AutoWeb stock suffers record sell-off after worst auto buying conditions in 50 years lead to ‘going concern’ warning

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Shares of AutoWeb Inc. suffered a record tumble in active trading on Tuesday after the provider of marketing services to auto dealers and manufacturers warned investors it had “substantial doubt” about its ability to continue as a “going concern” given its troubled cash position. .

AUTO company,
-15.19%
revealed in his 10-Q Ranking with the Securities and Exchange Commission on Monday night 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 it currently has sufficient cash to sustain operations through the remainder of 2022,” the company said in the 10-Q.

And in its earnings report also released on Monday evening, the company, whose brands include Autobytel, Car.com and Usedcars.com, warned that given its liquidity position and other factors, there is “doubt substantial impact on the company’s ability to continue as a going concern” for the next year.

The stock fell 65.2% to 79 cents, the lowest close since April 2020. It also suffered the biggest one-day selloff since its IPO in March 1999, surpassing the previous record low of 41 .6% on March 9, 2018.

Trading volume reached 4.9 million shares, compared to a full-day average of around 13,800 shares over the past 30 days.

The company announced late Monday that it posted a net loss of $4.3 million, or 32 cents per share, against revenue of $310,000, or 2 cents per share, in the same period there. one year old. That missed two analysts’ average estimate for a loss per share of 14 cents, according to FactSet.

Revenue rose 6.6% to $19.1 million, beating the FactSet consensus of $18.7 million. But rising 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 selling price per unit sold climbed 42.4% to $19,869, but average gross profit per unit sold fell 52.0% to 663 $.

“The general automotive market environment continued to deteriorate during the first quarter, triggering a 50-year low in vehicle buying conditions, according to data provided by the University of Michigan,” the director said. General Jared Rowe.

Due to “unfavorable macroeconomic conditions” which 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 adverse conditions included “weak industry-wide consumer sentiment,” rising interest rates, high inflation and an overall economy. uncertain. He said that while consumers are still in the market looking for vehicles, it takes them twice as long as before the pandemic to pull the trigger given low inventories of new vehicles.

“Given the current financial constraints in which we operate, we have made the difficult decision to suspend our CarZeus used vehicle acquisition operations and lay off our employees in this segment,” Rowe said. “We still believe there is long-term growth potential for acquiring used vehicles within our digital media platform, but given the cash requirements to continue to grow the business, we have made the decision to suspend operations in an effort to conserve cash.”

The stock has lost 76.8% since the start of the year, while the S&P 500 SPX index,
-1.60%
lost 14.2%.

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