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Autoweb, Inc. (AUTO) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2020

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AUTO Quarterly Reports

Autoweb, Inc.

CIK: 1023364 Ticker: AUTO
Exhibit 99.1
 
AutoWeb Reports Fourth Quarter and Full Year 2019 Results
 
TAMPA, FL – March 27, 2020 –
AutoWeb, Inc. (Nasdaq: AUTO), a robust digital marketing platform providing digital advertising solutions for automotive dealers and OEMs, is reporting financial results for the fourth quarter and full year ended December 31, 2019.
 
Fourth Quarter 2019 Financial Summary
Total revenues were $26.7 million compared to $28.6 million in Q3’19 and $32.3 million in Q4’18.
Advertising revenues were $5.9 million compared to $6.0 million in Q3’19 and $6.5 million in Q4’18.
Gross profit was $5.5 million compared to $5.9 million in Q3’19 and $5.6 million in Q4’18.
Gross margin was 20.7% compared to 20.7% in Q3’19 and 17.5% in Q4’18.
Net loss was $3.2 million or $(0.24) per share, compared to a net loss of $1.7 million or $(0.13) per share in Q3’19 and a net loss of $5.3 million or $(0.41) per share in Q4’18.
Adjusted EBITDA was $(0.8) million compared to $0.8 million in Q3’19 and $(2.6) million in Q4’18.
 
Fourth Quarter 2019 Key Operating Metrics1 
Lead traffic was 25.8 million visits compared to 31.7 million in Q3’19 and 32.1 million in Q4’18.2
Lead volume was 1.7 million compared to 1.8 million in Q3’19 and 2.0 million in Q4’18.3
Retail dealer count was 2,203 compared to 2,414 in Q3’19 and 2,596 in Q4’18.4
Retail lead capacity was 129,384 lead targets compared to 142,643 in Q3’19 and 147,145 in Q4’18.5
Click traffic was 24.1 million visits compared to 25.1 million in Q3’19 and 26.5 million in Q4’18. 6
Click volume was 6.5 million clicks compared to 6.5 million in Q3’19 and 6.6 million in Q4’18.7
Net revenue per click was $0.79 compared to $0.76 in Q3’19 and $0.81 in Q4’18.8
 
Management Commentary
“As highlighted over the past year, a key component of our turnaround has been increasing the efficiency of our resources, and the importance of that could not be greater given the current market environment amid COVID-19,” said Jared Rowe, CEO of AutoWeb. “We are all clearly working through a time of uncertainty; however, our top priority has been to take the necessary actions for the health and safety of our employees in the U.S. and abroad, while ensuring the continuity of operations for our dealer and OEM customers. To that end, all of our teams were mandated to work from home beginning last week, and we are doing all that we can to continue supporting our customers during this challenging time.
 
 
 
 
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“The near-term impacts to our business and the automotive industry at large are not yet fully understood. The top 150 dealer groups and OEMs have begun pulling back their marketing spend, and in the states that are most impacted by the virus, we have begun to see our retail customers suspend their marketing campaigns with us, which allows us to keep the account and makes it easier to reactivate the client once the market begins to recover. In response to this, we have implemented a hiring freeze to better manage our cash, and we have developed an action plan addressing our operations, business continuity, client communication and technology infrastructure as we adapt to our new work environment. The road ahead will require resilience, but in AutoWeb’s 25-year history, we have been through difficult times before and emerged stronger.
 
“Over the last several months, we have worked to optimize our product mix of leads and clicks, along with our sales channel mix of OEMs and retail dealers. We have also continued to enhance our traffic acquisition and conversion, and that focus will become even more imperative in the months ahead as we implement marketing expense controls against this new economic backdrop. Further, to improve our flexibility with working capital, earlier this week we signed a new $20 million revolving credit facility with CIT Northbridge Credit.
 
“Despite what lies ahead, we must maintain and even increase our productivity to better support our dealer and OEM customers that remain in-market. Prior to the COVID-19 pandemic, we had already taken considerable costs out of the business to establish a lean operation, and regardless of near-term headwinds, we believe we can expand gross margins with a lower revenue base and strict focus on conversion.”
 
Fourth Quarter 2019 Financial Results
Total revenues in the fourth quarter of 2019 were $26.7 million compared to $32.3 million in the year-ago quarter, with advertising revenues of $5.9 million compared to $6.5 million in the year-ago quarter. The decline in total revenues was primarily due to lower lead and click volumes.
 
Gross profit in the fourth quarter was $5.5 million compared to $5.6 million in the year-ago quarter. As a percentage of revenue, gross profit increased to 20.7% compared to 17.5% in the year-ago quarter, with the increase driven by more efficient traffic acquisition and higher margin product and channel mix.
 
Total operating expenses in the fourth quarter decreased to $8.6 million compared to $11.0 million in the year-ago quarter. The decrease was driven by prudent cost management and operating efficiencies.
 
Net loss in the fourth quarter of 2019 was $3.2 million or $(0.24) per share, compared to a net loss of $5.3 million or $(0.41) per share in the year-ago quarter.
 
Adjusted EBITDA in the fourth quarter of 2019 was $(0.8) million compared to $(2.6) million in Q4’18.
 
At December 31, 2019, cash, cash equivalents and restricted cash totaled $5.9 million compared to $6.1 million at September 30, 2019, and $13.6 million at December 31, 2018. The decrease from the end of 2018 was driven by operating losses and the funding of capital expenditures.
 
 
 
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At December 31, 2019, AutoWeb had an outstanding balance of $3.7 million on its $25 million revolving credit facility with PNC Bank, compared to $1.0 million outstanding on September 30, 2019.
 
On March 26, 2020, the company paid off the outstanding balance on its revolving credit facility with PNC Bank, and signed a new $20.0 million revolving credit facility with CIT Northbridge Credit.
 
Full Year 2019 Financial Results
Total revenues in 2019 were $114.0 million compared to $125.6 million in 2018, with advertising revenues of $23.2 million compared to $28.2 million in 2018.
 
Gross profit in 2019 was $22.6 million compared to $15.3 million in 2018. Gross profit in 2018 included a one-time impairment charge of $9.0 million related to the write-down of the company’s DealerX platform license.
 
Total operating expenses in 2019 were $37.9 million compared to $54.3 million in 2018. The 2018 period included a goodwill impairment charge and a one-time long-lived asset impairment charge totaling $7.1 million.
 
Net loss in 2019 was $15.2 million or $(1.17) per share, compared to a net loss of $38.8 million or $(3.04) per share last year.
 
Adjusted EBITDA in 2019 was $(5.1) million compared to $(7.0) million in 2018.
 
Conference Call
AutoWeb management will hold a conference call today at 8:30 a.m. Eastern time to discuss its fourth quarter and full year 2019 results, followed by a question-and-answer session.
 
Date: Friday, March 27, 2020
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Toll-free dial-in number: 1-877-852-2929
International dial-in number: 1-404-991-3925
Conference ID: 1649347
 
Please call the conference telephone number 5-10 minutes prior to the start time, and an operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.
 
A replay of the conference call will be available after 11:30 a.m. Eastern time on the same day through April 3, 2020. The call will also be archived in the Investors section of the company’s website for one year.
 
Toll-free replay number: 1-855-859-2056
International replay number: 1-404-537-3406
Replay ID: 1649347
 
Tax Benefit Preservation Plan
At December 31, 2019, the company had approximately $100.5 million in available net operating loss carryforwards (NOLs) for U.S. federal income tax purposes. AutoWeb reminds stockholders about its Tax Benefit Preservation Plan dated May 26, 2010, as amended on April 14, 2014 and April 13, 2017 (as amended, the “Plan”) between the company and Computershare Trust Company, N.A., as rights agent.
 
 
 
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The Plan was adopted by the company’s board of directors to preserve the company’s NOLs and other tax attributes, and thus reduce the risk of a possible change of ownership under Section 382 of the Internal Revenue Code. Any such change of ownership under Section 382 would limit or eliminate the ability of the company to use its existing NOLs for federal income tax purposes. In general, an ownership change will occur if the company’s 5% shareholders, for purposes of Section 382, collectively increase their ownership in the company by an aggregate of more than 50 percentage points over a rolling three-year period. The Plan is designed to reduce the likelihood that the company experiences such an ownership change by discouraging any person or group from becoming a new 5% shareholder under Section 382. Rights issued under the Plan could be triggered upon the acquisition by any person or group of 4.9% or more of the company’s outstanding common stock and could result in substantial dilution of the acquirer’s percentage ownership in the company. There is no guarantee that the Plan will achieve the objective of preserving the value of the company’s NOLs.
 
As of February 29, 2020, there were 13,146,831 shares of the company’s common stock, $0.001 par value, outstanding. Persons or groups considering the acquisition of shares of beneficial ownership of the company’s common stock should first evaluate their percentage ownership based on this revised outstanding share number to ensure that the acquisition of shares does not result in beneficial ownership of 4.9% or more of outstanding shares. For more information about the Plan, please visit investor.autoweb.com/tax.cfm.
 
About AutoWeb, Inc.
AutoWeb, Inc. provides high-quality consumer leads, clicks and associated marketing services to automotive dealers and manufacturers throughout the United States. The company also provides consumers with robust and original online automotive content to help them make informed car-buying decisions. The company pioneered the automotive Internet in 1995 and has since helped tens of millions of automotive consumers research vehicles; connected thousands of dealers nationwide with motivated car buyers; and has helped every major automaker market its brand online.
 
Investors and other interested parties can receive AutoWeb news alerts by accessing the online registration form at investor.autoweb.com/alerts.cfm.
 
Note about Non-GAAP Financial Measures
AutoWeb has disclosed Adjusted EBITDA in this press release, which is a non-GAAP financial measure as defined by SEC Regulation G. The company defines Adjusted EBITDA as net loss before interest, taxes, depreciation, amortization, non-cash stock-based compensation, non-cash gains or losses, and other extraordinary items. A table providing a reconciliation of Adjusted EBITDA is included at the end of this press release.
 
The company’s management believes that presenting Adjusted EBITDA provides useful information to investors regarding the underlying business trends and performance of the company’s ongoing operations, as well as providing for more consistent period-over-period comparisons. This non-GAAP measure assists management in its operational and financial decision-making and monitoring the company’s performance. In addition, we use Adjusted EBITDA as a measure for determining incentive compensation targets. Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review the company’s consolidated financial statements in their entirety and to not rely on any single financial measure.
 
 
 
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Forward-Looking Statements Disclaimer
The statements contained in this press release or that may be made during the conference call described above that are not historical facts are forward-looking statements under the federal securities laws. Words such as “anticipates,” “could,” “may,” “estimates,” “expects,” “projects,” “intends,” “pending,” “plans,” “believes,” “will” and words of similar substance, or the negative of those words, used in connection with any discussion of future operations or financial performance identify forward-looking statements. In particular, statements regarding expectations and opportunities, new product expectations and capabilities, projections, statements regarding future events, and our outlook regarding our performance and growth are forward-looking statements. These forward-looking statements, including, that the company believes it can expand gross margins with a lower revenue base and strict focus on conversion, are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Actual outcomes and results may differ materially from what is expressed in, or implied by, these forward-looking statements. AutoWeb undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements are changes in general economic conditions; the financial condition of automobile manufacturers and dealers; disruptions in automobile production; changes in fuel prices; the economic impact of terrorist attacks, political revolutions or military actions; failure of our internet security measures; dealer attrition; pressure on dealer fees; increased or unexpected competition; the failure of new products and services to meet expectations; failure to retain key employees or attract and integrate new employees; actual costs and expenses exceeding charges taken by AutoWeb; changes in laws and regulations; costs of legal matters, including, defending lawsuits and undertaking investigations and related matters; and other matters disclosed in AutoWeb’s filings with the Securities and Exchange Commission. Investors are strongly encouraged to review the company’s Annual Report on Form 10-K for the year ended December 31, 2018 and other filings with the Securities and Exchange Commission for a discussion of risks and uncertainties that could affect the business, operating results or financial condition of AutoWeb and the market price of the company’s stock.
 
Company Contact
J.P. Hannan
Chief Financial Officer
1-949-437-4651
jp.hannan@autoweb.com
 
Investor Relations Contact
Sean Mansouri, CFA or Cody Slach
Gateway Investor Relations
1-949-574-3860
AUTO@gatewayir.com
 
 
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AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
 
 
 
December 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $892 
 $13,600 
Restricted cash
  5,054 
  - 
Accounts receivable, net of allowances for bad debts and customer credits
    
    
of $740 and $566 at December 31, 2019 and December 31, 2018, respectively
  24,051 
  26,898 
Prepaid expenses and other current assets
  1,265 
  1,245 
Total current assets
  31,262 
  41,743 
 
    
    
Property and equipment, net
  3,349 
  3,181 
Right-of-use assets
  2,528 
  - 
Intangibles assets, net
  7,104 
  11,976 
Other assets
  661 
  516 
Total assets
 $44,904 
 $57,416 
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
Current liabilities:
    
    
Accounts payable
 $14,080 
 $17,572 
Accrued employee-related benefits
  1,004 
  3,125 
Borrowings under revolving credit facility
  3,745 
  - 
Other accrued expenses and other current liabilities
  2,315 
  2,204 
Current portion of lease liabilities
  1,167 
  - 
Current convertible note payable
  - 
  1,000 
Total current liabilities
  22,311 
  23,901 
 
    
    
Lease liabilities, net of current portion
  1,497 
  - 
Total liabilities
  23,808 
  23,901 
 
    
    
Stockholders' equity
    
    
Preferred stock, $0.001 par value; 11,445,187 shares authorized
    
    
Series A Preferred stock, none issued and outstanding
  - 
  - 
Common stock, $0.001 par value; 55,000,000 shares authorized;
    
    
13,146,831 and 12,960,450 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively
  13 
  13 
Additional paid-in capital
  364,028 
  361,218 
Accumulated deficit
  (342,945)
  (327,716)
Total stockholders' equity
  21,096 
  33,515 
Total liabilities and stockholders' equity
 $44,904 
 $57,416 
 
 
 
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AUTOWEB, INC.
AUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share data)
 
 Three Months Ended
 
 
 
Twelve Months Ended
 
 
 
December 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Lead generation
 $20,775 
 $25,659 
 $90,728 
 $96,936 
Digital advertising
  5,895 
  6,526 
  23,173 
  28,169 
Other
  13 
  68 
  80 
  484 
    Total revenues
  26,683 
  32,253 
  113,981 
  125,589 
Cost of revenues
  21,163 
  26,613 
  91,412 
  101,315 
Cost of revenues-impairment
  - 
   - 
  - 
  9,014 
Gross profit
  5,520 
  5,640 
  22,569 
  15,260 
 
    
    
    
    
Operating Expenses
    
    
    
    
Sales and marketing
  2,355 
  2,323 
  10,805 
  12,419 
Technology support
  2,052 
  3,185 
  8,849 
  13,838 
General and administrative
  3,453 
  4,097 
  13,882 
  16,077 
Depreciation and amortization
  731 
  1,402 
  4,371 
  4,897 
Goodwill impairment
  - 
   - 
  - 
  5,133 
Long-lived asset impairment
  - 
   - 
  - 
  1,968 
     Total operating expenses
  8,591 
  11,007 
  37,907 
  54,332 
Operating loss
  (3,071)
  (5,367)
  (15,338)
  (39,072)
Interest and other income (expense), net
  (101)
  72 
  119 
  250 
Loss before income tax provision
  (3,172)
  (5,295)
  (15,219)
  (38,822)
Income taxes provision
  5 
  (10)
  10 
  (6)
Net loss and comprehensive loss
 $(3,177)
 $(5,285)
 $(15,229
 $(38,816)
 
    
    
    
    
 
    
    
    
    
Basic and diluted loss per share:
    
    
    
    
Basic loss per common share
 $(0.24)
 $(0.41)
 $(1.17)
 $(3.04)
Diluted loss per common share
 $(0.24)
 $(0.41)
 $(1.17)
 $(3.04)
 
    
    
    
    
Shares used in computing net loss per share:
    
    
    
    
Basic
  13,114 
  12,892 
  13,071 
  12,756 
Diluted
  13,114 
  12,892 
  13,071 
  12,756 
 
 
-7-
 
 
AUTOWEB, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
'(amounts in thousands)
 
 
 
Twelve Months Ended December 31,
 
 
 
2019
 
 
2018
 
Cash flows from operating activities:
 
 
 
 
 
 
Net (loss) income
 $(15,229.00)
 $(38,816.00)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
    
    
Depreciation and amortization
  6,454 
  8,544 
Goodwill impairment
  - 
  5,133 
Intangible asset impairment
  - 
  9,014 
Provision for bad debt
  293 
  241 
Provision for customer credits
  250 
  217 
Share-based compensation
  2,402 
  4,866 
Right-of-use assets
  1,697 
  - 
Lease Liabilities
  (1,706)
  - 
Write down of asset
  59 
  - 
Gain on sale of investment
  (250)
  (25)
Long-lived asset impairment
  - 
  1,968 
Change in deferred tax asset
  - 
  692 
Changes in assets and liabilities
    
    
Accounts receivable
  2,304 
  (1,445)
Prepaid expenses and other current assets
  (20)
  814 
Other non-current assets
  (145)
  (278)
Accounts payable
  (3,492)
  4,873 
Accrued expenses and other current liabilities
  (2,034)
  1,282 
Net cash (used in) provided by operating activities
  (9,417)
  (2,920)
Cash flows from investing activities:
    
    
Purchases of property and equipment
  (1,640)
  (896)
Proceeds from sale of investment
  250 
  125 
Net cash (used in) provided by investing activities
  (1,390)
  (771)
Cash flows from financing activities:
    
    
Proceeds from issuance of common stock
  - 
  200 
Borrowings under revolving credit facility
  73,968 
  - 
Principal payments under revolving credit facility
  (70,223)
  (8,000)
Payments on convertible note
  (1,000)
  - 
Proceeds from exercise of stock options
  408 
  98 
Net cash (used in) provided by financing activities
  3,153 
  (7,702)
Net decrease in cash and cash equivalents and restricted cash
  (7,654)
  (11,393)
Cash and cash equivalents and restricted cash at beginning of period
  13,600 
  24,993 
Cash and cash equivalents and restricted cash at end of period
  5,946 
  13,600 
 
    
    
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
    
    
Cash and cash equivalents at beginning of period
 $13,600 
 $24,993 
Restricted cash at beginning of period
  - 
  - 
Cash and cash equivalents at beginning of period
 $13,600 
 $24,993 
 
    
    
Cash and cash equivalents at end of period
 $892 
 $13,600 
Restricted cash at end of period
  5,054 
  - 
Cash and cash equivalents and restricted cash at end of period
 $5,946 
 $13,600 
 
    
    
Supplemental disclosures of cash flow information:
    
    
Cash paid for income taxes
  12 
  4 
Cash refunds for income taxes
  128 
  223 
Cash paid for interest
  176 
  118 
 
 
 
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AUTOWEB, INC.
RECONCILIATION OF ADJUSTED EBITDA
(Amounts in thousands, except per-share data)
 
 
 
Three Months Ended
 
 
Three Months Ended
 
 
Three Months Ended
 
 
Three Months Ended
 
 
Year Ended    
 
 
 
March 31,
2019
 
 
March 31,
2018
 
 
June 30,
2019
 
 
June 30,
2018
 
 
September 30, 2019
 
 
September 30, 2018
 
 
December 31, 2019
 
 
December 31, 2018
 
 
December 31, 2019
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 $(5,360)
 $(10,279)
 $(4,953)
 $(5,217)
 $(1,739)
 $(18,036)
 $(3,177)
 $(5,283)
 $(15,229)
 $(38,815)
 
    
    
    
    
    
    
    
    
    
    
Depreciation and amortization
  1,787 
  2,179 
  1,723 
  2,181 
  1,747 
  2,174 
  1,197 
  2,011 
  6,453 
  8,545 
Interest income
  (6)
  (6)
  (20)
  (7)
  (22)
  (7)
  (16)
  (7)
  (64)
  (27)
Interest expense
  5 
  88 
  56 
  15 
  231 
  18 
  187 
  15 
  479 
  136 
Federal, state and local taxes
  - 
  4 
  77 
  - 
  50 
  65 
  91 
  (10)
  218 
  59 
EBITDA
  (3,574)
  (8,014)
  (3,117)
  (3,028)
  267 
  (15,786)
  (1,718)
  (3,274)
  (8,143)
  (30,102)
 
    
    
    
    
    
    
    
    
    
    
Non-cash stock compensation expense
  551 
  1,626 
  560 
  942 
  651 
  1,796 
  640 
  502 
  2,402 
  4,866 
Gain/loss on sale of asset
  - 
  - 
  - 
  - 
  (11)
  - 
  (9)
  - 
  (20)
  - 
Gain/loss on investment
  - 
  - 
  - 
  (125)
  (250)
  100 
  - 
  - 
  (250)
  (25)
Asset Impairment
  - 
  - 
  - 
  - 
  - 
  10,983 
  - 
  - 
  - 
  10,983 
Goodwill impairment
  - 
  5,133 
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  5,133 
Personnel Restructuring
  - 
  950 
  496 
  15 
  185 
  1,003 
  252 
  172 
  933 
  2,140 
Adjusted EBITDA
 $(3,023)
 $(305)
 $(2,061)
 $(2,196)
 $842 
 $(1,904)
 $(835)
 $(2,600)
 $(5,078)
 $(7,005)
 
 
 
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The following information was filed by Autoweb, Inc. (AUTO) on Tuesday, March 31, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

 
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
[X] 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2020
or
[  ] 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                  to                 
 
Commission file number 1-34761
 
 
 AutoWeb, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
33-0711569
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
 
 
 
400 North Ashley Drive, Suite 300
Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (949) 225-4500
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.001 per share
AUTO
The Nasdaq Capital Market
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes      No  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  
Accelerated filer  
Non-accelerated filer  
Smaller reporting company  
 
Emerging growth company  
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.    
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No  
 
As of May 5, 2020, there were 13,146,831 shares of the Registrant’s Common Stock, $0.001 par value, outstanding.
 

 
 

 
 
 INDEX
 
 
 
 
 
 
 
 
 
 
Page
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
 
 


 
 

 
1


 
 
 
 
2
 
 
 
 
 
 
3
 
 
 
 
 
 
4
 
 
 
 
 
 
5
 
 
 
 
 
16
 
 
 
 
 
20


 
 
 
20
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
 
 
 
21
 
 
 
 
 
23
 
 
 
 
 
 
24
 
 
 
 
 
 
 
PART I. FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
 
 
 
March 31,
2020
 
 
December 31,
2019
 
Assets
 

 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $7,354 
 $892 
Restricted cash
  502 
  5,054 
Accounts receivable, net of allowances for bad debts and customer credits of $759 and $740 at March 31, 2020 and December 31, 2019, respectively
  20,820 
  24,051 
Prepaid expenses and other current assets
  1,168 
  1,265 
Total current assets
  29,844 
  31,262 
Property and equipment, net
  3,100 
  3,349 
Right-of-use assets
  3,633 
  2,528 
Intangible assets, net
  6,244 
  7,104 
Other assets
  764 
  661 
Total assets
 $43,585 
 $44,904 
Liabilities and Stockholders’ Equity
    
    
Current liabilities:
    
    
Accounts payable
 $12,525 
 $14,080 
Borrowings under revolving credit facility
  6,712 
  3,745 
Accrued employee-related benefits
  1,345 
  1,004 
Other accrued expenses and other current liabilities
  1,696 
  2,315 
Current portion of lease liabilities
  1,057 
  1,167 
Total current liabilities
  23,335 
  22,311 
Lease liabilities, net of current portion
  2,706 
  1,497 
Total liabilities
  26,041 
  23,808 
Commitments and contingencies (Note 9)
    
    
Stockholders’ equity:
    
    
Preferred stock, $0.001 par value, 11,445,187 shares authorized
   
   
Series A Preferred stock, none issued and outstanding at March 31, 2020 and December 31, 2019, respectively.
    
    
Common stock, $0.001 par value; 55,000,000 shares authorized, and 13,146,831 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
  13 
  13 
Additional paid-in capital
  364,537 
  364,028 
Accumulated deficit
  (347,006)
  (342,945)
Total stockholders’ equity
  17,544 
  21,096 
Total liabilities and stockholders’ equity
 $43,585 
 $44,904 
 
See accompanying notes to unaudited condensed consolidated financial statements.

 
 
AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts in thousands, except per-share data)
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
Lead generation
 $18,460 
 $25,698 
Digital advertising
  6,012 
  5,878 
Other revenues
   
  28 
Total revenues
  24,472 
  31,604 
Cost of revenues
  19,115 
  25,847 
Gross profit
  5,357 
  5,757 
Operating expenses:
    
    
Sales and marketing
  2,132 
  2,878 
Technology support
  1,857 
  2,780 
General and administrative
  3,943 
  4,290 
Depreciation and amortization
  722 
  1,239 
Total operating expenses
  8,654 
  11,187 
 
    
    
Operating loss
  (3,297)
  (5,430)
Interest and other (expense) income:
    
    
Interest (expense) income, net
  (832)
  1 
Other income (expense)
  68 
  69 
Loss before income tax provision
  (4,061)
  (5,360)
Net loss
 $(4,061)
 $(5,360)
 
    
    
Basic loss per common share
 $(0.31)
 $(0.41)
 
    
    
Diluted loss per common share
 $(0.31)
 $(0.41)
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
 
AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share data)
 
 
 
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
 
Preferred Stock
 
 
Additional
 
 

 
 
 
 
 
 
Number
of Shares
 
 
Amount
 
 
Number
of Shares
 
 
Amount
 
 Paid-In
Capital
 
 Accumulated Deficit 
 
Total
 
 
 
 
Balance at December 31, 2019
  13,146,831 
 $13 
   
 $ 
 $364,028 
 $(342,945)
 $21,096 
Share-based compensation
   
   
   
   
  509 
   
  509 
Net loss
   
   
   
   
   
  (4,061)
  (4,061)
Balance at March 31, 2020
  13,146,831 
 $13 
   
 $ 
 $364,537 
 $(347,006)
 $17,544 
 
 
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
 
Preferred Stock
 
 
Additional
 
 

 
 
 
 
 
 
Number
of Shares
 
 
Amount
 
 
Number
of Shares
 
 
Amount
 
 
Paid-In
Capital 
 
 
 Accumulated Deficit 
 
 
Total
 
 
 
 
Balance at December 31, 2018
  12,960,450 
 $13 
   
 $ 
 $361,218 
 $(327,716)
 $33,515 
Share-based compensation
   
   
   
   
  551 
   
  551 
Issuance of common stock upon exercise of stock options
  156,012 
   
   
   
  307 
   
  307 
Net loss
   
   
   
   
   
  (5,360)
  (5,360)
Balance at March 31, 2019
  13,116,462 
  13 
   
 $ 
 $362,076 
 $(333,076)
 $29,013 
 
  
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
 
AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
 
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
 $(4,061)
 $(5,360)
Adjustments to reconcile net loss to net cash used in operating activities:
    
    
Depreciation and amortization
  1,212 
  1,787 
Provision for bad debts
  12 
  41 
Provision for customer credits
  92 
  74 
Share-based compensation
  509 
  551 
Right-of-use assets
  396 
  445 
Lease liabilities
  (402)
  (446)
Changes in assets and liabilities:
    
    
Accounts receivable
  3,127 
  3,698 
Prepaid expenses and other current assets
  97 
  64 
Other assets
  (103)
  6 
Accounts payable
  (1,555)
  (1,023)
Accrued expenses and other current liabilities
  (278)
  (1,954)
Net cash used in operating activities
  (954)
  (2,117)
Cash flows from investing activities:
    
    
Purchases of property and equipment
  (103)
  (57)
Net cash used in investing activities
  (103)
  (57)
Cash flows from financing activities:
    
    
Proceeds from exercise of stock options
   
  307 
Payment on convertible note
   
  (1,000)
Borrowings under PNC credit facility
  28,564 
   
Payments under PNC credit facility
  (32,308)
   
Borrowings under CNC credit facility
  8,001 
   
Payments under CNC credit facility
  (1,290)
   
Net cash provided by (used in) financing activities
  2,967 
  (693)
Net increase in cash and cash equivalents and restricted cash
  1,910 
  (2,867)
Cash and cash equivalents and restricted cash, beginning of period
  5,946 
  13,600 
Cash and cash equivalents and restricted cash, end of period
 $7,856 
 $10,733 
 
    
    
Reconciliation of cash and cash equivalents and restricted cash
    
    
Cash and cash equivalents at beginning of period
 $892 
 $13,600 
Restricted cash at beginning of period
  5,054 
   
Cash and cash equivalents and restricted cash at beginning of period
 $5,946 
 $13,600 
 
    
    
Cash and cash equivalents at end of period
 $7,354 
 $10,733 
Restricted cash at end of period
  502 
   
Cash and cash equivalents and restricted cash at beginning of period
 $7,856 
 $10,733 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash paid for income taxes
 $ 
 $1 
Cash refunds for income taxes
 $381 
 $ 
Cash paid for interest
 $323 
 $20 
Supplemental disclosure of non-cash financing activities:
    
    
Right-of-use assets obtained in exchange for operating lease liabilities
 $1,501 
 $ 
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
 
AUTOWEB, INC.
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.            
Organization and Operations
 
AutoWeb, Inc. (“AutoWeb” or the “Company”) is a digital marketing company for the automotive industry that assists automotive retail dealers (“Dealers”) and automotive manufacturers (“Manufacturers”) market and sell new and used vehicles to consumers by utilizing the Company’s digital sales enhancing products and services.
 
The Company’s consumer-facing websites (“Company Websites”) provide consumers with information and tools to aid them with their automotive purchase decisions and the ability to connect with Dealers regarding purchasing or leasing vehicles (“Leads”). The Company’s click traffic referral program provides consumers who are shopping for vehicles online with targeted offers based on make, model and geographic location. As these consumers conduct online research on Company Websites or on the site of one of our network of automotive publishers, they are presented with relevant offers on a timely basis and, upon the consumer clicking on the displayed advertisement, are sent to the appropriate website location of one of the Company’s Dealer, Manufacturer or advertising customers.
 
The Company was incorporated in Delaware on May 17, 1996. The Company’s common stock is listed on The NASDAQ Capital Market under the symbol AUTO.
 
2.            
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are presented on the same basis as the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”).  AutoWeb has made its disclosures in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of Company management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included. The unaudited condensed consolidated statement of operations and cash flows for the period ended March 31, 2020 are not necessarily indicative of the results of operations or cash flows expected for the year or any other period.  The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the 2019 Form 10-K.  
 
References to amounts in the consolidated financial statement sections are in thousands, except share and per share data, unless otherwise specified.
 
As of December 31, 2019, restricted cash primarily consisted of pledged cash pursuant to the PNC Credit Agreement (discussed in Note 11). As of March 31, 2020, the restricted cash primarily relates to cash pledged to secure credit card liabilities.
 
In early 2020 and continuing as of the date of this Quarterly Report on Form 10-Q, the COVID-19 pandemic has led to quarantines and stay-at-home/work-from-home orders in a number of countries, states, cities and regions and the closure or limited access to public and private offices and facilities, worldwide, causing widespread disruptions to travel, economic activity and financial markets.  We are unable to predict the extent and duration of these disruptions, which could result in a national or global recession. The pandemic has led the Company’s Manufacturer and Dealer customers to experience disruptions in the (i) supply of vehicle and parts inventories, (ii) ability and willingness of consumers to visit automotive dealerships to purchase or lease vehicles and (iii) overall health and availability of their labor force. Manufacturers have also shutdown assembly plants. Volatility in the financial markets, concerns about exposure to the novel coronavirus and governmental quarantines, stay-at-home/work-from-home orders, business closures, and employment furloughs and layoffs have also impacted consumer confidence and willingness to visit dealerships and to purchase or lease vehicles. High unemployment and lower consumer confidence may continue after the stay-at-home/work-from-home orders have ended. These disruptions have impacted the willingness or desire of the Company’s customers to acquire vehicle Leads or other digital marketing services from the Company. Vehicle sales have declined, and the Company is experiencing direct disruptions in its operations due to the overall health of, and concerns for, our labor force and as a result of governmental “social distancing” programs, quarantines, travel restrictions and stay-at-home/work-from-home orders, leading to office closures, operating from employee homes and restrictions on our employees traveling to our various offices. The Company is experiencing cancellations or suspensions of purchases of Leads and other digital marketing services by our customers, which materially and adversely affects our business, results of operations, financial condition, earnings per share, cash flow and the trading price of our common stock.
 
3.            
Recent Accounting Pronouncements
 
The Company has reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact to its consolidated financial statements.
 
 
 
4.            
Revenue Recognition
 
Revenue is recognized upon transfer of control of promised goods or services to the Company’s customers, or when the Company satisfies any performance obligations under contract. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for respective goods or services provided. Further, under ASC 606, “Revenue from Contracts with Customers,” (“ASC 606”) contract assets or contract liabilities that arise from past performance but require a further performance before the obligation can be fully satisfied must be identified and recorded on the balance sheet until respective settlements have been met.
 
The Company has two main revenue sources – Lead generation and digital advertising. Accordingly, the Company recognizes revenue for each source as described below:
 
Lead generation – paid by Dealers, Manufacturers and other third parties participating in the Company’s Lead programs and comprised of Lead transaction and/or monthly subscription fees. Lead generation is recognized in the period when service is provided.
 
Digital advertising – fees paid by Dealers, Manufacturers and third-party wholesale suppliers for (i) the Company’s click traffic program, (ii) display advertising on the Company’s websites and (iii) email and other direct marketing. Revenue is recognized in the period advertisements are displayed on the Company’s websites or the period in which clicks have been delivered, as applicable. The Company recognizes revenue from the delivery of action-based advertisement (including email and other direct marketing) in the period in which a user takes the action for which the marketer contracted with the Company. For advertising revenue arrangements where the Company is not the principal, the Company recognizes revenue on a net basis.
 
Variable Consideration
 
Leads are generally sold with a right-of-return for services that do not meet customer requirements as specified by the relevant contract. Rights-of-return are estimable, and provisions for estimated returns are recorded as a reduction in revenue by the Company in the period revenue is recognized, and thereby accounted for as variable consideration. The Company includes the allowance for customer credits in its net accounts receivable balances on the Company’s balance sheet at period end. Allowance for customer credits approximated $229,000 and $194,000 as of March 31, 2020 and December 31, 2019, respectively.
 
Contract Assets and Contract Liabilities
 
Unbilled Revenue
 
Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when revenue is recognized prior to invoicing. From time to time, the Company may have balances on its balance sheet representing revenue that has been recognized by the Company upon satisfaction of performance obligations and earning a right to receive payment. These not-yet invoiced receivable balances are driven by the timing of administrative transaction processing, and are not indicative of partially complete performance obligations, or unbilled revenue.
 
Deferred Revenue
 
The Company defers the recognition of revenue when cash payments are received or due in advance of satisfying the Company’s performance obligations, including amounts which are refundable. Such activity is not typical for the Company. The Company had zero deferred revenue included in its consolidated balance sheets as of March 31, 2020 and December 31, 2019. Payment terms and conditions can vary by contract type. Generally, payment terms within the Company’s customer contracts include a requirement of payment within 30 to 60 days from date of invoice. Typically, customers make payments after receipt of invoice for billed services, and less typically, in advance of rendered services.
 
The Company has not made any significant changes in applying ASC 606 during the three months ended March 31, 2020.
 
 
 
Disaggregation of Revenue
 
The Company disaggregates revenue from contracts with customers by revenue source and has determined that disaggregating revenue into these categories sufficiently depicts the differences in the nature, amount, timing and uncertainty of revenue streams.
 
The following table summarizes revenue from contracts with customers, disaggregated by revenue source, for the three months ended March 31, 2020 and 2019. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
 
 
 
 
 
 
 
Lead generation
 $18,460 
 $25,698 
Digital advertising
    
    
Clicks
  5,349 
  5,059 
Display and other advertising
  663 
  819 
Total digital advertising
  6,012 
  5,878 
 
    
    
Other revenues
   
  28 
Total revenue
 $24,472 
 $31,604 
 
5.            
Net Loss Per Share and Stockholders’ Equity
 
Basic net loss per share is computed using the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock. Diluted net loss per share is computed using the weighted average number of common shares, and if dilutive, potential common shares outstanding, as determined under the treasury stock and if-converted methods, during the period. Potential common shares consist of unvested restricted stock, common shares issuable upon the exercise of stock options and the exercise of warrants.
 
The following are the share amounts utilized to compute the basic and diluted net loss per share for the three months ended March 31, 2020 and 2019, respectively:
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
Basic Shares:
 
 
 
 
 
 
Weighted average common shares outstanding
  13,146,831 
  12,984,592 
Weighted average unvested restricted stock
  (13,333)
  (60,001)
Basic Shares
  13,133,498 
  12,924,591 
 
    
    
Diluted Shares:
    
    
Basic shares
  13,133,498 
  12,924,591 
Weighted average dilutive securities
   
   
Diluted Shares
  13,133,498 
  12,924,591 
 
For the three months ended March 31, 2020 and 2019, the Company’s basic and diluted net loss per share are the same because the Company generated a net loss for the period and potentially dilutive securities are excluded from diluted net loss per share because they have an anti-dilutive impact.
 
For the three months ended March 31, 2020 and 2019, 4.5 million and 4.1 million, respectively, of potentially anti-dilutive securities related to common stock have been excluded from the calculation of diluted net earnings per share.    
 
 
 
6.            
Share-Based Compensation
 
Share-based compensation expense is included in costs and expenses in the Unaudited Condensed Consolidated Statements of Operations included in this Part I, Item 1 of this Quarterly Report on Form 10-Q as follows:
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
 
 
 
 
Share-based compensation expense:
 
 
 
 
 
 
Sales and marketing
 $32 
 $72 
Technology support
  27 
  41 
General and administrative
  450 
  438 
Share-based compensation costs
  509 
  551 
 
    
    
Total share-based compensation costs
 $509 
 $551 
 
Service-Based Options.  The Company granted the following service-based options for the three months ended March 31, 2020 and 2019, respectively:
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
 
 
 
 
 
 
 
Number of service-based options granted
  460,000 
  1,042,883 
Weighted average grant date fair value
 $1.09 
 $1.81 
Weighted average exercise price
 $2.00 
 $3.41 
 
These options are valued using a Black-Scholes option pricing model. Options issued to employees generally vest one-third on the first anniversary of the grant date and ratably over twenty-four months thereafter.  The vesting of these awards is contingent upon the employee’s continued employment with the Company during the vesting period and vesting may be accelerated under certain conditions, including upon a change in control of the Company and, in the case of certain officers of the Company, termination of employment by the Company without cause and voluntary termination of employment by such officer with good reason. Options issued to non-employee directors generally vest monthly over a 12-month period and vesting may be accelerated under certain conditions, including upon a change in control of the Company and upon the termination of service as a director of the Company in the event such termination of service is due to resignation, failure to be re-elected, failure to be nominated for re-election, or without removal for cause.
 
The grant date fair value of stock options granted during these periods was estimated using the following weighted average assumptions:
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
 
 
 
 
 
 
 
Dividend yield
   
   
Volatility
  68%
  65%
Risk-free interest rate
  1.1%
  2.5%
Expected life (years)
  4.5 
  4.4 
 
Stock option exercises.  The following stock options were exercised during the three months ended March 31, 2020 and 2019, respectively:  
 
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
 
 
 
 
 
 
 
Number of stock options exercised
   
  156,012 
Weighted average exercise price
 $ 
 $1.97 
 
 
 
7.            
Selected Balance Sheet Accounts
 
Property and Equipment.  Property and equipment consist of the following:
  
 
 
March 31,
2020
 
 
December 31,
2019
 
 
 
 
 
Computer software and hardware
 $11,724 
 $12,804 
Capitalized internal use software
  7,060 
  5,878 
Furniture and equipment
  1,743 
  1,743 
Leasehold improvements
  1,613 
  1,613 
 
  22,140 
  22,038 
Less—Accumulated depreciation and amortization
  (19,040)
  (18,689)
 Property and Equipment, net
 $3,100 
 $3,349 
 
Concentration of Credit Risk and Risks Due to Significant Customers.  Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are primarily maintained with high credit quality financial institutions in the United States. Deposits held by banks exceed the amount of insurance provided for such deposits.
 
Accounts receivable are primarily derived from fees billed to Dealers and Manufacturers. The Company generally requires no collateral to support its accounts receivables and maintains an allowance for bad debts for potential credit losses.
 
The Company has a concentration of credit risk with its accounts receivable balances. Approximately 38%, or $8.2 million, of gross accounts receivable at March 31, 2020, and approximately 34% of total revenues for the quarter ended March 31, 2020, are related to Urban Science Applications (which represents Acura, Honda, Infiniti, Subaru, Toyota and Volvo), Carat Detroit (which represents General Motors) and Media.net. For 2019, approximately 37%, or $8.6 million, of gross accounts receivable at March 31, 2019, and approximately 28% of total revenues for the quarter ended March 31, 2019, are related to Urban Science Applications and Carat Detroit.
 
Intangible Assets.  The Company amortizes specifically identified definite-lived intangible assets using the straight-line method over the estimated useful lives of the assets.
 
The Company’s intangible assets will be amortized over the following estimated useful lives:
 
 
 
 
March 31, 2020
 
 
December 31, 2019
 
Definite-lived
Intangible Asset
Estimated Useful Life
 
Gross
 
 
Accumulated Amortization
 
 
Net
 
 
Gross
 
 
Accumulated Amortization
 
 
Net
 
 
 
 
 
 
Trademarks/trade names/licenses/ domains
3 – 7 years
 $16,589 
 $(15,571)
 $1,018 
 $16,589 
 $(15,442)
 $1,147 
Customer relationships
2 – 5 years
  19,563 
  (19,258)
  305 
  19,563 
  (18,800)
  763 
Developed technology
5 – 7 years
  8,955 
  (6,234)
  2,721 
  8,955 
  (5,961)
  2,994 
 
 $45,107 
 $(41,063)
 $4,044 
 $45,107 
 $(40,203)
 $4,904 
 
 
 
 
 
 
March 31, 2020
 
 
December 31, 2019
 
Indefinite-lived
Intangible Asset
Estimated Useful Life
 
Gross
 
 
Accumulated Amortization
 
 
Net
 
 
Gross
 
 
Accumulated Amortization
 
 
Net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domain
Indefinite
 $2,200 
 $ 
 $2,200 
 $2,200 
 $ 
 $2,200 
 
 
 
Amortization expense is included in “Cost of revenues” and “Depreciation and amortization” in the Unaudited Condensed Consolidated Statements of Operations. Amortization expense was $0.9 million and $1.4 million for the three months ended March 31, 2020 and 2019, respectively.
 
Amortization expense for the remainder of the year and for future years is as follows:
 
Year
 
Amortization Expense
 
 
 
 
 
2020
 $1,511 
2021
  1,499 
2022
  902 
2023
  86 
2024
  46 
 
 $4,044 
 
Accrued Expenses and Other Current Liabilities.  Accrued expenses and other current liabilities consisted of the following:
 
 
 
March 31,
2020
 
 
December 31,
2019
 
 
 
 
 
Accrued employee-related benefits
 $1,345 
 $1,004 
Other accrued expenses and other current liabilities:
    
    
Other accrued expenses
  1,181 
  1,264 
Amounts due to customers
  337 
  355 
Other current liabilities
  178 
  696 
Total other accrued expenses and other current liabilities
  1,696 
  2,315 
 
    
    
Total accrued expenses and other current liabilities
 $3,041 
 $3,319 
 
Convertible Notes Payable. In connection with the acquisition of AutoUSA, LLC on January 13, 2014, the Company issued a convertible subordinated promissory note for $1.0 million (“AutoUSA Note”) to AutoNationDirect.com, Inc., with interest payable at an annual rate of 6% in quarterly installments. The entire outstanding balance of the AutoUSA Note plus accrued interest was paid in full on January 31, 2019.
 
8.            
Leases
 
The Company determines if an arrangement is a lease at inception of the arrangement. The Company leases its facilities and certain office equipment under operating leases that expire on various dates through 2025. Right of use assets (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
 
Lease Liabilities.  Lease liabilities as of March 31, 2020 consist of the following:
 
Current portion of lease liabilities
 $1,057 
Long term lease liabilities, net of current portion
  2,706 
Total lease liabilities
 $3,763 
 
 
 
-10-
 
The Company’s aggregate lease maturities as of March 31, 2020 are as follows:
 
Year
 
 
 
2020 (remaining 9 months)
 $978 
2021
  924 
2022
  791 
2023
  786 
2024
  528 
Thereafter
  197 
Total minimum lease payments
  4,204 
Less imputed interest
  (441)
Total lease liabilities
 $3,763 
 
On March 11, 2020, the Company entered into a Lease Agreement (“New Irvine Lease”) with The Irvine Company LLC, a Delaware limited liability company, pursuant to which the Company will lease approximately 12,000 square feet of office space located in Irvine, California. The term of the New Irvine Lease will commence on or about August 1, 2020 upon completion of tenant improvements to the premises and will continue for a period of approximately five years, unless earlier terminated in accordance with the terms of the New Irvine Lease. The Company has the option to extend the term of the New Irvine Lease for one additional period of five years. The new office space will replace the Company’s current, approximately 39,361 square feet, office space in Irvine, California, the lease for which expires July 31, 2020. The Company included the New Irvine Lease on its balance sheet and within the future minimum lease payment table above.
 
Rent expense included in operating expenses and cost of revenue was $0.5 million for the three months ended March 31, 2020 with a weighted average remaining lease term of 2.0 years and a weighted average discount rate of 5.5% for leases prior to December 31, 2019. For leases starting January 1, 2020, the weighted average discount rate is 6.25%. Rent expense included in operating expenses and cost of revenue was $0.5 million for the three months ended March 31, 2019 with a weighted average remaining lease term of 2.3 years and a weighted average discount rate of 5.5%. In June 2017, the Company subleased one of its offices to a third party for the remainder of the lease term which expired in February 2019. Rent expense for the three months ended March 31, 2019 is net of sublease income of $26,000.
 
9.            
Commitments and Contingencies
 
Employment Agreements
 
The Company has employment agreements and severance benefits agreements with certain key employees. A number of these agreements require severance payments and continuation of certain insurance benefits in the event of a termination of the employee’s employment by the Company without cause or by the employee for good reason (as defined is these agreements). Stock option agreements and restricted stock award agreements with some key employees provide for acceleration of vesting of stock options and lapsing of forfeiture restrictions on restricted stock in the event of a change in control of the Company, upon termination of employment by the Company without cause or by the employee for good reason, or upon the employee’s death or disability.
 
Litigation
 
From time to time, the Company may be involved in litigation matters arising from the normal course of its business operations. Such litigation, even if not meritorious, could result in substantial costs and diversion of resources and management attention, and an adverse outcome in litigation could materially and adversely affect the Company’s business, results of operations, financial condition and cash flows.
 
 
 
-11-
 
10.            
Income Taxes
 
On an interim basis, the Company estimates what its anticipated annual effective tax rate will be and records a quarterly income tax provision in accordance with the estimated annual rate, adjusted accordingly by the tax effect of certain discrete items that arise during the quarter. As the year progresses, the Company refines its estimated annual effective tax rate based on actual year-to-date results. This process can result in significant changes to the Company’s estimated effective tax rate. When such activity occurs, the in