10-Q 1 cars-20230630.htm 10-Q 10-Q
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j

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

b

For the quarterly period ended June 30, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-37869

 

 

img255171408_0.jpg 

Cars.com Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

81-3693660

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

 

300 S. Riverside Plaza, Suite 1000

Chicago, Illinois 60606

(Address of principal executive offices)

(312) 601-5000

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

Common Stock

 

CARS

 

New York Stock Exchange

 

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

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

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

 

Large accelerated filer

 

 

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 July 27, 2023, the registrant had 66,468,133 shares of common stock, $0.01 par value per share, outstanding.

 

 


 

Table of Contents

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements:

2

Consolidated Balance Sheets

2

Consolidated Statements of Income

3

 

Consolidated Statements of Comprehensive Income

4

Consolidated Statements of Stockholders’ Equity

5

Consolidated Statements of Cash Flows

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.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

PART II.

OTHER INFORMATION

24

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

Signatures

27

 

 

 

1


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Cars.com Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(unaudited)

 

 

 

 

Assets:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

28,605

 

 

$

31,715

 

Accounts receivable, net

 

 

111,237

 

 

 

107,930

 

Prepaid expenses

 

 

10,104

 

 

 

8,377

 

Other current assets

 

 

7,363

 

 

 

605

 

Total current assets

 

 

157,309

 

 

 

148,627

 

Property and equipment, net

 

 

45,201

 

 

 

45,218

 

Goodwill

 

 

102,856

 

 

 

102,856

 

Intangible assets, net

 

 

668,771

 

 

 

707,088

 

Deferred tax assets, net

 

 

91,255

 

 

 

48

 

Investments and other assets, net

 

 

20,151

 

 

 

21,033

 

Total assets

 

$

1,085,543

 

 

$

1,024,870

 

Liabilities and stockholders' equity:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

19,888

 

 

$

18,230

 

Accrued compensation

 

 

16,343

 

 

 

19,316

 

Current portion of long-term debt, net

 

 

16,758

 

 

 

14,134

 

Other accrued liabilities

 

 

67,574

 

 

 

54,332

 

Total current liabilities

 

 

120,563

 

 

 

106,012

 

Noncurrent liabilities:

 

 

 

 

 

 

Long-term debt, net

 

 

434,210

 

 

 

458,249

 

Other noncurrent liabilities

 

 

53,313

 

 

 

76,179

 

Total noncurrent liabilities

 

 

487,523

 

 

 

534,428

 

Total liabilities

 

 

608,086

 

 

 

640,440

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred Stock at par, $0.01 par value; 5,000 shares authorized; no shares
   issued and outstanding as of June 30, 2023 and December 31, 2022,
   respectively

 

 

 

 

 

 

Common Stock at par, $0.01 par value; 300,000 shares authorized; 66,477 and
   
66,287 shares issued and outstanding as of June 30, 2023 and
   December 31, 2022, respectively

 

 

665

 

 

 

662

 

Additional paid-in capital

 

 

1,499,363

 

 

 

1,511,944

 

Accumulated deficit

 

 

(1,022,571

)

 

 

(1,128,176

)

Total stockholders' equity

 

 

477,457

 

 

 

384,430

 

Total liabilities and stockholders' equity

 

$

1,085,543

 

 

$

1,024,870

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

  Dealer

 

$

153,309

 

 

$

143,987

 

 

$

303,152

 

 

$

284,403

 

  OEM and National

 

 

12,402

 

 

 

14,144

 

 

 

25,945

 

 

 

29,318

 

  Other

 

 

2,465

 

 

 

4,742

 

 

 

6,147

 

 

 

7,359

 

     Total revenue

 

 

168,176

 

 

 

162,873

 

 

 

335,244

 

 

 

321,080

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

  Cost of revenue and operations

 

 

30,415

 

 

 

29,504

 

 

 

60,210

 

 

 

57,256

 

  Product and technology

 

 

24,956

 

 

 

23,117

 

 

 

49,057

 

 

 

44,424

 

  Marketing and sales

 

 

58,153

 

 

 

54,655

 

 

 

116,450

 

 

 

111,749

 

  General and administrative

 

 

17,649

 

 

 

17,211

 

 

 

35,953

 

 

 

33,771

 

  Depreciation and amortization

 

 

24,669

 

 

 

23,001

 

 

 

48,711

 

 

 

47,554

 

     Total operating expenses

 

 

155,842

 

 

 

147,488

 

 

 

310,381

 

 

 

294,754

 

         Operating income

 

 

12,334

 

 

 

15,385

 

 

 

24,863

 

 

 

26,326

 

Nonoperating expense:

 

 

 

 

 

 

 

 

 

 

 

 

  Interest expense, net

 

 

(8,150

)

 

 

(9,047

)

 

 

(16,394

)

 

 

(18,377

)

  Other (expense) income, net

 

 

(3,133

)

 

 

(54

)

 

 

5,106

 

 

 

154

 

     Total nonoperating expense, net

 

 

(11,283

)

 

 

(9,101

)

 

 

(11,288

)

 

 

(18,223

)

       Income before income taxes

 

 

1,051

 

 

 

6,284

 

 

 

13,575

 

 

 

8,103

 

       Income tax (benefit) expense

 

 

(93,075

)

 

 

739

 

 

 

(92,030

)

 

 

(1,782

)

          Net income

 

$

94,126

 

 

$

5,545

 

 

$

105,605

 

 

$

9,885

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

66,762

 

 

 

69,194

 

 

 

66,646

 

 

 

69,329

 

Diluted

 

 

68,493

 

 

 

70,257

 

 

 

68,118

 

 

 

70,505

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.41

 

 

$

0.08

 

 

$

1.58

 

 

$

0.14

 

Diluted

 

1.37

 

 

 

0.08

 

 

 

1.55

 

 

 

0.14

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

$

94,126

 

 

$

5,545

 

 

$

105,605

 

 

$

9,885

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

Reclassification of Accumulated other comprehensive loss on interest
    rate swap into Net income

 

 

 

 

800

 

 

 

 

 

 

2,002

 

Total other comprehensive income

 

 

 

 

800

 

 

 

 

 

 

2,002

 

Comprehensive income

$

94,126

 

 

$

6,345

 

 

$

105,605

 

 

$

11,887

 

 

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
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at December 31, 2022

 

 

 

$

 

 

 

66,287

 

 

$

662

 

 

$

1,511,944

 

 

$

(1,128,176

)

 

$

 

 

$

384,430

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,479

 

 

 

 

 

 

11,479

 

Repurchases of common stock

 

 

 

 

 

 

 

(413

)

 

 

(4

)

 

 

(7,170

)

 

 

 

 

 

 

 

 

(7,174

)

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

 

 

 

 

 

 

 

976

 

 

 

10

 

 

 

(9,807

)

 

 

 

 

 

 

 

 

(9,797

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

6,049

 

 

 

 

 

 

 

 

 

6,049

 

Balance at March 31, 2023

 

 

 

 

 

 

 

66,850

 

 

 

668

 

 

 

1,501,016

 

 

 

(1,116,697

)

 

 

 

 

 

384,987

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94,126

 

 

 

 

 

 

94,126

 

Repurchases of common stock

 

 

 

 

 

 

 

(532

)

 

 

(5

)

 

 

(9,987

)

 

 

 

 

 

 

 

 

(9,992

)

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

 

 

 

 

 

 

 

159

 

 

 

2

 

 

 

726

 

 

 

 

 

 

 

 

 

728

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

7,608

 

 

 

 

 

 

 

 

 

7,608

 

Balance at June 30, 2023

 

 

 

$

 

 

 

66,477

 

 

$

665

 

 

$

1,499,363

 

 

$

(1,022,571

)

 

$

 

 

$

477,457

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at December 31, 2021

 

 

 

$

 

 

 

69,170

 

 

$

692

 

 

$

1,544,712

 

 

$

(1,145,382

)

 

$

(2,002

)

 

$

398,020

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,340

 

 

 

 

 

 

4,340

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,202

 

 

 

1,202

 

Repurchases of common stock

 

 

 

 

 

 

 

(338

)

 

 

(3

)

 

 

(4,997

)

 

 

 

 

 

 

 

 

(5,000

)

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

 

 

 

 

 

 

 

971

 

 

 

9

 

 

 

(7,705

)

 

 

 

 

 

 

 

 

(7,696

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

5,221

 

 

 

 

 

 

 

 

 

5,221

 

Balance at March 31, 2022

 

 

 

 

 

 

 

69,803

 

 

 

698

 

 

 

1,537,231

 

 

 

(1,141,042

)

 

 

(800

)

 

 

396,087

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,545

 

 

 

 

 

 

5,545

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

800

 

 

 

800

 

Repurchases of common stock

 

 

 

 

 

 

 

(1,717

)

 

 

(17

)

 

 

(18,292

)

 

 

 

 

 

 

 

 

(18,309

)

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

 

 

 

 

 

 

 

158

 

 

 

1

 

 

 

857

 

 

 

 

 

 

 

 

 

858

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

6,407

 

 

 

 

 

 

 

 

 

6,407

 

Balance at June 30, 2022

 

 

 

$

 

 

 

68,244

 

 

$

682

 

 

$

1,526,203

 

 

$

(1,135,497

)

 

$

 

 

$

391,388

 

 

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

 

 

5


 

Cars.com Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

105,605

 

 

$

9,885

 

Adjustments to reconcile Net income to Net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

10,394

 

 

 

7,857

 

Amortization of intangible assets

 

 

38,317

 

 

 

39,697

 

Amortization of Accumulated other comprehensive loss on interest rate swap

 

 

 

 

 

2,362

 

Changes in fair value of contingent consideration

 

 

(5,182

)

 

 

 

Stock-based compensation

 

 

13,520

 

 

 

11,628

 

Deferred income taxes

 

 

(92,587

)

 

 

(