"As the secular shift of marketing dollars to online media continues for the auto industry, ABTL is positioning itself to be a strategic partner to auto dealers/manufacturers and financiers with its lead generation programs and value-added tools.
Key Data Points
§ ABTL reported 1Q12 revenues/ GAAP EPS of $16.7 million/$0.01 versus our estimate of $16.5 million/ $0.00 and versus consensus of $16.6 million/ $0.00
§ Purchase request revenues were up 7.4% Y/Y driven by 12.9% Y/Y growth for Wholesale revenues. Advertising revenues were down 14% Y/Y due to push out of some campaigns and Finance revenues declined 4% Y/Y, though recovered from 4Q11 with 8% Q/Q growth.
§ Gross margins expanded 250 bps Y/Y and cash opex declined $200k Q/Q. The company generated about $900k in CFO and ended the quarter with $12.1 mil in cash vs. $11.2 mil. in 4Q11.
§ Management indicated that 2Q12 is starting off softer as several manufacturers have reduced incentives as retail sales are lagging SAAR estimates.
§ We have reduced our estimates. For 2012 revenue/adjusted EBITDA/GAAP EPS, our estimates go from $73.3 million/ $7.4 million/ $0.09 to $68.9 million/ $6.0 million/ $0.06 and for 2013 from $76.7 million/ $7.5 million/ $0.09 to $75.8 million/ $7.1 million/ $0.08.
Valuation & Price Target
We apply a 8.5x multiple on 2012 adjusted EBITDA and 7.5x multiple to 2013 adjusted EBITDA to arrive at our price target of $1.30. The multiples are slightly below to in line with the comp group trading at 10.0x and 7.5x."
ABTL reported 1Q12 results in-line with consensus estimates as the company continues to demonstrate consistent auto purchase request growth, particularly in its wholesale channel. We expect the company to capitalize on its elevated close rates and large distribution network as auto sales figures improve. Maintain Buy rating and lowering price target to $1.75.
Consistent purchase request growth: 1Q12 purchase request revenue grew 5.5% y/y to $15.7M as the company delivered 1.1M auto purchase requests and 100K financing requests. Approx. 73% of the purchase requests were through the wholesale channel and 27% delivered via its retail dealer channel. We believe that the unseasonably warm weather during the winter months contributed to the increase in light vehicle demand in addition to the ongoing easing of financing availability for new car purchasers. According to data from JD Power, 15% of new car sales in the January/February 2012 period were sold to customers with C-tier credit (FICO 625-649) and D-tier (FICO <624) credit scores, a marketed improvement over the prior year period. We believe less stringent credit terms will continue to support gains in both purchase and finance requests for ABTL.
1Q12 results: 1Q12 revenue of $16.7M was in-line with our estimate of $16.7M slightly above consensus of $16.6M and GAAP diluted EPS of $0.01 was in-line with our estimate of $0.01 and a penny above consensus. Continued growth in internally generated purchase requests help drive gross margins during the quarter to 40.9%, a 250bps y/y improvement.
Ad revenue growth accelerating in 2H12: Advertising revenue in 1Q12 of $859K decreased 14.2% y/y as some campaigns were pushed back and domestic manufacturers scaled back on promotions and incentives. We believe the y/y decline in ad revenue in 1Q12 was largely an anomaly due to timing of certain ad campaigns and expect approx. 20% y/y segment growth for the remainder of2012.
Slightly lowering estimates, PT to $1.75: We are slightly lowering our estimates to reflect uncertainties in auto sales for the remainder of 2012. Lowering price target to $1.75 from $2.00.
I heard another comment that Craig Hallum just DOWNGRADED Autobytel. If this is true, it would be a serious concern. Especially since this recommendation in the past was highly touted. Does anyone know if this downgrade happened or other information?
"ABTL posted another solid quarter, adding another $1 million to their balance sheet and repurchasing roughly 333,000 shares of stock. We believe however, that barring more dramatic improvements to profitability, there is little reason for a microcap investor to pay attention. We think this could take several forms: (1) further trimming OpEx, which even after cuts, remains at a high level by almost any metric for a company of this size at 40% of revenue; (2) begin generating meaningful revenue from high-margin sources such as advertising or the sale of very valuable data, neither of which seem imminent in the near-term; or (3) the ability to use independent data from R.L. Polk (which demonstrates that ABTL leads cause as much as 150% more vehicle sales than competitor leads) to gain a price hike or greater volume commitments. We think all are doable and with a strong balance sheet, shares likely don’t have much downside. However, as a microcap stock, continuing to be marginally profitable even after a big improvement in auto sales over the last couple of years isn’t going to grab anyone’s attention, in our view. As a result, we are downgrading ABTL to a Hold and lowering our price target to $1.25, which is based on 10x this year’s cash EPS estimate of $0.10, plus cash/share of $0.26. ABTL management will be meeting with investors at the 9th Annual Craig-Hallum Institutional Investor Conference on May 30th."