Cars.com Inc.

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

Description of Business. Cars.com Inc. (the "Company") 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 nine months ended September 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.

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 thethree and nine months ended September 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.

(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. The Company collected these proceeds during the three months ended March 31, 2025, and the amount is reflected in Proceeds from sale of equity investment in the Consolidated Statements of Cash Flows for the nine months ended September 30, 2025. 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 September 30, 2026, $305.0 million was available to borrow under the revolving loan due in 2029 ("Revolving Loan"), and the Company had $45.0 million of outstanding borrowings. During thenine months ended September 30, 2026, the Company made $10.0 million in cash payments on the Revolving Loan, and there wereno 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 November 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 September 30, 2026 and December 31, 2025 were as follows (in millions):

Debt Covenants. As of September 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 3.5 x; and 2) Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) not to be below 3.0 x. As of September 30, 2026, the Company's Senior Secured Net Leverage Ratio was (0.09)x, due to its senior secured net debt balance being $(19.6) million, and its Consolidated Interest Coverage Ratio was 7.33 x. As of September 30, 2026, the Company's Total Net Leverage Ratio (as defined in the Credit Agreement) was 1.77 x.

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 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 athree-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 September 30, 2026, $100.2 million remained available 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 betweenone year tothree 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. For units issued beginning in 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 thenine months ended September 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. PSUs generally vest based on achievement of specified performance or market conditions and continued service through the applicable vesting date. For PSUs with performance conditions issued prior to March 2026, the fair value of the PSUs was equal to the Company's common stock price on the date of grant. For units issued beginning in March 2026, the fair value of PSUs with performance conditions 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. For PSUs with market conditions, fair value is determined on the grant date using a Monte Carlo simulation model, and compensation expense is recognized over the requisite service period if the required service is provided, regardless of whether the market condition is ultimately achieved. The percentage of PSUs that may vest will range from 0% to 200% of the target number of PSUs granted based on the Company’s performance overone-year tothree-year performance periods related primarily to certain revenue, adjusted earnings before interest, income taxes, depreciation and amortization, total shareholder return and share price targets. PSU activity for the nine months ended September 30, 2026 is as follows (in thousands, except for weighted-average grant date fair value):

(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 921 and 1,124 potential common shares excluded from diluted weighted-average common shares outstanding for thethree months ended September 30, 2026 and 2025, respectively, and 1,800 and 1,548 potential common shares excluded from diluted weighted-average common shares outstanding for thenine months ended September 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 nine months ended September 30, 2026 of 28.4%, 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 asingle 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.

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.

Note About Forward-Looking Statements

This report contains "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. These statements often use words such as "believe," "expect," "project," "anticipate," "outlook," "intend," "strategy," "plan," "estimate," "target," "seek," "will," "may," "would," "should," "could," "forecasts," "mission," "strive," "more," "goal" or similar expressions. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, condition of the global supply chain, fluctuating fuel prices, interest rate environment, inflationary pressures and other factors we think are appropriate. Such forward-looking statements, while considered reasonable by Cars.com Inc. ("we" or the "Company") and its management, are inherently uncertain. While the Company and its management make such statements in good faith and believe such judgments are reasonable, you should understand that these statements are not guarantees of future strategic action, performance or results. Our actual results, performance, achievements, strategic actions or prospects could differ materially from those expressed or implied by these forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. When we make comparisons of results between current and prior periods, we do not intend to express any future trends, or indications of future performance, unless expressed as such, and you should only view such comparisons as historical data. Forward-looking statements are subject to a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results and strategic actions to differ materially from those expressed in the forward-looking statements contained in this report. Factors that might cause such differences include, but are not limited to:

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

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Market acceptance of and influence over certain of our products and services is concentrated with a limited number of automobile OEMs, dealership associations and major dealership groups and we may not be able to maintain or grow these relationships.

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Dealer closures or consolidation among dealers, major dealership groups or OEMs could reduce demand for, and negatively affect the pricing of, our marketing and solutions offerings, thereby leading to decreased earnings.

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

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Our operations in Canada involve risks that differ from, or are in addition to, our domestic operational risks.

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The increased use, development and regulation of artificial intelligence ("AI"), including generative AI and agentic AI technologies, could materially and adversely affect our business, results of operations and financial condition.

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We rely in part on Internet search engines and mobile application stores to drive traffic to the Company's sites and increase downloads of our mobile applications. If the Company's sites and mobile applications fail to appear prominently in these search results, traffic to the Cars.com sites and mobile applications would decline and our business, results of operations or financial condition may be materially and adversely affected.

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We rely on in-house content creation and development to drive organic traffic to the Company's sites and mobile applications.

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Certain of our third-party service providers and customers are highly regulated financial institutions, and the federal and state laws related to financial services could have a direct or indirect material adverse effect on our business.

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Our business may be affected by climate change, including physical risks and regulatory changes that may increase our operating costs and impact our ability to deliver services to our customers.

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Expectations relating to environmental, social and governance considerations expose us to potential liabilities, increased costs, reputational harm and other adverse effects on the Company’s business.

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

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

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

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We may face difficulties in developing and launching new solution offerings or growing our complementary offerings that help automotive brands and dealers create enduring customer relationships.

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

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

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

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We rely on third-party service providers for many aspects of our business, including inventory information and sales of our product through social media, and interruptions in the services or data they provide or any failure to maintain these relationships could harm our business.

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We rely on third-party services to track and calculate certain of our key metrics, including unique visitors and traffic, and any errors or interruptions in the services or data they provide or any failure to maintain these relationships could harm our business.

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

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If the use of third-party cookies or other tracking technologies is rejected by Internet browsers or service providers or users, restricted or blocked, or subject to unfavorable laws or regulations, the amount of Internet user information would decrease, which may harm our business and operating results.

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Our ability to attract and retain customers depends on our ability to collect and use data and develop tools to enable us to effectively deliver and accurately measure advertisements on our platform.

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Uncertainty exists in the application and interpretation of various laws and regulations related to our business, including privacy and AI laws. New privacy and/or AI concerns or laws or regulations applicable to our business, or the expansion or interpretation of existing laws and regulations that apply to our business, could reduce the effectiveness of our offerings or subject us to use restrictions, licensing requirements, claims, judgments and remedies including sales and use taxes, other monetary liabilities and limitations on our business practices, and could increase administrative costs.

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

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Our ability to operate effectively could be impaired if we fail to attract and retain our key employees, including as a result of workforce reductions and related organizational changes.

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

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

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We cannot assure our stockholders that our share repurchase program will enhance long-term stockholder value and stock repurchases, if any, could increase the volatility of the price of our common stock and will diminish our cash reserves.

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

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

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Certain provisions of our Amended and Restated Certificate of Incorporation, By-laws and Delaware law may discourage takeovers and limit our ability to use, acquire or develop certain competing businesses.

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

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

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

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

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Our debt levels could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, inhibit us from making beneficial acquisitions, adversely impact our ability to implement our capital allocation strategy and prevent us from making debt service payments. In addition, changing or increasing interest rates, including the rates under our debt agreements, could adversely affect our business or financial condition.

For a detailed discussion of these risks and uncertainties, see "Part I, Item 1A., Risk Factors" and "Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (the "SEC") on February 26, 2026 and our other filings filed with the SEC. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statement. The forward-looking statements in this report are intended to be subject to the safe harbor protection provided by the federal securities laws.