Cars.com Inc. (Form: 10-Q, Received: 05/10/2019 16:10:33)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37869

Cars.com Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	81-3693660
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

300 S. Riverside Plaza, Suite 1000

Chicago, Illinois 60606

(Address of principal executive offices)

(312) 601-5000

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒


Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	CARS	New York Stock Exchange

As of April 30, 2019, the registrant had 66,626,608 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited) :	2
	Consolidated Balance Sheets	2
	Consolidated Statements of (Loss) Income	3
	Consolidated Statements of Stockholders’ Equity	4
	Consolidated Statements of Comprehensive (Loss) Income	5
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	24
Signatures		25

PART I — FINANCI AL INFORMATION

Item 1. Financial Statements.

Cars.com Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

	March 31, 2019			December 31, 2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	28,340		$	25,463
Accounts receivable, net		95,592			108,921
Prepaid expenses		7,417			9,264
Other current assets		9,523			10,289
Total current assets		140,872			153,937
Property and equipment, net		40,548			41,482
Goodwill		885,049			884,449
Intangible assets, net		1,486,318			1,510,410
Investments and other assets		27,479			10,271
Total assets	$	2,580,266		$	2,600,549
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	12,131		$	11,631
Accrued compensation		12,746			16,821
Unfavorable contracts liability		12,585			18,885
Current portion of long-term debt		29,667			26,853
Other accrued liabilities		52,827			36,520
Total current liabilities		119,956			110,710
Noncurrent liabilities:
Long-term debt		652,178			665,306
Deferred tax liability		175,346			177,916
Other noncurrent liabilities		40,116			19,694
Total noncurrent liabilities		867,640			862,916
Total liabilities		987,596			973,626
Commitments and contingencies
Stockholders' equity:
Preferred Stock at par, $0.01 par value; 5,000 shares authorized; no shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively		—			—
Common Stock at par, $0.01 par value; 300,000 shares authorized; 67,455 and 68,262 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively		675			683
Additional paid-in capital		1,510,057			1,508,001
Retained earnings		89,217			118,239
Accumulated other comprehensive loss		(7,279	)		—
Total stockholders' equity		1,592,670			1,626,923
Total liabilities and stockholders' equity	$	2,580,266		$	2,600,549

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Consolidated Statements of (Loss) Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Revenues:
Retail	$	139,338		$	132,343
Wholesale		14,860			27,614
Total revenues		154,198			159,957
Operating expenses:
Cost of revenues and operations		25,579			17,985
Product and technology		17,863			17,908
Marketing and sales		60,343			65,407
General and administrative		23,888			24,270
Affiliate revenue share		2,454			3,283
Depreciation and amortization		28,125			23,938
Total operating expenses		158,252			152,791
Operating (expense) income		(4,054	)		7,166
Nonoperating (expense) income:
Interest expense, net		(7,566	)		(5,957	)
Other income (expense), net		119			(16	)
Total nonoperating expense, net		(7,447	)		(5,973	)
(Loss) income before income taxes		(11,501	)		1,193
Income tax (benefit) expense		(2,470	)		264
Net (loss) income	$	(9,031	)	$	929
Weighted-average common shares outstanding:
Basic		67,584			71,952
Diluted		67,584			72,122
(Loss) earnings per share:
Basic	$	(0.13	)	$	0.01
Diluted		(0.13	)		0.01

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

	Preferred Stock				Common Stock						Additional Paid-In			Retained			Accumulated Other Comprehensive			Stockholders'
	Shares		Amount		Shares			Amount			Capital			Earnings			Loss			Equity

Balance at December 31, 2018		—	$	—		68,262		$	683		$	1,508,001		$	118,239		$	—		$	1,626,923
Net loss		—		—		—			—			—			(9,031	)		—			(9,031	)
Other comprehensive loss, net		—		—		—			—			—			—			(7,279	)		(7,279	)
Repurchases of common stock		—		—		(881	)		(9	)		—			(19,991	)		—			(20,000	)
Shares issued in connection with stock-based compensation plans, net		—		—		62			1			(744	)		—			—			(743	)
Stock-based compensation expense		—		—		—			—			2,981			—			—			2,981
Transactions with TEGNA, net ⁽¹⁾		—		—		12			—			(181	)		—			—			(181	)
Balance at March 31, 2019		—	$	—		67,455		$	675		$	1,510,057		$	89,217		$	(7,279	)	$	1,592,670

	Preferred Stock				Common Stock				Additional Paid-In			Retained		Stockholders'
	Shares		Amount		Shares		Amount		Capital			Earnings		Equity

Balance at December 31, 2017		—	$	—		71,628	$	716	$	1,501,830		$	176,582	$	1,679,128
Net income		—		—		—		—		—			929		929
Shares issued in connection with stock-based compensation plans, net		—		—		62		1		(618	)		—		(617	)
Stock-based compensation expense		—		—		—		—		1,600			—		1,600
Transactions with TEGNA, net ⁽¹⁾		—		—		175		2		(2,685	)		—		(2,683	)
Balance at March 31, 2018		—	$	—		71,865	$	719	$	1,500,127		$	177,511	$	1,678,357

(1)

As a result of the Separation, certain stock-based awards previously granted by TEGNA to its employees were converted into stock of both TEGNA and Cars.com. The Company is responsible for any employee payroll taxes related to awards settled in Cars.com common stock for which stock was withheld for payroll tax purposes.

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2019			2018

Net (loss) income	$	(9,031	)	$	929
Other comprehensive loss, net of tax:
Interest rate swap		(7,279	)		—
Total other comprehensive loss		(7,279	)		—
Comprehensive (loss) income	$	(16,310	)	$	929

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Cash flows from operating activities:
Net (loss) income	$	(9,031	)	$	929
Adjustments to reconcile Net (loss) income to Net cash provided by operating activities:
Depreciation		4,033			2,761
Amortization of intangible assets		24,092			21,177
Amortization of unfavorable contracts liability		(6,300	)		(6,300	)
Stock-based compensation expense		2,981			1,600
Deferred income taxes		(2,570	)		160
Provision for doubtful accounts		1,055			995
Amortization of debt issuance costs		311			317
Other, net		(9	)		129
Changes in operating assets and liabilities
Accounts receivable		12,274			3,208
Prepaid expenses		1,847			(5,691	)
Other current assets		886			(1,027	)
Other assets		(17,208	)		643
Accounts payable		574			518
Accrued compensation		(4,075	)		(5,148	)
Other accrued liabilities		14,087			13,839
Other noncurrent liabilities		15,442			(1,449	)
Net cash provided by operating activities		38,389			26,661
Cash flows from investing activities:
Purchase of property and equipment		(3,363	)		(2,513	)
Payment for Acquisition, net		—			(156,968	)
Other, net		(600	)		—
Net cash used in investing activities		(3,963	)		(159,481	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		—			165,000
Payments of long-term debt		(10,625	)		(40,625	)
Stock-based compensation plans, net		(743	)		(617	)
Repurchases of common stock		(20,000	)		—
Transactions with TEGNA, net		(181	)		—
Net cash (used in) provided by financing activities		(31,549	)		123,758
Net increase (decrease) in cash and cash equivalents		2,877			(9,062	)
Cash and cash equivalents at beginning of period		25,463			20,563
Cash and cash equivalents at end of period	$	28,340		$	11,501
Supplemental cash flow information:
Cash paid for income taxes, net of refunds	$	38		$	293
Cash paid for interest		7,413			5,552

The accompanying notes are an integral part of the Consolidated Financial Statements.

Cars.com Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1. Description of Business, Company History and Summary of Significant Accounting Policies

Description of Business. Cars.com is a leading two-sided digital automotive marketplace that connects car shoppers with sellers and manufacturers (“OEM”s), empowering shoppers with the resources and information to make informed buying decisions. The Company’s portfolio of brands includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, PickupTrucks.com and NewCars.com. Dealer Inspire and DealerRater provide digital solutions for car dealers, including cutting-edge dealer websites, technology and reputation management solutions that improve automotive selling for local dealerships and national OEM brands. In a rapidly changing market, Cars.com enables dealerships and OEMs with innovative technical solutions and data-driven intelligence to better reach and influence ready-to-buy shoppers, increase inventory turn and gain market share.

Company History. In May 2017, the Company separated from its former parent company, TEGNA Inc. (“TEGNA”) by means of a spin-off of a newly formed company, Cars.com Inc., which now owns TEGNA’s former digital automotive marketplace business (the “Separation”). On May 31, 2017, the Company made a $650.0 million cash transfer to TEGNA and TEGNA completed the Separation through a pro rata distribution to its stockholders of all of the outstanding shares of the Company’s common stock. The Company’s common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017.

In February 2018, the Company acquired all of the outstanding stock of Dealer Inspire Inc., an innovative technology leader providing progressive dealer websites, digital retailing and messaging platform products, and substantially all of the net assets of Launch Digital Marketing LLC, a provider of digital marketing services, including paid, organic, social and creative services (collectively, the “Acquisition”). The post-Acquisition business related to Dealer Inspire, Inc. and Launch Digital Marketing LLC is referred to collectively as “Dealer Inspire”.

Basis of Presentation . These accompanying unaudited interim Consolidated Financial Statements (“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 for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated and Combined Financial Statements and the notes thereto for the year ended December 31, 2018, which are included in the Company's Annual Report on Form 10-K dated February 28, 2019 (the “December 31, 2018 Financial Statements”).

The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in the December 31, 2018 Financial Statements. In the opinion of management, the Consolidated Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, cash flows and changes in stockholders' equity as of the dates and for the periods indicated. The unaudited results of operations for the three months ended March 31, 2019 are not necessarily indicative of results that may be expected for the year ending December 31, 2019.

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.

Principles of Consolidation . The accompanying Consolidated Financial Statements include the accounts of Cars.com Inc. and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

Reclassifications . Historically, certain costs related to severance, transformation and other exit costs; costs associated with the stockholder activist campaign; transaction-related costs and the write-off of long-lived assets were reflected in various operating expense line items in the Consolidated Statements of (Loss) Income. Beginning on January 1, 2019, these costs are reflected within General and administrative expenses. Therefore, certain prior year balances have been reclassified to conform to the current year presentation and are summarized as follows (in thousands):

	Three Months Ended March 31, 2018
	As Reported		Adjustments			As Adjusted
Cost of revenues and operations	$	19,086	$	(1,101	)	$	17,985
Product and technology		22,333		(4,425	)		17,908
Marketing and sales		66,035		(628	)		65,407
General and administrative		18,116		6,154			24,270
Affiliate revenue share		3,283		—			3,283
Depreciation and amortization		23,938		—			23,938
Total operating expenses	$	152,791	$	—		$	152,791

NOTE 2. Recent Accounting Pronouncements

Cloud Computing Arrangements. In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , aligning the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs for internal-use software. The new guidance is effective for the Company on January 1, 2020 and early adoption is permitted. The Company is currently evaluating this new guidance and does not expect it to have a material impact on its Consolidated Financial Statements and related disclosures.

Financial Instruments – Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses changing the way credit losses on accounts receivable are estimated. Under current U.S. GAAP, credit losses on trade accounts receivable are recognized once it is probable that such losses will occur. Under this new guidance, the Company will be required to estimate credit losses based on the expected amount of future collections which may result in earlier recognition of allowance for doubtful accounts. The new guidance is effective for the Company on January 1, 2020 and will be adopted using a modified retrospective approach. The Company is currently evaluating this new guidance and does not expect it to have a material impact on its Consolidated Financial Statements and related disclosures.

Leases. In February 2016, the FASB issued ASU 2016-02, Leases (ASU 2016-02) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current U.S. GAAP. The new guidance requires a lessee to recognize a liability to make lease payments (the “lease liability”) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. The Company adopted ASU 2016-02 in the first quarter of 2019 utilizing the modified retrospective transition approach for leases existing at, or entered into after, the beginning of the first quarter of 2019 and did not recast the comparative periods presented in the Consolidated Financial Statements upon adoption. The Company elected the ‘package of practical expedients’ and did not reassess its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease recognition exemption for all leases that qualify and did not recognize right-of-use assets or lease liabilities for those leases. The Company’s lease agreements are principally related to real estate. The adoption of ASU 2016-02 resulted in the recognition of operating lease assets of $18.2 million and $35.0 million in operating lease liabilities on its Consolidated Balance Sheets. The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the 300 South Riverside Lease in Chicago, Illinois. There was no material impact to its Consolidated Statements of (Loss) Income and Consolidated Statements of Cash Flows. For further information, see Note 11 (Leases).

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

NOTE 3. Revenues

Revenue Summary . In the table below (in thousands), revenue is disaggregated by sales channel and major products and services. The Company only has one reportable segment; therefore, further disaggregation is not applicable at this time.

	Three Months Ended March 31,
Sales channel	2019		2018
Direct	$	115,094	$	101,478
National advertising		20,295		26,818
Other		3,949		4,047
Retail		139,338		132,343
Wholesale		14,860		27,614
Total revenues	$	154,198	$	159,957

Major products and services
Subscription advertising and digital solutions	$	121,314	$	123,777
Display advertising		22,289		26,023
Pay per lead		7,934		7,556
Other		2,661		2,601
Total revenues	$	154,198	$	159,957

NOTE 4. Debt

As of March 31, 2019, the Company is in compliance with the covenants under its credit agreement.

Term Loan. As of March 31, 2019, the outstanding principal amount under the Term Loan was $410.6 million and the interest rate in effect was 4.3%, including the impact of the interest rate swap discussed in Note 5 (Interest Rate Swap). During the three months ended March 31, 2019, the Company made $5.6 million in mandatory quarterly Term Loan payments.

Revolving Loan. As of March 31, 2019, the outstanding borrowings under the Revolving Loan were $275.0 million and the interest rate in effect was 4.1%. During the three months ended March 31, 2019, the Company made $5.0 million in voluntary Revolving Loan payments. As of March 31, 2019, $175.0 million was available to borrow under the Revolving Loan. The Company’s borrowings are limited by its net leverage ratio, which is calculated in accordance with the credit agreement and was 3.0 to 1.0 as of March 31, 2019.

Fair Value. 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. The carrying amount of the Company’s debt approximated the fair value as of March 31, 2019.

NOTE 5. Interest Rate Swap

The interest rate on borrowings under the Company’s Term Loan is floating and, therefore, subject to fluctuations. In order to manage the risk associated with changes in interest rates on its borrowing under the Term Loan, the Company entered into an interest rate swap (the “Swap”) effective December 31, 2018. Under the terms of the Swap, the Company is locked into a fixed rate of interest of 2.96% plus an applicable margin, as defined in the Credit Agreement, on a notional amount of $300 million. The Swap is designated as a cash flow hedge of interest rate risk. As of March 31, 2019, the fair value of the Swap was an unrealized loss of $7.3 million, of which $2.3 million and $5.0 million is recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets. During the three months ended March 31, 2019, $0.3 million was reclassified from Accumulated other comprehensive (loss) into Interest expense, net.

NOTE 6. Unfavorable Contracts Liability

In connection with the October 2014 acquisition of Cars.com by TEGNA, the Company entered into affiliate agreements with the former owners of Cars.com (Belo Corporation (“Belo”), The McClatchy Company (“McClatchy”), tronc, inc. (“tronc”), and the Washington Post). Under the affiliate agreements, affiliates have the exclusive right to sell and price Cars.com’s products in their local territories, paying Cars.com a wholesale rate for the Cars.com product. The Company charges the affiliates 60% of the corresponding

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

Cars.com retail rate for product s sold to affiliate dealers and recognizes revenue generated from these agreements as Wholesale revenues in the Consolidated Statements of (Loss) Income. The Unfavorable contracts liability was established as a result of these unfavorable affiliate agreeme nts that the Company entered into as part of TEGNA’s acquisition of the Company in 2014. The Unfavorable contracts liability is being amortized on a straight-line basis over the five year contract period.

Prior to the affiliate conversions discussed below, the Company recognized $25.2 million of Wholesale revenues with a corresponding reduction of the Unfavorable contracts liability on an annual basis. As of March 31, 2019 and December 31, 2018, the Unfavorable contracts liability was $12.6 million and $18.9 million, respectively, and is recorded in Current liabilities on the Consolidated Balance Sheets.

The Company has amended three of its affiliate agreements ( McClatchy, tronc, and the Washington Post ) and as a result, now has a direct relationship with these dealer customers and recognizes the revenue associated with converted dealers as Retail revenues, rather than Wholesale revenues, in the Consolidated Statements of (Loss) Income. In addition, as part of the recent changes in the structure of the affiliate agreements, McClatchy, tronc and the Washington Post have agreed to perform certain marketing support and transition services through December 31, 2019, March 31, 2020 and October 1, 2019, respectively. The fees the Company pays associated with the amended affiliate agreements are recorded as Affiliate revenue share expense within Operating expenses in the Consolidated Statements of (Loss) Income.

The Company no longer records the amortization of the Unfavorable contracts liability associated with the converted markets to revenues as the Company now recognizes this direct revenue at retail rates. The amortization of the Unfavorable contracts liability is now recorded as a reduction of Affiliate revenue share expense within Operating expenses in the Consolidated Statements of (Loss) Income.

Therefore, during the three months ended March 31, 2019, the Company recorded $5.8 million as a reduction to Affiliate revenue share expense, rather than Wholesale revenues, in the Consolidated Statements of (Loss) Income. The reduction to Affiliate revenue share expense was partially offset by the fees associated with the marketing support and transition services.

The Company’s Unfavorable contracts liability activity for the three months ended March 31, 2019 is as follows (in thousands):

Balance at December 31, 2018	$	18,885
Amortization into Wholesale revenues ⁽¹⁾		(466	)
Amortization into Affiliate revenue share expense ⁽²⁾		(5,834	)
Balance at March 31, 2019	$	12,585

(1)

Amount represents the amortization of the Unfavorable contracts liability related to the remaining affiliate agreement (Belo) into Wholesale revenues in the Consolidated Statements of (Loss) Income.

(2)

Amount represents the amortization of the Unfavorable contracts liability related to the converted McClatchy, tronc and Washington Post affiliate agreements into Affiliate revenue share expense in the Consolidated Statements of (Loss) Income .

NOTE 7. Commitments and Contingencies

The Company and its subsidiaries are parties from time to time in legal and administrative proceedings involving matters incidental to its business. These matters, whether pending, threatened or unasserted, if decided adversely to the Company or settled, may result in liabilities material to its financial position, results of operations or cash flows. The Company records a liability when it believes that it is both probable that a loss will be incurred and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both the probability and the estimated amount.

NOTE 8. Stockholders’ Equity

In March 2018, the Company’s Board of Directors authorized a stock repurchase program to acquire up to $200 million of the Company’s common stock. The Company may repurchase stock from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. The timing and amounts of any purchases under the stock repurchase program will be based on market conditions and other factors including price. The repurchase program has a two-

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

year duration, does not require the purchase of any minimum number of shares and may be suspended, modified or discon tinued at any time without prior notice. The Company intends to fund the share repurchase program principally with cash from operations. During the three months ended March 31 , 2019, the Company repurchased and subsequently retired 0.9 million shares for $ 20.0 million. There was no stock repurchase activity during the three months ended March 31, 2018.

NOTE 9. Stock-Based Compensation

Performance Stock Units (“PSUs”). PSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting. The fair value of the PSUs is equal to the Company’s common stock price on the date of grant. During the three months ended March 31, 2019, the Company granted 207,000 PSUs at a weighted average grant date fair value of $24.02 per unit. These PSUs require continued employee service. The percentage of PSUs that shall vest will range from 0% to 200% of the number of PSUs granted based on the Company’s future performance related to certain revenue and adjusted earnings before interest, income taxes, depreciation and amortization targets over a three-year performance period. These PSUs are subject to cliff vesting at the end of the three-year performance period.

Restricted Stock Units (“RSUs”). RSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement. These RSU’s are subject to graded vesting, generally ranging between one and three years and the fair value of the RSUs is equal to the Company’s common stock price on the date of grant. During the three months ended March 31, 2019, the Company granted 477,000 RSUs at a weighted-average grant-date fair value of $24.02 per unit.

NOTE 10. (Loss) Earnings Per Share

Basic (loss) earnings per share is calculated by dividing Net (loss) income by the weighted-average number of shares of common stock outstanding. Diluted (Loss) earnings per share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans, unless the inclusion of such shares would have an anti-dilutive impact. The computation of (loss) earnings per share is as follows (in thousands, except per share data):

	Three Months Ended March 31,
	2019			2018
Net (loss) income	$	(9,031	)	$	929
Basic weighted-average common shares outstanding		67,584			71,952
Effect of dilutive stock-based compensation awards ⁽¹⁾		—			170
Diluted weighted-average common shares outstanding		67,584			72,122
(Loss) earnings per share, basic	$	(0.13	)	$	0.01
(Loss) earnings per share, diluted		(0.13	)		0.01

(1)

There were 0.3 million potential common shares excluded from diluted weighted-average shares outstanding for the three months ended March 31, 2019, as their inclusion would have had an anti-dilutive effect.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

(Unaudited)

NOTE 11. Leases

Leases. The Company is obligated as a lessee under certain non-cancelable operating leases for office space, and is also obligated to pay insurance, maintenance and other executory costs associated with the leases. As of March 31, 2019, Cars.com’s scheduled future minimum lease payments under operating leases having initial or remaining noncancelable lease terms of more than one year, were as follows (in thousands):

Remaining nine months of 2019	$	2,735
2020		4,368
2021		4,014
2022		3,751
2023		3,850
Thereafter		35,117
Total minimum lease payments		53,835
Less: Imputed interest ⁽¹⁾		(19,411	)
Present value of the minimum lease payments		34,424
Less: Current maturities of lease obligations		(1,494	)
Long-term lease obligations	$	32,930

(1)

The Company’s lease agreements do not provide a readily determinable implicit rate nor is it available from the Company’s lessors. Therefore, in order to discount lease payments to present value, the Company has estimated its incremental borrowing rate based on information available at either the lease transition date (for those leases that commenced prior to January 1, 2019) or the lease commencement date (for those leases that commenced after January 1, 2019).

As of March 31, 2019, the Company’s operating lease assets and liabilities were $17.9 million and $34.4 million, respectively. The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the 300 South Riverside Lease in Chicago, Illinois. Other information related to the Company’s operating leases for the three months ended March 31, 2019 is as follows (in thousands, except percentage):

Income statement information:
Operating lease cost	$	958
Short-term lease cost		381
Variable lease cost		994
Total lease cost	$	2,333

Other information:
Cash paid for operating leases	$	1,224
Weighted-average remaining lease term (in months)		139
Weighted-average discount rate		7.4	%

Note About Forward-Looking Information

This report contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements include information concerning our business strategies, strategic alternatives review process, plans and objectives, market potential, outlook, trends, future financial performance, planned operational and product improvements, potential strategic transactions, liquidity and other matters and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements, strategic actions or prospects may differ materially from those expressed or implied by these forward-looking statements. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “strategy,” “plan,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts,” “mission,” “strive,” “more,” “goal” or similar expressions. Forward-looking statements are based on our current expectations, beliefs, strategies, estimates, projections and assumptions, based on our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we think are appropriate. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by the Company and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are expressed in good faith and we believe these judgments are reasonable. However, you should understand that these statements are not guarantees of strategic action, performance or results. Our actual results could differ materially from those expressed in the forward-looking statements. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. Whether or not any such forward-looking statement is in fact achieved will depend on future events, some of which are beyond our control.

Important factors that could cause actual results or events to differ materially from those anticipated include, among others:

•	Our business is subject to risks related to the larger automotive ecosystem, including consumer demand and other macroeconomic issues.

•	We participate in a highly competitive market, and pressure from existing and new competitors may materially and adversely affect our business, results of operations and financial condition.

•	If we fail to maintain or increase our base of subscribing dealers that purchase our solutions or to increase our revenue from subscribing dealers, our business, results of operations and financial condition would be materially and adversely affected.

•	We compete with other consumer automotive websites and mobile apps and other digital content providers for share of automotive-related digital advertising spend and may be unable to maintain or grow our base of advertising customers or increase our revenue from existing advertisers.

•	We may face difficulties in transitioning to a full-service solutions provider that helps automotive brands and dealers create enduring customer relationships.

•	We rely on third-party service providers for many aspects of our business, including automobile pricing and other data, and any failure to maintain these relationships could harm our business.

•	We rely on in-house content creation and development to drive traffic to the Cars.com sites and mobile apps.

•

We rely in part on Internet search engines and ‘mobile app download stores’ to drive traffic to the Cars.com sites and mobile apps. If the Cars.com sites and mobile apps fail to appear prominently in these search results, traffic to the Cars.com sites and mobile apps would decline and our business would be materially and adversely affected.

•	The value of our assets or operations may be diminished if our information technology systems fail to perform adequately.

•	We rely on technology systems’ availability and ability to prevent unauthorized access. If our security and resiliency measures fail to prevent all incidents, it could result in damage to our reputation, incur costs and create liabilities.

•

Our business depends on a strong Cars.com brand, and any failure to maintain, protect and enhance our brand could hurt our ability to retain or expand our base of consumers, customers and advertisers, and our ability to increase the frequency with which consumers, dealers and advertisers use our services.

•	We cannot assure you that we will be able to continue to successfully develop and launch new products or grow our complementary product offerings.

•	Our business is dependent on keeping pace with advances in technology. If we are unable to keep pace with advances in technology, consumers may stop using our services and our revenues will decrease.

•	If we do not adapt to automated buying strategies quickly, our display advertising revenue could be adversely affected.

•	If our mobile apps do not continue to meet consumer demands or we are unable to successfully monetize our mobile advertising solutions, our business, results of operations and financial condition may be materially and adversely affected.

•	Dealer closures or consolidation among dealers or OEMs could reduce demand for, and the pricing of, our marketing solutions and advertising on our sites and mobile apps, thereby leading to decreased earnings.

•	If growth in the online and mobile automotive advertising market stagnates or declines, our business, results of operations and financial condition could be materially and adversely affected.

•	Our ability to generate wholesale advertising revenues depends, in part, on the performance of third parties who sell our solutions pursuant to affiliation agreements.

•

Uncertainty exists in the application of various laws and regulations to our business, including tax laws such as the Tax Cuts and Jobs Act. New laws or regulations applicable to our business, or the expansion or interpretation of existing laws and regulations to apply to our business, could subject us to licensing requirements, claims, judgments and remedies, including sales and use taxes, other monetary liabilities and limitations on our business practices, and could increase administrative costs.

•	Strategic acquisitions, investments and partnerships could pose various risks, increase our leverage, dilute existing stockholders and significantly impact our ability to expand our overall profitability.

•	The value of our existing intangible assets may become impaired, depending upon future operating results.

•	Adverse results from litigation or governmental investigations could impact our business practices and operating results.

•

Misappropriation or infringement of our intellectual property and proprietary rights, enforcement actions to protect our intellectual property and claims from third parties relating to intellectual property could materially and adversely affect our business, results of operations and financial condition.

•	If we expand into new geographic markets, we may be prevented from using our brands in such markets.

•	Our ability to operate effectively could be impaired if we fail to attract and retain our key employees.

•	Seasonality may cause fluctuations in our revenue and operating results.

•	Our business could be negatively affected as a result of actions of activist stockholders, and such activism could impact the trading value of our common stock.

•	While we are exploring and evaluating strategic alternatives, we may not be successful in identifying or completing any strategic alternative and any such strategic alternative may not yield additional value for stockholders.

•	Our historical and pro forma financial information for periods prior to the Separation from our former parent may not be a reliable indicator of our future results.

•	There could be significant liability if the distribution is determined to be a taxable transaction.

•	We may be unable to engage in certain corporate transactions after the Separation because such transactions could jeopardize the intended tax-free status of the distribution.

•	Our debt agreements contain restrictions that may limit our flexibility in operating our business.

•	Increases in interest rates could increase interest payable under our variable rate indebtedness.

•	Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021 may adversely affect the market value of our current or future debt obligations, including our long-term debt instruments and our bank credit facilities.

•	We do not expect to pay any cash dividends for the foreseeable future.

•	Your percentage of ownership in the Company may be diluted in the future.

•

Certain provisions of our certificate of incorporation, by-laws, tax matters agreement, separation and distribution agreement, employee matters agreement, transition services agreement, and Delaware law may discourage takeovers and limit our ability to use, acquire, or develop certain competing businesses.

•

Our amended and restated certificate of incorporation designates the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us and our directors and officers.

For a detailed discussion of many of these risks and uncertainties, see “Part I, Item 1A., Risk Factors” and “Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019 All forward-looking statements contained in this report are qual ified by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. The forward-looking statements contained in this report are based only on information currently av ailable to us and speak only as of the date of this report. We undertake no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unan ticipated or otherwise, or changes in future operating results over time or otherwise. The forward-looking statements in this report are intended to be subject to the safe harbor protection provided by the federal securities laws.

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 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 Information” 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 “Cars.com,” “we,” “us,” “our” and similar terms refer to Cars.com Inc. and its subsidiaries, collectively, unless the context indicates otherwise.

Business Overview

Cars.com is a leading two-sided digital automotive marketplace that connects car shoppers with sellers and original equipment manufacturers (“OEM”s), empowering shoppers with the resources and information to make informed buying decisions. Our portfolio of brands includes Cars.com, Dealer Inspire and DealerRater, in addition to Auto.com, PickupTrucks.com and NewCars.com. Dealer Inspire and DealerRater provide digital solutions for car dealers, including cutting-edge dealer websites, technology and reputation management solutions that improve automotive selling for local dealerships and national OEM brands. In a rapidly changing market, Cars.com enables dealerships and OEMs with innovative technical solutions and data-driven intelligence to better reach and influence ready-to-buy shoppers, increase inventory turn and gain market share.

In May 2017, we separated from our former parent company, TEGNA Inc. (“TEGNA”) by means of a spin-off of a newly formed company, Cars.com Inc., which now owns TEGNA’s former digital automotive marketplace business (the “Separation”). Our common stock began trading “regular way” on the New York Stock Exchange on June 1, 2017.

In the time since Cars.com became an independent company, we have developed and commenced a new, ongoing multi-year business strategy to better support sustainable long-term growth and market leadership. We are making strides to transform from a listings business to an online media and digital solutions platform that is well-positioned to lead in the online automotive retail sector. In 2018 and 2019, we accomplished many product, technology, sales and go-to-market changes designed to underpin a strategy aimed at achieving sustainable market leadership during a dynamic period in the automobile and automotive-advertising sectors.

In conjunction with our digital solutions strategy, in February 2018, we acquired all of the outstanding stock of Dealer Inspire, Inc. and substantially all of the net assets of Launch Digital Marketing LLC (the “Acquisition”). The post-Acquisition business related to Dealer Inspire, Inc. and Launch Digital Marketing LLC is referred to collectively as “Dealer Inspire”. The results of operations for the three months ended March 31, 2018 includes Dealer Inspire’s financial results for the post-Acquisition period of February 21, 2018 through March 31, 2018.

Overview of Results

	Three Months Ended March 31,
(In thousands, except percentages)	2019			2018
Revenues	$	154,198		$	159,957
Net (loss) income ^{(1) (2)}		(9,031	)		929
Retail revenues as % of total revenues		90	%		83	%
Wholesale revenues as % of total revenues		10	%		17	%

(1)

The net loss for the three months ended March 31, 2019 is primarily attributed to a decrease in national advertising revenues, higher depreciation and amortization expense due to the full quarter’s impact related to the Acquisition, and additional amortization resulting from the reduction of the useful lives of certain assets related to the Technology Transformation.

(2)

During the three months ended March 31, 2019, we recognized $6.5 million related to severance, transformation and other exit costs; $2.7 million in costs associated with stockholder activist campaign; and $2.0 million in transaction-related costs. During the three months ended March 31, 2018, we recognized $0.5 million related to severance, transformation and other exit costs; $3.8 million in costs associated with stockholder activist campaign; and $10.1 million in transaction-related costs.

2019 Highlights

Technology Transformation. In February 2019, we announced a restructuring of the product and technology teams (the “Technology Transformation”). This restructuring is primarily focused on shifting our technology spend towards innovation to improve our speed of product delivery, to enable integration across current and future systems, and to migrate our systems to the cloud. In connection

with the Technology Transformation, we have aligned our product and technology teams with our long-term growth strategy to expand beyond listings to a digital solutions marketplace. As part of this process, we have streamlined the existing teams as we mo dernize our technology platform and invest in a more efficient cloud-based infrastructure focused on machine learning, product innovation and growth. Further, we expect to achieve cost efficiencies upon completion of the Technology Transformation.

Strategic Alternatives to Enhance Shareholder Value. In January 2019, we announced that we have been conducting a process to explore strategic alternatives to enhance shareholder value. At the September 28, 2018 meeting, the Board of Directors authorized management and its external advisors to initiate such a process and we have since been considering a broad range of strategic alternatives, including a potential sale of the Company. There can be no assurance that the strategic alternatives review process will result in a sale of the Company or other strategic change or outcome. We have not set a timetable for the conclusion of our review of strategic alternatives, and we do not intend to comment further unless and until the Board of Directors has approved a specific course of action or we otherwise determined that further disclosure is appropriate or required by law.

Sales Transformation. In December 2018, we restructured the sales team (the “Sales Transformation”), which reorganized the sales force into teams designed to provide the full range of enhanced services to current customers and a more tailored structure to win new customers. These changes reflect the expansion of our business beyond car listings to include value-added digital solutions such as innovations from Dealer Inspire and DealerRater. The Sales Transformation also reflects a realignment of territories following the conversion of the majority of the affiliate agreements.

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. We also review other key metrics including: unique visitors, average revenue per dealer and dealer customer and consumer satisfaction statistics.

Information regarding Traffic and Average Monthly Unique Visitors is as follows:

	Three Months Ended March 31,
	2019		2018		% Change
Traffic (Visits)		132,474,000		113,416,000		17	%
Average Monthly Unique Visitors		22,408,000		19,352,000		16	%

Information regarding our Dealer Customers and Direct Monthly Average Revenue Per Dealer is as follows:


	March 31, 2019		March 31, 2018		% Change			December 31, 2018		% Change
Dealer Customers ⁽¹⁾		19,300		20,474		(6	)%		19,921		(3	)%
Direct Monthly Average Revenue Per Dealer ⁽²⁾	$	2,225	$	2,036		9	%	$	2,139		4	%

(1)	Beginning June 30, 2018, this key operating metric includes Dealer Inspire customers.

(2)	Beginning in the first quarter of 2019, this key operating metric includes revenues from dealer websites and related digital solutions from Dealer Inspire.

Traffic (Visits). Traffic is critical to our business. Traffic to the Cars.com network of websites and mobile apps provides value to our advertisers in terms of audience, awareness, consideration and conversion. In addition to tracking traffic volume and sources, we monitor activity on our properties, allowing us to innovate and refine our consumer-facing offerings. Traffic is defined as the number of visits to Cars.com desktop and mobile properties (responsive sites and mobile apps), using Adobe Analytics. Visits refers to the number of times visitors accessed Cars.com properties during the period, no matter how many visitors make up those visits. Traffic provides an indication of our consumer reach. Although our consumer reach does not directly result in revenue, we believe our ability to reach in-market car shoppers is attractive to our dealers and national advertisers.

The growth in Traffic was driven by increases in both organic and paid traffic. Mobile traffic accounted for 71% and 65% of total Traffic for the three months ended March 31, 2019 and 2018, respectively.

Average Monthly Unique Visitors (“UVs”). Growth in unique visitors and consumer traffic to our network of websites and mobile apps increases the number of impressions, clicks, leads and other events we can monetize to generate revenue. We define UVs in a given month as the number of distinct visitors that engage with our platform during that month. Visitors are identified when a user first visits an individual Cars.com property on an individual device/browser combination, or installs one of our mobile apps on an

individual device. If an individual 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 cou nts towards the number of UVs. We measure UVs using Adobe Analytics.

The growth in UVs was driven by increases in both organic and paid traffic.

Dealer Customers . Dealer Customers represent dealerships using our products as of the end of each reporting period. Each 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. Beginning June 30, 2018, this key operating metric includes Dealer Inspire customers.

Total Dealer Customers declined 3% from December 31, 2018. Dealer Customers decreased primarily due to higher cancellations of marketplace customers, offset in part by growth in Dealer Inspire only customers.

Total Dealer Customers declined 6% from March 31, 2018. Dealer Customers decreased primarily due to higher cancellations of marketplace customers, offset in part by incremental customers from the Acquisition and continued growth of Dealer Inspire only customers.

Average Revenue Per Dealer (“ARPD”). We believe that our ability to grow ARPD is an indicator of the value proposition of our products. We define ARPD as Direct retail revenue during the period divided by the average number of direct Dealer Customers during the same period. Beginning the first quarter of 2019, this key operating metric includes revenue from dealer websites and related digital solutions. ARPD prior to the first quarter of 2019 has not been recast to include Dealer Inspire as it would be impracticable to do so .

ARPD increased 4% from December 31, 2018, primarily driven by the addition of Dealer Inspire revenues. Excluding the impact of Dealer Inspire revenues, ARPD would have decreased 2%, primarily due to higher cancellations and reduced spend from marketplace customers.

ARPD increased 9% from March 31, 2018, primarily driven by the addition of Dealer Inspire revenues and the favorable impact of the increase in large dealers in larger markets that we now control. Direct ARPD excluding revenues from dealer websites and related digital solutions from Dealer Inspire was $2,102, up 3% from the prior year.

Factors Affecting Our Performance. Our business is impacted by the larger automotive environment, including consumer demand and other macroeconomic factors, and changes related to automotive digital advertising solutions. We have recently observed softness in new car sales in the United States and reduced dealer profitability, which has impacted OEMs’ and dealerships’ willingness to shift and/or increase spend with automotive marketplaces like Cars.com. Our success will depend in part on our ability to transform our business toward digital solutions that complement our media offerings, and our continued integration of Dealer Inspire will be an important driver of our success. We are adapting our go-to-market sales and technology infrastructure, as described in the Sales and Technology Transformations discussions above, to support the execution of our strategy. To continue driving more value to our customers in the form of highly qualified car shoppers, we plan to increase investment s in product and marketing. The foundation of our continued success is the value we deliver to customers, and we believe that our large and growing audience of car shoppers and innovative solutions will deliver value to our customers.

Results of Operations

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018

	Three Months Ended March 31,						Increase
(In thousands, except percentages)	2019			2018			(Decrease)			% Change
Revenues:
Direct	$	115,094		$	101,478		$	13,616			13	%
National advertising		20,295			26,818			(6,523	)		(24	)%
Other		3,949			4,047			(98	)		(2	)%
Retail		139,338			132,343			6,995			5	%
Wholesale		14,860			27,614			(12,754	)		(46	)%
Total revenues		154,198			159,957			(5,759	)		(4	)%
Operating expenses:
Cost of revenues and operations		25,579			17,985			7,594			42	%
Product and technology		17,863			17,908			(45	)		0	%
Marketing and sales		60,343			65,407			(5,064	)		(8	)%
General and administrative		23,888			24,270			(382	)		(2	)%
Affiliate revenue share		2,454			3,283			(829	)		(25	)%
Depreciation and amortization		28,125			23,938			4,187			17	%
Total operating expenses		158,252			152,791			5,461			4	%
Operating income		(4,054	)		7,166			(11,220	)		(157	)%
Nonoperating (expense) income:
Interest expense, net		(7,566	)		(5,957	)		(1,609	)		27	%
Other income (expense), net		119			(16	)		135		***%
Total nonoperating expense, net		(7,447	)		(5,973	)		(1,474	)		25	%
(Loss) income before income taxes		(11,501	)		1,193			(12,694	)	***%
Income tax (benefit) expense		(2,470	)		264			(2,734	)	***%
Net (loss) income	$	(9,031	)	$	929		$	(9,960	)	***%

*** Not meaningful

Retail Revenues—Direct . Direct revenues consists of marketplace and digital solutions sold to Dealer Customers. Direct revenues is our largest revenue stream, representing 74.6% and 63.4% of total revenues for the three months ended March 31, 2019 and 2018, respectively. Direct revenues grew by $13.6 million, or 13%, compared to the prior year. During 2018, we amended our affiliate agreements with The McClatchy Company (“McClatchy”), tronc, Inc. (“tronc”) and the Washington Post to convert all of these affiliate markets prior to the expiration dates of the original affiliate agreements. During the three months ended March 31, 2019, the affiliate market conversions contributed an incremental $13.2 million to Direct revenues measured at the month of each of the conversions, while reducing Wholesale revenues by $11.4 million (of which $2.8 million relates to the Unfavorable contracts liability amortization). A full quarter’s impact of Dealer Inspire’s business contributed an incremental $11.5 million to Direct revenues. Excluding the affiliate market conversions and Dealer Inspire, Direct revenues decreased $11.1 million, or 14%, compared to the prior year, primarily due to a 12% decline in Direct Dealer Customers. Direct Dealer Customers decreased 3% from December 31, 2018. For information related to the affiliate market conversions, see Note 6 (Unfavorable Contracts Liability) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Retail Revenues—National Advertising . National advertising revenues consists of display advertising and other solutions sold to OEMs and advertising agencies. National advertising revenues represent 13.2% and 16.8% of total revenues for the three months ended March 31, 2019 and 2018, respectively. National advertising revenue declined 24%, as OEMs reduced their upfront commitments and we experienced a lower close rate on new sales to these customers. These declines are occurring as OEMs have reduced or shifted their spending during the quarter.

Wholesale Revenues . Wholesale revenues represent the fees we charge for marketplace and digital solutions sold to dealers by affiliates. The fees represent approximately 60% of the retail value for the same online subscription products sold by our direct sales team. Wholesale revenues represent 9.6% and 17.3% of total revenues for the three months ended March 31, 2019 and 2018, respectively. Wholesale revenues decreased 46% primarily due to affiliate market conversions from Wholesale revenues ($11.4 million, which includes $2.8 million of Unfavorable contracts liability amortization) to direct revenues ($13.2 million). In addition,

excluding the affiliate market conversions, Wholesale revenues was impacted by a 9% decline in Dealer Customers. For informa tion related to the affiliate market conversions, see Note 6 (Unfavorable Contracts Liability) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Cost of revenues and operations . Cost of revenues and operations primarily consist of expenses related to our pay-per-lead products, third-party costs for processing dealer vehicle inventory, product fulfillment, customer service and compensation costs. Cost of revenues and operations represents 16.6% and 11.2% of total revenues for the three months ended March 31, 2019 and 2018, respectively. Cost of revenues and operations increased, primarily due to higher third-party costs, principally related to new product offerings, and incremental compensation costs associated with the full quarter’s impact of Dealer Inspire’s business.

Product and technology. The product team creates and manages consumer and dealer-facing innovation, manages consumer user experience and includes the costs associated with our editorial and data strategy teams. The technology team develops and supports the Cars.com products and website. Product and technology expenses include compensation costs, as well as license fees for vehicle specifications, search engine optimization, hardware/software maintenance, software licenses, data center and other infrastructure costs. Product and technology expenses represent 11.6% and 11.2% of total revenues for the three months ended March 31, 2019 and 2018, respectively. Product and technology expenses were flat, as the full quarter’s impact of Dealer Inspire’s business was offset by cost efficiencies.

Marketing and sales . Marketing and sales expenses primarily consist of traffic and lead acquisition costs (including search engine marketing and other online marketing), TV and digital display/video advertising and creative production, market research, trade events and compensation costs for the marketing, sales support and sales teams. Marketing and sales expenses represent 39.1% and 40.9% of total revenues for the three months ended March 31, 2019 and 2018, respectively. Marketing and sales decreased, primarily due to lower compensation costs as a result of the Sales Transformation and cost efficiencies associated with trade events. These costs were partially offset by the full quarter’s impact of Dealer Inspire’s business and an increase in performance marketing.

General and administrative . General and administrative expenses primarily consist of compensation costs for the finance, legal, human resources, facilities and other administrative employees. In addition, general and administrative expenses include office space rent, legal and accounting services, other professional services, transaction-related costs and costs related to the write-off and loss on assets. General and administrative expenses represent 15.5% and 15.2% of total revenues for the three months ended March 31, 2019 and 2018, respectively. General and administrative expenses decreased $0.4 million and 2% versus the prior year. During the three months ended March 31, 2019, we recognized $6.5 million related to severance, transformation and other exit costs; $2.7 million in costs associated with stockholder activist campaign and $2.0 million in transaction-related costs. During the three months ended March 31, 2018, we recognized $0.5 million related to severance, transformation and other exit costs; $3.8 million in costs associated with stockholder activist campaign; and $10.1 million in transaction-related costs. Excluding these costs, general and administrative expenses increased $2.8 million and 29% versus the prior year, primarily due to the full quarter’s impact of Dealer Inspire’s business and increased stock based compensation.

Affiliate revenue share. Affiliate revenue share expense primarily represents payments made to affiliates pursuant to our affiliate agreements. Affiliate revenue share expense decreased 25%, as the amortization of the Unfavorable contracts liability related to the converted affiliate markets is now recorded as a reduction of Affiliate revenue share expense, rather than Wholesale revenues. This decline was partially offset by higher costs associated with the early conversions of the McClatchy, tronc and Washington Post markets. For information related to the Unfavorable contracts liability, see Note 6 (Unfavorable Contracts Liability) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Depreciation and amortization . Depreciation and amortization expense increased 17%, primarily due to the full quarter’s impact of the Acquisition and additional amortization resulting from the reduction of the useful lives of certain assets related to the Technology Transformation.

Interest expense, net . Interest expense increased due to the full quarter’s interest related to the borrowing utilized to fund the Acquisition, as well as additional interest expense associated with the interest rate swap. For information related to our Term and Revolving Loans and interest rate swap, see Note 4 (Debt) and Note 5 (Interest Rate Swap), respectively, to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

Overview. Our primary sources of liquidity are cash flows from operations, available cash reserves and debt capacity available under our credit facilities. Our operations have generated positive operating cash flows in 2019 and 2018 which, along with our Term and Revolving Loans described below, provides adequate liquidity to meet our business needs, including those for investments and

strategic acquisitions. In addition, we may raise additional funds through other public or private debt or e quity financings. The tax matters agreement that we entered into with TEGNA prior to the Separation included restrictions that may limit our ability to pursue certain strategic transactions or other transactions that we may believe to be in the best intere sts of our stockholders, or that might increase the value of our business. See Part II, Item 1A., “Risk Factors” of this Quarterly Report on Form 10-Q. As of March 31, 2019, cash and cash equivalents were $28.3 million.

Term Loan and Revolving Loan. As of March 31, 2019, the outstanding principal amount under the Term Loan was $410.6 million, with an interest rate of 4.3%, including the impact of the interest rate swap. The outstanding borrowings under the Revolving Loan were $275.0 million, with an interest rate of 4.1%. During the three months ended March 31, 2019, we made $5.0 million in voluntary revolving loan payments and $5.6 million in mandatory Term Loan payments. As of March 31, 2019, $175.0 million was available to borrow under the Revolving Loan. Our borrowings are limited by our net leverage ratio, which is calculated in accordance with our credit agreement, and was 3.0 to 1.0 as of March 31, 2019.

Interest Rate Swap. The interest rate on borrowings under our Term Loan is floating and, therefore, subject to fluctuations. In order to manage the risk associated with changes in interest rates on our borrowing under our Term Loan, we entered into an interest rate swap agreement (the “Swap”) effective December 31, 2018. Under the terms of the Swap, we are locked into a fixed rate of interest of 2.96% plus an applicable margin, as defined in our Credit Agreement, on a notional amount of $300 million. As of March 31, 2019, the fair value of the Swap was an unrealized loss of $7.3 million. The Swap is designated as a cash flow hedge of interest rate risk and recorded at fair value in Other liabilities on the Consolidated Balance Sheets. Any gains or losses on the Swap will be reported as a component of Accumulated comprehensive (loss) income until reclassed to Interest expense, net in the same period the hedge transaction impacts earnings.

Share Repurchase Program. In March 2018, our Board of Directors authorized a share repurchase program to acquire up to $200 million of our common stock over a two year period. We may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. The timing and amounts of any purchases under the share repurchase program will be based on market conditions and other factors including price. The repurchase program does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. During the three months ended March 31, 2019, we repurchased and subsequently retired 0.9 million shares for $20.0 million. There was no stock repurchase activity during the three months ended March 31, 2018.

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

	Three Months Ended March 31,
	2019			2018			Change
Net cash provided by (used in):
Operating activities	$	38,389		$	26,661		$	11,728
Investing activities		(3,963	)		(159,481	)		155,518
Financing activities		(31,549	)		123,758			(155,307	)
Net change in cash and cash equivalents	$	2,877		$	(9,062	)	$	11,939

Operating Activities. Cash provided by operating activities for the three months ended March 31, 2018 was unfavorably impacted by the cash settlement of DI’s unvested equity awards. In addition, the increase in cash provided by operating activities for the three months ended March 31, 2019 benefited from changes in operating assets and liabilities, partially offset by lower net income.

Investing Activities. The decrease in cash used in investing activities is primarily due to the Acquisition in February 2018.

Financing Activities. During the three months ended March 31, 2018, cash provided by financing activities is primarily due to net revolving loan borrowings of $130.0 million related to the Acquisition in February 2018. During the three months ended March 31, 2019, financing activities primarily related to $20.0 million in share repurchases and $10.6 million of loan repayments, of which $5.0 million was voluntarily paid. For information related to our Term and Revolving Loans, see Note 4 (Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Commitments and Contingencies. For information related to commitments and contingenc ies, see Note 7 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

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

Critical Accounting Policies. For information related to critical accounting policies, see “Critical Accounting Policies and Estimates” in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of the Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the SEC on February 28, 2019 and see Note 1 (Description of Business, Company History and Summary of Significant Accounting Polices) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q. During the three months ended March 31, 2019, there have been no changes to our critical accounting policies.

Recent Accounting Pronouncements. For information related to recent accounting pronouncements, see Note 2 (Recent Accounting Pronouncements) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, see “Quantitative and Qualitative Disclosures About Market Risk,” in Part II, Item 7A., of the Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019. Our exposures to market risk have not changed materially since December 31, 2018.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control Over Financial Reporting. During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

For information relating to legal proceedings, see Note 7 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1., “Financial Statements” of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Our business and the ownership of our common stock are subject to a number of risks and uncertainties, including those described in Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019, which could materially affect our business, financial condition, results of operations and future results. There have been no material changes from the risk factors described in our Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities by Issuer

None.

Purchases of Equity Securities by Issuer

Our stock repurchase activity for the three months ended March 31, 2019 is as follows:

Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share ⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽³⁾ (in thousands)
January 1 through January 31, 2019		881,096	$	22.70		881,096	$	82,810
February 1 through February 28, 2019		—		—		—		82,810
March 1 through March 31, 2019		—		—		—		82,810
Total		881,096				881,096

(1)	The total number of shares purchased and subsequently retired and the average price paid per share reflects shares purchased pursuant to the share repurchase program. Our stock repurchases may occur through open market purchases or pursuant to a Rule 10b5-1 trading plan.

(2)

In March 2018, the Company’s Board of Directors authorized a share repurchase program to acquire up to $200 million of the Company’s common stock. The Company may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. The timing and amounts of any purchases under the share repurchase program will be based on market conditions and other factors including price. The repurchase program has a two-year duration, does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. The Company intends to fund the share repurchase program principally with cash from operations.

(3)	The amounts presented represent the remaining Board of Directors’ authorized value to be spent after each month's repurchases.

Ite m 3. Defaults Upon Senior Securiti es

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Index

Exhibit Number		Description
10.1^ 10.2^ 31.1*		Cars.com Inc. Executive Severance Plan Cars.com Inc. Change in Control Severance Plan Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

*	Filed herewith.

^	Management contract or compensatory plan or arrangement

SIGNA TURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Cars.com Inc.

Date: May 10, 2019	By:	/s/ T. Alex Vetter
		T. Alex Vetter
		President and Chief Executive Officer

Date: May 10, 2019	By:	/s/ Becky A. Sheehan
		Becky A. Sheehan
		Chief Financial Officer

EXHIBIT 10.1

CARS.COM INC.

EXECUTIVE SEVERANCE PLAN

Table of Contents

Page

Purpose of Plan 1

Certain Defined Terms1

Eligible Employees2

Term of the Plan2

Administration of the Plan2

Amendment or Termination of Plan2

Benefits under this Plan2

Release Requirement4

Timing and Form of Payment of Severance Amount4

10.

No Mitigation/Offset4

11.

Legal Expenses4

12.

Severability; Waiver4

13.

Employment Status5

14.

Tax Withholdings5

15.

Section 409A.5

16.

Successors6

17.

Governing Law6


	-i-

Cars.com Inc.
Executive Severance Plan

Purpose of Plan

. The purpose of this Cars.com Inc. Executive Severance Plan (the “ Plan ”) is to provide individuals who are designated as Participants in the Plan severance benefits in the event of certain involuntary terminations of employment.

Certain Defined Terms

. Certain terms used herein have the definitions given to them in the first place in which they are used, and all other defined terms have the meanings set forth below in this Section 2.

(a)

“ Annual Base Salary ” means a Participant’s regular rate of annual base salary as in effect immediately preceding such Participant’s Qualifying Termination.

(b)

“ Board ” means the Company’s Board of Directors.

(c)

“ Cause ” means a termination of a Participant’s employment following the occurrence of any of the following events, each of which shall constitute a “Cause” for such termination:

(i)

any material misappropriation of funds or property of the Company or its affiliate by the Participant;

(ii)

unreasonable and persistent neglect or refusal by the Participant to perform his or her duties which is not remedied within thirty (30) days after receipt of written notice from the Company;

(iii)

conviction, including a plea of guilty or of nolo contendere, of the Participant of a securities law violation or a felony; or

(iv)

material violation of the Company’s employment policies by a Participant.

(d)

“ Committee ” means the Compensation Committee of the Board of Directors of the Company.

(e)

“ Company ” means Cars.com Inc.

“ Qualifying Termination ” means an involuntary termination of a Participant’s employment by the Company (other than for Cause)

. Any determination as to whether a termination is a Qualifying Termination shall be made in the reasonable, good faith discretion of the Committee. In no event shall a Participant’s voluntary termination or a termination due to a Participant’s death or disability constitute a Qualifying Termination under this Plan. Additionally, a Qualifying Termination shall not occur if the Participant’s employment is terminated in connection with a restructuring,


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reorganization, redundancy, merger, acquisition, sale, spinoff, outsourcing, transfer, or other similar condition or transaction, in such circumstances where the Participant is offered employment by the Company, a successor organization or other entity related to the transaction with an Annual Base Salary that is not materially less than that paid to the Participant prior to such change. The Company shall provide written notice of the Qualifying Termination, and the date of a Qualifying Termination shall be the Participant’s separation from service with the Company in accordance with the notice.

(g)

“ Severance Multiple ” means (i) with respect to a Participant who is the Chief Executive Officer of the Company, one and one half (1.5) and (ii) with respect to any other Participant, such number from one half (.5) to one (1.0), as designated by the Committee.

Eligible Employees

. This Plan shall apply solely with respect to the Company’s key employees who are designated by the Board or the Committee as participants (the “ Participants ”). The Board or the Committee shall also designate the Severance Multiple of each Participant who is not the Chief Executive Officer of the Company. Designation as a Participant shall be effective as of the date of such Board or Committee action. The Committee and the Board reserve the right to add new Participants or terminate the participation of a Participant at any time and in its sole discretion, but a Participant may not be removed from participation in the Plan or have the Participant’s Severance Multiple reduced without at least six (6) months’ advance notice.

Term of the Plan

. This Plan shall be effective commencing as of June 1, 2017, the day following the spin-off of the Company from TEGNA Inc., and shall continue until the Committee terminates the Plan. The termination of the Plan shall not affect any unsatisfied obligations under this Plan that have arisen prior to the termination with respect to Participants who have received notice of a Qualifying Termination prior to the termination.

Administration of the Plan

. This Plan shall be administered by the Committee or its delegee. All actions taken and all determinations by the Committee shall be final and binding on all persons claiming any interest in or under this Plan.

Amendment or Termination of Plan

. Following the Effective Date, the Committee and the Board reserve the right to amend or terminate the Plan at any time, but the amendment or termination of this Plan shall not affect any obligations under this Plan that have arisen prior to the date of such amendment or termination and no reduction in the benefits under this Plan through a plan amendment or plan termination shall become effective unless the Company provides at least six (6) months’ advance written notice to the affected Participants.

7. Benefits under this Plan . Upon a Qualifying Termination, a Participant shall, subject to the terms and conditions of this Plan including Section 8, be entitled to receive the following (the “ Severance Benefits ”):

(a)

a severance payment (the “Severance Amount”) equal to the Participant’s Severance Multiple multiplied by the sum of: (i) the Participant’s Annual


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Base Salary, plus (ii) the average annual bonus the Participant earned with respect to the three most recent fiscal years for which the Participant had been paid (or was eligible for) a bonus prior to the date of the Qualifying Termination. For purposes of this subsection, “average annual bonus the Participant earned” will be calculated for any fiscal year prior to the Participant’s commencement of employment by using Participant’s target bonus percentage assigned at the commencement of Participant’s employment, and will be calculated for the fiscal year in which the Participant commenced employment by annualizing the annual bonus earned with respect to that year .

(b)

an amount equal to the monthly COBRA cost of the Participant’s medical and dental coverage in effect as of the Termination Date multiplied by (i) 18 for a Participant who is the Chief Executive Officer, (ii) 12 for those Participants with a Severance Multiple of 1.0, (iii) 6 for those Participants with a Severance Multiple of 0.5, and (iv) a prorated number between 6 and 12 for those Participants with a Severance Multiple between 0.5 and 1.0.

(c)

for stock-based awards, unless specifically provided otherwise in the award document at the time of grant, service credit and continued vesting in such awards for the 12-month period following a Qualifying Termination except that for the Company’s Chief Executive Officer the service credit and continued vesting shall be for the 18-month period following a Qualifying Termination and shall apply only to stock-based awards granted on or after November 2, 2016 with prior stock-based awards for the Company’s Chief Executive Officer subject to the terms of any prior employment agreement. The stock-based awards that become payable because of such service credit and continued vesting shall be paid at the same time such awards would have been paid if the Participant had remained employed for such period but no earlier than the payment date set forth in Section 9 for the Severance Amount.

a prorated portion of the Participant’s annual bonus for the fiscal year in which the Participant is terminated based on the Company’s actual performance and based on the Participant’s individual performance at target (i.e., actual CPF and 100% IPF), paid at the time that annual bonuses are paid to similarly situated executives but no earlier than the payment date set forth in Section 9 for the Severance Amount. In the event that the Termination Date falls between January 1 and the date that annual bonuses are to be paid with respect to the prior fiscal year, the Participant shall also be entitled to a receive the annual bonus for that year, based on the Company’s actual performance and the Participant’s actual performance, paid at the time that annual bonuses are paid to similarly situated executives but no earlier than the payment date set forth in Section 9 for the Severance Amount . In addition, a Participant shall be paid in accordance with normal payroll practices all earned but unpaid compensation, accrued vacation and


	- 3 -

accrued but unreimbursed expenses required to be reimbursed through the date of termination (the “ Accrued Obligations ”).

Notwithstanding the foregoing, in the event that a Participant experiences a Qualifying Termination under circumstances that entitle the Participant to compensation and benefits under the Company’s Change in Control Severance Plan, the Participant shall receive compensation and benefits under the Company’s Change in Control Severance Plan and not under this Plan.

Release Requirement

. A Participant shall not be entitled to the Severance Benefits unless the Participant has signed and not revoked, within (i) 30 days after the date of such Participant’s Qualifying Termination if such termination is not treated as part of a group termination under the Age Discrimination in Employment Act of 1967, as amended by the Older Worker Benefit Protection Act (“ADEA”) or (ii) 55 days after the date of such Participant’s Qualifying Termination if such termination is treated as part of a group termination under ADEA, a release and covenant agreement in the form attached hereto as Exhibit A (the “ Release and Restrictive Covenant Agreement ”) or such other form that the Committee deems appropriate. The Participant shall forfeit all rights under this Plan if such Release and Restrictive Covenant Agreement is not executed and irrevocable by that date.

Timing and Form of Payment of Severance Amount

. Subject to the Release and Restrictive Covenant Agreement becoming effective and irrevocable on the Release Effective Date (as defined in Exhibit A) after the Participant’s Qualifying Termination, the Severance Amount shall be payable in a lump sum on the 5th business day after the Release Effective Date except to the extent required by Section 409A, if the period to execute the Release and Restrictive Covenant Agreement spans two calendar years, the payment shall be made on the later of the 5th business day after the Release Effective Date or the first business day of such second calendar year.

No Mitigation/Offset

. A Participant shall not be required to mitigate damages or the amount of any payment provided for under this Plan by seeking other employment or otherwise, nor shall any payments hereunder be subject to offset in respect of any claims that the Company may have against a Participant, nor shall the amount of any payment provided for under this Plan be reduced by any compensation earned as a result of such Participant’s employment with another employer.

Legal Expenses

. If, with respect to any alleged failure by the Company to comply with the terms of this Plan, a Participant institutes or responds to legal action to assert or defend the validity of, enforce his or her rights under, or recover damages for breach of the terms of this Plan or, following termination of employment, the Release and Restrictive Covenant Agreement, and thereafter the Company is found in a judgment no longer subject to review or appeal to have breached this Plan or, following termination of employment, the Release and Restrictive Covenant Agreement in any material respect, then the Company shall indemnify the Participant for his or her reasonable attorneys’ fees and costs in connection with such legal action and such indemnification payment shall be made within 60 days after such judgment.

Severability; Waiver

. If any provision of this Plan or the application thereof is held invalid or unenforceable, the invalidity or unenforceability thereof shall not affect any other provisions of this Plan which can be given effect without the invalid or unenforceable provision, and to this end the provisions of this Plan are to be severable. No waiver by either party of any


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breach by the other party of any provision or conditions of this Plan shall be deemed to be a waiver of any other provision or condition at the same or any prior or subsequent time.

Employment Status

. This Plan does not constitute a contract of employment or impose on a Participant or the Company or its subsidiaries any obligation to retain the Participant as an employee or change the status of such Participant’s employment to anything other than “at will.” The Company reserves the right to terminate a Participant for any or no reason at its convenience.

Tax Withholdings

. The Company may withhold from any payments due to a Participant hereunder, such amounts as the Company may determine are required to be withheld under applicable federal, state and local tax laws.

15. Section 409A .

General

. It is intended that payments and benefits made or provided under this Plan shall not result in penalty taxes or accelerated taxation pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the Plan shall be interpreted and administered in accordance with that intent; however, the Company shall not be responsible for any such taxes. If any provision of the Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended so as to avoid the conflict. Any payments that qualify for the “short-term deferral” exception, the separation pay exception or another exception under Section 409A of the Code shall be paid under the applicable exception. For purposes of the limitations on nonqualified deferred compensation under Section 409A of the Code, each payment of compensation under this Plan shall be treated as a separate payment of compensation for purposes of applying the exclusion under Section 409A of the Code for short-term deferral amounts, the separation pay exception or any other exception or exclusion under Section 409A of the Code. In no event may a Participant, directly or indirectly, designate the calendar year of any payment under this Plan. Despite any contrary provision of this Plan, any references to termination of employment or date of termination shall mean and refer to the date of a Participant’s “separation from service,” as that term is defined in Section 409A of the Code and Treasury regulation Section 1.409A-1(h).

Delay of Payment

. Notwithstanding any other provision of this Plan to the contrary, if a Participant is considered a “specified employee” for purposes of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the termination date), any payment that constitutes nonqualified deferred compensation within the meaning of Section 409A of the Code that is otherwise due to a Participant under this Plan during the six (6)-month period immediately following a Participant’s separation from service (as determined in accordance with Section 409A of the Code) on account of a Participant’s


	- 5 -

separation from service shall be accumulated and paid to such Participant on the first (1st) business day of the seventh (7th) month following such Participant’s separation from service (the “ Delayed Payment Date ”). If such Participant dies during the postponement period, the amounts and entitlements delayed on account of Section 409A of the Code shall be paid to the personal representative of such Participant’s estate on the first to occur of the Delayed Payment Date or thirty (30) calendar days after the date of his or her death.

Successors

. This Plan shall be binding upon the successors and assigns of the Company.

Governing Law

. This Plan shall be governed by and construed under and in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws.


	- 6 -

Exhibit A
Release of Claims and Restrictive Covenant Agreement

This Release of Claims and Restrictive Covenant Agreement (this “ Agreement ”) is entered into by you [____________________] and Cars.com Inc. (the “ Company ”) in connection with your separation from employment with the Company and in accordance with the Cars.com Inc. Executive Severance Plan (the “ Plan ”). Capitalized terms used and not defined herein shall have the meanings provided in the Plan. You and the Company agree to the following:

(1)	Date of Termination . Your final day as an employee of the Company is _______________, 20_____ (the “ Date of Termination ”).

(2)

Severance Benefits . Provided that you execute this Agreement, do not later revoke your acceptance, and that this Agreement becomes effective and non-revocable on or before _______________, 20_____, you will receive (a) a lump sum cash payment in the amount of $__________, less legally-required withholdings, payable on __________, (b) continued service credit and vesting for [12][18] months in the following stock-based awards ____________ and (c) a prorated portion of the annual bonus, if any, for the year in which your employment is terminated based on actual performance and paid at the time that annual bonuses are paid to similarly situated key employees.

(3)	Release Deadline . You will receive the benefit described in paragraph 2 above only if you sign this Agreement on or before _______________, 20_____. In exchange for and in consideration of the benefits offered to you by the Company in paragraph 2 above, you agree to the terms of this Agreement.

(4)	Release of Claims . You agree that this is a full and complete Release of Claims. Accordingly, you and the Company agree as follows:

. This Release of Claims includes all legal claims that arose at any time before or at the time you sign this Agreement; it also includes those legal claims of which you know and are aware, as well as any legal claims of which you may not know or be aware, including claims for breach of contract, claims arising out of any employment agreement you may have or under the Plan, claims of intentional or negligent infliction of emotional distress, defamation, breach of implied covenant of good faith and fair dealing, and any other claim arising from, or related to, your employment by the Company.

Notwithstanding the foregoing, by executing this Release of Claims, (i) you will not forfeit or release your right to receive your vested benefits under a qualified retirement plan, the Cars.com Share Appreciation Rights Plan, or


~~91004-0040/135756924.1~~	A-1

the Cars.com, LLC Long Term Incentive (but you will forfeit your right to receive any further severance or annual bonus award); your vested outstanding awards under the Cars.com, Inc. Omnibus Incentive Compensation Plan comprised of [specify any outstanding vested awards] any rights to indemnification and advancement of expenses under the Company’s By-laws and/or directors’ and officers’ liability insurance policies; any other rights under the Plan that are intended to survive a termination of employment; any legal claims or causes of action arising out of actions allegedly taken by the Company after the date of your execution of this Agreement; any rights you have under applicable workers compensation laws; any benefits or monies paid in the normal course to employees separating from employment such as payment of accrued but unused vacation and reimbursement of valid and appropriate business expenses; or any other claims that cannot lawfully be released. The matters referenced in this paragraph are referred to as the “ Excluded Matters .”

Several laws of the United States and of the State of Illinois create claims for employees in various circumstances

. These laws include the Age Discrimination in Employment Act of 1967, as amended by the Older Worker Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the Americans With Disabilities Act, the Genetic Information Non-discrimination Act, and the Virginia Human Rights Act. Several of these laws also provide for the award of attorneys’ fees to a successful plaintiff. You agree that this Release of Claims specifically includes any possible claims under any of these laws or similar state and federal laws, including any claims for attorneys’ fees.

By referring to specific laws we do not intend to limit the Release of Claims to just those laws

. All legal claims for money damages, or any other relief that relate to or are in any way connected with your employment with the Company or any of its subsidiaries, related or affiliated companies, are included within this Release of Claims, even if they are not specifically referred to in this Agreement. The only legal claims that are not covered by this Release of Claims are the Excluded Matters.

(d)

Except for the Excluded Matters, we and you agree that neither party will say later that some particular legal claim or claims are not covered by this Release of Claims because we or you were unaware of the claim or claims, because such claims were overlooked, or because you or we made an error.

. If, at any time in the future, such a claim is made by you, or someone acting on behalf of you, or by some other person or a governmental agency, you


~~91004-0040/135756924.1~~	A-2

agree that you will be totally and completely barred from recovering any money damages or remedy of any kind, except in the case of any legal claims or causes of action arising out of any of the Excluded Matters. This provision is meant to include claims that are solely or in part on your behalf, or claims which you have or have not authorized.

. However, this Agreement, and the Release of Claims, does mean that you may not collect any monetary damages or receive any other remedies from charges filed with or actions by the EEOC or a state FEP agency. This Agreement and the Release of Claims do not prohibit you from participating in an investigation, filing a charge or otherwise communicating with any federal, state or local government office, official or agency, including, but not limited to, Department of Labor, National Labor Relations Board, or the Securities and Exchange Commission. Nothing in this Agreement shall prohibit you from seeking and obtaining a whistleblower award from a government agency, as provided for, protected under or warranted by applicable law, including Section 21F of the Securities Exchange Act of 1934, as amended.

(5)	Restrictive Covenants .

(a)

[You hereby reaffirm the Restrictive Covenant Agreement you previously entered into (a copy of which is attached to this Agreement).] [You agree that in consideration for the payment under paragraph 2 above, for a period of twelve (12) months after the Date of Termination (the “ Restricted Period ”), you will not, without the written consent of the Company, obtain or seek a position with a Competitor (as defined below) in which you will use or are likely to use any confidential information or trade secrets of the Company or its affiliates including, but not limited to, a position in which you would have duties for such Competitor within the United States that involve Competitive Services (as defined below) and that are the same or similar to those duties actually performed by you for the Company.

You understand and agree that the relationship between the Company and each of its employees constitutes a valuable asset of the Company and may not be converted to your own use. Accordingly, you hereby agree that during the Restricted Period, you shall not, directly or indirectly, on your own behalf or on behalf of another person, solicit or induce any employee of the Company or any affiliate of the Company to terminate his or her employment relationship with the Company or any affiliate of the Company or to enter into employment with another person or entity

. The foregoing shall not apply to employees who respond to solicitations of employment


~~91004-0040/135756924.1~~	A-3

directed to the general public or who seek employment at their own initiative.

(c)

For purposes of this paragraph 5, “ Competitive Services ” means the business of selling or otherwise providing a national searchable online resource to individuals and businesses seeking to purchase, sell or lease (other than short-term rentals) passenger cars or light trucks through internet websites or digital platforms (including in conjunction with any competitive platform or business listed in the last sentence of this paragraph 5(c)) or selling or otherwise providing to third parties through such websites or platforms products and services substantially equivalent to those included in the Customer Packages offered by the Company and “ Competitor ” means any individual or any entity or enterprise engaged, wholly or in part, in Competitive Services. The parties acknowledge that the Company or its affiliates may from time to time during the term of this Agreement change or increase the line of goods or services they provide, and you agree to amend this Agreement from time to time to include such different or additional goods and services to the definition of “Competitive Services” for purposes of this paragraph 5. The following is intended to constitute a nonexclusive list of National Restricted Businesses: ADP/Cobalt, AOL Autos, Autobytel/AutoUSA, Autolist, Autotrader.com, CarFax/HIS, CarGurus, CarsDirect/Internet Brands, CarsforSale.com, CarSoup.com, DealerTrack/Dealer.com, eBay Motors, Edmunds.com, KBB.com, LotLinx, MSN Autos, TrueCar, Yahoo! Autos.]

[ During the course of your employment and as part of the performance of your various duties you came into the possession of information which the Company or its affiliates consider to be Confidential and Proprietary Information and which is not generally disclosed or made known to the trade or public

. This includes, but is not limited to, information bearing on strategic planning, finances, shareholder matters, budgets, audience, research, marketing, personnel, management of the company and its affiliated companies, and relationships with advertisers, vendors and suppliers. You agree that unless duly authorized in writing by the Company, you will not at any time divulge or use in connection with any business activity any trade secrets or confidential and proprietary information first acquired by you during and by virtue of your employment with the Company or its affiliates. You agree that you will not retain any copies of such materials, whether in hard copy or electronic copy, and will not use or disclose to anyone any such Confidential or Proprietary Information, in any form.]

You agree that you will not make any statements, oral or written, or cause or allow to be published in your name, or under any other name, any statements, interviews, articles, books, web logs, editorials or commentary (oral or written) that are critical or disparaging of the Company, the


~~91004-0040/135756924.1~~	A-4

Company’s affiliates, or any of their operations, or any of their officers, employees or directors

(f)

You agree that due to your position of trust and confidence the restrictions contained in this paragraph 5 are reasonable, and the benefits conferred on you in this Agreement are adequate consideration, and since the nature of the Company’s business is national in scope, the geographic restriction herein is reasonable.

You acknowledge that a breach of this paragraph 5 would cause irreparable injury and damage to the Company which could not be reasonably or adequately compensated by money damages

. Accordingly, you acknowledge that the remedies of injunction and specific performance shall be available in the event of such a breach, and the non- breaching party shall be entitled to money damages, costs and attorneys’ fees, and other legal or equitable remedies, including an injunction pending trial, without the posting of bond or other security. Any period of restriction set forth in this paragraph 5 shall be extended for a period of time equal to the duration of any breach or violation thereof.

(h)

In the event of your breach of this paragraph 5, in addition to the injunctive relief described above, the Company’s remedy shall include the forfeiture or return to the Company of any payment made or due to you or on your behalf under paragraph 2 above.

(i)

In the event that any provision of this paragraph 5 is held to be in any respect an unreasonable restriction, then the court so holding may modify the terms thereof, including the period of time during which it operates or the geographic area to which it applies, or effect any other change to the extent necessary to render this paragraph 5 enforceable, it being acknowledged by the parties that the representations and covenants set forth herein are of the essence of this Agreement.

(6)

Cooperation . You agree to fully cooperate and assist the Company in the defense of any investigations, claims, charges, arbitrations, grievances, or lawsuits brought against the Company or any of its operations, or any officers, employees or directors the Company or any of its operations, as to matters of which you have personal knowledge necessary, in the Company’s judgment, for the defense of the action. You agree to provide such assistance reasonably consistent with the requirements of your other obligations and the Company agrees to pay your reasonable out-of-pocket expenses incurred in connection with this assistance and such expenses will be paid in accordance with Treasury Regulation 1.409A-3(i)(1)(iv)(A).

(7)

Entire Agreement . You agree that this Agreement contains all of the details of the agreement between you and the Company with respect to the subject matter hereof. Nothing has been promised to you, either in some other written document or orally, by the Company or any of its officers, employees or directors, that is not included in this Agreement.


~~91004-0040/135756924.1~~	A-5

(8)	No Admission . Nothing contained in this Agreement will be deemed or construed as an admission of wrongdoing or liability on the part of Company Parties.

(9)

Governing Law and Venue . All matters affecting this Agreement, including the validity thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. The parties agree to submit to the jurisdiction of the federal and state courts sitting in Delaware, for all purposes relating to the validity, interpretation, or enforcement of this Agreement.

(10)

Time to Consider; Effectiveness . Please review this Agreement carefully. We advise you to talk with an attorney before signing this Agreement. So that you may have enough opportunity to think about this offer, you may keep this Agreement for [21(if not a group termination under ADEA)][45 (if a group termination under ADEA)] days from the date of termination of your employment. You acknowledge that this Agreement was made in connection with your participation in the Plan and was available to you both prior to and immediately at the time of your termination of employment. For that reason you acknowledge and agree that the [21-day]][45-day] consideration period identified in this paragraph commenced to run, without any further action by the Company immediately upon your being advised of the termination of your employment. Consequently, if you desire to execute this Agreement, you must do so no later than _______________, 20_____. Should you accept all the terms by signing this Agreement on or before _______________, 20_____, you may nevertheless revoke this Agreement within seven (7) days after signing it by notifying ____________________ in writing of your revocation. We will provide a courtesy copy to your attorney, if you retain one to represent you and you request us to do so. If you choose to retain counsel to review and advise you concerning this Agreement that shall be considered a personal expense on your part and not be reimbursed or indemnified. If you wish to accept this Agreement, please confirm your acceptance of the terms of the Agreement by signing the original of this Agreement in the space provided below. The Agreement will become effective, and its terms will be carried out beginning on the day following the seven (7)-day revocation period (“ Release Effective Date ”).

(11)

Knowing and Voluntary . By signing this Agreement you agree that you have carefully read this Agreement and understand its terms. You also agree that you have had a reasonable opportunity to think about your decision, to talk with an attorney or advisor of your choice, that you have voluntarily signed this Agreement, and that you fully understand the legal effect of signing this Agreement.


Date:
			EMPLOYEE


Date:
			CARS.COM INC.
			By:
			Title:


~~91004-0040/135756924.1~~	A-6

EXHIBIT 10.2

CARS.COM INC.

CHANGE IN CONTROL SEVERANCE PLAN

Table of Contents

Page

Purpose of the Plan 1

Effective Date1

Administration of the Plan.1

(a)

The Committee1

(b)

Determinations by the Committee2

(c)

Delegation of Authority2

Participation in the Plan.2

(a)

Designation of Participants2

(b)

Terminating or Changing Severance Multiple as a Participant3

Change in Control3

Eligibility for Benefits under the Plan.4

(a)

General4

(b)

Cause4

(c)

Good Reason5

(d)

Certain Terminations Prior to a Change in Control5

(e)

No Waiver6

(f)

Notice of Termination After a Change in Control6

(g)

Date of Termination6

Obligations of the Company upon Termination.6

(a)

Cause; Other than for Good Reason6

(b)

Termination Without Cause; Good Reason Terminations7

(c)

Timing of Payments and Release Condition9

Mitigation9

Resolution of Disputes9

10.

Legal Expenses and Interest.10

11.

Funding10

12.

No Contract of Employment10

13.

Non-exclusivity of Rights.10

(a)

Future Benefits under Company Plans11

(b)

Benefits of Other Plans and Agreements11


	- i -

Table of Contents

(continued)

Page

14.

Successors; Binding Agreement 11

15.

Transferability and Enforcement.11

16.

Notices12

17.

Amendment or Termination of the Plan12

18.

Waivers12

19.

Validity12

20.

Governing Law12

21.

Section 409A.13

(a)

General13

(b)

Delay of Payment13

(c)

Reimbursement and In-Kind Benefits13

22.

Headings13


	- ii -

CARS.COM INC.

CHANGE IN CONTROL SEVERANCE PLAN

Purpose of the Plan

. The Board of Directors (the “Board”) of Cars.com Inc. (the “Company”) considers the establishment and maintenance of a strong and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders.

As is the case with most publicly held corporations, the possibility of a Change in Control (as defined below) of the Company exists, and that possibility, and the uncertainty and questions which it may raise among key executives concerning future employment, may result in the departure or distraction of key executives, to the detriment of the Company and its stockholders.

The purpose of the Plan (as defined below) is to assure the Company that it will have the continued dedication of, and the availability of objective advice and counsel from, key executives of the Company and its affiliates (as defined below) notwithstanding the possibility, threat or occurrence of a Change in Control.

In the event that the Company or its stockholders receive any proposal from a third party concerning a possible business combination with the Company or an acquisition of the Company’s equity securities, the Board believes it imperative that the Company and the Board be able to rely upon key executives to continue in their positions and be available for advice, if requested, without concern that those individuals might be distracted by the personal uncertainties and risks created by such a proposal.

Should the Company receive any such proposal, in addition to their regular duties, such key executives may be called upon to assist in the assessment of such proposal, advise management and the Board as to whether such proposal would be in the best interest of the Company and its stockholders, and to take such other actions as the Board might determine to be appropriate.

Therefore, in order to accomplish these objectives, the Board has adopted the Change in Control Severance Plan (the “Plan”).

Effective Date

. The Plan shall become effective as of June 1, 2017, the first business day following the date that the Company was spun off from TEGNA Inc.

3. Administration of the Plan .

The Committee

. The Plan shall be administered (i) by the Compensation Committee of the Board or (ii) if so determined by the Board, by such other committee of non- employee directors as the Board shall appoint or by the Board (the “Committee”). The members of the Committee shall be entitled to all of the rights to indemnification and payment of expenses and costs set forth in the Bylaws of the Company. In no event may the protection afforded the Committee members in this Section 3(a) be reduced in anticipation of or following a Change in Control.


	- 1 -

Determinations by the Committee

. Subject to the express provisions of the Plan and to the rights of the Participants (as defined below) pursuant to such provisions, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to designate persons to be covered by the Plan; to revoke such designations; to interpret the terms and provisions of the Plan (and any notices or agreements relating thereto); and otherwise to supervise the administration of the Plan in accordance with the terms hereof. Prior to a Change in Control, all decisions made by the Committee pursuant to the Plan shall be made in its sole discretion and shall be final and binding on all persons, including the Company and Participants. The Committee’s determinations need not be uniform, and may be made selectively among eligible employees and among Participants, whether or not they are similarly situated. Notwithstanding any provision in the Plan to the contrary, however, following a Change in Control, any act, determination or decision of the Company or the Committee, as applicable, with regard to the administration, interpretation and application of the Plan must be reasonable, as viewed from the perspective of an unrelated party and with no deference paid to the actual act, determination or decision of the Company or the Committee, as applicable. Furthermore, following a Change in Control, any decision by the Company or the Committee, as applicable, shall not be final and binding on a Participant. Instead, following a Change in Control, if a Participant disputes a decision of the Company or the Committee relating to the Plan and pursues legal action, the court shall review the decision under a “de novo” standard of review. In addition, following a Change in Control, in the event that (i) the Company’s common stock is no longer publicly traded and (ii) any securities of the Company’s Ultimate Parent (as defined below) are publicly traded, then any decisions by the Board with respect to whether a Participant was terminated for “Cause” shall be made by the board of directors of the Ultimate Parent. For purposes of the Plan, “Ultimate Parent” means a publicly traded corporation or entity which, directly or indirectly through one or more affiliates, beneficially owns at least a plurality of the then-outstanding voting securities of the Company (including any successor to the Company by reason of merger, consolidation, the purchase of all or substantially all of the Company’s assets or otherwise).

Delegation of Authority

. The Committee may delegate to one or more officers or employees of the Company such duties in connection with the administration of the Plan as it deems necessary, advisable or appropriate.

4. Participation in the Plan .

Designation of Participants

. The Committee shall from time to time select the employees who are to participate in the Plan (the “Participants”) from among those management or highly compensated employees of the Company and its affiliates it determines to be appropriate to include as Participants, given the purposes of the Plan and the potential effects on the employee of a Change in Control. The Committee shall also designate the Severance Multiple of each Participant who is not the Chief Executive Officer of the Company. The Company shall notify each Participant in writing of his or her participation in the Plan and such Participant’s Severance Multiple. For purposes of the Plan, the term “affiliate” has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and includes any partnership or joint venture of which the Company or any of its affiliates are general partners or co-venturers.


	- 2 -

Terminating or Changing S everance Multiple as a Participant

. A person shall cease to be a Participant upon (i) the termination of his or her employment by the Company and any affiliate for any reason prior to a Change in Control, or (ii) notification in writing by the Company that such individual’s status as a Participant has been revoked. Any such revocation shall not become effective until 12 months from the date that the revocation notice is provided. A Participant’s Severance Multiple may be changed if the Company notifies the Participant in writing that such Participant’s Severance Multiple has changed. A reduction in a Participant’s Severance Multiple shall not become effective until 12 months from the date that the change notice is provided. Except as specifically provided herein, the Committee shall have absolute discretion in the selection of Participants and Severance Multiples and in revoking their status as Participants or changing Severance Multiples. Notwithstanding the foregoing, no revocation by the Committee of any person’s designation as a Participant shall be effective if made (i) on the day of, or within 24 months after, a Change in Control, (ii) prior to a Change in Control, but at the request of any third party participating in or causing the Change in Control or (iii) otherwise in connection with, in relation to, or in anticipation of a Change in Control.

Change in Control

. For purposes of the Plan, “Change in Control” means the first to occur of the following:

(a)

the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or one of its affiliates or (D) any acquisition pursuant to a transaction that complies with Sections 5(c)(i), 5(c)(ii) and 5(c)(iii);

(b)

individuals who, as of the Effective Date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(c)

consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company


	- 3 -

Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation or entity resulting from such Business Combination (including, without limitation, a corporation or entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or any corporation or entity resulting from such Business Combination) beneficially owns, directly or indirectly, 3 0% or more of, respectively, the then- outstanding shares of common stock of the corporation or entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation or entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(d)	approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

No Participant in this Plan who participates in any group conducting a management buyout of the Company under the terms of which the Company ceases to be a public company may claim that such buyout is a Change in Control under this Plan and no such Participant shall be entitled to any payments or other benefits under this Plan as a result of such buyout. For purposes of the Plan, no Participant in this Plan shall be deemed to have participated in a group conducting a management buyout of the Company unless, following the consummation of the transaction, such Participant was the beneficial owner of more than 10% of the then-outstanding voting securities of the Company or any successor corporation or entity resulting from such transaction. Notwithstanding the foregoing, in no event will the spinoff of the Company from TEGNA Inc. be treated as a Change in Control.

6. Eligibility for Benefits under the Plan .

General

. If a Change in Control shall have occurred, each person who is a Participant on the date of the Change in Control shall be entitled to the compensation and benefits provided in Section 7(b) upon the subsequent termination of the Participant’s employment, provided that such termination occurs prior to the second anniversary of the Change in Control, unless such termination is (i) because of the Participant’s death or disability (as determined under the Company’s Long Term Disability Plan in effect immediately prior to the Change in Control), (ii) by the Company or its affiliate for Cause, or (iii) by the Participant other than for Good Reason.

Cause

. For purposes of the Plan, “Cause” means:

(i) any material misappropriation of funds or property of the Company or its affiliate by the Participant;


	- 4 -

(ii) unreasonable and persistent neglect or refusal by the Participant to perform his or her duties which is not remedied within thirty (30) days after receipt of written notice from the Company; or

(iii) conviction, including a plea of guilty or of nolo contendere, of the Participant of a securities law violation or a felony.

Notwithstanding the foregoing provisions of this Section 6(b), the Participant shall not be deemed to have been terminated for Cause after a Change in Control unless and until there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board (after reasonable notice to the Participant and an opportunity for Participant, together with his or her counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Participant was guilty of conduct set forth above in this Section 6(b) and specifying the particulars thereof in detail.

Good Reason

. For purposes of the Plan, “Good Reason” means the occurrence after a Change in Control of any of the following circumstances without the Participant’s express written consent, unless such circumstances are fully corrected prior to the Date of Termination (as defined below) specified in the Notice of Termination (as defined below) given in respect thereof:

(i) the material diminution of the Participant’s duties, authorities or responsibilities from those in effect immediately prior to the Change in Control (failure to report to the Chief Executive Officer or a change in reporting level does not, by itself, constitute Good Reason);

(ii) a reduction in the Participant’s base salary or target bonus opportunity as in effect on the date immediately prior to the Change in Control;

(iii) the relocation of the Participant’s office from the location at which the Participant is principally employed immediately prior to the date of the Change in Control to a location 35 or more miles farther from the Participant’s residence immediately prior to the Change in Control, or the Company’s requiring the Participant to be based anywhere other than the Company’s offices at such location, except for required travel on the Company’s business to an extent substantially consistent with the Participant’s business travel obligations prior to the Change in Control;

(iv) the failure by the Company or its affiliate to pay any compensation or benefits due to the Participant;

(v) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform the Plan, as contemplated in Section 14; or

(vi) any purported termination of the Participant’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of the Plan.

Certain Terminations Prior to a Change in Control

. Anything in the Plan to the contrary notwithstanding, if a Change in Control occurs and if the Participant’s employment with


	- 5 -

the Company terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Participant that such termination of employment (i) was at the request of any third party participating in or causing the Change in Control or (ii) otherwise arose in connection with, in relation to, or in anticipation of the Change in Control, then the Participant shall be entitled to all payments and benefits under the Plan as though the Participant had terminated his or her employment for Good Reason on the day after the Change in Control . For purposes of this Section 6(d), a Change in Control means a Change in Control that is also a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended, (the “Code”) and the Treasury regulations and guidance issued thereunder (“Section 409A”).

No Waiver

. Subject to the last sentence of Section 6(f), the Participant’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

Notice of Termination After a Change in Control

. Any termination by the Company, or by the Participant for Good Reason, shall be communicated by Notice of Termination given in accordance with the Plan. For purposes of the Plan, a “Notice of Termination” means a written notice that (i) indicates the specific termination provision in the Plan relied upon, and (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant’s employment under the provision so indicated. With respect to a Notice of Termination given by a Participant in connection with a termination for “Good Reason” such notice must be provided within ninety (90) days after the event that created the “Good Reason”.

Date of Termination

. For purposes of the Plan, “Date of Termination” means

(i) if the Participant’s employment is terminated by the Company for Cause, the date on which the Notice of Termination is given or any later date specified therein (which, however, shall not be more than 15 days later), (ii) if the Participant’s employment is terminated by the Participant for Good Reason, the date specified in the Notice of Termination (which, however, shall not be less than 30 days or more than 45 days later than the date on which the Notice of Termination is given), or (iii) if the Participant’s employment is terminated by the Company other than for Cause, the date on which the Company notifies the Participant of such termination. In all instances, the Date of Termination shall mean the date of the Participant’s separation from service within the meaning of Section 409A.

7. Obligations of the Company upon Termination .

Cause; Other than for Good Reason

. If the Participant’s employment shall be terminated for Cause, or if the Participant terminates his or her employment other than for Good Reason, the Company shall pay the Participant his or her annual salary through the Date of Termination, to the extent not already paid, at the rate in effect at the time Notice of Termination is given, plus all other amounts to which the Participant is entitled under any compensation, benefit


	- 6 -

or other plan or policy of the Company at the time such amounts are due, and the Company shall have no further obligations to the Participant under the Plan.

Termination Without Cause; Good Reason Terminations

. Any Participant who becomes eligible for compensation and benefits pursuant to Section 6(a) shall be paid or provided the following:

(i) his or her annual base salary through the Date of Termination, to the extent not already paid, at the rate in effect at the time Notice of Termination is given, plus all other amounts to which the Participant is entitled under any compensation, benefit or other plan or policy of the Company at the time such amounts are due, including without limitation the annual bonus for the fiscal year prior to the Date of Termination, to the extent not already paid based on the Company’s actual performance and based on the Participant’s actual performance, paid at the time that annual bonuses are paid to similarly situated executives but no earlier than the payment date set forth in Section 7(c);

(ii) as severance pay and in lieu of any further salary or bonus for the period following the Date of Termination, the Participant shall receive a lump sum payment equal to his or her “Annual Compensation” (as defined below) multiplied by the “Severance Multiple” (as defined below).

For purposes of the Plan, (i) for a Participant who is the Chief Executive Officer of the Company on the date of the Change in Control, the “Severance Multiple” means two (2.0) and (ii) for any other Participant, the “Severance Multiple” means such number from one half (.5) to one and one half (1.5), as designated by the Committee.

For purposes of the Plan, “Annual Compensation” means the sum of (A) the Participant’s annual base salary at the highest rate of salary during the 12-month period immediately prior to the Date of Termination or, if higher, during the 12 month period immediately prior to the Change in Control (in each case, as determined without regard for any reduction for deferred compensation, 401(k) Plan contributions and similar items), and (B) the higher of (1) the average annual bonus the Participant earned with respect to the three most recent fiscal years for which the Participant had been paid (or was eligible for) a bonus prior to the date of the Change in Control; and (2) the average annual bonus the Participant earned with respect to the three most recent fiscal years for which the Participant had been paid (or was eligible for) a bonus prior to the Date of Termination;

(iii) a prorated annual bonus for the portion of the fiscal year elapsed prior to the Date of Termination in an amount equal to the average annual bonus the Participant earned with respect to the three fiscal years immediately prior to the fiscal year in which the Date of Termination occurs prorated for the portion of the fiscal year elapsed prior to the Date of Termination;

(iv) an amount equal to the monthly COBRA cost of the Participant’s medical and dental coverage in effect as of the Termination Date multiplied by (i) 24 for a Participant who is the Chief Executive Officer, (ii) 18 for those Participants with a Severance Multiple of 1.5, (iii) 6 for those Participants with a Severance Multiple of .5,


	- 7 -

and (iv) a prorated number between 6 and 18 for those Participants with a Severance Multiple between .5 and 1.5 ;

(v) senior executive-level outplacement services for the Participant with such outplacement services being provided by such executive outplacement firm selected by the Executive with a cost to the Company of no more than $25,000. The Executive shall commence utilization of any such senior executive-level outplacement services within six months following the Participant’s Date of Termination.

(vi) For purposes of this subsection, “average annual bonus the Participant earned” will be calculated for any fiscal year prior to the Participant’s commencement of employment by using Participant’s target bonus percentage assigned at the commencement of Participant’s employment, and will be calculated for the fiscal year in which the Participant commenced employment by annualizing the annual bonus earned with respect to that year.

(vii) It is the object of this subsection to provide for the maximum after-tax income to each Participant with respect to any payment or distribution to or for the benefit of the Participant, whether paid or payable or distributed or distributable pursuant to the Plan or any other plan, arrangement or agreement, that would be subject to the excise tax imposed by Section 4999 of the Code or any similar federal, state or local tax that may hereafter be imposed (a “Payment”) (Section 4999 of the Code or any similar federal, state or local tax are collectively referred to as the “Excise Tax”). Accordingly, before any Payments are made under this Plan, a determination will be made as to which of two alternatives will maximize such Participant’s after-tax proceeds, and the Company must notify the Participant in writing of such determination. The first alternative is the payment in full of all Payments potentially subject to the Excise Tax. The second alternative is the payment of only a part of the Participant’s Payments so that the Participant receives the largest payment and benefits possible without causing the Excise Tax to be payable by the Participant. This second alternative is referred to in this subsection as “Limited Payment”. The Participant’s Payments shall be paid only to the extent permitted under the alternative determined to maximize the Participant’s after-tax proceeds, and the Participant shall have no rights to any greater payments on his or her Payments. If Limited Payment applies, Payments shall be reduced in a manner that would not result in the Participant incurring an additional tax under Section 409A and only to the extent required to avoid the Excise Tax. The Payments shall be reduced in a manner that maximizes the Participant’s economic position; provided that the reduction shall be made in a manner consistent with the requirements of Section 409A, and to the extent required by Section 409A where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.

In the event of conflict between the order of reduction under this Plan and the order provided by any other Company document governing a Payment, then the order under this Plan shall control.

All determinations required to be made under this Section 7(b)(v) shall be made by a nationally recognized independent accounting firm or consulting firm chosen by the


	- 8 -

Committee prior to the Change in Control (the “Firm”) which shall provide detailed supporting calculations both to the Company and the Participant within ten (10) business days of the termination of employment giving rise to benefits under the Plan, or such earlier time as is requested by the Company . All fees, costs and expenses (including, but not limited to, th e costs of retaining experts) of the Firm shall be borne by the Company . In the event the Firm determines that the Payments shall be reduced, it shall furnish the Participant with a written opinion to such effect . The determination by the Firm shall be binding upon the Company and the Participant.

Timing of Payments and Release Condition

. All payments under Sections 7(b)(ii), 7(b)(iii), and 7(b)(iv) shall be due and payable in a lump sum on the 5th business day after the Release Effective Date (as defined in Exhibit A) except to the extent required by Section 409A, if the period to execute the release and not revoke the release spans two calendar years, the payment shall be made on the later of the 5th business day after the Release Effective Date or the first business day of such second calendar year; provided that the Participant executes the attached agreement set forth at Exhibit A (or a substantially similar agreement) (i) on or before the 30th day after the Date of Termination if such termination is not treated as part of a group termination under the Age Discrimination in Employment Act of 1967, as amended by the Older Worker Benefit Protection Act (“ADEA”) or (ii) on or before the 55th day after the Date of Termination if such termination is treated as part of a group termination under ADEA. The Participant shall forfeit all rights under this Plan if such agreement is not executed by that date. The timing of all payments and benefits under this Plan shall be made consistent with the requirements of Section 409A, and notwithstanding any provision of the Plan to the contrary, any amount or benefit that is payable to a Participant who is a “specified employee” (as defined in Section 409A) shall be delayed until the date which is first day of the seventh month after the date of such Participant’s termination of employment (or, if earlier, the date of such Participant’s death), if paying such amount or benefit prior to that date would violate Section 409A.

Mitigation

. Except as provided in Section 13(b), the Participant shall not be required to mitigate the amount of any payment provided for in the Plan by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in the Plan be reduced by any compensation earned by the Participant as a result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Participant to the Company, or otherwise.

Resolution of Disputes

. If there shall be any dispute between the Company and the Participant (a) in the event of any termination of the Participant’s employment by the Company, as to whether such termination was for Cause, or (b) in the event of any termination of employment by the Participant, as to whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination by the Company was for Cause or that the termination by the Participant was not for Good Reason, the Company shall pay all amounts, and provide all benefits, to the Participant and/or the Participant’s family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to the Plan as though such termination were by the Company without Cause or by the Participant with Good Reason; provided, however, that the Company shall not be required to pay any disputed amount pursuant to this Section except upon receipt of a written undertaking by or on behalf of the Participant to repay all such amounts to which the Participant


	- 9 -

is ultimately adjudged by such court not to be entitled . Notwithstanding the foregoing, the payment of any amount in settlement of a dispute described in this Section shall be made in accordance with the requirements of Section 409A.

10. Legal Expenses and Interest .

(a)

If, with respect to any alleged failure by the Company to comply with any of the terms of the Plan or any dispute between the Company and the Participant with respect to the Participant’s rights under the Plan, a Participant in good faith hires legal counsel with respect thereto or institutes any negotiations or institutes or responds to legal action to assert or defend the validity of, to interpret, enforce his or her rights under, or recover damages for violation of the terms of the Plan, then (regardless of the outcome) the Company shall pay, as they are incurred, the Participant’s actual expenses for attorneys’ fees and disbursements. The Company agrees to pay such amounts within 10 days following the Company’s receipt of an invoice from the Participant, provided that the Participant shall have submitted an invoice for such amounts at least 30 days before the end of the calendar year next following the calendar year in which such fees and disbursements were incurred.

(b)

To the extent permitted by law, the Company shall pay to the Participant on demand a late charge on any amount not paid in full when due after a Change in Control under the terms of the Plan. Except as otherwise specifically provided in the Plan, the late charge shall be computed by applying to the sum of all delinquent amounts a late charge rate. The late charge rate shall be a fixed rate per year that shall equal the sum of 3% plus the “prime rate” of Morgan Guaranty Trust Company of New York or successor institution (“Morgan”) publicly announced by Morgan to be in effect on the Date of Termination, or if Morgan no longer publicly announces a prime rate on such date, any substantially equivalent rate announced by Morgan to be in effect on such date (or, if Morgan does not exist on such date, the prime rate published by the Wall Street Journal on such date) (provided, however, that such rate shall not exceed any applicable legally permissible rate).

Funding

. The Company may, in its discretion, establish a trust to fund any of the payments which are or may become payable to Participant under the Plan, but nothing included in the Plan shall require that the Company establish such a trust or other funding arrangement. Whether or not the Company sets any assets aside for the purposes of the Plan, such assets shall at all times prior to payment to Participants remain the assets of the Company subject to the claims of its creditors. Neither the Company nor the Board nor the Committee shall be deemed to be a trustee or fiduciary with respect to any amount to be paid under the Plan.

No Contract of Employment

. The Participant and the Company acknowledge that, except as may otherwise be provided under any written agreement between the Participant and the Company, the employment of the Participant by the Company is “at will” and, subject to such payments as may become due under the Plan, such employment may be terminated by either the Participant or the Company at any time and for any reason.


	- 10 -

13. Non-exclusivity of Rights .

Future Benefits under Company Plans

. Nothing in the Plan shall prevent or limit the Participant’s continuing or future participation in any plan, program, policy or practice of the Company or any of its affiliates, nor shall anything herein limit any rights or reduce any benefits the Participant may have under any agreement or arrangement with the Company or any of its affiliates. Amounts that are vested benefits or that the Participant is otherwise entitled to receive under any plan, policy, practice or program of or any agreement or arrangement with the Company or any of its affiliates at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or agreement or arrangement except as explicitly modified by the Plan.

Benefits of Other Plans and Agreements

. If the Participant becomes entitled to receive compensation or benefits under the terms of the Plan, such compensation or benefits will be reduced by other severance benefits payable under any plan, program, policy or practice of or agreement or other arrangement between the Participant and the Company (not including payments or distributions under the Company’s equity based compensation plan) unless the other plan specifically provides for payment under this Plan and not the other plan. It is intended that the Plan provide compensation or benefits that are supplemental to severance benefits and that are actually received by the Participant pursuant to any plan, program, policy or practice of or agreement or arrangement between the Participant and the Company, such that the net effect to the Participant of entitlement to any similar benefits that are contained both in the Plan and in any other existing plan, program, policy or practice of or agreement or arrangement between the Participant and the Company will be to provide the Participant with the greater of the benefits under the Plan or under such other plan, program, policy, practice, or agreement or arrangement. This Plan is not intended to modify, amend, terminate or otherwise affect the Company’s equity compensation plan, which shall remain a fully independent and separate plan.

Successors; Binding Agreement

. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform the Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in the Plan, “Company” means the Company as herein defined and any successor to its business and/or assets which assumes and agrees to perform the Plan, by operation of law or otherwise.

15. Transferability and Enforcement .

(a)

The rights and benefits of the Company under the Plan shall be transferable, but only to a successor of the Company, and all covenants and agreements hereunder shall inure to the benefit of and be enforceable by or against its successors and assigns. The rights and benefits of Participants under the Plan shall not be transferable other than by the laws of descent and distribution.

(b)	The Company intends the Plan to be enforceable by Participants. The rights and benefits under the Plan shall inure to the benefit of and be enforceable by any Participant and the Participant’s personal or legal representatives, executors, administrators, successors, heirs,


	- 11 -

distributees, devisees and legatees . If the Participant should die while any amount would still be payable to the Participant hereunder had the Participant continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of the Plan to the Participant’s estate or as determined appropriate by the Committee .

Notices

. Any notices referred to herein shall be in writing and shall be deemed given if delivered in person or by facsimile transmission, or sent by U.S. registered or certified mail to the Participant at his or her address on file with the Company (or to such other address as the Participant shall specify by notice), or to the Company at its principal executive office, Attn: Secretary.

Amendment or Termination of the Plan

. The Board reserves the right to amend, modify, suspend or terminate the Plan at any time, provided that:

(a)

without the written consent of the Participant, no such amendment, modification, suspension or termination shall adversely affect the benefits or compensation due under the Plan to any Participant whose employment has terminated prior to such amendment, modification, suspension or termination and is entitled to benefits and compensation under Section 7(b);

(b)

no such amendment, modification, suspension or termination that has the effect of reducing or diminishing the right of any Participant to receive any payment or benefit under the Plan will become effective prior to the first anniversary of the date on which written notice of such amendment, modification, suspension or termination was provided to the Participant, and if such amendment, modification, suspension or termination was effected (i) on the day of or subsequent to the Change in Control, (ii) prior to the Change in Control, but at the request of any third party participating in or causing a Change in Control or (iii) otherwise in connection with, in relation to, or in anticipation of a Change in Control, such amendment, modification, suspension or termination will not become effective until the second anniversary of the Change in Control; and

(c)	the Board’s right to amend, modify, suspend or terminate the Plan is subject to the requirements of Section 409A to the extent such requirements apply to the Plan.

Waivers

. The Participant’s or the Company’s failure to insist upon strict compliance with any provision of the Plan or the failure to assert any right the Participant or the Company may have hereunder, including, without limitation, the right of the Participant to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right under the Plan. However, the preceding sentence does not override the time limitations set forth in the last sentence of Section 6(f).

Validity

. The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, and such other provisions shall remain in full force and effect to the extent permitted by law.

Governing Law

. To the extent not preempted by federal law, all questions pertaining to the construction, regulation, validity and effect of the provisions of the Plan shall be determined in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof.


	- 12 -

21. Section 409A .

General

. It is intended that payments and benefits made or provided under this Plan shall not result in penalty taxes or accelerated taxation pursuant to Section 409A, and the Plan shall be interpreted and administered in accordance with that intent; however, the Company shall not be responsible for any such taxes. If any provision of the Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended so as to avoid the conflict. Any payments that qualify for the “short-term deferral” exception, the separation pay exception or another exception under Section 409A shall be paid under the applicable exception. For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under this Plan shall be treated as a separate payment of compensation for purposes of applying the exclusion under Section 409A for short-term deferral amounts, the separation pay exception or any other exception or exclusion under Section 409A. In no event may a Participant, directly or indirectly, designate the calendar year of any payment under this Plan. Despite any contrary provision of this Plan, any references to “termination of employment” or “Date of Termination” or similar term shall mean and refer to the date of a Participant’s “separation from service,” as that term is defined in Section 409A and Treasury regulation Section 1.409A-1(h).

Delay of Payment

. Notwithstanding any other provision of this Plan to the contrary, if a Participant is considered a “specified employee” for purposes of Section 409A (as determined in accordance with the methodology established by the Company as in effect on the termination date), any payment that constitutes nonqualified deferred compensation within the meaning of Section 409A that is otherwise due to a Participant under this Plan during the six (6)- month period immediately following a Participant’s separation from service (as determined in accordance with Section 409A) on account of a Participant’s separation from service shall be accumulated and paid to such Participant on the first (1st) business day of the seventh (7th) month following such Participant’s separation from service (the “Delayed Payment Date”). If such Participant dies during the postponement period, the amounts and entitlements delayed on account of Section 409A shall be paid to the personal representative of such Participant’s estate on the first to occur of the Delayed Payment Date or thirty (30) calendar days after the date of his or her death.

Reimbursement and In-Kind Benefits

. Notwithstanding anything to the contrary in this Plan, all reimbursements and in-kind benefits provided under this Plan that are subject to Section 409A shall be made in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Participant’s lifetime (or during such other period of time specified in this Plan); (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred; and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

Headings

. The headings and paragraph designations of the Plan are included solely for convenience of reference and shall in no event be construed to affect or modify any provisions of the Plan.


	- 13 -

Exhibit A
Release of Claims and Restrictive Covenant Agreement

This Release of Claims and Restrictive Covenant Agreement (this “ Agreement ”) is entered into by you [_______________] and Cars.com Inc. (the “ Company ”) in connection with your separation from employment with the Company and in accordance with the Cars.com Inc. Change in Control Severance Plan (the “ Plan ”). Capitalized terms used and not defined herein shall have the meanings provided in the Plan. You and the Company agree to the following:

(1) Date of Termination . Your final day as an employee of the Company is _______________, 20_____ (the “ Date of Termination ”).

(2) Severance Amount . Provided that you execute this Agreement, do not later revoke your acceptance, and that this Agreement becomes effective on or before _______________, 20_____, you will receive (a) a lump sum cash payment in the amount of $_______________, less legally-required withholdings, payable on _______________ and (b) outplacement services as described in Section 7(b)(v) of the Plan.

(3) Release Deadline . You will receive the benefits described in paragraph 2 above only if you sign this Agreement on or before _______________, 20_____. In exchange for and in consideration of the benefits offered to you by the Company in paragraph 2 above, you agree to the terms of this Agreement.

(4) Release of Claims . You agree that this is a full and complete Release of Claims. Accordingly, you and the Company agree as follows:

(a)

The Release of Claims means that you agree to give up forever any and all legal claims, or causes of actions, you may have, or think you have, against the Company, any of its subsidiaries, related or affiliated companies, including any predecessor or successor entities, and their respective directors, officers, and employees (collectively, the “ Company Parties ”). This Release of Claims includes all legal claims that arose at any time before or at the time you sign this Agreement; it also includes those legal claims of which you know and are aware, as well as any legal claims of which you may not know or be aware, including claims for breach of contract, claims arising out of any employment agreement you may have or under the Plan, claims of intentional or negligent infliction of emotional distress, defamation, breach of implied covenant of good faith and fair dealing, and any other claim arising from, or related to, your employment by the Company.

Notwithstanding the foregoing, by executing this Release of Claims, you will not forfeit or release your right to receive your vested benefits under a qualified retirement plan, the Cars.com Share Appreciation Rights Plan, or the Cars.com, LLC Long Term Incentive (but you will forfeit your right to receive any further severance or annual bonus award); your vested outstanding awards under the Omnibus Incentive Compensation Plan


	A-1

comprised of [specify any outstanding vested awards]; any rights to indemnification and advancement of expenses under the Company’s By-laws and/or directors’ and officers’ liability insurance policies; any other rights under the Plan that are intended to survive a termination of employment; or any legal claims or causes of action arising out of actions allegedly taken by the Company after the date of your execution of this Agreement; any rights you have under applicable workers compensation laws; any benefits or monies paid in the normal course to employees separating from employment such as payment of accrued but unused vacation and reimbursement of valid and appropriate business expenses; or any other claims that cannot lawfully be released . The matters referenced in this paragraph are referred to as the “ Excluded Matters .”

(b)

Several laws of the United States and of the State of Illinois create claims for employees in various circumstances. These laws include the Age Discrimination in Employment Act of 1967, as amended by the Older Worker Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the Americans With Disabilities Act, the Genetic Information Non-discrimination Act, and the Virginia Human Rights Act. Several of these laws also provide for the award of attorneys’ fees to a successful plaintiff. You agree that this Release of Claims specifically includes any possible claims under any of these laws or similar state and federal laws, including any claims for attorneys’ fees.

(c)

By referring to specific laws we do not intend to limit the Release of Claims to just those laws. All legal claims for money damages, or any other relief that relate to or are in any way connected with your employment with the Company or any of its subsidiaries, related or affiliated companies, are included within this Release of Claims, even if they are not specifically referred to in this Agreement. The only legal claims that are not covered by this Release of Claims are the Excluded Matters.

(d)

Except for the Excluded Matters, we agree that neither party will say later that some particular legal claim or claims are not covered by this Release of Claims because we or you were unaware of the claim or claims, because such claims were overlooked, or because you or we made an error.

(e)

You specifically confirm that, as far as you know, no one has made any legal claim in any federal, state or local court or government agency relating to your employment, or the ending of your employment, with the Company. If, at any time in the future, such a claim is made by you, or someone acting on behalf of you , or by some other person or a governmental agency, you agree that you will be totally and completely barred from recovering any money damages or remedy of any kind, except in the case of any legal claims or causes of action arising out of any of the Excluded Matters. This


	A-2

provision is meant to include claims that are solely or in part on your behalf, or claims which you have or have not authorized.

(f)

This Agreement, and the Release of Claims, will not prevent you from filing any future administrative charges with the United States Equal Employment Opportunity Commission (“ EEOC ”) or a state fair employment practices (“ FEP ”) agency, nor from participating in or cooperating with the EEOC or a state FEP agency in any investigation or legal action undertaken by the EEOC or a state FEP agency. However, this Agreement, and the Release of Claims, does mean that you may not collect any monetary damages or receive any other remedies from charges filed with or actions by the EEOC or a state FEP agency. This Agreement and the Release of Claims do not prohibit you from participating in an investigation, filing a charge or otherwise communicating with any federal, state or local government office, official or agency, including, but not limited to, Department of Labor, National Labor Relations Board, or the Securities and Exchange Commission. Nothing in this Agreement shall prohibit you from seeking and obtaining a whistleblower award from a government agency, as provided for, protected under or warranted by applicable law, including Section 21F of the Securities Exchange Act of 1934, as amended.

(5) Restrictive Covenants .

(a)

[You hereby reaffirm the Restrictive Covenant Agreement you previously entered into (a copy of which is attached to this Agreement). The Company and you agree that if you qualify for benefits under the Plan and this Agreement becomes effective, the non-competition provision within such Restrictive Covenant Agreement shall apply to no more than six entities specified by the Company no later than 10 days after the Date of Termination.] [You understand and agree that the relationship between the Company and each of its employees constitutes a valuable asset of the Company and may not be converted to your own use. Accordingly, you hereby agree that for a period of twelve (12) months after the Date of Termination (the “ Restricted Period ”), you shall not, directly or indirectly, on your own behalf or on behalf of another person, solicit or induce any employee of the Company or its affiliates to terminate his or her employment relationship with the Company or any affiliate of the Company or to enter into employment with another person or entity. The foregoing shall not apply to employees who respond to solicitations of employment directed to the general public or who seek employment at their own initiative.

(b)


	A-3

affiliates, or any of their operations, or any of their officers, employees or directors .

(c)

During the course of your employment and as part of the performance of your various duties you came into the possession of information which the Company or its affiliates consider to be Confidential and Proprietary Information and which is not generally disclosed or made known to the trade or public. This includes, but is not limited to, information bearing on strategic planning, finances, shareholder matters, budgets, audience, research, marketing, personnel, management of the company and its affiliated companies, and relationships with advertisers, vendors and suppliers. You agree that unless duly authorized in writing by the Company, you will not at any time divulge or use in connection with any business activity any trade secrets or confidential and proprietary information first acquired by you during and by virtue of your employment with the Company or its affiliates. You agree that you will not retain any copies of such materials, whether in hard copy or electronic copy, and will not use or disclose to anyone any such Confidential or Proprietary Information, in any form.]

(d)

You acknowledge that a breach of this paragraph 5 would cause irreparable injury and damage to the Company which could not be reasonably or adequately compensated by money damages. Accordingly, you acknowledge that the remedies of injunction and specific performance shall be available in the event of such a breach, and the non-breaching party shall be entitled to money damages, costs and attorneys’ fees, and other legal or equitable remedies, including an injunction pending trial, without the posting of bond or other security. Any period of restriction set forth in this paragraph 5 shall be extended for a period of time equal to the duration of any breach or violation thereof.

(e)

In the event of your breach of this paragraph 5, in addition to the injunctive relief described above, the Company’s remedy shall include the forfeiture and return to the Company of any payment made to you or on your behalf under paragraph 2 above.

(f)

(6) Entire Agreement . You agree that this Agreement contains all of the details of the agreement between you and the Company with respect to the subject matter hereof. Nothing has


	A-4

been promised to you, either in some other written document or orally, by the Company or any of its officers, employees or directors, that is not included in this Agreement.

(7) No Admission . Nothing contained in this Agreement will be deemed or construed as an admission of wrongdoing or liability on the part of Company Parties.

(8) Governing Law and Venue . All matters affecting this Agreement, including the validity thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. The parties agree to submit to the jurisdiction of the federal and state courts sitting in Delaware, for all purposes relating to the validity, interpretation, or enforcement of this Agreement.

(9) Time to Consider; Effectiveness . Please review this Agreement carefully. We advise you to talk with an attorney before signing this Agreement. So that you may have enough opportunity to think about this offer, you may keep this Agreement for [21(if not a group termination under ADEA)] [45 (if a group termination under ADEA) ] days from the date of termination of your employment. You acknowledge that this Agreement was made in connection with your participation in the Plan and was available to you both prior to and immediately at the time of your termination of employment. For that reason you acknowledge and agree that the [21-day][45-day] consideration period identified in this paragraph commenced to run, without any further action by the Company immediately upon your being advised of the termination of your employment. Consequently, if you desire to execute this Agreement, you must do so no later than _______________, 20_____. Should you accept all the terms by signing this Agreement on or before _______________, 20_____, you may nevertheless revoke this Agreement within seven (7) days after signing it by notifying ____________________ in writing of your revocation. We will provide a courtesy copy to your attorney, if you retain one to represent you and request us to do so. If you choose to retain counsel to review and advise you concerning this Agreement that shall be considered a personal expense on your part and not be reimbursed or indemnified. If you wish to accept this Agreement, please confirm your acceptance of the terms of the Agreement by signing the original of this Agreement in the space provided below. The Agreement will become effective, and its terms will be carried out beginning on the day following the seven (7)-day revocation period (“ Release Effective Date ”).

(10) Knowing and Voluntary . By signing this Agreement you agree that you have carefully read this Agreement and understand its terms. You also agree that you have had a reasonable opportunity to think about your decision, to talk with an attorney or advisor of your choice, that you have voluntarily signed this Agreement, and that you fully understand the legal effect of signing this Agreement.


Date:
			EMPLOYEE

Date:
			CARS.COM INC.
			By:
			Title:


	A-5

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, T. Alex Vetter, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cars.com Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2019	By:	/s/ T. Alex Vetter
		T. Alex Vetter
		President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Becky A. Sheehan, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cars.com Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2019	By:	/s/ Becky A. Sheehan
		Becky A. Sheehan
		Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Cars.com Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2019	By:	/s/ T. Alex Vetter
		T. Alex Vetter
		President and Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2019	By:	/s/ Becky A. Sheehan
		Becky A. Sheehan
		Chief Financial Officer