Autoweb Inc (AUTO) 2013 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Autobytel announces 2013 first-quarter financial results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions).

I would now like to introduce your host for today's conference, Mr. Roger Pondel, Investor Relations of Autobytel. You may begin.

Thanks operator and hello everyone. Welcome to Autobytel's 2013 first-quarter conference call. Presenting today are 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 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, the slides accompanying this presentation and the Company's public filings with the SEC. Actual events may differ materially from those forward-looking statements.

Specifically please refer to the Company's Form 10-K for the year ended December 31, 2012 and Form 10-Q for the quarter ended March 31, 2013, which was filed earlier today 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.

We have included slides with today's presentation to help illustrate some of the points being made and discussed during the call. These slides may be accessed by clicking on the link in today's press release or by visiting Autobytel's website which is www.autobytel.com and when you are there go to investor relations and then click on events and presentations.

Also please note that during this call we will be discussing EBITDA, cash net income and cash net income per diluted share which are non-GAAP financial measures as defined by SED 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 are posted on the Company's website.

With that I will turn the call over to Jeff Coats. Jeff?

Thank you, Roger. Good afternoon, everyone. We began 2013 on a high note generating our highest quarterly revenue in five years. We also produced year-over-year double-digit increases on auto lead volume, generated 15% growth in retail auto lead revenue and produced 11% growth in wholesale lead revenue, a Company record. Our ability to deliver consistently high sales conversion rates as well as meaningful consumer experience at Autobytel.com positions us for continued growth in 2013 and beyond.

The success we realized in the first quarter and anticipate going forward is directly tied to the strategic investments we are continuing to make. These investments which include enhanced customer acquisition and high quality lead generation activities are paying dividends in the form of greater market recognition, a growing customer base and increased revenue.

I will turn the call over to Curt now for the financial review and then return to speak more about our operational progress and strategy. Curt?

Thank you, Jeff. For the first quarter as you can see on slide 4, revenue grew more than 9% to $18.3 million from $16.7 million last year. This represented our ninth consecutive quarter of year-over-year revenue increases and as Jeff mentioned, our highest quarterly revenue in five years.

Total automotive lead revenue increased approximately 13% from last year's first quarter with the retail channel growing approximately 15% and the wholesale channel growing more than 11%. In fact, we achieved record wholesale revenue this quarter.

As shown on slide 5 during the 2013 first quarter, we delivered approximately 1.2 million automotive leads which is up 13% over last year's first quarter and 12% sequentially. 71% of these leads were delivered into the wholesale channel with the remaining 29% delivered into the retail channel.

Additionally, we delivered approximately 86,000 specialty finance leads during the first quarter of 2013 versus approximately 100,000 last year. Specialty finance lead revenue declined approximately 8% year-over-year for the 2013 first quarter attributable to ongoing lead supply softness. However, revenue from this business grew approximately 12% sequentially.

While the finance lead market has stabilized somewhat albeit with continued tight supply, we believe our efforts to generate more of these leads internally present a solid upside opportunity for the Company.

Advertising revenue was $715,000 for the 2013 first quarter versus $859,000 last year. One OEM as a result of changing ad agencies did not include Autobytel in its 2013 up front advertising buy but we have had spot buys by more OEMs already this year and believe there will be others before the year is up. As a result, we believe the advertising revenue will grow in single digits for 2013.

With our consumer facing website performance continuing to improve, mobile site page views increasing, we believe that advertising remains a long-term profit enhancing opportunity for us.

On slide 6, you can see the gross profit totaled $6.6 million or 36.1% of total revenue for the first quarter of 2013 compared with $6.8 million or 40.9% of total revenue last year. As discussed last quarter, we have been investing strategically and growing the topline through further enhancing our high quality lead volume and consumer experience at Autobytel.com, all helping expand our internal lead generation efforts.

Our long-term gross profit target remains above 40% and we believe the second quarter gross margin will increase from first-quarter levels.

Total operating expenses were $6.6 million for the first quarter of 2013 slightly higher than the $6.5 million last year. The increase in operating expenses primarily related to the increased investment in both consumer and dealer facing advertising and marketing. As a percentage of revenue total operating expenses declined to 36.1% from 39% last year.

As you will see on slide 7, non-cash stock-based compensation was $186,000 compared with $281,000 for the 2012 first quarter. Depreciation and amortization totaled $538,000 for the most recent first quarter versus $508,000 one year ago. For the 2013 first quarter, net income grew to $334,000 or $0.04 per diluted share. Net income for the first quarter included $500,000 in income related to an early termination of a licensing agreement. Net income was $253,000 or $0.03 per diluted share for last year's first quarter.

EBITDA grew 13% for the first quarter of $2013 to $1 million from $898,000 last year. Cash net income totaled $1.1 million or $0.12 per diluted share for the most recent quarter compared with $1 million or $0.11 per diluted share for last year's first quarter.

At March 31, 2013, our cash and cash equivalence balance totaled $14.7 million compared with $15.3 million at the end of 2012. Cash used in operations for the 2013 first quarter was $372,000 versus cash provided by operations of $894,000 in the first quarter of 2012. The decrease in cash related to an increase in working capital resulting from the significant increase in revenue for the first quarter of 2013 compared with the prior period.

Now I will turn the call back to Jeff.

Thanks, Curt. I will start my review today with a discussion of lead quality and sales conversion rates, elements that are providing Autobytel with a distinctive competitive advantage.

Our commitment to these key metrics is perhaps the most important reason that lead volumes are growing in the double digits and new dealers are being added to our customer count. As Curt mentioned, we delivered approximately 1.2 million automotive leads for the first quarter of 2013 reaching the highest lead volume in our history. This record volume was a result of the increased number of dealerships purchasing leads from us, increased dealer and OEM demand, strong investment and lead acquisition and improving automotive economy.

It bears repeating as you can see on slide 8, that the leads we generate from Autobytel.com convert to sales on average at a rate of approximately 24% as validated by R.L. Polk. This number represents a rolling three-month average and naturally fluctuates from month to month.

Our current sales conversion rate is three times the rate of the estimated industry average of approximately 6% to 8% and the market is taking notice. We are continuing to leverage the data we received from Polk to provide industry insights in the consumer auto purchasing behavior. As testament to the value we are providing dealerships, Autobytel was recently named as a finalist by the Driving Sales Presidents Club for the group's most valuable insight award where we presented examples of how our data is being used to help improve customer treatment.

Dealerships can now quantify the high degree to which consumers cross shop between brands and between new and used cars and then utilize this data to better shop their consumer interactions.

The data we are gathering is also useful in influencing the experience and tools that are offered on Autobytel.com. As a result, we have already made enhancements such as allowing consumers to compare new and used vehicles side-by-side and offering a combined new and used research path.

Moving forward, we will look for every opportunity to use the data to help better serve our consumers and our [mart] dealer and OEM partners with the intelligence that they need to make better business decisions.

As you know one of the keys to delivering high-quality leads to our customers is being able to generate those leads from our own websites. Our efforts to transform Autobytel.com into the preferred destination for car buyers and owners are aimed at helping assist consumers throughout the entire buying cycle. As part of this process, we will continue to increase the volume of high-quality consumer interactions that we provide for our dealer partners.

At Autobytel, our goal is to bring consumers and dealers together to facilitate the automotive purchase process. In order to emphasize this collaborative approach, we will continue to produce dealer focused content at Autobytel.com. Beginning last month we started featuring an Autobytel dealer of the month designed to highlight dealers that excel in customer treatment and service. The recent changes that we have made to the site and ongoing enhancements we continue to make are definitely resulting in positive website trends.

The many enhancements we have made to Autobytel.com are resulting in progress toward increasing page views and page views per visit for our website. We believe these metrics should continue to grow over time as we further enhance the usability and functionality of the site.

As you can see on slide 9, our YouTube channel is going strong as a fantastic source of customer engagement. With almost 16 million views and growing and populated with more than 530 unique videos, we are reaching an increasing number of consumers and bringing them to Autobytel.com.

With our site attracting positive attention we have begun preparing for radio spot buys in certain markets aimed at attracting consumers who are in market to purchase cars. The first of these ads which will focus on the consumer experience at Autobytel.com and the benefits consumers will attain by visiting our site is scheduled to launch during the second quarter of this year.

During the year, we will also focus on continuing to grow our retail network of auto dealerships to give us a larger base among which to sell our high-quality leads. As we discussed during last quarter's call, we are continuing to expand our retail sales force and arming them with verified data about our high sales conversion rates.

As a result, we grew our retail dealership network by 8% year-over-year in the first quarter to more than 3500. While we believe we now have the nation's largest distribution network through the combination of our retail and wholesale relationships, we also think there is significant room to further grow our direct retail presence amongst the country's dealerships.

The improving automotive market which is outlined on slide 10 and the significant progress we have made in enhancing lead quality and the consumer experience at Autobytel.com set us up for a great 2013. More immediate for the second quarter, we are expecting revenue in the range of $17 million to $18 million which will represent solid growth from last year's second quarter.

We believe that second quarter gross margin will improve on a sequential basis and will return to the 40% range during the second half of this year. We also expect continued profitability for the second quarter.

In addition to the business objectives outlined on slide 11, our primary financial goal remains to accelerate growth while continuing to improve profitability.

Operator, we are now ready to take questions.

(Operator Instructions). Kyle Krueger, Apollo Capital.

Yes, Jeff, could you discuss the investments that you are making in the form of gross margin and what those entail and how they are going to grow the business on a going forward basis and is that sustainable?

Kyle, it is a combination of enhancing our lead generation activities with our SEM team as well as additional video and written content for our website as we continue to expand the reach of the website in order to generate additional consumer leads and page views for our advertising business as a result. That is really it in a nutshell.

It is working very well for us so far and we are focused on maintaining our high quality. I mean our close rates are three times the industry average. We know from conversations with many of our wholesale customers that we are the largest supplier to their programs and that the quality of our leads are at the top end of all leads they buy from anybody.

So all of the investments that we have been making are definitely yielding fruit already. Having said that, we will continue to do some investment throughout the course of this year but as we have noted, we do expect our gross margin to move back up to 48% during the course of this year and we would expect it to stay in that area as we move forward.

Okay. Are you getting premium -- your leads are much better than the average leads generated out there. Is that translating into premium pricing for you at this point?

We are seeing the ability to increase our prices both at retail and wholesale. It is not across the board where we can just announce a price increase. It really has to be done on a customer by customer relationship basis. But we are writing new business at stronger prices and we are receiving through negotiations with customers increased pricing and other programs as well.

Any thoughts on returning capital to shareholders either via a dividend program or share repurchases? Where are you with respect to that issue?

We do have a $2 million share buyback approval in place. We have not purchased any shares under that during the last quarter. We believe there are opportunities for us to employ the capital that we have. Certainly it is a decision for the Board to make and it is a decision that is reviewed on a regular basis with the Board.

Meaning you plan to spend the $15 million?

Well, I didn't say I plan to spend the $15 million but I do think there are investment opportunities for us to accelerate our growth and reinforce what we are doing which would be for the benefit of everybody at the end of the day.

Okay. Thank you.

(Operator Instructions). I'm not showing any further questions in the queue. I would like to turn the call back over to Jeff Coats for any further remarks.

Okay. Thanks everybody for joining us today. As you can see we are very excited about the progress we continue to make and remain upbeat about 2013 and beyond. We look forward to reporting additional progress to you as the year unfolds. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This includes today's program. You may now disconnect. Everyone have a great day.