This summary is based on the first quarter fiscal 2006 earnings call conducted by Autobytel Inc. (ABTL: chart) on May 10, 2006.

Management:

- President and CEO: James Riesenbach
- Executive Vice President and CFO: Michael Schmidt
- Investor Relations: Jennifer Klein

Key Investors Issues

- Revenue dropped 13% to $29.1 million from $33.3 million in 2005.
- The net loss was $8.5 million or 20 cents a share, from $2.8 million or 7 cents a share in the prior year.
- The firm had 5560 retail dealer relationships, 760 enterprise dealer relationships and 9 direct relationships.

First Quarter Highlights

Revenue totaled $29.1 million, a decrease of $4.3 million or 13% from $33.3 billion in the prior year due to lower average revenue per lead.

- Revenue mix was 62% leads, 22% CRM, 13% advertising, and 3% data applications and other revenues from revenue mix of 59% leads, 21% CRM, 17% advertising, and 3% data applications and other revenue in the prior period.
- Revenue from lead fees totaled $18 million representing a decline of 17% from 2005.
- Average revenue per lead, which includes finance leads was $17.61 compared to $18.67 in 2005 with the decline attributable to an increase in the number of purchase requests per dealer that were delivered to dealers on a flat fee pricing program, primarily being dealers on the used program.
- Approximately 50% of retail dealers in the network are on a flat fee contract, meaning that they pay Autobytel a flat fee every month regardless of the number leads delivered.

The firm delivered approximately 900,000 purchase requests compared to 1 million purchase requests in 2005 and 500,000 purchase requests were delivered to retail dealers and 400,000 were delivered to enterprise dealers.

- Additionally, the firm delivered 200,000 finance requests in the first quarter of 2006.
- Average revenue per finance lead was $13.38 as compared to $11.72 in 2005, with the lead referral dealer relationships representing domestic and imported mix of vehicle and light trucks sold in the United States.
- By quarter end, the firm had 5560 retail dealer relationships, 760 enterprise dealer relationships with major dealer groups, and 9 direct relationships encompassing 19 brands with automotive manufacturers.
- The firm had 350 retail finance lead customers, an increase of 15% from one year ago and it delivered 185,000 finance leads with an average revenue per lead of $13.38.

Advertising revenue was $3.8 million, down 21% from the 2005, with advertising page views of $119 million compared to $110 in the prior year.

- Revenue from CRM services was approximately $6.3 million, a year-to-year improvement of 10% with CRM growth coming from both the RPM and web consult products.
- RPM increased the number customers from 750 in 2005 to 870 while web control increased the number of customers from 2870 to 3020.
- Revenues from data, applications, and other revenues was $1 million, a year-to-year decline of 18%.
- Cost of revenues, which include traffic acquisition cost of TAC totalled $14.8 million, and as a percentage of revenues, was 51%, up from 40% in 2005.
- The increase was a result of an increase in search engine marketing campaigns that were implemented to increase directive byte traffic and purchase requests.

Sales and marketing expense was $7.5 million or 26% of total revenues, compared to $6.1 million and $8.1 million for the fourth and first quarter of 2005 respectively.

- The sequential increase was driven by cost incurred from attendance at the National Auto Dealers Association Annual Trade Show, stock-based compensation costs and higher salary and wage costs.
- General and administrative expense was $9.7 million, up from $6.7 million and $8.3 million for the fourth and first quarters of 2005 respectively, with the sequential increase due to higher professional fees, stock-based compensation and legal costs.

The net loss was $8.5 million or 20 cents a share, from $2.8 million or 7 cents a share in the prior year on a higher expense mix and lower revenues.

- The company had $43.8 million in domestic cash, cash equivalents, and short-term investments.
- Day sales outstanding or DSO was 62 days, unchanged from the fourth quarter of 2005.

Operational Insights:

- The company experienced a series of challenging circumstances that affected advertising revenue and operating expenses, particularly the tax cost of revenues.
- The Company’s prime directive over the past six to eight months was to reduce return in our dealer base by improving the key component, dealer retention, lead quality.
- To drive and improve quality in the leads, the search engine marketing team was given the mandate to increase the direct-to-site traffic using keywords fitted.

Although profits grew from traffic acquisition costs, there was an improvement in closing rate deals and increase in the number of regenerated and an improvement in retail dealer return.

- Sales from that clients both advertising revenue and in CPMs were impacted as the number of advertising deals came in later than expected because several of the OEM customers did not launch their programs until the latter part of the quarter.
- Additionally, CPMs declined as the firm increased search engine marketing initiatives due to the increase number of pages views, essentially available inventories increased at a time that the firm did not have sufficient demand from advertisers in place.