CARS

Cars.com’s second quarter results aligned with Wall Street expectations, with management attributing flat sales to a deliberate shift in marketing to prioritize high-intent shoppers over pure audience growth. CEO Tobias Hartmann highlighted that the company’s “marketplace flywheel is solid,” and pointed to dealer subscription products and the launch of Dealer Verified Listings as key contributors to the period’s performance. Despite a year-over-year decline in website traffic, management emphasized improved lead conversion and a focus on organizational efficiency, such as cost discipline and process improvements, that supported higher operating margins. Is now the time to buy CARS? Find out in our full research report (it’s free). Revenue: $179.9 million vs analyst estimates of $180.6 million (flat year on year, in line) Adjusted EPS: $0.51 vs analyst estimates of $0.51 (in line) Adjusted EBITDA: $52.98 million vs analyst estimates of $51.95 million (29.4% margin, 2% beat) Operating Margin: 15.5%, up from 8.5% in the same quarter last year Dealer Customers: 19,343, in line with the same quarter last year Market Capitalization: $647.7 million While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Thomas White (D.A. Davidson) asked about the sustainability of marketplace revenue growth and Premium Plus package momentum. CFO Sonia Jain explained growth was driven by both dealer count improvements and new product adoption, with a target of 15% Premium Plus penetration by year-end. Marvin Fong (U.S. Bancorp) questioned the timeline for stabilizing and growing website solution subscribers. CEO Tobias Hartmann pointed to a roadmap focused on product innovation and cross-platform integration, aiming for a turnaround over the next two to three quarters. Naved Khan (B. Riley) pressed for clarity on increased marketing spend despite a quality-over-quantity approach. Hartmann clarified that higher spend includes investments in brand positioning to support the interconnected marketplace strategy. Alejandro Nuno (UBS) inquired about the flat EBITDA margin outlook despite ongoing cost efficiencies. Jain responded that innovation and resource reallocation are expected to yield margin scale as new products gain traction later in the year. Unknown Analyst (JPMorgan) asked about adapting to FTC dealer pricing transparency rules. Jain stated that the platform is supporting dealers with compliance tools and that transparency aligns with Cars.com's trust-based marketplace strategy. In the coming quarters, the StockStory analyst team will track (1) adoption rates of Dealer Verified Listings and Premium Plus packages among dealers, (2) the pace of website subscription stabilization and potential return to growth as product integration accelerates, and (3) the effectiveness of expanded AI features in driving shopper engagement and lead conversion. Additionally, we will monitor operational discipline and the impact of marketing strategy on both cost structure and traffic quality. Cars.com currently trades at $11.91, in line with $11.84 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members). ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time. Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 9:00 a.m. ET Vice President of Investor Relations - Katherine Chen Chief Executive Officer - Tobias Hartmann Chief Financial Officer - Sonia Jain Operator: Good morning, and welcome to our second quarter 2026 earnings conference call. [Operator Instructions] Please be advised that this call is being recorded today, August 7, 2026. I would now like to turn the conference over to Katherine Chen, Vice President of Investor Relations. Please go ahead. Katherine Chen: Good morning, everyone, and thank you for joining us for the Cars.com, Inc. Second Quarter 2026 Conference Call. With me this morning are Toby Hartmann, CEO; and Sonia Jain, CFO. Toby will start by discussing business highlights from our second quarter. Then Sonia will discuss our financial results in greater detail, along with our outlook. We'll finish the call with Q&A. Before I turn the call over to Toby, I'd like to draw your attention to our forward-looking statements and the description and definition of non-GAAP financial measures, which can be found in our presentation. We will be discussing certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, adjusted net income and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the financial tables included with our earnings press release and in the appendix of our presentation. Any forward-looking statements are subject to risks and uncertainties. For more information, please refer to the risk factors included in our SEC filings, including those in our most recently filed 10-K, which is available on the IR section of our website. We assume no obligation to update any forward-looking statements. And now I'll turn the call over to Toby. Tobias Hartmann: Thank you, Katherine, and thanks to everyone on the call for joining us to review our second quarter 2026 results. We delivered another quarter of revenue growth and increased profitability. Q2 revenue of $180 million was within our guidance range and grew year-over-year on the strength of dealer subscription products. Marketplace was a highlight for the quarter on both revenue and subscriber growth. Our expanded adjusted EBITDA margin of 29.4% outperformed the high end of guidance for a second consecutive quarter. And we continue to generate strong free cash flow, which enables both investment in organic growth and a 28% year-to-date increase in buybacks to return value to shareholders. Based on our results, we are pacing well to meet our 2026 financial targets, and we are positioned to deliver further improvement in 2027. As we laid out shortly after I joined in January, creating an interconnected marketplace-centric ecosystem is foundational to our long-term growth strategy. At its core, our marketplace flywheel is solid, and we remain a leader in driving vehicle sales at scale, integration between marketplace websites and appraisal solutions unlocks more opportunities to improve each component of this flywheel. For example, unifying our retail appraisal and vehicle insights helps build more trust and confidence in the purchase journey. A more seamless and personalized experience between Cars.com and dealer websites also powers better shopping signals and conversion. And we can speed product development velocity as we improve technical interoperability. We are operationalizing these goals through our focus on product, process and organizational improvements, the 3 initiatives that have guided our year-to-date execution. Marketplace results are already responding positively to the change in our strategy and operations. Marketplace revenue grew over 7% year-over-year in Q2. Putting this in context, outside of 2021's pandemic-related recovery, this is the fastest marketplace growth rate in our public company history. And as a result, dealer revenue growth more than offset the expected decline in OEM revenue. Underpinning this growth, in Q2, marketplace subscribers rebounded to their highest level since 2023 and marketplace ARPD reached an all-time high. We recently launched Dealer Verified Listings, a new feature that, for the first time, integrates aspects of AccuTrade and marketplace. Whereas AccuTrade has traditionally been a stand-alone dealership solution powering appraisals and trade-ins, we are now beginning to capitalize on its capabilities across the consumer marketplace. AccuTrade dealers and soon those wanting to participate in our dealer verified listings program can display current vehicle condition reports directly onto listings. This is a differentiated alternative to the traditional backward-looking vehicle history report. And for shoppers, the Dealer Verified badge is an additional trust signal unique to our marketplace. Dealer Verified Listings are the first step as we build cross-platform VIN-specific intelligence that helps maximize the value of each car. Compared to process and people changes, product typically requires a longer runway before results come to fruition. Therefore, it was exciting to see Dealer Verified Listings go from development to launch within just a few months. Overall, in 2026, our deployment rate for new features has already increased by 80% year-over-year. This new operating cadence underscores our growth potential as product momentum builds across our interconnected marketplace. We also continue to enhance the consumer product experience, adding our Carson's AI shopping assistance to more marketplace surfaces. Today, around 20% of active searches on Cars.com are engaging with Carson. Carson users are 4x more likely to submit a lead and accounted for nearly 30% of total leads submitted in the month of June, demonstrating our platform value. Offering an AI-first option for car shoppers boosts conversion, contributes to overall marketing efficiency and gives us additional bandwidth for strategic growth investments. Additional Carson features are slated for release this year, such as better comparison tools and more personalization that we expect will further improve consumer satisfaction. In terms of our overall marketplace audience, the year-over-year decline in Q2 traffic and visitors primarily reflects strategic shifts to prioritize value delivery. Adhering to a more rigorous marketing investment approach has helped us better target and convert high-intent shoppers. Q2 lead conversion was up double digits year-over-year and performance marketing cost per lead also improved throughout the quarter. Based on the clearly favorable customer response that fueled marketplace revenue and subscriber growth in Q2, we will continue to deemphasize lower quality traffic, opting instead to drive more value to dealers. We're also excited to have our new CMO leading these efforts. Leveraging her deep consumer and marketplace background will help us shape and refine our tactics. We believe marketplaces remain central to the car buying experience for shoppers. First, automotive is a considered purchase for the majority of consumers and requires deep vertical expertise and proprietary first-party insights like Dealers Verified Listings. Adding richer vehicle insights will continue to draw shoppers onto our marketplace. Second, organic traffic has consistently remained around 60% of our total traffic. SEO declines appear to have bottomed in late 2025 and direct traffic, our largest organic channel, grew year-over-year in the first half of 2026. Third, we view AI as a net benefit to the car shopping experience and seek to be a valuable partner in this expanded ecosystem. We are the #1 most cited public automotive marketplace amongst leading AI platforms. We also recently added 25-plus years of editorial content into our Cars.com ChatGPT app to enhance the consumer experience. In the medium term, we anticipate that pursuing a thoughtful AI strategy should be additive to our growth ambition. Each incremental step on product integration, process optimization and organizational improvement contributed to the meaningful uptick in marketplace performance in the first half. Simply put, our playbook shows impact. And we will reverse the recent decline in website customers by applying these same principles, particularly product innovation. Our goal is to accelerate product development velocity for websites first by adding current marketplace capabilities. This includes personalization, AI features like Carson and interconnected data insights between our products. For consumers, that means a more seamless and customized shopping experience when moving across Cars.com and Dealer Inspire websites. We will provide seekers with more options and choices for an interconnected marketplace experience. For dealers, aggregated consumer signals yield richer leads and a distinct advantage to closing sales. These enhancements plus further technical and product investments slated for 2027 are expected to position our website business for renewed growth. In summary, we have made solid progress to deliver our goals and objectives. Our 2026 financial performance has consistently met or exceeded guidance. Marketplace results are especially encouraging and reflect strong execution of our new strategy. Operating leverage is also improving via cost efficiencies, tighter internal processes and a leaner yet more productive organization. And product green shoots are showing the untapped potential of an interconnected marketplace platform. I want to acknowledge the discipline, hard work and focus of our team whose execution and collaboration has been instrumental to these initial successes. We are confident that these efforts will compound to drive long-term sustainable growth and shareholder value. Now Sonia will discuss our financial results and outlook. Sonia? Sonia Jain: Thank you, Toby. Second quarter financial performance highlighted strong execution of our marketplace first strategy and improved operating leverage across our business. Revenue of $179.9 million was up 1% year-over-year and within our guidance range. Dealer revenue growth was up 3% year-over-year and was slightly offset by the anticipated decline in OEM and national revenue, which was down 18% year-over-year. Within dealer revenue, robust marketplace growth more than offset flat to down performance for Solutions and Media products. ARPD and dealer count also broadly followed these same trends. Q2 ARPD of $2,500 was up 3% year-over-year and 1% quarter-over-quarter. Marketplace was the primary contributor to this year-over-year improvement, and we set a new record for marketplace-only ARPD during Q2. Premium Plus was up quarter-over-quarter and the fastest growing of our 3 marketplace packages, further supporting favorable pricing mix. We're making progress towards our stated 15% target adoption rate for 2026. However, lower uptake of add-on dealer media products remained a near-term headwind, partially offsetting gains from core marketplace adoption. Consolidated dealer count reflected similar puts and takes. Marketplace subscribers were up year-over-year and quarter-over-quarter. However, website units declined compared to a year ago, consistent with our view that future DI growth hinges on product innovation and packaging rather than unit volume expansion. Therefore, we're applying the same product-led approach that has worked well for marketplace. Step 1 is bringing existing marketplace capabilities to websites in Q3 and Q4, an efficient way to strengthen our focus on DI product innovation. As Toby also mentioned, we launched Dealer verified listings in June. This is an important first step as we integrate our product offerings to capture greater platform value, simplify go-to-market motions and unlock new cross-selling opportunities. Dealer Verified Listings are currently available to existing AccuTrade customers. And in Q4, we will begin expanding this feature to marketplace customers to drive further growth and adoption. As we migrate towards a more integrated marketplace and appraisal bundle, individual point sales of AccuTrade will become less relevant to our strategy. However, it's worth noting that AccuTrade subscribers were roughly flat sequentially in Q2, even as we retool our offering. Rounding out our revenue discussion, OEM and national revenue was down $3 million year-over-year in Q2. We signaled in May that this quarter would represent a trough in OEM revenue. And based on positive performance in July and incremental spend commitments for the remainder of the year, we anticipate quarter-over-quarter growth in Q3. Now to discuss cost. Second quarter operating expenses were $152.1 million, down 7% year-over-year. We drove operating leverage across the organization, maintaining strong cost discipline and a continued focus on process efficiencies. A meaningful decline in depreciation and amortization expense following the full amortization of customer list tied to our 2017 spin-off, combined with lower compensation costs accounted for the majority of the year-over-year delta. Q2 adjusted operating expenses were $144.3 million, down 6% year-over-year from the same cost levers. For the following line item detail, all comparisons are on a year-over-year basis unless otherwise noted. Product and technology expenses decreased $2.7 million on a reported basis and $2.5 million on an adjusted basis. Lower compensation expense related to streamlining our processes and improving interconnectivity and improvements in our capitalization rate drove both the reported and adjusted decrease. Marketing and sales increased roughly $2.7 million on both the reported and adjusted basis, largely driven by targeted marketing to prioritize value delivery. General and administrative expense was down $3.5 million on a reported basis and roughly $1 million on an adjusted basis. The reported decrease was primarily due to the elimination of the D2C earn-out expense accrual and lower compensation expense. As a reminder, the D2C earn-out is considered a special item and not included in adjusted operating expenses, which accounts for the delta between the decline in reported and adjusted G&A expense. Second quarter net income was $14.3 million or $0.25 per diluted share compared to net income of $7 million or $0.11 per diluted share a year ago. Net income was primarily driven by improved operating income. Adjusted net income for the second quarter was $28.7 million or $0.51 per diluted share compared to $26.4 million or $0.41 per diluted share a year ago. Adjusted EBITDA of $53 million in the second quarter was up 4% year-over-year, healthily outpacing revenue growth and clearly showing the early impact of our process, cost and organizational improvements. Adjusted EBITDA margin of 29.4% was up nearly 100 basis points year-over-year. Moving to the cash flow statement and balance sheet. Net cash provided by operating activities totaled $55.6 million for the first half of the year compared to $55.7 million a year ago. Free cash flow was $43.5 million year-to-date, up modestly from $41.8 million a year ago when we had higher spending related to the build-out of our office headquarters. Share buybacks totaled 6.2 million shares for $57 million year-to-date. Since the start of the year, we have bought back and retired over 10% of shares outstanding. We are pacing well towards our 2026 share repurchase target of $90 million through opportunistic deployment of our free cash flow in the first half of 2026. Lastly, debt outstanding was $450 million as of June 30, 2026, which includes a $5 million debt payment during the second quarter. Total liquidity was $333.3 million as of June 30, 2026, and we have ample capacity for our capital allocation needs. Finally, we'll conclude with outlook. Third quarter revenue growth is expected to be flat to up 2% year-over-year based on continued dealer revenue growth and marketplace improvement and quarter-over-quarter improvement for OEM and national revenue. Third quarter adjusted EBITDA margin is expected to be between 28.5% and 29.5%, benefiting from continued cost and operational discipline. Lastly, we are also reaffirming our full year 2026 guidance of flat to 2% revenue growth and adjusted EBITDA margin of 29% to 30%. And with that, I'd like to open the line for Q&A. Operator: [Operator Instructions] We now take our first question, and this comes from Thomas White from D.A. Davidson. Thomas White: So I guess just first off, marketplace, looks like a nice quarter there, 7% growth. I was hoping maybe you could just unpack a little bit more kind of the drivers there kind of between maybe some of the premium package adoption and the momentum from the new products and just sort of talk a little bit about the sustainability of that kind of trajectory? And then I've got a follow-up. Sonia Jain: Thanks for the question. No, we're excited about the marketplace performance that we saw in Q2. I would say that it was driven by a combination of both improvements in dealer count, which really helped accelerate the marketplace flywheel and continued progress on ARPD, a chunk of which was driven by the new Premium Plus package that we rolled out last year. We continue to see good adoption there. Our target, as a reminder, is to get to a 15% penetration rate by the end of the year. Thomas White: Okay. Great. And then -- so you called out growth in lead volume, but there's still a pretty sharp decline in Uniques. Toby, maybe can you help us -- or so can you help us reconcile that a little bit. It didn't sound like SEO headwinds for you kind of have gotten worse, although there's some other kind of Internet marketplaces who are talking about that. So I don't know, just help us kind of reconcile what's going on there with Uniques. And eventually, I presume that, that trend has to change, particularly if you're going to look to be adding more dealers to the marketplace. Tobias Hartmann: Yes, sure. As we laid out and shared, this is really an intentional shift. We looked at our marketing spend and our marketing practice, and we figured that there are some inefficiencies. We drove a lot of traffic in the past, a lot of clicks that didn't convert into leads. So we do not want to do this anymore. So we are intentionally shifting to prioritize the value delivery versus the pure audience reach. And they're very happy to see that this is actually kicking in. So a lot better conversion and lead volume also kicking in. We also have a new CMO who started, so she's going to take it to a new level. So you saw with marketplace. Obviously, it's a good sign that it's working. You saw the growth kicking in. We saw also the dealer growth and the revenue growth. So we think this is the right strategy. And of course, we'll create the right momentum to also reinvest in the right spots, but again, lower funnel versus just half of funnel. Operator: And the next question comes from Marvin Fong from U.S. Bancorp. Marvin Fong: Just would like to ask a question on the subscribers for solutions. You talked about turning that around with more innovation and new products. Can you just kind of talk about the time line you have for rolling out those new products? And do you have a time line in mind for when we can expect that the dealer or the subscriber count there to stabilize and turn positive? And then second question, I know it was just launched in June, but can you just talk about what you're seeing in terms of leads and conversion rates that you're able to on the dealer verified product? And what's the monetization strategy for that? What packages would it be included? And how would you monetize outside of in specific subscribers. Tobias Hartmann: Marvin, it's Toby. Thank you for your questions. Let's talk about the first part, which is the website part and the DI part. First of all, we'd like to recall that we did tell you in the future -- that the future growth will be a little bit slowing down and given the fact that we actually repackaged and this is actually what we did. So it's not just about a mere volume, but it's also the price points and the packaging. So we pushed that and that's totally in line with strategy. Having said that, our value delivery remains really, really strong. We're really scaled provider. We are endorsed by pretty much every major OEM, and we're still winning new customers. But let's also talk about the weakness, which I'd like to address. First of all, there's a slower pace of new feature releases to date. And what we've done is we've rolled out the playbook for marketplace. We talked about it. We are seeing great productivity enhancements and acceleration, and we are going to apply that same playbook also for the solutions business. So we have a pretty exciting road map ahead that we work behind closed doors, which will actually focus on the interconnectivity with some of the marketplace functionalities. And then another point I'd like to mention is, we do have some organizational and process misalignment in the past, which we're also addressing as part of our reorganization. We've named the new GM, and we're really picking up speed there. So over the next 2 to 3 quarters, there will be a focus on really product innovation and applying the same playbook. So we're very confident that we'll get this back on a growth trajectory. Now regarding your second question with the dealer verified listings, we're really very happy about that because it took us only a few months to launch that. And what it does is in terms of impact, it's basically creating already more impressions, which then converts into higher click-through rates to BDPs, which essentially then drives faster listing terms. Why? Because this is a major trust signal that we are integrating into marketplace to stand out and help consumers really getting a better coordination between lots of vehicles, and there's either CPOs or nothing. And this is another alternative that looks at not just the historic vehicle report, but at the actual condition and the actual inspection that a dealer had to go through by applying some of the assets from AccuTrade. So view this as a really important step, first step, we'll share more data points. We just rolled it out. So it's too early, but we are testing heavily towards an interconnected experience with a focus on trust signals and guiding consumers. So hopefully, this is some context for you. Thank... Operator: And the next question comes from Gary Prestopino from Barrington Research. Gary Prestopino: Toby, good progress here. I guess with some of the marketplace revenue growth, is that really somewhat of a function of that you're -- now got the sales force selling an integrated product and you're getting more uptake because of that integrated product sales approach? Tobias Hartmann: Yes. Thank you. There's a couple of factors. That's certainly one. I'm glad you called it out. We made good progress there as well. But the other piece is we're bundling it and it's easier to understand, it's easier to package and it's easier to roll it out. So away from point solutions more towards an interconnected subscription with a clear value delivery. And then also, let's not forget about the marketing piece that we just called out, we are focused on delivering more leads as opposed to just more traffic. And that is the -- at the very end, that's the value delivery that dealers want. So it's a combination of the process and organizational adjustments we made plus the clear interconnectivity. First steps we are by no means done. Thirdly, sales efficiency and packaging. And fourthly, support from marketing efficiency and greater lead volume. Gary Prestopino: Okay. And then just a follow-up on the verified product, which is being generated by AccuTrade. Is the data that is being shown there very similar to some of the output that we were shown in Las Vegas? Or is it more or less just a deeper dive on versus a CARFAX where it's going to say no mechanical issues, et cetera, et cetera, things like that? Tobias Hartmann: Yes, it's a great question. Thank you. So the main difference between what you saw in Vegas and how we're utilizing it currently is it was very much dealer facing in Vegas, which is, if you remember, this was used as a tool to determine the best price, how to price the vehicle from a dealer's perspective to then put it onwards to consumer-facing potential sale listing. Now what this does today, our focus is really on guiding consumers to shift more towards consumers, giving them additional data points to really understand that this is a vehicle and a VIN number that went through an additional loop of 15, 18 points inspection, which, by the way, the dealer adhered to and signed off. So that's the difference. It's more consumer-facing as opposed to just price labeling. Gary Prestopino: So I don't want to -- I know I only have 2 questions, but I just want to be clear. In order to do a verified have this program, the dealer does have to do some kind of certified inspection and guarantee that inspection before for the purchaser of the car? Tobias Hartmann: Yes. They need to go through a rigorous process, which is obviously part of the AccuTrade assets and then they can put it up online. That's correct. Thank you. Operator: The next question comes from Naved Khan from B. Riley. Naved Khan: Two questions from me. One, maybe just on the traffic, website traffic between unique and visits. So you said that you're focusing on higher-quality traffic, not just the volume of traffic, which I understand. But if I just look at sort of marketing and sales as a percentage of revenue, that's up year-on-year. You're spending more money. So is it that you have to spend more money to kind of acquire the high-quality traffic? How should I understand that deleverage in the marketing line versus what you just spoke about in terms of quality trade-off? And then I have a follow-up. Tobias Hartmann: Yes. Good catch there. We anticipated that question. But there's something else that we're trying to catch up with and trying to have proper allocation, which is really, call it, brand. Remember, we still need some brand investments for the long-term interconnected strategy. So we need to position this not only just a listings destination, but instead as a transaction enablement platform. So the focus we just called out is really on the performance and growth marketing piece where we're really focused on driving more value. Separately from that, we are continuing and actually, we are spending money on positioning this right in terms of branding. And that's an important part of the journey because we are here for long-term success. So yes, that's why you see those numbers. Naved Khan: Okay. That's great. The second question I have is just on the verified listing. So it looks like you're creating a greater value proposition for the dealers that buy AccuTrade and ultimately, that should drive sales for this product. Is that the right way I should be understanding this? Or are you just going to expand the verified listing to more dealers regardless of whether or not they are AccuTrade customers? Tobias Hartmann: Yes. Good question, too. As Sonia shared, we started with the AccuTrade customers. Why? Because they are used to the procedures and the processes. And obviously, they're closer to our intentional shift of driving a differentiated listing and providing a different trust signal. That's the current testing. Now again, this is early innings. We are only out there for a couple of weeks, but the intent is to then also make this available to a broader audience of dealers, and we are seeing very positive and very encouraging signals right now. But also to be fair, we are learning because these are the power users, and they're giving us incredibly fundamental and good sound feedback on how we can further improve that. So in summary, correct, we started with activate customers only and also only a subgroup of those. We're getting their feedback. We're monitoring. We are financing the product, but the intent is to roll it out and expand it and make it available to other dealers. Operator: The next question comes from Alejandro Nuno from UBS. Alejandro Nuno: Maybe you can just sort of help us out with the guidance. The EBITDA guide basically implies margins are relatively flat quarter-over-quarter, but it sounds like you continue to make good progress on optimizing the cost structure and expect sort of return growth in OEM revenues. So why are margins sort of flat quarter-over-quarter? And then maybe sort of on top of that, like the fourth quarter margin sort of implies close to sort of 31%. Like what drives, I guess, the step-up then from Q3 to Q4? Sonia Jain: Yes. No, thank you for the question. We're happy with our EBITDA performance on a year-to-date basis. As you heard, we've kind of reaffirmed the full year guide. I think the shape of the year maybe looks a little bit different from a margin perspective than you may have originally anticipated. But we're definitely committed to finding those ongoing efficiencies. Some of them unlocked in Q2 with the changes that we made to streamline the organization. But you've also heard us talk about the importance of innovation in driving forward growth in the business. So we're fairly committed to identifying and reallocating resources as needed to deliver on the growth profile. And we would also expect as innovation takes hold, as we get more of these efficiencies, as we see revenue growth, we should see more scale in our EBITDA numbers as we progress quarter-over-quarter. Alejandro Nuno: Got it. And maybe just sort of one more follow-up, if I can. I'm sorry if I missed this, but on the new Premium Plus package, you highlighted that you're targeting sort of 15% by the end of the year. Like can you just give us an update of where you stand now? Sonia Jain: We're making good progress. We're midway through the year, and I think we're seeing a lot of momentum in terms of those sales. Premium Plus was the fastest growing of our 3 packages in Q2. And as we continue to add more features and improve the interconnectivity of our marketplace experience, we believe a lot of that value will accrete to the Premium Plus package. So we're focused on delivering the 15% by the end of the year. Alejandro Nuno: Do you have a penetration number for the quarter so far, like where you stand right now? Sonia Jain: We're getting -- we're basically at double digits or close to double-digit penetration. Operator: The next question comes from Rajat Gupta from JPMorgan. Unknown Analyst: This is Josh on for Rajat Gupta. I just wanted to start off with one on the FTC's push around dealer pricing transparency. I was just wondering if you could expand on how you've changed the platform to just adhere to that increasing pricing transparency standard. You said a step removed since dealers do the advertising. So does all-in pricing play to a marketplace built on trust? Or does it create somewhat of a friction for your dealers? And is your approach any different from that, that is employed by your peers? I have a quick follow-up. Sonia Jain: We tried to take a role in helping dealers ensure that they are able to get their information out there and be trusted partners to consumers. If you think about our vision for marketplace, it is embedded in trust, transparency. And so we've been supporting them through this process, encouraging compliance and just better information, right? Because when the consumer understands what they have to pay before they walk into a dealership, it reduces the friction of the transaction, right? It increases lead to sale conversion. So we feel like we're taking the right steps. Unknown Analyst: Understood. That's very helpful. And then just as a quick follow-up, could we get an update on where Cars.com's dealer-to-dealer wholesale initiatives stand just around Dealer Club? -- with AccuTrade connected dealers not yet seeing meaningful upward pressure. Just curious how that flywheel starts turning and what's the unlock that gets that system -- that ecosystem to compound? Tobias Hartmann: Yes. Currently, we are focused, as we just laid out, on really taking some of the AccuTrade assets and making them more interconnected. So that's the first step. That's plenty of stuff to chew on. So we're going to take it step by step. And the Dealer Verified Listings program as we just launched it is going to keep us busy for quite some months. So we'll give you more updates on the other stuff, but that's the focus -- that's the current focus right now. The other part that we're really embedding and making it more connected is also anything that's related to our Premium Plus features. So we've developed a stack of new features that are going to be launched as part of our rollout and our future subscription services. But again, too early to talk about in public, but there's a lot of work behind closed doors. So stay tuned. Thanks. Operator: Thank you, and no further questions that came through. This concludes our conference call for today. Thank you all for participating. You may now disconnect. Before you buy stock in Cars.com, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cars.com wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Cars.com (CARS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Online new and used car marketplace Cars.com (NYSE:CARS) met Wall Street’s revenue expectations in Q2 CY2026, but sales were flat year on year at $179.9 million. Its non-GAAP profit of $0.51 per share was in line with analysts’ consensus estimates. Is now the time to buy CARS? Find out in our full research report (it’s free). Revenue: $179.9 million vs analyst estimates of $180.6 million (flat year on year, in line) Adjusted EPS: $0.51 vs analyst estimates of $0.51 (in line) Adjusted EBITDA: $52.98 million vs analyst estimates of $51.95 million (29.4% margin, 2% beat) Operating Margin: 15.5%, up from 8.5% in the same quarter last year Dealer Customers: 19,343, in line with the same quarter last year Market Capitalization: $656.3 million Cars.com’s second quarter results aligned with Wall Street expectations, with management attributing flat sales to a deliberate shift in marketing to prioritize high-intent shoppers over pure audience growth. CEO Tobias Hartmann highlighted that the company’s “marketplace flywheel is solid,” and pointed to dealer subscription products and the launch of Dealer Verified Listings as key contributors to the period’s performance. Despite a year-over-year decline in website traffic, management emphasized improved lead conversion and a focus on organizational efficiency, such as cost discipline and process improvements, that supported higher operating margins. Looking ahead, management is focused on accelerating product innovation and integrating AI features across its dealer and consumer offerings. The company sees upcoming launches, including expanded Carson AI capabilities and further rollout of Dealer Verified Listings, as central to driving renewed growth in dealer website subscriptions and maintaining marketplace momentum. CFO Sonia Jain stated, “We are fairly committed to identifying and reallocating resources as needed to deliver on the growth profile,” emphasizing that continued operational discipline and product-led strategy are expected to support margin expansion and moderate revenue growth. Management attributed the quarter’s performance to marketplace revenue growth, successful product launches, and a strategic focus on quality over quantity in website traffic. Marketplace revenue momentum: Marketplace revenue grew over 7% year-over-year, driven by increased dealer subscription adoption and particularly strong uptake of the Premium Plus package, which management aims to reach 15% penetration by year-end. Dealer Verified Listings launch: The company launched Dealer Verified Listings, integrating condition reports from AccuTrade into consumer-facing vehicle listings. This product is designed to differentiate Cars.com in the market by providing more transparent and trustworthy vehicle data to shoppers. AI-powered consumer assistance: Around 20% of active searches now use Carson, the company’s AI shopping assistant, which quadruples the likelihood of a shopper submitting a lead. Management cited plans to further expand Carson’s features, including improved comparison tools and personalization. Intentional marketing shift: Leadership shifted marketing strategy to focus on acquiring high-quality, high-conversion shoppers instead of maximizing total traffic. This led to improved lead conversion rates, even as overall website visits declined, and supported a more efficient cost structure. Organizational and product focus: The company streamlined processes, reduced compensation costs, and improved its development velocity, increasing the rate of feature deployment by 80% year-over-year. The addition of a new Chief Marketing Officer and a new GM for the solutions segment is intended to accelerate product innovation and cross-portfolio integration. Looking forward, management expects moderate revenue growth and stable margins, anchored by new product adoption, AI integration, and further cost efficiencies. Expansion of premium offerings: The company is prioritizing further adoption of the Premium Plus package and Dealer Verified Listings, aiming to bundle features and drive higher average revenue per dealer. Management believes this will bolster both revenue and dealer retention. AI and technology investment: With Carson AI shopping assistance already driving higher conversion rates, additional AI-powered features and deeper integration between Cars.com and dealer websites are expected to improve the consumer experience and differentiate the platform. Management anticipates this will support gradual growth in website subscriptions after a period of stagnation. Marketing and operational discipline: The company plans to maintain a rigorous approach to marketing spend, focusing on quality over quantity, while continuing to seek internal efficiencies. However, management cautioned that lower add-on media product uptake and ongoing investments in branding and product development could moderate near-term margin expansion. In the coming quarters, the StockStory analyst team will track (1) adoption rates of Dealer Verified Listings and Premium Plus packages among dealers, (2) the pace of website subscription stabilization and potential return to growth as product integration accelerates, and (3) the effectiveness of expanded AI features in driving shopper engagement and lead conversion. Additionally, we will monitor operational discipline and the impact of marketing strategy on both cost structure and traffic quality. Cars.com currently trades at $11.75, in line with $11.84 just before the earnings. Is there an opportunity in the stock? 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Interested in Cars.com Inc.? Here are five stocks we like better. Revenue and profitability improved: Q2 revenue rose 1% to $179.9 million, with marketplace revenue up more than 7% offsetting an 18% decline in OEM and national advertising. Adjusted EBITDA increased 4% to $53 million, while the margin expanded to 29.4%. Cars.com is prioritizing higher-intent traffic and product integration: Traffic declined, but lead conversion rose double digits and Carson AI users were four times more likely to submit leads. The company also launched Dealer Verified Listings and plans to add marketplace and AI features to dealer websites. Outlook reaffirmed amid strong shareholder returns: Cars.com generated $43.5 million in free cash flow during the first half of 2026 and repurchased 6.2 million shares for $57 million. Management maintained its full-year forecast of flat-to-2% revenue growth and a 29%-30% adjusted EBITDA margin. Advance Auto Parts: Retail Trends Suggest Big Gains Ahead Cars.com (NYSE:CARS) reported second-quarter revenue growth and higher profitability as marketplace subscription gains offset a decline in OEM and national advertising revenue, while management reaffirmed its full-year outlook. Revenue for the quarter totaled $179.9 million, up 1% from a year earlier and within the company’s guidance range. Dealer revenue increased 3% year over year, supported by more than 7% growth in marketplace revenue. That growth more than offset an 18% decline in OEM and national revenue, which fell by $3 million from the prior-year period. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth CarMax Is Firing on All Pistons as Growth Returns CEO Toby Hartmann said the marketplace performance reflected the company’s strategy of building a more interconnected platform spanning its consumer marketplace, dealer websites and appraisal products. “Marketplace subscribers rebounded to their highest level since 2023, and marketplace ARPD reached an all-time high,” Hartmann said, referring to average revenue per dealer. Cars.com generated adjusted EBITDA of $53 million in the second quarter, up 4% year over year. Adjusted EBITDA margin expanded nearly 100 basis points to 29.4%, exceeding the high end of the company’s guidance range for a second consecutive quarter. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High MarketBeat Week in Review – 2/26 - 3/1 Net income rose to $14.3 million, or $0.25 per diluted share, from $7 million, or $0.11 per diluted share, a year earlier. Adjusted net income was $28.7 million, or $0.51 per diluted share, compared with $26.4 million, or $0.41 per diluted share, in the prior-year quarter. Operating expenses declined 7% to $152.1 million. CFO Sonia Jain said the decline was driven primarily by the full amortization of customer lists associated with the company’s 2017 spinoff, as well as lower compensation expense. Adjusted operating expenses fell 6% to $144.3 million. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling Product and technology expense declined by $2.7 million on a reported basis, while marketing and sales expense increased by roughly $2.7 million as the company invested in targeted marketing. General and administrative expense fell by $3.5 million, including the elimination of a direct-to-consumer earn-out accrual and lower compensation costs. Management said the company has intentionally reduced emphasis on lower-quality website traffic in favor of attracting and converting higher-intent shoppers. While traffic and unique visitors declined year over year in the second quarter, Hartmann said lead conversion increased by double digits and performance marketing cost per lead improved during the quarter. “We are intentionally shifting to prioritize the value delivery versus the pure audience reach,” Hartmann said during the question-and-answer session. He added that the company is directing more performance marketing toward lower-funnel activity while continuing to invest in brand positioning. Cars.com said roughly 60% of its traffic remained organic. Hartmann said search-engine-optimization declines appeared to have bottomed in late 2025, while direct traffic, the company’s largest organic channel, increased year over year during the first half of 2026. The company also expanded use of its Carson AI shopping assistant across additional marketplace surfaces. About 20% of active Cars.com searchers now engage with Carson, according to Hartmann. Users of the tool were four times more likely to submit a lead and accounted for nearly 30% of total leads submitted in June. Cars.com launched Dealer Verified Listings in June, integrating elements of its AccuTrade appraisal business into the consumer marketplace. The feature allows participating dealers to display current vehicle condition reports on listings, providing what the company described as a consumer-facing trust signal based on vehicle inspections rather than a traditional historical vehicle report. The program is currently available to existing AccuTrade customers, with an expansion to marketplace customers planned for the fourth quarter. Hartmann said the company is initially gathering feedback from a subset of AccuTrade dealers before making the capability available more broadly. Jain said the company’s Premium Plus marketplace package was its fastest-growing marketplace offering during the quarter. Cars.com continues to target a 15% adoption rate for Premium Plus by the end of 2026. She said penetration was at or close to double digits, without providing a more specific figure. Management also plans to apply its marketplace product-development approach to its Dealer Inspire websites business, where unit counts declined from a year earlier. Hartmann said the company expects to add marketplace capabilities, including personalization, Carson AI features and connected data insights, to dealer websites during the third and fourth quarters. He said the company is focusing on product innovation and packaging rather than website unit-volume expansion, with a goal of returning the business to growth over the next two to three quarters. For the first half of 2026, Cars.com generated $55.6 million of operating cash flow and $43.5 million of free cash flow, compared with $41.8 million of free cash flow a year earlier. The company repurchased 6.2 million shares for $57 million year to date and said it had bought back and retired more than 10% of shares outstanding since the start of the year. Debt outstanding stood at $450 million as of June 30, following a $5 million debt payment during the quarter. Total liquidity was $333.3 million. For the third quarter, Cars.com expects revenue growth ranging from flat to 2% year over year and adjusted EBITDA margin between 28.5% and 29.5%. The company reaffirmed its full-year 2026 outlook for revenue growth of flat to 2% and adjusted EBITDA margin of 29% to 30%. Jain said OEM and national revenue was expected to grow sequentially in the third quarter following stronger performance in July and additional spending commitments for the remainder of the year. Cars.com operates as a leading online automotive marketplace in the United States, connecting car shoppers with new and used vehicle listings from dealerships and private sellers. The platform enables consumers to research makes and models, compare prices, read expert and user reviews, and access tools such as TrueCost to estimate ownership expenses over time. Through its website and mobile applications, Cars.com aims to simplify the car-buying process by aggregating detailed vehicle data, payment calculators, and dealership ratings into a single user-friendly experience. On the dealer side, Cars.com provides a suite of marketing and lead-generation services designed to help automotive retailers reach potential buyers and manage their online presence. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Cars.com Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Marketplace revenue grew 7% year-over-year, the fastest rate in public company history excluding pandemic recovery, driven by a strategic shift toward an interconnected product ecosystem. Management is intentionally prioritizing high-intent shopper conversion over raw traffic volume, resulting in double-digit year-over-year lead conversion growth despite a decline in total visitors. The launch of Dealer Verified Listings marks the first major integration of AccuTrade appraisal capabilities into the consumer marketplace, providing real-time vehicle condition trust signals. Product development velocity has increased by 80% year-over-year as the company operationalizes new organizational and technical interoperability goals. AI adoption is scaling rapidly, with the Carson AI assistant now engaging 20% of active searches and accounting for nearly 30% of total leads submitted in June. Operating leverage improved through cost discipline and a leaner organizational structure, resulting in an adjusted EBITDA margin of 29.4% that outperformed guidance. Full-year 2026 guidance is reaffirmed at flat to 2% revenue growth with adjusted EBITDA margins between 29% and 30%, assuming continued dealer revenue strength. OEM and national revenue is expected to grow quarter-over-quarter in Q3 following a Q2 trough, supported by incremental spend commitments for the second half of the year. Management targets a 15% adoption rate for the Premium Plus marketplace package by the end of 2026, up from current near double-digit penetration. The 'Marketplace Playbook' will be applied to the Dealer Inspire website business in Q3 and Q4 to reverse recent unit declines through personalization and AI feature integration. Future margin expansion is expected to scale as product innovation takes hold and the company realizes further efficiencies from organizational streamlining. The company retired over 10% of outstanding shares year-to-date, deploying $57 million toward a full-year buyback target of $90 million. Reported G&A expenses decreased due to the elimination of the D2C earn-out expense accrual and lower overall compensation costs. Depreciation and amortization declined significantly following the full amortization of customer lists associated with the company's 2017 spin-off. Marketing and sales expenses increased as a percentage of revenue due to deliberate investments in brand positioning as a transaction enablement platform. Growth was driven by a combination of improved dealer count and record-high marketplace ARPD. Premium Plus is currently the fastest-growing marketplace package, and management remains confident in reaching the 15% penetration target by year-end. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management clarified the decline is an intentional shift away from low-quality clicks that do not convert. The strategy focuses on performance marketing efficiency and 'lower funnel' high-intent shoppers to drive higher value to dealers. Management acknowledged a past slower pace of feature releases and organizational misalignment in the solutions business. A new GM has been appointed to apply the marketplace productivity playbook to websites over the next 2 to 3 quarters. The feature currently drives higher click-through rates to vehicle detail pages by providing a 'trust signal' based on actual inspections rather than just history reports. While currently limited to AccuTrade power users for feedback, the intent is to expand the program to the broader dealer audience in the future. Management views transparency as a friction reducer that increases lead-to-sale conversion. The platform is actively encouraging dealer compliance to ensure they remain trusted partners to consumers.

Cars.com (CARS) came out with quarterly earnings of $0.51 per share, beating the Zacks Consensus Estimate of $0.49 per share. This compares to earnings of $0.41 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +4.08%. A quarter ago, it was expected that this online automotive marketplace would post earnings of $0.48 per share when it actually produced earnings of $0.45, delivering a surprise of -6.25%. Over the last four quarters, the company has surpassed consensus EPS estimates just once. Cars.com, which belongs to the Zacks Internet - Commerce industry, posted revenues of $179.93 million for the quarter ended June 2026, missing the Zacks Consensus Estimate by 0.3%. This compares to year-ago revenues of $178.74 million. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Cars.com shares have lost about 3% since the beginning of the year versus the S&P 500's gain of 12.8%. While Cars.com has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Cars.com was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.57 on $182.55 million in revenues for the coming quarter and $2.10 on $727.83 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Commerce is currently in the bottom 37% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, PDD Holdings Inc. Sponsored ADR (PDD), is yet to report results for the quarter ended June 2026. This company is expected to post quarterly earnings of $2.85 per share in its upcoming report, which represents a year-over-year change of -7.5%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. PDD Holdings Inc. Sponsored ADR's revenues are expected to be $17.13 billion, up 18% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cars.com Inc. (CARS) : Free Stock Analysis Report PDD Holdings Inc. Sponsored ADR (PDD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Delivered expected revenue growth and strong profitability, underpinned by focused strategy with highest Marketplace revenue growth in five years Revenue grew to $179.9 million, up 1% year-over-year and in line with guidance Net income increased to $14.3 million, up 103% year-over-year Adjusted EBITDA grew to $53.0 million, up 4% year-over-year; Adjusted EBITDA margin of 29.4%, outperformed guidance range of 28% to 29% margin Share repurchases totaled 3.7 million shares for $37 million; year-to-date share repurchases totaled 6.2 million shares for $57 million and are on pace to 2026 target of $90 million CHICAGO, Aug. 6, 2026 /PRNewswire/ -- Cars.com Inc. (NYSE: CARS), a trusted audience-powered and data-driven technology platform that simplifies buying and selling cars, today released its financial results for the second quarter ended June 30, 2026. "We delivered revenue and profitability growth in the second quarter while making steady progress on our Marketplace-focused strategy. Deliberate prioritization of Marketplace product, processes, and organizational improvements drove Marketplace revenue growth to its highest level since 2021, more than offsetting the expected decline in OEM revenue. New product launches, such as Dealer Verified Listings, as well as stronger customer value delivery through more precise audience targeting, are encouraging signals. Looking ahead, we will deploy these learnings and operational drivers across our ecosystem to deliver sustainable long-term growth and value creation," said Tobias Hartmann, Chief Executive Officer of Cars.com, Inc. Marketplace revenue grew over 7% Y/Y and represents the fastest quarterly growth rate since 2021. Dealer count declined slightly Y/Y, reflecting lower Solutions adoption that was partially offset by Marketplace strength; Marketplace dealer customers grew 2% Y/Y, reaching four consecutive quarters of Y/Y subscriber growth. Traffic and UV performance reflects a deliberate strategic shift to value delivery, which produced year-to-date growth in lead volume. Dealer Verified Listings feature launched on marketplace, adding inspection and pricing insights onto vehicle listings. Q2 2026 Results Revenue for the second quarter was $179.9 million, up 1% year-over-year. Subscription-based Dealer revenue of $163.3 million was up 3% year-over-year, primarily driven by improved Marketplace value delivery and dealer count, partially offset by a decline in media products. OEM and National revenue of $13.6 million was down 18% year-over-year, consistent with previously communicated expectations of OEM advertising. Total operating expenses for the second quarter were $152.1 million compared to $163.5 million in the prior year period, down 7% year-over-year. Lower depreciation and amortization was the largest driver of the year-over-year decline, though expenses were broadly down and reflective of improving operating leverage across the business and a partial quarter of efficiencies associated with April cost reduction activities. Adjusted operating expenses were $144.3 million, down 6% year-over-year, driven by the aforementioned factors. Net income for the second quarter was $14.3 million, or $0.25 per diluted share, compared to $7.0 million, or $0.11 per diluted share, in the year-ago period. The change in Net income is primarily attributable to improved operating income. Adjusted net income for the second quarter was $28.7 million, or $0.51 per diluted share, compared to $26.4 million, or $0.41 per diluted share a year ago. Adjusted EBITDA for the second quarter was $53.0 million, or 29.4% of revenue, compared to $50.9 million, or 28.5% of revenue in the year-ago period. Adjusted EBITDA grew 4% year-over-year, demonstrating operating leverage against revenue growth. Cash Flow and Balance Sheet Net cash provided by operating activities for the six-month period ended June 30, 2026 was $55.6 million, compared to $55.7 million in the prior year. Free cash flow for the six-month period ended June 30, 2026 totaled $43.5 million, compared to $41.8 million in the prior year. Total debt outstanding was $450.0 million as of June 30, 2026. Total liquidity as of June 30, 2026 was $333.3 million, which is defined as Cash and cash equivalents of $33.3 million and revolver capacity of $300.0 million. Share Repurchase The Company repurchased 3.7 million shares of common stock for $37 million in the second quarter ended June 30, 2026, and 6.2 million shares of common stock for $57 million year-to-date in 2026. The Company's 2026 share repurchase target remains $90 million, reflecting its commitment to returning capital to stockholders. Shares repurchased and retired year-to-date through June 30, 2026 represent over 10% of the Company's common shares outstanding as of prior year end. As of June 30, 2026, approximately $116.6 million remains available under the current share repurchase authorization, which expires in February 2028. "Second quarter financial performance was anchored by strong Marketplace growth, coupled with improved operating leverage and Adjusted EBITDA margin outperformance. We also continued to return significant capital to stockholders, and are pacing comfortably to our $90 million share repurchase target for 2026. Looking ahead, we remain focused on efficient and disciplined growth to create long-term value for stakeholders," said Sonia Jain, Chief Financial Officer of Cars.com, Inc. Outlook Third Quarter 2026 Revenue is expected to be flat to up 2% year-over-year, driven by continued Dealer revenue growth and Marketplace improvement. OEM and National revenue is expected to reflect ongoing pressure in OEM advertising investment. Adjusted EBITDA margin is expected to be between 28.5% and 29.5%, reflecting continued operating efficiencies and cost savings. Full Year 2026The Company reaffirms its full year 2026 guidance: Revenue is expected to be flat to up 2% year-over-year Adjusted EBITDA margin is expected to be between 29.0% to 30.0% Q2 2026 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 the Cars.com 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 Commerce Cars.com Inc. (NYSE: CARS) is a trusted audience-powered and data-driven technology platform that simplifies buying and selling cars. The flagship Cars.com marketplace connects millions of consumers to dealerships across the U.S., powering the car buying experience with artificial intelligence ("AI") shopping tools and comprehensive vehicle reviews and content. Our interconnected ecosystem of products enables dealers and OEMs to sell more cars by efficiently leveraging our marketplace, dealer websites, trade and appraisal tools, and proprietary in-market media solutions. Learn more at www.carscommerce.inc. Non-GAAP Financial Measures This earnings release discusses Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net (loss) income, Free Cash Flow and Adjusted Operating Expenses. These financial measures are not prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). These financial measures are presented as supplemental measures of operating performance because the Company believes they provide meaningful information regarding the Company's performance and provide a basis to compare operating results between periods. In addition, the Company uses Adjusted EBITDA as a measure for determining incentive compensation targets. Adjusted EBITDA also is used as a performance measure under the Company's credit agreement and includes adjustments such as the items defined below and other further adjustments, which are defined in the credit agreement. These non-GAAP financial measures are frequently used by the Company's lenders, securities analysts, investors and other interested parties to evaluate companies in the Company's industry. While a reconciliation of non-GAAP measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to, as applicable, the timing, amount, valuation and number of future employee equity awards and the uncertainty relating to the timing, frequency, and effect of acquisitions and the significance of the resulting transaction-related expenses, the Company has provided a reconciliation of non-GAAP financial measures to their most directly comparable financial measure prepared in accordance with GAAP in this earnings release, see "Non-GAAP Reconciliations" below. Other companies may define or calculate these measures differently, limiting their usefulness as comparative measures. Because of these limitations, non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. Definitions of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are presented in the tables below. The Company defines Adjusted EBITDA as net income (loss) before (1) interest expense, net, (2) income tax (benefit) expense, (3) depreciation, (4) amortization of intangible assets, (5) stock-based compensation expense, (6) unrealized mark-to-market adjustments and cash transactions related to derivative instruments, (7) unrealized foreign currency exchange gains and losses, and (8) 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 AccuTrade acquisition. The Company defines Adjusted Net Income as GAAP net (loss) income excluding, net of their related tax effects: (1) amortization of intangible assets, (2) stock-based compensation expense, (3) unrealized mark-to-market adjustments and cash transactions related to derivative instruments, (4) unrealized foreign currency exchange gains and losses, and (5) certain other items, such as transaction-related costs, severance, transformation and other exit costs and write-off and impairments of goodwill, intangible assets and other long-lived assets. 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 upon first visit to an individual Cars.com property on an individual device/browser combination or installation of 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.com desktop and mobile properties (responsive sites and mobile apps). The Company measures UVs and Traffic via RudderStack. These metrics do not include traffic to Dealer Inspire, D2C Media, or DealerClub 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 and DealerClub, during the period divided by the monthly average number of Dealer Customers during the same period. 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. Dealer Customer metrics do not include DealerClub. 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. These statements often use words such as "believe," "expect," "project," "anticipate," "outlook," "intend," "strategy," "plan," "estimate," "target," "seek," "will," "may," "would," "should," "could," "forecasts," "mission," "strive," "more," "goal" or similar expressions. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, 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 based on estimates and assumptions that, while considered reasonable by Cars Commerce and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. While Cars Commerce and its management make such statements in good faith and believe such judgments are reasonable, you should understand that these statements are not guarantees of future strategic action, performance or results. Our actual results, performance, achievements, strategic actions or prospects could differ materially from those expressed or implied by these forward-looking statements. Given these uncertainties, you should not rely on forward-looking statements in making investment decisions. When we make comparisons of results between current and prior periods, we do not intend to express any future trends, or indications of future performance, unless expressed as such, and you should view such comparisons 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. Forward-looking statements are subject to a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our 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 "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, 2025, as filed with the Securities and Exchange Commission ("SEC") on February 26, 2026 and our other filings filed with the SEC and available on our website at investor.cars.com or via EDGAR at www.sec.gov. 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 us and speak only as of the date of this press release. 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. Cars Commerce Investor Relations Contact:Katherine [email protected] Cars Commerce Media Contact:Christine [email protected] View original content to download multimedia:https://www.prnewswire.com/news-releases/carscom-reports-second-quarter-2026-results-302844769.html

Image source: The Motley Fool. Thursday, May 7, 2026 at 9:00 a.m. ET Chief Executive Officer — Tobias Hartmann Chief Financial Officer — Sonia Jain Tobias Hartmann: Thank you, Katherine, and thank you to everyone joining us to review first quarter 2026 results. On our call in February, we set forth near-term goal to better realize the potential of our business and put Cars.com on a stronger growth and value-creation trajectory. We have made solid progress against those objectives in Q1 and early Q2 as we build a leading automotive marketplace experience. First, we delivered on our financial commitments. Q1 revenue of $180.2 million was towards the high end of guidance and the third consecutive quarter of year-over-year growth. Adjusted EBITDA margin of 28.3% exceeded guidance by over a full percentage point. And free cash flow remained strong, up 42% year-over-year and reflecting higher conversion from EBITDA. Second, we have taken immediate cost actions. We closely examined operations to identify efficiencies and opportunities to reshape our organization into more nimble marketplace-focused teams. During this process, we identified $25 million to $30 million of recurring annualized operating cost savings to create a healthier foundation to support future growth. Third, we are leveraging existing assets and data to rapidly launch new features that improve our marketplace value. Cars.com MCP integrations for agentic AI platforms and conversational capabilities for our cars and shopping assistant are examples where we have adopted to match new shopping behavior. Consumers were more than 4x as likely to submit a lead after having a conversation with Carson, demonstrating our efficacy at stimulating purchase intent. These are positive and necessary steps to start the year and reinforce our confidence in our 2026 growth guidance. We also increased our 2026 share repurchase target to $90 million to further enhance shareholder value creation. Overall, the start of the year has been productive and the teams have moved with speed to secure wins. In terms of our three 2026 initiatives, we have pushed hard on controllables such as cost containment. Other changes like the green shoots and product and marketplace are compelling, they will take some time to mature, but we are clear on the strategy that we need to execute for the rest of the year. Historically, we have grown our product as distinct and loosely affiliated pillars. But moving forward to truly maximize our value, we must integrate into one interconnected marketplace-centric ecosystem. For car seekers, we will offer relevant and desirable listings across marketplace and dealer websites, trusted data insights and an AI-first user experience. For car sellers, our combined marketplace and appraisal capabilities will evolve into an essential resource for used car insights. And dealers and OEMs will continue to benefit from our scale in market audience but with even better ROI based on our unique first-party retail signals across marketplace, websites and media. Our marketplace model will drive vehicle transactions at scale by focusing on these differentiators. Investing in product is key to powering our marketplace flywheel and long-term growth. Let me give you some examples of our accelerated product output in the first 4 months. Starting with AI, model context protocol integrations are helping our discoverability on leading agentic AI platforms such as ChatGPT. Consumers can now browse our marketplace inventory directly with a native LLM environment before submitting leads on Cars.com. And this has added value for existing marketplace dealers who are eager to tap into agentic commerce. LLMs are still sub-1% of our traffic, and we are well positioned to benefit as these platforms grow. Turning to our own platform. Conversational Carson is a positive step towards continued personalization of the marketplace shopping experience. Finally, the Cars.com dealer app just launched in April, putting a mobile command center in the hands of marketplace dealers. Early features include AI-generated summaries of performance metrics, lead follow-up alerts and pricing intelligence. We believe our app has the broadest analytics set among our competitors translating to the best ROI on every sales appointment and wholesale transactions. We expect greater product development velocity will continue to deliver a steady and diverse cadence of future releases. Cross-pollination, such as bringing AccuTrade data into marketplace listings will be an increasing focus in the second half of the year. Turning to the remaining initiatives. Sonia will offer more cost detail in her remarks. The actions we took in April supports our stated intention to grow adjusted EBITDA at a faster rate than revenue. We've also been clear that we must operate with better processes and organizational structure to successfully execute our marketplace strategy and grow LTV. From a go-to-market perspective, new product bundles will help clearly articulate platform value. Our products will be packaged according to integrated value delivery, which we expect to drive faster adoption than selling individual point solutions. For example, our data shows that customers with both AccuTrade and the Cars.com marketplace, the inventory turns speed up by an average of 6 days. A combined marketplace and appraisal offering would not only drive dealership gross profits, but also eliminate the paradox of choice for a customer facing too many a la carte options. We have reorganized the sales team accordingly to break down product-based silos, eliminate duplication and make the sales process simpler for dealers. Combined with our ongoing localization efforts, we feel front-footed in our ability to increase overall sales productivity. For our current customers, we are fully focused on enhanced value delivery. Our leads and connections already influenced more than 30% of our customers' vehicle sales. We will keep pressing this advantage with a balanced approach to top and lower funnel activities that maximizes ROI on our platform. We are committed to operating a scaled platform, though metrics like traffic and UVs may move depending on quarterly marketing mix. Most recently, Q1 traffic and UVs were pressured by a tough year-over-year comp from pull-forward tariff demand in the broader industry in 2025. Setting aside this onetime impact, our underlying direct traffic remains strong. Organic traffic was close to 60% of total mix in Q1, which is similar to our historical average, even with the advent of LLMs. Direct traffic conversion was also up meaningfully year-over-year and reflected a robust lead volume growth. Longer term, we have confidence that our strong brand improving user experience and listing inventory will fuel continued marketplace strength. To recap, we delivered against revenue expectations and outperformed on adjusted EBITDA. We are changing the way we operate to drive stronger financial results and operating metrics. We are executing to transform into the leading trusted automotive marketplace, connecting consumers, dealers and OEMs. And in the process, we will create meaningful and sustainable shareholder value. Now Sonia will discuss our financial results and outlook. Sonia? Sonia Jain: Thank you, Tobi. The first quarter was another positive step in improving our growth trajectory and profitability. Revenue was in line with expectations, while adjusted EBITDA beat our guidance range by over a full point. As Tobi stated, we are focused on our marketplace-centric strategy and are pleased with the performance of this core piece of our business. And as you read in our April announcement, we are focused on more product integration and innovation while working diligently to enable operational efficiencies. These cost benefits are beginning to manifest in our results, all revenue-driving measures will compound and support accelerated growth as we move through the year. Now to discuss the quarter. First quarter revenue of $180.2 million was up 1% year-over-year, above the midpoint of our guidance range. Dealer revenue growth was driven by enhanced value delivery across websites and marketplace as well as dealer count growth, which was up 140 customers year-over-year based on core marketplace strength. We're encouraged by steady marketplace improvement given its criticality to our strategy and importance to our revenue, profitability and cash flow profile. ARPD of $2,473 was consistent on both a year-over-year and sequential basis. Over the medium to long term, we expect this metric to continue growing based on underlying value delivery and increased product adoption. More immediately, we've made good progress in aligning marketplace and website packaging to our value proposition. For example, in marketplace, Premium Plus, our top-tier offering has grown to nearly 7% of subscribers, and we anticipate reaching 15% adoption across marketplace customers before year-end. For new and renewing website customers, subscription demand for our top website packages remain steady. Our work on core web vitals has improved site speed for many of our customers by nearly 30%. We have also released timely features like improved EV data, which is particularly important as dealers are now selling a growing supply of used EVs without the benefit of government incentives. The dealer media performance continues to temper otherwise favorable ARPD drivers, the planned refresh of our media suite, including AI VIN videos should set us up for a better traction in the second half of the year. In addition to these product-specific refinements, our new marketplace-first approach requires our distinct product pillars to evolve into more integrated subscription offerings. With these integrated offerings, we are entering a new phase of our cross-selling strategy, which we expect will deliver a distinct lever for ARPD growth. We'll share more updates on our work here in the coming months. Turning to dealer count. While our customer base was up year-over-year from marketplace net add, on a quarter-over-quarter basis, we experienced some pressure in solutions that resulted in overall dealer count decline. Recall, the website business has grown significantly over the last few years as we became a preferred OEM vendor and gained share. We're now in a different phase of growth that is more oriented around innovation and package value versus pure market share gains. And recent investments that we've made to improve technical performance on site speed, security and other metrics are garnering favorable customer feedback. Rounding out the solutions discussion, AccuTrade subscribers were down sequentially. As you heard Tobi mention, we expect AccuTrade sales to improve as it becomes more fully integrated with our marketplace. The strength of dealer revenue and more specifically marketplace is encouraging, and we expect this momentum to drive total revenue growth in 2026 and balance softness in OEM advertising. In the first quarter, OEM and national revenue was down $2 million year-over-year. There has been ongoing signals that OEM budgets are in flux. As an example, some manufacturers are opting to invest in vehicle incentives to offset the impact of tariffs rather than advertising in Q1. Based on proactive and positive conversations with our partners, we are cautiously optimistic that Q2 represents a trough for OEM media and that we will begin to grow on a sequential basis in the latter half of the year. Moving to on cost. First quarter operating expenses were $163.6 million, down 5% year-over-year. The decrease was primarily due to lower depreciation and amortization expense, specifically, the amortization of customer list associated with our 2017 spin-off as well as more efficient marketing spend. Q1 adjusted operating expenses were $145.9 million, down 6% year-over-year from lower depreciation and amortization and strong cost controls across the organization. For the following line item detail, all comparisons are on a year-over-year basis, unless otherwise noted. Product and technology expense increased $900,000 on a reported basis and decreased $300,000 on an adjusted basis. Higher severance costs and licensing and hardware expenses were the primary drivers of the reported increase. For adjusted expenses, lower compensation more than offset the aforementioned technology spend. Marketing and sales decreased roughly $700,000 on both a reported and adjusted basis, benefiting from a more efficient marketing mix. General and administrative expense was up nearly $1 million on a reported basis and up $2 million on an adjusted basis. The reported increase was primarily due to severance compensation and third-party costs, which were partially offset by the elimination of the D2C earn-out expense accrual. On an adjusted basis, compensation and third-party costs combined to push total adjusted G&A higher for the quarter. Several of these were discrete items that while individually insignificant, aggregated into slightly elevated total expense. Over the medium to long term, we still expect to realize operating leverage in this line. First quarter net income was $5 million or $0.08 per diluted share compared to a net loss of $2 million or $0.03 per diluted share a year ago. Net income was primarily driven by lower depreciation and amortization. Adjusted net income for the first quarter was $26.7 million or $0.45 per diluted share compared to $24 million or $0.37 per diluted share a year ago. Adjusted EBITDA of $51 million in the first quarter was up slightly year-over-year, while adjusted EBITDA margin of 28.3% was consistent year-over-year and more than 1 percentage point above our guidance range. On to the cash flow statement and balance sheet. Net cash provided by operating activities totaled $39.8 million for the quarter compared to $29.5 million last year. Free cash flow was $33.5 million for the quarter, up from $23.7 million a year ago, primarily due to favorable working capital changes from compensation accruals and the 2024 federal tax refund. In the first quarter, we bought back 2.5 million shares for $20 million, returning approximately 60% of in-period free cash flow to shareholders. Through April 30, 2026, we have bought back 3.8 million shares of common stock for $32.9 million, an efficient use of capital at current valuation levels that reduced shares outstanding by 5% since the beginning of the year. Driving shareholder value remains a priority and is reflected in our recent decision to increase our 2026 share repurchase target by 50% from $60 million to $90 million. Based on year-to-date activity, we are pacing solidly towards this target, and we'll continue to opportunistically leverage strong free cash flow conversion for capital returns and debt paydown. Lastly, debt outstanding was $455 million as of March 31, 2026, for a total net leverage ratio of 1.8x. Total liquidity was $359.6 million as of March 31, 2026, providing the capacity and flexibility to meet our capital allocation priorities. And now we'll conclude with outlook. Second quarter revenue growth is expected to be flat to up 2% year-over-year. Dealer revenue should continue to be a growth driver based on better value delivery and product upgrades and adoption. Based on year-to-date performance, we expect second quarter OEM and national revenue to face similar year-over-year pressures as Q1. The episodic nature of advertising and media investments is also driving our slightly wider than usual quarterly guidance range to account for possible timing variances in customer spending. Second quarter adjusted EBITDA margin is expected to be between 28% and 29%. And our priority is to grow adjusted EBITDA dollars year-over-year at a faster rate than revenue. Embedded within our guidance range is also a partial quarter of savings from the cost reduction program that was initiated in April. We are also reaffirming full year 2026 guidance of flat to 2% revenue growth and adjusted EBITDA margin of 29% to 30%. And with that, I'd like to open the line for Q&A. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Tom White from D. A. Davidson. Thomas White: One on AI and then I have a follow-up. But Tobi, I was hoping maybe you could share your latest thoughts on how you feel about the prospect of consumers increasingly relying on horizontal LLM and increasingly maybe sort of personal agents to help them shop for cars. And what does that mean for Cars.com's ability to interface directly with consumers? And are there ways that you guys can maybe make your business more resilient or sort of better positioned for that sort of future maybe by making some of your data sort of more proprietary or protected or anything else? Tobias Hartmann: Thanks for your questions. Yes, we do think that we are in a highly relevant space because car purchasing is very complex, and we have data accumulated over the past 20-plus years. As we talked over during this call, we make that data more discoverable, which we're in the midst of past. We've made some great progress there. And then we have a great brand, which is also something that we see increasingly become more important that the people start initially at a high level of searching, but then once they're getting down into deeper funnel metrics, they do rely on the branded context and the branded information that comes from Cars.com. So big picture, automotive is obviously a complex industry, and it requires deep vertical expertise. A car is the second largest purchase for consumers. And obviously, the vast majority of consumers spend time researching in depth, actually, on average, 8 to 9 hours. And we have a great brand, and we are in the process of making it more discoverable and bring it up front to the size and the site experience. So that will be a major focus for our future product development. But let me just add, it also in the spirit of, I talked about the interconnectivity. So that's why it's important to interconnect everything as opposed to driving in siloed subsidiaries. So that's actually what we're doing underneath the platform and across different data cycles. Thank you. Thomas White: Great. Maybe just a quick follow-up on AccuTrade and I was hoping maybe just get a bit more color on kind of what's happening there. I think you mentioned subscribers down sequentially. Is there maybe any seasonality happening there? Is the -- is what's happening with subscribers sort of a function of just the automotive backdrop more generally? Or is this sort of more of a product market fit thing that you guys sort of plan to work to maybe via bundling it with kind of core marketplace? Just a little bit more color on what's happening at AccuTrade. Tobias Hartmann: Sure thing. Yes, I want to be very transparent. We're in the midst of rearranging and refocusing towards a more interconnected experience and more interconnected product. And that means that we are deemphasizing the stand-alone solution as opposed to really bundling it up and making it as part of an integrated marketplace experience. So we have a pretty exciting product road map. We will hear more over the next couple of months and quarters. There's a lot in the making. And that's why you see temporarily, maybe the number is going down a little bit because we are deemphasizing again on just selling them on all solutions as opposed to making this an integrated part. So I wouldn't call this like a trend in the industry or anything. It's more the result of what we're doing internally. And I would say it's according to plan. Thanks. Operator: Our next question is from Rajat Gupta from JPMorgan. Again, Rajat Gupta from JPMorgan. Rajat Gupta: Sorry, I was on mute. Could you clarify the MCP integration opportunity? How many agentic AI platforms have connected? What does that usage funnel look like in terms of used quality for dealers? I have a quick follow-up. Tobias Hartmann: Right now, it's just one. And we're working towards other opportunities and channel integration, but not just with the ChatGPT. But again, we also mentioned the traffic is well below 1%. Rajat Gupta: Got it. And the -- it looks like OEM and national is coming in weaker than expected, both in 1Q, including the 2Q guidance that Sonia had mentioned. But it seems like you feel comfortable reiterating the margin guidance. Is it just the cost out that are offsetting some of the drop-through from the OEM national weakness? I'm curious, any other color you could give? And also an update on the OEM and national for guidance. I think the previous outlook was flat year-over-year. Sonia Jain: So I think in terms of the margin guidance, certainly, some of the actions that we took in April were helpful. And in addition to that, we continue to be focused on driving efficiencies in the business. I think you heard Tobi talk a little bit about the shifts that we're making in terms of marketing and focusing on lead generation versus solely kind of these top of funnel metrics. At the end of the day, that's what dealers really value from us. And so those are some of the levers we have at our disposal to deliver on margins in addition to, over time, the interconnected nature of the platform will naturally lend itself to more efficiencies. And marketplace in and of itself is also a fairly high margin business. Operator: Our next question is from Marvin Fong from BTIG. Marvin Fong: I guess I'd like to start just to dive a little deeper into the solutions business. I think you did describe entering a new phase of growth there. And just any commentary on should we expect the count of use customers to continue to decline for a few more quarters here? I think last call, we talked about how some dealers are striking out on their own, developing their own kind of solution. In fact, that dynamic go up for year just some additional commentary would be great. Sonia Jain: Yes, I do think we are entering a slightly different phase of growth. You've talked about it a little bit over the last several quarters, which is initially on websites, in particular, as we got onto OEM programs, we have the opportunity for rapid market share gains and the business is really switching to a mode where it's not just a unit count growth. It is, in fact, even more important to think about the packages that we're putting forward to dealers and how we integrate some of what we're doing from an innovation perspective an improvement and enhancement perspective into these packages. So it becomes a little bit more basically of an ARPD game. I think we certainly would like to see that unit count numbers stay stable over a longer period of time with maybe some modest upward improvement. So we feel pretty good about some of what we're -- some of the steps we've taken over the last several quarters, improvements we're making in site speed, enhancements that we think we're somewhat uniquely bringing to market on the security side of things to improve the technical performance of websites, not to mention being able to integrate some of what we've done for marketplace with solutions. So a good example of that are how we can leverage Carson, the marketplace AI assistant to enable experiences on DI websites in a more intuitive way. How we can take AI videos, which we launched as part of our IMV product and bring that also over to the dealer website experience. So I think things don't always move as linearly as you would like them to, but we believe that we're making the right steps or taking the right steps to continue to grow websites. Marvin Fong: Got it. And then my follow-up question, just on the repackaging, I just wanted to more fully understand like how that's going to roll out. The last time there was a repackaging, a major repackaging there was some dealer churn granted, I believe that was also have an embedded price increase. But just how you're thinking about or how we should think about dealer counts as you roll out the new set of packages? Do you expect that there will be a period of some choppiness? Or you think you can just start growing the dealer base right out of the gate as you roll out these package? Sonia Jain: Yes. I think in terms of what we saw in dealer count this quarter, the decline that we saw was largely related to solutions. And as I sort of alluded to, we do believe we have a pretty robust plan on how to tackle that. The goal is to grow dealer count. It is critical to how we think about continuing to grow our marketplace business, growing dealer count is one of those things that brings more inventory to us. It's one of the things that then brings more consumers to us. And so it's naturally just important to how we think about marketplace flywheel dynamics. I think critical to our ability to grow dealer count is how we go to market with more interconnected solutions. There's a lot on the product road map that we're excited about. Tobi alluded to it earlier, which is the integration of AccuTrade and marketplace, is something that puts really powerful data tools in the hands of dealers and allows them to manage one of their biggest assets more effectively, which is inventory. Tobias Hartmann: And maybe let me just add what Sonia mentioned. Historically, this has been not the center of gravity for the company. So by just looking at the market and in terms of what the different segments are in the customer penetration we have in dealership penetrations in those segments. We just feel there's a lot of room for us to grow. But we need to treat the product. We need to have the right product fit to really cater towards the needs of the dealers. And it's not just a 2 or 3 different product type. It's more like there's 6 to 8 different product types going forward. So that's what we're working behind the scenes. So to sum it all up, we do believe there is significant headroom for us to grow. At the same time, we do not want to create the impression that all of a sudden, overnight, the number of dealers will jump through the roof. This is a concentrated effort that will take a couple of quarters, but it's going to be product less than products first and data first and AI first, and that's what we're working on. Operator: Next question is from Gary Prestopino from Barrington Research. Gary Prestopino: Two questions. One dealing with the cost savings, Sonia. You're saying you annualized the $25 million to $30 million for 2027. Is that an absolute number that we should expect to capture as we model, and where are those costs coming out of? Is it SG&A cost of goods sold? Can you help us out there? Sonia Jain: So I think that is the $25 million to $30 million is kind of the discrete value on an annualized basis of the changes that we announced in April. It doesn't necessarily mean a $25 million to $30 million year-over-year step down, if that's kind of your question. But what it does enable us to do is be more thoughtful about reallocation in the business as we work to build out more of the interconnected nature, the market -- the interconnections to marketplace. In terms of where the costs are coming out of they are distributed across the lines of our P&L. We took a hard look across the business, whether it's operations, product and technology, marketing and sales, G&A, those were all important areas for us to look at how can we simplify our go-to-market process. How can we foster from a product impact perspective, more of the interconnectivity tools have obviously improved also really materially over the last couple of years that allows us to work more efficiently. And then reducing layers in the organization is also really important as a way to see decision-making. So those are some of the changes that we made. Gary Prestopino: Okay. That's helpful. And then just a question, Tobi, on -- as you're going out to market with an integrated sales product offering, you're going to bundle it, right? I would assume that will drive an increase in average revenue per dealer just from bundling. But at the same time, does that preclude a salesperson from going into a dealership and also selling a single point solution? I guess, are they still going to have the autonomy to sell a single point solution or you have to bundle in order to get the full ball of wax from Cars.com? Tobias Hartmann: It's a great question. It's the trade-off, but by and large, we would say point solutions will be deemphasized and not because they're not important, but just because you need to understand the holistic nature of a dealership infrastructure. And there's many systems that are in process and replacing one by one is a much harder to sell and it's much less convenient for dealers than coming in with the core, which is we are a marketplace partner. It's very easy to interact with us. It's very simple to get activities going, i.e., listings. It's very easy then to just activate or deactivate certain features that come as an embedded function with that marketplace integration. So that's the way how we're thinking about it. We want to make it as easy as possible for the dealers to use different features depending on what their needs are as opposed to you got to use this one solution only, and we are competing with 2 or 3 other legacy systems that are in place. So that's our high-level strategy. So in a nutshell, is it allowed to still sell point solutions? Will we still sell point solutions? Yes. If it makes sense and if there's a very specific need by a dealer, but the broad stroke strategy will be we are leading with marketplace and will provide an interconnected experience. Operator: Our next question is from Naved Khan from B. Riley Securities. Naved Khan: Just a couple of questions from me. One, maybe just on the website business. We saw a decline in dealer customers. And I think last time around Q4, I think you said maybe some -- maybe passing trend or just more noise than anything else. But what -- is there a change in the competitive dynamics? Or is there something else going on that's causing this sequential decline again in the website customer count. And what are the things you can do to kind of correct it? And then the second question I have is just around the organic traffic, around 60% where it has been historically. But as more and more traffic goes to AI overviews, AI mode and things like that. What are the things that you can do on your end to stay in that organic result mix that the technology -- the top of the funnel providers are kind of unleashing for everyone? Sonia Jain: Thanks, Naved. I'll start with the website question. So I do still think some of this is a little bit of noise. We are entering and we've talked about it for the last couple of quarters, a slightly different phase of growth for website, we initially grew through pretty significant market share gains as we got onto OEM programs and have the ability to bring in a significant number of dealers at a time. That dynamic has shifted a little bit since we're basically on program with everybody. The dealer acquisition side is coming in smaller pieces. It's still there in terms of a very active launch pipeline. But what we're focused on more is not necessarily unit growth. It is how do we think about the packages that we're putting forward to market. How do we think about more interconnectivity between marketplace and websites, specifically leveraging innovation happening in the marketplace side of our business and putting it on to dealer websites to make those tools available. Carson is a good example, Carson conversational search for dealer websites, bringing AI videos to dealer websites, not having it solely be a marketplace product. Those are some of the things that we're excited about. And there is a real opportunity for us to continue to push website customers into higher tier packages since 50% of them are still in the base package. So we feel good about this business. We have a solid foundation. Sometimes they're going to be flips when it comes to the trade-off of volume and ARPD, but there's -- but I think it's largely in the noise at this point. Tobias Hartmann: Yes. Regarding your second question about the traffic. Let's just put things in context. We love the discoverability with LLMs, but the traffic is well below 1%. And we do know what people are searching for and we do know that it's a really great tool and a really great entry point for very high-level searches. But again, we got the advantage. We are in a highly complex industry where it really matters on the purchasing intent and decision journey to go deep into the specificity of a particular vehicle. And that's where our strength comes into play. So you will see us being focused more on leads and the right leads and investments and reallocation towards generating those leads in the future than pure traffic. So I guess the punchline is whereas in the past, we were chasing traffic and visitors only as a key metric. We will now focus more on the right leads because if we think this through as part of an interconnected marketplace experience, it means that they need to get the lead allocation and lead generation right because smaller dealers have completely different needs per specific led than larger dealerships, which are driven by the value they proposed and the vehicles they can. So that's to summarize our opportunity also in context of AI. Operator: Our next question is from Joe Spak from UBS. Joseph Spak: Sonia, I just want to go back to some of the OpEx comments and maybe get a better understanding for the trends? Because I know you mentioned OpEx was down a lot year-over-year, but really, it was D&A, right, which I think was sort of a result of some of the actions in the fourth quarter. So that's sort of the lower trend. And you still had like G&A up year-over-year. So maybe back to the earlier questions, like how should we expect maybe some of the individual line items between product, marketing, G&A sort of really trend here over the balance of the year? Sonia Jain: So you're right to point out that a lot of what we saw on a year-over-year basis in operating cost was really tied to D&A. And I think there are 2 pieces there. One is just some customer list that were part of the spin. We fully amortize those. So that's kind of like a permanent step down and then there's some of the reduction is also due to the accounting for our office leases. You won't see the benefit of the April actions in our Q1 numbers. So that's going to start trickling through and flowing through our numbers in Q2. The majority of the actions took place in April. Some of them are in May. So even in Q2, you don't see necessarily the full benefit of what we're doing, but it is reflected in the guidance numbers that we've put out, both for Q2 and on a full year basis. With regards to G&A, I do recognize it looks a little bit maybe wonky the G&A trend for Q1. But at the end of the day, we're talking about like pretty small, pretty small delta on a year-over-year basis. Most of this was tied to some like, again, a couple of different discrete items, third-party costs, things like that, that had a blip. We would ultimately on a longer-term basis, expect to get leverage out of the G&A line. And transparently, we would expect to get leverage across our P&L. So that's the goal in terms of driving expanded margins in the business. Joseph Spak: Okay. Second question is, I was going through the NADA annual book that they put out every year over the weekend. And it mentioned that dealer advertising in 2025 is up like high single digits and then they sort of break down where that's spent and third-party listings that is 20%, so one of the larger buckets, but it was actually down 1 point versus '24, so overall grow third-party listing share down a little bit. And I'm not exactly sure, to be honest, how they're bucketing it and whether how I should sort of compare that to your business, whether it's sort of that display advertising and other line that is sort of most relevant. But like -- if it is, like you grew pretty nicely within that sub revenue line in, I guess, what was implying there's sort of, I guess, decent share. So I don't know if you could sort of just help me put into context, like how you think you're performing within some of those high-level dealership spending metrics. And which line really should we be looking at? Tobias Hartmann: This is Tobi. Thanks for your question. Maybe just some more generic response to your question. We think we should do better, and we think the market is attractive, we don't see any major headwinds from a dealership perspective for massive changes in behavior. But we do see the opportunity for cars to grow by having a better product fit and tailoring it towards the needs of the dealers, again, going back to selling 5 different point solutions as opposed to, hey, here's what we can do. And by the way, here's how we are combining those assets. Imagine the dealer website and inventory that's listed on that and the subscription that we have on marketplaces. And imagine that there was some sort of a connection, which, by the way, in the past, we didn't have. Those were siloed solutions. So from a dealer's perspective, you look at it from a budget and you're like, okay, I got a dealer website that cost me. I got listings there. I got my own listings. I got listings on third parties, and I look at the entire bucket of expenses. And you're like, "Okay, great. Now I have a partner who can actually drive efficiency and bring synergies to the table." So that's why we think we have headroom. So we actually don't think that there's a major change for in our hands to make this work and grow. Operator: Our next question is from Doug Arthur from Huber Research. Douglas Arthur: Sonia, you might have covered this. I was sort of throwing out a lot of numbers. Did website management grow in the quarter? And I realize in the integrated strategy you've got and might not be as relevant in a number, but did that -- was that up quarter-over-quarter, the number of [ desktops ]? Sonia Jain: I think when you -- if you're asking about website units, we did see some volatility in that number. So they were down a little bit on a year-over-year and quarter-over-quarter basis. Operator: There are no questions at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect. 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