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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-25 · 134 added, 95 removed, 252 unchanged (48% of the section changed)

Risk Factors.

The following risk factors should be considered carefully, together with all of the other information contained in this report, including “Selected Financial Data,”

The following risk factors should be considered carefully, together with all other information contained in this report, including “Selected Financial Data,”

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”

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Risks Related to Our Business

The COVID-19 pandemic and related restrictions have materially and adversely affected, and could continue to materially and adversely affect, our business, financial condition, liquidity and results of operations.

Since March 2020, the COVID-19 pandemic and the numerous measures implemented by governmental authorities around the country to contain the virus, such as quarantines, shelter-in-place orders and business shutdowns (“related restrictions”) have resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, and have caused significant volatility in U.S.

and international debt and equity markets.

To varying degrees and at different points over the past two years, our business, financial condition, liquidity and operating results have been, and may continue to be, adversely affected by the COVID-19 pandemic, additional resurgences and related restrictions.

For example, in the second quarter of 2020, the pandemic and related restrictions caused a widespread increase in unemployment and resulted in reduced consumer spending and an economic recession.

Substantially all of our revenue is generated from subscription services offered to automotive dealers and our national advertising offerings to OEMs and other advertisers in or adjacent to the automotive industry and our business may be negatively affected during times of low automobile sales, low dealer inventory due to production shortages or delays and high unemployment.

To the extent a weakened economy impacts our customers’

ability or willingness to pay for our services or our vendors’

ability to provide services to us, our operations, liquidity and financial condition could be negatively impacted.

As a result, in order to respond to changes in our revenue, we may be required to implement expense-reduction measures or amend our debt instruments in the future, which could further adversely impact our operations, liquidity and financial condition.

The extent to which the COVID-19 pandemic and responses to it impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the pandemic, any additional resurgence or COVID-19 variants, actions that have been and continue to be taken in response to the pandemic, the availability and cost to access the capital markets, the effect on our customers’

demand for and ability to pay for our services, the effect on consumer demand for our services, disruptions or restrictions on our employees’

ability to work and travel and impacts on employee health and responses to it.

We are subject to certain financial and other covenants contained in the Credit Agreement, as amended, and the indenture governing the Notes (as defined below).

The impact of the COVID-19 pandemic and related restrictions may affect our ability to comply with such covenants.

For information related to debt, see Note 7 (Debt) to the Consolidated Financial Statements included in Part II, Item 8.

“Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

While the duration of any adverse effects of the pandemic is uncertain, we believe our marketplace, advertising and digital solutions have been critical in helping our customers navigate the challenges of the pandemic and related restrictions through December 31, 2021.

We believe our solutions will continue to be important tools to our customers in the future and, in particular, any potential future impacts of the pandemic and related restrictions.

The impact of the pandemic and related restrictions may also heighten other risks discussed in this Annual Report on Form 10-K, which could adversely affect our business, financial condition, liquidity and results of operations.

Market acceptance of and influence ov er certain of our products and services is concentrated with a limited number of automobile OEMs and dealership associations, and we may not be able to maintain or grow these relationships.

Our business is subject to risks related to the larger automotive ecosystem, including consumer demand, direct-to-consumer sales models, and other macroeconomic issues.

A number of economic and market conditions drive changes in automobile sales, including disruptions in the new automobile supply chain, the availability and prices of new and used automobiles, levels of unemployment and inflation, availability of affordable financing, fluctuations in the cost of fuel, consumer confidence and demand for vehicles, political unrest or uncertainty, the occurrence of contagious disease or illness, including COVID-19, barriers to trade and other global economic conditions.

Decreases in consumer demand could adversely affect the market for automobile purchases and, as a result, reduce the number of consumers using our platform.

Consumer purchases of new and used automobiles generally decline during recessionary periods and other periods in which disposable income is adversely affected.

Purchases of new and used automobiles are typically discretionary for consumers and have been, and may continue to be, affected by negative trends in the economy, including an economic recession or downturn, increases in the cost of energy and gasoline, the availability and cost of credit, reductions in business and consumer confidence, stock market volatility, rising interest

rates, inflation, tariffs, health or similar issues, such as pandemic or epidemic, and increased unemployment.

An increase in interest rates can have a significant impact on automobile purchases and affordability due to the direct relationship between interest rates and monthly loan payments, a critical factor for many consumers, and the impact interest rates have on consumers’

borrowing capacity and disposable income.

Interest rates could negatively affect the number of vehicles purchased by consumers, and any reduction in purchases could adversely affect dealers and OEMs and lead to a reduction in spending on our solutions.

Further, if OEMs continue to transition to e-commerce and direct-to-consumer sales models to grow their market penetration, consumer demand for our platform could be materially affected with users shifting from our platform to an OEM-based platform.

In addition, a decline in market demand due to a shift to remote and virtual work and the use of ride sharing vehicles could erode demand for new and used automobiles.

A reduction in the number of automobiles purchased by consumers could adversely affect automobile dealers and car manufacturers and consequently lead to reduced spending on our digital marketing services and solution offerings.

Further, OEM production shortages, supply chain disruptions and inventory shortfalls could adversely impact automobile dealers and also reduce spending on our digital marketing services and solution offerings.

Though our current customer bases, revenue sources and operations are substantially limited to the United States, our business may be negatively affected by challenges in the global automotive ecosystem and other macroeconomic issues.

Market acceptance of and influence over certain of our products and services is concentrated with a limited number of automobile OEMs and dealership associations, and we may not be able to maintain or grow these relationships.

Although the automotive retail industry is fragmented, a relatively small number of OEMs, dealership associations, and their program administrators exert significant influence over the market acceptance of certain automotive products and services due to their concentrated purchasing activity, the visibility of their endorsement or recommendation of specific products and services, their provision of co-operative advertising money to dealers, and their ability to define technical standards and certifications and marketing guidelines.

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There are a limited number of OEMs, and financial difficulties or consolidation among OEMs could similarly lead to volume compression and loss of revenue.

Our business is subject to risks related to the larger automotive ecosystem, including consumer demand and other macroeconomic issues.

Decreases in consumer demand could adversely affect the market for automobile purchases and, as a result, reduce the number of consumers using our platform.

Consumer purchases of new and used automobiles generally decline during recessionary periods and other periods in which disposable income is adversely affected.

Purchases of new and used automobiles are typically discretionary for

consumers and have been, and may continue to be, affected by negative trends in the economy, including increases in the cost of energy and gasoline, the availability and cost of credit, reductions in business and consumer confidence, stock market volatility, inflation, tariffs, health or similar issues, such as pandemic or epidemic, and increased unemployment.

In addition, the use of ride sharing and the development of autonomous vehicles could erode the demand for new and used automobiles.

A reduction in the number of automobiles purchased by consumers could adversely affect automobile dealers and car manufacturers and lead to a reduction in other spending by these constituents.

Further, production shortages, supply chain disruptions and inventory shortfalls could adversely impact automobile dealers.

Our business depends on our strong brand recognition, and any failure to maintain, protect and enhance our brands could hurt our ability to retain or expand our base of consumers, dealers and advertisers, and our ability to increase the frequency with which consumers, dealers and advertisers use our services.

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Our brand drives traffic to our websites and applications.

Our brand is known for attracting a large base of in-market car shoppers by offering credible and easy-to-understand information from consumers and experts and an unrivaled set of new and used vehicle listings.

Our brand attracts a large base of in-market car shoppers by offering credible and easy-to-understand information from consumers and experts and new and used vehicle listings.

In addition, OEMs, dealers and other advertisers rely on our innovative digital marketing services and solution offerings to drive results in their businesses.

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In addition, any negative publicity about us, including our solutions, technologies, sales practices, personnel or customer service, could diminish confidence in and the use of our services.

If we experience persistent negative publicity, or if consumers otherwise perceive that content on the CARS sites or mobile applications is not reliable, our reputation, the value of our brands and traffic to our sites and mobile applications could decline.

If we experience negative publicity, or if consumers perceive that content on the CARS sites or mobile applications is not reliable, our reputation, the value of our brands and traffic to our sites and mobile applications could decline.

Since March 2020, the COVID-19 pandemic and the measures implemented by governmental authorities around the country to contain the virus have adversely affected businesses, economies and financial markets worldwide, and have caused significant volatility in U.S.

and international debt and equity markets.

To varying degrees and at different points over the past three years, the COVID-19 pandemic has adversely affected, and may continue to adversely affect our business, financial condition, liquidity and operating results.

To the extent to which the COVID-19 pandemic ultimately impacts our business depends on future developments, which are highly uncertain and cannot be predicted, such as the severity and duration of the pandemic, the continued transmission of the virus, further actions taken by federal, state, and local governments and third parties in response to the pandemic, the effectiveness of actions taken to contain the virus, the emergence of new variant strains, and the availability and effectiveness of vaccines.

Future epidemics, pandemics, and other outbreaks could also adversely affect our business, results of operations, and financial condition.

To the extent a weakened economy impacts our customers’

ability or willingness to pay for our services or our vendors’

ability to provide services to us, our operations, liquidity and financial condition could be negatively impacted.

Although the initial impact from the COVID-19 pandemic to our business has stabilized, we may continue to experience adverse effects to our business as a result of its economic impact, including an economic recession or downturn, the impact of such a recession or downturn on unemployment levels, consumer confidence, levels of personal discretionary spending, credit availability, the availability and cost to access the capital markets and the effect on our customers’

demand for and ability to pay for our services.

We rely in part on Internet search engines and mobile application stores to drive traffic to the CARS sites and increase downloads of our mobile applications.

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mobile application store search optimization efforts may result in their mobile applications receiving a higher result ranking than that of Cars.com, or mobile application download stores could revise their methodologies in a way that would adversely affect our search result rankings.

If Internet search engines or mobile application download stores modify their search algorithms in ways that negatively impact traffic to the CARS sites or CARS mobile apps, or if the search engine or mobile application store optimization efforts of our competitors are more successful than our own efforts, overall growth in our user base could slow or the user base could decline.

If Internet search engines or mobile application download stores modify their search algorithms in ways that negatively impact traffic to the CARS sites or CARS mobile applications, or if the search engine or mobile application store optimization efforts of our competitors are more successful than our own efforts, overall growth in our user base could slow or the user base could decline.

We rely on in-house content creation and development to drive organic traffic to the CARS sites and mobile applications.

We rely on our in-house editorial content team to continually develop content that is useful and of interest to consumers in order to drive organic traffic to the CARS sites and mobile applications.

Our editorial content team tests, reviews and photographs a large number of different car makes and models every year to facilitate our creation of independent and unbiased coverage of the automotive landscape.

Our internally developed content focuses primarily on consumer purchasing and ownership advice and analysis of consumer automotive purchasing and ownership trends.

We rely on our in-house editorial content team to continually develop content that is useful and of interest to consumers to drive organic traffic to the CARS sites and mobile applications.

Our editorial content team tests, reviews and photographs a large number of different

car makes and models every year to support our creation of independent and unbiased automotive industry coverage.

Our internally developed content focuses primarily on consumer automotive purchasing, ownership advice and analysis of ownership trends.

If we are unable to continue to develop our in-house content, we may be required to rely more heavily on third-party content providers, which could lead to less distinctive content on our sites and increased operating costs, including increased traffic acquisition costs.

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Such a decrease may lead to dealers receiving fewer indications of consumer interest through leads generated by the CARS sites and mobile applications and recognizing less value for their digital advertising spend.

As a result, dealers may not continue to list their vehicles on the CARS sites and mobile applications.

As a result, dealers may decide not to continue to list their vehicles on the CARS sites and mobile applications.

Similarly, decreased organic traffic due to a reduction in unique content may cause national advertisers such as OEMs to shift their digital advertising spend to sites with higher traffic.

Further, decreased traffic from in-house content could result in increased spend in paid channels, which would result in higher sales and marketing expense.

Further, decreased traffic from in-house content could result in increased spend in paid channels, which would result in higher sales and marketing expenses.

Any of the foregoing could materially and adversely affect our business, results of operations or financial condition.

Certain of our third-party service providers are highly regulated financial institutions, and the federal and state laws related to financial services could have a direct or indirect materially adverse effect on our business.

In November 2021, we acquired the stock of CreditIQ, Inc., a privately held, cutting edge automotive fintech platform that provides instant online loan screening and approvals to facilitate online car buying.

Although we do not provide financial products, we have entered into agreements with partners to provide automobile financing products to our users, including products that may involve a credit application or access to consumer credit scores.

Our partners may be subject to extensive federal and state laws and regulations related to the provision of financial services.

We cannot guarantee that relevant regulatory authorities or third parties will not take the position that some of the regulations applicable to financial product providers, or to the manner in which such products are advertised or sold, apply to our platforms or business.

If our products or services are determined to fall within the scope of those laws or regulations, we or our partners may be required to implement new measures to comply with these laws and regulations, which could be costly, or be required to discontinue or limit the offering of certain products or services in affected jurisdictions.

Additionally, if our products or services are determined not to comply with relevant regulatory requirements, we or our partners could be subject to possibly significant civil and criminal penalties, including fines, or the award of significant damages in class action or civil litigation, as well as orders interfering with our ability to continue providing our products and services in certain jurisdictions.

Even without a determination that our products or services fall within the scope of these laws or regulations, if any of our current or prospective partners is uncertain about the applicability of those laws and regulations to our business, the partners may terminate their business with us, or we could have difficulty attracting new partners, which would adversely affect our future growth.

Any or all of these adverse effects could result in substantial negative publicity, increased regulatory scrutiny, decreased revenues, increased expenses and decreased profitability.

Risks Related to Environmental Laws and Climate Change Impacts

Our business may be affected by climate change, including physical risks and regulatory changes that may increase our operating costs and impact our ability to deliver services to our customers.

Climate change poses both physical and transitional risks to CARS, which may affect our operations, financial performance, and reputation.

CARS conducted a climate risk assessment to better understand the types of climate-related risks that are most salient for our business.

This assessment reviewed our exposure to these risks as well as the systems in place to manage these risks.

During the climate risk assessment, we identified a series of climate-related challenges that may pose material, financial risks to our business operations and financial performance.

These include physical risks from extreme weather events such as floods, droughts, and storms, which can damage our assets and disrupt our operations.

Regulatory risks resulting from changes in laws and regulations on climate change may increase our compliance costs and limit our ability to operate.

Additionally, transition risks include the shift to a low-carbon economy which may affect the demand for our products and services.

Finally, reputational risks also exist related to the increased public scrutiny of our environmental impact and our response to climate change at the enterprise level.

Expectations relating to environmental, social and governance considerations expose the Company to potential liabilities, increased costs, reputational harm and other adverse effects on the Company’s business.

Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas (“GHG”) emissions, human capital and diversity, equity and inclusion.

The Company makes statements about its environmental, social and governance goals and initiatives through information provided on its website, press releases and other communications.

Responding to these environmental,

social and governance considerations and implementation of these goals and initiatives involves risks and uncertainties, requires investments, and are impacted by factors that may be outside the Company’s control.

In addition, some stakeholders may disagree with the Company’s goals and initiatives and the focus of stakeholders may change and evolve over time.

Stakeholders also may have very different views on where environmental, social and governance focus should be placed, including differing views of regulators in various jurisdictions in which we operate.

Any failure, or perceived failure, by the Company to achieve its goals, further its initiatives, adhere to its public statements, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against the Company and materially adversely affect the Company’s business, reputation, results of operations, financial condition and stock price.

Strategic and Competitive Risks

We participate in a highly competitive market, and pressure from existing and new competitors may materially and adversely affect our business, results of operations or financial condition.

We face significant competition from companies that provide listings, information, lead generation, websites, marketing and car-buying services designed to reach consumers and enable dealers to reach consumers.

Our competitors offer various products and services that compete with us including:

Internet search engines and online automotive sites, such as Google, Facebook, Craigslist, AutoTrader.com, eBay Motors, CARFAX, Edmunds.com, KBB.com, CarGurus.com and TrueCar.com

Sites operated by automobile sellers (traditional and digital) and by OEMs

Providers of offline, membership-based car-buying services, such as the Costco Auto Program

Website platform and solution providers, such as Dealer.com, Sincro (formerly CDK Global) and DealerOn

Automotive fintech, such as AutoFi

Digital advertising providers

We compete with many of the above-mentioned companies and other companies for a share of a car dealer’s overall marketing budget.

We face significant competition to attract consumers, customers, and advertisers from companies that provide listings, information, lead generation, websites, automotive appraisals, online loan screening and approvals, marketing and car-buying services designed to reach consumers and enable dealers to reach consumers.

We also compete with many of our competitors for a share of a car dealer’s overall marketing budget.

To the extent that car dealers view alternative marketing and media strategies to be superior, we may not be able to maintain or grow the number of dealers in our network.

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In addition, if we experience a significant decrease in advertising spending by OEMs or other national advertisers for any reason, our revenue will decrease and our business, results of operations or financial condition may be materially and adversely affected.

If we do not adapt to automated buying strategies quickly, our display advertising revenue could be adversely affected.

If we do not adapt to automated buying strategies, our display advertising revenue could be adversely affected.

The majority of the display advertising purchased by our national, regional and related advertisers (e.g., insurance advertisers and finance advertisers) is still done manually via insertion orders.

Recently however, advertisers have been shifting away from buying media directly from premium publishers like us and increasingly buying their target audiences via the ad exchanges across the broader Internet.

However, recently advertisers have shifted away from buying media directly from premium publishers and increasingly buying their target audiences via the ad exchanges across the broader Internet.

While we have grown our programmatic revenue, are developing new programmatic ad products, and are redesigning our ad delivery technology stack, we may not adapt quickly enough and may lose display advertising revenue as a result.

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We continue to expand, enhance and improve the nature and scope of our solution offerings and have expanded to incorporate digital solutions that use social, mobile and web-based technologies, and to enter into complementary markets.

Our ability to effectively offer a wide breadth of business solutions depends on our ability to attract existing or new clients to our new service offerings.

Our ability to effectively offer a wide range of business solutions depends on our ability to attract existing or new clients to our new service offerings.

The market for solutions is highly competitive.

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One of our key operating strategies is to pursue targeted acquisitions that enhance our platform strategy.

Acquisitions involve inherent risks, such as potentially increasing leverage and debt service requirements and combining company cultures and facilities, which could have a material and adverse effect on our business, results of operations or financial condition and could strain our human resources.

We may not be able to successfully integrate acquired businesses, which may result in an inability to realize the anticipated benefits of our acquisitions.

We may be unable to successfully implement effective cost controls or achieve expected synergies as a result of an acquisition.

job changes and reassignments, unforeseen difficulties in operating businesses we have not operated before and the diversion of management’s attention from the operation of our core business.

Acquisitions may also result in our having greater exposure to the industry risks of the businesses underlying the acquisition and possible tax costs and inefficiencies.

Strategic investments and partnerships with other companies expose us to the risk that we may not be able to control the operations of our investee or partnership, which could decrease the amount of benefits we realize from a particular relationship.

These acquisitions involve inherent risks, such as potentially increasing leverage and debt service requirements and combining company cultures and facilities, which could have a material and adverse effect on our business, results of operations or financial condition and could strain our human capital resources.

We may also be unable to successfully implement effective cost controls or achieve expected synergies as a result of an acquisition.

Acquisitions may result in our assumption of unexpected liabilities, the integration of separate organizations, the unanticipated incompatibility of systems and operating methods, negative impacts on employee morale and performance as a result of job changes and reassignments, unforeseen difficulties in operating businesses we have not operated before and the diversion of management’s attention from the operation of our core business.

Acquisitions may also result in greater exposure to the industry risks of the businesses underlying the acquisition and possible tax costs and inefficiencies.

Strategic investments and partnerships with other companies expose us to the risk that we may not be able to control the operations of our investee or partnership, which could decrease the value of benefits we realize from a particular relationship.

We are also exposed to the risk that our partners in strategic investments and infrastructure may encounter financial difficulties that could lead to disruption of investee or partnership activities, or impairment of assets acquired, which could adversely affect future reported results of operations and stockholders’

Acquisitions may subject us to new or different regulations or tax consequences which could have an adverse effect on our operations.

In addition, we may be unable to obtain the financing necessary to complete acquisitions on attractive terms or at all.

In addition, we may not be able to successfully integrate acquired businesses, which may result in an inability to realize the anticipated benefits of our acquisitions.

In March 2022 we completed the acquisition of certain assets and assumed certain liabilities of Accu-Trade, Galves Market Data and MADE Logistics (collectively, “Accu-Trade”), which added real-time, VIN-specific appraisal and valuation data, instant guaranteed offer capabilities, and logistics technology to our portfolio of dealer offerings.

Continued achievement of our transaction synergies and our ability to grow the Accu-Trade and CreditIQ businesses and the revenue associated with it depend on a number of factors, including, but not limited to our ability to:

(1) successfully integrate Accu-Trade and CreditIQ into the CARS platform and solution offerings, (2) expanding dealer and

consumer adoption, (3) securing lenders who will pay for lead generation, and (4) dealers honoring pre-approved loans.

If our anticipated transaction synergies do not fully materialize and/or the Accu-Trade or CreditIQ businesses fails to continue to grow at the rate we expect, our revenue and business would be harmed.

We may also be unable to obtain financing necessary to complete acquisitions on attractive terms or at all.

If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

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If we are unable to keep pace with advances in technology, consumers may stop using our services and our revenue may decrease.

The Internet and electronic commerce are characterized by rapid technological change, changes in user and customer requirements and expectations, frequent new service and product introductions embodying new technologies, including mobile applications, and the emergence of new industry standards and practices that could render our existing sites, mobile applications and technology obsolete.

The Internet and electronic commerce are characterized by rapid technological change, changes in user and customer requirements and expectations, frequent new service and product introductions incorporating new technologies, including mobile applications, and the emergence of new industry standards and practices that could render our existing sites, mobile applications and technology obsolete.

These market characteristics are intensified by the emerging nature of the market and the fact that many companies are expected to introduce new Internet products and services in the near future.

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We also partner with social media platforms, such as Facebook and Instagram, to leverage our valuable audience data to serve native advertisements and display real-time inventory for both dealers and OEMs to in-market car shoppers.

If the third parties on which we depend are unable or unwilling to provide data or services, restrict our use of data, experience difficulty meeting our requirements or standards, or revoke or fail to renew our licenses or partnerships, we could have difficulty operating key aspects of our business.

In addition, if these third-party service providers were to cease operations, temporarily or permanently, face financial distress

or other business disruption or increase their fees, or if our relationship with these providers were to deteriorate, we could suffer increased costs and delays in our ability to provide our products to consumers and customers until an equivalent provider could be found or until we develop replacement technology or operations.

If the third parties are unable or unwilling to provide data or services, restrict our use of data, experience difficulty meeting our requirements or standards, or revoke or fail to renew our licenses or partnerships, we could have difficulty operating key aspects of our business.

In addition, if these third-party service providers were to cease operations, temporarily or permanently, face financial distress or other business disruption or increase their fees, or if our relationship with these providers were to deteriorate, we could suffer increased costs and delays in our ability to provide our products to consumers and customers until a comparable provider is identified or until we develop replacement technology or operations.

We rely on third-party services to track and calculate certain of our key metrics, including unique visitors and traffic and any errors or interruptions in the services or data they provide or any failure to maintain these relationships could harm our business.

Certain of our key metrics, such as the number of our unique visitors and our traffic —

are measured with third-party tools.

Certain of our key metrics, such as the number of our unique visitors and our traffic, are measured with third-party tools.

While these numbers are based on what we believe to be reasonable calculations for the applicable periods of measurement, measurement methodologies exhibit a level of accuracy risk because of a variety of factors.

For example, we have discovered in the past, and expect to discover in the future, that portions of our traffic, have been attributable to non-human traffic.

For example, we have discovered that portions of our traffic have been attributable to non-human traffic.

Because this non-human traffic generally exhibits detectable anomalous patterns, our reported traffic metrics for impacted periods reflects an adjustment to remove non-human traffic.

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In addition, although we use technology designed to block low quality traffic, we may not be able to prevent all such traffic, and such technology may have the effect of blocking some valid traffic.

Further, users may have the ability to change privacy settings and opt-out of certain features, which could reduce the quality of data we receive.

For these and other reasons, our traffic and unique visitor metrics may not accurately reflect the number of people actually using our platform.

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We develop, create and acquire internal information that may be considered sensitive or valuable intellectual property in the normal operations of human resources, finance, legal, marketing, software development, product management, mergers and acquisitions and other business functions.

Failure to protect sensitive internal information

or intellectual property may result in loss of competitive advantage, reputation damage, direct and indirect costs and other liabilities.

Failure to protect sensitive internal information or intellectual property may result in loss of competitive advantage, reputation damage, direct and indirect costs and other liabilities.

Failure to protect material financial information including financial performance and merger and acquisition data could also subject us to liabilities imposed by U.S.

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Most customers rely on tools that measure the effectiveness of their ad campaigns in order to allocate their advertising spend among various formats and platforms.

If we are unable to measure the effectiveness of advertising on our platform or we are unable to convince customers that our platform should be part of a larger advertising budget, our ability to increase the demand and pricing of our advertising products and maintain or scale our revenue may be limited.

If we are unable to measure the effectiveness of advertising on our platform or are unable to convince customers that our platform should be part of a larger advertising budget, our ability to increase the demand and pricing of our advertising products and maintain or scale our revenue may be limited.

Our tools may be less developed than those of other platforms with which we compete for advertising spend.

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We are continually developing and improving these tools and such efforts have required and are likely to continue to require significant time and resources and additional investment, and in some cases we have relied on and may in the future rely on third parties to provide data and technology needed to provide certain measurement data to our customers.

If we cannot continue to develop and improve our advertising tools in a timely fashion, those tools are not reliable, or the measurement results are inconsistent with advertiser goals, our advertising revenue could be adversely affected.

If we cannot continue to develop and improve our advertising tools in a timely fashion, those tools are unreliable, or the measurement results are inconsistent with advertiser goals, our advertising revenue could be adversely affected.

In addition, web and mobile browser developers, such as Apple, Microsoft or Google, have implemented and may continue to implement changes that include requiring additional user permissions in their browser or device operating system that impair our ability to measure and improve the effectiveness of advertising on our platform.

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For example, Apple launched its Intelligent Tracking Prevention (“ITP”) feature in its Safari browser.

ITP blocks some or all third-party cookies by default on mobile and desktop and ITP has become increasingly restrictive over time.

ITP blocks some or all third-party cookies by default on mobile and desktop devices and ITP has become increasingly restrictive over time.

Apple's related Privacy-Preserving Ad Click attribution (PPAC), intended to preserve some of the functionality lost with ITP, would limit cross-site and cross-device attribution, prevent measurement outside a narrowly-defined attribution window, and prevent ad re-targeting and optimization.

Similarly, Google recently announced that it plans to stop supporting third-party cookies in its Google Chrome browser.

Further, Apple announced certain changes, including introducing an App Tracking Transparency framework that will limit the ability of mobile applications to request an iOS device’s advertising identifier and may also affect our ability to track user actions off our platform and connect their interactions with on-platform advertising.

In addition, third parties, such as Apple, Microsoft or Google, have implemented and may continue to implement changes and restrictions in browser or device functionality that limit the use of cookies, or that limit our ability to communicate with or understand the identity of our consumers.

Similarly, in January 2020, Google announced plans to phase out third-party cookies on Chrome, the most-used desktop browser, in 2022.

In July 2022, Google announced that these plans would be delayed until 2024 as Google continues to work to identify new technologies to replace third-party cookies.

Other web browsers have begun implementing certain cookie-blocking measures.

Further, in April 2021, Apple released a new iOS functionality called App Tracking Transparency that limits the ability of mobile applications to request an iOS device’s advertising identifier and may also affect our ability to track user actions off our platform and connect their interactions with on-platform advertising.

The shift to a “cookieless”

future is changing how we market and engage with our consumers and future changes and restrictions in browser or device functionality that limit the use of cookies, or that limit our ability to communicate with or understand the identity of our consumers.

These restrictions make it more difficult for us to provide the most relevant ads to our consumers, measure the effectiveness of and re-target and optimize advertising on our platform.

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If customers do not perceive our metrics to be accurate representations of our user base and user engagement or if we discover inaccuracies in our metrics, they may be less willing to allocate their budgets or resources to our platform, which could harm our business, revenue and financial results.

Uncertainty exists in the application and interpretation of various laws and regulations related to our business, including privacy laws such as the California Consumer Privacy Act and the upcoming California Privacy Rights Act.

Uncertainty exists in the application and interpretation of various laws and regulations related to our business, including privacy laws.

New privacy concerns or laws or regulations applicable to our business, or the expansion or interpretation of existing laws and regulations that apply to our business, could reduce the effectiveness of our offerings or subject us to use restrictions, licensing requirements, claims, judgments and remedies including sales and use taxes, other monetary liabilities and limitations on our business practices, and could increase administrative costs.

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Our business could be significantly affected by different interpretations or applications of existing laws or regulations, future laws or regulations, including changes to the corporate tax rate or actions or rulings by judicial or regulatory authorities.

Our operations may be subject to adoption, expansion or interpretation of various laws and regulations, and compliance with these laws and regulations may require us to obtain licenses at an undeterminable and possibly significant initial and annual expense.

For example, the Inflation Reduction Act of 2022 (the “IRA”) introduced a 15% alternative minimum tax on the “adjusted financial statement income”

of certain large corporations and a 1% excise tax on certain actual and deemed stock repurchases, both of which become effective in 2023.

We do not expect to be an applicable corporation that is subject to the alternative minimum tax, however we expect to be a covered corporation that could be subject to the 1% excise tax.

Similarly, state tax authorities could take aggressive positions as to whether certain of our products are subject to sales and use taxes, leading to increased tax exposure.

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We believe that most of these laws and regulations specifically apply only to traditional vehicle purchase and lease transactions, not Internet-based lead referral programs like ours.

If we determine that the licensing or other regulatory requirements in a given state are applicable to us or to a particular marketing services program, we may elect to obtain the required licenses and comply with applicable regulatory requirements.

If we determine that the licensing or other regulatory requirements in a state are applicable to us or to a particular marketing services program, we may elect to obtain the required licenses and comply with applicable regulatory requirements.

However, if licensing or other regulatory requirements are overly burdensome, we may elect to terminate operations or particular marketing services programs in that state or elect to not introduce particular marketing services programs in that state.

As we introduce new services, we may need to incur additional costs associated with additional licensing regulations and regulatory requirements.

As we introduce new services, we may incur additional costs associated with additional licensing regulations and regulatory requirements.

Misappropriation or infringement of our intellectual property and proprietary rights, enforcement actions to protect our intellectual property and claims from third parties relating to intellectual property could materially and adversely affect our business, results of operations or financial condition.

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While we rely on intellectual property laws, confidentiality agreements and technical measures to protect our proprietary rights, we believe that the technical and creative skills of our personnel, continued development of our proprietary systems and technology, brand name recognition and reliable website maintenance are essential in establishing and maintaining a leadership position and strengthening our brands.

Despite our efforts to protect our proprietary rights,

unauthorized parties may attempt to copy aspects of our services or obtain and use information that we regard as proprietary.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or obtain and use information that we regard as proprietary.

Policing unauthorized use of our proprietary rights is difficult and may be expensive.

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Effective trademark, service mark, patent, copyright and trade secret protection may not be available when our products and services are made available online.

In addition, if litigation becomes necessary to enforce or protect our intellectual property rights or to defend against claims of infringement or invalidity, such litigation, even if successful, could result in substantial costs and diversion of resources and management attention.

In addition, if litigation becomes necessary to enforce or protect our intellectual property rights or to defend against claims of

infringement or invalidity, such litigation, even if successful, could result in substantial costs and diversion of resources and management attention.

We also cannot provide any assurance that our products and services do not infringe on the intellectual property rights of third parties.

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Our success depends, in part, upon the continuing contributions of our executive officers, particularly our Chief Executive Officer, and other key employees and our continuing ability to attract, develop, motivate and retain highly qualified and skilled personnel, such as individuals with technical skills in a rapidly changing technological environment.

Additionally, as the workforce landscape changes due to the COVID-19 pandemic, we must compete to attract and retain employees.

Additionally, as the workforce landscape changes due to the shift to remote and virtual work, we must compete to attract and retain employees.

We do not have employment agreements with any of our executive officers or other operational personnel, and, therefore, they could terminate their employment with us at any time.

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If we elect or are compelled to remove valuable content from our sites or mobile applications, our platforms may become less useful to consumers and our traffic may decline.

The value of our existing intangible assets may become impaired depending upon future operating results.

Our intangible assets were approximately $769.4 million as of December 31, 2021, representing approximately 76% of our total assets.

We evaluate our intangible assets to determine whether all or a portion of their carrying value may no longer be recoverable, in which case a charge to earnings may be necessary.

Any future evaluations requiring an asset impairment charge for intangible assets would adversely affect future reported results of operations and stockholders’

The value of our existing goodwill and intangible assets may become impaired depending upon future operating results.

Our goodwill and other intangible assets were approximately $809.9 million as of December 31, 2022, representing approximately 79% of our total assets.

We evaluate our goodwill and other intangible assets to determine whether all or a portion of their carrying values may no longer be recoverable, in which case a charge to earnings may be necessary.

Any future evaluations requiring an asset impairment charge for goodwill or other intangible assets would adversely affect future reported results of operations and stockholders’

equity, although such charges would not affect our cash flow.

Risks Relating to our Common Stock

We cannot assure our stockholders that our share repurchase program will enhance long-term stockholder value and stock repurchases, if any, could increase the volatility of the price of our common stock and will diminish our cash reserves.

In February 2022, our Board of Directors authorized a share repurchase program to acquire up to $200 million of our common stock over a three-year period.

Under the share repurchase program, the Company can repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and regulations.

The timing and amounts of any purchases under the share repurchase program is dependent upon a variety of factors, including market conditions, price, regulatory requirements and other corporate considerations, as determined by the Company’s Board of Directors and management.

The share repurchase program may be extended, suspended or discontinued at any time.

Any purchases under the share repurchase program could affect our stock price and increase its volatility.

The existence of a share repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.

Additionally, repurchases under our share repurchase program will diminish our cash reserves, which could strain our liquidity, could impact our ability to pursue possible future strategic opportunities and acquisitions and could result in lower overall returns on our cash balances.

There can be no assurance that any further stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of stock.

Although our share repurchase program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness.

We do not expect to pay any cash dividends for the foreseeable future.

We intend to retain future earnings to finance and grow our business.

We intend to retain future earnings to finance and grow our business or fund share repurchases.

As a result, we do not expect to pay any cash dividends for the foreseeable future.

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Certain provisions of our Amended and Restated Certificate of Incorporation, By-laws, and Delaware law may discourage takeovers and limit our ability to use, acquire, or develop certain competing businesses.

Our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws contain certain provisions that may discourage, delay or prevent a change in our management or control over us.

Our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws contain certain provisions that may discourage, delay or prevent a change in our management or control over the Company.

For example, our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws, collectively:

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provide that vacancies on our Board of Directors, including vacancies resulting from an enlargement of our Board of Directors, may be filled only by a majority vote of directors then in office;

place limits on which stockholders may call special meetings of stockholders, and limit the actions that may be taken at such a meeting;

place limits on which stockholders may call special meetings of stockholders, and limit the actions that may be taken at such meeting;

prohibit stockholder action by written consent;

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any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our current or former directors or officers to us or to our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty;

any action asserting a claim against us or any of our current or former directors or officers arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”) or our Amended and Restated Certificate of Incorporation or Bylaws;

any action asserting a claim against us or any of our current or former directors or officers arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”) or

our Amended and Restated Certificate of Incorporation or Bylaws;

any action asserting a claim relating to or involving us that is governed by the internal affairs doctrine;

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as such term is defined in the DGCL.

This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our current or former directors or officers, which may discourage such lawsuits against us and our current or former directors and officers.

This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with the Company or our current or former directors or officers, which may discourage such lawsuits.

Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions.

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In the event of a proxy contest, our business could be adversely affected.

Responding to a proxy contest can be costly, time-consuming and disruptive, and can divert the attention of our management and employees from the operation of our business and

execution of our strategic plan.

Responding to a proxy contest can be costly, time-consuming and disruptive, and can divert the attention of our management and employees from the operation of our business and execution of our strategic plan.

Additionally, if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively implement our strategic plan and create additional value for our stockholders.

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Our interest rates are based on a floating rate index, and changes in interest rates could increase the amount of our interest payments and thus negatively impact our future earnings and cash flows.

Although we have entered into interest rate swap agreements on our Term Loan to reduce interest rate volatility for a portion of the extended term, we cannot assure you we will be able to enter into interest rate swap agreements in the future on acceptable terms or that such swaps or the swaps we have in place now will be effective.

We cannot assure you we will be able to enter into interest rate swap agreements in the future on acceptable terms or that such swaps or the swaps we have in place now will be effective.

If we do not have sufficient cash flow to make interest payments, we may be required to refinance all or part of our outstanding debt, sell assets, borrow additional money or sell securities, none of which we can guarantee we would be able to complete on acceptable terms or at all.

Unresolved Staff Comments.

We maintain administrative offices and other facilities to support our operations.

We have leases for our principal executive office in Chicago, Illinois and in Naperville, Illinois.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors