Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our business, financial condition, results of operations and quantitative and qualitative disclosures should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis also contains forward-looking statements and should be read in conjunction with the disclosures and information contained in "Note About Forward-Looking Statements" and "Risk Factors" in this Annual Report on Form 10-K. The financial information discussed below and included elsewhere in this Annual Report on Form 10-K may not necessarily reflect what our financial condition, results of operations and cash flows may be in the future.
References in this discussion and analysis to "we," "us," "our" and similar terms refer to Cars.com Inc. and its subsidiaries, collectively, unless the context indicates otherwise.
Business Overview. Cars.com Inc. 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.
Overview of Results
Year Ended December 31,
(In thousands)
Revenue
Net income (1)
Net income for the year ended December 31, 2023 is primarily related to the release of a significant portion of our valuation allowance for deferred tax assets that had been recorded as a result of the 2020 goodwill and indefinite-lived intangible asset impairments. For more information, see Note 12 (Income Taxes) to the accompanying Consolidated Financial Statements included in Part II, Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Key Operating Metrics
We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make operating and strategic decisions. Key Operating Metrics are as follows (Traffic and Average Monthly Unique Visitors in thousands):
Year Ended December 31,
% Change
Average Monthly Unique Visitors
Traffic
Monthly Average Revenue Per Dealer - Annual
December 31, 2025
December 31, 2024
YoY %
Change
September 30, 2025
QoQ %
Change
Dealer Customers
Monthly Average Revenue Per Dealer - Quarterly
Average Monthly Unique Visitors ("UVs") and Traffic. UVs and Traffic are fundamental to our business. They are indicative of our consumer reach and the level of engagement consumers have with our platform. Although our consumer engagement does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers, OEMs and national customers and a primary reason they do business with us. We believe we have achieved audience scale as measured by UVs and Traffic. Traffic is driven by a combination of UVs visiting our properties, repeat visitation and engagement. We monetize impressions, clicks and other connections that result from traffic to our site via our products and services.
We define UVs in a given month as the number of distinct visitors that engage with our 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 our mobile apps on an individual device. If a visitor accesses more than one of our 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). We measure UVs and Traffic via RudderStack. These metrics do not include traffic to Dealer Inspire, D2C Media or DealerClub websites.
UVs increased 1% year-over-year and Traffic remained flat year-over-year for the year ended December 31, 2025, reflecting the impacts of tariff-motivated consumer demand at the beginning of the year and tactical improvements in the marketing mix throughout the year, partially offset by depressed consumer demand due to the federal government shutdown at the end of the year.
Dealer Customers . Dealer Customers represent dealerships using our 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.
Dealer Customers increased 2% from December 31, 2024, primarily due to an increase in marketplace customers. Dealer Customers remained flat from September 30, 2025.
Monthly Average Revenue Per Dealer ("ARPD"). We believe that our ability to grow ARPD is an indicator of the value proposition of our platform. We define 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.
For the annual period of 2025, ARPD decreased 1% compared to the annual period 2024, primarily due to changes in our customer and product mix.
For the three months ended December 31, 2025, ARPD remained flat compared to the three months ended December 31, 2024, primarily due to marketplace repackaging, offset by changes in our customer and product mix.
For the three months ended December 31, 2025, ARPD remained flat compared to the three months ended September 30, 2025, primarily due to changes in our customer and product mix.
Factors Affecting Our Performance. Our business is impacted by changes in the larger automotive ecosystem, including supply and demand for new and used vehicle inventory, global supply chain and information systems disruptions, semiconductor and raw material shortages, vehicle acquisition cost, vehicle retail prices, the rate of electric vehicle adoption, employee retention and changes related to automotive advertising, among other macroeconomic factors including the political environment, inflationary and affordability pressures, tariffs and prevailing interest rates. Changes in vehicle sales volumes in the United States and Canada also influence OEMs’ and dealerships’ willingness to increase investments in marketing spend and technology solutions and could impact our pricing strategies and/or revenue mix.
Our long-term success will depend in part on our ability to attract and engage an in-market audience, to grow inventory supply and our dealer customers, to expand our relationship with dealers through greater adoption of our product offering, to transform our OEM relationships and to create operating leverage. We believe our core strategic strengths, including our Cars.com brand, growing high-quality audience and suite of digital solutions for dealers and OEMs, including AI-based tools, will assist us as we navigate a rapidly changing automotive environment.
Results of Operations
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
(In thousands, except percentages)
$ Change
% Change
Revenue:
Dealer
OEM and National
Other
Total revenue
Operating expenses:
Cost of revenue and operations
Product and technology
Marketing and sales
General and administrative
Depreciation and amortization
Total operating expenses
Operating income
Nonoperating expense:
Interest expense, net
Other income, net
Total nonoperating (expense) income, net
Income before income taxes
Income tax expense
Net income
*** Not meaningful
Dealer revenue . Dealer revenue is typically subscription-oriented and consists of marketplace, digital experience, including website solutions, trade and appraisal and media products sold to dealer customers. Dealer revenue is our largest revenue stream, representing 89% of total revenue for both the years ended December 31, 2025 and 2024. Dealer revenue increased $3.3 million or 1%, primarily due to continued growth in solutions, partially offset by declines in marketplace and media, as a result of lower average dealer count during the first half of 2025 and changes in our customer mix.
OEM and National revenue . OEM and National revenue largely consists of media solutions products, including display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies. OEM and National revenue represented 9% of total revenue for both the years ended December 31, 2025 and 2024. OEM and National revenue decreased $0.6 million or 1%, which we believe is primarily due to shifts in spending by OEM partners.
Other revenue. Other revenue primarily consists of revenue related to vehicle listing data sold to third parties. Other revenue represented 2% of total revenue for both the years ended December 31, 2025 and 2024. Other revenue increased $1.3 million or 11%.
Cost of revenue and operations . Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment and compensation and severance costs for the product fulfillment and customer service teams. Cost of revenue and operations expense represented 17% of total revenue for both the years ended December 31, 2025 and 2024. Cost of revenue and operations decreased $1.0 million or 1%, primarily due to lower compensation expense, partially offset by higher third-party costs associated with certain products driven by slight shifts in product mix.
Product and technology. The product team creates and manages consumer and customer-facing innovation and consumer and customer experience. The technology team develops and supports our products, websites and mobile apps. Product and technology expense includes compensation costs, consulting and contractor costs, hardware and software maintenance, software licenses, other infrastructure costs, costs related to the write-off of assets and severance costs. Product and technology expense represented 16% of total revenue for both the years ended December 31, 2025 and 2024. Product and technology expense decreased $0.5 million, primarily due to lower stock-based compensation, partially offset by incremental costs related to the acquisition of DealerClub Inc. ("DealerClub"). For more information related to the acquisition see Note 3 (Business Combinations) to the accompanying Consolidated Financial Statements included in Part II, Item 8,. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Marketing and sales . Marketing and sales expense primarily consists of traffic and lead acquisition costs, performance and brand marketing, trade events, compensation costs and travel for the marketing, sales and sales support teams, severance costs and bad debt expense related to the allowance for doubtful accounts. Marketing and sales expense represented 33% and 32% of total revenue for the years ended December 31, 2025 and 2024, respectively. Marketing and sales expense increased $7.1 million or 3%, primarily due to higher compensation, including stock-based compensation, and severance-related costs, as well as changes in our marketing investment, partially offset by lower bad debt expense.
General and administrative . General and administrative expense primarily consists of compensation costs for certain executive, finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expense includes the cost of office space, legal, accounting and other professional services, transaction-related costs, severance costs and transformation and other exit costs. General and administrative expense represented 13% and 12% of total revenue for the years ended December 31, 2025 and 2024, respectively. General and administrative expense increased $7.1 million or 9%, primarily due to higher compensation, including stock-based compensation, severance-related and third-party costs, partially offset by lower costs associated with our amended headquarters office lease.
Depreciation and amortization . Depreciation and amortization expense decreased $15.3 million or 14%, primarily due to certain assets being fully depreciated and amortized as compared to the prior-year period, partially offset by accelerated depreciation associated with our amended headquarters office lease.
Interest expense, net . Interest expense, net decreased $1.8 million or 6%, primarily due to a reduction in total indebtedness compared to the prior-year period and lower interest rates. For information related to our debt, see Note 6 (Debt) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Other income, net. Other income, net changed primarily due to the change in the fair value of contingent consideration associated with the Accu-Trade, LLC and CreditIQ, Inc. acquisitions and the $10.8 million gain on the sale of our RepairPal, Inc. ("RepairPal") equity investment, both of which were recorded in the prior period, partially offset by the impact of foreign exchange rates. For more information on the sale of our RepairPal equity investment, see Note 2 (Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Income tax expense . Our effective income tax rate increased to 41.5% from 22.1% in the prior-year period. The increase is primarily due to an outsized impact of state income taxes, net of federal income tax effect and nondeductible items, partially offset by the benefit of tax credits on substantially lower pre-tax income as compared to the prior-year period. Our effective income tax rate is generally more volatile at lower amounts of pre-tax income since the impact of our reconciling items is greater. For more information, see Note 12 (Income Taxes) to the Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
The comparison of the 2024 results with 2023 can be found under the heading "Year Ended December 31, 2024 Compared to Year Ended December 31, 2023" in "Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations" section of our 2024 Form 10-K, which comparison is incorporated by reference herein.
Liquidity and Capital Resources
Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and borrowing capacity available under our credit facility. We believe our positive operating cash flow, along with our $350.0 million revolving loan due in 2029 ("Revolving Loan"), provide adequate liquidity to meet our business needs for the next twelve months and beyond, including those for investments, debt service, share repurchases and strategic acquisitions. However, our ability to maintain adequate liquidity in the future is dependent upon a number of factors, including our revenue, our ability to contain costs, including capital expenditures, and to collect accounts receivable and various other macroeconomic factors, many of which are beyond our direct control.
We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. As of December 31, 2025, Cash and cash equivalents were $56.2 million and including our undrawn Revolving Loan, our total liquidity was $351.2 million.
Indebtedness. As of December 31, 2025, the outstanding aggregate principal amount of our indebtedness was $455.0 million, at an average interest rate of 6.3%, including $400.0 million of outstanding aggregate principal under the 6.375% Senior Unsecured Notes due in 2028 and $55.0 million of outstanding principal under the Revolving Loan which had an interest rate of 5.8%.
During the year ended December 31, 2025, we borrowed $10.0 million and repaid $15.0 million on our Revolving Loan. As of December 31, 2025, $295.0 million was available to borrow under the Revolving Loan. At each quarter-end, we are subject to certain net leverage ratio and interest coverage ratio financial covenants under our Credit Agreement. As of December 31, 2025, we were in compliance with all such covenants. For further information, see Note 6 (Debt) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Share Repurchase Program . On February 27, 2025, we announced that our Board of Directors had authorized a three-year share repurchase program to acquire up to $250.0 million of our common stock. The repurchase program may be suspended or discontinued at any time and does not obligate us to repurchase any specific amount or number of shares. We may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and other applicable legal requirements, and subject to our blackout periods. We intend to fund the share repurchase program principally with cash from operations. During the year ended December 31, 2025, we repurchased and subsequently retired 7.1 million shares for $86.0 million at an average price per share of $12.17. As of December 31, 2025, $173.8 million remained under the share repurchase program.
Earnouts.
As part of the acquisition of D2C Media, Inc. ("D2C Media"), are required to pay additional cash consideration to certain former owners who are now employees of the Company based on the achievement of a revenue performance metric. The amount to be paid will be determined by the acquired business’ achievement of certain revenue-related financial targets through December 31, 2025 and expensed over each performance period. In April 2025, we paid CAD$15.0 million (approximately USD$10.8 million) associated with the earnout for the year ended December 31, 2024. For the year ending December 31, 2025, we expensed CAD$15.0 million (approximately USD$10.9 million as of December 31, 2025) associated with the remaining portion of the earnout, which is expected to be paid in 2026.
As part of the DealerClub acquisition, we may be required to pay additional performance-based consideration of up to $88.0 million, which may be paid in cash, or stock if mutually agreed upon, to certain former owners who are now employees of the Company. The amount paid will be determined by DealerClub's future achievement of certain revenue-related financial targets through December 31, 2028, and will be expensed over the relevant performance periods. No such consideration was expensed during the year ended December 31, 2025.
For information related to the earnouts, see Note 3 (Business Combinations) in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Cash Flows. Details of our cash flows are as follows (in thousands):
Year Ended December 31,
Change
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on Cash and cash equivalents
Net change in Cash and cash equivalents
Operating Activities. Cash provided by operating activities for the year ended December 31, 2025 decreased slightly as compared to the year ended December 31, 2024, primarily due to an increase of $7.8 million of earnout payments related to the D2C Acquisition, as well as lower Net income and the related adjustments in the Consolidated Statement of Cash Flows. These decreases were partially offset by the impact of the prior year payment of the $10.5 million lease termination penalty. For further information, see the Consolidated Statements of Cash Flows included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Investing Activities. The increase in cash used in investing activities during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily related to the impact of the DealerClub Acquisition and the investment in an $8.0 million secured convertible note, partially offset by the proceeds collected from the sale of the RepairPal equity investment in the current year.
Financing Activities. During the year ended December 31, 2025, cash used in financing activities was primarily related to repurchases of common stock, net debt repayments and tax payments made in connection with the vesting of certain equity awards. During the year
ended December 31, 2024, cash used in financing activities was primarily related to repurchases of common stock, debt repayments, payments of contingent consideration and tax payments made in connection with the vesting of certain equity awards. For information related to our debt and repurchases of common stock see Note 6 (Debt) and Note 9 (Stockholders' Equity) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Contractual Obligations. As of December 31, 2025, we had the following obligations and commitments to make future payments under contracts, contractual obligations and commercial commitments (in thousands):
Payments due by Period
Contractual Obligations
Total
Thereafter
Long-term debt (1)
Interest on debt (2)
Operating leases
Other obligations (3)
Total
Long-term debt includes future principal payments on long-term borrowings through scheduled maturity dates. Excluded from these amounts are the non-cash amortization of debt issuance and other costs related to indebtedness.
Interest payments for variable rate debt were calculated using interest rates as of December 31, 2025.
Other obligations represent commitments under certain vendors and other contracts.
Commitments and Contingencies. For information related to commitments and contingencies, see Note 8 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements. We do not have any material off-balance sheet arrangements.
Critical Accounting Policies and Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. We believe the following discussion addresses our most critical accounting policies, which are those that are important to the presentation of our financial condition and results of operations and require management’s most subjective and complex judgments.
Revenue Recognition. We account for a customer arrangement when we and the customer have an approved and signed contract that specifies the rights and obligations of each party and the payment terms, and we believe it is probable that we will collect substantially all of the consideration to which we will be entitled in exchange for the services that will be provided to the customer. We periodically enter into arrangements that include multiple promises that we evaluate to determine whether the promises are separate performance obligations. We identify performance obligations based on services to be transferred to a customer that are distinct within the context of the contractual terms. We allocate the contractual transaction price to each distinct performance obligation and recognize revenue when a performance obligation is satisfied by providing a service to a customer. Revenue is primarily generated through our direct sales force.
Dealer. Dealer revenue consists of marketplace, digital experience, including website solutions, vehicle acquisition and media products sold to dealer customers, and is typically subscription-oriented in nature. Further information related to Dealer revenue in the Consolidated Statements of Income is as follows:
Subscription Based Products . We offer our dealers with subscription based packages across four capabilities: Marketplace, Digital Experience, Media Solutions and Trade & Appraisal. Our subscription packages are generally a fixed price arrangement with varying contract terms that are automatically renewed, typically on a month-to-month basis. We recognize our subscription revenue ratably as the service is provided over the contract term. Our primary source of revenue is through the sale of marketplace subscription advertising packages to dealer customers. Our subscription based add-on media products include: Cars Social, In-Market Video and VIN Performance Media. Substantially all of our add-on products are not sold separately from our subscription packages as the customer cannot benefit from add-on products on a standalone basis. Therefore, our other subscription packages and add-on products are combined as a single performance obligation, and we recognize the related revenue ratably as the services are provided over the contract term.
Other Media Solutions. We also provide certain non-subscription digital advertising services to dealer customers. We recognize revenue related to these services at the point in time the service is provided.
OEM and National revenue. OEM and National revenue in the Consolidated Statements of Income largely consists of media products sold to OEMs and auto adjacent businesses, including insurance companies. Revenue related to OEM and National customers are primarily transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements. An impression is the display of an advertisement to an end-user on the Cars.com website and is a measure of volume. A click-through occurs when an end-user clicks on an impression. We recognize revenue as the impressions or click-throughs are delivered. If the impressions or click-throughs delivered are less than the amount invoiced to the customer, the difference is recorded as deferred revenue and recognized as revenue when earned. We recognize revenue related to these services at the point in time the service is provided.
Other Revenue. Other revenue primarily includes revenue related to vehicle listing data sold to third parties. We recognize other revenue either ratably as the services are provided or at the point in time the services have been performed. Other revenue is recorded in Other revenue in the Consolidated Statements of Income.
Business Combinations.
Intangible Assets. Intangible assets are recorded at their estimated fair value at the date of acquisition. The fair values assigned to the intangible assets acquired were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods. These preliminary fair values are subject to change within the one-year measurement period. We amortize intangible assets over their estimated useful lives on a straight-line basis. Amortization is recorded over the relevant estimated useful lives ranging from two to 14 years.
We evaluate the useful lives of these assets on at least an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. If the estimate of an intangible asset’s remaining useful life is changed, we amortize the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. If an impairment is identified, the asset is written down to fair value as required.
Contingent Consideration. In the prior periods presented, we had contingent consideration obligations from arrangements resulting from acquisitions that involved potential future payment of consideration that was contingent upon the achievement of certain financial metrics or lender market share. Contingent consideration was recognized at its estimated fair value at the date of acquisition based on our expected future payment, discounted using accepted valuation methodologies.
We reviewed and re-assessed the estimated fair value of contingent consideration liabilities at each reporting period and the updated fair value could differ materially from the initial estimates. We measured contingent consideration recognized in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs. The fair value was measured based on a Monte Carlo simulation or a scenario-based method, depending on the earnout objective and timing. The fair value measurement included the following significant inputs: volatility and projected financial information. Significant increases or decreases to any of these inputs in isolation could result in a significantly higher or lower liability. Ultimately, the liability was equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and each reporting period and the amount paid was recognized in earnings within Other income (expense), net in the Consolidated Statements of Income.
Income Taxes. We account for income taxes according to the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement carrying value and tax basis of assets and liabilities, as well as tax attribute carryforwards, as measured by enacted tax rates. The effect of a tax rate change on deferred tax assets and liabilities is recognized in the Consolidated Statements of Income in the period that includes the enactment date of the change. We assess the recoverability of our deferred tax assets on a quarterly basis, considering all positive and negative evidence. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some portion of the deferred tax assets will not be realized. Uncertain tax positions that relate to deferred tax assets are recorded against deferred tax assets; otherwise, uncertain tax positions are recorded as either a current or noncurrent liability in the Consolidated Balance Sheets. See Note 12 (Income Taxes) to the Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Recent Accounting Standards. For information related to recent accounting pronouncements, see Note 2 (Significant Accounting Policies) to the Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. Market risk represents the risk of loss that may affect our financial position due to adverse changes in financial market prices and rates. We are exposed to market risks related to changes in interest rates and foreign currency exchange risk.
Interest Rate Risk. The interest rate on borrowings under our Revolving Credit Facility is floating and, therefore, subject to fluctuations. As of December 31, 2025, the outstanding aggregate principal amount of our indebtedness was $455.0 million, at a weighted average interest rate of 6.3%, including $400.0 million of outstanding principal under the bonds, which carries a fixed interest rate of 6.375% and $55.0 million of outstanding principal under the Revolving Loan which carried an interest rate of 5.8% at December 31, 2025.
Foreign Currency Exchange Risk. Historically, we have not faced any significant foreign currency risk as our operations and sales have been primarily in the United States. However, with the acquisition of D2C Media in November 2023, we expanded our presence in Canada and therefore, our risk related to changes in exchange rates between the U.S. dollar and Canadian dollar. D2C Media primarily bills its customers and incurs expenses in Canadian dollars. We also have intercompany debt between U.S. and Canadian entities that is subject to exchange rate fluctuations and will result in foreign exchange gains or losses depending on the currency movement during the respective time period. The effect of foreign currency exchange rate fluctuations since 2023 is immaterial. As we continue to grow our Canadian operations, we expect to continue to be exposed to foreign exchange rate risk. We may determine to take certain foreign exchange rate risk management measures.
Item 8. Financial Statement s and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Cars.com Inc.
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of Cars.com Inc. (the Company) as of December 31, 2025 and 2024, the related Consolidated Statements of Income, Comprehensive Income, Stockholders’ Equity and Cash Flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “Consolidated Financial Statements”). In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
Description of the Matter
As described in Note 2 to the Consolidated Financial Statements, the Company recognizes revenue in accordance with Accounting Standard Codification Topic 606, Revenue from Contracts with Customers, upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. The Company enters into contracts with customers that may include multiple service offerings. The assessment of terms and conditions for the identification of performance obligations may involve judgment.
Auditing the Company’s accounting for revenue recognition was challenging given the significant audit effort to identify and determine the distinct performance obligations in customer contracts through the inspection of terms and conditions in the customer contracts.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue recognition process, including management’s review of terms and conditions and the identification of distinct performance obligations in customer contracts.
To test the Company’s accounting for revenue recognition, we performed audit procedures that included, among others, an evaluation of management’s assessment of the distinct performance obligations within the arrangement based on its terms and conditions for a sample of customer contracts. We tested the application of the revenue recognition accounting requirements for each of the significant service offerings to determine whether the performance obligations identified by the Company were distinct.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Chicago, Illinois
February 26, 2026
Cars.com Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
December 31,
Assets:
Current assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses
Other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Deferred tax assets, net
Investments and other assets, net
Total assets
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable
Accrued compensation
Other accrued liabilities
Total current liabilities
Noncurrent liabilities:
Long-term debt, net
Deferred tax liabilities, net
Other noncurrent liabilities
Total noncurrent liabilities
Total liabilities
Commitments and contingencies
Stockholders' equity:
Preferred Stock at par, $ 0.01 par value; 5,000 shares authorized; no shares
issued and outstanding as of December 31, 2025 and 2024, respectively
Common Stock at par, $ 0.01 par value; 300,000 shares authorized; 58,636 and
64,391 shares issued and outstanding as of December 31, 2025 and 2024,
respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
The accompanying notes are an integral part of these Consolidated Financial Statements.
Cars.com Inc.
Consolidated Statements of Income
(In thousands, except per share data)
Revenue:
Dealer
OEM and National
Other
Total revenue
Operating expenses:
Cost of revenue and operations
Product and technology
Marketing and sales
General and administrative
Depreciation and amortization
Total operating expenses
Operating income
Nonoperating expenses:
Interest expense, net
Other income (expense), net
Total nonoperating (expense) income, net
Income before income taxes
Income tax expense (benefit)
Net income
Weighted-average common shares outstanding:
Basic
Diluted
Net income per share:
Basic
Diluted
The accompanying notes are an integral part of these Consolidated Financial Statements.
Cars.com Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
Year Ended December 31,
Net income
Other comprehensive income (loss) net of tax:
Foreign currency translation adjustments
Total other comprehensive income (loss), net of tax
Comprehensive income
The accompanying notes are an integral part of these Consolidated Financial Statements.
Cars.com Inc.
Consolidated Statements o f Stockholders’ Equity
(In thousands)
Preferred Stock
Common Stock
Additional
Accumulated Other
Shares
Amount
Shares
Amount
Paid-In
Capital
Accumulated
Deficit
Comprehensive Income (Loss)
Stockholders'
Equity
Balance at December 31, 2022
Net income
Other comprehensive income, net of tax
Repurchases of common stock
Shares issued in connection with
stock-based compensation plans, net
Stock-based compensation
Balance at December 31, 2023
Net income
Other comprehensive loss, net of tax
Repurchases of common stock
Shares issued in connection with
stock-based compensation plans, net
Stock-based compensation
Balance at December 31, 2024
Net income
Other comprehensive income, net of tax
Repurchases of common stock
Shares issued in connection with
stock-based compensation plans, net
Stock-based compensation
Balance at December 31, 2025
The accompanying notes are an integral part of these Consolidated Financial Statements.
Cars.com Inc.
Consolidated Stateme nts of Cash Flows
(In thousands)
Year Ended December 31,
Cash flows from operating activities:
Net income
Adjustments to reconcile Net income to Net cash provided by
operating activities:
Depreciation
Amortization of intangible assets
Stock-based compensation
Deferred income taxes
Provision for doubtful accounts
Amortization of debt issuance costs
Unrealized (gain) loss on foreign currency denominated transactions
Changes in fair value of contingent consideration
Gain on sale of equity investment
Other, net
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
Prepaid expenses and other assets
Accounts payable
Accrued compensation
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired
Capitalization of internally developed technology
Purchase of property and equipment
Proceeds from sale of equity investment
Purchase of convertible note receivable
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from Revolving Loan borrowings
Payments of Revolving Loan borrowings and long-term debt
Payments for stock-based compensation plans, net
Repurchases of common stock
Payments of contingent consideration
Payments of debt issuance costs and other fees
Net cash used in financing activities
Effect of exchange rate changes on Cash and cash equivalents
Net increase in Cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Cash paid for income taxes
Cash paid for interest
The accompanying notes are an integral part of these Consolidated Financial Statements.
Cars.com Inc.
Notes to Consolidated Financial Statements
Note 1. Description of Business
Description of Business. Cars.com Inc. 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 shopping tools and comprehensive vehicle reviews and content. The Company's interconnected ecosystem of products enables dealers and OEMs to sell more cars by efficiently leveraging its marketplace, dealer websites, trade and appraisal tools and proprietary in-market media solutions.
Note 2. Significant Accounting Policies
Basis of Presentation . The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the SEC. The Consolidated Financial Statements include the accounts of the Company and its 100 % owned subsidiaries, including D2C Media and DealerClub since the dates of acquisition. All intercompany transactions and accounts have been eliminated in consolidation.
Use of Estimates. The preparation of the accompanying Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates.
Reclassifications . Certain prior period balances have been reclassified to conform to the current period presentation. These reclassifications were not material to the previously reported Consolidated Financial Statements.
Revenue. The Company accounts for a customer arrangement when the Company and the customer have an approved and signed contract that specifies the rights and obligations of each party and the payment terms, and the Company believes it is probable that the Company will collect substantially all of the consideration to which the Company will be entitled in exchange for the services that will be provided to the customer. The Company periodically enters into arrangements that include multiple promises that the Company evaluates to determine whether the promises are separate performance obligations. The Company identifies performance obligations based on services to be transferred to a customer that are distinct within the context of the contractual terms. The Company allocates the contractual transaction price to each distinct performance obligation and recognizes revenue when a performance obligation is satisfied by providing a service to a customer. Revenue is primarily generated through the Company’s direct sales force.
Dealer. Dealer revenue consists of marketplace, digital experience, including website solutions, vehicle acquisition and media products sold to dealer customers, and is typically subscription-oriented in nature. Further information related to Dealer revenue in the Consolidated Statements of Income is as follows:
Subscription Based Products . The Company offers dealers with subscription based packages across four capabilities: Marketplace, Digital Experience, Media Solutions and Trade & Appraisal. These subscription packages are generally a fixed price arrangement with varying contract terms that are automatically renewed, typically on a month-to-month basis. The Company recognizes subscription revenue ratably as the service is provided over the contract term. The Company's primary source of revenue is through the sale of marketplace subscription advertising packages to dealer customers. The Company's subscription based add-on media products include: Cars Social, In-Market Video and VIN Performance Media. Substantially all of the Company's add-on products are not sold separately from the subscription packages as the customer cannot benefit from add-on products on a standalone basis. Therefore, the Company's other subscription packages and add-on products are combined as a single performance obligation, and the related revenue is recognized ratably as the services are provided over the contract term.
Other Media Solutions. The Company also provides certain non-subscription digital advertising services to dealer customers. The revenue related to these services is recognized at the point in time the service is provided.
OEM and National revenue. OEM and National revenue in the Consolidated Statements of Income largely consists of media products sold to OEMs and auto adjacent businesses, including insurance companies. Revenue related to OEM and National customers are primarily transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements. An impression is the display of an advertisement to an end-user on the Cars.com website and is a measure of volume. A click-through occurs when an end-user clicks on an impression. The Company recognizes revenue as the impressions or click-throughs are delivered. If the impressions or click-throughs delivered are less than the amount invoiced to the customer, the difference is recorded as deferred revenue and recognized as revenue when earned. The Company recognizes revenue related to these services at the point in time the service is provided.
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Other Revenue. Other revenue primarily includes revenue related to vehicle listing data sold to third parties. The Company recognizes other revenue either ratably as the services are provided or at the point in time the services have been performed. Other revenue is recorded in Other revenue in the Consolidated Statements of Income .
Cash and Cash Equivalents. All cash balances and liquid investments with original maturities of three months or less on their acquisition date are classified as cash and cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts . Accounts receivable are primarily derived from sales to customers and recorded at invoiced amounts. The allowance for doubtful accounts reflects the Company’s estimate of credit exposure, determined principally on the basis of its collection experience, aging of its receivables, expected losses and any specific reserves needed for certain customers based on their credit risk. Bad debt expense is included in Marketing and sales in the Consolidated Statements of Income. As of December 31, 2025, the Company's rollforward of the allowance for doubtful accounts is as follows (in thousands):
Description
Balance at
Beginning
of Period
Additions
Charged to
Costs and
Expenses
Write-offs
Recoveries
Balance at
End of
Period
Allowance for doubtful accounts:
Concentrations of Credit Risk. The Company’s financial instruments, consisting primarily of cash and cash equivalents and customer receivables, are exposed to concentrations of credit risk. The Company invests its cash and cash equivalents with highly rated financial institutions.
Note Receivable. On October 14, 2025, the Company entered into a Security Agreement with an automotive technology solutions provider that is developing a new customer relationship management platform. As part of this agreement, the Company invested in an $ 8.0 million secured convertible note, which has a five-year maturity, accrues interest at 4.1 % per annum and contains options to purchase the remaining outstanding equity of the provider at the Company's option. The Company accounts for this note as a loan receivable that is held for investment, and therefore the note is measured at amortized cost. The Company accounts for its loans held for investment using the interest method whereby interest income is recognized each period based on the effective interest rate required to amortize the deferred loan issuance costs over the life of the loans. As of December 31, 2025, $ 8.3 million is recorded in Investments and other assets, net in the Consolidated Balance Sheets.
Investments . Investments in non-marketable equity securities are measured at fair value with changes in fair value recognized in Net income. Prior to the sale of its RepairPal, Inc. ("RepairPal") equity investment, the Company utilized the measurement alternative for equity investments without readily determinable fair values and revalued this investment upon the occurrence of an observable price change for similar investments. On at least an annual basis, the Company assessed its investment to determine whether any events have occurred, or circumstances have changed, which might have a significant adverse effect on their fair value and as applicable, may be indicative of impairment.
During the year ended December 31, 2024, the Company sold its RepairPal equity investment for $ 9.5 million in closing proceeds and up to $ 2.7 million of additional proceeds to be received, subject to the satisfaction of certain conditions. The related cash proceeds for the sale were not yet received as of December 31, 2024, and was therefore recorded as a non-cash transaction at that time. As a result, the Company recorded the fair value of its expected proceeds as a gain of $ 10.8 million recorded in Other income (expense), net in the Consolidated Income Statements and Gain on sale of equity investment in the Consolidated Statements of Cash Flows. As of December 31, 2024, the Company recorded $ 9.5 million and $ 1.3 million in Other current assets and Investments and other assets, net, respectively, in the Consolidated Balance Sheets, of which the $ 9.5 million was collected in January 2025. As of December 31, 2025, $ 1.0 million and $ 0.3 million are rec orded in Other current assets and Investments and other assets, net, respectively, in the Consolidated Balance Sheets. Changes will be recognized in Other income (expense), net in the Consolidated Statements of Income .
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Property and Equipment, net . Property and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives as follows (in thousands):
December 31,
Asset
Estimated Useful Life
Computer software
18 months - 5 years
Leasehold improvements
Lesser of useful life or lease term
Computer hardware
3 - 5 years
Furniture and fixtures
5 - 10 years
Property and equipment, gross
Less: Accumulated depreciation
Property and equipment, net
Normal repairs and maintenance are expensed as incurred. Any resulting gain or loss from the disposition of fixed assets is included in General and administrative expense in the Consolidated Statements of Income .
Internally Developed Technology . The Company capitalizes costs associated with customized internal-use software systems and website development that have reached the application development stage. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees who are directly associated with the applications. Capitalization of such costs begins when the preliminary project stage is complete and ceases at the point in which the project is substantially complete and ready for its intended purpose. The Company reviews the carrying amount of internally developed technology for impairment and useful lives whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Capitalized software costs, excluding cloud computing arrangements, for the years ended December 31, 2025, 2024 and 2023 were $ 21.6 million, $ 21.4 million and $ 19.6 million, respectively. Capitalized costs, excluding those for cloud computing arrangements, are included in Property and equipment, net in the Consolidated Balance Sheets. Research and development costs are expensed as incurred.
Cloud Computing Arrangements, net. The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed technology. Any amortization is recorded in the same manner in the Consolidated Statements of Income as the expense associated with the underlying hosting arrangement. Capitalized cloud computing arrangements are amortized on a straight-line basis over an estimated useful life of five years. Amortization expense for the years ended December 31, 2025, 2024 and 2023 was $ 2.4 million, $ 1.8 million and $ 1.2 million. Cost and ac cumulated amortization is as follows (in thousands):
December 31,
Cloud computing arrangements, gross
Less: Accumulated amortization
Cloud computing arrangements, net
These capitalized costs in the Consolidated Balance Sheets are as follows (in thousands):
December 31,
Prepaid expenses
Investments and other assets, net
Goodwill and Other Intangible Assets . Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible assets, net of liabilities assumed. Goodwill is tested for impairment on an annual basis or between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company’s goodwill is tested for impairment at a level referred to as the reporting unit. The level at which the Company tested goodwill for impairment requires the Company to determine whether the operations below the business segment level constitute a business for which discrete financial information is available and segment management regularly reviews the operating results. The Company determined that it operated as a single reporting unit.
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
The process of estimating the fair value of goodwill is subjective and required the Company to make estimates that may significantly impact the outcome of the analysis. A qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications. If after performing this assessment, the Company concluded it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company will perform the quantitative test.
Under the quantitative test, a goodwill impairment is identified by comparing the fair value of the reporting unit to the carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, goodwill is considered impaired and an impairment charge is recognized in an amount equal to the excess, not to exceed the carrying amount of goodwill.
If a quantitative test is performed, the Company estimates the fair value of the reporting unit with an income approach using a discounted cash flow ("DCF") analysis and the Company also considers a market-based valuation methodology using comparable public company trading values and the Company’s market capitalization. Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, long-term growth rates, the discount rate and relevant comparable public company earnings multiples. The cash flows employed in the DCF analysis are based on the Company’s best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance. The discount rate utilized in the DCF analysis is based on the reporting unit’s weighted-average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the Company’s reporting unit.
Impairment assessment inherently involves management judgments regarding a number of assumptions described above. The reporting unit fair value also depends on the future strength of the economies the Company operates in. New and developing competition, as well as technological changes, could also adversely affect future fair value estimates. Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of the Company’s recorded goodwill, differences in assumptions could have a material effect on the estimated fair values. For further information, see Note 5 (Goodwill and Other Intangible Assets, net).
The Company’s indefinite-lived intangible asset relates to the Cars.com trade name. Intangible assets with indefinite lives are tested for impairment annually, or more often if circumstances dictate, and written down to fair value as required. Similar factors to goodwill are considered in this evaluation. The estimates of fair value are determined using the "relief from royalty" methodology, which is a variation of the income approach. The discount rate assumption is based on an assessment of the risk inherent in the projected future cash flows generated by the trade name intangible asset.
Amortizable intangible assets are amortized on a straight-line basis over the estimated useful lives as follows:
Intangible Asset
Estimated Useful Life
Acquired software
2 - 5 years
Customer relationships
4 - 14 years
Other trade names
5 - 12 years
Valuation of Long-Lived Assets . The Company reviews the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Once an indicator of potential impairment has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of projected undiscounted future cash flows against the carrying amount of the asset group. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset group would be deemed to be potentially impaired. The impairment, if any, would be measured based on the amount by which the carrying amount exceeds the fair value. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose. No material impairment for long-lived assets were recognized for the periods presented in the Consolidated Statements of Income .
Fair Value of Financial Instruments . Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. The three-level hierarchy of fair value measurements is based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels:
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Level 1—Quoted prices for identical instruments in active markets;
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and
Level 3—Valuations derived from valuation techniques in which one or more significant inputs are unobservable
The Company’s financial instruments include accounts receivable, notes receivable, other receivables, accounts payable and other liabilities. The carrying values of these instruments approximate their fair values.
The Company’s debt is classified as Level 2 in the fair value hierarchy and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments. Level 2 assets and liabilities are based on observable inputs other than quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. The approximate fair value and related carrying value of the Company's outstanding indebtedness, as of December 31, 2025 and December 31, 2024 were as follows (in millions):
December 31, 2025
December 31, 2024
Fair Value
Carrying Value
Contingent Consideration. In the prior periods presented, the Company had contingent consideration obligations from arrangements resulting from acquisitions that involved potential future payment of consideration that was contingent upon the achievement of certain financial or performance metrics. Contingent consideration was recognized at its estimated fair value at the date of acquisition based on expected future payment, discounted using a weighted average cost of capital in accordance with accepted valuation methodologies. Prior to the expiration of these arrangements, the Company reviewed and reassessed the estimated fair value of contingent consideration liabilities at each reporting period and the updated fair value could differ materially from the initial estimates. The Company measured contingent consideration recognized in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs. The fair value measurement had one significant input of projected financial information. Significant increases or decreases to the projected financial information could result in a significantly higher or lower liability. Ultimately, the liability was equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and each reporting period and the amount paid was recognized in earnings within Other income (expense), net in the Consolidated Statements of Income .
Foreign Currency Translation. The reporting currency of the Company is the U.S. dollar. The functional currency of the Company’s foreign subsidiaries is the local currency of each subsidiary. All balances of entities whose functional currency is a currency other than the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows: (i) asset and liability accounts at period‑end rates; (ii) income statement accounts at average exchange rates for the period; and (iii) stockholders’ equity accounts at historical exchange rates. The resulting translation adjustments are excluded from consolidated Net income and are recognized within Accumulated other comprehensive loss in the Consolidated Balance Sheets. Foreign currency transaction gains and losses are included in Other income (expense), net in the Consolidated Statements of Income. Monetary assets and liabilities that are in a currency other than the Company's functional currency are translated to the functional currency at period-end, with changes in such amounts being reported as a component of Other income (expense), net in the Consolidated Statements of Income .
Income Taxes . The Company accounts for income taxes according to the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement carrying value and tax basis of assets and liabilities, as well as tax attribute carryforwards, as measured by enacted tax rates. The effect of a tax rate change on deferred tax assets and liabilities is recognized in the Consolidated Statements of Income in the period that includes the enactment date of the change. The Company assesses the recoverability of our deferred tax assets on a quarterly basis, considering all positive and negative evidence. A valuation allowance is recorded against deferred tax assets if it is more likely that not that some portion of the deferred tax assets will not be realized. Uncertain tax positions that relate to deferred tax assets are recorded against deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50 % likelihood of being realized upon ultimate resolution. The Company’s uncertain tax position reserves are reviewed periodically and are adjusted as events occur that affect its estimates, such as the availability of new information, the lapsing of applicable statutes of limitation, the conclusion of tax audits, the measurement of additional estimated liability, the identification of new tax matters, the release of administrative tax guidance
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
affecting its estimates of tax liabilities or the rendering of relevant court decisions. The Company records penalties and interest relating to uncertain tax positions in Income tax expense (benefit) in the Consolidated Statements of Income. For further information, see Note 12 (Income Taxes).
Stock-Based Compensation. Stock-based compensation expense is recognized on a straight-line basis over the vesting period. Forfeitures are recorded at the time the forfeiture event occurs. For further information, see Note 10 (Stock-Based Compensation).
Adver tising Costs . Advertising costs are expensed as they are incurred and included in Marketing and sales in the Consolidated Statements of Income. Advertising expense for the years ended December 31, 2025, 2024 and 2023 was $ 109.1 million, $ 105.3 million and $ 107.8 million, respectively.
Cost of Revenue and Operations. Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment, compensation costs for the product fulfillment and customer service teams.
Defined Contribution Plans. The Company’s employees are eligible to participate in a defined contribution plan. Participants are eligible on their date of hire and are allowed to make tax-deferred contributions up to 90 % of employees' compensation, subject to limitations specified by the Internal Revenue Code of 1986, as amended. Employer contributions consist of matching contributions and/or non-elective employer contributions. The Company provides a maximum match for 4 % of the employee’s salary and contributions are immediately full y vested. The Company’s contributions to its defined contribution plans for the years ended December 31, 2025, 2024 and 2023 were $ 6.5 million, $ 6.4 million and $ 6.3 million, respe ctively.
Recently Adopted Accounting Standards. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which requires presentation of specific categories of reconciling items, as well as reconciling items that meet a quantitative threshold, in the reconciliation between the income tax provision and the income tax provision using statutory tax rates. The standard also requires disclosure of income taxes paid disaggregated by jurisdiction with separate disclosure of income taxes paid to individual jurisdictions that meet a quantitative threshold of 5 percent. This amendment was effective for fiscal years beginning after December 15, 2024, on a prospective basis and early adoption and retrospective application were permitted. The Company has adopted ASU 2023-09 as of December 31, 2025 using the retrospective approach, and included the required disclosures in Note 12 (Income Taxes). This standard update did not affect the Company's financial condition or results of operations.
Recently Issued Accounting Standards Not Yet Adopted . In December 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements , which clarifies current interim disclosure requirements and provides a comprehensive list of required interim disclosures. The update also establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. Per the FASB, the amendment does not intend to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements but rather provide clarity and improve navigability of the existing interim reporting requirements. This amendment is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted and entities are permitted to apply the new updates either prospectively or retrospectively to any or all periods presented in the financial statements. The Company is currently evaluating this new guidance and its impact on its Consolidated Financial Statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40) : Targeted Improvements to the Accounting for Internal-Use Software , which modernizes the accounting for internal-use software costs by eliminating the stage-based model in current U.S. GAAP and clarifying when capitalization of software development costs are appropriate. The standard removes the concept of discrete development stages and introduces a principle-based framework centered on whether management has authorized and committed to funding the project, and whether it is probable that the project will be completed and the software will be used to perform its intended function. This amendment is effective for annual reporting periods beginning after December 15, 2027, and for interim reporting periods beginning after December 15, 2027. Early adoption is permitted and entities are permitted to apply the new guidance in a prospective, modified or retrospective approach. The Company is currently evaluating this new guidance and its impact on its Consolidated Financial Statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires companies to provide more detailed and organized disclosures of their expenses in their income statements. The standard requires breaking down expenses into specific categories, such as employee compensation and costs related to depreciation and amortization. This amendment is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, on a prospective basis and early adoption and retrospective application is permitted. The Company is currently evaluating this new guidance and its impact on its financial statement disclosures.
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Note 3. Business Combinations
DealerClub Acquisition. In January 2025, the Company acquired all of the outstanding stock of DealerClub Inc. ("DealerClub"), an emerging dealer-to-dealer digital wholesale auction platform that facilitates transparent and efficient transactions between automotive dealers (the "DealerClub Acquisition"). The total purchase consideration was $ 25.3 million. The Company expensed as incurred total acquisition costs of $ 0.2 million during the year ended December 31, 2025. These costs were recorded in General and administrative expenses in the Consolidated Statements of Income.
As part of the DealerClub Acquisition, the Company may be required to pay additional performance-based consideration of up to $ 88.0 million, which may be paid in cash, or stock if mutually agreed upon. This potential performance-based consideration is not included in the total purchase consideration and will be deemed compensation expense. The amount to be paid will be determined by DealerClub's future achievement of certain revenue-related financial targets through December 31, 2028, and will be expensed over the relevant performance periods.
Purchase Price Allocation. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s final estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the replacement cost method. The DealerClub Acquisition purchase price allocation is as follows (in thousands):
Acquisition Date
Fair Value
Total purchase consideration
Cash and cash equivalents (1)
Other assets acquired (1)(2)
Identified intangible assets (3)
Total assets acquired
Total liabilities assumed (4)
Net identifiable assets
Goodwill
Total purchase consideration
During the three months ended June 30, 2025, the Company recorded a $ 0.3 million purchase accounting adjustment.
Other assets acquired primarily consists of deferred income tax assets and other receivables.
Identified intangible assets consists of acquired software with an amortization period of five years.
Liabilities assumed primarily consists of other accrued liabilities.
A reconciliation of cash consideration to Payments for acquisitions, net of cash acquired related to the DealerClub Acquisition in the Consolidated Statements of Cash Flows is as follows (in thousands):
Cash consideration
Less: Cash acquired (1)
Total payment for DealerClub Acquisition, net
During the three months ended June 30, 2025, the Company recorded a $ 0.3 million purchase accounting adjustment.
Goodwill. In connection with the DealerClub Acquisition, the Company recorded goodwill in the amount o f $ 22.0 m illion, which is primarily attributable to expected sales growth from existing and future customers, product offerings, technology and the value of the acquired assembled workforce. All of the goodwill is considered non-deductible for income tax purposes.
The DealerClub Acquisition would have had an immaterial impact on the Company’s Consolidated Financial Statements for years ended December 31, 2024 and 2023.
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
D2C Media Acquisition. On November 1, 2023, the Company acquired all of the outstanding stock of D2C Media Inc. and EZResults Inc. (collectively, the "D2C Media Acquisition"), a leading provider of website and digital advertising solutions in Canada for $ 80.1 million total purchase considera tion. The Company expensed as incurred total acquisition costs of $ 1.4 million during the year ended December 31, 2023. These costs were recorded in General and administrative expenses in the Consolidated Statements of Income.
As part of the D2C Media Acquisition, the Company was required to pay a cumulative cash earnout of CAD$ 34.1 million, of which CAD$ 15.0 million (approximately USD$ 10.9 million), CAD$ 15.0 million (approximately USD$ 10.8 million) and CAD$ 4.1 million (approximately USD$ 3.0 million) was expensed during the years ending December 31, 2025, 2024 and 2023, respectively. The payment was not included in the total purchase consideration and was deemed compensation expense, as the cash compensation was to former equity holders who became employees and would have been forfeited if employment was terminated prior to the end of the earnout period. The amount to be paid was determined by the acquired business’ achievement of certain revenue-related financial targets through December 31, 2025 and expensed over each performance period.
Purchase Price Allocation. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s final estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods. The D2C Media Acquisition purchase price allocation is as follows (in thousands):
Acquisition-date
Fair Value
Total purchase consideration (1)
Cash and cash equivalents
Accounts receivable
Other assets acquired (2)
Identified intangible assets (3)
Total assets acquired
Accounts payable and accrued liabilities
Other liabilities assumed (1) (4)
Deferred tax liabilities, net (1)
Total liabilities assumed
Net identifiable assets
Goodwill (1)
Total purchase consideration
During the year ended December 31, 2024, the Company recorded a $ 0.3 million purchase accounting adjustment, $ 0.2 million of which is reflected in Payments for acquisitions, net of cash acquired in the Consolidated Statements of Cash Flows.
Other assets acquired primarily consists of property and equipment, operating lease right of use assets and other prepaid expenses.
Information regarding the identifiable intangible assets acquired is as follows:
Acquisition-Date
Fair Value
(in thousands)
Amortization Period
(in years)
Customer relationships
Acquired software
Trade name
Total
Other liabilities assumed primarily consists of operating lease right of use liabilities and income taxes payable.
A reconciliation of cash consideration to Payments for acquisitions, net of cash acquired related to the D2C Media Acquisition in the Consolidated Statements of Cash Flows as of December 31, 2023 is as follows (in thousands):
Cash consideration
Less: Cash acquired
Total payment for D2C Media, net
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Goodwill. In connection with the D2C Media Acquisition, the Company recorded goodwill in the amount of $ 42.0 million, which is primarily attributable to expected sales growth from existing and future customers, product offerings, technology and the value of the acquired assembled workforce. All of the goodwill is considered non-deductible for income tax purposes.
The D2C Media Acquisition would have had an immaterial impact on the Company’s Consolidated Financial Statements for the period January 1, 2023 to October 31, 2023.
Note 4. Revenue
The Company's Consolidated Statements of Income provide disaggregated revenue information that reflects the nature, timing, amount and uncertainty of cash flows related to the Company's revenue. Substantially all revenue was generated and located within the U.S. The Company's disaggregated revenue information is as follows (in thousands):
Year Ended December 31,
Dealer
OEM and National
Other
Total revenue
Note 5. Goodwill and Other Intangible Assets, net
Goodwill and Indefinite-Lived Intangible Asset Summary. The changes in the carrying amount of goodwill and indefinite-lived intangible asset are as follows (in thousands):
Goodwill
Cars.com
Trade name
December 31, 2023
Foreign currency translation adjustment
Other adjustments
December 31, 2024
Additions (1)
Foreign currency translation adjustment
December 31, 2025
In connection with the DealerClub Acquisition, the Company recorded goodwill in the amount of $ 22.0 million. For more information on the DealerClub Acquisition, see Note 3 (Business Combinations).
Goodwill and Indefinite-Lived Intangible Asset Impairment Test. The Company performed impairment tests for goodwill and the indefinite-lived intangible asset. The Company performed a qualitative assessment that considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specific facts and circumstances. After performing this assessment, the Company concluded there were no indicators of impairment and therefore, the Company did not perform a quantitative test and did not record an impairment to goodwill or the indefinite-lived intangible asset during any of the three years ending December 31, 2025, 2024 and 2023.
Definite Lived Intangible Assets . The Company’s definite-lived intangible assets by major asset class are as follows (in thousands):
December 31, 2025
December 31, 2024
Weighted Average Remaining Useful Life (years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Customer relationships
Acquired software
Other trade names
Content library
Total
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
As of December 31, 2025, projected annual amortization expense for amortizable intangible assets is as follows (in thousands):
Thereafter
Total
Note 6. Debt
Fifth Amendment to the Credit Agreement. On May 6, 2024, the Company amended and extended its existing Credit Agreement (the "Fifth Amendment") which resulted in a new $ 350.0 million revolving loan due in 2029 ("Revolving Loan"). Upon closing, the Company borrowed $ 80.0 million under the new Revolving Loan to pay off and extinguish the outstanding $ 45.0 million in aggregate principal amount of existing Term Loan and $ 35.0 million in aggregate principal amount of existing Revolving Loan balances. This was a non-cash transaction predominantly amongst existing lenders in the Credit Agreement. Additionally, the Fifth Amendment, among other things, removed the Secured Overnight Financing Rate (SOFR) floor and replaced the financial covenant leverage test to Senior Secured Net Leverage from Senior Secured Leverage. Except as modified by the Fifth Amendment, the existing terms of the Credit Agreement, as amended, remain in effect.
Revolving Loan. As of December 31, 2025 , $ 295.0 m i llion was available to borrow under the Revolving Loan, and the Company had $ 55.0 million of outstanding borrowings. During the year ended December 31, 2025 , the Company borrowed $ 10.0 million and made $ 15.0 million in cash payments on the Revolving Loan . The interest rate in effect as of December 31, 2025 was 5.8 %.
Senior Unsecured Notes. In October 2020, the Company issued $ 400.0 million aggregate principal amount of 6.375 % Senior Unsecured Notes due in 2028. Interest on the notes is due semi-annually on May 1 and November 1.
Debt Issuance Costs. Debt issuance costs related to the various amendments and issuances were $ 5.8 million and $ 7.7 million as of December 31, 2025 and 2024, respectively. Depending on the nature of the debt issuance costs and the underlying debt to which it relates, they are recorded as either a reduction of debt and accreted using the effective interest method or as a deferred asset and accreted using the straight-line method with the amortization recorded in Interest expense, net in the Consolidated Statements of Income.
Debt Guarantors, Collateral, Covenants and Restrictions. The obligations under the debt agreements are guaranteed by the Company and its subsidiary guarantors. The Guarantors secured their respective obligations under the debt agreements by granting liens in favor of the agent on substantially all of their assets. The terms of the debt agreement include representations and warranties, affirmative and negative covenants (including certain financial covenants) and events of default that are customary for credit facilities of this nature. The negative covenants place restrictions and limitations on the Company’s ability to incur additional indebtedness, make distributions or other restricted payments, create liens, make certain equity or debt investments, engage in mergers or consolidations and engage in certain transactions with affiliates. At each quarter-end, the Company is subject to certain net leverage ratio and interest coverage ratio financial covenants under its Credit Agreement. As of December 31, 2025, the Company was in compliance with the covenants under its debt agreements.
Long-term Debt Maturities. Long-term debt includes future principal payments on long-term borrowings through scheduled maturity dates. Excluded from these amounts are the amortization of debt issuance and other costs related to indebtedness. As of December 31, 2025, the Company’s contractual payments under then-outstanding long-term debt agreements in each of the next five calendar years and thereafter are as follows (in thousands):
Thereafter
Total
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Note 7. Leases
Leases. The Company is obligated as a lessee under certain non-cancelable operating leases for office space, and is also obligated to pay insurance, maintenance and other executory costs associated with these leases. In May 2016, the Company entered into a lease of office space in Chicago, Illinois. In November 2024, the Company amended this lease, which resulted in a reduction of its office space by 67 %, extension of the lease term from June 2031 to June 2036 for the remaining office space, and paid a termination penalty of $ 10.5 million. This was accounted for as a lease modification. Monthly rental payments under the lease escalate by 2.5 % each year through June 2031 , then by 1.5 % each year through the remainder of the lease. As a result of this lease modification, and the commencement of a separate lease, the Company recognized $ 4.7 million of right of use assets obtained in exchange for lease obligations during the year ended December 31, 2024.
As of December 31, 2025, the Company’s scheduled future minimum lease payments under operating leases having initial noncancelable lease terms of more than one year, is as follows (in thousands):
Thereafter
Total minimum lease payments
Less: Imputed interest (1)
Present value of the minimum lease payments
Less: Current maturities of lease obligations
Long-term lease obligations
The Company’s lease agreements do not provide a readily determinable implicit rate nor is it available from the Company’s lessors. Therefore, in order to discount lease payments to present value, the Company has estimated its incremental borrowing rate based on information available at the lease commencement, modification or acquisition date.
As of December 31, 2025 and 2024, the Company's operating lease balance sheet information is as follows (in thousands):
December 31,
Balance sheet information:
Investments and other assets, net
Other accrued liabilities
Other noncurrent liabilities
The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received related to the lease in Chicago, Illinois.
Other information related to the Company’s operating leases for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands, except months and percentages):
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Year Ended December 31,
Income statement information:
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Other information:
Cash paid for amounts included in the measurement of operating lease liabilities (1)
Weighted-average remaining lease term (in months)
Weighted-average discount rate
The year ended December 31, 2024 includes a termination penalty of $ 10.5 million related to the lease amendment.
Note 8. Commitments and Contingencies
From time to time, the Company and its subsidiaries may become involved in actions, claims, suits or other legal or administrative proceedings arising in the ordinary course of business. The Company records a liability when it believes that it is both probable that a loss will be incurred and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its commitments and contingencies that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both the probability and the estimated amount of liability, if any. It is not possible to predict the outcome of these proceedings or the range of reasonably possible loss. The Company does not expect, based on circumstances currently known, that the ultimate resolution of any of these proceedings will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.
Note 9. Stockholders' Equity
On February 27, 2025, the Company announced that its Board of Directors had authorized a three-year share repurchase program to acquire up to $ 250.0 million of the Company 's common stock. The Company may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and other applicable legal requirements. The timing and amounts of any purchases under the share repurchase program will be based on market conditions and other factors, including price. The repurchase program may be suspended or discontinued at any time and does not obligate the Company to repurchase any specific amount or number of shares. The Company funds the share repurchase program principally with cash from operations. As of December 31, 2025, $ 173.8 million remained under the share repurchase program.
Year Ended December 31,
(in thousands, except per share data)
Aggregate purchase price
Shares repurchased
Average purchase price per share
Note 10. Stock-Based Compensation
Omnibus Plan. In May 2017, the Company’s Board of Directors approved the Cars.com Inc. Omnibus Incentive Compensation Plan (the "Omnibus Plan"), which provides for the granting of new shares for stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and other stock-based and cash-based awards. At the June 4, 2025 Annual Meeting of Stockholders, the Company's stockholders approved amendments to the Omnibus Plan to increase the maximum number of shares of the Company's common stock, par value $ 0.01 per share, that may be issued under the Omnibus Plan by 4.0 million shares to a total of 22.0 million shares and extend the term of the Omnibus Plan to June 4, 2035. As of December 31, 2025, there were 5.8 million common shares available for future grants. The Company issues new shares of common stock for shares delivered under the Omnibus Plan. A copy of the Company's Amended and Restated Omnibus Incentive Compensation Plan is incorporated by reference as Exhibit 10.26 to this Annual Report on Form 10-K.
Inducement Plan. In December 2025, the Company’s Board of Directors approved the Cars.com Inc. 2025 Inducement Equity Plan (the "Inducement Plan"), which provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and other stock-based and cash-based awards to individuals who were not previously employees or directors
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
of the Company. A maximum of 1.0 million common shares may be issued under the Inducement Plan. As of December 31, 2025, there were 0.6 million common shares available for future grants. The Company issues new shares of common stock for shares delivered under the Inducement Plan. A copy of the Company's Inducement Plan is incorporated by reference as Exhibit 10.28 to this Annual Report on Form 10-K.
Information related to stock-based compensation expense is as follows (in thousands):
Year Ended December 31,
Stock-based compensation expense
Income tax benefit related to stock-based
compensation expense
Stock-based compensation expense by financial statement line item on the Company’s Consolidated Statements of Income is as follows (in thousands):
Year Ended December 31,
Cost of revenue and operations
Product and technology
Marketing and sales
General and administrative
Total (1)
For the years ended December 31, 2025, 2024 and 2023, $ 0.1 million, $ 0.3 million, and $ 0.3 million, respectively, of capitalized internally developed technology costs is excluded from stock-based compensation expense.
Information related to outstanding stock-based compensation awards as of December 31, 2025 for restricted share units ("RSUs"), performance share units ("PSUs"), stock options and the Cars.com, Inc. Employee Stock Purchase Plan ("ESPP") is as follows (in thousands, except for weighted-average remaining period):
Unearned
Compensation
Weighted-Average
Remaining Period
(in years)
RSUs
PSUs
Stock Options
ESPP
Total
Restricted Share Units. RSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement. RSUs are subject to graded vesting, generally ranging between one year to three years and the fair value of the RSUs is equal to the Company's common stock price on the date of grant. RSU activity for the year ended December 31, 2025 is as follows (in thousands, except for weighted-average grant date fair value):
Number
of RSUs
Weighted-Average
Grant Date
Fair Value
Outstanding as of December 31, 2024
Granted
Vested and delivered
Forfeited
Outstanding as of December 31, 2025 (1)
Includes 441 RSUs that were vested, but not yet delivered.
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
The weighted-average grant-date fair value of RSUs granted during the year ended December 31, 2023 was $ 16.72 . The total grant-date fair value of RSUs that vested during the years ended December 31, 2025, 2024 and 2023 was $ 25.4 million, $ 24.5 million and $ 19.1 million, respectively.
Performance Share Units. PSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting. The fair value of the PSUs is equal to the Company’s common stock price on the date of grant. Expense related to PSUs is recognized when the performance conditions are probable of being achieved. The percentage of PSUs that shall vest will range from 0 % to 200 % of the number of PSUs granted based on the Company’s future performance over a one-year to three-year performance period related primarily to certain revenue, adjusted earnings before interest, income taxes, depreciation and amortization, cumulative adjusted net income per share targets, total shareholder return and share price targets. These PSUs are subject to cliff vesting after the end of the respective performance period. PSU activity for the year ended December 31, 2025 is as follows (in thousands, except for weighted-average grant date fair value):
Number
of PSUs
Weighted-Average
Grant Date
Fair Value
Outstanding as of December 31, 2024
Granted
Vested and delivered (1)
Forfeited
Outstanding as of December 31, 2025
The actual amount of shares that become common shares outstanding as of the date of vesting and delivery and will vary based on the attainment percentage of the relevant performance conditions.
The weighted-average grant-date fair value of PSUs granted during the year ended December 31, 2023 w as $ 16.47 .
Stock Options. Stock options represent the right to purchase shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement. Stock options are subject to three-year cliff vesting and expire 10 years from the grant date. Stock option activity for the year ended December 31, 2025 is as follows (in thousands, except for weighted-average grant date fair value and weighted-average remaining contractual term):
Number
of Options
Weighted-Average
Grant Date
Fair Value
Weighted-Average
Remaining Contractual
Term (in years)
Aggregate Intrinsic Value
Outstanding as of December 31, 2024
Granted
Exercised
Forfeited
Outstanding as of December 31, 2025
Exercisable as of December 31, 2025
There were no stock options granted during the years ending December 31, 2025 and 2024 . The fair value of the stock options granted during the year ended December 31, 2023 were estimated on the grant date using the Black-Scholes option pricing model, using the following assumptions:
Risk-free interest rate
Weighted-average volatility
Dividend yield
Expected years until exercise
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Employee Stock Purchase Plan. Eligible employees may authorize payroll deductions of up to 10 % of the employee’s base earnings with a maximum of $ 10,000 per every six-month offering period to purchase the Company's common stock at a purchase price per share equal to 85 % of the lower of (i) the closing market price per share of the Company at the beginning of the offering period or (ii) the closing market price per sh are at the end of the offering period. A maximum of three million shares are available for issuance under the ESPP. As of December 31, 2025 , 1.5 million sha res were available for issuance under the ESPP.
Information related to the ESPP is as follows (in thousands):
Year Ended December 31,
Shares issued related to the ESPP
Stock-based compensation expense related to the ESPP
Note 11. Net Income Per Share
Basic net income per share is calculated by dividing Net income by the weighted-average number of shares of the Company's common stock outstanding. Diluted net income per share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans, unless the inclusion of such shares would have an anti-dilutive impact. As part of the DealerClub Acquisition, the Company may pay up to $ 88.0 million of performance-based consideration in shares of the Company's stock at a future date if mutually agreed upon. Those potential shares have been excluded from the computations below as they are contingently issuable shares, and the contingency to which the issuance relates was not met at the end of the reporting period. The computation of net income per share is as follows (in thousands, except per share amounts):
Year Ended December 31,
Net income (1)
Basic weighted-average common shares outstanding
Effect of dilutive stock-based compensation awards (2)
Diluted weighted-average common shares outstanding
Net income per share, basic (1)
Net income per share, diluted (1)
During the year ended December 31, 2023 the Company released a significant portion of its valuation allowance for deferred tax assets that had been recorded as a result of the 2020 goodwill and indefinite-lived intangible asset impairments. For more information, see Note 12 (Income Taxes).
There were 1,408 , 31 and 290 potential common shares excluded from diluted weighted-average common shares outstanding for the years ended December 31, 2025, 2024 and 2023 , respectively, as their inclusion would have had an anti-dilutive effect.
Note 12. Income Taxes
Selected Information Related to Income Taxes. Significant components of Income before income taxes are as follows (in thousands):
Year Ended December 31,
Non-U.S.
Income before income taxes
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Significant components of the income tax provision are as follows (in thousands):
Year Ended December 31,
Current:
U.S. federal
U.S. state and local
Non-U.S.
Total current income tax expense
Deferred:
U.S. federal
U.S. state and local
Non-U.S.
Total deferred income tax expense (benefit)
Income tax expense (benefit)
The income tax provision differed from amounts computed at the U.S. federal statutory tax rate as follows (in thousands, except percentages):
Year Ended December 31,
Income tax provision at statutory rate
State and local income taxes, net of federal income tax effect (1)
Foreign tax effects
Canada
Provincial income taxes
Nondeductible transaction expenses
Other, net
Effect of cross-border tax laws
Tax credits
Changes in valuation allowance
Nontaxable or nondeductible items
Stock-based compensation
Nondeductible executive compensation
Nondeductible transaction expenses
Changes in unrecognized tax benefits
Other, net
Income tax expense (benefit)
In 2025, the state taxes in California, Illinois, New Jersey and New York made up the majority (greater than 50%) of the tax effect in this category.
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Cash Taxes Paid. Significant components of income taxes paid (net of refunds received) are as follows (in thousands):
Year Ended December 31,
U.S. federal
Alabama
Georgia
Michigan
Pennsylvania
Other
U.S. state and local
Canada
Total
* The amount of income taxes paid (net of refunds received) during the year does not meet the 5% disaggregation threshold and is included in 'Other'.
Deferred Tax Assets, Liabilities and Valuation Allowance. The Company has recorded deferred tax assets related to federal and state income tax net operating loss ("NOL") carryforwards of approxi mately $ 20.5 million and $ 2.9 million as of December 31, 2025 and 2024, respectively. These federal NOLs, and certain state NOLs, can be carried forward indefinitely.
The Com pany has also recorded deferred tax assets related to federal and state research and development ("R&D") tax credit carryforwards of $ 4.2 million and $ 1.9 million as of December 31, 2025 and 2024 , respectively. The federal and state R&D tax credits generally may be carried forward 20 years and 5 years, respectively.
The Tax Cuts and Jobs Act enacted in December 2017 amended Internal Revenue Code ("IRC") Section 174 to require that specific research and experimental ("R&E") expenditures be capitalized and amortized over five years (15 years for non-U.S. R&E expenditures) beginning in the Company’s 2022 fiscal year.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted. The OBBBA restored immediate expensing for domestic R&E expenditures that required capitalization under IRC Section 174 and reinstated the EBITDA-based limitation for business interest expense under IRC Section 163(j).
During 2023, the Company released a significant portion of the valuation allowance that had been previously recorded against its deferred tax assets. In connection with the sale of the Company’s RepairPal equity investment during 2024, the Company released its remaining portion of the valuation allowance. As a result, the Company has no valuation allowance recorded as of December 31, 2024 and 2025. For more information on the sale, see Note 2 (Significant Accounting Policies).
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
Significant components of the deferred tax assets and liabilities are as follows (in thousands):
December 31,
Deferred income tax liabilities:
Indefinite lived intangibles
Property and equipment
Right of use assets
Other
Total deferred tax liabilities
Deferred income tax assets:
Goodwill
NOL and tax credit carryforwards
Definite lived intangibles
Capitalized research and development costs
Accrued compensation
Lease obligations
Interest expense limitation
Total deferred tax assets
Net deferred tax asset
The deferred tax assets and liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2025 and 2024 were as follows (in thousands):
December 31,
Deferred tax assets, net
Deferred tax liabilities, net
Net deferred tax asset
Uncertain Tax Positions. A summary of the Company’s uncertain tax positions is as follows (in thousands):
Year Ended December 31,
Balance as of January 1
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Balance as of December 31
As of December 31, 2025 and 2024 , the Company had $ 4.5 millio n and $ 4.3 million, respectively, of uncertain tax positions that, if recognized, would affect the annual tax rate.
The Company files a consolidated U.S. federal income tax return, as well as income tax returns in various other jurisdictions, including in Canada. The Company's tax returns are routinely audited by tax authorities, and these tax audits are at various stages of completion at any given time. The Company’s tax returns open to examination by taxing authorities are for years beginning on or after January 1, 2021. The Company believes it has adequate tax reserves to cover potential federal, state or foreign tax exposures.
Note 13. Segment Information
Operating segments are components of an entity for which separate financial information is available and evaluated regularly by the chief operating decision maker (the "CODM") in deciding how to allocate resources and in assessing performance. The Company has determined that it has a single operating and reportable segment. The Company’s CODM is its Chief Executive Officer. The CODM
Cars.com Inc.
Notes to Consolidated Financial Statements (Continued)
makes resource allocation decisions to maximize the Company's consolidated financial results. Significant expenses reviewed by the CODM are primarily limited to those that are presented in the Consolidated Statements of Income. The significant expense categories disclosed in the December 31, 2024 Consolidated Financial Statements, except for those also presented in the Consolidated Statements of Income, are no longer regularly provided to or utilized by the CODM. Asset information is not provided to the CODM.
For the years ended December 31, 2025, 2024 and 2023, the Company did not have any one customer that generated greater than 10% of total revenue. Substantially all revenue and long-lived assets were generated and located within the U.S.
