What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-02-23 compared with 2022-02-25 · 541 added, 459 removed, 811 unchanged (55% of the section changed)

3 unchanged sentences

Cumulative Stockholder Return Graph.

The following graph shows the cumulative total stockholder return for our common stock during the period from May 18, 2017 to December 31, 2021.

The graph also shows the cumulative returns of Standard and Poor’s (“S&P”) SmallCap 600 Index, of which we are a member, and Research Data Group’s (“RDG”) Internet Composite Index.

The comparison assumes $100 was invested on May 18, 2017 in CARS common stock and each index.

The following graph shows the cumulative total stockholder return for our common stock for each of the last five fiscal years ended December 31, 2022.

The graph also shows the cumulative returns of Standard and Poor’s (“S&P”) SmallCap 600 Index and Research Data Group’s (“RDG”) Internet Composite Index, both of which we are a member.

The comparison assumes $100 was invested on December 31, 2017 in CARS common stock and each index.

Purchases of Equity Securities by Issuer.

Our share repurchase activity for the three months ended December 31, 2022 is as follows:

Total Number of Shares Purchased (1)

Average Price Paid per Share (1)

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)

Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (3)

October 1 through October 31, 2022

November 1 through November 30, 2022

December 1 through December 31, 2022

(1) The total number of shares purchased and subsequently retired and the average price paid per share reflects shares purchased pursuant to the share repurchase program.

Our stock repurchases may occur through open market purchases or through privately negotiated transactions.

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

We may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and other applicable legal requirements, and subject to our blackout periods.

The timing and amounts of any purchases under the share repurchase program will be based on market conditions and other factors including price.

The repurchase program may be suspended or discontinued at any time and does not obligate us to repurchase any dollar amount or particular amount of shares.

(3) The amounts presented represent the remaining Board of Directors’

authorized value to be spent after each month's repurchases.

We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future.

Any future determination to pay dividends on our common stock will be made by the Board of Directors and will depend upon, among other factors, our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that the Board of Directors may deem relevant.

for expansion and other factors that the Board of Directors may deem relevant.

In addition, the terms of our credit facilities contain restrictions on our ability to declare and pay cash dividends on our capital stock.

12 unchanged sentences

Business Overview.

We are a leading digital marketplace and solutions provider for the automotive industry, connecting car shoppers with sellers.

Through our marketplace, dealer websites and other digital products, we showcase dealer inventory, elevate and amplify dealers’

and automotive manufacturers (“OEMs”) brands, connect sellers with our ready-to-buy audience and empower shoppers with the resources and information needed to make confident car buying decisions.

Our digital solutions strategy builds on the rich data and audience of our digital marketplace to offer media and solutions that drive growth and efficiency for the automotive industry.

Our portfolio of brands now includes Cars.com, Dealer Inspire®, DealerRater®, FUEL, Auto.com, PickupTrucks.com, CreditIQ and NewCars.com®.

We are a leading automotive marketplace platform that provides a robust set of digital solutions that connect car shoppers with sellers.

We empower shoppers with the data, resources and digital tools needed to make informed buying decisions and seamlessly connect with automotive retailers, automotive manufacturers (“OEMs”), other national advertisers and lenders.

In a rapidly changing market, we enable dealers and OEMs with innovative technical solutions and data-driven intelligence, to better reach and influence ready-to-buy shoppers, increase inventory turn and operating efficiencies and gain market share.

In addition to Cars.com, our brands include Dealer Inspire®, a website and digital solutions provider enabling dealers to be more efficient through connected digital experiences;

FUEL, an advertising solution providing dealers and OEMs the benefit of leveraging targeted digital video and display marketing to Cars.com’s audience of in-market car shoppers;

DealerRater®, a leading car dealer review and reputation management technology solution;

CreditIQ®, a digital financing technology;

and Accu-Trade, vehicle valuation and appraisal technology.

Our portfolio of brands also includes NewCars.com®.

Overview of Results.

Year Ended December 31,

(In thousands, except percentages)

(In thousands)

Net income (loss) (1)

(1) The net loss for the year ended December 31, 2020 and 2019 is primarily attributed to goodwill and intangible asset impairments of $905.9 million and $461.5 million, respectively.

(1) The net loss for the year ended December 31, 2020 is primarily attributed to goodwill and intangible asset impairments of $905.9 million.

2022 Highlights and Recent Trends.

Dealer Customers.

In the fourth quarter of 2021, Dealer Customers increased by 150, or 1%, to 19,179 as of December 31, 2021, as compared with 19,029 as of September 30, 2021, continuing six consecutive quarters of growth in Dealer Customers.

Total Dealer Customers increased by 807, or 4%, as compared with December 31, 2020.

This increase was a result of sustained high retention rates and new sales to Dealer Customers.

Dealer Customers as of December 31, 2020 were lower due to higher cancellations of marketplace customers in 2020, principally due to the COVID-19 pandemic.

Accu-Trade Acquisition.

In March 2022, we acquired certain assets and assumed certain liabilities of Accu-Trade, LLC;

Accu-Trade Canada, LLC;

Galves Market Data;

and Headstart Logistics, LLC d/b/a MADE Logistics (collectively, “Accu-Trade”), which includes real-time, VIN-specific vehicle appraisal and valuation data, instant guaranteed offer capabilities and logistics technology (the “Accu-Trade Acquisition”).

Consideration for the transaction was composed of $64.7 million of cash and $5.3 million in other consideration.

As part of the transaction, upon achievement of certain financial targets, we may be required to pay additional cash and stock consideration to the former owners.

Together with our marketplace and Dealer Inspire websites, we have packaged this technology into a product called Accu-Trade Connected which we began rolling out in mid-2022.

We continue to sell and onboard dealers onto our Accu-Trade Connected product.

CreditIQ Acquisition.

In November 2021, we acquired all the outstanding stock of CreditIQ, Inc.

(the "CIQ Acquisition"), a cutting edge automotive fintech platform that provides instant online loan screening and approvals to facilitate online car buying.

Through the CIQ Acquisition, we are now able to make advanced digital financing technology available to dealers across the CARS platform.

(the "CIQ Acquisition"), an automotive fintech platform that provides instant online loan screening and approvals to facilitate online car buying.

Through the CIQ Acquisition, we provide dealers and consumers with access to advanced digital financing technology across the CARS platform.

Using cash on hand, we paid $30.0 million at the closing excluding transaction fees and expenses.

As part of the transaction, we may be required to pay additional cash consideration of up to $50.0 million based on future performance over a three-year period with a mutually agreed upon option for a fourth year.

Technology Transformation.

In June 2021, we announced the completion of a transformed online platform and mobile app for our users.

Our new Cars.com site offers load times up to 80% faster and real-time inventory updates of over 50,000 cars added to the site daily, an especially important feature in today's inventory-starved environment.

The upgraded Cars.com site, built on cloud-based technology, now delivers a more streamlined and dynamic experience for both car shoppers and sellers.

Our updated site experience builds on a wealth of content and offers even more advanced tools, interactive features and personalized content combined with a vibrant, intuitive and accelerated path to purchase.

FordDirect Agreement.

In April 2021, we announced that we were selected by FordDirect as a preferred website and technology platform provider for its approximately 3,000 U.S.

Debt Repayments.

During the year ended December 31, 2021, we generated substantial cash flow enabling us to make $120.0 million of debt repayments, of which $110.0 million were voluntary prepayments.

Launched in early 2020, FUEL is a unique, high-ROI, targeted video advertising solution that generates superior returns compared to high-cost broadcast television advertising, on which the auto industry spends approximately $10 billion per year, in addition to what is spent on other expensive advertising mediums.

FUEL continues to be one of our fastest growing products.

dealerships and OEMs to target and reach in-market car shoppers by leveraging the power of Cars.com's exclusive first-party audience data.

Impact of COVID-19 on our business.

Beginning in March 2020, the COVID-19 pandemic spread throughout the United States and the rest of the world and resulted in governmental authorities around the country implementing numerous measures to contain the virus, such as quarantines, shelter-in-place orders and business shutdowns (the “related restrictions”).

As cases of COVID-19 persist in various regions around the globe and new COVID-19 variants emerge, these related restrictions may still be enforced or be renewed in certain markets.

During the year ended December 31, 2020, and to a lesser extent during the year ended December 31, 2021, our business, financial condition, liquidity and operating results were adversely affected by the COVID-19 pandemic, as a widespread increase in unemployment, reduced consumer spending and supply chain disruptions impacted the greater macroeconomic automotive industry.

As part of the transaction, we may be required to pay additional cash consideration based on future performance over a three-year period.

CreditIQ was rolled out nationwide to dealers in September 2022, and approximately 2,300 dealers are leveraging the technology.

Share Repurchase Program.

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

We intend to fund the share repurchase program principally with cash from operations.

During the year ended December 31, 2022, we repurchased and subsequently retired 4.2 million shares for $49.0 million at an average price paid per share of $11.75.

Key Operating Metrics.

We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make operating and strategic decisions.

Information regarding Traffic, Average Monthly Unique Visitors and Monthly Average Revenue Per Dealer is as follows (in thousands, except for Monthly Average Revenue Per Dealer):

Annual information regarding Traffic, Average Monthly Unique Visitors and Monthly Average Revenue Per Dealer ("ARPD") is as follows (in thousands, except for ARPD and percentages):

Year Ended December 31,

Average Monthly Unique Visitors

Monthly Average Revenue Per Dealer - Annual

Information regarding our Dealer Customers is as follows:

ARPD - Annual

Information regarding our Dealer Customers and quarterly ARPD is as follows:

December 31, 2022

2 unchanged sentences

Dealer Customers

Monthly Average Revenue Per Dealer - Quarterly

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.

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.

Traffic for the twelve months ended December 31, 2021 was essentially flat compared to the prior year.

Average Monthly Unique Visitors (“UVs”).

Growth in unique visitors to our network of websites and mobile apps increases the number of impressions, clicks, leads and other events we can monetize to generate revenue.

ARPD - Quarterly

Average Monthly Unique Visitors (“UVs”) and Traffic ("Visits").

UVs and Traffic are fundamental to our business.

They are indicative of our consumer reach and the level of engagement they have with our platform.

Although our consumer engagement does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers, OEMs and national advertisers and a primary reason they do business with us.

We have achieved audience scale as measured by UVs and drive increased Traffic through a combination of continued growth in UVs and higher repeat visitation and engagement.

Traffic increases can result in increased impressions, clicks and other lead events that we can ultimately monetize through our products and services.

The growth in UVs for the year ended December 31, 2022 is driven by efficiencies gained and user acquisition strategy shifts in 2022.

This growth may be affected by the recent changes in browser and data privacy policies which have made it more difficult to resolve users across multiple visits.

The decrease in Traffic relative to the increase in UVs for the year ended December 31, 2022 was primarily due to continued lower vehicle inventory levels, which we believe are resulting in users purchasing cars with fewer visits.

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 count toward the number of UVs.

UVs do not include Dealer Inspire UVs.

We measure UVs using Adobe Analytics.

UVs increased 5% from December 31, 2020.

We believe the growth in UVs was primarily related to heightened consumer demand resulting from an increase in consumer confidence due to the economic stimulus during the first half of 2021.

This was partially offset by certain short-term negative impacts in connection with the completion of the Technology Transformation.

Average Revenue Per Dealer (“ARPD”).

If a visitor accesses more than one of our web properties or apps or uses more than one device or browser, each of those unique property/browser/app/device combinations counts toward the number of UVs.

Traffic is defined as the number of visits to CARS desktop and mobile properties (responsive sites and mobile apps).

We measure UVs and Traffic via Adobe Analytics.

These metrics do not include traffic to Dealer Inspire websites.

Monthly Average Revenue Per Dealer (“ARPD”).

We believe that our ability to grow ARPD is an indicator of the value proposition of our platform.

We define ARPD as Dealer revenue, excluding digital advertising services, during the period divided by the monthly average number of Dealer Customers during the same period.

ARPD for the quarter remained essentially flat from September 30, 2021 and increased 3% from December 31, 2020, primarily driven by growth in FUEL revenue, as well as growth in digital solutions.

ARPD for the year increased 16% from December 31, 2020, primarily driven by the second quarter 2020 invoice credits provided to our customers as a result of the COVID-19 pandemic and related restrictions, as well as our dealer customers' further adoption of FUEL and digital solutions.

Beginning with the three months ended June 30, 2022, Accu-Trade is included in our ARPD metric, which had an immaterial impact on ARPD for the annual and quarterly periods.

No prior period has been recast as it would be impracticable to do so.

ARPD for the fourth quarter of 2022 increased compared to the same period of the prior year and compared to the third quarter of 2022, primarily driven by growth in digital solutions, offset by a reduction in FUEL revenue.

ARPD for the annual period increased compared to the same period of the prior year, primarily driven by growth in digital solutions, offset by a reduction in FUEL revenue.

Dealer Customers .

2 unchanged sentences

Multi-franchise dealerships at a single location are counted as one dealer.

Total Dealer Customers increased 1% from September 30, 2021.

Dealer Customers increased, as a result of growth in marketplace and solutions only dealer customers, reflecting improved retention rates.

Total Dealer Customers increased by 4%, from December 31, 2020.

This increase was a result of sustained high retention rates and new sales to Dealer Customers.

Dealer Customers as of December 31, 2020 we re lower due to higher cancellations of marketplace customers in 2020, principally due t o the COVID-19 pandemic.

Beginning June 30, 2022, this key operating metric includes Accu-Trade;

however, no prior period has been recast as it would be impracticable to do so.

Dealer Customers was essentially flat as compared to September 30, 2022.

Dealer Customers increased 2% from December 31, 2021, driven by sustained high retention rates with traditional dealers, new sales to Dealer Customers, as well as the inclusion of Accu-Trade only dealers, partially offset by elevated cancellations from digital dealers.

Factors Affecting Our Performance.

Our business is impacted by the changes in the larger automotive ecosystem, including inventory supply and supply chain disruptions, semiconductor shortages, employee retention and changes related to automotive advertising, among other macroeconomic factors.

Our business is impacted by changes in the larger automotive ecosystem, including inventory supply and supply chain disruptions, semiconductor shortages, vehicle acquisition cost, electric vehicle adoption, employee retention

and changes related to automotive advertising, among other macroeconomic factors.

Changes in vehicle sales volumes in the United States also influence OEMs’

4 unchanged sentences

Additionally, we are focused on equipping our customers with digital solutions to enable them to compete in an environment in which an increasing number of car-buying customers are shopping online.

These solutions include virtual showrooms, home delivery, online chat, vehicle financing and our FUEL pro duct that allows dealers to target in-market buyers on streaming platforms .

These solutions include virtual showrooms, online chat, vehicle financing, appraisal and valuation, instant guaranteed offer capabilities, logistics technology and our FUEL product, which allows dealers to target in-market buyers on streaming platforms.

The foundation of our continued success is the value we deliver to customers, and we believe that our large audience of in-market, car shoppers and innovative solutions deliver significant value to our customers.

Although the future effects of the COVID-19 pandemic are unknown and depend on numerous factors outside of our control, we believe our marketplace, advertising and digital solutions remain critical in helping our customers navigate certain challenges of the pandemic and related restrictions.

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

Results of Operations.

8 unchanged sentences

General and administrative

Affiliate revenue share

Depreciation and amortization

Goodwill and intangible asset impairment

Total operating expenses

Operating income (loss)

Operating income

Nonoperating expense:

2 unchanged sentences

Total nonoperating expense, net

Income (loss) before income taxes

Income before income taxes

Income tax expense (benefit)

Net income (loss)

*** Not meaningful

Dealer revenue .

Dealer revenue consists of marketplace and digital solutions sold to dealer customers.

Dealer revenue is our largest revenue stream, representing 88.2% and 84.6% of total revenue for the years ended December 31, 2021 and 2020, respectively, and increased by $86.9 million, or 19%, compared to the prior year.

We experienced continued growth in our FUEL and digital solutions products, as well as a 4% increase in Dealer Customers.

Dealer revenue in 2020 was also impacted significantly by our response to the COVID-19 pandemic.

In an effort to assist our dealer customers impacted by the COVID-19 pandemic and related restrictions, we provided, among other measures, approximately $38.2 million of financial relief in the form of certain invoice credits of 50% for April 2020 and 30% for May and June 2020.

Dealer revenue consists of marketplace, digital solutions including Accu-Trade and media products sold to dealer customers.

Dealer revenue is our largest revenue stream, representing 88.6% and 88.2% of total revenue for the years ended December 31, 2022 and 2021, respectively, and increased by $29.3 million, or 5%, compared to the prior year, driven primarily by an increase in dealer customers, digital solutions and growth in digital advertising revenue from December 31, 2021.

OEM and National revenue .

OEM and National revenue consists of display advertising and other solutions sold to OEMs, certain advertising agencies, automotive dealer associations and auto adjacent businesses.

OEM and National revenue consists of display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses.

OEM and National revenue represents 9.0% and 10.4% of total revenue for the years ended December 31, 2022 and 2021, respectively.

OEM and National revenue declined 11%, primarily due to pullbacks in OEM spending associated with fewer new model releases and continued production shortages, both driven by supply-chain disruptions as a result of the COVID-19 pandemic.

Operating expenses.

For the year ended December 31, 2020, several of the financial statement line items described below were significantly lower as compared to the year ended December 31, 2021, due to our management of expenses in 2020 in response to the COVID-19 pandemic.

For example, beginning in the second quarter of 2020, we implemented multiple initiatives to align our expenses with the lower revenue resulting from our invoice credits.

The impact of lower spending in 2020 as a result of the COVID-19 pandemic primarily impacted the second quarter of 2020 and to a lesser extent, the latter half of 2020.

OEM and National revenue decreased 10%, primarily due to pullbacks in certain OEM spending associated with production delays and shortages, both driven by supply-chain disruptions.

Other revenue.

Other revenue primarily consists of revenue related to the Accu-Trade license agreement and vehicle listing data sold to third parties, as well as pay per lead.

Other revenue represents 2.4% and 1.4% of total revenue for the years ended December 31, 2022 and 2021, respectively.

Other revenue increased $7.4 million or 86%, primarily due to the Accu-Trade license agreement, as well as other Accu-Trade revenue.

For more information, see Note 3 (Business Combinations) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

Cost of revenue and operations .

Cost of revenue and operations expense primarily consists of costs related to our pay per lead products, third-party costs for processing dealer vehicle inventory, product fulfillment and compensation costs for the product fulfillment and customer service teams.

Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment, pay per lead products and compensation costs for the product fulfillment and customer service teams.

Cost of revenue and operations expense represents 17.6% and 18.3% of total revenue for the years ended December 31, 2022 and 2021, respectively.

Cost of revenue and operations expense increased, primarily due to lower spending in the prior year as a result of the COVID-19 pandemic expense adjustments, as well as revenue growth from FUEL and digital solutions products, which have an inherently higher cost of revenue.

Cost of revenue and operations expense increased at a slower pace than revenue, primarily due to higher compensation costs, partially offset by lower third-party costs associated with certain products driven by product mix.

Product and technology.

The product team creates and manages consumer and dealer-facing innovation and user experience.

The technology team develops and supports our products and websites.

Product and technology expense includes compensation costs, hardware and software maintenance, software licenses, data center and other infrastructure costs.

The technology team develops and supports our products, websites and mobile apps.

Product and technology expense includes compensation costs, consulting costs, hardware and software maintenance, software licenses, data center and other infrastructure costs.

Product and technology expense represents 13.6% and 12.4% of total revenue for the years ended December 31, 2022 and 2021, respectively.

Product and technology expense increased, primarily due to lower spending in the prior year as a result of the COVID-19 pandemic, as well as continued investment in the business.

Product and technology expense increased, primarily due to continued investment in the business through our recent acquisitions, talent acquisition and retention, and other licenses and fees.

Marketing and sales .

Marketing and sales expense primarily consists of traffic and lead acquisition costs (including search engine and other online marketing), TV and digital display/video advertising and creative production, market research, trade events and compensation costs for the marketing, sales and sales support teams, as well as bad debt expens e related to the allowance for doubtful accounts.

Marketing and sales expense primarily consists of traffic and lead acquisition costs (including search engine and other online marketing), TV and digital display, video advertising, creative production, market research, trade events, compensation costs and travel for the marketing, sales and sales support teams, as well as bad debt expense related to the allowance for doubtful accounts.

Marketing and sales expense represents 33.9% and 33.4% of total revenue for the years ended December 31, 2022 and 2021, respectively.

Marketing and sales expense increased, primarily due to lower spending in the prior year as a result of the COVID-19 pandemic that reduced our advertising and trade events spend.

Marketing and sales expense increased, primarily due to continued investment in marketing in 2022, including a return to in-person industry events that had been curtailed due to COVID-19, as well as higher compensation costs.

General and administrative .

General and administrative expense primarily consists of compensation costs for certain of the executive, finance, legal, human resources, facilities and other administrative employees.

In addition, general and administrative expense includes office space rent, legal, accounting and other professional services, transaction-related costs, severance, transformation and other exit costs and c osts related to the write-off and loss on assets, excluding the goodwill and intangible asset impairment discussed below.

General and administrative expense represents 10.3% and 11.8% of total revenue for the years ended December 31, 2022 and 2021, respectively.

General and administrative expense increased, primarily due to $11.9 million in transaction related costs, including $9.6 million of compensation expense recognized as part of the $30.0 million upfront purchase consideration of CreditIQ recorded in the fourth quarter.

In addition, the increase includes the impact of lower spending in the prior year as a result of the COVID-19 pandemic, as well as increased compensation costs, including stock-based compensation.

Affiliate revenue share.

Affiliate revenue share expense ended in June 2020.

For information related to the affiliate market conversions, see Note 6 (Unfavorable Contracts Liability) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

General and administrative expense decreased, primarily due to $9.6 million of compensation expense recorded in 2021 recognized as part of the upfront purchase consideration associated with the CreditIQ Acquisition.

This was partially offset by an increase in professional fees and other transaction costs.

For more information related to the CreditIQ Acquisition, see Note 3 (Business Combinations) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

1 unchanged sentence

Depreciation and amortization expense decreased, primarily due to certain assets being fully depreciated and amortized as compared to the prior year period, partially offset by depreciation and amortization on additional assets acquired.

Goodwill and intangible asset impairment .

As of March 31, 2020, we determined there was a triggering event, caused by the economic impacts of the COVID-19 pandemic.

We performed interim quantitative impairment tests as of March 31, 2020.

The results of the goodwill and indefinite-lived intangible asset impairment tests indicated that the carrying values exceeded the estimated fair values and thus, we recorded an impairment of $505.9 million and $400.0 million, respectively.

Interest expense, net .

Interest expense, net increased by $0.9 million compared to the prior year period, due to a higher overall interest rate on our outstanding debt, partially offset by lower debt outstanding.

For information related to our Term and Revolving Loans and interest rate swap, see Note 7 (Debt) and Note 8 (Interest Rate Swap) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

Interest expense, net decreased by $3.4 million compared to the prior year period, primarily due to the maturity of the interest rate swap.

For information related to our Term and Revolving Loans, senior unsecured notes and interest rate swap, see Note 7 (Debt) and Note 8 (Interest Rate Swap) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

Other expense, net.

Other expense, net changed, primarily due to the $9.4 million impairment of a non-marketable investment, triggered by the COVID-19 pandemic during the first quarter of 2020.

For information related to the impairment, see Note 2 (Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

Other expense, net increased primarily due to the change in the fair value of contingent consideration associated with the CreditIQ and Accu-Trade acquisitions.

For more information related to contingent consideration, see Note 3 (Business Combinations) and Note 4 (Fair Value Measurements) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

Income tax expense (benefit) .

The effective income tax rate, expressed by calculating the income tax expense (benefit) as a percentage of Income (loss) before income tax, was 19% for the year ended December 31, 2021 and differed from the U.S.

federal statutory rate of 21%, primarily due to the tax benefit realized from a partial release of the valuation allowance, stock-based compensation and tax credits, partially offset by an increase in our uncertain tax positions and the impact of nondeductible transaction expenses.

The effective income tax rate, expressed by calculating the income tax expense (benefit) as a percentage of Income before income tax, was 23.8% for the year ended December 31, 2022 and differed from the U.S.

federal statutory rate of 21%, primarily due to the impact of the return to provision adjustments and nondeductible executive compensation, partially offset by the tax benefits realized from a partial release of our uncertain tax positions and the impact of nondeductible transaction expenses.

The effective income tax rate was (13.8)% for the year ended December 31, 2021 and differed from the U.S.

federal statutory rate of 21%, primarily due to the goodwill and intangible asset impairments and the establishment of a valuation allowance recorded against the deferred tax assets.

federal statutory rate of 21%, primarily due to the tax benefit realized from a partial release of the valuation allowance, stock-based compensation and tax credits, partially offset by the impact of nondeductible transaction expenses, an increase in our uncertain tax positions and the impact of nondeductible executive compensation.

For information related to income taxes, see Note 14 (Income Taxes) to the Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

4 unchanged sentences

section of our 2021 Form 10-K, which comparison is incorporated by reference herein.

During the first quarter of 2022, we identified a $30.8 million overstatement of the valuation allowance recorded against deferred tax assets that originated in 2020.

In addition, we adjusted 2020 to reflect an immaterial income tax adjustment related to this same period.

We have concluded that these items are not material to the previously issued Consolidated Financial Statements and have therefore corrected these prior period amounts as presented in the Consolidated Financial Statements for the year ended December 31, 2022.

The line items impacted on the Consolidated Statements of Income (Loss) include Income tax expense (benefit), Net income (loss) and Earnings (loss) per share.

We have not included a full updated commentary on the changes in the new Income tax expense (benefit) since the change is not material.

See Note 2 (Significant Accounting Policies) and Note 14 (Income Taxes) to the Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K for more information regarding the correction of certain amounts relating to previously issued financial statements and the corrected income tax provision reconciliation to the statutory federal income tax rate, respectively.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations, available cash reserves and debt capacity available under our credit facilities.

Our positive operating cash flow, along with our Revolving Loan described below, provide adequate liquidity to meet our short and long-term business needs, including those for investments and strategic acquisitions.

However, our ability to maintain adequate liquidity for our operations in the future is dependent upon a number of factors, including our revenue, macroeconomic conditions, the duration and severity of the economic and operational impacts caused by the COVID-19 pandemic, our ability to manage costs, including capital expenditures, and to collect accounts receivable, and various other factors, many of which are beyond our direct control.

Our primary sources of liquidity are cash flows from operations, available cash reserves and borrowing capacity available under our credit facilities.

Our positive operating cash flow, along with our Revolving Loan described below, provide adequate liquidity to meet our business needs, including those for investments, debt service, share repurchases and strategic acquisitions.

However, our ability to maintain adequate liquidity in the future is dependent upon a number of factors, including our revenue, our ability to contain costs, including capital expenditures, and to collect accounts receivable, and various other macroeconomic factors, many of which are beyond our direct control.

As discussed below, we are subject to certain financial and other covenants contained in our debt agreements, as amended, including by the third amendment to the Credit Agreement (the "Third Amendment").

For information related to the Credit Amendment, as amended, see Note 7 (Debt) in Part II, Item 8., “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K.

We may also seek to raise funds through debt or equity financing in the future to fund acquisitions, investments, or operations, consistent with our strategy.

We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy.

If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all.

1 unchanged sentence

Indebtedness.

As of December 31, 2021, the outstanding aggregate principal amount of our indebtedness was $477.5 million, at an effective interest rate of 5.7%, including $77.5 million of outstanding principal under the Term Loan, which carries an interest rate of 2.5% and outstanding principal under the bonds of $400.0 million, at an interest rate of 6.375%.

During the year ended December 31, 2021, we made $120.0 million in Term Loan payments, of which $10.0 million were mandatory.

As of December 31, 2022, the outstanding aggregate principal amount of our indebtedness was $481.3 million, at an effective interest rate of 6.4%, including $400.0 million of outstanding principal under the bonds, which carries an interest rate of 6.375%, $66.3 million of outstanding principal under the Term Loan which had an interest rate of 6.7% at December 31, 2022, and $15.0 million of outstanding principal under the Revolving Loan which had an interest rate of 6.4% at December 31, 2022.

During the year ended December 31, 2022, we made $11.3 million in mandatory Term Loan payments, we borrowed $45.0 million on our Revolving Loan and we repaid $30.0 million on our Revolving Loan.

As of December 31, 2022, $215.0 million was available to borrow under the Revolving Loan.

2 unchanged sentences

of this Annual Report on Form 10-K.

On October 30, 2020, we issued $400.0 million aggregate principal amount of 6.375% senior unsecured notes due 2028 (the "Notes”).

We used the net proceeds from the offering, together with cash on hand, to repay $235.0 million of borrowings under our Revolving Credit Facility, repay $162.8 million of borrowings under our Term Loan and pay fees associated with the offering.

On October 30, 2020, we entered into the Third Amendment to our Credit Agreement in connection with a broader refinancing, in which we reduced the size of our outstanding borrowings under the Credit Agreement to an aggregate principal amount of $430.0 million, comprised of a $230.0 million Revolving Credit Facility and a $200.0 million Term Loan, and extended the maturity date to May 31, 2025.

The Third Amendment also included the following:

A maximum Senior Secured Leverage Ratio of 3.50x (as defined within the Credit Agreement, as amended), with a temporary step up for material permitted acquisitions;

A minimum Interest Coverage Ratio of 2.75x and 3.00x beginning June 30, 2023;

A revised interest rate grid updated to reflect a maximum ABR margin of 1.75% and a maximum Eurodollar margin of 2.75%;

Reduction of the LIBOR floor to 0.50%;

Certain modifications to negative covenants restricting additional indebtedness, investments, acquisitions, debt repayments and certain dividends and distribution;

Provisions to accommodate the replacement of the existing LIBOR Rate with a successor benchmark interest rate;

Ended the Covenant Adjustment Period and removed the related minimum liquidity requirement and anti-cash hoarding covenant that were implemented pursuant to the second amendment of our Credit Agreement (the "Second Amendment").

Interest Rate Swap.

The interest rate on borrowings under our Term Loan is floating and, therefore, subject to fluctuations.

In order to manage the risk associated with changes in interest rates on its borrowing under the Term Loan, we entered into an interest rate swap (the “Swap”) effective December 31, 2018.

Under the terms of the Swap, we are locked into a fixed rate of interest of 2.96% on a notional amount of $300 million.

The Swap was initially designated as a cash flow hedge of interest rate risk.

The Second Amendment triggered a quantitative hedge effectiveness test, which resulted in the loss of hedge accounting.

As a result, as of the date of the Second Amendment, the unrealized loss included within Accumulated other comprehensive loss was frozen and is now being ratably reclassified into Net income (loss) over the remaining life of the Swap through Interest expense, net and Income tax expense (benefit) on the Consolidated Statements of Income (Loss).

Subsequent to the Second Amendment, any changes in the fair value of the Swap are recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).

The Third Amendment triggered a partial extinguishment of the underlying Term Loan.

Due to the extinguishment, we wrote-off a proportional amount of the frozen Accumulated other comprehensive loss balance as of the date of the partial extinguishment proportional to the reduction in the underlying Term Loan.

As a result, we included $4.5 million in Interest expense, net on the Consolidated Statement of Income (Loss) during the year ended December 31, 2020.

As of December 31, 2021, the fair value of the Swap was an unrealized loss of $3.5 million, which is recorded in Other accrued liabilities on the Consolidated Balance Sheets.

As of December 31, 2020, the fair value of the Swap was an unrealized loss of $12.1 million, of which $8.5 million and $3.6 million was recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets.

During the years ended December 31, 2021 and December 31, 2020, $5.7 million and $11.1 million was reclassified from Accumulated other comprehensive loss and recorded in Interest expense, net, respectively.

During the year ended December 31, 2021, we made payments of $8.6 million related to the Swap.

During the year ended December 31, 2021, $0.9 million was reclassified as a tax benefit from Accumulated other comprehensive loss into Income tax expense (benefit) on the Consolidated Statements of Income (Loss).

Affiliate Agreements.

As of October 2019, we successfully converted all affiliates to our direct control, as our last affiliate agreement terminated in October 2019.

Therefore, we have a direct relationship with all dealer customers and recognize the revenue associated with converted dealers as Dealer revenue, rather than Wholesale revenue, in the Consolidated Statements of Income (Loss).

During 2021 and, to a lesser extent in 2020, we realized incremental cash flow, as we are no longer required to make any further payments to the affiliates under these agreements.

Share Repurchase Program .

In March 2018, our Board of Directors authorized a share repurchase program to acquire up to $200 million of our common stock over a two-year period.

Under this program, we were able to repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws.

The timing and amounts of any purchases under the share repurchase program was based on market conditions and other factors including price.

The repurchase program did not require the purchase of any minimum number of shares and could have been suspended, modified or discontinued at any time without prior notice.

In March 2020, the repurchase program expired and there were no share repurchases during the year ended December 31, 2020.

We repurchased and subsequently retired 1.7 million shares for $40.0 million during the year ended December 31, 2019.

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

We intend to fund the share repurchase program with cash from operations.

During the year ended December 31, 2022, we repurchased and subsequently retired 4.2 million shares for $49.0 million at an average price per share of $11.75.

Contingent Consideration.

The fair value as of December 31, 2022 for the contingent consideration related to the CIQ and Accu-Trade Acquisitions was $55.9 million.

Within the next twelve months, we expect to pay $10.0 million of the potential contingent consideration amounts discussed below.

As part of the Accu-Trade Acquisition, we may be required to pay additional consideration to the former owners based on achievement of an earnings-related metric.

For the Accu-Trade contingent consideration, we have the option to pay consideration in cash or certain

amounts in stock, which may result in a variable number of shares being issued.

The actual amount to be paid will be based on the acquired business’

future performance to be attained over a three-year performance period through February 2025.

As part of the CIQ Acquisition, we may be required to pay additional cash consideration to the former owners based on two earn-out achievement objectives, including an earnings-related metric and lender market share.

The actual amount to be paid will be based on the acquired business’

future performance to be attained over a three-year performance period through December 2024.

For information related to the contingent consideration, see Note 3 (Business Combination) and Note 4 (Fair Value Measurements) in Part II, Item 8., “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K.

Details of our cash flows are as follows (in thousands):

6 unchanged sentences

Operating Activities.

Cash provided by operating activities was essentially flat compared to the prior period.

The decrease in cash provided by operating activities was primarily related to changes in operating assets and liabilities, including fluctuations in working capital during the year ended December 31, 2022, principally the receipt of a $9.1 million tax refund related to the carryback of federal and state income tax net operating loss as a result of the CARES Act during the year ended December 31, 2021.

Investing Activities.

The change in cash used in investing activities is primarily due to payments related to the CIQ Acquisition in 2021, net of cash acquired.

The cash used in investing activities in 2022 was primarily related to the Accu-Trade Acquisition and purchases of property and equipment.

The cash used in investing activities in 2021 was primarily related to the CIQ Acquisition and purchases of property and equipment.

Financing Activities.

During the year ended December 31, 2021, cash used in financing activities was primarily related to $120.0 million of debt repayments, of which $110.0 million were voluntary prepayments.

During the year ended December 31, 2020, cash used in financing activities is primarily related to $50.6 million of net debt repayments, inclusive of $615.6 million in debt repayments, partially offset by $565.0 million in proceeds related to the issuance of the bond and our draw on our Revolving Credit Facility during the first quarter of 2020.

Additionally, there was $17.3 million of debt issuance costs associated with the bond offering and the second and third amendments.

For information related to our debt, see Note 7 (Debt) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

During the year ended December 31, 2022, cash used in financing activities was primarily related to repurchases of common stock and payments on our long-term debt, partially offset by $45.0 million of proceeds from Revolving Loan borrowings related to the Accu-Trade Acquisition.

During the year ended December 31, 2021, cash used in financing activities was primarily related to $120.0 million of debt repayments, of which $110.0 million were voluntary pre-payments.

For information related to our debt and repurchases of our common stock, see Note 7 (Debt) and Note 11 (Stockholders' Equity) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

4 unchanged sentences

Long-term debt (1)

Interest on debt and swap (2)

Interest on debt (2)

Operating leases

2 unchanged sentences

Excluded from these amounts are the non-cash amortization of debt issuance and other costs related to indebtedness.

(2) Interest payments for variable rate debt were calculated using interest rates as of December 31, 2021 and factor in scheduled amortization payments primarily on the Term Loan and Swap.

(3) Other obligations represent commitments under certain vendor and other contracts.

Excluded from the above table is the contingent consideration related to the CIQ Acquisition as the amounts and timing are uncertain.

(2) Interest payments for variable rate debt were calculated using interest rates as of December 31, 2022 and factor in scheduled amortization payments on the Term Loan.

(3) Other obligations represent commitments under certain vendors and other contracts.

Excluded from the above table is the contingent consideration related to the CIQ and Accu-Trade Acquisitions as the amounts and timing are uncertain.

As part of the CIQ Acquisition, we may be required to pay up to an additional $50.0 million in cash consideration to the former owners based on two earn-out achievement objectives, including an earnings-related metric and lender market share.

The actual amount to be paid will be based on the acquired business’s future performance to be attained over a three-year performance period with a mutually agreed upon option for a fourth year.

The actual amount to be paid will be based on the acquired business’s future performance to be attained over a three-year performance period.

As part of the Accu-Trade Acquisition, we may be required to pay an additional $63.0 million, of which $15.0 million could be in stock, based on certain tiered performance metrics with additional upside for performance that exceeds the tiered

performance metrics.

The actual amount to be paid will be based on the acquired business’s future performance to be attained over a three-year performance period.

Commitments and Contingencies.

1 unchanged sentence

of this Annual Report on Form 10-K.

Subsequent Events.

Accu-Trade Acquisition.

I n February 2022, we signed a definitive agreement to acquire 100% of the assets of Accu-Trade , Galves Market Data and MADE Logistics ("Accu-Trade"), which includes real-time, VIN-specific appraisal and valuation data, instant guaranteed offer capabilities and logistics technology.

Consideration for the transaction will be $65 million in cash at closing.

There is also the potential for additional cash and stock consideration based on achievement of certain financial thresholds.

The transaction is expected to close in March 2022.

Share Repurchase Program.

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

Critical Accounting Policies and Estimates.

7 unchanged sentences

We allocate the contractual transaction price to each distinct performance obligation and recognize revenue when it satisfies a performance obligation by providing a service to a customer.

Revenue is generated through our direct sales force and prior to October 2019, through affiliate sales channels (Wholesale revenue).

Revenue is primarily generated through our direct sales force.

Marketplace Subscription Advertising Revenue.

Our primary source of revenue is through the sale of marketplace subscription advertising packages to dealer customers.

Our subscription packages allow dealer customers to showcase their new and used vehicle inventory to in-market shoppers on the Cars.com website.

Our subscription packages allow dealer customers and OEMs to showcase their new and used vehicle inventory to in-market shoppers on the Cars.com website.

The subscription packages are generally a fixed price arrangement with varying contract terms, typically ranging from three to six months, that are automatically renewed, typically on a month-to-month basis.

We recognize subscription package revenue ratably as the service is provided over the contract term.

Marketplace subscription advertising revenue is recorded in Dealer revenue and, prior to October 2019, Wholesale revenue in the Consolidated Statements of Income (Loss).

Marketplace subscription advertising revenue is recorded in Dealer revenue in the Consolidated Statements of Income (Loss).

We also offer our customers several add-on products to the subscription packages, as well as FUEL.

1 unchanged sentence

Substantially all of our add-on products, as well as FUEL, are sold from the subscription packages as the customer cannot benefit from add-on products on their own.

Therefore, the subscription packages and add-on products, as well as FUEL, are combined as a single performance obligation, and we recognize the related revenue ratably as the services are provided over the contract term.

Therefore, the subscription packages and add-on products are combined as a single performance obligation, and we recognize the related revenue ratably as the services are provided over the contract term.

We also provide services, including hosting flexible, custom-designed website platforms supporting highly personalized digital marketing campaigns, digital retailing and messaging platform products.

In addition, we also provide dealers with vehicle valuation and appraisal services through Accu-Trade.

We recognize revenue related to these services ratably as the service is provided over the contract term.

The related revenue is recorded in Dealer revenue in the Consolidated Statements of Income (Loss).

Prior to October 2019, our affiliates also sold marketplace subscription advertising to dealer customers, and we earned Wholesale revenue through our affiliate agreements.

Affiliates were assigned certain sales territories in which they sold our products.

Under these agreements, we charged the affiliates 60% of the corresponding Cars.com retail rate for products sold to affiliate dealer customers.

We recognized Wholesale revenue ratably as the service was provided over the contract term.

In situations where our direct sales force sold our products within an affiliate’s assigned territory, we paid the affiliate a revenue share which was classified as Affiliate revenue share in the Consolidated Statements of Income (Loss).

Wholesale revenue also included the amortization of the Unfavorable contracts liability.

For information related to the Unfavorable contracts liability, see Note 6 (Unfavorable Contracts Liability) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

Display Advertising Products and Services Revenue.

We also earn revenue through the sale of display advertising on our website to national advertisers, pursuant to transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements.

We also earn revenue through the sale of display advertising on our website to dealers, OEMs and other national advertisers, pursuant to transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements.

An impression is the display of an advertisement to an end-user on the website and is a measure of volume.

3 unchanged sentences

We recognize revenue related to these services at the point in time the service is provided.

Display advertising products revenue sold to OEMs is recorded in OEM and National revenue in the Consolidated Statements of Income (Loss).

Display advertising products revenue sold to OEMs and national advertisers is recorded in OEM and National revenue in the Consolidated Statements of Income (Loss).

We also provide services related to customized digital marketing and customer acquisition services, including paid, organic, social and creative services to dealer customers.

4 unchanged sentences

We recognize pay per lead revenue primarily on a per-lead basis at the point in time in which the lead has been delivered.

Revenue related to pay per lead is recorded in Dealer revenue, OEM and National revenue, Other revenue or, prior to October 2019, Wholesale revenue, depending on the customer who is purchasing this product, in the Consolidated Statements of Income (Loss).

Revenue related to pay per lead is recorded in Dealer revenue, OEM and National revenue or Other revenue, depending on the customer who is purchasing this product, in the Consolidated Statements of Income (Loss).

Other Revenue.

Other revenue primarily includes revenue related to vehicle listing data sold to third parties and peer-to-peer vehicle advertising.

Other revenue primarily includes revenue related to vehicle listing data sold to third parties.

We recognize other revenue either ratably as the services are provided or at the point in time the services have been performed.

In connection with the Accu-Trade

Acquisition, the Company entered into an agreement to provide one of the former owners with a one-year license to a certain product.

The recognition of revenue associated with the license fee is recorded in Other revenue.

Other revenue is recorded in Other revenue in the Consolidated Statements of Income (Loss).

Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible assets, net of liabilities assumed.

Goodwill is tested for impairment on an annual basis or between annual tests if events occur or circumstances changed that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Our goodwill is tested for impairment at a level referred to as the reporting unit.

The level at which we test goodwill for impairment requires us to determine whether the operations below the business segment level constitute a business for which discrete financial information is available and segment management regularly reviews the operating results.

We determined that we operated as a single reporting unit.

The process of estimating the fair value of goodwill is subjective and requires us to make estimates that may significantly impact the outcome of the analysis.

A qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications.

If after performing this assessment, we concluded it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then we would perform the quantitative test.

Under the quantitative test, a goodwill impairment is identified by comparing the fair value of the reporting unit to the carrying amount, including goodwill.

If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, goodwill is considered

impaired and an impairment charge is recognized in an amount equal to the excess, not to exceed the carrying amount of goodwill.

We estimate the fair value of the reporting unit with an income approach using the discounted cash flow (“DCF”) analysis and we also considered a market-based valuation methodology using comparable public company trading values and our market capitalization.

Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, long-term growth rates, the discount rate and relevant comparable public company earnings multiples.

The cash flows employed in the DCF analysis are based on our best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance.

The discount rate utilized in the DCF analysis is based on the reporting unit’s weighted-average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of our reporting unit.

Impairment assessment inherently involves management judgments regarding a number of assumptions described above.

The reporting unit fair value also depends on the future strength of the U.S.

New and developing competition as well as technological change could also adversely affect future fair value estimates.

Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our recorded goodwill, differences in assumptions could have a material effect on the estimated fair values.

For information related to the goodwill impairment recorded during the years ended December 31, 2020 and 2019, see Note 5 (Goodwill and Other Intangible Assets, net) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

Indefinite-Lived Intangibles .

In connection with TEGNA's acquisition of Cars.com, we recorded an intangible asset with an indefinite life associated with the Cars.com trade name.

The indefinite-lived intangible asset is tested annually, or more often if circumstances dictate, for impairment and is written down to fair value as required.

During the year ended December 31, 2021, we performed a qualitative test for impairment and noted no quantitative test or impairment was required.

For information related to the intangible asset impairment recorded during the years ended December 31, 2020 and 2019, see Note 5 (Goodwill and Other Intangible Assets, net) to the accompanying Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

Business Combinations.

8 unchanged sentences

If an impairment is identified, the asset is written down to fair value as required.

For the CIQ Acquisition, we did not identify any impairments or changes to the useful lives of the intangible assets during the year ended December 31, 2021.

Contingent Consideration.

CreditIQ Contingent Consideration.

As part of the CIQ Acquisition, we may be required to pay up to an additional $50.0 million in cash consideration to the former owners based on two different earn-out achievement objectives, including an earnings-related metric and lender market share.

The actual amount to be paid will be based on the acquired business’s future performance to be attained over a three-year performance period with a mutual option for a fourth year.

The actual amount to be paid will be based on the acquired business’s future performance to be attained over a three-year performance period.

The contingent consideration is classified as Level 3 in the fair value hierarchy and the fair value is measured based on a Monte Carlo simulation or a scenario-based method, depending on the earn-out achievement objective, utilizing projections about future performance.

Significant inputs include volatility, discount rate and projected financial information.

Significant inputs include volatility and projected financial information.

Accu-Trade Contingent Consideration.

As part of the Accu-Trade Acquisition, we may be required to pay additional consideration to the former owners based on achievement of an earnings-related metric.

We have the option to pay consideration in cash or certain amounts in stock, which would result in a variable number of shares being issued.

The amount to be paid will be determined by the acquired business’

future performance to be attained over a three-year performance period;

based on certain tiered performance metrics the maximum amount to be paid is $63.0 million, with additional upside for performance that exceeds the tiered performance metrics.

The contingent consideration is classified as Level 3 in the fair value hierarchy and the fair value is measured based on a Monte Carlo simulation.

Significant inputs include volatility and projected financial information.

Contingent Consideration.

Our contingent consideration obligations are from arrangements resulting from acquisitions that involve potential future payment of consideration that is contingent upon the achievement of certain financial metrics or lender market share.

Contingent consideration is recognized at its estimated fair value at the date of acquisition based on our expected future payment, discounted using accepted valuation methodologies.

We review and re-assess the estimated fair value of contingent consideration liabilities at each reporting period and the updated fair value could differ materially from the initial estimates.

We measure contingent consideration recognized in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs.

The fair value is measured based on a Monte Carlo simulation or a scenario-based method, depending on the earnout objective.

The fair value measurement includes the following significant inputs:

volatility and projected financial information.

Significant increases or decreases to any of these inputs in isolation could result in a significantly higher or lower liability.

Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and each reporting period and the amount paid will be recognized in earnings.

Recent Accounting Pronouncements.

5 unchanged sentences

The interest rate on borrowings under our Term Loan and Revolving Credit Facility is floating and, therefore, subject to fluctuations.

In order to manage the risk associated with changes in interest rates on our borrowing under the Term Loan, we entered into an interest rate swap (the “Swap”) effective December 31, 2018.

Under the terms of the Swap, we are locked into a fixed rate of interest of 2.96% on a notional amount of $300 million.

The Swap was initially designated as a cash flow hedge of interest rate risk.

The Second Amendment triggered a quantitative hedge effectiveness test, which resulted in the loss of hedge accounting.

Subsequent to the Second Amendment, any changes in the fair value of the Swap are recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).

As of December 31, 2021, the fair value of the Swap was an unrealized loss of $3.5 million, which is recorded in Other accrued liabilities on the Consolidated Balance Sheets.

As of December 31, 2020, the fair value of the Swap was an unrealized loss of $12.1 million, of which $8.5 million and $3.6 million is recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets.

During the year ended December 31, 2021, we made payments of $8.6 million related to the Swap.

As of December 31, 2022, the outstanding aggregate principal amount of our indebtedness was $481.3 million, at an effective interest rate of 6.4%, including $400.0 million of outstanding principal under the bonds, which carries a fixed interest rate of 6.375%, $66.3 million of outstanding principal under the Term Loan which carried an interest rate of 6.7% at December 31, 2022, and $15.0 million of outstanding principal under the Revolving Loan which carried an interest rate of 6.4% at December 31, 2022.

Foreign Currency Exchange Risk.

Historically, as our operations and sales have been primarily in the United States, we have not faced any significant foreign currency risk.

With the acquisitions of DealerRater in August 2016 and Dealer Inspire in February 2018, we acquired a limited number of Canadian dealer customers, some of which are billed in Canadian dollars.

With the acquisitions of DealerRater in August 2016, Dealer Inspire in February 2018 and Accu-Trade in March 2022, we acquired a limited number of Canadian customers, some of which are billed in Canadian dollars.

Any foreign currency exchange rate fluctuations have been and are anticipated to be immaterial.

25 unchanged sentences

(1) relate to accounts or disclosures that are material to the Consolidated Financial Statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The communication of the critical audit matters does not alter in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

9 unchanged sentences

We also assessed the appropriateness of the related disclosures in the Consolidated Financial Statements.

Acquisition of CreditIQ, Inc.

Acquisition of Accu-Trade

Description of the Matter

During 2021, the Company completed its acquisition of CreditIQ, Inc.

(“CreditIQ”) for total purchase consideration of $44.1 million, as disclosed in Note 3 to the Consolidated Financial Statements.

As described in Note 3 to the Consolidated Financial Statements, in March 2022 the Company completed its acquisition of certain of the assets and assumed certain liabilities of Accu-Trade, LLC;

Accu-Trade Canada, LLC;

Galves Market Data;

and Headstart Logistics, LLC d/b/a/ MADE Logistics (collectively “Accu-Trade”) for total purchase consideration of $94 million.

The transaction was accounted for as a business combination.

Auditing the Company's accounting for its acquisition of CreditIQ was complex due to the significant estimation required by management to determine the fair value of contingent consideration and acquired software intangible assets of $23.8 million and $19.0 million, respectively.

Auditing the Company's accounting for its acquisition of Accu-Trade was complex due to the significant estimation required by management to determine the fair value of contingent consideration and acquired software intangible assets of $23.9 million and $12.9 million, respectively.

The significant estimation was primarily due to the complexity of the valuation models used by management to measure the fair value of the contingent consideration and acquired software intangible assets and the sensitivity of the respective fair values to the significant underlying assumptions.

The Company used a Monte Carlo simulation to measure the contingent consideration.

The significant assumptions used in the Monte Carlo simulation included volatility, discount rate and projected financial information.

The Company used a multi-period excess earnings method to measure the acquired software intangible assets.

The significant assumptions used to estimate the value of the acquired software included the discount rate and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates, technology replacement rate and EBITDA margin).

The Company used a Monte Carlo simulation to measure the fair value of contingent consideration on date of acquisition.

The significant assumptions used in the Monte Carlo simulation included volatility and projected financial information.

The Company used a relief-from-royalty method to measure the fair value of acquired software intangible assets.

The significant assumptions used to estimate the value of the acquired software intangible assets included the forecasted revenue projections, royalty rates and obsolescence factors.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

1 unchanged sentence

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for its acquisition.

For example, we tested controls over the recognition and measurement of consideration transferred (including contingent consideration) and acquired software intangible assets, including the valuation models and underlying assumptions used to develop such estimates.

To test the fair value of the contingent consideration, we performed audit procedures that included, among others, assessing the terms of the arrangement, including the conditions that must be met for the contingent consideration to become payable.

We also involved our valuation specialists to assist in evaluating the Company's use of a Monte Carlo simulation and testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data.

For example, we compared the significant assumptions to current industry, market and economic trends and to the Company's budgets and forecasts.

To test the estimated fair value of the acquired software intangible assets, we performed audit procedures that included, among others, evaluating the Company's use of the income approach (the multi-period excess earnings method) and testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data.

For example, we tested controls over the recognition and measurement of net assets acquired and total consideration transferred (including contingent consideration), including the valuation models and underlying assumptions used to develop such estimates.

To test the estimated fair value of the contingent consideration liability, we performed audit procedures that included, among others, assessing the terms of the arrangement, including the conditions that must be met for the contingent consideration to become payable.

We evaluated the assumptions and judgments considering observable industry and economic trends.

We assessed the reasonableness of projected financial information in relation to the Company’s budget and forecasts.

Our procedures included evaluating the data sources used by

management in determining its assumptions and, where necessary, included an evaluation of available information that either corroborated or contradicted management’s conclusions.

We involved our valuation specialists to assist in our evaluation of the Company's use of a Monte Carlo simulation model, the volatility assumption used in the model and to perform corroborative fair value calculations.

To test the estimated fair value of the acquired software intangible assets, we performed audit procedures that included, among others, evaluating the Company's use of the relief-from-royalty method and testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data.

For example, we compared the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other acquisitions, to the historical results of the acquired business and to other guidelines used by companies within the same industry.

We involved our valuation specialists to assist in our evaluation of certain significant assumptions.

We involved our valuation specialists to assist in our evaluation of the Company’s use of a relief-from-royalty valuation model, as well as certain significant assumptions used in the model and to perform corroborative fair value calculations.

Valuation of Contingent Consideration

Description of the Matter

As described in Note 2 and Note 4 to the Consolidated Financial Statement, the Company recognized contingent consideration liabilities at the estimated fair value on the acquisition date in connection with applying the acquisition method of accounting for business combinations.

Subsequent changes to the fair value of the contingent consideration liabilities were recorded within the Consolidated Financial Statements in the period of change.

At December 31, 2022, the Company had $55.9 million in contingent consideration liabilities, which represented a Level 3 fair value measurement in the fair value hierarchy due to the significant unobservable inputs used in determining the fair value and the use of management judgment about the assumptions market participants would use in pricing the liabilities.

Auditing the Company's valuation of contingent consideration liabilities was complex and required significant auditor judgment due to the use of a Monte Carlo simulation model and the subjectivity in evaluating certain assumptions required to estimate the fair value of contingent consideration payments.

The significant assumptions used in the Monte Carlo simulation included volatility and projected financial information.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of contingent consideration liabilities.

For example, we tested controls over management’s review of the significant assumptions and other inputs used in the determination of fair value.

To test the estimated fair value of contingent consideration liabilities, we performed audit procedures that included, among others, assessing the terms of the arrangement, including the conditions that must be met for the contingent consideration to become payable.

We evaluated the assumptions and judgments considering observable industry and economic trends.

We assessed the reasonableness of projected financial information in relation to Company’s budgets and forecasts.

Our procedures included evaluating the data sources used by management in determining its assumptions and, where necessary, included an evaluation of available information that either corroborated or contradicted management’s conclusions.

We involved our valuation specialists to assist in our evaluation of the Company’s use of a Monte Carlo simulation model, the volatility assumption used in the model and to perform corroborative fair value calculations.

/s/ Ernst & Young LLP

23 unchanged sentences

Long-term debt, net

Deferred tax liability

Other noncurrent liabilities

5 unchanged sentences

5,000 shares authorized;

issued and outstanding as of December 31, 2021 and December 31, 2020,

issued and outstanding as of December 31, 2022 and 2021, respectively

Common Stock at par, $ 0.01 par value;

300,000 shares authorized;

67,387 shares issued and outstanding as of December 31, 2021 and

December 31, 2020, respectively

69,170 shares issued and outstanding as of December 31, 2022 and 2021, respectively

Additional paid-in capital

22 unchanged sentences

Interest expense, net

Other (expense) income, net

Other expense, net

Total nonoperating expense, net

13 unchanged sentences

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

Total other comprehensive income (loss)

Total other comprehensive income

Comprehensive income (loss)

4 unchanged sentences

Preferred Stock

Retained Earnings (Accumulated

Accumulated Other Comprehensive

Accumulated Other

Stockholders'

Income (Loss)

Comprehensive Loss

Balance at December 31, 2019

Other comprehensive loss, net of tax

Repurchases of common stock

Shares issued in connection with stock-based

compensation plans, net

Other comprehensive income, net of tax

Shares issued in connection with

stock-based compensation plans, net

Stock-based compensation

6 unchanged sentences

Other comprehensive income, net of tax

Repurchases of common stock

Shares issued in connection with

12 unchanged sentences

Amortization of intangible assets

Amortization of unfavorable contracts liability

Goodwill and intangible asset impairment

1 unchanged sentence

Amortization of Accumulated other comprehensive loss on interest rate swap

Changes in fair value of contingent consideration

Stock-based compensation

2 unchanged sentences

Amortization of debt issuance costs

Changes in operating assets and liabilities, net of CIQ Acquisition:

Amortization of deferred revenue related to Accu-Trade Acquisition

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

5 unchanged sentences

Cash flows from investing activities:

Payments for CIQ Acquisition, net of cash acquired

Payments for acquisitions, net of cash acquired

Purchase of property and equipment

2 unchanged sentences

Proceeds from Revolving Loan borrowings and issuance of long-term debt

Payments of debt issuance costs and other fees

Payments of long-term debt

Stock-based compensations plans, net

Payments for stock-based compensation plans, net

Repurchases of common stock

Payments of debt issuance costs and other fees

Net cash used in financing activities

3 unchanged sentences

Supplemental cash flow information:

Cash (received) paid for income taxes

Cash paid (received) for income taxes

Cash paid for interest and swap

7 unchanged sentences

or “CARS”) is a leading automotive marketplace platform that provides a robust set of digital solutions that connect car shoppers with sellers.

Through the Company's marketplace, dealer websites and other digital products, it showcases dealer inventory, elevate and amplify dealers’

and automotive original equipment manufacturers’

(“OEMs”) brands, connect sellers with our ready-to-buy audience and empower shoppers with the resources and information needed to make confident car buying decisions.

Our platform strategy builds on the rich data and audience of our digital marketplace to offer media and solutions that drive growth and efficiency for the automotive industry.

The Company's portfolio of brands now includes Cars.com, Dealer Inspire®, DealerRater®, FUEL, Auto.com, PickupTrucks.com, CreditIQ and NewCars.com®.

The Company empowers shoppers with the data, resources and digital tools needed to make informed buying decisions and seamlessly connect with automotive retailers.

In a rapidly changing market, CARS enables dealers and automotive manufacturers (“OEMs”), with innovative technical solutions and data-driven intelligence, to better reach and influence ready-to-buy shoppers, increase inventory turn and gain market share.

In addition to Cars.com, the Company’s brands include Dealer Inspire®, a website and digital solutions provider enabling dealers to be more efficient through connected digital experiences;

FUEL, an advertising solution providing dealers and OEMs the benefit of leveraging targeted digital video and display marketing to Cars.com’s audience of in-market car shoppers;

DealerRater®, a leading car dealer review and reputation management technology solution;

CreditIQ®, digital financing technology and Accu-Trade, vehicle valuation and appraisal technology.

The Company's portfolio of brands also includes PickupTrucks.com.

Significant Accounting Policies

10 unchanged sentences

Certain prior year balances have been reclassified to conform to the current year presentation.

In addition, effective January 1, 2021, the Company renamed its revenue categories as follows:

"Direct" revenue is now "Dealer" revenue and "National advertising" revenue is now "OEM and National" revenue.

This naming convention change has no impact on the components or the historical amounts of the respective revenue categories.

Dealer revenue consists of marketplace and digital solutions sold to dealer customers.

OEM and National revenue consists of display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses.

The Company accounts for a customer arrangement when the Company and the customer have an approved contract that specifies the rights and obligations of each p arty and the payment terms, and the Company believes it is probable that the Company will collect substantially all of the consideration to which the Company will be entitled in exchange for the services that will be provided to the customer.

Correction of Certain Amounts Relating to Previously Issued Financial Statements.

During the first quarter of 2022, the Company identified a $ 30.8 million overstatement of the valuation allowance recorded against deferred tax assets that originated in 2020.

In addition, the Company adjusted 2020 to refl ect an immaterial income tax adjustment related to this same period.

The Company has concluded that these items are not material to the previously issued Consolidated Financial Statements and has therefore corrected these prior period amounts as presented in the Consolidated Financial Statements for the year ended December 31, 2022.

The impact of correcting the items on the related financial statement line items for the year ended December 31, 2021 is as follows (in thousands, except per share data):

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Consolidated Balance Sheet and Consolidated Statement of Stockholders' Equity, as applicable

As of December 31, 2021

Financial statement line item

Deferred tax liability

Total noncurrent liabilities

Total liabilities

Accumulated deficit

Total stockholders' equity

Consolidated Statements of Income (Loss), Comprehensive Income (Loss) and Consolidated Statement of Stockholders' Equity, as applicable

Year ended December 31, 2021

Financial statement line item

Income tax expense (benefit)

Net income (loss)

Comprehensive income (loss)

Basic Earnings (loss) per share

Diluted Earnings (loss) per share

Consolidated Statements of Cash Flows

Year ended December 31, 2021

Financial statement line item

Net income (loss)

Deferred income taxes

Other liabilities

The impact of correcting the misstatements on the related financial statement line items for the year ended December 31, 2020 is as follows (in thousands, except per share data):

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

Year ended December 31, 2020

Financial statement line item

Income tax expense (benefit)

Net income (loss)

Comprehensive income (loss)

Basic and Diluted Earnings (loss) per share

Consolidated Statement of Stockholders' Equity

Year ended December 31, 2020

Financial statement line item

Net income (loss)

Accumulated deficit

Total stockholders' equity

Consolidated Statements of Cash Flows

Year ended December 31, 2020

Financial statement line item

Net income (loss)

Deferred income taxes

Other liabilities

The Company accounts for a customer arrangement when the Company and the customer have an approved contract that specifies the rights and obligations of each party and the payment terms, and the Company believes it is probable that the Company will collect substantially all of the consideration to which the Company will be entitled in exchange for the services that will be provided to the customer.

The Company periodically enters into arrangements that include multiple promises that the Company evaluates to determine whether the promises are separate performance obligations.

1 unchanged sentence

The Company allocates the contractual transaction price to each distinct performance obligation based on the relative standalone selling price and recognizes revenue when it satisfies a performance obligation by providing a service to a customer.

Revenue is generated through the Company’s direct sales force and prior to October 2019, through affiliate sales channels (Wholesale revenue).

Revenue is primarily generated through the Company’s direct sales force.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Marketplace Subscription Advertising Revenue.

The Company’s primary source of revenue is through the sale of marketplace subscription advertising packages to dealer customers.

Our subscription packages allow dealer customers to showcase their new and used vehicle inventory to in-market shoppers on the Cars.com website.

Our subscription packages allow dealer customers and OEMs to showcase their new and used vehicle inventory to in-market shoppers on the Cars.com website.

The subscription packages are generally a fixed price arrangement with varying contract terms, typically ranging from three to six months , that are automatically renewed, typically on a month-to-month basis.

The Company recognizes subscription package revenue ratably as the service is provided over the contract term.

Marketplace subscription advertising revenue is recorded in Dealer revenue and, prior to October 2019, Wholesale revenue in the Consolidated Statements of Income (Loss).

Marketplace subscription advertising revenue is recorded in Dealer revenue in the Consolidated Statements of Income (Loss).

The Company also offers its customers several add-on products to the subscription packages, as well as FUEL.

1 unchanged sentence

Substantially all of the Company’s add-on products, as well as FUEL, are not sold separately from the subscription packages as the customer cannot benefit from add-on products on their own.

Therefore, the subscription packages and add-on products, as well as FUEL, are combined as a single performance obligation, and the Company recognizes the related revenue ratably as the services are provided over the contract term.

Therefore, the subscription packages and add-on products are combined as a single performance obligation, and the Company recognizes the related revenue ratably as the services are provided over the contract term.

The Company also provides services, including hosting flexible, custom-designed website platforms supporting highly personalized digital marketing campaigns, digital retailing and messaging platform products.

In addition, the Company also provides dealers with vehicle valuation and appraisal services through Accu-Trade.

The Company recognizes revenue related to these services ratably as the service is provided over the contract term.

The related revenue is recorded in Dealer revenue in the Consolidated Statements of Income (Loss).

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Prior to October 2019, the Company’s affiliates also sold marketplace subscription advertising to dealer customers, and the Company earned Wholesale revenue through its affiliate agreements.

Affiliates were assigned certain sales territories in which they sold the Company’s products.

Under these agreements, the Company charged the affiliates 60 % of the corresponding Cars.com retail rate for products sold to affiliate dealer customers.

The Company recognized Wholesale revenue ratably as the service was provided over the contract term.

In situations where the Company’s direct sales force sold the Company’s products within an affiliate’s assigned territory, the Company paid the affiliate a revenue share which was classified as Affiliate revenue share in the Consolidated Statements of Income (Loss).

Wholesale revenue also included the amortization of the Unfavorable contracts liability.

For further information, see Note 6 (Unfavorable Contracts Liability).

Display Advertising Products and Services Revenue.

The Company also earns revenue through the sale of display advertising on the Company’s website to national advertisers, pursuant to transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements.

The Company also earns revenue through the sale of display advertising on the Company’s website to dealers, OEMs and other national advertisers, pursuant to transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements.

An impression is the display of an advertisement to an end-user on the website and is a measure of volume.

3 unchanged sentences

The Company recognizes revenue related to these services at the point in time the service is provided.

Display advertising products revenue sold to OEMs is recorded in OEM and National revenue in the Consolidated Statements of Income (Loss).

Display advertising products revenue sold to OEMs and other national advertisers is recorded in OEM and National revenue in the Consolidated Statements of Income (Loss).

The Company also provides services related to customized digital marketing and customer acquisition services, including paid, organic, social and creative services to dealer customers.

4 unchanged sentences

The Company recognizes pay per lead revenue primarily on a per-lead basis at the point in time in which the lead has been delivered.

Revenue related to pay per lead is recorded in Dealer revenue, OEM and National revenue or Other revenue depending on the customer who is purchasing this product, in the Consolidated Statements of Income (Loss).

Other Revenue.

Other revenue primarily includes revenue related to vehicle listing data sold to third parties and peer-to-peer vehicle advertising.

Other revenue primarily includes revenue related to vehicle listing data sold to third parties.

The Company recognizes other revenue either ratably as the services are provided or at the point in time the services have been performed.

In connection with the Accu-Trade Acquisition, the Company entered into an agreement to provide one of the former owners with a one-year license to a certain product.

The recognition of revenue associated with the license fee is recorded in Other revenue.

Other revenue is recorded in Other revenue in the Consolidated Statements of Income (Loss).

9 unchanged sentences

The Company invests its cash and cash equivalents with highly rated financial institutions.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Investments .

3 unchanged sentences

In the first quarter of 2020, the Company recorded a full impairment of $ 9.4 million, triggered by the novel coronavirus disease 2019 (“COVID-19”) pandemic and the related restrictions, for the year ended December 31, 2020.

The impairment was included in the Other (expense) income, net in the Consolidated Statements of Income (Loss).

The impairment was included in the Other expense, net in the Consolidated Statements of Income (Loss).

The non-marketable investments recorded within Investments and other assets, net on the Consolidated Balance Sheets were zero as of December 31, 2022 and 2021.

For further information on the triggering event, see Note 6 (Goodwill and Other Intangible Assets, net).

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Property and Equipment .

4 unchanged sentences

Computer hardware

3 years - 5 years

Leasehold improvements

5 unchanged sentences

Normal repairs and maintenance are expensed as incurred.

Any resulting gain or loss from the disposition of those assets is included in General and administrative expense on the Consolidated Statements of Income (Loss).

Any resulting gain or loss from the disposition of fixed assets is included in General and administrative expense on the Consolidated Statements of Income (Loss).

Internally Developed Technology .

9 unchanged sentences

Any amortization is recorded in the same manner on the Consolidated Statements of Income (Loss) as the expense associated with the underlying host arrangement.

These capitalized costs as of December 31, 2021 were $ 0.6 million and $ 2.6 million and were included in Prepaid expenses and Investments and other assets, net on the Consolidated Balance Sheets, respectively.

These capitalized costs were immaterial as of December 31, 2020.

These capitalized costs as of December 31, 2022 were $ 1.0 million and $ 4.7 million in Prepaid expenses and Investments and other assets, net on the Consolidated Balance Sheets, respectively.

These capitalized costs as of December 31, 2021 were $ 0.6 million and $ 2.6 million in Prepaid expenses and Investments and other assets, net on the Consolidated Balance Sheets, respectively.

Research and development costs are expensed as incurred.

Goodwill and Other Intangible Assets .

5 unchanged sentences

The process of estimating the fair value of goodwill is subjective and required the Company to make estimates that may significantly impact the outcome of the analysis.

A qualitative assessment considers events and circumstances such as macroeconomic conditions,

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

industry and market conditions, cost factors and overall financial performance, as well as company specifications.

If after performing this assessment, the Company concluded it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company performed the quantitative test.

1 unchanged sentence

If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, goodwill is considered impaired and an impairment charge is recognized in an amount equal to the excess, not to exceed the carrying amount of goodwill.

The Company estimated the fair value of the reporting unit with an income approach using the discounted cash flow (“DCF”) analysis and the Company also considered a market-based valuation methodology using comparable public company trading values and the Company’s market capitalization.

If a quantitative test is performed, the Company estimates the fair value of the reporting unit with an income approach using the discounted cash flow (“DCF”) analysis and the Company also considers a market-based valuation methodology using comparable public company trading values and the Company’s market capitalization.

The cash flows employed in the DCF analysis are based on the Company’s best estimate of future sales, earnings and cash flows after

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

considering factors such as general market conditions and recent operating performance.

The cash flows employed in the DCF analysis are based on the Company’s best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance.

22 unchanged sentences

The impairment, if any, would be measured based on the amount by which the carrying amount exceeds the fair value.

Fair value is determined primarily using the projected future undiscounted cash flows.

Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose.

No impairment losses were recognized for the periods presented in the Consolidated Statements of Income (Loss).

No material impairment losses for long-lived assets were recognized for the periods presented in the Consolidated Statements of Income (Loss).

Fair Value of Financial Instruments .

8 unchanged sentences

and model-derived valuations in which all significant inputs are observable in active markets;

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Level 3—Valuations derived from valuation techniques in which one or more significant inputs are unobservable

The Company’s financial instruments include the interest rate swap (the “Swap”) and the contingent consideration related to the CreditIQ acquisition, both recorded at fair value.

The Company’s financial instruments include the contingent consideration related to our acquisitions and, before the year ended December 31, 2022, the interest rate swap (the “Swap”), both recorded at fair value.

Financial instruments also include accounts receivable, accounts payable and other liabilities.

3 unchanged sentences

As of December 31, 2022, the fair value of the outstanding indebtedness was approximately $ 435.4 million, compared to the carrying value of $ 481.3 million.

As of December 31, 2020, the fair value approximated the carrying value.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

As of December 31, 2021, the fair value of the outstanding indebtedness was approximately $ 502.7 million, compared to the carrying value of $ 477.5 million.

Significant inputs include volatility, discount rate and projected financial information.

Significant inputs include volatility and projected financial information.

Contingent Consideration.

The Company's contingent consideration obligations are from arrangements resulting from acquisitions that involve potential future payment of consideration that is contingent upon the achievement of certain financial metrics or lender market share.

Contingent consideration was recognized at its estimated fair value at the date of acquisition based on our expected future payment, discounted using a weighted average cost of capital in accordance with accepted valuation methodologies.

The Company reviews and reassesses the estimated fair value of contingent consideration liabilities at each reporting period and the updated fair value could differ materially from the initial estimates.

The Company measures contingent consideration recognized in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs.

The fair value is measured based on a Monte Carlo simulation or a scenario-based method, depending on the earnout objective.

The fair value measurement includes the following significant inputs:

volatility and projected financial information.

Significant increases or decreases to any of these inputs in isolation could result in a significantly higher or lower liability.

Derivative Financial Instrument.

4 unchanged sentences

For further information, see Note 8 (Interest Rate Swap).

As a result, as of the date of the Second Amendment, the unrealized loss included within Accumulated other comprehensive loss is ratably reclassified into Net income (loss) over the remaining life of the Swap.

Each period, a portion of the unrealized loss is recorded to Interest expense, net and Income tax expense (benefit) within the Consolidated Statements of Income (Loss).

Subsequent to the Second Amendment, any changes in the fair value of the Swap is recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).

As a result of the amendment entered into in October 2020 (the “Third Amendment”), the existing debt at the time of the amendment resulted in a partial debt extinguishment.

As a result, as of the date of the Second Amendment, the unrealized loss included within Accumulated other comprehensive loss was ratably reclassified into Net income (loss) over the remaining life of the Swap.

Each period, a portion of the unrealized loss was recorded to Interest expense, net and Income tax expense (benefit) within the Consolidated Statements of Income (Loss).

Subsequent to the Second Amendment, any changes in the fair value of the Swap were recorded within Other expense, net on the Consolidated Statements of Income (Loss).

A third amendment was entered into in October 2020 (the “Third Amendment”), which resulted in the partial extinguishment of the existing debt at the time of the amendment.

Due to the reduction in value of the underlying Term Loan upon the Third Amendment as compared to the notional amount of the Swap, a proportional amount of the frozen Accumulated other comprehensive loss balance was immediately reclassified into Interest expense, net.

The Swap is recognized on the Consolidated Balance Sheets at fair value and classified based on the instrument’s maturity date.

The Swap expired on May 31, 2022 and, as such, is no longer recorded on the

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Consolidated Balance Sheets.

As of December 31, 2021 the Swap was recognized within Other accrued liabilities on the Consolidated Balance Sheets at fair value.

Income Taxes .

Income taxes are presented on the Consolidated Financial Statements using the asset and liability method, under which deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying amount of assets and liabilities and their respective tax basis, as well as from operating loss and tax credit carry-forwards.

Deferred income taxes reflect expected future tax benefits (i.e.

15 unchanged sentences

Advertising Costs .

The Company expenses all advertising costs as they are incurred and are included in Marketing and sales in the Consolidated Statements of Income (Loss).

The Company expenses advertising costs as they are incurred and are included in Marketing and sales in the Consolidated Statements of Income (Loss).

Advertising expense for the years ended December 31, 2022, 2021 and 2020 was $ 107.1 million, $ 104.4 million and $ 80.4 million, respectively.

Cost of Revenue and Operations.

Cost of revenue and operations consist of expenses related to the pay per lead products, third-party costs, such as processing of dealer vehicle inventory, product fulfillment, customer service, hosting for our digital solutions and related compensation costs.

Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, pay per lead products, product fulfillment and compensation costs for the product fulfillment and customer service teams.

Affiliate Revenue Share Expense.

In connection with the October 2014 acquisition of CARS by the Company’s former parent, the Company entered into affiliate agreements with the former owners of CARS.

The Company amended five of its affiliate agreements (Gannett, McClatchy, TEGNA, tronc, and the Washington Post) and as a result, had a direct relationship with these dealer customers before the original contractual conversion date specified.

As part of the amendments to the affiliate agreements, Gannett, McClatchy, TEGNA, tronc, and the Washington Post agreed to perform certain marketing support and transition services through varying dates, the latest of which was June 29, 2020.

The fees the Company incurred associated with the amended affiliate agreements were recorded as Affiliate revenue share expense within Operating expenses in the Consolidated Statements of Income (Loss).

A s of June 30, 2020, the Company no longer incurs affiliate revenue share expense.

Defined Contribution Plans.

2 unchanged sentences

Employer contributions consist of matching contributions and/or non-elective employer contributions.

The Company provides a maximum match for 4 % of the employee’s salary and contributions are

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

immediately fully vested.

The Company provides a maximum match for 4 % of the employee’s salary and contributions are immediately fully vested.

As part of the cost reduction efforts in response to the COVID-19 pandemic and related restrictions, beginning in the second quarter of 2020, the Company temporarily suspended the employer match of employees’

2 unchanged sentences

The Company’s contributions to its defined contribution plans for the years ended December 31, 2022, 2021 and 2020 were $ 5.5 million, $ 5.0 million and $ 2.4 million, respectively .

Business Combination

On November 5, 2021, the Company acquired all of the outstanding stock of CreditIQ, (the “CIQ Acquisition”) a cutting edge automotive fintech platform that provides instant online loan screening and approvals to facilitate online car buying.

Business Combinations

Accu-Trade Acquisition.

On March 1, 2022, the Company acquired certain of the assets and assumed certain liabilities of Accu-Trade, LLC;

Accu-Trade Canada, LLC;

Galves Market Data;

and Headstart Logistics, LLC d/b/a/ MADE Logistics (collectively,

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

“Accu-Trade”), which provides dealers with VIN-specific vehicle valuation and appraisal data, instant offer capabilities and logistics technology (the “Accu-Trade Acquisition”).

The Company expensed as incurred total acquisition costs of $ 2.0 million, of which $ 1.0 million were recorded during the year ended December 31, 2022.

These costs were recorded in General and administrative expenses in the Consolidated Statements of Income (Loss).

Preliminary Purchase Price Allocation.

The preliminary fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods.

These preliminary fair values are subject to change within the one-year measurement period.

The Accu-Trade Acquisition purchase price allocation is as follows (in thousands):

Acquisition-date

Cash consideration

Other consideration (1)

Contingent consideration (2)

Total purchase consideration

Assets acquired (3)

Identified intangible assets (4)

Total assets acquired

Total liabilities assumed (5)

Net identifiable assets

Total purchase consideration

(1) In connection with the Accu-Trade Acquisition, the Company entered into an agreement to provide one of the former owners with a one-year license to a certain product.

The preliminary fair value of the license was determined to be $ 6.5 million, of which the Company received $ 1.2 million in cash upon the close of the Accu-Trade Acquisition.

The $ 5.3 million difference between the fair value of $ 6.5 million and the $ 1.2 million in cash was recorded as non-cash consideration and the $ 6.5 million license fee was recorded in Other accrued liabilities as a contract liability on the Consolidated Balance Sheets and is being amortized into Other revenue on the Consolidated Statements of Income (Loss) over the one-year contract term.

The current period revenue related to the non-cash consideration of $ 5.3 million is a non-cash reconciling item titled Amortization of deferred revenue related to Accu-Trade Acquisition on the Consolidated Statements of Cash Flows.

(2) As part of the Accu-Trade Acquisition, the Company may be required to pay additional consideration to the former owners based on the achievement of certain financial targets.

The Company has the option to pay consideration in cash or certain amounts in stock, which would result in a variable number of shares being issued.

The amount to be paid will be determined by the acquired business’

future performance to be attained over a three-year performance period;

based on certain tiered performance metrics the maximum amount to be paid is $ 63.0 million, of which a maximum of $ 15.0 million could be in stock, with additional upside for performance that exceeds the tiered performance metrics.

The contingent consideration is classified as Level 3 in the fair value hierarchy.

The fair value is measured based on a Monte Carlo simulation.

This amount represents the estimated fair value at the time of the acquisition.

For more information on the fair value of the Accu-Trade contingent consideration, see Note 4 (Fair Value Measurements).

(3) Assets acquired primarily consist of accounts receivable.

(4) Preliminary information regarding the identifiable intangible assets acquired is as follows:

Acquisition-Date

(in thousands)

Amortization Period

Acquired software

Customer relationships

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

(5) Total liabilities assumed primarily consist of accounts payable.

In connection with the Accu-Trade Acquisition, the Company recorded goodwill in the amount of $ 76.9 million, which is primarily attributable to sales growth from existing and future technology, product offerings, customers and the value of the acquired assembled workforce.

All of the goodwill is considered deductible for income tax purposes.

The Accu-Trade Acquisition would have had an immaterial impact on the Company’s Consolidated financial statements for the year ended December 31, 2021 and 2020.

CreditIQ Acquisition.

On November 5, 2021, the Company acquired all of the outstanding stock of CreditIQ, (the “CIQ Acquisition”) an automotive fintech platform that provides instant online loan screening and approvals to facilitate online car buying.

Through the CIQ Acquisition, the Company now provides dealers with access to advanced digital financing technology across the CARS platform.

The Company expensed as incurred total acquisition costs of $ 1.2 million, all of which were recorded during the twelve months ended December 31, 2021.

The Company expensed as incurred total acquisition costs of $ 1.3 million during the year ended December 31, 2021.

These costs were recorded in General and administrative in the Consolidated Statements of Income (Loss).

1 unchanged sentence

The fair value of these awards was based on the price paid per common share to the owners of the acquired business and recognized immediately after the CIQ Acquisition as compensation expense in the Company’s Consolidated Statements of Income (Loss).

Preliminary Purchase Price Allocation.

The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods.

The preliminary fair values of all assets acquired and liabilities assumed are subject to change within the one-year measurement period.

The Acquisition purchase price allocation is as follows (in thousands):

Purchase Price Allocation.

The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s final estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods.

The CIQ Acquisition purchase price allocation is as follows (in thousands):

Acquisition-date

15 unchanged sentences

(2) As part of the CIQ Acquisition, the Company may be required to pay up to an additional $ 50.0 million in cash consideration to the former owners based on two earn-out achievement objectives, including an earnings-related metric and lender market share.

The actual amount to be paid will be based on the acquired business’s future performance to be attained over a three-year performance period with a mutually agreed upon option for a fourth year.

The actual amount to be paid will be based on the acquired business’s future performance to be attained over a three-year performance period.

The fair value was estimated utilizing a Monte Carlo simulation or a scenario-based method, depending on the achievement objective.

For more information on the fair value of the CIQ contingent consideration, see Note 4 (Fair Value Measurements).

(3) In connection with the Acquisition, CreditIQ’s unvested equity awards were cash settled.

The fair value of these awards was $ 9.6 million and was based on the price paid per common share to the owners of the acquired business and recognized immediately after the Acquisition as compensation expense in General and administrative expense on the Company’s Consolidated Statements of Income (Loss).

(4) Assets acquired includes cash and cash equivalents, accounts receivable and other identifiable assets acquired.

The fair value of these awards was $ 9.6 million and was based on the price paid per common share to the owners of the acquired business and recognized immediately after

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

the Acquisition as compensation expense in General and administrative expense on the Company’s Consolidated Statements of Income (Loss).

(4) Assets acquired includes cash and cash equivalents, accounts receivable and other identifiable assets.

(5) Information regarding the identifiable intangible assets acquired is as follows:

4 unchanged sentences

Acquired software

(6) Total liabilities assumed includes accounts payable, deferred income tax liabilities, net and other liabilities assumed.

(6) Total liabilities assumed includes accounts payable, deferred income tax liabilities, net and other liabilities.

(7) During the year ended December 31, 2022, the Company recorded a $ 0.2 million purchase accounting adjustment.

In connection with the CIQ Acquisition, the Company recorded goodwill in the amount of $ 26.0 million, which is primarily attributable to sales growth from existing and future technology, product offerings, customers and the value of the acquired assembled workforce.

All of the goodwill is considered non-deductible for income tax purposes.

Prior to the CIQ Acquisition for the years ended December 31, 2021, 2020 and 2019, the CIQ Acquisition would have had an immaterial impact on the Company’s Consolidated Statements of Income (Loss).

The CIQ Acquisition would have had an immaterial impact on the Company’s Consolidated financial statements for the year ended December 31, 2021 and 2020.

Fair Value Measurements

The Company's contingent consideration measured at fair value on a recurring basis consisted of the following (in thousands):

Fair value measurement at reporting date

December 31, 2022

Contingent consideration

Fair value measurement at reporting date

December 31, 2021

Contingent consideration

The rollforward of the Level 3 contingent consideration from December 31, 2021 is as follows (in thousands):

December 31, 2021

Addition Related to

Accu-Trade Acquisition

Adjustment (1)

December 31, 2022

Contingent consideration

(1) Fair value adjustments on contingent considerations are reflected within Other expense, net in the Consolidated Statements of Income (Loss).

The contingent consideration is classified on the Consolidated Balance Sheets based on expected payment dates.

As of December 31, 2022, $ 9.4 million and $ 46.5 million were included within Other accrued liabilities and Other noncurrent liabilities on the Consolidated

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Balance Sheets.

As of December 31, 2021, $ 23.8 million was included within Other noncurrent liabilities on the Consolidated Balance Sheets.

The significant inputs and assumptions that were used in the contingent consideration valuations as of December 31, 2022 related to volatility ranged from 25 % to 49 %.

We expect to make payments on the contingent consideration in 2023, 2024 and 2025.

For more information relating to contingent consideration, see Note 3 (Business Combinations ).

Revenue Summary .

2 unchanged sentences

therefore, further disaggregation is not applicable at this time.

Prior to October 2019, the Company’s affiliates also sold marketplace subscription advertising to dealer customers, and the Company earned Wholesale revenue through its affiliate agreements.

For further information, see Note 6 (Unfavorable Contracts Liability).

Year Ended December 31,

4 unchanged sentences

Goodwill and Other Intangible Assets, net

Goodwill and Indefinite-Lived Intangible Assets Summary.

Goodwill and Indefinite-Lived Intangible Asset Summary.

The changes in the carrying amount of goodwill and indefinite-lived intangible asset are as follows (in thousands):

December 31, 2020

Additions (1)

December 31, 2021

Additions (1)

Adjustments (2)

December 31, 2022

(1) In connection with the CreditIQ Acquisition, the Company recorded goodwill in the amount of $ 26.2 million.

No impairment was noted for the year ended December 31, 2021.

For more information on the Acquisition, see Note 3 (Business Combination).

Goodwill and Indefinite-Lived Intangible Asset Prior Year Impairments.

In September 2019, the Company determined there was a triggering event, primarily caused by a sustained decrease in the Company's stock price after the completion of the strategic alternatives review process and performed interim quantitative impairment tests.

The results of the goodwill and indefinite-lived intangible asset impairment tests indicated that the carrying values exceeded the estimated fair values.

Thus, during the third quarter of 2019, the Company recorded an impairment of $ 379.2 million and $ 82.3 million related to its goodwill and indefinite-lived intangible asset, respectively.

In the fourth quarter of 2019, the Company performed an updated quantitative impairment analysis of its goodwill and indefinite-lived intangible asset and the results of those tests indicated that the estimated fair value exceeded the carrying value as of December 31, 2019.

For further information, see Note 2 (Significant Accounting Polices).

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

(1) In connection with the CreditIQ and Accu-Trade acquisitions, the Company recorded preliminary goodwill in the amount of $ 26.2 million and $ 76.9 million, respectively.

No impairment was noted for the years ended December 31, 2022 and 2021.

For more information on the acquisition, see Note 3 (Business Combinations).

(2) During the year ended December 31, 2022, the Company recorded a purchase accounting adjustment related to CreditIQ.

Goodwill and Indefinite-Lived Intangible Asset 2020 Impairments.

In March 2020, the Company determined there was a triggering event, caused by the economic impacts of the COVID-19 pandemic and related restrictions.

2 unchanged sentences

The related restrictions have had, and the Company expects they will continue to have, a negative impact on regional and national economies and the automotive industry for an uncertain duration.

While certain jurisdictions have relaxed or reversed some of these related restrictions, many have been subsequently reinstated.

The COVID-19 pandemic and related restrictions have caused a widespread increase in unemployment and have resulted in reduced consumer spending and an economic recession.

During the first quarter of 2020, the COVID-19 pandemic and related restrictions caused a widespread increase in unemployment and resulted in reduced consumer spending and an economic recession.

As a result of overall uncertainty related to the automotive industry, in the second half of March 2020, the Company’s customers began to adjust, reduce or suspend their operating and marketing activities.

This resulted and may continue to result in decreased subscription revenue and reduced demand for the Company’s services.

Moreover, depending upon the progress of the pandemic and the government and societal responses thereto, the Company’s customers may implement further cost-savings measures, including additional reductions of their advertising spend.

In an effort to assist its dealer customers impacted by the COVID-19 pandemic and related restrictions, the Company provided, among other measures, financial relief in the form of certain invoice credits of 50 % for April 2020 and 30 % for May and June 2020.

With respect to managing its expenses, the Company implemented several initiatives, including both permanent and temporary measures, to adjust expenses with changes in revenue.

The effects of the COVID-19 pandemic and related restrictions, particularly reduced consumer spending and the discounts that the Company provided its dealer customers in the second quarter of 2020, have negatively impacted its results of operations, cash flows and financial position.

In addition, the extent of the impact will vary depending on the duration and severity of the economic and operational impacts of the pandemic and related restrictions.

Thus, the amount and timing of future cash flows, used in the valuation models to estimate the fair value of the Company’s assets, were significantly and negatively impacted by the COVID-19 pandemic and related restrictions.

This resulted in decreased subscription revenue and reduced demand for the Company’s services.

The effects of the COVID-19 pandemic, particularly reduced consumer spending and the discounts that the Company provided its dealer customers in the second quarter of 2020, negatively impacted its results of operations, cash flows and financial position.

Thus, the amount and timing of future

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

cash flows, used in the valuation models to estimate the fair value of the Company’s assets, were significantly and negatively impacted by the COVID-19 pandemic.

The Company performed interim quantitative impairment tests as of March 31, 2020.

1 unchanged sentence

This impairment charge reduced the goodwill balance to zero at March 31, 2020.

2021 and 2022 Goodwill and Indefinite-Lived Intangible Asset Impairment Test.

The Company performed impairment tests for goodwill and the indefinite-lived intangible asset.

The Company performed a qualitative assessment that considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications.

After performing this assessment, the Company concluded there were no indicators of impairment and therefore, the Company did not perform a quantitative test and did not record an impairment to goodwill or the indefinite-lived intangible asset.

Definite Lived Intangible Assets .

7 unchanged sentences

As of December 31, 2022, projected annual amortization expense for amortizable intangible assets is as follows (in thousands):

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Unfavorable Contracts Liability

In connection with the October 2014 acquisition of CARS by the Company’s former parent, the Company entered into affiliate agreements with the former owners of CARS.

Under the affiliate agreements, affiliates had the exclusive right to sell and price the Company’s products and services in their local territories, paying the Company a wholesale rate for the Company’s products.

The Company charged the affiliates 60 % of the corresponding Cars.com’s retail rate for products sold to affiliate dealer customers and prior to October 2019, recognized revenue generated from these agreements as Wholesale revenue in the Consolidated Statements of Income (Loss).

The Unfavorable contracts liability was established as a result of these below market-rate unfavorable affiliate agreements that the Company entered into as part of TEGNA’s acquisition of the Company in 2014.

Prior to the affiliate conversions discussed below, over the contract period, the Company recognized $ 25.2 million of Wholesale revenue per year with a corresponding reduction of the Unfavorable contracts liability.

The Unfavorable contracts liability was fully amortized as of September 30, 2019.

As a result, the Company recognized the revenue associated with converted dealer customers as Dealer revenue, rather than Wholesale revenue, in the Consolidated Statements of Income (Loss).

On October 2019, the Belo affiliate agreement expired.

The Company no longer records the amortization of the Unfavorable contracts liability associated with the converted markets to revenue as the Company is recognizing this Dealer revenue at retail rates.

The amortization of the Unfavorable contracts liability related to these converted markets was recorded as a reduction of Affiliate revenue share within Operating expenses in the Consolidated Statements of Income (Loss).

As of December 31, 2019, the Unfavorable contracts liability has been fully amortized.

During the years ended December 31, 2020 and 2019, the Company recorded zero and $ 17.5 million, respectively, as a reduction to Affiliate revenue share, rather than Wholesale revenue, in the Consolidated Statements of Income (Loss).

As of October 2019, the Company has direct relationships with all of its dealer customers.

In addition, as of June 30, 2020, the Company no longer incurs affiliate revenue share expense.

Credit Agreement.

3 unchanged sentences

Interest on the borrowings under the Credit Agreement is payable based on either (i) the London Interbank Offered Rate (“LIBOR”) or (ii) the Alternate Base Rate (“ABR”), as defined in the Credit Agreement, in either case plus an applicable margin and fees which, after the second full fiscal quarter following the closing date, was based upon its Total Net Leverage Ratio.

The ABR is the greater of (a) the prime rate, (b) the New York Fed Bank Rate plus 50 basis points or (c) adjusted LIBOR, which is computed as the LIBOR Screen Rate at 11:00 AM on such day.

The applicable margin varied between 1.25 % to 2.0 % for LIBOR borrowings and 0.25 % to 1.0 % for ABR borrowings, depending on the Company’s Total Net Leverage Ratio.

The Credit Agreement required a maximum Total Net Leverage Ratio of 4.25 x with an incremental step down to 3.75 x on or after May 31, 2019 and a minimum Interest Coverage Ratio of 3.0 x (each as defined in the Credit Agreement).

23 unchanged sentences

Ended the Covenant Adjustment Period and removed the related minimum liquidity requirement and anti-cash hoarding covenant that were implemented pursuant to the Second Amendment.

As of December 31, 2021, the outstanding principal amount under the Term Loan was $ 77.5 million and the interest rate in effect was 2.5 %, not including the impact of the interest rate swap.

During the year ended December 31, 2021, the Company made $ 120.0 million in Term Loan payments, of which $ 110.0 million were voluntary prepayments.

As of December 31, 2022, the outstanding principal amount under the Term Loan was $ 66.3 million and the interest rate in effect was 6.7 %.

During the year ended December 31, 2022, the Company made $ 11.3 million in Term Loan payments.

Revolving Loan.

As of December 31, 2022, the outstanding borrowings under the Revolving Loan were $ 15.0 million and the interest rate in effect was 6.4 %.

During the twelve months ended December 31, 2022, the Company borrowed $ 45.0 million and made $ 30.0 million in Revolving Loan payments.

As of December 31, 2022, $ 215.0 million was available to borrow under the Revolving Loan.

The Company had zero drawdo wns on the Revolving Loan during the year ended December 31, 2021.

The Company’s borrowings are limited by its Senior Secured Leverage Ratio and Consolidated Interest Coverage Ratio, which are calculated in accordance with our Credit Agreement, and were 0.4 x and 5.7 x as of December 31, 2022, respectively.

Senior Unsecured Notes.

2 unchanged sentences

Debt Issuance Costs.

Debt issuance costs related to the various amendments and issuances were $ 14.3 million and $ 17.7 million at December 31, 2021 and December 31, 2020, respectively.

Debt issuance costs related to the various amendments and issuances were $ 11.1 million and $ 14.3 million as of December 31, 2022 and December 31, 2021, respectively.

Depending on the nature of the debt issuance costs and the underlying debt to which it relates, they are recorded as either a reduction of debt and accreted using the effective interest method or as a deferred asset and accreted using the straight-line method with the amortization recorded in Interest expense, net on the Consolidated Statements of Income (Loss).

Debt Extinguishment.

The Third Amendment resulted in a partial debt extinguishment of $ 1.8 million of the previously capitalized debt issuance costs and included in Other (expense) income, net in the Consolidated Statements of Income (Loss) for the year ended December 31, 2020.

The Third Amendment resulted in a partial extinguishment of $ 1.8 million of the previously capitalized debt issuance costs which is included in Other expense, net in the Consolidated Statements of Income (Loss) for the year ended December 31, 2020.

Debt Guarantors, Collateral, Covenants and Restrictions.

The obligations under the debt agreements are guaranteed by the Guarantors and the Company.

The obligations under the debt agreements are guaranteed by the Company and its subsidiary guarantors.

The Guarantors secured their respective obligations under the debt agreements by granting liens in favor of the agent on substantially all of their assets.

The terms of the debt agreement include representations and warranties, affirmative and negative covenants (including certain financial covenants) and events of default that are customary for credit facilities of this nature.

The negative covenants place restrictions and limitations on the Company’s ability to incur additional indebtedness, make distributions or other

The terms of the debt agreement include representations and warranties, affirmative and

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

restricted payments, create liens, make certain equity or debt investments, engage in mergers or consolidations and engage in certain transactions with affiliates.

negative covenants (including certain financial covenants) and events of default that are customary for credit facilities of this nature.

The negative covenants place restrictions and limitations on the Company’s ability to incur additional indebtedness, make distributions or other restricted payments, create liens, make certain equity or debt investments, engage in mergers or consolidations and engage in certain transactions with affiliates.

As of December 31, 2022, the Company is in compliance with the covenants under its debt agreements.

6 unchanged sentences

In order to manage the risk associated with changes in interest rates on its borrowing under the initial Term Loan, the Company entered into an interest rate swap (the “Swap”) effective December 31, 2018.

Under the terms of the Swap, the Company is locked into a fixed rate of interest of 2.96 %, as defined in the Company’s Credit Agreement, on a notional amount of $ 300 million until May 31, 2022.

Under the terms of the Swap, the Company is locked into a fixed rate of interest of 2.96 %, on a notional amount of $ 300 million until May 31, 2022.

The Swap was initially designated as a cash flow hedge of interest rate risk.

During the second quarter of 2020, the Company entered into the second amendment to the Credit Agreement, which triggered a quantitative hedge effectiveness test that resulted in the loss of hedge accounting.

As a result, as of the date of the second amendment, the unrealized loss included within Accumulated other comprehensive loss was frozen and is now being ratably reclassified into Net income (loss) over the remaining life of the Swap through Interest expense, net and Income tax expense (benefit) within the Consolidated Statements of Income (Loss).

Subsequent to the second amendment, any changes in the fair value of the Swap are recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).

As a result, as of the date of the second amendment, the unrealized loss included within Accumulated other comprehensive loss was frozen and then was ratably reclassified into Net income (loss) over the remaining life of the Swap through Interest expense, net and Income tax expense (benefit) within the Consolidated Statements of Income (Loss).

Subsequent to the second amendment, any changes in the fair value of the Swap were recorded within Other expense, net on the Consolidated Statements of Income (Loss).

During the fourth quarter of 2020, the Company entered into the third amendment to the Credit Agreement, which triggered a partial debt extinguishment, including a partial extinguishment of the underlying Term Loan.

1 unchanged sentence

The Company will continue to amortize the remaining Accumulated other comprehensive loss to Interest expense, net and Income tax expense (benefit) within the Consolidated Statements of Income (Loss) through the remainder of the term of the Swap.

Any changes in the fair value of the Swap will continue to be recorded within Other (expense) income, net on the Consolidated Statements of Income (Loss).

Any changes in the fair value of the Swap will continue to be recorded within Other expense, net on the Consolidated Statements of Income (Loss).

The Swap expired on May 31, 2022 and, as such, is no longer recorded on the Consolidated Balance Sheets.

As of December 31, 2021, the fair value of the Swap was an unrealized loss of $ 3.5 million, which is recorded in Other accrued liabilities on the Consolidated Balance Sheets.

As of December 31, 2020, the fair value of the Swap was an unrealized loss of $ 12.1 million, of which $ 8.5 million and $ 3.6 million was recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets.

During the years ended December 31, 2021 and December 31, 2020, $ 5.7 million and $ 11.1 million was reclassified from Accumulated other comprehensive loss and recorded in Interest expense, net, respectively.

During the year ended December 31, 2021, the Company made payments of $ 8.6 million related to the Swap.

During the year ended December 31, 2021, $ 0.9 million was reclassified as a tax benefit from Accumulated other comprehensive loss into Income tax expense (benefit) on the Consolidated Statements of Income (Loss).

During the years ended December 31, 2022, 2021 and 2020, $ 2.4 million, $ 5.7 million and $ 11.1 million was reclassified from Accumulated other comprehensive loss and recorded in Interest expense, net, respectively.

During the years ended December 31, 2022, 2021 and 2020 the Company made payments of $ 3.3 million, $ 8.6 million and $ 7.0 million related to the Swap.

During the years ended December 31, 2022, 2021 and 2020, $ 0.4 million, $ 0.9 million and $ 1.3 million was reclassified as a tax benefit from Accumulated other comprehensive loss into Income tax expense (benefit) on the Consolidated Statements of Income (Loss).

Cars.com Inc.

1 unchanged sentence

The Company is obligated as a lessee under certain non-cancelable operating leases for office space, and is also obligated to pay insurance, maintenance and other executory costs associated with the leases.

In May 2016, the Company entered into a lease of office space in Chicago, Illinois.

In May 2016, the Company entered into a lease of office space in Chicago, Illinois, which is our most material lease.

The lease extends through June 2031 and monthly rental payments under the lease escalate by 2.5 % each year throughout the lease.

8 unchanged sentences

As of December 31, 2022 and 2021, the Company’s operating lease assets, included in Investments and other assets , net, were $ 13.7 million and $ 14.6 million, respectively, and operating lease liabilities were $ 28.5 million and $ 30.8 million, respectively, the current maturities of which is included in Other accrued liabilities and the long-term portion of which is included in Other noncurrent liabilities .

The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the 300 South Riverside Lease in Chicago, Illinois.

Other information related to the Company’s operating leases for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands, except months and percentage):

The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the lease in Chicago, Illinois.

Other information related to the Company’s operating leases for the years ended December 31, 2022, 2021 and 2020 is as follows (in thousands, except months and percentages):

Year Ended December 31,

8 unchanged sentences

Weighted-average discount rate as of December 31,

Commitments and Contingences

The Company and its subsidiaries are parties from time to time in legal and administrative proceedings involving matters incidental to its business.

Commitments and Contingencies

From time to time, the Company and its subsidiaries are parties in legal and administrative proceedings involving matters incidental to its business.

These matters, whether pending, threatened or unasserted, if decided adversely to the Company or settled, may result in liabilities material to its financial position, results of operations or cash flows.

5 unchanged sentences

Notes to Consolidated Financial Statements (Continued)

In March 2018, the Company’s Board of Directors authorized a two-year share repurchase program to acquire up to $ 200 million of the Company’s common stock.

The Company repurchased shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws.

The timing and amounts of any purchases under the share repurchase program were based on market conditions and other factors including price.

The repurchase program did not require the purchase of any minimum number of shares and the Company funded the share repurchase program principally with cash from operations.

In March 2020, the repurchase program expired and there were no share repurchases during the year ended December 31, 2020.

The Company repurchased and subsequently retired 1.7 million shares for $ 40.0 million during the year ended December 31, 2019.

In February 2022, the Company's Board of Directors authorized a three-year share repurchase program to acquire up to $ 200 million of the Company 's common stock.

The Company may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and other applicable legal requirements and subject to the Company's blackout periods.

The timing and amounts of any purchases under the share repurchase program will be based on market conditions and other factors, including price.

The repurchase program may be suspended or discontinued at any time and does not obligate the Company to repurchase any dollar amount or particular amount of shares.

The Company funds the share repurchase program principally with cash from operations.

During the year ended December 31, 2022, the Company repurchased and subsequently retired 4.2 million shares for $ 49.0 million at an average price per share of $ 11.75 .

Stock-Based Compensation

2 unchanged sentences

Omnibus Incentive Compensation Plan (the “Omnibus Plan”), which provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and other stock-based and cash-based awards.

A maximum of 18.0 million common stock shares may be issued under the Omnibus Plan.

As of December 31, 2021, there were 8.9 million common stock shares available for future grants.

A maximum of 18.0 million common shares may be issued under the Omnibus Plan.

As of December 31, 2022, there were 6.8 million common shares available for future grants.

The Company issues new shares of CARS common stock for shares delivered under the Omnibus Plan.

4 unchanged sentences

compensation expense

The following table shows stock-based compensation expense by financial statement line item on the Company’s Consolidated Statements of Income (Loss) (in thousands).

S tock-based compensation expense by financial statement line item on the Company’s Consolidated Statements of Income (Loss) is as follows (in thousands):

Year Ended December 31,

3 unchanged sentences

General and administrative

Information related to outstanding stock-based compensation awards as of December 31, 2021 for restricted share units (“RSUs”), restricted stock, performance share units (“PSUs”) and the Cars.com Employee Stock Purchase Plan (“ESPP”) is as follows (in thousands, except for weighted-average remaining period):

For the years ended December 31, 2022 excluded from stock-based compensation expense is $ 0.1 million of capitalized internally developed technology costs.

Information related to outstanding stock-based compensation awards as of December 31, 2022 for restricted share units (“RSUs”), performance share units (“PSUs”), stock options and the Cars.com Employee Stock Purchase Plan (“ESPP”) is as follows (in thousands, except for weighted-average remaining period):

Weighted-Average

Remaining Period

RSUs and Restricted Stock

Stock Options

Restricted Share Units and Restricted Stock.

RSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting, subject to any restrictions a s specified in the individual holder’s award agreement.

RSUs are subject to graded vesting, generally ranging between one and four years and the fair value of the RSUs is equal to the Company's common stock price on the date of grant.

Restricted Stock represents RSUs that have been delivered to certain non-employee directors who have elected to receive shares underlying RSUs before they vest.

Restricted Stock is subject to graded vesting over one year and the fair value of the

Restricted Share Units ("RSUs").

RSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement.

RSUs are subject to graded vesting, generally ranging between one and four years and the fair value of the RSUs is equal to the Company's common stock price on the date

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Restricted Stock is equal to the Company’s common stock price on the date of grant.

RSU and Restricted Stock activity for the year ended December 31, 2021 is as follows (in thousands, except for weighted-average grant date fair value):

Number of RSUs

and Restricted Stock

RSU activity for the year ended December 31, 2022 is as follows (in thousands, except for weighted-average grant date fair value):

Weighted-Average

2 unchanged sentences

Outstanding as of December 31, 2022 (1)

(1) The outstanding balance as of December 31, 2021 includes 63 RSUs that were vested, but not yet delivered.

(1) Includes 63 RSUs that were vested, but not yet delivered.

The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2021 and 2020 was $ 14.94 and $ 5.87 , respectively.

5 unchanged sentences

The percentage of PSUs that shall vest will range from 0 % to 200 % of the number of PSUs granted based on the Company’s future performance related to certain revenue and adjusted earnings before interest, income taxes, depreciation and amortization targets over a three-year performance period.

These PSUs are subject to cliff vesting at the end of the respective performance period.

These PSUs are subject to cliff vesting after the end of the respective performance period.

PSU activity for the year ended December 31, 2022 is as follows (in thousands, except for weighted-average grant date fair value):

2 unchanged sentences

Vested and delivered

Forfeited or cancelled

Outstanding as of December 31, 2022

Stock Options.

Stock optio ns represent the right to purchase shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement.

Stock options represent the right to purchase shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement.

Stock options are subject to three-year cliff vesting and expire 10 years from the grant date.

The Company began issuing stock options during the year ended December 31, 2020.

Stock option activity for the year ended December 31, 2022 is as follows (in thousands, except for weighted-average grant date fair value and weighted-average remaining contractual term):

Weighted-Average

Weighted-Average Remaining Contractual Term (in years)

Weighted-Average

Remaining Contractual

Term (in years)

Intrinsic Value

Outstanding as of December 31, 2021

Vested and delivered

Outstanding as of December 31, 2022

1 unchanged sentence

The fair value of the stock options granted during the years ended December 31, 2022, 2021 and 2020 are estimated on the grant date using the Black-Scholes option pricing model, using the following assumptions:

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Risk-free interest rate

2 unchanged sentences

Expected years until exercise

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Employee Stock Purchase Plan.

In September 2017, the Company’s Board of Directors approved the Cars.com Employee Stock Purchase Plan (the “ESPP”).

Employee Stock Purchase Plan ("ESPP").

Eligible employees may authorize payroll deductions of up to 10 % of the employee’s base earnings with a maximum of $ 10,000 per every six-month offering period to purchase CARS common stock at a purchase price per share equal to 85 % of the lower of (i) the closing market price per share of CARS at the beginning of the offering period or (ii) the closing market price per share at the end of the offering period.

1 unchanged sentence

As of December 31, 2022, 2.1 million shares were available for issuance under the ESPP.

The Company issued 0.2 million and 0.3 million shares related to the ESPP and recorded $ 0.7 million of stock-based compensation expense related to the ESPP for the years ended December 31, 2021 and 2020, respectively.

The Company issued 0.2 million, 0.2 million and 0.3 million shares related to the ESPP and recorded $ 0.6 million, $ 0.7 million and $ 0.7 million of stock-based compensation expense related to the ESPP for the years ended December 31, 2022, 2021 and 2020, respectively.

Earnings (Loss) Per Share

1 unchanged sentence

Diluted earnings (loss) per share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans, unless the inclusion of such shares would have an anti-dilutive impact.

As part of the Accu-Trade Acquisition, the Company may pay up to $ 15.0 million of the contingent consideration in stock at a future date.

Those potential shares have been excluded from the computations below because they are contingently issuable shares, and the contingency to which the issuance relates was not met at the end of the reporting period .

The computations of the Company’s basic and diluted earnings (loss) per share is as follows (in thousands, except per share amounts):

11 unchanged sentences

Income (loss) before income taxes

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Year Ended December 31,

2 unchanged sentences

state and local

Total deferred income tax benefit

Total deferred income tax expense (benefit)

Income tax expense (benefit)

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

The income tax provision differed from amounts computed at the statutory federal income tax rate, as follows (in thousands, except percentage):

The income tax provision differed from amounts computed at the statutory federal income tax rate, as follows (in thousands, except percentages):

Year Ended December 31,

7 unchanged sentences

Stock-based compensation

Return to provision adjustments

Uncertain tax positions

6 unchanged sentences

The federal and state R&D tax credits generally may be carried forward 20 years and 5 years, respectively.

The Tax Cuts and Jobs Act enacted in December 2017, amended Internal Revenue Code Section 174 to require that specific research and experimental expenditures be capitalized and amortized over five years (15 years for non-U.S.

R&D expenditures) beginning in the Company’s 2022 fiscal year.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Significant components of the deferred tax assets and liabilities are as follows (in thousands):

Deferred income tax liabilities:

Indefinite lived intangible

Definite lived intangibles

Indefinite lived intangibles

Right of use assets

2 unchanged sentences

Accrued compensation

Capitalized research and development costs

Definite lived intangibles

Indefinite lived intangibles

Lease obligations

2 unchanged sentences

Valuation allowance

Net deferred tax liability

Net deferred tax (liability) asset

The deferred tax assets and liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2022 and 2021 were as follows (in thousands):

Investments and other assets, net

Deferred tax liability

Net deferred tax liabilities

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

On March 27, 2020, the CARES Act was enacted into law.

The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic.

The CARES Act includes several significant business tax provisions that, among other things, would allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years.

As a result of the CARES Act, during the year ended December 31, 2021, the Company received a $ 9.1 million refund from the carryback of NOLs to 2017 and 2018.

The Company's receivable was included in Other current assets on the Consolidated Balance Sheets as of December 31, 2020.

Other noncurrent liabilities

Net deferred tax (liability) asset

Uncertain Tax Positions.

12 unchanged sentences

The Company's tax returns are routinely audited by federal and state tax authorities and these tax audits are at various stages of completion at any given time.

Generally, the Company’s tax returns open to examination by a federal or state taxing authority are for years beginning on or after January 1, 2017.

The Company’s tax returns open to examination by a federal or state taxing authority are for years beginning on or after January 1, 2017.

Segment Information

Operating segments are components of an enterprise where separate financial information is available that is evaluated regularly by the chief operating decision maker (the “CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

The Company’s CODM is the CARS Chief Executive Officer.

The CODM makes resource allocation decisions to maximize the Company’s consolidated financial results.

For the year ended December 31, 2021, the Company had one operating and reportable segment.

For the years ended December 31, 2022, 2021 and 2020, the Company had one operating and reportable segment.

For the years ended December 31, 2022, 2021 and 2020, the Company did not have any one customer that generated greater than 10% of total revenue.

Substantially all revenue and long-lived assets were generated and located within the U.S.

Subsequent Events

Accu-Trade Acquisition.

In February 2022, the Company signed an agreement to acquire 100 % of the assets of Accu-Trade , Galves Market Data and MADE Logistics ("Accu-Trade"), which includes real-time, VIN-specific appraisal and valuation data, instant guaranteed offer capabilities, and logistics technology.

Consideration for the transaction will be $ 65 million in cash at closing.

There is also the potential for additional cash and stock consideration based on achievement of certain financial thresholds.

The transaction is expected to close in March 2022.

Share Repurchase Program.

In February 2022, the Company’s Board of Directors authorized a three-year share repurchase program to acquire up to $ 200 million of the Company’s common stock.

Changes in and Disagreements With Accou ntants on Accounting and Financial Disclosure.

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 5. Market for Registrant’s Common Equity