Autoweb Inc (AUTO) 2009 Q3 法說會逐字稿

Good afternoon. My name is Christy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Autobytel third-quarter 2009 financial results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions.) Thank you.

Mr. Lawrence Brogan, Senior Vice President of Strategic and Financial Planning, you may now begin.

Thank you. Good afternoon, and welcome to Autobytel's 2009 third-quarter conference call. With me on the line today are Jeff Coats, President and Chief Executive Officer; and Curt DeWalt, Chief Financial Officer.

Before we begin, I need to remind you that during today's call, including the Q&A session, any projections and forward-looking statements made regarding future events and the future financial performance of the Company are covered by the safe harbor statement contained in today's press release and in the Company's public filings with the Securities and Exchange Commission.

Please note that actual events or results may differ materially from the forward-looking statements. Specifically, please refer to our Form 10-K for the year ended December 31, 2008, or Form 10-Q for the quarter ended June 30, 2009, and our Form 10-Q for the quarter ended September 30, 2009, which we expect to file shortly. These filings identify the principal factors that that could cause results to differ materially from those forward-looking statements.

Slides are included with today's presentation to help illustrate some of the points being made and discussed during this call. You can access the slides in the Investor Relations section of our Web site, www.autobytel.com.

Now I'll turn the call over to Jeff.

Thank you, Larry. Good afternoon, everyone.

While the Autobytel story the past few quarters was primarily one of cost reduction and containment, our focus has also been on implementing a carefully thought out reinvestment in our properties and products to enhance our gross margins and drive revenue.

We've improved our gross margin by approximately 8% from the second quarter of 2009, while at the same time reducing total operating expenses by a further 7% sequentially. But the last few quarters have also included an extensive ground-laying effort to upgrade, re-platform and reconfigure our Web sites and integrate the data and content acquired from the patent settlements completed in the second quarter of this year. This effort has improved page views to our Web site but -- and increased the level of our direct-to-site or organic leads, which carry better margins and are generally of higher quality than leads acquired from third-party sites.

As you will recall, back in January we rehired two former Autobytel executives to take charge of our Web site operations and search engine marketing. That investment has already paid substantial dividends, and we are excited about our current momentum in improving user experience, traffic acquisition and monetization.

By most measures, the general economy seems to be stabilizing, and there has been some recent positive news coming out of the automotive industry. General Motors and Chrysler have emerged from bankruptcy, and the government's Cash for Clunkers program, albeit a one-time event, stimulated the purchase of nearly 700,000 cars through a rebate, which returned close to $3 billion to consumers.

Although Cash for Clunkers was a real boon to auto manufacturers and dealers, it was somewhat of a mixed blessing for Autobytel. Although we experienced increased leads delivered per dealer as a result of the program during the third quarter, overall dealer demand for our lead programs decreased, reflected in fewer new dealer sign-ups as certain dealers felt they had sufficient volume of customers through increased online and showroom traffic.

Our OEM and advertising businesses benefited from heightened consumer demand in the short term, but we are now dealing with the after effects of dealer inventory sellouts and a softening of consumer interest, which typically means fewer requests for auto lead referrals. We are hopeful that dealers buoyed by recent increased sales related to Cash for Clunkers will increase their marketing budgets over the coming months related to new products introduced for the 2010 model year.

While working toward bolstering our top line and improving profitability, we have maintained a strong position -- a strong cash position, $25.2 million at the end of September. Autobytel remains debt free, and we are highly committed to upholding and building our financial flexibility to take advantage of the strategic opportunities that are available to us.

I'll now turn things over to Curt, who will provide a review of our third quarter results. Curt?

Thank you, Jeff.

To keep things to the point, I'll highlight a few key metrics from the third quarter. You'll find more detail in the press release we just issued and in our 10-Q for the quarter ended September 30, 2009, which we expect to file shortly. As Larry mentioned, you can also follow along with the slide presentation we posted earlier today on our Web site.

As shown on slide three, total revenues for the third quarter of $13.4 million were flat with the second quarter of this year and down by approximately 23% year over year. This is primarily due to the decline in the number of participating dealers in our leads programs and the corresponding leads to those dealers.

As the automotive market has struggled, many of our dealers have gone out of business or pulled back significantly in their marketing spend. While the Cash for Clunkers program provided a short-term boost for dealers, it did not boost demand for our lead programs, as dealers were flooded with customers both online and in their showrooms.

Finance leads were off 2% from the second quarter of this year and declined 51% from the prior-year third quarter due to the decline in the number of participating dealers, which is primarily related to continued tightness in subprime consumer credit environment, making it difficult for dealers to get credit-challenged customers financed.

Wholesale OEM lead delivery improved throughout the quarter showing continued stability, and was up slightly from the second quarter. But this business is still down year over year. We continue to see OEMs leads in this -- as an area of growth for Autobytel as more OEMs become active in the lead marketplace.

Slide five shows our quarterly revenue by product over the last two years. In the third quarter of 2009, we delivered approximately 675,000 auto leads compared with 690,000 in the prior quarter and 772,000 in last-year's third quarter, reflecting a declining dealer base partially offset by an increase in the number of leads delivered per dealer. Increasing the leads delivered per dealer directly impacts our revenue per dealer.

We delivered 87,000 finance leads in 2009 third quarter, roughly equal to the second quarter of 2009, and 145,000 in the third quarter of 2- -- a year ago -- third quarter a year ago. Again, declines primarily reflected the declining dealer base impacted by the lack of available subprime consumer credit.

Our dealer network continued to be impacted by challenges facing the automotive industry. At the end of the third quarter 2009, we were serving 2,021 new car franchises versus 2,263 in the second quarter of 2009 and 3,215 in the prior-year period.

Our used car dealer franchises totaled 923 at the end of 2009 third quarter compared with 1,016 at the end of the second quarter 2009 and down from 1,321 in the year-ago quarter.

Finance dealer franchises totaled 186 at the end of 2009 third quarter compared with 201 at the end of the second quarter and 298 in the 2008 third quarter. It is encouraging to note that we are continuing -- we are currently seeing signs of a reversal in the dealer cancellations and loss.

Third quarter advertising revenue was about equal to this year's second quarter as well as last year's third quarter. Although Cash for Clunkers resulted in higher traffic to our Web site properties during the quarter, advertisers' budgets did not increase significantly from prior periods.

There were approximately 48 million total Web page views across our Internet properties in the 2009 third quarter, up about 30% from the 37 million page views in the second quarter of 2009. We had approximately 50 million in the year-ago period.

The Cash for Clunkers program presented us with an opportunity to spend SEM dollars effectively in July and August to generate leads and page views. Our in-house SEM spending was approximately three times higher than in Q3 -- versus Q2 of 2009. This allowed us to displace leads in traffic purchased from third-party sources leading to an improvement in gross margin from Q2 to Q3.

As Jeff mentioned at the beginning of the call, carefully thought out reinvestment in our programs and properties has become a major focus for the Autobytel story.

Gross margins of 35.5% in the 2009 third quarter, up from 32.9% in the second quarter of this year was -- as we work to redefine the -- refine the retail auto lead promotions, which were initiated in response to the sliding economy. In addition, the results of our decisions to carefully reinvest in our property and programs to enhance our gross margins is becoming evident as we approach last year's third quarter margins of 35.7%.

Both slides three and six illustrate the reduced operating expenses by approximately 50% to $6.2 million from $12.2 million in the same period last year, which was -- which included $1.8 million in severance costs. Without considering the severance costs, the year-over-year decline in operating expenses was 40%. On a sequential basis, expenses were lower by approximately 7%.

Also on slide six, you will see significant improvements we've made in expense management over the last seven quarters. Rest assured we are continually looking for increased efficiency, decreased costs in line with our current and anticipated revenue levels.

Noncash share-based compensation in the third quarter of 2009 decreased to $266,000, down from $561,000 in the last year's third quarter. Net loss for 2009 third quarter was $799,000 or $0.02 per share, which included approximately $642,000 of other income and discontinued -- from discontinued operations primarily related to the release of funds from an escrow account, which was established when we sold our AVV business in January 2008, along with certain tax adjustments. These results are a significant decline from the net loss of $5.6 million or $0.13 a share in the 2008 third quarter.

The Company's reported loss from continuing operations was $1.4 million for the third -- for 2009 third quarter. In the 2009 second quarter, the loss from continuing operations was $1.5 million. And in the third quarter of last year, it was operating -- loss from continuing operations was $5.8 million.

With respect to the $1.9 million of AVV escrow, we expect to have this account fully reconciled by the end of the year and captured approximately 95% of the escrow funds at closing. The remaining amount will be paid to the acquirer of the AVV business to obtain certain software licenses per the original agreement.

Slide nine, you can see how cash has trended since the beginning of the year. At September 30, 2009, our cash balance was $25.2 million or $0.56 per share compared with $27.4 million or $0.61 per share at December 31, 2008, and $26.8 million or $0.59 per share at June 30, 2009. As Jeff mentioned, our balance sheet remains debt free.

Some of you had questions regarding the exposure to Chrysler and GM bankruptcy, both of which emerged earlier this last quarter. We've received payment for all outstanding pre-bankruptcy receivables and, at this time, the lead delivery program with Chrysler is not active. We are continuing to provide leads and advertising to General Motors, and Ford continues to be an important growing OEM customer.

Our current ratio continued to improve and stood at 4.7 to 1 at the end of September compared with 4.4 to 1 at the end of June and 3.3 to 1 at the end of December 2008.

As many of you know from our recent Form 8-K filing with the SEC, we received a notification from NASDAQ on September 15th informing us that Autobytel had -- was no -- not in compliance with NASDAQ's $1 minimum closing price requirement for continued listing on -- of our stock on the NASDAQ Global Market. NASDAQ has previously suspended the minimum bid requirement but lifted the suspension on August 3rd. Per the terms of the notification, Autobytel has six months from September 15th to regain compliance with the minimum bid requirement or face delisting. We are currently evaluating our options with respect to this compliance deficiency and will be communicating accordingly.

With that, I'll now turn the call back to Jeff.

Thank you, Curt.

We are pleased with the progress we are making, although we remained constrained by a challenging external environment even as our industry made some short-term progress during the third quarter. Throughout this period, we've been working hard to blend together efficiencies, decrease expenses and, most importantly, we are seeking new and better ways to provide increasing value to our customer base. Particularly encouraging has been the significant progress we've made on our owned and operated suite of Web sites including autobytel.com, Autoweb, Autosite, car.com, CarSmart, CarTV and myride.com.

In the first quarter of this year, we assembled a new leadership team to help us rebuild our Web presence. We then focused on making improvements in site reporting and infrastructure to lay the groundwork for this effort.

In the second quarter, we relaunched myride.com, improving the site speed, stability, customer interaction and lead conversion.

In the third quarter, we began integrating the data, content, tools -- and tools we received as part of several intellectual property settlements in the second quarter, including those with Edmunds and Internet Brands. These assets include editorial content, core vehicle data, car photos and other research tools. We are hoping to achieve similar arrangements with other parties that would allow us to further strengthen our Web site content.

In the fourth quarter, we expect to complete the remainder of the third-party content integration into our Web sites and relaunch autobytel.com. As we do this work, we are already seeing improved results in customer acquisition and conversion due to improvements in content, tools and user experience.

In the first quarter of 2010, we expect to continue this work across our Web platform, including relaunching car.com, Autoweb and Autosite.

By continuing to improve our Web sites, we believe we can continue to decrease customer acquisition costs, improve margins and raise product quality in both the leads and the advertising businesses. Slide eight highlights our progress and provides a roadmap to further product development. This progress has allowed us to bring our search engine marketing, or SEM, activities in-house at a positive and increasing ROI. We've eliminated all negative SEM-related ROI that previously was outsourced.

As seen on slide seven, further conversion of site visits into leads has increased by over 300% from the first quarter of 2009, and we expect this -- to see this momentum continue. As we've mentioned previously, the creation of more organic leads is an important cornerstone of our strategy going forward.

Our cash position and prudent balance sheet management have allowed us the time to not only weather the current storm but to position Autobytel for future growth by providing our manufacturer and dealer customers with value-added services that allow them to maximize vehicle sales. For example, as we discussed last quarter, we entered into an agreement with Kelley Blue Book to extend our reach into the large used car market. This will improve both the quality and quantity of leads from our used car program.

In July, we launched a new lead verification technology platform to increase the quality of, and closing ratios on, new and used car leads for our dealer customers. We are very pleased thus far with the results. Especially in this type of environment, which has been one of the challenging times in our industry's history, we must be sensitive and responsive to our customers' needs and help them quickly adapt to rapidly changing business conditions.

Most recently, we relaunched our email manager program to help dealers better respond to what has become a highly prolonged consumer purchase cycle. In fact, today's consumers spend about nine months from the time they begin to research a car until they finalize a purchase. This timeframe is now about twice what it was in 2001.

We completely revamped and enhanced the program's capabilities to provide dealers with a better method for keeping in front of potential customers. Our email campaigns result in earlier and more frequent communications with consumers without taxing existing dealer resources.

In our continued efforts to provide innovation, in September, we began the rollout of a new lead product program designed to better meet the needs of our large dealer customers. It is services like these, coupled with our leading automotive Web properties, that give dealers and manufacturers the tools they need to effectively compete in a shrinking target market. We are confident that as well as these programs work in today's environment they will become even more valuable as the economy continues to stabilize and returns to a pattern of growth.

While continually improving our consumer, manufacturer and dealer experiences, we are also highly cognizant of our ongoing need to streamline our business and make sure our costs are proportional to our current and expected revenue levels. We remain focused on the further development of robust tools that will assist our customers in selling cars in the most cost-effective manner possible. In parallel, we remain committed to fine-tuning our own operations for maximum efficiency.

The recovery in the general economy appears to be underway, and Detroit's three major automakers, as well as JDPower, seem to painting better scenarios for 2010. We certainly hope they are right, but are focused on increasing productivity enhancement and further cost rationalization regardless.

At Autobytel, I am confident that we are doing the right things to strengthen our position in the marketplace while using the financial flexibility to our -- our financial flexibility to the utmost.

Even in this economy and perhaps because of it, strategic opportunities abound. As I mentioned in prior calls, the automotive industry and its diverse segments are ripe for change and consolidation, and Autobytel is positioned very well to benefit from this.

We've made considerable progress. We have the right team and strategy in place to further strengthen and grow our company. We are strongly positioned to benefit from a recovering economy and automotive market. I look forward to reporting back to you as we continue to find new ways to not only survive but to thrive.

Operator, we'll now take questions.

Yes, sir. (Operator instructions.)

And your first question comes from the line of [William Martin].

Hey, Jeff. How are you?

Good. Bill, how are you?

Very good.

Did I hear you correctly that you said that you're seeing a reversal in dealer losses this quarter?

Things are strengthening. They're looking pretty good so far this quarter.

Great. And kind of along the same lines, we've heard a number of major auto retailers talking about significantly reallocating dollars on line. I'm just curious as -- if you could talk about how you're attacking and going after that opportunity.

Well as I mentioned, we have -- we launched in late September and earlier this month a couple of new products. One's particularly focused on the large dealer groups. We don't really want to talk about it too much publicly at this point for competitive reasons, but we are very confident that that's going to pull more of those dollars in our direction. It's exactly what the big dealers have been asking for. The initial feedback that we're getting, as we meet with them, has really been astounding, so we're -- we are confident we're going to see some big pickups from that.

Great.

And I -- you obviously noted you're -- continue to evaluate ways to strengthen your market position from a strategic perspective. But I was wondering are you seeing -- in this difficult auto environment, are you seeing smaller competitors go out of business or come up for sale?

Haven't really seen a lot of smaller competitors go out of business thus far. Some of the smaller guys do seem to have liquidity issues, but it only takes two guys and a dog in a garage to start a search business, and there are a lot of guys like that out there. They can generate some amount of revenue, a million, a couple million, whatever. I think it's hard for them to scale much beyond that. But there's always people like that out there.

We are looking for some interesting acquisition candidates. We're talking to quite a few. So we're definitely -- we've got our ear to the ground and trying to see what we can do.

Great, and just one more question. Autobytel obviously owns a valuable patent portfolio. I was curious, if you're comfortable articulating this publicly, just how are you thinking about that asset today?

We are currently reviewing what our opportunities may be to pursue additional licensing for our patent portfolio and are in fact in some discussions currently.

Great. Well thank you so much for your hard work. I really appreciate it.

Thanks.

And your next question comes from the line of Seth Setrakian with First New York.

Hi, guys. How are you?

Hey, Seth.

I guess I have a couple questions, one regarding the balance sheet. Is there one more payment that's due from the settlement a couple years ago?

Yes. There's a payment of $2.67 million due in the middle of March 2010.

Got it. So --

And it's not on the balance sheet, Seth.

Yes, yes. No, it's not on the -- I'm just trying to think incremental, like, pro forma, where -- assuming the burn isn't that dramatic for the fourth quarter, where we will be in the beginning of next year. So essentially we're still trading approximately net cash.

It seems like you guys have done a phenomenal job considering the state of where we were operationally a year ago and the state of really automotive industry over the past 12 to 18 months. And I guess from a fundamental point of view, we're doing very well in terms of what -- the hand we were dealt with. I guess now my question is, considering we're still only trading at net cash per share -- and I'm looking at all your peers, if we can call them peers, all of the dealers, all of the manufacturers, advertising companies, everyone that kind of fell off the cliff from a business point of view.

A lot of their stocks have come back, back to the spring 2008 levels. We're clearly not even near that. We were at $2 a share back then. So -- and from a fundamental point of view, all these companies that I'm alluding to probably had business drop off between 30% and 50%, probably comparable to us. But their stocks have come back; ours has not. We're still trying to get -- our business is being valued at zero.

So I guess going forward, I really am curious to hear your thoughts on how we're going to enhance shareholder value for us in light of the fact that you're not going to get any credit for the business. But even more so, I mean, we do have this NASDAQ listing issue also. And I mean, from where I sit, I see no reason why we're not above $1 a share. And I just kind of wanted -- I guess I want to hear your thoughts on all of that.

Let's see. Those are a lot of points to address.

I know. I'm sorry.

No, no. I think probably one of the reasons that our stock hasn't come back the way others has is because our -- we had damaged our credibility, historically, with our results. Our results had trended poorly for a while, even before the bottom fell out of the economy and the automotive market.

So I think we are a little bit in a situation of, "Show me." I think the market's waiting to see us not just prove that we can cut costs, which we definitely have done, but that we can actually rebuild the business and improve the top line. We are absolutely in the process of demonstrating that we can rebuild the business. Our margins are improving.

And in all of the things that we talked about with regards to our lead conversion and our page views being up and the work we've done on the sites this year, all of that will set us up very nicely as we move forward into the fourth quarter and into 2010. So as the economy recovers, as the automotive economy recovers, we really are very well positioned to be able to improve the top line.

I also think -- and we haven't really talked about this a whole lot on these calls, but historically the leads business was not getting a lot of investment capital during the prior two or three years as other business efforts were being pursued. And so we've spent this year rebuilding the leads business. I think we've come a long way. I think we will be able to demonstrate that we can and are rebuilding the business and will be able to drive the top line.

I agree with you with regards to the stock price, but then, of course, I would. We certainly are reviewing all of our options with regards to the situation with the NASDAQ. And there certainly are various options available to us, but the best option is to put results -- or demonstrate results which result in greater investor confidence and an improved stock price.

We think we've begun to do that. We think, as we continue to move forward, we'll be able to further demonstrate that our margins are strengthening again. We're not even close to historic margin levels. The benefits that we've seen in lead conversion and page views have been pretty good so far this year, under almost anybody's metrics, and yet, for the most part, it was done with sites that had yet to be overhauled, with sites that we had not yet integrated any of the new content or tools or photos or reviews that we received as part of the litigation settlements.

So I think there's some -- the best is yet to come, as they say, as we complete the integration of all of these assets into the Web sites. And we can really continue to turn up the flame under our search activities, both SEM and SEO, and see the benefits from those.

In addition, you alluded to investor confidence. Just one other point I want to make, I think investor awareness is going to matter also. I just feel we are below the radar screen. It seems like there's been a core list of holders that have been owning the stock over the last couple of years, and there are some new significant shareholders also.

However, I think in terms of getting the story out and letting people know how much improvement there's been and the value that's here, there's probably a better effort we can make on investor awareness. And just one thing I want to highlight, even on the press release, it's only a webcast, and I know there's a dial-in number, and that's not even on the press release. So that's just something that we could do.

And I know this is probably not the time to talk about stuff like this, but it's just too good of a story out there that's tremendously undervalued. And I think little small things like that can increase our profile with a larger audience that can help us accomplish what we all want to do, and that's see the stock be higher.

Sure. Well yes, we're always -- always want to get feedback and good ideas from people. We certainly are working to -- toward the goals that you're talking about. And I'll be candid with you, I have not devoted much time to some of the activities thus far that you're talking about because it doesn't -- I made the decision --.

Your plate's been full. I know. There's been a lot that you had to reverse.

No, no, no. It's not just that. It's I decided that it didn't make sense for me to go out and say to the markets, "This is what we're going to do," because a lot of companies say that. This company has said that historically and then didn't deliver. So I decided to wait until we had delivered some results and then go out and start saying, "Okay, this is what we've now done," so we've got a little bit of credibility, "This is what we're going to do," and start telling the story that way.

So I think -- I agree with you. I think we're pretty well positioned at this point to start telling our story more broadly, more widely. And also, this has been a difficult year in the automotive market and who knew where the bottom was going to be and even if for sure we're at the bottom, even though the conventional wisdom certainly hopes that we are. Some of us were at the JDPower conference last week, and there certainly seems to be a positive outlook, not enthusiastic, so it's not over the top, but a positive outlook as we roll into 2010. So --.

Well look, I just want to commend you guys. You guys are working really hard. You're doing a great job, and I think eventually the market's going to notice. Keep it up.

Thank you very much. We appreciate your support.

Thanks. Bye.

And your next question comes from the line of Brian Horey with Aurelian.

Hi. I had two questions.

I guess the first was, in terms of the post Cash for Clunkers period, how does it all net out. I understand you said that dealers were maybe more interested now in lead generations since they don't have so much showroom traffic, but consumers, on the other hand, are less interested. So how does that net out for the business as we enter Q4, do you think?

And the second question was I'm just kind of curious as to your sense of how much of the organic traffic yield or potential we have realized with these search engine optimization efforts that we've done to date and kind of how much more opportunity is there to improve that going forward.

Okay. With regards to your first question, I'd say it's a mixed bag. Kind of what we've seen -- and there were some concerns during Cash for Clunkers that what it would do would be -- would pull forward a lot of demand into July and August for people that would normally have gone in and bought cars later in the year. And certainly, there seems to have been -- there seems to be a significant element of that.

But even worse than that is the fact that a lot of dealerships don't have any inventory or haven't had any inventory until this month because -- for a variety of reasons. Cash for Clunkers really sucked out a lot of inventory out of the system. But even before then, many dealers had prudently and judiciously curtailed their inventory purchases earlier in the year as they were seeing things not look great. So there wasn't a lot of, as they say in Detroit, metal on the lot before Cash for Clunkers. Cash for Clunkers really siphoned off a lot of what was left.

And so we'll see what happens as the 2010 products are delivered to dealers. It's -- it'll be interesting. We are hoping to see some pickup in marketing dollars spent. So we'll -- it remains to be seen.

I've gone blank on your second question.

SEO/SEM.

Oh, SEO/SEM.

The -- it's a good answer, I'm happy to tell you, in that we've barely scratched the surface. We've made some good inroads thus far. But again, what we've been able to do so far is even with many of our sites still in need of overhaul, without the new content, the new tools, the new pictures, the new reviews that are coming into the sites. We're working on some other data acquisition opportunities to even further enhance the quality of our Web sites.

So it never has made sense to bring a lot of people to our sites through paid search if we couldn't hold them on our sites. Now that we're improving our sites and continuing to improve our sites and really -- even if you go to autobytel.com today, that site has not yet been overhauled. MyRide, of all of the sites, has got most of the integration into it. As we integrate the new tools, the new pictures and everything, it's going into MyRide first. So that's a place to look. But as we complete the relaunch of Autobytel in November and the other sites and integrate all of these wonderful things into them, we will really be able to see, and expect to see, some good benefits from our search activities.

Okay. And as -- at this point, is there any way to kind of translate that potential into, let's say, a long-term goal for gross margin and just to give us a sense as to what -- maybe a quantification of how big an opportunity there is in front of us as far as all that goes?

We're working on that. It's -- because we've only scratched the surface so far and because it's a different world these days, we're not prepared to say anything about that publicly. But stay tuned for the earnings call that we'll have in 2010 and perhaps we'll be able to talk a little bit more about that at that point with some more results behind us.

Okay. Thank you.

(Operator instructions.)

Your next question comes from the line of [Robert] Setrakian with Helios.

Hi, guys.

Hi, Robert. How are you?

Good.

As the couple of previous callers mentioned, operationally, investors should be happy with what you have accomplished here in a difficult environment. From a stock perspective, we're still selling at net cash. If I remember correctly, in the past few years, a couple of times we had hired bankers and we had gone through processes for strategic alternatives.

And I'm wondering whether, with the environment improving a little bit and having heard, at that time, from industry sources, market players, talking to some of your competitors before, there was a bit of interest. Do you guys, as management and board, feel vulnerable at all with the stock trading at net cash? And you have plans, obviously, for the next couple of years to take this to the next level. And you feel it's very undervalued, but at net cash, environment improving, marketing on the Internet being an interesting area for people, the automotive industry improving, don't you think -- don't you feel a little vulnerable?

Certainly, Robert, we'd like to see the stock price higher, which would of course moderate some of what you're talking about. I don't know that I would say, "Yes, we do feel vulnerable," and I certainly would not say that, "No, we don't feel vulnerable." I kind of view us -- I think we kind of view us as in a very interesting position. We have the opportunity to be a catalyst for a lot of the consolidation opportunities in this marketplace in a variety of ways.

So we certainly are not putting our head in the sand. We're doing everything we can to improve our operations so that they are reflected in the Company's financial results. I would remind you that we also have a pill in place that if anyone purchases in excess of 15% of our stock it triggers the pill, and that generally is a big negative if that were to happen.

So that provides us with some amount of comfort. But really, we're pushing forward to both improve the Company and, as I've mentioned several times, position ourselves to take advantage of market consolidation opportunities.

Yes.

And I do the math from where some of these comps are trading in terms of three, four times sales. We're trading at net cash. Here we are talking about $1 stock price, which would probably us at, like, 0.25 times sales. For a lot of these guys, simple math, in terms of what they can do through their own earnings or through their own sales, I find it incredible that they're not -- some of the people who were interested at that time, if they are still interested in the area, are not approaching you for an interesting deal.

On the other hand, I wanted to ask at what point in time do you feel comfortable with the business being stable, stable as enough for you with the incredibly strong balance sheet that you have relative to the size of the business, to put in a buyback for your stock to get to a certain level to show confidence to the market. And then perhaps, when people's attentions are on your stock and we get the stock to a certain level, be able to advantage of some of these opportunities in the marketplace with your stock, where you guys are happy, your investors are happy, you have a currency now to be able to do things, you have a lot more flexibility.

And that's something that is always on my mind having been in this investment for a couple of years now. I think on every single conference call I've mentioned the same thing, like a broken record.

As I know very well from my numerous conversations with you, you definitely are keen to see us do a buyback. I'd almost think, from your earlier comments, you were trying to put us in play with regards to pointing out that we might or might not be vulnerable.

Yes, at the -- if somebody comes in at $2, I don't think we would be unhappy at this point in time, at these prices, like the investor who tried to take advantage a few months back and then went away.

Right.

Not that kind of vulnerability.

No, no. Well I guess, as we sit today, we still are in an uncertain environment. I can't see us doing anything to spend our cash on something that doesn't improve our operations at the moment.

At the moment.

But as things evolve, who knows? I'm sure that you and I will have many more conversations about this, and we'll just have to see how things evolve. There really are some very interesting opportunities out there for us. I agree with you that a big plus for us would be a strengthened stock to use as a currency. I'm -- perhaps, I just kind of look at a slightly different way to get there for the time being.

Yes. Well congratulations on the quarter and look forward to many more improving quarters.

Thank you. Thank you very much.

And there are no further questions at this time. I will now turn the call back over to Mr. Coats.

Thanks, everybody. We appreciate you taking the time to speak with us today. As I've said before, stay tuned. I think we have an ever-improving story, and I truly believe that we are about as well positioned to benefit from the recovery in the automotive economy as we could be. We look forward to talking to you in the future. Thank you.

And this concludes today's conference call. You may now disconnect.