Cars.com Inc. (NYSE: CARS) (“CARS” or the “Company”), a leading automotive marketplace platform that provides a robust set of digital solutions, today released its financial results for the fourth quarter and year ended December 31, 2021.
Q4 2021 Financial and Key Metric Highlights
- Revenue of $158.3 million, up $5.3 million, or 3% year-over-year
- Net loss of $6.0 million, or ($0.09) per diluted share, compared to Net income of $7.2 million, or $0.10 per diluted share, in the prior year
- Adjusted EBITDA of $46.8 million, or 30% of revenue, down $1.7 million, year-over-year
- Average Monthly Unique Visitors (“UVs”) of 23.6 million, up 6% year-over-year
- Traffic (Visits) of 134.0 million, down 3% year-over-year
- Monthly Average Revenue Per Dealer (“ARPD”) of $2,333, up 3% from $2,264 in the prior year period
- Dealer Customers of 19,179 as of December 31, 2021, up 150 compared to 19,029 as of September 30, 2021
2021 Full Year Financial and Key Metric Highlights
- Revenue of $623.7 million, up $76.2 million, or 14% year-over-year. Excluding the impact of the prior year invoice credits1, revenue increased $38 million, or 6%
- Net income of $7.7 million, or $0.11 per diluted share, compared to a Net loss of $817.1 million, or ($12.15) per diluted share, in the prior year
- Adjusted EBITDA of $189.2 million, or 30% of revenue, compared to $155.9 million, or 28% of revenue, in the prior year
- Year-to-Date Net cash provided by operating activities of $138.0 million, flat compared to the prior year, with Free Cash Flow of $118.8 million, compared to $121.9 million in the prior year
- Average Monthly Unique Visitors of 25.1 million, up 5% year-over-year
- Traffic of 591.5 million, down 1% year-over-year
- Dealer Customers of 19,179 as of December 31, 2021, up 807 compared to 18,372 in the prior year
Operational Highlights
- Recently acquired CreditIQ, a cutting edge automotive fintech platform that provides instant online loan screening and approvals, now rolling out on the Cars.com platform and Dealer Inspire websites
- Announced agreement to acquire the Accu-Trade Group, a leading vehicle appraisal and acquisition solution, expected to close in the first quarter
- Announced a $200 million share repurchase program, underscoring the Company’s commitment to build shareholder value, while prioritizing continued investments in growth opportunities and maintaining modest leverage
“We achieved double-digit Revenue and Adjusted EBITDA growth this year, by driving continued adoption of our superior digital solutions across the industry,” said Alex Vetter, Chief Executive Officer of CARS. “We are leveraging our strong cash flow to acquire technology that advances our platform strategy and enables car buyers and sellers. Our recent acquisitions create incremental revenue streams and expand our TAM into new and growing markets. Our momentum coupled with new product launches position us to deliver strong and sustainable growth in 2022 and beyond.”
Q4 2021 Results
Revenue for the fourth quarter totaled $158.3 million, an increase of $5.3 million, or 3%, compared to the prior year period. Dealer revenue grew 8% year-over-year, driven by 4% growth in dealer customers and 3% growth in ARPD, primarily related to continued penetration of FUEL and the Company’s other digital solutions. OEM and national revenue was 23% lower compared to the prior period, reflecting lower OEM advertising budgets as inventory shortages persist.
Total operating expenses for the fourth quarter were $154.2 million, compared to $137.1 million for the prior year period. Adjusted Operating Expenses for the quarter were $136.6 million, a $6.3 million increase compared to the prior year period. This increase is primarily due to higher Product and Technology expenses as a result of lower investments in the prior year because of the COVID-19 uncertainty.
Net loss for the quarter was $6.0 million, or ($0.09) per diluted share, compared to Net income of $7.2 million, or $0.10 per diluted share, in the fourth quarter of 2020. The current quarter net loss was primarily a result of $9.6 million of compensation expense recognized as part of the $30 million upfront purchase price of CreditIQ.
Adjusted EBITDA for the quarter was $46.8 million, or 30% of revenue, compared to $48.5 million, or 32% of revenue, for the prior year period.
For the quarter, we delivered double-digit lead growth and 6% growth in Average Monthly Unique Visitors. Total Traffic was 3% lower compared to the fourth quarter of 2020.
Fourth-quarter ARPD was $2,333, up 3% year-over-year, driven by continued growth in FUEL and digital solutions.
Dealer Customers totaled 19,179 at December 31, 2021, up 150 Dealer Customers compared to the end of the third quarter of 2021. This increase was driven by continued strong retention rates and new customer additions. Compared to December 31, 2020, Dealer Customers increased 807, or 4%.
2021 Full-Year Results
Revenue for the year totaled $623.7 million, a 14% increase compared to $547.5 million in 2020, which reflects the impact of the financial relief the Company provided to its dealer customers. Excluding the impact of the financial relief the Company provided to its dealer customers, revenue increased 6% year-over-year.
For the year, total operating expenses were $575.3 million, compared to $1.4 billion, or $528.9 million excluding the 2020 goodwill and intangible asset impairment charge. Adjusted Operating Expenses for the year were $536.3 million, a $31.4 million increase compared to the prior year period. The increase was primarily related to the Company’s management of expenses to adjust to changes in revenue due to the COVID-19 pandemic 2020. In 2021, Product and Technology expense increased due to continued investments to support growth, including the Company’s replatforming. Marketing and Sales expense also grew as the Company gradually returned to a more typical operating environment.
GAAP net income for 2021 totaled $7.7 million, or $0.11 per diluted share, compared to GAAP net loss of $817.1 million, or ($12.15) per diluted share, in 2020. The 2020 net loss was driven by the goodwill impairment.
Adjusted EBITDA for the year was $189.2 million, or 30% of revenue, compared to $155.9 million, or 28% of revenue, in the prior year period.
Average Monthly Unique Visitors grew 5% and Traffic was 1% lower. Organic traffic remained strong at 70% of Traffic for the full year 2021.
Cash Flow and Balance Sheet
Net cash provided by operating activities in 2021 was $138.0 million, or flat compared to the prior year. Free Cash Flow in 2021 was $118.8 million compared to $121.9 million in 2020.
The Company made $120.0 million in debt repayments during 2021, reducing total debt outstanding to $477.5 million as of December 31, 2021. The Company’s total net leverage ratio at year-end improved to 2.3x, compared to 3.4x as of December 31, 2020. Total liquidity was $269.1 million, including cash and cash equivalents of $39.1 million and $230.0 million of revolver capacity, as of December 31, 2021.
“We delivered another quarter of solid Revenue and Adjusted EBITDA growth, in line with expectations, while also generating substantial free cash flow, closing the year in a strong financial position. We’re entering 2022 with significant momentum and the financial flexibility to execute on our growth strategy, while reinvesting in the business, paying down debt, and returning capital to shareholders,” said Sonia Jain, Chief Financial Officer of CARS.
2022 Outlook
For the first quarter of 2022, the Company expects Revenue of approximately $156.5 million to $158.5 million. Guidance reflects our strong 2021 performance along with the impact of industry-wide inventory shortages on advertising budgets, particularly for OEMs. The Company expects year-over-year revenue growth to accelerate throughout the year with the roll-out of recently announced and acquired solutions and as inventory recovers. Full-year revenue growth is expected to be between 6% to 8%, with double-digit revenue growth in the fourth quarter, assuming inventory shortages have recovered in the second half.
Adjusted EBITDA guidance for the first quarter includes the margin impact of our expected revenue mix as well as higher year-over-year expenses. We expect to invest in the integration and launch of our recent acquisitions and marketing and trade events, and we also expect higher expenses in areas that had been curtailed due to the COVID-19 pandemic. These investments will position the Company for accelerated long-term growth. Adjusted EBITDA margin for the first quarter is expected to be between 26% and 28% and is expected to approach 30% in the fourth quarter as revenue growth accelerates, inventory returns to more normalized levels, and OEM revenue returns to modest growth and also because investments are weighted towards the first half of the year.
Q4 2021 Earnings Call
As previously announced, management will hold a conference call and webcast today at 8:00 a.m. CT. This webcast may be accessed at investor.cars.com. A replay of the webcast will be available at this website following the conclusion of the call until March 10, 2022.
