10-Q 1 cars-10q_20190331.htm Q1 2019 10-Q cars-10q_20190331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37869

 

Cars.com Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-3693660

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

 

300 S. Riverside Plaza, Suite 1000

Chicago, Illinois 60606

(Address of principal executive offices)

(312) 601-5000

Registrant’s telephone number, including area code

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock

 

CARS

 

New York Stock Exchange

 

As of April 30, 2019, the registrant had 66,626,608 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements (unaudited):

2

 

Consolidated Balance Sheets

2

 

Consolidated Statements of (Loss) Income

3

 

Consolidated Statements of Stockholders’ Equity

4

 

Consolidated Statements of Comprehensive (Loss) Income

5

 

Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

PART II.

OTHER INFORMATION

23

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 3.

Defaults Upon Senior Securities

24

Item 4.

Mine Safety Disclosures

24

Item 5.

Other Information

24

Item 6.

Exhibits

24

Signatures

25

 

 

 

1


 

PART IFINANCIAL INFORMATION

Item 1. Financial Statements.

Cars.com Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

28,340

 

 

$

25,463

 

Accounts receivable, net

 

 

95,592

 

 

 

108,921

 

Prepaid expenses

 

 

7,417

 

 

 

9,264

 

Other current assets

 

 

9,523

 

 

 

10,289

 

Total current assets

 

 

140,872

 

 

 

153,937

 

Property and equipment, net

 

 

40,548

 

 

 

41,482

 

Goodwill

 

 

885,049

 

 

 

884,449

 

Intangible assets, net

 

 

1,486,318

 

 

 

1,510,410

 

Investments and other assets

 

 

27,479

 

 

 

10,271

 

Total assets

 

$

2,580,266

 

 

$

2,600,549

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,131

 

 

$

11,631

 

Accrued compensation

 

 

12,746

 

 

 

16,821

 

Unfavorable contracts liability

 

 

12,585

 

 

 

18,885

 

Current portion of long-term debt

 

 

29,667

 

 

 

26,853

 

Other accrued liabilities

 

 

52,827

 

 

 

36,520

 

Total current liabilities

 

 

119,956

 

 

 

110,710

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

652,178

 

 

 

665,306

 

Deferred tax liability

 

 

175,346

 

 

 

177,916

 

Other noncurrent liabilities

 

 

40,116

 

 

 

19,694

 

Total noncurrent liabilities

 

 

867,640

 

 

 

862,916

 

Total liabilities

 

 

987,596

 

 

 

973,626

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred Stock at par, $0.01 par value; 5,000 shares authorized; no shares

  issued and outstanding as of March 31, 2019 and December 31, 2018,

  respectively

 

 

 

 

 

 

Common Stock at par, $0.01 par value; 300,000 shares authorized; 67,455

  and 68,262 shares issued and outstanding as of March 31, 2019 and

  December 31, 2018, respectively

 

 

675

 

 

 

683

 

Additional paid-in capital

 

 

1,510,057

 

 

 

1,508,001

 

Retained earnings

 

 

89,217

 

 

 

118,239

 

Accumulated other comprehensive loss

 

 

(7,279

)

 

 

 

Total stockholders' equity

 

 

1,592,670

 

 

 

1,626,923

 

Total liabilities and stockholders' equity

 

$

2,580,266

 

 

$

2,600,549

 

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

2


 

Cars.com Inc.

Consolidated Statements of (Loss) Income

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

  Retail

 

$

139,338

 

 

$

132,343

 

  Wholesale

 

 

14,860

 

 

 

27,614

 

     Total revenues

 

 

154,198

 

 

 

159,957

 

Operating expenses:

 

 

 

 

 

 

 

 

  Cost of revenues and operations

 

 

25,579

 

 

 

17,985

 

  Product and technology

 

 

17,863

 

 

 

17,908

 

  Marketing and sales

 

 

60,343

 

 

 

65,407

 

  General and administrative

 

 

23,888

 

 

 

24,270

 

  Affiliate revenue share

 

 

2,454

 

 

 

3,283

 

  Depreciation and amortization

 

 

28,125

 

 

 

23,938

 

     Total operating expenses

 

 

158,252

 

 

 

152,791

 

        Operating (expense) income

 

 

(4,054

)

 

 

7,166

 

Nonoperating (expense) income:

 

 

 

 

 

 

 

 

  Interest expense, net

 

 

(7,566

)

 

 

(5,957

)

  Other income (expense), net

 

 

119

 

 

 

(16

)

     Total nonoperating expense, net

 

 

(7,447

)

 

 

(5,973

)

       (Loss) income before income taxes

 

 

(11,501

)

 

 

1,193

 

       Income tax (benefit) expense

 

 

(2,470

)

 

 

264

 

          Net (loss) income

 

$

(9,031

)

 

$

929

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

67,584

 

 

 

71,952

 

Diluted

 

 

67,584

 

 

 

72,122

 

(Loss) earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.13

)

 

$

0.01

 

Diluted

 

 

(0.13

)

 

 

0.01

 

  The accompanying notes are an integral part of the Consolidated Financial Statements.

 

3


 

Cars.com Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

 

$

 

 

 

68,262

 

 

$

683

 

 

$

1,508,001

 

 

$

118,239

 

 

$

 

 

$

1,626,923

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,031

)

 

 

 

 

 

(9,031

)

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,279

)

 

 

(7,279

)

Repurchases of common stock

 

 

 

 

 

 

 

(881

)

 

 

(9

)

 

 

 

 

 

(19,991

)

 

 

 

 

 

(20,000

)

Shares issued in connection with

   stock-based compensation plans, net

 

 

 

 

 

 

 

62

 

 

 

1

 

 

 

(744

)

 

 

 

 

 

 

 

 

(743

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

2,981

 

 

 

 

 

 

 

 

 

2,981

 

Transactions with TEGNA, net (1)

 

 

 

 

 

 

 

12

 

 

 

 

 

 

(181

)

 

 

 

 

 

 

 

 

(181

)

Balance at March 31, 2019

 

 

 

$

 

 

 

67,455

 

 

$

675

 

 

$

1,510,057

 

 

$

89,217

 

 

$

(7,279

)

 

$

1,592,670

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Retained

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

 

 

$

 

 

 

71,628

 

 

$

716

 

 

$

1,501,830

 

 

$

176,582

 

 

$

1,679,128

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

929

 

 

 

929

 

Shares issued in connection with

   stock-based compensation plans, net

 

 

 

 

 

 

 

62

 

 

 

1

 

 

 

(618

)

 

 

 

 

 

(617

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

1,600

 

 

 

 

 

 

1,600

 

Transactions with TEGNA, net (1)

 

 

 

 

 

 

 

175

 

 

 

2

 

 

 

(2,685

)

 

 

 

 

 

(2,683

)

Balance at March 31, 2018

 

 

 

$

 

 

 

71,865

 

 

$

719

 

 

$

1,500,127

 

 

$

177,511

 

 

$

1,678,357

 

 

 

(1)

As a result of the Separation, certain stock-based awards previously granted by TEGNA to its employees were converted into stock of both TEGNA and Cars.com. The Company is responsible for any employee payroll taxes related to awards settled in Cars.com common stock for which stock was withheld for payroll tax purposes.

 

The accompanying notes are an integral part of the Consolidated Financial Statements.


4


 

Cars.com Inc.

Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

Net (loss) income

$

(9,031

)

 

$

929

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

    Interest rate swap

 

(7,279

)

 

 

 

Total other comprehensive loss

 

(7,279

)

 

 

 

Comprehensive (loss) income

$

(16,310

)

 

$

929

 

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

5


 

Cars.com Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(9,031

)

 

$

929

 

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

 

 

 

 

 

 

 

 

Depreciation

 

 

4,033

 

 

 

2,761

 

Amortization of intangible assets

 

 

24,092

 

 

 

21,177

 

Amortization of unfavorable contracts liability

 

 

(6,300

)

 

 

(6,300

)

Stock-based compensation expense

 

 

2,981

 

 

 

1,600

 

Deferred income taxes

 

 

(2,570

)

 

 

160

 

Provision for doubtful accounts

 

 

1,055

 

 

 

995

 

Amortization of debt issuance costs

 

 

311

 

 

 

317

 

Other, net

 

 

(9

)

 

 

129

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

12,274

 

 

 

3,208

 

Prepaid expenses

 

 

1,847

 

 

 

(5,691

)

Other current assets

 

 

886

 

 

 

(1,027

)

Other assets

 

 

(17,208

)

 

 

643

 

Accounts payable

 

 

574

 

 

 

518

 

Accrued compensation

 

 

(4,075

)

 

 

(5,148

)

Other accrued liabilities

 

 

14,087

 

 

 

13,839

 

Other noncurrent liabilities

 

 

15,442

 

 

 

(1,449

)

Net cash provided by operating activities

 

 

38,389

 

 

 

26,661

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

     Purchase of property and equipment

 

 

(3,363

)

 

 

(2,513

)

     Payment for Acquisition, net

 

 

 

 

 

(156,968

)

     Other, net

 

 

(600

)

 

 

 

Net cash used in investing activities

 

 

(3,963

)

 

 

(159,481

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

     Proceeds from issuance of long-term debt

 

 

 

 

 

165,000

 

     Payments of long-term debt

 

 

(10,625

)

 

 

(40,625

)

     Stock-based compensation plans, net

 

 

(743

)

 

 

(617

)

     Repurchases of common stock

 

 

(20,000

)

 

 

 

     Transactions with TEGNA, net

 

 

(181

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(31,549

)

 

 

123,758

 

Net increase (decrease) in cash and cash equivalents

 

 

2,877

 

 

 

(9,062

)

Cash and cash equivalents at beginning of period

 

 

25,463

 

 

 

20,563

 

Cash and cash equivalents at end of period

 

$

28,340

 

 

$

11,501

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for income taxes, net of refunds

 

$

38

 

 

$

293

 

Cash paid for interest

 

 

7,413

 

 

 

5,552

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

 

6


 

Cars.com Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1. Description of Business, Company History and Summary of Significant Accounting Policies

 

Description of Business. Cars.com is a leading two-sided digital automotive marketplace that connects car shoppers with sellers and manufacturers (“OEM”s), empowering shoppers with the resources and information to make informed buying decisions. The Company’s portfolio of brands includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, PickupTrucks.com and NewCars.com. Dealer Inspire and DealerRater provide digital solutions for car dealers, including cutting-edge dealer websites, technology and reputation management solutions that improve automotive selling for local dealerships and national OEM brands. In a rapidly changing market, Cars.com 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.

Company History. In May 2017, the Company separated from its former parent company, TEGNA Inc. (“TEGNA”) by means of a spin-off of a newly formed company, Cars.com Inc., which now owns TEGNA’s former digital automotive marketplace business (the “Separation”). On May 31, 2017, the Company made a $650.0 million cash transfer to TEGNA and TEGNA completed the Separation through a pro rata distribution to its stockholders of all of the outstanding shares of the Company’s common stock. The Company’s common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017.

 

In February 2018, the Company acquired all of the outstanding stock of Dealer Inspire Inc., an innovative technology leader providing progressive dealer websites, digital retailing and messaging platform products, and substantially all of the net assets of Launch Digital Marketing LLC, a provider of digital marketing services, including paid, organic, social and creative services (collectively, the “Acquisition”). The post-Acquisition business related to Dealer Inspire, Inc. and Launch Digital Marketing LLC is referred to collectively as “Dealer Inspire”.

 

Basis of Presentation. These accompanying unaudited interim Consolidated Financial Statements (“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 for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated and Combined Financial Statements and the notes thereto for the year ended December 31, 2018, which are included in the Company's Annual Report on Form 10-K dated February 28, 2019 (the “December 31, 2018 Financial Statements”).

 

The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in the December 31, 2018 Financial Statements. In the opinion of management, the Consolidated Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, cash flows and changes in stockholders' equity as of the dates and for the periods indicated. The unaudited results of operations for the three months ended March 31, 2019 are not necessarily indicative of results that may be expected for the year ending December 31, 2019.

 

Use of Estimates. The preparation of the accompanying Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates.

Principles of Consolidation. The accompanying Consolidated Financial Statements include the accounts of Cars.com Inc. and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation.


7


Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

 

 

Reclassifications. Historically, certain costs related to severance, transformation and other exit costs; costs associated with the stockholder activist campaign; transaction-related costs and the write-off of long-lived assets were reflected in various operating expense line items in the Consolidated Statements of (Loss) Income. Beginning on January 1, 2019, these costs are reflected within General and administrative expenses. Therefore, certain prior year balances have been reclassified to conform to the current year presentation and are summarized as follows (in thousands):

 

 

 

Three Months Ended March 31, 2018

 

 

 

As Reported

 

 

Adjustments

 

 

As Adjusted

 

Cost of revenues and operations

 

$

19,086

 

 

$

(1,101

)

 

$

17,985

 

Product and technology

 

 

22,333

 

 

 

(4,425

)

 

 

17,908

 

Marketing and sales

 

 

66,035

 

 

 

(628

)

 

 

65,407

 

General and administrative

 

 

18,116

 

 

 

6,154

 

 

 

24,270

 

Affiliate revenue share

 

 

3,283

 

 

 

 

 

 

3,283

 

Depreciation and amortization

 

 

23,938

 

 

 

 

 

 

23,938

 

Total operating expenses

 

$

152,791

 

 

$

 

 

$

152,791

 

 

NOTE 2. Recent Accounting Pronouncements 

Cloud Computing Arrangements. In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, aligning the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs for internal-use software. The new guidance is effective for the Company on January 1, 2020 and early adoption is permitted. The Company is currently evaluating this new guidance and does not expect it to have a material impact on its Consolidated Financial Statements and related disclosures.

Financial Instruments – Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses changing the way credit losses on accounts receivable are estimated. Under current U.S. GAAP, credit losses on trade accounts receivable are recognized once it is probable that such losses will occur. Under this new guidance, the Company will be required to estimate credit losses based on the expected amount of future collections which may result in earlier recognition of allowance for doubtful accounts. The new guidance is effective for the Company on January 1, 2020 and will be adopted using a modified retrospective approach. The Company is currently evaluating this new guidance and does not expect it to have a material impact on its Consolidated Financial Statements and related disclosures.

 

Leases. In February 2016, the FASB issued ASU 2016-02, Leases (ASU 2016-02) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current U.S. GAAP. The new guidance requires a lessee to recognize a liability to make lease payments (the “lease liability”) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. The Company adopted ASU 2016-02 in the first quarter of 2019 utilizing the modified retrospective transition approach for leases existing at, or entered into after, the beginning of the first quarter of 2019 and did not recast the comparative periods presented in the Consolidated Financial Statements upon adoption. The Company elected the ‘package of practical expedients’ and did not reassess its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease recognition exemption for all leases that qualify and did not recognize right-of-use assets or lease liabilities for those leases. The Company’s lease agreements are principally related to real estate. The adoption of ASU 2016-02 resulted in the recognition of operating lease assets of $18.2 million and $35.0 million in operating lease liabilities on its Consolidated Balance Sheets. The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the 300 South Riverside Lease in Chicago, Illinois. There was no material impact to its Consolidated Statements of (Loss) Income and Consolidated Statements of Cash Flows. For further information, see Note 11 (Leases).


8


Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

 

NOTE 3. Revenues

 

Revenue Summary. In the table below (in thousands), revenue is disaggregated by sales channel and major products and services. The Company only has one reportable segment; therefore, further disaggregation is not applicable at this time.

 

 

 

Three Months Ended March 31,

 

Sales channel

 

2019

 

 

2018

 

Direct

 

$

115,094

 

 

$

101,478

 

National advertising

 

 

20,295

 

 

 

26,818

 

Other

 

 

3,949

 

 

 

4,047

 

   Retail

 

 

139,338

 

 

 

132,343

 

   Wholesale

 

 

14,860

 

 

 

27,614

 

Total revenues

 

$

154,198

 

 

$

159,957

 

 

 

 

 

 

 

 

 

 

Major products and services

 

 

 

 

 

 

 

 

Subscription advertising and digital solutions

 

$

121,314

 

 

$

123,777

 

Display advertising

 

 

22,289

 

 

 

26,023

 

Pay per lead

 

 

7,934

 

 

 

7,556

 

Other

 

 

2,661

 

 

 

2,601

 

Total revenues

 

$

154,198

 

 

$

159,957

 

 

NOTE 4. Debt

 

As of March 31, 2019, the Company is in compliance with the covenants under its credit agreement.

 

Term Loan. As of March 31, 2019, the outstanding principal amount under the Term Loan was $410.6 million and the interest rate in effect was 4.3%, including the impact of the interest rate swap discussed in Note 5 (Interest Rate Swap). During the three months ended March 31, 2019, the Company made $5.6 million in mandatory quarterly Term Loan payments.

 

Revolving Loan. As of March 31, 2019, the outstanding borrowings under the Revolving Loan were $275.0 million and the interest rate in effect was 4.1%. During the three months ended March 31, 2019, the Company made $5.0 million in voluntary Revolving Loan payments. As of March 31, 2019, $175.0 million was available to borrow under the Revolving Loan. The Company’s borrowings are limited by its net leverage ratio, which is calculated in accordance with the credit agreement and was 3.0 to 1.0 as of March 31, 2019.

 

Fair Value. 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. The carrying amount of the Company’s debt approximated the fair value as of March 31, 2019.

 

NOTE 5. Interest Rate Swap

 

The interest rate on borrowings under the Company’s Term Loan is floating and, therefore, subject to fluctuations. In order to manage the risk associated with changes in interest rates on its borrowing under the Term Loan, the Company entered into an interest rate swap (the “Swap”) effective December 31, 2018. Under the terms of the Swap, the Company is locked into a fixed rate of interest of 2.96% plus an applicable margin, as defined in the Credit Agreement, on a notional amount of $300 million. The Swap is designated as a cash flow hedge of interest rate risk. As of March 31, 2019, the fair value of the Swap was an unrealized loss of $7.3 million, of which $2.3 million and $5.0 million is recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets. During the three months ended March 31, 2019, $0.3 million was reclassified from Accumulated other comprehensive (loss) into Interest expense, net.

 

NOTE 6. Unfavorable Contracts Liability

 

In connection with the October 2014 acquisition of Cars.com by TEGNA, the Company entered into affiliate agreements with the former owners of Cars.com (Belo Corporation (“Belo”), The McClatchy Company (“McClatchy”), tronc, inc. (“tronc”), and the Washington Post). Under the affiliate agreements, affiliates have the exclusive right to sell and price Cars.com’s products in their local territories, paying Cars.com a wholesale rate for the Cars.com product. The Company charges the affiliates 60% of the corresponding

9


Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

 

Cars.com retail rate for products sold to affiliate dealers and recognizes revenue generated from these agreements as Wholesale revenues in the Consolidated Statements of (Loss) Income. The Unfavorable contracts liability was established as a result of these unfavorable affiliate agreements that the Company entered into as part of TEGNA’s acquisition of the Company in 2014. The Unfavorable contracts liability is being amortized on a straight-line basis over the five year contract period.

 

Prior to the affiliate conversions discussed below, the Company recognized $25.2 million of Wholesale revenues with a corresponding reduction of the Unfavorable contracts liability on an annual basis. As of March 31, 2019 and December 31, 2018, the Unfavorable contracts liability was $12.6 million and $18.9 million, respectively, and is recorded in Current liabilities on the Consolidated Balance Sheets.

 

The Company has amended three of its affiliate agreements (McClatchy, tronc, and the Washington Post) and as a result, now has a direct relationship with these dealer customers and recognizes the revenue associated with converted dealers as Retail revenues, rather than Wholesale revenues, in the Consolidated Statements of (Loss) Income. In addition, as part of the recent changes in the structure of the affiliate agreements, McClatchy, tronc and the Washington Post have agreed to perform certain marketing support and transition services through December 31, 2019, March 31, 2020 and October 1, 2019, respectively. The fees the Company pays associated with the amended affiliate agreements are recorded as Affiliate revenue share expense within Operating expenses in the Consolidated Statements of (Loss) Income.

 

The Company no longer records the amortization of the Unfavorable contracts liability associated with the converted markets to revenues as the Company now recognizes this direct revenue at retail rates. The amortization of the Unfavorable contracts liability is now recorded as a reduction of Affiliate revenue share expense within Operating expenses in the Consolidated Statements of (Loss) Income.

 

Therefore, during the three months ended March 31, 2019, the Company recorded $5.8 million as a reduction to Affiliate revenue share expense, rather than Wholesale revenues, in the Consolidated Statements of (Loss) Income. The reduction to Affiliate revenue share expense was partially offset by the fees associated with the marketing support and transition services.

 

The Company’s Unfavorable contracts liability activity for the three months ended March 31, 2019 is as follows (in thousands):

 

Balance at December 31, 2018

 

$

18,885

 

Amortization into Wholesale revenues (1)

 

 

(466

)

Amortization into Affiliate revenue share expense (2)

 

 

(5,834

)

Balance at March 31, 2019

 

$

12,585

 

 

 

(1)

Amount represents the amortization of the Unfavorable contracts liability related to the remaining affiliate agreement (Belo) into Wholesale revenues in the Consolidated Statements of (Loss) Income.

 

 

 

(2)

Amount represents the amortization of the Unfavorable contracts liability related to the converted McClatchy, tronc and Washington Post affiliate agreements into Affiliate revenue share expense in the Consolidated Statements of (Loss) Income.

 

 

NOTE 7. Commitments and Contingencies

 

The Company and its subsidiaries are parties from time to time 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. 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.

 

NOTE 8. Stockholders’ Equity

 

In March 2018, the Company’s Board of Directors authorized a stock repurchase program to acquire up to $200 million of the Company’s common stock. The Company may repurchase stock from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. The timing and amounts of any purchases under the stock repurchase program will be based on market conditions and other factors including price. The repurchase program has a two-

10


Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

 

year duration, does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. The Company intends to fund the share repurchase program principally with cash from operations. During the three months ended March 31, 2019, the Company repurchased and subsequently retired 0.9 million shares for $20.0 million. There was no stock repurchase activity during the three months ended March 31, 2018.

 

NOTE 9. Stock-Based Compensation

 

Performance Stock Units (“PSUs”). PSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting. The fair value of the PSUs is equal to the Company’s common stock price on the date of grant. During the three months ended March 31, 2019, the Company granted 207,000 PSUs at a weighted average grant date fair value of $24.02 per unit. These PSUs require continued employee service. 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 at the end of the three-year performance period.

 

Restricted Stock Units (“RSUs”). 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. These RSU’s are subject to graded vesting, 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. During the three months ended March 31, 2019, the Company granted 477,000 RSUs at a weighted-average grant-date fair value of $24.02 per unit.

NOTE 10. (Loss) Earnings Per Share

 

Basic (loss) earnings per share is calculated by dividing Net (loss) income by the weighted-average number of shares of common stock outstanding. Diluted (Loss) 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. The computation of (loss) earnings per share is as follows (in thousands, except per share data):

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Net (loss) income

 

$

(9,031

)

 

$

929

 

Basic weighted-average common shares outstanding

 

 

67,584

 

 

 

71,952

 

Effect of dilutive stock-based compensation awards (1)

 

 

 

 

 

170

 

Diluted weighted-average common shares outstanding

 

 

67,584

 

 

 

72,122

 

(Loss) earnings per share, basic

 

$

(0.13

)

 

$

0.01

 

(Loss) earnings per share, diluted

 

 

(0.13

)

 

 

0.01

 

 

 

(1)

There were 0.3 million potential common shares excluded from diluted weighted-average shares outstanding for the three months ended March 31, 2019, as their inclusion would have had an anti-dilutive effect.


11


Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

 

NOTE 11. Leases

 

Leases. 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. As of March 31, 2019, Cars.com’s scheduled future minimum lease payments under operating leases having initial or remaining noncancelable lease terms of more than one year, were as follows (in thousands):

 

Remaining nine months of 2019

 

$

2,735

 

2020

 

 

4,368

 

2021

 

 

4,014

 

2022

 

 

3,751

 

2023

 

 

3,850

 

Thereafter

 

 

35,117

 

Total minimum lease payments

 

 

53,835

 

Less: Imputed interest (1)

 

 

(19,411

)

Present value of the minimum lease payments

 

 

34,424

 

Less: Current maturities of lease obligations

 

 

(1,494

)

Long-term lease obligations

 

$

32,930

 

 

 

(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 date (for those leases that commenced after January 1, 2019).

 

As of March 31, 2019, the Company’s operating lease assets and liabilities were $17.9 million and $34.4 million, respectively. The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the 300 South Riverside Lease in Chicago, Illinois. Other information related to the Company’s operating leases for the three months ended March 31, 2019 is as follows (in thousands, except percentage):

 

Income statement information:

 

 

 

 

Operating lease cost

 

$

958

 

Short-term lease cost

 

 

381

 

Variable lease cost

 

 

994

 

Total lease cost

 

$

2,333

 

 

 

 

 

 

Other information:

 

 

 

 

Cash paid for operating leases

 

$

1,224

 

Weighted-average remaining lease term (in months)

 

 

139

 

Weighted-average discount rate

 

 

7.4

%

 

 

 

12


 

Note About Forward-Looking Information

 

This report 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 our business strategies, strategic alternatives review process, plans and objectives, market potential, outlook, trends, future financial performance, planned operational and product improvements, potential strategic transactions, liquidity and other matters and involve known and unknown risks that are difficult to predict. As a result, our 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,” “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 our current expectations, beliefs, strategies, estimates, projections and assumptions, based on our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we think 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 we believe these judgments are reasonable. However, you should understand that these statements are not guarantees of strategic action, performance or results. Our actual results 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 our control.

 

Important factors that could cause actual results or events to differ materially from those anticipated include, among others: 

 

Our business is subject to risks related to the larger automotive ecosystem, including consumer demand and other macroeconomic issues.

We participate in a highly competitive market, and pressure from existing and new competitors may materially and adversely affect our business, results of operations and financial condition.

If we fail to maintain or increase our base of subscribing dealers that purchase our solutions or to increase our revenue from subscribing dealers, our business, results of operations and financial condition would be materially and adversely affected.

We compete with other consumer automotive websites and mobile apps and other digital content providers for share of automotive-related digital advertising spend and may be unable to maintain or grow our base of advertising customers or increase our revenue from existing advertisers.

We may face difficulties in transitioning to a full-service solutions provider that helps automotive brands and dealers create enduring customer relationships.

We rely on third-party service providers for many aspects of our business, including automobile pricing and other data, and any failure to maintain these relationships could harm our business.

We rely on in-house content creation and development to drive traffic to the Cars.com sites and mobile apps.

We rely in part on Internet search engines and ‘mobile app download stores’ to drive traffic to the Cars.com sites and mobile apps. If the Cars.com sites and mobile apps fail to appear prominently in these search results, traffic to the Cars.com sites and mobile apps would decline and our business would be materially and adversely affected.

The value of our assets or operations may be diminished if our information technology systems fail to perform adequately.

We rely on technology systems’ availability and ability to prevent unauthorized access. If our security and resiliency measures fail to prevent all incidents, it could result in damage to our reputation, incur costs and create liabilities.

Our business depends on a strong Cars.com brand, and any failure to maintain, protect and enhance our brand could hurt our ability to retain or expand our base of consumers, customers and advertisers, and our ability to increase the frequency with which consumers, dealers and advertisers use our services.

We cannot assure you that we will be able to continue to successfully develop and launch new products or grow our complementary product offerings.

Our business is dependent on keeping pace with advances in technology. If we are unable to keep pace with advances in technology, consumers may stop using our services and our revenues will decrease.

If we do not adapt to automated buying strategies quickly, our display advertising revenue could be adversely affected.

13


 

If our mobile apps do not continue to meet consumer demands or we are unable to successfully monetize our mobile advertising solutions, our business, results of operations and financial condition may be materially and adversely affected.

Dealer closures or consolidation among dealers or OEMs could reduce demand for, and the pricing of, our marketing solutions and advertising on our sites and mobile apps, thereby leading to decreased earnings.

If growth in the online and mobile automotive advertising market stagnates or declines, our business, results of operations and financial condition could be materially and adversely affected.

Our ability to generate wholesale advertising revenues depends, in part, on the performance of third parties who sell our solutions pursuant to affiliation agreements.

Uncertainty exists in the application of various laws and regulations to our business, including tax laws such as the Tax Cuts and Jobs Act. New laws or regulations applicable to our business, or the expansion or interpretation of existing laws and regulations to apply to our business, could subject us to licensing requirements, claims, judgments and remedies, including sales and use taxes, other monetary liabilities and limitations on our business practices, and could increase administrative costs.

Strategic acquisitions, investments and partnerships could pose various risks, increase our leverage, dilute existing stockholders and significantly impact our ability to expand our overall profitability.

The value of our existing intangible assets may become impaired, depending upon future operating results.

Adverse results from litigation or governmental investigations could impact our business practices and operating results.

Misappropriation or infringement of our intellectual property and proprietary rights, enforcement actions to protect our intellectual property and claims from third parties relating to intellectual property could materially and adversely affect our business, results of operations and financial condition.

If we expand into new geographic markets, we may be prevented from using our brands in such markets.

Our ability to operate effectively could be impaired if we fail to attract and retain our key employees.

Seasonality may cause fluctuations in our revenue and operating results.

Our business could be negatively affected as a result of actions of activist stockholders, and such activism could impact the trading value of our common stock.

While we are exploring and evaluating strategic alternatives, we may not be successful in identifying or completing any strategic alternative and any such strategic alternative may not yield additional value for stockholders.

Our historical and pro forma financial information for periods prior to the Separation from our former parent may not be a reliable indicator of our future results.

There could be significant liability if the distribution is determined to be a taxable transaction.

We may be unable to engage in certain corporate transactions after the Separation because such transactions could jeopardize the intended tax-free status of the distribution.

Our debt agreements contain restrictions that may limit our flexibility in operating our business.

Increases in interest rates could increase interest payable under our variable rate indebtedness.

Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021 may adversely affect the market value of our current or future debt obligations, including our long-term debt instruments and our bank credit facilities.

We do not expect to pay any cash dividends for the foreseeable future.

Your percentage of ownership in the Company may be diluted in the future.

Certain provisions of our certificate of incorporation, by-laws, tax matters agreement, separation and distribution agreement, employee matters agreement, transition services agreement, and Delaware law may discourage takeovers and limit our ability to use, acquire, or develop certain competing businesses.

Our amended and restated certificate of incorporation designates the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us and our directors and officers.

14


 

For a detailed discussion of many of these risks and uncertainties, see “Part I, Item 1A., Risk Factors” and “Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019  All forward-looking statements contained in this report are qualified by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. The forward-looking statements contained in this report are based only on information currently available to us and speak only as of the date of this report. We undertake 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.

 

15


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of our business, financial condition, results of operations and quantitative and qualitative disclosures should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis also contains forward-looking statements and should be read in conjunction with the disclosures and information contained in “Note About Forward-Looking Information” in this Quarterly Report on Form 10-Q. The financial information discussed below and included elsewhere in this Quarterly Report on Form 10-Q may not necessarily reflect what our financial condition, results of operations and cash flows may be in the future.

 

References in this discussion and analysis to “Cars.com,” “we,” “us,” “our” and similar terms refer to Cars.com Inc. and its subsidiaries, collectively, unless the context indicates otherwise.

 

Business Overview

 

Cars.com is a leading two-sided digital automotive marketplace that connects car shoppers with sellers and original equipment manufacturers (“OEM”s), empowering shoppers with the resources and information to make informed buying decisions. Our portfolio of brands includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, PickupTrucks.com and NewCars.com. Dealer Inspire and DealerRater provide digital solutions for car dealers, including cutting-edge dealer websites, technology and reputation management solutions that improve automotive selling for local dealerships and national OEM brands. In a rapidly changing market, Cars.com 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 May 2017, we separated from our former parent company, TEGNA Inc. (“TEGNA”) by means of a spin-off of a newly formed company, Cars.com Inc., which now owns TEGNA’s former digital automotive marketplace business (the “Separation”). Our common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017.

 

In the time since Cars.com became an independent company, we have developed and commenced a new, ongoing multi-year business strategy to better support sustainable long-term growth and market leadership. We are making strides to transform from a listings business to an online media and digital solutions platform that is well-positioned to lead in the online automotive retail sector. In 2018 and 2019, we accomplished many product, technology, sales and go-to-market changes designed to underpin a strategy aimed at achieving sustainable market leadership during a dynamic period in the automobile and automotive-advertising sectors. 

In conjunction with our digital solutions strategy, in February 2018, we acquired all of the outstanding stock of Dealer Inspire, Inc. and substantially all of the net assets of Launch Digital Marketing LLC (the “Acquisition”). The post-Acquisition business related to Dealer Inspire, Inc. and Launch Digital Marketing LLC is referred to collectively as “Dealer Inspire”. The results of operations for the three months ended March 31, 2018 includes Dealer Inspire’s financial results for the post-Acquisition period of February 21, 2018 through March 31, 2018.

 

Overview of Results

 

 

Three Months Ended March 31,

 

(In thousands, except percentages)

 

2019

 

 

2018

 

Revenues

 

$

154,198

 

 

$

159,957

 

Net (loss) income (1) (2)

 

 

(9,031

)

 

 

929

 

Retail revenues as % of total revenues

 

 

90

%

 

 

83

%

Wholesale revenues as % of total revenues

 

 

10

%

 

 

17

%

 

 

(1)

The net loss for the three months ended March 31, 2019 is primarily attributed to a decrease in national advertising revenues, higher depreciation and amortization expense due to the full quarter’s impact related to the Acquisition, and additional amortization resulting from the reduction of the useful lives of certain assets related to the Technology Transformation.

 

 

(2)

During the three months ended March 31, 2019, we recognized $6.5 million related to severance, transformation and other exit costs; $2.7 million in costs associated with stockholder activist campaign; and $2.0 million in transaction-related costs. During the three months ended March 31, 2018, we recognized $0.5 million related to severance, transformation and other exit costs; $3.8 million in costs associated with stockholder activist campaign; and $10.1 million in transaction-related costs.

 

2019 Highlights

 

Technology Transformation. In February 2019, we announced a restructuring of the product and technology teams (the “Technology Transformation”). This restructuring is primarily focused on shifting our technology spend towards innovation to improve our speed of product delivery, to enable integration across current and future systems, and to migrate our systems to the cloud. In connection

16


 

with the Technology Transformation, we have aligned our product and technology teams with our long-term growth strategy to expand beyond listings to a digital solutions marketplace. As part of this process, we have streamlined the existing teams as we modernize our technology platform and invest in a more efficient cloud-based infrastructure focused on machine learning, product innovation and growth. Further, we expect to achieve cost efficiencies upon completion of the Technology Transformation.

 

Strategic Alternatives to Enhance Shareholder Value. In January 2019, we announced that we have been conducting a process to explore strategic alternatives to enhance shareholder value. At the September 28, 2018 meeting, the Board of Directors authorized management and its external advisors to initiate such a process and we have since been considering a broad range of strategic alternatives, including a potential sale of the Company. There can be no assurance that the strategic alternatives review process will result in a sale of the Company or other strategic change or outcome. We have not set a timetable for the conclusion of our review of strategic alternatives, and we do not intend to comment further unless and until the Board of Directors has approved a specific course of action or we otherwise determined that further disclosure is appropriate or required by law.

 

Sales Transformation. In December 2018, we restructured the sales team (the “Sales Transformation”), which reorganized the sales force into teams designed to provide the full range of enhanced services to current customers and a more tailored structure to win new customers. These changes reflect the expansion of our business beyond car listings to include value-added digital solutions such as innovations from Dealer Inspire and DealerRater. The Sales Transformation also reflects a realignment of territories following the conversion of the majority of the affiliate agreements.

 

Key Operating Metrics

 

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. We also review other key metrics including: unique visitors, average revenue per dealer and dealer customer and consumer satisfaction statistics.

 

Information regarding Traffic and Average Monthly Unique Visitors is as follows:

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

2019

 

 

2018

 

 

% Change

 

Traffic (Visits)

 

 

132,474,000

 

 

 

113,416,000

 

 

 

17

%

Average Monthly Unique Visitors

 

 

22,408,000

 

 

 

19,352,000

 

 

 

16

%

 

Information regarding our Dealer Customers and Direct Monthly Average Revenue Per Dealer is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

March 31, 2018

 

 

% Change

 

 

December 31, 2018

 

 

% Change

 

Dealer Customers (1)

 

 

19,300

 

 

 

20,474

 

 

 

(6

)%

 

 

19,921

 

 

 

(3

)%

Direct Monthly Average Revenue Per Dealer (2)

 

$

2,225

 

 

$

2,036

 

 

 

9

%