From George Santana of Ascendiant Capital Markets:
Autobytel Inc.
Q4 2012: With another quarter of profitability and cash flow, company switches to growth mode. Reiterate Strong Buy
Q4 (Dec.) 2012 results marked another solid quarter. Revenues were $16.9mm, -3.1% sequentially and +4.3% y-o-y, versus our $17.1mm forecast. Cost control remained strong, resulting in diluted EPS of $0.04 vs. our $0.02 forecast.
Operating EBITDAS was $1.0mm, in line with our $1.0mm forecast.
Operating leverage in the model begins to appear. For the year, revenues were $66.8mm, +4.7%, net income more than tripled to $1.4mm, and Operating EBITDAS was $4.4mm, +29%. (Guidance had been for 3-5% revenue growth and a tripling of net income.)
Notably, Q4 2012 was the 7th consecutive quarter of profitability and 8th consecutive quarter of positive EBITDAS. Solid net-cash balance sheet. Autobytel continues to accumulate cash, even
after repurchasing $1.5mm of common stock in the first half of 2012. (Cash and equivalents were $15.3mm at year-end, less a convert of $5.0mm, for net cash of $10.3mm or $1.16 per share.)
Strengthening U.S. auto sales should provide a nice tailwind. With
strengthening consumer demand and increasing availability of auto financing, U.S. auto sales and promotional activity by auto manufacturers and dealers – the two drivers of Autobytel’s business – should continue to grow steadily.
Operating leverage: Management contends that current level of operating expenditures is sufficient to support much higher revenues, a nod to the scalability of Autobytel’s Internet-based business. Rebounding U.S. vehicle sales and increasing promotional activity should translate into higher revenues and even stronger growth in profits and cash flow.
We are adjusting our 2013 forecast: revenues from $74.6mm to $71.7mm; EPS unchanged at $0.24; Operating EBITDAS from $5.3mm to $5.1mm. We introduce our 2014 forecast: for revenues of $79.2mm; EPS of $0.53; and Operating EBITDAS of $7.2mm.
On the earnings call, management was much more vocal about driving growth. Autobytel is making its first real non-replacement hires for the first time in years, reflecting higher business volume as auto sales strengthen and potential gains in market share on the very favorable data coming out of the Polk study.
We believe ABTL deserves an in-depth look, as the stock has yet to reflect the significant improvement in the company’s business. EV of $28mm values the company at 5.6x and 4.0x forecast Operating EBITDAS for 2013 and 2014, respectively. With a net cash balance sheet, rebuilt and consistent cash flow, and a low valuation, we believe the stock should begin to attract the attention of
GARP and other small-cap value investors.
Reiterate Strong Buy and maintain our price target of $7.00, which is based on an EV multiple of 9x forecast 2013 Operating EBITDAS.
