Cars.com lost money in the fourth quarter of 2019 as revenue fell and operating expenses rose.
The Chicago vehicle listings company reported Wednesday that it swung to a $4.1 million net loss in the quarter, compared with $9.4 million in net income in the same period the year before. Cars.com also reported a net loss and lower revenue for all of 2019 as dealership customers declined.
In the fourth quarter, revenue dropped 7.4 percent to $152.2 million. The company attributed higher operating expenses for the period in part to the ending of partnerships with affiliate newspaper owners and planned marketing investments.
Cars.com said its adjusted net income for the fourth quarter rose 24 percent to $42.2 million. The adjusted figure excludes one-time charges related to the amortization of intangible assets; stock-based compensation; severance, transformation and other exit costs; transaction-related costs; and a tax impact.
“We exited 2019 with momentum and fundamental strength,” Cars.com CEO Alex Vetter said in a statement. “Despite entering 2020 with a lower dealer base, by mid-year we will have completely re-architected the business in the three years since going public: we turned around [search engine optimization] and reestablished our leadership in traffic, we stabilized our dealer base, we transformed our go-to-market strategy and we are set to have fully completed the conversion of our affiliate channel and the technology transformation mid-year 2020.”
The company reported a net loss of $445.3 million for 2019, a swing from $38.8 million in net income in 2018. Cars.com attributed the loss to a noncash goodwill and intangible asset impairment charge of $461.5 million recorded in the third quarter. That charge came after the company completed a 10-month strategic review prompted by an activist investor. The review failed to yield a buyer, and its end sent the company’s share price plunging.
Excluding one-time items such as the strategic review charge, Cars.com said its adjusted net income for 2019 tumbled 23 percent to $104.2 million. Revenue for the year dropped 8.4 percent to $606.7 million, in keeping with the company’s expectations, it said.
The news sent Cars.com shares down 16 percent to close at $8.89 on Wednesday.
Cars.com reported 18,834 dealership customers as of Dec. 31, a decline of 1,087 from where it ended 2018.
The company reported adding 199 dealership customers in the fourth quarter, which it said is typically the weakest quarter. Vetter said on an earnings call Wednesday that the fourth quarter was the strongest quarter for dealership growth since 2015.
Vetter has told Automotive News that the company is working on restructuring its sales operation after unwinding the last of the partnerships it had with legacy newspaper companies that owned Cars.com before it went public in 2017. That change will allow Cars.com to keep more revenue and have a more direct relationship with dealership customers going forward, Vetter said.
Cars.com reported increases in its website visits and average unique visitors each month, and it said mobile traffic made up nearly three-quarters of total visits compared with just over two-thirds in 2018.
The company’s Dealer Inspire unit, which provides dealership websites and other retail software, had 3,200 website customers as of Dec. 31. Dealer Inspire also said it has gained more than 800 General Motors website customers after the automaker included the company as one of four preferred website vendors. Before 2020, CDK Global Inc. had been GM’s exclusive website provider.
