experiences.
16
We define UVs in a given month as the number of distinct visitors that engage with our platform during that month. Visitors are identified when a user first visits an individual CARS property on an individual device/browser combination or installs one of our mobile apps on an individual device. If a visitor accesses more than one of our web properties or apps or uses more than one device or browser, each of those unique property/browser/app/device combinations counts toward the number of UVs. Traffic is defined as the number of visits to CARS desktop and mobile properties (responsive sites and mobile apps). We measure UVs and Traffic via Adobe Analytics. These metrics do not include traffic to Dealer Inspire websites.
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. Beginning June 30, 2022, this key operating metric includes Accu-Trade; however, no prior period has been recast as it would be impracticable to do so.
Dealer Customers decreased 2% from March 31, 2022 and December 31, 2022, due to elevated cancellations from digital dealers.
Monthly Average Revenue Per Dealer (“ARPD”). We believe that our ability to grow ARPD is an indicator of the value proposition of our platform. We define ARPD as Dealer revenue, excluding digital advertising services, during the period divided by the monthly average number of Dealer Customers during the same period. Beginning with the three months ended June 30, 2022, Accu-Trade is included in our ARPD metric, which had an immaterial impact on ARPD for the quarterly periods. No prior period has been recast as it would be impracticable to do so.
For the three months ended March 31, 2023, ARPD increased 4% and 1% compared to the three months ended March 31, 2022 and December 31, 2022, respectively. The increase was primarily driven by growth in digital solutions, offset by a reduction in FUEL revenue.
Factors Affecting Our Performance. Our business is impacted by changes in the larger automotive ecosystem, including inventory supply, supply chain disruptions, semiconductor shortages, vehicle acquisition cost, electric vehicle adoption, employee retention and changes related to automotive advertising, among other macroeconomic factors. Changes in vehicle sales volumes in the United States also influence OEMs’ and dealerships’ willingness to increase investments in technology solutions and automotive marketplaces like Cars.com and could impact our pricing strategies and/or revenue mix.
Our long-term success will depend in part on our ability to continue to transform our business toward a multi-faceted suite of digital solutions that complement our online marketplace offerings. We believe 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 automotive environment. 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 online. These solutions include virtual showrooms, online chat, vehicle financing, appraisal and valuation, instant offer capabilities and our audience targeted marketing solutions, which allows dealers to target in-market shoppers on streaming platforms. The foundation of our continued success is the value we deliver to customers via our large audience of in-market, car shoppers and innovative solutions.
17
Results of Operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
(In thousands, except percentages) |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dealer |
|
$ |
149,843 |
|
|
$ |
140,416 |
|
|
$ |
9,427 |
|
|
|
7 |
% |
OEM and National |
|
|
13,543 |
|
|
|
15,174 |
|
|
|
(1,631 |
) |
|
|
(11 |
)% |
Other |
|
|
3,682 |
|
|
|
2,617 |
|
|
|
1,065 |
|
|
|
41 |
% |
Total revenue |
|
|
167,068 |
|
|
|
158,207 |
|
|
|
8,861 |
|
|
|
6 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue and operations |
|
|
29,795 |
|
|
|
27,752 |
|
|
|
2,043 |
|
|
|
7 |
% |
Product and technology |
|
|
24,101 |
|
|
|
21,307 |
|
|
|
2,794 |
|
|
|
13 |
% |
Marketing and sales |
|
|
58,297 |
|
|
|
57,094 |
|
|
|
1,203 |
|
|
|
2 |
% |
General and administrative |
|
|
18,304 |
|
|
|
16,560 |
|
|
|
1,744 |
|
|
|
11 |
% |
Depreciation and amortization |
|
|
24,042 |
|
|
|
24,553 |
|
|
|
(511 |
) |
|
|
(2 |
)% |
Total operating expenses |
|
|
154,539 |
|
|
|
147,266 |
|
|
|
7,273 |
|
|
|
5 |
% |
Operating income |
|
|
12,529 |
|
|
|
10,941 |
|
|
|
1,588 |
|
|
|
15 |
% |
Nonoperating expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
(8,244 |
) |
|
|
(9,330 |
) |
|
|
1,086 |
|
|
|
(12 |
)% |
Other income, net |
|
|
8,239 |
|
|
|
208 |
|
|
|
8,031 |
|
|
***% |
|
|
Total nonoperating expense, net |
|
|
(5 |
) |
|
|
(9,122 |
) |
|
|
9,117 |
|
|
***% |
|
|
Income before income taxes |
|
|
12,524 |
|
|
|
1,819 |
|
|
|
10,705 |
|
|
***% |
|
|
Income tax expense (benefit) |
|
|
1,045 |
|
|
|
(2,521 |
) |
|
|
3,566 |
|
|
***% |
|
|
Net income |
|
$ |
11,479 |
|
|
$ |
4,340 |
|
|
$ |
7,139 |
|
|
***% |
|
|
*** Not meaningful
Dealer revenue. Dealer revenue consists of marketplace, digital solutions, including website solutions and Accu-Trade and media products sold to dealer customers, and is typically subscription oriented in nature. Dealer revenue is our largest revenue stream, representing 90% and 89% of total revenue for the three months ended March 31, 2023 and 2022, respectively. Dealer revenue increased $9.4 million or 7% compared to the three months ended March 31, 2022, driven primarily by an increase in digital solutions revenue from March 31, 2022.
OEM and National revenue. OEM and National revenue consists of display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies. OEM and National revenue represents 8% and 10% of total revenue for the three months ended March 31, 2023 and 2022, respectively. OEM and National revenue decreased $1.6 million or 11%, primarily due to pullbacks in spending from some of our insurance customers in response to certain macroeconomic factors.
Other revenue. Other revenue primarily consists of revenue related to the Accu-Trade license agreement and vehicle listing data sold to third parties, as well as a lead product. Other revenue represents 2% and 1% of total revenue for the three months ended March 31, 2023 and 2022, respectively. Other revenue increased $1.1 million or 41%, primarily due to the Accu-Trade license agreement. For more information, see Note 3 (Business Combinations).
Cost of revenue and operations. Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment, pay per lead products and compensation costs for the product fulfillment and customer service teams. Cost of revenue and operations expense represents 18% of total revenue for the three months ended March 31, 2023 and 2022. Cost of revenue and operations increased, primarily due to higher compensation costs.
Product and technology. The product team creates and manages consumer and dealer-facing innovation and user experience. The technology team develops and supports our products, websites and mobile apps. Product and technology expense includes compensation costs, consulting and contractor costs, hardware and software maintenance, software licenses and other infrastructure costs. Product and technology expense represents 14% and 13% of total revenue for the three months ended March 31, 2023 and 2022, respectively. Product and technology expense increased, primarily due to an additional two months of expenses in the current quarter related to the acquisition of Accu-Trade in March 2022 as well as higher compensation and third-party costs, including licenses and consulting.
18
Marketing and sales. Marketing and sales expense primarily consists of traffic and lead acquisition costs, performance and brand marketing, trade events, compensation costs and travel for the marketing, sales and sales support teams, as well as bad debt expense related to the allowance for doubtful accounts. Marketing and sales expense represents 35% and 36% of total revenue for the three months ended March 31, 2023 and 2022, respectively. Marketing and sales expense increased, primarily due to higher compensation, partially offset by lower spend due to strong traffic generation in the quarter.
General and administrative. General and administrative expense primarily consists of compensation costs for certain of the executive, finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expense includes office space rent, legal, accounting and other professional services, transaction-related costs, severance, transformation and other exit costs and costs related to the write-off of assets. General and administrative expense represents 11% and 10% of total revenue for the three months ended March 31, 2023 and 2022, respectively. General and administrative expense increased primarily due to increased compensation costs, including stock-based compensation as well as severance related costs, partially offset by a decrease in transaction-related costs.
Depreciation and amortization. Depreciation and amortization expense decreased, primarily due to certain assets being fully depreciated and amortized as compared to the prior-year period, partially offset by depreciation and amortization on additional assets acquired.
Interest expense, net. Interest expense, net decreased by $1.1 million compared to the prior year period due to the maturity of the interest rate swap and a reduction in total indebtedness, partially offset by higher interest rates in 2023. For information related to our debt, see Note 5 (Debt) and Note 6 (Interest Rate Swap) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.
Other income, net. Other income, net changed primarily due to the change in the fair value of contingent consideration associated with the CreditIQ and Accu-Trade acquisitions. For more information related to contingent consideration, see the Liquidity and Capital Resources section below, Note 3 (Business Combinations) and Note 4 (Fair Value Measurements).
Income tax expense (benefit). The effective income tax rate, expressed by calculating the Income tax expense as a percentage of Income before income taxes, was 8.3% for the three months ended March 31, 2023, and Income tax expense was $1.0 million. The effective income tax rate was different from the statutory federal income tax rate of 21%, primarily due to the tax benefits realized on stock-based compensation.
19
Liquidity and Capital Resources
Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and borrowing capacity available under our credit facilities. Our positive operating cash flow, along with our Revolving Loan, provide adequate liquidity to meet our business needs for the next 12 months and beyond, including those for investments, debt service, share repurchases and strategic acquisitions. However, our ability to maintain adequate liquidity in the future is dependent upon a number of factors, including our revenue, our ability to contain costs, including capital expenditures, and to collect accounts receivable and various other macroeconomic factors, many of which are beyond our direct control.
As discussed below, we are subject to certain financial and other covenants contained in our debt agreements, as amended, including by the Third Amendment to the Credit Agreement. For information related to the Credit Amendment, as amended, see Note 5 (Debt) in Part II, Item 8., “Financial Statements and Supplementary Data”, of our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on February 23, 2023.
We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. As of March 31, 2023, Cash and cash equivalents were $18.8 million and including our undrawn Revolving Loan, our total liquidity was $248.8 million.
Indebtedness. As of March 31, 2023, the outstanding aggregate principal amount of our indebtedness was $462.5 million, at an effective interest rate of 6.5%, including $400.0 million of outstanding principal under the bonds, which carries an interest rate of 6.375% and $62.5 million of outstanding principal under the Term Loan which had an interest rate of 7.2% at March 31, 2023.
During the three months ended March 31, 2023, we made $3.8 million in mandatory Term Loan payments and we repaid $15.0 million on our Revolving Loan. As of March 31, 2023, $230.0 million was available to borrow under the Revolving Loan. Our borrowings are limited by our Senior Secured Leverage Ratio and Interest Coverage Ratio, calculated in accordance with our Credit Agreement, which were 0.3x and 5.7x as of March 31, 2023, respectively. For further information, 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.
Share Repurchase Program. On February 24, 2022, we announced that our Board of Directors authorized a three-year share repurchase program to acquire up to $200 million of our common stock. We may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and other applicable legal requirements, and subject to our blackout periods. We intend to fund the share repurchase program principally with cash from operations. During the three months ended March 31, 2023, we repurchased and subsequently retired 0.4 million shares for $7.2 million at an average price paid per share of $17.38.
Contingent Consideration. The fair value as of March 31, 2023 for the contingent consideration related to the CreditIQ and Accu-Trade acquisitions was $47.6 million. Within the next twelve months, we expect to pay $6.7 million of the potential contingent consideration amounts discussed below.
As part of the Accu-Trade Acquisition, we may be required to pay additional consideration to the former owners based on achievement of an earnings-related metric. For the Accu-Trade contingent consideration, we have the option to pay consideration in cash or certain amounts in stock, which may result in a variable number of shares being issued. The actual amount to be paid will be based on the acquired business’ future performance to be attained over a three-year performance period through February 2025.
As part of the CreditIQ Acquisition, we may be required to pay additional cash consideration to the former owners based on two earn-out achievement objectives, including an earnings-related metric and lender market share. The actual amount to be paid will be based on the acquired business’ future performance to be attained over a three-year performance period through December 2024. For information related to the contingent consideration, see Note 4 (Fair Value Measurements) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q and Note 3 (Business Combinations) in Part II, Item 8., “Financial Statements and Supplementary Data”, of our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on February 23, 2023.
20
Cash Flows. Details of our cash flows are as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|
|
|
||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|||
Operating activities |
|
$ |
28,141 |
|
|
$ |
30,358 |
|
|
$ |
(2,217 |
) |
Investing activities |
|
|
(5,371 |
) |
|
|
(68,778 |
) |
|
|
63,407 |
|
Financing activities |
|
|
(35,647 |
) |
|
|
29,804 |
|
|
|
(65,451 |
) |
Net change in cash and cash equivalents |
|
$ |
(12,877 |
) |
|
$ |
(8,616 |
) |
|
$ |
(4,261 |
) |
Operating Activities. The decrease in cash provided by operating activities was primarily related to changes in operating assets and liabilities during the three months ended March 31, 2023.
Investing Activities. The decrease in cash used in investing activities was primarily related to the payment for the Accu-Trade Acquisition in 2022.
Financing Activities. During the three months ended March 31, 2023, cash used in financing activities was primarily related to debt repayments, tax payments made in connection with the vesting of certain equity awards and repurchases of common stock. During the three months ended March 31, 2022, cash provided by financing activities was primarily related to $45.0 million of proceeds from Revolving Loan borrowings related to the Accu-Trade Acquisition, partially offset by tax payments made in connection with the vesting of certain equity awards and repurchases of common stock. For information related to our debt and repurchases of common stock, see Note 5 (Debt) and Note 8 (Stockholders' Equity) 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 7 (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 our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on February 23, 2023 and see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q. During the three months ended March 31, 2023, there have been no changes to our critical accounting policies.
Recent Accounting Pronouncements. There were no significant new accounting pronouncements applicable to us in the period.
21
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For quantitative and qualitative disclosures about market risk, see “Quantitative and Qualitative Disclosures About Market Risk,” in Part II, Item 7A., of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 23, 2023. Our exposures to market risk have not changed materially since December 31, 2022.
Item 4. Controls and Procedures
Disclosure Controls and Procedures. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control Over Financial Reporting. During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
22
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
For information relating to legal proceedings, see Note 7 (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.
Item 1A. Risk Factors
Our business and the ownership of our common stock are subject to a number of risks and uncertainties, including those described in Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on February 23, 2023, which could materially affect our business, financial condition, results of operations and future results. There have been no material changes from the risk factors described in our Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sales of Unregistered Securities by Issuer
None.
Purchases of Equity Securities by Issuer
Our stock repurchase activity for the three months ended March 31, 2023 is as follows:
Period |
Total Number of |
|
Average Price Paid per Share (1) |
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |
|
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (3) |
|
||||
January 1 through January 31, 2023 |
|
83,171 |
|
$ |
15.81 |
|
|
83,171 |
|
$ |
149,702 |
|
February 1 through February 28, 2023 |
|
111,934 |
|
|
17.80 |
|
|
111,934 |
|
|
147,710 |
|
March 1 through March 31, 2023 |
|
217,654 |
|
|
17.77 |
|
|
217,654 |
|
|
143,843 |
|
|
|
412,759 |
|
|
|
|
412,759 |
|
|
|
||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
23
Item 6. Exhibits
Exhibit Index
Exhibit Number |
|
Description |
3.1** |
|
|
3.2** |
|
|
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
|
The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted with Inline XBRL (included with Exhibit 101 attachments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Filed herewith.
** Previously filed.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Cars.com Inc. |
||
|
|
|
|
|
Date: May 4, 2023 |
|
By: |
|
/s/ T. Alex Vetter |
|
|
|
|
T. Alex Vetter |
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
Date: May 4, 2023 |
|
By: |
|
/s/ Sonia Jain |
|
|
|
|
Sonia Jain |
|
|
|
|
Chief Financial Officer |
25
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, T. Alex Vetter, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Cars.com Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 4, 2023 |
|
By: |
|
/s/ T. Alex Vetter |
|
|
|
|
T. Alex Vetter |
|
|
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sonia Jain, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Cars.com Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 4, 2023 |
|
By: |
|
/s/ Sonia Jain |
|
|
|
|
Sonia Jain |
|
|
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cars.com Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 4, 2023 |
|
By: |
|
/s/ T. Alex Vetter |
|
|
|
|
T. Alex Vetter |
|
|
|
|
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cars.com Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 4, 2023 |
|
By: |
|
/s/ Sonia Jain |
|
|
|
|
Sonia Jain |
|
|
|
|
Chief Financial Officer |