TRAK (MM)

Provides Guidance for 2008 LAKE SUCCESS, N.Y., Feb. 19 /PRNewswire-FirstCall/ -- DealerTrack Holdings, Inc. (NASDAQ:TRAK) today reported financial results for the fourth quarter and year ended December 31, 2007. GAAP Results for Fourth Quarter 2007 -- Revenue for the quarter was $60.7 million, a 33 percent increase from $45.7 million for the fourth quarter of 2006. -- GAAP net income for the quarter was $4.1 million, a decrease from $5.7 million for the fourth quarter of 2006. Included in GAAP net income for the fourth quarter of 2006 was other income of $1.4 million, or $0.03 per diluted share, resulting from a purchase price adjustment of a prior year's acquisition. -- GAAP diluted net income per share for the quarter was $0.10, compared to $0.14 per share for the fourth quarter of 2006. Non-GAAP Results for Fourth Quarter 2007 -- EBITDA for the quarter was $15.0 million up from $14.5 million for the fourth quarter of 2006. Included in EBITDA for the fourth quarter of 2006 was other income of $1.4 million, as mentioned above. -- Cash net income for the quarter was $10.9 million, a 17 percent increase from $9.3 million for the fourth quarter of 2006. Included in cash net income for the fourth quarter of 2006 was other income of $1.4 million, as mentioned above. -- Diluted cash net income per share for the quarter was $0.25, up from $0.23 per share for the fourth quarter of 2006. GAAP Results for Year Ended December 31, 2007 -- Revenue for the year was $233.8 million, a 35 percent increase from $173.3 million for 2006. -- GAAP net income for the year was $19.8 million, compared to $19.3 million for 2006. As mentioned above, included in GAAP net income for 2006 was other income of $1.4 million, or $0.04 per diluted share. -- GAAP diluted net income per share for the year was $0.48, a decrease from $0.51 per share for 2006. Non-GAAP Results for Year Ended December 31, 2007 -- EBITDA for the year was $66.0 million, a 37 percent increase from $48.0 million for 2006. Included in EBITDA for 2006 was other income of $1.4 million, as mentioned above. -- Cash net income for the year was $44.2 million, a 35 percent increase from $32.7 million for 2006. Included in cash net income for 2006 was other income of $1.4 million, as mentioned above. -- Diluted cash net income per share for the year was $1.07, a 23 percent increase from $0.87 per share for 2006. EBITDA is a non-GAAP financial measure that represents GAAP earnings excluding interest, taxes, depreciation and amortization expenses. Cash net income is a non-GAAP financial measure that represents GAAP net income before non-cash stock-based compensation expense (net of taxes), amortization of acquired identifiable intangibles (net of taxes), and for 2006 the reversal of a benefit related to a tax valuation allowance. See "Non-GAAP Financial Measures" below for a further discussion of EBITDA and cash net income, and refer to Attachment 5 of this press release for reconciliations of GAAP financial measures to non-GAAP financial measures. "Despite a challenging macroeconomic environment in the latter part of the year, our 2007 results were very strong," said Mark O'Neil, chairman and chief executive officer of DealerTrack. "We achieved significant revenue, EBITDA and cash net income growth for the year due to great execution and innovation within both our subscription and transaction businesses. Our accomplishments included expansion into the DMS and accessories markets, the signing of significant customer relationships such as the Asbury Automotive Group and the introduction or enhancement of several exciting products such as the DealerTrack Leads Network, Dealwatch and InventoryPro." Business Statistics There were 22,043 active dealers in the DealerTrack network as of December 31, 2007. The number of active financing sources in the DealerTrack network as of December 31, 2007 reached 465, up 52 percent from 305 a year earlier. Transactions processed in the network for the fourth quarter were approximately 20.8 million, a 7 percent increase from approximately 19.5 million for the fourth quarter of 2006. Transactions processed in the network for 2007 were approximately 90.9 million, a 27 percent increase from approximately 71.5 million for 2006. The number of revenue-generating subscriptions in the network as of December 31, 2007 was 28,966, a 34 percent increase from 21,613 as of the end of 2006. DealerTrack also provided guidance for its expected 2008 financial performance. Guidance for 2008 annual performance Expected GAAP Results -- Revenue for the year is expected to be between $270 million and $276 million. -- GAAP net income for the year is expected to be between $24.8 million and $26.2 million. -- Diluted GAAP net income per share for the year is expected to be between $0.56 and $0.60. Expected Non-GAAP Results -- EBITDA for the year is expected to be between $71.2 million and $73.5 million. -- Cash net income for the year is expected to be between $50.4 million and $51.8 million. -- Diluted cash net income per share for the year is expected to be between $1.14 and $1.18. DealerTrack's estimate of weighted average diluted shares outstanding for 2008 is 44.0 million shares. Refer to Attachment 5 of this press release for a reconciliation of expected GAAP financial measures to expected non-GAAP financial measures. O'Neil commented "We are pleased to be able to provide guidance that shows our ability to grow revenue in a range of 15.0% - 18% despite a challenging economic environment. Our expected profitability is strong, particularly when you consider that included in our guidance is the cost of approximately $7.0 million or $0.10 per diluted share in the year in relation to our outstanding patent litigation. We believe this expenditure is needed to defend our intellectual property. We anticipate that based on our scheduled trial date in July 2008 that this will be the final year that this level of expenditure will be necessary. Additionally, and as mentioned on prior calls, we continue to make significant investments in on-going growth initiatives such as our Arkona dealer management system, InventoryPro, the Aftermarket Network, the Accessories Network and the Independent dealer initiative." O'Neil continued, "Our fundamental growth strategy remains consistent for 2008. We will look to expand the number and nature of participants on the network, to continue to cross-sell our products to existing customers, to expand our product offerings and to complete targeted strategic acquisitions. All of these priorities can contribute to greater efficiency in the dealership, thus enhancing dealer profitability while strengthening the DealerTrack network." DealerTrack will host a conference call to discuss its 2007 results, 2008 guidance and other matters on February 19, 2008 at 5:00 p.m. Eastern Time. The conference call will be webcast live on the Internet at http://ir.dealertrack.com/eventdetail.cfm?eventid=49570. In addition, a live audio of the call will be accessible to the public by calling 877-681-3373 (domestic) or 719-325-4897 (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 March 4, 2008. Non-GAAP Financial Measures In this release, the Company's EBITDA and cash 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. EBITDA represents GAAP earnings excluding interest, taxes, depreciation and amortization expenses. Cash net income represents net income excluding stock-based compensation expense (net of taxes), amortization of acquired intangibles (net of taxes), and for 2006 the reversal of a benefit related to a tax valuation allowance. EBITDA and cash net income are presented because management believes 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. Management believes the EBITDA and cash net income information is useful to investors for these reasons. EBITDA and cash 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 EBITDA and cash net income is GAAP net income and has provided a reconciliation of EBITDA to GAAP net income, and cash net income to GAAP net income, in Attachment 5 to this press release. About DealerTrack (http://www.dealertrack.com/) DealerTrack Holdings, Inc. (NASDAQ:TRAK) is a leading provider of on- demand software and data solutions for the U.S. automotive industry. Our solutions enable dealers to receive consumer leads, submit credit applications, compare financing and leasing options, sell insurance, vehicle accessories and other aftermarket products, document compliance, and execute financing contracts electronically. In addition, the DealerTrack Arkona dealer management system is used by dealerships nationwide. Over 22,000 dealers, 500 financing sources and many other service and information providers are active in the DealerTrack network. For more information visit http://www.dealertrack.com/. Safe Harbor for Forward-Looking and Cautionary Statements Statements in this press release regarding DealerTrack's expected 2008 performance, the development, expansion and benefits of DealerTrack's network, products and services, DealerTrack's growth expectations, the status and expected cost of outstanding litigation, 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: increased competitive pressure from other industry participants, the inability to execute any element of DealerTrack's business strategy, including selling additional products and services to existing and new customers; 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 the automotive retail and indirect automotive financing industries on DealerTrack's business; the impact of some vendors of software products for automotive dealers making it more difficult for our customers to use our products and services; the timing, cost and extent of litigation, the impact of general economic trends, including interest rates, as well as the trends in the automotive industry, and other risks listed in DealerTrack's reports filed with the Securities and Exchange Commission (SEC), including its 2006 Form 10-K. These filings can be found on DealerTrack's website at http://www.dealertrack.com/ and the SEC's website at http://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. CONTACT: Investor Relations DealerTrack (888) 450-0478 Stephanie Lowenthal RF|Binder Partners (212) 994-7619 Attachment (1) Actual Results: Three-Month Period DEALERTRACK HOLDINGS, INC. Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited) Three Months Ended December 31, 2007 2006 Net revenue $60,742 $45,659 Cost of revenue 26,495 19,307 Product development 2,386 2,372 Selling, general and administrative 27,716 17,580 Total operating costs and expenses 56,597 39,259 Income from operations 4,145 6,400 Interest income, net 1,742 1,546 Other income 2 1,373 Income before provision for income taxes 5,889 9,319 Provision for income taxes (1,758) (3,640) Net income $4,131 $5,679 Basic net income per share $0.10 $0.15 Diluted net income per share $0.10 $0.14 Weighted average shares outstanding 40,956,826 38,027,280 Weighted average shares outstanding assuming dilution 42,845,842 39,683,653 EBITDA (Non-GAAP) (a) $14,982 $14,531 EBITDA margin (Non-GAAP) (b) 25% 32% Cash net income (Non-GAAP) (a) $10,852 $9,270 Diluted cash net income per share (Non-GAAP) $0.25 $0.23 (a) See Reconciliation Data in Attachment 5. (b) Represents EBITDA as a percentage of net revenue. Attachment (2) Actual Results: Twelve-Month Period DEALERTRACK HOLDINGS, INC. Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited) Twelve Months Ended December 31, 2007 2006 Net revenue(1) $233,845 $173,272 Cost of revenue (2) 99,631 70,843 Product development 9,808 9,153 Selling, general and administrative 96,875 72,537 Total operating costs and expenses 206,314 152,533 Income from operations 27,531 20,739 Interest income, net 5,251 4,021 Other income 4 1,373 Income before provision for income taxes 32,786 26,133 Provision for income taxes (a) (13,034) (6,797) Net income $19,752 $19,336 Basic net income per share $0.50 $0.54 Diluted net income per share $0.48 $0.51 Weighted average shares outstanding 39,351,138 36,064,796 Weighted average shares outstanding assuming dilution 41,198,773 37,567,488 (1) Related party revenue $2,425 $33,380 (2) Related party cost of revenue $38 $1,840 EBITDA (Non-GAAP) (b) $66,014 $48,027 EBITDA margin (Non-GAAP) (c) 28% 28% Cash net income (Non-GAAP) (b) $44,170 $32,688 Diluted cash net income per share (Non-GAAP) $1.07 $0.87 (a) Included in the provision for income taxes for the twelve months ended December 31, 2006 is $206,000 of tax expense that relate to prior periods and the reversal of a tax valuation allowance of $3.7 million both of which relate to our Canadian subsidiary. (b) See Reconciliation Data in Attachment 5. (c) Represents EBITDA as a percentage of net revenue. Attachment (3) Condensed Consolidated Balance Sheet DEALERTRACK HOLDINGS, INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) December 31, December 31, 2007 2006 ASSETS Cash, cash equivalents and short-term investments $220,144 $171,195 Accounts receivable, net 26,957 19,958 Prepaid expenses and other current assets 11,132 7,177 Total current assets 258,233 198,330 Property and equipment, net 12,792 6,157 Software and web site development costs, net 10,771 10,048 Intangible assets, net 69,528 37,918 Goodwill 117,702 52,499 Deferred taxes and other long-term assets 13,900 16,561 Total assets $482,926 $321,513 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $28,676 $23,907 Deferred revenue 4,016 3,166 Due to acquirees and other current liabilities 2,731 2,440 Total current liabilities 35,423 29,513 Long-term liabilities 9,141 7,663 Total liabilities 44,564 37,176 Total stockholders' equity 438,362 284,337 Total liabilities and stockholders' equity $482,926 $321,513 Attachment (4) Summary Cash Flow Information DEALERTRACK HOLDINGS, INC. Summary Cash Flow Information (Dollars in thousands) (Unaudited) Twelve Months Ended December 31, 2007 2006 Net cash provided by operating activities $56,926 $45,489 Net cash used in investing activities (a) $(168,725) $(168,390) Net cash provided by financing activities $114,216 $66,740 (a) For the twelve months ended December 31, 2007, net cash used in investing activities includes $45.5 million in net sales of auction rate securities that are invested in tax-exempt and tax-advantaged securities. For the twelve months ended December 31, 2006, net cash used in investing activities included $124.1 million in net purchases of auction rate securities that were invested in tax-exempt and tax- advantaged securities. Attachment (5) Reconciliation Data DEALERTRACK HOLDINGS, INC. Reconciliation of GAAP Net Income to Non-GAAP EBITDA (Dollars in thousands) (Unaudited) Three Months Ended December 31, 2007 2006 GAAP net income (a) $4,131 $5,679 Interest income (1,866) (1,608) Interest expense 124 62 Provision for income taxes 1,758 3,640 Depreciation and amortization 2,871 2,399 Amortization of acquired identifiable intangibles 7,964 4,359 EBITDA (Non-GAAP) $14,982 $14,531 (a) GAAP net income for the three months ended December 31, 2006, includes $1.4 million in other income resulting from a purchase price adjustment of a prior year's acquisition. DEALERTRACK HOLDINGS, INC. Reconciliation of GAAP Net Income to Non-GAAP Cash Net Income (Dollars in thousands) (Unaudited) Three Months Ended December 31, 2007 2006 GAAP net income (a) $4,131 $5,679 Non-cash stock-based compensation charges, net of taxes 1,871 932 Amortization of acquired identifiable intangibles, net of taxes 4,850 2,659 Cash net income (Non-GAAP) $10,852 $9,270 (a) GAAP net income for the three months ended December 31, 2006, includes $1.4 million in other income resulting from a purchase price adjustment of a prior year's acquisition. DEALERTRACK HOLDINGS, INC. Reconciliation of GAAP Net Income to Non-GAAP EBITDA (Dollars in thousands) (Unaudited) Twelve Months Ended December 31, 2007 2006 GAAP net income (a) $19,752 $19,336 Interest income (5,606) (4,289) Interest expense 355 268 Provision for income taxes 13,034 6,797 Depreciation and amortization 10,262 8,629 Amortization of acquired identifiable intangibles 28,217 17,286 EBITDA (Non-GAAP) (b) $66,014 $48,027 (a) GAAP net income for the twelve months ended December 31, 2006, includes $1.4 million in other income resulting from a purchase price adjustment of a prior year's acquisition. (b) EBITDA for 2006 includes charges of $5.0 million in non-cash stock- based compensation expense and $0.8 million in cash compensation expense related to the departure of an executive officer in the third quarter of 2006. DEALERTRACK HOLDINGS, INC. Reconciliation of GAAP Net Income to Non-GAAP Cash Net Income (Dollars in thousands) (Unaudited) Twelve Months Ended December 31, 2007 2006 GAAP net income (a) $19,752 $19,336 Non-cash stock-based compensation charges, net of taxes 6,992 6,512 Amortization of acquired identifiable intangibles, net of taxes 17,426 10,544 Benefit related to reversal of tax valuation allowance (b) - (3,704) Cash net income (Non-GAAP) (c) $44,170 $32,688 (a) GAAP net income for the twelve months ended December 31, 2006, includes $1.4 million in other income resulting from a purchase price adjustment of a prior year's acquisition. (b) Reversal of tax valuation allowance in 2006 relates to DealerTrack's Canadian subsidiary, DealerAccess Canada, Inc. (c) Cash net income for 2006 includes a charge of $0.8 million in cash compensation expense related to the departure of an executive officer during the third quarter of 2006. DEALERTRACK HOLDINGS, INC. Reconciliation of Forward-Looking GAAP Net Income to Forward-looking Non-GAAP EBITDA (Dollars in millions) (Unaudited) Year Ending December 31, 2008 Expected Range GAAP net income $24.8 $26.2 Interest income (9.8) (9.8) Interest expense 0.1 0.1 Provision for income taxes 15.2 16.1 Depreciation and amortization 15.4 15.4 Amortization of acquired identifiable intangibles 25.5 25.5 EBITDA (Non-GAAP) $71.2 $73.5 DEALERTRACK HOLDINGS, INC. Reconciliation of Forward-looking GAAP Net Income to Forward-looking Non-GAAP Cash Net Income (Dollars in millions) (Unaudited) Year Ending December 31, 2008 Expected Range GAAP net income $24.8 $26.2 Non-cash stock-based compensation charges, net of taxes 10.0 10.0 Amortization of acquired identifiable intangibles, net of taxes 15.6 15.6 Cash net income (Non-GAAP) $50.4 $51.8 Attachment (6) Summary of Business Statistics (Unaudited) DEALERTRACK HOLDINGS, INC. Three months ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2007 2007 2007 2007 2006 Active dealers (a) 22,043 22,551 22,630 22,642 22,147 Active financing sources (b) 465 427 380 344 305 Transactions processed (c) (in thousands) 20,836 23,810 23,498 22,725 19,521 Product subscriptions (d) 28,966 27,469 25,621 23,267 21,613 (a) We consider a dealer to be active as of a date if the dealer completed at least one revenue-generating credit application processing transaction using the DealerTrack network during the most recently ended calendar month. (b) We consider a financing source to be active in our network as of a date if it is accepting credit application data electronically from dealers in the DealerTrack network. (c) Represents revenue-generating transactions processed in the DealerTrack, DealerTrack Digital Services and DealerTrack Canada networks at the end of a given period. (d) Represents revenue-generating subscriptions in the DealerTrack and DealerTrack Canada networks at the end of a given period. Three months ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2007 2007 2007 2007 2006 Transaction revenue (in thousands) $35,330 $39,096 $38,596 $34,290 $29,077 Subscription revenue (in thousands) $21,470 $20,378 $17,444 $15,769 $14,852 Other revenue (in thousands) $3,942 $3,397 $2,467 $1,666 $1,730 Average transaction price (a) $1.70 $1.64 $1.64 $1.51 $1.49 Average subscription price (b) $253 $256 $238 $234 $238 (a) Calculation includes revenue from ALG transactions that were not processed within the DealerTrack, DealerTrack Digital Services or DealerTrack Canada networks. (b) Calculation includes revenue for Chrome and ALG subscriptions that were outside of the DealerTrack and DealerTrack Canada networks. DATASOURCE: DealerTrack Holdings, Inc. CONTACT: DealerTrack Investor Relations, 1-888-450-0478, ; or Stephanie Lowenthal of RF|Binder Partners for DealerTrack, +1-212-994-7619, Web site: http://www.dealertrack.com/

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