8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): November 2, 2006

DEALERTRACK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-51653	52-2336218
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)
1111 Marcus Ave., Suite M04, Lake Success, NY		11042
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 516-734-3600

Not Applicable

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

     Attached hereto as Exhibit 99.1 and incorporated by reference herein is financial information for the registrant for the third quarter of 2006 and forward-looking statements relating to 2006, as presented in a press release of November 2, 2006. The information in this Current Report on Form 8-K is furnished under Item 2.02 — “Results of Operations and Financial Condition.” Such information, including the exhibits attached hereto, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

(c) Exhibits.

Exhibit
No.	Description
99.1	Registrant’s Press Release dated November 2, 2006.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 2, 2006

Dealertrack Holdings, Inc.
By:	/s/ Robert J. Cox III
	Robert J. Cox III
	Senior Vice President, Chief Financial Officer and Treasurer

EXHIBIT INDEX

Exhibit
No.	Description
99.1	Registrant’s Press Release dated November 2, 2006.

EX-99.1

Exhibit 99.1

CONTACT:
Liz Zale
DealerTrack
(516) 734-3758
liz.zale@dealertrack.com

Tom Pratt
RF|Binder Partners
(212) 994-7563
tom.pratt@rfbinder.com

DEALERTRACK HOLDINGS, INC. REPORTS
THIRD QUARTER RESULTS

Company Raises 2006 Revenue and Earnings Guidance

Lake Success, NY, November 2, 2006 – DealerTrack Holdings, Inc. (Nasdaq: TRAK) today reported financial results for the three months and nine months ended September 30, 2006.

GAAP Results for Third Quarter of 2006

§	Revenue for the quarter was $46.3 million, a 35 percent increase from $34.4 million for the third quarter of 2005.
§	GAAP net income for the quarter was $5.6 million, a substantial increase from $0.6 million for the third quarter of 2005.
§	GAAP diluted net income per share for the quarter was $0.15, compared with $0.01 for the third quarter of 2005.

Non-GAAP Results for Third Quarter of 2006

§	EBITDA for the quarter was $9.3 million, compared to $10.4 million for the third quarter of 2005. Included in EBITDA for the third quarter of 2006 are charges of $5.0 million in non-cash stock-based compensation expense and $0.8 in cash compensation expense related to the departure of an executive officer
§	Cash net income for the quarter was $8.6 million, a 61 percent increase from $5.3 million for the third quarter of 2005.
§	Diluted cash net income per share for the quarter was $0.23, more than double the amount of $0.09 for the third quarter of 2005.

EBITDA is a non-GAAP financial measure that represents GAAP net income before interest, taxes, depreciation and amortization. Cash net income is a non-GAAP financial measure that represents GAAP net income before non-cash stock-based compensation charges (net of taxes), amortization of acquired identifiable intangibles (net of taxes) and the reversal of a benefit related to a tax valuation allowance. See “Non-GAAP Financial Measures” for a further discussion of EBITDA and cash net income, and refer to Attachment 4 of this press release for a reconciliation of GAAP financial measures to non-GAAP financial measures.

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“We are pleased with the third quarter performance of both our transaction and subscription businesses and with the ongoing expansion of the DealerTrack network,” said Mark O’Neil, DealerTrack’s chairman and chief executive officer. “Successful execution of our growth strategy is delivering solid financial performance and creating a substantial foundation for DealerTrack’s future growth opportunities.”

GAAP Results for the Nine Months ended September 30, 2006

• Revenue for the nine months was $127.6 million, an increase of 47 percent from $86.8 million for the same period in 2005.

• GAAP net income for the nine months was $13.7 million, more than triple the amount of $3.8 million for the same period in 2005.

• GAAP diluted net income per share for the nine months was $0.37, compared to $0.07 for the same period in 2005.

Non-GAAP Results for Nine Months ended September 30, 2006

• EBITDA for the nine months was $33.5 million, an increase of 35 percent from $24.8 million for the same period in 2005. Included in EBITDA for the nine months ended September 30, 2006 are charges of $5.0 million in non-cash stock-based compensation expense and $0.8 in cash compensation expense related to the departure of an executive officer.

• Cash net income for the nine months was $23.4 million, up 85 percent from $12.7 million for the same period in 2005.

• Diluted cash net income per share for the nine months was $0.63, more than twice the amount of $0.23 for the same period in 2005.

“Our business continues to thrive as we create efficiencies for all participants within the automotive retail environment by converting legacy paper-based tasks to electronic processes,” said O’Neil. “Higher interest rates are an additional catalyst for the adoption of our electronic and digital contracting solutions, as dealers seek to reduce their costs and accelerate the funding process. We expect dealers, especially the large public dealer groups, will place increasing pressure on their financing sources to implement eContracting. As an intermediate step, lenders can implement eDocs, our digital contracting solution, to reduce their back-end processing costs.”

Business Statistics

There were 22,276 active dealers in the DealerTrack network as of September 30, 2006, a 6 percent increase from 21,071 at September 30, 2005. The number of active financing sources in the DealerTrack network as of September 30, 2006 was 268, up 60 percent from 167 a year ago. Transactions processed through the DealerTrack network for the third quarter were approximately 18.8 million, a 29 percent increase from approximately 14.6 million transactions processed through the network for the third quarter of 2005. The number of subscriptions in the network as of September 30, 2006 was 19,952, a 54 percent increase from 12,928 a year earlier. The number of dealers with at least one subscription in the network was 9,566, a 30 percent increase from the third quarter of 2005. As of September 30, 2006, 43 percent of dealers in the network subscribed to at

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least one product within the network. A total of 14 providers have signed agreements to participate in the aftermarket component of the DealerTrack network as of the end of the quarter.

Other Activity

On August 1, 2006, DealerTrack acquired the assets of DealerWare LLC, an aftermarket menu provider. On October 12, 2006, a public offering of 11.5 million shares of DealerTrack stock was completed, including a fully-exercised over-allotment option of 1.5 million shares. DealerTrack sold 2.75 million shares and the selling stockholders sold 8.75 million shares. As a result of the offering, the number of weighted average diluted common shares outstanding for the fourth quarter of 2006 is expected to be 39.7 million.

Guidance

DealerTrack updated revenue and earnings guidance for its 2006 expected financial performance.

Expected GAAP Results for full year 2006

• Revenue for 2006 is expected to be between $170.0 million and $171.0 million.

• GAAP net income for 2006 is expected to be between $17.0 million and $17.5 million.

• GAAP diluted net income per share for 2006 is expected to be between $0.45 and $0.47, based on a weighted average of 37.6 million diluted common shares outstanding for 2006.

Expected Non-GAAP Results for full year 2006

• EBITDA for the year is expected to be between $45.0 million and $45.5 million, including third quarter charges of $5.0 million in non-cash stock-based compensation expense and $0.8 in cash compensation expense related to the departure of an executive officer.

• Cash net income for the year is expected to be between $30.2 million and $30.7 million.

• Diluted cash net income per share is expected to be between $0.80 and $0.82, based on a weighted average of 37.6 million diluted common shares outstanding for 2006.

DealerTrack will host a conference call to discuss its third quarter results, expectations for 2006 performance and other matters on Thursday, November 2, 2006, at 5:00 p.m. Eastern Time. The conference call will be webcast live on the Internet at http://ir.dealertrack.com/releases_financial.cfm. A live audio of the call will be accessible to the public by calling (877) 704-5380 (domestic) or (913) 312-1294 (international); no access code is necessary. Callers should dial in approximately 10 minutes before the call begins. A replay of the call will be available on the DealerTrack website through November 16, 2006.

Non-GAAP Financial Measures

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In this release, the Company’s EBITDA and cash net income disclosures are not presented in accordance with generally accepted accounting principles (GAAP) and are not intended to be used in lieu of GAAP presentations of net income. EBITDA represents GAAP earnings excluding interest, taxes, depreciation and amortization expenses. Cash net income represents net income excluding stock-based compensation expense (net of taxes), and amortization of acquired intangibles (net of taxes). EBITDA and cash net income are presented because management believes they provide additional information with respect to the performance of our fundamental business activities and are also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. Management believes the EBITDA and cash net income information is useful to investors for these reasons. EBITDA and cash net income are non-GAAP financial measures and should not be viewed as an alternative to GAAP measures of performance. Management believes the most directly comparable GAAP financial measure for EBITDA and cash net income is GAAP net income and has provided a reconciliation of GAAP net income to EBITDA and GAAP net income to cash net income in Attachment 4 to this press release.

About DealerTrack (www.dealertrack.com)

DealerTrack Holdings, Inc. (Nasdaq: TRAK) is a leading provider of on-demand software and data solutions for the U.S. automotive retail industry. The company’s online credit application processing product automates and accelerates the automotive financing process, while its integrated subscription-based software enables dealers to receive consumer leads, compare financing and leasing options, sell insurance and other aftermarket products, document compliance, and execute financing contracts electronically. Over 22,000 dealers, with more than 85% of all franchised dealers; 275 financing sources, including nine captives and the 20 largest U.S. independents; and other service and information providers are active in the DealerTrack network.

Safe Harbor for Forward-Looking and Cautionary Statements

Statements in this press release regarding DealerTrack’s expected 2006 performance, the development and expansion of DealerTrack’s network, products and services, the demand for DealerTrack’s products (including expected trends resulting from higher interest rates and expected demand for DealerTrack’s eContracting and eDocs products), DealerTrack’s growth, and all other statements in this release other than the recitation of historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). These statements involve a number of risks, uncertainties and other factors that could cause actual results, performance or achievements of DealerTrack to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Factors that might cause such a difference include: increased competitive pressure from other industry participants, the inability to execute any element of DealerTrack’s business strategy, including selling additional products and services to existing and new customers; DealerTrack’s success in expanding its customer base and product and service offerings; the impact of the automotive retail industry on DealerTrack’s business; the impact of some vendors of software products for automotive dealers making it more difficult for our customers to use our products and services; the impact of general

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economic trends, including interest rates, as well as the trends in the automotive industry, and other risks listed in the Company’s reports filed with the SEC, including its registration statement on Form S-1 and its 2005 Form 10-K. These filings can be found on DealerTrack’s website at www.dealertrack.com and the SEC’s website at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and the Company disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.

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(1) Actual Results – Three-Month Period

DEALERTRACK HOLDINGS, INC.
Consolidated Statements of Operations
(All amounts in thousands, except per share data)
(Unaudited)

	Three Months Ended
	September 30,
	2006		2005
Net revenue(1)	$	46,264	$	34,380
Cost of revenue (2)		19,128		16,733
Product development		2,218		1,498
Selling, general and administration		22,515		14,399
Total operating costs and expenses		43,861		32,630
Income from operations		2,403		1,750
Interest income (expense), net		869		(613	)
Income before benefit (provision) for income taxes		3,272		1,137
Benefit (provision) for income taxes		2,294		(488	)
Net income	$	5,566	$	649
Basic net income per share applicable to common stockholders (a)	$	0.16	$	0.03
Diluted net income per share applicable to common stockholders (b)	$	0.15	$	0.01
Weighted average shares outstanding		35,548		674
Weighted average shares outstanding assuming dilution (b)		36,990		1,635
(1) Related party revenue	$	12,500	$	8,124
(2) Related party cost of revenue	$	26	$	876
EBITDA (Non-GAAP) (c)	$	9,322	$	10,395
Cash net income (Non-GAAP) (c)	$	8,597	$	5,343
Diluted cash net income per share (Non-GAAP) (b)	$	0.23	$	0.09

(a)	Basic net income per share for third quarter of 2005 was calculated in accordance with the two-class method under FASB Statement 128, and assumes 0.7 million weighted average common shares outstanding for the quarter ended September 30, 2005.
(b)	Diluted net income per share and diluted cash net income per share for third quarter of 2005 were each calculated in accordance with the two-class method under FASB Statement 128, and each calculation assumes 1.6 million weighted average diluted common shares outstanding for the quarter ended September 30, 2005.
(c)	See Reconciliation Data in Attachment 4.

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(1) Actual Results – Nine-Month Period

DEALERTRACK HOLDINGS, INC.
Consolidated Statements of Operations
(All amounts in thousands, except per share data)
(Unaudited)

	Nine Months Ended
	September 30,
	2006			2005
Net revenue(1)	$	127,613		$	86,844
Cost of revenue (2)		51,536			36,922
Product development		6,781			3,585
Selling, general and administration		54,957			38,795
Total operating costs and expenses		113,274			79,302
Income from operations		14,339			7,542
Interest income (expense), net		2,475			(900	)
Income before provision for income taxes		16,814			6,642
Provision for income taxes (a)		(3,157	)		(2,856	)
Net income	$	13,657		$	3,786
Basic net income per share applicable to common stockholders (b)	$	0.39		$	0.15
Diluted net income per share applicable to common stockholders (c)	$	0.37		$	0.07
Weighted average shares outstanding		35,408			603
Weighted average shares outstanding assuming dilution (c)		36,879			1,318
(1) Related party revenue	$	32,819		$	21,495
(2) Related party cost of revenue	$	1,835		$	2,552
EBITDA (Non-GAAP) (d)	$	33,496		$	24,800
Cash net income (Non-GAAP) (d)	$	23,418		$	12,677
Diluted cash net income per share (Non-GAAP) (c)	$	0.63		$	0.23

(a)	Included in the provision for income taxes for the nine months ended September 30, 2006 is $206,000 of tax expense for our Canadian subsidiary that relates to prior periods.
(b)	Basic net income per share for the nine months ended September 30, 2005 was calculated in accordance with the two-class method under FASB Statement 128, and assumes 0.6 million weighted average common shares outstanding for the nine months ended September 30, 2005.
(c)	Diluted net income per share and diluted cash net income per share for the nine months ended September 30, 2005 were each calculated in accordance with the two-class method under FASB Statement 128, and each calculation assumes 1.3 million weighted average diluted common shares outstanding for the nine months ended September 30, 2005.
(d)	See Reconciliation Data in Attachment 4.

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DEALERTRACK HOLDINGS, INC.
Condensed Consolidated Balance Sheet
(Dollars in thousands)
(Unaudited)

	September 30,		December 31,
	2006		2005
ASSETS
Cash, cash equivalents and short-term investments	$	90,714	$	103,264
Accounts receivable, net		22,302		19,279
Prepaid expenses and other current assets		8,053		4,812
Total current assets		121,069		127,355
Property, plant and equipment, net		6,330		4,885
Software and website development costs, net		10,855		8,769
Intangible assets, net		42,915		39,550
Goodwill		51,742		34,200
Other assets		14,023		5,856
Total assets	$	246,934	$	220,615
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	22,356	$	22,140
Deferred revenue		3,472		3,267
Capital leases payable		58		387
Total current liabilities		25,886		25,794
Long-term liabilities		7,901		8,150
Total liabilities		33,787		33,944
Total stockholders’ equity		213,147		186,671
Total liabilities and stockholders’ equity	$	246,934	$	220,615

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(3) Summary Cash Flow Information

DEALERTRACK HOLDINGS, INC.
Summary Cash Flow Information
(Dollars in thousands)
(Unaudited)

	Nine Months Ended
	September 30,
	2006			2005
Net cash provided by operating activities	$	27,786		$	18,829
Net cash used in investing activities (a)	$	(103,601	)	$	(70,392	)
Net cash provided by financing activities	$	2,444		$	43,283

(a) For the nine months ended September 30, 2006, net cash used in investing activities includes $60.8 million in net purchases of auction rate securities that are invested in tax-exempt and tax-advantaged securities.

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(4) Reconciliation Data

DEALERTRACK HOLDINGS, INC.
Reconciliation of GAAP Net Income to Non-GAAP EBITDA
(Dollars in thousands)
(Unaudited)

	Three Months Ended
	September 30,
	2006			2005
GAAP net income	$	5,566		$	649
Interest income		(934	)		(20	)
Interest expense		65			633
(Benefit) Provision for income taxes		(2,294	)		488
Depreciation and amortization		2,404			1,063
Amortization of acquired identifiable intangibles		4,515			7,582
EBITDA (Non-GAAP)	$	9,322		$	10,395

DEALERTRACK HOLDINGS, INC.

Reconciliation of GAAP Net Income to Non-GAAP Cash Net Income

(Dollars in thousands)

(Unaudited)

	Three Months Ended
	September 30,
	2006			2005
GAAP net income	$	5,566		$	649
Non-cash stock-based compensation charges, net of taxes (a)		3,981			372
Amortization of acquired identifiable intangibles, net of taxes		2,754			4,322
Benefit related to reversal of tax valuation allowance		(3,704	)		—
Cash net income (Non-GAAP)	$	8,597		$	5,343

(a) Includes charges related to employee stock options, employee stock purchases and restricted common stock.

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(4) Reconciliation Data (continued)

DEALERTRACK HOLDINGS, INC.
Reconciliation of GAAP Net Income to Non-GAAP EBITDA
(Dollars in thousands)
(Unaudited)

	Nine Months Ended
	September 30,
	2006			2005
GAAP net income	$	13,657		$	3,786
Interest income		(2,681	)		(106	)
Interest expense		206			1,006
Provision for income taxes		3,157			2,856
Depreciation and amortization		6,230			2,977
Amortization of acquired identifiable intangibles		12,927			14,281
EBITDA (Non-GAAP)	$	33,496		$	24,800

DEALERTRACK HOLDINGS, INC.

Reconciliation of GAAP Net Income to Non-GAAP Cash Net Income

(Dollars in thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2006			2005
GAAP net income	$	13,657		$	3,786
Non-cash stock-based compensation charges, net of taxes (a)		5,580			751
Amortization of acquired identifiable intangibles, net of taxes		7,885			8,140
Benefit related to reversal of tax valuation allowance		(3,704	)		—
Cash net income (Non-GAAP)	$	23,418		$	12,677

(a) Includes charges related to employee stock options, employee stock purchases and restricted common stock.

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(4) Reconciliation Data (continued)

DEALERTRACK HOLDINGS, INC.
Reconciliation of Forward-looking GAAP Net Income
to Forward-looking Non-GAAP EBITDA
(Dollars in millions)
(Unaudited)

	Year Ending
	December 31, 2006
	Expected Range
GAAP net income	$	17.0		$	17.5
Interest income		(3.8	)		(3.8	)
Interest expense		—			—
Provision for income taxes		6.1			6.1
Depreciation and amortization		8.5			8.5
Amortization of acquired identifiable intangibles		17.2			17.2
EBITDA (Non-GAAP)	$	45.0		$	45.5

DEALERTRACK HOLDINGS, INC.
Reconciliation of Forward-looking GAAP Net Income to
Forward-looking Non-GAAP Cash Net Income
(Dollars in millions)
(Unaudited)

	Year Ending
	December 31, 2006
	Expected Range
GAAP net income	$	17.0		$	17.5
Non-cash stock-based compensation charges, net of taxes		6.4			6.4
Amortization of acquired identifiable intangibles, net of taxes		10.5			10.5
Benefit related to the reversal of tax valuation allowance		(3.7	)		(3.7	)
Cash net income (Non-GAAP)	$	30.2		$	30.7

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(5) Summary of Business Statistics (Unaudited)

DEALERTRACK HOLDINGS, INC.

	Three months ended
	September 30,		June 30,		March 31,		December 31,		September 30,
	2006		2006		2006		2005		2005
Active dealers in the network as of end of period (a)		22,276		22,031		21,794		21,155		21,071
Active financing sources in the network as of end of period (b)		268		243		214		201		167
Transactions processed (c)		18,837,133		17,446,623		15,710,636		12,843,883		14,608,229
Product subscriptions as of end of period (d)		19,952		18,064		16,438		14,473		12,928

(a)	We consider a dealer to be active as of a date if the dealer completed at least one revenue-generating transaction in our network during the most recently ended calendar month.
(b)	We consider a financing source to be active in our network as of a date if it is accepting credit application data electronically from dealers in our network.
(c)	Represents revenue generating transactions processed in the DealerTrack, Global Fax and dealerAccess networks at the end of a given period.
(d)	Represents revenue generating subscriptions in the DealerTrack network at the end of a given period.

DEALERTRACK HOLDINGS, INC.

	Three months ended
	September 30,		June 30,		March 31,		December 31,		September 30,
	2006		2006		2006		2005		2005
Transaction revenue (in thousands)	$	30,837	$	28,298	$	24,540	$	20,779	$	23,171
Subscription revenue (in thousands)	$	13,878	$	12,991	$	11,631	$	10,800	$	9,535
Other revenue (in thousands)	$	1,549	$	2,125	$	1,764	$	1,796	$	1,674
Average transaction price (a)	$	1.64	$	1.62	$	1.56	$	1.62	$	1.59
Average subscription price (b)	$	243	$	251	$	251	$	263	$	262

(a)	Calculation includes revenue from ALG and NAT transactions that were not processed within the DealerTrack, Global Fax or dealerAccess networks.
(b)	Calculation includes revenue for Chrome and ALG subscriptions that were outside of the DealerTrack network.

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