Autobytel, Inc
(NASDAQ: ABTL)
CEO: Jeffrey Coats
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Interview Transcripts:
WSR: Good day from Wall Street. This is Juan Costello senior analyst of the Wall Street Reporter. And joining us today is Jeff Coats the CEO for Autobytel Incorporated. The company trades on NASDAQ and their ticker symbol is ABTL. Thanks for joining us today Jeff.
Jeff Coats: Thank you, looking forward to it.
WSR: Great. Now, starting off, give us a brief history and overview of the company for some of our listeners here that are in need of your story.
Jeff Coats: Okay. Autobytel has been around since 1995, it was the pioneer in the online automotive leads business started by former car dealer. Over the years we have developed relationship with several thousand dealers and pretty much all of the manufacturers that sell automobiles and trucks in the United States. So we have a kind of a dual business and that we have a family of websites primarily autobytel.com and a few others through which consumers can come and do research on the kind of car they would like, car or truck that they would like to buy as well as compare them to other makes and models and then configure them using the same term packages that the manufacturer sell then with. You submit a lead so we provide that service to consumers. We generate more than 70% of our own leads internally today through our family of branded websites as well as our microsites. And then that is bolted on to the front end of the lead distribution business. We actually have the most extensive lead distribution network in the United States today, because we have not only our own direct retail relationships with approximately 3500 leaders around the country now in use, but we also have relationships with several other companies that we compete with or that we partnered with and we deliver leads through their networks to their customers. So all toldwe reach pretty much the entire nation with the most extensive network.
WSR: Great. So what are some of the drivers behind the company’s full year and Q4 results which were particularly strong?
Jeff Coats: It’s really been a focus on two things. One is reconnecting with consumers as they come online and like I said before research and configure automobile. We re-launched and re-platform our flagship autobytel.com last summer. So it’s really been through the growth on that site and the reconnection with the consumers as well as our focus on increasing the quality of our leads. And quality in the auto business is defined as close rate, so how many consumers that we sent to dealers who actually buy cars from them or through our wholesale programs to the manufacturers and then those consumers buy cars through the retailers that are part of the manufacturer programs. So it’s really been that focus on consumers and the quality of the leads and our constant increases in close rates as reported by our customers over the last 2 to 2 and a half years. Consumers are coming to us and dealers and manufacturers want our leads because they are at the top end of the quality range in the country.
WSR: Certainly. So talk a little bit more about some of the trends right now in the sector and how to position the company as to capitalize on them.
Jeff Coats: Sure. You know the automobile business is really turning around quite nicely. In the mid part of the last decade car sales were running between 16 and 17 million vehicles for several years in a row. 2008 was the last year if anything close to that itself from 16 in 2007 to 13.3 in 2008 and then down to 10.5 in 2009. So the automobile industry has been building back since 2009. Last year car sales peak at 12.7 million, so far this year January had a 14.1 million SAAR run rate and February had an astonishing 15.1 million SAAR run rate. So I think pretty much everybody in the auto business is bullish right now. We’re expecting a real blockbuster March coming off of the highs in February and that should set us all up quite nicely for a good year this year. Autobytel is a pretty good proxy for the growth and the recovery in the auto business, because we’re really focused on new car sales and that’s really the engine that’s driving it right now.
WSR: Certainly. So you know obviously the competition right now is pretty slim, but what makes the company unique from some of the other players in the sector?
Jeff Coates: It’s a combination of our direct connection with consumers as well as the way we generate our leads, the quality. We’re only really trying to send to our dealer and manufacturer customers through end market buyers, people that are really ready to buy in less than 30 days generally. That works very well for us. It works very well for the dealer and manufacturer customers and then it ends up being a very good experience for consumers.
WSR: Certainly. And perhaps you could walk us through your background and experienceJeff and talk about some of the management team there.
Jeff Coates: Sure. My background is generally in investments. I actually got involved in Autobytel almost at the very beginning in the middle of 1996 when I used to run part of General Electric’s venture capital and private equity business. Autobytel was actually the very first e-commerce company that we and GE invested in, in 1996. That investment I believe was made in August of 96 and I joined the Board of Directors at that point. So I’ve been on the Board of Directors over the years and was asked by the Board to step in and become CEO in December of 2008 as part of the whole turnaround in the auto business for Autobytel. But we have a very strong management team of people that have been here, a combination of several years and a couple of people that just have joined us in the last couple of years, Steve Lind, who is a long time Autobytel employee, Executive Vice President of Corporate Development and Sales. He leads our retail sales team and our business development efforts was with Nissan earlier in his career and has been with Autobytel for quite a long time now. Jim Helberg is responsible for our advertising business as well as our product development and our websites. He comes out of a background of media. He was with Omnicom where he’s responsible with Chrysler and Nissan for a lot of their media buying, so very well connected. We also have a really solid team of people below those guys that have all for the most part been in the online lead space for several years.
WSR: Certainly. So what are some of the goals and milestones there that you and the team are hoping to accomplish over the course of the next year?
Jeff Coats: It’s continuing growth at the top line as well as increasing our gross margin. We have been able to very nicely increase our gross margin by several hundred basis points over the last couple of years as we have focused on generating more and more of our leads internally. As I mentioned earlier 70% of our leads are generated internally that has a very nice positive effect on our gross margin because of the way we do that, as well as on the overall quality mix. We expect to grow generally in line with SAAR growth for auto sales going forward. And as we have just turned the corner in 2011 for profitability for the first time in a few years, we expect to move forward and further increase our net margin and our cash flow as well as our cash balance from those increases in operations.
WSR: Certainly. So in terms of investors and the financial community Jeff as you continue to participate in some of these investor conferences including ROTH here coming up next week, do you believe that the investors in the financial community completely understand and appreciate the company story? And if not, what do you wish they better understood about either the company or your sector?
Jeff Coats: Candidly I think it’s a mix bag. I think we have a good core of investors that do understand the company’s story and our profile going forward. Our stock has been beaten down over the last few months as part of the downdraft on the micro-cap stocks. We’ve also unfortunately had a couple of sellers on our stock for reasons that don’t have anything to do with the company but for issues with those other firms. Our stock trades a little bit below with dollar right now. It’s I think, we think a very undervalued for where we are in terms of posting the results that we’re posting. The opportunity to present and speak at conferences like ROTH next week, me, Riley and Mae, Craig Harlem and June, give us the opportunity to get our story out to new investors and reinforcing our existing investor community.
WSR: Well, certainly. And so, once again joining us today is Jeff Coats, CEO and President for Autobytel. The company trades on NASDAQ, ticker symbol is ABTL, currently trading at 94 cents a share. The market cap is north of 43 million. And before we conclude Jeff, to recap some of your key points here, why do you believe investors should consider the company as a good investment opportunity today?
Jeff Coats: I think we’ve demonstrated that the company has a straightforward growth path. We are a good proxy for the continuing recovery in the auto business. Our success in taking market share over the last couple of years is continuing to work in our favour. So if you believe in the recovery of the auto business in the United States, we’re a good proxy to invest in to follow that growth.
WSR: Well, we certainly look forward to continue to track the company’s growth and report on your upcoming progress and I’d like to thank you for taking the time to join us today Jeff and update our investors on Autobytel.
Jeff Coats: Thank you, Juan.