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    AUTO   US05335B1008

AUTOWEB, INC.

(AUTO)
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AUTOWEB : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/05/2021 | 05:01pm EDT

Cautionary Note Concerning Forward-Looking Statements




The Securities and Exchange Commission ("SEC") encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. This Quarterly Report
on Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as "anticipates,"
"believes," "could," "estimates," "expects," "intends," "may," "plans,"
"projects," "will" and words of similar substance used in connection with any
discussion of future operations or financial performance identify
forward-looking statements. In particular, statements regarding expectations and
opportunities, industry trends, new product expectations and capabilities, and
our outlook regarding our performance and growth are forward-looking statements.
This Quarterly Report on Form 10-Q also contains statements regarding plans,
goals and objectives. There is no assurance that we will be able to carry out
our plans or achieve our goals and objectives or that we will be able to do so
successfully on a profitable basis. These forward-looking statements are just
predictions and involve significant risks and uncertainties, many of which are
beyond our control, and actual results may differ materially from these
statements. Factors that could cause actual outcomes or results to differ
materially from those reflected in forward-looking statements include, but are
not limited to, those discussed in this Item 2, Part II, Item 1A of this
Quarterly Report on Form 10-Q, and under the heading "Risk Factors" in our
annual report on Form 10-K for the year ended December 31, 2020
("2020 Form 10-K"). Investors are urged not to place undue reliance on
forward-looking statements. Forward-looking statements speak only as of the date
on which they were made. Except as may be required by law, we do not undertake
any obligation, and expressly disclaim any obligation, to update or alter any
forward-looking statements, whether as a result of new information, future
events or otherwise. All forward-looking statements contained herein are
qualified in their entirety by the foregoing cautionary statements.



The following discussion of our results of operations and financial condition
should be read in conjunction with our unaudited condensed consolidated
financial statements and related notes included in Part I, Item 1 of this
Quarterly Report on Form 10-Q and our audited consolidated financial statements
and the notes thereto in the 2020 Form 10-K.



Our corporate website is located at www.autoweb.com. Information on our website
is not incorporated by reference in this Quarterly Report on Form 10-Q. At or
through the Investor Relations section of our website we make available free of
charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and all amendments to these reports as soon as practicable
after the reports are electronically filed with or furnished to the SEC.



Unless the context otherwise requires, the terms "we", "us", "our", "AutoWeb" and "Company" refer to AutoWeb, Inc. and its consolidated subsidiaries.

Basis of Presentation and Critical Accounting Policies

See Note 2, Basis or Presentation, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.




We prepare our financial statements in conformity with accounting principles
generally accepted in the United States of America, which require us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Accordingly, actual results could differ materially
from our estimates. To the extent that there are material differences between
these estimates and our actual results, our financial condition or results of
operations may be affected. For a detailed discussion of the application of our
critical accounting policies, see Item 7 "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the 2020 Form 10-K. There
have been no changes to our critical accounting policies since we filed our
2020
Form 10-K.



Overview


Total revenues in the first six months of 2021 were $36.6 million compared to
$41.5 million in the first six months of 2020. The decline in total revenues was
directly related to the impact of the coronavirus pandemic on vehicle sales and
overall demand from our clients for our products. Offsetting this reduction is a
one-time lump sum payment for the early termination of the new vehicle leads
program by one of our manufacturing customers which approximated $0.5 million.
Although our prior strategic focus often generated higher gross revenue, the
margin profile and overall quality was lower, resulting in lower overall levels
of gross profit and higher client churn. As a part of our strategic decisions,
we also shifted focus to our core Leads, clicks and email products and services
and away from non-core products and services, such as third-party party product
offerings. This shift further negatively impacted total revenues. Generally
lower retail Leads sales levels resulting from retail dealer participation
attrition in the retail dealer network that occurred in part of 2020 was an
additional factor that contributed to lower total revenues during the six months
ended June 30, 2021.




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As a result of the continued impact of the coronavirus pandemic on vehicle
sales, coupled with vehicle inventory and supply related issues, we have
continued to intentionally operate at lower levels of media spend to match
projected industry selling rates, which provides a more accurate reflection of
true consumer demand. Dealers and consumers alike are still contending with
broader macroeconomic uncertainty, and with this in mind, our objective is to
provide the right mix of high-quality Leads and click traffic to our customers
by staying aligned with automotive supply and demand dynamics. Finally, the
disruption from the January 2020 malware attack on the Company's systems also
negatively impacted total revenues in 2020. In March 2021, we received an
approximate $0.3 million insurance reimbursement related to the January 2020
malware attack, which is partially included in other income during the six
months ended June 30, 2021.



As we continue to work with our traffic suppliers to optimize our SEM
methodologies and further grow our high-quality traffic streams, we are also
investing in and testing new traffic acquisition strategies and enhanced mobile
consumer experiences. Further, we continue to invest in our pay-per-click
approach to improve the consumer experience of that product. With a more
efficient traffic acquisition model emerging, our plan for 2021 and beyond is to
grow audience, improve conversion, improve Leads and clicks delivery rates,
expand distribution, and increase retail Dealer Leads and clicks budget
capacity. We believe that this focus, along with plans to develop or integrate
new, innovative products and re-platforming existing experiences will create a
more efficient process for how active vehicle shoppers with a vehicle in mind
can be matched with sellers that can meet the shoppers' needs, will create
opportunities for improved quality of delivery and strengthen our position
for
revenue growth.



To maximize our growth potential as a matchmaker, we believe that we must
continue to optimize our platform and products to facilitate more comprehensive
matches between car buyer intent and transaction providers who can meet these
buyers' needs. These investments began with improvements to shop.car.com in the
first quarter of 2021 and continued through the second quarter of 2021, spanning
similar improvements to our additional properties. We have also made progress
with layering additional retail-ready components into our platform through our
strategic relationship with Credit IQ and the CarZeus Purchase Transaction.



At the beginning of June 2021, we announced our new strategic relationship with
CreditIQ, an automotive retailing-focused software and service company that
enables dealers to provide seamless digital retail experiences to consumers.
This relationship allows shoppers using our search funnel to calculate car
payments on a vehicle of interest, which streamlines the car buying process for
both buyers and sellers. We believe that features like these not only enhance
our platform's user experience, but also enable us to create more tailored
profiles of the buyers using our sites to understand what kind of shopping
experience they're seeking. We expect to expand both this base and the offerings
of our platform even further through our recently announced acquisition of
specified assets of CarZeus, which positions us to participate more meaningfully
in the consumer used vehicle disposal market.



The CarZeus Purchase Transaction provides us the opportunity to purchase
vehicles directly from consumers and resell them primarily through wholesale
auctions, forming a complementary, retail-ready product line extension to our
existing consumer offerings. We believe this acquisition will also allow us to
increase our total addressable market by expanding our presence in the used car
market, while giving us the opportunity to enhance the offerings and usefulness
of our underutilized sites and monetize our traffic more effectively. We plan to
use our traffic acquisition capabilities and operational efficiency to drive
growth, improve financial performance and build scalable operating processes to
enhance performance within CarZeus' San Antonio market. With this foundation in
place, we plan to prepare the business for broader geographic coverage in the
long-term. We are not able at this time to provide any guidance related to
CarZeus impact to our full year 2021 financial performance. See the description
of the CarZeus Purchase Transaction contained in Note 1 to these Notes to
Unaudited Condensed Consolidated Financial Statements for additional
information.



Our lead and click generation products have historically operated with limited
visibility due to short sales cycles and a high rate of customer churn as
clients are able to join and leave our platform with limited notice. Our
advertising business is also subject to seasonal trends, with the first quarter
of the calendar year typically showing sequential decline versus the fourth
quarter. These factors have historically contributed to volatility in our
revenues, cost of revenues, gross profit, and gross profit margin. We anticipate
these trends will continue throughout 2021.



We anticipate that our remaining 2021 financial condition may be adversely
impacted when compared to 2020 by (i) the continuing impact of the coronavirus
pandemic on vehicle sales and on demand for our products and services; (ii)
increased competitive pressure on cost of audience acquisition that may limit
how much volume we will be able to profitably source and distribute to our
customers; (iii) the costs and revenue impact associated with our efforts to
optimize our clicks product; and (iv) the decision to shift our focus to our
core leads, clicks and email products and services and away from non-core
product and services. Many industry analysts have forecast improvement in new
vehicle unit sales seasonally adjusted annual rate from 14.5 million units in
2020 to a range of 15.5-16.4 million units in 2021, or 7-13% growth. The pace of
growth in 2021 is expected to be uneven. The first half of 2021 franchise dealer
unit volume grew 29%, but inventory shortages have reduced growth to the lower
end of the range and this slower growth is expected to continue until inventory
supplies normalize.



In early 2020 and continuing as of the date of this Quarterly Report on Form
10-Q, the outbreak of coronavirus has led to quarantines and
stay-at-home/work-from-home orders in a number of countries, states, cities and
regions and the closure or limited access to public and private offices,
businesses and facilities, worldwide, causing widespread disruptions to travel,
economic activity and financial markets. The pandemic has led our Manufacturer
and Dealer customers to experience disruptions in the (i) supply of vehicle and
parts inventories, (ii) ability and willingness of consumers to visit automotive
dealerships to purchase or lease vehicles, and (iii) overall health, safety and
availability of their labor force. Manufacturers have also shut down assembly
plants, adversely impacting inventories of new vehicles. Volatility in the
financial markets, concerns about exposure to the virus, governmental
quarantines, stay-at-home/work-from-home orders, business closures and
employment furloughs and layoffs have also impacted consumer confidence and
willingness to visit dealerships and to purchase or lease vehicles. High
unemployment rates and lower consumer confidence may continue even after
stay-at-home/work-from-home orders and business closures have ended. These
disruptions have impacted the willingness or desire of our customers to acquire
vehicle Leads or other digital marketing services from us. We are also
experiencing direct disruptions in our operations due to the overall health and
safety of, and concerns for, our labor force and as a result of governmental
"social distancing" programs, quarantines, travel restrictions and
stay-at-home/work-from-home orders, leading to office closures, operating from
employee homes and restrictions on our employees traveling to our various
offices.




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In addition to the continued impact of the coronavirus pandemic on supply chains
and vehicle inventories and sales, Manufacturers have also experienced
significant disruption in the supply of semiconductor chips required for new
vehicles due to a worldwide shortage of these chips. As a result, the ability of
Manufacturers to maintain regular production output of certain vehicles, and the
corresponding reduction in available new vehicle inventories, have adversely
impacted vehicle sales. Further disrupting the automotive industry and the
number of vehicles available for sale or lease are disruptions in the supply of
seat foam and rubber, which is a key material used in tires as well as other
components of new vehicles.



We are unable to predict the continuing extent, duration and impact of the
pandemic and supply chain disruptions on the automotive industry in general, and
on our business and operations specifically. The spread of coronavirus variants
and governmental responses thereto may prolong or increase the negative impacts
of the pandemic. Vehicle sales have declined, and we continue to experience
cancellations or suspensions of purchases of Leads and other digital marketing
services by our customers, which could materially and adversely affect our
future business, results of operations, financial condition, earnings per share,
cash flow or the trading price of our stock (individually and collectively
referred to as the Company's "financial performance"). In light of the impact of
the pandemic and supply chain disruptions, we have taken steps to reduce our
overall lead and click generation efforts and corresponding costs to better
align our volumes with industry demand and consumer intent and ability to
purchase or lease vehicles. We will continue to evaluate these and other cost
reduction measures, and explore all options available to us, in order to
minimize the impact of these events on us.




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Results of Operations


Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

The following table sets forth certain statement of operations data for the three-month periods ended June 30, 2021, and 2020 (certain balances and calculations have been rounded for presentation):




                                       % of                        % of
                                       Total                       Total
                          2021       Revenues         2020       Revenues       Change      % Change
                                                 (Dollar amounts in thousands)
Revenues:
Lead generation         $ 15,225            81 %    $ 14,263            84 %    $   962             7 %
Digital advertising        3,511            19         2,770            16          741            27
Total revenues            18,736           100        17,033           100        1,703            10
Cost of revenues          12,179            65        10,993            65        1,186            11
Gross profit               6,557            35         6,040            35          517             9
Operating expenses:
Sales and marketing        2,103            11         2,026            12           77             4
Technology support         1,271             7         1,786            10         (515 )         (29 )
General and
administrative             3,089            17         2,901            17          188             6
Depreciation and
amortization                 196             1           559             3         (363 )         (65 )
Total operating
expenses                   6,659            36         7,272            42         (613 )          (8 )
Operating loss              (102 )          (1 )      (1,232 )          (7 )      1,130           (92 )
Interest and other
income (expense), net       (202 )          (1 )        (142 )          (1 )        (60 )          42
Loss before income
tax provision               (304 )          (2 )      (1,374 )          (8 )      1,070           (78 )
Income tax provision           -             -             -             - 
          -             -
Net loss                $   (304 )          (2 )%   $ (1,374 )          (8 )%   $ 1,070           (78 )%



Lead generation. Lead generation revenues increased $1.0 million, or 7%, in the
second quarter of 2021 compared to the second quarter of 2020 primarily as a
result of a one-time lump sum payment for the early termination of the new
vehicle leads program by one of our manufacturing customers which approximated
$0.5 million. Further contributing to this increase was an increase in the
volume of automotive leads delivered to manufacturers and wholesale customers.



Digital advertising. Digital advertising revenues increased $0.7 million, or
27%, in the second quarter of 2021 compared to the second quarter of 2020
primarily as a result of increased monetization of our website traffic. Further
contributing to this increase was our internal decision to reduce overall click
generation efforts during the second quarter of 2020 to better align with
industry demand.



Cost of revenues. Cost of revenues consists of purchase request and traffic
acquisition costs and other cost of revenues. Purchase request and traffic
acquisition costs consist of payments made to our third-party purchase request
providers, including internet portals and online automotive information
providers. Other cost of revenues consists of SEM and fees paid to third parties
for data and content, including search engine optimization activity, included on
our websites; connectivity costs; development costs related to our websites;
technology license fees; server equipment depreciation; and technology
amortization directly related to our websites. Cost of revenues increased $1.2
million, or 11%, in the second quarter of 2021 compared to the second quarter of
2020 primarily due to increased SEM, traffic acquisition costs and click
publisher costs.



Gross profit. Gross Profit increased $0.5 million, or 9%, in the second quarter
of 2021 compared to the second quarter of 2020. This was a direct result of our
continued prioritization of gross profitability as opposed to the maximization
of lead traffic and lead volume. Further contributing to this increase was the
one-time lump sum payment for the early termination of the new vehicle leads
program by one of our manufacturing customers which approximated $0.5 million.



Sales and marketing. Sales and marketing expense include costs for developing
our brand equity, personnel costs and other costs associated with Dealer sales,
website advertising and Dealer support. Sales and marketing expense in the
second quarter of 2021 increased $0.1 million, or 4%, compared to the second
quarter of 2020 due primarily to an increase in SEM and advertising expense.



Technology support. Technology support expense includes compensation, benefits,
software licenses and other direct costs incurred by the Company to enhance,
manage, maintain, support, monitor and operate the Company's websites and
related technologies, and to operate the Company's internal technology
infrastructure. Technology support expense in the second quarter of 2021
decreased by $0.5 million, or 29%, compared to the second quarter of 2020, due
to continued expense savings resulting from our internal cost reduction
initiatives enacted as a result of the coronavirus pandemic on vehicle sales.




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General and administrative. General and administrative expense consists of
executive, financial, human resources and legal personnel and expenses, costs
related to being a public company and bad debt expense. General and
administrative expense in the second quarter of 2021 increased by $0.2 million,
or 6%, from the second quarter of 2020 due primarily to the cost action
initiatives taken in the second quarter of 2020 in response to the coronavirus
pandemic. These prior-year cost reductions included reductions in executive and
board compensation, recruitment, and travel-related expenses.



Depreciation and amortization. Depreciation and amortization expense in the
second quarter of 2021 decreased $0.4 million, or 65% from the second quarter of
2020 primarily due to assets that have been fully depreciated as compared to the
same period in the prior year.



 Interest and other income (expense), net. Interest and other income (expense),
was $0.2 million of expense for the second quarter of 2021 compared to $0.1
million of expense in the second quarter of 2020. Interest expense increased to
$0.3 million in the second quarter of 2021 from $0.2 million in the second
quarter of 2020, primarily due to borrowings under CNC Credit Agreement coupled
with the amortization of debt issuance costs.



Income taxes. Income tax expense was zero in the second quarter of 2021 and
2020, respectively. Our income tax rate for the second quarter of 2021 differed
from the federal statutory rate primarily due to operating losses that receive
no tax benefit as a result of valuation allowance recorded for such losses.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020




The following table sets forth certain statement of operations data for the
six-month periods ended June 30, 2021, and 2020 (certain amounts may not
calculate due to rounding):



                                      % of                       % of
                                      Total                      Total
                         2021       Revenues        2020       Revenues        Change       % Change
                                                 (Dollar amounts in thousands)
Revenues:
Lead generation        $ 29,411            80 %   $ 32,723            79 %    $ (3,312 )          (10 )%
Digital advertising       7,205            20        8,782            21   
    (1,577 )          (18 )
Total revenues           36,616           100       41,505           100        (4,889 )          (12 )
Cost of revenues         24,250            66       30,108            73        (5,858 )          (19 )
Gross profit             12,366            34       11,397            27           969              9
Operating expenses:
Sales and marketing       4,303            12        4,158            10           145              3
Technology support        2,638             7        3,643             9        (1,005 )          (28 )
General and
administrative            6,221            17        6,844            16          (623 )           (9 )
Depreciation and
amortization                400             1        1,281             3          (881 )          (69 )
Total operating
expenses                 13,562            37       15,926            38        (2,364 )          (15 )
Operating loss           (1,196 )          (3 )     (4,529 )         (11 )       3,333            (74 )
Interest and other
income (expense),
net                       1,202             3         (906 )          (2 ) 
     2,108           (233 )
Income (loss) before
income tax provision          6             -       (5,435 )         (13 )       5,441           (100 )
Income tax provision          -             -            -             -             -              -
Net income (loss)      $      6     -%            $ (5,435 )         (13 )%   $  5,441           (100 )%




Lead generation. Lead generation revenues decreased $3.3 million, or 10%, in the
first six months of 2021 compared to the first six months of 2020 primarily as a
result of the impact of the coronavirus pandemic on vehicle sales. This decrease
is partially offset by the one-time lump sum payment for the early termination
of the new vehicle leads program by one of our manufacturing customers which
approximated $0.5 million.




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Digital advertising. Digital advertising revenues decreased $1.6 million, or
18%, in the first six months of 2021 compared to the first six months of 2020
primarily as a result of a decrease in click revenue associated with decreased
click volume. The decrease in click volume is attributed to the impact of the
coronavirus pandemic.



Cost of revenues. Cost of revenues decreased $5.9 million, or 19%, in the first
six months of 2021 compared to the first six months of 2020 primarily due to
decreased SEM, purchase requests and other costs of revenues. Partially
offsetting this decrease was an increase in click publisher costs.



Gross profit. Gross Profit increased $1.0 million, or 9%, for the first six
months of 2021 compared to the first six months of 2020. This was a direct
result of our continued prioritization of gross profitability as opposed to the
maximization of lead traffic and lead volume. Further contributing to this
increase was a reduction in cost of revenues primarily driven by a reduction in
cost-per-click.


 Sales and marketing. Sales and marketing expense in the first six months of
2021 increased $0.1 million, or 3%, compared to the first six months of 2020 due
primarily to an increase in SEM and advertising expense.



Technology support. Technology support expense in the first six months of 2021
decreased by $1.0 million, or 28%, compared to the first six months of 2020 due
to continued expense savings resulting from our internal cost reduction
initiatives enacted as a result of the coronavirus pandemic on vehicle sales.



General and administrative. General and administrative expense in the first six
months of 2021 decreased $0.6 million, or 9%, compared to the first six months
of 2020 due primarily to reductions in recruitment, travel-related expenses,
rent, severance and consulting-related expenses.



Depreciation and amortization. Depreciation and amortization expense in the
first six months of 2021 decreased $0.9 million, or 69% compared to the first
six months of 2020 due primarily to assets that have been fully depreciated as
compared to the same period in the prior year.



Interest and other income (expense), net. Interest and other income (expense)
was $1.2 million of income for the first six months of 2021 compared to $0.9
million of expense in the first six months of 2020. In the first quarter of
2021, we recorded $1.4 million of income associated with the forgiveness of our
PPP Loan. Further contributing to the increase in interest and other income
(expense) was an insurance reimbursement related to the January 2020 malware
attack in which we recorded $0.2 million on our Unaudited Condensed Consolidated
Statement of Operations. Interest expense decreased to $0.5 million in the first
six months of 2021 from $1.0 million in the first six months of 2020, due to the
prior year write-off of our deferred financing fees associated with the
revolving line of credit under the PNC Credit Facility. Interest expense
includes interest on outstanding borrowings and the amortization of debt
issuance costs.



Income taxes. Income tax expense was zero for the first six months of 2021 and
2020, respectively. Our income tax rate for the first six months of 2021
differed from the federal statutory rate primarily due to operating losses that
receive no tax benefit as a result of valuation allowance recorded for such
losses.



Three Months Ended June 30, 2021 Compared to the Three Months Ended March 31, 2021

The following table sets forth certain statement of operations data for the
three-month periods ended June 30, 2021, and March 31, 2021 (certain balances
and calculations have been rounded for presentation). In accordance with
Regulation S-K Item 303(c), as amended, we are providing a comparison of our
June 30, 2021, period against the preceding quarter. We believe providing a
sequential results-of-operations would be more useful for investors and
stakeholders, as it will provide more clarity into our current year financial
performance. For additional information related to the three months ended March
31, 2021, please refer to our first quarter Form 10-Q filed with the SEC on May
6, 2021.




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                                      % of                           % of
                      June 30,        Total         March 31,        Total                       %
                        2021        Revenues          2021         Revenues       Change      Change
                                                (Dollar amounts in thousands)
Revenues:
Lead generation       $  15,225            81 %    $    14,186            79 %   $  1,039           7 %
Digital advertising       3,511            19            3,694            21         (183 )        (5 )
Total revenues           18,736           100           17,880           100          856           5
Cost of revenues         12,179            65           12,071            68          108           1
Gross profit              6,557            35            5,809            32          748          13
Operating expenses:
Sales and marketing       2,103            11            2,200            12          (97 )        (4 )
Technology support        1,271             7            1,367             8          (96 )        (7 )
General and
administrative            3,089            17            3,132            18          (43 )        (1 )
Depreciation and
amortization                196             1              204             1           (8 )        (4 )
Total operating
expenses                  6,659            36            6,903            39         (244 )        (4 )
Operating loss             (102 )          (1 )         (1,094 )          (6 )        992         (91 )
Interest and other
income (expense),
net                        (202 )          (1 )          1,404             8       (1,606 )      (114 )
Income (loss)
before income tax
provision                  (304 )          (2 )            310             2         (614 )      (198 )
Income tax
provision                     -             -                -             -            -           -
Net income (loss)     $    (304 )          (2 )%   $       310             2 %   $   (614 )      (198 )%



Lead generation. Lead generation revenues increased $1.0 million, or 7%, in the
second quarter of 2021 compared to the first quarter of 2021 primarily as a
result of a one-time lump sum payment for the early termination of the new
vehicle leads program by one of our manufacturing customers which approximated
$0.5 million. Further contributing to this increase was an increase in the
volume of automotive leads delivered to manufacturers and wholesale customers
when compared to the preceding quarter.



Digital advertising. Digital advertising revenues decreased $0.2 million, or 5%,
in the second quarter of 2021 compared to the first quarter of 2021 primarily as
a result of a decrease in click revenue associated with decreased click volume.



Cost of revenues. Cost of revenues increased $0.1 million, or 1%, in the second
quarter of 2021 compared to the first quarter of 2021 primarily due to increased
SEM, purchase requests and click publisher costs. Offsetting these increases was
a decrease in traffic acquisition costs.



Gross profit. Gross Profit increased $0.7 million, or 13%, in the second quarter
of 2021 compared to the first quarter of 2021. This was a direct result of the
one-time lump sum payment for the early termination of the new vehicle leads
program by one of our manufacturing customers which approximated $0.5 million.



Sales and marketing. Sales and marketing expense in the second quarter of 2021 decreased $0.1 million, or 4%, compared to the first quarter of 2021 due primarily to a decrease in commission related compensation.

Technology support. Technology support expense in the second quarter of 2021 decreased by $0.1 million, or 7%, compared to the first quarter of 2021 due primarily to a reduction in consulting related expenses.




General and administrative. General and administrative expense in the second
quarter of 2021 did not materially change when compared to the first quarter of
2021.


Depreciation and amortization. Depreciation and amortization expense in the second quarter of 2021 did not materially change when compared to the first quarter of 2021.




 Interest and other income (expense), net. Interest and other income (expense),
was $0.2 million of expense for the second quarter of 2021 compared to $1.4
million of income in the first quarter of 2021. In the first quarter of 2021, we
recorded $1.4 million of income associated with the forgiveness of our PPP Loan.
Further contributing to the first quarter increase was an insurance
reimbursement related to the January 2020 malware attack in which we recorded
$0.2 million on our Unaudited Condensed Consolidated Statement of Operations.




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Income taxes. Income tax expense was zero in the second quarter of 2021 as well
as the first quarter of 2021. Our income tax rate for the second quarter of 2021
differed from the federal statutory rate primarily due to operating losses that
receive no tax benefit as a result of valuation allowance recorded for such
losses.



Liquidity and Capital Resources




The table below sets forth a summary of our cash flows for the six months ended
June 30, 2021, and 2020:



                                                        Six Months Ended
                                                            June 30,
                                                        2021         2020
                                                         (In thousands)

Net cash provided by (used in) operating activities $ 708$ (1,869 ) Net cash used in investing activities

                     (770 )       (388 )
Net cash provided by financing activities                  113        4,821




Our principal sources of liquidity are our cash and cash equivalent balances and
borrowings under the CNC Credit Agreement. Our cash and cash equivalents and
restricted cash totaled $15.2 million as of June 30, 2021, compared to $15.1
million as of December 31, 2020. As of June 30, 2021, we had net income of
approximately $6,000. The net income is primarily attributable to receiving
approximately $1.4 million of PPP loan forgiveness coupled with $0.2 million of
income associated with the insurance reimbursement related to the January 2020
malware attack. We had cash provided by operations of $0.7 million for the six
months ended June 30, 2021. As of June 30, 2021, we had an accumulated deficit
of $349.8 million and stockholders' equity of $17.4 million.



We have developed a strategic plan focused on improving operating performance in
the future that includes modernizing and upgrading our technology and systems,
pursuing business objectives and responding to business opportunities,
developing new or improving existing products and services and enhancing
operating infrastructure.



Our objective is to achieve cash generation as a business; however, there is no assurance that we will be able to achieve this objective. The CNC Credit Agreement is expected to be used to continue to partially fund operations.




We believe that current cash reserves and operating cash flows will be enough to
sustain operations for the next twelve months. If we are unsuccessful in meeting
our objective to sustain cash generation as a business, we may need to seek to
satisfy our future cash needs through private or public sales of securities,
debt financings or partnering/licensing transactions; however, there is no
assurance that we will be successful in satisfying our future cash needs to
continue operations.



Our future capital requirements will depend on many factors, including but not
limited to, those discussed in this Item 2, Part II, Item 1A of this Quarterly
Report on Form 10-Q and the risk factors set forth in Part I, Item 1A, "Risk
Factors" of our 2020 Form 10-K. To the extent that our existing sources of
liquidity are insufficient to fund our future operations, we may need to engage
in equity or additional or alternative debt financings to secure additional
funds. There can be no assurance that additional funds will be available when
needed from any source or, if available, will be available on terms that are
acceptable to us.


On July 30, 2021, we entered into a Credit Facility Amendment with CNC, to amend
our existing Loan, Security and Guarantee Agreement with CNC initially entered
into on March 26, 2020, as amended on May 18, 2020. For information concerning
our CNC Credit Agreement, see Note 9 and Note 12 included in the Notes to
Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1
of this Quarterly Report on Form 10-Q.



Net Cash Provided by (Used in) Operating Activities. Net cash provided by
operating activities in the six months ended June 30, 2021, of $0.7 million
resulted primarily from depreciation and amortization of $1.3 million, stock
compensation expense of $0.9 million and the amortization of right-of-use assets
of $0.5 million. Offsetting these non-cash charges was the forgiveness of the
PPP loan of $1.4 million coupled with a $0.6 million net increase in net working
capital.



Net cash used in operating activities in the six months ended June 30, 2020, of
$1.9 million resulted primarily from net loss of $5.4 million, offset by
depreciation and amortization of $2.3 million, stock compensation expense of
$1.0 million and a $0.2 million net increase in net working capital.




         26

  Table of Contents



Net Cash Used in Investing Activities. Net cash used in investing activities was approximately $0.8 million in the six months ended June 30, 2021, which primarily related to purchases of property and equipment and expenditures related to capitalized internal use software.

Net cash used in investing activities was approximately $0.4 million in the six
months ended June 30, 2020, which primarily related to purchases of property and
equipment and expenditures related to capitalized internal use software.



Net Cash Provided by Financing Activities. Net cash provided by financing
activities of $0.1 million during the six months ended June 30, 2021, primarily
consisted of $0.2 million of proceeds from the exercise of common stock offset
by $0.1 million of net borrowings on the credit facility coupled with payments
made under the financing agreement.



Net cash provided by financing activities of $4.8 million during the six months
ended June 30, 2020, primarily consisted of $3.4 million net borrowings on the
credit facility coupled with proceeds from a $1.4 million PPP Note.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2021 75,1 M - -
Net income 2021 -2,04 M - -
Net Debt 2021 - - -
P/E ratio 2021 -20,9x
Yield 2021 -
Capitalization 43,0 M 43,0 M -
Capi. / Sales 2021 0,57x
Capi. / Sales 2022 0,50x
Nbr of Employees 149
Free-Float 57,9%
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Number of Analysts 4
Last Close Price 3,19 $
Average target price 4,75 $
Spread / Average Target 48,9%
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Managers and Directors
Jared R. Rowe President, Chief Executive Officer & Director
Michael Sadowski Chief Financial Officer & Executive Vice President
Michael J. Fuchs Chairman
Daniel R. Ingle Chief Operating Officer & Executive Vice President
Glenn Evan Fuller Secretary, Chief Legal & Administrative Officer
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