Cars.com Inc. · NYSE:CARS
Cars.com — Q4 2019 Earnings Presentation
25 slides from Cars.com's earnings presentation, Feb 26, 2020
Slide 1: Fourth Quarter and Full Year 2019 Earnings
Fourth Quarter and Full Year 2019 Earnings February 26, 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements include information concerning our business strate
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation discusses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Net Income per Diluted Share and Free Cash Flow. These are not financial measures as defined by GAAP. These financial measures are presented as supplemental measures of oper
Slide 4: 2019 Accomplishments
2019 Accomplishments Successful Completion Leading Market Stabilization and of Affiliate Channel Share Gains and Return to Dealer Conversions Unprecedented Growth in Q4 Audience Growth Efficiencies and Cost Acceleration of Savings from Sales and Solutions Strategy Tech Transformations 4
Slide 5: Q4: Strongest Quarterly Dealer Count Growth Since 2015
DEALER CUSTOMERS Q4: Strongest Quarterly Dealer Count Growth 19,300 Since 2015 18,891 18,834 18,635 3/31/2019 6/30/2019 9/30/2019 12/31/2019 5 5
Slide 6: DI green-lighted for dealer websites for GM
• 800+ aggregate sales to date DI green-lighted • Post-development launches for dealer and revenue recognition expected to begin in H2 websites for GM: Adds 4,000+ new Q3 2019 Q4 2019 H1 2020 H2 2020 dealer targets Win OEM Selling window Website Subscription revenue endorsement and contracts develop
Slide 7: Accelerating Market Share, Audience Growth a Core Competency
Accelerating Market Share, Audience Growth a Core Competency Gaining Share Delivering Consistent Traffic Growth 50% 40% 30% 20% 10% 0% (10%) (20%) Source: Comscore 2017 2018 2019 7
Slide 8: SEO Leadership Continues
“The Google Winners & Losers of 2019” 1 Domain Rank Visibility Increase Cars.com #1 Auto 69% SEO Leadership Continues Ahrefs | Estimated SEO Traffic Cars.com Fastest growing in and CarGurus2 our competitive set. ~4M keywords 1. SEO visibility developed throughout 2019, looking at the week-on-week ch
Slide 9: Stabilizing National
Stabilizing National Channel finished the year strong with highest revenue quarter of the year 1 2 3 Growing Solid Incremental Onsite Programmatic Upfronts Media Sales Open Auction 9
Slide 10: Corporate Social Responsibility
Talented & Diverse Workforce Data Security & Privacy • Biannual surveys to monitor • Robust Information Security Corporate • employee satisfaction Incentives such as leading • and Privacy Policies Use Secure Socket Layer (SSL) Social Employee Stock Purchase Plan and competitive compensation encrypti
Slide 11: FOCUS: Audience + Solutions Strategy = Revenue Growth
FOCUS Audience + Solutions Strategy = Revenue Growth Category-leading Acceleration of Launch and Growth Traffic Solutions Strategy of FUEL™ In-Market Video (IMV) 11
Slide 12: Executing our Digital Solutions Strategy
Executing our Digital Solutions Strategy: RESULTS SHOW… Cars.com shoppers are nearly Cars.com shoppers are 40% MORE LIKELY 4x MORE LIKELY to return to a dealer website. to buy a vehicle. Source: Internal CARS data 12 12
Slide 13: Gaining Momentum Expected Throughout 2020
Gaining Momentum Expected Throughout 2020 POSITIVE DRIVERS • Continued traffic growth and market-leading SEO Continued dealer success. Positive comps by Q4 performance Affiliate revenue share payments end. Uplift in cash flow in H2 Launch FUEL IMV initiative – new value-add Sequential revenue build
Slide 14: 2020 Outlook
2020 Outlook Investments begin to unlock uplift in H2, expected to lead to revenue growth by end of year Differences in H1 and H2 revenue narrative: • The ending of affiliate payments in June Revenue (4)% to Flat • More difficult comps especially in H1 due to 1,087 fewer dealers to start the year. Q
Slide 15: Full Year Financial Highlights
($ in millions, except per share data) 2019 2018 Revenue $606.7 $662.1 Full Year Total Operating Expenses1 $1,052.7 $578.2 2019 Net (Loss)/Income1 ($445.3) $38.8 Financial (Loss)/Earnings per Diluted Share ($6.65) $0.55 Highlights Adjusted Net Income $104.2 $135.3 Adjusted Net Income per Diluted Sha
Slide 16: Q4 2019 Key Operating Metrics
Average Monthly Unique Visitors + 32% YOY Q4 2019 Traffic (Visits) + 39% YOY Mobile Traffic 1 74% Key Operating Direct Monthly ARPD 2 $2,136 Metrics Dealer Customers 18,834 1 Mobile traffic includes mobile browser, mobile app and tablet. 2 ARPD includes revenue from dealer websites and related digit
Slide 17: Q4 2019 Financial Highlights
($ in millions, except per share data) 2019 2018 Revenue $152.2 $164.3 Total Operating Expenses $147.5 $140.5 Q4 2019 Net (Loss)/Income ($4.1) $9.4 Financial (Loss)/Earnings per Diluted Share ($0.06) $0.14 Highlights Adjusted Net Income $42.2 $34.1 Adjusted Net Income per Diluted Share $0.63 $0.50 A
Slide 18: Dec. 31, 2019 Balance Sheet, Cash Flow & Capitalization
Dec. 31, 2019 Cash Flows from Operating Activities $101.5 million Balance Free Cash Flow $80.2 million Sheet, Cash Cash $13.5 million Debt $648.1 million Flow & Net Leverage Ratio 1 3.8x Capitalization Shares Outstanding 2 66.8 million Enterprise Value 3 $1.4 billion 1. Net Leverage Ratio calculated
Slide 19: H1 Adjusted EBITDA Bridge
H1 Adjusted EBITDA Bridge 2020 H1 Adjusted EBITDA margin compression compared to 2019 H1 margin of 27% • Marketplace revenue decline driven by lower beginning dealer count and lower ARPD partially offset by lower costs $82.1M • DI decline driven by costs incurred during website development period pr
Slide 20: H2 Adjusted EBITDA Bridge
H2 Adjusted EBITDA Bridge 2020 H2 Adjusted EBITDA margin expansion compared to 2019 H2 margin of 28% • Despite continued pressure on ARPD, marketplace revenue begins to stabilize upon anniversary of dealer progress and full affiliate conversions to reflect billing at retail rates (conversions of Gan
Slide 21: Building Blocks for Our Future
Building Blocks for Our Future 1 2 3 4 Best-in-Class Brand Product Solutions to Efficient Technology Industry-Leading and Consumer Help Customers Sell Systems to Speed Sales and Customer Experience More Cars Innovation Support SUSTAINABLE MARKET LEADERSHIP 21
Slide 22: Questions
Questions 22
Slide 23: Appendix
Appendix 23
Slide 24: Non-GAAP Reconciliations
Three Months Ended Year Ended December December 31, 31, 2019 2018 2019 2018 Reconciliation of Net (loss) income to Adjusted EBITDA Net (loss) income $ (4,110) $ 9,357 $(445,324) $ 38,809 Interest expense, net 7,785 7,412 30,774 27,717 Non-GAAP Income tax expense (benefit) 1,056 7,747 (29,955) 18,120
Slide 25: Definitions
Definitions Traffic (Visits). Traffic is critical to our business. Traffic to the CARS network of websites and mobile apps provides value to our advertisers in terms of audience, awareness, consideration and conversion. In addition to tracking traffic volume and sources, we monitor activity on our p