AutoWeb, Inc. (NASDAQ:AUTO) is an automotive industry marketing and used vehicle acquisition and reselling company focused on connecting consumers seeking to acquire vehicles with vehicle sellers that can meet their needs. The company primarily generates revenue through automotive retail dealers and automotive manufacturers by helping them market and sell new and used vehicles to consumers through the company's programs for online lead and traffic referrals, dealer marketing products and services, and online advertising.
Financials
In the latest fiscal year, AutoWeb reported annual revenue of $71,585,000, a net loss of $6,670,000, annual operating cash flow of -$1,416,000, and annual free cash flow of -$3,460,000. The company's quarterly results have been volatile, with revenue ranging from $17,195,000 in Q2 2022 to $19,064,000 in Q1 2022. Net loss has also fluctuated, from $4,449,000 in Q2 2022 to $4,307,000 in Q1 2022.
Business Segments
The company's lead generation business, which accounts for 55% of total revenue, saw a 32% year-over-year decline in the first half of 2022, primarily due to the continued negative impact of supply chain issues on new vehicle inventory and sales, declining consumer confidence, and rising inflation. Digital advertising revenue, 22% of total revenue, increased 13% year-over-year in the same period, driven by an increase in click revenue associated with higher-paying advertisers. The company's used vehicle sales business, which contributed 22% of revenue, was launched in 2021 through the acquisition of Tradein Expert, Inc., dba CarZeus.
Geographically, AutoWeb does not provide a breakdown of revenue by region. However, as an online-focused business, the company's customer base is likely spread across the United States.
Liquidity
From a liquidity perspective, AutoWeb had $2.8 million in cash and cash equivalents and restricted cash as of June 30, 2022, down from $11.6 million at the end of 2021. The company has a revolving credit facility with $4.7 million outstanding and only $0.1 million of availability as of the latest quarter. Management has expressed substantial doubt about the company's ability to continue as a going concern for the next 12 months, citing its current cash and liquidity position.
Recent Developments
In response to the challenging market conditions, AutoWeb has implemented several initiatives, including reducing costs, suspending investments in growth strategies, and suspending its used vehicle acquisition business. The company has also formed a special committee to explore strategic alternatives, including a potential sale of the company.
Risks and Challenges
Regarding risks, AutoWeb faces several key challenges. The company's business is heavily dependent on the automotive industry, which has been impacted by supply chain disruptions, chip shortages, and declining consumer confidence. The company also faces intense competition in the digital automotive marketing space, as well as the risk of losing key customers or failing to attract new ones.
Outlook
Looking ahead, AutoWeb's guidance and outlook are uncertain. The company has not provided any formal financial guidance for the upcoming fiscal year. However, management has indicated that it expects the challenging market conditions to persist, which could continue to impact the company's financial performance.
Conclusion
In conclusion, AutoWeb is navigating a difficult period, with declining revenue, mounting losses, and substantial doubt about its ability to continue as a going concern. The company's strategic review process and efforts to reduce costs and streamline operations will be critical in determining its future direction. Investors should closely monitor the company's progress and any updates regarding a potential sale or other strategic alternatives.