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| EX-99.2 - TRANSCRIPT OF AUTOWEB, INC.'S CONFERENCE CALL DATED AUGUST 2, 2018 - AutoWeb, Inc. | ex99-2.htm |
| 8-K - CURRENT REPORT - AutoWeb, Inc. | auto8k_aug22018.htm |
Exhibit 99.1
AutoWeb Reports Second Quarter 2018 Results
IRVINE, Calif. – August 2, 2018 – AutoWeb, Inc.
(Nasdaq: AUTO), a robust digital marketing platform providing
advertising solutions for automotive dealers and OEMs, is reporting
financial results for the second quarter ended June 30,
2018.
Second Quarter 2018 Financial Summary vs. Year-Ago
Quarter
●
Total revenues were
$29.3 million compared to $34.6 million.
●
Advertising
revenues were $6.9 million, with click revenues of $5.8
million.
●
Net loss was $5.2
million or $(0.41) per share, compared to net income of $0.3
million or $0.02 per share.
●
Non-GAAP loss was
$2.8 million or $(0.22) per share, compared to non-GAAP income of
$2.5 million or $0.19 per share.
Management Commentary
“During the second
quarter, we made great progress in working towards the completion
of our operating review and the development of a new strategic
plan,” said Jared Rowe, president & CEO of AutoWeb.
“This included a comprehensive review of our products,
traffic acquisition strategies, pricing policies, distribution
channels, and organizational capabilities and
structure.
“Although
we are still engaged in our strategic review, we have already begun
to redevelop and invest in the key pillars of our business, which
will continue to impact short-term profitability, particularly as
we invest in new product development and test new traffic
acquisition strategies to improve quality and consumer targeting.
In an effort to improve consumer-to-advertiser matching, we are
also investing to enhance our click algorithm, which we expect to
complete and deploy later this year. Further, we plan to
restructure our organization to better align with our revised
strategic imperatives.
“With
just over three months at AutoWeb, I am very encouraged by the
progress our team has made to evolve our go-to-market approach.
However, there is still work to be done to determine the proper
new/used car targeting mix, channel mix, and product mix, among
other strategic decisions. We look forward to laying this out in
greater detail in the coming months as we finalize our revised
strategic plan. We continue to expect that the enhancement of our
platform and advertising solutions will enable AutoWeb to return to
growth and profitability.”
Second Quarter 2018 Financial Results
Total
revenues in the second quarter of 2018 were $29.3 million compared
to $34.6 million in the year-ago quarter, with advertising click
revenues of $5.8 million compared to $6.5 million in the year-ago
quarter. The decline in total revenues was primarily due to lower
retail dealer count and lower lead and click volumes.
Gross
profit in the second quarter was $5.5 million compared to $10.6
million in the year-ago quarter, with the decrease driven by
investments in new traffic acquisition strategies and testing of
new traffic sources. As a percentage of revenue, gross profit was
18.9% compared to 30.7%. The decrease in gross margin was also due
to the company’s investments in new traffic acquisition
strategies that resulted in higher cost of revenues, which the
company would otherwise expect to proportionately decrease with
total revenues.
Total
operating expenses in the second quarter were $10.9 million
compared to $10.4 million in the year-ago quarter.
Net
loss in the second quarter of 2018 was $5.2 million or $(0.41) per
share, compared to net income of $0.3 million or $0.02 per share in
the year-ago quarter.
Non-GAAP
loss was $2.8 million or $(0.22) per share, compared to non-GAAP
income of $2.5 million or $0.19 per share in the second quarter of
2017 (see "Note about Non-GAAP Financial Measures" below for
further discussion). The decline was primarily driven by the
aforementioned lower revenue and gross profit resulting from
traffic acquisition investments, lower retail dealer count and
lower lead and click volume.
At June
30, 2018, cash and cash equivalents totaled $18.3 million compared
to $15.2 million at March 31, 2018, and $25.0 million at December
31, 2017, with the reduction from year-end primarily driven by the
repayment of AutoWeb’s $8.0 million revolving line of credit.
Total debt was reduced to $1.0 million compared to $9.0 million at
December 31, 2017.
Conference Call
AutoWeb
will hold a conference call today at 5:00 p.m. Eastern time to
discuss its second quarter 2018 results, followed by a
question-and-answer session.
Date:
Thursday, August 2, 2018
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: 1886006
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 Liolios 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 May 19, 2018. The call will
also be archived in the Investors section of AutoWeb’s
website for one year.
Toll-free
replay number: 1-855-859-2056
International
replay number: 1-404-537-3406
Replay
ID: 1886006
Tax Benefit Preservation Plan
At
December 31, 2017, the company had approximately $74.0 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 on April
14, 2014 and April 13, 2017 (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
June 30, 2018, there were 12,947,950 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/tax.cfm.
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 and
special event invitations by accessing the online registration form
at http://investor.autoweb.com/alerts.cfm.
Note about Non-GAAP Financial Measures
AutoWeb
has disclosed non-GAAP (loss) income and non-GAAP EPS in this press
release, which are non-GAAP financial measures as defined by SEC
Regulation G, for the 2018 and 2017 second quarters. The company
defines (i) non-GAAP (loss) income as GAAP net (loss) income before
amortization of acquired intangibles, non-cash stock-based
compensation, severance costs, gain or loss on investment or sale,
litigation settlements, goodwill impairment and income taxes; and
(ii) non-GAAP EPS as non-GAAP (loss) income divided by weighted
average diluted shares outstanding. The company's management
believes that presenting non-GAAP (loss) income and non-GAAP EPS
provides useful information to investors regarding the underlying
business trends and performance of the company's ongoing operations
and are better metrics for monitoring the company's performance
given the company’s net operating loss (NOL) tax credits.
These non-GAAP financial measures are 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. Tables providing
reconciliations of non-GAAP (loss) income and non-GAAP EPS are
included at the end of this press release.
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 (i) expects to complete and deploy an enhanced click
algorithm, later this year; (ii) plans to restructure its
organization to better align with its revised strategic
imperatives; and (iii) continues to expect that the enhancement of
its platform and advertising solutions will enable the company to
return to growth and profitability, 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, 2017 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
Wesley
Ozima
Interim
Chief Financial Officer
949-225-4543
wes.ozima@autoweb.com
Investor Relations Contact
Sean
Mansouri or Cody Slach
Liolios
Investor Relations
949-574-3860
AUTO@liolios.com
|
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
|
||
|
(Amounts in thousands, except share and per-share
data)
|
||
|
|
|
|
|
|
|
|
|
|
June 30,
|
December 31,
|
|
|
2018
|
2017
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
and cash equivalents
|
$18,271
|
$24,993
|
|
Short-term
investment
|
255
|
254
|
|
Accounts
receivable (net of allowances for bad debts and customer credits of
$659 and $892 at June 30, 2018 and December 31, 2017,
respectively)
|
24,064
|
25,911
|
|
Prepaid
expenses and other current assets
|
1,376
|
1,805
|
|
Total
current assets
|
43,966
|
52,963
|
|
Property
and equipment, net
|
3,702
|
4,311
|
|
Investments
|
100
|
100
|
|
Intangible
assets, net
|
25,755
|
29,113
|
|
Goodwill
|
-
|
5,133
|
|
Long-term
deferred tax asset
|
-
|
692
|
|
Other
assets
|
1,233
|
601
|
|
Total
assets
|
$74,756
|
$92,913
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$8,895
|
$7,083
|
|
Accrued
employee-related benefits
|
2,697
|
2,411
|
|
Other
accrued expenses and other current liabilities
|
7,649
|
7,252
|
|
Current
convertible note payable
|
1,000
|
-
|
|
Total
current liabilities
|
20,241
|
16,746
|
|
Convertible
note payable
|
-
|
1,000
|
|
Borrowings
under revolving credit facility
|
-
|
8,000
|
|
Total
liabilities
|
20,241
|
25,746
|
|
|
|
|
|
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; 12,947,950
and 13,058,841 shares issued and outstanding, as of June 30, 2018
and December 31, 2017, respectively
|
13
|
13
|
|
Additional
paid-in capital
|
358,898
|
356,054
|
|
Accumulated
deficit
|
(304,396)
|
(288,900)
|
|
Total
stockholders' equity
|
54,515
|
67,167
|
|
Total
liabilities and stockholders' equity
|
$74,756
|
$92,913
|
|
AUTOWEB, INC.
|
||||
|
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
|
||||
|
(Amounts in thousands, except per-share data)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
||
|
|
June 30,
|
June 30,
|
||
|
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
Lead
fees
|
$22,211
|
$26,347
|
$46,291
|
$55,439
|
|
Advertising
|
6,950
|
7,999
|
15,037
|
15,967
|
|
Other
revenues
|
131
|
245
|
313
|
526
|
|
Total
revenues
|
29,292
|
34,591
|
61,641
|
71,932
|
|
Cost
of revenues
|
23,765
|
23,955
|
48,423
|
48,385
|
|
Gross
profit
|
5,527
|
10,636
|
13,218
|
23,547
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Sales
and marketing
|
3,052
|
3,229
|
6,764
|
6,992
|
|
Technology
support
|
2,965
|
3,188
|
6,351
|
6,441
|
|
General
and administrative
|
3,765
|
2,766
|
8,340
|
6,223
|
|
Depreciation
and amortization
|
1,163
|
1,201
|
2,323
|
2,430
|
|
Goodwill
impairment
|
-
|
-
|
5,133
|
-
|
|
Total
operating expenses
|
10,945
|
10,384
|
28,911
|
22,086
|
|
Operating
income (loss)
|
(5,418)
|
252
|
(15,693)
|
1,461
|
|
Interest
and other income (expense), net
|
201
|
(96)
|
201
|
(196)
|
|
Income
(loss) before income tax provision (benefit)
|
(5,217)
|
156
|
(15,492)
|
1,265
|
|
Income
tax provision (benefit)
|
-
|
(166)
|
4
|
459
|
|
Net
income (loss) and comprehensive income (loss)
|
$(5,217)
|
$322
|
$(15,496)
|
$806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per common share
|
$(0.41)
|
$0.03
|
$(1.22)
|
$0.07
|
|
Diluted
earnings (loss) per common share
|
$(0.41)
|
$0.02
|
$(1.22)
|
$0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in computing earnings (loss) per common share (in
thousands):
|
|
|
|
|
|
Basic
|
12,726
|
11,149
|
12,672
|
11,030
|
|
Diluted
|
12,726
|
13,344
|
12,672
|
13,326
|
|
AUTOWEB, INC.
|
||||||
|
RECONCILIATION OF NON-GAAP INCOME (LOSS) / EPS
|
||||||
|
(Amounts in thousands, except per-share data)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||
|
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
$(10,279)
|
$484
|
$(5,217)
|
$322
|
$(15,496)
|
$806
|
|
Amortization
of acquired intangibles
|
1,687
|
1,387
|
1,670
|
1,359
|
3,357
|
2,746
|
|
Non-cash
stock based compensation:
|
|
|
|
|
|
|
|
Cost
of revenues
|
15
|
20
|
4
|
19
|
19
|
39
|
|
Sales
and marketing
|
225
|
412
|
159
|
402
|
384
|
814
|
|
Technology
support
|
152
|
127
|
173
|
134
|
325
|
261
|
|
General
and administrative
|
1,234
|
452
|
607
|
389
|
1,841
|
841
|
|
Total
non-cash stock-based compensation
|
1,626
|
1,011
|
943
|
944
|
2,569
|
1,955
|
|
Severance
costs
|
950
|
-
|
-
|
57
|
950
|
57
|
|
Litigation
settlements
|
(17)
|
(25)
|
(25)
|
(25)
|
(42)
|
(50)
|
|
Gain
(loss) on investment
|
-
|
-
|
(125)
|
-
|
(125)
|
-
|
|
Goodwill
impairment
|
5,133
|
-
|
-
|
-
|
5,133
|
-
|
|
Income
taxes
|
4
|
625
|
-
|
(166)
|
4
|
459
|
|
|
|
|
|
|
|
|
|
Non-GAAP
income (loss)
|
$(896)
|
$3,482
|
$(2,754)
|
$2,491
|
$(3,650)
|
$5,973
|
|
|
|
|
|
|
|
|
|
Weighted
average diluted shares
|
12,617
|
13,309
|
12,726
|
13,344
|
12,672
|
13,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
GAAP EPS
|
$(0.81)
|
$0.04
|
$(0.41)
|
$0.02
|
$(1.22)
|
$0.06
|
|
EPS
impact of adjustments
|
0.74
|
0.23
|
0.19
|
0.16
|
0.93
|
0.39
|
|
Non-GAAP
EPS
|
$(0.07)
|
$0.26
|
$(0.22)
|
$0.19
|
$(0.29)
|
$0.45
|