CARS

• Strategic Direction & Marketplace Progress

  • The firm is executing on a marketplace-first, interconnected platform strategy, adding AI features (including Carson), personalization, and cross-product data insights to deliver a more customized shopping experience for consumers and higher-quality aggregated leads for dealers, with additional product investments planned through 2027.
  • Growth is prioritized on value delivery over pure audience/unit volume: marketing spend has been reallocated from low-conversion upper-funnel traffic to high-quality lower-funnel lead generation, resulting in improved lead conversion despite a decline in unique site visitors.
  • Premium Plus marketplace package adoption is on track to reach a 15% penetration target by the end of 2026, and currently stands at close to double-digit penetration.

• Operational & Organizational Changes

  • Cost discipline and process streamlining have delivered improved operating leverage: Q2 operating expenses fell 7% year-over-year to $152.1 million, with adjusted operating expenses down 6% year-over-year to $144.3 million. The majority of the cost reduction came from lower depreciation (after full amortization of 2017 spinoff customer lists) and lower compensation costs from organizational streamlining.
  • The solutions/website business is being reoriented to product-led growth, with a new general manager appointed to fix prior organizational misalignment and accelerate feature releases. Existing marketplace capabilities will be integrated into dealer website offerings in H2 2026 to drive innovation and value.
  • Dealer-verified listings, built using AccuTrade inspection assets, launched in June 2026 starting with existing AccuTrade customers, with expansion to all marketplace customers planned for Q4. The feature adds a consumer-facing trust signal via rigorous dealer-conducted vehicle inspections to increase impressions, click-through rates, and faster listing turnover, supporting future cross-selling and integrated product bundling.

• Financial Performance

  • Q2 net income was $14.3 million (25 cents per diluted share), up from $7 million (11 cents per diluted share) year-over-year. Adjusted net income was $28.7 million (51 cents per diluted share), up from $26.4 million (41 cents per diluted share) year-over-year.
  • Adjusted EBITDA was $53 million in Q2, up 4% year-over-year, outpacing revenue growth, with an adjusted EBITDA margin of 29.4%, up nearly 100 basis points year-over-year.
  • Net operating cash flow for H1 2026 was $55.6 million, and the firm is on track to meet its 2026 $90 million share repurchase target. As of Q2 end, total debt was $450 million with total liquidity of $333.3 million.

• Third quarter 2026 revenue is expected to grow flat to 2% year-over-year, driven by continued dealer segment and marketplace growth, and quarter-over-quarter improvement in OEM and national revenue.
• Third quarter 2026 adjusted EBITDA margin is expected to range between 28.5% and 29.5%, supported by ongoing cost and operational discipline.
• Full year 2026 guidance is reaffirmed: revenue is expected to grow flat to 2% year-over-year, with adjusted EBITDA margin expected to range between 29% and 30%.

Overall consolidated Q2 2026 revenue was $179.9 million, a 1% year-over-year increase. The Dealer segment generated 3% year-over-year revenue growth, with robust marketplace growth more than offsetting flat-to-down performance for solutions and media products. Dealer ARPD (Average Revenue Per Dealer) hit $2,500 in Q2, up 3% year-over-year and 1% quarter-over-quarter, with marketplace as the primary driver; marketplace-only ARPD set a new quarterly record, and the Premium Plus marketplace package was the fastest growing tier. Marketplace dealer subscribers increased year-over-year and quarter-over-quarter, while website units declined year-over-year aligned with strategic priorities. OEM and national revenue was down 18% year-over-year, a $3 million year-over-year decline, which management expected to represent a revenue trough for the segment. AccuTrade, the firm's vehicle appraisal business, saw roughly flat sequential subscriber count in Q2 as the offering is being retooled for integrated product bundles.

• Lower uptake of add-on dealer media products remains a near-term headwind that partially offsets gains from core marketplace adoption.
• The website/solutions business has faced slower-than-desired new feature release pace and prior organizational/process misalignment, which has driven subscriber declines to date.
• OEM and national revenue has been in a multi-quarter decline, with Q2 2026 expected to be the trough before sequential recovery begins.

Q: What is driving the 7% Q2 marketplace growth, and can you explain the decline in unique site visitors despite rising lead volume? / A: Marketplace growth comes from both increasing dealer count (which accelerates the marketplace flywheel) and rising ARPD, driven largely by adoption of the Premium Plus package launched last year. The decline in uniques is an intentional strategic shift: management cut low-conversion, inefficient upper-funnel marketing spend to prioritize high-quality lower-funnel traffic that converts to leads. This shift has already delivered stronger conversion and growing lead volume, aligned with dealer value priorities, and long-term momentum from this focus will support future audience growth. (298 characters)

Q: What is the timeline for turning around the declining website/solutions subscriber business, and what early traction do you see for the newly launched dealer-verified listings? / A: Management will apply the same successful product development playbook from marketplace to the solutions business, with a focus on integrating marketplace functionality, fixing past organizational misalignment via a new GM, and accelerating innovation. New features will roll out over the next 2-3 quarters to return the segment to growth. Dealer-verified listings, launched just weeks ago, already show higher impressions and click-through rates that drive faster vehicle turnover by adding a consumer trust signal via dealer-conducted vehicle inspections. It is too early to share full performance data, but early testing is positive. (417 characters)

Q: Marketing spend as a percentage of revenue increased this quarter. Why is spend up if you are cutting low-quality traffic, and what is the rollout plan for dealer-verified listings beyond current AccuTrade customers? / A: The increased spend reflects targeted long-term brand investment to position the company as a full transaction enablement platform, not just a listing site, while performance marketing still focuses on efficient high-quality lead generation. Dealer-verified listings launched with a small group of existing AccuTrade customers, who are already familiar with the company's processes and provide valuable early feedback. After refining the product based on this input, management plans to expand the feature to all marketplace dealers in Q4 2026. (394 characters)

Q: How is Cars.com adapting to new FTC dealer pricing transparency rules, and when will the dealer-to-dealer wholesale initiative progress? / A: Pricing transparency aligns with the company's marketplace strategy built on consumer trust. Cars.com supports dealers in complying with new rules by helping them share clear, upfront pricing with consumers, which actually reduces transaction friction and improves lead-to-sale conversion. Currently, management is fully focused on rolling out and refining dealer-verified listings and integrating core platform features, so the wholesale initiative is on the back burner for the near term. No updates on its progress are available at this time. (365 characters)