Reports 46% Year over Year Revenue Growth
Including the Impact of Acquisitions
Raises 2014 Revenue Guidance to Reflect Strong
First Quarter Performance
Dealertrack Technologies, Inc. (NASDAQ: TRAK) today reported
financial results for the first quarter ended March 31, 2014.
GAAP Results for the First Quarter 2014
- Revenue for the quarter was $158.8
million, as compared to $109.1 million for 2013.
- GAAP net loss for the quarter was
$(11.6) million, as compared to $(34,000) for 2013.
- Diluted GAAP net loss per share for the
quarter was $(0.25), as compared to $(0.00) for 2013.
GAAP net loss for the quarter of 2014 was negatively impacted by
a $7.5 million, or $0.16 per share, non-cash charges (net of taxes)
relating to changes in expected asset use as we integrate solutions
and was positively impacted by a $6.8 million, or $0.14 per share,
gain (net of taxes) on the sale of our investment in TrueCar,
Inc.
Non-GAAP Results for the First Quarter 2014
- Adjusted EBITDA for the quarter was
$30.5 million, as compared to $24.2 million for 2013.
- Adjusted net income for the quarter was
$11.5 million, as compared to $12.0 million for 2013.
- Diluted adjusted net income per share
for the quarter was $0.23, as compared to $0.27 for 2013.
Mark F. O’Neil, chairman and chief executive officer of
Dealertrack Technologies, Inc., commented, “We are pleased to
report strong first quarter results, with revenue up 46 percent in
total and up 18 percent on an organic basis from a year ago. In
addition to a strong revenue performance, the quarter was
highlighted by the completion of our transformative acquisition of
Dealer.com. With our initial integration efforts successfully
underway, we are off to a strong start to 2014. Continued momentum
in our subscription business, combined with advertising revenue
from Dealer.com, is driving an increasing mix of recurring revenue.
We are also continuing to drive strong transaction revenue growth,
independent of car sales. We are becoming increasingly optimistic
about 2014, as reflected in our increased full year revenue
guidance, and believe we are positioned for continued growth as we
realize our vision of transforming automotive retailing.”
Updated Guidance for 2014
Dealertrack increased its 2014 annual revenue guidance and
updated profitability guidance, as follows:
Expected GAAP Results
- Revenue for the year is expected to be
between $814.0 million and $826.0 million, an increase from prior
guidance of between $800.0 million and $816.0 million.
- GAAP net loss for the year is expected
to be between $(18.0) million and $(12.0) million, a decrease from
prior guidance of between $(13.0) million and $(7.0) million.
- Diluted GAAP net loss per share for the
year is expected to be between $(0.34) and $(0.23), a decrease from
prior guidance of between $(0.24) and $(0.13) per share.
Expected Non-GAAP Results
Dealertrack has not changed its prior non-GAAP guidance, which
is as follows:
- Adjusted EBITDA for the year is
expected to be between $180.0 million and $188.0 million.
- Adjusted net income for the year is
expected to be between $78.0 million and $84.0 million.
- Diluted adjusted net income per share
for the year is expected to be between $1.42 and $1.53.
Diluted GAAP net loss is based on an estimated diluted share
count of 53 million shares and adjusted net income per share is
based on an estimated diluted share count of 55 million shares
guidance for the year. The guidance also continues to assume that
new car sales by franchised dealers will be approximately 16.2
million units and used car sales by franchised dealers will be
approximately 15.9 million units in 2014.
Conference Call
Dealertrack will host a conference call to discuss its first
quarter 2014 results, as well as its 2014 guidance, on May 12,
2014, 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 webcast replay will be available on the
Dealertrack Technologies, Inc. website at www.dealertrack.com.
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 (loss). 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 items that we do
not believe are indicative of our ongoing operating results.
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 items that we do not believe are indicative of
our ongoing operating results. 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 acquisition method of accounting 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,
aftermarket providers and other service providers. In addition to
the industry's largest online credit application network,
connecting more than 20,000 dealers with more than 1,400 lenders,
Dealertrack Technologies delivers the industry's most comprehensive
solution set for automotive retailers, including Dealer Management
System (DMS), Inventory, Sales and F&I, Digital Marketing 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 2014 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 automotive
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, 2014 2013
Net revenue $ 158,808 $ 109,059 Cost of revenue 89,907 48,210
Research and development 24,048 17,630 Selling, general and
administrative 67,486 42,468 Total operating expenses
181,441 108,308 Income (loss) from operations
(22,633) 751 Interest expense, net (5,810) (3,240) Other income,
net 709 66 Gain on sale of investment 9,828 — Earnings from equity
method investment, net 1,625 1,219 Loss before
benefit from income taxes, net (16,281) (1,204) Benefit from income
taxes, net 4,639 1,170 Net loss $ (11,642) $ (34)
Basic net loss per share $ (0.25) $ (0.00) Diluted net loss
per share $ (0.25) $ (0.00) Weighted average common stock
outstanding (basic) 47,351 43,173 Weighted average common stock
outstanding (diluted) 47,351 43,173 Adjusted EBITDA
(non-GAAP) (a) $ 30,514 $ 24,229 Adjusted EBITDA margin (non-GAAP)
(b) 19 % 22 % Adjusted net income (non-GAAP) (a) $ 11,487 $ 12,036
Shares used for diluted adjusted net income per share (c) 49,576
44,624 Diluted adjusted net income per share (non-GAAP) $ 0.23 $
0.27 Stock-based compensation expense was classified as
follows: Cost of revenue $ 276 $ 271 Research and development 752
589 Selling, general and administrative 3,095 2,411 $
4,123 $ 3,271
(a) See Reconciliation Data.(b) Represents adjusted EBITDA as a
percentage of net revenue.(c) For the three months ended March 31,
2014, the diluted weighted average shares outstanding of 49,576,000
does not include 1,366,000 shares related to our senior convertible
notes.
DEALERTRACK TECHNOLOGIES,
INC. Condensed Consolidated Balance Sheets (Dollars
in thousands) (Unaudited) March 31,
December 31, 2014 2013 ASSETS Cash and cash
equivalents $ 144,267 $ 122,373 Marketable securities 5,147 10,589
Customer funds and customer funds receivable 35,601 25,901 Accounts
receivable, net 97,529 48,349 Deferred tax assets, net 22,938 6,331
Prepaid expenses and other current assets 29,878
21,314 Total current assets 335,360 234,857 Property and
equipment, net 77,043 31,866 Investments – cost and equity 36,652
119,318 Software and website development costs, net 70,648 62,513
Intangible assets, net 580,545 136,754 Goodwill 1,051,559 316,130
Deferred tax assets, net 56,862 40,421 Other assets – long-term
20,743 14,616 Total assets $ 2,229,412 $ 956,475
LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and
accrued expenses $ 100,226 $ 56,942 Customer funds payable 35,601
25,901 Senior convertible notes, net 172,399 — Deferred revenue
14,758 9,958 Deferred tax liabilities 4,277 4,278 Notes payable
2,577 2,000 Total current liabilities 329,838 99,079
Long-term liabilities 822,463 256,172 Total
liabilities 1,152,301 355,251 Total stockholders'
equity 1,077,111 601,224 Total liabilities and
stockholders' equity $ 2,229,412 $ 956,475
DEALERTRACK TECHNOLOGIES, INC. Consolidated
Statements of Cash Flows (Dollars in thousands)
(Unaudited) Three Months Ended March 31,
2014 2013 Operating activities: Net loss $
(11,642 ) $ (34 ) Adjustments to reconcile net loss to net cash
used in operating activities: Depreciation and amortization 31,291
13,897 Deferred tax benefit (34,603 ) (1,158 ) Stock-based
compensation expense 4,123 3,271 Provision for doubtful accounts
and sales credits 3,114 1,682 Earnings from equity method
investment, net (1,625 ) (1,219 ) Deferred compensation 50 38
Stock-based compensation windfall tax benefit (8,685 ) (3,587 )
Gain on sale of investment (9,828 ) — Realized gain on sale of
securities — (11 ) Amortization of debt issuance costs and debt
discount 3,170 2,302 Change in contingent consideration (250 ) (500
) Forfeited customer deposits (648 ) — Amortization of deferred
interest 53 279 Changes in operating assets and liabilities, net of
effects of acquisitions: Accounts receivable (12,534 ) (6,339 )
Prepaid expenses and other current assets 4,236 (2,186 ) Other
assets – long-term (4,227 ) 3,166 Accounts payable and accrued
expenses (68,213 ) (13,518 ) Deferred rent (6 ) 51 Deferred revenue
1,714 (60 ) Other liabilities – long-term 11,646
(1,074 ) Net cash used in operating activities (92,864 )
(5,000 )
Consolidated
Statements of Cash Flows (continued) Three Months
Ended March 31, 2014 2013 Investing
activities: Capital expenditures (5,108 ) (2,027 ) Capitalized
software and website development costs (10,645 ) (5,296 ) Proceeds
from sale of investment in TrueCar 92,518 — Purchases of marketable
securities (2,150 ) (18,037 ) Proceeds from sales and maturities of
marketable securities 7,539 12,539 Payment for acquisition of
businesses, net of acquired cash (541,288 ) —
Net cash used in investing activities (459,134 ) (12,821 )
Financing activities: Principal payments on capital lease
obligations and financing arrangements (29 ) (38 ) Proceeds from
stock purchase plan and exercise of stock options 10,729 3,109
Proceeds from issuance of term loan B credit facility 575,000 —
Proceeds from note receivable 500 — Payments for debt issuance
costs (15,501 ) — Purchases of treasury stock (4,412 ) (678 )
Stock-based compensation windfall tax benefit 8,685
3,587 Net cash provided by financing activities
574,972 5,980 Net increase (decrease) in cash and cash
equivalents 22,974 (11,841 ) Effect of exchange rate changes on
cash and cash equivalents (1,080 ) (393 ) Cash and cash
equivalents, beginning of period 122,373
143,811 Cash and cash equivalents, end of period $ 144,267
$ 131,577
Supplemental
disclosure: Cash paid for: Income taxes $ 2,210 $ 702 Interest
3,424 1,646 Non-cash investing and financing activities: Accrued
capitalized hardware, software and fixed assets 6,771 2,224 Assets
acquired under capital leases and financing arrangements 35 34
Non-cash consideration issued for investment in Dealer.com 471,220
—
DEALERTRACK TECHNOLOGIES,
INC. Reconciliation of GAAP Net Income to Non-GAAP Adjusted
EBITDA (Dollars in thousands) (Unaudited)
Three Months Ended March 31, 2014 2013
GAAP net loss $ (11,642 ) $ (34 ) Interest income (100 ) (124 )
Interest expense – cash 2,740 1,062 Interest expense – non-cash
3,170 2,302 Benefit from income taxes, net (4,639 ) (1,170 )
Depreciation of property and equipment and amortization of
capitalized software and website costs 10,595 6,581 Amortization of
acquired identifiable intangibles 20,696 7,316
EBITDA (non-GAAP) 20,820 15,933 Adjustments: Stock-based
compensation 4,123 3,271 Contra-revenue 1,157 1,354
Acquisition-related and other professional fees 6,974 483
Acquisition-related contingent consideration changes and
compensation expense, net 929 35 Integration and other related
costs 5,792 799 Gain on sale of investment (9,828 ) — Amortization
of equity method investment basis difference 547 706 Rebranding
expense — 1,648 Adjusted EBITDA
(non-GAAP) $ 30,514 $ 24,229
DEALERTRACK TECHNOLOGIES, INC.
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net
Income (Dollars in thousands) (Unaudited)
Three Months Ended March 31, 2014 2013
GAAP net loss $ (11,642 ) $ (34 ) Adjustments: Interest expense –
non-cash (not tax-impacted) 3,170 2,302 Amortization of acquired
identifiable intangibles 20,696 7,316 Stock-based compensation
4,123 3,271 Contra-revenue 1,157 1,354 Gain on sale of investment
(9,828 ) — Acquisition-related and other professional fees 6,974
483 Acquisition-related contingent consideration changes and
compensation expense, net 929 35 Integration and other related
costs 6,481 799 Rebranding expense — 1,648 Amortization of equity
method investment basis difference 547 706 Amended state tax
returns impact (non-taxable) — 56 Tax impact of adjustments (a)
(11,120 ) (5,900 ) Adjusted net income (non-GAAP) $
11,487 $ 12,036
(a) The tax impact of adjustments for the three months ended
March 31, 2014 are based on a U.S. statutory tax rate of 38.7%
applied to taxable adjustments other than amortization of acquired
identifiable intangibles, stock-based compensation expense and gain
on sale of investment, which are based on a blended tax rate of
38.6%, 38.3% and 31.0%, respectively. Additionally, the tax impact
of adjustments includes $1.6 million of incremental deferred taxes
related to the acquisition of Dealer.com. The tax impact of
adjustments for the three months ended March 31, 2013 are based on
a U.S. statutory tax rate of 38.2% 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 38.1% and 37.7%, respectively.
A reconciliation of GAAP to non-GAAP measures is included in our
investor presentation, which also includes the impact of reconciled
items on individual income statement classifications.
DEALERTRACK TECHNOLOGIES,
INC. Reconciliation of Forward-looking GAAP Net Income to
Forward-looking Non-GAAP Adjusted EBITDA (Dollars in
millions) (Unaudited) Year Ending December 31,
2014 Expected Range GAAP net income $ (18.0 ) $
(12.0 ) Interest, net 34.0 34.0 Income taxes, net (10.0 ) (6.8 )
Amortization of basis difference from joint venture 2.2 2.2
Depreciation and amortization 43.5 42.3 Amortization of acquired
identifiable intangibles 83.0 83.0 EBITDA (non-GAAP)
134.7 142.7 Adjustments: Stock-based compensation 18.2 18.2 Gain on
sale of investment (9.8 ) (9.8 ) Non-recurring costs (a) 32.0 32.0
Contra-revenue 4.9 4.9 Adjusted EBITDA - (non-GAAP) $
180.0 $ 188.0 (a) Includes certain
professional fees, integration and other related costs,
acquisition-related compensation expense and fair value
adjustments.
Reconciliation of Forward-looking GAAP Net
Income to Forward-looking Non-GAAP Adjusted Net Income
(Dollars in millions) (Unaudited) Year Ending
December 31, 2014 Expected Range GAAP net income
$ (18.0 ) $ (12.0 ) Adjustments: Stock-based compensation 18.2 18.2
Amortization of acquired identifiable intangibles 83.0 83.0
Amortization of basis difference from joint venture 2.2 2.2
Non-cash interest expense (not tax-impacted) 13.0 13.0 Gain on sale
of investment (9.8 ) (9.8 ) Non-recurring costs (a) 32.0 32.0
Contra-revenue 4.9 4.9 Tax impact of adjustments (b) (47.5 ) (47.5
) Adjusted net income (non-GAAP) $ 78.0 $ 84.0
(a) Includes certain professional fees, integration and
other related costs, acquisition-related compensation expense,
accelerated depreciation and fair value adjustments. (b) The tax
impact of adjustments are based on a blended tax rate of 36%
applied to taxable adjustments.
DEALERTRACK
TECHNOLOGIES, INC. Summary of Business Statistics
Three months ended (Unaudited) Mar 31,
Dec 31, Sep 30, Jun 30,
Mar 31,
2014 2013 2013 2013 2013
Transaction services revenue (in thousands) $ 77,735 $ 70,338 $
73,514 $ 71,645 $ 61,364 Subscription services revenue (in
thousands) $ 61,969 $ 49,107 $ 45,223 $ 44,623 $ 42,778 Advertising
and other revenue (in thousands) $ 19,104 $ 6,666 $ 5,845 $ 5,514 $
4,917 Active dealers in our U.S. network as of end of the
period (a) 20,719 20,046 20,238 20,205 20,041 Active lenders in our
U.S. network as of end of the period (b) 1,443 1,410 1,378 1,355
1,291 Active lender to dealer relationships as of end of the period
(c) 202,984 191,135 191,548 184,273 181,578 Transactions processed
(in thousands) (d) 28,560 24,471 27,172 26,176 24,106 Average
transaction price (e) $ 2.76 $ 2.91 $ 2.74 $ 2.79 $ 2.60
Transaction revenue per car sold (f) $ 11.20 $ 8.63 $ 7.70 $ 7.38 $
8.99 Subscribing dealers in U.S. and Canada as of end of the period
(g) 23,624 18,464 18,255 18,076 17,832 Average monthly subscription
revenue per subscribing dealership (h) $ 956 $ 815 $ 758 $ 757 $
737 Active dealerships on advertising platform as of end of the
period (i) 7,053 * * * * Average advertising spend per dealer
rooftop (j) $ 1,708 * * * *
* Historical amounts not applicable
(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 U.S. Dealertrack
network.
(b) We consider a lender to be active in our U.S. network as of
a date if it is accepting credit application data electronically
from U.S. dealers in the U.S. Dealertrack network.
(c) 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.
(d) Represents revenue-generating transactions processed in the
U.S. Dealertrack, Dealertrack Aftermarket Services, Registration
and Titling Solutions, Collateral Management Solutions and
Dealertrack Canada networks at the end of a given period.
(e) Represents the average revenue earned per transaction
processed in the U.S. Dealertrack, Dealertrack Aftermarket
Services, Registration and Titling Solutions, Collateral Management
Solutions and Dealertrack Canada networks during a given period.
Revenue used in the calculation adds back (excludes) transaction
related contra-revenue.
(f) Represents transaction services revenue divided by our
estimate of total new and used car sales for the period in the U.S.
and Canada. Revenue used in calculation adds back (excludes)
transaction related contra-revenue.
(g) Represents the number of dealerships in the U.S. and Canada
with one or more active subscriptions at the end of a given period.
Subscriptions to Dealertrack CentralDispatch have been excluded as
these customers include brokers and carriers in addition to
dealers.
(h) Represents subscription services revenue divided by average
subscribing dealers for a given period in the U.S. and Canada.
Revenue used in the calculation adds back (excludes) subscription
related contra-revenue. In addition, subscribing dealers and
subscription services revenue from Dealertrack CentralDispatch have
been excluded from the calculation as a majority of these customers
are not dealers.
(i) We consider a dealership to be active on our advertising
platform as of a date if they incurred advertising spend in that
month.
(j) Represents advertising services revenue divided by average
active dealerships on our advertising platform for a given
period.
TRAK-E
MEDIA CONTACT:Dealertrack Technologies, Inc.Ken Engberg,
516-734-3692kenneth.engberg@dealertrack.comorINVESTOR
CONTACT:Garo Toomajanian,
888-450-0478investorrelations@dealertrack.com
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