There's not much to like about the U.S. auto industry right now. But, there are still some success stories. An example is DealerTrack Holdings Inc. (NASDAQ: TRAK), which provides a variety of web-based systems to help auto dealers improve their performance.
The fact remains that the environment is still tough for the company, which reported its Q4 numbers. Revenues came in at $54.7 million, which was down from $60.7 million. There was a net loss of $1.1 million, which compares to a net gain of $4.1 million in the same period a year ago. Then again, the company was able to generate cash net income of $6.2 million in Q4.
At the heart of DealerTrack's service is an online lending system. No doubt, with the harsh credit environment, the business has slumped. The transaction volume in Q4 was 14.3 million, which compares to 20.8 million in the same period a a year ago.
Moreover, the total number of dealers in the system went from 22,000 to 19,700. Bear in mind that 900 franchised and 3,000 independent dealers closed down last year. Unfortunately, it looks like dealers will continue to close at a rapid clip in 2009.
But, DealerTrack has some advantages. For example, the company has boosted its number of financing sources to 730 (a 37% annual increase). What's more, DealerTrack has a robust product line, which definitely provides value to customers. One is inventory management -- a critical thing in this market.
However, there remains much uncertainty in the auto market. After all, what will happen if there is prepackaged bankruptcy of Chrysler or GM (NYSE: GM)? This could be a big shock to a system that is already under pressure.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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