Cars.com Inc. (CARS) Q3 2026 Earnings Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to the Cars.com third quarter 2026 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. I would now like to turn the conference call over to Katherine Chen, Vice President of Investor Relations. Please go ahead.

Katherine Chen: Good morning, everyone, and thank you for joining us for the Cars.com Inc. third quarter 2026 conference call. With me this morning are Tobi Hartmann, CEO, and Sonia Jain, CFO. Tobi will start by discussing business highlights from our third quarter. Sonia will discuss our financial results in greater detail along with our outlook. We will finish the call with Q&A. Before I turn the call over to Tobi, I would 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, including adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, adjusted net income, and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures 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 will turn the call over to Tobi.

Tobi Hartmann: Thank you, Katherine, and thanks to those joining us to review third quarter 2026 results. We delivered another quarter of steady execution against our financial and strategic goals. Q3 revenue of $182 million was within our guidance range and up slightly year-over-year. Marketplace, where we have been continually improving value delivery and winning customers, grew revenue by 5% year-over-year. In keeping with our focus on development velocity, we launched our first self-service marketplace offering to better attract and serve the smaller independent dealer segment. Adjusted EBITDA margin of 30.7% outperformed the high end of guidance for a third consecutive quarter. This also translated to a new quarterly record of adjusted EBITDA dollars. Finally, our strong free cash flow generation enabled targeted organic investments as well as capital return to shareholders. We are on pace to achieve our $90 million share buyback target for fiscal 2026. Looking back on the year, we made a steady arc of progress with improving fundamentals, tangible momentum, and an accelerating pace of innovation. Revenue and adjusted EBITDA have grown in tandem each quarter year to date. This largely resulted from deliberate reprioritization of Marketplace, our most scaled and differentiated asset. Unlocking Marketplace opportunities was the fastest way to inflect financial performance and help identify and drive the foundational changes needed to shift the long-term trajectory of the business. These changes fall into the three categories we outlined on our February earnings call, each of which we've substantially advanced through the year. First, jumpstarting product innovation. We have meaningfully shortened development cycles, enabling us to quickly iterate on AI tools like Carson to stay ahead of changing consumer shopping habits. We also began the phased rollout of dealer-verified listings, which ties together the Marketplace and appraisal layers of our product platform for the first time. Launching new products can be long and iterative process, but our path is clear, and we are becoming a more interconnected and trusted Marketplace for consumers, dealers, and OEMs. Second, making sure we optimize our cost base and processes. Shortly after I joined, we quickly made significant changes in April to reduce silos and management layers to speed growth and eliminate duplicated efforts. Other smaller organizational adjustments were also completed over the past few months to further align our resources to our roadmap. In aggregate, our ongoing cost containment efforts yielded $30 million-$35 million in discrete annualized operating cost savings. Third, and related, we are putting the right people in critical organizational roles. I am pleased to officially welcome Trent Ziegler, our new CFO, and Mausam Bhatt, our new Chief Product Officer. Both are seasoned professionals, adept at moving quickly to build leading digital businesses and marketplaces, trusted products, and interconnected product ecosystems. Their skills and perspective will be extremely valuable as we evolve toward a product-led growth model. Focused execution across these three initiatives has put our Marketplace business back on a growth path. Marketplace revenue growth for the first nine months is over 5%, the best growth rate we've delivered in the last five years. Marketplace subscribers remain at a healthy level and were up year-over-year. And Marketplace ARPD reached another all-time high after setting a new record only last quarter. Over the long run, we believe Marketplace growth will be increasingly product-driven, for example, through offerings like our new self-service starter package. We said before that the first step to powering the Marketplace flywheel is attracting and harnessing relevant inventory, such as affordable vehicles. Our surveys show that 50% of recent respondents are delaying a car purchase due to affordability. We identified a market gap we could meet, quickly invented, and built a new product that did not exist before, and we are seeing promising early results. Starter packages are an extremely timely addition to our portfolio as we attract local, smaller dealers whose lower-priced vehicles are exactly what consumers are seeking online. Almost 400 dealers have already signed up for the starter package, and roughly 80% of vehicle inventory from starter dealers is under $20,000, squarely in the sweet spot for in-market shoppers. Practically speaking, this is also a highly efficient channel that requires zero sales or onboarding assistance before dealers begin listing with no fees. Although we are still making product changes and tweaks, more than 60% of eligible signups have been fully self-service. This is exactly in line with our emphasis on better, more scalable processes and a great example where we are doing more with less. Beyond offering more breadth of inventory, we have also improved how consumers find the right car using AI. On platform, our Carson AI shopping assistant almost doubled its user base year-over-year to surpass 1 million monthly users during Q3. Our data clearly shows Carson's growing utility and trust among marketplace shoppers. Longer queries of six or more words have nearly tripled year-over-year. We also saw a 72% year-over-year increase in queries that only state vehicle needs without any OEM brand preference. This points to the significant opportunity for us to engage with consumers and provide them with tools and trust signals for their decision journey. Furthermore, around 91% of users rated Carson positively over the last six months. Carson is elevating the consumer experience on our platform. Off-platform, third-party data shows that Carson continued to lead automotive marketplace peers in the number of citations by the largest LLMs in Q3. We are also in the process of integrating our MCP with Muse to surface our vehicle listings and dealers to more users. Overall, consumer scale and engagement on marketplace remains healthy and is trending up thanks to ongoing product improvements and optimization of marketing investments. Q3 traffic and visitors were down only mid-single digits year-over-year, a much lower decline versus Q1 and Q2. As a reminder, we intentionally shifted our focus to prioritize value delivery, target high-intent shoppers, and drive lead conversion. We explained this during our last call, so we are pleased to report that lead performance was up nearly double digits year-over-year in Q3 and a direct result of more rigorous and targeted investments. Just as we saw last quarter, solid Q3 marketplace growth tells us that customers are responding well to our pivot. We took a disciplined approach to drive the metrics that truly matter for growth, and our strategy is working. Stepping back, we believe our marketplace has strengthened materially over the past nine months and is well-positioned for long-term growth. For consumers, listings today are more user-friendly, have more trust signals and AI integrations, and drive more engagement. Proprietary data like dealer-verified listings and soon-to-come review badges, pricing breakdowns, and other features add to a richer Carson experience. These are long-term marketplace differentiators and key to sustaining our high brand recognition among car shoppers. Case in point, Q3 organic traffic volume grew year-over-year, and organic traffic as a percent of total traffic was at its highest level in nearly two years. For dealers and OEMs, we continue to advance product innovation such as VIN and lead-specific intelligence and AI solutions to drive more car sales. As I explained earlier, we strategically focused on marketplace first because it is our core. Now, we are adapting the marketplace playbook and applying our product, process, and people tactics to transform our website business. Over the past six years, Dealer Inspire has grown from a disruptor into a scaled player, meaning future customer wins will hinge on product innovation rather than OEM endorsements. We have identified how to be a better partner to customers, and we are taking decisive action. In Q3, this work was behind the scenes, strengthening the foundation of our platform. Mobile site speeds have gotten more than 40% faster since spring, an important customer metric where we focused on moving the needle. We launched inventory endpoints built for AI agents in May, and they have become one of the most visited parts of our platform as we help customers adapt to LLMs. We've also laid the groundwork to connect DI and cars.com to allow us to deliver a more personalized and unified consumer shopping experience. We pointed last quarter to adding current marketplace capabilities into DI, particularly related to AI. AI VIN videos, utilizing the technology that we showcased at NADA in February for marketplace and media customers, is coming to DI in Q4. Our native integration auto-generates vehicle summary videos for every vehicle on the lot to produce more engaging websites and signals with no additional overhead for dealers. Leveraging the success of our Carson assistant on marketplace, similar AI shopper tools like search, recommendations, and VDP summaries will be embedded into DI websites in Q4. These are some of our ongoing improvements to make our websites best in class, and you'll see us continue to roll out enhancements steadily as part of our new platform roadmap. We are confident that we can stabilize website development and improve its growth outlook in 2027, as we have demonstrated for marketplace over the course of this year. In closing, I'd like to acknowledge both the important progress we've made since the start of the year and the work that is to come. Recognizing the marketplace as our growth engine and reorienting the business to drive that flywheel meant a comprehensive overhaul of our strategy, investment, and organizational structure. Undertaking this hard work helped us return marketplace to year-over-year growth and its highest year-to-date revenue level in six years. Costs are down, while overall productivity and efficiency are up. We have filled key roles that will help push our growth and product agenda in 2027 and beyond. However, we are still in early innings, and several parts of our platform are not at their full potential. There will be near-term headwinds for point solutions like websites and trade and appraisal while we are working to reshape those roadmaps. But we are energized by the work ahead and confident in the growth opportunities our strategy creates. Before we get into the financial results, and in light of our upcoming CFO transition, I want to take a moment to recognize Sonia and her many contributions to Cars.com over the past six years. She has been essential in driving the company forward, relentlessly finding avenues to improve performance and positioning us for success as we enter the next phase of our growth strategy. Not to mention, she has been an invaluable partner to me, as well as a leader and mentor across our organization. We are glad that she'll be with us for a while longer to ensure a seamless handover to Trent. Thank you, Sonia. Now I'll turn it over to Sonia to discuss our financial results and outlook.

Sonia Jain: Thank you, Tobi. Being CFO of Cars has been a true honor. I am deeply appreciative of my talented colleagues and the finance team, and I am proud of what we have accomplished together. I also want to thank our investors and analysts for their support and partnership over the years. Cars is in good hands, and I look forward to seeing its continued transformation under Tobi and Trent. Now, turning to the financial discussion. In the third quarter, we executed on near-term growth opportunities while also delivering strong adjusted EBITDA and net income gains, with adjusted EBITDA outperforming our guidance range. Our pace of product development continued to accelerate, with exciting launches like new starter packages adding momentum to our marketplace flywheel. Q3 revenue of $181.9 million was driven by similar dynamics as first-half performance. Subscription-based dealer revenue was up year-over-year for the fifth consecutive quarter. While OEM and national revenue recovered nicely from its Q2 trough, it was still down slightly year-over-year, weighing on total revenue growth. Further unpacking dealer revenue, our marketplace strategy continues to deliver from both a dealer footprint and listings growth perspective and value delivery that we are unlocking in the form of ARPD growth. We extended our streak of growing marketplace customers in Q3 and exited the quarter with our second-highest subscription base in three years. With the launch of our new starter offering, we now also have the ability to offer marketplace capabilities to independent and smaller local dealers at no upfront cost. As Tobi mentioned earlier, there are numerous benefits to expanding beyond traditional subscription packages. The self-service aspect of the starter offering represents an efficient and scalable channel for acquiring listings inventory and also increases our presence with independent dealers. Between paid subscriptions and no-fee starter packs, we have added close to 600 independent dealers onto cars.com year-over-year. ARPD grew another 3% year-over-year in Q3 to $2,532, just shy of a new record. The largest driver of growth was robust uptake of higher-tier marketplace subscriptions, such as Premium+. In May, we set out a goal to grow Premium+ adoption to 15% of mix by year-end, and I am pleased that we crossed the 12% mark in Q3. Marketplace progress, while very encouraging, was partially offset by challenges in dealer solutions and media products. Consolidated dealer count was down year-over-year in Q3 due to a decline in website subscriptions. We have been transparent about ongoing development work to augment our feature set and also better integrate platform capabilities into websites. Upcoming AI-related enhancements for Dealer Inspire are just one example of our progress as we seek to return this part of our platform to healthier growth. We also made a deliberate decision to de-emphasize AccuTrade as a point solution in favor of more integration into Marketplace. Lastly, on revenue, OEM and national revenue was down 3% year-over-year and up 15% quarter-over-quarter in Q3. This performance was largely in line with our expectations, and we were encouraged to see improved spending by a majority of our OEM partners. Now, turning to our Q3 cost discussion. Third quarter operating expenses were $153 million, down 7% year-over-year. Roughly half of the year-over-year improvement stemmed from lower costs and improved efficiencies. The remaining benefit resulted from lower depreciation and amortization expense following the full amortization of customer lists tied to our 2017 spin-off. Q3 adjusted operating expenses were $142.4 million, down 5% year-over-year from largely the same factors. For the following line item detail, all comparisons are on a year-over-year basis unless otherwise noted. Product and technology expenses were down low single-digit percentages on both a reported and adjusted basis. On balance, lower compensation expense was partially offset by slight increases in third-party software and hosting costs, netting out to a minimal year-over-year change. Marketing and sales decreased roughly $2.9 million on a reported basis and $2.6 million on an adjusted basis, driven by more efficient marketing investments as we optimize our audience acquisition strategy to drive value delivery. General and administrative expense was down $3 million on a reported basis and up $1.6 million on an adjusted basis. The reported variance was primarily due to the expiration of the D2C earnout accrual. Recall that the D2C earnout accrual is excluded from adjusted operating expenses, which resulted in adjusted G&A expense increasing year-over-year from certain third-party costs. As Tobi mentioned, our diligence on process and organizational optimization has yielded strong cost benefits in 2026 and also provides us with forward flexibility to reinvest resources to execute our new roadmap while preserving a portion of savings to benefit adjusted EBITDA. Third quarter net income was $16.3 million, or $0.30 per diluted share, compared to net income of $7.7 million, or $0.12 per diluted share a year ago. Net income was primarily driven by improved operating income. Adjusted net income for the third quarter was $32.3 million, or $0.58 per diluted share, compared to $30.4 million, or $0.48 per diluted share a year ago. Adjusted EBITDA of $55.8 million in the third quarter was up 2% year-over-year, delivering robust operating leverage from steady gains in cost, process, and organizational efficiencies. Our resulting adjusted EBITDA margin of 30.7% overachieved the high end of our guidance range by 120 basis points. Moving on to cash flows and the balance sheet. Net cash provided by operating activities totaled $114.7 million for the nine-month period ending in Q3, compared to $114.5 million a year ago. Free cash flow was $97.3 million over that timeframe, up from $94.5 million a year ago. Share buybacks totaled 7.6 million shares for $74 million year-to-date through Q3, putting us well on pace to achieve our 2026 share repurchase target of $90 million. Our 2026 buyback activity represents over 12% of the outstanding share count from the start of the year and reflects our commitment to return value to shareholders. In terms of debt, year-to-date total debt repayments of $10 million reduced total debt outstanding to $445 million as of September 30th, 2026. Total liquidity was $369.6 million as of September 30th, 2026, providing strong financial flexibility to support our growth priorities and other capital needs. Now, we'll conclude with outlook. We are reaffirming our full year 2026 guidance of flat to 2% revenue growth and adjusted EBITDA margin of 29%-30%. Bearing in mind our year-to-date performance and current trends, we expect revenue towards the lower end of our outlook range. We anticipate tailwinds for Marketplace to persist, and we are pleased that our focused execution in 2026 has improved Marketplace's growth trajectory. We're acting with urgency to apply those product marketing and sales tactics to solutions and media products and move that portfolio from near-term declines back to stable to growing performance in 2027. The same is true on a smaller scale for OEM revenue, where we're assuming that near-term macro challenges will continue to temper media investments, but also see encouraging initial signals for 2027 spending commitments. For adjusted EBITDA, we are currently anticipating full-year performance to be at the higher end of our guidance range. Proactive cost management and efficiency gains are yielding strong operating leverage that we expect to sustain through the remainder of the year. With that, I'd like to open the line for Q&A.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one in your touchtone phone. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Please note to only limit yourself to one question and one follow-up. Once again, that is star one should you wish to ask a question. Your first question is from Naved Khan from B. Riley Securities. Your line is open.

Ethan Widell: Hi there. This is Ethan Widell on for Naved. Thanks for taking my questions. For starters, can you give us a little additional color on traffic to your website and maybe impact that you're seeing from Google's changes to search? You mentioned inventory agents for AI. Could you maybe double-click on new traffic sources that you're exploring with agents and LLMs, and any early traction there? Thank you.

Tobi Hartmann: Hey, good morning. Yeah, thanks for your question. With regards to traffic to the website, I think we've outlined our strategy, which was that we would de-emphasize a little bit just driving traffic as opposed to driving leads. I think we're very happy that this strategy has worked. Traffic and UVs are recovering from first-half levels, and that we've seen we're de-emphasizing still the traffic, but we drove nearly double-digit increase on leads. You're basically seeing that the strategy on efficiency works. The other thing to mention is Carson. We had mentioned that we saw about 1 million users now, so it's really an embedded part now of our discovery search, and then leading to incremental engagement with users. We are very pleased about that. The last point to close out is, we are also working on an integration with Muse that should follow in the next couple of weeks. We've had preliminary discussions and also some tests and trials, and that also looks promising. Thank you.

Ethan Widell: Thank you. That's helpful. Can you maybe tell us more about what you're seeing in OEM ad spend and maybe what your expectations are as we look towards 2027?

Sonia Jain: Yes, thank you for the question. We're pretty pleased to see the recovery in OEM spend from Q2 to Q3. We had mentioned that Q2 was going to be a trough, and we see good activity as we head into Q4 on the OEM side. We're not really giving formal 2027 guidance yet, but this is the time of year when we sit down with OEMs around upfront planning for their fiscal, and those conversations have been positive. I think one of the things we observed in Q3 is almost all of our OEM partners that we were working with were increasing spend levels. So, it's nice to see them be a little bit more front-footed than we saw earlier in the year in how they are thinking about investing and investing in our platform.

Ethan Widell: Thank you. I appreciate all the color.

Operator: Thank you. Your next question is from Gary Prestopino from Barrington Research. Your line is open.

Gary Prestopino: Hi. Good morning, all. The self-service product for the independent dealer market, did I hear you right that there's no upfront charge for taking this on? If there isn't, what's the revenue stream?

Tobi Hartmann: Yeah, thank you for your question. You are correct. The self-service Marketplace Starter, as we call it, is focused on smaller, more local, and predominantly independent dealers. The idea is very simple. We follow the principle of listings traffic money, which means we need to have the relevant inventory on our marketplace. We saw that we had a gap, but there's a product need and there's a market need because due to the affordability issue in the U.S., there's more demand for, call it, more value offerings in terms of car segments. So, let's say up to $20,000, that's really a segment where we had not really a strong offering. So, we're closing that product gap by bringing on those dealers literally as a self-service starter pack, so to say. Once they're on and once they experience the power of our marketplace, there's other solutions down the road that, for competitive reasons, I'd not like to talk about during this call, that we can then bundle and interconnect with going forward. But yes, you are correct. At first, it's a free, so to say, startup package to have them experience the power of our marketplace.

Gary Prestopino: Okay. Then, in terms of when you say it's self-service, I mean, how does it differ in the sense of what your normal Marketplace offering is to a franchise dealer? Exing out all the other add-ons that a franchise Marketplace dealer can get.

Tobi Hartmann: I'm glad you are asking that question. It's a great question. So, to be transparent, it's really new what we have built there, because self-service means that there is no handholding or hands on the keyboard that we need to enable and to get that partner or to get that local dealer started. In other words, we reach out to them, and they push a button, and everything pops in. Listings are populated. They see their inventory on Marketplace. They get a reporting, they get a cockpit, they get KPIs, and they are part of our ecosystem. That did not exist. The way we operated before, and also for larger dealers, is there is a lot of handholding, there is a lot of manual processes in order to connect to the various systems, the dealer-related systems, the MarTech solutions, and so forth. It is a really, truly an innovative new product that the teams have put together, and the amount of time it took to put it together exceeded our own expectations. We are very pleasantly surprised, and we have about 60%-65% of all these new local smaller dealers using it as an auto service jumpstarted, as opposed to a manual process that we need to go through before. That really explains it. That's what we mean by self-service.

Gary Prestopino: Okay. Thank you.

Operator: Thank you. Your next question is from Marvin Fong from BTIG. Your line is now open.

Marvin Fong: Great. Good morning. Thanks for taking my questions. I would like to also ask about the starter package. With other freemium products or free products that we see in the market, there are, like for instance, I believe, leads are anonymized and things of that nature. Are you doing a similar thing to incentivize these dealers to eventually upgrade to the subscription package? The second part of the question is, do you envision the next step for them your base package, or are you contemplating developing something in between, like the free package and the current standard package you offer to help them stay in the ecosystem and advance up the tier system?

Tobi Hartmann: Yeah. Thank you, Marvin. Highly relevant question. I should have mentioned that earlier, so I am glad you picked up on that. Yes, of course, just like with any other freemium products you see as a consumer that you are all absorbing in the market, there are certain caps and there are certain limitations as to how you can consume that free starter package. One of the dimensions, obviously, is our core currency in terms of leads and the number of leads we are providing, and that also ties to some product work we did, and we have accelerated in the past couple of months, which is the so-called DLE, the dealer lead engine. We are getting more sophisticated in how we are distributing leads, how quickly we are distributing leads, and if you hop on as a new partner, obviously you would like to have a positive experience very early on. You wouldn't want to wait for three to four weeks for the first lead to come through. We are sophisticating our processes around that in terms of ramping up new customers, creating a positive experience, but then also telling them, "Hey, you are running into a cap, so now if you would like to stay on, you either have to upgrade or you got to talk to us." That is the journey that we are currently on. The idea is that there is additional offerings wrapped around that in the spirit of interconnectivity, as I talked about in the past. The idea is that there are different levels in terms of caps. You could extend a cap or you could lower a cap. There is the idea of offering other services that are not directly tied to the pure marketplace, but that could be tied to the digital presence, i.e., the website, and/or also to a future program around verified. Thank you.

Marvin Fong: Got it. If I could do a follow-up, maybe for you, Sonia, just like on the financial impact or how should we think about the impact of the starter program on ARPD? I am assuming these dealers will be in the dealer count. They were in this quarter. Do you believe the ARPD might be affected or you can kind of overcome it?

Sonia Jain: I think in the very near term, and very specifically in terms of the Q3 numbers we have shared with you, the starter dealers are not included in our dealer count, and therefore are also not having an impact on ARPD. As you think about this longer term, I think the real thesis behind starter pack is, how do we get more listings onto our platform, particularly attractive, affordable listings? That is the primary goal. We do not view Starter Pack as a long-term driver of ARPD, because it will likely be dilutive to the ARPD calculation once we have the conversion feature built in. This is largely oriented towards smaller independent dealers, but they are not included in the Q3 number. We do believe that this is a component of the overall marketplace flywheel, right? Listings bring eyeballs, which allow us to drive more value to both consumers and our customers.

Tobi Hartmann: Yeah. To build on what Sonia stated, we view this from two dimensions. We view this, one, in terms of there's a future impact through indirect monetization, which is what Sonia just alluded to. The more listings, the more inventory, the more market share we have down to townships, zip codes, DMAs, and so forth, dealership level value buckets, the more attractive the overall marketplace experience becomes, which leads to opportunities how you can monetize not directly, but indirectly through other parts of the ecosystem. The second one is the direct monetization layer that I touched on before, which is playing around with, throttles around lead caps, other caps, other services wrapped around and interconnectivity. Hope this clarifies it. Thank you.

Marvin Fong: No, that was very helpful. Thank you. Sonia, best of luck on the future endeavors. Thanks.

Sonia Jain: Thank you.

Operator: Thank you. Your next question is from Josh Patel from JPMorgan. Your line is now open.

Josh Patel: Good morning, and thanks for taking my questions. Sonia, it has been a pleasure working with you, and best of luck. Congratulations on the continued product momentum. My first question is on transactional capabilities. With consumers increasingly embracing online vehicle purchases, as reflected in Carvana's growth and activity across other marketplaces, how are you thinking about Carson extending further into the transaction itself? Is there scope to accelerate investment in end-to-end purchasing capabilities? I think you mentioned an upcoming news integration, so maybe any additional flavor there would be very helpful. Thanks, and I have a quick follow-up.

Tobi Hartmann: Thanks. I will start off with that one. Another good question. The way we are thinking about our positioning and the future evolution is, we are really here not to compete with our customers. Anything that is more headed in the direction of buying or potentially getting really deep into the transaction itself, I would say right now is not core. Why not? Because our place to be is we want to be a trustworthy, a trusted, and authoritative partner to seekers, to buyers, to dealers, to OEMs, as a neutral platform partner that enables and empowers and facilitates our customers' transactions. That does not mean that we ourselves get into the transaction. You should not expect us to see CapEx investments into picking up cars, selling cars, whatever, as opposed to really driving lead volume, driving highest quality of leads, driving innovation for local dealers, franchise, major dealerships, and helping them figure out how they can drive a better P&L. That is really our place to be.

Josh Patel: That is very helpful. Thank you. As a quick follow-up, the FTC pricing transparency enforcement has created a range of varied behaviors across the marketplace. I am wondering if you could just talk about how that has changed how dealers interact with Carson, how have they shifted their listing behavior, and what pricing trends are looking like. Thanks.

Tobi Hartmann: Yes. So, another really good question that lines up with what we just talked about, the positioning of our current platform and how we are thinking about it. We want to be consumer-led, to be clear, which means we are doing the right thing by the consumers. There will always be instances where customers, i.e. B2B customers, may have a different view because short-term, they will not share the same view, or they may say, "Look, there is hidden costs or expenses," and it is hard to transparently show all of that. But our mission and our job is to put everything on the platform to guide the consumers as part of a neutral marketplace, positive marketplace experience. The changes that we implemented as part of the FTC requirements are largely welcome because it provides more transparency and it standardizes the way how B2B customers ought to interact with regards to price transparency. So, it is fully in line with our understanding of our role, our objectives, and we fully support this. Now, having said that, there will always be individual dealerships or individual customers who, for good or bad reasons, cannot make that happen overnight, and we also respect that because they are our customers. But we, as a platform operator, we want to do the right thing by the consumer.

Josh Patel: Understood. Great color. Thanks and good luck.

Operator: Your next question is from Joe Spak from UBS. Your line is now open.

Joe Spak: Thank you. Good morning, everyone. I was wondering if you could maybe help us think about how to size this opportunity, particularly as it relates to the Marketplace Starter packages. Because if I look at your dealer count, a little bit over 19,000, there's 40K U.S. franchise and independent dealers, but probably, what, 18K or so franchise. It's maybe almost half and half. I don't really have a good sense, I guess, for of your dealer exposure, maybe the share within each of those franchise versus independents. How much room do you think you have to go on the independent side from this initiative?

Tobi Hartmann: Yeah. Thank you. There's roughly, call it, probably north of 20,000 indies out there, and we are under-penetrated, clearly under-penetrated. What we'd like to bring across during this call, and as we will have further conversations with all of you in the next couple quarters, again, we don't want to call out, "Oh, this is a huge monetization potential right now," because it's part of an ecosystem approach. Again, there's a direct and there's an indirect monetization path. We believe this is strategically, operationally, and also for the long-term positioning of our marketplace absolutely crucial that we welcome these local dealerships, these independent dealerships. We also think, as of today, that we have very specific assets in our portfolio that we can enrich the offering beyond a pure listings and marketplace experience that could be actually a pretty prominent USP. This is a part of our product roadmap for 2027. If you think about what's the opportunity, the opportunity is first inventory liquidity. We bring on additional inventory where we have data insights, what drives eyeballs, what drives the attractivity of a marketplace. The second piece is, we learn because we're getting additional signals in terms of supply and demand signals to connect the dots what it means to help consumers guide and take and make a better car decision. The third piece is, as listings, pure listings, become more or less a commodity going forward, the question is, what's a listing going to be on our marketplace versus a listing on another marketplace? And there we have some cool things in store that we will develop over time, and we want to make sure that independent dealers and local dealers get access to that. We are developing it, if you will, from an enterprise-grade point of view, because we came from the large dealers, and they're the backbone, and they're really helping us think this through at the highest level of requirements and what's really needed to succeed in the market. But then we're taking this down like an enterprise-grade level to the local dealerships, and that's why we think this is a powerful product path going forward.

Sonia Jain: And maybe, Joe, just to give you some numbers if you're trying to put some boundaries on this, we probably would say the mix is a little bit more heavily weighted to indies when you think about the overall TAM. So when you think about our dealer mix, we'll roughly call it two-thirds franchise, one-third independent, and that then translates into having, call it, like a 20%-25% penetration rate amongst independent dealers, which is why we're so excited about the opportunity with the starter package. It's a really efficient and scalable way for us to get after this segment.

Joe Spak: That's helpful. Maybe a quick follow-up on that and then sort of second question. Is there an opportunity for a somewhat similar package for larger dealers that are not currently using Cars.com? Then, the follow-on second question is just maybe, Sonia, specifically on the fourth quarter guidance, it's a pretty wide range since you didn't really sort of for EBITDA for the fourth quarter, since you didn't really touch the full year number. I think it's like plus or minus 10%. Just what would sort of You typically have pretty good visibility, but so I'm just curious sort of what would cause you to come in sort of higher end versus lower end. Thanks.

Sonia Jain: Yeah, maybe we'll take the guidance question first. So we did try to provide some indication. We've reaffirmed full year, but given where we are in terms of year-to-date performance, we expect to come in toward the lower end of that range on revenue and towards the higher end when it comes to adjusted EBITDA. I think there's a couple different puts and takes. Again, we've leveraged year-to-date performance in order to steer folks to the right portion of the guidance range. I would say Q4 is also an interesting time of year as people spend down their marketing budgets. There's often opportunity for us to collect incremental dollars, particularly on the media side, which could move us maybe closer to the midpoint of the range. But what we're saying right now is given the information that we have today, we would expect to land towards the lower end of the revenue guide range.

Tobi Hartmann: Yeah, and your question regarding other customer segments and larger dealerships, it's really a different product. That's why we started from scratch. Our experience is, if you start to tweak your existing large enterprise kind of packages and say, "Okay, let's do the exact same thing, but now let's try to bring it down for smaller customers or local," that's one approach. From my experience, that's kind of hard to do. You got to start from scratch and almost start with a whiteboard and say, "Look, let's make this as convenient as possible, and let's think about what these customers really need." That's how we approached it. There are more differences and nuances between our larger customers' packages and their subscription tiers versus the starter package. Now, having said that, we will learn from both ends. What we didn't talk about is, we've already collected great data signals from the engagement with those 400 dealerships that we just brought on recently, which will have an impact in terms of development cycle and innovation for the larger enterprise clients. It goes both ways, but they are different packages. They're different clients and customer segments, and they're different nuances in terms of obviously pricing and features.

Joe Spak: Thank you so much.

Tobi Hartmann: Thank you.

Operator: Thank you. There are no further questions at this time. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.