What changed in this filing

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Item 1A. Risk Factors

2020-11-09 compared with 2020-07-30 · 19 added, 27 removed, 24 unchanged (66% of the section changed)

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Our business, financial condition, liquidity and operating results have been, and will continue to be, adversely affected by the COVID-19 pandemic and related restrictions, including any resurgences of the pandemic.

For example, the COVID-19 pandemic and related restrictions have caused a widespread increase in unemployment and are expected to result in reduced consumer spending and an economic slowdown or recession.

Substantially all of our revenue is generated from subscription services offered to automotive dealers and our national advertising offerings to original equipment manufacturers (“OEMs") and other advertisers in or endemic to the automotive industry and our business may be negatively affected during times of low automobile sales and high unemployment.

For example, the pandemic and related restrictions have caused a widespread increase in unemployment and are expected to result in reduced consumer spending and an economic slowdown or recession.

Substantially all of our revenue is generated from subscription services offered to automotive dealers and our national advertising offerings to OEMs and other advertisers in or endemic to the automotive industry and our business may be negatively affected during times of low automobile sales and high unemployment.

To the extent that a weakened economy continues to impact our customers’ ability or willingness to pay for our services or our vendors’ ability to provide services to us, our operations, liquidity and financial condition could be negatively impacted.

OEMs and automobile dealers operate in a highly competitive market and are vulnerable to both decreased supply and demand for new and used vehicles, as well as corresponding changes in vehicle pricing.

Furthermore, certain OEMs have temporarily ceased production and certain dealerships have temporarily or permanently closed and more may close in the future in light of the COVID-19 pandemic and related restrictions.

Negative changes in the financial condition of dealers has resulted and may continue to result in decreased subscription revenue and reduced demand for our services.

Moreover, the impact of the COVID-19 pandemic and related restrictions on dealers may materially reduce our number of dealer customers in the future.

Additionally, OEMs have and may continue to reduce their advertising spend on our platforms due to the impact of the COVID-19 pandemic and related restrictions on the automotive industry.

Moreover, the impact of the pandemic and related restrictions on dealers may materially reduce our number of dealer customers in the future.

Additionally, OEMs have and may continue to reduce their advertising spend on our platforms due to the impact of the pandemic and related restrictions on the automotive industry.

All of these factors could adversely impact our profitability and financial results.

In an effort to assist our dealer customers impacted by the COVID-19 pandemic and related restrictions, we provided, among other measures, financial relief in the form of certain invoice credits of 50% for April 2020 and 30% for May and June 2020.

These discounts and reduced consumer spending have negatively impacted our revenue and results of operations in the near term and, if not effective in mitigating the effects of the COVID-19 pandemic and related restrictions on our dealer customers, may adversely affect our business and results of operations more substantially in the long term.

With respect to managing our expenses, we have implemented multiple initiatives to adjust our expenses in response to changes in revenue.

These steps have included an employee furlough, reduction in force, salary reductions, freezes on hiring and temporary labor, deferral of merit and promotion increases;

Although the invoice credits have expired, these discounts and reduced consumer spending have negatively impacted our revenue and results of operations in the near term and, if not effective in mitigating the effects of the pandemic and related restrictions on our dealer customers, may adversely affect our business and results of operations more substantially in the long term.

With respect to managing our expenses, primarily in the second quarter of 2020, we implemented multiple initiatives to adjust our expenses in response to changes in revenue.

These steps included:

an employee furlough, reduction in force, salary reductions, freezes on hiring and temporary labor, deferral of merit and promotion increases;

a reduction of our marketing expense, while carefully maintaining consumer engagement as evidenced by our strong organic traffic;

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and significant reductions of non-essential spending.

Despite our efforts, we cannot accurately predict whether these measures will be effective in mitigating the impact of the COVID-19 pandemic and related restrictions on our operations, liquidity and financial condition or whether these measures will affect the productivity of our workforce, reduce consumer traffic to our websites or otherwise affect our operations.

We may be required to implement additional expense-reduction measures or amend our debt instruments in the future if the COVID-19 pandemic and related restrictions persist over a longer period, which could further adversely impact our operations, liquidity and financial condition.

The extent to which the COVID-19 pandemic and responses to it impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including:

the duration and scope of the pandemic;

actions that have been and continue to be taken in response to the pandemic;

the availability and cost to access the capital markets;

the effect on our dealer customers’ demand

for and ability to pay for our services;

the effect on consumer demand for our services;

disruptions or restrictions on our employees’ ability to work and travel;

and impacts on employee health and responses to it.

During the period of the COVID-19 pandemic and related restrictions, we may not be able to provide the same level of customer service and product features that our dealer customers and consumers are used to, which could negatively impact their perception of our service resulting in an increase in cancellations or reduction in traffic to our website.

We are subject to certain financial and other covenants contained in our Credit Agreement.

While we have restored certain expense reducing initiatives, including the return of some furloughed employees, we cannot accurately predict whether these measures will be sufficiently effective in mitigating the impact of the COVID-19 pandemic and related restrictions on our operations, liquidity and financial condition or whether these measures will affect the productivity of our workforce, reduce consumer traffic to our websites or otherwise affect our operations.

We may be required to reimplement or implement additional expense-reduction measures or amend our debt instruments in the future if the pandemic and related restrictions persist over a longer period, which could further adversely impact our operations, liquidity and financial condition.

The extent to which the COVID-19 pandemic and responses to it impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the pandemic, actions that have been and continue to be taken in response to the pandemic, the availability and cost to access the capital markets, the effect on our dealer customers’ demand for and ability to pay for our services, the effect on consumer demand for our services, disruptions or restrictions on our employees’ ability to work and travel and impacts on employee health and responses to it.

During the period of the pandemic and related restrictions, we may not be able to provide the same level of customer service and product features that our dealer customers and

consumers are used to, which could negatively impact their perception of our service resulting in an increase in cancellations or reduction in traffic to our website.

We are subject to certain financial and other covenants contained in the Credit Agreement, as amended, and the indenture governing the Notes (as defined below).

The impact of the COVID-19 pandemic and related restrictions may affect our ability to comply with such covenants.

We have taken steps to strengthen our financial position during this period of heightened uncertainty.

In June 2020, we entered into an amendment to our Credit Agreement (the “Second Amendment”) that provides for a waiver with respect to the Total Net Leverage Ratio and Consolidated Interest Coverage Ratio financial covenants for the covenant testing periods through December 31, 2020 (the “Covenant Adjustment Period”).

As of June 30, 2020, our liquidity, as defined in the Credit Agreement, was approximately $232.2 million including cash and cash equivalents and availability under the revolving credit facility.

We may further seek to amend our Credit Agreement to provide greater comfort that we will be able to remain in compliance with our obligations but we may not be able to do so on terms that are acceptable or to the extent necessary to avoid a default, depending upon conditions in the credit markets, the length and depth of the market reaction to the pandemic and our ability to compete in this environment.

In October 2020, we sold $400.0 million aggregate principal amount of 6.375% senior unsecured notes due 2028 (“Notes”) and used the net proceeds, together with cash on hand, to repay $235.0 million of borrowings under our revolving facility, repay $162.8 million of borrowings under our term loan and pay fees associated with the offering of the Notes.

Simultaneously, we amended our existing credit facility to, among other things, refinance the facility and provide for a $230.0 million undrawn revolving facility and a $200.0 million term loan, extend the maturity date of the facility until May 31, 2025, update and modify certain covenants, modify pricing and eliminate certain requirements previously in effect.

We may further seek to amend the Credit Agreement to provide greater comfort that we will be able to remain in compliance with our obligations, but we may be unable to do so on terms that are acceptable or to the extent necessary to avoid a default, depending upon conditions in the credit markets, the length and depth of the market reaction to the pandemic and our ability to compete in this environment.

We may also seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy.

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It is not clear what the potential lasting effects any such alterations or modifications may have on our business, including the effects on our OEM and dealer customers, suppliers or vendors, consumers or on our financial results.

The impact of the COVID-19 pandemic and related restrictions may also heighten other risks discussed in our Annual Report on Form 10-K, which could adversely affect our business, financial condition, liquidity and results of operations.

The impact of the pandemic and related restrictions may also heighten other risks discussed in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our subsequent Quarterly Reports on 10-Q, which could adversely affect our business, financial condition, liquidity and results of operations.

Unregistered Sales of Equity Securities and Use of Proceeds

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors