CONTACT:
Investor Relations
Dealertrack
(888) 450-0478
investorrelations@Dealertrack.com
Dealertrack Technologies, Inc. Reports Third Quarter 2012 Financial Results
Updates 2012 Guidance Based on Results and Acquisitions
Lake Success, N.Y., November 8, 2012– Dealertrack Technologies, Inc. (NASDAQ: TRAK) today reported financial results for the third quarter ended September 30, 2012. The Company changed its name from DealerTrack Holdings, Inc. on November 1, 2012.
GAAP Results for the Third Quarter 2012
| § | Revenue for the quarter was $99.1 million, as compared to $95.8 million for the third quarter of 2011. |
| § | GAAP net loss for the quarter was $(2.9) million, as compared to GAAP net income of $5.4 million for the third quarter of 2011. |
| § | Diluted GAAP net loss per share for the quarter was $(0.07), as compared to GAAP net income per share of $0.13 for the third quarter of 2011. |
GAAP net loss for the three months ended September 30, 2012 includes a $3.3 million, or $0.08 per share, non-cash charge (net of taxes) from an adjustment to fair value relating to a warrant.
Non-GAAP Results for the Third Quarter 2012
| § | Adjusted EBITDA for the quarter was $27.0 million, as compared to $25.8 million for the third quarter of 2011. |
| § | Adjusted net income for the quarter was $12.5 million, as compared to $14.7 million for the third quarter of 2011. |
| § | Diluted adjusted net income per share for the quarter was $0.28, as compared to $0.34 for the third quarter of 2011. As a result of updating the Company's full year expected effective tax rate, a tax benefit that was realized in the prior quarter was reversed in the third quarter, negatively impacting diluted adjusted net income per share by $0.02. Adjusted net income per share for the third quarter would have been $0.30 without the impact of this reversal. |
GAAP Results for the Nine Months Ended September 30, 2012
| § | Revenue for the nine months was $287.1 million, as compared to $262.0 million for the same period in 2011. |
| § | GAAP net income for the nine months was $20.0 million, as compared to $32.3 million for the same period in 2011. |
| § | Diluted GAAP net income per share for the nine months was $0.45, as compared to $0.76 for the same period in 2011. |
GAAP net income for the nine months ended September 30, 2012 includes a $15.9 million, or $0.36 per share, gain (net of taxes) for the contribution of the net assets of Chrome to the Chrome Data Solutions joint venture; a $3.4 million, or $0.08 per share, gain (net of taxes) from the sale of certain Chrome branded assets that were not contributed to our Chrome Data joint venture; and a $3.9 million, or $0.09 per share, non-cash charge (net of taxes) from an adjustment to fair value relating to a warrant.GAAP net income for the nine months ended September 30, 2011 was positively impacted by a $22.4 million, or $0.53 per share, non-cash reduction in the valuation allowance against the Company's net U.S. deferred tax assets.
Non-GAAP Results for the Nine Months Ended September 30, 2012
| § | Adjusted EBITDA for the nine months was $71.5 million, as compared to $65.6 million for the same period in 2011. |
| § | Adjusted net income for the nine months was $35.4 million, as compared to $33.2 million for the same period in 2011. |
| § | Diluted adjusted net income per share for the nine months was $0.81, as compared to $0.78 for the same period in 2011. |
Mark F. O’Neil, chairman and chief executive officer of Dealertrack Technologies, Inc., commented, “Our healthy third quarter performance allows us to remain squarely on track to achieve our full-year revenue expectations and our adjusted EBITDA margin target of approximately 25%, with revenue from recent acquisitions further contributing to our results. In addition to organic growth in our transaction and subscription businesses in the quarter, we are excited to further broaden our market opportunity with the addition of ClickMotive to our digital retailing suite. ClickMotive significantly strengthens Dealertrack’s existing eCarList digital retailing capabilities with an expanded website and digital marketing platform.Importantly, it gives Dealertrack access to a part of dealership advertising budgets, in addition to their technology budgets. We believe investments we are making to both broaden and deepen our product portfolio are improving our market leadership and position us for long-term growth.”
Updated Guidance for 2012
Dealertrack updated its 2012 annual guidance based on its third quarter results and for the acquisitions ofClickMotive and the assets of Ford Motor Company of Canada Limited’s iCONNECT Direct DMS business as follows:
Expected GAAP Results
| § | Revenue for the year is expected to be between $387.0 million and $390.0 million, an increase from prior guidance of between $381.0 million and $385.0 million. |
| § | GAAP net income for the year is expected to be between $21.5 million and $23.0 million, a decrease from prior guidance of between $24.5 million and $26.5 million. |
| § | Diluted GAAP net income per share for the year is expected to be between $0.49 and $0.52, a decrease from prior guidance of between $0.55 and $0.60 per share. |
Expected Non-GAAP Results
| § | Adjusted EBITDA for the year is expected to be between $96.5 millionand $98.0 million, an increase from prior guidance of between $96.0 millionand $98.0 million. |
| § | Adjusted net income for the year is expected to be between $48.0 millionand $49.5 million, an increase from prior guidance of between $47.5 millionand $49.5 million. |
| § | Diluted adjusted net income per share for the year is expected to be between $1.08 and $1.12, an increase from prior guidance of between $1.07 and $1.12. |
The updated guidance assumes car sales will be generally consistent with what we have seen during the first nine months of 2012, with new car sales by franchised dealers of approximately 14.3 million units and used car sales by franchised dealers of approximately 14.5 million units for 2012, an increase from our previous assumptions of 14.2 million units and 14.0 million units, respectively. Diluted GAAP net income and adjusted net income per share guidance for the year continue to be based on an estimated 44.3 million diluted weighted average shares outstanding. The updated guidance assumes an effective tax rate of 39% for the full year, a decrease from prior guidance of 39.5% at the mid-point.
Conference Call
Dealertrack will host a conference call to discuss its third quarter 2012 results and other matters on November 8, 2012 at 5:00 p.m. Eastern Time. The conference call will be webcast live on the Internet at ir.dealertrack.com. 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 Technologies, Inc. website until November 30, 2012.
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 income (loss) excluding interest, taxes, depreciation and amortization expenses, stock-based compensation, and contra-revenue and may exclude certain items such as: impairment charges, restructuring charges, impact of acquisition-related activity (including contingent consideration changes, compensation expense, basis difference amortization, and professional service fees), realized gains on sales of previously impaired securities, gains or losses on sales or disposals of subsidiaries and other assets, and certain other non-recurring items.
All stock-based compensation expense is excluded from the calculation of the adjusted EBITDA non-GAAP measure. This may reduce the comparability with prior periods. This non-cash expense was included in presentations prior to fourth quarter 2011.
Adjusted net income is a non-GAAP financial measure that represents GAAP net income (loss) excluding stock-based compensation expense, the amortization of acquired identifiable intangibles, and contra-revenue, and may also exclude certain items such as: impairment charges, restructuring charges, impact of acquisition-related activity (including contingent consideration changes, compensation expense, basis difference amortization, and professional service fees), realized gains on sales of previously impaired securities, gains or losses on sales or disposals of subsidiaries and other assets, adjustments to deferred tax asset valuation allowances, non-cash interest expense and certain other non-recurring items. These adjustments to net income (loss), which are shown before taxes, are adjusted for their tax impact.
Adjusted EBITDA and adjusted net income are presented because management believes that they provide additional information with respect to the performance of our fundamental business activities and are also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. Adjusted EBITDA and adjusted net income are also presented because 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, in 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 (loss) and has provided a reconciliation of adjusted EBITDA to GAAP net income (loss) and adjusted net income to GAAP net income (loss) in this press release.
About Dealertrack Technologies (www.dealertrack.com)
Dealertrack's intuitive and high-value web-based software solutions and services enhance efficiency and profitability for all major segments of the automotive retail industry, including dealers, lenders, OEMs, third-party retailers, agents, and aftermarket providers. In addition to the industry’s largest online credit application network, connecting more than 19,000 dealers with more than 1,200 lenders, Dealertrack delivers the industry’s most comprehensive solution set for automotive retailers, including Dealer Management System (DMS), Inventory, Sales and F&I, Interactive, and Registration and Titling solutions. For more information visit www.dealertrack.com.
Safe Harbor for Forward-Looking and Cautionary Statements
Statements in this press release regarding Dealertrack’s expected 2012 performance based on both GAAP and non-GAAP measures, the long-term outlook for its business, the benefits of the ClickMotive acquisition 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; credit availability; reductions in auto dealerships; 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; Dealertrack’s success in implementing an ERP system; the volatility of Dealertrack’s stock price; new regulations or changes to existing regulations; 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; the impairment of intangible assets, such as trademarks and goodwill; 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 atwww.dealertrack.com and the SEC’s website atwww.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, except as required by law.
| DEALERTRACK TECHNOLOGIES, INC. |
| Consolidated Statements of Operations |
| (In thousands, except per share amounts) |
| (Unaudited) |
| | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | | | | | | | | | | | |
| Net revenue | | $ | 99,084 | | | $ | 95,793 | | | $ | 287,097 | | | $ | 262,035 | |
| Cost of revenue | | | 55,475 | | | | 52,129 | | | | 162,337 | | | | 145,121 | |
| Product development | | | 2,874 | | | | 3,278 | | | | 8,812 | | | | 9,749 | |
| Selling, general and administrative | | | 35,307 | | | | 33,342 | | | | 103,502 | | | | 95,317 | |
| Total operating expenses | | | 93,656 | | | | 88,749 | | | | 274,651 | | | | 250,187 | |
| Income from operations | | | 5,428 | | | | 7,044 | | | | 12,446 | | | | 11,848 | |
| Interest expense, net | | | (3,033 | ) | | | (263 | ) | | | (6,984 | ) | | | (308 | ) |
| Other income (expense), net | | | (5,271 | ) | | | 72 | | | | (6,121 | ) | | | 171 | |
| Gain on disposal of subsidiary and sale of other assets | | | - | | | | - | | | | 33,193 | | | | - | |
| Earnings from equity method investment, net | | | 429 | | | | - | | | | 737 | | | | - | |
| Realized gain on securities | | | 4 | | | | - | | | | 4 | | | | 409 | |
| Income (loss) before (provision for) benefit from income taxes, net | | | (2,443 | ) | | | 6,853 | | | | 33,275 | | | | 12,120 | |
| (Provision for) benefit from income taxes, net | | | (488 | ) | | | (1,492 | ) | | | (13,320 | ) | | | 20,135 | |
| Net (loss) income | | $ | (2,931 | ) | | $ | 5,361 | | | $ | 19,955 | | | $ | 32,255 | |
| | | | | | | | | | | | | | | | | |
| Basic net (loss) income per share | | $ | (0.07 | ) | | $ | 0.13 | | | $ | 0.47 | | | $ | 0.78 | |
| Diluted net (loss) income per share | | $ | (0.07 | ) | | $ | 0.13 | | | $ | 0.45 | | | $ | 0.76 | |
| Weighted average common stock outstanding (basic) | | | 42,661 | | | | 41,396 | | | | 42,413 | | | | 41,146 | |
| Weighted average common stock outstanding (diluted) | | | 42,661 | | | | 42,497 | | | | 43,909 | | | | 42,367 | |
| | | | | | | | | | | | | | | | | |
| Adjusted EBITDA - previous presentation (non-GAAP)(a) | | $ | 23,554 | | | $ | 23,041 | | | $ | 61,298 | | | $ | 56,989 | |
| Adjusted EBITDA margin - previous presentation (non-GAAP)(b) | | | 24 | % | | | 24 | % | | | 21 | % | | | 22 | % |
| Adjusted EBITDA (non-GAAP)(a) | | $ | 27,044 | | | $ | 25,786 | | | $ | 71,500 | | | $ | 65,584 | |
| Adjusted EBITDA margin (non-GAAP)(b) | | | 27 | % | | | 27 | % | | | 25 | % | | | 25 | % |
| Adjusted net income (non-GAAP)(a) | | $ | 12,455 | | | $ | 14,654 | | | $ | 35,396 | | | $ | 33,194 | |
| Diluted adjusted net income per share (non-GAAP) | | $ | 0.28 | | | $ | 0.34 | | | $ | 0.81 | | | $ | 0.78 | |
| | | | | | | | | | | | | | | | | |
| Stock-based compensation expense was classified as follows: | | | | | | | | | | | | | | | | |
| Cost of revenue | | $ | 603 | | | $ | 456 | | | $ | 1,828 | | | $ | 1,308 | |
| Product development | | | 169 | | | | 176 | | | | 589 | | | | 548 | |
| Selling, general and administrative | | | 2,718 | | | | 2,113 | | | | 7,785 | | | | 6,857 | |
| | | $ | 3,490 | | | $ | 2,745 | | | $ | 10,202 | | | $ | 8,713 | |
| (a) | See Reconciliation Data. |
| (b) | Represents adjusted EBITDA as a percentage of net revenue. |
| (c) | For the three months ended September 30, 2012, the diluted adjusted net income per share of approximately $0.28 is based on 44,081,500 diluted weighted average shares outstanding. |
| DEALERTRACK TECHNOLOGIES, INC. |
| Condensed Consolidated Balance Sheets |
| (Dollars in thousands) |
| (Unaudited) |
| | | | | | | |
| | | | | | | |
| | | September 30,
2012 | | | December 31,
2011 | |
| | | | | | | |
| ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 163,700 | | | $ | 78,709 | |
| Marketable securities | | | 45,413 | | | | 46 | |
| Customer funds | | | 3,861 | | | | 1,097 | |
| Customer funds receivable | | | 20,822 | | | | 18,695 | |
| Accounts receivable, net | | | 46,772 | | | | 37,588 | |
| Deferred tax assets | | | 9,019 | | | | 9,171 | |
| Prepaid expenses and other current assets | | | 24,488 | | | | 23,011 | |
| Total current assets | | | 314,075 | | | | 168,317 | |
| | | | | | | | | |
| Marketable securities - long-term | | | 8,192 | | | | - | |
| Property and equipment, net | | | 22,702 | | | | 21,637 | |
| Software and website development costs, net | | | 40,348 | | | | 37,341 | |
| Investments | | | 124,179 | | | | 89,000 | |
| Intangible assets, net | | | 99,289 | | | | 96,441 | |
| Goodwill | | | 242,082 | | | | 200,840 | |
| Deferred tax assets, net | | | 31,654 | | | | 34,421 | |
| Other assets - long-term | | | 14,308 | | | | 12,356 | |
| Total assets | | $ | 896,829 | | | $ | 660,353 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 36,781 | | | $ | 41,194 | |
| Customer funds payable | | | 24,683 | | | | 19,792 | |
| Deferred revenue | | | 10,103 | | | | 9,115 | |
| Deferred tax liabilities | | | 3,473 | | | | 3,443 | |
| Due to acquirees | | | 10,966 | | | | - | |
| Capital leases payable | | | 122 | | | | 255 | |
| Total current liabilities | | | 86,128 | | | | 73,799 | |
| Long-term liabilities | | | 246,162 | | | | 91,798 | |
| Total liabilities | | | 332,290 | | | | 165,597 | |
| Total stockholders' equity | | | 564,539 | | | | 494,756 | |
| Total liabilities and stockholders' equity | | $ | 896,829 | | | $ | 660,353 | |
| DEALERTRACK TECHNOLOGIES, INC. |
| Consolidated Statements of Cash Flows |
| (Dollars in thousands) |
| (Unaudited) |
| | | | | | | |
| | | Nine Months Ended | |
| | | September 30, | |
| | | 2012 | | | 2011 | |
| Operating activities: | | | | | | |
| Net income | | $ | 19,955 | | | $ | 32,255 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 37,659 | | | | 37,620 | |
| Deferred tax provision (benefit) | | | 9,261 | | | | (22,813 | ) |
| Stock-based compensation expense | | | 10,202 | | | | 8,713 | |
| Provision for doubtful accounts and sales credits | | | 5,520 | | | | 4,828 | |
| Earnings from equity method investment, net | | | (737 | ) | | | - | |
| Deferred compensation | | | 112 | | | | 150 | |
| Stock-based compensation windfall tax benefit | | | (4,226 | ) | | | (2,255 | ) |
| Gain on disposal of subsidiary and sale of other assets | | | (33,193 | ) | | | - | |
| Realized gain on securities | | | (4 | ) | | | (409 | ) |
| Amortization of debt issuance costs and debt discount | | | 5,244 | | | | 213 | |
| Change in contingent consideration | | | (900 | ) | | | - | |
| Change in fair value of warrant | | | 6,310 | | | | - | |
| Amortization of deferred interest | | | 574 | | | | 15 | |
| Changes in operating assets and liabilities, net of effects of acquisitions: | | | | | | | | |
| Accounts receivable | | | (17,312 | ) | | | (16,449 | ) |
| Prepaid expenses and other current assets | | | 2,848 | | | | (1,649 | ) |
| Other assets — long-term | | | 6,796 | | | | (223 | ) |
| Accounts payable and accrued expenses | | | (5,186 | ) | | | (3,969 | ) |
| Deferred rent | | | 151 | | | | 37 | |
| Deferred revenue | | | 1,912 | | | | 1,726 | |
| Other liabilities — long-term | | | (2,190 | ) | | | 965 | |
| Net cash provided by operating activities | | | 42,796 | | | | 38,755 | |
| Consolidated Statements of Cash Flows (continued) | | | | | | |
| | | Nine Months Ended | |
| | | September 30, | |
| | | 2012 | | | 2011 | |
| Investing activities: | | | | | | |
| Capital expenditures | | | (6,610 | ) | | | (6,860 | ) |
| Capitalized software and website development costs | | | (14,824 | ) | | | (14,807 | ) |
| Proceeds from sale of Chrome-branded asset | | | 5,500 | | | | - | |
| Purchases of marketable securities | | | (70,175 | ) | | | - | |
| Proceeds from sales and maturities of marketable securities | | | 16,106 | | | | 2,935 | |
| Cash contributed for equity method investment | | | (1,750 | ) | | | - | |
| Payment for acquisition of businesses and intangible assets, net of acquired cash | | | (73,994 | ) | | | (151,962 | ) |
| Net cash used in investing activities | | | (145,747 | ) | | | (170,694 | ) |
| | | | | | | | | |
| Financing activities: | | | | | | | | |
| Principal payments on capital lease obligations and financing arrangements | | | (496 | ) | | | (387 | ) |
| Proceeds from the exercise of employee stock options | | | 5,500 | | | | 5,177 | |
| Proceeds from employee stock purchase plan | | | 592 | | | | 509 | |
| Proceeds from issuance of senior convertible notes | | | 200,000 | | | | - | |
| Payments for debt issuance costs | | | (7,723 | ) | | | (1,909 | ) |
| Payments for convertible note hedges | | | (43,940 | ) | | | - | |
| Proceeds from issuance of warrants | | | 29,740 | | | | - | |
| Purchases of treasury stock | | | (784 | ) | | | (446 | ) |
| Stock-based compensation windfall tax benefit | | | 4,226 | | | | 2,255 | |
| Net cash provided by financing activities | | | 187,115 | | | | 5,199 | |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 84,164 | | | | (126,740 | ) |
| Effect of exchange rate changes on cash and cash equivalents | | | 827 | | | | (872 | ) |
| Cash and cash equivalents, beginning of period | | | 78,709 | | | | 192,563 | |
| Cash and cash equivalents, end of period | | $ | 163,700 | | | $ | 64,951 | |
| | | | | | | | | |
| | | | | | | | | |
| Supplemental disclosure: | | | | | | | | |
| Cash paid for: | | | | | | | | |
| Income taxes | | $ | 2,708 | | | $ | 5,125 | |
| Interest | | | 1,965 | | | | 141 | |
| Non-cash investing and financing activities: | | | | | | | | |
| Non-cash consideration issued for investment in Chrome Data Solutions | | | 42,301 | | | | - | |
| Non-cash consideration issued for acquisition of eCarList | | | - | | | | 12,956 | |
| Accrued capitalized hardware, software and fixed assets | | | 2,603 | | | | 1,756 | |
| Assets acquired under capital leases and financing arrangements | | | 772 | | | | 34 | |
| Capitalized stock-based compensation | | | - | | | | 98 | |
| Deferred compensation reversal to equity | | | 112 | | | | 150 | |
| DEALERTRACK TECHNOLOGIES, INC. |
| Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA |
| (Dollars in thousands) |
| (Unaudited) |
| | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | | | | | | | | | | | |
| GAAP net (loss) income | | $ | (2,931 | ) | | $ | 5,361 | | | $ | 19,955 | | | $ | 32,255 | |
| Interest income | | | (181 | ) | | | (71 | ) | | | (595 | ) | | | (270 | ) |
| Interest expense - cash | | | 984 | | | | 334 | | | | 2,426 | | | | 578 | |
| Interest expense - non-cash | | | 2,230 | | | | - | | | | 5,153 | | | | - | |
| Provision for (benefit from) income taxes, net | | | 488 | | | | 1,492 | | | | 13,320 | | | | (20,135 | ) |
| Depreciation of property and equipment and amortization of capitalized software and website costs | | | 5,780 | | | | 5,338 | | | | 17,175 | | | | 15,509 | |
| Amortization of acquired identifiable intangibles | | | 6,952 | | | | 7,543 | | | | 20,484 | | | | 22,111 | |
| EBITDA (non-GAAP) | | | 13,322 | | | | 19,997 | | | | 77,918 | | | | 50,048 | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Gain on disposal of subsidiary and sale of other assets | | | - | | | | - | | | | (33,193 | ) | | | - | |
| Acquisition-related and other professional fees | | | 1,385 | | | | 1,390 | | | | 2,122 | | | | 2,606 | |
| Contra-revenue | | | 1,092 | | | | 1,175 | | | | 3,190 | | | | 3,232 | |
| Integration and other related costs (including amounts related to stock-based compensation) | | | 483 | | | | 51 | | | | 704 | | | | 1,009 | |
| Acquisition-related contingent consideration changes and compensation expense, net | | | 445 | | | | 428 | | | | 403 | | | | 503 | |
| Amortization of equity method investment basis difference | | | 996 | | | | - | | | | 2,989 | | | | - | |
| Rebranding expense | | | 521 | | | | - | | | | 855 | | | | - | |
| Change in fair value of warrant | | | 5,310 | | | | - | | | | 6,310 | | | | - | |
| Realized gain on securities | | | - | | | | - | | | | - | | | | (409 | ) |
| Adjusted EBITDA - previous presentation (non-GAAP) | | $ | 23,554 | | | $ | 23,041 | | | $ | 61,298 | | | $ | 56,989 | |
| Stock-based compensation (excluding amounts included in integration and other related costs) | | | 3,490 | | | | 2,745 | | | | 10,202 | | | | 8,595 | |
| Adjusted EBITDA (non-GAAP) | | $ | 27,044 | | | $ | 25,786 | | | $ | 71,500 | | | $ | 65,584 | |
| DEALERTRACK TECHNOLOGIES, INC. |
| Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income |
| (Dollars in thousands) |
| (Unaudited) |
| | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | | | | | | | | | | | |
| GAAP net (loss) income | | $ | (2,931 | ) | | $ | 5,361 | | | $ | 19,955 | | | $ | 32,255 | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Deferred tax asset valuation allowance (non-taxable) | | | - | | | | 1,197 | | | | - | | | | (22,350 | ) |
| Amortization of acquired identifiable intangibles | | | 6,952 | | | | 7,543 | | | | 20,484 | | | | 22,111 | |
| Stock-based compensation (excluding integration and other related costs) | | | 3,490 | | | | 2,745 | | | | 10,202 | | | | 8,595 | |
| Gain on disposal of subsidiary and sale of other assets | | | - | | | | - | | | | (33,193 | ) | | | - | |
| Contra-revenue | | | 1,092 | | | | 1,175 | | | | 3,190 | | | | 3,232 | |
| Integration and other related costs (including amounts related to stock-based compensation) | | | 536 | | | | 51 | | | | 757 | | | | 1,009 | |
| Interest expense - non-cash (not tax-impacted) | | | 2,230 | | | | - | | | | 5,153 | | | | - | |
| Amortization of equity method investment basis difference | | | 996 | | | | - | | | | 2,989 | | | | - | |
| Acquisition-related and other professional fees | | | 1,385 | | | | 1,390 | | | | 2,122 | | | | 2,606 | |
| Acquisition-related contingent consideration changes and compensation expense, net | | | 445 | | | | 428 | | | | 403 | | | | 503 | |
| Rebranding expense | | | 521 | | | | - | | | | 855 | | | | - | |
| Realized gain on securities (non-taxable) | | | - | | | | - | | | | - | | | | (409 | ) |
| Accelerated depreciation of certain technology assets | | | 75 | | | | - | | | | 1,004 | | | | - | |
| Change in fair value of warrant | | | 5,310 | | | | - | | | | 6,310 | | | | - | |
| Amended state tax return impact (non-taxable) | | | - | | | | (271 | ) | | | - | | | | (239 | ) |
| Tax impact of adjustments(a) | | | (7,646 | ) | | | (4,965 | ) | | | (4,835 | ) | | | (14,119 | ) |
| Adjusted net income (non-GAAP) | | $ | 12,455 | | | $ | 14,654 | | | $ | 35,396 | | | $ | 33,194 | |
| (a) | The tax impact of adjustments for the three and nine months ended September 30, 2012 are based on a U.S. statutory tax rate of 38.2% applied to taxable adjustments other than amortization of acquired identifiable intangibles and stock-based compensation expense, which are based on a blended tax rate of 38.1% and 37.6%, respectively, for the three months ended September 30, 2012, and 38.1% and 37.6%, respectively, for the nine months ended September 30, 2012. The tax impact of adjustments for the three and nine months ended September 30, 2011 were based on a U.S. statutory tax rate of 37.4% applied to taxable adjustments other than amortization of acquired identifiable intangibles and stock-based compensation expense, which are based on a blended tax rate of 37.3% and 37.0%, respectively, for the three months ended September 30, 2011, and 37.1% and 37.0%, respectively, for the nine months ended September 30, 2011. |
| DEALERTRACK TECHNOLOGIES, INC. |
| Reconciliation of Forward-looking GAAP Net Income to Forward-looking Non-GAAP Adjusted EBITDA |
| (Dollars in millions) |
| (Unaudited) |
| | | | | | | |
| | | Year Ending December 31, 2012 | |
| | | Expected Range | |
| | | | | | | |
| GAAP net income | | $ | 21.5 | | | $ | 23.0 | |
| Interest, net | | | 10.3 | | | | 10.3 | |
| Income taxes, net | | | 13.5 | | | | 14.5 | |
| Amortization of basis difference from joint venture | | | 4.0 | | | | 4.0 | |
| Depreciation and amortization | | | 23.7 | | | | 22.7 | |
| Amortization of acquired identifiable intangibles | | | 28.2 | | | | 28.2 | |
| EBITDA (non-GAAP) | | | 101.2 | | | | 102.7 | |
| Adjustments: | | | | | | | | |
| Non-recurring costs(a) | | | 11.0 | | | | 11.0 | |
| Realized gains | | | (33.2 | ) | | | (33.2 | ) |
| Contra-revenue | | | 4.0 | | | | 4.0 | |
| Adjusted EBITDA - previous presentation (non-GAAP) | | $ | 83.0 | | | $ | 84.5 | |
| Stock-based compensation (excluding amounts included in integration and other related costs) | | | 13.5 | | | | 13.5 | |
| Adjusted EBITDA - (non-GAAP) | | $ | 96.5 | | | $ | 98.0 | |
| (a) | Includes certain professional fees, integration and other related costs, acquisition-related compensation expense, rebranding and fair value adjustments. |
| DEALERTRACK TECHNOLOGIES, INC. |
| Reconciliation of Forward-looking GAAP Net Income to Forward-looking Non-GAAP Adjusted Net Income |
| (Dollars in millions) |
| (Unaudited) |
| | | Year Ending December 31, 2012 | |
| | | Expected Range | |
| | | | | | | |
| GAAP net income | | $ | 21.5 | | | $ | 23.0 | |
| Adjustments: | | | | | | | | |
| Stock-based compensation | | | 13.5 | | | | 13.5 | |
| Amortization of acquired identifiable intangibles | | | 28.2 | | | | 28.2 | |
| Amortization of basis difference from joint venture | | | 4.0 | | | | 4.0 | |
| Non-cash interest expense (not tax-impacted) | | | 7.5 | | | | 7.5 | |
| Non-recurring costs(a) | | | 12.0 | | | | 12.0 | |
| Realized gains, net of taxes | | | (19.3 | ) | | | (19.3 | ) |
| Contra-revenue | | | 4.0 | | | | 4.0 | |
| Tax impact of adjustments(b) | | | (23.4 | ) | | | (23.4 | ) |
| Adjusted net income (non-GAAP) | | $ | 48.0 | | | $ | 49.5 | |
| (a) | Includes certain professional fees, integration and other related costs, acquisition-related compensation expense, rebranding, accelerated depreciation and fair value adjustments. |
| (b) | The tax impact of adjustments are based on a blended tax rate of 38% applied to taxable adjustments. |
| DEALERTRACK TECHNOLOGIES, INC. |
| Summary of Business Statistics (Unaudited) |
| Three months ended |
| | | | | | | | | | | | | | | | |
| | | Sep 30, | | | Jun 30, | | | Mar 31, | | | Dec 31, | | | Sep 30, | |
| | | 2012 | | | 2012 | | | 2012 | | | 2011 | | | 2011 | |
| | | | | | | | | | | | | | | | |
| Active U.S. dealers(a) | | | 19,107 | | | | 18,638 | | | | 18,345 | | | | 17,543 | | | | 17,629 | |
| Active U.S. lenders(b) | | | 1,237 | | | | 1,212 | | | | 1,165 | | | | 1,120 | | | | 1,103 | |
| Transactions processed (in thousands)(c) | | | 22,738 | | | | 22,562 | | | | 21,751 | | | | 18,769 | | | | 19,772 | |
| Active U.S. lender to dealer relationships(d) | | | 178,809 | | | | 177,570 | | | | 172,075 | | | | 164,776 | | | | 161,400 | |
| Subscribing dealers(e) | | | 16,421 | | | | 16,280 | | | | 16,143 | | | | 16,003 | | | | 15,860 | |
| (a) | We consider a dealer to be active in our U.S. network as of a date if the dealer completed at least one revenue-generating credit application processing transaction using the U.S. Dealertrack network during the most recently ended calendar month. The number of active U.S. dealers is based on the number of dealer accounts as communicated by lenders on the U.S. Dealertrack network. |
| (b) | We consider a lender to be active in our U.S. network as of a date if it is accepting credit application data electronically from U.S. dealers in the U.S. Dealertrack network. |
| (c) | Represents revenue-generating transactions processed in the U.S. Dealertrack, Dealertrack Aftermarket Services, DealerTrack Processing Solutions and Dealertrack Canada networks at the end of a given period. |
| (d) | Each lender to dealer relationship represents a pair between an active U.S. lender and an active U.S. dealer at the end of a given period. 2011 results are recalculated to reflect an improved methodology of accumulating relationships. As previously reported: December 31, 2011 - 151,126, September 30, 2011 - 150,514. |
| (e) | Represents the number of dealerships in the U.S. and Canada with one or more active subscriptions at the end of a given period. |
| DEALERTRACK TECHNOLOGIES, INC. |
| Summary of Business Statistics (Unaudited) |
| Three months ended |
| | | Sep 30, | | | Jun 30, | | | Mar 31, | | | Dec 31, | | | Sep 30, | |
| | | 2012 | | | 2012 | | | 2012 | | | 2011 | | | 2011 | |
| | | | | | | | | | | | | | | | |
| Transaction revenue (in thousands) | | $ | 58,729 | | | $ | 57,433 | | | $ | 54,079 | | | $ | 47,541 | | | $ | 50,411 | |
| Subscription revenue (in thousands) | | $ | 35,723 | | | $ | 33,932 | | | $ | 33,231 | | | $ | 38,779 | | | $ | 39,261 | |
| Other revenue (in thousands) | | $ | 4,632 | | | $ | 5,031 | | | $ | 4,307 | | | $ | 4,939 | | | $ | 6,121 | |
| Average transaction price(a) | | $ | 2.63 | | | $ | 2.59 | | | $ | 2.53 | | | $ | 2.58 | | | $ | 2.60 | |
| Transaction revenue per car sold(b) | | $ | 6.47 | | | $ | 6.12 | | | $ | 8.61 | | | $ | 7.17 | | | $ | 6.20 | |
| Average monthly subscription revenue per subscribing dealership(c) (d) | | $ | 694 | | | $ | 697 | | | $ | 690 | | | $ | 813 | | | $ | 834 | |
| Average monthly subscription revenue per subscribing dealership (excluding Chrome & ALG)(e) | | $ | 694 | | | $ | 697 | | | $ | 690 | | | $ | 690 | | | $ | 684 | |
| (a) | Represents the average revenue earned per transaction processed in the U.S. Dealertrack, Dealertrack Aftermarket, Dealertrack Processing Solutions and Dealertrack Canada networks during a given period. Revenue used in calculation adds back transaction related contra-revenue. |
| (b) | Represents transaction revenue (includes contra-revenue) divided by our estimate of total new and used car sales for the period in the U.S. and Canada. |
| (c) | Revenue used in the calculation adds back subscription related contra-revenue. |
| (d) | Subscribing dealers and subscription revenue from Dealertrack CentralDispatch have been excluded from the calculation as a majority of these customers are not dealers. |
| (e) | Excludes subscription revenue from Chrome and ALG. |
TRAK-E ###
