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Lake Success, NY, November 5, 2008- DealerTrack Holdings, Inc. (Nasdaq: TRAK) today reported financial results for the three and nine month periods ended September 30, 2008.
GAAP Results for Third Quarter 2008
Non-GAAP Results for Third Quarter 2008
Included in GAAP net loss and EBITDA is an impairment charge of $5.7 million related to certain auction rate securities. The charge was deemed necessary after an analysis of other-than-temporary impairment factors, including the severity of decline in the securities and current financial market conditions. Auction rate securities with an original par value of $9.6 million were written-down to an estimated fair value of $3.9 million as of September 30, 2008. GAAP diluted net loss per share for the quarter was unfavorably impacted by $0.14 as a result of this impairment. Please refer to Attachment 7 of this press release for additional details on the impairment charge affecting auction rate securities holdings.
EBITDA is a non-GAAP financial measure that represents GAAP earnings excluding interest, taxes, depreciation and amortization expenses. Adjusted EBITDA represents EBITDA excluding the impairment charges relating to the re-measurement of auction rate securities. Cash net income is a non-GAAP financial measure that represents GAAP net (loss) income before non-cash stock-based compensation expense (net of taxes), amortization of acquired identifiable intangibles (net of taxes), for 2007 the reversal of a benefit related to a tax valuation allowance, and the impairment charges relating to the re-measurement of auction rate securities in 2008. See "Non-GAAP Financial Measures" below for a further discussion of EBITDA and cash net income, and refer to Attachment 4 of this press release for reconciliations of GAAP financial measures to non-GAAP financial measures.
"We are pleased with the continued growth in subscription revenue. However, the tight credit market and decade low new car sales continue to present serious headwinds for transactions on the DealerTrack network," said Mark O'Neil, chairman and chief executive officer of DealerTrack. "We remain confident that when credit availability and consumer confidence rebound, we are well positioned to see a return of growth in our transaction business."
GAAP Results for Nine Months Ended September 30, 2008
Non-GAAP Results for Nine Months Ended September 30, 2008
Included in GAAP net income and EBITDA is the impairment charge of $5.7 million related to certain auction rate securities recognized during the three months ended September 30, 2008. GAAP diluted net income per share was unfavorably impacted by $0.13 for the year to date as a result of this impairment.
"Our balance sheet is strong with approximately $200 million in cash and investments," said Mr. O'Neil. "Cash flow from operations during the third quarter of 2008 increased by 63 percent to approximately $20.5 million compared to $12.6 million a year ago."
Business Statistics
There were 21,001 active dealers in the DealerTrack network as of September 30, 2008, down 7 percent from 22,551 a year earlier.. The National Automobile Dealers Association projects that as many as 700 franchised dealerships will close this year, a decrease of 3 percent industry wide. This consolidation is expected to continue in 2009. The number of active financing sources in the DealerTrack network as of September 30, 2008 reached 706, up 43 percent from 495 a year earlier. The number of lender to dealer relationships was approximately 179,000, compared to 227,000 at the beginning of 2008. Transactions processed during the third quarter of 2008 were approximately 19.2 million, down 19 percent from 23.8 million a year ago. Total subscriptions as of September 30, 2008 were 33,123, up 21 percent from 27,469 a year ago. At September 30, 2008, approximately 65 percent of active dealers now have one or more of DealerTrack's subscription products. The average monthly subscription revenue per subscribing dealership was $557, up 5 percent from $528 a month for the third quarter of 2007.
Other Activity
As previously announced, the trial date for our patent infringement lawsuit has been moved to February 2009. The trial is currently expected to proceed on three claims on DealerTrack's most recently issued patent and DealerTrack remains confident about the upcoming trial.
On March 18, 2008, DealerTrack's board of directors authorized a stock repurchase program. In the quarter ended September 30, 2008 DealerTrack repurchased approximately 1.6 million shares at a cost of approximately $25.6 million. Since the end of September DealerTrack purchased an additional 0.4 million shares for approximately $5.1 million. As of November 5, 2008 the total number of shares repurchased by DealerTrack under the program was 3.0 million shares for approximately $49.8 million.
Revised Guidance for Full Year 2008
In light of the continued deterioration of the economic environment, the challenges facing the lending and automotive industries, and the $5.7 million impairment charge relating to auction rate securities taken in the third quarter, we have revised our guidance for the full year 2008 as follows:
Expected GAAP Results
Expected Non-GAAP Results
DealerTrack will host a conference call to discuss its third quarter 2008 results and other matters on November 5, 2008 at 5:00 p.m. Eastern Time. The conference call will be webcast live on the Internet at http://ir.dealertrack.com/releases_financial.cfm.
Live audio of the call will be accessible to the public by calling 877-419-6597 (domestic) or 719-325-4870 (international); no access code is necessary. Callers should dial in approximately 10 minutes before the call begins. A replay of the webcast will be available on the Investor Relations section of the DealerTrack website until November 14, 2008.
Non-GAAP Financial Measures
In this release, DealerTrack'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. Adjusted EBITDA represents EBITDA excluding the impairment charges relating to the re-measurement of auction rate securities. Cash net income represents GAAP net income excluding non-cash stock-based compensation expense (net of taxes), amortization of acquired intangibles (net of taxes), and for 2007 the reversal of a benefit related to a tax valuation allowance, and for 2008 excluding the impairment charges relating to the re-measurement of auction rate securities. 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 that 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 a reconciliation of cash net income to GAAP net income, in Attachment 4 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 retail 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 company provides dealer management systems (DMS) through its Arkona, Inc., subsidiary. Over 21,000 dealers, 700 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 2008 performance, the development, expansion and benefits of DealerTrack's network, products and services, DealerTrack's growth expectations, assumptions relating to 2008 new car sales 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: the impact of trends in the automotive retail industry on DealerTrack's business including the ongoing decline in new automobile sales, reductions in the number of dealers, and the loss of large national lenders from indirect auto lending; 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 impact of general economic trends, including 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; decrease in DealerTrack's market value such that it results in an impairment to goodwill and other long-lived assets requiring a write-off of such assets, the inability to expand DealerTrack's customer base and product and service offerings; declines in consumer confidence, adverse changes in the credit market, currency and interest rate fluctuations, and other risks listed in DealerTrack's reports filed with the Securities and Exchange Commission (SEC), including its 2007 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.
CONTACT:
Katherine Piscopo Stein
Investor Relations
DealerTrack
(888) 450-0478
investorrelations@dealertrack.com
