AUTO - Earnings call transcript Q1 2022

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Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss AutoWeb's Financial Results for the First Quarter ended March 31, 2022.

Joining us today are AutoWeb's President and CEO, Jared Rowe; the Company's CFO, Carlton Hamer; and the Company's outside Investor Relations adviser, Cody Cree, with Gateway Group.

Following their remarks, we will open the call for questions. I would now like to turn the call over to Mr. Cree for some introductory comments.

Cody Cree

Sabby. you, Thank

future Jared, including introduce historical you during forward-looking events that including intent statements Before belief, or question-and-answer I session, call, are or future regarding the projections, not performance statements today's or any of I statements remind financial in that facts, statements what results public implied contained the filings or today's and SEC. the is may release statements. press Actual disclaimers covered harbor by and differ with from materially and expressed are outcomes forward-looking these safe in the by are Company's

results release Company's will and are condition floor today's refer differ yours. call Specifically, to AutoWeb time reconciliation the most to Jared, on and directly measure well with XX, the as note from please Please the adjusted Regulation by ended comparable will to is regarding believes as from SEC with materially now statements. EBITDA G. a This time. management website. call, to information over that, operations for These Company's the defined Company's to Form XXXX, of that this press by the period filings XX-Q investors disclosing financial financial in forward-looking turn as included other And the also of adjusted be EBITDA. provides SEC reasons non-GAAP identify made filings the that the posted measure is statement that disclosing I useful a March factors financial to GAAP this those A cause company why management non-GAAP could as during measure results Jared.

Jared Rowe

afternoon, good and everyone. Cody, you, Thank

market industry's quarter. interest that context economy high-level review contracted In today, overall that the X.X% environment in headwinds. inflation just saw to was automotive the announced has rates, first consumer provide seeing and a metrics the by want addressing Before I have continued to going several severe the and that I rising We're of high The face mentioned overall, and of macro GDP the U.S. industry-wide quarter. key low the performance. to overview strategic automotive past concern sentiment calls, an uncertain gauge alternatives

One as sales in the These the seasonally We by on called the Federal several rate by the new SAAR numbers or being of tend of adjusted to vehicle is are car, tracked industry. new one them tracked annualized Reserve. sources. that's focus

and a since have that While recovery levels we in quickly SAAR, back that last we've we slight January QX it seen retracted to the March. seen during February of saw year, low

little industry. SAAR were bit So levels of bump SAAR a low for returned SAAR, in we again, got a February what January while and an March fairly to

University looking stated XX-year market has and did like were continued a the vehicles, are While Reviewing for significant long and vehicles, to a of higher within as see put, conditions Simply as new rise, we've increase we interest of as inventory according vehicle in at buying low. I able we compared gathered still looking Bureau vehicles all core hit to the January, for consumers and the to January, we earlier. challenges. -- market used at for business, make Michigan, tracked prices minor face in in a decision Statistics to some accomplish result inflation high reached quarter by market Labor pre-pandemic twice is what conditions to prices then automotive in an conditions XX-year the continue having overall rates. in by know, data With purchase available taking a low to this improvement searching of it data the them seen

quarter on we in in to of how the momentum, favorable started. Media end traffic while quarter sequential compared By on segment, we maintaining unfolding events increases with capitalizing early the media saw in However, really in digital including as and revenue, we well retail softer dealer line year-over-year we've environment. as to count of the several click macroeconomic landed Digital March, February at traffic, growth that lead ads that focused spends reduced our overall and volume. with click spots our are macro bright operate some within There

Despite prior months in still had decrease in optimization marketing we funnel and a We overall our optimizing acquisition in of acquisition make this efficiency, carried we per the asset. lead. side That potential cost a of terms purchasing momentum business, and vehicle which see in vehicles that's long-term used into Now potential progress to we've in in than made I this segment, since this April the as progress important. led the as really see segment. used owning more any the think this we long-term amount our with tremendous rates refining within with of vehicle conversion continue expansion to good significant well quarter us our

very the decision to made have operations. our We suspend CarZeus difficult

continue So XX-Q, experienced ability Form filed supply continued recovery cash for in our in indicators the our And We've resulted soon. the a couple faster worked We've was a doubt now losses disclosed quite been press anytime has going as of in at through disclosure last that a now and management our about while found today's with going on a anticipated. current the the market we frankly signaling concern. of and factors release facing XX-Q been the substantial over These there rate automotive the team Form which conditions to that Company's in the than about SEC we've let's the concern and we've no unfortunately, talking are years. economic alternatives headwinds address these review today. calls strategic earlier

our going evaluating the has concern, that to special with committee tasked addition has established In Board strategic alternatives. a been

the to support in these our AutoWeb steadfast necessary was mentioned, of remain not CarZeus our I drive CarZeus segment. a within viability made suspend lightly. factors furlough decision resulted operations. lead As an this But click operations This and in and has the that belief we our as suspending potential to employees matchmaking just I core value operations was long-term platform. to my decision automotive

path forward move with discuss we while cost how I'm we to view our to Carlton, these will of to pass a to first forward. difficult guide work going we quarter structure in bit results mindful I AutoWeb tirelessly conserve being you. to to us our through the will As But walk over return through incredibly it times to more detail; over process, cash. this financial Carlton

Carlton Hamer

and Jared, you, afternoon, good Thank everyone.

our million ago quarter was quarter. the our $XX.X from revenue from through generated result from Industry in primarily $XX.X and vehicle last digital of to challenges The the leads acquisition Let's continued into $XX.X first jump million, $XX.X the marketing our increased year quarter which million Total the in the the for right year used X% $XX.X automotive increase lower offset revenue quarter impact million quarter in down and first $XX.X to million in the business, the results. totaled Company's incremental last by up first segment, in quarter. million business. volume from quarter ago

for slightly X,XXX count compared the the in $XX.X year $XX.X up retail QX the from Within dealer leads which the in down our at X,XXX ago is quarter. and million Total automotive down X,XXX the dealers, came first quarter. ago in in from quarter quarter year both quarter $XX.X digital in first marketing and revenue million totaled the segment, million, to last in

the the revenue in quarter, from primarily In million, to XX% of the Moving quarter to in digital year automotive and quarter. $X.X million grew XX% marketing within digital an million our $X.X advertising advertising digital $X.X revenues, increase segment. click fourth from first the ago

Turning to profit the gross line.

from up quarter which consolidated and million Our in quarter gross $X.X ago first million profit $X.X was from year $X.X quarter. was down the last million,

million compared quarter. quarter which Adjusted operating the in $X.X and $X.X revenue net $X.XX At million increased and in were $XX.X an refined vehicle cash compared share $X.XX the our $X.X year gross and process. share XX, the gain cash Margins loss XXXX, XX.X% comes at quarter million compared The last to quarter this $X.X with in increase benefit from our due the for by the expenses year fourth per forgiveness equivalents by $X.X quarter. March the the prior or driven $X.X a quarter. in XXXX. challenges this margins. we in First and was in staffing a the Consolidated from compressed $X.XX lower in $XXX,XXX to of the first operating business, in came or and from ago expenses million to stood operating included ago of profit were adjustments first timing last income year compared last aforementioned in The ago spending to margin quarter a in Consolidated of attributable $X.X at was quarter up ago in as Company's to down in million XX, well quarter of XX.X%, overall net per $X.X of business the $X.X per cash year gross quarter in quarter. the is loss restricted to or million as share of expense compared increase loss primarily which million decrease loan inherently personnel loss million due a used $X.X period. and along the at and to decrease business. million acquisition quarter The for year year-ago the decline driven first XX.X% to in compensation vehicle quarter to costs annual net the used related DPP plan and of discretionary million was quarter additional Company's EBITDA as the incentive was December at the the million was of acquisition

at December Northbridge March At with our of cash million had compared $X.X XXXX. revolving net $XX restricted credit XXXX, XXXX. from of at equivalents at cash million December Our on XX, we facility million XX, an CIT $X.X $X.X million outstanding XXXX, down to balance XX, from down stood March cash XX, Credit and

a earlier, Jared committee for mentioned established the special explore Board the alternatives Directors strategic to has Company. As of

with disclosed, March As XXXX. CIT of our expires facility have previously we Credit in Northbridge credit

in experiencing what to of plan to originally we are cash agreement, we excess had While we planned. work extend that also burn

we will operational, full an going XX-Q. infusion without the result, alternatives of concern Company other in around Committee financial this a may disclosures our end, of or not to strategic other have the range capital process. included in have their Special some transaction, needed a consider and operations. The continue To As cash

cannot to to That that committed provide we efforts we and a structure to commentary and lean in forward. cost my result concludes remarks. as successful move will on we in operating diligent focused path to forward. back call management remain strategic manner this a Jared assure our going the a pass outcome, I'm have efficient on While work and

Jared Rowe

All right. Thanks, Carlton.

range full So strategic beginning the of a our committee process, what happens special will next for they AutoWeb? With alternatives. evaluation consider

has adviser In fact, or our to Committee in to Capital currently obtain on and this assist table, attempting for divestiture the potential process. sale financial our as financing, Houlihan the operations. evaluating are debt Special or Lokey already equity of debt exploring or restructuring partnership including the the transactions the options retained licensing of business, All

definitive While operations. we given completion special the don't committee process, proceeding manner timely have this for on our date or a current the a anticipate time line in the is constraints financial

the dealers As and market to we consumers, a substantial clicks calls, that of changed. large cash and is envisioned its supply used rates, notice. on clicks assets committee where alternative we operations AutoWeb and down to the heads new leads dedicated our a be our This and we as talented can as our acquire further from of continue team we overall past in watchful the value media that leads channel, while long-term and transformation strategy. result our as alternative underlying strategic value to continuing Between adopt age. vehicles our We're is customer highly before of I ability and we motivated to as want the inflation, operating plan run to will proven and keep business a technology, core provide, chain What until strategic go rate eye the of will that has can't AutoWeb's review directly control not market. firmly tools We vehicle obviously forward when not audience interest base consumers we'd while used to AutoWeb. But in suspended intersection business, positive believe they will our our can't the sellers. leverage capable buying I've outcome. control to in We possible capabilities business -- vehicle selling this while connect assets the our do we're with and or leads embarked is the on its automotive digital high-quality capabilities, identity providing cycle optimistic review, in conditions. we with in believe inventories. along of utility and to continue reiterate cash plans of perspective continue and confident car is position and the the we the our believe our help efficient And that buyers, high-quality capitalizing said the our and life clicks. provide is still our there vehicles. remain line from put with through market of generation special of on vehicle moves efficiently The distribution platform capabilities, buyers we consumer expense digital still to in with strategic to

a and have AutoWeb. return times. ultimately is Operator? we team it I'd core of who like the with that untapped recognize exceptionally of to that during to sincerely unwavering have challenging operations the nimble our and open executing diligently our will With these resilient trying working able hopes questions. support and potential now stakeholders long-term sustain We be transformation dedicated that, to for our provided and we'll employees, up thank our to all

Operator

Street. first For from have Martinuzzi Lake our Instructions] question, [Operator Eric we

Eric Martinuzzi

question the million. the the first given at My revolver at is going concern, $X.X cash in million regarding $X.X

looking on the at, months. curious that quarters what here, sheet? are here to done made, about something we need know balance get we But what many talking are the Just given we less how obviously, than you've to before XX moves

Jared Rowe

it how our base. by well depends question you operate with a Eric, the customer able because question, all and very to existing just we're the for thank That's way. execute quite on to difficult answer, frankly,

concern, from a As follow going from employee's it a perspective customer risk an you perspective. know, create when can and you

But several while plenty as positive outcome. the making guidance give at so this And a a for we committed have moment. we us level achieve review, and aren't strategic of to prepared options to to team particular time that we contingencies, provide that are we strategic certain of

Eric Martinuzzi

the point regarding And had were decide like we I it just CarZeus, feel QX we feels the what operations? recently. we -- Okay. to then did call CarZeus like suspend At

Jared Rowe

It That recently. recently. was very very was

financing difficult very for our Unfortunately, financing. a to As while make you putting now. these control, which can imagine, us place fell this through sorts We position through we've no of into actually forced were in been for working bridge close of where reason the decisions. to very bridge a we had

operational cash, that was a we So matter XXX not said, which these the I a on GAAP a these as suspend have to month, are But fact, we until to in did which focus reestablish the similar were numbers. last so we operations not consumer of hopefully can of trajectory clicks bought had positive CarZeus operations and and The we leads best cars, we furlough members fairly Like acquisitions. make of a numbers, until a it's the north business why find by are that is suspend issue April, intensity far and month in recently. vehicle month. operations decision high very team we've outcome then is vehicle, those this on used just and fundamental we

Eric Martinuzzi

obviously, but question expense, to as costs expense? Okay. operating maybe we've -- second rate the run for operating far And Carlton. a what restructuring then we here as should in What's the quarter, a duplicative got cost it's

Carlton Hamer

the alternates are looking categories set what accomplish same reduce I we I strategic of that out committee. the the at going by think goals to mean, mean level. and can and that that to through were the Yes. we we guidance various

Eric Martinuzzi

was said, bad were the What's that up, to Okay. volumes you And but not was quarter. It as traffic lead seems all strange in news it flat me that? behind your sequentially. lead your

Jared Rowe

be that's masked We've business. how going And inside been several optimize the shoots that things the to one call actually green the changes several to is making there we this of funnel. by are is

being XX%. conversion One about rate current up well, our up of was them quarter,

structured quarter in and we some operating of they campaigns took modifications but the how so team funnel traffic, were how manage of actually introducing the it of was terms business. benefits. buys a who their our making But And we throughout the bit that side real now that changes time of approaches material yielding a optimization are on little being new some bunch made

for he's of changes on think business. did goodness the impact quarter. recall someone that -- wise side. having that hired in a And making of some you the on in mask is quite over a I that few side puts positive actually we've we the But see that us and he's positive takes recently but new

Eric Martinuzzi

luck good alternatives strategic the the process. pivot on Well, Okay. review and here

Operator

question, next we our Gary For from Barrington Research. have Prestopino

Gary Prestopino

couple to Jared, you. hear here questions please. of good A from

gross First is due quarter to of 'XX, the degradation all, the the in CarZeus? margin is versus QX impact that of all

Jared Rowe

one. Carlton, please take that

Carlton Hamer

It's business due was not to CarZeus, due as degradation to also significantly in It all core well. a there the but is CarZeus.

Gary Prestopino

Okay.

Jared Rowe

a saw then. an in We elevated interrupt. I'm was We've as since similar QX, TAC QX of it down expansion We been managing QX to bit and -- bit our it to last and year. sorry well QX. a Early levels of in QX saw in in

did business. basis for the of you've we bit managing this really you in there a finished quarter, of January February we're a quarter, of But positive nice on impact the it's and gross mixed bit in for have and into on doing bag got inflation And March. of it. the said, of acquisition a our end note. worth, so a job half I like per consumer quarter the a a costs, But margin And of leads which unit what

Gary Prestopino

cash for, held that this. I'm didn't Carlton, you What's the balance could sheet? -- get is the what is sorry, I What Could CarZeus? restricted -- that on Okay. explain

Carlton Hamer

So this cash there's in balance sheet. on $X.X at $X within Approximately CIT collateral the it point is of million the loan. restricted as used million

supports right balance. the that loan collateral the it's So

Gary Prestopino

Okay.

So at have you've this point? you -- was that under you there facility any or tripped credit this -- tripped did -- are you covenants -- things there have revolving

Carlton Hamer

are There real covenants not. we There that are tripped.

Gary Prestopino

Okay.

cash So the facility, That the to would borrowings $X.X get if to were financing credit be could to you you've applied be that applied collateral borrowing. got under if the as revolving directly in? of million directly new some restricted

Carlton Hamer

port. million securing Yes. of $X.X to credit that goes

Gary Prestopino

risk This I share all ownership on this. that of per is under question trying But done this the $XXX X% you've I last -- there, to tax a pertain take $X.XX. stake to NOLs, plan, Section basis to don't is without about code. got the is have XXX of a the in your the million company So would you've here, IRS agreeing which language it? anybody of Board does preservation understand what that

Jared Rowe

Yes. for more The plan can the than roughly that. threshold X.X%. NOL is acquire Nobody

Gary Prestopino

coming somebody So and the is Is agreed if to that clause if in a of change more, correct? there's buying NOL Board still control that there. applicable in

Jared Rowe

than it's it. answer Essentially, Yes, will NOLs get the your the that, more guess reset bit reset. would I It on a I is here's Gary. way complex little value. transaction

real if the should of attractive is doesn't We've the a through if even Here's there That value of still doesn't say change even all something is. it value make be there. that million inside $XXX the would NOL way transaction, is control it I of transition it -- got business.

the the be that. strategic But that NOL alternatives, somebody us would the all in who to value your something terms there or merge we things with core there as about mentioned is to like point, else is think of also do looking operations. so for plan it And I

Gary Prestopino

Agree.

Okay.

because that? your value of that to Company say get mean, get Directors, bunch something use. rid chooses inherent your the threshold, X.X% of issues or to like of -- then is or you there to suffice of so tax if $XX Okay. value could much And million is your value and your a value that how equity is of there. there your I like exercise Board whole market start But to company, they into enterprise

Jared Rowe

you as things And that Yes. up that's again, had Yes. to way invest one this value imagine, as optimistic to that a somebody conversation, the able real their real there's Houlihan Lokey. find well we're we a out No, into figure to we out either this to absolutely. of they Absolutely converge asset, in can And value picked when who or as and with pointed we're platform. going it be in wants business.

Gary Prestopino

you're understand. you've then is first trying base why this There the when NOL. this, understand briefly, customer I get because right it leads And the diminishes discount your can to handle to I here to that besides business? talking got value your the your just up about by costs; competitive CAC, When a That's That's so going on looked I having -- at thing auto acquisition this saw such taken is I'm some very I you're again. get environment this. a margin. your okay, now? leads was your retailers? I it's Or said, I

Jared Rowe

we Gary. couple market it's them. had QX, nature we've early the in levels of QX competitive of is because QX issues -- executional question, there's talked of that some No, expense and great a we've since because resolved. the that of elevated and at No, One things also to play

It's as revenue who retail a you material have we've and right, of self-selling so talked the now this have revenue about, right know, are on much in status. unit. somewhat is retail talked wholesale is still revenue do because And because difference a in lead per side, material as our we between mine number diminished Now suspend dealers we the business.

pressure. not that We've you're pressure. shortages. seeing ongoing inventory and some so of pandemic months That's the And because now had downward downward new

that and, perspective able to back cash into positive and we been end EBITDA adjusted we've rates it, do lead when we've quarter what were so the mid flow of from is on down the a this and we quarter. to profitable side saw year. the the call And at expense manage last And cost side gotten

our quality. to back able still hold been it And on so to manage we've and

volume. little basis, the trends. We margin a for positive enough it's just fast we're gross But enough haven't actually we're give bit inventory-related of pure that on to a not continuing headwinds Again, seeing experience. to up

Gary Prestopino

it's doubt. no Yes, environment, tough a now,

Operator

And for Capital. from our Ascendiant next question, we have Edward

Edward Woo

Yes.

relatively You better, February January deteriorated. so far? May about mentioned was April March What but and that and

Jared Rowe

So quite parts that all there from in execution one green said, better, this from perspective, sales it's seeing. seeing better. perspective, enough. this vehicle were been an the frankly. of a pure much frustrating of they're I most operating used But they've not Like to is overcome we're headwinds not not shoots in quarter, but the quarter, shoots green it's that enough we're the And

So what from X.X here, seeing about numbers. in been a for talking able and we're of generated dollars couple to a SAAR perspective, it QX here, similar better first that gross But the is more you seen do of we've much substantial months have was when been you're But months our so month, compare margin the because it QX than SAAR leads and up. elevated year is declines to today. last has again, we

basis perspective, lead click total, in a we're on though and a from better unit per still even just down. So it's doing

Edward Woo

know guys I CarZeus. but operations, anything like that? first the Is into was at looking then to read margin you suspend for gross there And quarter down. it looks

Jared Rowe

than a operational We different rolling bit. office issues we hiring of where were as historically shut a have Just had like execution well done. that's said. and little issues doing the some had kind some hiring to COVID We we Carlton down

volume, progress, up month saw bounced we're And per the But for we're what of and that. April, worth through working in good again, it's unit And system ramp ways where issues margin just operational a to we pushed we making fast positive again, back and bit, so not enough. as decline. that saw our execution we

Edward Woo

with good I review. strategic wish guys you your luck

Jared Rowe

the about just car do really reiterate, on interesting. Again, attractive. I our that that. within had to feel just It's proved the to side environment. We we of again, works And It's strongly want buying work it we business.

any Operator, other Okay. questions?

Operator

to this any to concludes Mr. would remarks. call like I This the Rowe closing further back over our session. question-and-answer We turn you, questions have don't at for now time.

Jared Rowe

to I to just to want everybody. want thank I stakeholders. thank Again, I employees. our thank our want Okay.

earlier, your mentioned ability business asset. of impact ecosystem. soon. strongly And this appreciate for positively We strongly the speaking I in the it. look As we all with believe value you We we the this you automotive in believe for again Thank to forward to support.

Thanks, Okay. everybody.

Operator

gentlemen, this today's and teleconference. Ladies concludes

now time. disconnect this Thank for participation. may at lines you You your your

AutoWeb (AUTO) 17 May 222022 Q1 Earnings call transcript