Cars.com Inc. (CARS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. It's now 9:00 a.m. Central time, and I would like to call the meeting to order. I am Scott Forbes, Chairman of the Board of Directors of Cars.com and Chair of the Compensation Committee. It is my privilege to welcome you to our 2021 Annual Meeting of Stockholders. This meeting is held pursuant to the company's bylaws. Notice was duly sent to all stockholders of record as of April 12, 2021. We are once again conducting this year's annual meeting online. Upon joining the meeting, an agenda should have been available to you on the screen. A link to the rules of conduct for this meeting is available on the bottom-right corner of your screen. Stockholders who have control numbers and are able to vote during the meeting, whether or not they have previously voted and are able to ask questions on germane topics by typing in their question using the Q&A icon found on the web portal. We will address questions relating to these proposals while the polls are open and address general questions after the polls close. Although you may vote or submit questions at any time before the polls close, we suggest that you -- if you want to cast a vote or pose a question that you do so now to ensure that your vote or question is received in a timely fashion. With that, I would like to continue the meeting. First, I would like to acknowledge that other members of the Board are present on our call today or all Directors. Next, let me also name our officials for today's meeting. Jim Rogers, our Chief Legal Officer; and Sonia Jain, our CFO. And they'll act as proxies, and Jim will serve as Secretary. If you have returned your proxy card, Sonia and Jim will vote your shares as you indicated on the proxy card. James Pyle or JP, will serve as inspector of elections. JP has previously taken his oath as the inspector of elections. Representatives from Ernst & Young, our independent auditors, are also attending. Jim, please confirm the proof of mailing of the notice of annual meeting, the proxy statement, the proxy card and the annual report for fiscal year 2020.

Thank you, Scott. I have before me the proof that the notice of annual meeting, the proxy statement, the proxy card and the annual report for fiscal year 2020 were mailed to stockholders commencing on April 30, 2021. Those who wish to receive a copy of the annual report may obtain one by e-mailing a request to [email protected]. The Board established April 12, 2021, as the record date for entitlement to receive notice of and vote at this meeting. As of the record date, there were 68,633,229 shares of common stock issued and outstanding. The list of registered holders of our common stock is available now for inspection upon request by selecting the Registered Shareholders List button on the bottom-right hand side of this site. All holders of our common stock are entitled to one vote per share on all matters submitted to a vote. Under our Bylaws, a quorum is present when at least a majority of the voting power of the issued and outstanding shares entitled to vote at the meeting is present or represented by proxy. The Inspector of Elections has been sworn in, and we have his oath of office. The Inspector has informed me that a quorum is, in fact, present. Therefore, I hereby declare this meeting to be duly constituted for the transaction of business.

Thank you, Jim. The Secretary will incorporate into the minutes the proof of mailing, the list of stockholders and other documents presented. With the confirmation that a quorum is present, we will proceed with the business of the meeting. First, we will address the items being presented for the stockholders for a vote. Following the voting, I will recess the meeting while the votes are tabulated. During this recess, we will address any general questions submitted that are appropriate for this forum. I will reconvene the meeting to announce the results of the voting and then the meeting will adjourn. We will now commence the voting. Many of you have already mailed or otherwise delivered your proxy card and therefore, intend to have your shares voted by proxies. The polls are now open. And it's 9:05 a.m., June 9, 2021. Any stockholder in possession of a control number who wishes to vote or change a vote previously made by a proxy and has not yet done so, please do so by following the voting instructions on your screen as the polls will close in some minutes. During this time, we are happy to respond to any questions regarding the 3 proposals via the Q&A icon. However, we will not be responding to questions on other topics at this time. We will address questions on other topics after the polls close. The first matter that comes before the meeting is the nomination of the candidates for election as Directors. The Board has unanimously recommended that the stockholders vote for each of Scott Forbes, Jerri DeVard, Jill Greenthal, Tom Hale; Mike Kelly, Don McGovern, Greg Revelle, Jenell Ross, Bala Subramanian, Alex Vetter, and Bryan Wiener as Directors of Cars.com, Inc., to serve and hold office until the 2022 Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified. Next, we consider the proposal to ratify the appointment of Ernst & Young LLP as independent auditors of the company for 2021 fiscal year. I would like to remind the stockholders that the Audit Committee has the exclusive right to appoint the company's independent auditors. And the appointment of E&Y is not contingent upon obtaining stockholder approval. However, the Board is giving stockholders the opportunity to express their opinions with regard to the appointment of E&Y as the company's auditors for fiscal 2021. This vote is neither required or binding, but is being solicited by the Board in order to determine if our stockholders ratify the appointment of E&Y as the company's independent auditors. If this proposal does not receive the affirmative vote of a majority of the votes cast for this proposal at the meeting, the Audit Committee will take such vote into consideration in determining whether to continue to retain E&Y. Next, we will consider a proposal on a nonbinding advisory vote on the compensation of our named executive officers. The Board is giving our stockholders the opportunity to express their opinion with regard to the compensation of our named executive officers. JP, are there any questions related specifically to the proposal?

Not for the proposal.

So we'll handle the other ones at the appropriate time, okay. Okay. If you have provided your proxy card then your shares will be voted in accordance with your instructions. If you have not and you still wish to vote, now is an opportunity to do so. And we will keep the polls remain open for additional votes to be received and that the meeting will be adjourned until later in the day at 1:00 Central Time for the sole purpose only of receiving those votes. We will now recess the meeting and address appropriate questions on topics other than the proposals.

Scott, I'd just like to read our statement on forward-looking statements and non-GAAP [indiscernible] and certain of the statements that we may make this morning may not be historical facts and may be considered forward-looking statements. These statements are subject to risks and uncertainties as described in our annual report on Form 10-K and other SEC filings. And these or other events could cause our actual results to differ materially from those expressed or implied in our -- by our comments. The comments made in our presentation are made only as of today, [indiscernible] no obligation to publicly update any of these forward-looking statements. Additionally, we may reference certain non-GAAP financial measures that we believe provide useful information for our investors. Reconciliation of non-GAAP financial measures, where appropriate to the corresponding GAAP measures, can be found in the company's earnings releases and other filings with the SEC.

Okay. Thank you, JP. So I have received a question from shareholder regarding ESG performance factors, referencing the -- it's a long question. So I'm paraphrasing. Execution can be complicated, and we'd like to understand the Board's perspective on the concept of shareholder capitalism. So let me address that. And Jim, if there's anything to add, I think you should. The first thing I would like to state is that we've got a long history with regard to ESG. I believe it's in our DNA. We have a -- yes, it is complicated. And because of that we bring in quite a few knowledgeable and people dedicated, both internally and externally, to help us with our -- forming our ESG policy, staying on top of current trends and on ideas and practices. That includes Board representation and oversight, includes specific senior named Officer -- Executive officer-level direction as well as subject matter experts, including external experts. We do look at everything from environmental, governance, social and foundational work. And we have a specific timeline and targets, all of which will evolve over a period of time with milestones, very specific milestones in 2021. And certainly, we'll be developing the milestones and refining those thereafter. It's a really, as you say, complicated topic, but one that is certainly worth the effort. I hope that addresses your question. Jim, anything to add?

Yes. I can add just a little bit. This is a subject that has been important to the company for some time. But within the last year, we have actually renamed our Nominating and Corporate Governance Committee as the Environmental, Social and Governance Committee to oversee the company's efforts, in particular, on addressing stakeholder capitalism in a meaningful and thoughtful way. Scott described much of what we're doing. Our goal is to mature our program over the course of the year, to have more intensive and thoughtful stakeholder considerations as we move forward. And I think you can look forward to seeing the next year's proxy statement, a much more fulsome discussion of what we have done. And you'll also be able to see on the investor site and the ESG tab further information about our efforts as we have things to report.

The second question is regarding majority vote standard. And the last part of the question is whether the Board would be willing to consider the adoption of the a majority vote standard. Jim, as Chief Legal Officer, I think you probably have greater insight into this than I, and I take your good counsel. However, if a shareholder asked something that we should consider, we certainly can consider that at a Board level. So I think that might answer the specific question, but I'm not sure if you want to add to it?

[indiscernible] This is something that was in our charter when we became a public company. But it's an evolving standard of good corporate governance. It is something that we and management will definitely consult with the Board about from time to time. And we will raise this issue with the Board and give them the best guidance from both the inside and external counsel as well as other advisers about the best way to proceed. We appreciate you raising it.

Yes. Thank you, Jim. Actually, they were both very questions, right? So there are no other questions in the queue. So therefore, that concludes the Q&A period. [Voting]

We now have the results of the voting, and I would like to reconvene the meeting. The meeting is now called to order. Jim, please announce the results. We may have a technical issue that we're working through.

I forgot to unmute myself. We have only preliminary results since the polls are being kept open until 1:00 Central Time this afternoon. Given our plurality voting requirement that was discussed a moment ago, I can say with confidence that each of the 11 nominees recommended by the Board have been elected as Director to serve until our 2022 Annual Meeting. With respect to the advisory votes considering the appointment of Ernst & Young and the compensation of our named executive officers, we will announce the final tabulation of those by an 8-K after the polls have closed at 1:00 Central time this afternoon, so that anyone having technical issues voting or otherwise, we'll be able to make sure that their votes can be counted.

Okay. The report of the inspector will ultimately get fixed to the minutes of the meeting. Not -- a few votes remain to be counted. But as you say, Jim, based on the plurality, each of the directors, Scott Forbes, Jerri DeVard, Jill Greenthal, Tom Hale, Mike Kelly, Don McGovern, Greg Revelle, Jenell Ross, Bala Subramanian, Alex Vetter and Bryan Wiener will be elected as duly elected Directors of the company to serve and hold office until the 2022 Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified. Similarly, we will approve the proposal to ratify the appointment of Ernst & Young as independent auditors of the company for 2021 fiscal year. And approve on an advisory basis, the compensation of our named executive officers. The final tally will be published within 4 business days in a current report on Form 8-K, and that will be filed with the Securities and Exchange Commission. And that concludes the business to be brought before this meeting, the 2021 Annual Meeting of Cars.com, Inc., with the exception of keeping the polls open till 1:00 p.m. Central Time. I want to thank you for attending and for your interest in the affairs of Cars.com Inc. Thank you very much.