Cars.com Inc. CARS Form 10-Q filing Q2 FY2026

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

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

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

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

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

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

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Cars.com Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1. Description of Business and Summary of Significant Accounting Policies

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.

Basis of Presentation. The accompanying unaudited interim consolidated financial statements ("Consolidated Financial Statements") have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the SEC rules and regulations. These Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2025, which are included in the Company's Annual Report on Form 10-K as filed with the SEC on February 26, 2026 (the "December 31, 2025 Consolidated Financial Statements").

The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in the December 31, 2025 Consolidated Financial Statements. In the opinion of management, the Consolidated Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, cash flows and changes in stockholders' equity as of the dates and for the periods indicated. The unaudited results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of results that may be expected for the year ending December 31, 2026.

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.

Principles of Consolidation. The accompanying Consolidated Financial Statements include the accounts of the Company and its 100% owned subsidiaries, including DealerClub since the date of acquisition. All intercompany transactions and accounts have been eliminated in consolidation.

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 a company must disclose events since the end of the last annual reporting period that have a material impact on the company. Per the FASB, the amendment is not intended 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.

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Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

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.

NOTE 2. 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):

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 three months ended March 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. Based on current performance trends, no such consideration was expensed during the three and six months ended June 30, 2026.

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 final DealerClub Acquisition purchase price allocation is as follows (in thousands):

(1)

Other assets acquired primarily consists of deferred income tax assets and other receivables.

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Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

(2)

Identified intangible assets consists of acquired software with an amortization period of five years.

(3)

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):

Goodwill. In connection with the DealerClub Acquisition, the Company recorded goodwill in the amount of $22.0 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.

NOTE 4. RepairPal Equity Investment

During the fourth quarter of 2024, the Company sold its RepairPal equity investment, which included $9.5 million in closing proceeds. These proceeds were collected during the six months ended June 30, 2025 and are reflected in Proceeds from sale of equity investment in the Consolidated Statements of Cash Flows. For more information, see Note 2 (Significant Accounting Policies) in Part II, Item 8., "Financial Statements and Supplementary Data", of the Company's December 31, 2025 Consolidated Financial Statements.

NOTE 5. Debt

Revolving Loan. As of June 30, 2026, $300.0 million was available to borrow under the revolving loan due in 2029 ("Revolving Loan"), and the Company had $50.0 million of outstanding borrowings. During the six months ended June 30, 2026, the Company made $5.0 million in cash payments on the Revolving Loan, and there were no additional borrowings. The Revolving Loan is governed by our Credit Agreement dated as of May 31, 2017 among the Company, as Borrower, each lender from time to time party hereto, the other parties party hereto and JPMorgan Chase Bank, N.A., as Administrative Agent (as amended from time to time, the "Credit Agreement").

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.

Fair Value. The Company's debt is classified as Level 2 in the fair value hierarchy, and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments. 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 June 30, 2026 and December 31, 2025 were as follows (in millions):

Debt Covenants. As of June 30, 2026, the Company was in compliance with the covenants under its debt agreements. The Company’s borrowings are limited primarily by: 1) Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) not to exceed 3.5x; and 2) Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) not to be below 3.0x. As of June 30, 2026, the Company's Senior Secured Net Leverage Ratio was 0.08x and its Consolidated Interest Coverage Ratio was 7.20x. As of June 30, 2026, the Company's Total Net Leverage Ratio (as defined in the Credit Agreement) was 1.95x.

NOTE 6. 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

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Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

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 7. 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 June 30, 2026, $116.6 million remained under the share repurchase program.

NOTE 8. Stock-Based Compensation

Restricted Share Units ("RSUs"). RSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement. RSUs are subject to graded vesting, generally ranging between one year to three years. For units issued prior to March 2026, the fair value of the RSUs was equal to the Company's common stock price on the date of grant. As of March 2026, the fair value of RSUs is equal to the Company's average closing common stock price over the 30 trading days leading up to and including the date of grant. RSU activity for the six months ended June 30, 2026 is as follows (in thousands, except for weighted-average grant date fair value):

(1)

Includes 374 RSUs that were vested but not yet delivered.

Performance Share Units ("PSUs"). PSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting. The fair value of the PSUs is equal to the Company’s common stock price on the date of grant. 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 three-year performance period related primarily to certain revenue, adjusted earnings before interest, income taxes, depreciation and amortization, 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 six months ended June 30, 2026 is as follows (in thousands, except for weighted-average grant date fair value):

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Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

(1)

The actual amount of PSUs that become common shares outstanding as of the date of vesting and delivery will vary based on the attainment percentage of the relevant performance conditions.

NOTE 9. 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):

(1)

There were 3,608 and 3,510 potential common shares excluded from diluted weighted-average common shares outstanding for the three months ended June 30, 2026 and 2025, respectively, and 4,115 and 3,508 potential common shares excluded from diluted weighted-average common shares outstanding for the six months ended June 30, 2026 and 2025, respectively, as their inclusion would have had an anti-dilutive effect.

NOTE 10. Income Taxes

Effective Tax Rate. The effective income tax rate for the six months ended June 30, 2026 of 31.9%, expressed by calculating the Income tax expense as a percentage of Income before income taxes, differed from the statutory federal income tax rate of 21% primarily due to the tax expense on stock-based compensation.

NOTE 11. 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 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. Asset information is not provided to the CODM.

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Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

NOTE 12. Reduction in Workforce

During the three months ended March 31, 2026, the Company recorded $8.5 million of expense associated with a plan to reduce its operating expenses and realign its resources via an 11% reduction in workforce. These expenses were generally recognized evenly across line items within Operating expenses (excluding Depreciation and amortization) in the Consolidated Statements of Income. These costs are comprised of one-time termination benefits, substantially all of which was related to employee severance and substantially all of which was paid during the three months ended June 30, 2026.

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

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

References in this discussion and analysis to "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 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

(1)

During the three months ended March 31, 2026, we recorded $8.5 million of expense associated with a plan to reduce our operating expenses and realign our resources via an 11% reduction in workforce. These costs are comprised of one-time termination benefits, substantially all of which is related to employee severance and substantially all of which was paid during the three months ended June 30, 2026.

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):

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

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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 decreased 14% and 13% for the three and six months ended June 30, 2026, respectively, and Traffic decreased 12% and 9% for the three and six months ended June 30, 2026, respectively, which primarily reflects intentional marketing shifts towards effectively capturing high-intent consumer demand.

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.

For the three months ended June 30, 2026, Dealer Customers remained flat compared to each of the three months ended June 30, 2025 and March 31, 2026, as an increase in marketplace customers was offset by a decrease in digital solutions customers.

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 three months ended June 30, 2026, ARPD increased 3% compared to the three months ended June 30, 2025, primarily reflecting the adoption of new marketplace packages and ongoing improvements in value delivery, partially offset by declines in dealer media.

For the three months ended June 30, 2026, ARPD increased 1% compared to the three months ended March 31, 2026, primarily reflecting the continued benefits of adoption of new marketplace packages and ongoing improvements in value delivery.

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, geopolitical incidents, 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 depends 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, our growing high-quality audience and suite of digital solutions for dealers and OEMs, including AI-based tools, position us to navigate a rapidly changing automotive environment.

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Results of Operations

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

*** 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 91% and 89% of total revenue for the three months ended June 30, 2026 and 2025, respectively. Dealer revenue increased $4.9 million or 3%, primarily due to growth in marketplace customers, partially offset by a decline in our media products.

OEM and National revenue. OEM and National revenue largely consists of media solutions products, including display advertising and other solutions to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies. OEM and National revenue represented 7% and 9% of total revenue for the three months ended June 30, 2026 and 2025, respectively. OEM and National revenue decreased $3.0 million or 18%, 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 each of the three months ended June 30, 2026 and 2025. Other revenue decreased $0.7 million or 19%.

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 each of the three months ended June 30, 2026 and 2025. Cost of revenue and operations decreased $0.3 million or 1%, primarily due to lower compensation, partially offset by higher third-party costs.

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, severance costs and costs related to the write-off of assets. Product and technology expense represented 15% and 16% of total revenue for the three months ended June 30, 2026 and 2025, respectively. Product and technology expense decreased $2.7 million or 9%, primarily due to lower compensation.

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 34% and 32% of total revenue for the

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three months ended June 30, 2026 and 2025, respectively. Marketing and sales expense increased $2.7 million or 5%, primarily due to higher spend, building consumer awareness to more effectively capture high-intent demand.

General and administrative. General and administrative expense primarily consists of compensation costs for certain of the executive, finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expense includes the cost of legal, accounting and other professional services, severance costs, office space, transformation and other exit costs and transaction-related costs. General and administrative expense represented 9% and 11% of total revenue for the three months ended June 30, 2026 and 2025, respectively. General and administrative expense decreased $3.5 million or 17%, primarily due to a reduction in costs as a result of the conclusion of the D2C Media earnout period and lower compensation, partially offset by higher third-party costs. For more information on the D2C Media earnout, see the "Liquidity and Capital Resources" section below.

Depreciation and amortization. Depreciation and amortization expense decreased $7.5 million or 30%, primarily due to certain intangible assets being fully amortized as compared to the prior-year period and the accelerated depreciation associated with our amended headquarters office lease in the prior-year period.

Interest expense, net. Interest expense, net decreased $0.2 million or 3%, primarily due to a reduction in total indebtedness compared to the prior-year period and lower interest rates as well as higher interest income. For information related to our debt, see Note 5 (Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Other (expense) income, net. Other (expense) income, net changed primarily due to unrealized losses on foreign currency denominated transactions.

Income tax expense. Income tax expense changed primarily due to the increase in income before income taxes.

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Results of Operations

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

*** Not meaningful

Dealer revenue. Dealer revenue represented 90% and 89% of total revenue for the six months ended June 30, 2026 and 2025, respectively. Dealer revenue increased $8.7 million or 3%, primarily due to growth in marketplace customers, ongoing improvements in value delivery and upgrades in website offerings, partially offset by a decline in our media products.

OEM and National revenue. OEM and National revenue represented 8% and 9% of total revenue for the six months ended June 30, 2026 and 2025, respectively. OEM and National revenue decreased $5.0 million or 15%, primarily due to shifts in spending by OEM partners.

Other revenue. Other revenue represented 2% of total revenue for each of the six months ended June 30, 2026 and 2025. Other revenue decreased $1.3 million or 19%.

Cost of revenue and operations. Cost of revenue and operations expense represented 17% of total revenue for each of the six months ended June 30, 2026 and 2025. Cost of revenue and operations was essentially flat period over period.

Product and technology. Product and technology expense represented 16% and 17% of total revenue for of the six months ended June 30, 2026 and 2025, respectively. Product and technology expense decreased $1.9 million or 3%, primarily due to lower compensation, partially offset by higher severance-related costs and third-party costs, including licenses.

Marketing and sales. Marketing and sales expense represented 34% of total revenue for each of the six months ended June 30, 2026 and 2025. Marketing and sales expense increased $1.9 million or 2%, primarily due to increased third-party costs, higher spend to build consumer awareness and more effectively capture high-intent demand, as well as elevated bad debt expense.

General and administrative. General and administrative expense represented 11% and 12% of total revenue for the six months ended June 30, 2026 and 2025, respectively. General and administrative expense decreased $2.6 million or 6%, primarily due to a reduction in costs as a result of the conclusion of the D2C Media earnout period and lower compensation, partially offset by higher severance-related costs and third-party costs. For more information on the D2C Media earnout, see the "Liquidity and Capital Resources" section below.

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Depreciation and amortization. Depreciation and amortization expense decreased $17.9 million or 34%, primarily due to certain intangible assets being fully amortized as compared to the prior-year period and the accelerated depreciation associated with our amended headquarters office lease in the prior-year period.

Interest expense, net. Interest expense, net decreased $0.7 million or 4%, primarily due to a reduction in total indebtedness compared to the prior-year period and lower interest rates as well as higher interest income. For information related to our debt, see Note 5 (Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Other (expense) income, net. Other (expense) income, net changed primarily due to unrealized losses on foreign currency denominated transactions.

Income tax expense. Income tax expense changed primarily due to increase in income before income taxes.

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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 Agreement dated as of May 31, 2017, as amended from time to time ("Credit Agreement"). 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 June 30, 2026, Cash and cash equivalents were $33.3 million and including our undrawn Revolving Loan, our total liquidity was $333.3 million.

Indebtedness. As of June 30, 2026, the outstanding aggregate principal amount of our indebtedness was $450.0 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 $50.0 million of outstanding principal under the Revolving Loan which had an interest rate of 5.8%. During the six months ended June 30, 2026, we made $5.0 million in cash payments on our Revolving Loan, and there were no additional borrowings. As of June 30, 2026, $300.0 million was available to borrow under the Revolving Loan.

As of June 30, 2026, we were in compliance with the covenants under our debt agreements. Our borrowings are limited primarily by: 1) Senior Secured Net Leverage Ratio (as defined in our Credit Agreement) not to exceed 3.5x; and 2) Consolidated Interest Coverage Ratio (as defined in our Credit Agreement) not to be below 3.0x. As of June 30, 2026, our Senior Secured Net Leverage Ratio was 0.08x and our Consolidated Interest Coverage Ratio was 7.20x. As of March 31, 2026, our Total Net Leverage Ratio (as defined in the Credit Agreement) was 1.95x. For further information, see Note 5 (Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

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 six months ended June 30, 2026, we repurchased and subsequently retired 6.2 million shares for $57.3 million at an average price paid per share of $9.23.

Earnouts.

• As part of the D2C Media acquisition, we were 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 was determined by the acquired business’ achievement of certain revenue-related financial targets through December 31, 2025 and expensed over each performance period. In April 2026, we paid CAD$15.0 million (approximately USD$10.9 million) associated with the earnout for the year ended December 31, 2025, which was the final installment of the earnout.
• 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 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. Based on current performance trends, no such consideration was expensed during the six months ended June 30, 2026.

For information related to the earnouts, see Note 3 (Business Combinations) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q and Note 3 (Business Combinations) in Part II, Item 8., "Financial Statements and Supplementary Data", of our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 26, 2026.

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Cash Flows. Details of our cash flows are as follows (in thousands):

Operating Activities. Cash provided by operating activities for the six months ended June 30, 2026 decreased as compared to the six months ended June 30, 2025 primarily due to unfavorable working capital changes, partially offset by higher Net income and related adjustments in the Consolidated Statement of Cash Flows. For further information, see the Consolidated Statements of Cash Flows included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Investing Activities. The decrease in cash used in investing activities during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily due to the impact of the DealerClub acquisition, partially offset by the proceeds collected from the sale of the RepairPal equity investment, both of which occurred in the prior year period. For further information on these items, see Note 3 (Business Combinations) and Note 4 (RepairPal Equity Investment) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Financing Activities. During the six months ended June 30, 2026, cash used in financing activities was primarily related to repurchases of our common stock, debt repayments and tax payments made in connection with the vesting of certain equity awards. During the six months ended June 30, 2025, cash used in financing activities was primarily related to repurchases of our common stock, debt repayments and tax payments made in connection with the vesting of certain equity awards, partially offset by proceeds from Revolving Loan borrowings. For information related to our debt and repurchases of our common stock, see Note 5 (Debt) and Note 7 (Stockholders' Equity) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Commitments and Contingencies. For information related to commitments and contingencies, see Note 6 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements. We do not have any material off-balance sheet arrangements.

Critical Accounting Policies. For information related to critical accounting policies, see "Critical Accounting Policies and Estimates" in Part II, Item 7., "Management’s Discussion and Analysis of Financial Condition and Results of Operations", of our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 26, 2026 and see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q. During the six months ended June 30, 2026, there have been no changes to our critical accounting policies.

Recent Accounting Standards. For information related to recent accounting pronouncements, see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, see "Quantitative and Qualitative Disclosures About Market Risk," in Part II, Item 7A. of our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026. Our exposures to market risk have not changed materially since December 31, 2025.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control Over Financial Reporting. During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

For information relating to legal proceedings, see Note 6 (Commitments and Contingencies) to the accompanying Notes to the Consolidated Financial Statements included in Part I, Item 1., "Financial Statements" of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Our business and the ownership of our common stock are subject to a number of risks and uncertainties that could materially affect our business, financial condition, results of operations and future results, including those described in Part I, Item 1A., "Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 26, 2026. There have been no material changes from the risk factors described in the Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities by Issuer

None.

Purchases of Equity Securities by Issuer

Our share repurchase activity for the three months ended June 30, 2026 is as follows:

(1)

The total number of shares purchased and subsequently retired and the average price paid per share reflects shares purchased pursuant to the share repurchase program. Our stock repurchases may occur through open market purchases or through privately negotiated transactions.

(2)

On February 27, 2025, we announced that our Board of Directors authorized a three-year share repurchase program to acquire up to $250.0 million of our common stock. 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. The timing and amounts of any purchases under the share repurchase program will be based on market conditions and other factors including price. The share repurchase program may be suspended or discontinued at any time and does not obligate us to repurchase any dollar amount or particular amount of shares.

(3)

The amounts presented represent the remaining dollar amount of shares of our common stock that may be repurchased under the share repurchase program at the end of each month.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Insider Adoption or Termination of Trading Arrangements

During the quarter ended June 30, 2026, no director or officer of the Company adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as the terms are defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits

Exhibit Index

• Filed herewith.

** Previously filed.

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