SEC Connect
Exhibit 99.2
AUTOBYTEL INC.
Moderator: Sean Mansouri
March 9, 2017
5:00 p.m. ET
Operator:
This is conference
# 77540425.
Good
afternoon, everyone. Thank you for participating in today's
conference call to discuss Autobytel's financial results for the
fourth quarter and full-year, ended December 31, 2016.
Joining
us today are Autobytel's President and CEO, Jeff Coats; the
Company's CFO, Kimberly Boren; and the Company's Outside Investor
Relations Advisor, Sean Mansouri, with Liolios group. Following
their remarks, we will open the call for your
questions.
I will
now turn the call over to Mr. Mansouri for some introductory
comments.
Sean
Mansouri:
Thank you,
Karen.
Before
I introduce Jeff, I 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, 2016, which was filed prior to this call as well as other
filings made with 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 visiting Autobytel's website at
www.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. And
for purposes of 2017 guidance, we'll be adjusting 2016 revenues,
non-GAAP income and non-GAAP EPS to reflect the exclusion of the
Company's specialty finance leads product that was divested on
December 31, 2016.
These
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'll turn the call over to
Jeff.
Jeff
Coats:
Thank you, Sean.
Good afternoon, everyone. Thank you for joining us today to discuss
our record fourth-quarter and full-year 2016 results. As a reminder
to those of you who are new to Autobytel, we are a pioneer and
leading provider of online digital automotive services, connecting
in-market buyers with our dealer and manufacturer
customers.
We are
pleased to announce, we generated record revenues in both Q4 2016
and in full-year 2016, while maintaining our commitment to
high-quality products for our dealer and OEM customers as you can
see on slide 3 and 4.
2016
represented a year of integration, execution and investment. We
completed the integration of the Dealix and AutoWeb acquisitions
from 2015, each of which brought us extremely important strategic
assets. Additionally we rolled out the new beta version of our
usedcars.com site and we invested in increasing our internal lead
generation capabilities and in developing and optimizing new
traffic sources to further accelerate the growth of both our
high-quality clicks and leads products.
The
AutoWeb acquisition brought us both our exciting
advertising-related click products, which has dramatically
strengthened our technology leadership in the automotive digital
landscape and additional talented cost-effective technology
resources in our Guatemala operations. Our click product continues
to exceed our expectations, with revenues growing more than 300
percent in 2016 and is already accelerating our overall company
growth.
This
high-growth product has also propelled Autobytel from just the lead
generation market into the much larger search and pay-per-click
automotive market, as you can see on slides 5 and 6. Although we
have been methodical in our rollout of this product, having thus
far only introduced it to a small number of our customers, during
2017 we are making it available to many more of our thousands of
dealer and OEM customers. We also experienced approximately 98
percent customer retention with the product in 2016, further
validating its exceptional quality of high-intent consumer
traffic.
The
usedcars.com site, which came to us with Dealix, is the core around
which we are building our used car leads and used car clicks
business. This represents a particularly attractive growth
opportunity for us because used car represents less than 10 percent
of our revenues today. Even though the volume of annual used car
sales in the United States is generally to 2 to 3 times that of new
cars.
In Q3
of 2016, we began increasing our investment in traffic acquisition
to bolster our leads business with high-quality in-market consumers
and to increase the volume of consumers to our click products. We
continued that investment in Q4 2016 and as a result, increased our
click volume by over 160 percent and at the same time increased our
effective CPMs by over 80 percent.
At the
end of the fourth quarter we divested our specialty finance leads
product, which now enables us to further dedicate time and
resources to our core vehicle leads and fast-growing clicks
products for both new and used. Before commenting further, I would
like to turn the call over to Kim and have her take us through the
important details of our financial results. Kim?
Kimberly
Boren:
Thanks, Jeff and
good afternoon everyone. For those of you following along with our
earnings presentation, on slide 7, you can see our fourth-quarter
revenues increased 11 percent to $40.4 million, compared to $36.4
million in the year ago quarter. The increase was primarily driven
by growth in advertising click revenues and wholesale lead
revenues.
Lead
revenues from automotive manufacturers and wholesale customers, our
wholesale channel, increased 9 percent to $18.6 million from $17.1
million in the prior year period. While lead revenue from
automotive dealers, our retail channel, decreased 12 percent to
$12.3 million, compared to $14 million last year.
Both
the wholesale and retail channels were impacted by the systematic
reduction of lower quality lead supply, which effectively began in
Q4 of 2015 and continued through Q2 of 2016. Further, the expected
impact to retail revenues was driven by the transition of 190
retail dealers into one comprehensive OEM program in the second
quarter of 2016. This has proven to be a success, as overall
revenues for this OEM have expanded 21 percent since initiating the
transition.
Moving
on to advertising, our advertising revenues increased 119 percent
to $8.1 million, compared to $3.7 million in the year ago quarter.
The growth was due to a significant increase in click revenue
driven by the continued investment in our AutoWeb
products.
Additionally on
slide 8, you will see click revenues in the fourth quarter
increasing 219 percent to $6.4 million compared to $2 million in
the same period last year. The triple digit year-over-year increase
in click revenue was driven by continued strong growth in AutoWeb
as we continue to grow impressions and effective CPMs. The momentum
in our click product is further evidenced by the 16 percent
sequential increase from Q3, even with seasonal headwinds in
Q4.
Moving
now to slide 9, you'll see that we delivered approximately $2.3
million automotive leads during the fourth quarter, compared to
$2.4 million last year, as we worked to replace a meaningful amount
of the eliminated low-quality volume with higher quality leads from
our internal lead generation. Consistent with lead revenue, retail
new leads were down 12 percent compared to the prior-year quarter,
while used leads were down slightly by 2 percent.
76
percent of leads were delivered to the wholesale channel, with the
remaining 24 percent to the retail channel. Retail new leads
invoiced per dealer was up 3 percent compared to the year ago
quarter and retail used leads invoiced per dealer was up 8 percent.
This is consistent with our strategy of focusing on larger
dealerships.
On
slide 10 you will see that dealer count stood at 4,115 at December
31, a 4 percent decline from Q3. The decrease was driven by dealer
churn as we continue to focus on building stronger relationships
with larger, more profitable dealers. I remind listeners that this
figure would be closer to 22,000 dealer franchises in total, if
dealers in our OEM network were included.
At the
end of the fourth quarter we sold our specialty finance leads
product to internet brands. Total consideration included $3.2
million of cash, as well as additional transition licensing income,
totaling $1.6 million over a five-year period.
In
accordance with recent accounting literature released in 2014, the
divestiture of the finance leads product does not meet this
discontinued operation tests and therefore is included in our 2016
results. For future comparative purposes, we calculated the 2016
revenue impact to be approximately $6.3 million, the non-GAAP
income to be just under $0.5 million and the non-GAAP EPS to be
$0.03 on a full-year basis. As Jeff mentioned earlier, with the
divestiture of the finance leads product we can now dedicate
greater time, energy, and resources to our core vehicle lead and
fast growing click products.
Now
moving to slide 11, gross profit during the fourth quarter
increased 1 percent to $14.6 million and gross margin was 36.2
percent, compared to 39.7 percent in the year ago quarter, in line
with our expectations. In Q3 we made the decision to further invest
in our traffic acquisition in order to accelerate the growth of our
lead and click products.
The
decline in gross margin was due to the corresponding increase in
our traffic acquisition and technology related costs as we focus
more on accelerated growth and incremental gross profit dollars as
opposed to gross margin percentage. We expect gross margin to
continue in the mid 30 percent range over the next several quarters
as we invest in our core products to grow revenues and ultimately,
gross profit dollars.
Total
operating expenses in the fourth quarter were $12.8 million,
roughly flat compared to the year ago quarter. As a percentage of
revenues total operating expenses were 31.7 percent compared to
35.5 percent in the fourth-quarter of 2015, with the improvement
largely attributable to operating leverage experienced with top
line growth. While we have realized considerable leverage over the
course of the year, we plan to reinvest more going forward and
further accelerate the growth opportunities we see in our
business.
On a
GAAP basis, net income in the fourth quarter was $1.4 million or
$0.10 per diluted share on 13.3 million diluted shares, compared to
$1.4 million or $0.10 per diluted share on 13.4 million diluted
shares in the year ago quarter. We expect our quarterly diluted
share count in 2017 to remain around 13.5 million, contingent upon
our share price and assuming current outstanding shares, warrants,
options, and convertible debt remain constant.
For the
fourth quarter, non-GAAP income, which adds back amortization on
acquired intangibles, non-cash stock-based compensation,
acquisition costs, severance costs, gain or loss on investment or
sale, litigation settlement, and income taxes increased 7 percent
to $4.7 million or $0.35 per diluted share compared to $4.4 million
or $0.33 in the year ago quarter. Cash provided by operations for
the 2016 fourth quarter improved to $6.2 million, compared to $4.6
million in the prior-year quarter.
On
slide 12 you'll see that our cash balance remains strong, with cash
and cash equivalents of $38.5 million at December 31, 2016, which
represents a 61 percent increase from December 31, 2015. Total debt
at December 31, 2016, was reduced to $23.1 million compared to $27
million at the end of 2015. With that, I'll now turn the call back
over to Jeff.
Jeff
Coats:
Thank you, Kim. As
I mentioned earlier, 2016 represented a year of integration,
execution, and investment. We completed the integrations of AutoWeb
and Dealix, each of which had meaningful impacts to our business in
its own right. With AutoWeb we acquired the technology and
development operation that powers our growing clicks business. With
Dealix we added an extensive network of dealers and bolstered our
used car practice with the acquired usedcars.com consumer facing
website.
At the
end of the third quarter we launched a new version of usedcars.com
with fully responsive technology and mobile friendly application.
We remain very excited about the strength of the usedcars.com
domain and will continue to invest in it in an effort to make it
the premier used vehicle destination for consumers. As a reminder,
retail used car leads still only represent about 7 percent of our
total leads business today and approximately 9 percent of revenue,
even though used car sales in the United States are 2 to 3 times
that of new car sales by volume. This provides us with a strong
growth path in the months and years ahead.
During
the fourth quarter, our click volumes from AutoWeb continued to
exceed our expectations. As Kim mentioned, volumes were up even
sequentially, despite seasonal slowdown we typically experience in
Q4. Customer feedback has been very positive.
We are
continuing to increase click volumes with existing clients and plan
to add OEMs, large dealer groups, dealer agencies, and tier 2
dealer associations throughout 2017. As I mentioned earlier, our
strong growth in clicks up to this point has only come from a small
number of dealer and OEM customers, and it is also important to
note the minimal churn we continue to experience with the
product.
As
previously announced in Q3, we began heavily investing in traffic
acquisition to accelerate the continued growth of both our
high-quality clicks product and our high quality lead supply. As we
have mentioned in previous quarters, OEMs tend to be very selective
in the digital marketing spend and they continue to demonstrate
increasing demand for our high-quality leads and
clicks.
Before
getting into more detail about 2017, I would like to quickly walk
through some of our strong industry metrics from the quarter. On
slide 13 you can see that we estimate sales from consumers
submitting leads through Autobytel's network accounted for
approximately 5 percent of all new light vehicle retail sales in
the United States in 2016, and approximately 2 percent of all used
car sales. On slide 14 you'll see that our estimated average buy
rate for internally generated leads in the fourth quarter was 17
percent, which remains in our targeted range of 16 percent to 24
percent.
Because
of our ongoing commitment to lead quality, we are continuing to
focus on enhanced methodologies to meaningfully increase the mix of
internally generated leads from the current 80 percent level, while
only utilizing volume from the small number of trusted suppliers
who share our commitment to quality. On slide 15 you'll note that
these estimated buy rates have remained consistently strong since
Q1 2011, with Autobytel.com generating an average buy rate of 25
percent and all Autobytel internally generated leads at about 18
percent.
Now
moving onto 2017. 2017 will be a year of growth and continued
investment for Autobytel. Specifically we will focus on investments
in technology including investments in our consumer acquisition
technology, the AutoWeb ad platform and our consumer facing
websites, which includes car.com, AutoWeb.com, autobytel.com and
usedcars.com. We expect these investments to ultimately enhance and
simplify the consumer’s path to purchase of new or used cars
and trucks.
As
mentioned before, we've migrated our previously outsourced
development resources to our in-house Guatemala operations. And
during the fourth quarter we further repositioned our resources by
removing redundant positions at the corporate level and
strengthened our US and Guatemala development teams. We plan to
continue investing in these development teams throughout 2017 as we
believe this will further accelerate the growth of both our click
and core leads products, and especially our used cars.com
website.
As we
continue to optimize our products and service offerings, we will
also continue to bolster our sales and marketing efforts. Our used
car business remains a focal point for growth and we continue to
increase the level of resources dedicated to ramping our used car
platforms for internal lead generation.
Moving
onto the industry outlook, as you can see on slide 16, automotive
news has the seasonally adjusted run rate, or SAAR, for total sales
at 17.7 million units for February 2017, up from 17.6 million units
one year ago and 17.5 million units in January. And on slide 17
you'll see that in February, J.D. Power, LMC Automotive maintained
their full year 2017 total light vehicle sales forecast at 17.6
million, an increase of 0.2 percent from 2016. The forecast for
retail light vehicle sales also remains at 14.1 million units,
essentially flat from 2016.
Now
moving onto our 2017 business outlook highlighted on slide 18. We
currently expect revenue to range between $156 million and $160
million, an increase of approximately 4 percent to 7 percent in
2016. We also expect non-GAAP income to range from $16.8 million
and $17.3 million, representing an increase of up to approximately
3 percent, with non-GAAP diluted EPS ranging between $1.24 and
$1.28 on 13.5 million shares.
Note
that for comparative purposes, the foregoing percentage growth
calculations and the 2016 non-GAAP diluted EPS exclude 2016
revenues, non-GAAP income and non-GAAP EPS related to our specialty
finance leads products that was divested on December 31, 2016. As
we stated last year, our outlook reflects our continued expectation
to grow both revenues and profit dollars in 2017.
As we
look ahead to the remainder of 2017, we will continue to reinvest
in our business to drive sustainable, long-term organic growth and
further solidify Autobytel's position as a leader in the digital
automotive landscape. We will also maintain our keen focus on
providing our dealer and OEM customers with high-quality,
high-intent car buyers. Be it through new or used car leads, clicks
or one of our many value-added product offerings, we remain
committed to helping our customers sell more cars and trucks.
Karen, at this time we would like to open the call for
questions.
Operator:
Thank you,
sir.
Ladies
and gentlemen, if you have a question at this time, please press
star followed by the number one key on your telephone keypad. If
your question has been answered, or you’d like to remove your
line from the queue, you may press the pound key. Our first
question comes from the line of Sameet Sinha, from B.
Riley.
Sameet
Sinha:
Yes, thank you very
much. Couple of questions here. Let's talk about the clicks
business. This was pretty strong, much more than we had expected.
What sort of growth should we be expecting as you open up the
program to more dealers and partners and OEMs? And this opening up,
should we expect more of a second half weighted results or do you
think the benefits will start to accrue from the Q1
itself?
Secondly, can you
talk about experience with this increased traffic investment --
gross margins came in a little higher than we had expected. But can
you talk about the different sources that you started using and
where you have been able to optimize and in case, the mid 30s
guidance that you had given from gross margin, is that more a
function that you will keep? Do you keep those margins and try to
grow revenues? Or that you would try to optimize for gross
margins?
Jeff
Coats:
Sameet, I would say
that -- let me answer your second question first. We have been
working through a lot of the new traffic sources. I would say we
are still in the middle of it. We will be doing it throughout this
year. We have identified a few that are working nicely for us thus
far where we are getting pretty interesting volume and margins that
are probably a little better than we initially
anticipated.
I
wouldn't necessarily take that as something that we are going to
see on everything that we do or on a continued basis. Is just too
early to make that call in terms of what we are doing. But it is
looking pretty good so far from that standpoint in terms of
qualifying these new traffic sources.
Kimberly
Boren:
And then Sameet, I
can answer your first question around growth. We are expecting
right now to continue to see somewhat of linear growth into 2017,
so I would have the growth roughly at a linear level. There will be
some seasonal impact in Q3 because that is clearly our strongest
quarter and the traffic drives it.
But
that is how I would go ahead and model it. We haven't necessarily
provided guidance in terms of the growth in the click revenues, but
I would anticipate seeing the same growth dollars next year that we
saw in 2015 to 2016.
Sameet
Sinha:
Okay. One follow-up
question. You spoke about investments in some of the consumer
sites, seems like there's going to be a major overhaul that you
intend to do on all your sites. And on that usedcars.com, Jeff, I
was under the impression that you're probably going to push that
investment out into 2018 considering there is so much traction that
you're getting on the clicks business. It seems like you are now
saying you have been investing in it right now. Is that a fair
assessment?
Jeff
Coats:
It is. We are
investing in it now. We launched the new beta version of the used
car site in September. I would say there is a fairly large amount
of additional capabilities and bells and whistles that we are in
the process of adding to it. One of the really extremely positive
benefits of promoting internally, Billy Ferriolo, from running our
Tampa operation to being Chief Operating Officer, is he has been
working with the development teams in both the United States and in
Guatemala to reorganize how we do some of our development work in
order to accelerate making product improvements to both our clicks
business, our lead engine and the way we are doing our lead
generation, as well as to the consumer facing
websites.
I would
say that the biggest beneficiary of the current investment in the
consumer facing sites will continue to be the usedcars.com site as
well as the car.com site. We have already largely overhauled the
car.com site previously and again, we are adding bells and whistles
to that. We will be making investments in the other sites along the
way, but I would say those two currently are receiving the primary
investment dollars.
Sameet
Sinha:
Okay. Thank you
very much.
Jeff
Coats:
And those
investments will be made within the context of the financial
outlook that we just provided.
Sameet
Sinha:
Understood. Thank
you.
Operator:
Thank you, and our
next question comes from the line of Eric Martinuzzi, from Lake
Street Capital.
Eric
Martinuzzi:
Thanks. I wanted to
go a layer deeper on the guidance here. First of all, I just want
to make sure I have the apples to apples correct on the specialty
finance leads impact. If I take the midpoint of the 2017 guidance
for revenue, that is $158 million. So on apples to apples, I would
add $6.3 million to that assuming no growth in the specialty
finance lead, if you haven't sold it. We'd be talking about $164.3
million number for a pro forma 2017, is that the right way to think
about it?
Eric
Martinuzzi:
Okay and then the
same thing on the EPS? About 26 midpoint plus $0.03, it would be
about 29, had you not sold it for pro forma 2017.
Kimberly
Boren:
Correct, on heavier
share count.
Eric
Martinuzzi:
Okay. And then
going into the seasonality. I know you guys are trying not to be in
a quarterly earnings guidance business, but given what happened
last year where so much of the year was backend loaded I'm just
curious to know -- let's talk about revenue first.
If I
look back in 2016, obviously a lot of moving parts. You've got the
pay-per-click growth in one hand, you've got the Dealix cleansing
on the other hand, but it was kind of 45 percent, 46 percent of
revenue on the front half with 54 percent in the back half. For a
year, last year where you did $157 million and then we are talking
about midpoint $158 million this year -- does that topline front
half/back half hold true this year?
Kimberly
Boren:
There will still be
further growth on the back half of the year, Eric, it probably
won't be as skewed because of what we were able to do after we cut
out the low-quality lead supply in the first quarter in 2016. So it
will be a little heavier from the 45 percent, I don't have accounts
in front of me, but I am using your numbers, but not
materially.
Eric
Martinuzzi:
Okay. Well, maybe I
could go a little more granular. The consensus estimates for Q1 --
you probably don't happen to have in front of you, but I do. We've
got a revenue consensus of around $36 million and EPS of $21
million. Is there a comfort level or discomfort level? Can you
comment at all on that?
Kimberly
Boren:
I'm sorry, Eric. I
can't give quarterly guidance at this point in time.
Eric
Martinuzzi:
Okay. And then as
far as the layout and earnings throughout the year, you have talked
about -- we won't have as maybe as much seasonality on the revenue
side on the top line, but the EPS -- I did the same quick math on
your backend loaded 2016 and it was pretty breathtaking that you
did $0.46 in the front half and $0.84 in the back half to get to
your $1.30.
Given
the midpoint guide now, again, we are talking about $1.26, so down
$0.04, and I understand all the reasoning behind that. But that the
laying out of the EPS, given your commentary on the revenue, does
that same logic flow for their expense items that would skew
different from the revenue waiting that you've already commented
on?
Kimberly
Boren:
Yes. The non-GAAP
income and EPS should flow similarly to last year in the same
fashion that we have significantly higher employee related and
trade cost in the first half of the year. Those will continue. So
again, it won't be as skewed, similarly to the revenue, but it will
still be skewed in the same direction.
Eric
Martinuzzi:
Okay. That is
helpful. As I look to the pay-per-click investments here, obviously
we're getting terrific growth, but we're also spending a good bit
of money on pay-per-click. We're trying a lot of different things
here. You are working with a select group of partners, but it feels
like there is an element of -- I don't know, profitless prosperity,
but when do we get a return on this investment? Is it shifting this
from the point players to the more broader adoption, we start to
see some leverage, is that what turns it into the profit engine
that we hope it will be?
Jeff
Coats:
I think the way for
you to look at that is, as we have stated before and as we stated
today, we have really been slow walking the rollout of that
product. Particularly since we completed the acquisition and
brought it internally. And that was done in part because we really
needed to integrate it into our existing financial system and we've
been doing development work on top of that integration in order to
have better visibility and to grow margin and other things like
that within the clicks product.
We are
now ready to start rolling it out. We have already begun to start
rolling it out on a more accelerated basis. And so, it will be
somewhat straight-line during the year as Kim mentioned, but that
is also going to be a function of growth with the existing
customers, as well as signing on new customers throughout the
course of the year. (multiple speakers)
Eric
Martinuzzi:
I follow the
topline part of that. I was just more about the adjusted EBITDA or
the adjusted operating flow through contribution margin below the
revenue line.
Jeff
Coats:
Well, there is
always leverage in a situation. We pay our sales organization a
salary which is a fixed component and then their commissions based
on sales are variable. So we do have a certain amount of a fixed
component to our expenses related to that, that we need to cover.
Candidly, it is one of the reasons why in the third quarter every
year, you always see a generally much more robust bottom line,
because that is where you can really see the leverage in our
business as revenue increases based on the seasonal uptick based on
our existing cost structure, but a lot more of those dollars fall
through to the bottom line. The metrics that we saw in the fourth
quarter after taking out some costs, some incremental cost in the
business -- we did shift some cost out of the business during the
fourth quarter and got our percentage of OpEx down to 31 percent
from 35 percent; a very nice move from a leverage
standpoint.
Eric
Martinuzzi:
And then last
question for me. You attended the NADA conference. I know when
people hear the name Autobytel, they immediately think leads. As
far as your conversations with key partners at NADA, is there any
feedback, any anecdotal feedback that you could share with us as
far as, either on the lead side or on the pay-per-click side? Where
there were any “a-ha” moments, some light bulb moments
for prospects or existing customers?
Jeff
Coats:
I don't really know
how to think about it from an “a-ha” moment. I can tell
you that NADA this year was overall, extremely positive. It was in
New Orleans this year, it was one of the largest attendances in
years. So despite the fact that there is some level of concern,
certainly in the stock market and to some extent in the automotive
market about automobile sales starting to touch a ceiling, there
was a great deal of excitement in the industry.
Now
some of that is also coming because we have a new, more
conservative anti-regulation regime in Washington. There is an
expectation that some of the cafe rules and other things may be
softened somewhat, which will help the manufacturers, which will
help the dealers. So I would say overall there was a real positive
sentiment. We saw a lot of traffic in our booth at NADA. We always
have a booth there. In fact for this past NADA, we actually sold
more new relationships than we have in several of the recent
ones.
So I
would say overall -- people do know Autobytel as a recognized
player in the industry. We are getting credit for our many years of
focus on improving the quality of the leads product that we sell
and helping bring up the overall lead quality in the industry. I
would say a lot of people are very excited about our new clicks
product. So we are definitely moving in the right direction from
that standpoint.
Eric
Martinuzzi:
Great. Thanks for
taking my questions.
Jeff
Coats:
Thank you,
Eric.
Operator:
Thank you. And as a
reminder, if you do have a question you may press star and one on
your telephone keypad. And our next question comes from Ed Woo,
from Ascendiant.
Ed
Woo:
Yes.
Congratulations on the quarter, guys.
I had
at question in terms of, now that you guys are transitioning more
or growing your pay-per-click business much more, how do you see
the competitive environment?
Do you
still see your biggest competitors the same as before? Or are you
having a new focus on different competition?
Jeff
Coats:
Ed, I think the way
to think about that is, it is not so much product to product that
we are competing with. It is marketing dollar, budget allocation.
So a dealer is only going to spend so many dollars on their digital
marketing. We vie for a piece of that budget, so do the other
players who have been our traditional competitors
historically.
We are
-- I would say in the clicks side of the business, to some extent
dealing with a larger number of relatively small players at the
dealer level, who don't necessarily have the scale nor scope that
we do to drive high volume of really high quality traffic. And of
course we get that because of our 14 years of long tail search
traffic from our lead generation operation in Tampa. The two are
absolutely interconnected. Our legacy of the being the largest,
oldest lead company has been a huge plus for us in developing the
new pay-per-click business, because it's that high quality traffic
that we are now also converting instead of just in the leads, also
in the clicks for our dealer and manufacturer
customers.
Ed
Woo:
There are some
discussions last year about a lot of these retailers or dealers
wanted to establish their own direct relationships with the
consumers and trying to develop their own digital strategy. Have
you seen any change in dealers focusing on allocating their digital
marketing budgets to internal sources versus using people like you
guys
Jeff
Coats:
I would say it is
similar to what -- it's not really different than what we have seen
for the last couple, three years. Dealers are interested in
developing relations as much as they can directly with consumers. I
would say however, they all recognize and value strongly the leads
they get, especially from us, but also from a few other
players.
Having
said that, our click product is absolutely allowing them to
establish that direct relationship with the consumer. So we kind of
have a very nice bag of products that we can lay out for a dealer
to help them the traditional lead way and a new updated, more
direct relationship with the consumer by dropping that consumer
onto a dealer's website on a vehicle description page or a specials
page or something like that. So I don't know that it's changed
dramatically over the last two or three years, but we now certainly
are participating more on the pay-per-click side and are becoming
one of the larger players as that piece of the market continues to
grow.
Ed
Woo:
Great. Well, thank
you and good luck.
Operator:
Thank you. And that
does conclude our question and answer session. I'd like to turn the
call back over to Mr. Coats for closing remarks.
Jeff
Coats:
Thank you, Karen.
Thanks everybody for joining us on the call today. I would like to
thank our team of hard-working and dedicated employees. We look
forward to speaking with our investors during our Q1 call in May.
In addition, I am doing several non-deal roadshow investor meetings
with two of our analysts in San Francisco, Denver, and Salt Lake
City later this month, and in New York in April. We look forward to
speaking with you. Thank you.
Operator:
Ladies and
gentlemen this does conclude today's teleconference. You may
disconnect your lines at this time. Thank you for your
participation.
END
