Autoweb Inc (AUTO) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Autobytel 2012 third-quarter financial results conference call. (Operator Instructions). As a reminder, today's conference is being recorded. And now, I would like to introduce your host for today, Roger Pondel. Roger, please go ahead.

Thank you, John, and good afternoon, everyone. Welcome to Autobytel's 2012 third-quarter conference call.

Today, I'm joined by Jeffrey Coats, President and Chief Executive Officer, and Curt DeWalt, Senior Vice President and Chief Financial Officer.

Before we begin, I must remind you that during today's call, including the question-and-answer 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, in the slides accompanying this presentation, and in 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 December 31, 2011, and Form 10-Q for the quarter ended September 30, 2012, which was filed prior to this 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 visiting Autobytel's website at www.Autobytel.com. When there, go to investor relations and click on events and presentations.

Also please note that during this call, we will be discussing EBITDA, cash flow, cash net income, and cash net income per diluted share, 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.

With that, I will turn the call over to Jeff.

Thank you, Roger. Good afternoon, everyone.

I'm pleased to again report significant improvement in our business, including our sixth consecutive quarter of profitability, our seventh consecutive quarter of positive cash flow, and our highest quarterly revenue since the second quarter of 2008.

During the third quarter, customer demand for purchase requests, also known as leads, which is our core product offering, remained strong. On the supply side, consumer traffic and lead volume strengthened. While the fourth quarter will likely be impacted by normal seasonal trends, October was good compared with the same month last year. In addition, we expect to show revenue gains in the 3% to 5% range for the full-year 2012.

I will come back to update you on some of our key initiatives after Curt provides the financial review. Curt?

Thank you, Jeff.

As you can see on slide four, total revenues for 2012 third quarter increased 7% to $17.5 million from $16.3 million for the prior-year quarter, primarily reflecting increases in both retail and wholesale automotive purchase requests.

11% sequential growth was driven by purchase request volume increases. As a reminder, the first and third quarters are generally our strongest from a seasonal perspective. As Jeff mentioned, although we anticipate the usual seasonal sequential pattern, we do expect to see year-over-year revenue improvement for the coming fourth quarter.

Also on slide four, you'll see quarterly revenues by source for the third quarter of 2012. Total automotive purchase request revenue rose 12% to $15.1 million, up from $13.5 million for last year's third quarter, reflecting 11% year-over-year growth in revenue generated from wholesale customers and 14% growth from retail customers.

On a sequential basis, automotive purchase request revenue improved 14%.

Finance request revenue, which accounts for less than 10% of our total revenue, declined 29% year over year and 7% sequentially, as a result of continuing softness in leads supply. Substantially all our finance-related leads are aggregated from outside third-party providers, and given tight supply in the marketplace, these leads have become more expensive to acquire and to generate internally.

On a positive note, there's been significant increase in dealer demand from customers looking for specialty financing. Due to the increase in demand, the scarcity of high-quality supply, as well as a more favorable lending climate, dealers are willing to pay more to obtain high-quality finance leads. We've increased efforts to generate more of these leads internally and believe we'll be able to improve this business over time.

Advertising revenue increased approximately 13% year over year, boosted by our mobile revenue.

We delivered approximately $1.1 million automotive purchase requests for the 2012 third quarter, up approximately $1 million from the prior-year period. 69% of those delivered in the wholesale channel and the remaining 31% in the retail channel. We delivered approximately 83,000 finance requests in the third quarter of 2012 versus 121,000 one year ago.

On slide five, you can see gross profit improved to $6.7 million for the 2012 third quarter, up slightly from $6.6 million for the third quarter of 2011. Gross margin totaled 38.5% versus 40.3% in last year's third quarter, while year-to-date gross margin totaled 39.9% and 40.1%, respectively.

The decline in gross margin during the quarter was the result of investments in generating additional lead volume and further investment in our online content, both of which are designed to drive increased growth. However, we did not sacrifice incremental net income growth, as you can see from our profit generation this quarter, which also yielded a 140 basis-point increase in operating margin on a sequential basis and a 100 basis-point increase year over year.

Total operating expenses for both 2012 and 2011 third quarters were $6.1 million. Total operating expenses as a percent of revenues declined to 34.9% from 37.7% for the 2011 third quarter. For 2012 third quarter, operating expenses included a $68,000, or $0.01 per diluted share, one-time impairment charge related to a long-lived asset.

As you'll see on slide six, non-cash stock-based compensation for the 2012 third quarter was $209,000, compared with $268,000 for the 2011 third quarter. Amortization and depreciation totaled $607,000 for the most recent third quarter, versus $524,000 for the prior-year third quarter. This brings EBITDA to $1.3 million for the third quarter of 2012, compared with $1 million for last year's third quarter.

We generated net income of $551,000, or $0.05 per diluted share, for the 2012 third quarter, based on 10.1 million diluted average weighted shares outstanding. Including the one-time impairment charge, net income per diluted share would have been $0.06. This compares with last year's third-quarter net income of $446,000, or $0.05 per diluted share, based on $9.5 million average weighted shares outstanding.

As a reminder, all EPS and share counts reflect the one-for-five reverse stock split which became effective July 11.

Cash provided by operations grew substantially to $1.5 million for the most recent third quarter, compared with cash used in operations of $93,000 for the third quarter of 2011. For the year-to-date period, cash provided by operations totaled $4.4 million, compared with $120,000 for the same period in 2011.

Also, as seen on slide six, cash net income, which we derive by adding back depreciation, amortization, and stock-based compensation to net income, totaled $1.4 million, or $0.14 per diluted share, for the third quarter of 2012, versus $1.2 million, or $0.13 per diluted share, for the same period last year.

On a year-to-date basis, we achieved cash net income of $3.4 million, or $0.36 per diluted share, for 2012, compared with $2.4 million, or $0.25 per diluted share, for 2011.

At the end of September, our cash and cash equivalents balance had grown to $13.7 million, up from $11.2 million at the end of 2011 and $9.2 million one year ago. Year-to-date results can be found in the press release we issued earlier this afternoon.

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

Thank you, Curt.

I'd like to spend some time today discussing our recent purchase request quality initiatives with R.L. Polk. As you know, we've been a strong advocate of the importance of quality or sales conversion rates for quite some time. High conversion rates are a key reason Autobytel's purchase requests are so valuable to dealers and OEMs, which we, of course, believe is a competitive advantage for us.

Our focus on quality is the reason we've been able to steadily increase purchase request volumes and gain market share.

Until our collaboration with R.L. Polk, there was very little transparency into purchase request quality throughout the industry. Now, by cross-referencing Polk's state vehicle registration data with the automotive purchase requests we deliver to our clients, we are able to deliver -- we are able to establish reliable data on an ongoing basis regarding consumer crossover between makes and purchase request conversion at the dealer level.

In addition to providing this valuable information regularly to our dealer and OEM partners so that they can accurately measure the return on their investments with us, we use the data internally to better manage and focus our own internal lead generation and lead acquisition activities, including supplier lead quality.

On slide seven, you can see that Autobytel purchase requests, which make up the majority of our purchase request volume, close at an indexed rate 40% higher than average. The Autobytel close rate includes all Autobytel internally-generated leads. The average is an index of the average close rate we see from all leads, including Autobytel leads, as well as third-party leads that we purchase. This data once again shows the high quality of Autobytel leads compared to other available sources.

On a monthly basis, dealers and OEMs now have access to a more comprehensive view of consumers' purchase time frames, as well as new to used vehicle shopping patterns. As you can see on slide eight, among other data, we now provide information that shows a dealer where consumers actually bought their vehicles, be it at our customers' dealership, a same make dealership, or a competitive make dealership. This actionable information allows them to adapt their marketing efforts based on actual consumer behavior.

We can also show auto manufacturers how purchase requests for their brands performed compared to segment and industry averages. In effect, we are placing information in the hands of the people who have the opportunity to implement more strategic marketing approaches for targeting end-market automotive consumers.

In addition to the quantitative evidence of the value we are providing to customers, we are getting great marketplace feedback and we are generating positive buzz. Our retail and wholesale sales groups report significant inbound interest from dealers across the country, as well as several OEMs, just as we published our first case study on purchase request quality in mid-October.

Our folks also reported that our Polk collaboration was a hot topic at the recent Digital Dealer and Driving Sales conferences held two weeks ago.

We are continually learning from our relationship with Polk and will use this new intelligence to further improve purchase request quality and customer relationships.

As an integral part of our business going forward, we are working to extend and expand the available data for the benefit of our dealer and OEM customers, and we are only in the very beginning stages of using this data to create additional opportunities for our Company. We believe this will translate into increased automotive purchase request volume and profitability for Autobytel.

Our quality efforts have already begun to pay off. We are very excited about the recent growth we've seen in dealer-facing revenue. Back on slide four, you can see that dealer revenue grew 14% year over year as a result of increased demand and lead quality. This quarter represented the highest level of dealer revenue in 11 quarters, and we are currently investing in additional sales and customer support personnel to allow us to take full advantage of the dealer opportunity.

An essential part of our focus on improving sales conversion rates for our customers is the ongoing enhancement of Autobytel.com. Over the last year, we have made substantial site improvements, as you can see on slide nine. In addition to our expanded dealer directory, which includes a comprehensive listing of all US franchised dealers, and the MyGarage ownership feature, which provides a single place for automotive ownership information, our new mobile site is performing very nicely.

We are improving our visibility and usefulness to consumers from several angles. As you can see on slide 10, Autobytel's YouTube video channel continues its rapid growth and is further enhancing our brand recognition. At just over 4.5 million views since last time we spoke in August, our channel now has more than 8 million views. That's nearly three times greater than one of our key competitors and twice that of another.

From new car reviews to highlights of the Space Shuttle Endeavor being moved through southern California by a Toyota Tundra, we continue to provide consumers with information that is both fun and easy to interact with.

Before we turn it over to your questions, I'd like to discuss ad revenue, which remains a good long-term opportunity for us. As you know, during the previous upfront cycle we were focused on meeting customer delivery expectations within our existing share of individual OEM budgets. Because of the enhanced consumer experience being provided by Autobytel and the launch of the mobile version of Autobytel.com, thus far during 2012 we are overdelivering on those commitments. This overdelivery has set us up nicely for the 2013 upfronts, through which advertising is currently being negotiated for the coming year.

It's still very early as manufacturers continue their budget planning, but we've got an early indication that dollar commitments for Autobytel should be meaningfully higher for 2013, given our improvement in page views and performance.

As summarized on slides 12 and 13, through a combination of strategic changes and focused execution, we have successfully repositioned to Autobytel to once again be a leader in our core business. With the automotive market trends continuing on a favorable path, as you can see back on slide 11, and an ongoing shift toward digital activities, we are making strategic investments to capitalize on these opportunities and are establishing a platform that we believe will contribute to consistent growth for many years to come.

We provided guidance this year that we are now comfortable we will exceed. Accordingly, we are raising our guidance today to reflect that outperformance. We currently anticipate that net income will triple for 2012 from last year and, as I stated earlier, we also expect year-over-year revenue growth in the range of 3% to 5% for the full-year 2012.

With that, John, we'll now take questions.

(Operator Instructions). Sameet Sinha, B. Riley.

I have a few questions here. You made an interesting comment about mobile revenue. Can you talk a little more about that? I know you launched your mobile website some time back. Are these views, in your opinion, are they incremental to the desktop views? And also, if you can talk to us about CPMs on these mobile views. To continue on that trend, do you get legion entries from a mobile device such as that?

Secondly about -- a question of new product, and I know in the past you've spoken about having new products to diversify your revenue mix. Any chance that you could shed some more light on it and when we could see some of these new ones coming out? And in terms of the upfront for 2013, since you're getting initial feedback, any sense of how much CPM increases are you seeing there? Thank you.

Sameet, nice to talk to you. You're going to have to probably prompt me again as I go through this.

So we do -- we're seeing a nice increase in mobile. We believe that in the automotive industry, everything is going to mobile to make it easier for people to shop. That's why we built a mobile-enhanced version of our site to make it easier. It's not an app.

We do believe the page views for our mobile is incremental. From a CPM standpoint, the CPMs are a bit higher from a mobile standpoint, but as you know, we don't really talk about the details of those numbers, so I'm not really prepared today to go any further than that. (Multiple speakers).

The upfronts for 2013 are going very well for us. We are seeing larger dollar commitments as a result of the growth in page views. There will be some overall CPM improvements largely as part of mix, but there are some CPM increases that are coming through as a result of the upfronts.

We're still pretty early. A lot of stuff doesn't get nailed down until toward the end of the year, and our mobile site does support lead generation. I think that's one of the questions that you asked. Yes, it does, and we're further enhancing things for that.

I think there was a question in there about new products. We are working on new products, both from a dealer-centric point of view. I would expect that we'll have something out in the marketplace probably later in 2013, but what we are really focused on right now, we really view our partnership with Polk as providing to us incredibly valuable information that we can then provide to our dealer customers and even to our OEM customers for the dealers that are part of their programs.

As you can see somewhat from the slides that we have in the presentation, which really shows dealers -- and for the first time in our history, we're actually able to talk to dealers and know upfront how many cars they sold from the leads we provided to them and what happened to the consumers associated with the other leads that we also sold them.

So that slide, which is -- what's the slide number on that? -- slide number eight, will show you really where those consumers did end up buying a car. Some will have submitted Ford leads through us using the example on these slides and then just ended up buying from another Ford dealer. Some of the important stuff that this data shows is that consumers do cross over from new to used after they submit a new lead, and it also shows the consumers to cross over makes after they submit a lead because several of these -- and this is actual data that we've dropped in here from a specific example. We've changed the names of all the dealerships, but this shows you the crossover between makes after a consumer has submitted a Ford lead.

So this kind of data is actually pretty new and extremely actionable in the auto space, so we're very excited about this.

So for the time being, for the foreseeable future, we'll be focused on getting this message out there because these are specific dealer reports on a dealer-by-dealer basis. Did I hit everything?

Yes, yes, definitely. One final question, in terms of expenses, you keep threatening us with incremental expenses going forward, but we still haven't seen that. The OpEx has been fairly flat. Should we assume that your incremental expenses are basically in the cost of goods line? That's why your gross margin is going down? Or do you think there is going to be some operating expense incrementals going forward?

Well, I wouldn't exactly agree that we threaten you with incremental expenses. We just talk about the fact that we see great growth opportunities in our business and we're investing in order to accelerate those growth opportunities in our business.

One of the reasons that you're not seeing an increase in our operating expense line is because we're also at the same time doing a damn good job of managing our operating expenses, so we've been able to offset some of the investments that we make through operating expenses with reductions in other areas. And we would expect to continue to do that.

Some of the investments are in cost of goods sold, particularly the ones related to lead generation as we beef up our internal lead generation team and as we create new and increased content. The video content that we create that's on the YouTube channel and other written content is in our cost of goods sold line. So we believe we actually continue to do a good job of managing our expenses and balancing where it makes sense to invest and take expenses out of other areas.

The comment that I made about investing in the sales force, that will be in the operating expense line. We have not invested in our sales force, other than replacing positions, for quite some time, but we're very excited about what we've been able to do in terms of growing our dealer-facing revenue, and that's even before we began having any meaningful information back from the Polk partnership to use to go out and talk to dealers about.

So we believe that by arming our sales force with all of this incredibly important information that is actionable for dealers, we're going to drive our revenue up and our productivity is going to increase pretty meaningfully as a result from that.

Great. Thank you.

Jared Schramm, Roth Capital.

You there?

Yes. Hi, Jared.

Okay, sorry. So it appears that the R.L. Polk study to date has been quite a success for you. Is this something that you're going to look to continue in perpetuity, or will you take the data you have thus far and just replicate that as you pitch the product to wholesalers and retailers?

This is something that we would basically expect to continue in perpetuity. It's an ongoing. We update this data on a regular basis, working with Polk, so it's a living, breathing part of what we're doing today.

We basically update the information with new feeds from Polk on a monthly basis. So it will continue to be an integral part of what we're doing as we go forward.

And candidly, what we're also doing is encouraging our competitors and our suppliers to participate in a program like this with Polk because it's a great thing for everybody in the auto space to overall improve the quality of the leads that are being sold to the dealers and the manufacturers. Everybody benefits at the end of the day, and so we're strongly encouraging all of our competitors to join us in doing this.

And turning to finance requests, any deeper color on what you're seeing in that space there? It appears the environment seems to be lightening up as far as requirements are concerned. I just want to get your take on what you're seeing, particularly in the finance request arena.

Historically, that's really been a business that we aggregate leads, so we would buy the vast majority of all the leads that we turned around and sold to our dealer customers.

Starting about -- actually, about August of last year, there was starting to be some ripple effects in that market, I think as a result of more players coming into it. Sub-prime was starting to kick up. Some of the larger lending institutions were beginning to enter the SEM markets related to subprime. Prices started going up.

And what's really happened over the course of the last year is there are actually a handful of long-time participants in the market and some brand-new, very large participants in the market that are bidding up the available supply to prices that approach what has historically been the retail price that we would all sell these leads for.

As you can imagine, that's not something that we have found terribly palatable. We have begun ramping up our internal efforts; we're beefing up our SEM team in order to focus on this more. We are ramping up our efforts on Autobytel.com in order to expand our finance section. We're looking at a partnership with a couple of large providers of finance-related opportunities, tools, in terms of what we're doing.

So we do believe that we will be able to turn that business around. We do believe we will be able to ramp up the volume of leads that we generate internally.

We will continue to focus on the quality into that market. We could have continued to boost our revenue by buying poor quality stuff. We, of course, chose not to do that. That's a short-term fool's errand, from the way I look at this. And so, we have kept our reputation intact and are looking to grow that business as we move forward.

We've also seen even recently, over the last couple of months, the volume issues have moderated a little bit. I think some of the people that were grossly overpaying for months perhaps have recognized that their return on investment is not what they would like it to be, and they're pulling back.

So we're still optimistic about the future of that.

That's helpful. Lastly here, turning to just purchase requests, you mentioned as you're looking to buy from third-party aggregators that supply has gotten a little tighter. Is that due to fewer aggregators being around right now kicking out leads, or is that just the demand side is really ticked up and is making that supply go a little shorter?

It's a combination of both. There are fewer suppliers out in the marketplace today, in large part because there was a large number of them that were generating and selling some very poor-quality stuff. Some of those guys have gone out of business; some of those guys are cleaning up their act and they're improving the quality of what they're doing.

You know, one of the benefits of our new relationship with Polk is we can use that information and get a much better handle on the true quality of the leads that we're buying from some of our suppliers and help them understand how they can do better at generating quality through their own methods. And those that we see that are improving their quality, we are and are prepared to increase our purchases from, to the detriment of those that don't. So we view it as kind of a positive.

Thank you very much.

Thank you, Jared.

(Operator Instructions). George Santana, Ascendiant.

I have a few of them for you. Small ones, on the Polk data, thanks so much for sharing some color on that. How far along in the process are you on that? And what I mean by that, are you showing that to all dealers -- in other words, on a national basis -- or are you still rolling this out by territory?

I think it's probably fair to say we're still in the rolling-out process. I mean, these reports have to be pulled on a dealer-by-dealer basis. You know, we've got about 3,800 dealers on our programs today, new and used programs, so they've got to be pulled dealer by dealer.

We are looking for ways to improve that process. We're also in additional discussions with Polk in order to deepen the type of information that we get, as well as to speed up the timing of some of the information that we get.

So I think the good news out of this is we've been able to pick up our progress, generate increased revenue, increase our profitability even before we've had any meaningful benefit from the Polk data for any reasonable amount of time. I mean, really, it's only been in the last probably three months that we've had enough of this data that we've worked with and that we and Polk feel comfortable we are seeing the right results from in order to go out and use it with dealers.

But we are, in fact, gearing that up, and candidly, that's one of the reasons why we are interested in investing and increasing our sales force is to get that message out there, both to the dealers we already have on our programs, but equally important to go out there and sit down with dealers that we don't have on our program that we see as a result of the Polk data having purchased -- or sold cars to consumers that have come through our process.

That's great. So this will be an ongoing process, and you mentioned it's one in perpetuity, but it's -- I can imagine that kind of data takes some time to compile.

Yes. They aggregate it from all 50 DMVs around the country. So it takes them a while to gather it after the end of every month, clean it.

So there is probably a 60- to 90-day lag time on getting the data. We're working to reduce that. But it's still highly actionable data because what we're doing is showing dealers where they could have sold vehicles, in addition to discussions about the ones they did sell.

And you actually have anecdotal data that you've shown this info to a dealer, and they said, sign me up.

Yes, we definitely have examples of those conversations, absolutely.

That's great to hear. You also mentioned your sales force. How many sales people are actually out there for you and how does that compare and what do you envision going forward?

We have currently 18 people in the field, or 18 positions in the field. There are a couple of open positions that we're replacing. We have about 20 people internally that do both sales and customer support. I would say the total increase in that would probably be less than 20% overall of that.

What we're really looking to do, and the way we've done this is quite scientific and it's based upon where we know we have high volumes of customers that we could use additional support, either sales support or frontline sales support or sales people because of the volume of opportunity or interest that we have in the most popular areas around the country, for the most part.

So the increase of less than 20%, is that from last year or where you envision that you will go?

I'm sorry, George. Could you ask me that one more time?

You said you envisioned a total increase for -- it represented a total increase of less than 20%. I'm not sure if that is less than 20% increase from where you were last year or you don't need that many more bodies in order to fully staff a sales force.

It would probably be -- what I mean is a 20% increase from where we are right now.

I see, to get to where you need?

Well, to get to where we feel like we can more aggressively cover the most populous areas of the country.

Okay. Perhaps on a tangent there, what do you need to do and how much of an investment would it require to build up your internally-generated finance leads?

We pretty much have done what we think we need to do. We beefed up our internal group with -- largely by making an additional hire. There really aren't a lot of other expenses associated with that, other than just the way we normally generate those volumes of leads.

It's not going to be a big increase in OpEx or in cost of revenue related to beginning to generate those.

I see, okay. Also, is there an update on -- last quarter, you mentioned something about Yahoo and Detroit Trading and True Car?

To the best of our understanding, and I don't really want to be too detailed because, to be perfectly honest, I'm not privy to all the details, Yahoo and True Car have changed the nature of their relationship.

As you know from the press releases that were put out, Detroit Trading is managing the lead volume out of Yahoo Autos. We have a very strong relationship with Yahoo and with Detroit Trading, and as far as we're aware, we are one of the large purchasers of leads coming from Yahoo Autos, that we in turn sell to our dealer customers.

And they're scrubbing -- well, I guess you can't really say. You wouldn't be buying them if they were not of high quality, right?

We would not be buying them if they were not good quality.

Okay. Finally, and certainly you guys deserve a lot of credit for driving profitability, operating cash flow, but what do I tell an investor who is looking at your company, going, well, this is great, but you have revenue growth of 3% to 5%. Can this be a 2013, 2014 that's double-digit grower, at least on the top line, with hopefully operating leverage that gets you to significantly greater profitability?

I would say it's not inconceivable that we could reach those levels. Certainly the ability to do that is enhanced by adding to our sales and sales support operations in order to increase the number of dealers on our programs, so I think it is possible. I forgot the last part of what you asked, and I apologize.

It's just more if you expect the topline revenue -- not trying to ask you to commit to any number, of course, but can this business be there? Certainly the economy has been difficult, you see auto sales returning, we see people getting auto loans again, so that will help. The advertising, as you're mentioning, but if you're growing on topline, hopefully part of the story is that you have significant operating leverage, and the profitability will grow faster.

Let me just say this, there's nothing structurally that would prevent us from being able to do that. And one of the reasons we are continuing to invest in the business is so that we can accelerate our growth and take advantage of the opportunities we see in front of us.

Great. Thank you, guys.

Thank you, George.

Sameet Sinha.

In terms of the sales force expansion, especially for a dealer group, can you talk to us about the compensation structure? How does that work? And could this be marginally incremental?

And secondly is any impact from Hurricane Sandy? Obviously a lot of dealer inventories (inaudible) probably destroyed. Can you just give us some initial feedback that you're getting?

Let me answer the second part of your question first. It's really, so far, too soon for us to tell to what extent there will be an impact directly on our business.

Having said that, the Eastern Seaboard corridor is one of the most populous quarters in the country, and we do have a lot of dealer customers in those markets. We know that some of our dealer customers, particularly in New Jersey, still do not have power and have not reopened their operations. So we do expect to see some, but thus far we don't think it's going to be a difficult impact on our business.

Having said that, we're also aware, and I think NBC put out a report earlier today estimating that up the Eastern Seaboard, there's probably approximately 250,000 vehicles that will have to be replaced over the coming months, and we would expect to be part of that replacement process as consumers look online, figure out what they want to try to buy once they get their insurance check, and go through that process.

I doubt we'll see too much of benefit to ourselves in the fourth quarter. There might be some in December. December's usually a pretty robust month. I don't know if this December is going to be affected by concerns over the fiscal cliff and taxes going up and all that kind of stuff. It remains to be seen.

But the good news or the silver lining in that cloud for the automotive industry is there will be 250,000 cars, approximately, that have got to be replaced. It will start this year and it will probably be relatively robust in the first few months of 2013.

To answer the first part of your question, we really don't talk about compensation in that granular detail. So I really can't answer that question for you.

Great, thank you.

Thank you, Sameet.

Thank you. So I'd like to turn the call back to Jeff Coats for any concluding remarks.

Thanks, folks, for joining us today. We look forward to reporting to you on our continued progress. Thanks.

Okay, ladies and gentlemen, that does conclude your conference. You may now disconnect and have a great day.