Cars.com Inc.

Good morning and welcome to the CARS fourth quarter 2021 earnings conference call. This call is being recorded and a live webcast can be found at investor.cars.com. A replay of this webcast will be available until March 10th. A copy of the accompanying slides can also be found on the company's investor relations website. I'd now like to hand the call over to Robin Ward-Randolph, Director of Investor Relations.

Good morning, everyone, and thank you for joining us. It's my pleasure to welcome you to the CARS fourth quarter and full year 2021 conference call. With me this morning are Alex Vedder, CEO, and Sonia Jain, CFO. Alex will start by discussing business highlights from our fourth quarter and the full year and provide an overview of expectations for 2022. Then Sonia will discuss our financial results in greater detail along with our 2022 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 table included with our earnings release and in the appendix of the presentation. For more information, please refer to the risk factors included in our SEC filings, including those in our annual, quarterly, and current reports, which are available on the IR section of our website. We assume no obligation to update any forward-looking statements or information as of the respective date. Now, I'll turn the call over to Alex.

Thank you, Robin, and welcome to our fourth quarter and full year 2021 earnings call. CARS delivered impressive results in 2021. We delivered double-digit revenue and adjusted EBITDA growth underpinned by increased dealer customers, elevated ARPD, and record customer retention. We also announced two acquisitions, Credit IQ and the AccuTrade Group, that further accelerate our platform strategy. This enables us to enter 2022 well-positioned for sustained growth and margin expansion. Revenue momentum continued throughout the year as we increased value to our dealer and OEM customers, driven by our high intent, organic audience, number one brand, and industry-leading solutions. dealer revenue increased 19% year-over-year and total revenue increased 14% despite inventory constraints and continued OEM and national revenue softness. After adjusting for last year's pandemic-related credits, dealer revenue increased 10% and total revenue grew 6%. Consumer demand remained strong throughout the year, outpacing supply. While new vehicle production was down in the second half of the year, leading to widespread inventory shortages and softer sales, retail prices on both new and used cars skyrocketed, resulting in record dealer profitability. Average retail prices for new and used vehicles on Cars.com increased 26% and 33% in the fourth quarter, respectively. Despite current market conditions, we continue to deliver high-value solutions that help dealers showcase their inventory and stand out on dimensions other than just price. Our level playing field enables consumers to easily find cars of high quality, and dealers know they're working with a partner who doesn't force them to lower profits to climb in the search results. Our reviews and reputation management solution from Dealerator is another great example of our objectivity. With more than 11 million reviews, consumers help determine which dealers are providing a great experience. This also allows individual dealers and salespeople to stand out and build their brands. The power of cars enables us to generate traffic far more efficiently than our competitors, who are forced to rent their audience via search. For the year, 70% of our traffic came to us directly, largely driven by our original editorial content and category expertise. Just last week, our expertise was recognized by Elon Musk, who pointed to the Cars.com American-Made Index on Twitter spurring a national conversation in front of its 70 million followers. Our ability to consistently generate high-quality organic traffic and leads is paramount to a dealer's success. For the quarter, leads to dealers grew double digits, and unique visitors increased 6% compared to a year ago. This value is further evidenced by our historically low 2021 cancellation rate, which is half the 2019 average. we reached 19,179 dealer customers by the end of 2021, an increase of 807 dealers compared to the previous year, and 150 dealer increase quarter over quarter. For the year, ARPD also grew an impressive 16% year over year, or 7% when adjusting for the 2020 pandemic-related credits. This was driven by continued strong performance in our website solutions, and the adoption of fuel, which remains in high demand despite inventory shortages. In 2021, total dealer websites grew to approximately 5,300, further demonstrating dealers' increasing adoption of our innovative technology. Looking ahead, not only do we expect to continue to develop and launch additional dealer websites, but we also have tremendous opportunity to cross-sell existing products from DI, fuel, and marketplace, along with newly acquired solutions across more than our 19,000 dealer customer network. As we advance our platform strategy and strengthen our end-to-end transactional capabilities, we are making new solutions available to our customers. We continue to differentiate our industry-leading brands by enabling the local retail system to be more efficient to drive more profits and better compete. Last quarter, we introduced CreditIQ, cutting-edge automotive digital financing technology that has been well-received by the dealer community. The new solution enables dealers to facilitate instant loan approvals and online financing with consumers from lenders of their choice. This digital solution also addresses one of consumers' most pressing pain points during their car buying journey, time spent in the dealership making decisions around their financing options. Credit IQ is in the formative stages and will continue to make investments this year to accelerate its integration into our platform. We've already begun piloting Credit IQ technology on Cars.com and on Dealer Inspire websites with approximately 100 dealer customers, and we expect to begin scaling this technology to a wider audience of users, customers, and lenders while we ramp investment in this differentiated digital financing solution. We further enhanced our offerings with the recently announced acquisition of the AccuTrade Group, which is expected to close later this quarter. This technology will enable dealers to quickly and efficiently buy and sell inventory at scale across a consumer-to-dealer network and a dealer-to-dealer exchange, helping dealers improve inventory turn and maximize profits. Nearly half of the 25 million in-market shoppers on Cars.com are looking to trade in their used car before making a purchase. Using Accutrade's proprietary VIN-specific valuation and appraisal technology, dealers can confidently source inventory directly from the tens of millions of high-intent in-market shoppers who visit the car's platform. Consumers will also benefit from real-time transparency about a vehicle's guaranteed value and gain instant connection to the best buyer, making it the easiest way to sell their car. We will be launching new sell-it-yourself capabilities, allowing over 11 million annual private party car sellers the option to sell to another consumer or to one of our thousands of certified dealers. We will integrate this technology across our platform shortly after the transaction closes and invest in building out this consumer and dealer offer. I want to emphasize that the power of our platform is our high-intent audience with nearly 592 million annual visits to cars.com and an incremental 952 million visits across dealer-inspired websites. As we deploy our technology solutions, be it financing or trade-in, we can unlock a much bigger opportunity across a larger consumer and dealer network while leveraging insights and creating efficiencies across our platform. I'm pleased with the progress we've made building innovative solutions that advance our business and the industry. These ongoing internal investments in innovation, coupled with high-value creative acquisitions, position us to build on our momentum and deliver on our strategic growth priorities. Credit IQ and Accutrade, along with organic investments, bring to our Cars.com platform a critical set of technology capabilities, enabling an omni-channel experience for car shoppers and sellers. In 2022, we are investing for growth. Sales and marketing expenses will modestly increase year over year, with higher investment in the first quarter as we resume our participation in trade and industry events like NADA. Also, over the course of the year, we'll restore investments into areas that have been curtailed due to the pandemic. While our near-term growth expectations have been somewhat muted by the inventory shortages, we expect our growth to accelerate in the second half of the year as inventory begins to recover. And these investments, particularly those related to integrating our acquisitions, will result in accelerated long-term growth. Our revenue comes from a diversified set of customers across dealers, OEMs, lenders, and other automotive industry participants. As the inventory shortages subside, we expect that our high ROI innovative products and solutions to OEMs will deliver increased contribution to both revenue and margin. Credit IQ and Accutrade will also contribute to accelerated long-term growth in both revenue and margin, especially after the first year of pre-launch development work and product integration. The completion of our tech transformation in 2021 enables us to innovate much faster, and it is a natural inflection point in our product development journey to bring these new solutions to market. To help drive our growth, I'm pleased to welcome Matthew Crawford, who joined us last month as our new Chief Product Officer. Matthew has considerable experience managing, operating, and leading product development and enterprise scale. He has built two-sided marketplaces, integrated acquisitions, and scaled innovation for growth. I'm excited to bring Matthew's rich experience and platform expertise to our team. Before I turn the call over to Sonia, who will discuss our financial performance and outlook in greater detail, I want to highlight our ESG work that is core to our culture. Powered by CARS action, in 2021, we continue to drive environmental, social, and governance priorities throughout the company. Our commitment towards carbon reduction has come to life in several areas across the business, perhaps most importantly, in the form of ongoing consumer education. As the electric vehicle future takes hold, we will double down on our leadership in this area, increasing our EV-focused editorial content by over 20% this year. We will also continue to do our part in increasing representation in our company, industry, and communities. Within our industry, we will continue to provide ongoing support in education, technology, and financial investments to critical partners such as the National Association of Minority Auto Dealers, Women in Automotive, and Girls Who Code. And at CARS, we are proud of our work to build an inclusive culture where 45% of our employees identify as other than male and a quarter of our team identifies as having a racial or ethnic background. We are committed to increasing our representation at CARS, and we hold ourselves accountable by forwardly tying executive compensation to our DE&I goals. These actions are a critical part of our corporate culture, and we will continue to create sustainable value across all our stakeholders. And now, I'll turn the call over to Sonia.