# Cars.com Inc. (CARS)

Informational only - not investment advice.

CIK: 0001683606
SIC: 7374 Services-Computer Processing & Data Preparation
SIC breadcrumb: [Services](/division/I/) > [Business Services](/major-group/73/) > [SIC 7374 Services-Computer Processing & Data Preparation](/industry/7374/)
Latest 10-K filed: 2026-02-26
SEC page: https://www.sec.gov/edgar/browse/?CIK=1683606
Filing source: https://www.sec.gov/Archives/edgar/data/1683606/000119312526076546/cars-20251231.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 723239000 | USD | 2025 | 2026-02-26 |
| Net income | 20052000 | USD | 2025 | 2026-02-26 |
| Assets | 1062418000 | USD | 2025 | 2026-02-26 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-26. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001683606.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | 633,106,000 | 626,262,000 | 662,127,000 | 606,682,000 | 547,503,000 | 623,683,000 | 653,876,000 | 689,183,000 | 719,152,000 | 723,239,000 |
| Net income | 176,370,000 | 224,443,000 | 38,809,000 | -445,324,000 | -789,106,000 | 10,791,000 | 17,206,000 | 118,442,000 | 48,188,000 | 20,052,000 |
| Operating income | 176,650,000 | 134,256,000 | 83,924,000 | -446,060,000 | -887,327,000 | 48,338,000 | 66,036,000 | 54,116,000 | 53,498,000 | 60,250,000 |
| Diluted EPS | 2.46 | 3.13 | 0.55 | -6.65 | -11.74 | 0.15 | 0.25 | 1.74 | 0.72 | 0.32 |
| Operating cash flow | 199,153,000 | 185,929,000 | 163,548,000 | 101,484,000 | 138,616,000 | 138,003,000 | 128,511,000 | 136,720,000 | 152,524,000 | 151,639,000 |
| Capital expenditures | 9,701,000 | 32,774,000 | 14,233,000 | 21,257,000 | 16,712,000 | 1,451,000 | 1,828,000 | 1,280,000 | 3,000,000 | 4,286,000 |
| Share buybacks |  | 0.00 | 97,190,000 | 40,000,000 | 0.00 | 0.00 | 48,982,000 | 31,293,000 | 49,179,000 | 86,907,000 |
| Assets | 2,547,266,000 | 2,511,039,000 | 2,600,549,000 | 2,027,991,000 | 1,075,712,000 | 1,007,205,000 | 1,024,870,000 | 1,172,449,000 | 1,111,865,000 | 1,062,418,000 |
| Liabilities | 129,981,000 | 831,911,000 | 973,626,000 | 886,923,000 | 735,536,000 | 609,185,000 | 640,440,000 | 680,341,000 | 600,380,000 | 589,888,000 |
| Stockholders' equity | 2,417,285,000 | 1,679,128,000 | 1,626,923,000 | 1,141,068,000 | 368,190,000 | 398,020,000 | 384,430,000 | 492,108,000 | 511,485,000 | 472,530,000 |
| Cash and cash equivalents | 8,896,000 | 20,563,000 | 25,463,000 | 13,549,000 | 67,719,000 | 39,069,000 | 31,715,000 | 39,198,000 | 50,673,000 | 56,236,000 |
| Free cash flow | 189,452,000 | 153,155,000 | 149,315,000 | 80,227,000 | 121,904,000 | 136,552,000 | 126,683,000 | 135,440,000 | 149,524,000 | 147,353,000 |

### Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net margin | 27.86% | 35.84% | 5.86% | -73.40% | -144.13% | 1.73% | 2.63% | 17.19% | 6.70% | 2.77% |
| Operating margin | 27.90% | 21.44% | 12.67% | -73.52% |  | 7.75% | 10.10% | 7.85% | 7.44% | 8.33% |
| Return on equity | 7.30% | 13.37% | 2.39% | -39.03% | -214.32% | 2.71% | 4.48% | 24.07% | 9.42% | 4.24% |
| Return on assets | 6.92% | 8.94% | 1.49% | -21.96% | -73.36% | 1.07% | 1.68% | 10.10% | 4.33% | 1.89% |
| Liabilities / equity | 0.05 | 0.50 | 0.60 | 0.78 | 2.00 | 1.53 | 1.67 | 1.38 | 1.17 | 1.25 |
| Current ratio | 1.66 | 1.58 | 1.39 | 1.24 | 1.97 | 1.56 | 1.40 | 1.22 | 1.83 | 1.87 |

## Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001683606.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

| Quarter | End date | Revenue | Net income | Diluted EPS | Method |
| --- | --- | ---: | ---: | ---: | --- |
| 2022-Q2 | 2022-06-30 |  |  | 0.08 | reported discrete quarter |
| 2022-Q3 | 2022-09-30 |  |  | -0.04 | reported discrete quarter |
| 2023-Q1 | 2023-03-31 |  |  | 0.17 | reported discrete quarter |
| 2023-Q2 | 2023-03-31 |  | 11,479,000 |  | reported discrete quarter |
| 2023-Q2 | 2023-06-30 | 168,176,000 |  | 1.37 | reported discrete quarter |
| 2023-Q3 | 2023-06-30 |  | 94,126,000 |  | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 174,333,000 |  | 0.07 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 179,606,000 | 8,346,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2024-Q1 | 2024-03-31 | 180,176,000 | 784,000 | 0.01 | reported discrete quarter |
| 2024-Q2 | 2024-03-31 |  | 784,000 |  | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 178,894,000 |  | 0.17 | reported discrete quarter |
| 2024-Q3 | 2024-06-30 |  | 11,381,000 |  | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 179,651,000 |  | 0.28 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 180,431,000 | 17,304,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2025-Q1 | 2025-03-31 | 179,024,000 | -2,013,000 | -0.03 | reported discrete quarter |
| 2025-Q2 | 2025-03-31 |  | -2,013,000 |  | reported discrete quarter |
| 2025-Q2 | 2025-06-30 | 178,739,000 |  | 0.11 | reported discrete quarter |
| 2025-Q3 | 2025-06-30 |  | 7,009,000 |  | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 181,573,000 |  | 0.12 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 183,903,000 | 7,398,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2026-Q1 | 2026-03-31 | 180,223,000 | 4,978,000 | 0.08 | reported discrete quarter |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance
- [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States
- [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States
- [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States
- [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States
- [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States
- [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized
- [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized
- [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks
- [GDP](/indicator/GDP/): Gross Domestic Product
- [GPDI](/indicator/GPDI/): Gross Private Domestic Investment
- [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment
- [PCEC](/indicator/PCEC/): Personal Consumption Expenditures
- [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services
- [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt
- [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit
- [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts
- [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures
- [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing
- [USCONS](/indicator/USCONS/): All Employees, Construction
- [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade
- [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities
- [USGOVT](/indicator/USGOVT/): All Employees, Government
- [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private
- [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods
- [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- [BUSINV](/indicator/BUSINV/): Total Business Inventories
- [EXPGS](/indicator/EXPGS/): Exports of Goods and Services
- [IMPGS](/indicator/IMPGS/): Imports of Goods and Services
- [IR](/indicator/IR/): Import Price Index (End Use): All Commodities
- [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand

## Latest quarter (10-Q)

Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/1683606/000119312526211864/cars-20260331.htm

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary.
Confidence: high
Filing date: 2026-05-07
Report date: 2026-03-31

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our business, financial condition, results of operations and quantitative and qualitative disclosures should be read in conjunction with our unaudited interim consolidated financial statements ("Consolidated Financial Statements") and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis also contains forward-looking statements and should be read in conjunction with the disclosures and information contained in "Note About Forward-Looking Statements" in this Quarterly Report on Form 10-Q. The financial information discussed below and included elsewhere in this Quarterly Report on Form 10-Q may not necessarily reflect what our financial condition, results of operations and cash flows may be in the future.

References in this discussion and analysis to "we," "us," "our" and similar terms refer to Cars.com Inc. and its subsidiaries, collectively, unless the context indicates otherwise.

Business Overview. Cars.com Inc. is a trusted audience-powered and data-driven technology platform that simplifies buying and selling cars. The flagship Cars.com marketplace connects millions of consumers to dealerships across the U.S., powering the car buying experience with artificial intelligence shopping tools and comprehensive vehicle reviews and content. Our interconnected ecosystem of products enables dealers and OEMs to sell more cars by efficiently leveraging our marketplace, dealer websites, trade and appraisal tools and proprietary in-market media solutions.

Overview of Results

Three Months Ended March 31,

(in thousands)

2026

2025

Revenue

$

180,223

$

179,024

Net income (loss) (1)

4,978

(2,013

)

(1)
During the three months ended March 31, 2026, we recorded $8.5 million of expense associated with a plan to reduce our operating expenses and realign our resources via an 11% reduction in workforce. These costs are comprised of one-time termination benefits, substantially all of which is related to employee severance and is expected to be paid during the three months ended June 30, 2026.

Key Operating Metrics

We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make operating and strategic decisions. Key Operating Metrics are as follows (Traffic and Average Monthly Unique Visitors in thousands):

Three Months Ended March 31,

2026

2025

% Change

Traffic

159,562

170,088

(6

)%

Average Monthly Unique Visitors

25,794

29,048

(11

)%

March 31, 2026

March 31, 2025

% Change

December 31, 2025

% Change

Dealer Customers

19,390

19,250

1

%

19,544

(1

)%

Monthly Average Revenue Per Dealer

$

2,473

$

2,473

0

%

$

2,472

0

%

Average Monthly Unique Visitors ("UVs") and Traffic. UVs and Traffic are fundamental to our business. They are indicative of our consumer reach and the level of engagement consumers have with our platform. Although our consumer engagement does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers, OEMs and national customers and a primary reason they do business with us. We believe we have achieved audience scale as measured by UVs and Traffic. Traffic is driven by a combination of UVs visiting our properties, repeat visitation and engagement. We monetize impressions, clicks and other connections that result from traffic to our site via our products and services.

We define UVs in a given month as the number of distinct visitors that engage with our platform during that month. Visitors are identified upon first visit to an individual Cars.com property on an individual device/browser combination or installation of one of our mobile apps on an individual device. If a visitor accesses more than one of our web properties or apps or uses more than one device or browser, each of those unique property/browser/app/device combinations counts toward the number of UVs. Traffic is defined as the number of visits to Cars.com desktop and mobile properties (responsive sites and mobile apps). We measure UVs and Traffic via RudderStack. These metrics do not include traffic to Dealer Inspire, D2C Media or DealerClub websites.

16

UVs decreased 11% year-over-year and Traffic decreased 6% year-over-year for the three months ended March 31, 2026, which primarily reflects pull-forward consumer demand in the prior year period leading up to the anticipated announcement of automotive tariffs, which served to elevate traffic and visitors. Additionally, we realized marketing efficiencies to more effectively capture high-intent consumer demand.

Dealer Customers. Dealer Customers represent dealerships using our products as of the end of each reporting period. Each physical or virtual dealership location is counted separately, whether it is a single-location proprietorship or part of a large, consolidated dealer group. Multi-franchise dealerships at a single location are counted as one dealer. Dealer Customer metrics do not include DealerClub.

For the three months ended March 31, 2026, Dealer Customers increased 1% compared to the three months ended March 31, 2025, primarily due to an increase in marketplace customers, partially offset by a decrease in digital solutions customers.

For the three months ended March 31, 2026, Dealer Customers decreased 1% compared to the three months ended December 31, 2025, primarily due to decrease in digital solutions customers.

Monthly Average Revenue Per Dealer ("ARPD"). We believe that our ability to grow ARPD is an indicator of the value proposition of our platform. We define ARPD as Dealer revenue, excluding digital advertising services and DealerClub, during the period divided by the monthly average number of Dealer Customers during the same period.

For the three months ended March 31, 2026, ARPD remained flat compared to each of the three months ended March 31, 2025 and December 31, 2025, primarily reflecting ongoing improvements in value delivery, including upgrades in website offerings, and adoption of new marketplace packages, partially offset by declines in dealer media.

Factors Affecting Our Performance. Our business is impacted by changes in the larger automotive ecosystem, including supply and demand for new and used vehicle inventory, geopolitical incidents, global supply chain and information systems disruptions, semiconductor and raw material shortages, vehicle acquisition cost, vehicle retail prices, the rate of electric vehicle adoption, employee retention and changes related to automotive advertising, among other macroeconomic factors including the political environment, inflationary and affordability pressures, tariffs and prevailing interest rates. Changes in vehicle sales volumes in the United States and Canada also influence OEMs’ and dealerships’ willingness to increase investments in marketing spend and technology solutions and could impact our pricing strategies and/or revenue mix.

Our long-term success depends in part on our ability to attract and engage an in-market audience, to grow inventory supply and our dealer customers, to expand our relationship with dealers through greater adoption of our product offering, to transform our OEM relationships and to create operating leverage. We believe our core strategic strengths, including our Cars.com brand, our growing high-quality audience and suite of digital solutions for dealers and OEMs, including AI-based tools, position us to navigate a rapidly changing automotive environment.

17

Results of Operations

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Three Months Ended March 31,

(In thousands, except percentages)

2026

2025

$ Change

% Change

Revenue:

Dealer

$

163,007

$

159,144

$

3,863

2

%

OEM and National

14,279

16,279

(2,000

)

(12

)%

Other

2,937

3,601

(664

)

(18

)%

Total revenue

180,223

179,024

1,199

1

%

Operating expenses:

Cost of revenue and operations

31,741

31,483

258

1

%

Product and technology

31,495

30,617

878

3

%

Marketing and sales

61,818

62,540

(722

)

(1

)%

General and administrative

21,818

20,885

933

4

%

Depreciation and amortization

16,718

27,039

(10,321

)

(38

)%

Total operating expenses

163,590

172,564

(8,974

)

(5

)%

Operating income

16,633

6,460

10,173

***%

Nonoperating expense:

Interest expense, net

(7,231

)

(7,668

)

437

(6

)%

Other expense, net

(686

)

(25

)

(661

)

***%

Total nonoperating expense, net

(7,917

)

(7,693

)

(224

)

3

%

Income (loss) before income taxes

8,716

(1,233

)

9,949

***%

Income tax expense

3,738

780

2,958

***%

Net income (loss)

$

4,978

$

(2,013

)

$

6,991

***%

*** Not meaningful

Dealer revenue. Dealer revenue is typically subscription-oriented and consists of marketplace, digital experience, including website solutions, trade and appraisal and media products sold to dealer customers. Dealer revenue is our largest revenue stream, representing 90% and 89% of total revenue for the three months ended March 31, 2026 and 2025, respectively. Dealer revenue increased $3.9 million or 2%, primarily due to reflecting ongoing improvements in value delivery, upgrades in website offerings and growth in marketplace customers, partially offset by changes in our product mix.

OEM and National revenue. OEM and National revenue largely consists of media solutions products, including display advertising and other solutions to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies. OEM and National revenue represented 8% and 9% of total revenue for the three months ended March 31, 2026 and 2025, respectively. OEM and National revenue decreased $2.0 million or 12%, which is primarily due to shifts in spending by OEM partners.

Other revenue. Other revenue primarily consists of revenue related to vehicle listing data sold to third parties. Other revenue represented 2% of total revenue for both the three months ended March 31, 2026 and 2025. Other revenue decreased $0.7 million or 18%.

Cost of revenue and operations. Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment and compensation and severance costs for the product fulfillment and customer service teams. Cost of revenue and operations expense represented 18% of total revenue for both the three months ended March 31, 2026 and 2025. Cost of revenue and operations increased $0.3 million or 1%, primarily due to higher compensation and severance-related costs, partially offset by lower third-party costs associated with certain products driven by slight shifts in product mix.

Product and technology. The product team creates and manages consumer and customer-facing innovation and consumer and customer experience. The technology team develops and supports our products, websites and mobile apps. Product and technology expense includes compensation costs, consulting and contractor costs, hardware and software maintenance, software licenses, other infrastructure costs, severance costs and costs related to the write-off of assets. Product and technology expense represented 17% of total revenue for both the three months ended March 31, 2026 and 2025. Product and technology expense increased $0.9 million or 3%, primarily due to higher severance-related costs, partially offset by lower compensation.

Marketing and sales. Marketing and sales expense primarily consists of traffic and lead acquisition costs, performance and brand marketing, trade events, compensation costs and travel for the marketing, sales and sales support teams, severance costs and bad debt

18

expense related to the allowance for doubtful accounts. Marketing and sal

[Excerpt truncated for page length; source filing is linked above.]

## Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our business, financial condition, results of operations and quantitative and qualitative disclosures should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis also contains forward-looking statements and should be read in conjunction with the disclosures and information contained in "Note About Forward-Looking Statements" and "Risk Factors" in this Annual Report on Form 10-K. The financial information discussed below and included elsewhere in this Annual Report on Form 10-K may not necessarily reflect what our financial condition, results of operations and cash flows may be in the future.

References in this discussion and analysis to "we," "us," "our" and similar terms refer to Cars.com Inc. and its subsidiaries, collectively, unless the context indicates otherwise.

Business Overview. Cars.com Inc. is a trusted audience-powered and data-driven technology platform that simplifies buying and selling cars. The flagship Cars.com marketplace connects millions of consumers to dealerships across the U.S., powering the car buying experience with artificial intelligence ("AI") shopping tools and comprehensive vehicle reviews and content. Our interconnected ecosystem of products enables dealers and OEMs to sell more cars by efficiently leveraging our marketplace, dealer websites, trade and appraisal tools and proprietary in-market media solutions.

Overview of Results

Year Ended December 31,

(In thousands)

2025

2024

2023

Revenue

$

723,239

$

719,152

$

689,183

Net income (1)

20,052

48,188

118,442

(1)
Net income for the year ended December 31, 2023 is primarily related to the release of a significant portion of our valuation allowance for deferred tax assets that had been recorded as a result of the 2020 goodwill and indefinite-lived intangible asset impairments. For more information, see Note 12 (Income Taxes) to the accompanying Consolidated Financial Statements included in Part II, Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Key Operating Metrics

We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make operating and strategic decisions. Key Operating Metrics are as follows (Traffic and Average Monthly Unique Visitors in thousands):

Year Ended December 31,

2025

2024

% Change

Average Monthly Unique Visitors

25,708

25,517

1

%

Traffic

627,141

627,556

(0

)%

Monthly Average Revenue Per Dealer - Annual

$

2,460

$

2,483

(1

)%

December 31, 2025

December 31, 2024

YoY %

Change

September 30, 2025

QoQ %

Change

Dealer Customers

19,544

19,206

2

%

19,526

0

%

Monthly Average Revenue Per Dealer - Quarterly

$

2,472

$

2,475

(0

)%

$

2,460

0

%

Average Monthly Unique Visitors ("UVs") and Traffic. UVs and Traffic are fundamental to our business. They are indicative of our consumer reach and the level of engagement consumers have with our platform. Although our consumer engagement does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers, OEMs and national customers and a primary reason they do business with us. We believe we have achieved audience scale as measured by UVs and Traffic. Traffic is driven by a combination of UVs visiting our properties, repeat visitation and engagement. We monetize impressions, clicks and other connections that result from traffic to our site via our products and services.

We define UVs in a given month as the number of distinct visitors that engage with our platform during that month. Visitors are identified upon first visit to an individual Cars.com property on an individual device/browser combination or installation of one of our mobile apps on an individual device. If a visitor accesses more than one of our web properties or apps or uses more than one device or browser, each of those unique property/browser/app/device combinations counts toward the number of UVs. Traffic is defined as the number of

23

visits to Cars.com desktop and mobile properties (responsive sites and mobile apps). We measure UVs and Traffic via RudderStack. These metrics do not include traffic to Dealer Inspire, D2C Media or DealerClub websites.

UVs increased 1% year-over-year and Traffic remained flat year-over-year for the year ended December 31, 2025, reflecting the impacts of tariff-motivated consumer demand at the beginning of the year and tactical improvements in the marketing mix throughout the year, partially offset by depressed consumer demand due to the federal government shutdown at the end of the year.

Dealer Customers. Dealer Customers represent dealerships using our products as of the end of each reporting period. Each physical or virtual dealership location is counted separately, whether it is a single-location proprietorship or part of a large, consolidated dealer group. Multi-franchise dealerships at a single location are counted as one dealer. Dealer Customer metrics do not include DealerClub.

Dealer Customers increased 2% from December 31, 2024, primarily due to an increase in marketplace customers. Dealer Customers remained flat from September 30, 2025.

Monthly Average Revenue Per Dealer ("ARPD"). We believe that our ability to grow ARPD is an indicator of the value proposition of our platform. We define ARPD as Dealer revenue, excluding digital advertising services and DealerClub, during the period divided by the monthly average number of Dealer Customers during the same period.

For the annual period of 2025, ARPD decreased 1% compared to the annual period 2024, primarily due to changes in our customer and product mix.

For the three months ended December 31, 2025, ARPD remained flat compared to the three months ended December 31, 2024, primarily due to marketplace repackaging, offset by changes in our customer and product mix.

For the three months ended December 31, 2025, ARPD remained flat compared to the three months ended September 30, 2025, primarily due to changes in our customer and product mix.

Factors Affecting Our Performance. Our business is impacted by changes in the larger automotive ecosystem, including supply and demand for new and used vehicle inventory, global supply chain and information systems disruptions, semiconductor and raw material shortages, vehicle acquisition cost, vehicle retail prices, the rate of electric vehicle adoption, employee retention and changes related to automotive advertising, among other macroeconomic factors including the political environment, inflationary and affordability pressures, tariffs and prevailing interest rates. Changes in vehicle sales volumes in the United States and Canada also influence OEMs’ and dealerships’ willingness to increase investments in marketing spend and technology solutions and could impact our pricing strategies and/or revenue mix.

Our long-term success will depend in part on our ability to attract and engage an in-market audience, to grow inventory supply and our dealer customers, to expand our relationship with dealers through greater adoption of our product offering, to transform our OEM relationships and to create operating leverage. We believe our core strategic strengths, including our Cars.com brand, growing high-quality audience and suite of digital solutions for dealers and OEMs, including AI-based tools, will assist us as we navigate a rapidly changing automotive environment.

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Results of Operations

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

(In thousands, except percentages)

2025

2024

$ Change

% Change

Revenue:

Dealer

$

644,053

$

640,722

$

3,331

1

%

OEM and National

65,305

65,894

(589

)

(1

)%

Other

13,881

12,536

1,345

11

%

Total revenue

723,239

719,152

4,087

1

%

Operating expenses:

  Cost of revenue and operations

123,328

124,332

(1,004

)

(1

)%

  Product and technology

117,330

117,875

(545

)

(0

)%

  Marketing and sales

239,365

232,280

7,085

3

%

  General and administrative

91,124

83,985

7,139

9

%

  Depreciation and amortization

91,842

107,182

(15,340

)

(14

)%

Total operating expenses

662,989

665,654

(2,665

)

(0

)%

Operating income

60,250

53,498

6,752

13

%

Nonoperating expense:

Interest expense, net

(30,382

)

(32,197

)

1,815

(6

)%

Other income, net

4,438

40,562

(36,124

)

(89

)%

Total nonoperating (expense) income, net

(25,944

)

8,365

(34,309

)

***

Income before income taxes

34,306

61,863

(27,557

)

(45

)%

Income tax expense

14,254

13,675

579

4

%

Net income

$

20,052

$

48,188

$

(28,136

)

(58

)%

*** Not meaningful

Dealer revenue. Dealer revenue is typically subscription-oriented and consists of marketplace, digital experience, including website solutions, trade and appraisal and media products sold to dealer customers. Dealer revenue is our largest revenue stream, representing 89% of total revenue for both the years ended December 31, 2025 and 2024. Dealer revenue increased $3.3 million or 1%, primarily due to continued growth in solutions, partially offset by declines in marketplace and media, as a result of lower average dealer count during the first half of 2025 and changes in our customer mix.

OEM and National revenue. OEM and National revenue largely consists of media solutions products, including display advertising and other solutions sold to OEMs, advertising agencies, automotive dealer associations and auto adjacent businesses, including insurance companies. OEM and National revenue represented 9% of total revenue for both the years ended December 31, 2025 and 2024. OEM and National revenue decreased $0.6 million or 1%, which we believe is primarily due to shifts in spending by OEM partners.

Other revenue. Other revenue primarily consists of revenue related to vehicle listing data sold to third parties. Other revenue represented 2% of total revenue for both the years ended December 31, 2025 and 2024. Other revenue increased $1.3 million or 11%.

Cost of revenue and operations. Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment and compensation and severance costs for the product fulfillment and customer service teams. Cost of revenue and operations expense represented 17% of total revenue for both the years ended December 31, 2025 and 2024. Cost of revenue and operations decreased $1.0 million or 1%, primarily due to lower compensation expense, partially offset by higher third-party costs associated with certain products driven by slight shifts in product mix.

Product and technology. The product team creates and manages consumer and customer-facing innovation and consumer and customer experience. The technology team develops and supports our products, websites and mobile apps. Product and technology expense includes compensation costs, consulting and contractor costs, hardware and software maintenance, software licenses, other infrastructure costs, costs related to the write-off of assets and severance costs. Product and technology expense represented 16% of total revenue for both the years ended December 31, 2025 and 2024. Product and technology expense decreased $0.5 million, primarily due to lower stock-based compensation, partially offset by incremental costs related to the acquisition of DealerClub Inc. ("DealerClub"). For more information related to the acquisition see Note 3 (Business Combinations) to the accompanying Consolidated Financial Statements included in Part II, Item 8,. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

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Marketing and sales. Marketing and sales expense primarily consists of traffic and lead acquisition costs, performance and brand marketing, trade events, compensation costs and travel for the marketing, sales and sales support teams, severance costs and bad debt expense related to the allowance for doubtful accounts. Marketing and sales expense represented 33% and 32% of total revenue for the years ended December 31, 2025 and 2024, respectively. Marketing and sales expense increased $7.1 million or 3%, primarily due to higher compensation, including stock-based compensation, and severance-related costs, as well as changes in our marketing investment, partially offset by lower bad debt expense.

General and administrative. General and administrative expense primarily consists of compensation costs for certain executive, finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expense includes the cost of office space, legal, accounting and other professional services, transaction-related costs, severance costs and transformation and other exit costs. General and administrative expense represented 13% and 12% of total revenue for the years ended December 31, 2025 and 2024, respectively. General and administrative expense increased $7.1 million or 9%, primarily due to higher compensation, including stock-based compensation, severance-related and third-party costs, partially offset by lower costs associated with our amended headquarters office lease.

Depreciation and amortization. Depreciation and amortization expense decreased $15.3 million or 14%, primarily due to certain assets being fully depreciated and amortized as compared to the prior-year period, partially offset by accelerated depreciation associated with our amended headquarters office lease.

Interest expense, net. Interest expense, net decreased $1.8 million or 6%, primarily due to a reduction in total indebtedness compared to the prior-year period and lower interest rates. For information related to our debt, see Note 6 (Debt) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Other income, net. Other income, net changed primarily due to the change in the fair value of contingent consideration associated with the Accu-Trade, LLC and CreditIQ, Inc. acquisitions and the $10.8 million gain on the sale of our RepairPal, Inc. ("RepairPal") equity investment, both of which were recorded in the prior period, partially offset by the impact of foreign exchange rates. For more information on the sale of our RepairPal equity investment, see Note 2 (Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Income tax expense. Our effective income tax rate increased to 41.5% from 22.1% in the prior-year period. The increase is primarily due to an outsized impact of state income taxes, net of federal income tax effect and nondeductible items, partially offset by the benefit of tax credits on substantially lower pre-tax income as compared to the prior-year period. Our effective income tax rate is generally more volatile at lower amounts of pre-tax income since the impact of our reconciling items is greater. For more information, see Note 12 (Income Taxes) to the Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

The comparison of the 2024 results with 2023 can be found under the heading "Year Ended December 31, 2024 Compared to Year Ended December 31, 2023" in "Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations" section of our 2024 Form 10-K, which comparison is incorporated by reference herein.

Liquidity and Capital Resources

Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and borrowing capacity available under our credit facility. We believe our positive operating cash flow, along with our $350.0 million revolving loan due in 2029 ("Revolving Loan"), provide adequate liquidity to meet our business needs for the next twelve months and beyond, including those for investments, debt service, share repurchases and strategic acquisitions. However, our ability to maintain adequate liquidity in the future is dependent upon a number of factors, including our revenue, our ability to contain costs, including capital expenditures, and to collect accounts receivable and various other macroeconomic factors, many of which are beyond our direct control.

We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. As of December 31, 2025, Cash and cash equivalents were $56.2 million and including our undrawn Revolving Loan, our total liquidity was $351.2 million.

Indebtedness. As of December 31, 2025, the outstanding aggregate principal amount of our indebtedness was $455.0 million, at an average interest rate of 6.3%, including $400.0 million of outstanding aggregate principal under the 6.375% Senior Unsecured Notes due in 2028 and $55.0 million of outstanding principal under the Revolving Loan which had an interest rate of 5.8%.

26

During the year ended December 31, 2025, we borrowed $10.0 million and repaid $15.0 million on our Revolving Loan. As of December 31, 2025, $295.0 million was available to borrow under the Revolving Loan. At each quarter-end, we are subject to certain net leverage ratio and interest coverage ratio financial covenants under our Credit Agreement. As of December 31, 2025, we were in compliance with all such covenants. For further information, see Note 6 (Debt) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Share Repurchase Program. On February 27, 2025, we announced that our Board of Directors had authorized a three-year share repurchase program to acquire up to $250.0 million of our common stock. The repurchase program may be suspended or discontinued at any time and does not obligate us to repurchase any specific amount or number of shares. We may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws and other applicable legal requirements, and subject to our blackout periods. We intend to fund the share repurchase program principally with cash from operations. During the year ended December 31, 2025, we repurchased and subsequently retired 7.1 million shares for $86.0 million at an average price per share of $12.17. As of December 31, 2025, $173.8 million remained under the share repurchase program.

Earnouts.

•
As part of the acquisition of D2C Media, Inc. ("D2C Media"), are required to pay additional cash consideration to certain former owners who are now employees of the Company based on the achievement of a revenue performance metric. The amount to be paid will be determined by the acquired business’ achievement of certain revenue-related financial targets through December 31, 2025 and expensed over each performance period. In April 2025, we paid CAD$15.0 million (approximately USD$10.8 million) associated with the earnout for the year ended December 31, 2024. For the year ending December 31, 2025, we expensed CAD$15.0 million (approximately USD$10.9 million as of December 31, 2025) associated with the remaining portion of the earnout, which is expected to be paid in 2026.

•
As part of the DealerClub acquisition, we may be required to pay additional performance-based consideration of up to $88.0 million, which may be paid in cash, or stock if mutually agreed upon, to certain former owners who are now employees of the Company. The amount paid will be determined by DealerClub's future achievement of certain revenue-related financial targets through December 31, 2028, and will be expensed over the relevant performance periods. No such consideration was expensed during the year ended December 31, 2025.

For information related to the earnouts, see Note 3 (Business Combinations) in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Cash Flows. Details of our cash flows are as follows (in thousands):

Year Ended December 31,

2025

2024

Change

Net cash provided by (used in):

Operating activities

$

151,639

$

152,524

$

(885

)

Investing activities

(49,399

)

(24,597

)

(24,802

)

Financing activities

(96,622

)

(115,958

)

19,336

Effect of exchange rate changes on Cash and cash equivalents

(55

)

(494

)

439

Net change in Cash and cash equivalents

$

5,563

$

11,475

$

(5,912

)

Operating Activities. Cash provided by operating activities for the year ended December 31, 2025 decreased slightly as compared to the year ended December 31, 2024, primarily due to an increase of $7.8 million of earnout payments related to the D2C Acquisition, as well as lower Net income and the related adjustments in the Consolidated Statement of Cash Flows. These decreases were partially offset by the impact of the prior year payment of the $10.5 million lease termination penalty. For further information, see the Consolidated Statements of Cash Flows included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Investing Activities. The increase in cash used in investing activities during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily related to the impact of the DealerClub Acquisition and the investment in an $8.0 million secured convertible note, partially offset by the proceeds collected from the sale of the RepairPal equity investment in the current year.

Financing Activities. During the year ended December 31, 2025, cash used in financing activities was primarily related to repurchases of common stock, net debt repayments and tax payments made in connection with the vesting of certain equity awards. During the year

27

ended December 31, 2024, cash used in financing activities was primarily related to repurchases of common stock, debt repayments, payments of contingent consideration and tax payments made in connection with the vesting of certain equity awards. For information related to our debt and repurchases of common stock see Note 6 (Debt) and Note 9 (Stockholders' Equity) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Contractual Obligations. As of December 31, 2025, we had the following obligations and commitments to make future payments under contracts, contractual obligations and commercial commitments (in thousands):

Payments due by Period

Contractual Obligations

Total

2026

2027

2028

2029

2030

Thereafter

Long-term debt (1)

$

455,000

$

—

$

—

$

400,000

$

55,000

$

—

$

—

Interest on debt (2)

89,990

29,473

29,473

29,466

1,578

—

—

Operating leases

22,420

3,919

2,040

2,093

2,001

1,925

10,442

Other obligations (3)

52,603

28,758

21,114

1,412

754

565

—

Total

$

620,013

$

62,150

$

52,627

$

432,971

$

59,333

$

2,490

$

10,442

(1)
Long-term debt includes future principal payments on long-term borrowings through scheduled maturity dates. Excluded from these amounts are the non-cash amortization of debt issuance and other costs related to indebtedness.

(2)
Interest payments for variable rate debt were calculated using interest rates as of December 31, 2025.

(3)
Other obligations represent commitments under certain vendors and other contracts.

Commitments and Contingencies. For information related to commitments and contingencies, see Note 8 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements. We do not have any material off-balance sheet arrangements.

Critical Accounting Policies and Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. We believe the following discussion addresses our most critical accounting policies, which are those that are important to the presentation of our financial condition and results of operations and require management’s most subjective and complex judgments.

Revenue Recognition. We account for a customer arrangement when we and the customer have an approved and signed contract that specifies the rights and obligations of each party and the payment terms, and we believe it is probable that we will collect substantially all of the consideration to which we will be entitled in exchange for the services that will be provided to the customer. We periodically enter into arrangements that include multiple promises that we evaluate to determine whether the promises are separate performance obligations. We identify performance obligations based on services to be transferred to a customer that are distinct within the context of the contractual terms. We allocate the contractual transaction price to each distinct performance obligation and recognize revenue when a performance obligation is satisfied by providing a service to a customer. Revenue is primarily generated through our direct sales force.

Dealer. Dealer revenue consists of marketplace, digital experience, including website solutions, vehicle acquisition and media products sold to dealer customers, and is typically subscription-oriented in nature. Further information related to Dealer revenue in the Consolidated Statements of Income is as follows:

•
Subscription Based Products. We offer our dealers with subscription based packages across four capabilities: Marketplace, Digital Experience, Media Solutions and Trade & Appraisal. Our subscription packages are generally a fixed price arrangement with varying contract terms that are automatically renewed, typically on a month-to-month basis. We recognize our subscription revenue ratably as the service is provided over the contract term. Our primary source of revenue is through the sale of marketplace subscription advertising packages to dealer customers. Our subscription based add-on media products include: Cars Social, In-Market Video and VIN Performance Media. Substantially all of our add-on products are not sold separately from our subscription packages as the customer cannot benefit from add-on products on a standalone basis. Therefore, our other subscription packages and add-on products are combined as a single performance obligation, and we recognize the related revenue ratably as the services are provided over the contract term.

•
Other Media Solutions. We also provide certain non-subscription digital advertising services to dealer customers. We recognize revenue related to these services at the point in time the service is provided.

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OEM and National revenue. OEM and National revenue in the Consolidated Statements of Income largely consists of media products sold to OEMs and auto adjacent businesses, including insurance companies. Revenue related to OEM and National customers are primarily transaction-based contracts, which are billed for impressions delivered or click-throughs on their advertisements. An impression is the display of an advertisement to an end-user on the Cars.com website and is a measure of volume. A click-through occurs when an end-user clicks on an impression. We recognize revenue as the impressions or click-throughs are delivered. If the impressions or click-throughs delivered are less than the amount invoiced to the customer, the difference is recorded as deferred revenue and recognized as revenue when earned. We recognize revenue related to these services at the point in time the service is provided.

Other Revenue. Other revenue primarily includes revenue related to vehicle listing data sold to third parties. We recognize other revenue either ratably as the services are provided or at the point in time the services have been performed. Other revenue is recorded in Other revenue in the Consolidated Statements of Income.

Business Combinations.

Intangible Assets. Intangible assets are recorded at their estimated fair value at the date of acquisition. The fair values assigned to the intangible assets acquired were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods. These preliminary fair values are subject to change within the one-year measurement period. We amortize intangible assets over their estimated useful lives on a straight-line basis. Amortization is recorded over the relevant estimated useful lives ranging from two to 14 years.

We evaluate the useful lives of these assets on at least an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. If the estimate of an intangible asset’s remaining useful life is changed, we amortize the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. If an impairment is identified, the asset is written down to fair value as required.

Contingent Consideration. In the prior periods presented, we had contingent consideration obligations from arrangements resulting from acquisitions that involved potential future payment of consideration that was contingent upon the achievement of certain financial metrics or lender market share. Contingent consideration was recognized at its estimated fair value at the date of acquisition based on our expected future payment, discounted using accepted valuation methodologies.

We reviewed and re-assessed the estimated fair value of contingent consideration liabilities at each reporting period and the updated fair value could differ materially from the initial estimates. We measured contingent consideration recognized in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs. The fair value was measured based on a Monte Carlo simulation or a scenario-based method, depending on the earnout objective and timing. The fair value measurement included the following significant inputs: volatility and projected financial information. Significant increases or decreases to any of these inputs in isolation could result in a significantly higher or lower liability. Ultimately, the liability was equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and each reporting period and the amount paid was recognized in earnings within Other income (expense), net in the Consolidated Statements of Income.

Income Taxes. We account for income taxes according to the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement carrying value and tax basis of assets and liabilities, as well as tax attribute carryforwards, as measured by enacted tax rates. The effect of a tax rate change on deferred tax assets and liabilities is recognized in the Consolidated Statements of Income in the period that includes the enactment date of the change. We assess the recoverability of our deferred tax assets on a quarterly basis, considering all positive and negative evidence. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some portion of the deferred tax assets will not be realized. Uncertain tax positions that relate to deferred tax assets are recorded against deferred tax assets; otherwise, uncertain tax positions are recorded as either a current or noncurrent liability in the Consolidated Balance Sheets. See Note 12 (Income Taxes) to the Consolidated Financial Statements included in Part II, Item 8., "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Recent Accounting Standards. For information related to recent accounting pronouncements, see Note 2 (Significant Accounting Policies) to the Consolidated Financial Statements included in Part II, Item 8., “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

29