DealerTrack Holdings, Inc. (Nasdaq: TRAK) today reported
financial results for the fourth quarter and year ended December
31, 2008.
GAAP Results for the Fourth Quarter 2008
- Revenue for the quarter was
$54.7 million, as compared to $60.7 million for the fourth quarter
of 2007.
- GAAP net loss for the quarter
was $(1.1) million, as compared to GAAP net income of $4.1 million
for the fourth quarter of 2007.
- GAAP diluted net loss per share
for the quarter was $(0.03), as compared to GAAP diluted net income
of $0.10 per share for the fourth quarter of 2007.
Non-GAAP Results for the Fourth Quarter 2008
- Adjusted EBITDA for the quarter
was $7.7 million, which excludes a $0.3 million impairment charge
related to certain auction rate securities, as compared to $15.0
million for the fourth quarter of 2007.
- Cash net income for the quarter
was $6.2 million, as compared to $10.9 million for the fourth
quarter of 2007.
- Diluted cash net income per
share for the quarter was $0.16, as compared to $0.25 per share for
the fourth quarter of 2007.
GAAP Results for the Year Ended December 31, 2008
- Revenue for the year was $242.7
million, as compared to $233.8 million for 2007.
- GAAP net income for the year was
$1.7 million, as compared to $19.8 million for 2007.
- GAAP diluted net income per
share for the year was $0.04, as compared to $0.48 per share for
2007.
Non-GAAP Results for the Year Ended December 31, 2008
- Adjusted EBITDA for the year was
$47.3 million, which excludes $6.0 million in impairment charges
related to certain auction rate securities, as compared to $66.0
million for 2007.
- Cash net income for the year was
$34.3 million, as compared to $44.2 million for 2007.
- Diluted cash net income per
share for the year was $0.82, as compared to $1.07 per share for
2007.
Adjusted EBITDA is a non-GAAP financial measure that represents
GAAP earnings (loss) excluding interest, taxes, depreciation and
amortization expenses and, in 2008, excludes an impairment charge
related to certain auction rate securities. Cash net income is a
non-GAAP financial measure that represents GAAP net income (loss)
before non-cash stock-based compensation expense (net of taxes),
the amortization of acquired identifiable intangibles (net of
taxes) and, in 2008, an impairment charge related to certain
auction rate securities. See �Non-GAAP Financial Measures� below
for a further discussion of adjusted 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.
Guidance for 2009 annual performance
DealerTrack also provided the following guidance ranges for its
expected 2009 financial performance:
Expected GAAP Results
- Revenue for the year is expected
to be between $242 million and $250 million.
- GAAP net loss for the year is
expected to be between $(11.1) million and $(9.6) million. Included
in the expected GAAP net loss for the year are an estimated $4.2
million of amortization of intangible assets and approximately $0.3
million in professional service fees related to the acquisition of
certain assets, including the AAX suite of inventory management
solutions and services, from JM Dealer Services, Inc. on January
23, 2009 (the �Acquisition�) and approximately $4.7 million in
restructuring charges related to the realignment of our work force
and the relocation of our digital services business (the
�Restructuring�), which, in each case, are net of taxes.
- GAAP net loss per share for the
year is expected to be between $(0.28) and $(0.24).
Expected Non-GAAP Results
- Adjusted EBITDA for the year is
expected to be between $31.0 million and $33.0 million. Adjusted
EBITDA for 2009 excludes approximately $7.3 million related to the
Restructuring and approximately $0.4 million in professional
service fees relating to the Acquisition. Due to a change in
accounting rules, acquisition related costs can no longer be
capitalized. Going forward, adjusted EBITDA will be provided.
- Cash net income for the year is
expected to be between $16.7 million and $18.2 million.
- Diluted cash net income per
share for the year is expected to be between $0.40 and $0.44.
Cash net income guidance for the year is based on an assumed
41.5 million diluted weighted average shares outstanding. GAAP net
loss guidance for the year is based on 39.5 million basic weighted
average shares outstanding.
The guidance assumes an approximately 10% to 15% decline in
lender to dealer relationships in 2009. It also assumes U.S. new
car sales for 2009 of approximately 10.5-11.5 million units,
compared to an approximately 10.5 million run rate in the fourth
quarter of 2008. Additionally, it assumes used car sales from U.S.
franchised dealers of approximately 12.0-13.0 million units for
2009, compared to 2008 total sales of approximately 13.2 million
units.
Mark F. O�Neil, chairman and chief executive officer of
DealerTrack, commented, �The second half of 2008 was obviously very
challenging, and we do not expect the first half of 2009 to improve
as it relates to credit availability or car sales. Given this
outlook, we took aggressive action early in the new year to realign
our workforce and business to focus on growth opportunities that we
believe will make DealerTrack a stronger, more nimble company. We
continue to invest in the solutions that have healthy end-markets
today, specifically our DMS and Inventory Management solutions, and
expect that these and other subscription products will deliver
significant revenue growth in 2009. We maintain a strong balance
sheet and believe we will continue to generate strong cash flows
from operations throughout 2009. Ultimately, we expect to enter
2010 with an even stronger leadership position in automotive retail
software and technology.�
Other Activity
The judge in DealerTrack�s pending patent litigation recently
moved the trial commencement date from February 24, 2009 to April
21, 2009 due to a conflict in the court�s schedule.
On March 18, 2008, DealerTrack�s board of directors authorized a
stock repurchase program. In the quarter ended December 31, 2008,
DealerTrack repurchased 0.4 million shares for approximately $5.1
million. In the full year 2008, DealerTrack repurchased 3.0 million
shares for approximately $49.8 million.
DealerTrack will host a conference call to discuss its 2008
results, 2009 guidance and other matters on February 19, 2009 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 800-967-7149 (domestic) or 719-325-2232 (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 5, 2009.
Non-GAAP Financial Measures
In this release, the Company�s adjusted 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 (loss). Adjusted
EBITDA is a non-GAAP financial measure that represents GAAP
earnings (loss) excluding interest, taxes, depreciation and
amortization expenses and, in 2008, excludes an impairment charge
related to certain auction rate securities, and, in 2009, will also
exclude restructuring charges and acquisition related professional
service fees. Cash net income is a non-GAAP financial measure that
represents GAAP net income (loss) excluding non-cash stock-based
compensation expense (net of taxes), the amortization of acquired
intangibles (net of taxes) and an impairment charge related to
certain auction rate securities. Adjusted 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
adjusted EBITDA and cash net income information is useful to
investors for these reasons. Adjusted 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 adjusted
EBITDA and cash net income is GAAP net income (loss) and has
provided a reconciliation of adjusted EBITDA to GAAP net income
(loss) and cash net income to GAAP net income (loss), in Attachment
5 to this press release.
About DealerTrack (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 and submit credit
applications, compare financing and leasing options, sell
insurance, purchase vehicle accessories, analyze inventory,
document compliance, and execute financing contracts
electronically. In addition, the DealerTrack Arkona dealer
management system (DMS) is used by dealerships nationwide. Over
19,000 dealers, 730 financing sources and many other service and
information providers are active in the DealerTrack network. For
more information visit www.dealertrack.com.
Safe Harbor for Forward-Looking and Cautionary
Statements
Statements in this press release regarding DealerTrack�s
expected 2009 performance, assumptions relating to the number of
active lender to dealer relationships in 2009, assumptions relating
to 2009 new and used car sales, the development, expansion and
benefits of DealerTrack�s network, solutions and services,
DealerTrack�s growth and cash flow expectations, credit
availability in 2009, the amount of the restructuring charge and
acquisition related professional service fees in 2009 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; 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; 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 timing, cost and extent of litigation,
the impact of recent economic trends, including the inaccessibility
of funds associated with DealerTrack�s auction rate securities, the
potential for impairment charges on certain assets, and
difficulties and increased costs associated with raising additional
capital, and other risks listed in DealerTrack�s reports filed with
the Securities and Exchange Commission (SEC), including its 2007
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.
Attachment (1) Actual
Results: Three-Month Period
�
DEALERTRACK HOLDINGS,
INC.
Consolidated Statements of
Operations
(Dollars in thousands, except
per share data)
(Unaudited)
� �
Three Months EndedDecember 31, 2008 �
2007 � Net revenue $ 54,692 � $ 60,742 � � Cost of revenue
29,300 26,495 Product development 2,557 2,386 Selling, general and
administrative � 25,869 � � 27,716 �
Total operating costs and
expenses
57,726 56,597 (Loss) income from operations (3,034 ) 4,145 �
Interest income, net 836 1,742 Impairment of auction rate
securities (292 ) -
Other income, net
�
63
�
�
2
� � �
(Loss) income before provision for
income taxes
(2,427 ) 5,889 Benefit (provision) for income taxes � 1,362 � �
(1,758 ) Net (loss) income $ (1,065 ) $ 4,131 � � Basic net (loss)
income per share $ (0.03 ) $ 0.10 Diluted net (loss) income per
share $ (0.03 ) $ 0.10 Weighted average shares outstanding
38,963,048 40,956,826 Weighted average shares outstanding
assuming dilution
38,963,048 42,845,842 � � � � � EBITDA (Non-GAAP) (a) $ 7,426 $
14,982 EBITDA margin (Non-GAAP) (b) 14 % 25 % Adjusted EBITDA
(Non-GAAP) (a) 7,718 $ 14,982 Adjusted EBITDA margin (Non-GAAP) (b)
14 % 25 % Cash net income (Non-GAAP) (a) $ 6,245 $ 10,852 Diluted
cash net income per share(Non-GAAP) (c) $ 0.16 $ 0.25
(a) See Reconciliation Data in
Attachment 5.
(b) Represents EBITDA and adjusted
EBITDA as a percentage of net revenue.
(c) For 2008 is based on
39,989,356 diluted weighted average shares outstanding.
Attachment (2) Actual
Results: Twelve-Month Period
�
DEALERTRACK HOLDINGS,
INC.
Consolidated Statements of
Operations
(Dollars in thousands, except
per share data)
(Unaudited)
� �
Twelve Months EndedDecember 31, 2008 �
2007 � Net revenue(1) $ 242,706 � $ 233,845 � � Cost of
revenue 113,731 99,631 Product development 11,658 9,808 Selling,
general and administrative � 110,265 � � 96,875 �
Total operating costs and
expenses
�
235,654
�
206,314
Income from operations 7,052 27,531 � Interest income, net 4,396
5,251 Other income, net 205 4 Impairment of auction rate securities
� (5,956 ) � - � � Income before provision for income taxes 5,697
32,786 Provision for income taxes � (3,961 ) � (13,034 ) Net income
$
1,736 � $ 19,752 � � Basic net income per share $ 0.04 $ 0.50
Diluted net income per share $ 0.04 $ 0.48 Weighted average shares
outstanding 40,461,896 39,351,138 Weighted average shares
outstanding
assuming dilution
41,673,007 41,198,773 � � � � � (1) Related party revenue $ 2,419 $
2,425 EBITDA (Non-GAAP) (a) $ 41,377 $ 66,014 EBITDA margin
(Non-GAAP) (b) 17 % 28 % Adjusted EBITDA (Non-GAAP) (a) $ 47,333 $
66,014 Adjusted EBITDA margin (Non-GAAP) (b) 20 % 28 % Cash net
income (Non-GAAP) (a) $ 34,336 $ 44,170 Diluted cash net income per
share(Non-GAAP) $ 0.82 $ 1.07
(a) See Reconciliation Data in
Attachment 5.
(b) Represents EBITDA and adjusted
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,
2008
December 31,
2007
ASSETS
Cash, cash equivalents and
short-term investments
$
198,806
$
220,144
Accounts receivable, net 18,462 26,957 Prepaid expenses and other
current assets � 11,961
�
� 11,132 Total current assets 229,229 258,233 � Property and
equipment, net 13,448 12,792 Software and web site development
costs, net 12,705 10,771 Intangible assets, net 44,405 69,528
Goodwill 114,886 117,702 Deferred taxes and other long-term assets
� 22,542 � 13,900 Total assets $ 437,215 $ 482,926 �
LIABILITIES
AND STOCKHOLDERS� EQUITY Accounts payable and accrued expenses
$ 23,723 $ 28,676 Deferred revenue 5,609 4,016 Due to acquirees and
other current liabilities � 2,100 � � 2,731 Total current
liabilities 31,432 35,423 � Long-term liabilities � 9,563 � 9,141
Total liabilities 40,995 44,564 Total stockholders� equity �
396,220 � 438,362 Total liabilities and stockholders� equity $
437,215 $ 482,926
Attachment (4) Summary
Cash Flow Information
�
DEALERTRACK HOLDINGS,
INC.
Summary Cash Flow
Information
(Dollars in thousands)
(Unaudited)
�
Twelve Months Ended
December 31,
2008 �
2007 � Net cash provided by operating
activities $ 61,494
$
56,926
Net cash provided by (used in) investing activities (a) $ 94,874 $
(168,725 ) Net cash (used in) provided by financing activities $
(47,816 ) $ 114,216
(a) For the twelve months ended December 31, 2008, net cash
provided by investing activities includes $115.8 million in net
sales of investments and auction rate securities that are invested
in tax-exempt and tax-advantaged securities. For the twelve months
ended December 31, 2007, net cash used in investing activities
includes $45.5 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
(Loss) Income to Non-GAAP adjusted EBITDA
(Dollars in thousands)
(Unaudited)
� �
Three Months Ended
December 31,
2008 �
2007 � GAAP net (loss) income $
(1,065
)
$
4,131
Interest income (907 ) (1,866 ) Interest expense 71 124 (Benefit)
provision for income taxes (1,362 ) 1,758 Depreciation and
amortization 3,510 2,871 Amortization of acquired identifiable
intangibles(1) � 7,179 � � 7,964 � EBITDA (Non-GAAP) 7,426 14,982
Impairment of auction rate securities � 292 � �
- � Adjusted
EBITDA (Non-GAAP) $ 7,718 � $ 14,982 � �
(1) Includes a $1.9 million
impairment charge relating to the digital services business.
DEALERTRACK HOLDINGS,
INC.
Reconciliation of GAAP Net
(Loss) Income to Non-GAAP Cash Net Income
(Dollars in thousands)
(Unaudited)
�
Three Months Ended
December 31,
2008 �
2007 � GAAP net (loss) income
$
(1,065
)
$
4,131
Non-cash stock-based compensation charges, net of taxes 2,324 1,871
Amortization of acquired identifiable intangibles, net of taxes (1)
4,694 4,850 Impairment of auction rate securities � 292 � � - Cash
net income (Non-GAAP) $ 6,245 � $ 10,852 �
(1) Includes a $1.2 million
impairment charge relating to the digital services business, net of
taxes.
Attachment (5)
Reconciliation Data - (continued)
�
DEALERTRACK HOLDINGS,
INC.
Reconciliation of GAAP Net
Income to Non-GAAP adjusted EBITDA
(Dollars in thousands)
(Unaudited)
�
Twelve Months Ended
December 31,
2008 �
2007 �
GAAP net income
$
1,736
$
19,752
Interest income (4,720 ) (5,606 ) Interest expense 324 355
Provision for income taxes 3,961 13,034 Depreciation and
amortization 13,295 10,262 Amortization of acquired identifiable
intangibles(1) � 26,781 � � 28,217 � EBITDA (Non-GAAP) 41,377
66,014 Impairment of auction rate securities � 5,956 � � - �
Adjusted EBITDA (Non-GAAP) $ 47,333 � $ 66,014 � �
(1) Includes a $1.9 million
impairment charge relating to the digital services business.
DEALERTRACK HOLDINGS,
INC.
Reconciliation of GAAP Net
Income to Non-GAAP Cash Net Income
(Dollars in thousands)
(Unaudited)
�
Twelve Months Ended
December 31,
2008 �
2007 � GAAP net income $ 1,736
$
19,752
Non-cash stock-based compensation charges, net of taxes 9,122 6,992
Amortization of acquired identifiable intangibles, net of taxes (1)
17,522 17,426 Impairment of auction rate securities � 5,956 � -
Cash net income (Non-GAAP) $ 34,336 $ 44,170 �
(1) Includes a $1.2 million
impairment charge relating to the digital services business, net of
taxes.
DEALERTRACK HOLDINGS,
INC.
Reconciliation of
Forward-Looking GAAP Net Loss
to Forward-looking Non-GAAP
adjusted EBITDA
(Dollars in millions)
(Unaudited)
�
Year Ending
December 31, 2009
Expected Range
� GAAP net loss $ (11.1 ) $ (9.6 ) Interest income (2.1 ) (2.1 )
Interest expense 0.2 0.2 Benefit from income taxes (5.2 ) (4.7 )
Depreciation and amortization 16.1 16.1 Amortization of acquired
identifiable intangibles � 25.4 � � 25.4 � EBITDA (Non-GAAP) 23.3
25.3 Restructuring 7.3 7.3 Acquisition related professional fees �
0.4 � � 0.4 � Adjusted EBITDA (Non-GAAP) $ 31.0 � $ 33.0 �
DEALERTRACK HOLDINGS,
INC.
Reconciliation of
Forward-looking GAAP Net Loss to
Forward-looking Non-GAAP Cash
Net Income
(Dollars in millions)
(Unaudited)
�
Year Ending
December 31, 2009
Expected Range
� GAAP net loss $ (11.1 ) $ (9.6 ) Non-cash stock-based
compensation charges, net of taxes (1) 11.5 11.5 Amortization of
acquired identifiable intangibles, net of taxes 16.3 16.3
Impairment of auction rate securities � - � � - � Cash net income
(Non-GAAP) $ 16.7 � $ 18.2 � �
(1) Includes $2.6 million in non
cash charges related to Restructuring, net of taxes.
Attachment (6) Summary
of Business Statistics (Unaudited)
�
�
�
DEALERTRACK HOLDINGS,
INC.
Three months ended December 31,
2008
�
September 30,
2008
�
June 30,
2008
�
March 31,
2008
�
December 31,
2007
� Active U.S.
dealers (a)
19,652 21,001 21,735 22,457 22,043 Active U.S. financing sources
(b) 733 706 659 578 536 Transactions processed (c) (in thousands)
14,296 19,219 22,251 23,889 20,836 Product subscriptions (d) 34,243
33,123 31,499 30,098 28,966 Active U.S. lender to dealer
relationships (e) 156,437 179,102 195,886 220,264 226,314
(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 DealerTrack network as of a date if it is
accepting credit application data electronically from U.S. 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.
(e) Each lender to dealer
relationships represents a pair between an active U.S. financing
source and an active U.S. dealer.
�
Three months ended December 31,
2008
�
September 30,
2008
�
June 30,
2008
�
March 31,
2008
�
December 31,
2007
� Transaction revenue(in thousands) $24,924 $33,007 $36,321 $38,167
$35,330 Subscription revenue (in thousands) $25,630 $23,797 $22,877
$22,386 $21,470 Other revenue(in thousands) $4,138 $3,721 $3,983
$3,755 $3,942 Average transaction price $1.74 $1.72 $1.63 $1.60
$1.70 Average subscription price $249 $244 $246 $251 $253 Average
monthly subscription revenue per subscribing dealership (a) $595
$557 $547 $547 $543
(a) Represents net subscription
revenue divided by subscribing dealers in DealerTrack and
DealerTrack Canada networks.
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