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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2025

Basis of Presentation. The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the SEC. The Consolidated Financial Statements include the accounts of the Company and its 100% owned subsidiaries, including D2C Media and DealerClub since the dates of acquisition. All intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates

Use of Estimates. The preparation of the accompanying Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. 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.

Reclassifications

Reclassifications. Certain prior period balances have been reclassified to conform to the current period presentation. These reclassifications were not material to the previously reported Consolidated Financial Statements.

Revenue

Revenue. The Company accounts for a customer arrangement when the Company and the customer have an approved and signed contract that specifies the rights and obligations of each party and the payment terms, and the Company believes it is probable that the Company will collect substantially all of the consideration to which the Company will be entitled in exchange for the services that will be provided to the customer. The Company periodically enters into arrangements that include multiple promises that the Company evaluates to determine whether the promises are separate performance obligations. The Company identifies performance obligations based on services to be transferred to a customer that are distinct within the context of the contractual terms. The Company allocates the contractual transaction price to each distinct performance obligation and recognizes revenue when a performance obligation is satisfied by providing a service to a customer. Revenue is primarily generated through the Company’s 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:

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

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Other Media Solutions. The Company also provides certain non-subscription digital advertising services to dealer customers. The revenue related to these services is recognized at the point in time the service is provided.

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. The Company recognizes 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. The Company recognizes 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. The Company recognizes 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.

Cash and Cash Equivalents

Cash and Cash Equivalents. All cash balances and liquid investments with original maturities of three months or less on their acquisition date are classified as cash and cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are primarily derived from sales to customers and recorded at invoiced amounts. The allowance for doubtful accounts reflects the Company’s estimate of credit exposure, determined principally on the basis of its collection experience, aging of its receivables, expected losses and any specific reserves needed for certain customers based on their credit risk. Bad debt expense is included in Marketing and sales in the Consolidated Statements of Income. As of December 31, 2025, the Company's rollforward of the allowance for doubtful accounts is as follows (in thousands):


Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Write-offs			Recoveries		Balance at End of Period
Allowance for doubtful accounts:
2025	$	2,455	$	1,961	$	(3,527	)	$	886	$	1,775
2024		2,473		3,389		(4,306	)		899		2,455

Concentrations of Credit Risk

Concentrations of Credit Risk. The Company’s financial instruments, consisting primarily of cash and cash equivalents and customer receivables, are exposed to concentrations of credit risk. The Company invests its cash and cash equivalents with highly rated financial institutions.

Note Receivable

Note Receivable. On October 14, 2025, the Company entered into a Security Agreement with an automotive technology solutions provider that is developing a new customer relationship management platform. As part of this agreement, the Company invested in an $8.0 million secured convertible note, which has a five-year maturity, accrues interest at 4.1% per annum and contains options to purchase the remaining outstanding equity of the provider at the Company's option. The Company accounts for this note as a loan receivable that is held for investment, and therefore the note is measured at amortized cost. The Company accounts for its loans held for investment using the interest method whereby interest income is recognized each period based on the effective interest rate required to amortize the deferred loan issuance costs over the life of the loans. As of December 31, 2025, $8.3 million is recorded in Investments and other assets, net in the Consolidated Balance Sheets.

Investments

Investments. Investments in non-marketable equity securities are measured at fair value with changes in fair value recognized in Net income. Prior to the sale of its RepairPal, Inc. ("RepairPal") equity investment, the Company utilized the measurement alternative for equity investments without readily determinable fair values and revalued this investment upon the occurrence of an observable price change for similar investments. On at least an annual basis, the Company assessed its investment to determine whether any events have occurred, or circumstances have changed, which might have a significant adverse effect on their fair value and as applicable, may be indicative of impairment.

During the year ended December 31, 2024, the Company sold its RepairPal equity investment for $9.5 million in closing proceeds and up to $2.7 million of additional proceeds to be received, subject to the satisfaction of certain conditions. The related cash proceeds for the sale were not yet received as of December 31, 2024, and was therefore recorded as a non-cash transaction at that time. As a result, the Company recorded the fair value of its expected proceeds as a gain of $10.8 million recorded in Other income (expense), net in the Consolidated Income Statements and Gain on sale of equity investment in the Consolidated Statements of Cash Flows. As of December 31, 2024, the Company recorded $9.5 million and $1.3 million in Other current assets and Investments and other assets, net, respectively, in the Consolidated Balance Sheets, of which the $9.5 million was collected in January 2025. As of December 31, 2025, $1.0 million and $0.3 million are recorded in Other current assets and Investments and other assets, net, respectively, in the Consolidated Balance Sheets. Changes will be recognized in Other income (expense), net in the Consolidated Statements of Income.

Property and Equipment, net

Property and Equipment, net. Property and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives as follows (in thousands):


	December 31,
Asset	2025			2024			Estimated Useful Life
Computer software	$	120,712		$	108,805		18 months - 5 years
Leasehold improvements		20,130			17,398		Lesser of useful life or lease term
Computer hardware		6,865			12,995		3 - 5 years
Furniture and fixtures		4,573			4,601		5 - 10 years
Property and equipment, gross		152,280			143,799
Less: Accumulated depreciation		(117,057	)		(103,095	)
Property and equipment, net	$	35,223		$	40,704

Normal repairs and maintenance are expensed as incurred. Any resulting gain or loss from the disposition of fixed assets is included in General and administrative expense in the Consolidated Statements of Income.

Internally Developed Technology

Internally Developed Technology. The Company capitalizes costs associated with customized internal-use software systems and website development that have reached the application development stage. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees who are directly associated with the applications. Capitalization of such costs begins when the preliminary project stage is complete and ceases at the point in which the project is substantially complete and ready for its intended purpose. The Company reviews the carrying amount of internally developed technology for impairment and useful lives whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Capitalized software costs, excluding cloud computing arrangements, for the years ended December 31, 2025, 2024 and 2023 were $21.6 million, $21.4 million and $19.6 million, respectively. Capitalized costs, excluding those for cloud computing arrangements, are included in Property and equipment, net in the Consolidated Balance Sheets. Research and development costs are expensed as incurred.

Cloud Computing Arrangements, net

Cloud Computing Arrangements, net. The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed technology. Any amortization is recorded in the same manner in the Consolidated Statements of Income as the expense associated with the underlying hosting arrangement. Capitalized cloud computing arrangements are amortized on a straight-line basis over an estimated useful life of five years. Amortization expense for the years ended December 31, 2025, 2024 and 2023 was $2.4 million, $1.8 million and $1.2 million. Cost and accumulated amortization is as follows (in thousands):


	December 31,
	2025			2024
Cloud computing arrangements, gross	$	12,647		$	11,681
Less: Accumulated amortization		(5,438	)		(3,177	)
Cloud computing arrangements, net	$	7,209		$	8,504

These capitalized costs in the Consolidated Balance Sheets are as follows (in thousands):


	December 31,
	2025		2024
Prepaid expenses	$	2,478	$	2,327
Investments and other assets, net		4,731		6,178

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets. Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible assets, net of liabilities assumed. Goodwill is tested for impairment on an annual basis or between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company’s goodwill is tested for impairment at a level referred to as the reporting unit. The level at which the Company tested goodwill for impairment requires the Company to determine whether the operations below the business segment level constitute a business for which discrete financial information is available and segment management regularly reviews the operating results. The Company determined that it operated as a single reporting unit.

The process of estimating the fair value of goodwill is subjective and required the Company to make estimates that may significantly impact the outcome of the analysis. A qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications. If after performing this assessment, the Company concluded it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company will perform the quantitative test.

Under the quantitative test, a goodwill impairment is identified by comparing the fair value of the reporting unit to the carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, goodwill is considered impaired and an impairment charge is recognized in an amount equal to the excess, not to exceed the carrying amount of goodwill.

If a quantitative test is performed, the Company estimates the fair value of the reporting unit with an income approach using a discounted cash flow ("DCF") analysis and the Company also considers a market-based valuation methodology using comparable public company trading values and the Company’s market capitalization. Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, long-term growth rates, the discount rate and relevant comparable public company earnings multiples. The cash flows employed in the DCF analysis are based on the Company’s best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance. The discount rate utilized in the DCF analysis is based on the reporting unit’s weighted-average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the Company’s reporting unit.

Impairment assessment inherently involves management judgments regarding a number of assumptions described above. The reporting unit fair value also depends on the future strength of the economies the Company operates in. New and developing competition, as well as technological changes, could also adversely affect future fair value estimates. Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of the Company’s recorded goodwill, differences in assumptions could have a material effect on the estimated fair values. For further information, see Note 5 (Goodwill and Other Intangible Assets, net).

The Company’s indefinite-lived intangible asset relates to the Cars.com trade name. Intangible assets with indefinite lives are tested for impairment annually, or more often if circumstances dictate, and written down to fair value as required. Similar factors to goodwill are considered in this evaluation. The estimates of fair value are determined using the "relief from royalty" methodology, which is a variation of the income approach. The discount rate assumption is based on an assessment of the risk inherent in the projected future cash flows generated by the trade name intangible asset.

Amortizable intangible assets are amortized on a straight-line basis over the estimated useful lives as follows:


Intangible Asset		Estimated Useful Life
Acquired software		2 - 5 years
Customer relationships		4 - 14 years
Other trade names		5 - 12 years

Valuation of Long-Lived Assets

Valuation of Long-Lived Assets. The Company reviews the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Once an indicator of potential impairment has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of projected undiscounted future cash flows against the carrying amount of the asset group. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset group would be deemed to be potentially impaired. The impairment, if any, would be measured based on the amount by which the carrying amount exceeds the fair value. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose. No material impairment losses for long-lived assets were recognized for the periods presented in the Consolidated Statements of Income.

Fair Value of Financial Instruments

Fair Value of Financial Instruments. Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. The three-level hierarchy of fair value measurements is based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels:

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Level 1—Quoted prices for identical instruments in active markets;

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Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and

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Level 3—Valuations derived from valuation techniques in which one or more significant inputs are unobservable

The Company’s financial instruments include accounts receivable, notes receivable, other receivables, accounts payable and other liabilities. The carrying values of these instruments approximate their fair values.

The Company’s debt is classified as Level 2 in the fair value hierarchy and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments. Level 2 assets and liabilities are based on observable inputs other than quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. The approximate fair value and related carrying value of the Company's outstanding indebtedness, as of December 31, 2025 and December 31, 2024 were as follows (in millions):


	December 31, 2025		December 31, 2024
Fair Value	$	454.1	$	456.6
Carrying Value		455.0		460.0

Contingent Consideration

Contingent Consideration. In the prior periods presented, the Company 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 or performance metrics. Contingent consideration was recognized at its estimated fair value at the date of acquisition based on expected future payment, discounted using a weighted average cost of capital in accordance with accepted valuation methodologies. Prior to the expiration of these arrangements, the Company reviewed and reassessed the estimated fair value of contingent consideration liabilities at each reporting period and the updated fair value could differ materially from the initial estimates. The Company 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 measurement had one significant input of projected financial information. Significant increases or decreases to the projected financial information 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.

Foreign Currency Translation

Foreign Currency Translation. The reporting currency of the Company is the U.S. dollar. The functional currency of the Company’s foreign subsidiaries is the local currency of each subsidiary. All balances of entities whose functional currency is a currency other than the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows: (i) asset and liability accounts at period‑end rates; (ii) income statement accounts at average exchange rates for the period; and (iii) stockholders’ equity accounts at historical exchange rates. The resulting translation adjustments are excluded from consolidated Net income and are recognized within Accumulated other comprehensive loss in the Consolidated Balance Sheets. Foreign currency transaction gains and losses are included in Other income (expense), net in the Consolidated Statements of Income. Monetary assets and liabilities that are in a currency other than the Company's functional currency are translated to the functional currency at period-end, with changes in such amounts being reported as a component of Other income (expense), net in the Consolidated Statements of Income.

Income Taxes

Income Taxes. The Company accounts 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. The Company assesses 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 that 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.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company’s uncertain tax position reserves are reviewed periodically and are adjusted as events occur that affect its estimates, such as the availability of new information, the lapsing of applicable statutes of limitation, the conclusion of tax audits, the measurement of additional estimated liability, the identification of new tax matters, the release of administrative tax guidance

affecting its estimates of tax liabilities or the rendering of relevant court decisions. The Company records penalties and interest relating to uncertain tax positions in Income tax expense (benefit) in the Consolidated Statements of Income. For further information, see Note 12 (Income Taxes).

Stock-Based Compensation

Stock-Based Compensation. Stock-based compensation expense is recognized on a straight-line basis over the vesting period. Forfeitures are recorded at the time the forfeiture event occurs. For further information, see Note 10 (Stock-Based Compensation).

Advertising Costs

Advertising Costs. Advertising costs are expensed as they are incurred and included in Marketing and sales in the Consolidated Statements of Income. Advertising expense for the years ended December 31, 2025, 2024 and 2023 was $109.1 million, $105.3 million and $107.8 million, respectively.

Cost of Revenue and Operations

Cost of Revenue and Operations. Cost of revenue and operations expense primarily consists of costs related to processing dealer vehicle inventory, product fulfillment, compensation costs for the product fulfillment and customer service teams.

Defined Contribution Plans

Defined Contribution Plans. The Company’s employees are eligible to participate in a defined contribution plan. Participants are eligible on their date of hire and are allowed to make tax-deferred contributions up to 90% of employees' compensation, subject to limitations specified by the Internal Revenue Code of 1986, as amended. Employer contributions consist of matching contributions and/or non-elective employer contributions. The Company provides a maximum match for 4% of the employee’s salary and contributions are immediately fully vested. The Company’s contributions to its defined contribution plans for the years ended December 31, 2025, 2024 and 2023 were $6.5 million, $6.4 million and $6.3 million, respectively.

Recently Issued Accounting Standards Not Yet Adopted

Recently Adopted Accounting Standards. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which requires presentation of specific categories of reconciling items, as well as reconciling items that meet a quantitative threshold, in the reconciliation between the income tax provision and the income tax provision using statutory tax rates. The standard also requires disclosure of income taxes paid disaggregated by jurisdiction with separate disclosure of income taxes paid to individual jurisdictions that meet a quantitative threshold of 5 percent. This amendment was effective for fiscal years beginning after December 15, 2024, on a prospective basis and early adoption and retrospective application were permitted. The Company has adopted ASU 2023-09 as of December 31, 2025 using the retrospective approach, and included the required disclosures in Note 12 (Income Taxes). This standard update did not affect the Company's financial condition or results of operations.

Recently Issued Accounting Standards Not Yet Adopted. In December 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies current interim disclosure requirements and provides a comprehensive list of required interim disclosures. The update also establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. Per the FASB, the amendment does not intend to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements but rather provide clarity and improve navigability of the existing interim reporting requirements. This amendment is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted and entities are permitted to apply the new updates either prospectively or retrospectively to any or all periods presented in the financial statements. The Company is currently evaluating this new guidance and its impact on its Consolidated Financial Statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software costs by eliminating the stage-based model in current U.S. GAAP and clarifying when capitalization of software development costs are appropriate. The standard removes the concept of discrete development stages and introduces a principle-based framework centered on whether management has authorized and committed to funding the project, and whether it is probable that the project will be completed and the software will be used to perform its intended function. This amendment is effective for annual reporting periods beginning after December 15, 2027, and for interim reporting periods beginning after December 15, 2027. Early adoption is permitted and entities are permitted to apply the new guidance in a prospective, modified or retrospective approach. The Company is currently evaluating this new guidance and its impact on its Consolidated Financial Statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires companies to provide more detailed and organized disclosures of their expenses in their income statements. The standard requires breaking down expenses into specific categories, such as employee compensation and costs related to depreciation and amortization. This amendment is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, on a prospective basis and early adoption and retrospective application is permitted. The Company is currently evaluating this new guidance and its impact on its financial statement disclosures.

Uncertain Tax Positions

Uncertain Tax Positions.