There's a fair chance that your car loan is somehow processed through DealerTrack Holdings
In the first quarter, DealerTrack sales increased 63% to $37.9 million, and net income was up 66% to $3.4 million, or $0.09 per share. Excluding stock option expenses and charges for acquisitions, the company generated income of $6.6 million, or $0.18 per share.
DealerTrack runs a comprehensive Web-based system that makes it easier for auto dealers to do things like obtain credit checks and financing. That gives dealers more time to focus on their most important task -- selling cars. And while it has active relationships with 80% of franchised dealers, it has only 5% penetration into the U.S. market of 50,000 independent dealers. That's where it can grow, and it's focusing on finding ways to cost-effectively acquire these customers.
In terms of its business model, DealerTrack has a mixed stream of revenues consisting of subscriptions and transactions. On the conference call, the company's CEO stressed the critical importance of building subscriber numbers, since doing so will drive more transactional revenues.
There are also more cross-sale opportunities as the customer base grows. To that end, DealerTrack has introduced new products, such as SalesMaker, a profit-management system; DealerWire, which incorporates inventory analytics; and Global Fax, which allows for document scanning, storage, and retrieval.
Competition? There's not much. Actually, DealerTrack is buying a variety of smaller competitors, and that's only enhancing the overall product line and bringing new customers online. What's more, the company has opportunities overseas in addition to its room to grow here in the States. Basically, we're looking at something like an eBay
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Fool contributor Tom Taulli does not own shares of companies mentioned in this article.