Cars.com Inc. [CARS] Filings

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

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

For the quarterly period ended June 30, 2023


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

Commission File Number: 001-37869

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

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.

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.

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.

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.

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	)		(

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