Dealertrack Technologies, Inc. Reports First Quarter 2013 Financial Results

Dealertrack Technologies, Inc. Reports First Quarter 2013 Financial Results

Updates 2013 Guidance to Reflect Acquisition of Casey & Casey

LAKE SUCCESS, N.Y.--(BUSINESS WIRE)-- Dealertrack Technologies, Inc. (NAS: TRAK) today reported financial results for the first quarter ended March 31, 2013.


GAAP Results for the First Quarter 2013

  • Revenue for the quarter was $109.1 million, as compared to $91.6 million for the first quarter of 2012.

  • GAAP net loss for the quarter was $(34,000), as compared to GAAP net income of $17.0 million for the first quarter of 2012.

  • Diluted GAAP net loss per share for the quarter was $(0.00), as compared to GAAP net income per share of $0.39 for the first quarter of 2012.

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, L.P. joint venture.

Non-GAAP Results for the First Quarter 2013

  • Adjusted EBITDA for the quarter was $24.2 million, as compared to $19.4 million for the first quarter of 2012.

  • Adjusted net income for the quarter was $12.0 million, as compared to $9.4 million for the first quarter of 2012.

  • Diluted adjusted net income per share for the quarter was $0.27, as compared to $0.22 for the first quarter of 2012.

Mark F. O'Neil, chairman and chief executive officer of Dealertrack Technologies, Inc., commented, "We are off to a solid start for the year. Our focus on selling broader solutions to dealerships helped drive an increase in momentum for our subscription products in the first quarter, led by our dealer management system. At the same time, transaction revenue continues to increase faster than the growth in car sales as we derived more revenue per car sold through increased cross-selling. We are also making significant progress in a number of product initiatives that we believe will help us deliver strong growth and profitability in the years ahead."

Updated Guidance for 2013

Dealertrack updated its 2013 annual guidance to reflect the acquisition of Casey & Casey as follows:

Expected GAAP Results

  • Revenue for the year is expected to be between $453.0 million and $462.0 million, an increase from prior guidance of between $447.0 million and $456.0 million.

  • GAAP net income for the year is expected to be between $9.5 million and $12.5 million, a decrease from prior guidance of between $10.0 million and $13.0 million.

  • Diluted GAAP net income per share for the year is expected to be between $0.21 and $0.28, a decrease from prior guidance of between $0.22 and $0.29 per share.

Expected Non-GAAP Results

  • Adjusted EBITDA for the year is expected to be between $112.5 millionand $116.5 million, an increase from prior guidance of between $111.0 millionand $115.0 million.

  • Adjusted net income for the year is expected to be between $55.0 millionand $58.0 million, an increase from prior guidance of between $54.0 millionand $57.0 million.

  • Diluted adjusted net income per share for the year is expected to be between $1.21 and $1.28, an increase from prior guidance of between $1.19 and $1.26.

Diluted GAAP net income and adjusted net income per share guidance for the year continues to be based on an estimated 45.4 million diluted weighted average shares outstanding. The guidance also continues to assume that new car sales by franchised dealers will be approximately 15.2 million units and used car sales by franchised dealers will be approximately 15.0 million units in 2013.

Conference Call

Dealertrack will host a conference call to discuss its first quarter 2013 results on May 8, 2013 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 Technologies, Inc. website until May 30, 2013.

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, contra-revenue and certain items, as applicable, 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 on sales of previously impaired securities, gains or losses on sales or disposals of subsidiaries and other assets, rebranding expense and certain other non-recurring items.

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, contra-revenue, and certain items, as applicable, 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 on sales of previously impaired securities, gains or losses on sales or disposals of subsidiaries and other assets, adjustments to deferred tax asset valuation allowances, non-cash interest expense, rebranding expense and certain other non-recurring items. These adjustments to net income (loss), which are shown before taxes, are adjusted for their tax impact at their applicable statutory rates.

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 Technologies (www.dealertrack.com)

Dealertrack Technologies' intuitive and high-value web-based software solutions and services enhance efficiency and profitability for all major segments of the automotive retail industry, including dealers, lenders, OEMs, third-party retailers, agents, and aftermarket providers. In addition to the industry's largest online credit application network, connecting more than 19,000 dealers with more than 1,300 lenders, Dealertrack Technologies delivers the industry's most comprehensive solution set for automotive retailers, including Dealer Management System (DMS),Inventory, Sales and F&I, Interactive, and Registration and Titling solutions. For more information visit www.dealertrack.com.

Safe Harbor for Forward-Looking and Cautionary Statements

Statements in this press release regarding Dealertrack's expected 2013 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.

DEALERTRACK TECHNOLOGIES, INC.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

March 31,

2013

2012

Net revenue

$

109,059

$

91,617

Cost of revenue

63,188

53,150

Product development

3,630

2,994

Selling, general and administrative

41,490

34,128

Total operating expenses

108,308

90,272

Income from operations

751

1,345

Interest expense, net

(3,240

)

(927

)

Other income , net

66

76

Gain on disposal of subsidiary

-

27,693

Earnings from equity method investment, net

1,219

163

(Loss) income before benefit from (provision for) income taxes, net

(1,204

)

28,350

Benefit from (provision for) income taxes, net

1,170

(11,389

)

Net (loss) income

$

(34

)

$

16,961

Basic net (loss) income per share

$

(0.00

)

$

0.40

Diluted net (loss) income per share

$

(0.00

)

$

0.39

Weighted average common stock outstanding (basic)

43,173

42,091

Weighted average common stock outstanding (diluted)

43,173

43,720

Adjusted EBITDA (non-GAAP) (a)

$

24,229

$

19,419

Adjusted EBITDA margin (non-GAAP) (b)

22

%

21

%

Adjusted net income (non-GAAP) (a)

$

12,036

$

9,444

Diluted adjusted net income per share (non-GAAP) (c)

$

0.27

$

0.22

Stock-based compensation expense was classified as follows:

Cost of revenue

$

692

$

635

Product development

168

214

Selling, general and administrative

2,411

2,481

$

3,271

$

3,330

(a) See Reconciliation Data.
(b) Represents adjusted EBITDA as a percentage of net revenue.
(c) For the three months ended March 31, 2013, the diluted adjusted net income per share of approximately $0.27 is based on 44,624,000 diluted weighted average shares outstanding.

DEALERTRACK TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

March 31,

2013

December 31,

2012

ASSETS

Cash and cash equivalents

$

131,577

$

143,811

Marketable securities

39,284

34,031

Customer funds

3,540

1,999

Customer funds receivable

22,613

14,077

Accounts receivable, net

48,225

43,679

Deferred tax assets, net

4,412

4,412

Prepaid expenses and other current assets

24,439

19,142

Total current assets

274,090

261,151

Marketable securities - long-term

4,383

4,428

Property and equipment, net

27,523

27,407

Investments

122,927

122,808

Software and website development costs, net

48,892

46,182

Intangible assets, net

110,193

117,599

Goodwill

270,062

270,646

Deferred tax assets, net

44,316

43,611

Other assets - long-term

14,790

16,684

Total assets

$

917,176

$

910,516

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses

$

39,295

$

50,852

Customer funds payable

26,153

16,076

Deferred revenue

7,884

7,959

Deferred tax liabilities

3,088

3,031

Due to acquirees

11,281

11,124

Total current liabilities

87,701

89,042

Long-term liabilities

250,142

250,157

Total liabilities

337,843

339,199

Total stockholders' equity

579,333

571,317

Total liabilities and stockholders' equity

$

917,176

$

910,516

DEALERTRACK TECHNOLOGIES, INC.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

Three Months Ended

March 31,

2013

2012

Operating activities:

Net (loss) income

$

(34

)

$

16,961

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

Depreciation and amortization

13,897

11,979

Deferred tax (benefit) provision

(1,158

)

10,893

Stock-based compensation expense

3,271

3,330

Provision for doubtful accounts and sales credits

1,682

2,146

Earnings from equity method investment, net

(1,219

)

(163

)

Deferred compensation

38

38

Stock-based compensation windfall tax benefit

(3,587

)

(2,943

)

Amortization of deferred interest

279

26

Amortization of debt issuance costs and debt discount

2,302

703

Change in contingent consideration

(500

)

(250

)

Gain on sale of marketable securities

(11

)

-

Gain on disposal of subsidiary

-

(27,693

)

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

Accounts receivable

(6,339

)

(6,742

)

Prepaid expenses and other current assets

(2,186

)

3,059

Other assets — long-term

3,166

1,539

Accounts payable and accrued expenses

(13,518

)

(11,441

)

Deferred rent

51

48

Deferred revenue

(60

)

527

Other liabilities — long-term

(1,074

)

(1,166

)

Net cash (used in) provided by operating activities

(5,000

)

851

Consolidated Statements of Cash Flows (continued)