Autobytel Losses Continue

By Brendan Moore

Internet auto retail pioneer Autobytel, which has turned a profit in only two of the eleven years it has been a publicly traded company, announced in a press release two days ago that it has posted a loss for yet another quarter.

The company lost $970,000 USD in the last quarter of 2009, which is a big improvement over the same quarter in 2008, in which they lost $15.1 million, but still not what most people would consider a good result.

Except, of course, to anyone but their CEO, Jeffrey Coats, who says the fact that they are losing less per quarter is concrete evidence of a turnaround in progress.

The press release from Autobytel, in which Coats is quoted, states that: “Several important metrics, including gross profit, and the significant reduction in the company’s net loss, exceeded our expectations in the 2009 fourth quarter,” said Jeffrey H. Coats, President and Chief Executive Officer. “By returning to our core auto lead generation business and taking significant steps to ensure that we are operating as efficiently as possible, we have made significant headway toward achieving profitability.”

“One of the most substantial improvements we’ve made during the past year is generating more leads directly from our websites. Not only has this lessened our dependence on third party lead providers and reduced our cost base, but has allowed us to post our highest quarterly gross margin since the second quarter of 2007,” Coats said.

You know, he could be right.

Coats, originally on the board of Autobytel, became CEO a little over a year ago, and has pushed the struggling company back towards their original business model, which is providing sales leads to dealers and manufacturers. A few years ago Autobytel announced that MyRide.com, their new online magazine and forum, would save the company, but it became apparent very quickly that the new venture was not moving the revenue needle very much, and the company reverted back to their previous business of selling leads. MyRide.com (www.myride.com) still exists, but as more of an accessory to the main business of originating leads than anything else.

Autobytel reported a net loss of $2.4 million for all of 2009, compared to a net loss of $79.9 million in 2008. The company’s only two years of profitability since going public in 1999 were the years of 2003 and 2004.

The text of Autobytel’s press release, minus the legal disclaimers and financial tables:

Autobytel Reports Fourth Quarter and Full Year 2009 Financial Results
Highest Gross Margin in Ten Quarters; Operating Costs Continue to Decline; Balance Sheet Remains Strong and Flexible

IRVINE, Calif., February 25, 2010 — Autobytel Inc. (Nasdaq:ABTL), a leader in providing online consumer leads and marketing resources to auto dealers and manufacturers, today announced financial results for the fourth quarter and full year ended December 31, 2009.

The company reported a net loss of $970,000, or $0.02 per share, for the 2009 fourth quarter. For the 2008 fourth quarter, Autobytel reported a net loss of $15.1 million, or $0.34 per share, including severance-related costs of $5.1 million and non-cash impairment charges totaling $5.5 million. Excluding the severance-related costs and non-cash impairment charges, net loss for the 2008 fourth quarter would have been $4.5 million, or $0.10 per share. For purposes of financial reporting, revenues and expenses related to Autobytel’s AVV business, which was sold in the first quarter of 2008, have been accounted for in discontinued operations.

Loss from continuing operations was reduced to $985,000 for the fourth quarter of 2009, from $1.2 million for the preceding 2009 third quarter and $15.1 million for the fourth quarter of 2008, which included the severance-related costs and non-cash impairment charges disclosed above. Excluding these charges, loss from continuing operations would have been $4.5 million for the fourth quarter of 2008.

Revenue for the 2009 fourth quarter was $12.3 million, down from $13.4 million for the 2009 third quarter, related in part to normal seasonality, as well as the “Cash for Clunkers” program, which accelerated vehicle purchases from the fourth quarter into the third quarter. Revenues for the 2008 fourth quarter were $14.2 million.

Auto lead referral revenue decreased approximately 7% from the third quarter of 2009 and approximately 7% from the same period a year ago, reflecting continued weakness in the general economy and automotive sector. Additionally, dealer lead demand in the 2009 fourth quarter was impacted by lack of inventory, primarily related to “Cash for Clunkers” and to the delayed arrival of 2010 vehicles to dealer showrooms. Advertising revenue declined slightly to $1.4 million for the 2009 fourth quarter, from $1.6 million for the 2009 third quarter and $1.9 million for 2008 fourth quarter.

“Several important metrics, including gross profit, and the significant reduction in the company’s net loss, exceeded our expectations in the 2009 fourth quarter,” said Jeffrey H. Coats, President and Chief Executive Officer. “By returning to our core auto lead generation business and taking significant steps to ensure that we are operating as efficiently as possible, we have made significant headway toward achieving profitability.”

“One of the most substantial improvements we’ve made during the past year is generating more leads directly from our websites. Not only has this lessened our dependence on third party lead providers and reduced our cost base, but has allowed us to post our highest quarterly gross margin since the second quarter of 2007,” Coats said.

Gross profit margin increased to 39.1% for the 2009 fourth quarter, up from 35.5% in the 2009 third quarter. Excluding severance costs and the non-cash impairment charges, gross profit margin was 32.2% in the 2008 fourth quarter. The substantial improvement in gross profit margin primarily resulted from the curtailment of various retail auto lead promotions, a decrease in auto lead supply costs and recent increases in direct-to-site lead generation from the company’s owned websites, which carry better margins than leads acquired from third parties.

Total operating expenses decreased approximately 5% in the 2009 fourth quarter to $5.9 million, from $6.2 million for the preceding third quarter. Total operating expenses for the fourth quarter of 2008 were $15.3 million, or $9.3 million, excluding the severance-related costs and non-cash impairment charges.

Operating expenses as a percentage of total revenue were 48% for the 2009 fourth quarter, versus 46% for the 2009 third quarter. For the fourth quarter of 2008, operating expenses as a percentage of total revenue were 107%, or 65%, excluding the severance-related costs and non-cash impairment charges.

Full Year 2009 Results

Autobytel reported a net loss of $2.4 million, or $0.05 per share, for 2009, including $1.2 million in income from discontinued operations. For 2008, net loss was $79.9 million, or $1.81 per share, including severance-related costs of $6.9 million, non-cash impairment charges totaling $57.6 million and $4.4 million in income from discontinued operations. Excluding the severance-related costs and non-cash impairment charges, net loss for 2008 would have been $15.5 million, or $0.35 per share.

Loss from continuing operations was $3.6 million for 2009, compared with $84.3 million for 2008, which included the severance-related costs and non-cash impairment charges disclosed above. Excluding these charges, loss from continuing operations would have been $19.9 million for 2008.
Revenue for 2009 totaled $52.9 million, compared with $71.2 million for 2008.
Cash and cash equivalents totaled $25.1 million at December 21, 2009, roughly equal to $25.2 million at September 30, 2009. There is no debt on Autobytel’s balance sheet.

“During 2009, our focus was on recovering Autobytel’s leadership position by returning to the basics and providing increasing value to our dealer and manufacturer customers,” Coats said. “Internally generated auto referrals are up, dealer count is beginning to show signs of improvement and we generated positive cash flow for the months of November and December. I am very pleased by the progress we have made and believe that Autobytel is now ready to pursue new opportunities, as we look to grow our franchise and achieve our goal of returning to profitability.”

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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