A day after officially changing its name, dealership lead provider AutoWeb — formerly Autobytel — on Tuesday entered into a license agreement with DealerX Partners,a provider of data-driven marketing products for car dealerships and OEMs.
Under the terms of the agreement, AutoWeb will receive a perpetual license to access and use DealerX’s proprietary platform and technology for targeted online marketing. The company indicated this process will be implemented through the creation of consumer information databases and audiences, which will allow AutoWeb to generate traffic, clicks, and leads.
Officials explained DealerX will operate the platform for AutoWeb and provide enhancements to and support for the platform for an initial five-year period, which may be extended in perpetuity.
“Today, most dealers know very little about users of their websites and many display the same message to all users—a ‘one size fits all’ strategy,” AutoWeb president and chief executive officer Jeff Coats said in a news release. “Dealers can only hope that the offers presented are relevant and attractive.
“At AutoWeb, our critical mission is to know what users want and when they want it in order to deliver the best marketing at the best time — and to deliver that user to the right dealership at the right time,” Coats continued. “In DealerX, we have found a powerful partner in this mission, and we look forward to leveraging the DealerX platform to further capitalize on the evolving consumer and automotive marketplace.”
At the end of 2016, AutoWeb promoted Billy Ferriolo to chief operating officer to accelerate improvements in its clicks and lead generation businesses. AutoWeb said this licensing arrangement is a prime example of that improvement.
“DealerX has created a unique, all-in-one automotive online marketing platform encompassing data collection, activation, analytics and attribution,” Ferriolo said. “Its platform employs extensive machine learning in the determination of what content to show which consumer across multiple devices, where and when. This is all derived from the real-time capture and scoring of consumer-driven behavioral events.
“We look forward to using this audience intelligence to deliver a better car-buying experience for consumers,” he went on to say.
AutoWeb mentioned the transaction consideration consists of a lump-sum payment to DealerX of $8.0 million upon the execution of the agreement.
During the initial five-year support period, DealerX will have the ability to earn shares of AutoWeb common stock representing approximately 5 percent of AutoWeb’s outstanding common stock if AutoWeb’s market capitalization reaches $225 million.
If these shares are issued to DealerX, its obligation to provide platform operation, enhancements and support for the platform will continue in perpetuity.
Alternatively, AutoWeb may elect to make a lump-sum payment of $12.5 million upon the occurrence of certain events in order to extend DealerX’s obligations in perpetuity. If such a lump-sum payment is made, DealerX’s right to receive shares of common stock is terminated.
Tax and stock implications
As of Dec. 31, AutoWeb reported that it had approximately $75.8 million in available net operating loss carryforwards (NOLs) for U.S. federal income tax purposes.
In light of the company’s recent stock repurchases, the company reminds stockholders about AutoWeb’s Tax Benefit Preservation Plan dated May 26, 2010, as amended on April 14, 2014 and May 26 of this year between the company and Computershare Trust Company, N.A., as rights agent.
AutoWeb explained 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, AutoWeb pointed out that an ownership change will occur if the company’s 5 percent 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 percent shareholder under Section 382.
The company acknowledged rights issued under the plan could be triggered upon the acquisition by any person or group of 4.9 percent 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,” officials said.
As of Oct. 1, there were 13,082,948 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 percent or more of outstanding shares,” officials said.
In connection with the license agreement, the company’s board of directors considered and granted to DealerX an exemption under the plan with respect to the shares of common stock that may be issued to DealerX under the license agreement, and DealerX and the company entered into a stockholder agreement that provides for various restrictions on transfers of the shares and the grant of a proxy to the company to vote the shares as long as the restrictions remain in effect.
For more information about the Plan, please visit investor.autoweb.com/tax.cfm.