DealerTrack Holdings, Inc.

Transcription

1 DealerTrack Holdings, Inc. Investor Presentation Second Quarter 2007 Results and Growth Opportunities

2 Safe harbor for forward-looking statements Statements in this presentation regarding DealerTrack s expected performance, the development and expansion of DealerTrack s products and services, the addition of participants to the network, the likelihood or benefits of acquisitions, the demand for DealerTrack s products and services, 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; ability to expand or retain customers from acquisitions; ability to integrate acquisitions; 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, and other risks listed in the Company s reports filed with the SEC, including DealerTrack s 2006 Form 10-K. These filings can be found on DealerTrack s website at and the SEC s website at Forward-looking statements and all other statements included herein speak only as of August 2, 2007 unless publicly released subsequent to that date. 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. 2

3 DealerTrack is a leading provider of on-demand software and data solutions for automotive retail The DealerTrack Network Automotive Dealers Aftermarket Providers 26 aftermarket providers (extended vehicle service contracts, credit life disability insurance, accessories) Financing Sources Used by 22,000+ dealers, including over 90% of U.S. franchised dealers and dealer groups Other Information and Service Providers Credit bureaus, used car value guides, identity verification services Connecting 400 financing sources electronically 3

4 DealerTrack s hybrid business model leverages the power of the network effect Integrated Products and Services Reinforce Use of the DealerTrack Network Transactions Subscriptions OFFERING 6 transaction products 13 subscription products* VALUE PROPOSITION REVENUE SOURCE Reduce inefficiency and error rates Volume-based pricing Provider pays fee per transaction * Including Arkona DMS and AutoStyleMart products Help dealers drive profitability and reduce costs Priced for high value and ROI Recurring monthly fees paid by dealer 4

5 The power of the DealerTrack network # of Transactions # of Network Participants (in millions) Dealers 15,999 19,150 21,155 22,147 22, Lenders TTM 6/30/07 # of Subscriptions Q207 # of Dealers with Subscriptions 3,030 7,705 14,473 21,613 25,621 Q106 Q206 Q306 Q406 8,472 9,371 9,566 10, Q207 Dealer Penetration: 16% 25% 38% 48% 54% Q107 Q207 11,231 12, Average per Dealer Note: All numbers represent total as of end of period. 5

6 A diversified business model has enabled us to grow within the automotive retail industry TRAK Transaction Volume vs. Auto Unit Sales (millions of transactions / units) 84.6 Transaction Volume Drivers Number of network participants Prime and non-prime financing 34.0 New and used vehicles Size and type of financing source Multiple transaction services offered TTM 6/30/07 New Auto Sales Units (Franchised Dealers) Source: Automotive News and CNW Used Auto Sales Units (Franchised Dealers) DealerTrack Transaction Volume 6

7 Dealers need other sources of profitability as new car profits continue to decline Average Dealer Profile Total Sales and Net Profit Profit by Department ($ thousands) ($ thousands) $31,275 $32,296 $33,009 $32,318 $31,856 $350 $300 $250 $ % 1.7% 1.7% 1.6% 1.5% $150 $ Total Dealership Sales Net profit % before tax $50 $0 -$ New Vehicle Used Vehicle Service / Parts Note: New and Used vehicle profit includes F&I Source: NADA

8 DealerTrack s growth strategy Expand Customer Base Grow penetration of franchised and independent dealers Add finance sources Add aftermarket providers Cross-Sell Additional Products Increase percentage of active dealers with subscriptions Expand number of subscriptions per dealer Cross-sell to lenders (e.g. econtracting/edocs) Expand Product/ Service Offerings Develop new products and services for dealers Expand offerings for financing sources and other providers Strategic Acquisitions Buy technology and services to increase operating leverage Distribute acquired products and services through the DealerTrack network 8

9 2007 growth initiatives Inventory Optimization Aftermarket Network Consumers Dealers Limited knowledge Unfavorable dealers Buyer s remorse Agents Right products Time to sell Disclosures Mistakes emenu and Aftermarket Lack of data Contract handling Monthly scramble Many products Underwriting rules Printed rate books Product differentiation Market expansion Sales visibility Third Party Administrators Maximize profit Identify profit lost by understocking Minimize cost Reduce overstocking Identify aging and cost risk Improve efficiency Reduce errors with automatic rating engine Seamless flow of data from credit application Reduce cost Eliminate back-office contract entry 9

10 2007 growth initiatives Independent Dealer Opportunity econtracting Opportunity Franchised Dealers Independent Dealers 8% Sell new and used vehicles Sell used vehicles 92% 70% of cars sold (1) 93% 30% of cars sold (1) 7% 21,200 dealers 43,850 dealers Outside DealerTrack Network In DealerTrack Network (1) NADA and CNW data, 2007 Expand financing opportunities Meet consumer need for financing Mitigate title and dealer risk for lenders Create efficiencies Reduce costs Faster funding Fewer errors and contracts-in-transit Eliminate overnight shipping expense Improve SSI/CSI 10

11 Recent acquisitions have provided additional growth potential DMS Addition of Arkona in June 2007 facilitated opportunity for seamless end-to-end dealership technology solution International Acquisition of Curomax in February 2007 expanded share of Canadian auto finance market Specialty Retail Curomax acquisition provided initial entry into Marine, RV and powersport financing Accessories Acquisition of AutoStyleMart in August 2007 provided initial components for a technology solution to help dealers procure and sell vehicle accessories 11

12 DealerTrack has significant growth opportunities in its core and related markets DealerTrack s Potential Market Opportunity: Up to $4.4 Billion Identified Opportunities $0.50 B Transaction $0.75 B Current DMS Spend $2.50 B Subscription $0.60 B Source: Management estimates and industry data 12

13 DealerTrack s comprehensive suite of products provides competitive advantage Credit Solutions Aftermarket Solutions Desking Data & Reporting Inventory Analytics Dealer Mgmt Systems DEALER SERVICES 13

14 Financials reflect strong growth momentum (millions) Total $38.7 $70.0 Net Revenue $120.2 $173.3 $202.2 (millions) Net Income (1) $22.4 $19.3 $11.3 Subscription Transaction Other $32.4 $12.4 $82.6 $4.1 $56.4 $32.7 $1.9 $1.2 $5.2 $61.9 $53.4 $132.8 $112.7 $7.2 $7.4 $4.5 ($3.3) TTM 6/30/07 (millions) 26.5% 20.0% $18.6 $7.7 EBITDA (2) $48.0 $ % 27.7% $ % TTM 6/30/ TTM EBITDA Margin 6/30/07 (1) Net income includes a net provision for income taxes of ($6.8) million in 2006, ($4.1) million in 2005 and a benefit of $3.6 million in (2) EBITDA is a non-gaap financial measure. Please see end of document for reconciliation to net income. EBITDA for 2006 includes charges of approximately $5.0 million in stock-based compensation expense and $0.8 in cash compensation expense relating to the departure of an executive officer during the 3 rd quarter of

15 Limited seasonality of revenue relative to franchised dealers unit sales growth $60 $50 $40 $30 $20 $10 (Revenue in millions) $23.3 $19.1 $18.7 $15.4 $16.8 1% DealerTrack Quarterly Revenue vs. Auto Sales Growth DealerTrack Revenue Auto Unit Sales Growth 1 year over year) 3% -2% 0% 1% $29.2 3% $37.9 $34.4$33.4 6% -4% -1% $43.4 $46.3$45.7-6% -16% -5% $55.8 $51.7-9% -1% 50% 40% 30% 20% 10% 0% -10% $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Source: CNW (represents year over year new and used auto unit sales growth for franchised dealers). -20% 15

16 Robust and reliable technology infrastructure Network Availability Scalability & Integration Redundancy High availability 99.9% available Comprehensive site monitoring and alerting system Horizontally and vertically scalable for easy capability upgrades Easy integration with lenders and partners: Support for industry standards - STAR XML based messaging Supports MSMQ, MQ Series, HTTPS Post transports, Web Services Fully redundant production site with automated server fail-over Disaster Recovery Site: Separate site with capacity to run the workload Real-time data replication Security CyberTrust Certified - SiteSecure Assurance Program 24 X 7 - managed firewalls and intrusion detection systems 16

17 Experienced management team with deep industry and technology expertise Name Title Age Experience Mark O Neil Chairman & CEO years in the automotive industry John Blair President, ALG and Chrome Systems years in automotive and technology fields Robert Cox SVP, CFO & Treasurer years in audit and finance Charles Giglia SVP & CIO years in technology and auto finance industry Ana Herrera SVP, Human Resources years in human resource management Eric Jacobs SVP, General Counsel & Secretary years in finance and legal functions Richard McLeer SVP, Strategy & Planning years in auto finance and technology fields Raj Sundaram SVP, Dealer Solutions years in the automotive industry David Trinder SVP, Network Solutions years in technology businesses and automotive industry Rick Von Pusch SVP, Customer Development & Retention years in the automotive industry 17

18 DealerTrack fundamentals Leading provider of on-demand software, network and data solutions for the automotive retail industry Consistent track record of growth and profitability Predictable business model Significant future growth opportunities Strong management team with extensive industry experience For more information, contact: Liz Zale, Investor Relations

19 Appendix DealerTrack Products and Services Corporate History Reconciliations to Non-GAAP Financial Measures 19

20 DealerTrack s transaction and subscription services span the automotive retail value chain Automotive Retail Value Chain Pre-sales Marketing and Prospecting Sales Financing Data / Reporting / Compliance Dealer Management System Finance & Insurance Aftermarket Sales Contracting Transaction Products ToolKit (credit apps) Credit Reports econtracting and edocs Sales lead distribution Aftermarket Network ExactID TM Vehicle Accessories Subscription Products SalesMaker TM DealTransfer Website Plus econtracting ActivityReports emenu BookOut (3 versions) DealWatch TM InventoryPro Arkona (DMS) AutoStyleMart Non-Network Network Products ALG Residual Value Guides ALG Data Services Chrome Carbook and Carbook Showroom TM Chrome New Vehicle Data 20

21 Corporate history of DealerTrack Founded by Chase, AmeriCredit and Wells Fargo Initial financing of $18.95 million Acquired Webalg, Inc. Second financing round of $32.72 million Acquired Credit Online, Inc. s CreditConnection Acquired dealeraccess Canada Inc. and assets of LML Technologies Inc. Acquired assets of GO BIG! Software, NAT, Inc., Chrome Systems, Automotive Lease Guide (ALG) DealerTrack s IPO Acquired assets of DealerWire Acquired assets of Global Fax Acquired DealerWare Public offering of 11.5 million shares Acquired Curomax Acquired Arkona Acquired AutoStyleMart Official network launch PaymentTrack roll out DMS Integration (DealTransfer) roll out econtracting national launch 50 millionth credit app transmitted NADA BookOut launched Website Plus rollout Launched DeskLink and Finance Wizard Launched emenu, BookOut Pro 100 millionth credit app transmitted Launch of SalesMaker, DealWatch, ExactID, DealerWire 150 millionth credit app transmitted Launch of InventoryPro 21

22 Reconciliation of GAAP Net Income to Non-GAAP financial measures EBITDA ($ millions) TTM 6/30/07 Net (loss) income ($3.3) $11.3 $4.5 $19.3 $22.4 Interest income (0.1) (0.1) (0.3) (4.3) (5.3) Interest expense Tax expense (benefit) Depreciation of property and equipment and amortization of capitalized software and website costs Amortization of acquired identifiable intangibles (3.6) EBITDA (1) $7.7 $18.6 $32.6 $48.0 $57.3 (1) EBITDA for 2006 includes charges of $5.8 related to the departure of an executive officer in the 3 rd quarter of Cash Net Income ($ millions) TTM Net (loss) income ($3.3) $11.3 $4.5 $19.3 $22.4 Amortization of acquisition related intangibles, net of tax (1) Stock-based compensation charges, net of tax (2) Benefit related to reversal of tax (4.7) (3.7) (3.7) valuation allowance (3) $13.6 Cash net income $0.4 $16.8 $32.7 $39.3 (1) Net of tax: effective tax rate of zero in 2003, 14.2% in 2004, 43.0% in 2005 and 39.0% in (2) Net of tax (3) Benefit in 2004 was related to DealerTrack, Inc. business; benefit in 2006 was related to DealerTrack s Canadian subsidiary, DealerAccess. 22