Autoweb Inc (AUTO) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Autobytel announces 2011 fourth-quarter and full-year financial results. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions)

As a reminder today's call may be recorded. Now it is my pleasure to turn the call over to Roger Pondel, Investor Relations for Autobytel.

Thanks, and hello, everyone. Welcome to Autobytel's 2011 fourth-quarter and year-end conference call. I am joined today by Jeffrey Coats, President and Chief Executive Officer; and Curt DeWalt, Senior Vice President and Chief Financial Officer.

Before we begin, I would like to remind you that during today's call, including the Q&A session, any projections and forward-looking statements made regarding future events or Autobytel's future financial performance are covered by the Safe Harbor statements contained in today's press release, the slides accompanying this presentation, and the Company's public filings with the SEC. Actual events and results may differ materially from those forward-looking statements. Specifically, please refer to the Company's Form 10-K for the year ended 2011, which was filed just before the start of today's call, as well as other filings made by Autobytel with the SEC. These filings identify factors 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 the call. You can access the slides by clicking on the link in today's press release or by going to Autobytel's website at www.autobytel.com. And when there, go to Investor Relations and then click on events and presentations. Also, please note that during this call we will be discussing adjusted operating expenses, EBITDA, cash flow which are non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the slides being used on this call and that are posted on Autobytel's website. And now I will turn the call over to Jeff.

Thank you, Roger. Good afternoon, everyone. 2011 was a milestone year for Autobytel. We were profitable for the last three quarters of the year and posted our first full-year profit since 2004. Our turnaround is the result of a variety of factors. First, steps we have taken to enhance the quality of our purchase requests, mainly the rate at which sales closed, are resonating with our dealer and manufacturer customers, as well as generating revenue and gross margin gains.

Second, we significantly enhanced the online experience at Autobytel.com for consumers, which is improving our engagement with them and beginning to drive greater and deeper traffic to our site. Continuing to attract additional traffic to Autobytel.com should produce incrementally higher close rates for our purchase request, boosting quality while also further helping improve margins. Third, industry trends have been steadily improving as we saw again today with the release of February's SAR of $15.1 million.

And last but not least, over a several-year effort we have brought more discipline to our P&L by focusing on business fundamentals, optimizing operating efficiencies, and keeping a tight line on costs. We have come a long way and have reached an important inflection point. Autobytel is now well positioned to benefit from our ability to help dealers and manufacturers sell more cars and trucks through our high-quality purchase requests. When Curt completes his financial review, I will return to speak about some of our key initiatives. Curt?

Thanks, Jeff. Starting with a brief recap of the full year, which you can see on slide 4 of the fourth-quarter package posted on our Investor Relations website, total revenues rose 24% to $63.8 million for 2011, from $51.5 million for 2010. Purchase request revenues increased 25% from the prior year and advertising revenues of $3.9 million were approximately the same as 2010. Gross profit rose 33% to $26 million for 2011, from $19.5 million for the prior year. Gross margin improved to 40.7% for 2011, up from 37.8% for 2010.

EBITDA increased 145% to $3.2 million, from a negative $7 million in 2010. Net income for 2011 was $416,000, or $0.01 cent per diluted share, versus a net loss of $6.8 million, or $0.19 per share for 2010. Cash flow provided by operations improved substantially for the full year at $2.2 million for 2011, compared with cash flow used in operations of $4.3 million for 2010. All of my following discussion will now focus on the fourth quarter.

As you will see on slide 5, total revenues for 2011 fourth quarter grew 11% to $16.2 million, from $14.7 million in the prior year, reflecting an increase in wholesale purchase requests. For those of you that are new to the Autobytel story, wholesale refers primarily to purchase requests sold to manufacturers or OEMs, and retail refers to purchase requests sold directly to dealers. On a sequential basis, revenues were generally flat as a result of normal seasonality.

Moving to slide 6 you can see the quarterly revenue by source for 2011 fourth quarter. Total automotive purchase request revenue increased by nearly 11% over the prior year, which included a 19% increase in OEM and other wholesale channels, compared with the prior year's fourth quarter. Finance request revenue declined 2%, compared with the prior year as a result of our decision to eliminate lower quality traffic. Advertising revenue improved 26% over last year's fourth quarter as we redesigned Autobytel.com and the consumer proposition to be your lifetime automotive advisor, which is attracting incremental advisors, advertisers, and revenue.

This positive momentum, combined with improved consumer purchase intent, will allow us to realize new content monetization opportunities. The volume of purchase requests delivered rose year over year compared with the fourth quarter of the prior year. We delivered approximately 1 million automotive purchase requests in 2011 fourth quarter, versus 917,000 in the prior year's fourth quarter. 74% of the automotive purchase requests we delivered were in the wholesale channel and 26% were in the retail channel. We delivered approximate 91,000 finance requests in the current quarter, versus 98,000 in the prior year's fourth quarter.

As seen on slide 7, gross profit increased 20% to $6.9 million for the 2011 fourth quarter, up from $5.8 million for the fourth quarter of 2010 and $6.6 million for the 2011 third quarter. Gross margin improved to 42.5%, versus 39.3% for the prior year's fourth quarter and 40.3% in the third quarter of 2011. The year-over-year and sequential improvements were driven in part by a greater number of internally generated purchase requests.

Moving to slide 8, you will see our cost structure on an adjusted basis. Total operating expenses for the 2011 fourth quarter were reduced by 28% to $6.5 million, from $9 million in the prior year's fourth quarter. As you will see on slide 9, non-cash stock-based compensation for 2011 fourth quarter was $254,000, versus $298,000 for the fourth quarter of last year. Amortization and depreciation was $508,000 for the most recent fourth quarter, compared with $499,000 in the prior year's fourth quarter. This brings EBITDA to $1 million for the fourth quarter of 2011, versus an EBITDA loss of $2.6 million for the fourth quarter of 2010. In the third quarter of 2011, EBITDA also totaled $1 million.

We generated net income of $341,000, or $0.01 per diluted share, for the 2011 fourth quarter, compared with a net loss of $3.3 million, or $0.07 per share, in the prior year's fourth quarter. Cash flow provided by operations was $2.1 million in the 2011 fourth quarter, compared with cash used in operations of $586,000 for the 2010 fourth quarter. At the end of December, our cash and cash equivalents balance had grown to $11.2 million, up from $9.2 million at the end of September and $8.8 million at the end of 2010. We are carrying a $5 million convertible note from the acquisition of Cyber Ventures, which pays simple interest at a rate of 6% per year.

As I'm sure you know, we received a letter from NASDAQ last September notifying us that we were not in compliance with the $1 minimum bid closing price. We have until March 13 to regain compliance. However, given the trading in our stock that has not resulted in regaining the compliance, we will not be able to regain compliance in time prior to the expiration of the initial grace period. We have, however, already been evaluating our options for regaining compliance, including a reverse stock split of our common stock.

As a reminder, on February 13, we announced that our Board of Directors had approved a stock repurchase program that authorizes the repurchase of up to $1.5 million of our common stock. We may repurchase common stock from time to time in the open market or in private transactions. And we will fund the repurchases through the use of available cash. We currently anticipate that we will initiate repurchases in the open market the week of March 5, but the timing and extent of purchases will depend upon market conditions, legal constraints, and corporate considerations at the Company's sole discretion. Now I will turn the call back to Jeff.

Thanks, Curt. The auto industry is healthier now than it has been for some time and we have reason to believe the positive momentum will continue. As you'll see on slides 10 and 11, 2011 US light vehicle sales were up approximately 10% to 12.7 million units from 2010, and that growth continued into January and February 2012 with sales up 11% and 16% respectively from the same month last year. On the same slide, you will see that January SAR grew meaningfully to 14.1 million units, while February SAR grew to 15.1 million units from 13.6 million in both December and November of last year. According to data from JD Power, this is the first time in nearly four years that SAR has surpassed the 14 million mark. In fact, last week, JD Power lifted their 2012 forecast to 14 million units, which you can see on slide 11. Other full-year 2012 forecasts currently range from about 13.5 million to 14 million units.

Also, if attendance and temperament at the recent auto shows in Detroit and Chicago are any indication, consumers appear to be more ready to enter the market than they have been in a long time. We believe this is likely to be spurred by pent-up demand, replacement of aging vehicles, expected new vehicle introductions, and an expanding credit market. In fact, Automotive News recently reported that lenders are charging US car buyers the lowest rates in at least four years, which is supporting demand for new vehicles.

Our core business of delivering high-quality purchase requests to dealers and OEMs continues to perform well. As Curt mentioned, automotive purchase request revenue for the fourth quarter 2011 was up 11% from the prior year's fourth quarter. The improvement stems from our ability to directly generate purchase requests that convert to vehicle sales for our customers. Currently, 70% of all of our purchase requests are generated from Autobytel-owned sites, a level that will likely remain stable in the months ahead. Internal purchase request generation is important for many reasons, including reducing our expenses and driving higher margins. Equally important, internally generated purchase requests are typically of higher quality than those purchased from most third parties. Quality is measured in our industry by purchase request conversion into sales, so we are taking a proactive approach to helping our dealer and OEM customers better understand the value we're delivering.

We are now working with RL Polk, a trusted automotive data and marketing solutions company, to provide transparency in purchase request quality. With this actionable data, our customers will be able to more effectively calculate and understand their return on investment with Autobytel. We know from experience that the conversion rates of Autobytel internally generated purchase requests significantly outperform, by as much as 150%, what we believe represents an industry average closing rate of between 6% and 8%. This is the number one reason OEMs and dealers buy our purchase requests, because they convert at a significantly higher rate.

As a result of quality improvements to date, we are already being allocated increased budgets from OEM and large-dealer group customers, driving a significant increase in purchase requests and corresponding close rates sold into our wholesale channel. We expect this trend to continue as a result of ongoing quality enhancements, coupled with our new approach to dealer customer acquisition and retention, which concentrates on higher revenue accounts and dealerships where we can supply an increasing percentage of purchase requests through internally generated channels.

Autobytel is now healthy and vibrant and we are confident that we are continuing to significantly upgrade the quality of the purchase requests we deliver to our customers. And by leveraging the growing auto market, we will continue to drive improved operating performance. Our ongoing commitment to producing highly credible authoritative content on Autobytel.com continues to drive consumer traffic and engagement. Specifically in January, Autobytel announced its choices for our 2012 Car and Truck of the Year awards. The awards, our first in several years, have been met with outstanding response from both the automotive manufacturers and the press, while also generating terrific conversations among auto bloggers and across social networks. Importantly, the awards announcement and related content generated 105% increase in traffic and 176% increase in page views.

In addition to the awards, our editors had some fun to mark this year's Valentine's Day, by naming the hottest cars for 2012 across different price points. The Valentine's Day editorial increased traffic and page views by 46% and 137% respectively. This approach to tying annual events to consumer interests will, with increasing frequency, continue throughout the year with several entertaining and thought-provoking takes for consumers to enjoy. We believe these examples of highly visible branded content, along with a wide array of editorial offerings such as exclusive Autobytel vehicle video reviews, our customizable MyGarage ownership section, and the addition of mobile capabilities on the second quarter of this year position us well for continued growth as we deliver our consumer promise as your lifetime automotive adviser across multiple channels, platforms, and devices. Slide 12 provides an example of some of the content we are currently offering.

We have also teamed with AutoNation to offer one of our newest features, Sell Your Car, which gives consumers a hassle-free way to sell their cars and AutoNation dealers an easier way to source used cars, which is especially important in the current tight market for previously owned vehicles. Autobytel is one of only three AutoNation partners offering this program.

I'm gratified by our progress and our ability to emerge from what was one of the most challenging periods in the history of auto sales. We have meaningfully enhanced Autobytel's current business and future prospects. With the industry continuing its positive trajectory, Autobytel.com driving increased consumer traffic, as well as additional and ongoing improvements to purchase requests quality, we are looking ahead with a sense of optimism about Autobytel's future performance. Our outlook for 2012 is bullish as we continue along the path we followed in 2011. Based on our business plan, we believe that purchase request volumes should grow in line with anticipated SAR growth. Thus, we expect strong top-line growth with positive cash flow and net income.

Before opening the call to questions, I would like to address an issue that we have learned may be confusing for some of our investors. I have mentioned in the past that our industry is consolidating and that Autobytel expects to be among the consolidators. This may have signaled an unintended message that we would soon be in fundraising mode to support a transaction. For clarity and as an update, while we are always open to strategic opportunities, at the present time we have no plans to engage in fundraising. However, we fully intend to work diligently to grow our business and enhance our shareholder value. With that, operator, we're now ready to take questions.

(Operator Instructions). Steve Dyer, Craig-Hallum.

Nice quarter and, Jeff, you had mentioned in passing how strong of a start we are off to this year. The next logical question is, any help or direction you could give us on how you see the first quarter shaking out? Maybe even directionally?

We have entered the year pretty strongly. We expect to have a good first quarter with growth. Probably should not go much beyond that.

Advertising perked up for the first time in a while. Can it move higher? Maybe any information about uniques or anything like that, that you could share and how that makes you feel about kind of the advertising line going forward?

We feel pretty good about advertising. The relaunch of Autobytel.com last summer reset the bar with all of our manufacture advertising customers. We had a good upfront where we were meaningfully sold through as we entered the year. Even were able to achieve some CPM increases. There is growth. There is a growth opportunity for us in advertising revenue during 2012. Absolutely. We, as you know, have not thus far begun reporting on certain kinds of metrics including uniques. That may change during the course of the year, but not at the present time.

As you look across your customer base, is there any OEM or numerous OEMs that you feel like you're may be more levered to than others? As I think this will be a year where there is a lot of share shift and so forth. Who would you say, and I know you're probably pretty diversified, but who have you tied your wagon to?

We really do business with all of the major manufacturers, domestic and international. We do have a bit more of a concentration with some than with others. But we are pretty well-balanced I think, with all the major manufacturers.

Asked another way, the fall off in the Japan six last year, due to the natural disasters hurt you guys quite a bit. Would you expect a similar kind of a bounce back as they get restocked and start selling through?

We should see a benefit as that is happening. And actually, just in today in some of the Automotive News stories, there were some comments being made about inventory levels with major Japanese firms already being back in substantially better shape than they were even in the fourth quarter. I don't think we will have those same kinds of problems rolling into this year that we saw because of the natural disasters in the Far East last year.

Sameet Sinha, B. Riley.

Can you talk about [vehicle] sales? Do you have any during the quarter? How do you expect that business to ramp throughout the year? What is the potential if you can guess on what [seat] sales could be for that particular revenue line? As a follow-on, you spoke about eliminating lower quality traffic for financing leads, if can you elaborate on that? Also you mentioned some consolidation amongst dealers. I would appreciate your insight on that as well.

Sameet, I'm not sure I caught your first question completely. But let me answer or try to answer the others and then maybe we can go back to that. As sub prime financing has begun coming back, pretty strongly in general in the markets, last year and the second half of last year, we began seeing some quality problems coming from some of our suppliers and traffic partners that we weren't happy with.

As you know, we are completely focused on either generating or acquiring for our customers a top quality product. We began pulling back as we noticed problems with some of those suppliers. It did affect our revenue in that business in the second half of the year. We think that is mostly straightened out at this point. We don't expect to see a big impact from that in 2012. I forgot your third question.

Yes, basically was asking about, I think in your presentation or press release, you mentioned there was some consolidation amongst dealers. Was that consolidation amongst dealer groups? Or was it -- I know you have an internal effort to focus efforts on larger dealer groups versus the smaller ones.

It is really an effort to focus the way we internally go to market with our retail dealer customers. We are trying to focus on areas and markets in large part where we can create a larger relationship with a dealer or a dealer group and deliver more purchase requests into those customers. It is a way to try to better balance our expenses of going to that market, as compared to the revenue that we are generating. It does impact, to some extent, looking at doing business with some of the larger groups, but we still have a widely diverse customer base. We are trying to focus on doing business with people that really want to do business with us and that value our product.

My first question actually was, you have been talking to [Day Tran] contacts about selling visitor data into their data pools. That was my question. Have you started sales into those companies? If yes, how do you expect that revenue stream to ramp throughout the year? And if they have given you an assessment over the peak revenue potential, what it is for this particular revenue line?

We are still working with Day Tran. They actually merged with another company during 2011. The efforts have been refocused as we move into 2012. There are some customer conversations going on. I am not exactly sure of what the sales cycle will look like on that. I think it is safe to say that with sales -- February SAR skyrocketed to $15.1 million. I don't think anybody was expecting anything close to that.

General Motors and Nissan came out this morning and made comments that based upon their sales, they thought SAR could hit $14.9 million. I think we will see more activity as more of the manufacturers begin pushing their vehicles as we enter the prime selling season. March, April, moving into the summer months is really the prime selling season. It is interesting to see car sales jump up so high in a couple of the seasonally weakest months.

The article that you referenced about SAR data and the amount of inventory on the dealer lots, you also mentioned the level of incentive has declined. I am wondering, how should we think about these two and how do they impact your business, either to the magnitude or direction? If you could elaborate I would appreciate it.

You are right. Some of those articles did refer to the fact that incentives were down. I think that is in part because General Motors in the first quarter of 2011 was pushing some pretty heavy incentives, particularly in January and February, that they ended up pulling back from as we moved into the second quarter. I think some of those year-over-year comparisons are little skewed from that standpoint.

It is my understanding that as some of the dealers, Toyota, Honda and the like, did have some inventory issues last year, those sales programs are ramping up as we move into this year. None of that has a negative impact on us. When the manufacturers are advertising, it generally draws people online and as they come online, they either come to us or we find them through some of our other activities. Overall, manufacturer advertising, manufacturer incentives generally are a good thing for us.

George Santana, Ascendiant.

Thank you and congratulations on just a great quarter. You told us what to expect, the improvement quarter-to-quarter, and you guys have executed on a fairly non-flashy, but consistent way. This is great. The gross margin of 42.5% or so. My model goes back to the beginning of 2007 and that margin I think is the highest since the March 2007 quarter. Is that right?

I don't have all the information in front of me, but going off memory, George, that is correct.

Is this sustainable? Is it a question of the advertising revenues coming back and giving you a higher margin? What should we look for going forward?

George, our revenues are always a mix issue. We did have some spot advertising buys in the fourth quarter that helped boost our margin in the fourth quarter. It really is affected by a mix of the wholesale and retail revenue as well. I don't think that margin level is out of reach for us as we move through the course of the year. I wouldn't expect to see us post a 42% gross margin in the first quarter. Generally, it is a result of a lot of different factors and I do think over time, as we continue to bring data revenue into our mix, as well as continue to boost our advertising revenue, it is going to go ahead and push us up into the low 40s overall.

Unfortunately, when you look back two, three, four, five years, the seasonality by quarter of gross margin cannot really draw a bead on what to expect and what to forecast. It really isn't subject to seasonality much at all, right?

It is not so much seasonality. It really is the revenue mix. It is even harder to keep a good handle on today, because our business has been evolving into a stronger wholesale growth profile than on the retail side. And our wholesale margins are not, thus far, on a par with our retail margins. It is really a mix.

During the course of a given quarter, manufacturers may periodically increase to what to want to take from us, given other things they have going on. It tends to move things around a little bit. It is just one of those issues that we currently deal with on a regular basis. We do maintain a pretty stable gross margin, however. It is just a mix issue.

What was the level you said? Towards the 40s?

The low 40s, yes.

The low 40s on an annual basis, then, is fair. Did I hear you correctly?

Yes.

Something that you mentioned in the prepared remarks towards the end. That you have enrolled RL Polk to do a study on your Company's purchase requests? Did I hear that correctly?

What we have done is signed a contract with them. We have them reconcile all of the purchase requests that we generate and sell to our dealers and manufacturers against their registration data on a 30, 60, 90 look back basis. We can actually see, did the consumers that generated those purchase requests with us end up buying a car within those periods of time? Historically, in our business, close rate data has not been something that lead generators or aggregators could really calculate. It was provided to us by our customers.

In addition to the RL Polk information, we also get feedback from our OEM customers that do give us regular close rate feedback. We get a lot of close rate feedback from our large dealer group customers, and we also have several regular retail dealers or dealer groups that provide us with periodic close rate information. What we are really looking at doing is reconciling all of this for the leads that we are generating. It is very interesting information. It is very timely information. We have been gratified to see that our efforts to buckle down and work on generating ever improving quality of purchase requests are paying dividends, because as I mentioned, our close rates are closing as much as 150% higher than the average industry close rates of 6% to 8%. That is what dealers and manufacturers care about. How many cars they sell from the purchase requests we sell them.

That's the number one thing I heard back in my due diligence of auto dealers, that the leads stink, we cannot follow-up or they're great. My question to you is has anyone ever done is kind of study? Has this data been out there before independently verified by a third party?

Not to my knowledge. Certainly not on the program basis that we are currently doing it. People have always had some level or other of close rate feedback, but again it is from customers. If you think about the difference between our wholesale business and our retail business, we have a handful, two or three dozen wholesale customers who focus on the close rate and provide them to us. They see the quality of at which our purchase requests are closing because we generally always are closing above their program average and generally pull up their program average.

On the retail side, it is more candidly of an opportunity for us to have this good close rate data because our folks in the field will now be armed with close rate information based upon the purchase requests we have sold to different dealers or dealer groups, who can go sit down and have those kind of conversations with them. What kind of transparency are you getting from your other lead providers in the marketplace? We really want to introduce that whole topic to our marketplace, because transparency of the quality of the purchase requests or leads that the customers are buying is something that everyone in this business ought to be focused on.

When would that study conclude?

It is not a study, George. It is an ongoing relationship. As we generate leads, the purchase requests through what we are doing, they go into these filters and we generally get reports back as to what is going on. It is an ongoing daily, weekly, monthly business arrangement that we have with Polk that will continue for the foreseeable future.

That's great. That transparency surely will be welcome. I will refrain from asking you for the data going forward.

It is our intention, at some point, to start disclosing that data publicly. We just need to get a little bit of it under our belts first. But that is the goal. To begin reporting on it publicly.

Can you give us any indication of expense levels and CapEx for 2012?

I don't think our CapEx levels will be anything materially different than they were in 2011. Our operating expenses will, of course, grow as our revenues grow to some extent because of the variable expenses in our P&L, sales commissions and various other things that are related to growth. We don't expect to see a large increase in expenses that aren't driving growth at the top line.

Jared Schramm, ROTH Capital.

Congrats on the quarter. When do you see the decline in revenue from finance request leveling out?

We think it is pretty much already leveled out as we rolled into 2012.

Looking over, you touched briefly on consolidation as far as the dealership level was concerned. What stage is that transition in currently, from what you are seeing in the market?

It is still pretty early.

How long would you anticipate that takes to resolve?

It is a multi-month process. Probably not until sometime in 2013.

Lastly, on last quarter's call we touched on the Thai floods potentially having an impact on some of the wholesale revenue. Could you describe if you saw any impact of that in Q4? If there was any at all.

We didn't really see any meaningful impact in the fourth quarter from that.

Robert Setrakian, Helios Group.

A great quarter, great year. You delivered on everything that you have said. Congratulations. A couple of questions, couple of technical ones first. I know that you have a very large tax NOL. However, on book taxes on reported income, for the fourth quarter, book taxes are 24% and book taxes for the year are 45% plus. Is there a possibility that those book taxes could be lowered somehow? I know it doesn't affect business. It doesn't affect cash flow. But just for EPS reporting purposes, have you guys looked into that?

Yes. The single biggest thing in there, Robert, is a result of the acquisition we did as something we've talked about in prior quarters. It is a technical thing called the naked credit on the goodwill. We are required to provide, for book purposes, a tax provision. There is no cash out. We're not paying anything. But from a technical accounting standpoint, we do need to provide against the goodwill of this naked credit.

The fact that we have all of our deferred tax assets and liabilities under a full valuation allowance is the reason we find ourselves in this position. Otherwise, we have more than enough to sweep it up. It is a bit involved. I could certainly go into it in more detail with you. But that is the crux of what is driving that is the acquisition, goodwill, naked credit.

Does that mean that we practically pay no federal or state taxes, cash?

That is correct. On a cash basis, we pay very little. What little we do pay, a number of the states are getting smart. They're moving away from income taxes and they are going to gross receipts and things of that nature. There are some states where we do actually have to pay taxes. The vast majority, and certainly at a federal level, we are not paying taxes.

Second question relates to the NASDAQ compliance and the reverse stock split. Is there any possibility that we may appeal to NASDAQ? Are you guys considering that?

Appeal to them in what regard?

To give us additional time to get in compliance?

Yes. Actually, we would expect to receive an additional 180 days to regain compliance. That is one of the options that we have available to us with NASDAQ. And I would expect that to happen.

Finally, I noticed that the cash on the balance sheet as of December 31 was actually higher than what most of the analysts expected and I expected by about $1 million. I saw that working capital was managed excellently also. Was there anything that was spent less in the quarter than anticipated to account for that higher than expected cash?

No, Robert. There is nothing unusual. It is really an ongoing ebbing and flowing of timing of payments, as well as receipts of folks paying us the receivables.

That's what I noticed from the receivables and the payables also. I just wanted to make sure that it wasn't something that was just deferred in the first quarter or something like that. Actually cash came up better than we thought.

Brian Horey, Aurelian

In terms of OpEx, I heard your prior answer about some parts growing in line with revenue. If we assume that you guys grow in line with, let's say the SAR number for this year, how much leverage do think you can generate on that line from a basis point standpoint?

Brian, we do have some leverage in our OpEx. We can grow revenue without meaningfully increasing our OpEx. However, at the same time, we are in a very interesting period of time having re-launched Autobytel.com and beginning to drive traffic back to it, which of course becomes a virtuous circle. As traffic comes to the site, it increases our page views which increases our advertising revenue and then positions us nicely again for the upfronts toward the end of this year for our 2013 advertising year. We're looking at creative ways that we can help accelerate the growth in our top line without meaningfully increasing our operating expenses for the wrong reasons. It is a balance. We worked hard to get our OpEx down. We think we are in a pretty good range, based on what we are doing right now and based upon the business that we currently have configured.

Looking at your top line versus the SAR number, I'm tempted to infer that you guys have picked up share. Is that your sense?

It is our sense.

Can you quantify that in any degree?

No, I really would rather not do that.

The other question I had was, you talk a lot about consolidation of your business on these calls over time. Has the been any other consolidation? Obviously, you guys did this last year. But has there been any other consolidation activity recently that has been disclosed?

The bigger ones, there were quite a few in late 2010. AutoTrader bought Kelley Blue Book and a couple of other companies. There were a couple of smaller ones during the course of '11. I am familiar with a couple of others, but they have not been publicly disclosed. And I don't think it is for me to disclose them.

You are still bullish on there being more activity to come on that regard?

Yes. There are still opportunities in the market. Absolutely.

It looks like that concludes our time for questions and answers. I would like to turn the program back over to Mr. Jeff Coats.

I just want to say in closing, everyone, we do feel bullish about 2012. I think today's SAR number was eye opening coming off of a good-looking month anyhow. We look forward to speaking with you all as we move forward during the course of the year. Thank you.

Ladies and gentlemen, this does conclude today's program. Thank you for your participation and have a wonderful day. Attendees, you may log off at this time.