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Item 1. Business

2021-02-25 compared with 2020-02-26 · 180 added, 116 removed, 48 unchanged (86% of the section changed)

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CARS conducts all of its operations through its wholly owned subsidiaries.

We are a leading digital marketplace and solutions provider for the automotive industry that connects car shoppers with sellers and original equipment manufacturers (“OEM”s).

Our marketplace empowers shoppers with the resources and information to make confident car buying decisions, while our digital solutions and technology platform helps sellers improve operational efficiency, profitability and sales.

Our portfolio of brands includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, NewCars.com and PickupTrucks.com.

The CARS marketplace consists of a fully-responsive website that is accessible on a user’s device of choice as well as the No.

1 downloaded and rated mobile application in our category.

It features a database of 4.5 million new and used vehicle listings, more than eight million consumer and expert reviews, a significant news and research section, consisting of original editorial content from a team of automotive experts, and several pricing, comparison and research tools to help guide shoppers on their path to purchase.

Recently launched shopper solutions include:

More than 70 percent of early-stage car shoppers are undecided about make and model, and yet all car search sites begin the same way:

by asking consumers to select make or model.

In 2018, Cars.com launched “Matchmaker,” a new, simple search experience powered by machine learning that helps match undecided shoppers with the best car for them based on their individual lifestyle and preferences.

Pricing Tools:

In addition to a pricing calculator and intuitive price comparison tool featured on each vehicle details page, we also offer a series of deal badges to help shoppers understand how well a particular vehicle is priced within the market they are shopping.

Our deal badges consider several different factors impacting a vehicle’s value, including its condition, ownership history, popular features and market factors.

Our “Hot Car” badge leverages predictive analytics to determine how quickly a vehicle will sell.

We analyze over 50 factors affecting vehicle supply, demand and pricing on a market level to alert shoppers of exceptional deals and encourage them to act now.

Salesperson Connect:

In 2017, we became the first marketplace to offer dealership salespeople reviews with the launch of Salesperson Connect.

The feature allows shoppers to read salesperson related reviews, select and connect with a salesperson before ever stepping foot on a dealership lot.

Digital Solutions & Technology Platform.

As we expand beyond an inventory listings provider to a full-service digital solutions provider, bolstered by our acquisitions of Dealer Inspire and DealerRater, our offerings and value proposition for both shoppers and sellers has strengthened.

Dealer Inspire, acquired in 2018, is an automotive technology leader that provides market-leading websites, technology solutions and advertising services to dealers across the United States and Canada.

DealerRater, acquired in 2016, is one of the nation’s leading sources of user-generated reviews of both automobile dealers and dealership salespeople.

Through DealerRater, we help dealerships establish and manage their reputations.

DealerRater’s six million reviews are syndicated across a variety of platforms (including Cars.com), reaching more than 40 million consumers, digitally, each month.

Digital Advertising.

We offer dealers and manufacturers a variety of digital advertising services and solutions, including our core inventory listings package, display advertising, social media advertising, video marketing, paid search and email marketing.

CARS was established in 1998 as part of a joint venture formed by a number of leading newspaper and broadcast companies that realized their historic classified advertising businesses were being eroded as advertising began to move to the Internet.

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

Our vision is to become the largest digital automotive marketplace and platform powering innovative solutions and frictionless omni-channel experiences supporting local buyers and sellers.

Our vision is realized through three strategic priorities:

continue to build industry-leading shopping experiences to drive our audience, bring market-leading solutions to our customers, and enable online transactions to support local and small businesses across the country.

Through our marketplace, dealer websites and other digital products, we showcase dealer inventory, elevate and amplify dealers’ and automotive manufacturers’ (“OEMs”) brands, connect sellers with our ready-to-buy audience and empower shoppers with the resources and information needed to make confident car buying decisions.

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

We launched in 1998 with the flagship marketplace Cars.com and, on June 1, 2017, became a publicly traded company with our shares traded on The New York Stock Exchange (the “NYSE”).

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

Attracting ready-to-buy car shoppers to our marketplace is crucial to meeting the needs of our customers.

Driven by the strength of the Cars.com brand name and our extensive trusted editorial content, we attract over 20 million unique visitors each month, the majority

coming to us organically.

Approximately 85% of consumers who visit Cars.com intend to purchase a vehicle within the next six months, and we believe Cars.com has some of our category’s strongest site engagement.

Our marketplace is core to our business, and we have built on this strength to increase our value to customers by also providing digital solutions.

Through the acquisitions of DealerRater in 2016 and Dealer Inspire in 2018 and our recently launched FUEL product, we have materially expanded our solutions and media offerings to improve the sales, operational efficiency and profitability of our automotive customers.

For Customers.

Our primary customers are local car dealers, OEMs and other national advertisers.

For the year ended December 31, 2020, 85% of our revenue was generated from car dealerships, 13% related to OEMs and other national advertisers and 2% was generated from other customers.

Dealer Customers.

As of December 31, 2020, we served 18,372 dealer customers across all 50 states, including franchise dealers and independent dealers, with both digital and brick-and-mortar stores.

The vast majority of our dealer customers are car sellers advertising through our marketplace subscription products.

Manufacturers.

As of December 31, 2020, we served nearly all of the major automakers selling vehicles in the United States.

For Shoppers.

At the core of our business is a powerful marketplace that functions as a definitive resource for car buyers.

We are known for our scale and depth with nearly four million used and new vehicle listings, nearly ten million consumer and expert editorial reviews, and a significant news and research section that helps shoppers along their purchase journey.

Our user experience is focused on reducing friction, improving speed and delivering powerful results through several pricing, comparison, research and communication tools in order to empower buyers.

As a result of the imposition of government restrictions in response to the novel coronavirus disease 2019 (“COVID-19”) pandemic, we launched additional digital products in 2020 to meet the rise in demand for online car shopping and buying.

Both buyers and sellers have accelerated their adoption of digital tools, products and solutions.

With digital tools and virtual buying and selling as a defining feature of our offerings, we pivoted quickly to meet the market in March 2020 with the launch of new Home Delivery and Virtual Appointment badges, allowing shoppers to easily identify which dealerships offer these digital and contactless buying options.

Since we launched these badges, nearly twenty million vehicles across nearly 11,000 dealers nationwide have been badged.

In addition, we launched Virtual Test Drives to enable shoppers to remotely experience many of the features and functionality of a vehicle.

These new product launches complement our Conversations chat tool and our Online Shopper digital retailing tool to allow shoppers to communicate directly with dealers and confidently make purchase decisions, creating a frictionless shopping and selling experience, even with COVID-19 related restrictions (as defined below) and social distancing.

We offer local dealers, OEMs, dealer groups and auto-adjacent companies a variety of digital products utilizing media, technology and data.

We generate revenue primarily through the sale of our marketplace subscription products to local car dealer customers which provide dealers with access to our high-quality, in-market audience of car shoppers.

We supplement our marketplace products with digital solutions offerings, which have become a key area of growth.

Cars.com was established in 1998 as part of a joint venture formed by a number of leading newspaper and broadcast companies that realized their historic classified advertising businesses were being eroded as advertising began to move to the Internet.

In 2014, one of the joint ventures, Gannett Co., Inc.

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and distributing 100% of our common stock to TEGNA’s shareholders.

On June 1, 2017, our common stock began trading on the New York Stock Exchange (the “NYSE” under the ticker symbol “CARS”).

On June 1, 2017, our common stock began trading on the NYSE under the ticker symbol “CARS”.

In February 2018, we acquired the stock of privately held Dealer Inspire Inc.

and, substantially all the assets of Launch Digital Marketing LLC, which provided the digital marketing services now offered by Dealer Inspire.

which provides website and other technology solutions, and substantially all the assets of Launch Digital Marketing LLC, which provided the digital marketing services now offered by Dealer Inspire.

Industry Dynamics.

CARS operates in the large and growing automotive advertising and technology solutions market.

According to the Borrell Associates’ 2018 Automotive Outlook report, approximately 67% of the $34 billion U.S.

auto advertising industry is spent on digital marketing.

Over the next five years, advertising for the automotive industry is expected to grow to approximately $37 billion, with digital advertising expected to reach 74% of the overall market spend over the same period.

Furthermore, dealers spend three times more on solutions than marketing, according to the same report.

Automotive dealers are facing increasing market pressures to become more competitive in attracting car buyers.

Margins are compressing while consumer expectations are growing.

Dealers are investing more on technology solutions and their first-party platforms (their own websites).

CARS is the only combined marketplace and solutions provider in the market today.

Moving beyond a pure marketplace model to a comprehensive, multi-faceted sales-oriented suite of tools and solutions, with one of the biggest online marketplaces as its crown jewel, allows for unique product offerings that cannot be found or emulated by any competitor.

According to recent Automotive Outlook Reports from Borrell Associates, approximately 63% of the $33 billion U.S.

auto advertising industry was projected to be spent on digital marketing in 2020.

By 2023, advertising for the automotive industry is expected to grow to approximately $36 billion, with digital advertising expected to reach approximately 74% of the overall market spend over the same period.

Furthermore, dealers spend four times more on digital solutions than marketing, according to Borrell Associates.

Automotive dealers operate in a competitive market.

Prior to the COVID-19 pandemic, dealers were experiencing margin compression, decreased OEM support, and growing consumer expectations around service and support.

As a result, dealers are investing more in technology solutions and their first-party platforms (their own websites).

This trend has accelerated in the current

COVID-19 environment.

Dealers are embracing technology solutions that help drive operational efficiency and allow them to support consumers through their preferred channels (online, offline, or both).

In part by leveraging technology solutions, many dealers are achieving record profitability.

As the first truly integrated marketplace and solutions provider in the market today, we believe we are well-positioned to support dealers with our comprehensive, multi-faceted sales-oriented suite of tools and solutions .

For shoppers, buying a car is one of life’s most significant and researched decisions.

According to a 2018 Mintel study, two out of three car shoppers believe buying a vehicle is stressful.

According to Mintel’s 2020 car purchasing study, approximately 69% of car shoppers believe buying a vehicle is stressful.

Numerous product options with opaque, negotiable prices and gaps in the online-to-offline shopping experience add complexity to an already overwhelming decision-making process.

Consumers want an improved shopping experience.

Automotive marketplaces help car shoppers research and facilitate their car purchase.

Shoppers want a streamlined, simplified automotive retail experience.

Marketplaces like Cars.com help car shoppers cut through the clutter and support shoppers with empowering tools from search to signature.

Dealers and OEMs value our marketplace for the chance to connect with our unique, extensive and valuable in-market audience, and to improve their marketing efficiency with our suite of solutions and tools.

According to the 2018 Car Buyer Journey study conducted by IHS Markit, nearly 80% of car shoppers utilize third-party sites such as Cars.com and spend more than 60% of their research time on these sites.

We see an opportunity to continue to address pain-points for both car shoppers and sellers.

CARS makes shopping easier by providing the tools and information needed to better prepare consumers for the visit to the dealership lot, and we deliver solutions that drive efficiency, profitability and improved sales for sellers.

Our core customers are car dealerships and automotive manufacturers.

84.3% of our revenue is generated from car dealerships, while 13.3% comes from manufacturers and national advertisers and 2.4% is generated from customers within peer industries.

Dealer Customers.

As of December 31, 2019, we served 18,834 dealer customers, including both franchise dealers and independent dealers, in all 50 states.

Manufacturers.

As of December 31, 2019, we served all but one of the major automakers selling vehicles in the United States.

Attracting ready-to-buy car shoppers to our marketplace is crucial to meeting the needs of our automotive customers.

We believe we are the category leaders in organic traffic and the vast majority of our traffic is organic.

Eight out of ten consumers who visit Cars.com intend to purchase a vehicle, and we believe we have some of the category’s strongest site engagement.

We generate revenue primarily through the sale of online subscription advertising products to car dealer customers, which enable dealers access to our high-quality, in-market audience of car shoppers through their vehicle inventory listing.

The growth of our solutions business has become a core focus for us.

Some of our core digital solutions and technology products for customers include:

Our core products for sellers include:

Marketplace products.

Marketplace subscription advertising.

We sell marketplace subscription advertising to dealer customers through varying levels of subscription packages.

Our subscription packages provide the dealer customer’s available new and used vehicle inventory to in-market shoppers on the Cars.com website.

We also offer our customers several add-on products to the subscription packages.

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

Display Advertising.

Our display advertising business helps dealers and manufacturers alike extend their reach and stand out from their competition in front of a large audience of in-market car shoppers.

Our geographically targeted advertising served on desktop and mobile helps retailers increase brand awareness and promote inventory.

Beyond our core Cars.com platform, we offer audience extension products which allow dealers and manufacturers to extend their reach and deliver targeted display advertising based on location and desired vehicle type on other advertising networks.

We sell marketplace subscription advertising to dealer customers through varying packages, which allow our dealer customers to showcase their available new and used vehicle inventory to our extensive audience of in-market car shoppers.

We also offer our customers several add-on products, which include premium on-platform advertising products that can be uniquely tailored to an individual dealer customer.

Our marketplace subscription service continues to be our largest product by revenue and number of subscribing dealers.

Social selling.

In 2018, CARS pioneered the use of social media platforms to sell cars by launching multiple solutions for both dealers and manufacturers to connect with a new audience and sell more cars.

For dealers, we offer Cars Social and Social Sales Drive .

Cars Social serves native advertisements displaying real-time inventory to consumers on Facebook and Instagram and leverages Cars.com’s valuable first-party audience data to target shoppers.

Social Sales Drive helps dealers extend the reach of their Cars.com used vehicle listings onto Facebook Marketplace (where we manage over 375,000 listings as of December 31, 2019) and seamlessly connects dealers with shoppers via Dealer Inspire’s AI-powered chat tool embedded into Facebook Messenger.

For manufacturers, we offer Social Extension , Social Link and Social Data , digital advertising products that serve static, creative assets to consumers on Facebook and Instagram, and enable manufacturers to access Cars.com’s invaluable first-party audience data of 22.6 million average monthly unique visitors.

In 2018, we pioneered the use of social media platforms to sell cars by launching multiple solutions for both dealers and OEMs to connect with in-market car shoppers on social media platforms, expanding their opportunity to sell more cars.

We offer Cars Social, for both dealers and OEMs, which serves native advertisements displaying real-time inventory to consumers on Facebook and Instagram and leverages our valuable audience data to target in-market car shoppers.

Digital Solutions.

Website platform hosting.

A six -time Automotive Website Award Pinnacle Platform Winner, our advanced website platform is the core of our connected eco system of solutions that make automotive retail faster, easier, and smarter from search to signature.

Through our Dealer Inspire brand, a seven-time Automotive Website Award Pinnacle Platform Winner, our advanced website platform is the core of our connected ecosystem of solutions that make automotive retail faster, easier and smarter from search to signature.

Built on a customizable platform and designed with user behavior data, our websites are set apart by advanced technologies that drive modern consumers toward purchase decisions.

Review & Reputation Management.

We are the largest dealer review platform in the industry, with over eight million consumer and expert reviews.

Our reputation management solutions enable dealers to build, measure, monitor and manage their review programs.

Digital Retailing .

Online Shopper™ is our digital retailing solution that allows shoppers to customize and compare payments across multiple vehicles to make real buying decisions with dealers’ inventory.

A “Garage” feature allows consumers to save vehicles, customize and compare their payments side-by-side, add finance and insurance products and aftermarket accessories, and checkout for delivery or pick-up in just three easy steps .

Proprietary Reporting.

Our platform was first built in 2012 to provide dealers with transparent ROI on their website and marketing performance, and advanced reporting continues to enhance the dealer software — including Roxanne™ event-based attribution and customer models, as well as the brand-new PRIZM™ dashboard with proactive data alerts.

Website hosting is a business with high retention rates and supports the reliability, stability and diversification of our revenue streams.

AI chat tool .

With AI technology and managed chat support to instantly respond to all incoming messages 24/7, Conversations™ turns chats into customers.

Conversations is built to connect today’s car shoppers with dealerships — wherever, whenever, and however they want to shop.

Key Differentiators.

Our strategy is to drive efficiencies in the automotive industry by uniting media, solutions and data.

We believe that our business has many competitive advantages, including:

A Powerful Family of Brands with Industry-Leading Fundamentals.

Our Conversations product turns chats into customers by leveraging AI technology, live video chat capabilities and managed chat support to instantly respond to all incoming messages 24/7.

Conversations is built to connect today’s car buyers with sellers — wherever, whenever and however they want to shop.

Digital retailing .

Our Online Shopper solution enables e-commerce transactions for dealers.

The “Garage” feature allows shoppers to save vehicles, customize and compare their payments side-by-side, add finance and insurance products and aftermarket accessories, and checkout for delivery or pick-up in just three easy steps.

Review and reputation management .

Through our DealerRater brand, we are one of the leading dealer review platforms in the industry, with nearly seven million consumer reviews.

Our reputation management solutions enable dealers to build, measure, monitor and manage their review programs to drive more leads that close faster.

DealerRater reviews are syndicated across a variety of platforms (including Cars.com), reaching more than 40 million consumers, digitally, each month.

Display advertising .

Our display advertising business helps dealers and manufacturers extend their reach and efficiently access our large audience of in-market car shoppers.

The geographically targeted advertising served on our Cars.com site and mobile app enables retailers to increase brand awareness and promote inventory.

Digital advertising services .

We also offer programs that manage dealer search engine optimization, as well as paid media spend beyond the Cars.com platform.

Our data analytics and insights ensure dealers’ search investments are deployed in the most efficient manner possible.

In-market video .

Launched in 2020, FUEL is a digital video solution that provides OEMs and dealers with the opportunity to reach Cars.com’s in-market car shopping audience of over 20 million monthly shoppers on their screen of choice via social media platforms and streaming apps.

FUEL leverages Cars.com’s high-quality, in-market audience data to pinpoint serious ready-to-buy shoppers.

This targeted approach drives high advertising efficiency for FUEL, which compares favorably to high-cost broadcast television solutions that dealers and OEMs have historically relied on.

Our strengths and competitive advantages.

Our strategy is to drive growth and efficiency in the automotive industry by uniting media, solutions and data.

We believe our business has many competitive advantages, including:

A powerful family of brands with industry-leading fundamentals at scale.

Cars.com is synonymous with car shopping.

Among our competitive set, we rank No.

1 in brand awareness, according to Millward Brown, a global leader in brand strategy consulting.

Among our competitors, we rank No.

1 in brand awareness according to Millward Brown, a leader in brand strategy consulting.

We are trusted as a reliable partner for car buyers and sellers.

Dealer Inspire is widely recognized as an industry innovator who has propelled the future of automotive retail for sellers.

Among marketplaces, we are a first mover in extending our focus to automotive solutions.

Additionally, Dealer Inspire is widely recognized as an industry innovator that has helped to shape the future of automotive retail for sellers.

In 2019, Dealer Inspire earned 9.5 out of 10 in a customer satisfaction survey.

DealerRater is the No.

1 dealer review platform in the industry.

Together, Cars.com, Dealer Inspire and DealerRater are a strong force delivering the only combined digital marketplace and solutions provider in the market today.

A Growing, High-Quality Audience.

DealerRater is one of the leading dealer review platforms in the industry.

Our newly launched FUEL solution further differentiates us, as we leverage our powerful audience data to efficiently target shoppers on streaming apps and social media platforms through digital video.

Together, we believe Cars.com, Dealer Inspire, DealerRater and FUEL are a strong force delivering the first truly integrated digital marketplace and solutions provider in the market today.

A high-quality audience, at scale, drives our leading marketplace .

We have made strategic investments in technology and marketing to deliver what we believe is the industry’s most qualified audience of car shoppers.

And as a result, we have seen 24 months of consecutive year-over-year traffic growth.

As of December 31, 2019, the CARS network had more than 550 million annual site visits with nearly 23 million average monthly unique visitors.

In December 2019, traffic was up 42%, and we ended the year with traffic up 24%, year-over-year.

Notably, according to a third-party report, in late 2019, CARS became the No.

1 leader in SEO traffic in our category, with 45% growth year-over-year in December.

As the category URL with a trusted consumer brand, the majority of our traffic is generated organically.

Over the past 20 years, we have made more than half a billion connections between car shoppers and sellers and more than 80% of our audience is in market to buy a car, compared to a fraction of the general population.

The average days to a car purchase is under 60 days, while 46% of our audience plans to buy within 30 days.

Thus, we offer unique reach for advertisers and attract automotive manufacturers and dealerships seeking digital platforms for impactful campaigns.

A Growing Suite of Digital Solutions for Advertisers.

Our robust solutions portfolio is an important pillar of our strategy and a key differentiator versus our competitors.

Our seller solutions and technology help sellers expand their influence and engagement with consumers across the entire purchasing journey, increase operational efficiency, boost sales and profitability.

Our solutions reinforce the value of each item in our portfolio, which is important as shoppers rely on multiple digital touchpoints before they make a purchase.

For instance, Dealer Inspire enables dealers to improve their own website platforms with technologies such as voice search and add-on solutions such as digital retailing tools and connected real-time dashboards measuring marketing effectiveness.

DealerRater offers automotive retailers a platform for publishing reviews, ratings, and background on their salespeople, which is crucial at a time when customers across all industries rely on ratings and reviews before making purchases.

Mobile App Leadership.

Cars.com has seen steady growth in mobile traffic, consistent with the increasing use of mobile devices in car shopping.

The Cars.com app is the No.

1 downloaded app in our category for both iOS and Android devices.

Our mobile leadership benefits dealer customers in a number of ways.

For instance, our On the Lot patented technology shares data-driven insights with dealers about how consumers use their mobile devices to research our marketplace while physically on or near a dealership lot.

As of December 31, 2020, our network had 600 million annual site visits and 24 million Average Monthly Unique Visitors.

As the category URL with a trusted consumer brand, we generate the majority of our traffic organically.

Over the past 20 years, we have made more than half a billion connections between car shoppers and sellers.

Further, approximately 85% of our audience is in-market to buy a car, compared to a fraction of the general population.

The average time to purchase a car is less than 50 days, while approximately 49% of our audience plans to buy within 30 days.

Thus, we offer unique reach for advertisers and attract OEMs and dealerships seeking digital platforms for impactful campaigns and transactions with consumers.

The quality of our in-market audience is validated by the increasingly strong retention rates we are experiencing across our base of dealer customers.

As of December 31, 2020, our network of over 18,000 dealer customers maintained nearly 4 million average daily listings on our marketplace.

Internal research suggests that approximately 70% of consumers want to execute some portion of the automotive purchase online.

Since the COVID-19 pandemic began, consumers’ interest in completing price negotiations online reached 50% at the height of the pandemic while those interested in conducting financing and credit applications online rose to 41%.

Our marketplace plays an integral role in digitally connecting consumers and dealers to help facilitate these online transactions.

A growing suite of digital solutions for the automotive industry.

Our robust solutions portfolio is an important component of our strategy and a key differentiator from our competitors.

Our solutions and technology help sellers expand their influence and engagement with consumers across the entire purchasing journey, increasing sales, creating operational efficiency and improving profitability.

Examples of these solutions include:

Dealer Inspire .

Dealer Inspire participates in the majority of OEM sponsored digital website programs in the United States.

As of December 31, 2020, Dealer Inspire powered the digital storefront of dealers, hosting 4,400 websites.

Our digital retailing and selling solutions, such as Conversations and Online Shopper, further enhance our value proposition to dealers.

These fully integrated, value-add solutions allow consumers to explore pricing and financing options and enable consumers and dealers to engage directly via chat, video and text.

DealerRater .

DealerRater’s platform for collecting and publishing ratings and reviews, including reviews of dealership salespeople, is an important point of connection, as many shoppers would like to connect with and select a salesperson to work with prior to stepping on the lot.

According to a 2020 J.D.

Power New Autoshopper Study, approximately 64% of car shoppers use consumer reviews to help narrow down their choices.

Our FUEL solution provides dealers and OEMs the opportunity to harness the power and efficiency of digital video - a market that is predicted to grow to $4.8 billion by 2023 - by leveraging our unique, first-party audience data.

Dealers and OEMs today rely on broadcast television and general audiences for advertising.

Our in-market video strategy allows dealers

to become hyper-efficient with marketing spend and target only those shoppers who are looking to purchase a vehicle by serving them custom, interactive video content on video platforms such as YouTube, Hulu and Facebook.

We face competition to attract consumers and paying dealers to our marketplace and to attract advertisers to purchase our advertising products and services.

Our competitors offer various marketplaces, products, and services that compete with us.

Some of these competitors include:

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

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

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

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

Digital advertising providers

Competition for Consumers and Dealers.

We compete for consumer visits with other online automotive marketplaces, free listing services, general search engines, and dealers’ websites.

We compete for consumers primarily on the basis of the quality of the consumer experience.

We believe we compete favorably on user experience due to the number of our vehicle listings, the unbiased transparency of the information we provide on cars, prices, and dealers, the intuitive nature of our user interface, sophisticated search tools and algorithms and our mobile user experience, among other factors.

We compete for dealers’ marketing spend with offline customer acquisition channels, other online automotive marketplaces, dealers’ own customer acquisition efforts on search engines, and other internet sites that attract consumers searching for vehicles.

We compete primarily on the basis of the return on investment (“ROI”) to the customer that our marketplace provides.

We believe we compete favorably due to our large in-market consumer audience, high consumer engagement, and the volume and quality of connections we provide to well‑informed consumers, which results in an attractive ROI for dealers.

Competition for Advertisers.

We compete for a share of advertisers’ total marketing budgets against media sites, websites dedicated to helping consumers shop for cars, search engines and social media sites, among others.

We also compete for a share of advertisers’ overall marketing budgets with traditional media, such as television, radio, magazines, newspapers, automotive guide publications, billboards, and other offline advertising channels.

We compete for advertising spend based on the marketing ROI that our marketplace provides.

We believe we compete favorably due to our large in-market consumer audience size, high consumer engagement, and the effectiveness and relevance of our advertising products.

Intellectual Property .

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In particular, the advertising and sale of new or used vehicles is highly regulated by the states in which we do business.

Although we do not sell motor vehicles, the dealers from which we derive a significant portion of our revenue do sell them.

Moreover, state regulatory authorities or other third parties could take and, on some occasions, have taken the position that some of the regulations applicable to dealers or to the manner in which motor vehicles are advertised and sold generally are directly applicable to our business model.

Although we do not sell automobiles, the dealers from which we derive a significant portion of our revenue do sell them.

Moreover, state regulatory authorities or other third parties could take and, on some occasions, have taken the position that some of the regulations applicable to dealers or to the manner in which automobiles are advertised and sold generally are directly applicable to our business model.

By providing a medium through which users can post content and communicate with one another using text messages and other mobile phone communications , our business is subject to laws, regulations, and standards covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, such as the Telephone Consumer Protection Act, the CAN-SPAM Act, and similar state consumer protection laws.

Our digital solutions products may be subject to laws governing accessibility, intellectual property ownership, obscenity, libel, and privacy, among other issues.

In addition, we are subject to numerous federal, national, state, and local laws and regulations in the United States and internationally regarding privacy and the collection, processing, storage, sharing, disclosure, use, and protection of personal information and other data, such as the Gramm-Leach-Bliley Act or the California Consumer Privacy Act .

While the scope of these laws and regulations is changing and remains subject to differing interpretations, we seek to comply with industry standards and all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data protection.

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If, and to the extent that, our products and services fail to satisfy relevant regulatory requirements, we could be subject to significant civil and criminal penalties, including fines, or the award of significant damages in class action or other civil litigation, as well as orders interfering with our ability to continue providing our products and services in certain states.

As of December 31, 2019, we had approximately 1,500 full-time employees.

Human Capital.

CARS is committed to the highest standards of integrity, inclusion and responsible business practices.

We believe our unmatched desire to build a culture and business that cares about our employees, customers, industry and communities is a part of who we are – it’s in our DNA.

We believe our highly innovative and effective teams are one of the biggest differentiators and investments at CARS.

We promote and foster an environment that encourages constant learning and curiosity, including offering all of our employees additional learning and development opportunities.

More than 40% of our employees engage in some form of additional voluntary learning and development annually outside of our required trainings.

We provide individual training and certifications, across thousands of topics and interests, to ensure our teams continue developing the needed skills to grow in their careers at CARS and deliver their very best every day.

Leadership development programs are also available to provide in-depth training courses to help managers build successful teams focused on innovating in our business and the ever-changing automotive and technology industries.

The courses develop skills of influence, time management, coaching, feedback, conflict management, empathy and overall leadership.

At CARS, we believe we offer competitive and equitable compensation and benefits that include:

A leading Employee Stock Purchase Plan, under which all team members – including part-time and temporary employees – are eligible to participate

Alternative work arrangements for eligible employees, such as, our Work from Home program, which we believe improves work-life balance, productivity and overall employee satisfaction

Benefits such as family benefits, fitness programs and subsidies, tuition reimbursements, phone discounts, and volunteer opportunities

We also closely monitor employee satisfaction and engagement, conducting semi-annual, anonymous company-wide surveys that are shared with our executive management team and Board of Directors.

These surveys are an important way for us to identify areas where we can improve.

The survey typically generates more than 80% participation rate, which allows us to gather valuable insight into employee satisfaction.

We believe that a diverse workforce is necessary.

We undertake many initiatives to ensure that CARS is an inclusive place to work for people of all backgrounds, genders, nationalities, ethnicities, sexual orientations and beliefs.

We incorporate diversity considerations into all aspects of our employment journey, from targeted recruitment to fostering diversity affinity groups through our Employee Resource Groups.

We also offer frequent Unconscious Bias training to encourage and uncover opportunities to create a more inclusive and open workplace.

At CARS we have solidified our commitment to diversity, equity and inclusion by monitoring and measuring five key metrics:

diversity in talent acquisition;

retention of diverse employees;

learning and development;

and succession planning.

Our diversity initiatives are managed directly by our executive management team, underscoring our commitment to this important principle across all levels of the organization.

Beginning in 2021, each metric will influence a portion of each of our executive team members’ compensation.

We have a variety of active Employee Resource Groups at CARS, focused on serving as enterprise-wide champions for diversity, equity and inclusion – helping us to identify areas in which we can become even more inclusive.

These groups also allow for the open sharing of ideas and cultural awareness among our teams while providing civic engagement within our communities, leadership development and improving overall cultural competence.

As of December 31, 2020, CARS had approximately 1,500 full-time employees.

In total, 46.3% of the employees identify as female and 22.7% identify as having a racial and ethnic background other than white.

The CARS executive management team consists of 10 members, and 30.0% identify as female, 40.0% identify as having a racial and ethnic background other than white and 30.0% self-

identify as LGBTQIA.

In addition, our Board of Directors consists of 10 members, 20 .0 % who identify as female and 20 .0 % as having a racial and ethnic background other than white .

We also engage contractors to support our operations.

None of our employees are represented by a labor union or subject to a collective bargaining agreement.

We have not experienced any work stoppages, and we consider our relations with our employees to be good.

Available Information.

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Item 1. Business