This summary is based on the second quarter fiscal 2006 earnings call conducted by Autobytel Inc. (ABTL: chart) on August 9, 2006.

Management:

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

Key Investors Issues

- Revenue of $29.4 million was down 6% from $31.4 million in 2005.
- Net loss was $7.9 million or 19 cents a share, down 140.9% from $3.28 million or 8 cents a share in the prior year.
- The firm had 5570 retail dealer relationships, 760 enterprise dealer relationships with major dealer groups, and 10 direct relationships.

Half Year Highlights:

- Revenues decreased 10.7% from $64.7 million in 2005 to $58.4 million.
- The net loss position worsened to $16.3 million or 39 cents a share, down 168%.
- Cash and cash equivalents strengthened to $29.2 million from $27.1 million in 2005.

Second Quarter Highlights

Revenue totaled $29.4 million, a decrease of $2 million or 6% from $31.4 million in 2005 as revenues from lead fees declined 10%.

- Revenue mix was 60% leads, 22% CRM, 15% advertising, and 3% data applications and other revenues.
- Revenue from lead fees totaled $17.8 million, a decline of $1.9 million or 10% from the second quarter of 2005.
- Average revenue per purchase request was $18.51 compared to $17.61 and $19.09 for the first quarter of 2006 and the second quarter of 2005 respectively.
- The firm delivered 800,000 purchase requests compared to 900,000 purchase requests in each of the first quarter of 2006 and the second quarter of 2005.
- Approximately, 500,000 purchase requests were delivered to retail dealers and 300,000 purchase requests were delivered to enterprise dealers.

Average revenue per finance lead was $14.37 compared to $11.80 in 2005.

- The lead referral dealer relationships represent domestic and imported mix of vehicles and light trucks sold in the United States.
- The firm had 5570 retail dealer relationships, 760 enterprise dealer relationships with major dealer groups, and 10 direct relationships encompassing 20 brands with automotive manufacturers for their automotive buying services affiliates.
- A total of 660 retail dealers had more than one retail lead referral relationship with Autobytel.
- The finance leads business grew in terms of number of dealers, leads delivered, and average revenue per finance lead to 370 retail finance lead customers, an increase of 21% from one year ago.

Advertising revenue was $4.3 million, a decline of 4% from 2005.

- Advertising page views were $115 million compared to $90 million in 2005, with CPM per ad page view of $32.32 compared to $44.23 in the prior year.
- Revenue from CRM services was $6.3 million, a net increase of $300,000 from the second quarter of 2005.
- Revenues from data, applications, and others were $1 million, effectively flat with the previous quarter.

Cost of revenues, which includes traffic acquisition costs or TAC totaled $14.4 million, or 49% of revenues, up from 40% in 2005 as a result of improved efficiencies in search engine marketing initiatives.

- Sales and marketing expense was $7.3 million or 25% of total revenue compared to $7 million in the prior year.
- Product and technology development expense was $6.2 million or 21% of total revenues from $6.3 million in 2005.
- Sequentially, product and technology development expense increased by $600,000, driven primarily by increased software costs, severance costs associated with the recent realignment of the workforce, and higher consulting and depreciation costs.

Net loss was $7.9 million or 19 cents a share, from $3.28 million or 8 cents a share in the prior year on revenue reduction and higher cost structure.

- The Company had $38.1 million in domestic cash, cash equivalents, and short-term investments.
- Day sales outstanding or DSO was 58 days during the second quarter of 2006, an improvement of 4 days from 62 days in the previous quarter.
- It incurred $1.2 million of costs associated with stock-based compensation and spent $3 million in legal costs enforcing the patent.
- Autobytel reduced the workforce by 10% or 46 employees.

Strategic Insights:

- The firm has made significant progress towards stabilization and a number of the strategies and tactics initiated are beginning to pay off.
- It continues to stress the importance of reducing turn in dealer relationships, partially by improving the quality or conversion rates of purchase requests that it provides to the network.
- The firm closed the second quarter with 5570 retail dealer relationships, the first time in seven quarters it has seen a net gain in the number of retail dealer relationships.

Despite increasing the number of dealers in the network, revenues from purchase requests dipped as focus initiatives was to improve lead quality.

- Advertising revenues rebounded from the first quarter as the firm improved its sell through capabilities and implemented initial efforts in inventory optimization.
- The major constraint on advertising growth today is the availability of predictable and sustainable advertising inventories.
- As it reinvigorates the web offerings, it expects that it will see growth in ad page views and advertising revenues, ultimately driving advertising up as a percentage of revenues.

The firm expects the goal of launching powerful new internet marketing services through dealers with initial products in search marketing that will complement and enhance the purchase requests dealers receive through Autobytel.