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CARS Reports First Quarter 2021 Results

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 March 31, 2021.

Q1 2021 Financial and Key Metric Highlights

  • Revenue of $153.3 million, up $5.2 million, or 4% year-over-year
  • GAAP net income of $5.3 million, or $0.08 per diluted share
  • Adjusted EBITDA of $48.1 million, or 31% of revenue, up $13.0 million year-over-year
  • Net cash provided by operating activities of $50.4 million, up 74% year-over-year, with Free Cash Flow of $44.1 million, compared to $28.9 million of net cash provided by operating activities and $23.1 million of Free Cash Flow in the prior-year period
  • Average Monthly Unique Visitors of 26.0 million, up 4% year-over-year
  • Traffic of 156.6 million, down 1% year-over-year
  • Monthly Average Revenue Per Dealer (“ARPD”) of $2,268, up 8% from $2,092 in the prior-year period, representing three consecutive quarters of year-over-year growth
  • Dealer Customers of 18,823 as of March 31, 2021, up 451, the highest number of additions since the spin-off, compared to 18,372 as of December 31, 2020

Operational Highlights

  • Became a semi-exclusive provider of website services for FordDirect, opening up a new opportunity to sell to FordDirect’s 3,000 U.S. dealers
  • Surpassed 10 million vehicle, dealership and salesperson reviews, demonstrating a focus on continuously providing unique content to consumers through digital solutions like DealerRater
  • Appointed auto industry veteran, Jenell Ross, to CARS’ Board of Directors; Jenell is the President of Bob Ross Auto Group, a leading Midwest dealership, and was recently named to Automotive News‘ 100 Leading Women in the North American Auto Industry

“We maintained strong momentum in our business in the first quarter, delivering continued sequential growth in dealer customers and year-over-year growth in ARPD and across all key financial measures. Our value, which includes our unique organic traffic and industry-leading digital solutions, creates a competitive advantage that attracts and retains dealer customers,” said Alex Vetter, President and Chief Executive Officer of CARS. “So far this year we have seen positive industry trends, an indication of strong consumer demand and continued dealer health. These trends reinforce confidence in our outlook for growth in 2021.”

Q1 2021 Results

Revenue for the first quarter totaled $153.3 million, up $5.2 million, or 4%, compared to the prior year period, due to growth in ARPD driven by increased solutions sales and underlying strength in the Company’s marketplace business.

Total operating expenses were $136.7 million, compared to $1.1 billion for the prior year period, or $147.3 million excluding a non-cash goodwill and intangible asset impairment charge of $905.9 million triggered by the COVID-19 pandemic and related restrictions, which was recorded during the first quarter of 2020. This decrease was driven by the conclusion of affiliate revenue share expense, which had been provided to our prior owners, in the second half of 2020 as well as a reduction in depreciation and amortization expense coupled with continued focus on cost savings and reinvestment in growth areas like innovation.

GAAP net income was $5.3 million, or $0.08 per diluted share, compared to GAAP net loss of $787.4 million, or $11.76 per diluted share, in the first quarter of 2020.

Adjusted EBITDA was $48.1 million, or 31% of revenue, compared to $35.2 million, or 24% 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 first quarter increased 4% and total traffic was down 1% compared to the first quarter of 2020. Organic traffic was 74% of Traffic and grew 12% year-over-year, fueled by record SEO traffic in the quarter, further demonstrating the unique, high-quality traffic that the Company delivers to its dealer customers. This strength in SEO enabled the Company to reduce planned marketing investments during the quarter.

For the quarter, ARPD was $2,268, up 8% year-over-year and flat compared to the fourth quarter of 2020. The ARPD growth was driven by continued growth in solutions products.

Dealer Customers totaled 18,823 at the end of the first quarter, nearly back to pre-COVID-19 pandemic levels. Growth in both marketplace and solutions-only Dealer Customers drove the 451 sequential increase.

Cash Flow and Balance Sheet

Net cash provided by operating activities in the first quarter was $50.4 million, up 74% compared to $28.9 million in the prior year. Free Cash Flow in the first quarter was $44.1 million, compared to $23.1 million in the prior year.

Total liquidity was $283.7 million, including cash and cash equivalents of $53.7 million and $230.0 million of revolver capacity, as of March 31, 2021. The Company made $52.5 million in debt repayments during the first quarter, of which $50.0 million was voluntary, reducing total debt outstanding to $545.0 million as of March 31, 2021. Total net leverage as of March 31, 2021 was 2.9x and senior secured leverage was 0.9x, compared to maximum allowable senior secured leverage of 3.5x, in accordance with the Company’s credit agreement.

“Our thriving digital solutions strategy enabled us to deliver strong financial performance in the quarter and gives us confidence in our second quarter guidance for continued growth in revenue and Adjusted EBITDA. Our balance sheet remains strong, giving us ample flexibility to opportunistically pay down debt and continue our investments in product innovation, marketing and talent acquisition supporting and enabling dealers to meet consumers in both physical and digital channels,” said Sonia Jain, Chief Financial Officer of CARS.

Outlook

For the second quarter of 2021, revenue is expected to be approximately $152 million to $154 million. The Company expects to deliver strong year-over-year Adjusted EBITDA growth while investing in the business, resulting in Adjusted EBITDA margins for the second quarter of approximately 28% to 30%.

Q1 Earnings Call

As previously announced, management will hold a conference call and webcast today at 9:00 a.m. CDT. 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 May 20, 2021.

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