Cars.com Inc., and media company tronc, Inc. announced an agreement to convert tronc’s eight affiliate markets into Cars.com’s direct retail channel, effective February 1, 2018.
The converting markets include Los Angeles and Chicago, the nation’s second and third largest markets for new vehicle sales in 2017, according to Cars.com’s data, which is aligned with Nielsen’s household DMA statistics. More than 2,000 dealer customers will convert from tronc’s affiliate network into Cars.com’s direct sales channel.
Upon conversion, tronc’s sales and support teams will also join Cars.com, facilitating an accelerated and seamless transition of the markets and the opportunity for Cars.com to directly offer its full suite of digital solutions for the benefit of dealer customers.
Cars.com notes that tronc represents 37 percent of Cars.com’s wholesale revenue, including $13 million of unfavorable contracts liability amortization. Cars.com expects to report more than $10 million of incremental revenue in 2018 ($23 million before the impact of the reduction in revenue amortization).
The agreement also includes a multi-year advertising and marketing agreement between Cars.com and tronc. As a result of the revenue recognition rules effective January 1, 2018, tronc notes that the company would have recognized revenue related to the Cars.com solutions on a “net” basis. Under this new agreement, tronc will be recognizing less revenue but a slightly improved EBITDA.
Edited by G. Davila
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