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EX-99.2 - TRANSCRIPT - AutoWeb, Inc. | ex99-2.htm |
8-K - CURRENT REPORT - AutoWeb, Inc. | auto8k_nov52020.htm |
Exhibit 99.1
AutoWeb Reports Third Quarter 2020 Results
- Sustained Operational Improvements Drive Continued Performance
Across Key Financial Metrics -
TAMPA, Fla. – Nov. 5, 2020 – AutoWeb, Inc.
(Nasdaq: AUTO), a robust digital marketing platform providing
digital advertising solutions for automotive dealers and OEMs, is
reporting financial results for the third quarter ended September
30, 2020.
“We
continued to execute on our plan during the third quarter, as
reflected by our highest levels of quarterly gross profit and gross
margin in several years,” said Jared Rowe, President and CEO
of AutoWeb. “The automotive market has improved from the low
points of the second quarter, however it remains a rather
challenging environment and well below pre-COVID levels. Despite
this backdrop, the improvements we have driven across key financial
metrics demonstrate the strength of our strategy and
operations.”
Third Quarter 2020 Financial Highlights
|
Q3 2020
|
Q2 2020
|
Q3 2019
|
Total
Revenues
|
$17.8
|
$17.0
|
$28.6
|
Gross
Profit
|
$6.4
|
$6.0
|
$5.9
|
Gross
Margin
|
36.1%
|
35.5%
|
20.7%
|
Net
Income/(Loss)
|
$(0.4)
|
$(1.4)
|
$(1.7)
|
Net
Income/(Loss) per share
|
$(0.03)
|
$(0.10)
|
$(0.13)
|
Adjusted
EBITDA1
|
$1.0
|
$0.4
|
$0.8
|
Third Quarter 2020 Key Operating Metrics
|
Q3 2020
|
Q2 2020
|
Q3 2019
|
Lead
Traffic2
(millions)
|
18.7
|
18.3
|
31.7
|
Lead
Volume3
(millions)
|
1.2
|
1.2
|
1.8
|
Retail
Dealer Count4
|
1,707
|
1,854
|
2,414
|
Retail
Lead Capacity5
|
105,000
|
100,000
|
143,000
|
Click
Traffic6
(millions)
|
18.6
|
23.0
|
25.1
|
Click
Volume7
(millions)
|
4.6
|
5.5
|
6.5
|
Rowe
continued: “Similar to Q2, we have continued to operate
intentionally at lower levels of media spend to better align our
traffic acquisition with true consumer demand in the market. This
is designed to ensure that we are delivering leads submitted by
action-minded car buyers, not simply passive shoppers. We know that
overall online shopping metrics have increased, however, this does
not directly translate into more buyers.
1 Refer to the note below about Non-GAAP financial
measures.
2 Lead traffic = total visits to AutoWeb’s
owned lead websites.
3 Lead volume = total new and used vehicle leads
invoiced to retail and wholesale customers.
4 Retail dealer count = the number of franchised
dealers contracted for delivery of retail new vehicle leads plus
the number of vehicle dealers (franchised or independent)
contracted for delivery of retail used vehicle
leads.
5 Retail lead capacity = the number of new and used
vehicle leads contracted for by new or used retail vehicle dealers
that the dealers wish to receive each month (i.e.,
“targets”) at the end of the applicable
quarter.
6 Click traffic = total visits to AutoWeb’s
owned click referral websites and AutoWeb's Click Traffic Affiliate
Network websites.
7 Click volume = the number of times during the
applicable quarter that consumers clicked on advertisements on
AutoWeb’s owned click referral websites and on AutoWeb's
Click Traffic Affiliate Network websites.
“This
approach also enables us to better match lead volume with lower
dealership inventory that resulted from vehicle production
reductions in Q2 and historically high used car wholesale pricing.
Dealers and consumers alike are still contending with broader
macroeconomic uncertainty, and with this in mind, we will continue
to provide the right mix of high-quality leads and click traffic to
our customers by staying aligned with true auto supply and demand
dynamics. We do not believe that this is the time to get out in
front of the overall recovery.
“As
a follow-up to our comments last quarter, in addition to delivering
value to our dealer and OEM customers, we have been intently
focused on improving our product offerings. In our leads business,
we rolled out a new, more contemporary lead funnel experience for
mobile audience campaigns in Q1. This improved funnel has increased
our mobile conversion rates by more than 50%, , which is
significant given that mobile is by far our largest traffic source.
Initiatives like this demonstrate our commitment to optimizing user
experience and the overall quality of our matching
process.
“As
we look ahead, Q4 is traditionally one of our slowest quarters due
to the holidays and normal seasonality in our business. However, we
plan to continue operating efficiently in support of our dealer and
OEM customers, while continuing to strategically enhance our
product suite to capitalize on evolving consumer shopping habits.
We have established a strong foundation to drive sustained
improvements to our business, and I want to thank our entire team
for their dedication to executing our strategy and delivering value
to our customers.”
Third Quarter 2020 Financial Results
Total
revenues in the third quarter of 2020 were $17.8 million compared
to $28.6 million in the year-ago quarter. The expected decline in
total revenues was primarily due to sustained COVID-19 related
challenges in the automotive industry. The company continued to
proactively reduce marketing spend to better align lead and click
volumes with market demand amid this environment.
Gross
profit in the third quarter increased 8% to $6.4 million compared
to $5.9 million in the year-ago quarter. As a percentage of
revenue, gross profit increased significantly to 36.1% compared to
20.7%. The increase was driven by efficiencies in traffic
acquisition and lower cost per lead, along with continued focus on
higher-margin distribution channels.
Total
operating expenses in the third quarter decreased to $6.7 million
compared to $7.8 million in the year-ago quarter. The decrease was
primarily driven by expense management throughout the
organization.
Net
loss in the third quarter of 2020 improved to $0.4 million or
$(0.03) per share, compared to a net loss of $1.7 million or
$(0.13) per share in the year-ago quarter.
Adjusted
EBITDA increased 21% to $1.0 million compared to $0.8 million in
the third quarter of 2019 (See “Note about Non-GAAP Financial
Measures” below for further discussion).
At
September 30, 2020, cash, cash equivalents and restricted cash
totaled $14.6 million compared to $8.5 million at June 30,
2020.
At
September 30, 2020, AutoWeb had an outstanding balance of $10.0
million on its revolving credit facility with CIT Northridge Credit
compared to $7.2 million at June 30, 2020.
Conference Call
AutoWeb
will hold a conference call today at 5:00 p.m. Eastern time to
discuss its third quarter results, followed by a
question-and-answer session.
Date:
Thursday, November 5, 2020
Time:
5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free
dial-in number: 1-877-852-2929
International
dial-in number: 1-404-991-3925
Conference
ID: 8329656
The
conference call will also be broadcast live at www.autoweb.com
(click on “Investors” and then click on “Events
& Presentations”). Please visit the website at least 15
minutes prior to the start of the call to register and download any
necessary software. For those who will be joining the call by
phone, please call the conference telephone number 5-10 minutes
prior to the start time, and an operator will register your name
and organization. If you have any difficulty connecting with the
conference call, please contact Gateway Investor Relations at
1-949-574-3860.
A
replay of the conference call will be available after 8:00 p.m.
Eastern time on the same day through November 12, 2020. The call
will also be archived in the Investors section of the
company’s website for one year.
Toll-free
replay number: 1-855-859-2056
International
replay number: 1-404-537-3406
Replay
ID: 8329656
Tax Benefit Preservation Plan
At
December 31, 2019, the company had approximately $100.5 million in
available net operating loss carryforwards (NOLs) for U.S. federal
income tax purposes. AutoWeb reminds stockholders about its Tax
Benefit Preservation Plan dated May 26, 2010, as amended (the
“Plan”) between the company and Computershare Trust
Company, N.A., as rights agent.
The
Plan was adopted by the company’s board of directors to
preserve the company’s NOLs and other tax attributes, and
thus reduce the risk of a possible change of ownership under
Section 382 of the Internal Revenue Code. Any such change of
ownership under Section 382 would limit or eliminate the ability of
the company to use its existing NOLs for federal income tax
purposes. In general, an ownership change will occur if the
company’s 5% shareholders, for purposes of Section 382,
collectively increase their ownership in the company by an
aggregate of more than 50 percentage points over a rolling
three-year period. The Plan is designed to reduce the likelihood
that the company experiences such an ownership change by
discouraging any person or group from becoming a new 5% shareholder
under Section 382. Rights issued under the Plan could be triggered
upon the acquisition by any person or group of 4.9% or more of the
company’s outstanding common stock and could result in
substantial dilution of the acquirer’s percentage ownership
in the company. There is no guarantee that the Plan will achieve
the objective of preserving the value of the company’s
NOLs.
As of
September 30, 2020, there were 13,169,044 shares of the
company’s common stock, $0.001 par value, outstanding.
Persons or groups considering the acquisition of shares of
beneficial ownership of the company’s common stock should
first evaluate their percentage ownership based on this revised
outstanding share number to ensure that the acquisition of shares
does not result in beneficial ownership of 4.9% or more of
outstanding shares. For more information about the Plan, please
visit investor.autoweb.com/financial-information/tax.
About AutoWeb, Inc.
AutoWeb,
Inc. provides high-quality consumer leads, clicks and associated
marketing services to automotive dealers and manufacturers
throughout the United States. The company also provides consumers
with robust and original online automotive content to help them
make informed car-buying decisions. The company pioneered the
automotive Internet in 1995 and has since helped tens of millions
of automotive consumers research vehicles; connected thousands of
dealers nationwide with motivated car buyers; and has helped every
major automaker market its brand online.
Investors
and other interested parties can receive AutoWeb news alerts by
accessing the online registration form at investor.autoweb.com/email-alerts.
Note about Non-GAAP Financial Measures
AutoWeb
has disclosed Adjusted EBITDA in this press release, which is a
non-GAAP financial measure as defined by SEC Regulation G. The
company defines Adjusted EBITDA as net loss before interest, taxes,
depreciation, amortization, non-cash stock-based compensation,
non-cash gains or losses, and other extraordinary items. A table
providing a reconciliation of Adjusted EBITDA is included at the
end of this press release.
The
company’s management believes that presenting Adjusted EBITDA
provides useful information to investors regarding the underlying
business trends and performance of the company’s ongoing
operations, as well as providing for more consistent
period-over-period comparisons. This non-GAAP measure assists
management in its operational and financial decision-making and
monitoring the company’s performance. In addition, we use
Adjusted EBITDA as a measure for determining incentive compensation
targets. Adjusted EBITDA is used in addition to and in conjunction
with results presented in accordance with GAAP and should not be
relied upon to the exclusion of GAAP financial measures. Management
strongly encourages investors to review the company’s
consolidated financial statements in their entirety and to not rely
on any single financial measure.
Forward-Looking Statements Disclaimer
The
statements contained in this press release or that may be made
during the conference call described above that are not historical
facts are forward-looking statements under the federal securities
laws. Words such as “anticipates,” “could,”
“may,” “estimates,” “expects,”
“projects,” “intends,”
“pending,” “plans,” “believes,”
“will” and words of similar substance, or the negative
of those words, used in connection with any discussion of future
operations or financial performance identify forward-looking
statements. In particular, statements regarding expectations and
opportunities, new product expectations and capabilities,
projections, statements regarding future events, and our outlook
regarding our performance and growth are forward-looking
statements. These forward-looking statements, including, that the
company plans to continue operating efficiently in support of its
dealer and OEM customers, while continuing to strategically enhance
its product suite to capitalize on evolving consumer shopping
habits, are not guarantees of future performance and involve
assumptions and risks and uncertainties that are difficult to
predict. Actual outcomes and results may differ materially from
what is expressed in, or implied by, these forward-looking
statements. AutoWeb undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise. Among the important factors that could
cause actual results to differ materially from those expressed in,
or implied by, the forward-looking statements are changes in
general economic conditions; the financial condition of automobile
manufacturers and dealers; disruptions in automobile production;
changes in fuel prices; the economic impact of terrorist attacks,
political revolutions or military actions; failure of our internet
security measures; dealer attrition; pressure on dealer fees;
increased or unexpected competition; the failure of new products
and services to meet expectations; failure to retain key employees
or attract and integrate new employees; actual costs and expenses
exceeding charges taken by AutoWeb; changes in laws and
regulations; costs of legal matters, including, defending lawsuits
and undertaking investigations and related matters; and other
matters disclosed in AutoWeb’s filings with the Securities
and Exchange Commission. Investors are strongly encouraged to
review the company’s Annual Report on Form 10-K for the year
ended December 31, 2019 and other filings with the Securities and
Exchange Commission for a discussion of risks and uncertainties
that could affect the business, operating results or financial
condition of AutoWeb and the market price of the company’s
stock.
Company Contact
J.P.
Hannan
Chief
Financial Officer
1-949-437-4651
jp.hannan@autoweb.com
Investor Relations Contact:
Sean
Mansouri, CFA or Cody Slach
Gateway
Investor Relations
1-949-574-3860
AUTO@gatewayir.com
AUTOWEB, INC.
|
||
AUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
||
(Amounts in thousands, except share and per share
data)
|
||
|
|
|
|
September 30,
|
December 31,
|
|
2020
|
2019
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$11,270
|
$892
|
Restricted
cash
|
3,302
|
5,054
|
Accounts
receivable, net of allowances for bad debts and customer credits of
$578 at September 30, 2020,
|
|
|
and
net of allowances for bad debt and customer credits of $740 at
December 31, 2019
|
14,633
|
24,051
|
Prepaid
expenses and other current assets
|
1,145
|
1,265
|
Total
current assets
|
30,350
|
31,262
|
Property
and equipment, net
|
3,000
|
3,349
|
Right-of-use
assets
|
2,956
|
2,528
|
Intangibles
assets, net
|
5,135
|
7,104
|
Other
assets
|
697
|
661
|
Total
assets
|
$42,138
|
$44,904
|
|
|
|
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS'
EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$7,540
|
$14,080
|
Borrowings
under revolving credit facility
|
10,024
|
3,745
|
Accrued
employee-related benefits
|
2,071
|
1,004
|
Other
accrued expenses and other current liabilities
|
969
|
2,315
|
Current
portion of PPP Loan
|
846
|
-
|
Current
portion of lease liabilities
|
837
|
1,167
|
Current
portion of financing debt
|
64
|
-
|
Total
current liabilities
|
22,351
|
22,311
|
|
|
|
Lease
liabilities, net of current portion
|
2,361
|
1,497
|
PPP
loan, net of current portion
|
538
|
-
|
Financing
debt, net of current portion
|
76
|
-
|
Total
liabilities
|
25,326
|
23,808
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
Stockholders'
equity
|
|
|
Preferred
stock, $0.001 par value; 11,445,187 shares authorized
|
|
|
Series
A Preferred stock, none issued and outstanding
|
-
|
-
|
Common
stock, $0.001 par value; 55,000,000 shares authorized;
|
|
|
13,169,044
and 13,146,831 shares issued and outstanding at September 30, 2020
and December 31, 2019, respectively
|
13
|
13
|
Additional
paid-in capital
|
365,627
|
364,028
|
Accumulated
deficit
|
(348,828)
|
(342,945)
|
Total
stockholders' equity
|
16,812
|
21,096
|
Total
liabilities, minority interest and stockholders'
equity
|
$42,138
|
$44,904
|
AUTOWEB, INC.
|
||||
AUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
||||
AND COMPREHENSIVE LOSS
|
||||
(Amounts in thousands, except share and per share
data)
|
||||
|
|
|
|
|
|
|
|||
|
Three
Months Ended
|
Nine Months Ended
|
||
|
September 30,
|
September 30,
|
||
|
2020
|
2019
|
2020
|
2019
|
Revenues:
|
|
|
|
|
Lead
generation
|
$14,758
|
$22,564
|
$47,481
|
$69,953
|
Digital
advertising
|
3,054
|
5,968
|
11,822
|
17,278
|
Other
|
1
|
20
|
15
|
67
|
Total
revenues
|
17,813
|
28,552
|
59,318
|
87,298
|
Cost
of revenues
|
11,390
|
22,645
|
41,498
|
70,249
|
Gross
profit
|
6,423
|
5,907
|
17,820
|
17,049
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
Sales
and marketing
|
1,904
|
2,632
|
6,062
|
8,450
|
Technology
support
|
1,451
|
1,819
|
5,094
|
6,797
|
General
and administrative
|
3,110
|
2,112
|
9,954
|
10,429
|
Depreciation
and amortization
|
225
|
1,200
|
1,506
|
3,640
|
Total
operating expenses
|
6,690
|
7,763
|
22,616
|
29,316
|
Operating
loss
|
(267)
|
(1,856)
|
(4,796)
|
(12,267)
|
Interest
and other income (expense), net
|
(181)
|
117
|
(1,087)
|
220
|
Loss
before income tax provision
|
(448)
|
(1,739)
|
(5,883)
|
(12,047)
|
Income
taxes provision
|
-
|
-
|
-
|
5
|
Net
loss and comprehensive loss
|
$(448)
|
$(1,739)
|
$(5,883)
|
$(12,052)
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share:
|
|
|
|
|
Basic
loss per common share
|
$(0.03)
|
$(0.13)
|
$(0.45)
|
$(0.92)
|
Diluted
loss per common share
|
$(0.03)
|
$(0.13)
|
$(0.45)
|
$(0.92)
|
|
|
|
|
|
Shares
used in computing net loss per share:
|
|
|
|
|
Basic
|
13,141
|
13,114
|
13,136
|
13,051
|
Diluted
|
13,141
|
13,114
|
13,136
|
13,051
|
AUTOWEB, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(amounts in thousands)
|
Nine Months Ended September 30,
|
|
|
2020
|
2019
|
Cash
flows from operating activities:
|
|
|
Net
(loss) income
|
$(5,883)
|
$(12,052)
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
|
|
Depreciation
and amortization
|
2,975
|
5,256
|
Provision
for bad debt
|
321
|
198
|
Provision
for customer credits
|
75
|
113
|
Share-based
compensation
|
1,525
|
1,762
|
Right-of-use
assets
|
1,107
|
1,306
|
Lease
Liabilities
|
(1,001)
|
(1,309)
|
Gain
on sale of investment
|
-
|
(250)
|
Changes
in assets and liabilities
|
|
|
Accounts
receivable
|
9,072
|
3,940
|
Prepaid
expenses and other current assets
|
120
|
(164)
|
Other
non-current assets
|
(36)
|
(280)
|
Accounts
payable
|
(6,682)
|
(3,348)
|
Accrued
expenses and other current liabilities
|
(280)
|
(2,006)
|
Net
cash (used in) provided by operating activities
|
1,313
|
(6,834)
|
Cash
flows from investing activities:
|
|
|
Purchases
of property and equipment
|
(396)
|
(1,330)
|
Proceeds
from sale of investment
|
-
|
250
|
Net
cash (used in) provided by investing activities
|
(396)
|
(1,080)
|
Cash
flows from financing activities:
|
|
|
Borrowings
under PNC credit facility
|
28,564
|
46,740
|
Payments
under PNC credit facility
|
(32,308)
|
(45,704)
|
Borrowings
under CNC credit facility
|
53,612
|
-
|
Payments
under CNC credit facility
|
(43,588)
|
-
|
Borrowings
under the PPP Loan
|
1,384
|
-
|
Payments
on convertible note
|
-
|
(1,000)
|
Proceeds
from exercise of stock options
|
74
|
408
|
Payments
under financing agreement
|
(29)
|
-
|
Net
cash provided by (used in) financing activities
|
7,709
|
444
|
Net
increase in cash and cash equivalents and restricted
cash
|
8,626
|
(7,470)
|
Cash
and cash equivalents and restricted cash at beginning of
period
|
5,946
|
13,600
|
Cash
and cash equivalents and restricted cash at end of
period
|
$14,572
|
$6,130
|
|
|
|
RECONCILIATION
OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
Cash
and cash equivalents at beginning of period
|
$892
|
$13,600
|
Restricted
cash at beginning of period
|
5,054
|
-
|
Cash
and cash equivalents and restricted cash at beginning of
period
|
$5,946
|
$13,600
|
|
|
|
Cash
and cash equivalents at end of period
|
$11,270
|
$1,092
|
Restricted
cash at end of period
|
$3,302
|
$ 5,038
|
Cash
and cash equivalents and restricted cash at end of
period
|
$14,572
|
$6,130
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
Cash
paid for income taxes
|
$1
|
$1
|
Cash
refunds for income taxes
|
$814
|
$124
|
Cash
paid for interest
|
$640
|
$101
|
Supplemental
disclosure of non-cash financing activities:
|
|
|
Right-of-use
assets obtained in exchange for operating lease
liabilities
|
$1,535
|
$-
|
Purchase
of fixed assets on account
|
$142
|
$-
|
Financing
for the purchase of fixed assets
|
$120
|
$-
|
AUTOWEB, INC.
RECONCILIATION OF ADJUSTED EBITDA
(Amounts in thousands)
|
Three Months Ended
|
||
|
September 30, 2020
|
June 30, 2020
|
September 30, 2019
|
|
|
|
|
Net
loss
|
$(448)
|
$(1,374)
|
$(1,739)
|
|
|
|
|
Depreciation
and amortization
|
698
|
1,066
|
1,747
|
Interest
income
|
(23)
|
-
|
(22)
|
Interest
expense
|
256
|
205
|
231
|
Other
income (expense)
|
10
|
-
|
-
|
Income
taxes
|
33
|
(34)
|
50
|
Non-cash
stock compensation expense
|
497
|
518
|
651
|
Gain
on government grant
|
-
|
(10)
|
-
|
Personnel
Restructuring
|
-
|
-
|
185
|
Gain/loss
on sale of asset
|
-
|
-
|
(11)
|
Gain/loss
on investment
|
-
|
-
|
(250)
|
Adjusted
EBITDA
|
$1,023
|
$371
|
$842
|