Autoweb Inc (AUTO) 2015 Q2 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Autobytel's financial results for the second quarter ended June 30th, 2015.

Joining us today are Autobytel's President and CEO, Jeff Coats; the Company's CFO, Kim Boren; and the Company's outside Investor Relations advisor, Cody Slach with Liolios Group. Following their remarks, we'll open the call for questions.

I would now like to turn the call over to Mr. Slach for some introductory comments.

Thank you, Damon. Before I introduce Jeff, I would 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-Q for the quarter ended June 30th, 2015 which was filed prior to this call, as well as other filings made by Autobytel with the SEC from time to time. These filings identify factors that could cause results to differ materially from those forward-looking statements.

There are slides included with today's presentation to help illustrate some of the points being made and discussed during the call. The slides can be accessed by clicking on the link in today's press release or by visiting Autobytel's website at Autobytel.com. When there, go to Investor Relations and then click on Events and Presentations.

Please also note that during this call and/or in the accompanying slides, management will be disclosing non-GAAP income and non-GAAP EPS, 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 today's press release and/or in the slides, which are posted on the Company's website.

And with that, I will now turn the call over to Jeff.

Thanks, Cody. Good afternoon, everyone. Thanks for joining us today to discuss our second quarter results for 2015.

The second quarter was filled with several significant milestones for Autobytel. First and foremost, we acquired one of the top ranking providers in the leads marketplace, Dealix, which we are integrating on schedule and as planned.

We are extremely pleased to note that we've been able to maintain Dealix's revenue profile at a stronger level than we initially anticipated. Accordingly, we've decided to take the opportunity created by this stronger revenue profile to further increase our overall lead quality.

Our best in class consumer acquisition team in Tampa has now integrated the Dealix Autotegrity SEM team in Cambridge, and we are already seeing positive results in terms of increased quality as well as margin.

As a result of this combination, Autobytel's internal lead generation capabilities are strong than ever. And over the next 18 months or so, we expect to continue to see more of our overall lead volume generated internally.

While we expect this shift in sourcing may create a bit of a revenue timing issue for the next two to three quarters as we adjust our current levels of outside purchases, we also expect this action to both boost our margins and to boost our overall close rates, because our internally generated leads have a higher margin than those we purchase from outside suppliers and are better quality than virtually anything we can buy from the outside. This will allow us to focus on having deeper relationships with a smaller number of outside suppliers who share our commitment to quality.

I'm also very pleased to confirm that our organic Autobytel retail dealer count, which does not include the Dealix dealers, did in fact bottom during the second quarter and began to grow again on a net basis.

During the quarter, we launched our completely designed Car.com website, and saw an immediate improvement in page views and page views per visit. We also launched our exciting new traffic product, Autobytel Direct, jointly developed with AutoWeb. Initial market response has been even better than we expected.

In addition to these operational accomplishments, we drove strong growth during the quarter with robust advertising revenues, driven both by our AutoWeb commercial relationship and the continued page view growth on both Autobytel.com and Car.com. Our success is evidence by record non-GAAP income for Q2.

I will provide more information on these exciting developments, but first I'd like to turn the call over to Kim and have her take us through the important details of our financial results for the second quarter. Kim?

Thanks, Jeff, and good afternoon, everyone.

For those of you following along with our earnings presentation, on slide four you can see our second quarter revenues increased 17% to $30.4 million compared to $25.9 million in the year-ago quarter. The increase was driven by growth in advertising revenues, coupled with the recent Dealix acquisition.

Lead revenue from automotive dealers, our retail channel, increased 5% to $12.9 million. Lead revenue from auto manufacturers and wholesale partners, our wholesale channel, increased 28% to $13.9 million, driven by a major OEM significantly ramping their leads program with us and the contribution from Dealix.

Advertising revenues were $2 million, a 27% increase sequentially, and a 166% increase on a year-over-year basis. Our display advertising business continues to ramp through our relationship with Jumpstart as we continue to generate a higher volume of page views.

We also experienced an increase in click revenue through our commercial relationship with AutoWeb. The details of these relationships are further highlighted on slide five.

Moving now to slide six, you'll see that we delivered approximately 2 million automotive leads during the second quarter, a 24% increase over last year.

Retail new leads were essentially flat compared to the prior year quarter, while used leads increased 4%. 70% of leads were delivered to the wholesale channel, with the remaining 30% to the retail channel.

We delivered over 87,000 specialty finance leads during the second quarter, down from 113,000 in the corresponding year-ago period. Specialty finance leads revenue was $1.6 million in the second quarter, unchanged from last quarter and down over $300,000 from the year-ago quarter.

The year-over-year decrease was primarily due to a difficult comparable, as we were testing incremental volume with lead suppliers in Q2 2014. We have since scaled back on low quality lead supply.

On our last quarterly update, you may recall that we planned to introduce a new capacity metric to replace our typical dealer count metric, as dealer count does not necessarily serve as an appropriate barometer of the health and success of our business.

We continue to believe this capacity metric is a better way to track the strong growth of our leads business. However, after feedback from our shareholders and analysts and the ongoing integration of the Dealix business, we've decided to continue providing only dealer count. Once the Dealix integration is complete, we will publicly provide both dealer count and capacity metrics.

With that said, on slide seven you'll see dealer count stood at 5,238 as of June 30th, which is a 29% increase from March 31st, with the majority of that growth coming from the dealers added from Dealix.

As we'd expressed previously, we're expecting some dealer churn from the acquisition, however not nearly at the same rate that we experienced in our acquisition of Auto USA. Given our experience with the Auto USA acquisition, we believe we can more effectively manage the churn this time around.

On slide eight, you'll see that we continued to experience strong page view growth in the second quarter, with total page views up 185% year-over-year and 21% sequentially to nearly 102 million.

In February, Google announced that beginning April 21st, they would be expanding their use of mobile friendliness as a ranking signal, which they stated would change mobile searches worldwide and have a significant impact on search results.

Autobytel had anticipated the move to mobile with our Mobile First strategy, and consequently both our unique visitors and page views have continued to increase since the algorithm update.

Now moving to slide nine, gross profit during the second quarter increased 14% to $11.8 million compared to the year-ago quarter. Gross margin was 38.7% compared to 39.8% one year ago.

We anticipated the reduction of gross margin as a result of the Dealix acquisition. I remind you that Dealix historically had gross margins of approximately 32%, so we are pleased with the rate at which the gross margin is returning to pre-acquisition levels.

Total operating expenses in the second quarter were $10.1 million compared to $8.9 million in the year-ago quarter. As a percentage of revenue, total operating expenses decreased 110 basis points to 33.1% compared to 34.2% in the second quarter of 2014.

This improvement reflects the operating leverage we are seeing in the business despite the approximately $900,000 that was spent on acquisition costs during the second quarter.

On a GAAP basis, net income increased 9% to $871,000, or $0.08 per diluted share, on 11.1 million diluted shares compared to $801,000, or $0.08 per diluted share, on 11.3 million diluted shares in last year's quarter.

For the second quarter, non-GAAP income, which adds back amortization on acquired intangibles, non-cash stock-based compensation, acquisition costs, litigation settlements, severance costs, and income taxes, increased 65% to a record $3.5 million, or $0.31 per diluted share, compared to $2.1 million, or $0.19, in the year-ago quarter.

Cash provided by operations for the 2015 second quarter was $3 million compared to $1.9 million in the prior year quarter.

On slide 10, you can see that our cash balance remained strong despite our acquisition of Dealix, with cash and cash equivalents of $16 million at June 30th, compared to $20.7 million at the end of 2014.

As a reminder, the purchase price for Dealix was $25 million, including a one-time working capital adjustment. We purchased Dealix in part through a newly established $15 million senior secured term loan via Union Bank and by drawing on the $2.8 million remaining balance of our $8 million working capital revolver, which both carry attractive rates. The remainder was funded by cash on hand.

I'll now turn the call back over to Jeff. Jeff?

Thanks, Kim. As I mentioned earlier, our second quarter was indeed filled with several significant accomplishments.

Building on Kim's remarks, in May we acquired Dealix, a top ranked provider of automotive leads. Our new combined businesses are expected to support our mission to deliver high quality leads for the automotive marketplace.

Further, we expect to provide enhanced analytics, more robust service and support for the industry, and an expanded suite of products for dealers and manufacturers. On slide 11, you'll find some incremental color on the transaction, as well as some of the benefits and opportunities Dealix provides for our business.

A common question we've received over the last couple of months is how this acquisition differs from Auto USA. The easiest way to think about it is this. Auto USA was a distribution play for us. It added 1,400 incremental dealers to our network. Auto USA did not generate any leads internally.

Rather, they were strictly a reseller of leads they purchased from other third party suppliers. As such, Auto USA's lead quality was not nearly as high as ours. And as a result, they experienced higher dealer churn and lower margins.

Dealix, on the other hand, is truly a growth acquisition for us. In addition to 1,200 incremental dealers and healthy wholesale and OEM programs, Dealix provides us with an opportunity to leverage their technology and internal lead acquisition capabilities, which are particularly strong in the used car market.

I do want to be clear, however, that Auto USA was still a very beneficial acquisition for us, as it enabled us to provide our dealer services to a much larger client base, and of course the incremental cash flow it generates. It would be hard to imagine that our business would be as strong as it is today without that acquisition and the expanded dealer network.

As many of you may have seen earlier today, we filed an 8-K/A that provides Dealix's historical financials. The business had been declining as the product fit inside CDK was not conducive to its shared sales force, as opposed to our dedicated sales force model.

We believe that we will be able to stabilize the revenue in the short term, and have already begun work on cleaning up the business by eliminating hundreds of unprofitable dealers and reducing lower quality lead suppliers. We expect that we will emerge from this process with Dealix contributing at a lower revenue base than reported historically in the 8-K/A, but with a stronger and more profitable business.

In June, Autobytel officially launched a new platform called Autobytel Direct, which is powered by AutoWeb and sold by our retail dealer sales team. This pay-per-click platform drives high intent, lower funnel car shoppers right to dealers' online inventory pages and enables dealers to target car shoppers by make, model, and geography.

The ad platform also provides real time performance tracking with an advanced reporting dashboard which can track impressions, clicks, conversions, and click through rates. Several dealers have been piloting this program since last fall, and have since experienced a high conversion of leads and calls, all while creating a unique online shopping experience for high intent consumers which ultimately maximizes the dealer's branding.

With the success of our pilot dealers, we are rolling out this new traffic product even further to a select group of Autobytel member dealers. The initial response to our expanded rollout has also been very positive, as dealers are seeing the benefits of enhancing their brand by delivering these in-market consumers to their dealership websites.

Also, our large dealership groups and OEM customers are recognizing the benefits of directing this high quality, high intent traffic to their consumer facing websites, as we have several initiatives with both OEMs and a large public dealer group already in process.

We expect this new initiative to supplement our various avenues for growth, and of course reinforces that we do not put our brand between our dealer customers and consumers.

We continue to be excited about our strategic investment in and commercial relationship with AutoWeb, a company whose platform enables specialized targeting to high intent online shoppers while allowing advertisers to optimize their campaigns efficiently.

Just to remind you, we currently own approximately 15% of AutoWeb, and have an option for additional AutoWeb shares which would increase our ownership to approximately 21%.

It is worth nothing that AutoWeb commissioned evaluation of its business by an independent valuation firm in November 2014 in conjunction with raising its Series B round. The company successfully raised more capital than it originally intended, which resulted in final proceeds of $6.6 million at a post money valuation over $51 million.

On slide 12, you'll note that for several of our OEM customers we continue to estimate that consumers submitting leads that we deliver to these OEMs and their dealers accounted for over 6% of their respective total new retail sales in 2014, with the majority of these leads growing on a year-over-year basis for every OEM.

We also continued to experience healthy organic growth this year, as most of our existing OEM customers continue to significantly expand their leads programs with us. In fact, we continue to experience a significant ramp from a major OEM that has consistently increased their volumes over the last three quarters.

Compared to the second quarter of 2014, this OEM increased year-over-year lead volume by over 365%. We expect to continue expanding our leads program with this manufacturer as they continue to realize the high ROI our leads are providing them. Accordingly, slide 12 will look quite different when we update it through June 30th at the time of our Q3 earnings call.

As we expected, our retail dealer account bottomed and returned to organic growth during the second quarter. And as I previously noted, this calculation does not include any of the dealers which were part of the Dealix acquisition.

Retail new leads invoiced per dealer was up 6% year-over-year in the second quarter of 2015. And retail used leads invoiced per dealer was up 7% in the same period, which further illustrates our focus -- our shift in focus to larger, more profitable dealers.

As indicated on slide 13, our estimated average buy rate for Autobytel internally generated leads in the second quarter was 18%, in line with our estimated buy rate during the first quarter.

And as you can see on slide 14, as reported by IHS, these buy rates have remained consistently strong for the last two years, with Autobytel.com generating an average of 23% and all Autobytel internally generated leads at about 18%.

For those of you new to Autobytel, we remain confident in our estimated buy rates, largely due to our comprehensive relationship with IHS Automotive, which provides us with a credible, consistent, and quantifiable way to measure the conversion of online leads into actual vehicle sales.

Moving on to our used car business, as Kim and I noted earlier, used car leads in the second quarter grew 4% year-over-year and 12% sequentially. Our used car business remains a focal point for growth in 2015 and beyond. In fact, we've begun increasing the level of resources dedicated to sales and marketing for our used car business, and have already begun ramping the investment in our used car platform for internal lead generation.

It's worth noting that retail used car leads only represent about 9% of our total leads business today and approximately 11% of revenue, even though used car sales in the United States are two to three times that of new car sales, thus providing us with significant room to expand our revenue profile.

Our acquisition of Dealix also significantly expands our used car opportunity, especially with the addition of their highly successful car buying site, Usedcars.com, which we are already beginning to upgrade and expand.

During the second quarter, we also launched our completely redesigned Car.com website, a screenshot of which you can see on slide 15. The new Car.com is a consumer focused, mobile friendly website designed and built as a data driven Web platform to simplify the automotive decision process for consumers.

By providing a set of easy to use tools, consumers can quickly identify cars and trucks that match the key features they desire. Unique content will provide consumers with our industry expert reviews in a consumable and friendly format. The new Car.com site, which also showcases AutoWeb listings, builds upon the significant opportunity to drive growth in our advertising business.

As we have previously disclosed, Autobytel and SaleMove teamed up with Toyota's Scion brand in April to offer the SaleMove virtual showroom experience to consumers visiting Scion.com, as reflected on slide 16.

SaleMove is an easy to use, easy to implement virtual showroom technology that enables dealers and manufacturer representatives to co-browse with consumers online and in real time, and to communicate with them directly while they're shopping by way of video, audio, and text-based communication.

This program began only on Scion.com, but was recently expanded to include numerous Scion dealers in order to highlight SaleMove's ability to navigate with consumers from the Scion.com corporate site down to individual Scion dealer sites in order to stay with the consumer during their shopping experience.

Another key area of focus this year is dealer facing marketing as well as education and training. We've been ramping our sales team to help drive this important initiative. The better we can educate our dealer customers, the better they will understand our true value proposition and the high return on investment we believe our high quality leads can provide, especially relative to our competitors.

Our dealer marketing and education activities this year are designed to highlight these differences and ensure our dealers understand the higher ROI they should achieve from Autobytel leads.

On slide 17, you'll see how our pay-per-lead model compares with a pay-per-sale model. At our estimated average current buy rate of 18% for leads we deliver to our dealer customers, the hypothetical pay-per-sale in our model is about $120.00, assuming a $22.00 price per lead.

Even at an average 8% dealer close rate, which is significantly less than our high quality leads but more in line with other lead providers, the equivalent pay-per-sale is only $275.00.

Moving on to the industry outlook, as you can see on slide 18 J.D. Power has its total light vehicle sales forecast for 2015 at 17.1 million units, a 100,000 unit increase since we reported this forecast on our Q1 call, and a retail forecast at 13.9 million units, which is unchanged from our last call.

The July retail seasonally adjusted annual run rate, or SAAR, is expected to be 14 million units, which is up 400,000 units from June 2015, and 451,000 units stronger than July 2014.

Now moving on to our outlook for 2015 on slide 19, we are reaffirming our fiscal 2015 revenue guidance to range between $128 million and $132 million, representing an increase of approximately 20% to 24% from 2014.

We also maintain our expectation for non-GAAP diluted EPS in fiscal 2015 to range between $1.21 and $1.27, an increase of approximately 46% to 53%.

Our primary focus for 2015, as always, is to provide value to all of our customers, which we believe will ultimately translate to enhanced value for our stockholders. Through the continued growth of our dealers, high quality leads, value-added products, and our fast growing relationship with AutoWeb, we expect to carry our momentum through 2015 and beyond in order to capitalize on the evolving consumer and automotive marketplace.

At this time, we'd like to open the call for questions. Damon?

Thank you, sir. (Operator instructions.) Eric Martinuzzi.

Robust quarter there in Q2. Curious to know, just having digested Dealix now for the six weeks that you had it, roughly, are you seeing any scale related changes in conversation? In other words, you're -- particularly on the OEM side where, because you are now a larger entity, you're seeing more budget, not just a one for one what you acquired with Dealix, but kind of more of a strategic buy for some of these customers.

We are a larger supplier to pretty much all of our manufacturers now as part of integrating Dealix. But, it's really too early to see much difference so far in the way the relationships go, Eric.

I mean, I would anticipate over time -- we are a bigger player. We are working to bring all of our lead volume, including that which we acquired through Dealix, up to our quality levels. And as a result of that, we do anticipate having much happier customers as a result. And one would hope that will translate into nice growth opportunities for us as we go forward.

Okay. And then, anything anecdotally from dealers that you're talking to? I assume you're going out and trying to touch as many as you can. Their reaction to Autobytel's acquisition of Dealix and Autotegrity?

From what I've heard so far, it's been pretty positive across the board. I haven't really seen anything big or negative anywhere, or heard anything.

I was in Detroit last week for most of the week meeting mostly with the manufacturers, and a very positive response from those guys as well. So, I think this has been well viewed by the marketplace.

Shifting over to the cost side, I hear you talking about the dedicated additional resources. To me that means more hiring. To me that means an OpEx increase. Maybe I'm overstating it here. But, as far as kind of a run rate, I know you're only giving annual guidance, but we had a partial quarter impact of Dealix in Q2. So, maybe a simpler way to ask the question is what's the OpEx expense expectation for Q3?

Sure. We absolutely expect the OpEx to grow, especially given the fact that Q2 only had a chunk, less than half of the acquired business costs in the numbers. So, we would expect it to grow probably by 10% to 15%.

Okay, that's helpful. Thanks for taking my questions, and congrats again.

Thanks, Eric.

Sameet Sinha, B. Riley.

Yes, thank you very much. So, looking at the wholesale revenue growth and a pretty solid increase: about $2 million sequentially. Now, remind me. Does Dealix contribute to that line, or is that primarily a dealer channel and this wholesale growth was primarily from the organic Autobytel channel?

And secondly, Jeff, you'd given some information about this one particular OEM who's been growing and ramping up. Can you just repeat that data? And then I have a follow up question.

Sure. It's a combination -- the wholesale growth is a combination of organic growth on our side. Most of our manufacturers are up with us year-over-year anyway as they continue to scale their programs with us because of our high quality.

But, Dealix did bring in a nice chunk of wholesale revenue with them. So, it was spread amongst probably 15, 18 manufacturers. I can't remember off the top of my head. But, there were a couple that were pretty large relationships, so it did create a significantly larger relationship for us with a handful of manufacturers.

The manufacturer that I was referring to has been ramping with us. The year-over-year growth from Q2 2014 to Q2 2015 was 365%. So, when we publish our OEM chart in November when we announce our Q3 results you'll be able to figure it out pretty clearly, because one manufacturer will jump up pretty dramatically and move over to the right with all those other guys at a higher level.

Got it. Now, final question. In terms of just trying to back into organic growth, it seems like organic growth in the second quarter was more in the 6% level, but your second half guidance implies about 9%. Is that a fair characterization?

Yes, that's a relatively fair characterization.

Okay. And finally -- I'm sorry. I'd said that was my last question, but just one more. Can you elaborate on your used car strategy? Obviously you will average in how big the market opportunity is. It's 9% of leads, 11% of revenue, and you have this prime real estate with Usedcars.com. How are you planning to tackle this? If you can just elaborate on that, that'll be helpful.

Sure. There's really no reason our used car business doesn't end up being as big or bigger than our new car business, Sameet. Used car volume is two to three times the number of new cars sold every year. We're looking at maybe 17 million new cars this year, so the used car market is two to three times that.

So, there's a huge growth opportunity for us. The product that I mentioned, Autobytel Direct, is a great one that'll help from a used car standpoint. It allows traffic directly to vehicle description pages on a dealer's website. It highlights the dealer's brand.

So, we're increasing our lead gen capabilities out of Tampa. We just acquired some incremental used car lead gen capabilities out of the Cambridge office of Autotegrity and Dealix and the Usedcar.com site that they've got.

So, we are very excited about our used car opportunity. And it takes a little bit of time to start scaling it up, but we would expect to see some nice, robust growth in 2016 in used cars.

Thank you very much.

Thank you.

Gary Prestopino, Barrington Research.

Thanks. Good afternoon.

Hi, Gary.

I'm new to the call here, but just wanted to ask a couple of questions in terms of your deck shows that your retail new car leads were essentially flat in the quarter, but new car sales were up about 3.3%. So, what accounts for that discrepancy, Jeff?

Sure. So, there are a few things in there; one, sourcing a nice increase in revenue per lead so we're seeing pricing efficiencies. And the second is we're seeing growth in our other retail products that aren't included in the dealer count and our lead volume metrics, for example our mobile suite that also gets reported in the dealer -- the retail dealer revenue line.

Okay. But, that still doesn't -- that doesn't answer the question. I mean, I'm talking about absolute lead numbers. This slide in the deck says lead volume or lead numbers. So, I'm just trying to get an idea. Did you have tough comparisons versus last year?

I'm assuming you're talking about the reason that it's relatively flat. And that would be because of the churn that we saw with the Auto USA dealers.

Okay. So, that's churn with Auto USA. That's fine. That's what I wanted to get at.

And then, do you have a metric for what your internally generated leads were this quarter versus last year at this time?

We didn't include it in the deck because of the acquisition and the movement in internally generated. But, it was around the 70% range.

So, it was about 70%. Where was it last year? Is it higher then, I would assume?

It was a little higher than that. It was between 70% and 75% a year ago.

Okay, thanks. And then, I was trying to write and couldn't write fast enough. Did you say your retail new lead revenue was up 6% this quarter?

The reference was to invoiced dealers per lead.

Okay. All right. Thank you.

John Blackledge, Cowen.

Great. Thanks. Just two questions. Is there an opportunity to drive unit sales via affinity partners? It's an area where one of your competitors is seeing stalled out growth, but just wondering if it would be an opportunity for you guys.

And then secondly, just on the used car leads, I think you said 9% of total leads in the quarter. For it to get to parity with new car leads, obviously the growth would have to be much faster. Just wondering how many years it might take to kind of get there, if at all. Thank you.

Sure. There definitely is an affinity opportunity for us. We've certainly been approached by people. It's something that we're interested in. So, it's something that you'll probably hear more about from us over time.

It's a very interesting market, and the dealers like it a lot. And we're really trying to do things -- we're a very dealer focused, dealer friendly company. And so, everything we can do to help our dealers sell more cars we're interested in. And that's a very interesting one.

With regards to the used car stuff, it would definitely take probably three plus years to get the used business up to parity with the new business, because new is going to continue to grow anyway, unless of course we did some sort of an acquisition that brought in a much larger proportion of used revenue for us.

But, the opportunity is out there. The used car business continues to grow. IHS recently published the statistic that the average age of a car on the roads in the United States is now up to 11.5 years.

So, despite the extremely robust car sales over the last three or four years after we've come out of the recession, the age of the fleet on the roads in the United States continues to inch up every single year. It'll be interesting to see how long it takes before those two lines finally cross.

Thank you.

Ed Woo, Ascendiant Capital.

Yes, congratulations on a great quarter. Now that you guys acquired Dealix and are integrating it, have you noticed any changes in the competitive environment?

Not really. It's too early to really see anything like that. And this is the automobile industry in the United States, so --.

I guess I was more trying to see, now that obviously you guys have much larger scale, does it change how you guys approach your relationship with your dealer customers and OEM manufacturers, or have you not noticed anything significantly different?

Well, that's what I meant, Ed. It would be shortsighted of us to think that, just because we finished this acquisition, we all of a sudden have huge amounts of leverage in negotiations with our customers.

We do expect over time, as I have discussed publicly, to see the opportunity increase the price of our products based on the return that we provide to our dealer and manufacturer customers. And so, we engage in those negotiations on a customer-by-customer basis all the time.

I don't envision an across the board increase opportunity as a result of what we've been doing. We've not created monopoly power as part of doing this. We're just a larger, better provider for our customers today.

What it does do is give us the ability to invest more money in improving our products, improving our quality, providing other very helpful products for our dealers. So, in terms of becoming a better partner to our dealer and manufacturer customers, that's how we envision our ability to really grow our revenue and, as a result, our profits over time.

Great. There was a lot of noise this quarter with a major competitor of yours and also a major auto dealer about lead generation. Have you seen any impact from this noise?

We have. It's anecdotal for the most part at this point. But, we are aware of dealers who have decided to stop doing business with that competitor as a result of that public spat and some of the information that came out publicly as a result of it.

I would expect that we would ultimately be a beneficiary of that over time, particularly as we now have a larger footprint, more dealers to deal with. And it's pretty clear from the data with our close rates, and especially for the traffic that we're -- the traffic product, Autobytel Direct, that we're beginning to sell to our dealer products and to our dealers customers, including some of the largest ones, that we can provide them with extremely high ROI and really help them sell more cars on a very cost effective basis.

That's what's going to really drive revenue for us on a going forward basis is that realization. I've mentioned in the past it's a bit of a communications issue. We are on it. That's why we've upped our game on dealer facing communications, training, and why we're increasing our sales force.

So, we're trying to hit it from all angles at this point. And we feel very confident in our ability to make it work.

Great. Well, thank you and good luck.

Thank you, Ed.

(Operator instructions.) Patrick Lin, Primarius Capital.

Hi, guys. Congrats on the quarter and thanks for taking my question. I wanted to say also the Car.com website looks terrific, so kudos to the team involved. Jeff, if we could step back a little bit, we've been on this call now on and off for probably the last five years, and maybe discuss big picture wise what's your confidence level in terms of the opportunity that Autobytel is addressing today and how the visibility is in terms of your guidance and so on versus in prior years, please.

I think we have an extremely bright future in front of us, Patrick. I'd say we're better positioned today than we have been ever, and certainly better positioned than we have been at any time over the last five years.

The industry is driven in large part by leads. They are an extremely valuable tool for dealers and manufacturers. They generate a very high return on investment. We are by far the largest lead provider today.

But, in conjunction with that, we believe the future also includes traffic or clicks. That's why we were excited to help found AutoWeb with the team that founded that. That's why we do so much business with them today. We see a very bright future as we jointly develop lead and click products.

Some manufacturers, some dealers may prefer to buy traffic than -- and a minority of leads. Some will prefer to buy leads and clicks, and buy more leads.

So, we think we're extremely well positioned to take advantage of that opportunity as we go forward, because it really is a lead and click driven kind of an opportunity. I don't see that we have to worry about anything from a gross technological standpoint. I think we continue to invest in our technology. We continue to invest in our lead generation capabilities. The investment in AutoWeb and their ongoing investments in their business we think will position they and we extremely positively for growth as we go forward.

Terrific. And can you maybe just give a quick highlight of some of your upcoming conferences? I know you have good relationships with many of the people on Wall Street. But, just to give a little preview so some of the investors might be able to come see you, that'd be great.

Sure. I'm at the Canaccord conference in Boston next Thursday. And we're doing the Liolios conference in San Francisco on September the 10th. And I can't remember the next one after that off the top of my head.

But, we are doing non-deal road shows periodically around the country with some of the different banks. And so, there should be plenty of opportunities for us to meet with people. We are certainly interested in meeting with our investors.

Terrific. Thank you very much, and congrats again on the performance.

Thanks, Patrick.

At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Coats for closing remarks.

Thanks, Damon. Thanks, everybody, for joining us today. This is a very exciting time for Autobytel. I want to thank all of our very hardworking, dedicated employees, our new team members from Dealix and Autotegrity.

We look forward to speaking with our investors and our analysts in the months ahead, and to speaking to you all in November on our third quarter earnings call. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.