What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-22 · 356 added, 371 removed, 853 unchanged (46% of the section changed)

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This discussion and analysis also contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in "Note About Forward-Looking Statements" and "Risk Factors" in this Annual Report on Form 10-K.

References in this discussion and analysis to “Cars Commerce”, the "Company," “we,” “us,” “our” and similar terms refer to Cars.com Inc.

References in this discussion and analysis to "we," "us," "our", "Cars Commerce" and similar terms refer to Cars.com Inc.

and its subsidiaries, collectively, unless the context indicates otherwise.

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Cars Commerce is an audience-driven technology company empowering the automotive industry.

We simplify everything about car buying and selling with powerful products, solutions and AI-driven technologies that span pretail, retail and post-sale activities – enabling more efficient and profitable retail operations.

We simplify everything about car buying and selling with powerful products, solutions and machine learning model-driven artificial intelligence technologies that span pretail, retail and post-sale activities – enabling more efficient and profitable retail operations.

The Cars Commerce platform is organized around four industry-leading brands:

our flagship automotive marketplace and dealer reputation site Cars.com, award-winning digital retail technology and marketing services from Dealer Inspire, essential trade-in and appraisal technology from AccuTrade, and exclusive in-market media solutions from the Cars Commerce Media Network.

our flagship automotive marketplace and dealer reputation site Cars.com, award-winning digital retail technology and marketing services from Dealer Inspire and D2C Media, essential trade-in and appraisal technology from AccuTrade, and exclusive in-market media solutions from the Cars Commerce Media Network.

Overview of Results.

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(1) Net income for the year ended December 31, 2023 is primarily related to the release of a significant portion of our valuation allowance for deferred tax assets that had been recorded as a result of the 2020 goodwill and indefinite-lived intangible asset impairments.

For more information, see Note 14 (Income Taxes) to the Consolidated Financial Statements included in Part II, Item 8.

For more information, see Note 14 (Income Taxes) 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.

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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.

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

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

Year Ended December 31,

Average Monthly Unique Visitors

ARPD - Annual

Monthly Average Revenue Per Dealer - Annual

Quarterly information regarding our Dealer Customers and ARPD is as follows:

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Dealer Customers

ARPD - Quarterly

Monthly Average Revenue Per Dealer - Quarterly

UVs and Traffic.

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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 customers and a primary reason they do business with us.

We believe we have achieved audience scale as measured by UVs and Traffic, and we 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 connections that we can ultimately monetize through our products and services.

We believe we have achieved audience scale as measured by UVs and Traffic.

Traffic is driven by a combination of UVs visiting our properties and repeat visitation and engagement.

We monetize impressions, clicks and other connections that result from traffic to our site via our products and services.

We define UVs in a given month as the number of distinct visitors that engage with our platform during that month.

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

We measure UVs and Traffic via Adobe Analytics.

We measured UVs and Traffic via Adobe Analytics through the year ended December 31, 2023.

As of January 1, 2024, we began to measure UVs and Traffic via RudderStack, which we

believe better aligns to our product and technology platform and provides improved visibility into our UVs and Traffic.

Prior period UVs and Traffic information has not been recast, as it is impracticable to do so.

These metrics do not include traffic to Dealer Inspire or D2C Media websites.

Consumer demand remains strong as indicated by both UVs and traffic.

While UVs for the year ended December 31, 2023 were largely flat compared to the year ended December 31, 2022, traffic for the period was the highest level recorded, reflecting a combination of increased consumer interest from rising inventory levels, product investment in mobile app, and increased consumer engagement following the consolidation of Auto.com and Pickuptrucks.com into the Cars.com experience.

UVs decreased 3% year-over-year for the year ended December 31, 2024, primarily driven by normalizing demand from consumers due to increased vehicle inventory levels, continued elevated prices and higher interest rates, partially offset by shifts in our marketing mix.

Additionally, UVs for the year ended December 31, 2023 benefited from Q1 2023 being our highest quarter ever for UVs.

Traffic increased 2% year-over-year for the year ended December 31, 2024, primarily driven by the shift to RudderStack, higher repeat visitation and optimization of our user acquisition strategy, partially offset by shifts in our marketing mix.

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.

Beginning with the three months ended June 30, 2022, AccuTrade is included in our ARPD metric.

No prior period has been recast as it would be impracticable to do so and the inclusion of AccuTrade would have had an immaterial impact on ARPD for prior periods.

Additionally, beginning December 31, 2023, this key operating metric includes D2C Media.

ARPD for the fourth quarter of 2023 increased 7% as compared to the fourth quarter 2022, primarily driven by the marketplace repackaging initiative, including the adoption of higher tier packages, and growth in digital solutions.

ARPD for the annual period of 2023 increased 7% as compared to the annual period 2022 primarily driven by the marketplace repackaging initiative, including the adoption of higher tier packages, and growth in digital solutions.

Beginning December 31, 2023, this key operating metric includes D2C Media.

ARPD for the annual period of 2024 remained flat compared to the annual period 2023.

For the three months ended December 31, 2024, ARPD decreased 2% compared to the three months ended December 31, 2023, primarily due to the impact of one additional month of D2C Media.

For the three months ended December 31, 2024, ARPD remained flat compared to the three months ended September 30, 2024.

Dealer Customers .

Dealer Customers represent dealerships using our products as of the end of each reporting period.

Dealer Customers represent dealerships subscribed to our products as of the end of each reporting period.

Each physical or virtual dealership location is counted separately, whether it is a single-location proprietorship or part of a large, consolidated dealer group.

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

Beginning June 30, 2022, this key operating metric includes AccuTrade;

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

Additionally, beginning December 31, 2023, this key operating metric includes D2C Media.

Dealer Customers increased 4% as compared to September 30, 2023, primarily driven by the inclusion of 950 customers through the acquisition of D2C Media.

Dealer Customers remained flat from December 31, 2022, primarily driven by the inclusion of 950 D2C Media customers, offset by the anticipated churn from our 2023 marketplace repackaging initiative and a pull back by digital dealers in previous quarters.

Beginning December 31, 2023, this key operating metric includes D2C Media.

Dealer Customers decreased 2% from December 31, 2023, primarily due to normalizing dealer profitability given increased inventory, which we believe to be influenced by higher flooring expense for our dealer customers.

Dealer Customers remained flat from September 30, 2024.

Factors Affecting Our Performance.

Our business is impacted by changes in the larger automotive ecosystem, including supply and demand for new and used vehicle inventory, supply chain disruptions, semiconductor shortages, vehicle acquisition cost, vehicle retail prices, electric vehicle adoption, employee retention and changes related to automotive advertising, among other macroeconomic factors.

Our business is impacted by changes in the larger automotive ecosystem, including supply and demand for new and used vehicle inventory, global supply chain and information systems disruptions, semiconductor and raw material shortages, vehicle acquisition cost, vehicle retail prices, the rate of electric vehicle adoption, employee retention and changes related to automotive advertising, among other macroeconomic factors including the political environment, inflationary pressures, tariffs and prevailing interest rates.

Changes in vehicle sales volumes in the United States and Canada also influence OEMs’ and dealerships’ willingness to increase investments in technology solutions and automotive marketplaces like Cars.com and could impact our pricing strategies and/or revenue mix.

Our long-term success will depend in part on our ability to continue to execute our platform strategy including continuing to create the most engaged in-market audience, growing our dealer customers, unlocking the cross sell, transforming our OEM relationships and creating platform advantages.

We believe our core strategic strengths, including our powerful family of brands, growing high-quality audience and suite of digital solutions for advertisers, including AI-based tools, will assist us as we navigate a rapidly changing automotive environment.

Our long-term success will depend in part on our ability to continue to execute our platform strategy including continuing to create the most engaged in-market audience, growing our dealer customers, expanding our relationship with dealers through greater adoption of our platform, unlocking the cross-sell, transforming our OEM relationships and creating platform advantages.

We believe our core strategic strengths, including our powerful family of brands, growing high-quality audience and suite of digital solutions for advertisers, including machine learning model artificial intelligence, will assist us as we navigate a rapidly changing automotive environment.

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.

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Interest expense, net

Other expense, net

Total nonoperating expense, net

Other income (expense), net

Total nonoperating income (expense), net

Income before income taxes

Income tax (benefit) expense

Income tax expense (benefit)

*** Not meaningful

Dealer revenue .

Dealer revenue is typically subscription oriented and consists of marketplace, digital solutions, including website solutions and AccuTrade and media solutions sold to dealer customers.

Dealer revenue is typically subscription-oriented and consists of marketplace, digital experience, including website solutions and AccuTrade, and media products sold to dealer customers.

Dealer revenue is our largest revenue stream, representing 89% and 90% of total revenue for the years ended December 31, 2024 and 2023, respectively.

Dealer revenue increased by $42.4 million, or 7.3%, compared to the prior year, driven primarily by growth in solutions revenue, growth in marketplace led by the 2023 marketplace repackaging initiative and growth in media products, partially offset by a reduction in revenue from digital only dealers.

Dealer revenue increased $19.1 million or 3%, primarily driven by the incremental revenue related to the acquisition of the D2C Media business and growth in digital experience revenue, including our website creation and hosting.

OEM and National revenue .

OEM and National revenue largely consists of Cars Commerce Media Network products, including display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies.

OEM and National revenue represents 8.1% and 9.0% of total revenue for the years ended December 31, 2023 and 2022, respectively.

OEM and National revenue decreased 4.5%, primarily due to pullbacks in spending from some of our insurance customers in response to certain macroeconomic factors, partially offset by growth in OEM revenue.

OEM and National revenue represented 9% and 8% of total revenue for the years ended December 31, 2024 and 2023, respectively.

OEM and National revenue increased $10.0 million or 18%, primarily due to increased OEM spending to raise consumer awareness, as on-the lot inventory continues to increase.

Other revenue.

Other revenue primarily consists of revenue related to vehicle listing data sold to third parties and a lead product, as well as the AccuTrade license agreement.

Other revenue represents 1.7% and 2.4% of total revenue for the years ended December 31, 2023 and 2022, respectively.

Other revenue decreased $4.5 million or 27.8%, primarily due to the planned expiration in the first quarter of 2023 of the AccuTrade license agreement entered into as part of the acquisition.

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.

Other revenue primarily consists of revenue related to vehicle listing data sold to third parties and pay per lead products.

Other revenue represented 2% of total revenue for each of the years ended December 31, 2024 and 2023.

Other revenue increased $0.9 million or 8%, primarily due to the incremental revenue related to the acquisition of the D2C Media business, partially offset by the first quarter 2023 expiration of a license agreement entered into as part of the AccuTrade acquisition.

Cost of revenue and operations .

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 17.7% and 17.6% of total revenue for the years ended December 31, 2023 and 2022, respectively.

Cost of revenue and operations expense increased, primarily due to higher compensation costs.

Cost of revenue and operations expense represented 17% and 18% of total revenue for the years ended December 31, 2024 and 2023, respectively.

Cost of revenue and operations increased $2.1 million or 2%, but decreased as a percentage of revenue.

The change is primarily due to the incremental costs related to the acquisition of the D2C Media business.

Product and technology.

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

Product and technology expense represents 14.4% and 13.6% of total revenue for the years ended December 31, 2023 and 2022, respectively.

Product and technology expense increased, primarily due to higher compensation, including stock-based compensation, as well as third-party costs and licenses.

Product and technology expense represented 16% and 14% of total revenue for the years ended December 31, 2024 and 2023, respectively.

Product and technology expense increased $14.3 million or 14%, primarily due to higher compensation, including stock-based compensation and third-party costs, including licenses.

Marketing and sales .

Marketing and sales expense primarily consists of traffic and lead acquisition costs, performance and brand marketing, 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 34.2% and 33.9% of total revenue for the years ended December 31, 2023 and 2022, respectively.

Marketing and sales expense increased, primarily due to higher compensation, including stock-based compensation, marketing and advertising costs related to our new Cars.com Possibilities campaign, Cars Commerce branding and third party costs and an increase in our provision for doubtful accounts.

This was partially offset by lower performance media spend due to strong traffic generation in the year.

Marketing and sales expense represented 32% and 34% of total revenue for the years ended December 31, 2024 and 2023, respectively.

Marketing and sales expense decreased $4.0 million or 2%, primarily due to changes in our marketing investment and mix, partially offset by incremental costs related to the acquisition of the D2C Media business.

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 costs related to the write-off of assets.

General and administrative expense represents 11.1% and 10.3% of total revenue for the years ended December 31, 2023 and 2022, respectively.

General and administrative expense increased, primarily due to compensation, including stock-based compensation and earnout compensation related to the D2C Media acquisition.

This was partially offset by a decrease in professional fees and other transaction costs.

For more information related to the D2C Media 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.

In addition, general and administrative expense includes the cost of office space, legal, accounting and other professional services, transaction-related costs, severance, transformation and other exit costs and costs related to the write-off of assets.

General and administrative expense represented 12% and 11% of total revenue for the years ended December 31, 2024 and 2023, respectively.

General and administrative expense increased $11.9 million or 15%, the majority of which is due to incremental costs related to the acquisition of the D2C Media business, including compensation expense of $10.8 million related to the D2C Media earnout.

Additionally, the change is impacted by higher compensation, including stock-based compensation.

For information related to the D2C Media earnout, 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.

Depreciation and amortization .

Depreciation and amortization expense increased, primarily due to additional internally developed technology asset depreciation and amortization on acquisition-related intangibles.

Depreciation and amortization expense increased $6.2 million or 6%, primarily due to depreciation and amortization on additional assets acquired and the amortization of intangible assets related to the D2C Media Acquisition, partially offset by certain assets being fully depreciated and amortized as compared to the prior-year period.

Interest expense, net .

Interest expense, net decreased by $2.9 million compared to the prior year period due to the maturity of the interest rate swap and increased interest income, partially offset by higher interest rates in 2023.

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 decreased primarily due to the change in the fair value of contingent consideration associated with the CreditIQ and AccuTrade acquisitions, partially offset by foreign exchange gains.

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 (benefit) expense .

The effective income tax rate, expressed by calculating the income tax (benefit) expense as a percentage of Income before income tax, was (554.2)% for the year ended December 31, 2023, primarily due to the release of a significant portion of our valuation allowance for deferred tax assets that had been recorded as a result of the 2020 goodwill and indefinite-lived intangible asset impairments.

The effective income tax rate 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.

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” of this Annual Report on Form 10-K.

Interest expense, net was essentially flat compared to the prior-year period.

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" of this Annual Report on Form 10-K.

Other income (expense), net.

Other income (expense), net changed primarily due to the change in the fair value of contingent consideration associated with the AccuTrade and CreditIQ acquisitions and the $10.8 million gain on the sale of our RepairPal, Inc.

("RepairPal") equity investment.

For more information related to contingent consideration, see the Liquidity and Capital Resources section below, and 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.

For more information on the sale of our RepairPal equity investment, see Note 2 (Significant Accounting Policies) 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 differed from the statutory federal income tax rate of 21%, primarily due to the impact of state income taxes, net of federal income tax expense, nondeductible transaction expenses and nondeductible executive compensation, partially offset by tax credits and the release of the remaining portion of our valuation allowance.

The prior period income tax benefit was primarily due to the release of a significant portion of our valuation allowance for deferred tax assets that had been recorded as a result of the 2020 goodwill and indefinite-lived intangible asset impairments.

For more information, see 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.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

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Liquidity and Capital Resources

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

We believe that our positive operating cash flow, along with our Revolving Loan described below, provide adequate liquidity to meet our business needs for the next 12 months and beyond, including those for investments, debt service, share repurchases and strategic acquisitions.

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

Our positive operating cash flow, along with our Revolving Loan, provide adequate liquidity to meet our business needs for the next 12 months and beyond, including those for investments, debt service, share repurchases, contingent consideration payments 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 fourth amendment to the Credit Agreement (the "Fourth 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 operations, significant investments or acquisitions that are consistent with our strategy.

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Indebtedness.

As of December 31, 2023, the outstanding aggregate principal amount of our indebtedness was $490.0 million, at a weighted average interest rate of 6.6%, including $400.0 million of outstanding principal under the bonds, which carries an interest rate of 6.375%, $55.0 million of outstanding principal under the Term Loan which had an interest rate of 7.5% at December 31, 2023, and $35.0 million of outstanding principal under the Revolving Loan which had an interest rate of 7.5% at December 31, 2023.

During the year ended December 31, 2023, we made $11.3 million in mandatory Term Loan payments, we borrowed $45.0 million on our Revolving Loan and we repaid $25.0 million on our Revolving Loan.

As of December 31, 2024, the outstanding aggregate principal amount of our indebtedness was $460.0 million, at an average interest rate of 6.4%, including $400.0 million of outstanding aggregate principal under the 6.375% Senior Unsecured Notes due in 2028 and $60.0 million of outstanding principal under the Revolving Loan which had an interest rate of 6.5%.

On May 6, 2024, we amended and extended our existing Credit Agreement (the "Fifth Amendment") which resulted in a new $350.0 million Revolving Loan due in 2029.

Upon closing, we borrowed $80.0 million under the new Revolving Loan to repay the outstanding $45.0 million in aggregate principal amount of existing Term Loan and $35.0 million in aggregate principal amount of existing Revolving Loan balances.

During the year ended December 31, 2024, we made $10.0 million in mandatory Term Loan payments and repaid $20.0 million on our Revolving Loan.

As of December 31, 2024, $290.0 million was available to borrow under the Revolving Loan.

Our borrowings are limited by our Senior Secured Leverage Ratio and Interest Coverage Ratio, calculated in accordance with our Credit Agreement, which were 0.5x and 6.0x as of December 31, 2023, respectively.

Our borrowings are limited by our Senior Secured Net Leverage Ratio and Consolidated Interest Coverage Ratio, in addition to other factors.

Calculated in accordance with our Credit Agreement, these ratios were 0.04x and 6.5x, respectively, as of December 31, 2024.

For further information, see Note 7 (Debt) 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.

Share Repurchase Program .

In February 2022, our Board of Directors authorized a three-year share repurchase program to acquire up to $200.0 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.

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

On February 21, 2022, our Board of Directors authorized a three-year share repurchase program to acquire up to $200.0 million of our common stock.

During the year ended December 31, 2024, we repurchased and subsequently retired 2.8 million shares for $49.2 million at an average price per share of $17.72.

As of December 31, 2023, $119.7 million of the program remains available.

The share repurchase authorization expired on February 21, 2025.

As a result, on February 24, 2025, our Board of Directors authorized a new three-year share repurchase program to acquire up to $250.0 million of our common stock.

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

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

Contingent Consideration and Earnout.

The fair value as of December 31, 2023 for the contingent consideration related to the CIQ and AccuTrade Acquisitions was $61.4 million.

Within the next twelve months, we expect to pay a total of $32.5 million of potential contingent consideration and earnout based on the most recent projected financial information as of December 31, 2023.

Further information related to the contingent consideration and earnouts is as follows.

The contingent consideration associated with the CIQ Acquisition is based on two 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.

The fair value as of December 31, 2024 for the contingent consideration related to the CreditIQ and AccuTrade acquisitions was $0.5 million.

Within the next twelve months, we expect to pay $10.9 million of potential contingent consideration and D2C Media earnout discussed below.

During the year ended December 31, 2024, we paid $30.4 million related to contingent consideration and earnout, which reduced the corresponding liability.

The contingent consideration and earnout consists of the following:

• The contingent consideration associated with the CreditIQ acquisition was based on two achievement objectives, including an earnings-related metric and lender market share.

The actual amount to be paid was based on the future performance of the acquired business attained over a three-year performance period through December 2024.

• The contingent consideration associated with the AccuTrade Acquisition is based on achievement of an earnings-related metric.

For the AccuTrade 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 in accordance with a calculation based on future share prices.

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.

The actual amount to be paid will be based on the future performance of the acquired business to be attained over a three-year performance period through February 2025.

• As part of the D2C Media Acquisition, we may be required to pay additional cash consideration to certain former owners who are now employees of Cars Commerce based on the achievement of a revenue performance metric.

The actual amount to be paid will be based on the acquired business' future performance to be attained through December 31, 2025 with a total maximum amount of CAD$35.0 million.

The amount to be paid will be determined by the acquired business' future achievement of certain revenue-related financial targets through December 31, 2025 and expensed over each performance period.

We may expense up to CAD$15.0 million (approximately US$10.4 million as of December 31, 2024) associated with the remaining portion of the earnout for the year ending December 31, 2025.

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

Lease Amendment.

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

In November 2024, we amended the lease, which resulted in a reduction of our office space by 67%, extension of the lease term from June 2031 to June 2036 for the remaining portion, and paid a termination penalty of $10.5 million.

The December 31, 2024 Consolidated Financial Statements and related notes to the Consolidated Financial Statements reflect the impact of the amendment and the related termination penalty.

In 2025, as a result

of the amendment, we expect a $5.3 million decrease in lease related costs, primarily driven by an abatement of variable lease costs, as well as operating lease costs amortized over an extended lease term.

We also expect to see significant savings over the original lease term ending in 2031.

For more information, see Note 9 (Leases) 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):

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Operating Activities.

The increase 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, 2023.

C ash provided by operating activities for the year ended December 31, 2024 increased due to Net income after non-cash adjustments, partially offset by changes in working capital compared to the year ended December 31, 2023.

Investing Activities.

The cash used in investing activities in 2023 was primarily related to the D2C Acquisition and capitalization of internally developed technology.

The cash used in investing activities in 2022 was primarily related to the AccuTrade Acquisition and capitalization of internally developed technology.

The decrease in cash used in investing activities was primarily related to the impact of the D2C Media Acquisition in the prior year, partially offset by increases in capitalization of internally developed software and purchases of property and equipment.

Financing Activities.

During the year ended December 31, 2023, cash used in financing activities was primarily related to $36.3 million of payments on our long-term debt and $31.3 million repurchases of common stock, offset by $45.0 million of proceeds from Revolving Loan borrowings related to the D2C Acquisition.

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 AccuTrade Acquisition.

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.

During the year ended December 31, 2024, cash used in financing activities was primarily related to repurchases of common stock, debt repayments, payments of contingent consideration and tax payments made in connection with the vesting of certain equity awards.

During the year ended December 31, 2023, cash used in financing activities was primarily related to debt repayments, repurchases of common stock and tax payments made in connection with the vesting of certain equity awards, offset by proceeds from Revolving Loan borrowings related to the D2C Media Acquisition.

For information related to our debt, repurchases of common stock and contingent consideration, see Note 4 (Fair Value Measurements), 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.

Contractual Obligations.

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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, 2023 and factor in scheduled amortization payments on the Term Loan.

(2) Interest payments for variable rate debt were calculated using interest rates as of December 31, 2024.

(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 AccuTrade acquisitions and the earnout related to the D2C Media acquisition as the amounts and timing are uncertain with the exception of the portion for D2C Media that was earned as of December 31, 2023.

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.

As part of the AccuTrade 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.

Additionally, as part of the D2C Media Inc.

acquisition, we may pay up to an additional CAD$35.0 million over the total period (CAD$30.0 million remaining as of December 31, 2023).

Excluded from the above table is the contingent consideration related to the CreditIQ and AccuTrade acquisitions and the earnout related to the D2C Media Acquisition as the amounts and timing are uncertain with the exception of the portion for D2C Media that was earned as of December 31, 2024.

For more information related to the earnout and 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.

Commitments and Contingencies.

For further information, see Note 10 (Commitments and Contingencies) 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.

For information related to commitments and contingencies, see Note 10 (Commitments and Contingencies) 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.

Subsequent Events.

DealerClub Acquisition.

In January 2025, we acquired all of the outstanding stock of DealerClub, Inc.

("DealerClub"), an emerging dealer-to-dealer digital wholesale auction platform that facilitates transparent and efficient transactions between automotive dealers.

Cash consideration for the transaction was approximately $25.3 million at closing paid with cash on hand.

There is also the potential for additional performance-based consideration of up to $88.0 million through 2028, which may be paid in cash or stock.

The amount to be paid will be based on achievement of certain financial thresholds.

Share Repurchase Program.

In February 2025, our Board of Directors authorized a share repurchase program to acquire up to $250.0 million of our common stock over a three-year period.

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

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

Critical Accounting Policies and Estimates.

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Actual results could differ significantly from those estimates.

believe the following discussion addresses our most critical accounting policies, which are those that are important to the presentation of our financial condition and results of operations and require management’s most subjective and complex judgments.

We believe the following discussion addresses our most critical accounting policies, which are those that are important to the presentation of our financial condition and results of operations and require management’s most subjective and complex judgments.

Revenue Recognition.

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• Cars Commerce Media Network.

The Cars Commerce Media Network unifies our media products, including display advertising, social selling, such as Cars Social, and In-Market Video.

The Cars Commerce Media Network unifies our media products, including In-Market Display, Cars Social, In-Market Video and VIN Performance Media.

o Add-on Marketplace and Digital Experience products include premium advertising products that can be uniquely tailored to an individual dealer customer’s current needs.

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OEM and National revenue.

OEM and National revenue largely consists of Cars Commerce Media Network products, including In-Market Display and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies.

Revenue related to OEM and National customers are primarily transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements.

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If the impressions or click-throughs delivered are less than the amount invoiced to the customer, the difference is recorded as deferred revenue and recognized as revenue when earned.

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

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

We recognize revenue related to

these services at the point in time the service is provided.

In-Market Display products revenue sold to OEMs and national customers is recorded in OEM and National revenue in the Consolidated Statements of Income.

Other Revenue.

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Intangible assets are recorded at their estimated fair value at the date of acquisition.

The fair values assigned to the intangible assets acquired 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.

We amortize intangible assets over their estimated useful lives on a straight-line basis.

Amortization is recorded over the relevant estimated useful lives ranging from five to 14 years.

Amortization is recorded over the relevant estimated useful lives ranging from two to 14 years.

We evaluate the useful lives of these assets on at least an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

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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.

As part of the CreditIQ 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.

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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 is measured based on a Monte Carlo simulation or a scenario-based method, depending on the earnout objective and timing.

The fair value measurement includes the following significant inputs:

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Uncertain tax positions that relate to deferred tax assets are recorded against deferred tax assets;

otherwise, uncertain tax positions are recorded as either a current or noncurrent liability in the Consolidated Balance Sheets.

otherwise, uncertain tax

positions are recorded as either a current or noncurrent liability in the Consolidated Balance Sheets.

See 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.

Recent Accounting Pronouncements.

There are no recent accounting pronouncements that materially impact our financial statements as of December 31, 2023.

Recent Accounting Standards.

For information related to recent accounting pronouncements, see Note 2 (Significant Accounting Policies) to the Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Quantitative and Qualitat ive Disclosures About Market Risk.

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Interest Rate Risk.

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

As of December 31, 2023, the outstanding aggregate principal amount of our indebtedness was $490.0 million, at a weighted average interest rate of 6.6%, including $400.0 million of outstanding principal under the bonds, which carries a fixed interest rate of 6.375%, $55.0 million of outstanding principal under the Term Loan which carried an interest rate of 7.5% at December 31, 2023, and $35.0 million of outstanding principal under the Revolving Loan which carried an interest rate of 7.5% at December 31, 2023.

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

As of December 31, 2024, the outstanding aggregate principal amount of our indebtedness was $460.0 million, at a weighted average interest rate of 6.4%, including $400.0 million of outstanding principal under the bonds, which carries a fixed interest rate of 6.375% and $60.0 million of outstanding principal under the Revolving Loan which carried an interest rate of 6.5% at December 31, 2024.

Foreign Currency Exchange Risk.

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

However, with the acquisition of D2C Media Inc.

in November 2023, we have expanded our presence in Canada and therefore our risk related to changes in exchange rates between the U.S.

However, with the acquisition of D2C Media in November 2023, we have expanded our presence in Canada and therefore our risk related to changes in exchange rates between the U.S.

dollar and Canadian dollar.

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and Canadian entities that is subject to exchange rate fluctuations and will result in foreign exchange gains or losses depending on the currency movement during the respective time period.

The effect of foreign currency exchange rate fluctuations during 2023 is immaterial.

The effect of foreign currency exchange rate fluctuations during 2023 and 2024 is immaterial.

As we continue to grow our Canadian operations, we expect to continue to be exposed to foreign exchange rate risk.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

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

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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

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We tested the application of the revenue recognition accounting requirements for each of the significant service offerings to determine whether the performance obligations identified by the Company were distinct.

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

Acquisition of D2C Media, Inc.

Description of the Matter

As described in Note 3 to the Consolidated Financial Statements, in November 2023 the Company completed its acquisition of all of the outstanding stock of D2C Media, Inc.

for total purchase consideration of $79.8 million.

The transaction was accounted for as a business combination.

Auditing the Company's accounting for its acquisition of D2C Media, Inc.

was complex due to the significant estimation required by management to determine the fair value of the customer relationship intangible asset of $29.2 million.

The significant estimation was primarily due to the complexity of the valuation model used by management to measure the fair value of the customer relationship intangible asset and the sensitivity of the fair value to the significant underlying assumptions.

The Company used a multi-period excess earnings method to measure the fair value of the customer relationship intangible asset.

The significant assumptions used to estimate the value of the customer relationship intangible asset included the forecasted revenue projections, EBITDA margin projections and the attrition rate.

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 accounting for its acquisition.

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

To test the estimated fair value of the customer relationship intangible asset, we performed audit procedures that included, among others, evaluating the Company's use of 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 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 the Company’s use of a multi-period excess earnings 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 Statements, 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, 2023, the Company had $61.4 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 the 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

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Long-term debt, net

Deferred tax liabilities

Deferred tax liabilities, net

Other noncurrent liabilities

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Accumulated deficit

Accumulated other comprehensive income

Accumulated other comprehensive (loss) income

Total stockholders' equity

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Interest expense, net

Other expense, net

Total nonoperating expenses, net

Other income (expense), net

Total nonoperating income (expense), net

Income before income taxes

Income tax (benefit) expense

Income tax expense (benefit)

Weighted-average common shares outstanding:

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Year Ended December 31,

Other comprehensive income, net of tax:

Foreign currency translation adjustment

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments

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

Total other comprehensive income, net of tax

Total other comprehensive (loss) income, net of tax

Comprehensive income

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Other comprehensive income, net of tax

Repurchases of common stock

Shares issued in connection with

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Balance at December 31, 2023

Other comprehensive income, net of tax

Other comprehensive loss, net of tax

Repurchases of common stock

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Amortization of intangible assets

Amortization of Accumulated other comprehensive loss on interest rate swap

Changes in fair value of contingent consideration

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Amortization of debt issuance costs

Unrealized gain on foreign currency denominated transactions

Unrealized loss (gain) on foreign currency denominated transactions

Gain on sale of equity investment

Amortization of deferred revenue related to AccuTrade Acquisition

Amortization of Accumulated other comprehensive loss on interest rate swap

Changes in operating assets and liabilities, net of acquisitions:

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Repurchases of common stock

Payments of contingent consideration

Payments of debt issuance costs and other fees

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Supplemental cash flow information:

Cash paid (received) for income taxes

Cash paid for income taxes

Cash paid for interest and swap

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Description of Business.

Cars.com Inc., d/b/a Cars Commerce (the "Company" or "Cars Commerce") is an audience-driven technology company empowering the automotive industry.

The Company simplifies everything about car buying and selling with powerful products, solutions and AI-driven technologies that span pretail, retail and post-sale activities – enabling more efficient and profitable retail operations.

Cars.com Inc., d/b/a Cars Commerce Inc.

(the "Company" or "Cars Commerce") is an audience-driven technology company empowering the automotive industry.

The Company simplifies everything about car buying and selling with powerful products, solutions and machine learning model-driven artificial intelligence technologies that span pretail, retail and post-sale activities – enabling more efficient and profitable retail operations.

The Cars Commerce platform is organized around four industry-leading brands:

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Basis of Presentation .

These accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S.

GAAP") and the rules and regulations of the SEC.

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

These reclassifications were not material to the previously reported Consolidated Financial Statements.

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.

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• Cars Commerce Media Network.

The Cars Commerce Media Network unifies our media products, including display advertising, social selling, such as Cars Social, and In-Market Video.

The Cars Commerce Media Network unifies our media products, including In-Market Display, Cars Social, In-Market Video and VIN Performance Media.

o Add-on Marketplace and Digital Experience products include premium advertising products that can be uniquely tailored to an individual dealer customer’s current needs.

Substantially all of the Company's add-on products 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 are combined as a single performance obligation, and the Company recognizes the related revenue ratably as the services are provided over the contract term.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

o The Company also provides certain non-subscription digital advertising services to dealer customers.

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OEM and National revenue.

Revenue related to OEM and National customers are primarily transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements.

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

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

In-Market Display products revenue sold to OEMs and national customers is recorded in OEM and National revenue in the Consolidated Statements of Income.

Other Revenue.

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On at least an annual basis, the Company assesses its investments to determine whether any events have occurred, or circumstances have changed, which might have a significant adverse effect on their fair value and as applicable, may be indicative of impairment.

The non-marketable investments recorded within Investments and other assets, net on the Consolidated Balance Sheets were zero as of December 31, 2023 and 2022.

The RepairPal, Inc.

("RepairPal") equity investment recorded within Investments and other assets, net on the Consolidated Balance Sheets was zero as of December 31, 2023.

During the year ended December 31, 2024, the Company sold its RepairPal equity investment for $ 9.5 million in closing proceeds and up to $ 2.7 million of additional proceeds to be received, subject to the satisfaction of certain conditions.

The related cash proceeds for the sale were not yet received as of December 31, 2024, and was therefore recorded as a non-cash transaction.

As a result, the Company recorded the fair value of its expected proceeds as a gain of $ 10.8 million recorded in Other income (expense), net in the Consolidated Income Statements and Gain on sale of equity investment in the Consolidated Statements of Cash Flows.

As of December 31, 2024, the Company recorded $ 9.5 million and $ 1.3 million in Other current assets and Investments and other assets, net, respectively, in the

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Property and Equipment .

Consolidated Balance Sheets, of which the $ 9.5 million was received in January 2025.

Changes will be recognized in Other income (expense), net.

Property and Equipment, net .

Property and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives as follows (in thousands):

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Research and development costs are expensed as incurred.

Cloud Computing Arrangements.

Cloud Computing Arrangements, net.

The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed technology.

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

Capitalized cloud computing arrangements are amortized on a straight-line basis over an estimated useful life of five years.

Amortization expense for the years ended December 31, 2024, 2023 and 2022 was $ 1.8 million, $ 1.2 million and $ 0.6 million.

Cost and accumulated amortization is as follows (in thousands):

Cloud computing arrangements, gross

Accumulated amortization

Cloud computing arrangements, net

These capitalized costs as of December 31, 2024 were $ 2.3 million and $ 6.2 million in Prepaid expenses and Investments and other assets, net on the Consolidated Balance Sheets, respectively.

These capitalized costs as of December 31, 2023 were $ 1.3 million and $ 6.5 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 .

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The Company determined that it operated as a single reporting unit.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

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.

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If a quantitative test is performed, the Company estimates the fair value of the reporting unit with an income approach using a 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.

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

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

earnings multiples.

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.

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• Level 1—Quoted prices for identical instruments in active markets;

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

• Level 2—Quoted prices for similar instruments in active markets;

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

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

See Note 4 (Fair Value Measurements) and Note 8 (Interest Rate Swap) for additional information on the contingent consideration and the interest rate swap, respectively.

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

The Company’s financial instruments include the contingent consideration related to the Company's acquisitions which is recorded at fair value.

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

The carrying values of these instruments approximate their fair values.

The Company’s debt is classified as Level 2 in the fair value hierarchy and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 2 assets and liabilities are based on observable inputs other than quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

The approximate fair value and related carrying value of the Company's outstanding indebtedness, as of December 31, 2024 and December 31, 2023 were as follows (in millions):

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Carrying Value

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 and projected financial information.

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 in the fair value hierarchy.

The fair value measurement has one significant input of projected financial information.

Contingent Consideration.

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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.

The fair value measurement has one significant input of projected financial information.

Significant increases or decreases to the projected financial information 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 within Other expense, net on the Consolidated Statements of Income.

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and (iii) stockholders’ equity accounts at historical exchange rates.

The resulting translation adjustments are excluded from consolidated Net income and are recognized within Accumulated other comprehensive income in the Consolidated Balance Sheets.

Foreign currency transaction gains and losses are included in Other expense, net within consolidated Net income for the period.

Monetary assets and liabilities that are in a currency other than the Company's functional currency are translated to the functional currency at period-end, with changes in such amounts being reported as a component of Other expense, net in the Consolidated Statements of Income.

The resulting translation adjustments are excluded from consolidated Net income and are recognized within Accumulated other comprehensive (loss) income in the Consolidated Balance Sheets.

Foreign currency transaction gains and losses are included in Other income (expense), net in the Consolidated Statements of Income.

Monetary assets and liabilities that are in a currency other than the Company's functional currency are translated to the functional currency at period-end, with changes in such amounts being reported as a component of Other income (expense), net in the Consolidated Statements of Income.

Income Taxes .

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The Company recognizes the effect on deferred taxes of a change in tax rates in income in the period that includes the enactment date.

Valuation allowances are established if, based upon the weight of available evidence, management determines it is “more likely than not” that some portion or all of the deferred tax asset will not be realized.

Valuation allowances are established if, based upon the

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

weight of available evidence, management determines it is "more likely than not" that some portion or all of the deferred tax asset will not be realized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

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The Company’s uncertain tax position reserves are reviewed periodically and are adjusted as events occur that affect its estimates, such as the availability of new information, the lapsing of applicable statutes of limitation, the conclusion of tax audits, the measurement of additional estimated liability, the identification of new tax matters, the release of administrative tax guidance affecting its estimates of tax liabilities or the rendering of relevant court decisions.

The Company records penalties and interest relating to uncertain tax positions in Income tax (benefit) expense in the Consolidated Statements of Income.

The Company records penalties and interest relating to uncertain tax positions in Income tax expense (benefit) in the Consolidated Statements of Income.

For further information, see Note 14 (Income Taxes).

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Stock-Based Compensation.

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The Company’s contributions to its defined contribution plans for the years ended December 31, 2024, 2023 and 2022 were $ 6.4 million, $ 6.3 million and $ 5.5 million, respectively.

Recently Issued Accounting Standards Not Yet Adopted .

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , which requires companies to provide more detailed and organized disclosures of their expenses in their income statements.

The standard requires breaking down expenses into specific categories, such as employee compensation and costs related to depreciation and amortization.

This amendment is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, on a prospective basis and early adoption and retrospective application is permitted.

The Company is currently evaluating this new guidance and its impact on its Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires presentation of specific categories of reconciling items, as well as reconciling items that meet a quantitative threshold, in the reconciliation between the income tax provision and the income tax provision using statutory tax rates.

The standard also requires disclosure of income taxes paid disaggregated by jurisdiction with separate disclosure of income taxes paid to individual jurisdictions that meet a quantitative threshold.

This amendment is effective for fiscal years beginning after December 15, 2024, on a prospective basis and early adoption and retrospective application are permitted.

The Company is currently evaluating this new guidance and its impact on its Consolidated Financial Statements and related disclosures.

Recently Adopted Accounting Standards.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which requires disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker and included within each reported measure of segment profit or loss.

This amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted.

The Company adopted ASU 2023-07 retrospectively effective December 31, 2024.

The adoption of this ASU affects only our disclosures, with no impacts to our financial condition or results of operations.

For more information, see Note 15 (Segment Information).

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Business Combinations

D2C Acquisition.

D2C Media Acquisition.

On November 1, 2023, the Company acquired all of the outstanding stock of D2C Media Inc.

and EZResults Inc.

(collectively, the “D2C Acquisition”), a leading provider of website and digital advertising solutions in Canada for $ 79.8 million total purchase considera tion.

(collectively, the "D2C Media Acquisition"), a leading provider of website and digital advertising solutions in Canada for $ 80.1 million total purchase considera tion.

The Company expensed as incurred total acquisition costs of $ 1.4 million during the year ended December 31, 2023.

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

As part of the D2C Acquisition, the Company may be required to pay a cash earnout of up to an additional CAD$ 35.0 million (approximately US $ 26.4 million as of December 31, 2023).

The payment is classified as compensation expense and is not included in the total purchase consideration, as the potential cash compensation is to former equity holders who became employees and is forfeited if employment is terminated prior to the end of the earnout period.

The amount to be paid will be determined by the acquired business’ future achievement of certain revenue-related financial targets through December 31, 2025 and expensed over each performance period of up to CAD$ 5.0 million, CAD$ 15.0 million and CAD$ 15.0 million, for the years ending December 31, 2023, 2024 and 2025, respectively.

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.

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

The preliminary D2C Acquisition purchase price allocation is as follows (in thousands):

As part of the D2C Media Acquisition, the Company may be required to pay a cumulative cash earnout of up to an additional CAD$ 34.1 million (approximately US $ 23.8 million as of December 31, 2024 ), of which CAD $ 15.0 million (approximately US$ 10.8 million) and CAD$ 4.1 million (approximately US$ 3.0 million) was expensed during the years ending December 31, 2024 and 2023, respectively.

The payment is not included in the total purchase consideration and is deemed compensation expense, as the potential cash compensation is to former equity holders who became employees and will be forfeited if employment is terminated prior to the end of the earnout period.

The Company may expense up to CAD$ 15.0 million (approximately US$ 10.4 million as of December 31, 2024) associated with the remaining portion of the earnout for the year ending December 31, 2025.

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 D2C Media Acquisition purchase price allocation is as follows (in thousands):

Acquisition-date

Cash consideration

Total purchase consideration (1)

Cash and cash equivalents

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Total purchase consideration

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

(1) During the year ended December 31, 2024, the Company recorded a $ 0.3 million purchase accounting adjustment, $ 0.2 million of which is reflected in Payments for acquisitions, net of cash acquired in the Consolidated Statements of Cash Flows.

(2) Other assets acquired primarily consists of property and equipment, operating lease right of use assets and other prepaid expenses.

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

Preliminary Acquisition-Date Fair Value

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

Acquisition-Date

(in thousands)

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(4) Other liabilities assumed primarily consists of operating lease right of use liabilities and income taxes payable.

A reconciliation of cash consideration to Payment for D2C Media, net in the Consolidated Statements of Cash Flows is as follows (in thousands):

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

A reconciliation of cash consideration to Payments for acquisitions, net of cash acquired related to the D2C Media Acquisition in the Consolidated Statements of Cash Flows as of December 31, 2023 is as follows (in thousands):

Cash consideration

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Total payment for D2C Media, net

In connection with the D2C Acquisition, the Company recorded goodwill in the amount of $ 42.3 million, which is primarily attributable to expected sales growth from existing and future customers, product offerings, technology and the value of the acquired assembled workforce.

In connection with the D2C Media Acquisition, the Company recorded goodwill in the amount of $ 42.0 million, which is primarily attributable to expected sales growth from existing and future customers, product offerings, technology and the value of the acquired assembled workforce.

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

The D2C Acquisition would have had an immaterial impact on the Company’s Consolidated financial statements for the years ended December 31, 2022 and 2021.

The D2C Media Acquisition would have had an immaterial impact on the Company’s Consolidated Financial Statements for the year ended December 31, 2022.

AccuTrade Acquisition.

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Total purchase consideration

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

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

The 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 AccuTrade 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 over the one-year contract term.

The current period revenue related to the non-cash consideration of $ 0.9 million is a non-cash reconciling item titled Amortization of deferred revenue related to AccuTrade Acquisition on the Consolidated Statements of Cash Flows.

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 was amortized into Other revenue on the Consolidated Statements of Income over the one-year contract term.

The revenue related to the non-cash consideration of $ 0.9 million and $ 4.4 million for the years ended December 31, 2023 and 2022, respectively, is a non-cash reconciling item titled Amortization of deferred revenue related to AccuTrade Acquisition on the Consolidated Statements of Cash Flows.

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

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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 contingent consideration is classified as Level 3 in the

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

fair value hierarchy.

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

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(3) Assets acquired primarily consist of accounts receivable.

(4) I nformation regarding the identifiable intangible assets acquired is as follows:

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

Acquisition-Date

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

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

CreditIQ Acquisition.

On November 5, 2021, the Company acquired all of the outstanding stock of CreditIQ, Inc.

(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 Commerce platform.

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.

In connection with the CIQ Acquisition, CreditIQ’s unvested equity awards were cash settled for a total of $ 9.6 million.

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.

Purchase Price Allocation.

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

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Acquisition-date

Cash consideration (1)

Contingent consideration (2)

Cash settlement of CIQ Acquisition's unvested equity awards (3)

Total purchase consideration

Assets acquired (4)

Identified intangible assets (5)

Total assets acquired

Total liabilities assumed (6) (7)

Net identifiable assets

Total purchase consideration

(1) A reconciliation of cash consideration to Payments for the CIQ Acquisition, net of cash acquired in the Consolidated Statements of Cash Flows is as follows (in thousands):

Cash consideration

Cash settlement of CIQ Acquisition's unvested equity awards (3)

Cash acquired

Payments for CIQ Acquisition, net of cash acquired

(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.

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 CreditIQ 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.

(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:

Acquisition-Date

(in thousands)

Weighted-Average

Amortization Period

Acquired software

(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.

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

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Fair Value Measurements

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

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

Fair value measurement at reporting date

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December 31, 2023

Payment of Contingent Consideration

Adjustment (1)

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Contingent consideration

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

The contingent consideration related to CreditIQ and AccuTrade is classified on the Consolidated Balance Sheets based on expected payment dates.

As of December 31, 2023, $ 25.8 million and $ 35.6 million were included within Other accrued liabilities and Other noncurrent liabilities on the Consolidated Balance Sheets.

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 Balance Sheets.

The significant inputs and assumptions that were used in the contingent consideration valuations as of December 31, 2023 related to volatility ranged from 27 % to 41 %.

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

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

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

The Company's contingent consideration obligations arise from acquisitions that involve a potential future payment of consideration that is contingent upon the achievement of certain financial or operational metrics.

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

As of December 31, 2024 , $ 0.5 million was included within Other accrued liabilities in the Consolidated Balance Sheets.

As of December 31, 2023 , $ 25.8 million and $ 35.6 million were included within Other accrued liabilities and Other noncurrent liabilities, respectively, in the Consolidated Balance Sheets.

For information related to the AccuTrade contingent consideration agreement, see Note 3 (Business Combinations).

The Company expects to make the remaining payments on the contingent consideration in 2025.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

The Company's Consolidated Statements of Income provide disaggregated revenue information that reflects the nature, timing, amount and uncertainty of cash flows related to the Company's revenue.

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Goodwill and Other Intangible Assets, net

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Goodwill and Indefinite-Lived Intangible Asset Summary.

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Additions (1)

Adjustments (2)

Foreign currency translation adjustment

December 31, 2023

Additions (1)

Foreign currency translation adjustment

Other adjustments (1)

December 31, 2024

(1) In connection with the D2C Acquisition and AccuTrade Acquisition, the Company recorded goodwill in the amount of $ 42.3 million and $ 76.9 million, respectively.

The D2C Acquisition related goodwill is preliminary as of December 31, 2023.

(1) In connection with the D2C Media Acquisition, the Company recorded goodwill in the amount of $ 42.0 million.

The D2C Media Acquisition related goodwill was preliminary as of December 31, 2023, and was subject to an immaterial purchase accounting adjustment in 2024.

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

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

Goodwill and Indefinite-Lived Intangible Asset Impairment Test.

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Content library

As of December 31, 2023, projected annual amortization expense for amortizable intangible assets is as follows (in thousands):

Credit Agreement.

On May 31, 2017, the Company and certain of its domestic wholly-owned subsidiaries (collectively, the “Guarantors”) entered into what was originally a $900.0 million Credit Agreement (the “Credit Agreement”) with the lenders named therein.

Subsequent to the initial Credit Agreement, the Company has entered into four amendments.

The Credit Agreement’s initial maturity was May 31, 2022 and originally included (a) revolving loan commitments in an aggregate principal amount of up to $ 450.0 million (of which up to $ 25.0 million may be in the form of letters of credit at its request) and (b) term

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

loans in an aggregate principal amount of $ 450.0 million.

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 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).

The Credit Agreement allowed for with a temporary step up to the maximum Total Net Leverage Ratio for material permitted acquisitions.

Third Amendment.

On October 30, 2020, the Company entered into the Third Amendment to its Credit Agreement in connection with a broader refinancing, in which the Company reduced the size of the 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, among others:

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

• A minimum Interest Coverage Ratio of 2.75 x and 3.00 x 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 %;

Fourth Amendment.

In the second quarter of 2023, the Company entered into an amendment (the “Fourth Amendment”) to the Credit Agreement.

The Fourth Amendment, among other things, memorializes certain terms of the Credit Agreement to replace the relevant benchmark provisions from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and makes certain other conforming and mechanical changes.

This amendment also included a more favorable credit spread adjustment.

Except as modified by the Fourth Amendment, the existing terms of the Credit Agreement remain in effect.

As of December 31, 2023, the outstanding principal amount under the Term Loan was $ 55.0 million and the interest rate in effect was 7.5 %.

During the year ended December 31, 2023, the Company made $ 11.3 million in Term Loan payments.

As of December 31, 2024, projected annual amortization expense for amortizable intangible assets is as follows (in thousands):

Fifth Amendment to the Credit Agreement.

On May 6, 2024, the Company amended and extended its existing Credit Agreement (the "Fifth Amendment") which resulted in a new $ 350.0 million Revolving Loan due in 2029.

Upon closing, the Company borrowed $ 80.0 million under the new Revolving Loan to pay off and extinguish the outstanding $ 45.0 million in aggregate principal amount of existing Term Loan and $ 35.0 million in aggregate principal amount of existing Revolving Loan balances.

This was a non-cash transaction predominantly amongst existing lenders in the Credit Agreement and therefore is not reflected within the Consolidated Statements of Cash Flows.

Additionally, the Fifth Amendment, among other things, removed the Secured Overnight Financing Rate (SOFR) floor and replaced the financial covenant leverage test to Senior Secured Net Leverage from Senior Secured Leverage.

Except as modified by the Fifth Amendment, the existing terms of the Credit Agreement, as amended, remain in effect.

Revolving Loan.

As of December 31, 2023, the outstanding borrowings under the Revolving Loan were $ 35.0 million and the interest rate in effect was 7.5 %.

During the year ended December 31, 2023, the Company borrowed $ 45.0 million and made $ 25.0 million in Revolving Loan payments.

As of December 31, 2023, $ 195.0 million was available to borrow under the Revolving Loan.

The Company’s borrowings are limited by its Senior Secured Leverage Ratio and Consolidated Interest Coverage Ratio, which were 0 .5 x and 6.0 x as of December 31, 2023, respectively, and calculated in accordance with the Company's Credit Agreement.

As of December 31, 2024, $ 290.0 million was available to borrow under the Revolving Loan, and the Company had $ 60.0 million of outstanding borrowings.

The Company made $ 20.0 million in cash payments on the Revolving Loan during the year ended December 31, 2024.

There we re no cash drawdowns during the period.

The interest rate in effect as of December 31, 2024 was 6.5 %.

The Company’s borrowings are limited by its Senior Secured Net Leverage Ratio and Consolidated Interest Coverage Ratio, which were 0.04 x and 6.5 x, respectively, as of December 31, 2024 and calculated in accordance with the Company's Credit Agreement.

During the year ended December 31, 2024 , the Company made $ 10.0 million in Term Loan payments.

In connection with the Fifth Amendment in May 2024, the Company borrowed amounts under the new Revolving Loan to fully repay the remaining outstanding principal amount under the Term Loan in a non-cash transaction.

Senior Unsecured Notes.

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Debt Issuance Costs.

Debt issuance costs related to the various amendments and issuances were $ 8.1 million and $ 11.1 million as of December 31, 2023 and December 31, 2022, respectively.

Debt issuance costs related to the various amendments and issuances were $ 7.7 million and $ 8.1 million as of December 31, 2024 and 2023, 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.

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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 was locked into a fixed rate of interest of 2.96 %, on a notional amount of $ 300.0 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 income was frozen and then was ratably reclassified into Net income over the remaining life of the Swap through Interest expense, net and Income tax (benefit) expense within the Consolidated Statements of Income.

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.

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.

Due to the reduction in the Term Loan as compared to the notional amount of the Swap, the Company wrote-off a proportional amount of the frozen Accumulated other comprehensive income balance as of the date of the partial extinguishment proportional to the reduction in the underlying notional amount of Term Loan.

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

Any changes in the fair value of the Swap were recorded within Other expense, net on the Consolidated Statements of Income.

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

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

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

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

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

During the year ended December 31, 2022, $ 2.4 million was reclassified from Accumulated other comprehensive (loss) income and recorded in Interest expense, net, respectively.

During the year ended December 31, 2022, the Company made payments of $ 3.3 million related to the Swap.

During the year ended December 31, 2022, $ 0.4 million was reclassified as a tax benefit from Accumulated other comprehensive (loss) income into Income tax expense (benefit) on the Consolidated Statements of Income.

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, which is the Company's 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.

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

In November 2024, the Company amended the lease, which resulted in a reduction of its office space by 67 %, extension of the lease term from June 2031 to June 2036 for the remaining portion, and paid a termination penalty of $ 10.5 million.

This was accounted for as a lease modification.

Monthly rental payments under the lease escalate by 2.5 % each year through June 2031 , then by 1.5 % each year through the remainder of the lease.

As a result of this lease modification, and the commencement of a separate lease, the Company recognized $ 4.7 million of right of use assets obtained in exchange for lease obligations during the year ended December 31, 2024.

As of December 31, 2024, the Company’s scheduled future minimum lease payments under operating leases having initial noncancelable lease terms of more than one year, is as follows (in thousands):

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Long-term lease obligations

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

(1) The Company’s lease agreements do not provide a readily determinable implicit rate nor is it available from the Company’s lessors.

Therefore, in order to discount lease payments to present value, the Company has estimated its incremental borrowing rate based on information available at either the lease transition date (for those leases that commenced prior to January 1, 2019) or the lease commencement or acquisition date (for those leases that commenced or were acquired after January 1, 2019).

Therefore, in order to discount lease payments to present value, the Company has estimated its incremental borrowing rate based on information available at the lease commencement, modification or acquisition date.

As of December 31, 2024 and 2023 , the Company’s operating lease assets, included in Investments and other assets , net, were $ 16.8 million and $ 13.0 million, respectively, and operating lease liabilities were $ 20.6 million and $ 27.6 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 .

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Weighted-average discount rate as of December 31,

(1) The year ended December 31, 2024 includes a termination penalty of $ 10.5 million related to the lease amendment.

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.

From time to time, the Company and its subsidiaries may become involved in actions, claims, suits or other legal or administrative proceedings arising in the ordinary course of business.

The Company records a liability when it believes that it is both probable that a loss will be incurred and the amount of loss can be reasonably estimated.

The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate.

Significant judgment is required to determine both the probability and the estimated amount.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

The Company evaluates, at least quarterly, developments in its commitments and contingencies that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate.

Significant judgment is required to determine both the probability and the estimated amount of liability, if any.

It is not possible to predict the outcome of these proceedings or the range of reasonably possible loss.

The Company does not expect, based on circumstances currently known, that the ultimate resolution of any of these proceedings will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

Stockholders' Equity

In February 2022, the Company's Board of Directors authorized a three-year share repurchase program to acquire up to $ 200.0 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 repurchase program may be suspended or discontinued at any time and does not obligate the Company to repurchase any specific amount or number of shares.

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

During the year ended December 31, 2024 , the Company repurchased and subsequently retired 2.8 million shares for $ 49.2 million at an average price paid per share of $ 17.72 .

As of December 31, 2023, $ 119.7 million of the program remains available.

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Stock-Based Compensation

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compensation expense

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

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

Year Ended December 31,

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General and administrative

For the years ended December 31, 2023 and 2022, excluded from stock-based compensation expense is $ 0.3 million and $ 0.1 million of capitalized internally developed technology costs, respectively.

For each of the years ended December 31, 2024 and 2023 , $ 0.3 million of capitalized internally developed technology costs is excluded from stock-based compensation expense.

Information related to outstanding stock-based compensation awards as of December 31, 2024 for restricted share units ("RSUs"), performance share units ("PSUs"), stock options and the Cars Commerce Employee Stock Purchase Plan ("ESPP") is as follows (in thousands, except for weighted-average remaining period):

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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,

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

generally ranging between one and three years and the fair value of the RSUs is equal to the Company's common stock price on the date of grant.

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

RSU activity for the year ended December 31, 2024 is as follows (in thousands, except for weighted-average grant date fair value):

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Outstanding as of December 31, 2024 (1)

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

(1) Includes 376 RSUs that were vested, but not yet delivered.

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Expense related to PSUs is recognized when the performance conditions are probable of being achieved.

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 after the end of the respective performance period.

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Exercisable as of December 31, 2024

There were no stock options granted during the year ending December 31, 2023.

The fair value of the stock options granted during the years ended December 31, 2022 and 2021 were 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)

There were no stock options granted during the years ending December 31, 2024 and 2023 .

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

Risk-free interest rate

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Expected years until exercise

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

Employee Stock Purchase Plan ("ESPP").

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Earnings Per Share

Basic earnings per share is calculated by dividing Net income by the weighted-average number of shares of common stock outstanding.

Basic earnings per share is calculated by dividing Net income by the weighted-average number of shares of the Company's common stock outstanding.

Diluted earnings 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 AccuTrade Acquisition, the Company may pay up to $ 15.0 million of the contingent consideration in stock at a future date at the Company's discretion.

As part of the AccuTrade Acquisition, the Company may pay up to $ 15.0 million of the contingent consideration in shares of the Company's common 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 per share is as follows (in thousands, except per share amounts):

The computation of Earnings per share is as follows (in thousands, except per share amounts):

Year Ended December 31,

Net income (1)

Basic weighted-average common shares outstanding

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Earnings per share, diluted (1)

(1) During the year ended December 31, 2023 the Company released a significant portion of its valuation allowance for deferred tax assets that had been recorded as a result of the 2020 goodwill and indefinite-lived intangible asset impairments.

For more information, see Note 14 (Income Taxes).

(2) There were 31 , 290 and 2,033 potential common shares excluded from diluted weighted-average common shares outstanding for the years ended December 31, 2024, 2023 and 2022 , respectively, as their inclusion would have had an anti-dilutive effect.

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state and local

Total deferred income tax (benefit) expense

Income tax (benefit) expense

Total deferred income tax expense (benefit)

Income tax expense (benefit)

The income tax provision differed from amounts computed at the statutory federal income tax rate, as follows (in thousands, except percentages):

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State income taxes, net of federal income tax expense

Nondeductible executive compensation

Nondeductible transaction expenses

Nondeductible executive compensation

Uncertain tax positions

Stock-based compensation

Return to provision adjustments

Uncertain tax positions

Valuation allowance

Income tax (benefit) expense

Deferred Tax Assets and Liabilities and Valuation Allowance.

Income tax expense (benefit)

Deferred Tax Assets, Liabilities and Valuation Allowance.

The Company has recorded deferred tax assets related to federal and state income tax net operating loss ("NOL") carryforwards of approximately $ 2.9 million and $ 2.4 million as of December 31, 2024 and 2023, respectively.

These federal NOLs, and certain state NOLs, can be carried forward indefinitely.

Prior 2023, the Company concluded a valuation allowance was required against its deferred tax assets.

In reaching this conclusion, in accordance with U.S.

GAAP, the Company evaluated all available evidence, both positive and negative, and determined that the Company’s history of recent losses, primarily due to the goodwill and indefinite-lived intangible asset impairments, was significant negative evidence to require a valuation allowance.

Therefore, the Company recorded a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized in future periods.

At each reporting date, the Company evaluates the realizability of its deferred tax assets to determine whether a valuation allowance is warranted.

During 2023, the Company evaluated all available evidence and determined that the Company's recent performance and future projections enabled the Company to release a significant portion of the Company's valuation allowance that was previously recorded.

The Company also has recorded deferred tax assets related to federal and state research and development (“R&D”) tax credit carryforwards of $ 1.2 million, as of December 31, 2023 and 2022.

The Company has also recorded deferred tax assets related to federal and state research and development ("R&D") tax credit carryforwards of $ 1.9 million and $ 1.2 million as of December 31, 2024 and 2023 , respectively.

The federal and state R&D tax credits generally may be carried forward 20 years and 5 years, respectively.

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R&D expenditures) beginning in the Company’s 2022 fiscal year.

During 2023, the Company released a significant portion of the valuation allowance that had been previously recorded against its deferred tax assets.

In connection with the sale of the Company’s RepairPal equity investment during 2024, the Company released its remaining portion of the valuation allowance.

As a result, the Company has no valuation allowance recorded as of December 31, 2024.

For more information on the sale, see Note 2 (Significant Accounting Policies).

Cars.com Inc.

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Indefinite lived intangibles

Property and equipment

Right of use assets

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Deferred income tax assets:

Accrued compensation

Capitalized research and development costs

Definite lived intangibles

Accrued compensation

Lease obligations

Interest expense limitation carryforward

NOL and tax credit carryforwards

1 unchanged sentence

Valuation allowance

Net deferred tax asset (liability)

Net deferred tax asset

The deferred tax assets and liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2024 and 2023 were as follows (in thousands):

1 unchanged sentence

Other noncurrent liabilities

Net deferred tax asset (liability)

Net deferred tax asset

Uncertain Tax Positions.

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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

Cars.com Inc.

Notes to Consolidated Financial Statements (Continued)

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.

The Company’s CODM is the Cars Commerce Chief Executive Officer .

The CODM makes resource allocation decisions to maximize the Company’s consolidated financial results.

No asset information is provided to the CODM.

For the years ended December 31, 2024, 2023 and 2022 , the Company had one operating and reportable segment.

The Company's significant segment expenses are as follows:

Year Ended December 31,

OEM and National

Total revenue

Operating expenses:

Employee expense (1)

Marketing and advertising

Hardware, software and supplies

Stock-based compensation

Depreciation and amortization

Total operating expenses

Operating income

Nonoperating income (expense), net

Income before income taxes

Income tax expense (benefit)

(1) Employee expense excludes stock-based compensation, which is shown separately, and earnout compensation related to the D2C Media Acquisition, which is included in Other.

(2) Other primarily includes total lease cost, utilities, consulting and professional fees, earnout compensation related to the D2C Media Acquisition and travel and expense, training and conferences.

For more information on the D2C Media earnout, see Note 3 (Business Combinations).

For the years ended December 31, 2024, 2023 and 2022 , 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

DealerClub Acquisition.

In January 2025, the Company acquired all of the outstanding stock of DealerClub, Inc.

("DealerClub"), an emerging dealer-to-dealer digital wholesale auction platform that facilitates transparent and efficient transactions between automotive dealers.

Cash consideration for the transaction will be approximately $ 25.3 million at closing and funded with cash on hand.

There is also the potential for additional performance-based consideration of up to $ 88.0 million through 2028, which may be paid in cash or stock.

The amount to be paid will be based on achievement of certain financial thresholds.

Share Repurchase Program.

In February 2025, the Company's Board of Directors authorized a share repurchase program to acquire up to $ 250.0 million of the Company's common stock over a three-year period.

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

The Company intends to fund the share repurchase program principally with cash from operations.

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 7. Management’s Discussion and Analysis