SEC Form DEF 14A filed by Cars.com Inc.

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Check the appropriate box:

Payment of Filing Fee (Check all boxes that apply):

 

Dear Fellow Stockholders:

On behalf of the Board of Directors and the senior management team, we are pleased to invite you to join the 2024 Annual Meeting of Stockholders of Cars.com Inc. d/b/a Cars Commerce, Inc. (“Cars Commerce”), which will be held virtually on Wednesday, June 5, 2024, beginning at 9:30 a.m. Central Time. You may join at www.virtualshareholdermeeting.com/CARSCOMMERCE2024.

Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to vote online, by telephone or by mail as soon as possible to ensure your vote is recorded promptly.

During the Annual Meeting, you will also have the opportunity to vote on matters set forth in the accompanying Proxy Statement, as well as have the opportunity to ask questions.

On behalf of the Board of Directors, I thank you for your investment and continued support of Cars Commerce, and I look forward to working with my fellow directors and the management team to drive growth and sustainable long-term value for all our stockholders in 2024 and beyond.

Sincerely,

 

Scott E. Forbes

To reduce cost and environmental concerns, we have elected to take advantage of Securities and Exchange Commission (“SEC”) rules that allow companies to furnish their proxy materials over the Internet. On April 19, 2024, we will begin mailing to our stockholders of record as of April 9, 2024 (other than those who previously requested electronic delivery or a full set of printed proxy materials), a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy materials, including this Proxy Statement. The Proxy Statement, the proxy or voting instruction card, and our 2023 Annual Report are available at www.proxyvote.com. As more fully described in the Notice, all stockholders may choose to access these materials electronically or may request printed or emailed copies.

Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. It is extremely important that your shares are represented and voted at the Annual Meeting. You are urged to follow the instructions in the proxy card to vote by mail, telephone or via the Internet. Voting now will not limit your right to change your vote or to attend the Annual Meeting. If your shares are held in the name of a broker, bank or other holder of record, follow the voting instructions you received from the holder of record in order to vote your shares.

If you do not vote in advance and instead plan to vote during the Annual Meeting, you may do so by entering the 16-digit control number found on your proxy card, Voting Instruction Form, or Notice, as applicable, at the time you log into the Annual Meeting at www.virtualshareholdermeeting.com/CARSCOMMERCE2024.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 5, 2024.

Our Proxy Statement and 2023 Annual Report are available on our Investor Relations website at https://investor.cars.com and at www.proxyvote.com. You may also request paper copies of these proxy materials free of charge by following the instructions for requesting such materials contained in the Notice.

We encourage you to review the Questions and Answers about the Annual Meeting section for answers to common questions about the Annual Meeting, proxy materials, voting, and other related topics.

By Order of the Board of Directors,

 

Angelique Strong Marks

Chief Legal Officer and Corporate Secretary

April 19, 2024

Chicago, Illinois

This Notice of Annual Meeting and Proxy Statement contains “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking statements. These statements often use words such as “believe,” “expect,” “project,” “anticipate,” “outlook,” “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, 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 based on estimates and assumptions that, while considered reasonable by Cars Commerce and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. While Cars Commerce and its management make such statements in good faith and believe such judgments are reasonable, you should understand that these statements are not guarantees of future strategic action, performance or results. Our actual results, performance, achievements, strategic actions or prospects could differ materially from those expressed or implied by these forward-looking statements. Given these uncertainties, you should not rely on forward-looking statements in making investment decisions.

To understand the most important factors that could cause our actual results to differ from our forward-looking statements, it is important to review our description of risk factors included in Part I, Item 1A, Risk Factors of our 2023 Annual Report on Form 10-K, in conjunction with the forward-looking statements in this Proxy Statement. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statement. The forward-looking statements in the Notice of Annual Meeting and Proxy Statement are intended to be subject to the safe harbor protection provided by the federal securities laws.

Website references throughout this document are provided for convenience only. The content on the referenced websites is not incorporated into this document.

Corporate governance at Cars Commerce is designed to promote the long-term interests of our stockholders, strengthen Board and management accountability, provide strategic oversight and risk assessment, and engender public trust.

The Board regularly evaluates Cars Commerce’s leadership structure and may consider alternative structures, as appropriate, over time. The Board believes that Cars Commerce and our stockholders are best served by the Board retaining discretion to determine the appropriate leadership structure. The Board also believes that the current structure, which separates the Chair and CEO roles, is appropriate. In particular, this structure clarifies the individual roles and responsibilities of CEO and Chair, streamlines decision-making, and enhances accountability.

The Chair has robust responsibilities including:

The Board believes that a majority of its members should be independent. The Board, led by the ESG Committee, evaluates the independence of its members at least annually, and at other appropriate times when a change in circumstances could potentially impact the independence or effectiveness of one or more directors (such as in connection with a change in employment status or other significant status changes). After carefully considering all relevant relationships, the ESG Committee submits its recommendations regarding independence to the Board, which then makes a determination with respect to each director.

The Board has affirmatively determined that all directors, except for Mr. Vetter, are independent as defined by the New York Stock Exchange (”NYSE”) listing standards. Mr. Vetter, our CEO, is the only employee director and is not independent because of his employment with Cars Commerce. The Chair of the Board is independent and all current members of the Audit Committee, Compensation Committee, and ESG Committee are independent.

The Board sets the number of directors from time to time by resolution adopted by a majority of the Board. The ESG Committee reassesses the suitability of the Board’s size at least annually. The Board has the flexibility to increase or decrease the size of the Board as circumstances warrant. The Board currently has 11 members, comprised of 10 independent, non-employee directors and the CEO.

We routinely assess the composition of our Board to ensure we have the right combination of attributes, experiences, qualifications, and skills to maximize the Board’s effectiveness. We believe Cars Commerce, our employees, and our stockholders benefit from both the continuity of longer-tenured directors and complemented by the fresh perspectives of newer directors. Cars Commerce does not currently have a specific term limit or a set retirement age for directors. Cars Commerce’s policy regarding director tenure and retirement is determined on a case-by-case basis depending upon various factors, including the age and experience of the director and history of service on the Board. The average tenure of our directors is less than six years as of the date of the Annual Meeting, and our most recent director joined the Board in 2021.

During 2023, our Board held six meetings, the Audit Committee held eight meetings, the Compensation Committee held five meetings and the ESG Committee held four meetings. Each director attended more than 75% of the total meetings of the Board and committees on which the director served. All directors attended the 2023 Annual Meeting of Stockholders.

Executive sessions of non-employee directors are held in connection with regularly scheduled Board meetings and at other times as necessary and are chaired by the Chair. Our Board’s practice is to hold executive sessions without the presence of management, including the CEO. Our committees also generally meet in executive session at the end of committee meetings and are chaired by the respective committee chairs.

While our directors bring a wealth of business and strategic experience from other business affiliations to our Board, each director must ensure that other existing and future commitments, including employment responsibilities and service on other public company boards, does not materially interfere or conflict with service as a director on our Board. The ESG Committee regularly reviews directors’ outside commitments and service on other public company boards to determine whether a director’s service creates any actual or potential material conflict of interest that impairs the director’s ability to effectively serve on our Board. We do not have any directors that serve as an executive officer of any public company while serving on more than one external public company board, as an executive chair of any public company while serving on more than two external public company boards or any directors who serve on more than four public company boards. We believe that our directors have the necessary time to fulfill their duties to our stockholders and that none of our directors are overboarded.

One of the Board’s key responsibilities is overseeing management’s development and execution of Cars Commerce’s business strategy. Throughout the year, our CEO and executive officers provide detailed business and strategy updates to the Board. The Board engages with our CEO and executive officers regarding various strategic topics, including business operating strategy and initiatives, capital allocation, the competitive landscape, industry and economic trends, talent and culture (including the benefits of experience that comes from a diverse and inclusive board), environmental, social, and governance (ESG) matters, and regulatory developments. Additionally, on an annual basis, the Board reviews and approves Cars Commerce’s annual financial plan and budget. While the Board oversees our strategic planning process, management is responsible for day-to-day operations and executing our strategy.

Our business faces various risks, including strategic, financial, legal, cybersecurity and information security, operational, and accounting risks. Identifying, managing and mitigating our exposure to these risks and effectively overseeing the risk management process is critical to our operational decision-making and annual planning processes. While management is responsible for the day-to-day management and mitigation of risk, our Board, acting directly and through its committees, is responsible for risk management oversight. As part of our overall risk oversight framework, our committees also oversee certain categories of risk associated with their respective areas of responsibility. Each committee regularly reports to the Board on its risk oversight activities and invites all members of the Board to committee meetings to discuss risks that the chair of that committee believes will benefit non-committee member directors.

Our committees are charged with specific areas of risk oversight, summarized below.

To learn more about risks facing Cars Commerce, you can review the risks described in Item 1A. Risk Factors in the 2023 Annual Report on Form 10-K. The risks described in the Form 10-K are not the only risks Cars Commerce faces. Additional risks and uncertainties also may materially adversely affect our business, financial condition or results of operations in future periods.

The Board provides strategic guidance regarding Cars Commerce’s overall risk oversight, including identification, management and mitigation of risk. The Board has delegated direct cybersecurity and information security risk oversight to the Audit Committee. Cars Commerce management provides the Audit Committee with regular updates at least quarterly regarding the effectiveness of Cars Commerce’s overall cybersecurity program and other cybersecurity related matters, which may include, Cars Commerce’s inherent cybersecurity risks, updates on recent cybersecurity threats and incidents, policies and practices, industry trends, regulatory developments, threat environment and vulnerability assessments, and specific and ongoing efforts to prevent, detect, and respond to internal and external cybersecurity threats. The Chair of the Audit Committee informs the Board of the outcome of these meetings through updates presented to the Board at regularly scheduled Board meetings.

At the management level, Cars Commerce’s CEO provides general management, oversight and mitigation of Cars Commerce’s risk. Effective April 2024, our SVP of Information Security and Chief Technology Officer are the key executives responsible for managing Cars Commerce’s Information Security function and ensuring that Cars Commerce’s information security processes comply with applicable laws, SEC requirements and contractual obligations respectively. Cars Commerce’s Information Security Team, in conjunction with the Information Security Governance Committee, is responsible for assessing and managing material risks from cybersecurity threats and providing management direction and support for information security. The Information Security Team is composed of skilled professionals with relevant information and cybersecurity education, certifications, and experience. The Information Security Team coordinates with the Cars Commerce Information Security Governance Committee, comprised of senior business leaders who support Cars Commerce’s Information Security Management System based on their area of expertise. Working together the teams initiate and control the implementation and operation of information security within Cars Commerce.

Cars Commerce is driven by a culture that cares about our people, our customers, our community and our planet. The ESG Committee is charged with overseeing Cars Commerce’s efforts in the important areas of environmental, social, and governance matters. The Board’s oversight of ESG includes review of environmental, community affairs, corporate donations, corporate governance, diversity, equity and inclusion, and culture and human capital management matters. Our Chief Legal Officer and Chief Communications Officer regularly meet with and provide reports to the Board and ESG Committee on ESG-related matters and recent developments, so that the Board and the ESG Committee can ensure that any material ESG risks and opportunities are appropriately integrated into Cars Commerce’s long-term strategy.

Our Board has three standing committees: the Audit Committee, the Compensation Committee, and the ESG Committee. Each Committee Chair meets regularly with management during the year to discuss committee business, develop agendas, and facilitate efficient meetings. Each Committee operates under a written charter, a current copy of which is available on our Investor Relations website at https://investor.cars.com.

On April 19, 2024, Cars Commerce published its inaugural Corporate Social Responsibility and Community Action Report in conjunction with this Proxy Statement, which provides a summary of our approach to corporate social responsibility. A copy of the Corporate Social Responsibility and Community Action Report is available on our website at https://investor.cars.com/csr. Information on our website, including the Corporate Social Responsibility and Community Action Report, is not incorporated by reference in or otherwise considered a part of this Proxy Statement.

Cars Commerce believes that fostering a culture of inclusion strengthens our business performance, improves our ability to recruit and develop talent and provides a rewarding workplace experience that allows all our employees to thrive and succeed. Information about our workforce demographics can be found in our Corporate Social Responsibility and Community Action Report available on our website at https://investor.cars.com/csr.

Cars Commerce is committed to strong corporate governance, and we believe that it is essential to creating long-term stockholder value. Aligned with that belief, our Board has adopted company-wide corporate governance policies and works with management to review and revise as appropriate on a periodic basis to ensure that the policies reflect our corporate governance objectives and best practices.

Our credibility and reputation depend upon the sound judgment, ethical behavior and personal integrity of each director, executive officer and employee. Unethical or illegal business conduct destroys trust, exposes us to legal liability and significant financial loss, and damages the very reputation for excellence we have worked hard to build. The Code of Conduct embodies our expectations on several topics including conflicts of interest, fair dealing, compliance with laws, rules, and regulations, including but not limited to applicable antitrust, anti-bribery and anti-corruption laws, protection of company assets, and protection of confidential information. Employees are expected to report any conduct that they believe in good faith to be an actual or apparent violation of our Code of Conduct, our policies or laws or regulations. We regularly review and update our Code of Conduct and related policies to ensure they provide clear, actionable guidance to our employees, executive officers, and directors.

To foster a strong culture of compliance and ethics, we conduct annual compliance training for all employees, which covers areas such as our Code of Conduct, insider trading, anti-harassment, employment discrimination and cybersecurity. Upon joining Cars Commerce and annually thereafter, our employees must complete the required compliance training. Additionally, Cars Commerce requires key employees to complete quarterly assessments/certifications to ensure that there have not been any violations of the Code of Conduct, which includes anti-corruption and business ethics, laws or regulations, suspected fraud or improper activity that has not been reported.

The Board has adopted Corporate Governance Guidelines to serve as a framework to aid the Board in effectively conducting its business. The Corporate Governance Guidelines cover many of the policies and practices discussed in this Proxy Statement. The ESG Committee reviews the Corporate Governance Guidelines annually and recommends changes to the Board for consideration and approval as necessary or appropriate in response to changing regulatory requirements, evolving best practices and other considerations.

Our Insider Trading Policy prohibits all Cars Commerce directors, executive officers and employees from trading in Cars Commerce securities while in possession of material, non-public information about Cars Commerce, and from trading any Cars Commerce derivatives (e.g., put or call options), engaging in short sales or otherwise engaging in hedging activities, and pledging of Cars Commerce securities.

Please visit the Governance section of our website at https://investor.cars.com to learn more about our corporate governance practices and to access the following material:

The Board, acting upon the recommendation of the ESG Committee, has nominated the following 11 directors for re-election to the Board.

Each of the director nominees currently serves on the Board and was elected by our stockholders at the 2023 Annual Meeting. Our directors are elected annually by a majority of votes cast by stockholders. If elected, each director will hold office until the 2025 Annual Meeting and until his or her successor is elected and qualified. We have no reason to believe that any of the director nominees will be unable or unwilling to serve if elected. If any nominee should become unavailable for election, our Board may designate a substitute nominee, in which event the shares represented by proxies at the Annual Meeting will be voted for such substitute nominee unless an instruction to the contrary is indicated on the proxy card.

The Board believes that the combination of the qualifications and experiences of the director nominees will contribute to an effective and well-functioning board and that the director nominees possess the relevant skills and capacity to provide effective oversight of the business and counsel to management to advance our long-term strategy and oversee the interests of our stockholders.

Further information on the Board’s composition, as well as each nominee’s qualifications and relevant experience, are provided on the following pages.

The Board, upon recommendation of the ESG Committee, unanimously recommends that stockholders vote FOR the election of each of the nominees for director.

Our Board believes that an appropriate balance of skills, attributes and experience is important for an effective board of directors. The ESG Committee is responsible for establishing director qualification criteria and identifying the key competencies, skills and desired areas of expertise for the Board. When evaluating potential directors for nomination to the Board, the ESG Committee considers, among other factors, the candidate’s: (i) demonstrated ability, as evidenced by significant accomplishment in the candidate’s field, to contribute meaningfully to the Board’s oversight of Cars Commerce’s

business and affairs; (ii) reputation for honesty and ethical conduct in the candidate’s personal and professional activities; (iii) specific experience and skills, industry background and knowledge relevant to Cars Commerce’s strategic needs; and (iv) diversity of experience and perspectives, including diversity with respect to race, gender, sexual orientation, ethnicity, background and areas of expertise.

The ESG Committee believes that a board composed of diverse backgrounds and experiences will enhance the quality of the Board’s discussions and decision-making process and expand the Board’s understanding of the needs and viewpoints of our customers, partners, employees and other stakeholders. The ESG Committee regularly reviews and evaluates the Board’s composition to determine whether the Board requires skills or experience not currently represented on the Board. If, as part of its ongoing review and evaluation, the ESG Committee or the Board determines that it requires any additional directors, Cars Commerce’s Amended and Restated Bylaws (the “Bylaws”) permit the Board to expand the size of the Board and appoint persons to fill any resulting vacancies without the need for stockholder action. The ESG Committee will consider candidates for our Board recommended by our stockholders for election at the Annual Meeting. Nominations of candidates for our Board by our stockholders for consideration at the Annual Meeting are subject to the deadlines and other requirements described under the Questions and Answers about the Annual Meeting section.

Our Bylaws provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected, each director must receive the majority of the votes cast with respect to that director. If a director does not receive a majority vote, he or she must submit a letter of resignation to the Board. The ESG Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the resignation taking into account the recommendation of the ESG Committee, which would include consideration of the vote and any relevant input from stockholders. The Board will publicly disclose its decision and its rationale within 90 days of the certification of the election results. The director who tenders his or her resignation will not participate in the Board or ESG Committee or Board’s decision regarding the resignation.

Our Board recognizes the value of diverse opinions, perspectives, personal and professional experiences, and backgrounds, including gender, race, ethnicity, and country of origin. We believe the judgment and perspectives offered by a diverse board of directors improves the quality of decision-making and enhances Cars Commerce’s business performance. Cars Commerce is committed to having a Board and a workforce that reflects the world in which it operates, its stockholders and its customers. Currently, our Board is composed of 73% men (8) and 27% women (3). Our Board is also 73% White (8), 18% African American (2), and 9% Asian (1). 55% of our Board is under the age of 60, 36% is between the ages of 60 and 70, and 9% is over 70 years old.

 

The Board believes that the combination of backgrounds, skills, and experiences has produced a Board that is well-equipped to exercise oversight responsibilities on behalf of our stockholders. The following tables highlight the key skills, qualifications, experiences, and diversity attributes that each director nominee brings to our Board. The skills matrix is a summary, and it is not intended to be a complete description of all the key skills, qualifications, attributes, and experience of each director. Director nominees developed competencies in these skills through education, direct experience, and oversight responsibilities.

The Board recognizes that a robust and constructive evaluation process is an essential part of good corporate governance and board effectiveness. As such, the Board conducts an annual evaluation intended to determine whether the Board, each of its committees, and individual directors are functioning effectively and to provide the Board with an opportunity to reflect upon and improve processes and effectiveness. Our annual evaluation is led by the ESG Committee and is designed to elicit the views of all directors about Board effectiveness, areas of improvement, collaboration with management, current business strategy and whether steps should be taken to improve the performance of the Board and its committees. The evaluation has taken a variety of forms including written surveys and interviews conducted by the Chair of the Board. The results are then reported to the full Board, which considers the results and ways in which Board processes and effectiveness may be enhanced.

Cars Commerce’s philosophy regarding director compensation is to align the interests of non-executive directors with the interests of our stockholders and to provide market competitive compensation commensurate with the work required to serve on the Board. Under the Cars Commerce Non-Executive Director Compensation Program, each of our non-executive directors receives:

Non-executive directors may receive compensation for providing additional support and services, based on the recommendation of the Compensation Committee and the approval of the Board. Non-executive directors also have the option to defer receipt of their equity awards after their vesting date.

Our non-executive directors are subject to minimum share ownership and stock retention requirements. Under our Stock Ownership and Retention Policy, non-executive directors are expected to hold shares of our common stock with a value of three times the annual cash retainer (currently $225,000). Our non-executive directors are expected to hold at least 50% of the shares received from Cars Commerce as compensation until the stock ownership requirements are met. As of the date of this Proxy Statement, all current non-executive directors are in compliance with these guidelines.

The following table shows the compensation earned, paid or awarded to our non-executive directors for their service on the Board during the fiscal year ending on December 31, 2023. Alex Vetter, our CEO, did not receive additional compensation for his service on the Board. Information on compensation paid to Mr. Vetter in his role as CEO during the fiscal year ending December 31, 2023, is described in the Compensation Discussion and Analysis section and the Summary Compensation Tables of this Proxy Statement.

This Compensation Discussion and Analysis (“CD&A”) describes Cars Commerce’s compensation program, philosophy, decisions and the process for the compensation of our Named Executive Officers (“NEOs”) for fiscal 2023 (January 1, 2023 to December 31, 2023). Additionally, we outline our rationale for the compensation framework for fiscal 2023. We are committed to maintaining a close alignment of our executive pay programs with Cars Commerce and our stockholders’ interests, which includes establishing a compensation structure that will allow us to fairly reward, attract and retain key talent.

For fiscal 2023, our Executive Officers, who also constitute our NEOs, were:

Information on Alex Vetter, who is also a member of our Board, can be found in the “2024 Director Nominee” section.

2023 was a year of significant progress for our business, as we advanced our platform strategy through the introduction of Cars Commerce, the rollout of our Marketplace Repackaging initiative and our expansion into Canada with the acquisition of D2C Media Inc. At the beginning of fiscal 2023, management proposed, and the Board approved our financial plan. The Compensation Committee then approved the fiscal 2023 short-term incentive plan based upon the 2023 financial plan and set long-term incentive targets based on our three-year outlook. Our fiscal 2023 financial results, which is the criteria Cars Commerce uses to measure performance relative to our 2023 short-term incentive plan were as follows:

Revenue for the year totaled $689.2 million, an increase of $35.3 million, or up 5%, compared to the prior year period. 2023 Net Income totaled $118.4 million, or $1.74 per diluted share, compared to Net Income of $17.2 million, or $0.25 per diluted share in the prior year. Adjusted EBITDA for the year totaled $194.9 million, or 28% of revenue, compared to $186.7 million, or 29% of revenue, in the prior year period.

Our executive compensation program is designed to recruit, retain and fairly reward highly skilled executives who bring the business acumen necessary to achieve our long-term business objectives. We pay for performance and design executive compensation programs that reward short-term and long-term performance and align the financial interests of executive officers with those of our stockholders. Accordingly, the compensation packages provided to our executives include both cash and equity-based components. We evaluate performance and compensation levels to ensure that:

Our Compensation Committee is responsible for establishing the compensation of our NEOs. The Compensation Committee oversees (i) administration of Cars Commerce’s executive compensation plan, policies and programs, including corporate goals and objectives relating to compensation, short-term bonus (incentive) plans and long-term equity compensation plans, (ii) approval of grants of equity awards, and (iii) organization and succession planning. The Compensation Committee is appointed by the Board.

Management participates in the review and refinement of our executive compensation program. Our CEO meets with the Compensation Committee to discuss compensation packages for the executive team and to review the performance of Cars Commerce and each executive, other than himself, and makes recommendations with respect to the appropriate base salary, annual cash bonus and grants of long-term equity awards. After considering these recommendations and other considerations discussed below, the Compensation Committee determines the annual compensation package for each executive.

The Compensation Committee regularly reviews our compensation philosophy and objectives. As part of this process, it monitors, reviews and evaluates our executive compensation program to determine and ensure that it provides reasonable compensation that aligns with its philosophy and objectives. During fiscal year 2023, the Compensation Committee engaged Korn Ferry as the Compensation Committee’s independent compensation consultant to provide an executive compensation program assessment, peer group analysis, incentive plan design review and related compensation advice. After considering the required factors relevant to evaluate independence, the Compensation Committee determined that Korn Ferry is an independent compensation consultant in accordance with applicable SEC and NYSE rules. Representatives of Korn Ferry participated in all meetings of the Compensation Committee in 2023.

During fiscal 2023, Korn Ferry provided the following services as requested by the Committee:

Working with Korn Ferry, the Compensation Committee considered multiple sources of data to evaluate the fairness of our compensation structures and whether they met our compensation objectives. We also considered how our compensation practices compare to market practices among relevant companies in terms of size, industry and geography. Among other factors considered and provided by Korn Ferry are the following, when available, regarding compensation for executives:

As it does on at least an annual basis, in 2023 the Compensation Committee worked with Korn Ferry to review the composition of our peer group to determine if Cars Commerce’s compensation structure required any changes. The Compensation Committee evaluated the peer group based on a variety of factors including revenue, size, market capitalization, industry, talent market and organizational structure. Based on the aforementioned factors, we conducted a thorough review and analysis of our previous peer group and the available data on our industry and market. As a result of this review, six peer companies were removed in 2023: America’s Car-Mart, Inc., CoStar Group, Inc., Groupon, Inc., Match Group, Inc., TripAdvisor, Inc. and Vroom, Inc. Seven peer companies were added in 2023: Ebix, Inc., EverCommerce Inc.,

Iridium Communications, Inc., Magnite Inc., TechTarget Inc., Vivid Seats Inc. and Upwork Inc. The 2023 peer group now consists of 14 companies. We believe that this change will help us to improve the comparability and relevance of our executive compensation practices and ensure that they are competitive and reasonable in comparison to our peers. We will continue to monitor and evaluate our peer group selection process to ensure that it remains effective in providing an appropriate benchmark for our executive compensation practices.

In connection with the Compensation Committee’s approval of executive officer base salary, short-term incentives and equity compensation discussed below in the section titled “Principal Elements of Our Executive Compensation Practices,” data regarding compensation practices for comparable executive officer positions at the following peer companies were considered and used for the purpose of determining competitive compensation levels:

Cars Commerce actively engages with stockholders on a broad range of topics which from time to time also includes topics related to compensation and our compensation philosophy. Cars Commerce engages in proactive outreach to stockholders to discuss and receive input, provide additional information, and address questions about matters including but not limited to our business strategy, financial performance, capital allocation, executive compensation programs, corporate

governance and ESG philosophy and policies. Our senior management team, including the Chief Executive Officer, the Chief Financial Officer, and the Director of Investor Relations, and from time to time, the Chair of our Board and Compensation Committee, engage in meaningful dialogue with our stockholders through in-person and teleconference meetings, earnings calls and other channels of communication.

At our 2023 Annual Meeting of Stockholders, 94% of our stockholders approved our advisory “say-on-pay” proposal to approve the compensation of our NEOs, based on the total votes cast. We considered the results of the “say-on-pay” vote in determining our 2023 executive compensation and did not make any changes to our compensation practices as a result of the vote given the strong level of support.

As described below, the key elements of our compensation package for NEOs are base salary, short-term (annual) cash incentive plan (“STIP”) awards, equity-based awards, and our benefits programs

Each NEO’s compensation has been individually designed to provide a combination of fixed and at-risk compensation that is tied to the achievement of Cars Commerce’s short- and long-term objectives.

Equity grants represent the majority of our executives’ total direct compensation at target (sum of base salary, STIP and equity-based awards). This helps to align our NEOs’ interests with those of our stockholders. We intend to continue our practice of awarding equity to our NEOs as it reaffirms our philosophy of paying for performance and aligning compensation directly to the long-term value and growth of Cars Commerce.

The following charts show the weight of each element of compensation relative to target direct compensation for our CEO and the other NEOs, in the aggregate. In 2023, 89% of aggregate CEO target compensation was variable compensation. Of that variable amount, 13% was in the form of the STIP cash-based award and the remaining 87% was in the form of Long-Term Incentive Plan (LTIP) equity-based awards comprised of both time-based and performance-based equity grants with multi-year vesting periods.

 

In 2023, 79% of aggregate NEO (other than CEO) target compensation was variable compensation. Of that variable amount, 25% was in the form of the STIP cash-based award and the remaining 75% was in the form of LTIP equity-based awards comprised of both time-based and performance-based equity grants that have multi-year vesting periods.

 

Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain talent. Each NEO’s base salary is generally reviewed annually to determine whether an adjustment is warranted or required based on the competitive market, the economic environment and the individual’s performance.

In determining base salaries for our NEOs, the Compensation Committee considers several factors, including:

After considering the above factors, the Compensation Committee determined that the salaries for most of our NEOs were appropriate and did not make any adjustments, other than a modest increase to Angelique’s salary as set forth below, effective as of April 1, 2023.

We offer our NEOs the opportunity to earn STIP awards based on achieved performance against Compensation Committee-approved single-year performance goals. The Compensation Committee, in its sole discretion with respect to the CEO and in collaboration with the CEO for all other NEOs, determines whether and to what extent STIP awards shall be paid to each NEO. The Compensation Committee approved a Company Performance Factor (“CPF”) of 107.8% which is based on internal targets previously established and approved by the Compensation Committee included in the 2023 STIP. The Compensation Committee selected Revenue and Adjusted EBITDA targets to measure annual performance because they are and have been the metrics by which management has measured success and accountability, both internally and externally.

In 2023, our NEOs participated in our STIP program. The Compensation Committee set each NEO’s 2023 target STIP award opportunity (expressed as a percentage of base salary) based on several factors, including Cars Commerce’s financial performance relative to targets set by the Compensation Committee, the NEO’s scope of duties and responsibilities, internal pay equity considerations and competitive market conditions and data. The cash payout under this program was equal to the product of the following Compensation Committee-approved performance factors: (i) the CPF, which is related to achieved performance against two equally weighted performance metrics, Adjusted EBITDA and Revenue, multiplied by (ii) the Individual Performance Factor (“IPF”), which is related to each NEO’s performance considering functional leadership, talent and team growth and role modeling. Cars Commerce defines Adjusted EBITDA as net income (loss) before (1) interest expense, net, (2) income tax (benefit) expense, (3) depreciation, (4) amortization of intangible assets, (5) stock-based compensation expense, (6) unrealized mark-to-market adjustments and cash transactions related to derivative instruments, and (7) certain other items, such as transaction-related items, severance, transformation and other exit costs and write-off and impairments of goodwill, intangible assets and other long-lived assets.

Based on achieved performance against the two financial metrics, the CPF may make a NEO eligible to earn between 0% and 200% of the NEO’s target STIP opportunity. In accordance with the STIP formula, the threshold payout for Adjusted EBITDA requires the attainment of at least 90% of target Adjusted EBITDA to yield 37.5% of the NEO’s target STIP

opportunity, and the threshold payout for Revenue requires the attainment of at least 90% of target Revenue to yield 37.5% of the NEO’s target STIP opportunity. As described above and below, the amount earned under the financial metrics is subject to adjustment based on a NEO’s IPF, based on functional leadership, talent and team growth and role modeling.

Using the Revenue and Adjusted EBITDA calculations described above, the table below shows target, threshold, and maximum goals for each financial metric, 2023 results achieved against these goals and the CPF payout calculation (expressed as a percentage of target STIP opportunity) for each financial metric.

Based on the approved formula as described above, management recommended, and the Compensation Committee adopted, a CPF of 107.8%.

In general, based on a NEO’s individual performance, the CEO recommends to the Compensation Committee (other than for himself) the NEO’s IPF, which may range between 0% to 150%. The CEO recommendation considers each NEO’s contribution to deliver our financial results, lead and develop their teams, including creating a diverse and inclusive talent strategy - while driving overall strategic and operational contributions to create stockholder value. The Compensation Committee determined the CEO’s IPF to be 100%. The Compensation Committee also determined, based on the CEO’s recommendation, that Sonia, Doug and Angelique’s IPF to be 100%.

Based on such payout percentages, the Compensation Committee approved the following determination of each NEO’s 2023 cash award under the STIP:

Our LTIP awards are designed to drive achievement of long-term operational and financial goals and increase stockholder value, as well as to attract and retain key talent. Cars Commerce has a pay-for-performance culture and includes performance conditions in a portion of equity grants to certain executive leaders. The Compensation Committee approved

targets with a three-year performance period for performance-based Restricted Stock Units (“PSUs”) comprising 50% of the equity grant allocation to Alex, Sonia and Doug in 2023. The Board believes Revenue and Adjusted EBITDA compound annual growth rates over a three-year period are the most appropriate metrics and most correlated with Cars Commerce’s success and the sustainable growth in stockholder value.

Target long-term incentive awards are based on a percentage of base salary or a fixed dollar amount. In 2023, the Compensation Committee set each NEO’s LTIP target value based on the NEO’s role and responsibilities, internal equity considerations, competitive market conditions and data and target direct compensation. Our NEOs’ LTIP target values were as follows:

The Compensation Committee makes LTIP equity grants annually at its March meeting following issuance of Cars Commerce Annual Report on Form 10-K.

The Compensation Committee approved the following 2023 equity pay mix for our NEOs:

In 2023, the Compensation Committee awarded the CEO, CFO and CCO equity grants in the form of PSUs. The PSUs are based on a three-year performance period consisting of fiscal years 2023, 2024, and 2025, measuring performance against pre-established Revenue and Adjusted EBITDA growth targets and will include threshold and maximum payouts as indicated in the chart below.

The number of RSUs granted was determined by dividing the approved value of each grant by the closing share price of a share of Cars Commerce common stock on the date of grant. The 2023 RSUs vest in equal annual installments over a three-year period. Generally, a NEO must be employed through each vesting date to avoid forfeiting any unvested RSUs except as provided by Cars Commerce severance plans. RSUs that vest on each vesting date are settled in shares of common stock, less shares that may be withheld by Cars Commerce for payment of taxes. The following table shows the number of RSUs granted to our NEOs in 2023.

In addition to the primary elements of compensation (base salary, cash bonuses and equity awards) described above, NEOs may participate in benefit programs generally available to our employees, including a 401(k) plan that provides for matching contributions up to a stated limit.

In general, with the exception of offer letters provided to all Cars Commerce employees, Cars Commerce does not enter into employment agreements with its employees. In certain instances, to attract and retain executives or key employees, Cars Commerce may provide sign-on bonuses (typically reflected in the offer letter) or award bonuses in recognition of interim service beyond the executive’s normal role. To minimize the need for unique employment agreements and to establish compensation programs that are market competitive, we have also adopted a Change-in-Control Severance Plan and an Executive Severance Plan as described in the section “Named Executive Officer Compensation – Potential Payments Upon Termination or Change in Control” below.

Cars Commerce is committed to fostering a compensation structure that aligns each executive’s interests with those of our stockholders. As part of these alignment efforts, the Board adopted a Stock Ownership and Retention Policy that requires executive officers, including each NEO, to maintain a meaningful level of investment in Cars Commerce common stock. The levels of stock ownership are reviewed by the ESG Committee to evidence compliance with the guidelines. Executive officers are expected to hold shares (at least 50% of the net shares received after shares are withheld by Cars Commerce in payment of withholding taxes, counting unvested RSUs at 50% of the underlying shares, and PSUs at zero until the performance period is complete) received under equity grants until the stock ownership requirements are met. The following table reflects the minimum stock ownership guidelines for the executive officers, including the NEOs. All NEOs are currently in compliance with the Stock Ownership and Retention Policy.

Our Insider Trading Policy prohibits employees, including executive officers, directors and their family members, from engaging in short sales, directly or indirectly, trading in puts or calls, options, warrants or similar instruments relating to Cars Commerce securities or selling such securities “short” (i.e., selling stock that is not owned and borrowing the shares to make delivery), day-trading or hedging with respect to Cars Commerce securities. These restrictions are also applicable to hedging transactions through the purchase of financial instruments, such as prepaid variable forward contracts, equity swaps, collars and exchange funds, trading on margin or in margin-related derivatives, or any financial instruments or derivatives or entering into any contracts, warrants or the like for the purpose of hedging price movements in Cars Commerce securities. Additionally, directors and executive officers may not, directly or indirectly, pledge Cars Commerce securities as collateral on any debt instrument.

Cars Commerce believes that it is in the best interests of Cars Commerce and its stockholders to create and maintain a culture that emphasizes integrity, accountability and that reinforces Cars Commerce’s pay-for-performance compensation philosophy. In accordance with the NYSE listing standards, Section 10D of the Exchange Act, and Rule 10D-1 under the Exchange Act, the Compensation Committee adopted a Clawback Policy (the “Clawback Policy”) to recover certain excess incentive-based compensation granted to current and former executive officers.

Under the Clawback Policy, the Compensation Committee is required to recover excess incentive-based compensation received within the last three completed fiscal years by covered employees, including current and former executive officers, in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under any applicable securities laws (unless one of the limited clawback exception applies). The Clawback Policy also permits recovery of incentive-based compensation in the discretion of the Compensation Committee in the event of any violation of laws, regulations, or Cars Commerce policies that result in significant harm to Cars Commerce, including but not limited to reputational, financial, or competitive harm.

Although the Compensation Committee considers tax and accounting consequences in making its determination, the Compensation Committee designs and administers compensation programs that it believes are in the best interests of Cars Commerce and our stockholders.

The following Summary Compensation Table contains compensation information for fiscal years 2023, 2022, and 2021 (as applicable) for our NEOs: (i) Alex Vetter, who served as CEO; (ii) Sonia Jain who served as Chief Financial Officer and (iii) Doug Miller and Angelique Strong Marks, our other executive officers serving as of December 31, 2023.

The following table sets forth information regarding grants of awards made to our NEOs during 2023.

The following table lists all outstanding equity awards held by our NEOs as of December 31, 2023.