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DEALERTRACK HOLDINGS REPORTS FIRST QUARTER 2010
FINANCIAL RESULTS AND
MAINTAINS REVENUE AND EARNINGS GUIDANCE
Lake Success, NY, May 5, 2010 – DealerTrack Holdings, Inc. (Nasdaq: TRAK) today reported financial results for the first quarter ended March 31, 2010.
GAAP Results for the First Quarter 2010
§ | Revenue for the quarter was $56.8 million, as compared to $55.7 million for the first quarter of 2009. |
§ | GAAP net loss for the quarter was $(2.5) million, as compared to GAAP net loss of $(5.6) million for the first quarter of 2009. |
§ | GAAP net loss per share for the quarter was $(0.06) as compared to GAAP net loss per share of $(0.14) for the first quarter of 2009. |
Non-GAAP Results for the First Quarter 2010
§ | Adjusted EBITDA for the quarter was $4.9 million, as compared to $6.1 million for the first quarter of 2009. |
§ | Adjusted net income for the quarter was $2.1 million, as compared to $3.8 million for the first quarter of 2009. |
§ | Diluted adjusted net income per share for the quarter was $0.05 as compared to $0.09 per share for the first quarter of 2009. |
Guidance for 2010 Annual Performance
DealerTrack reaffirms its revenue and GAAP and non-GAAP earnings guidance for the full year 2010 as follows:
Expected GAAP Results
§ | Revenue for the year is expected to be between $240.0 million and $246.0 million, net of approximately $1.5 to $2.0 million of contra-revenue related to the GMAC agreement |
§ | GAAP net income for the year is expected to be between $2.0 million and $4.0 million |
§ | Diluted GAAP net income per share for the year is expected to be between $0.05 and $0.09 |
Expected Non-GAAP Results
§ | Adjusted EBITDA for the year is expected to be between $41.0 million and $45.0 million |
§ | Adjusted net income for the year is expected to be between $21.5 million and $24.0 million |
§ | Diluted adjusted net income per share for the year is expected to be between $0.51 and $0.57 |
GAAP net income and adjusted net income per share guidance for the year are based on an assumed 42.3 million diluted weighted average shares outstanding.
The guidance assumes that for 2010 new car sales will be 11.0 million units and used car sales will be 13.5 million units. Our guidance originally assumed 11.5 million new car units. The guidance also includes the expected ongoing impact of the Chrysler and General Motors bankruptcies and related franchise terminations, including the Saturn wind down. Also included in our guidance is the strategic agreement that we recently announced with GMAC.
Mark O’Neil, chairman and chief executive officer of DealerTrack, commented, “Results for the quarter were in-line with our expectations, and we expect our business to continue to improve throughout the year.” O’Neil continued, “Looking ahead, we believe that the auto industry has begun to rebound, and DealerTrack is extremely well-positioned to benefit in both our transaction and subscription businesses.”
Conference Call
DealerTrack will host a conference call to discuss its first quarter 2010 results, 2010 guidance, and other matters on May 5, 2010 at 5:00 p.m. Eastern Time. The conference call will be webcast live on the Internet at http://ir.dealertrack.com/eventdetail.cfm?eventid=79638. In addition, a live audio of the call will be accessible to the public by calling 877-303-6648 (domestic) or 970-315-0443 (international); no access code is necessary. Callers should dial in approximately 10 minutes before the call begins. A replay will be available on the DealerTrack website until May 19, 2010.
Non-GAAP Financial Measures
The non-GAAP measures of adjusted EBITDA and adjusted net income disclosures are not presented in accordance with generally accepted accounting principles (GAAP) and are not intended to be used in lieu of GAAP presentations of net income. Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net (loss) income excluding interest, taxes, depreciation and amortization expenses, GMAC contra-revenue and may exclude certain items such as: impairment charges, restructuring charges, acquisition-related earn-out compensation expense and professional service fees, and realized gains or (losses) on securities. Adjusted net income is a non-GAAP financial measure that represents GAAP net (loss) income excluding stock-based compensation expense, the amortization of acquired identifiable intangibles, GMAC contra-revenue and may also exclude certain items, such as: impairment charges, restructuring charges, acquisition-related earn-out compensation expense and professional service fees, and realized gains or (losses) on securities. These adjustments, which are shown before taxes, are adjusted for their tax impact.
Adjusted EBITDA and adjusted net income are presented because management believes they provide additional information with respect to the performance of our fundamental business activities as the purchase accounting treatment of acquisitions can have a negative impact on our GAAP results because the depreciation and amortization expenses associated with acquired assets, as well as particular intangibles (which tend to have a relatively short useful life), can be substantial in the first several years following an acquisition. As a result, we monitor our adjusted EBITDA and adjusted net income and other business statistics as a measure of operating performance in addition to net income and the other measures included in our consolidated financial statements. Management believes the adjusted EBITDA and adjusted net income information is useful to investors for these reasons. Adjusted EBITDA and adjusted net income are non-GAAP financial measures and should not be viewed as an alternative to GAAP measures of performance. Management believes the most directly comparable GAAP financial measure for adjusted EBITDA and adjusted net income is GAAP net income and has provided a reconciliation of adjusted EBITDA to GAAP net income and adjusted net income to GAAP net income, in Attachment 4 to this press release.
About DealerTrack (www.dealertrack.com)
DealerTrack's intuitive and high-value software solutions enhance efficiency and profitability for all major segments of the automotive retail industry, including dealers, lenders, OEMs, agents and aftermarket providers. Our solution set for dealers is the industry's most comprehensive. DealerTrack operates the industry's largest online credit application network, connecting approximately 17,000 dealers with over 850 lenders. Our Dealer Management System (DMS) provides dealers easy-to-use tools and real-time data access that will streamline any automotive business. Dealers using DealerTrack AAX get the inventory management tools and services needed to accelerate turns and increase profit. Our Sales and F&I solution enables dealers to streamline the entire sales process while structuring all types of deals from a single integrated platform. DealerTrack's Compliance solution helps dealers meet legal and regulatory requirements and protect their hard-earned assets. DealerTrack's family of companies also includes data and consulting services providers ALG (Automotive Lease Guide) and Chrome Systems.
Safe Harbor for Forward-Looking and Cautionary Statements
Statements in this press release regarding DealerTrack’s expected 2010 performance, the long-term outlook for its business, and all other statements in this release other than the recitation of historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). These statements involve a number of risks, uncertainties and other factors that could cause actual results, performance or achievements of DealerTrack to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.
Factors that might cause such a difference include: economic trends that affect the automotive retail industry or the indirect automotive financing industry including the number of new and used cars sold; reductions in auto dealerships by General Motors and Chrysler in the United States; increased competitive pressure from other industry participants, including Open Dealer Exchange, RouteOne, CUDL, Finance Express and AppOne; the impact of some vendors of software products for automotive dealers making it more difficult for DealerTrack’s customers to use DealerTrack’s solutions and services; security breaches, interruptions, failures and/or other errors involving DealerTrack’s systems or networks; the failure or inability to execute any element of DealerTrack’s business strategy, including selling additional products and services to existing and new customers; the volatility of DealerTrack’s stock price; new regulations or changes to existing regulations; the timing of the rollout of GMAC Financial Services on the DealerTrack network, the integration of recent acquisitions and the expected benefits, as well as the integration and expected benefits of any future acquisitions that DealerTrack may pursue; DealerTrack’s success in expanding its customer base and product and service offerings, the impact of recent economic trends, and difficulties and increased costs associated with raising additional capital and other risks listed in DealerTrack’s reports filed with the Securities and Exchange Commission (SEC), including its most recent Annual Report on Form 10-K. These filings can be found on DealerTrack’s website at www.dealertrack.com and the SEC’s website at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and DealerTrack disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.
Attachment (1) Actual Results: Three-Month Period
DEALERTRACK HOLDINGS, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
Net revenue | $ | 56,785 | $ | 55,700 | ||||
Cost of revenue | 30,717 | 29,121 | ||||||
Product development | 3,598 | 4,132 | ||||||
Selling, general and administrative | 27,408 | 32,318 | ||||||
Total operating expenses | 61,723 | 65,571 | ||||||
Loss from operations | (4,938 | ) | (9,871 | ) | ||||
Interest and other income, net | 691 | 402 | ||||||
Realized gain on securities | 582 | 463 | ||||||
Loss before benefit from income taxes | (3,665 | ) | (9,006 | ) | ||||
Benefit from income taxes | 1,214 | 3,381 | ||||||
Net loss | $ | (2,451 | ) | $ | (5,625 | ) | ||
Basic net loss per share | $ | (0.06 | ) | $ | (0.14 | ) | ||
Diluted net loss per share | $ | (0.06 | ) | $ | (0.14 | ) | ||
Weighted average shares outstanding (basic) | 40,154,275 | 39,095,730 | ||||||
Weighted average shares outstanding (diluted) | 40,154,275 | 39,095,730 | ||||||
Adjusted EBITDA (non-GAAP) (a) | $ | 4,942 | $ | 6,077 | ||||
Adjusted EBITDA margin (non-GAAP) (b) | 9 | % | 11 | % | ||||
Adjusted net income (non-GAAP) (a) | $ | 2,065 | $ | 3,822 | ||||
Diluted adjusted net income per share (non-GAAP) (c) (d) | $ | 0.05 | $ | 0.09 | ||||
Stock-based compensation expense was classified as follows: | ||||||||
Cost of revenue | $ | 403 | $ | 613 | ||||
Product development | $ | 151 | $ | 210 | ||||
Selling, general and administrative | $ | 2,188 | $ | 6,583 |
(a) | See Reconciliation Data in Attachment 4. |
(b) | Represents adjusted EBITDA as a percentage of net revenue. |
(c) | For the three months ended March 31, 2010, the adjusted net income per share of approximately $0.05 is based on 41,148,416 diluted weighted average shares outstanding. |
(d) | For the three months ended March 31, 2009, the adjusted net income per share of approximately $0.09 is based on 40,579,974 diluted weighted average shares outstanding. |
Attachment (2) Condensed Consolidated Balance Sheets
DEALERTRACK HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
March 31, 2010 | December 31, 2009 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 183,210 | $ | 197,509 | ||||
Short-term investments | 69 | 1,484 | ||||||
Accounts receivable, net | 21,208 | 17,478 | ||||||
Prepaid expenses and other current assets | 31,559 | 9,620 | ||||||
Total current assets | 236,046 | 226,091 | ||||||
Property and equipment, net | 15,345 | 13,514 | ||||||
Software and web site development costs, net | 22,565 | 21,158 | ||||||
Intangible assets, net | 37,589 | 41,604 | ||||||
Goodwill | 135,667 | 134,747 | ||||||
Deferred taxes and other long-term assets | 35,155 | 35,213 | ||||||
Total assets | $ | 482,367 | $ | 472,327 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Accounts payable and accrued expenses | $ | 36,199 | $ | 26,960 | ||||
Deferred revenue | 4,929 | 4,992 | ||||||
Due to acquirees and other current liabilities | 1,241 | 2,245 | ||||||
Total current liabilities | 42,369 | 34,197 | ||||||
Long-term liabilities | 17,781 | 17,244 | ||||||
Total liabilities | 60,150 | 51,441 | ||||||
Total stockholders’ equity | 422,217 | 420,886 | ||||||
Total liabilities and stockholders’ equity | $ | 482,367 | $ | 472,327 |
Attachment (3) Consolidated Statements of Cash Flows
DEALERTRACK HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
Operating activities: | ||||||||
Net loss | $ | (2,451 | ) | $ | (5,625 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 9,240 | 8,775 | ||||||
Deferred tax provision (benefit) | 13,372 | (3,359 | ) | |||||
Stock-based compensation expense | 2,742 | 7,406 | ||||||
Provision for doubtful accounts and sales credits | 1,463 | 2,458 | ||||||
Gain on sale of property and equipment | - | (166 | ) | |||||
Realized gain on securities | (582 | ) | (463 | ) | ||||
Amortization of bond premium | - | 40 | ||||||
Amortization of deferred interest | 41 | 34 | ||||||
Deferred compensation | - | 75 | ||||||
Stock-based compensation windfall tax benefit | (629 | ) | (829 | ) | ||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||
Accounts receivable | (5,004 | ) | (5,415 | ) | ||||
Prepaid expenses and other current assets | (18,016 | ) | (3,977 | ) | ||||
Accounts payable and accrued expenses | 5,219 | 259 | ||||||
Deferred revenue | (69 | ) | 371 | |||||
Other long-term liabilities | 184 | (336 | ) | |||||
Deferred rent | 30 | 41 | ||||||
Other long-term assets | (13,206 | ) | (448 | ) | ||||
Net cash used in operating activities | (7,666 | ) | (1,159 | ) | ||||
Investing activities: | ||||||||
Capital expenditures | (2,527 | ) | (1,273 | ) | ||||
Restricted cash | - | 114 | ||||||
Sale of investments | - | 31,300 | ||||||
Capitalized software and website development costs | (2,244 | ) | (3,050 | ) | ||||
Payment for acquisition of business and intangible assets, net of acquired cash | (2,278 | ) | (33,808 | ) | ||||
Proceeds from sale of property and equipment | - | 71 | ||||||
Net cash used in investing activities | (7,049 | ) | (6,646 | ) |
Attachment (3) Consolidated Statements of Cash Flows (continued)
DEALERTRACK HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Financing activities: | ||||||||
Principal payments on capital lease obligations | (126 | ) | (92 | ) | ||||
Proceeds from the exercise of employee stock options | 97 | 935 | ||||||
Proceeds from employee stock purchase plan | 236 | 342 | ||||||
Purchase of treasury stock | (590 | ) | (325 | ) | ||||
Principal payments on notes payable | - | (212 | ) | |||||
Stock-based compensation windfall tax benefit | 629 | 829 | ||||||
Net cash provided by financing activities | 246 | 1,477 | ||||||
Net decrease in cash and cash equivalents | (14,469 | ) | (6,328 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 170 | (472 | ) | |||||
Cash and cash equivalents, beginning of period | 197,509 | 155,456 | ||||||
Cash and cash equivalents, end of period | $ | 183,210 | $ | 148,656 |
Three Ended March 31, | ||||||||
2010 | 2009 | |||||||
Supplemental disclosure: | ||||||||
Cash paid for: | ||||||||
Income taxes | $ | 2,536 | $ | 2,173 | ||||
Interest | $ | 18 | $ | 16 |
Attachment (4) | Reconciliation Data |
DEALERTRACK HOLDINGS, INC.
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
GAAP net loss | $ | (2,451 | ) | $ | (5,625 | ) | ||
Interest income | (126 | ) | (402 | ) | ||||
Interest expense | 59 | 50 | ||||||
Benefit from income taxes | (1,214 | ) | (3,381 | ) | ||||
Depreciation and amortization | 4,006 | 3,443 | ||||||
Amortization of acquired identifiable intangibles | 5,234 | 5,286 | ||||||
EBITDA (non-GAAP) | 5,508 | (629 | ) | |||||
Adjustments: | ||||||||
Restructuring costs (including stock-based compensation) (a) | - | 6,731 | ||||||
Acquisition related professional fees | 16 | 438 | ||||||
Realized gain on securities | (582 | ) | (463 | ) | ||||
Adjusted EBITDA (non-GAAP) | $ | 4,942 | $ | 6,077 |
(a) | Includes costs related to a reduction in workforce, a plant relocation related to DealerTrack's Digital Services business and a gain related to DealerTrack's exit from the SCS business. |
DEALERTRACK HOLDINGS, INC.
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Income
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
GAAP net loss | $ | (2,451 | ) | $ | (5,625 | ) | ||
Adjustments: | ||||||||
Stock-based compensation (excluding restructuring costs) | 2,742 | 3,515 | ||||||
Amortization of acquired identifiable intangibles | 5,234 | 5,286 | ||||||
Acquisition related professional fees | 16 | 438 | ||||||
Realized gain on securities (non-taxable) | (582 | ) | (463 | ) | ||||
Restructuring costs | - | 6,731 | ||||||
Tax impact of adjustments (a) | (2,894 | ) | (6,060 | ) | ||||
Adjusted net income (non-GAAP) | $ | 2,065 | $ | 3,822 |
(a) | The tax impact of adjustments for the three months ended March 31, 2010, are based on a U.S. effective tax rate of 36.8% applied to taxable adjustments other than amortization of acquired identifiable intangibles which is based on a blended effective tax rate of 35.9%. The tax impact of adjustments for the three months ended March 31, 2009, are based on a U.S. effective tax rate of 38.3% applied to taxable adjustments other than amortization of acquired identifiable intangibles which is based on a blended effective tax rate of 37.2%. |
DEALERTRACK HOLDINGS, INC.
Reconciliation of Forward-looking GAAP Net Loss to
Forward-looking Non-GAAP Adjusted EBITDA
(Dollars in millions)
(Unaudited)
Year Ending December 31, 2010 Expected Range | ||||||||
GAAP net income | $ | 2.0 | $ | 4.0 | ||||
Interest income | (0.5 | ) | (0.5 | ) | ||||
Interest expense | 0.2 | 0.2 | ||||||
Provision for income taxes | 1.3 | 2.6 | ||||||
Depreciation and amortization | 17.0 | 17.2 | ||||||
Amortization of acquired identifiable intangibles | 19.5 | 19.5 | ||||||
EBITDA (non-GAAP) | 39.5 | 43.0 | ||||||
GMAC contra-revenue | 1.5 | 2.0 | ||||||
Adjusted EBITDA (non-GAAP) | $ | 41.0 | $ | 45.0 |
DEALERTRACK HOLDINGS, INC.
Reconciliation of Forward-looking GAAP Net Loss to
Forward-looking Non-GAAP Adjusted Net Income
(Dollars in millions)
(Unaudited)
Year Ending December 31, 2010 Expected Range | ||||||||
GAAP net income | $ | 2.0 | $ | 4.0 | ||||
Adjustments: | ||||||||
Stock-based compensation charges | 11.2 | 11.4 | ||||||
Amortization of acquired identifiable intangibles | 19.5 | 19.5 | ||||||
GMAC contra-revenue | 1.5 | 2.0 | ||||||
Tax impact of adjustments (a) | (12.7 | ) | (12.9 | ) | ||||
Adjusted net income (non-GAAP) | $ | 21.5 | $ | 24.0 |
(a) | The tax impacts of adjustments are based on a U.S. effective tax rate of between 41.8% and 42.5% applied to all adjustments other than amortization of acquired identifiable intangibles which is based on a blended effective tax rate of 37.4%. |
Attachment (5) Summary of Business Statistics (Unaudited)
DEALERTRACK HOLDINGS, INC.
Three months ended | ||||||||||||||||||||
Mar 31, 2010 | Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | ||||||||||||||||
Active U.S. dealers (a) | 16,860 | 16,690 | 17,241 | 18,047 | 18,998 | |||||||||||||||
Active U.S. lenders (b) | 847 | 823 | 790 | 755 | 736 | |||||||||||||||
Transactions processed (c) (in thousands) | 11,841 | 10,114 | 13,804 | 13,157 | 14,327 | |||||||||||||||
Active U.S. lender to dealer relationships (d) | 127,724 | 118,209 | 120,305 | 123,885 | 134,475 | |||||||||||||||
Subscribing dealers (e) | 13,705 | 13,852 | 13,959 | 14,115 | 14,646 |
(a) | We consider a dealer to be active as of a date if the dealer completed at least one revenue-generating credit application processing transaction using the DealerTrack network during the most recently ended calendar month. |
(b) | We consider a lender to be active in our DealerTrack network as of a date if it is accepting credit application data electronically from U.S. dealers in the DealerTrack network. |
(c) | Represents revenue-generating transactions processed in the DealerTrack, DealerTrack Digital Services and DealerTrack Canada networks at the end of a given period. |
(d) | Each lender to dealer relationships represents a pair between an active U.S. lender and an active U.S. dealer. |
(e) | Represents the number of dealerships with one or more active subscriptions on the DealerTrack or DealerTrack Canada networks at the end of a given period. |
Three months ended | ||||||||||||||||||||
Mar 31, 2010 | Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | ||||||||||||||||
Transaction revenue (in thousands) | $ | 22,870 | $ | 20,237 | $ | 25,483 | $ | 24,645 | $ | 24,041 | ||||||||||
Subscription revenue (in thousands) | $ | 29,728 | $ | 28,982 | $ | 28,978 | $ | 29,028 | $ | 27,943 | ||||||||||
Other revenue (in thousands) | $ | 4,187 | $ | 4,028 | $ | 4,348 | $ | 4,197 | $ | 3,716 | ||||||||||
Average transaction price | $ | 1.93 | $ | 2.00 | $ | 1.85 | $ | 1.87 | $ | 1.68 | ||||||||||
Average monthly subscription revenue per subscribing dealership (a) | $ | 719 | $ | 695 | $ | 692 | $ | 686 | $ | 635 |
(a) | Represents net subscription revenue divided by average subscribing dealers for a given period in the DealerTrack and DealerTrack Canada networks. |
TRAK-E ###