The automotive retail industry is the largest consumer retail market in the United States with total sales of approximately $714 billion in 2004, according to NADA. The U.S. automotive retail industry consists primarily of approximately 21,640 franchised dealers and approximately 50,000 independent dealers, according to NADA and CNW Marketing Research, Inc., CNW, respectively. Franchised dealers sell a particular manufacturer’s new automobiles as well as used automobiles from multiple manufacturers, while independent dealers primarily purchase and sell used automobiles. In 2004, approximately 47.6 million new and used automobiles were sold retail in the United States, of which approximately 70% were sold by franchised dealers, according to CNW.

The automotive retail industry is mature yet highly fragmented. In 2004, the 50 largest dealer groups generated less than 15% of total industry sales, with much of the remainder attributable to smaller regional and local dealerships. Increased competition and easier access to invoice prices for consumers on the Internet have negatively impacted dealer profit margins on sales of new automobiles in recent years. In 2004, dealers generated average profit margins of just 1.3% and 2.9% from new and used automobile sales, respectively, according to CNW. In response to the reduced margins available from vehicle sales, dealers have focused on the wide range of other products and services they offer, including financing and insurance, F&I, products. F&I is generally the largest profit center within a dealership. In addition, dealers continually seek to improve profitability by making their operations more efficient and improving consumer loyalty in order to capture a higher share of their aftermarket parts and services needs.

The Company’s ALG Residual Value Guides are the industry standard for the residual value forecasting of vehicles. New car residual values are available in a national percentage guide, as well as regional dollar guides. The Company’s Chrome Carbook and PC Carbook provide automotive specification and pricing information. These products enable dealers, financial institutions and consumers to specify and price both new and used automobiles online, which helps promote standardized information among these parties and facilitates the initial contact between buyer and seller. The Company’s WebsitePlus enables visitors to a dealer’s website to submit credit application data online that the dealer can then access by logging onto its network. This product provides dealers with valuable consumer leads.

The Company’s Chrome Inventory Search is a web-based automobile locator solution that enables automobile buyers and sellers to search inventory belonging to a single dealer or dealer group, using detailed specifications or selection criteria. Dealers can use this product to order specific automobiles quickly from manufacturers and search their inventory for automobiles to meet a specific consumer’s need. With the Company’s Credit Reports, dealers can electronically access a consumer’s credit reports from the leading credit reporting agencies. The dealer can use the consumer’s credit report to determine an appropriate automobile and financing package for that particular consumer. With the Company’s DeskLink, dealers can search the hundreds of current financing source programs in its database within seconds to find the current financing or lease that is best for a consumer and the most profitable for themselves. The Company’s FinanceWizard assists dealers in finding financing for consumers with low credit scores, while maximizing their own profit. In addition, dealers can quickly pre-qualify prospective consumers and then match the best financing source program against their available inventory.

With the Company’s BookOut, a dealer can quickly and easily look up used automobile values by year/make/model or vehicle identification number for use in the credit application process. The Company currently offers separate BookOut subscriptions for data provided by Kelley Blue Book and NADA. The Company’s DealerTrack eMenu allows dealers to consistently present consumers the full array of insurance and other aftermarket product options they offer in a menu format. The Company’s DealTransfer permits dealers to transfer transaction information directly between select dealer management systems and its ToolKit product with just a few mouse clicks. The Company’s eContracting product allows dealers to obtain electronic signatures and transmit contracts and contract information electronically to financing sources that subscribe to eContracting. The Company’s ToolKit facilitates the online credit application process by enabling dealers to transmit a consumer’s credit application information to one or multiple financing sources and obtain credit decisions quickly and efficiently.

Cost of revenue increased $1.6 million, or 23%, from $6.8 million for the three months ended March 31, 2004 to $8.4 million for the three months ended March 31, 2005.

Product development expenses increased $0.3 million, or 59%, from $0.5 million for the three months ended March 31, 2004 to $0.8 million for the three months ended March 31, 2005.

Selling, general and administrative expenses increased $4.1 million, or 64%, from $6.4 million for the three months ended March 31, 2004 to $10.5 million for the three months ended March 31, 2005.