Cars.com Inc. Q4 FY2025 earnings call

• Toby Hartman discussed his vision for the company, emphasizing prioritizing marketplace, product integration, processes, cost, and organizational improvements. He highlighted the importance of a well - oiled marketplace flywheel as the growth engine. • Sonia Jane recapped 2025 performance, including revenue of $723 million, adjusted EBITDA margin of 29.2%, and free cash flow of $126 million. She also provided 2026 outlook, covering revenue expectations and adjusted EBITDA margin guidance. • Toby further elaborated on 2026 priorities, including accelerating the marketplace by integrating assets, developing features as a trusted platform, reallocating resources towards marketplace, and scrutinizing cost structure for efficiencies.

In 2025, total annual revenue was $723 million, up 1% year - over - year. Dealer revenue represented roughly 90% of total revenue mix. Fourth quarter revenue was $183.9 million, up 2% year - over - year. Dealer revenue was up 3% year - over - year, with 19,544 dealer customers at the end of Q4, adding 338 dealers year - over - year. Marketplace accounted for over 80% of unit growth in dealer count. ARPD in Q4 was $2,472, slightly up quarter over quarter and flat year over year. Full - year adjusted EBITDA margin was 29.2%. Adjusted EBITDA dollars grew 1% year - over - year. Free cash flow was $126 million for the year. In 2026, full - year revenue is expected to be flat to up 2% year - over - year, with dealer revenue expected to continue growing, while OEM and national revenue, which is 9% of the business, is expected to be under pressure. First quarter revenue is expected to be flat to up 1% year - over - year. Full - year 2026 adjusted EBITDA margin is expected to be between 29 - 30%, and first quarter adjusted EBITDA margin is expected to be between 26 - 27% due to lower mix of margin accretive revenue and slightly elevated expenses.

• Full - year 2026 revenue is expected to be flat to up 2% year - over - year, with dealer revenue expected to continue growing and OEM and national revenue under pressure. • Full - year 2026 adjusted EBITDA margin is expected to be between 29 - 30% and absolute adjusted EBITDA dollars are expected to grow year - over - year. • First quarter 2026 revenue is expected to be flat to up 1% year - over - year. • First quarter 2026 adjusted EBITDA margin is expected to be between 26 - 27% due to lower mix of margin accretive revenue and slightly elevated expenses. • Dealer Club is expected to generate EBITDA losses in 2026, more pronounced in Q1.

Q: Just on the plan to refocus on marketplace, how might marketing investments and audience growth play into that this year?

A: We're refocusing on marketplace fundamentals, not a lack of marketing. The current plan foresees marketing investments being more focused and centered around the marketplace flywheel.

Q: How do you envision AI and agentic AI evolving in the automotive space?

A: Automotive is a complex industry with deep vertical expertise. We have data accumulated over 25 years, and AI will play a significant role. LLMs will have to revert back to the brand, especially for consumer verticals like automotive.

Q: What is contemplated in the annual guide in terms of contribution from new products launched at NADA?

A: New products like AccuTrade IMS, market area expansion, and AI - based VIN videos are incorporated into the guidance, though they will take time to scale with different sales cycles.

Q: Is there any seasonality in website customer count decline in Q4?

A: Some dealer groups may want to strike out on their own with technology solutions, but many are expected to come back over time as they test and find value in our products.

Q: Should we think about the algorithm as dealer revenue up to two to three points and advertising detracting about a point of growth?

A: Directionally correct, but OEM is expected to be flat to down on a full - year basis.

Q: How should we think about the OPEX trend over the turnaround plan period?

A: There's an opportunity to streamline costs from operational and organizational standpoints to reallocate towards technology, product investments, and marketing.

Q: When you're talking about the integrated marketplace, did you have separate sales forces and what needs to be done to the sales force?

A: We did have separate sales forces. The chief commercial officer has redefined the sales strategy and organization to have more consultative selling, and there's still the opportunity to sell standalone solutions while prioritizing integrated sales wrapped around the marketplace