DealerTrack Holdings, Inc. Earnings Cheat Sheet: Margins Suffer as Costs Rise

DealerTrack Holdings, Inc. (NASDAQ:TRAK) climbed to a profit in the second quarter and beat Wall Street’s expectations in the process. DealerTrack Holdings, Inc. is a provider of on-demand software and data solutions for the automotive retail industry in the United States.

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DealerTrack Holdings Earnings Cheat Sheet for the Second Quarter

Results: Swung to a profit of $2.2 million (5 cents per diluted share) in the quarter. DealerTrack Holdings, Inc. had a net loss of $117,000 or break even per share in the year earlier quarter.

Revenue: Rose 43.8% to $89.1 million from the year earlier quarter.

Actual vs. Wall St. Expectations: TRAK reported adjusted net income of 25 cents per share. By that measure, the company beat the mean estimate of 16 cents per share. It beat the average revenue estimate of $82.3 million.

Quoting Management: Mark O’Neil, chairman and chief executive officer of DealerTrack, commented, “We are very pleased with our results for the second quarter as our transaction businesses benefitted from the continued improvement in the credit environment. Our transaction results also reflect the strong performance of our recently acquired processing solutions business.” O’Neil continued, “We believe that the subscription business will grow more rapidly in the future as our acquisition of eCarList will enable us to provide the most comprehensive inventory management solution in the industry.”

Key Stats:

Gross margin shrank 4.6 percentage points to 44.9%. The contraction appeared to be driven by increased costs, which rose 56.9% from the year earlier quarter while revenue rose 43.8%.

Revenue has risen the past four quarters. Revenue increased 35.9% to $77.2 million in the first quarter. The figure rose 16.4% in the fourth quarter of the last fiscal year from the year earlier and climbed 7.3% in the third quarter of the last fiscal year from the year-ago quarter.

The company has now beaten estimates the last two quarters. In the first quarter, it topped expectations with net income of 25 cents versus a mean estimate of net income of 7 cents per share.

Competitors to Watch: Automatic Data Processing (NASDAQ:ADP), Openwave Systems Inc. (NASDAQ:OPWV), Equifax Inc. (NYSE:EFX), ModusLink Global Solutions, Inc. (NASDAQ:MLNK), Solera Holdings, Inc. (NYSE:SLH), Keynote Systems, Inc. (NASDAQ:KEYN).

Investing Insights: Steve Jobs Prepares to Deliver a New Catalyst for Apple’s Stock >>

(Source: Xignite Financials)