DealerTrack Holdings, Inc. Reports First Quarter 2012 Financial Results

Raises 2012 Revenue and Non-GAAP Earnings Guidance

May 08, 2012, 16:05 ET from DealerTrack Holdings, Inc.

LAKE SUCCESS, N.Y., May 8, 2012 /PRNewswire/ -- DealerTrack Holdings, Inc. (Nasdaq: TRAK) today reported financial results for the first quarter ended March 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20101028/DEALERTRACKLOGO )

GAAP Results for the First Quarter 2012

  • Revenue for the quarter was $91.6 million, as compared to $77.2 million for the first quarter of 2011
  • GAAP net income for the quarter was $17.0 million, as compared to $24.7 million for the first quarter of 2011
  • Diluted GAAP net income per share for the quarter was $0.39, as compared to $0.59 for the first quarter of 2011

GAAP net income for the first quarter of 2012 was positively impacted by $16.1 million (net of tax), or $0.37 per share, from a non-cash gain related to the contribution of Chrome to the Chrome Data Solutions, LP joint venture.  GAAP net income for the first quarter of 2011 was positively impacted by $24.5 million, or $0.58 per share, from a non-cash reduction in the valuation allowance against the company's net U.S. deferred tax assets. 

Non-GAAP Results for the First Quarter 2012

  • Adjusted EBITDA for the quarter was $19.4 million, as compared to $15.5 million for the first quarter of 2011
  • Adjusted net income for the quarter was $9.4 million, as compared to $7.5 million for the first quarter of 2011
  • Diluted adjusted net income per share for the quarter was $0.22, as compared to $0.18 for the first quarter of 2011

Guidance for 2012 Annual Revenue Performance DealerTrack raised annual guidance for revenue and non-GAAP earnings to reflect its stronger outlook for the year, and adjusted its expected GAAP earnings to further reflect certain interest expense and costs related to the company's issuance of $200 million in senior convertible notes in March 2012, as follows:

Expected GAAP Results

  • Revenue for the year is expected to be between $375.0 million and $382.0 million, an increase from prior guidance of between $365.0 to $372.0 million
  • GAAP net income for the year is expected to be between $27.0 million and $30.0 million, a decrease from prior guidance of between $33.0 million and $36.0 million
  • Diluted GAAP net income per share for the year is expected to be between $0.61 and $0.68, a decrease from prior guidance of between $0.75 and $0.81 per share

Expected Non-GAAP Results

  • Adjusted EBITDA for the year is expected to be between $94.0 million and $97.0 million, an increase from prior guidance of between $91.0 and $95.0 million
  • Adjusted net income for the year is expected to be between $46.0 million and $49.0 million, an increase from prior guidance of between $44.0 and $47.0 million
  • Diluted adjusted net income per share for the year is expected to be between $1.04 and $1.11, an increase from prior guidance of between $0.99 and $1.06

The guidance assumes that new car sales by franchised dealers will be approximately 14.2 million units, up from our previous expectation of 13.5 million units, and used car sales by franchised dealers will be approximately 14.0 million units for 2012, an amount unchanged from our previous estimate.  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. 

Mark F. O'Neil, chairman and chief executive officer of DealerTrack, commented, "We are pleased with our strong performance in the first quarter. Transaction revenue grew at a multiple of growth in car sales as we increased the average transaction revenue per car sold. Our subscription business also performed well, as we saw particularly strong interest in our Inventory solution." O'Neil further commented, "We are increasing our revenue guidance for 2012, reflecting strong first quarter results and an increase in our 2012 car sales expectations. Continued momentum combined with investments in our future growth make us more confident in our outlook for 2012 and beyond." 

Conference Call

DealerTrack will host a conference call to discuss its first quarter 2012 results and other matters on May 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 website until May 21, 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 or losses on sales of securities, gains or losses on sales or disposals of subsidiaries, 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 or losses on sales of securities, gains or losses on sales or disposals of subsidiaries, adjustments to deferred tax asset valuation allowances, non-cash interest expense and certain other non-recurring items.  These adjustments to net income, 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 (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 retail automotive industry, including dealers, lenders, OEMs, third-party retailers, agents and aftermarket providers. DealerTrack, whose solution set for dealers is the industry's most comprehensive, operates the largest online credit application network in the United States, connecting over 17,000 dealers with more than 1,100 lenders.  DealerTrack's Dealer Management System (DMS) provides dealers with easy-to-use tools and real-time data access to enhance their efficiency. DealerTrack's Inventory offerings provide vehicle inventory management and merchandising solutions to help dealers drive higher in-store and online traffic with state-of-the-art, real-time listings, accelerate used-vehicle turn rates, and increase dealer profits. DealerTrack's Sales and F&I solutions allow dealers to streamline the entire sales process as they structure deals from a single integrated platform.  Its Compliance offering helps dealers meet legal and regulatory requirements, and protect their assets.  DealerTrack also offers additional solutions for the automotive industry, including electronic motor vehicle registration and titling applications, paper title storage, and digital document services. 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, 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 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, except as required by law.

Three-Month Period

DEALERTRACK HOLDINGS, INC.

Consolidated Statements of Operations

(Dollars in thousands, except share and per share data)

(Unaudited)

Three Months Ended

March 31,

2012

2011

Net revenue

$             91,617

$             77,191

Cost of revenue

53,696

44,099

Product development

3,544

3,742

Selling, general and administrative

33,032

30,424

      Total operating expenses

90,272

78,265

      Income (loss) from operations

1,345

(1,074)

Interest expense and other income, net

(688)

89

Gain on disposal of subsidiary

27,693

-

      Income (loss) before (provision for) benefit from income taxes, net

28,350

(985)

(Provision for) benefit from income taxes, net 

(11,389)

25,713

  Net income

$             16,961

$             24,728

Basic net income per share

$                 0.40

$                 0.61

Diluted net income per share

$                 0.39

$                 0.59

Weighted average common stock outstanding (basic) 

42,090,947

40,851,659

Weighted average common stock outstanding (diluted) 

43,720,166

42,103,811

Adjusted EBITDA - previous presentation (non-GAAP) (a)

$             16,089

$             12,678

Adjusted EBITDA margin - previous presentation (non-GAAP) (b)

18%

16%

Adjusted EBITDA (non-GAAP) (a)

$             19,419

$             15,493

Adjusted EBITDA margin (non-GAAP) (b)

21%

20%

Adjusted net income (non-GAAP) (a)

$               9,444

$               7,490

Diluted adjusted net income per share (non-GAAP)

$                 0.22

$                 0.18

Stock-based compensation expense was classified as follows:  

   Cost of revenue

$                  635

$                  427

   Product development

214

185

   Selling, general and administrative

2,481

2,330

$               3,330

$               2,942

(a)     See Reconciliation Data. 

(b)     Represents adjusted EBITDA as a percentage of net revenue.

 

DEALERTRACK HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

March 31, 2012

December 31, 2011

ASSETS

Cash and cash equivalents 

$          257,544

$             78,709

Investments

80

46

Customer funds 

1,477

1,097

Customer funds receivable

20,526

18,695

Accounts receivable, net

39,025

37,588

Deferred tax assets

9,188

9,171

Prepaid expenses and other current assets 

23,668

23,011

   Total current assets

351,508

168,317

Property and equipment, net

21,816

21,637

Software and website development costs, net                                         

36,241

37,341

Investments - long-term

132,359

89,000

Intangible assets, net

87,551

96,441

Goodwill

193,423

200,840

Deferred tax assets

33,436

34,421

Other assets - long-term

17,155

12,356

   Total assets

$          873,489

$          660,353

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses

$             31,368

$             41,194

Customer funds payable

22,003

19,792

Deferred revenue

8,531

9,115

Deferred tax liabilities

3,443

3,443

Capital leases payable

204

255

   Total current liabilities

65,549

73,799

Long-term liabilities

257,826

91,798

   Total liabilities

323,375

165,597

Total stockholders' equity

550,114

494,756

   Total liabilities and stockholders' equity 

$          873,489

$          660,353

 

DEALERTRACK HOLDINGS, INC.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

Three Months Ended

March 31, 

2012

2011

Operating activities:

Net income

$            16,961

$             24,728

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

   Depreciation and amortization

11,979

11,745

   Deferred tax provision (benefit)

10,893

(24,670)

   Stock-based compensation expense

3,330

2,942

   Provision for doubtful accounts and sales credits

2,146

1,737

   Earnings from equity method investment, net

(163)

-

   Deferred compensation

38

50

   Stock-based compensation windfall tax benefit

(2,943)

(1,304)

   Gain on disposal of subsidiary

(27,693)

-

   Amortization of debt issuance costs and debt discount

729

-

   Change in contingent consideration

(250)

-

Changes in operating assets and liabilities, net of effects of acquisitions:

Accounts receivable

(6,742)

(6,420)

Prepaid expenses and other current assets

3,059

(3,301)

Other assets — long-term

1,539

809

Accounts payable and accrued expenses

(11,441)

(11,350)

Deferred rent

48

92

Deferred revenue

527

788

Other liabilities — long-term

(1,166)

705

Net cash provided by (used in) operating activities

851

(3,449)

 

Three Months Ended

March 31, 

2012

2011

Investing activities:

Capital expenditures

(1,695)

(3,102)

Capitalized software and website development costs

(3,665)

(3,359)

Cash contributed for equity method investment

(1,750)

-

Payment for acquisition of businesses, net of acquired cash

-

(128,482)

Net cash used in investing activities

(7,110)

(134,943)

Financing activities:

Principal payments on capital lease obligations and financing arrangements

(349)

(159)

Proceeds from the exercise of employee stock options

3,478

2,215

Proceeds from employee stock purchase plan

184

175

Proceeds from the issuance of senior convertible notes

200,000

-

Payments for debt issuance costs

(6,690)

-

Payments for convertible note hedges

(43,940)

-

Proceeds from the issuance of warrants

29,740

-

Purchases of treasury stock

(657)

(437)

Stock-based compensation windfall tax benefit

2,943

1,304

   Net cash provided by financing activities

184,709

3,098

Net increase (decrease) in cash and cash equivalents

178,450

(135,294)

Effect of exchange rate changes on cash and cash equivalents

385

280

Cash and cash equivalents, beginning of period

78,709

192,563

Cash and cash equivalents, end of period

$          257,544

$             57,549

Supplemental disclosure:

Cash paid for:

   Income taxes

$               1,109

$               1,280

   Interest

217

14

Non-cash investing and financing activities:

   Non-cash consideration issued for investment in Chrome Data Solutions

42,301

-

   Accrued capitalized hardware, software and fixed assets

1,879

3,725

   Capitalized stock-based compensation

-

31

   Deferred compensation reversal to equity

38

50

   Assets acquired under capital leases and financing arrangements

725

-

 

DEALERTRACK HOLDINGS, INC.

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

(Dollars in thousands)

(Unaudited)

Three Months Ended

March 31, 

2012

2011

GAAP net income

$              16,961

$              24,728

Interest income

(230)

(114)

Interest expense - cash

454

32

Interest expense - non-cash

703

-

Provision for (benefit from) income taxes, net

11,389

(25,713)

Depreciation of property and equipment and amortization of capitalized software and website costs

5,100

4,885

Amortization of acquired identifiable intangibles 

6,879

6,860

EBITDA (non-GAAP) 

41,256

10,678

   Adjustments:

   Gain on disposal of subsidiary

(27,693)

-

   Acquisition-related and other professional fees 

199

330

   Contra-revenue

1,102

943

   Integration and other related costs (including amounts related to stock-based compensation)

-

652

   Acquisition-related contingent consideration changes and compensation expense

178

75

   Rebranding expense

51

-

   Amortization of equity method investment basis difference

996

-

Adjusted EBITDA - previous presentation (non-GAAP)

$              16,089

$              12,678

   Stock-based compensation (excluding amounts included in integration and other related costs)

3,330

2,815

Adjusted EBITDA - new presentation (non-GAAP)

$              19,419

$              15,493

DEALERTRACK HOLDINGS, INC.

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income

(Dollars in thousands)

(Unaudited)

Three Months Ended

March 31, 

2012

2011

GAAP net income

$              16,961

$              24,728

Adjustments:

   Deferred tax asset valuation allowance (non-taxable)

-

(24,548)

   Amortization of acquired identifiable intangibles

6,879

6,860

   Stock-based compensation (excluding integration and other related costs)

3,330

2,815

   Gain on disposal of subsidiary

(27,693)

-

   Contra-revenue

1,102

943

   Integration and other related costs (including amounts related to stock-based compensation)

-

652

   Interest expense - non-cash (not tax-impacted)

703

-

   Amortization of equity method investment basis difference

996

-

   Acquisition-related and other professional fees 

199

330

   Acquisition-related contingent consideration changes and compensation expense

178

75

   Amended state tax return impact (non-taxable)

-

32

   Rebranding expense

51

-

   Tax impact of adjustments (a)

6,738

(4,397)

   Adjusted net income (non-GAAP)

$                 9,444

$                 7,490

(a)   The tax impact of adjustments for the three months ended March 31, 2012, are 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. The tax impact of adjustments for the three months ended March 31, 2011, are based on a U.S. statutory tax rate of 38.3% 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 37.6% and 38.0%, respectively.

DEALERTRACK HOLDINGS, 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

$                   27.0

$                   30.0

Interest, net

10.3

10.3

Income taxes, net

16.3

17.3

Amortization of basis difference from joint venture

4.0

4.0

Depreciation and amortization

23.6

22.6

Amortization of acquired identifiable intangibles 

25.8

25.8

EBITDA (non-GAAP) 

107.0

110.0

   Adjustments:

      Non-recurring costs (a)

3.0

3.0

      Realized gains

(33.2)

(33.2)

      Contra-revenue

4.0

4.0

Adjusted EBITDA - previous presentation (non-GAAP)

$                   80.8

$                   83.8

   Stock-based compensation (excluding amounts included in integration and other related costs)

13.2

13.2

Adjusted EBITDA - new presentation (non-GAAP)

$                   94.0

$                   97.0

 

(a)  Includes certain professional fees, integration and other related costs and acquisition-related compensation expense.

DEALERTRACK HOLDINGS, 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 

$                   27.0

$                   30.0

Adjustments:

   Stock-based compensation 

13.2

13.2

   Amortization of acquired identifiable intangibles 

25.8

25.8

   Amortization of basis difference from joint venture

4.0

4.0

   Non-cash interest expense (not tax-impacted)

7.6

7.6

   Non-recurring costs (a)

3.0

3.0

   Realized gains, net of taxes

(19.6)

(19.6)

   Contra-revenue

4.0

4.0

   Tax impact of adjustments (b)

(19.0)

(19.0)

   Adjusted net income (non-GAAP)

$                   46.0

$                   49.0

 

(a)  Includes certain professional fees, integration and other related costs, acquisition-related compensation expense.

(b)  The tax impact of adjustments are based on a blended tax rate of 38% applied to taxable adjustments.  

DEALERTRACK HOLDINGS, INC.

Summary of Business Statistics (Unaudited)

Three months ended

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

2012

2011

2011

2011

2011

Active U.S. dealers (a) 

18,345

17,543

17,629

17,660

17,373

Active U.S. lenders (b) 

1,165

1,120

1,103

1,062

1,010

Transactions processed (in thousands) (c) 

21,751

18,769

19,772

19,135

16,774

Active U.S. lender to dealer relationships (d) 

172,075

164,776

161,400

157,591

152,095

Subscribing dealers (e)

16,143

16,003

15,860

14,488

14,239

(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 DealerTrack network.  

(b)     We consider a lender to be active in our U.S. DealerTrack 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, June 30, 2011 - 149,398, March 31, 2011 - 146,660.

(e)     Represents the number of dealerships with one or more active subscriptions on the U.S. DealerTrack or DealerTrack Canada networks at the end of a given period.

DEALERTRACK HOLDINGS, INC.

Summary of Business Statistics (Unaudited)

Three months ended

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

2012

2011

2011

2011

2011

Transaction revenue (in thousands)

$54,079

$47,541

$50,411

$48,505

$38,435

Subscription revenue (in thousands)

$33,231

$38,779

$39,261

$34,716

$33,865

Other revenue (in thousands)

$4,307

$4,939

$6,121

$5,830

$4,891

Average transaction price (a)

$2.53

$2.58

$2.60

$2.58

$2.35

Transaction revenue per car sold (b)

$8.61

$7.17

$6.20

$5.73

$6.71

Average monthly subscription revenue per

subscribing dealership (c)

$690

$813

$834

$807

$798

Average monthly subscription revenue per

subscribing dealership (excluding Chrome & ALG) (d)

$690

$690

$684

$649

$641

(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 divided by our estimate of total new and used car sales for the period in the U.S. and Canada. Revenue used in the calculation adds back transaction related contra-revenue.

(c)  Revenue used in the calculation adds back subscription related contra-revenue.

(d)  Excludes subscription revenue from Chrome and ALG.

 

TRAK-E

 

 

SOURCE DealerTrack Holdings, Inc.



RELATED LINKS

http://www.dealertrack.com