CARS Reports First Quarter 2023 Results
Continued Growth in Revenue and ARPD
Achieved First Quarter Guidance and Reaffirms Full-Year 2023 Guidance
Repaid Revolving Loan
Q1 2023 Financial and Key Metric Highlights
- Revenue of
$167.1 million $8.9 million 6% year-over-year - Net income of
$11.5 million $0.17 $4.3 million $0.06 - Adjusted EBITDA of
$44.3 million 26.5% of revenue, up$2.3 million - Average Monthly Unique Visitors ("UVs") of 28.5 million, up
7% year-over-year - Traffic ("Visits") of 164.8 million, up
11% year-over-year - Monthly Average Revenue Per Dealer ("ARPD") of
$2,386 4% from the prior year period - Dealer Customers of 19,186 as of March 31, 2023, 320 lower compared to 19,506 as of December 31, 2022 and 314 lower compared to the prior year
Operational Highlights
- Generated
$28.1 million $15.0 million $7.2 million - Launched new Marketplace packages and aligned subscription pricing with the enhanced value of features and solutions such as CreditIQ's Instant Finance and DealerRater, enabling customers to better leverage cross-platform capabilities
- Strengthened editorial content with the publication of Cars.com's first-ever affordability report, providing shoppers with insights on comparative vehicle pricing and trends
"We drove strong first quarter performance with year-over-year growth in key metrics - revenue, Adjusted EBITDA, and traffic. Our subscription business continues to deliver strong recurring revenue driven by increased product sales and customer retention. Based on our momentum, we are confident in our growth prospects for the second quarter and reaffirm our full-year guidance," said Alex Vetter, Chief Executive Officer of CARS.
Q1 2023 Results
Revenue for the first quarter totaled
Total operating expenses for the first quarter were
Net income for the quarter was
Adjusted EBITDA for the quarter totaled
For the quarter, Average Monthly Unique Visitors increased
As of March 31, 2023, Dealer Customers totaled 19,186, 320 customers lower compared to the end of the fourth quarter of 2022, and down 314 compared to March 31, 2022. The decrease was primarily due to an anticipated pull-back by certain digital dealers. Excluding these cancellations, Dealer Customers would have increased year-over-year.
First quarter ARPD totaled
Cash Flow and Balance Sheet
Net cash provided by operating activities in the first quarter 2023 was
The Company paid down
During the first quarter, the Company repurchased 0.4 million of its common shares for
"The strength of our integrated platform, efficiency of our traffic generation and our asset light business model continue to yield growth and profitability for our business, generating
2023 Outlook
The Company's asset-light, diversified platform strategy provides a solid foundation for growth. Second quarter revenue is expected to be between
Adjusted EBITDA margin for the second quarter is expected to be between
The Company reaffirms its full-year revenue guidance, of
Margins are expected to improve over the course of the year, and the Company expects to exit the year with fourth quarter Adjusted EBITDA margins approaching
Q1 2023 Earnings Call
As previously announced, management will hold a conference call and webcast today at 8:00 a.m. CT. This webcast may be accessed at CARS' Investor Relations website, investor.cars.com. An archive of the webcast will be available at investor.cars.com following the conclusion of the call.
About CARS
CARS is a leading automotive marketplace platform that provides a robust set of digital solutions that connect car shoppers with sellers. Launched in 1998 with the flagship marketplace Cars.com and headquartered in
In addition to Cars.com, CARS brands include Dealer Inspire, a website and digital solutions provider enabling dealers to be more efficient through connected digital experiences; FUEL, an advertising solution providing dealers and OEMs the benefit of leveraging targeted digital video and display marketing to Cars.com's audience of in-market car shoppers, DealerRater, a leading car dealer review and reputation management platform, a digital financing technology platform CreditIQ, and Accu-Trade Group, a leading provider of vehicle valuation and appraisal technology.
The full suite of CARS properties includes Cars.com™, Dealer Inspire®, FUEL™, DealerRater®, CreditIQ®, Accu-Trade™ and NewCars.com®. For more information, visit www.Cars.com.
Non-GAAP Financial Measures
This earnings release discusses Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow and Adjusted Operating Expenses. These financial measures are not prepared in accordance with generally accepted accounting principles in
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 items, severance, transformation and other exit costs and write-off and impairments of goodwill, intangible assets and other long-lived assets.
Transaction-related items result 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 items may also include, without limitation, transition and integration costs such as retention bonuses and acquisition-related milestone payments to acquired employees, consulting, compensation and other incremental costs associated with integration projects, fair value changes to contingent considerations and amortization of deferred revenue related to the Accu-Trade acquisition.
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 internally developed technology.
The Company defines Adjusted Operating Expenses as total operating expenses adjusted to exclude stock-based compensation, write-off and impairments of goodwill, intangible assets, long-lived assets, severance, transformation and other exit costs and transaction-related items.
Key Metric Definitions
Average Monthly Unique Visitors ("UVs") and Traffic ("Visits"). 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 its 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. Traffic is defined as the number of visits to CARS desktop and mobile properties (responsive sites and mobile apps). The Company measures UVs and Traffic via Adobe Analytics. These metrics do not include traffic to Dealer Inspire websites.
Monthly Average Revenue Per Dealer ("ARPD"). The Company believes that its ability to grow ARPD is an indicator of the value proposition of its platform. 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. Beginning with the three months ended June 30, 2022, Accu-Trade is included in our ARPD metric, which had an immaterial impact on ARPD for the annual and quarterly periods. No prior period has been recast as it would be impracticable to do so.
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. Beginning June 30, 2022, this key operating metric includes Accu-Trade; however, no prior period has been recast as it would be impracticable to do so.
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, recent acquisitions, such as CreditIQ and Accu-Trade, liquidity, including draws from the Company's revolving credit facility, expense management and other matters and involve known and unknown risks that are difficult to predict. 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. 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. 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, global supply chain shortages, fluctuating fuel prices 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
rmr@cars.com
312.601.5929
CARS Media Contact:
Marita Thomas
mthomas@cars.com
312.601.5692
Cars.com Inc. | ||||
Consolidated Statements of Income | ||||
(In thousands, except per share data) | ||||
(Unaudited) | ||||
Three Months Ended March 31, | ||||
2023 | 2022 | |||
Revenue: | ||||
Dealer | ||||
OEM and National | 13,543 | 15,174 | ||
Other | 3,682 | 2,617 | ||
Total revenue | 167,068 | 158,207 | ||
Operating expenses: | ||||
Cost of revenue and operations | 29,795 | 27,752 | ||
Product and technology | 24,101 | 21,307 | ||
Marketing and sales | 58,297 | 57,094 | ||
General and administrative | 18,304 | 16,560 | ||
Depreciation and amortization | 24,042 | 24,553 | ||
Total operating expenses | 154,539 | 147,266 | ||
Operating income | 12,529 | 10,941 | ||
Nonoperating expense: | ||||
Interest expense, net | (8,244) | (9,330) | ||
Other income, net | 8,239 | 208 | ||
Total nonoperating expense, net | (5) | (9,122) | ||
Income before income taxes | 12,524 | 1,819 | ||
Income tax expense (benefit) | 1,045 | (2,521) | ||
Net income | $ 11,479 | $ 4,340 | ||
Weighted-average common shares outstanding: | ||||
Basic | 66,530 | 69,463 | ||
Diluted | 67,747 | 70,899 | ||
Earnings per share: | ||||
Basic | $ 0.17 | $ 0.06 | ||
Diluted | 0.17 | 0.06 | ||
Cars.com Inc. | ||||
Consolidated Balance Sheets | ||||
(In thousands, except per share data) | ||||
March 31, 2023 | December 31, 2022 | |||
Assets: | (unaudited) | |||
Current assets: | ||||
Cash and cash equivalents | $ 18,838 | $ 31,715 | ||
Accounts receivable, net | 114,035 | 107,930 | ||
Prepaid expenses | 11,369 | 8,377 | ||
Other current assets | 409 | 605 | ||
Total current assets | 144,651 | 148,627 | ||
Property and equipment, net | 45,692 | 45,218 | ||
Goodwill | 102,856 | 102,856 | ||
Intangible assets, net | 687,930 | 707,088 | ||
Investments and other assets, net | 21,092 | 21,081 | ||
Total assets | $ 1,002,221 | $ 1,024,870 | ||
Liabilities and stockholders' equity: | ||||
Current liabilities: | ||||
Accounts payable | $ 17,424 | $ 18,230 | ||
Accrued compensation | 12,412 | 19,316 | ||
Current portion of long-term debt, net | 15,444 | 14,134 | ||
Other accrued liabilities | 62,068 | 54,332 | ||
Total current liabilities | 107,348 | 106,012 | ||
Noncurrent liabilities: | ||||
Long-term debt, net | 438,739 | 458,249 | ||
Other noncurrent liabilities | 71,147 | 76,179 | ||
Total noncurrent liabilities | 509,886 | 534,428 | ||
Total liabilities | 617,234 | 640,440 | ||
Commitments and contingencies | ||||
Stockholders' equity: | ||||
Preferred Stock at par, | — | — | ||
Common Stock at par, | 668 | 662 | ||
Additional paid-in capital | 1,501,016 | 1,511,944 | ||
Accumulated deficit | (1,116,697) | (1,128,176) | ||
Total stockholders' equity | 384,987 | 384,430 | ||
Total liabilities and stockholders' equity | $ 1,002,221 | $ 1,024,870 | ||
Cars.com Inc. | ||||
Consolidated Statements of Cash Flows | ||||
(In thousands) | ||||
(Unaudited) | ||||
Three Months Ended March 31, | ||||
2023 | 2022 | |||
Cash flows from operating activities: | ||||
Net income | $ 4,340 | |||
Adjustments to reconcile Net income to Net cash provided by operating activities: | ||||
Depreciation | 4,884 | 4,014 | ||
Amortization of intangible assets | 19,158 | 20,539 | ||
Amortization of accumulated other comprehensive loss on interest rate swap | — | 1,417 | ||
Changes in fair value of contingent consideration | (8,259) | — | ||
Stock-based compensation | 5,982 | 5,221 | ||
Deferred income taxes | (228) | (374) | ||
Provision for doubtful accounts | 447 | 27 | ||
Amortization of debt issuance costs | 781 | 816 | ||
Amortization of deferred revenue related to Accu-Trade Acquisition | (883) | (442) | ||
Other, net | 134 | 87 | ||
Changes in operating assets and liabilities, net of acquisitions: | ||||
Accounts receivable | (6,552) | 4,442 | ||
Prepaid expenses and other assets | (3,039) | (3,073) | ||
Accounts payable | (859) | 1,081 | ||
Accrued compensation | (6,904) | (13,488) | ||
Other liabilities | 12,000 | 5,751 | ||
Net cash provided by operating activities | 28,141 | 30,358 | ||
Cash flows from investing activities: | ||||
Payments for acquisitions, net of cash acquired | — | (64,770) | ||
Capitalization of internally developed technology | (5,172) | (3,516) | ||
Purchase of property and equipment | (199) | (492) | ||
Net cash used in investing activities | (5,371) | (68,778) | ||
Cash flows from financing activities: | ||||
Proceeds from Revolving Loan borrowings | — | 45,000 | ||
Payments of long-term debt | (18,750) | (2,500) | ||
Payments for stock-based compensation plans, net | (9,797) | (7,696) | ||
Repurchases of common stock | (7,100) | (5,000) | ||
Net cash (used in) provided by financing activities | (35,647) | 29,804 | ||
Net decrease in cash and cash equivalents | (12,877) | (8,616) | ||
Cash and cash equivalents at beginning of period | 31,715 | 39,069 | ||
Cash and cash equivalents at end of period | ||||
Supplemental cash flow information: | ||||
Cash paid for income taxes | $ 96 | $ 17 | ||
Cash paid for interest and swap | 1,486 | 2,743 | ||
Cars.com Inc. | ||||||||
Non-GAAP Reconciliations | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Reconciliation of Net income to Adjusted EBITDA | ||||||||
Net income | $ 11,479 | $ 4,340 | ||||||
Interest expense, net | 8,244 | 9,330 | ||||||
Income tax expense (benefit) | 1,045 | (2,521) | ||||||
Depreciation and amortization | 24,042 | 24,553 | ||||||
Stock-based compensation | 6,952 | 5,417 | ||||||
Write-off of long-lived assets and other | 135 | (45) | ||||||
Severance, transformation and other exit costs | 1,217 | 392 | ||||||
Transaction-related items | (8,777) | 556 | ||||||
Adjusted EBITDA | $ 44,337 | $ 42,022 | ||||||
Reconciliation of Net cash provided by operating activities to Free cash flow | ||||||||
Net cash provided by operating activities | $ 28,141 | $ 30,358 | ||||||
Capitalization of internally developed technology | (5,172) | (3,516) | ||||||
Purchase of property and equipment | (199) | (492) | ||||||
Free cash flow | $ 22,770 | $ 26,350 | ||||||
Reconciliation of Operating expenses to Adjusted operating expenses for the Three Months Ended March 31, 2023: | ||||||||
As Reported | Adjustments (1) | Stock-Based | As Adjusted | |||||
Cost of revenue and operations | $ 29,795 | $ — | $ (307) | $ 29,488 | ||||
Product and technology | 24,101 | — | (2,057) | 22,044 | ||||
Marketing and sales | 58,297 | — | (1,433) | 56,864 | ||||
General and administrative | 18,304 | (1,917) | (3,155) | 13,232 | ||||
Depreciation and amortization | 24,042 | — | — | 24,042 | ||||
Total operating expenses | $ 154,539 | $ (1,917) | $ (6,952) | $ 145,670 | ||||
Total nonoperating expense, net | $ (5) | $ (8,259) | $ — | $ (8,264) | ||||
(1) Includes transaction related items, severance, transformation and other exit costs, and write-off of long-lived assets and other. | ||||||||
Reconciliation of Operating expenses to Adjusted operating expenses for the Three Months Ended March 31, 2022: | ||||||||
As Reported | Adjustments (1) | Stock-Based | As Adjusted | |||||
Cost of revenue and operations | $ 27,752 | $ — | $ (195) | $ 27,557 | ||||
Product and technology | 21,307 | — | (1,240) | 20,067 | ||||
Marketing and sales | 57,094 | — | (1,305) | 55,789 | ||||
General and administrative | 16,560 | (1,615) | (2,677) | 12,268 | ||||
Depreciation and amortization | 24,553 | — | — | 24,553 | ||||
Total operating expenses | $ 147,266 | $ (1,615) | $ (5,417) | $ 140,234 | ||||
Total nonoperating expense, net | $ (9,122) | $ (170) | $ — | $ (9,292) | ||||
(1) Includes transaction related items, severance, transformation and other exit costs, and write-off of long-lived assets and other. | ||||||||
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SOURCE Cars.com Inc.
