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Operator: Good morning, and welcome to the Cars First Quarter 2023 Earnings Conference Call. This call is being recorded, and a live webcast and the accompanying slides can be found at investor.cars.com. An archive of the webcast will be available at Cars Investor Relations website. I’d now like to turn the call over to Robbin Moore-Randolph, Director of Investor Relations.

Robbin Moore-Randolph: Good morning, everyone, and thank you for joining us. It’s my pleasure to welcome you to the Cars first quarter 2023 conference call. With me this morning are Alex Vetter, CEO; and Sonia Jain, CFO. Alex will start by discussing the business highlights from our first quarter, then Sonia will discuss our financial results in greater detail, along with our 2023 outlook. We’ll finish the call with Q&A. Before I turn the call over to Alex, I’d like to draw your attention to our forward-looking statements, and the description and definition of non-GAAP financial measures, which can be found in our presentation. We will be discussing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses and free cash flow.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure can be found in the financial tables included with our earnings press release and in the appendix of our presentation. Any forward-looking statements are subject to risks and uncertainties. For more information, please refer to the risk factors included in our SEC filings, including those in our most recently filed 10-K, which is available on the IR section of our website. We assume no obligation to update any forward-looking statements. Now I’ll turn the call over to Alex.

Alex Vetter: Thank you, Robbin, and welcome to our first quarter 2023 earnings call. We continue to deliver on our key performance indicators. Revenue grew 6% year-over-year to $167 million and adjusted EBITDA totaled $44 million, representing a 27% margin, all comfortably within our guidance range. We achieved these solid results through continued marketplace strength, website growth, the addition of Accu-Trade and media product upsells, growing ARPD 4% year-over-year. Although the industry remains dynamic with fluctuating vehicle prices and low inventory levels, our customers consistently rely on our marketplace for its ability to attract a significant audience of shoppers and remain dependent on our digital solutions regardless of inventory level.

We remain an industry enabler and do not take possession of inventory, empowering our customers with digital solutions, allowing them to own the last mile in retail. Our audience engagement and traffic trends also remained strong. For the quarter, traffic increased 11% and monthly unique visitors were up 7% year-over-year. The strength of our brand, strong editorial content, and best-in-class app, resulted in a 7% year-over-year growth in organic traffic, enabling us to preserve marketing dollars as we continue to focus on product innovation. Building upon our strong value proposition, during the first quarter, we introduced new marketplace subscription packages that seamlessly combine new tools like search expansion that extends the customer sales radius as well as CreditIQ and DealerRater features.

These packages enable customers to better leverage our platform capabilities. We also aligned our subscription pricing with the enhanced value offered as part of these new packages. Overall reception has been positive with strong demand from dealers opting for our premium tier. As discussed in prior quarters, digital dealers began scaling back their operations last year. Despite this, we still ended the quarter with 19,186 dealer customers, 320 lower compared to the prior quarter and 314 fewer than the previous year. Excluding the loss of digital dealers, customers would have been up on a year-over-year basis. In addition to our marketplace strength, dealers continue to adopt our website solutions, as website customers grew to more than 6,100 at quarter end, a 630-customer increase year-over-year.

Accu-Trade appraisal and vehicle acquisition solution is also seeing strong engagement from dealers and consumers. Dealers love Accu-Trade given our proprietary VIN-specific valuations that help pinpoint accurate trade-in values using real-time supply and demand data. Consumers also appreciate more accurate vehicle values, which reduces the need for negotiation and enables shoppers and sellers to transact with greater trust and transparency. Appraisals increased by 70% sequentially, and we now have more than 600 Accu-Trade connected customers on our platform. In closing, we continued to deliver strong results with operating momentum. Cars.com is a trusted brand for consumers who overwhelmingly use our platform and our subscription business coupled with upsell opportunities, deliver strong and stable revenue growth.

These solid fundamentals position us well to deliver on our continued growth outlook for the balance of the year. Sonia?

Sonia Jain: Thank you, Alex. Our year is off to a strong start. Revenue for the first quarter totaled $167 million, up 6% year-over-year. Dealer revenue grew 7% or $9 million year-over-year driven by websites, media sales and Accu-Trade. We also saw strength in revenue from OEM customers this quarter. However, national revenue, which includes our insurance customers was down. As a result, dealer revenue growth was partially offset by an 11% decrease in our OEM and national revenue line. Moving to expenses. Our operating expenses for the first quarter were $155 million compared to $147 million in the prior year. On an adjusted basis, operating expenses increased $5 million or 4% compared to the prior year. The increase is due in part to higher product and technology expenses related to the acquisition, integration and launch of Accu-Trade.

Also, we continue to invest in our sales and support staff to increase new product sales and fulfillment. This is reflected in our cost of revenue and operations and marketing and sales line. While marketing and sales was up year-over-year, we spent less than originally planned on marketing this quarter, due to the strong growth in our audience metrics. Traffic was up 11% year-over-year, driven by momentum in organic traffic, which was up 7% year-over-year. We continually evaluate our marketing spend and identify opportunities for efficiencies and lean into the channels that provide the highest return. We capitalized on increased consumer demand this quarter with shifts in our paid user acquisition strategy and enhancements to our app and website experiences.

Net income for the quarter totaled $11 million or $0.17 per diluted share. This quarter’s results reflect the $8 million change in the fair value of earnouts related to our recent acquisitions. Adjusted EBITDA was $44 million, up 6% compared to the prior year, and adjusted EBITDA margin was 26.5% of revenue. Margin for the quarter reflects revenue growth, partially offset by the investments to support our growth initiatives. As Alex mentioned, we recently started to roll out new marketplace packages. These new packages simplify our go-to-market efforts and allow us to deliver more of our platform value to our customers. They also afford us the opportunity to better align our pricing and value delivery. Early results are showing increased adoption of our higher-tiered packages, somewhat tempered by an expected but modest increase in cancels.

Still, we expect these packages to drive incremental revenue and adjusted EBITDA, which will accumulate as the year progresses. Now turning to our key metrics that are the foundation for our solid quarterly results. As discussed, dealer customers would have been up year-over-year, if not for the additional digital dealer pullback. This is not a surprise and reflects their continued operational challenges. Our customer base remains healthy and strong, and we ended the quarter with 19,186 dealer customers. And we continue to be focused on cross selling our customers’ new solutions. Year-over-year, we grew website customers by 630 to a total of 6,100 customers. Although sequential growth in website customers was more muted due to elevated cancels in the quarter, websites and Dealer Inspire dig ad business combined to drive 29% year-over-year growth.

First quarter ARPD grew $95 year-over-year to $2,386 driven by growth in digital solutions, website and the benefit of a full quarter of Accu-Trade. We expect continued ARPD growth through cross-sell opportunities and our marketplace repackaging efforts. Our subscription business delivered strong and consistent cash flow, enabling us to continue to delever our business, while maintaining a balanced capital allocation strategy. During the quarter, we paid down $19 million of debt, including the $15 million remaining on our revolving loan, which we used to fund the Accu-Trade acquisition in 2022. That outstanding decreased to $463 million, of which nearly 90% is related to our [6.375%] fixed rate senior unsecured notes maturing in 2028. The combination of adjusted EBITDA growth and debt paydown resulted in a net leverage ratio of 2.3x, down from 2.7x a year ago.

We also returned $7 million of capital to shareholders via share repurchases. Our liquidity is strong at approximately $249 million between our undrawn revolver and cash on hand. This provides us with significant strategic flexibility going forward. Our strong financial performance and integrated platform position us well for continued profitable growth. Looking ahead to the second quarter, we expect to deliver revenue between $168 million and $170 million, reflecting continued dealer revenue growth. While the marketplace repackaging rollout will accelerate in the second quarter, the full benefit will be realized over the course of the second half of the year. And despite OEM greenshoots in the first quarter, we remain cautious on OEM and national revenue, largely due to the pullback by our insurance customers and historically lean inventory levels.

It is important to note that in the second quarter, we will fully lap the acquisition of Accu-Trade and will be comping to a period not yet impacted by the digital dealer pullback. Despite this difficult comp, we anticipate growing second quarter revenue by 3% to 4% year-over-year. Second quarter adjusted EBITDA margin is expected to be 26% to 28%. Our margin outlook contemplates lower OEM and national advertising revenue relative to the first quarter, as well as increased investment in brand marketing to drive growth in the business and awareness of new products. Building on that, we reaffirm our 2023 full year revenue growth expectations of 3% to 6%. We also anticipate exiting the fourth quarter of 2023 with margins approaching 30%. We are well positioned to deliver on our goals.

The strength of our customer relationship, efficiency of our traffic generation and asset-light business model will continue to translate into growth and profitability. And with that, operator, we’d like to open the call for questions.

Operator: [Operator Instructions] And our first question comes from Thomas White from D.A. Davidson.

Operator: Our next question comes from Gary Prestopino of Barrington Research.

Operator: Our next question comes from Marvin Fong from BTIG.

Operator: [Operator Instructions] And our next question comes from Doug Arthur of Huber Research.

Operator: [Operator Instructions] And seeing no further questions, I’ll turn the call back over to Alex Vetter, CEO.

Alex Vetter: Thank you. And just before we wrap the call, I want to call out a few upcoming IR engagements. On May 10, Sonia and I will host investor meetings with D.A. Davidson in New York City. On May 18, we’re going to participate in the Barrington Virtual Conference. On May 23, we’re going to participate in a fireside chat in Boston at the JPMorgan Annual Global Technology, Media and Communications Conference. So details about these will be available on the Events section of our IR website. This concludes our call on May 4, be with you, and thank you very much.

Operator: The meeting has now concluded. Thank you for joining, and have a pleasant day.