DealerTrack Revises Full-Year Guidance, Reports Fewer Network Transactions
LAKE SUCCESS, N.Y. — With sales down throughout the country, not only are automakers and dealers getting hurt, but so, too, are lenders and the platforms that rely on them to bolster profits. One such instance can be found in the recent earnings report from DealerTrack.
While revenue climbed over the second quarter of last year for DealerTrack, GAAP net income was down double-digits ultimately leading the company to revise its full-year guidance.
"In spite of the worst first-half new-car sales since 1993, DealerTrack continues to grow revenue," said Mark O'Neil, chairman and chief executive officer. "We are conscious of the economic environment and remain focused on being a high value provider of automotive retail software."
More specifically, revenue for the quarter came in at $63.2 million, up 8 percent from $58.5 million during the same period of 2007.
Meanwhile, GAAP net income declined 51 percent to $3.1 million, down from $6.3 million in the same time frame of last year.
Additionally, DealerTrack indicated that GAAP diluted net income per share came in at $0.07, a 53-percent decline from $0.15 per share during the same period in the prior year.
Looking at non-GAAP results, EBITDA for the quarter was $13.9 million, down 26 percent from $18.9 million.
Cash net income came in at $9.4 million, a 21-percent decrease from $11.8 million.
"With record-low car sales and a very challenging credit environment, our dealer customers are looking for efficiency, cost savings and increased profit opportunities, all of which our suite of solutions offers," O'Neil said.
Deeper Breakdown of Statistics
Reflecting the tough sales and credit environment, DealerTrack reported that transactions processed in its network came in at 21 million, down 10 percent from the same quarter in 2007.
Moreover, the average subscription revenue per subscribing dealer was $547 a month, compared with $470 in the previous year.
As for dealers, there were 21,735 active dealers in its network as of June 30, down 4 percent from the previous year.
According to officials, about 62 percent of active dealers are now subscribed to one or more of DealerTrack's products.
Continuing on, the number of active financing sources grew to 659, up 47 percent over the prior year.
"We continue to add new financing sources to the DealerTrack network. During the second quarter we added 81 participants, including the numerous credit unions represented by Aimbridge in the indirect auto financing space," executives indicated.
"In addition to adding these financing sources, we added approximately 1,400 subscriptions to the U.S. and Canadian networks," they added.
Six-Month Results
Reviewing the six-month period, the company reported revenue of $127.5 million, up 16 percent from $110.2 million in 2007. GAAP net income was $5.4 million, down 51 percent from $11.1 million in the same quarter last year.
Moreover, DealerTrack posted GAAP diluted net income per share at $0.13, a 52-percent decline from $0.27 per share during the 2007 time frame.
As for non-GAAP results, officials said EBITDA for the six-month period was $27.2 million, down 19 percent from $33.5 million.
Cash net income for the time frame came in at $18.6 million, a 13-percent decline from $21.3 million in the same quarter of 2007.
Diluted cash net income was $0.43, down 19 percent from $0.53 from the same time frame last year.
Revised Guidance
Looking ahead, the company explained that the challenging credit markets, combined with a lower-than-normal sales during the first half of the year has led to an "adverse outlook" for the full year.
"Revenue for the year is expected to be between $246 million and $253 million, compared to the previous estimate of $268 million to $272 million," executives reported.
Additionally, GAAP net income for the year is expected to hit between $9.4 million and $12.8 million, compared to prior estimates of $21 million to $22.6 million. As for diluted GAAP net income per share, it looks to come in at $0.22 and $0.30 per share, compared to the previous estimate of $0.48 to $0.52.
Furthermore, officials said they expect EBITDA for 2008 to slip to $48.3 million to $54.3 million, compared with prior estimates of $67.3 million to $70 million.
Cash net income will likely reach $33.9 million to $37.3 million, compared with $45.6 million to $47.2 million.
As for diluted cash net income, officials indicated they expect this to come in at $0.80 to $0.88 per share, compared with previous estimates of $1.05 to $1.09.
Explaining the revision, officials said, "This guidance is based on new-car sales of 13 to 14 million units for the full-year 2008 and does not assume a recovery of the auto lending environment this year. It is based on an estimated average of 42.2 million shares outstanding."
Despite the tough marketplace, O'Neil said his company won't hold back on initiatives.
"We continue to expand our product offerings and to invest in our existing products. We believe we can continue to grow through this economic downturn," he said.
"It would be shortsighted of us to stop development of new projects; instead, we remain focused on growing DealerTrack by providing our customers with the solutions they need to be more efficient," he concluded.
Editor's Note: For more details from DealerTrack, please stay tuned to SubPrime Auto Finance News.