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CARS Reports Second Quarter 2021 Results

August, 05, 2021
Exceeded Second Quarter Guidance
Continued Growth in ARPD, Dealer Customers and Revenue
Robust Year-Over-Year Growth in Year-to-Date Operating Cash Flow

CHICAGO, Aug. 5, 2021 /PRNewswire/ -- Cars.com Inc. (NYSE: CARS) ("CARS" or the "Company"), a leading digital marketplace and solutions provider for the automotive industry, today released its financial results for the quarter ended June 30, 2021.

Q2 2021 Financial and Key Metric Highlights

  • Revenue of $155.5 million, up $53.5 million, or 52% year-over-year. Excluding the impact of prior-year invoice credits,1 revenue was up $15.3 million, or 11%, year-over-year.
  • GAAP Net income totaled $6.0 million, or $0.08 per diluted share
  • Adjusted EBITDA of $48.5 million, or 31% of Revenue
  • Year-to-Date Net cash provided by operating activities of $79.6 million, up 38% year-over-year, with Free Cash Flow of $66.5 million, up 36% year-over-year
  • Average Monthly Unique Visitors of 26.4 million, up 16% year-over-year
  • Traffic of 158.4 million, up 10% year-over-year
  • Monthly Average Revenue Per Dealer ("ARPD") of $2,299, up 59% from $1,442 in the prior-year period. Excluding the impact of prior-year invoice credits, year-over-year ARPD growth was 10%, approximately half of which was driven by FUEL.
  • Dealer Customers of 18,845 as of June 30, 2021, up 22 compared to 18,823 as of March 31, 2021






1


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

Operational Highlights

  • Made a $20.0 million voluntary debt prepayment, bringing total debt prepayments to $70 million for the first half of 2021, evidence of the Company's continued strength in Free Cash Flow and focus on maintaining a strong balance sheet
  • Launched the Company's new cloud-based web platform enabling faster innovation to introduce new industry-leading features and solutions to shoppers and customers
  • Based on the number of live dealership websites, Dealer Inspire is the leading provider of the new entries in the GM "Dealer Choice" program

"Our momentum continued as we delivered solid sequential results. Performance was driven by growth in ARPD and dealers' continued adoption of digital tools and is reflective of our robust marketplace and solutions strategy," stated Alex Vetter, President and Chief Executive Officer of CARS. "The launch of our new cloud-based platform provides shoppers with an enhanced experience on our site and mobile app and enables us to more rapidly innovate features and solutions for our customers."

Q2 2021 Results

Revenue for the second quarter totaled $155.5 million, an increase of $53.5 million, or 52%, compared to the second quarter of 2020, which reflects the impact of the financial relief the Company provided to its dealer customers. Excluding the impact of prior-year invoice credits, revenue grew 11% year-over-year. Compared to the first quarter of 2021, revenue increased $2.2 million, or 1%, and dealer revenue grew 3%, led by growth in ARPD driven by continued growth in FUEL and website solutions. 

Total operating expenses were $139.9 million, compared to $119.2 million for the prior year period. The second quarter of 2020 reflects the Company's management of expenses to adjust to changes in revenue due to the COVID-19 pandemic; as a result, operating expenses were lower than those in the Company's typical operating environment. Compared to the first quarter of 2021, total operating expenses increased 2%, primarily due to higher Product and Technology expense related to continued investments to support growth as well as the Company's new cloud-based platform.

GAAP net income was $6.0 million, or $0.08 per diluted share, compared to GAAP net loss of $24.6 million, or $(0.37) per diluted share, in the second quarter of 2020.

Adjusted EBITDA was $48.5 million, or 31% of revenue, compared to $23.2 million, or 23% of revenue, for the prior-year period.

The Company remains focused on driving high-quality traffic and leads while continuing to optimize marketing investments. Average Monthly Unique Visitors in the second quarter increased 16% and Traffic increased 10%, compared to the second quarter of 2020. Organic traffic was 72% of Traffic and grew 3% year-over-year.

For the quarter, ARPD was $2,299, up 59% year-over-year. Excluding the impact of the invoice credits, year-over-year ARPD growth was 10%, driven by continued growth in solutions products. Compared to the first quarter of 2021 ARPD increased 1%.

Dealer Customers totaled 18,845 at the end of the second quarter, a 5% increase compared to the prior year period.

Cash Flow and Balance Sheet

Net cash provided by operating activities for the six month period ended June 30, 2021 was $79.6 million, up 38% compared to $57.6 million in the prior year. Free Cash Flow in the first six months of 2021 totaled $66.5 million, up 36% compared to $48.9 million in the prior year.

Total liquidity was $282.2 million, including cash and cash equivalents of $52.2 million and $230.0 million of revolver capacity, as of June 30, 2021. The Company made $22.5 million in debt payments during the second quarter, of which $20.0 million was a voluntary prepayment, thereby reducing total debt outstanding to $522.5 million as of June 30, 2021. In the first half of 2021, the Company has repaid $75.0 million of its outstanding debt, of which $70.0 million was a voluntary prepayment. Total net leverage ratio as of June 30, 2021 improved to 2.4x, compared to 4.1x as of June 30, 2020. In July 2021, the Company made an additional prepayment of $15.0 million.

"We delivered another quarter of solid performance with growth in revenue and adjusted EBITDA, both coming in ahead of our guidance, which generated another quarter of strong cash flow," stated Sonia Jain, Chief Financial Officer of CARS. "Looking ahead, we are in a strong operational and financial position, which gives us confidence that we'll achieve our third quarter guidance and enables us to continue to strategically deploy capital to invest in organic opportunities, pay down our debt and pursue bolt-on acquisitions."

Outlook

For the third quarter 2021, the Company expects Revenue of approximately $155 million to $157 million, and Adjusted EBITDA margins of approximately 27.5% to 29.5%. Guidance reflects the Company's expectation of a continuation of the industry-wide inventory shortage into the third quarter and continued investments in marketing to support its brand and in technology to drive innovation.

Q2 Earnings Call

As previously announced, management will hold a conference call and webcast today at 9:00 a.m. CT. This webcast may be accessed at investor.cars.com. A replay of the webcast will be available at this website following the conclusion of the call until August 19, 2021.

About CARS

CARS is a leading digital marketplace and solutions provider for the automotive industry that connects car shoppers with sellers. Launched in 1998 with the flagship marketplace Cars.com and headquartered in Chicago, the Company empowers shoppers with the data, resources and digital tools needed to make informed buying decisions and seamlessly connect with automotive retailers. In a rapidly changing market, CARS enables dealerships and OEMs with innovative technical solutions and data-driven intelligence to better reach and influence ready-to-buy shoppers, increase inventory turn and gain market share.

In addition to Cars.com, CARS brands include Dealer Inspire, a technology provider building solutions that future-proof dealerships with more efficient operations and connected digital experiences; FUEL, which gives dealers and OEMs the opportunity to harness the untapped power of digital video by leveraging Cars.com's pure audience of in-market car shoppers, and DealerRater, a leading car dealer review and reputation management platform.

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

Non-GAAP Financial Measures

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

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

The Company defines Adjusted EBITDA as net income (loss) before (1) interest expense, net, (2) income tax (benefit) expense, (3) depreciation, (4) amortization of intangible assets, (5) stock-based compensation expense, (6) unrealized mark-to-market adjustments and cash transactions related to derivative instruments, and (7) certain other items, such as transaction-related costs, severance, transformation and other exit costs and write-off and impairments of goodwill, intangible assets and other long-lived assets.

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

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

Key Metric Definitions

Traffic. Traffic is fundamental to the Company's business. Traffic to the CARS network of websites and mobile apps provides value to the Company's advertisers in terms of audience, awareness, consideration and conversion. In addition to tracking traffic volume and sources, the Company monitors activity on its properties, allowing the Company to innovate and refine its consumer-facing offerings. Traffic is defined as the number of visits to CARS desktop and mobile properties (responsive sites and mobile apps), measured using Adobe Analytics. Traffic does not include traffic to Dealer Inspire websites. Traffic provides an indication of the Company's consumer reach. Although the Company's consumer reach does not directly result in revenue, the Company believes its ability to reach in-market car shoppers is attractive to its dealer customers and national advertisers.

Average Monthly Unique Visitors ("UVs"). Growth in unique visitors and consumer traffic to the Company's network of websites and mobile apps increases the number of impressions, clicks, leads and other events it can monetize to generate revenue. The Company defines UVs in a given month as the number of distinct visitors that engage with its platform during that month. Visitors are identified when a user first visits an individual CARS property on an individual device/browser combination or installs one of its mobile apps on an individual device. If a visitor accesses more than one of the Company's web properties or apps or uses more than one device or browser, each of those unique property/browser/app/device combinations counts toward the number of UVs. UVs do not include Dealer Inspire UVs. The Company measures UVs using Adobe Analytics.

Dealer Customers. Dealer Customers represent dealerships using the Company's products as of the end of each reporting period. Each physical or virtual dealership location is counted separately, whether it is a single-location proprietorship or part of a large, consolidated dealer group. Multi-franchise dealerships at a single location are counted as one dealer.

Average Revenue Per Dealer ("ARPD"). The Company believes that its ability to grow ARPD is an indicator of the value proposition of its products. The Company defines ARPD as Dealer revenue, excluding digital advertising services, during the period divided by the monthly average number of Dealer Customers during the same period.

Forward-Looking Statements

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

Forward-looking statements are subject to a number of risks, uncertainties and other important factors, many of which are beyond the Company's control, that could cause its actual results and strategic actions to differ materially from those expressed in the forward-looking statements contained in this press release. For a detailed discussion of many of these and other risks and uncertainties, see the Company's Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its Current Reports on Form 8-K and its other filings with the Securities and Exchange Commission, available on the Company's website at investor.cars.com or via EDGAR at www.sec.gov. All forward-looking statements contained in this press release are qualified by these cautionary statements. You should evaluate all forward-looking statements made in this press release in the context of these risks and uncertainties. The forward-looking statements contained in this press release are based only on information currently available to the Company and speak only as of the date of this press release. The Company undertakes no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

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

CARS Investor Relations Contact:
Robbin Moore-Randolph
rmoorerandolph@cars.com
312.601.5929

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

 

Cars.com Inc.

Consolidated Statements of Income (Loss)

(In thousands, except per share data)

(Unaudited)












Three Months Ended June 30,


Six Months Ended June 30,



2021


2020


2021


2020

Revenue:









  Dealer


$              136,866


$  83,242


$ 269,824


$   208,603

  OEM and National


16,329


16,021


34,398


35,414

  Other 


2,335


2,746


4,603


6,086

       Total revenue


155,530


102,009


308,825


250,103

Operating expenses:









  Cost of revenue and operations


28,219


22,912


56,050


48,942

  Product and technology


19,434


12,031


36,194


26,904

  Marketing and sales


51,309


32,036


104,520


86,958

  General and administrative


15,615


16,460


28,881


30,577

  Affiliate revenue share



4,601



10,970

  Depreciation and amortization


25,298


31,193


50,978


62,154

  Goodwill and intangible asset impairment





905,885

       Total operating expenses


139,875


119,233


276,623


1,172,390

         Operating income (loss)


15,655


(17,224)


32,202


(922,287)

Nonoperating expense:









  Interest expense, net


(9,839)


(7,924)


(19,840)


(15,450)

  Other (expense) income, net


(39)


557


(1)


(8,944)

     Total nonoperating expense, net


(9,878)


(7,367)


(19,841)


(24,394)

       Income (loss) before income taxes


5,777


(24,591)


12,361


(946,681)

       Income tax (benefit) expense


(189)


53


1,117


(134,603)

          Net income (loss)


$                  5,966


$ (24,644)


$   11,244


$ (812,078)

Weighted-average common shares outstanding:









Basic


68,869


67,256


68,328


67,095

Diluted


70,694


67,256


70,790


67,095

Earnings (loss) per share:









Basic


$                    0.09


$     (0.37)


$       0.16


$       12.10

Diluted


0.08


(0.37)


0.16


12.10

 

Cars.com Inc.

Consolidated Balance Sheets

(In thousands, except per share data)








June 30, 2021


December 31, 2020



(unaudited)



Assets:





Current assets:





Cash and cash equivalents


$         52,185


$                  67,719

Accounts receivable, net


100,491


93,649

Prepaid expenses


8,303


6,491

Other current assets


1,298


10,222

Total current assets


162,277


178,081

Property and equipment, net


46,450


41,323

Intangible assets, net 


792,168


835,166

Investments and other assets, net


19,989


21,142

Total assets


$    1,020,884


$             1,075,712

Liabilities and stockholders' equity:





Current liabilities:





Accounts payable


$         25,394


$                  16,512

Accrued compensation


13,926


18,319

Current portion of long-term debt


7,727


7,756

Other accrued liabilities


48,925


47,781

Total current liabilities


95,972


90,368

Noncurrent liabilities:





Long-term debt


502,357


576,143

Deferred tax liability


30,792


30,800

Other noncurrent liabilities


34,321


38,225

Total noncurrent liabilities


567,470


645,168

Total liabilities


663,442


735,536

Commitments and contingencies





Stockholders' equity:





Preferred Stock at par, $0.01 par value; 5,000 shares authorized; no shares
issued and outstanding as of June 30, 2021 and December 31, 2020,
respectively



Common Stock at par, $0.01 par value; 300,000 shares authorized; 68,964 and
67,387 shares issued and outstanding as of June 30, 2021 and
December 31, 2020, respectively


690


674

Additional paid-in capital


1,534,098


1,530,493

Accumulated deficit


(1,172,943)


(1,184,187)

Accumulated other comprehensive loss


(4,403)


(6,804)

Total stockholders' equity


357,442


340,176

Total liabilities and stockholders' equity


$    1,020,884


$             1,075,712

 

Cars.com Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)








Six Months Ended June 30,



2021


2020

Cash flows from operating activities:





Net income (loss)


$ 11,244


$ (812,078)

Adjustments to reconcile Net income (loss) to Net cash provided by operating activities:





Depreciation


7,980


11,599

Amortization of intangible assets


42,998


50,555

Goodwill and intangible asset impairment



905,885

Impairment of non-marketable security



9,447

Unrealized gain on interest rate swap



(558)

Amortization of accumulated other comprehensive income on interest rate swap


2,835


300

Stock-based compensation 


10,670


6,266

Deferred income taxes


(442)


(133,064)

Provision for doubtful accounts


211


2,846

Amortization of debt issuance costs


1,657


1,377

Other, net


(44)


142

Changes in operating assets and liabilities:





Accounts receivable


(7,053)


24,363

Prepaid expenses


(1,812)


(540)

Other current assets


8,951


(2,368)

Other assets


690


589

Accounts payable


8,888


1,973

Accrued compensation


(4,393)


(5,942)

Other accrued liabilities


1,143


(933)

Other noncurrent liabilities


(3,904)


(2,230)

Net cash provided by operating activities


79,619


57,629

Cash flows from investing activities:





     Purchase of property and equipment


(13,095)


(8,725)

Net cash used in investing activities


(13,095)


(8,725)

Cash flows from financing activities:





     Proceeds from revolving loan borrowings



165,000

     Payments of long-term debt


(75,000)


(166,875)

     Stock-based compensation plans, net


(7,049)


(309)

     Payments of debt issuance costs and other fees


(9)


(3,324)

Net cash used in financing activities


(82,058)


(5,508)

Net (decrease) increase in cash and cash equivalents


(15,534)


43,396

Cash and cash equivalents at beginning of period


67,719


13,549

Cash and cash equivalents at end of period


$ 52,185


$    56,945

Supplemental cash flow information:





Cash (received) paid for income taxes, net of refunds


$  (8,875)


$         318

Cash paid for interest and interest rate swap


19,634


13,889

 

Cars.com Inc.

Non-GAAP Reconciliations

(In thousands)

(Unaudited)












Three Months Ended June 30,


Six Months Ended June 30,



2021


2020


2021


2020

Reconciliation of Net income (loss) to Adjusted EBITDA

















Net income (loss)


$                   5,966


$               (24,644)


$                 11,244


$             (812,078)

Interest expense, net


9,839


7,924


19,840


15,450

Income tax (benefit) expense


(189)


53


1,117


(134,603)

Depreciation and amortization


25,298


31,193


50,978


62,154

Goodwill and intangible asset impairment





905,885

Stock-based compensation


6,029


4,376


11,137


6,287

Write-off of long-lived assets and other


94


(463)


79


9,020

Severance, transformation and other exit costs


927


4,764


1,707


6,168

Transaction-related costs


512


20


512


117

Adjusted EBITDA


$                 48,476


$                 23,223


$                 96,614


$                 58,400



















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
















Net cash provided by operating activities


$                 29,257


$                 28,737


$                 79,619


$                 57,629

Purchase of property and equipment


(6,876)


(2,970)


(13,095)


(8,725)

Free cash flow


$                 22,381


$                 25,767


$                 66,524


$                 48,904

 

Cars.com Inc.

Supplemental Information

(In thousands)

(Unaudited)



















Expense category for the Three Months Ended June 30, 2021:




















As Reported


Adjustments (1)


Stock-Based Compensation


As Adjusted

Cost of revenue and operations


$        28,219


$                    —


$              (189)


$       28,030

Product and technology


19,434



(1,795)


17,639

Marketing and sales


51,309



(1,448)


49,861

General and administrative


15,615


(1,456)


(2,597)


11,562

Affiliate revenue share





Depreciation and amortization


25,298




25,298

Goodwill and intangible asset impairment





Total operating expenses


$      139,875


$             (1,456)


$           (6,029)


$     132,390










Total nonoperating expense, net


$        (9,878)


$                    77


$                  —


$        (9,801)










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










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




















As Reported


Adjustments (1)


Stock-Based Compensation


As Adjusted

Cost of revenue and operations


$        22,912


$                    —


$              (164)


$       22,748

Product and technology


12,031



(921)


11,110

Marketing and sales


32,036



(983)


31,053

General and administrative


16,460


(4,879)


(2,308)


9,273

Affiliate revenue share


4,601




4,601

Depreciation and amortization


31,193




31,193

Goodwill and intangible asset impairment





Total operating expenses


$      119,233


$             (4,879)


$           (4,376)


$     109,978










Total nonoperating expense, net


$        (7,367)


$                    —


$                  —


$        (7,367)










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










Expense category for the Six Months Ended June 30, 2021:




















As Reported


Adjustments (1)


Stock-Based Compensation


As Adjusted

Cost of revenue and operations


$        56,050


$                    —


$              (543)


$       55,507

Product and technology


36,194



(3,076)


33,118

Marketing and sales


104,520



(2,761)


101,759

General and administrative


28,881


(2,218)


(4,757)


21,906

Affiliate revenue share





Depreciation and amortization


50,978




50,978

Goodwill and intangible asset impairment





Total operating expenses


$      276,623


$             (2,218)


$         (11,137)


$     263,268










Total nonoperating expense, net


$      (19,841)


$                    80


$                  —


$      (19,761)










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










Expense category for the Six Months Ended June 30, 2020:




















As Reported


Adjustments (1)


Stock-Based Compensation


As Adjusted

Cost of revenue and operations


$        48,942


$                    —


$              (201)


$       48,741

Product and technology


26,904



(1,487)


25,417

Marketing and sales


86,958



(1,479)


85,479

General and administrative


30,577


(6,416)


(3,120)


21,041

Affiliate revenue share


10,970




10,970

Depreciation and amortization


62,154




62,154

Goodwill and intangible asset impairment


905,885


(905,885)



Total operating expenses


$   1,172,390


$         (912,301)


$           (6,287)


$     253,802










Total nonoperating expense, net


$      (24,394)


$               9,447


$                  —


$      (14,947)










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

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/cars-reports-second-quarter-2021-results-301348995.html

SOURCE Cars.com Inc.

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