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Filed by autobytel.com inc.
Pursuant to Rule 425
under the Securities
Act of 1933 and deemed
filed pursuant to Rule
14a-12 of the
Securities Exchange
Act of 1934
Subject Company:Autoweb.com, Inc.
Commission File No. 000-25577
OPERATOR: Good day ladies and gentlemen, and welcome to the Autobytel.com
conference call. At this time, all participants are in listen-only mode. Later,
we will conduct a question and answer session and instructions will follow at
that time. If anyone should require assistance during the conference, please
press star, then zero on your touch tone telephone. If anyone should disconnect
and need to rejoin, please dial 800 949 5458.
As a reminder, this conference is being recorded.
Now, I would like to introduce your host for today's conference, Melanie Webber
of Autobytel.com. Ms. Webber, you may begin your conference.
MW: Thank you. Good afternoon and thank you for joining us today to discuss
Autobytel.com's earnings for the first quarter ended March 31st, 2001. By now,
you should have all received a copy of today's press release. If you haven't
received the press release, please contact Crystal Nguyen of Autobytel.com at
949.862.1355, and we will e-mail you right away.
With us today from Autobytel.com, we have Mark Lorimer, President and Chief
Executive Officer, as well as Amit Kothari, Vice President, Corporate
Controller. Also with us this afternoon is Hoshi Printer our CFO who re-joined
the company last week.
Amit Kothari will begin the call by providing the financials for the quarter,
followed by Mark Lorimer who will overview the business. After that we will be
ready to answer any questions you may have.
Today's conference call, including the question and answer period or projections
or other forward-looking statements regarding future events and the future
financial performance of the company are covered by the Safe Harbor Statement
contained in today's press release.
We would like to caution you that actual events or results may differ materially
from those forward looking statements. We refer you to documents the company has
filed with the SEC, specifically Form 10-K for the year ended December 31, 2000
and quarterly reports on Form 10-Q. These documents identify the principal
factors that could cause results to differ materially from those forward looking
statements.
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And now, at this time, I would like to turn the call over to Amit
KOTHARI: Thank you Melanie.
Our revenue for the quarter was $16.7 million, a 10 percent increase over the
first quarter of last year, and a 1 percent sequential decline from the fourth
quarter revenue of $16.8 million. I'll break down the revenues for you. Program
fees were $12.9 million, a decline from the $13.8 million in program fees in the
fourth quarter of 2000. This resulted from a sequential decline in the number of
paying dealers, from 5,037 to 4,706, or 7 percent, and a slight reduction in the
average fee per dealer, from $904 to $880, or 3 percent.
Revenue from related products and services increased to $2.5 million in the
first quarter of 2001, from $1.9 million in the fourth quarter of 2000. In most
categories of related services, revenue actually declined, including financing,
insurance, advertising and database sales. The shortfall in these categories was
offset by higher revenue for web hosting and by the recognition of $1.4 million
in consulting revenue. International revenue increased to $1.3 million, from
$1.1 million in the fourth quarter.
In response to the overall market environment, we significantly reduced the
operating expenses, from $23.5 million in the fourth quarter to $21.9 million in
the first quarter. The $21.9 million includes a charge of $1 million taken for
restructuring efforts of our automotive operations group. We have reduced costs
across the board. We reduced Sales and Marketing expense by 10 percent; product
and technology development by 17 percent; and G&A by 6 percent.
As a result of our marketing cost reduction efforts, our aggregated cost per
purchase request dropped by 27% from the fourth quarter to the first quarter.
Aggregated cost per purchase request is a function of traditional and TV and
publication spending, internet advertising expenses and marketing and
advertising salaries and overhead.
Our loss in the quarter was $4.1 million, or $0.20 per share. We cut our net
loss by 50% versus $8.1 million in the first quarter in the prior year. For
three quarters in a row, we have reduced our net loss from operations. This
quarter it is $5.3 million versus $6.7 million in the fourth quarter of 2000.
Turning to our balance sheet - our cash position remains very strong. As of
March 31, we had $75.1 million in cash and cash equivalents. That includes $34.6
million reserved for use by Autobytel Europe. We used $8.6 million in
operations, and received a net $1.7 million from investments related to
international operations, which resulted in a net cash usage of $6.9 million.
Our accounts receivable increased to $7.4 million, from $6.6 million at the end
of Q4, and our DSO's increased during that time from 35 days to 37 days. We
expect DSO to remain in that range.
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Our guidance for the second quarter is as follows. We expect revenue to be in
the range of $16 to 16.5 million; and the loss per share between 9 and 11 cents.
We expect to use approximately $5 million in operations in the second quarter,
versus $8.6 million in operations in the first quarter. We also expect to use
$2.5 million in investments in international ventures and $1 million in
transaction costs related to our recently announced merger agreement with
Autoweb during the second quarter. We expect total cash use in the second
quarter to be between $8 million and $9 million.
There is much uncertainty surrounding the auto industry sales numbers and
e-commerce in general for the second half of this year. Moreover, while we
reiterate our belief that the Autoweb transaction closing will have no negative
impact on our expectation to become profitable in the third quarter, our
forecasting precision of the pro forma results should improve during the second
quarter. Accordingly, we do not believe it prudent to give formal guidance today
on the third and fourth quarters.
Now I'll turn the call over to Mark.
LORIMER: Thank you Amit; and thank you to all of those listening today, we
appreciate your support.
I want to cover a few important topics this afternoon. First, I'll expand a bit
on what we are seeing in the marketplace right now, and how that is affecting
our results. Second, I'll review the actions we are taking to achieve
profitability in the very near term. Finally, I'll discuss how over the longer
term we plan to leverage our market leadership position and our strategic assets
to grow and maintain profitability.
As you know, the overall slowdown in the economy is negatively affecting auto
sales, and there is a lot of uncertainty in the forecasts for the remainder of
the year.
On the one hand, we believe that the slowdown in the economy has a potential
upside for Autobytel: because research groups such as Gartner and J.D. Power
agree that the number of consumers turning to the Internet to purchase their
cars is continuously increasing; and because, in this economy, more consumers
will turn to the Internet for better deals on new and used cars. We saw some of
this last quarter. We believe this trend will continue. We experienced a 20
percent increase in purchase requests in Q1 over Q4 A recent study by Opinion
Research Group shows that 70% of consumers believe they will get a better deal
by purchasing used cars online. Another recent study released by Yale University
and UC Berkeley shows that consumers do save money when they purchase new cars
online.
On the other hand, dealers are responding as you might expect them to in an
economic downturn, by reducing expenses, or declining to take on new expenses.
While dealers understand and recognize that Autobytel can help grow their
business, we represent an
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immediate expense with an uncertain payback schedule, particularly in this
environment. Many dealers either won't make that commitment, or they are asking
for incentives or fee arrangements that are not economical for us. These dealer
attitudes contributed to our decline in the number of paying dealers during the
quarter.
In addition to apprehension by the dealers, many of our partners for related
products and services, who are also e-commerce providers, are experiencing their
own slowdowns. This is negatively affecting our non-dealer revenue.
We believe the downturns and slowdowns are presenting significant opportunities
for companies in a position to capitalize on them. We think we are in just such
a position, and, if we have and execute a strong action plan we will emerge on
the other side of this economy in an excellent competitive position.
Our plan is to 1) get profitable, 2) get bigger and 3) get closer to our
industry.
Profitability in a weakening economic environment requires expense reductions.
We have taken several actions in the first quarter, and will continue them and
add more actions in the second.
First, we have reduced advertising and other marketing expenditures. We were
able to do this while increasing our purchase requests at the same time.
Efficiencies were found in almost all marketing areas, including national print
and regional television advertising. More efficiencies will be found in the
second through fourth quarters.
Second, Amit mentioned the reorganization in the dealer operations area. This
reorganization should result in approximately $1.5 million in cost reductions on
an annualized basis. We also took and continue to take actions within our dealer
operations organization to 1) analyze the dealer body on a segmented basis
looking for profitability within each segment 2) balancing the cost of sales and
service against the revenues received by region, by make model, and by size of
dealer and 3) improve alignment between the sales commissions and the company
goals of sustained revenue and profit.
Third, we have successfully renegotiated many of our marketing arrangements. As
Amit mentioned, our aggregate cost per purchase request declined by 27% from Q4
to Q1. Over the past two quarters, we have achieved an annualized savings in
internet marketing costs alone of $4-5 million through the renegotiation of
contracts. We expect further savings as we continue this process with even more
of our providers.
Fourth, we achieved significant cost savings in our product and technology
development process. Part of these savings came from our moving certain
development work overseas.
The second quarter will see us continue all of these actions, and add new ones,
including examination of our various revenue streams and reducing or eliminating
unprofitable lines of business. With these actions, we expect to achieve
profitability in the third quarter and then sustain it in future quarters.
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As for growth, as we have said on the last few calls, profitability is our
number one driver. The uncertainty in the auto industry, the apprehension of
auto dealers and the general downturn in internet expenditures have all made
organic growth even tougher.
The chief reasons we believe we won't see growth in the second quarter, are 1):
we will be focusing on eliminating unprofitable revenue streams and their
associated expenses; and 2): the consolidation opportunities we have seen in our
space make growth through acquisition and combination the most efficient path to
getting bigger.
Our announcement to acquire Autoweb is very significant. The combination will
create a platform of over 7,000 dealer customers, twenty-four international
automotive manufacturer customers and over two million unique visitors per
month. The combined company is projected to have revenues of over $100 million
per year. Successful completion and integration of the Autoweb deal should give
us huge growth, while allowing us to be very intense in our internal evaluation
of existing revenue streams and their associated costs. In effect, we expect to
get profitable, and to get big at the same time.
Yesterday, Jeffrey Schwartz in the Autoweb conference call stated his relentless
drive towards profitability. Jeffrey, Dean and the rest of the Autoweb team have
done a great job in reducing their costs and focussing on the revenue streams
most likely to yield profits and growth. Their actions allow me to believe
strongly that when the transaction with Autoweb closes in third quarter, we will
be profitable as a combined entity.
The competitive landscape is clearing, with more one-time competitors
disappearing every quarter. When the economic cycle rebounds, we should be a
profitable, big company with few competitors in a giant market opportunity. At
that point, we will be able to refocus on organic growth with many fewer
impediments or barriers.
As for getting closer to the industry, we are here focussed primarily on
expanding our relationships with manufacturers.
Our relationship with General Motors, for whom we are test marketing their
dealers' new Locate-to-Order program in the Washington D.C. area is but the
biggest example to date of our willingness and desire to engage the
manufacturers on an increasingly deepening level. The locate-to-order system
displays a market area view of available inventory, and enables consumers to
purchase selected vehicles at a dealer-set online price. Vehicle buyers will not
only be able to find a Chevy car or truck they want, but also select a preferred
dealer to complete the transaction.
This program demonstrates Autobytel's unique position in the online sector, and
why we believe we have staying power when others don't. Having the largest
manufacturer select us as a partner to help them improve their dealers' online
efforts reflects the value
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of our market experience, our technological capability and our management
expertise. We believe there will be an increasing trend of manufacturers using
independent providers to help them reach consumers. We believe Autobytel stands
to benefit most from that trend.
We also look forward to growth in our manufacturer relationships as a result of
our combination with Autoweb. Autoweb's AIC division is one of the leading
providers of industry information to all the major manufacturers.
To summarize, we need to get profitable, get bigger and get closer to the
manufacturers. We are making substantial progress on all fronts. When the dust
settles, the economy turns up and our combination with Autoweb is completed, we
believe Autobytel will have the following competitive profile:
[X] the premier brand name
[X] the largest dealer network
[X] the largest provider of purchase requests
[X] the broadest array of value added services to the consumer
[X] the broadest and best array of value added, high margin services to dealers
and manufacturers
[X] a highly efficient cost structure
[X] strong relationships with manufacturers and other key players in the auto
market
[X] financial resources to pursue the right opportunities
[X] sustainable profitability and growth
That, is the profile of a clear market leader.
We will now open up this call for questions.
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