CARS Reports Fourth Quarter and Full Year 2020 Results

CHICAGO, Feb. 25, 2021 — 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 fourth quarter and year ended December 31, 2020.

Fourth Quarter Year-Over-Year Revenue Growth Establishes Solid Footing for 2021

Second Consecutive Quarter of Growth in Dealer Customers and ARPD

Full-Year Cash Flow From Operations of $138.6 Million, Up 37% Year-Over-Year

Q4 Financial and Key Metric Highlights

• Revenue of $153.0 million, up $0.8 million, or 1% year-over-year
• GAAP net income of $7.2 million, or $0.10 per diluted share, compared to GAAP net loss of $4.1 million, or $0.06 per diluted share, in the prior year
• Adjusted Net Income of $6.0 million, or $0.09 per diluted share, compared to Adjusted Net Income of $42.2 million, or $0.63 per diluted share, in the prior year
• Adjusted EBITDA of $48.5 million, or 32% of revenue, up $9.2 million and 600 basis points as a percentage of revenue, year-over-year
• Average Monthly Unique Visitors of 22.2 million, down 5% year-over-year
• Traffic (visits) of 138.1 million, down 6% year-over-year
• Monthly Average Revenue Per Dealer (“ARPD”) was $2,264, up 6% from $2,136 in the prior year period and up 4% compared to the third quarter of 2020
• Dealer Customers of 18,372 as of December 31, 2020, up 242 compared to 18,130 as of September 30, 2020, driven by both strong retention and growth in new Dealer Customers

2020 Full Year Financial and Key Metric Highlights

• Revenue of $547.5 million, down $59.2 million, or 10% year-over-year
• GAAP net loss of $817.1 million, or $12.15 per diluted share, primarily due to non-cash goodwill and intangible asset impairment pre-tax charge of $905.9 million triggered by the COVID-19 pandemic and recorded in the first quarter
• Adjusted Net Income of $70.3 million, or $1.02 per diluted share, compared to Adjusted Net Income of $104.2 million, or $1.55 per diluted share, in the prior year
• Adjusted EBITDA of $155.9 million, or 28% of revenue, compared to $167.3 million, or 28% of revenue, in the prior year
• Net cash provided by operating activities of $138.6 million, with Free Cash Flow of $121.9 million, compared to $101.5 million, and $80.2 million of Free Cash Flow, in the prior year
• $67.7 million of cash and cash equivalents with total liquidity of $297.7 million, including availability under our revolving credit facility, as of December 31, 2020
• Average Monthly Unique Visitors of 23.8 million, up 5% year-over-year
• Traffic (visits) of 599.8 million, up 8% year-over-year

Operational Highlights

• Growth in Dealer Customers in four out of the last five quarters
• Growth in website customers continues, reaching approximately 4,400 at December 31, 2020
• Expanded digital advertising program; Dealer Inspire selected as a preferred digital advertising provider for U.S.-based FordDirect dealers
• Momentum with new FUEL product continues to build and contribute to ARPD growth
• Voluntary debt payment of $30 million in January 2021

“We are entering 2021 in a position of operational and financial strength. Our solutions allow dealers to meet consumers where they want to buy cars, either online or in physical showrooms. While 2020 was a challenging year, the COVID-19 pandemic has accelerated the importance of our digital solutions strategy and propelled our organic strength as a technology enabler for both buyers and sellers,” said Alex Vetter, President and Chief Executive Officer of CARS. “Our audience, customers and average revenue per dealer are all trending positively as we continue to invest in our dealer network and expand our solutions and services.”

Q4 Results

Revenue for the fourth quarter of 2020 was $153.0 million, up $0.8 million, or 1%, compared to the prior year period, due to growth in ARPD driven by increased solutions sales.

Total operating expenses for the fourth quarter of 2020 were $137.1 million, compared to $147.5 million for the prior year period. This decrease was driven by the cessation of our affiliate revenue share expense in the second half of 2020.

GAAP net income for the fourth quarter of 2020 was $7.2 million, or $0.10 per diluted share, compared to GAAP net loss of $4.1 million, or $0.06 per diluted share, in the fourth quarter of 2019. The current period net income was driven by tax benefits generated through an increase in the Company’s ability to carryback operating losses as a result of the CARES Act. Adjusted Net Income for the fourth quarter of 2020 was $6.0 million compared to $42.2 million in the fourth quarter of 2019.

Adjusted EBITDA for the fourth quarter of 2020 was $48.5 million, or 32% of revenue, compared to $39.3 million, or 26% of revenue, for the prior year period. Looking forward to 2021, we expect to increase our investment in the business, with a particular focus on marketing to support opportunistic consumer traffic acquisition and the CARS brand. Additionally, we expect to invest in resources to accelerate product innovation. These investments will result in lower sequential Adjusted EBITDA margins. We expect Adjusted EBITDA for the first quarter to be up on a year over year basis with margins between 27% and 30%.

While we delivered record Traffic and lead growth in 2020, Average Monthly Unique Visitors in the fourth quarter declined 5% year-over-year and total traffic declined 6% compared to the fourth quarter of 2019. In the fourth quarter, we increased our brand investments to support longer term consumer growth. While we are always seeking to further optimize our marketing mix, our decision in the fourth quarter to make long-term marketing investments was based on our double-digit year-over-year lead growth. Organic traffic was 73% of total traffic and grew 1% year-over-year, a testament to the consistent, high-quality traffic that we deliver to our Dealer Customers.

Fourth quarter 2020 ARPD was $2,264, up 6% year over year and up 4% compared to the third quarter of 2020. The ARPD growth was driven by continued growth in solutions products.

Dealer Customers were 18,372 at the end of 2020, 242 higher than Dealer Customers of 18,130 at the end of the third quarter of 2020. This increase came from growth in both marketplace and solutions only Dealer Customers. Compared to December 31, 2019, Dealer Customers were down 462.

2020 Full Year Results

Revenue for 2020 was $547.5 million, compared to $606.7 million in 2019. This decrease was primarily due to invoice credits that we provided to marketplace customers as COVID-19 relief in the second quarter, second quarter Dealer Customers declines, and a decline in national advertising revenue, partially offset by growth in solutions products.

Total operating expenses for 2020 were $1.4 billion, or $528.9 million excluding the 2020 goodwill and intangible asset impairment charge, compared to $1.1 billion, or $591.3 million excluding the 2019 goodwill and intangible asset impairment charge, in the prior year. This decrease in expenses was due to the actions taken to align expenses with revenue in an uncertain COVID-19 environment. These actions included lower marketing spend and measures taken to reduce headcount-related expenses, primarily during the second quarter of 2020. In addition, affiliate revenue share expenses ended in the second half of 2020.

GAAP net loss for 2020 was $817.1 million, or $12.15 per diluted share, compared to GAAP net loss of $445.3 million, or $6.65 per diluted share, in 2019. Adjusted Net Income for the year was $70.3 million, or $1.02 per diluted share, compared to $104.2 million, or $1.55 per diluted share in the prior year period.

Adjusted EBITDA for 2020 was $155.9 million, or 28% of revenue, compared to $167.3 million, or 28% of revenue, in the prior year period.

We delivered record Traffic and leads in 2020. Average Monthly Unique Visitors grew 5% and Traffic grew 8%. Traffic and lead growth were supported by our brand strength, heightened consumer demand and consumer gravitation toward online marketplaces, particularly in the second and third quarters, and a focus on driving high-quality organic traffic. Organic traffic was 73% of total traffic and grew 10% year-over-year. Mobile traffic grew 12% year-over-year and accounted for 75% of total traffic, compared to 72% in the prior year.

Cash Flow and Balance Sheet

Net cash provided by operating activities in 2020 was $138.6 million, compared to $101.5 million in the prior year. Free Cash Flow in 2020 was $121.9 million, compared to $80.2 million in 2019.

Total liquidity was $297.7 million, including cash and cash equivalents of $67.7 million and $230 million of revolver capacity, as of December 31, 2020. The Company made $50.6 million in debt repayments during 2020, net of borrowings, bringing total debt outstanding to $597.5 million as of December 31, 2020. Net leverage at December 31, 2020 was 3.4x and secured leverage was 1.3x, compared to maximum allowable secured leverage of 3.5x, in accordance with the Company’s recently amended credit agreement. In addition, the Company made a $30 million voluntary debt payment in January 2021.

During the fourth quarter, the Company refinanced its debt facilities on favorable terms extending the maturity date from 2022 to 2025 for the credit facility and establishing a 2028 maturity date for the new senior unsecured notes. This new structure improves the Company’s flexibility to invest in and grow the business.

“Our solutions-driven model delivered in the second half of 2020 with strong top-line trends, profitability and cash flow. We maintained cost discipline, made focused investments in marketing and continued to invest organically in our digital platform. Solid performance and a strengthened financial position give us ample flexibility to pay down debt, pursue opportunistic acquisitions and invest in marketing and technology innovations setting us up for growth in 2021,” said Sonia Jain, Chief Financial Officer of CARS.

Q4 Earnings Call

As previously announced, management will hold a conference call and webcast today at 9:00 a.m. CST. 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 March 11, 2021.

CARS Investor Relations Contact:
ir@cars.com

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

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