CARS Reports Third Quarter 2020 Results

CHICAGO, Nov. 9, 2020 /PRNewswire/ -- Cars.com Inc. (NYSE: CARS) ("CARS" or the "Company"), a leading digital marketplace and solutions provider for the automotive industry, today released its financial results for the quarter ended September 30, 2020.

Q3 Financial Highlights

    --  Revenue of $144.4 million, down $7.7 million, or 5% year over year
    --  GAAP Net Loss of $12.3 million, or $0.18 per diluted share, compared to
        GAAP Net Loss of $426.2 million, or $6.38 per diluted share in the
        prior-year period. The prior year GAAP net loss included a Goodwill and
        Intangible impairment charge of $431.3 million, net of tax
    --  Adjusted Net Income of $34.6 million, or $0.50 per diluted share,
        compared to Adjusted Net Income of $21.3 million, or $0.32 per diluted
        share in the prior-year period
    --  Adjusted EBITDA of $49.0 million, or 34% of Revenue, up $3.1 million, or
        7% year over year
    --  Net cash provided by operating activities of $96.9 million for the nine
        months ended September 30, 2020 up 20% compared to the prior year period
    --  Free Cash Flow of $84.3 million for the nine months ended September 30,
        2020, up 29% compared to the prior year period
    --  $43.8 million of cash and cash equivalents and total liquidity of $258.8
        million, including availability under our revolving credit facility, as
        of September 30, 2020

Q3 Key Metrics Highlights

    --  Average Monthly Unique Visitors of 25.3 million, up 10% year over year
    --  Traffic (visits) of 158.8 million, up 10% year over year
    --  Dealer Customers grew to 18,130 at September 30, 2020 from 18,033 at
        June 30, 2020 and included growth in both marketplace and solutions only
        customers
    --  Monthly average revenue per dealer ("ARPD") was $2,183, rebounding to
        pre-COVID levels and up slightly compared to the prior-year period

Operational Highlights

    --  Continued robust organic traffic and lead generation leading to strong
        dealer retention and growth
    --  Strong growth and increased penetration of Conversations, Online
        Shopper, and FUEL solutions leading to ARPD growth
    --  Dealer Inspire remains on track to launch half of the contracted GM
        websites in 2020
    --  In October 2020, refinanced our debt facilities on favorable terms
        extending maturity dates from 2022 to 2025 for the credit facility and
        2028 for the new senior unsecured notes

"Revenue rebounded sequentially with meaningful growth in ARPD and increased dealer customers as dealers are more rapidly adopting digital solutions in response to accelerated consumer demand because of the COVID pandemic. The launch of new dealer websites, and further growth and penetration of our FUEL, Online Shopper, and Conversations solutions, are driving growth in both ARPD and dealer count which will allow us to start 2021 with strong momentum," said Alex Vetter, President and Chief Executive Officer of CARS.

Q3 Results

Revenue for the third quarter of 2020 was $144.4 million, compared to $152.1 million in the prior-year period. The decrease was primarily due to a decline in National Advertising revenue and lower dealer count, largely COVID related, partially offset by continued growth in solutions revenue compared with the prior-year period.

Total operating expenses for the third quarter of 2020 were $125.3 million, 9% lower than the prior-year period when excluding a $461.5 million Goodwill and intangible asset impairment charge in that period. The decrease in Total Operating Expenses compared to the prior year period is primarily due to reduced marketing spending and the cessation of our Affiliate Revenue Share expense in the second quarter.

Net loss for the third quarter of 2020 was $12.3 million, or $0.18 per diluted share, compared to Net loss of $426.2 million, or $6.38 per diluted share, in the third quarter of 2019. The Net loss is primarily due to an approximately $30.9 million non-cash charge for the correction of an error related to the calculation of the valuation allowance for income taxes established in connection with an impairment recorded during the three months ended March 31, 2020. Net loss in the third quarter of 2019 included a Goodwill and Intangible asset impairment charge of $431.3 million, net of tax. Adjusted Net Income for the third quarter of 2020 was $34.6 million, or $0.50 per diluted share, compared to $21.3 million, or $0.32 per diluted share, in the third quarter of 2019.

Adjusted EBITDA for the third quarter of 2020 was $49.0 million, or 34% of revenue, an increase of 7% compared to $45.9 million, or 30% of revenue, for the prior-year period. The increase in Adjusted EBITDA is primarily due to reduced expenses, largely attributable to a prudent level of marketing spend in a period of strong organic traffic growth and the cessation of our Affiliate Revenue Share expense in the second quarter. In the fourth quarter, we expect to increase marketing and product innovation spend as we shift to more normalized levels of investment, which we expect to drive long-term growth. We expect Q4 Adjusted EBITDA to be higher on a YoY basis with Adjusted EBITDA margin between 28-31%.

For the third quarter, Average Monthly Unique Visitors and Traffic grew 10% year over year. Organic Traffic was 76% of total Traffic compared to 71% in the prior year period. Mobile traffic grew 11% year over year and accounted for 74% of total Traffic.

Dealer customers were 18,130 as of September 30, 2020, an increase of 1%, compared to 18,033 dealer customers at June 30, 2020.

ARPD was $2,183, snapping back to pre-COVID levels and up slightly compared to the prior-year period.

"Strong top-line trends, focused execution, and thoughtful cost discipline drove year-over-year growth in Adjusted EBITDA and free cash flow. Increased investments in the business coupled with continued growth in digital solutions will position us to exit the year with a strengthened competitive and financial position. In addition, the refinancing of our debt improves our flexibility to invest in and grow our business," said Sonia Jain, Chief Financial Officer of CARS.

Cash Flow and Balance Sheet

Net cash provided by operating activities for the nine-month period ended September 30, 2020 was $96.9 million, compared to $80.6 million in the prior year. Free Cash Flow for the nine-month period ended September 30, 2020, was $84.3 million, compared to $65.1 million in the same period last year.

Cash and cash equivalents was $43.8 million and debt outstanding was $597.8 million as of September 30, 2020, after paying down $48.4 million in debt during the quarter. Net leverage at September 30, 2020 was 3.8x.

Q3 Earnings call

As previously announced, management will hold a conference call and webcast today at 9:00 a.m. Central Time. This webcast may be accessed at investor.cars.com. A replay of the webcast and the slideshow will be available at this website following the conclusion of the call until November 23, 2020.

About CARS

CARS is a leading digital marketplace and solutions provider for the automotive industry that connects car shoppers with sellers. Launched in 1998 with the flagship marketplace Cars.com and headquartered in Chicago, 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 dealerships and 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, CARS companies include Dealer Inspire, a technology provider building solutions that future-proof dealerships with more efficient operations and connected digital experiences; FUEL, which gives dealers and OEMs the opportunity to harness the untapped power of digital video by leveraging Cars.com's pure audience of in-market car shoppers, and DealerRater, a leading car dealer review and reputation management platform.

The full suite of CARS properties include Cars.com(TM), Dealer Inspire®, DealerRater®, FUEL(TM), Auto.com(TM), PickupTrucks.com(TM) and NewCars.com®. For more information, visit www.Cars.com.

Non-GAAP Financial Measures

This earnings release discusses Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per diluted share and Free Cash Flow. These financial measures are not prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). These financial measures are presented as supplemental measures of operating performance because we believe they provide meaningful information regarding our performance and provide a basis to compare operating results between periods. In addition, we use Adjusted EBITDA as a measure for determining incentive compensation targets. Adjusted EBITDA also is used as a performance measure under our credit agreement and includes adjustments such as the items defined below and other further adjustments, which are defined in the credit agreement. These non-GAAP financial measures are frequently used by our lenders, securities analysts, investors and other interested parties to evaluate companies in our industry. For a reconciliation of the non-GAAP measures presented in this earnings release to their most directly comparable financial measure prepared in accordance with GAAP, see "Non-GAAP Reconciliations" below.

Other companies may define or calculate these measures differently, limiting their usefulness as comparative measures. Because of these limitations, these non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Definitions of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are presented in the tables below.

We define Adjusted EBITDA as net income (loss) before (1) interest expense (income), net, (2) income tax expense (benefit), (3) depreciation, (4) amortization of intangible assets, (5) stock-based compensation expense, (6) unrealized mark-to-market adjustments related to derivative instruments, and (7) certain other items, such as transaction-related costs, costs associated with the stockholder activist campaign, severance, transformation and other exit costs and write-off and impairments of goodwill, intangible assets and other long-lived assets. Amortization of unfavorable contracts liability is not adjusted out of Adjusted EBITDA.

We define Adjusted Net Income as net income (loss) excluding the after-tax impact of (1) amortization of intangible assets, (2) stock-based compensation expense, (3) unrealized mark-to-market adjustments related to derivative instruments, and (4) certain other items, such as transaction-related costs, costs associated with the stockholder activist campaign, severance, transformation and other exit costs and write-off and impairments of goodwill, intangible assets and other long-lived assets. Amortization of unfavorable contracts liability is not adjusted out of Adjusted Net Income.

Transaction-related costs are certain expense items resulting from actual or potential transactions such as business combinations, mergers, acquisitions, dispositions, spin-offs, financing transactions, and other strategic transactions, including, without limitation, (1) transaction-related bonuses and (2) expenses for advisors and representatives such as investment bankers, consultants, attorneys and accounting firms. Transaction-related costs may also include, without limitation, transition and integration costs such as retention bonuses and acquisition-related milestone payments to acquired employees, in addition to consulting, compensation and other incremental costs associated with integration projects.

We define Free Cash Flow as net cash provided by operating activities less capital expenditures, including purchases of property and equipment and capitalization of internal-use software and website development costs.

Key Metric Definitions

Traffic (Visits). Traffic is fundamental to our business. Traffic to the CARS network of websites and mobile apps provides value to our advertisers in terms of audience, awareness, consideration and conversion. In addition to tracking traffic volume and sources, we monitor activity on our properties, allowing us to innovate and refine our consumer-facing offerings. Traffic is defined as the number of visits to CARS desktop and mobile properties (responsive sites and mobile apps), measured using Adobe Analytics. Traffic does not include traffic to Dealer Inspire websites. Visits refers to the number of times visitors accessed CARS properties during the period, no matter how many visitors make up those visits. Traffic provides an indication of our consumer reach. Although our consumer reach does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealer customers and national advertisers.

Average Monthly Unique Visitors ("UVs"). Growth in unique visitors and consumer traffic to our network of websites and mobile apps increases the number of impressions, clicks, leads and other events. We 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 towards the number of UVs. UVs do not include Dealer Inspire UVs. We measure UVs using Adobe Analytics.

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.

Average Revenue Per Dealer ("ARPD"). We believe our ability to grow ARPD is an indicator of the value proposition of our products. We define ARPD as Direct retail revenue during the period divided by the monthly average number of direct dealer customers during the same period.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements include information concerning the impact of the COVID-19 pandemic on our industry, our dealer customers and our results of operations, our business strategies, strategic alternatives, plans and objectives, market potential, outlook, trends, future financial performance, planned operational and product improvements, potential strategic transactions, liquidity, including expense reduction and draws from our revolving credit facility, and other matters and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements, strategic actions or prospects may differ materially from those expressed or implied by these forward-looking statements. These statements often include words such as "believe," "expect," "project," "anticipate," "outlook," "intend," "strategy," "plan," "estimate," "target," "seek," "will," "may," "would," "should," "could," "forecasts," "mission," "strive," "more," "goal" or similar expressions. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, based on our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, current developments regarding the COVID-19 pandemic and other factors we think are appropriate. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by the Company and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are expressed in good faith and we believe these judgments are reasonable. However, you should understand that these statements are not guarantees of strategic action, performance or results. Our actual results and strategic actions could differ materially from those expressed in the forward-looking statements. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. Whether or not any such forward-looking statement is in fact achieved will depend on future events, some of which are beyond our control.

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 press release. For a detailed discussion of many of these and other risks and uncertainties, see our Annual Report on Form 10-K for the year ended December 31, 2019, our subsequent Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and our other filings with the Securities and Exchange Commission, available on our website at investor.cars.com or via EDGAR at www.sec.gov. All forward-looking statements contained in this press release are qualified by these cautionary statements. You should evaluate all forward-looking statements made in this press release in the context of these risks and uncertainties. The forward-looking statements contained in this press release are based only on information currently available to us and speak only as of the date of this press release. We undertake no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

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


                                                                                       
            
              Cars.com Inc.


                                                                              
            
              Consolidated Statements of Loss


                                                                          
       
              
                (In thousands, except per share data)


                                                                                  
            
              
                (Unaudited)




                                                                            Three Months Ended September 30,                                Nine Months Ended September 30,



                                                                                                        2020                                                            2019         2020          2019




     
              
                Revenue:



       Direct                                                                                      $123,955                                                        $122,878     $332,558      $349,162



       National advertising                                                                          17,753                                                          20,161       53,167        59,752



       Other                                                                                          2,684                                                           3,642        8,770        11,215




         Retail                                                                                     144,392                                                         146,681      394,495       420,129



         Wholesale                                                                                                                                                   5,409                    34,366



            Total revenue                                                                           144,392                                                         152,090      394,495       454,495




     
              
                Operating expenses:



       Cost of revenue and operations                                                                25,434                                                          25,089       74,376        74,987



       Product and technology                                                                        15,455                                                          14,923       42,359        48,125



       Marketing and sales                                                                           45,776                                                          50,789      132,734       164,872



       General and administrative                                                                    13,289                                                          13,414       43,866        59,265



       Affiliate revenue share                                                                                                                                       5,158       10,970         9,788



       Depreciation and amortization                                                                 25,375                                                          28,970       87,529        86,761



       Goodwill and intangible asset impairment                                                                                                                    461,463      905,885       461,463



            Total operating expenses                                                                125,329                                                         599,806    1,297,719       905,261




              Operating income (loss)                                                                19,063                                                       (447,716)   (903,224)    (450,766)




     
              
                Nonoperating expense:



       Interest expense, net                                                                       (10,779)                                                        (7,712)    (26,229)     (22,989)



       Other income (expense), net                                                                    1,957                                                           1,402      (6,987)        1,530




          Total nonoperating expense, net                                                           (8,822)                                                        (6,310)    (33,216)     (21,459)



            Income (loss) before income taxes                                                        10,241                                                       (454,026)   (936,440)    (472,225)



            Income tax expense (benefit)                                                             22,502                                                        (27,869)   (112,101)     (31,011)



               Net loss                                                                           $(12,261)                                                     $(426,157)  $(824,339)   $(441,214)




     
              
                Weighted-average common shares outstanding:



     Basic                                                                                           67,295                                                          66,769       67,163        67,043



     Diluted                                                                                         67,295                                                          66,769       67,163        67,043



     
              
                Loss per share:



     Basic                                                                                          $(0.18)                                                        $(6.38)    $(12.27)      $(6.58)



     Diluted                                                                                         (0.18)                                                         (6.38)     (12.27)       (6.58)


                                                                                                
       
            Cars.com Inc.


                                                                                              
       
       Consolidated Balance Sheets


                                                                                          
     
         
         (In thousands, except per share data)




                                                                                                                                            
      
        September 30, 2020      
     
     December 31, 2019



                                                                                                                                              
      (unaudited)



             
                
                  Assets:



             
                Current assets:



             Cash and cash equivalents                                                                                                                             $43,769                      $13,549



             Accounts receivable, net                                                                                                                               89,094                      101,762



             Prepaid expenses                                                                                                                                       10,615                        6,526



             Other current assets                                                                                                                                   10,571                          603



             Total current assets                                                                                                                                  154,049                      122,440




             Property and equipment, net                                                                                                                            41,072                       43,696



             Goodwill                                                                                                                                                                          505,885



             Intangible assets, net                                                                                                                                857,055                    1,329,499



             Investments and other assets                                                                                                                           16,274                       26,471



             Total assets                                                                                                                                       $1,068,450                   $2,027,991




             
                
                  Liabilities and stockholders' equity:



             
                Current liabilities:



             Accounts payable                                                                                                                                      $19,896                      $12,431



             Accrued compensation                                                                                                                                   16,949                       16,738



             Current portion of long-term debt                                                                                                                      32,654                       31,391



             Other accrued liabilities                                                                                                                              43,377                       38,246



             Total current liabilities                                                                                                                             112,876                       98,806




             
                Noncurrent liabilities:



             Long-term debt                                                                                                                                        558,720                      611,277



             Deferred tax liability                                                                                                                                 30,865                      132,996



             Other noncurrent liabilities                                                                                                                           43,616                       43,844



             Total noncurrent liabilities                                                                                                                          633,201                      788,117




             Total liabilities                                                                                                                                     746,077                      886,923




             Commitments and contingencies



             
                Stockholders' equity:



             Preferred Stock at par, $0.01 par value; 5,000 shares authorized; no shares
      issued and outstanding as of September 30, 2020 and December 31, 2019,
      respectively



             Common Stock at par, $0.01 par value; 300,000 shares authorized; 67,206 and                                                                               672                          668
      66,764 shares issued and outstanding as of September 30, 2020 and
      December 31, 2019, respectively



             Additional paid-in capital                                                                                                                          1,525,114                    1,515,109



             Accumulated deficit                                                                                                                               (1,191,406)                   (367,067)



             Accumulated other comprehensive loss                                                                                                                 (12,007)                     (7,642)




             Total stockholders' equity                                                                                                                            322,373                    1,141,068



             Total liabilities and stockholders' equity                                                                                                         $1,068,450                   $2,027,991


                                                                                            
        
                Cars.com Inc.


                                                                                      
        
          Consolidated Statements of Cash Flows


                                                                                        
         
           
                  (In thousands)


                                                                                         
         
           
                  (Unaudited)




                                                                                                                                        Nine Months Ended September 30,



                                                                                                                                                                   2020        2019




     
                
                  Cash flows from operating activities:



     Net loss                                                                                                                                               $(824,339) $(441,214)



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



     Depreciation                                                                                                                                               15,085      13,427



     Amortization of intangible assets                                                                                                                          72,444      73,334



     Amortization of unfavorable contracts liability                                                                                                                     (18,885)



     Goodwill and intangible asset impairment                                                                                                                  905,885     461,463



     Impairment of non-marketable security                                                                                                                       9,447



     Unrealized gain on interest rate swap                                                                                                                     (2,482)



     Amortization of accumulated other comprehensive loss on interest rate swap                                                                                  2,101



     Stock-based compensation                                                                                                                                   10,338       5,258



     Deferred income taxes                                                                                                                                   (102,199)   (52,741)



     Provision for doubtful accounts                                                                                                                             3,854       3,844



     Amortization of debt issuance costs                                                                                                                         2,420         959



     Other, net                                                                                                                                                    121         411



     Changes in operating assets and liabilities:



     Accounts receivable                                                                                                                                         8,814       3,295



     Prepaid expenses                                                                                                                                          (4,089)      1,672



     Other current assets                                                                                                                                      (9,968)      9,992



     Other assets                                                                                                                                                  819     -16,517



     Accounts payable                                                                                                                                            7,465      -5,363



     Accrued compensation                                                                                                                                          211      -2,233



     Other accrued liabilities                                                                                                                                   4,349      28,627



     Other noncurrent liabilities                                                                                                                              (3,410)     15,221



     Net cash provided by operating activities                                                                                                                  96,866      80,550




     
                
                  Cash flows from investing activities:



          Purchase of property and equipment                                                                                                                  (12,603)   (15,409)



          Other, net                                                                                                                                                        (599)



     Net cash used in investing activities                                                                                                                    (12,603)   (16,008)




     
                
                  Cash flows from financing activities:



          Proceeds from revolving loan borrowings                                                                                                              165,000      10,000



          Payments of debt issuance costs and other fees                                                                                                       (3,402)



          Payments of long-term debt                                                                                                                         (215,312)   (39,688)



          Stock-based compensation plans, net                                                                                                                    (329)      (352)



          Repurchases of common stock                                                                                                                                    (40,000)



          Other                                                                                                                                                             (192)



     Net cash used in financing activities                                                                                                                    (54,043)   (70,232)




     Net increase (decrease) in cash and cash equivalents                                                                                                       30,220     (5,690)




     Cash and cash equivalents at beginning of period                                                                                                           13,549      25,463



     Cash and cash equivalents at end of period                                                                                                                $43,769     $19,773




     
                Supplemental cash flow information:



     Cash paid for income taxes, net of refunds                                                                                                                   $478        $168



     Cash paid for interest                                                                                                                                     21,512      22,413


                                                                                                            
              
                Cars.com Inc.


                                                                                                      
              
                Non-GAAP Reconciliations


                                                                                                 
     
                
                  (In thousands, except per share data)


                                                                                                     
              
                
                  (Unaudited)




                                                                                                        Three Months Ended September 30,                             Nine Months Ended September 30,



                                                                                                                                    2020                                                         2019         2020          2019




     
                Reconciliation of Net loss to Adjusted EBITDA





     Net loss                                                                                                                 $(12,261)                                                  $(426,157)  $(824,339)   $(441,214)



     Interest expense, net                                                                                                       10,779                                                        7,712       26,229        22,989



     Income tax expense (benefit)                                                                                                22,502                                                     (27,869)   (112,101)     (31,011)



     Depreciation and amortization                                                                                               25,375                                                       28,970       87,529        86,761



     Goodwill and intangible asset impairment                                                                                                                                               461,463      905,885       461,463



     Stock-based compensation                                                                                                     4,189                                                      (1,160)      10,476         5,404



     Write-off of long-lived assets and other                                                                                         2                                                        (111)       9,580           529



     Severance, transformation and other exit costs                                                                                 289                                                        2,114        6,457         9,625



     Transaction-related costs                                                                                                       59                                                                      176         4,623



     Costs associated with the stockholder activist campaign                                                                                                                                    905                     8,825



     Unrealized gain on interest rate swap                                                                                      (1,924)                                                                 (2,482)



     Adjusted EBITDA*                                                                                                           $49,010                                                      $45,867     $107,410      $127,994








     
                Reconciliation of Net loss to Adjusted net income





     Net loss                                                                                                                 $(12,261)                                                  $(426,157)  $(824,339)   $(441,214)



     Amortization of intangible assets                                                                                           21,889                                                       24,621       72,444        73,334



     Goodwill and intangible asset impairment                                                                                                                                               461,463      905,885       461,463



     Stock-based compensation                                                                                                     4,189                                                      (1,160)      10,476         5,404



     Write-off of long-lived assets and other                                                                                         2                                                        (111)       9,580           529



     Severance, transformation and other exit costs                                                                                 289                                                        2,114        6,457         9,625



     Transaction-related costs                                                                                                       59                                                                      176         4,623



     Costs associated with the stockholder activist campaign                                                                                                                                    905                     8,825



     Unrealized gain on interest rate swap                                                                                      (1,924)                                                                 (2,482)



     Tax impact of adjustments                                                                                                   22,323                                                     (40,347)   (113,903)     (60,565)



     Adjusted net income*                                                                                                       $34,566                                                      $21,328      $64,294       $62,024




     Adjusted net income per share, diluted                                                                                       $0.50                                                        $0.32        $0.94         $0.92




     Weighted-average common shares outstanding, diluted**                                                                       68,903                                                       66,935       68,147        67,395







     
                Reconciliation of Net cash provided by operating activities to Free cash flow





     Net cash provided by operating activities                                                                                  $39,237                                                      $29,795      $96,866       $80,550



     Purchase of property and equipment                                                                                         (3,878)                                                     (6,055)    (12,603)     (15,409)



     Free cash flow                                                                                                             $35,359                                                      $23,740      $84,263       $65,141




               * There was no unfavorable
                contract liability
                amortization during 2020 as it
                was fully amortized as of
                September 30, 2019.
                Additionally for 2019,
                amortization of unfavorable
                contracts liability is not
                adjusted out of Adjusted
                EBITDA or Adjusted net income.


               ** Weighted-average common
                shares outstanding, diluted,
                includes shares excluded from
                GAAP loss per share due to the
                net loss position for the
                three and nine months ended
                September 30, 2020 and
                September 30, 2019.


                                                                                                                                             
              
                Cars.com Inc.


                                                                                                                                       
              
                Supplemental Information


                                                                                                                                     
              
                
                  (In thousands)


                                                                                                                                      
              
                
                  (Unaudited)







              
                Expense category for the Three Months Ended September 30, 2020:




                                                                                                       
              
                As Reported                      
              
                Adjustments (1)     
        
                Stock-Based       
     
     As Adjusted
                                                                                                                                                                                                                 Compensation




              Cost of revenue and operations                                                                                           $25,434                       
              $                        -                              $(165)               $25,269



              Product and technology                                                                                                    15,455                                                                                           (943)                14,512



              Marketing and sales                                                                                                       45,776                                                                                         (1,010)                44,766



              General and administrative                                                                                                13,289                                                       (350)                             (2,071)                10,868



              Affiliate revenue share



              Depreciation and amortization                                                                                             25,375                                                                                                                25,375



              Goodwill and intangible asset impairment                                                                                       -



              Total operating expenses                                                                                                $125,329                                                      $(350)                            $(4,189)              $120,790





              Total nonoperating expense, net                                                                                         $(8,822)                      
              $                        -    
         $                        -              $(8,822)






              
                (1) Includes severance, transformation and other exit costs, transaction-related costs, and write-off of long-lived assets and other.





              
                Expense category for the Three Months Ended September 30, 2019:




                                                                                                       
              
                As Reported                      
              
                Adjustments (1)     
        
                Stock-Based       
     
     As Adjusted
                                                                                                                                                                                                                 Compensation




              Cost of revenue and operations                                                                                           $25,089                       
              $                        -                                 $79                $25,168



              Product and technology                                                                                                    14,923                                                                                             893                 15,816



              Marketing and sales                                                                                                       50,789                                                                                           (172)                50,617



              General and administrative                                                                                                13,414                                                     (4,308)                                 360                  9,466



              Affiliate revenue share                                                                                                    5,158                                                                                                                 5,158



              Depreciation and amortization                                                                                             28,970                                                                                                                28,970



              Goodwill and intangible asset impairment                                                                                 461,463                                                   (461,463)                                                         -



              Total operating expenses                                                                                                $599,806                                                  $(465,771)                              $1,160               $135,195





              Total nonoperating expense, net                                                                                         $(6,310)                                                   $(1,400)    
         $                        -              $(7,710)






              
                (1) Includes write-off and impairments of goodwill, intangible assets and other long-lived assets and other, severance,
    transformation and other exit costs and costs associated with the stockholder activist campaign.





              
                Expense category for the Nine Months Ended September 30, 2020:




                                                                                                       
              
                As Reported                      
              
                Adjustments (1)     
        
                Stock-Based       
     
     As Adjusted
                                                                                                                                                                                                                 Compensation




              Cost of revenue and operations                                                                                           $74,376                       
              $                        -                              $(366)               $74,010



              Product and technology                                                                                                    42,359                                                                                         (2,430)                39,929



              Marketing and sales                                                                                                      132,734                                                                                         (2,489)               130,245



              General and administrative                                                                                                43,866                                                     (6,766)                             (5,191)                31,909



              Affiliate revenue share                                                                                                   10,970                                                                                                                10,970



              Depreciation and amortization                                                                                             87,529                                                                                                                87,529



              Goodwill and intangible asset impairment                                                                                 905,885                                                   (905,885)                                                         -



              Total operating expenses                                                                                              $1,297,719                                                  $(912,651)                           $(10,476)              $374,592





              Total nonoperating expense, net                                                                                        $(33,216)                                                     $9,447     
         $                        -             $(23,769)






              
                (1) Includes write-off and impairments of goodwill, intangible assets and other long-lived assets and other, severance,
    transformation and other exit costs, and transaction-related costs.





              
                Expense category for the Nine Months Ended September 30, 2019:




                                                                                                       
              
                As Reported                      
              
                Adjustments (1)     
        
                Stock-Based       
     
     As Adjusted
                                                                                                                                                                                                                 Compensation




              Cost of revenue and operations                                                                                           $74,987                       
              $                        -                               $(68)               $74,919



              Product and technology                                                                                                    48,125                                                                                           (658)                47,467



              Marketing and sales                                                                                                      164,872                                                                                         (1,170)               163,702



              General and administrative                                                                                                59,265                                                    (25,002)                             (3,508)                30,755



              Affiliate revenue share                                                                                                    9,788                                                                                                                 9,788



              Depreciation and amortization                                                                                             86,761                                                                                                                86,761



              Goodwill and intangible asset impairment                                                                                 461,463                                                   (461,463)                                                         -



              Total operating expenses                                                                                                $905,261                                                  $(486,465)                            $(5,404)              $413,392





              Total nonoperating expense, net                                                                                        $(21,459)                                                   $(1,400)    
         $                        -             $(22,859)


                            (1) Includes write-off and
                             impairments of goodwill,
                             intangible assets and other long-
                             lived assets and other, severance,
                             transformation and other exit
                             costs, costs associated with the
                             stockholder activist campaign and
                             transaction-related costs.

CARS Investor Relations Contact:
Kamal Hamid
khamid@cars.com
312.601.5110

CARS Media Contact:
Marita Thomas
mthomas@cars.com
312.601.5692

View original content to download multimedia:http://www.prnewswire.com/news-releases/cars-reports-third-quarter-2020-results-301168374.html

SOURCE Cars.com Inc.