By Tomi Kilgore
Shares of AutoWeb Inc. suffered a record plunge in active trading Tuesday, after the provider of marketing services to auto dealers and manufacturers warned investors that it had “substantial doubt” in its ability to continue as a “going concern” given its troubled cash position.
The company (NAS:AUTO) disclosed in its 10-Q filing with the Securities and Exchange Commission late Monday that it had $3.8 million in cash and cash equivalents as of March 31 but had an accumulated deficit of $359.7 million.
“Based on current operating and cash forecasts, the company does not believe that it currently has sufficient cash to sustain operations for the entire remainder of 2022,” the company stated in the 10-Q.
And in its earnings report also released late Monday, the company, of which its brands include Autobytel, Car.com and Usedcars.com, warned that given its liquidity position and other factors, there is “substantial doubt about the company’s ability to continue as a going concern” for the next year.
The stock plummeted 65.2% to 79 cents, the lowest close since April 2020. It is also suffered the biggest one-day selloff since going public in March 1999, surpassing the previous record drop of 41.6% on March 9, 2018.
Trading volume swelled to 4.9 million shares, compared with the full-day average over the past 30 days of about 13,800 shares.
The company reported late Monday that it swung to a net loss of $4.3 million, or 32 cents a share, from income of $310,000, or 2 cents a share, in the same period a year ago. That missed the average estimate of two analysts for a per-share loss of 14 cents, according to FactSet.
Revenue grew 6.6% to $19.1 million, to top the FactSet consensus of $18.7 million. But the increase in the cost of revenue outpaced revenue growth, rising 25.6% to $15.2 million, as gross margin contracted to 20.5% from 32.5%.
Vehicles sold jumped 90.4% to 219 and the average sales price per unit sold climbed 42.4% to $19.869, but average gross profit per unit sold dropped 52.0% to $663.
“The overall environment within the automotive market continued to degrade during the first quarter, triggering a 50-year low in buying conditions for vehicles, according to data procured by the University of Michigan,” said Chief Executive Jared Rowe.
Because of the “unfavorable macroeconomic conditions” that have significantly weighed on operating cash flow, the company decided to create a special committee to evaluate strategic alternatives.
Rowe said on the post-earnings conference call with analysts that the unfavorable conditions included “industry-wide low consumer sentiment,” rising interest rates, high inflation and an overall uncertain economy. He said that while consumers are still in the market to search for vehicles, it is taking them twice as long as pre-pandemic times to pull the trigger given low inventories for new vehicles.
“Given the current financial constraints we are operating under, we have made the difficult decision to suspend our CarZeus used vehicle acquisition operations and furlough our employees within that segment,” Rowe said. “We still believe there is long-term growth potential for used vehicle acquisition within our digital media platform, but given the cash requirements to continue to grow the business, we made this decision to suspend its operations in an effort to conserve cash.”
The stock has lost 76.8% year to date, while the S&P 500 index (S&P:SPX) has shed 14.2%.