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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 000-51653
 DEALERTRACK HOLDINGS, INC.
 (Exact name of registrant as specified in its charter)\
 Delaware(State or other jurisdiction 
of incorporation or organization)
    
    52-2336218(I.R.S. Employer
Identification Number)
 1111 Marcus Ave., Suite M04
Lake Success, NY 11042  (Address of principal executive offices, including zip code)
 (516) 734-3600
(Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Common Stock, $0.01 Par Value Per Share(Title of each class)
    
    The NASDAQ Stock Market, LLC(Name of exchange on which registered)
 Securities registered pursuant to Section 12(g) of the Act: None
 þ o
 o þ
 þ o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PageItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
15Item 1B. Unresolved Staff Comments
    
    
    25Item 2. Properties
    
    
    26Item 3. Legal Proceedings
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    27Item 6. Selected Consolidated Financial Data
    
    
    29Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    30Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    48Item 8. Financial Statements and Supplementary Data
    
    
    50Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    86Item 9A. Controls and Procedures
    
    
    87Item 9B. Other Information
    
    
    87Item 10. Directors, Executive Officers and Corporate Governance
    
    
    87Item 11. Executive Compensation
    
    
        87Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
        88Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
        88Item 14. Principal Accounting Fees and Services
    
    
        88Item 15. Exhibits and Financial Statement Schedule
    
    
    88EX-21.1: LIST OF SUBSIDIARIESEX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONSEX-21.1: LIST OF SUBSIDIARIESEX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATION
  2




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PART I
 
 Item 1. Business
 Certain statements in this Annual Report on Form 10-K are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended
(the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act). These statements involve a number of risks, uncertainties
and other factors that could cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements expressed
or implied by these forward-looking statements. Factors which could materially affect
such forward-looking statements can be found in the section entitled Risk Factors in
Part 1, Item 1A in this Annual Report on Form 10-K . Investors are urged to consider
these factors carefully in evaluating the forward-looking statements and are cautioned
not to place undue reliance on such forward-looking statements. The forward-looking
statements made herein are only made as of the date hereof and we will undertake no
obligation to publicly update such forward-looking statements to reflect subsequent
events or circumstances.
 References in this Annual Report on Form 10-K to DealerTrack, the Company,
Our or We are to DealerTrack Holdings, Inc., a Delaware corporation, and/or its
subsidiaries.
 Overview
    www.dealertrack.com. www.sec.gov.
 3




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Our Business
    Our Solutions
  Dealers
    4




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Financing Sources
  Aftermarket Providers
 tm
 Other Service and Information Providers
  Our Web-based Network
  Our Growth Strategy
  Expand Our Customer Base
  5




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Sell Additional Products and Services to Our Existing Customers
  Expand Our Product and Service Offerings
  Pursue Acquisitions and Strategic Alliances
  6




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Our Products and Services
  Stage
    
    Products and Services
    
    Subscription/TransactionMarketing and Prospecting:
    
     Chrome Carbook Showroom ®
    
     Subscription PC Carbook ®
    
     Subscription Carbook Fleet Edition
    
     Subscription Chrome Interactive Media
    
     Transaction or Subscription Leads Network
    
     Transaction WebsitePlus TM
    
     SubscriptionSales:
    
     Credit Reports
    
     Transaction SalesMaker TM
    
     Subscription ALG Residual Value Guides
    
     SubscriptionFinance and Insurance:Financing:
    
     BookOut
    
     Subscription ToolKit TM (On-line credit
    
     Transactionapplication processing product)Aftermarket and
Accessories Sales:
    
     DealerTrack eMenu TM
    
     Subscription DealerTrack Aftermarket NetworkTM
    
     Transaction DealerTrack Accessory Solution
    
     Subscription and TransactionContracting:
    
     DealTransferTM
    
     Subscription eContracting
    
     Subscription and Transaction eDocs
    
     TransactionData and Reporting:
    
     Activity ReportsTM
    
     Subscription ALG Data Services
    
     Subscription and Transaction Chrome New Vehicle Data
    
     Subscription Chrome VIN Search Data
    
     SubscriptionGeneral Management:
    
     DealerTrack  Arkona DMS
    
     Subscription DealWatch TM
    
     Subscription InventoryPro
    
     Subscription
  Marketing and Prospecting
 Chrome Carbook Showroom ®, PC Carbook ® and Carbook Fleet Edition
 Chrome Interactive Media
 Leads Network
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WebsitePlus TM
 Sales
 Credit Reports
 SalesMaker TM
 ALG Residual Value Guides
 Finance and Insurance
 BookOut
 ToolKit TM
 DealerTrack
eMenu TM
 DealerTrack
Aftermarket Network TM
 DealerTrack Accessory Solution
 8




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DealTransfer TM
 eContracting and eDocs
 Data and Reporting
 ActivityReport TM
 ALG Data Services
 Chrome New Vehicle Data
 Chrome VIN Search Data
 General Management
 DealerTrack Arkona DMS
 DealWatch TM
 InventoryPro .
 9




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International
   Technology
  Web-Based Interface
  Partner Integration
  Infrastructure
  Security
   10




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Customer Development and Retention
 Sales
  Training
  Marketing
  
    
    Advertising in automotive trade magazines and other
periodicals;
    
    Public relations through press releases and publication of news and
thought leadership articles;
    
    Direct marketing employing mail and e-mail delivered to buyers and
influencers in dealer and lender markets;
    
    Participation in industry events, and the hosting of a corporate
proprietary event;
    
    Employing our website to offer services, and provide product and
company information;
    
    Search marketing to increase visibility in search engine result pages;
and
    
    Promotions and sponsorships on national and regional levels.
 Customer Service
  11




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Customers
  Competition
  
    
    web-based automotive finance credit application processors, including CUDL, Finance Express and RouteOne;
    
    proprietary finance credit application processing systems, including those used and provided to dealers
by American Honda Finance Corp. and Volkswagen Credit;
    
    dealer management system providers, including ADP, Inc. and The Reynolds and Reynolds Company;
    
    automotive retail sales desking providers, including ADP, Inc. and Market Scan Information Systems, Inc.;
    
    vehicle configuration providers, including Autodata Solutions Company, R.L. Polk & Co. and JATO
Dynamics, Inc.;
    
    providers of services related to aftermarket products, including JM&A Group, MenuVantage and the
StoneEagle Group; and
    
    providers of inventory analytic tools, including American
Auto Exchange and First Look, LLC.
  Government Regulation
  12




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Consumer Privacy and Data Security Laws
     Fair Credit Reporting Act
  State Laws and Regulations
  13




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Revised Uniform Commercial Code Section 9-105, E-SIGN and UETA
  Internet Regulation
  Intellectual Property
   Industry Trends
  Employees
  14




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Item 1A. Risk Factors
 You should carefully consider the following risk factors, as well as the more
detailed descriptions of our business elsewhere in this Annual Report on Form 10-K . The
risks described below are not the only ones we face. Additional risks not presently
known to us or that we currently deem immaterial may also materially adversely affect
our business, prospects,
financial condition or results of operations. Our business, prospects, financial
condition or results of operations could be materially and adversely affected by the
following:
 We may be unable to continue to compete effectively in our industry.
  We may face increased competition from RouteOne, CUDL and Finance Express.
  Economic trends that affect the automotive retail industry or the indirect automotive
financing industry may have a negative effect on our business.
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Some vendors of software products used by automotive dealers, including certain of
our competitors, are designing their software and using financial or other incentives
to make it more difficult for our customers to use our products and services.
  Our systems and network may be subject to security breaches, interruptions, failures
and/or other errors or may be harmed by other events beyond our control.
 Our systems may be subject to security breaches.
    Our network may be vulnerable to interruptions or failures.
  16




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Undetected errors in our software may harm our operations.
  Our systems may be harmed by events beyond our control.
  Our failure or inability to execute any element of our business strategy could
adversely affect our operations.
  
    
    selling additional products and services to our existing customers;
    
    expanding our customer base;
    
    expanding our product and service offerings; and
    
    pursuing acquisitions and strategic alliances.
   Our revenue, operating results and profitability will vary from quarter to quarter,
which may result in volatility in our stock price.
  
    
    the volume of new and used automobiles financed or leased by our participating financing source customers;
    
    the timing, size and nature of our subscriptions and any cancellations thereof;
 17




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
    
    automobile manufacturers or their captive financing sources offering special incentive programs such as
discount pricing or low cost financing;
    
    the timing of our acquisitions of businesses, products and services;
    
    unpredictable sales cycles;
    
    product and price competition regarding our products and services and those of our participating
financing sources;
    
    changes in our operating expenses;
    
    the timing of introduction and market acceptance of new products, services or
product enhancements by us or our competitors;
    
    foreign currency fluctuations; and
    
    personnel changes and fluctuations in economic and financial market conditions.
  We may be unable to develop and bring products and services in development and new
products and services to market in a timely manner.
  We are subject, directly and indirectly, to extensive and complex federal and state
regulation and new regulations and/or changes to existing regulations may adversely
affect our business.
 The indirect automotive financing and automotive retail industries are subject to
extensive and complex federal and state regulation.
  18




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The use of our electronic contracting product by financing sources is governed by
relatively new laws.
  New legislation or changes in existing legislation may adversely affect our business.
  We utilize certain key technologies from, and integrate our network with, third
parties and may be unable to replace those technologies if they become obsolete,
unavailable or incompatible with our products or services.
  19




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We may be unable to adequately protect, and we may incur significant costs in
defending, our intellectual property and other proprietary rights.
   A license agreement we have with a financing source customer restricts our ability to
utilize the technology licensed under this agreement beyond the automotive finance
industry.
  Claims that we or our technologies infringe upon the intellectual property or other
proprietary rights of a third party may require us to incur significant costs, enter
into royalty or licensing agreements or develop or license substitute technology.
  20




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We could be sued for contract or product liability claims, and such lawsuits may
disrupt our business, divert managements attention or have an adverse effect on our
financial results.
  We have made strategic acquisitions in the past and intend to do so in the future. If
we are unable to find suitable acquisitions or partners or to achieve expected
benefits from such acquisitions or partnerships, there could be a material adverse
effect on our business, prospects, financial condition and results of operations.
   
    
    integration and restructuring costs, both one-time and ongoing;
    
    maintaining sufficient controls, policies and procedures;
    
    diversion of managements attention from ongoing business operations;
    
    establishing new informational, operational and financial systems to meet the needs of our business;
    
    losing key employees, customers and vendors;
    
    failing to achieve anticipated synergies, including with respect to complementary products or services; and
    
    unanticipated and unknown liabilities.
  21




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Any acquisitions that we complete may dilute your ownership interest in us, may have
adverse effects on our business, prospects, financial condition and results of
operations and may cause unanticipated liabilities.
  We may not successfully integrate recent or future acquisitions.
  Restrictive covenants in our credit facility may restrict our ability to pursue our
business strategies.
  
    
    access our, or our existing or future subsidiaries, cash flow and value and, therefore, to pay interest and/or
principal on our other indebtedness or to pay dividends on our common stock;
    
    incur additional indebtedness;
    
    issue preferred stock;
    
    pay dividends or make distributions in respect of our, or our existing or future subsidiaries, capital stock or to
make certain other restricted payments or investments;
    
    sell assets, including our capital stock;
    
    agree to payment restrictions;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our or the applicable subsidiarys assets;
    
    enter into transactions with our or the applicable subsidiarys affiliates;
    
    incur liens; and
    
    designate any of our, or the applicable subsidiarys, future subsidiaries as unrestricted subsidiaries.
   22




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We are dependent on our key management, direct sales force and technical personnel
for continued success.
   If we fail to effectively manage our growth, our financial results could be adversely
affected.
  
    
    our expanding product lines;
    
    our marketing and sales organizations; and
    
    our client support organization as use of our products increases.
  We may need additional capital in the future, which may not be available to us, and
if we raise additional capital, it may dilute our stockholders ownership in us.
  
    
    acquiring businesses, customer, technologies, products and services;
    
    taking advantage of growth opportunities, including more rapid expansion;
    
    making capital improvements to increase our capacity;
    
    developing new services or products; and
    
    responding to competitive pressures.
  23




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Our future success depends substantially on the continued growth in the use of the
Internet by automotive dealers and the indirect automotive finance industry.
   Our financing source customers may elect to use competing third-party services,
either in addition to or instead of our network.
  Some provisions in our certificate of incorporation and by-laws may deter third
parties from acquiring us.
  
    
    our board of directors is classified into three classes, each of which serves for a staggered three-year term;
    
    only our board of directors may call special meetings of our stockholders;
    
    we have authorized undesignated preferred stock, the terms of which may be established and shares of which
may be issued without stockholder approval;
    
    our stockholders have only limited rights to amend our by-laws; and
    
    we require advance notice for stockholder proposals.
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Funds associated with certain of our auction rate securities may not be accessible
for in excess of 12 months and our auction rate securities may experience an other
than temporary decline in value, which would adversely affect our income.
  The price of our common stock may be volatile.
  
    
    price and volume fluctuations in the overall stock market from time to time;
    
    actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations
of equity research analysts;
    
    trends in the automotive and automotive finance industries;
    
    catastrophic events;
    
    loss of one or more significant customers or strategic alliances;
    
    significant acquisitions, strategic alliances, joint ventures or capital commitments by us or our competitors;
    
    legal or regulatory matters, including legal decisions affecting the indirect automotive finance industry or
involving the enforceability or order of priority of security interests of electronic chattel paper affecting
our electronic contracting product; and
    
    additions or departures of key employees.
  
 Item 1B. Unresolved Staff Comments
  25




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Item 2. Properties
   
 Item 3. Legal Proceedings
  DealerTrack Inc. v. RouteOne LLC
   DealerTrack Inc. v. Finance Express et al., CV-06-2335;
 DealerTrack Inc. v. RouteOne and Finance Express et al., CV-06-6864; and
 DealerTrack Inc. v. RouteOne and Finance Express et al., CV-07-215
     26




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Item 4. Submission of Matters to a Vote of Security Holders
 
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
 Market Information
  High
    
    LowYear Ended December 31, 2007Fourth Quarter
    
    $
    50.37
    
    
    $
    31.10Third Quarter
    
    $
    42.75
    
    
    $
    34.35Second Quarter
    
    $
    38.20
    
    
    $
    30.04First Quarter
    
    $
    33.25
    
    
    $
    26.00Year Ended December 31, 2006Fourth Quarter
    
    $
    29.98
    
    
    $
    21.72Third Quarter
    
    $
    23.96
    
    
    $
    18.80Second Quarter
    
    $
    24.18
    
    
    $
    20.73First Quarter
    
    $
    23.91
    
    
    $
    19.96
 Use of Proceeds
   
    
    pay in full the $25.0 million outstanding under our term loan facility and the $18.5
million outstanding under our revolving credit facility;
    
    pay acquisition related notes payable to an acquiree in the amount of $4.1 million;
    
    purchase assets of WiredLogic, Inc.. for $6.0 million in cash;
 27




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
    
    purchase assets of Global Fax L.L.C., Inc. for $24.6 million in cash;
    
    purchase assets of DealerWare L.L.C., Inc. for $5.2 million in cash;
    
    purchase all outstanding shares of Curomax Corporation for $38.9 million in cash; and
    
    the remaining $3.8 million of the proceeds were used as part of the $60.0 million in
cash used to purchase all of the outstanding shares of Arkona, Inc.
   Dividend Policy
  Repurchases
   Total
    
    MaximumNumber of
    
    NumberShares
    
    of SharesPurchased
    
    Thatas Part of
    
    May Yet beTotal Number
    
    Average Price
    
    Publicly
    
    Purchasedof Shares
    
    Paid per
    
    Announced
    
    Under thePeriod
    
    Purchased
    
    Share
    
    Program
    
    ProgramOctober 2007
    
    
    955
    
    
    $
    48.09
    
    
    
    n/a
    
    
    
    n/aNovember 2007
    
    
    
    
    
    $
    
    
    
    
    n/a
    
    
    
    n/aDecember 2007
    
    
    
    
    
    $
    
    
    
    
    n/a
    
    
    
    n/a
 28




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Item 6. Selected Consolidated Financial Data
    Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(In thousands, except per share and share amounts)Consolidated Statements of Operations Data:Net revenue
    
    $
    233,845
    
    
    $
    173,272
    
    
    $
    120,219
    
    
    $
    70,044
    
    
    $
    38,679Income (loss) from operations
    
    
    27,531
    
    
    
    20,739
    
    
    
    9,831
    
    
    
    7,722
    
    
    
    (3,270
    )Income (loss) before (provision) benefit for income
taxes
    
    
    32,786
    
    
    
    26,133
    
    
    
    8,528
    
    
    
    7,661
    
    
    
    (3,217
    )Net income (loss)
    
    $
    19,752
    
    
    $
    19,336
    
    
    $
    4,468
    
    
    $
    11,253
    
    
    $
    (3,289
    )Basic net income (loss) per share (1)
    
    $
    0.50
    
    
    $
    0.54
    
    
    $
    0.17
    
    
    $
    0.45
    
    
    $
    (1,000.30
    )Diluted net income (loss) per share (1) (2)
    
    $
    0.48
    
    
    $
    0.51
    
    
    $
    0.12
    
    
    $
    0.02
    
    
    $
    (1,000.30
    )Weighted average shares outstanding
    
    
    39,351,138
    
    
    
    36,064,796
    
    
    
    2,290,439
    
    
    
    40,219
    
    
    
    3,288Weighted average shares outstanding assuming dilution
    
    
    41,198,773
    
    
    
    37,567,488
    
    
    
    3,188,180
    
    
    
    1,025,248
    
    
    
    3,288
 As of December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(In thousands)Consolidated Balance Sheets Data:Cash and cash equivalents and short-term investments
    
    $
    220,144
    
    
    $
    171,195
    
    
    $
    103,264
    
    
    $
    21,753
    
    
    $
    16,790Working capital (3)
    
    
    222,810
    
    
    
    168,817
    
    
    
    101,561
    
    
    
    24,421
    
    
    
    15,640Total assets
    
    
    482,926
    
    
    
    321,513
    
    
    
    220,615
    
    
    
    76,681
    
    
    
    46,643Capital lease obligations (short and long-term), due to
acquirees (short and long-term) and other long-term
liabilities
    
    
    11,872
    
    
    
    10,103
    
    
    
    9,984
    
    
    
    7,999
    
    
    
    1,100Total redeemable convertible participating preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,226
    
    
    
    72,226Retained earnings (accumulated deficit)
    
    
    18,522
    
    
    
    (1,230
    )
    
    
    (20,566
    )
    
    
    (25,034
    )
    
    
    (36,287
    )Total stockholders equity (deficit)
    
    
    438,362
    
    
    
    284,337
    
    
    
    186,671
    
    
    
    (20,001
    )
    
    
    (33,608
    )
 
 (1)
    
    For the years ended December 31, 2005 and 2004, the basic and diluted
earnings per share calculations include adjustments to net income
relating to preferred dividends earned, but not paid, and net income
amounts allocated to the participating preferred stockholders in order
to compute net income applicable to common stockholders in accordance
with SFAS No. 128, Earnings per Shareand EITF 03-6, Participating
Securities and the Two  Class Method under FASB No. 128.For more
detail, please see Note 2 to our consolidated financial statements.(2)
    
    In accordance with SFAS No. 128, for the years ended December 31, 2007
and 2006, we have excluded 196,666 and 400,000 contingently issuable
shares, respectively, from diluted weighted average common stock
outstanding as their contingent conditions (a) have not been satisfied
at the reporting date nor (b) would have been satisfied if the
reporting date was the end of the contingency period (Please see Note
12 for further information).(3)
    
    Working capital is defined as current assets less current liabilities. 29




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our consolidated financial statements and
related notes thereto. In addition, you should read the sections entitled Cautionary
Statements Relating to Forward-Looking Statements and Risk Factors in Part 1, Item
1A in this Annual Report on Form 10-K .
 Overview
     Year Ended December 31,2007
    
    2006
    
    2005EBITDA and Other Business Statistics:EBITDA (1)
    
    $
    66,014
    
    
    $
    48,027
    
    
    $
    32,594Capital expenditures, software and website development costs
    
    $
    15,068
    
    
    $
    10,605
    
    
    $
    10,746Active dealers in our network as of end of the year (2)
    
    
    22,043
    
    
    
    22,147
    
    
    
    21,155Active financing sources in our network as of end of year (3)
    
    
    465
    
    
    
    305
    
    
    
    201Transactions processed (4)
    
    
    90,869
    
    
    
    71,515
    
    
    
    40,185Product subscriptions (5)
    
    
    28,966
    
    
    
    21,613
    
    
    
    14,473
 
 (1)
    
    EBITDA represents net income before interest (income) expense, taxes,
depreciation and amortization. We present EBITDA because we believe
that EBITDA provides useful information with respect to the
performance of our fundamental business activities and is also
frequently used by securities analysts, investors and other interested
parties in the evaluation of comparable companies. We rely on EBITDA
as a primary measure to review and assess the operating performance of
our company and management team in connection with our executive
compensation plan incentive payments. In addition, our credit
agreement uses EBITDA (with additional adjustments), in part, to
measure our compliance with covenants such as interest coverage.  
    
    EBITDA does not reflect our cash expenditures or future requirements for capital
expenditures or contractual commitments;
    
    EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
    
    EBITDA does not reflect the interest expense or the cash requirements that may be
necessary to service any interest or principal payments on our debts;
    
    Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and EBITDA does
not reflect any cash requirements for such replacements; and
    
    Other companies may calculate EBITDA differently than we do, limiting its usefulness as
a comparative measure.
 30




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Year Ended December 31,2007
    
    
    2006
    
    
    2005Net income
    
    $
    19,752
    
    
    $
    19,336
    
    
    $
    4,468Interest income
    
    
    (5,606
    )
    
    
    (4,289
    )
    
    
    (282
    )Interest expense
    
    
    355
    
    
    
    268
    
    
    
    1,585Provision for income taxes
    
    
    13,034
    
    
    
    6,797
    
    
    
    4,060Depreciation of property and equipment and
amortization of capitalized software and website
costs
    
    
    10,262
    
    
    
    8,629
    
    
    
    4,166Amortization of acquired identifiable intangibles
    
    
    28,217
    
    
    
    17,286
    
    
    
    18,597EBITDA (6)
    
    $
    66,014
    
    
    $
    48,027
    
    
    $
    32,594
 
 (2)
    
    We consider a dealer to be active as of a date if the dealer completed
at least one revenue-generating credit application processing
transaction using the DealerTrack network during the most recently
ended calendar year.(3)
    
    We consider a financing source to be active in our network as of a
date if it is accepting credit application data electronically from
dealers in the DealerTrack network.(4)
    
    Represents revenue-generating transactions processed in the
DealerTrack, DealerTrack Digital Services and DealerTrack Canada
networks at the end of a given period.
A new agreement executed during the fourth quarter of 2006 resulted in
a different method of measurement regarding transaction volumes and
fees from a particular credit bureau provider. This agreement resulted
in an additional 2.5 million revenue-generating transactions processed
through the network for the year ended December 31, 2007.(5)
    
    Represents revenue-generating subscriptions in the DealerTrack or
DealerTrack Canada networks at the end of a given period.(6)
    
    For the year ended December 31, 2006, EBITDA includes $1.4 million in
other income resulting from the DealerAccess purchase price
adjustment, as described in Note 3 to the consolidated financial
statements. Revenue
 Transaction Services Revenue.
 31




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##### Table of Contents



Subscription Services Revenue.
  Cost of Revenue and Operating Expenses
 Cost of Revenue.
 Product Development Expenses.
 Selling, General and Administrative Expenses.
  Acquisitions
     32




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##### Table of Contents



Acquisition-Related Amortization Expense
  Critical Accounting Policies and Estimates
    Revenue Recognition
 Revenue Recognition in
Financial Statements Revenue Arrangements with Multiple
Deliverables. Software Revenue Recognition.
 Transaction Services Revenue.
  33




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##### Table of Contents



Subscription Services Revenue.
  Allowance for Doubtful Accounts
  Goodwill, Other Intangibles and Long-lived Assets
 Goodwill and Other Intangible Assets
   34




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##### Table of Contents



Income Taxes
 Accounting for Income Taxes,
 Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109 of FIN 48,
 Retail Sales Tax
     35




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Stock-Based Compensation
      36




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##### Table of Contents



Significant Factors, Assumptions and Methodologies Used in Determining Fair Value
 July 2004
   
    
    U.S. companies with sales between $40.0 million to $3.0 billion;
    
    Revenue growth in 2002-2004 ranging from 10%-20%;
    
    EBITDA margin ranging from 8%-20%;
    
    Annual earnings ranging from $2.5 million to $300.0 million; and
    
    Revenue multiples ranging from 0.9 to 4.2, EBITDA multiples ranging
from 5 to 53 and earnings per share multiples ranging from 15.5 to
26.4.
 37




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##### Table of Contents



August 2004
  January, March and April 2005
  38




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##### Table of Contents



May, June and July 2005
    Significant Factors Contributing to the Difference between Fair Value as of the Date
of Each Grant and Estimated IPO Price
  
    
    In the third quarter of 2004, we completed our acquisition of LML, which expanded our customer base and
product offerings;
    
    In the third quarter of 2004, we experienced continued profitability and a continued increase in our
dealer and lender customer base;
    
    In the fourth quarter of 2004, we believe we had successfully integrated the business we acquired from LML;
    
    In the first quarter of 2005, we completed the acquisition of Go Big, which expanded our customer base and
product offerings;
    
    In the first quarter of 2005, several prospective underwriters made presentations to our board of
directors regarding a potential initial public offering in the second half of 2005;
    
    In the second quarter of 2005, we completed our acquisitions of ALG, NAT and Chrome, which expanded our
customer base and product offerings;
    
    In the third quarter of 2005, we filed our initial registration statement with the SEC; and
    
    Throughout the entire period from July 1, 2004 through September 30, 2005, our dealer and financing source
customer base increased, as did the number of transactions processed and the number of product
subscriptions.
 39




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##### Table of Contents



Exercise
    
    
    Fair MarketGrant

    
    Number of
    
    
    Price Per
    
    
    Value
    
    
    Intrinsic ValueDate

    
    Options
    
    
    Share
    
    
    Per Share
    
    
    Per ShareStock options:
    
    May 2004
    
    
    761,544
    
    
    $
    2.80
    
    
    $
    5.86
    
    
    $
    3.06July 2004
    
    
    25,000
    
    
    
    2.80
    
    
    
    5.86
    
    
    
    3.06August 2004
    
    
    699,450
    
    
    
    2.80
    
    
    
    6.73
    
    
    
    3.93May 2005
    
    
    964,850
    
    
    
    12.92
    
    
    
    17.10
    
    
    
    4.18June 2005
    
    
    30,000
    
    
    
    12.92
    
    
    
    17.10
    
    
    
    4.18July 2005
    
    
    75,125
    
    
    
    17.08
    
    
    
    18.00
    
    
    
    0.92Total stock options
    
    
    2,555,969Restricted common stock:
    
    May 2005
    
    
    101,000
    
    
    
    n/a
    
    
    
    17.10
    
    
    
    17.10June 2005
    
    
    3,500
    
    
    
    n/a
    
    
    
    17.10
    
    
    
    17.10July 2005
    
    
    3,500
    
    
    
    n/a
    
    
    
    18.00
    
    
    
    18.00December 2005
    
    
    17,925
    
    
    
    n/a
    
    
    
    19.80
    
    
    
    19.80Total restricted common stock
    
    
    125,925
 Results of Operations
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(% of net revenue)Consolidated Statements of Operations Data:Net revenue (1)
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating costs and expenses:Cost of revenue (1)
    
    
    42.6
    
    
    
    40.9
    
    
    
    41.7Product development
    
    
    4.2
    
    
    
    5.2
    
    
    
    4.6Selling, general and administrative
    
    
    41.4
    
    
    
    41.9
    
    
    
    45.5Total operating costs and expenses
    
    
    88.2
    
    
    
    88.0
    
    
    
    91.8Income from operations
    
    
    11.8
    
    
    
    12.0
    
    
    
    8.2Interest income
    
    
    2.4
    
    
    
    2.5
    
    
    
    0.2Interest expense
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (1.3
    )Other income
    
    
    
    
    
    
    0.8
    
    
    
    Income before provision for income taxes
    
    
    14.0
    
    
    
    15.1
    
    
    
    7.1Provision for income taxes
    
    
    (5.6
    )
    
    
    (3.9
    )
    
    
    (3.4
    )Net income
    
    
    8.4
    %
    
    
    11.2
    %
    
    
    3.7
    %
 
 Year Ended December 31,2007
    
    2006
    
    2005(% of net revenue)(1) Related party revenue
    
    
    1.0
    %
    
    
    19.3
    %
    
    
    24.1
    %Related party cost of revenue
    
    
    0.0
    %
    
    
    1.1
    %
    
    
    2.7
    %
 40




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##### Table of Contents



Years Ended December 31, 2007 and 2006
 Revenue
  Transaction Services Revenue.
 Subscription Services Revenue.
 Cost of Revenue and Operating Expenses
 Cost of Revenue. ,
 Product Development Expenses.
 Selling, General and Administrative Expenses.
 41




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##### Table of Contents



Interest Income
  Other Income
  Provision for Income Taxes
   Years Ended December 31, 2006 and 2005
 Revenue
  Transaction Services Revenue.
 Subscription Services Revenue.
 Cost of Revenue and Operating Expenses
 Cost of Revenue.
 42




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##### Table of Contents



Product Development Expenses.
 Selling, General and Administrative Expenses.
 Interest Income
  Interest Expense
  Other Income
  Provision for Income Taxes
   43




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##### Table of Contents



Quarterly Results of Operations
  First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter(Unaudited)(In thousands, except for share and per share data)2007Net revenue
    
    $
    51,725
    
    
    $
    58,507
    
    
    $
    62,871
    
    
    $
    60,742Gross profit
    
    
    30,425
    
    
    
    34,349
    
    
    
    35,193
    
    
    
    34,247Operating income
    
    
    6,797
    
    
    
    9,755
    
    
    
    6,834
    
    
    
    4,145Net income
    
    
    4,825
    
    
    
    6,284
    
    
    
    4,512
    
    
    
    4,131Basic net income per share (1)
    
    $
    0.12
    
    
    $
    0.16
    
    
    $
    0.12
    
    
    $
    0.10Diluted net income per share (1)
    
    $
    0.12
    
    
    $
    0.15
    
    
    $
    0.11
    
    
    $
    0.10Basic weighted average common
shares outstanding
    
    
    38,625,215
    
    
    
    38,748,405
    
    
    
    39,058,863
    
    
    
    40,956,826Diluted weighted average common
shares outstanding
    
    
    40,231,194
    
    
    
    40,569,993
    
    
    
    40,840,688
    
    
    
    42,845,842
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    

Quarter
(2)(Unaudited)(In thousands, except for share and per share data)2006Net revenue
    
    $
    37,935
    
    
    $
    43,414
    
    
    $
    46,264
    
    
    $
    45,659Gross profit
    
    
    22,816
    
    
    
    26,125
    
    
    
    27,136
    
    
    
    26,352Operating income
    
    
    4,645
    
    
    
    7,290
    
    
    
    2,404
    
    
    
    6,400Net income
    
    
    3,436
    
    
    
    4,655
    
    
    
    5,566
    
    
    
    5,679Basic net income per share (1)
    
    $
    0.10
    
    
    $
    0.13
    
    
    $
    0.16
    
    
    $
    0.15Diluted net income per share (1)
    
    $
    0.09
    
    
    $
    0.13
    
    
    $
    0.15
    
    
    $
    0.14Basic weighted average common
shares outstanding
    
    
    35,268,289
    
    
    
    35,402,769
    
    
    
    35,547,699
    
    
    
    38,027,280Diluted weighted average common
shares outstanding
    
    
    36,718,023
    
    
    
    36,933,366
    
    
    
    36,989,642
    
    
    
    39,683,653
 
 (1)
    
    The addition of earnings per share by quarter may not equal total earnings per share for the year.(2)
    
    Included in the fourth quarter 2006 net income are (i) the DealerAccess purchase price adjustment
of $1.4 million in other income and (ii) the write-off of a prepaid asset in the amount of
$1.1 million in cost of revenue. Liquidity and Capital Resources
  44




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Year Ended December 31,2007
    
    2006
    
    2005Net cash provided by operating activities
    
    $
    56,926
    
    
    $
    45,489
    
    
    $
    32,223Net cash used in investing activities
    
    
    (168,725
    )
    
    
    (168,390
    )
    
    
    (77,197
    )Net cash provided by financing activities
    
    
    114,216
    
    
    
    66,740
    
    
    
    126,443
 Operating Activities
  45




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##### Table of Contents



Investing Activities
  Financing Activities
  Contractual Obligations
  Less Than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years(In thousands)Operating lease obligations
    
    $
    31,794
    
    
    $
    4,802
    
    
    $
    9,900
    
    
    $
    5,209
    
    
    $
    11,883Capital lease obligations
    
    
    1,742
    
    
    
    575
    
    
    
    1,167
    
    
    
    
    
    
    
    Payments due to acquirees
    
    
    3,928
    
    
    
    2,428
    
    
    
    1,500
    
    
    
    
    
    
    
    Payments due to departed executive
    
    
    271
    
    
    
    271
    
    
    
    
    
    
    
    
    
    
    
    License fee obligations
    
    
    500
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    Total contractual cash obligation
    
    $
    38,235
    
    
    $
    8,076
    
    
    $
    13,067
    
    
    $
    5,209
    
    
    $
    11,883
    46




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##### Table of Contents



Credit Facility
   
    
    access our, or our existing or future subsidiaries, cash flow and value and, therefore, to pay interest and/or
principal on our other indebtedness or to pay dividends on our common stock;
    
    incur additional indebtedness;
    
    issue preferred stock;
    
    pay dividends or make distributions in respect of our, or our existing or future subsidiaries, capital stock or to
make certain other restricted payments or investments;
    
    sell assets, including our capital stock;
    
    make certain investments, loans, advances, guarantees or acquisitions;
    
    enter into sale and leaseback transactions;
    
    agree to payment restrictions;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our or the applicable subsidiarys assets;
    
    enter into transactions with our or the applicable subsidiarys affiliates;
    
    incur liens; and
    
    designate any of our, or the applicable subsidiarys, future subsidiaries as unrestricted subsidiaries.
   47




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Off-Balance Sheet Arrangements
  Industry Trends
  Effects of Inflation
  Recent Accounting Pronouncements
  The Fair Value Option for Financial Assets and Financial Liabilities
 Fair Value Measurements
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Exposure
  48




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Interest Rate Exposure
     49




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 PageDEALERTRACK HOLDINGS, INC.:Report of Independent Registered Public Accounting Firm
    
    
        51Consolidated Balance Sheets
    
    
        52Consolidated Statements of Operations
    
    
        53Consolidated Statements of Cash Flows
    
    
        54Consolidated Statements of Stockholders Equity (Deficit) and Comprehensive Income
    
    
        56Notes to Consolidated Financial Statements
    
    
        58Schedule II  Valuation and Qualifying Accounts
    
    
        86
 50




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Report of Independent Registered Public Accounting Firm
  Internal Control  Integrated
Framework
     /s/ PricewaterhouseCoopers LLP   51




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##### Table of Contents



DEALERTRACK HOLDINGS, INC.
 CONSOLIDATED BALANCE SHEETS
 December 31,2007
    
    
    2006(In thousands,except share and per shareamounts)ASSETSCurrent assetsCash and cash equivalents
    
    $
    50,564
    
    
    $
    47,080Short-term investments
    
    
    169,580
    
    
    
    124,115Accounts receivable  related party
    
    
    232
    
    
    
    398Accounts receivable, net of allowances of $2,615 and $4,407 at December 31, 2007 and 2006, respectively
    
    
    26,725
    
    
    
    19,560Prepaid expenses and other current assets
    
    
    7,305
    
    
    
    4,694Deferred tax assets
    
    
    3,827
    
    
    
    2,483Total current assets
    
    
    258,233
    
    
    
    198,330Property and equipment, net
    
    
    12,792
    
    
    
    6,157Software and web site developments costs, net
    
    
    10,771
    
    
    
    10,048Intangible assets, net
    
    
    69,528
    
    
    
    37,918Goodwill
    
    
    117,702
    
    
    
    52,499Restricted cash
    
    
    540
    
    
    
    540Deferred taxes and other long-term assets
    
    
    13,360
    
    
    
    16,021Total assets
    
    $
    482,926
    
    
    $
    321,513LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    4,762
    
    
    $
    1,818Accrued compensation and employee benefits
    
    
    12,527
    
    
    
    10,111Accrued other
    
    
    11,387
    
    
    
    11,978Deferred revenues
    
    
    4,016
    
    
    
    3,166Due to acquirees
    
    
    2,251
    
    
    
    2,440Capital leases payable
    
    
    480
    
    
    
    Total current liabilities
    
    
    35,423
    
    
    
    29,513Capital leases payable  long-term
    
    
    1,076
    
    
    
    Due to acquirees  long-term
    
    
    1,280
    
    
    
    2,982Deferred tax liabilities
    
    
    2,800
    
    
    
    Deferred revenue and other long-term liabilities
    
    
    3,985
    
    
    
    4,681Total liabilities
    
    
    44,564
    
    
    
    37,176Commitments and contingencies (Note 13)Stockholders equityPreferred stock, $0.01 par value; 10,000,000 shares authorized and no shares issued and outstanding
at December 31, 2007 and 2006, respectively
    
    
    
    
    
    
    Common
stock, $0.01 par value; 175,000,000 shares authorized; 42,556,925
shares issued and 42,552,723 shares outstanding at December 31,
2007; and 39,358,769 shares issued and
39,357,550 shares outstanding at December 31, 2006
    
    
    426
    
    
    
    393Treasury stock, at cost, 4,202 and 1,219 shares at December 31, 2007 and 2006, respectively
    
    
    (139
    )
    
    
    (31
    )Additional paid-in capital
    
    
    413,428
    
    
    
    289,490Deferred stock-based compensation (APB 25)
    
    
    (2,056
    )
    
    
    (4,322
    )Accumulated other comprehensive income (foreign currency)
    
    
    8,181
    
    
    
    37Retained
Earnings (accumulated deficit)
    
    
    18,522
    
    
    
    (1,230
    )Total stockholders equity
    
    
    438,362
    
    
    
    284,337Total liabilities and stockholders equity
    
    $
    482,926
    
    
    $
    321,513
  52




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DEALERTRACK HOLDINGS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands, except per share and share amounts)RevenueNet revenue (1)
    
    $
    233,845
    
    
    $
    173,272
    
    
    $
    120,219Operating costs and expensesCost of revenue (1)(2)
    
    
    99,631
    
    
    
    70,843
    
    
    
    50,132Product development (2)
    
    
    9,808
    
    
    
    9,153
    
    
    
    5,566Selling, general and administrative (2)
    
    
    96,875
    
    
    
    72,537
    
    
    
    54,690Total operating costs and expenses
    
    
    206,314
    
    
    
    152,533
    
    
    
    110,388Income from operations
    
    
    27,531
    
    
    
    20,739
    
    
    
    9,831Interest income
    
    
    5,606
    
    
    
    4,289
    
    
    
    282Interest expense
    
    
    (355
    )
    
    
    (268
    )
    
    
    (1,585
    )Other income
    
    
    4
    
    
    
    1,373
    
    
    
    Income before provision for income taxes
    
    
    32,786
    
    
    
    26,133
    
    
    
    8,528Provision for income taxes, net
    
    
    (13,034
    )
    
    
    (6,797
    )
    
    
    (4,060
    )Net income
    
    $
    19,752
    
    
    $
    19,336
    
    
    $
    4,468Basic net income per share
    
    $
    0.50
    
    
    $
    0.54
    
    
    $
    0.17Diluted net income per share
    
    $
    0.48
    
    
    $
    0.51
    
    
    $
    0.12Weighted average shares outstanding
    
    
    39,351,138
    
    
    
    36,064,796
    
    
    
    2,290,439Weighted average shares outstanding assuming dilution
    
    
    41,198,773
    
    
    
    37,567,488
    
    
    
    3,188,180
 
 Year Ended December 31,2007
    
    2006
    
    2005(In thousands)(1)     Related party revenue
    
    $
    2,425
    
    
    $
    33,380
    
    
    $
    29,021Related party cost of revenue
    
    
    38
    
    
    
    1,840
    
    
    
    3,216
 (2)
    
    Stock-based compensation expense recorded for the years ended December 31, 2007, 2006 and 2005 was classified as follows:
 Year Ended December 31,2007
    
    2006
    
    2005(In thousands)Cost of revenue
    
    $
    2,022
    
    
    $
    1,115
    
    
    $
    295Product development
    
    
    589
    
    
    
    361
    
    
    
    95Selling, general and administrative
    
    
    8,295
    
    
    
    9,200
    
    
    
    1,600
  53




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DEALERTRACK HOLDINGS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year EndedDecember 31,2007
    
    
    2006
    
    
    2005(In thousands)Cash flows from operating activitiesNet income
    
    $
    19,752
    
    
    $
    19,336
    
    
    $
    4,468Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization
    
    
    38,479
    
    
    
    25,915
    
    
    
    22,763Deferred tax (benefit) provision
    
    
    (4,631
    )
    
    
    (11,600
    )
    
    
    2,301Amortization of deferred stock-based compensation
    
    
    10,906
    
    
    
    10,676
    
    
    
    1,990Provision for doubtful accounts and sales credits
    
    
    6,767
    
    
    
    4,838
    
    
    
    3,664Loss (gain) on sale of property and equipment
    
    
    17
    
    
    
    (53
    )
    
    
    (26
    )Amortization of deferred interest
    
    
    187
    
    
    
    175
    
    
    
    165Deferred compensation
    
    
    294
    
    
    
    214
    
    
    
    110Stock-based compensation windfall tax benefit
    
    
    (6,995
    )
    
    
    (2,317
    )
    
    
    Amortization of bank financing costs
    
    
    122
    
    
    
    124
    
    
    
    411Changes in operating assets and liabilities, net of effects of acquisitionsAccounts receivable
    
    
    (11,139
    )
    
    
    (9,290
    )
    
    
    (11,052
    )Accounts receivable  related party
    
    
    166
    
    
    
    4,988
    
    
    
    (1,687
    )Prepaid expenses and other current assets
    
    
    (1,286
    )
    
    
    (501
    )
    
    
    (375
    )Accounts payable and accrued expenses
    
    
    3,905
    
    
    
    4,878
    
    
    
    3,764Accounts payable  related party
    
    
    
    
    
    
    (2,021
    )
    
    
    1,310Deferred revenue and other current liabilities
    
    
    567
    
    
    
    (193
    )
    
    
    1,181Other long-term liabilities
    
    
    19
    
    
    
    180
    
    
    
    2,329Deferred rent
    
    
    86
    
    
    
    357
    
    
    
    399Other long-term assets
    
    
    (290
    )
    
    
    (217
    )
    
    
    508Net cash provided by operating activities
    
    
    56,926
    
    
    
    45,489
    
    
    
    32,223Cash flows from investing activitiesCapital expenditures
    
    
    (7,189
    )
    
    
    (3,228
    )
    
    
    (3,453
    )Funds released from escrow and other restricted cash
    
    
    
    
    
    
    50
    
    
    
    577Purchase of short-term investments
    
    
    (554,445
    )
    
    
    (214,950
    )
    
    
    Sale of short-term investments
    
    
    508,980
    
    
    
    90,835
    
    
    
    Capitalized software and web site development costs
    
    
    (6,474
    )
    
    
    (3,636
    )
    
    
    (7,293
    )Proceeds from sale of property and equipment
    
    
    8
    
    
    
    58
    
    
    
    31Payment for net assets acquired, net of acquired cash
    
    
    (109,605
    )
    
    
    (37,519
    )
    
    
    (67,059
    )Net cash used in investing activities
    
    
    (168,725
    )
    
    
    (168,390
    )
    
    
    (77,197
    )Cash flows from financing activitiesPrincipal payments on capital lease obligations
    
    
    (229
    )
    
    
    (394
    )
    
    
    (492
    )Principal payments on notes payable
    
    
    (422
    )
    
    
    (315
    )
    
    
    Proceeds from the exercise of employee stock options
    
    
    4,009
    
    
    
    2,685
    
    
    
    1,469Proceeds from employee stock purchase plan
    
    
    1,779
    
    
    
    849
    
    
    
    Purchase of treasury stock
    
    
    (108
    )
    
    
    (31
    )
    
    
    Net proceeds from bank indebtedness
    
    
    
    
    
    
    
    
    
    
    47,899Repayment of bank indebtedness
    
    
    
    
    
    
    
    
    
    
    (48,500
    )Proceeds from public offerings, net of expenses
    
    
    102,192
    
    
    
    61,617
    
    
    
    126,067Stock-based compensation expense windfall tax benefit
    
    
    6,995
    
    
    
    2,317
    
    
    
    Other
    
    
    
    
    
    
    12
    
    
    
    Net cash provided by financing activities
    
    
    114,216
    
    
    
    66,740
    
    
    
    126,443Net increase (decrease) in cash and cash equivalents
    
    
    2,417
    
    
    
    (56,161
    )
    
    
    81,469Effect of exchange rate changes on cash and cash equivalents
    
    
    1,067
    
    
    
    (23
    )
    
    
    42Beginning of year
    
    
    47,080
    
    
    
    103,264
    
    
    
    21,753End of year
    
    $
    50,564
    
    
    $
    47,080
    
    
    $
    103,264
 54




---



##### Table of Contents



Year EndedDecember 31,2007
    
    
    2006
    
    
    2005(In thousands)Supplemental disclosureNon cash investing and financing activities:Conversion of redeemable convertible participating preferred stock to common stock
    
    $
    
    
    
    $
    
    
    
    $
    72,226Assets acquired under capital leases
    
    
    219
    
    
    
    
    
    
    
    Acquisition of capitalized software through note payable
    
    
    
    
    
    
    2,608
    
    
    
    Accrued capitalized hardware and software
    
    
    1,186
    
    
    
    1,133
    
    
    
    Goodwill adjustment
    
    
    620
    
    
    
    494
    
    
    
    Deferred compensation expense reversal to equity
    
    
    360
    
    
    
    325
    
    
    
    Cash paid for:Income taxes
    
    $
    15,308
    
    
    $
    13,707
    
    
    $
    2,117Interest
    
    
    153
    
    
    
    82
    
    
    
    1,417
  55




---



##### Table of Contents



DEALERTRACK HOLDINGS, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) AND
COMPREHENSIVE INCOME
 Accumulated
    
    
    Retained
    
    
    TotalCommon Stock,
    
    
    Additional
    
    
    Deferred
    
    
    Other
    
    
    Earnings
    
    
    StockholdersPreferred Stock
    
    
    Common Stock
    
    
    In Treasury
    
    
    Paid-In
    
    
    Stock-Based
    
    
    Comprehensive
    
    
    (Accumulated
    
    
    Equity
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Income
    
    
    Deficit)
    
    
    (Deficit)
    
    
    Income(In thousands, except share amounts)Balance as of January 1, 2005
    
    
    
    
    
    
    
    
    
    
    177,926
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    8,451
    
    
    
    (3,520
    )
    
    
    100
    
    
    
    (25,034
    )
    
    
    (20,001
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    511,610
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    1,464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,469Tax benefit from the exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    57
    
    
    $
    57Deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,010
    
    
    
    (4,010
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted common stock grants
    
    
    
    
    
    
    
    
    
    
    125,925
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,204
    
    
    
    (2,205
    )
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,684
    
    
    
    
    
    
    
    
    
    
    
    1,684Restricted common stock amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306
    
    
    
    
    
    
    
    
    
    
    
    306Conversion of redeemable convertible
participating preferred stock
    
    
    
    
    
    
    
    
    
    
    26,397,589
    
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    71,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,226Issuance of common stock  initial public
offering
    
    
    
    
    
    
    
    
    
    
    8,166,667
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    125,985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,067Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,468
    
    
    
    4,468
    
    
    $
    4,468Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,525Balance as of December 31, 2005
    
    
    
    
    
    $
    
    
    
    
    35,379,717
    
    
    $
    354
    
    
    
    
    
    
    $
    
    
    
    $
    214,471
    
    
    $
    (7,745
    )
    
    $
    157
    
    
    $
    (20,566
    )
    
    $
    186,671Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    387,748
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    2,681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,685Directors deferred compensation stock units
    
    
    
    
    
    
    
    
    
    
    14,917
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    324
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    324Issuance of common stock under employee stock
purchase plan
    
    
    
    
    
    
    
    
    
    
    42,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    849
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    849Compensation expense related to the employee
stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150Compensation expense related to the departure
of an executive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,892
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    5,004Tax benefit from the exercise of stock
options and restricted common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,317Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    (120
    )
    
    
    (120
    )Treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,219
    
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31
    )Issuance of restricted common stock grants
    
    
    
    
    
    
    
    
    
    
    784,250
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Restricted common stock grant reversal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (355
    )
    
    
    355
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense (APB 25)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,877
    
    
    
    
    
    
    
    
    
    
    
    1,877Stock-based compensation expense (FAS 123
(R))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,011Restricted common stock-based
compensation expense (APB 25)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    472
    
    
    
    
    
    
    
    
    
    
    
    472Restricted common stock-based
compensation expense (FAS 123 (R))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,162Options and restricted share cancellations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (625
    )
    
    
    625
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock  public offering
    
    
    
    
    
    
    
    
    
    
    2,750,000
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    61,590
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,617Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    12Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,336
    
    
    
    19,336
    
    
    
    19,336Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    19,216Balance as of December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    39,358,769
    
    
    $
    393
    
    
    
    1,219
    
    
    $
    (31
    )
    
    $
    289,490
    
    
    $
    (4,322
    )
    
    $
    37
    
    
    $
    (1,230
    )
    
    $
    284,337
 56




---



##### Table of Contents



Accumulated
    
    
    Retained
    
    
    TotalCommon Stock,
    
    
    Additional
    
    
    Deferred
    
    
    Other
    
    
    Earnings
    
    
    StockholdersPreferred Stock
    
    
    Common Stock
    
    
    In Treasury
    
    
    Paid-In
    
    
    Stock-Based
    
    
    Comprehensive
    
    
    (Accumulated
    
    
    Equity
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Income
    
    
    Deficit)
    
    
    (Deficit)
    
    
    Income(In thousands, except share amounts)Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    633,320
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    4,003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,009Directors deferred compensation stock units
    
    
    
    
    
    
    
    
    
    
    8,133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294Officers deferred compensation stock units
    
    
    
    
    
    
    
    
    
    
    2,177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Issuances of common stock under employee
stock purchase plan
    
    
    
    
    
    
    
    
    
    
    59,202
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1,777
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,779Compensation expense related to the
employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314Tax benefit from the exercise of stock
options and restricted common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,995Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,144
    
    
    
    
    
    
    
    8,144
    
    
    
    8,144Treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,983
    
    
    
    (108
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108
    )Issuance of restricted common stock grants
    
    
    
    
    
    
    
    
    
    
    235,725
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense (APB 25)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,729
    
    
    
    
    
    
    
    
    
    
    
    1,729Stock-based compensation expense (FAS
123(R))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,604Restricted common stock-based compensation
expense (APB 25)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    397
    
    
    
    
    
    
    
    
    
    
    
    397Restricted common stock-based compensation
expense (FAS 123(R))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,862Options and restricted share cancellations
    
    
    
    
    
    
    
    
    
    
    (40,401
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140
    )
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock  public offering
    
    
    
    
    
    
    
    
    
    
    2,300,000
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    102,169
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,192Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,752
    
    
    
    19,752
    
    
    
    19,752Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    27,896Balance as of December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    42,556,925
    
    
    $
    426
    
    
    
    4,202
    
    
    $
    (139
    )
    
    $
    413,428
    
    
    $
    (2,056
    )
    
    $
    8,181
    
    
    $
    18,522
    
    
    $
    438,362
  57




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##### Table of Contents



DEALERTRACK HOLDINGS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Business Description
  2. Summary of Significant Accounting Policies
  Basis of Presentation
  Use of Estimates
    58




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##### Table of Contents



Revenue Recognition
 Revenue Recognition in
Financial Statements Revenue Arrangements with Multiple
Deliverables. Software Revenue Recognition.
 Transaction Services Revenue.
   Subscription Services Revenue.
  Shipping Costs
  Cash and Cash Equivalents
  59




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##### Table of Contents



Short-term Investments
 Accounting for Certain Investments in Debt and Equity Securities.
    Translation of Non-U.S.  Currencies
  Allowance for Doubtful Accounts
  Property, Equipment and Depreciation
  Software and Web Site Development Costs and Amortization
 Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use Accounting for
Web Site Development Costs.
 60




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##### Table of Contents



Goodwill, Other Intangibles and Long-lived Assets
 Goodwill and Other
Intangible Assets
     Income Taxes
 Accounting for Income Taxes
 Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No 109 of FIN 48
 61




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##### Table of Contents



Advertising Expenses
  Concentration of Credit Risk
   Net Income per Share
 Earnings per Share. Participating Securities and the Two  Class Method under FASB Statement No.
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Numerator:Net income
    
    $
    19,752
    
    
    $
    19,336
    
    
    $
    4,468Amount allocated to participating preferred stockholders under
two-class method (1)
    
    
    
    
    
    
    
    
    
    
    (4,072
    )Net income applicable to common stockholders
    
    $
    19,752
    
    
    $
    19,336
    
    
    $
    396Denominator:Weighted average common stock outstanding (basic)
    
    
    39,351,138
    
    
    
    36,064,796
    
    
    
    2,290,439Common equivalent shares from options to purchase common stock,
restricted common stock and contingent Long-Term Incentive Equity
Awards
    
    
    1,847,635
    
    
    
    1,502,692
    
    
    
    897,741Weighted average common stock outstanding (diluted)
    
    
    41,198,773
    
    
    
    37,567,488
    
    
    
    3,188,180Basic net income per share applicable to common stockholders
    
    $
    0.50
    
    
    $
    0.54
    
    
    $
    0.17Diluted net income per share applicable to common stockholders (2)
    
    $
    0.48
    
    
    $
    0.51
    
    
    $
    0.12 
 (1)
    
    Not applicable for the two years ended December 31, 2007, as all outstanding
participating preferred stock was converted into common stock upon our initial public
offering in December 2005.(2)
    
    In accordance with SFAS No. 128, for the years ended December 31, 2007 and 2006,
we have excluded 196,666 and 400,000 contingently issued shares, respectively, from
diluted weighted average common stock outstanding as their contingent considerations (a)
have not been satisfied at the reporting date nor (b) would have been satisfied if the
reporting date was the end of the contingency period (Refer to Note 12 of our
consolidated financial statements for further information).
 62




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##### Table of Contents



Year Ended December 31,2007
    
    2006
    
    2005Stock options
    
    
    476,464
    
    
    
    819,500
    
    
    
    100,275Restricted common stock
    
    
    36,877
    
    
    
    59,667
    
    
    
    Preferred stock
    
    
    
    
    
    
    
    
    
    
    24,765,127Total
    
    
    513,341
    
    
    
    879,167
    
    
    
    24,865,402
 Stock-Based Compensation
     63




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##### Table of Contents



Year EndedDecember 31,2006Stock options, restricted common stock and employee stock purchase plan compensation expense recognized:Cost of revenue
    
    $
    753Product development
    
    
    252Selling, general and administrative
    
    
    2,658Total stock-based compensation expense
    
    
    3,663Related deferred income tax benefit
    
    
    (1,429
    )Decrease in net income
    
    $
    2,234Decrease in basic earnings per share
    
    $
    0.06Decrease in diluted earnings per share
    
    $
    0.06
   64




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##### Table of Contents



Number
    
    Exercise
    
    Fair
    
    Intrinsicof
    
    Price
    
    Market
    
    ValueGrant
    
    Options/
    
    Per
    
    Value Per
    
    PerDate
    
    Shares
    
    Share
    
    Share
    
    ShareStock options:
    
    May 2004
    
    
    761,544
    
    
    $
    2.80
    
    
    $
    5.86
    
    
    $
    3.06July 2004
    
    
    25,000
    
    
    
    2.80
    
    
    
    5.86
    
    
    
    3.06August 2004
    
    
    699,450
    
    
    
    2.80
    
    
    
    6.73
    
    
    
    3.93May 2005
    
    
    964,850
    
    
    
    12.92
    
    
    
    17.10
    
    
    
    4.18June 2005
    
    
    30,000
    
    
    
    12.92
    
    
    
    17.10
    
    
    
    4.18July 2005
    
    
    75,125
    
    
    
    17.08
    
    
    
    18.00
    
    
    
    0.92Total stock options
    
    
    2,555,969Restricted common stock:
    
    May 2005
    
    
    101,000
    
    
    
    n/a
    
    
    
    17.10
    
    
    
    17.10June 2005
    
    
    3,500
    
    
    
    n/a
    
    
    
    17.10
    
    
    
    17.10July 2005
    
    
    3,500
    
    
    
    n/a
    
    
    
    18.00
    
    
    
    18.00December 2005
    
    
    17,925
    
    
    
    n/a
    
    
    
    19.80
    
    
    
    19.80Total restrictedcommon stock
    
    
    125,925
   Year Ended December 31,2007
    
    2006Expected life (in years) (1)
    
    
    4.33 - 6.25
    
    
    
    6.25Risk-free interest rate
    
    
    3.09 - 4.76
    %
    
    
    4.27 - 5.04
    %Expected volatility (2)
    
    
    47
    %
    
    
    47
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
 
 (1)
    
    For the years ended December 31, 2007 and 2006, the expected lives of
options were determined based on the simplified method under the
provisions of SAB 107. Due to our limited history as a public company,
we believe we do not have appropriate historical experience to
estimate future exercise patterns. As more information becomes
available, we may revise this estimate on a prospective basis.(2)
    
    For the years ended December 31, 2007 and 2006 we estimated our
expected volatility based on the historical volatility of similar
entities whose common shares are publicly traded.   65




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##### Table of Contents



Recent Accounting Pronouncements
  The Fair Value Option for Financial Assets and Financial Liabilities
 Fair Value Measurements
 3. Business Combinations
 AutoStyleMart, Inc. (ASM)
   Current assets
    
    $
    69Property and equipment
    
    
    32Intangible assets
    
    
    4,126Goodwill
    
    
    803Total assets acquired
    
    
    5,030Total liabilities assumed
    
    
    (993
    )Net assets acquired
    
    $
    4,037
  66




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##### Table of Contents



Arkona, Inc. (Arkona)
   Current assets
    
    $
    2,842Property and equipment
    
    
    2,065Other assets
    
    
    191Intangible assets
    
    
    25,660Goodwill
    
    
    39,927Total assets acquired
    
    
    70,685Total liabilities assumed
    
    
    (10,712
    )Net assets acquired
    
    $
    59,973
    Curomax Corporation and its subsidiaries (collectively, Curomax)
   67




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##### Table of Contents



Current assets
    
    $
    1,925Property and equipment
    
    
    339Intangible assets
    
    
    21,670Goodwill
    
    
    20,130Total assets acquired
    
    
    44,064Total liabilities assumed
    
    
    (5,154
    )Net assets acquired
    
    $
    38,910
    DealerWare L.L.C. (DealerWare)
  Current assets
    
    $
    12Intangible assets
    
    
    2,200Goodwill
    
    
    2,942Total assets acquired
    
    
    5,154Total liabilities assumed
    
    
    Net assets acquired
    
    $
    5,154
   68




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##### Table of Contents



Global Fax, L.L.C. (Global Fax)
  Current assets
    
    $
    1,261Property and equipment
    
    
    537Other long-term assets
    
    
    14Intangible assets
    
    
    11,192Goodwill
    
    
    11,718Total assets acquired
    
    
    24,722Total liabilities assumed
    
    
    (167
    )Net assets acquired
    
    $
    24,555
   WiredLogic, Inc. (DealerWire)
  Current assets
    
    $
    18Property and equipment
    
    
    36Other long-term assets
    
    
    5Intangible assets
    
    
    2,262Goodwill
    
    
    3,734Total assets acquired
    
    
    6,055Total liabilities assumed
    
    
    (22
    )Net assets acquired
    
    $
    6,033
 69




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##### Table of Contents



Automotive Lease Guide (alg), LLC and Automotive Lease Guide (alg) Canada, Inc.
(collectively, ALG)
  Current assets
    
    $
    95Property and equipment
    
    
    178Other long-term assets
    
    
    581Intangible assets
    
    
    21,450Goodwill
    
    
    18,467Total assets acquired
    
    
    40,771Total liabilities assumed
    
    
    (88
    )Net assets acquired
    
    $
    40,683
   North American Advanced Technology, Inc. (NAT)
  Current assets
    
    $
    490Property and equipment
    
    
    69Intangible assets
    
    
    3,830Goodwill
    
    
    4,497Total assets acquired
    
    
    8,886Total liabilities assumed
    
    
    (161
    )Net assets acquired
    
    $
    8,725
   70




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##### Table of Contents



Chrome Systems Corporation (Chrome)
  Current assets
    
    $
    2,497Property and equipment
    
    
    529Intangible assets
    
    
    16,220Goodwill
    
    
    2,039Total assets acquired
    
    
    21,285Total liabilities assumed
    
    
    (859
    )Net assets acquired
    
    $
    20,426
   GO BIG! Software, Inc. (Go Big)
  Current assets
    
    $
    43Intangible assets
    
    
    1,173Goodwill
    
    
    821Total assets acquired
    
    
    2,037Total liabilities assumed
    
    
    (38
    )Net assets acquired
    
    $
    1,999
   71




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##### Table of Contents



DealerAccess Purchase Price Adjustment
   Unaudited Pro Forma Summary of Operations
  Year Ended December 31,2007
    
    2006(Unaudited)(In thousands, except per share data)Net revenue
    
    $
    242,256
    
    
    $
    201,407Net income
    
    $
    15,931
    
    
    $
    7,819Basic net income
    
    $
    0.40
    
    
    $
    0.22Diluted net income
    
    $
    0.38
    
    
    $
    0.21
 4. Related Party Transactions
 Service Agreement with Related Parties  Financing Sources
    Service Agreements with Related Parties  Other Service and Information Providers
  72




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##### Table of Contents



5. Property and Equipment
  Estimated Useful
    
    
    December 31,Life (Years)
    
    
    2007
    
    
    2006Computer equipment
    
    
    3
    
    
    $
    16,719
    
    
    $
    9,671Office equipment
    
    
    5
    
    
    
    2,189
    
    
    
    1,245Furniture and fixtures
    
    
    5
    
    
    
    2,840
    
    
    
    1,627Leasehold improvements
    
    
    5-7
    
    
    
    992
    
    
    
    63622,740
    
    
    
    13,179Less: Accumulated depreciation and amortization
    
    
    
    
    
    
    (9,948
    )
    
    
    (7,022
    )Total property and equipment, net
    
    
    
    
    
    $
    12,792
    
    
    $
    6,157
  6. Intangible Assets
  December 31,
    
    
    December 31,2007
    
    
    2006Gross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    AmortizationBook
    
    
    Accumulated
    
    
    Book
    
    
    Accumulated
    
    
    PeriodValue
    
    
    Amortization
    
    
    Value
    
    
    Amortization
    
    
    (Years)Customer contracts
    
    $
    41,569
    
    
    $
    (14,789
    )
    
    $
    19,308
    
    
    $
    (10,904
    )
    
    
    1-3Database
    
    
    16,433
    
    
    
    (9,577
    )
    
    
    15,900
    
    
    
    (6,666
    )
    
    
    3-6Trade names
    
    
    10,500
    
    
    
    (4,460
    )
    
    
    10,500
    
    
    
    (3,428
    )
    
    
    5-10Patents/technology
    
    
    35,212
    
    
    
    (16,618
    )
    
    
    16,031
    
    
    
    (8,806
    )
    
    
    2-5Non-compete agreement
    
    
    14,062
    
    
    
    (6,214
    )
    
    
    3,308
    
    
    
    (1,738
    )
    
    
    2-5Partner agreement
    
    
    4,400
    
    
    
    (1,029
    )
    
    
    4,400
    
    
    
    (206
    )
    
    
    5Other
    
    
    900
    
    
    
    (861
    )
    
    
    900
    
    
    
    (681
    )
    
    
    5Total
    
    $
    123,076
    
    
    $
    (53,548
    )
    
    $
    70,347
    
    
    $
    (32,429
    )
 73




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##### Table of Contents



7. Goodwill
  Balance as of January 1, 2007
    
    $
    52,499Acquisition of Curomax (see Note 3)
    
    
    20,130Impact of change in Canadian dollar exchange rate
    
    
    3,768Acquisition of Arkona (see Note 3)
    
    
    39,927Acquisition of AutoStyleMart (see Note 3)
    
    
    803Purchase price adjustments  ALG (see Note 3)
    
    
    547Purchase price adjustments  Go Big (se Note 3)
    
    
    74Other adjustments
    
    
    (46
    )Balance as of December 31, 2007
    
    $
    117,702
  Balance as of January 1, 2006
    
    $
    34,200Acquisition of DealerWire (see Note 3)
    
    
    3,734Acquisition of Global Fax (see Note 3)
    
    
    11,718Acquisition of DealerWare (see Note 3)
    
    
    2,942Purchase price adjustments  ALG (see Note 3)
    
    
    306Purchase price adjustments  Go Big (see Note 3)
    
    
    361Recognition of acquired tax benefits related to dealerAccess (see Note 3 and 11)
    
    
    (746
    )Other adjustments
    
    
    (16
    )Balance as of December 31, 2006
    
    $
    52,499
 8. Other Accrued Liabilities
  December 31,
    
    
    December 31,2007
    
    
    2006Taxes
    
    $
    3,379
    
    
    $
    1,774Customer deposits
    
    
    2,773
    
    
    
    2,685Professional fees
    
    
    1,462
    
    
    
    1,167Software licenses
    
    
    1,212
    
    
    
    1,184Revenue share
    
    
    1,196
    
    
    
    1,926Severance
    
    
    271
    
    
    
    489Public company costs
    
    
    174
    
    
    
    625Other
    
    
    920
    
    
    
    2,128Total other accrued liabilities
    
    $
    11,387
    
    
    $
    11,978
 74




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##### Table of Contents



9. Public Offerings
     
    
    On December 13, 2005, the effective date of the offering, our
redeemable convertible participating preferred stock converted into
26,397,589 shares of our common stock. In connection with the
conversion, all rights and preferences of the convertible preferred
stock terminated.
    
    The amended and restated certificate of incorporation authorized us to
issue two classes of stock to be designated, respectively, common
stock, par value $0.01 per share, and preferred stock, par value $0.01
per share. The total number of shares that we shall have the authority
to issue is 185,000,000 shares, 175,000,000 shares of which shall be
common stock and 10,000,000 shares of which shall be preferred stock.
    
    We repaid $43.5 million in credit facilities.
    
    We increased the authorized number of shares of common stock and
preferred stock from 30,000,000 shares and zero to 175,000,000 and
10,000,000, respectively.
  10. 401(k) Plan
  75




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##### Table of Contents



11. Income Taxes
  Year Ended December 31,2007
    
    
    2006
    
    
    2005United States
    
    $
    29,433
    
    
    $
    23,554
    
    
    $
    7,944Canada
    
    
    3,353
    
    
    
    2,579
    
    
    
    584Total income before taxes
    
    $
    32,786
    
    
    $
    26,133
    
    
    $
    8,528
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Current tax:Federal
    
    $
    14,123
    
    
    $
    15,558
    
    
    $
    908State and local
    
    
    2,373
    
    
    
    2,839
    
    
    
    851Canada
    
    
    1,169
    
    
    
    
    
    
    
    Total current tax
    
    
    17,665
    
    
    
    18,397
    
    
    
    1,759Deferred tax:Federal
    
    
    (5,757
    )
    
    
    (8,510
    )
  
    
    
    1,631State and local
    
    
    179
    
    
    
    (471
     )
   
    
    670Canada
    
    
    947
    
    
    
    (2,619
    )
    
    
    Total deferred tax
    
    
    (4,631
    )
    
    
    (11,600
    )
    
    
    2,301Provision for income taxes, net
    
    $
    13,034
    
    
    $
    6,797
    
    
    $
    4,060
   76




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##### Table of Contents



December 31,2007
    
    
    2006Deferred tax assets:Net operating loss carryforwards
    
    $
    8,092
    
    
    $
    4,256Depreciation and amortization
    
    
    143
    
    
    
    395Deferred compensation
    
    
    7,543
    
    
    
    4,984Acquired intangibles
    
    
    1,230
    
    
    
    8,097Tax credits
    
    
    511
    
    
    
    433Other
    
    
    2,940
    
    
    
    3,03720,459
    
    
    
    21,202Deferred tax liabilities:Acquired Intangibles
    
    
    (2,795
    )
    
    
    Capitalized software and web site development
    
    
    (2,264
    )
    
    
    (2,224
    )Other
    
    
    (733
    )
    
    
    (561
    )14,667
    
    
    
    18,417Deferred tax asset valuation allowance
    
    
    (954
    )
    
    
    (214
    )Total Deferred tax assets, net
    
    $
    13,713
    
    
    $
    18,203
        Year Ended December 31,2007
    
    2006
    
    2005Pre-tax book income
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    34.0
    %State taxes
    
    
    3.5
    
    
    
    6.0
    
    
    
    10.7Foreign rate differential
    
    
    2.8
    
    
    
    0.2
    
    
    
    (2.3
    )Deferred tax rate adjustment
    
    
    1.5
    
    
    
    2.3
    
    
    
    5.6Valuation allowance and other
    
    
    (3.1
    )
    
    
    (17.5
    )
    
    
    (0.4
    )Total
    
    
    39.7
    %
    
    
    26.0
    %
    
    
    47.6
    %
  77




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##### Table of Contents



Balance January 1, 2007
    
    $
    0.4Additions
    
    
    Payments
    
    
    (0.3
    )Balance December 31, 2007
    
    $
    0.1
  12. Stock Option and Deferred Compensation Plans
 2001 Stock Option Plan
  Amended and Restated 2005 Incentive Award Plan
  
    
    in connection with the Restated 2005 Plan, 1,300,000 new shares are
authorized for issuance, although only 1,000,000 of the shares may be issued
in the form of full value shares;
    
    any shares underlying grants that are forfeited, cancelled or are
terminated are added back for issuance;
    
    shares tendered or held for taxes will not be added to the reserved pool;
    
    upon the exercise of a stock appreciation rights, or SAR, the gross number
of shares will be reduced from the pool;
    
    we may grant non-qualified stock options, restricted common stock, SARs,
performance shares, performance stock units, dividend equivalent units, stock
payment awards, deferred stock awards, restricted stock units
performance-based awards payable in either cash or in shares to our employees,
directors or consultants, and additionally, we may grant incentive stock
options to our employees;
    
    the option term for new stock options is now limited to seven years;
    
    the maximum number of shares of common stock that may be awarded to any one
person during any one year is 750,000 shares and the maximum amount payable
with respect to cash performance bonus awards during any fiscal year is
limited to $3,000,000;
    
    to ensure that certain awards granted as performance-based compensation
under section 162(m) of the Internal Revenue Code of 1986, the compensation
committee may require that the vesting of such awards be conditioned on the
satisfaction of performance criteria;
    
    the term of the Restated 2005 Plan is now extended to May 3, 2017.
  78




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##### Table of Contents



Number of
    
    Weighted-AverageShares
    
    Exercise PriceBalance as of January 1, 2007
    
    
    3,897,448
    
    
    $
    9.2395Options Granted
    
    
    805,805
    
    
    $
    33.7317Options Exercised
    
    
    (633,320
    )
    
    $
    6.3305Options Cancelled
    
    
    (151,338
    )
    
    $
    22.7483Balance as of December 31, 2007
    
    
    3,918,595
    
    
    $
    14.2254Vested and unvested expected to vest at December 31, 2007
    
    
    3,863,850
    
    
    $
    14.0797
   Options Outstanding
    
    Options ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    Weighted-
    
    Aggregate
    
    
    
    
    
    Average
    
    Weighted-
    
    AggregateExercise
    
    Number of
    
    Remaining
    
    Average
    
    Intrinsic
    
    
    
    
    
    Remaining
    
    Average
    
    IntrinsicPrice
    
    Shares
    
    Contractual
    
    Exercise
    
    Value
    
    Number
    
    Contractual
    
    Exercise
    
    ValueRange
    
    Outstanding
    
    Life in Years
    
    Price
    
    (000)
    
    Exercisable
    
    Life in Years
    
    Price
    
    (000)$2.80  $47.98
    
    
    3,918,595
    
    
    
    6.9432
    
    
    $
    14.2254
    
    
    $
    85,035
    
    
    
    2,354,455
    
    
    
    6.4014
    
    
    $
    7.3911
    
    
    $
    67,184
   79




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##### Table of Contents



Restricted Common StockWeightedNumber of
    
    Average GrantShares
    
    Date Fair ValueNon-vested as of January 1, 2007
    
    
    858,652
    
    
    $
    19.6050Awards granted
    
    
    235,725
    
    
    $
    30.2443Awards vested
    
    
    (73,947
    )
    
    $
    19.3303Awards canceled/expired/forfeited
    
    
    (37,301
    )
    
    $
    21.7764Non-vested as of December 31, 2007
    
    
    983,129
    
    
    $
    22.0943
  Employee Stock Purchase Plan
  Employees Deferred Compensation Plan
  Directors Deferred Compensation Plan
  80




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##### Table of Contents



Long Term Incentive Equity Awards
    July 21, 2007
    
    November 2, 2006
    

August 2, 2006Expected volatility
    
    
    47.00
    %
    
    
    40.00
    %
    
    
    40.00
    %Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected life (in years)
    
    
    2.37
    
    
    
    3.16
    
    
    
    3.42Risk-free interest rate
    
    
    4.43
    %
    
    
    4.91
    %
    
    
    4.99
    %Weighted-average fair
value of EBITDA
Performance Award
    
    $
    38.01
    
    
    $
    25.39
    
    
    $
    18.95
  July
21, 2007
    
    November 2, 2006
    

August 2, 2006Expected volatility
    
    
    47.00
    %
    
    
    40.00
    %
    
    
    40.00
    %Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected life (in years)
    
    
    2.37
    
    
    
    1.16-3.16
    
    
    
    1.41-3.42Risk-free interest rate
    
    
    4.43
    %
    
    
    4.55-4.91
    %
    
    
    4.83-4.99
    %Weighted-average fair
value of Market Value
Award
    
    $
    29.77
    
    
    $
    15.86
    
    
    $
    7.49
 13. Commitments and Contingencies
 Operating Leases
  81




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##### Table of Contents



Years EndingDecember 31,2008
    
    $
    4,8022009
    
    
    4,2152010
    
    
    3,1362011
    
    
    2,5492012
    
    
    2,635Thereafter
    
    
    14,457$
    31,794
 Capital Leases
  As of December 31,2007
    
    
    2006Computer equipment
    
    $
    1,486
    
    
    $
    Furniture and fixtures
    
    
    203
    
    
    
    1,689
    
    
    
    Less: Accumulated depreciation
    
    
    (274
    )
    
    
    $
    1,415
    
    
    $
    
  Years EndingDecember 31,2008
    
    $
    5752009
    
    
    5392010
    
    
    4712011
    
    
    157Total
miminum lease payments
    
    
    1,742Less: Amount
representing taxes, included in total minimum lease payments
    
    
    (74
    )Net minimum
lease payments
    
    
    1,668Less: Amount
representing interest
    
    
    (186
    )Present
value of net minimum lease payments
    
    $
    1,482
 Executive Severance Commitment
  82




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##### Table of Contents



Retail Sales Tax
      Commitments
    83




---



##### Table of Contents



Legal Proceedings
  DealerTrack Inc. v. RouteOne LLC
   DealerTrack Inc. v. Finance Express et al., CV-06-2335;
 DealerTrack Inc. v. RouteOne and Finance Express et al., CV-06-6864; and
 DealerTrack Inc. v. RouteOne and Finance Express et al., CV-07-215
        84




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##### Table of Contents



14. Segment Information
 Disclosures about Segments of an Enterprise and
Related Information
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Transaction services revenue
    
    $
    147,312
    
    
    $
    112,752
    
    
    $
    82,637Subscription services revenue
    
    
    75,061
    
    
    
    53,352
    
    
    
    32,390Other
    
    
    11,472
    
    
    
    7,168
    
    
    
    5,192Total net revenue
    
    $
    233,845
    
    
    $
    173,272
    
    
    $
    120,219
 15. Credit Facility
  
    
    access our, or our existing or future subsidiaries, cash flow and value and, therefore, to pay interest and/or
principal on our other indebtedness or to pay dividends on our common stock;
    
    incur additional indebtedness;
    
    issue preferred stock;
    
    pay dividends or make distributions in respect of our, or our existing or future subsidiaries, capital stock or to
make certain other restricted payments or investments;
    
    sell assets, including our capital stock;
    
    make certain investments, loans, advances, guarantees or acquisitions;
    
    enter into sale and leaseback transactions;
    
    agree to payment restrictions;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our or the applicable subsidiarys assets;
    
    enter into transactions with our or the applicable subsidiarys affiliates;
    
    incur liens; and
    
    designate any of our, or the applicable subsidiarys, future subsidiaries as unrestricted subsidiaries.
   85




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##### Table of Contents



DEALERTRACK HOLDINGS, INC.
 
 SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
 Balance at
    
    Additions
    
    
    
    
    
    
    
    
    
    Balance atBeginning of
    
    Charged to
    
    
    
    
    
    Other
    
    End ofDescription
    
    Period
    
    Expenses
    
    Deductions
    
    Adjustments
    
    Period(In thousands)As of December 31, 2007:Allowance for doubtful accounts
    
    $
    1,884
    
    
    
    3,620
    
    
    
    (3,883
    )
    
    
    109
    
    
    $
    1,730Allowance for sales credits
    
    $
    2,523
    
    
    
    3,147
    
    
    
    (4,785
    )
    
    
    
    
    
    $
    885Deferred tax valuation allowance
    
    $
    214
    
    
    
    109
    
    
    
    
    
    
    
    631
    (1)
    
    $
    954As of December 31, 2006:Allowance for doubtful accounts
    
    $
    1,531
    
    
    
    1,527
    
    
    
    (1,174
    )
    
    
    
    
    
    $
    1,884Allowance for sales credits
    
    $
    1,133
    
    
    
    3,311
    
    
    
    (1,921
    )
    
    
    
    
    
    $
    2,523Deferred tax valuation allowance
    
    $
    4,245
    
    
    
    214
    
    
    
    (4,245
    )(2)
    
    
    
    
    
    $
    214As of December 31, 2005:Allowance for doubtful accounts
    
    $
    640
    
    
    
    1,181
    
    
    
    (371
    )
    
    
    81
    
    
    $
    1,531Allowance for sales credits
    
    $
    59
    
    
    
    2,483
    
    
    
    (1,409
    )
    
    
    
    
    
    $
    1,133Deferred tax valuation allowance
    
    $
    7,700
    
    
    
    
    
    
    
    (3,455
    )(3)
    
    
    
    
    
    $
    4,245
 
 (1)
    
    For the year ended December 31, 2007, the deferred tax valuation
allowance was increased by $0.6 million primarily due to acquisitions
during 2007 and was further increased by expenses in various states.(2)
    
    For the year ended December 31, 2006, the deferred tax asset valuation
was reversed by $4.2 million. Included in this reversal is a $0.7
million adjustment to goodwill relating to the net operating loss
acquired but not recognized at the date of acquisition of DealerAccess
in January 2004. Please refer to Note 11 of the financial statements
for further information.(3)
    
    For the year ended December 31, 2005, the deferred tax asset valuation
was reversed by $3.5 million. Included in this reversal is a $3.3
million adjustment to goodwill relating to a net operating loss
acquired but not recognized at the date of acquisition of Credit
Online, Inc. in March 2003. 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 86




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##### Table of Contents



Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  Managements Annual Report on Internal Control Over Financial Reporting
    
 Item 9B. Other Information
  PART III
  
 Item 10. Directors, Executive Officers of Corporate Governance
  
 Item 11. Executive Compensation
  87




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  PART IV
 
 Item 15. Exhibits, Financial Statement Schedule
           Number
    
    Description3.1 (4)
    
    Form of Fifth Amended and Restated Certificate of Incorporation of DealerTrack Holdings, Inc.3.2 (4)
    
    Form of Amended and Restated By-laws of DealerTrack Holdings, Inc.4.1 (1)
    
    Fourth Amended and Restated Registration Rights Agreement, dated as of March 19, 2003, among
DealerTrack Holdings, Inc. and the stockholders of DealerTrack Holdings, Inc. party thereto.4.2 (3)
    
    Form of Certificate of Common Stock.10.1 (1)
    
    Credit Agreement, dated as of April 15, 2005, by and among DealerTrack, Inc., DealerTrack
Holdings, Inc.,
 88




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##### Table of Contents



Number
    
    Descriptioncertain subsidiaries of DealerTrack Holdings, Inc., J.P. Morgan Securities
Inc. and Lehman Brothers Inc., as joint bookrunners, J.P. Morgan Securities Inc., Lehman
Brothers Inc. and Wachovia Securities Inc., as arrangers, JPMorgan Chase Bank, N.A., as
administrative agent and letter of credit issuing bank, Lehman Commercial Paper Inc., as
syndication agent, and Wachovia Bank, National Association, as documentation agent.10.2 (1)
    
    Guarantee and Security Agreement, dated as of April 15, 2005, by and among DealerTrack,
Inc., DealerTrack Holdings, Inc., certain subsidiaries of DealerTrack Holdings, Inc. and
JPMorgan Chase Bank, N.A., as administrative agent.10.3 (2)
    
    Transition Services Agreement, dated as of March 19, 2003, by and among DealerTrack
Holdings, Inc., Credit Online, Inc., DealerTrack, Inc., First American Credit Management
Solutions, Inc. and First American Real Estate Solutions, LLC.10.4 (2)
    
    Joint Marketing Agreement, dated as of March 19, 2003, by and among DealerTrack Holdings,
Inc., DealerTrack, Inc., Credit Online, Inc. and First American CREDCO, a division of First
American Real Estate Solutions, LLC.10.5 (2)
    
    First Amendment to the Joint Marketing Agreement by and among DealerTrack Holdings, Inc.,
DealerTrack, Inc., Credit Online, Inc. and First American CREDCO, a division of First
American Real Estate Solutions, LLC, dated as of December 1, 2004.10.6 (2)
    
    Agreement between DealerTrack, Inc. and CreditReportPlus, LLC, dated as of December 1, 2004.10.7 (2)
    
    Application Service Provider Contract, dated as of April 15, 2005, between First American
Credit Management Solutions, Inc. and DealerTrack, Inc.10.9 (2)
    
    Non-Competition Agreement, dated as of March 19, 2003, by and among DealerTrack Holdings,
Inc., Credit Online, Inc., First American Credit Management Solutions, Inc. and The First
American Corporation.10.10 (2)
    
    License Agreement, made and entered into as of February 1, 2001, by and between The Chase Manhattan
Bank and J.P. Morgan Partners (23A SBIC Manager), Inc.10.11 (2)
    
    Asset Purchase Agreement, dated as of May 25, 2005, by and among Santa Acquisition Corporation,
Automotive Lease Guide (alg), LLC, Automotive Lease Guide (alg) Canada, Inc., Douglas W. Aiken, John
A. Blair and Raj Sundaram.10.12 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by and
between Mark F. ONeil and DealerTrack Holdings, Inc.10.13 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by and
between John A. Blair and Automotive Lease Guide (alg), Inc.10.14 (5)
    
    Unfair Competition and Nonsolicitation Agreement, dated as of May 25, 2005, by and between John A.
Blair and Automotive Lease Guide (alg), Inc.10.15 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by and
between Eric D. Jacobs and DealerTrack Holdings, Inc.10.16 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by and
between Raj Sundaram and DealerTrack Holdings, Inc.10.17 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by and
between Robert Cox and DealerTrack Holdings, Inc.10.18 (1)
    
    2001 Stock Option Plan of DealerTrack Holdings, Inc., effective as of August 10, 2001.10.19 (1)
    
    First Amendment to 2001 Stock Option Plan of DealerTrack Holdings, Inc., effective as of December 28,
2001.10.20 (1)
    
    Second Amendment to 2001 Stock Option Plan of DealerTrack Holdings, Inc., effective as of March 19,
2003.10.21 (1)
    
    Third Amendment to 2001 Stock Option Plan of DealerTrack Holdings, Inc., effective as of January 30,
2004.10.22 (6)
    
    Fourth Amendment to 2001 Stock Option Plan of DealerTrack Holdings, Inc. effective as of February 10,
2006.10.23 (10)
    
    Amended and Restated 2005 Incentive Award Plan, effective as of July 11, 2007.10.24 (8)
    
    Amendment to Asset Purchase Agreement, dated October 18, 2006, by and among Santa Acquisition
Corporation, Automotive Lease Guide (alg), LLC, Automotive Lease Guide (alg) Canada, Inc., Douglas W.
Aiken, John A. Blair and Raj Sundaram.10.25 (5)
    
    Form of Stock Option Agreement.10.26 (5)
    
    Form of Restricted Stock Agreement.10.27 (1)
    
    Senior Executive Incentive Bonus Plan, effective as of May 26, 2005.10.28 (9)
    
    Stock Ownership and Retention Program, adopted May 26, 2005.10.29 (1)
    
    Employee Stock Purchase Plan, adopted May 26, 2005.10.30 (1)
    
    Directors Deferred Compensation Plan, effective as of June 30, 2005.10.31 (1)
    
    Employees Deferred Compensation Plan, effective as of June 30, 2005.
 89




---



##### Table of Contents



Number
    
    Description10.32 (1)
    
    401(k) Plan, effective as of January 1, 2001, as amended.10.34 (9)
    
    Letter Agreement, dated October 23, 2006, from DealerTrack, Inc. to Raj Sundaram regarding relocation.10.35 (9)
    
    Unfair Competition and Nonsolicitation Agreement, dated as of May 25, 2005, by and between Raj
Sundaram and Automotive Lease Guide (alg), Inc.10.36 (9)
    
    Amendment No. 1 to Unfair Competition and Nonsoliciation Agreement, made as of August 21, 2006, by
and between Automotive Lease Guide (alg), Inc. and Raj Sundaram.10.37 (2)
    
    Lease Agreement, dated as of August 5, 2004, between iPark Lake Success, LLC and DealerTrack, Inc.10.38 (4)
    
    Lender Integration Support Agreement, dated as of September 1, 2005, between First American CMSI Inc.
and DealerTrack, Inc.10.39 (7)
    
    Shares Purchase Agreement, made as of January 16, 2007, among certain shareholders of Curomax
Corporation and all of the shareholders of 2044904 Ontario Inc., 2044903 Ontario Inc. and 2044905
Ontario Inc. and 6680968 Canada Inc.10.40 (11)
    
    First Amendment to DealerTrack Holdings, Inc. Directors Deferred Compensation Plan effective as of
January 1, 2007.10.41 (11)
    
    First Amendment to DealerTrack Holdings, Inc. Employees Deferred Compensation Plan effective as of
January 1, 2007.14.1 (6)
    
    Code of Business Conduct and Ethics.21.1*
    
    List of Subsidiaries.23.1*
    
    Consent of PricewaterhouseCoopers LLP.31.1*
    
    Certification of Mark F. ONeil pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Robert J. Cox III pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Mark F. ONeil and Robert J. Cox III pursuant 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.(1)
    
    Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-126944) filed July 28, 2005.(2)
    
    Incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-126944)
filed September 22, 2005.(3)
    
    Incorporated by reference to Amendment No. 2 to our Registration Statement on Form S-1 (File No. 333-126944)
filed October 12, 2005.(4)
    
    Incorporated by reference to Amendment No. 3 to our Registration Statement on Form S-1 (File No. 333-126944)
filed October 24, 2005.(5)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed May 12, 2006.(6)
    
    Incorporated by reference to our Annual Report on Form 10-K filed March 30, 2006.(7)
    
    Incorporated by reference to our Current Report on Form 8-K dated January 16, 2007 filed January 18, 2007.(8)
    
    Incorporated by reference to our Quarterly Report on Form
10-Q filed November 14, 2006.(9)
    
    Incorporated by reference to our Annual Report on Form 10-K filed March 16, 2007.(10)
    
    Incorporated by reference to our Registration Statement on Form S-8 (File No. 333-144491) filed July 11, 2007 .(11)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed August 9, 2007. http://www.sec.gov.
 90




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##### Table of Contents



SIGNATURE
  Date:
 DealerTrack Holdings, Inc.
(Registrant)By:
    /s/  Robert J. Cox IIIRobert J. Cox IIISenior Vice President, Chief Financial Officer
and Treasurer
(Duly Authorized Officer and
Principal Financial Officer) SIGNATURES
 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
 Signature
    
    Title
    
    Date/s/ Mark F. ONeil

Mark F. ONeil
    
    Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
    
    February 28, 2008/s/ Robert J. Cox III

Robert J. Cox III
    
    Senior Vice President, Chief Financial
Officer and Treasurer
(principal financial and
accounting officer)
    
    February 28, 2008/s/ Mary Cirillo-Goldberg

Mary Cirillo-Goldberg
    
    Director
    
    February 28, 2008/s/ Ann B. Lane 

Ann B. Lane
    
    Director
    
    February 28, 2008/s/ John J. McDonnell, Jr.

John J. McDonnell, Jr.
    
    Director
    
    February 28, 2008/s/ James David Power III

James David Power III
    
    Director
    
    February 28, 2008/s/ Howard L. Tischler

Howard L. Tischler
    
    Director
    
    February 28, 2008/s/ Barry Zwarenstein

Barry Zwarenstein
    
    Director
    
    February 28, 2008
 91




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##### Table of Contents



EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2007
 Number
    
    Description3.1 (4)
    
    Form of Fifth Amended and Restated Certificate of Incorporation of DealerTrack Holdings, Inc.3.2 (4)
    
    Form of Amended and Restated By-laws of DealerTrack Holdings, Inc.4.1 (1)
    
    Fourth Amended and Restated Registration Rights Agreement, dated as of March 19, 2003, among
DealerTrack Holdings, Inc. and the stockholders of DealerTrack Holdings, Inc. party thereto.4.2 (3)
    
    Form of Certificate of Common Stock.10.1 (1)
    
    Credit Agreement, dated as of April 15, 2005, by and among DealerTrack, Inc., DealerTrack
Holdings, Inc., certain subsidiaries of DealerTrack Holdings, Inc., J.P. Morgan Securities
Inc. and Lehman Brothers Inc., as joint bookrunners, J.P. Morgan Securities Inc., Lehman
Brothers Inc. and Wachovia Securities Inc., as arrangers, JPMorgan Chase Bank, N.A., as
administrative agent and letter of credit issuing bank, Lehman Commercial Paper Inc., as
syndication agent, and Wachovia Bank, National Association, as documentation agent.10.2 (1)
    
    Guarantee and Security Agreement, dated as of April 15, 2005, by and among DealerTrack,
Inc., DealerTrack Holdings, Inc., certain subsidiaries of DealerTrack Holdings, Inc. and
JPMorgan Chase Bank, N.A., as administrative agent.10.3 (2)
    
    Transition Services Agreement, dated as of March 19, 2003, by and among DealerTrack
Holdings, Inc., Credit Online, Inc., DealerTrack, Inc., First American Credit Management
Solutions, Inc. and First American Real Estate Solutions, LLC.10.4 (2)
    
    Joint Marketing Agreement, dated as of March 19, 2003, by and among DealerTrack Holdings,
Inc., DealerTrack, Inc., Credit Online, Inc. and First American CREDCO, a division of First
American Real Estate Solutions, LLC.10.5 (2)
    
    First Amendment to the Joint Marketing Agreement by and among DealerTrack Holdings, Inc.,
DealerTrack, Inc., Credit Online, Inc. and First American CREDCO, a division of First
American Real Estate Solutions, LLC, dated as of December 1, 2004.10.6 (2)
    
    Agreement between DealerTrack, Inc. and CreditReportPlus, LLC, dated as of December 1, 2004.10.7 (2)
    
    Application Service Provider Contract, dated as of April 15, 2005, between First American
Credit Management Solutions, Inc. and DealerTrack, Inc.10.9 (2)
    
    Non-Competition Agreement, dated as of March 19, 2003, by and among DealerTrack Holdings,
Inc., Credit Online, Inc., First American Credit Management Solutions, Inc. and The First
American Corporation.10.10 (2)
    
    License Agreement, made and entered into as of February 1, 2001, by and between The Chase
Manhattan Bank and J.P. Morgan Partners (23A SBIC Manager), Inc.10.11 (2)
    
    Asset Purchase Agreement, dated as of May 25, 2005, by and among Santa Acquisition
Corporation, Automotive Lease Guide (alg), LLC, Automotive Lease Guide (alg) Canada, Inc.,
Douglas W. Aiken, John A. Blair and Raj Sundaram.10.12 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by
and between Mark F. ONeil and DealerTrack Holdings, Inc.10.13 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by
and between John A. Blair and Automotive Lease Guide (alg), Inc.10.14 (5)
    
    Unfair Competition and Nonsolicitation Agreement, dated as of May 25, 2005, by and between
John A. Blair and Automotive Lease Guide (alg), Inc.10.15 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by
and between Eric D. Jacobs and DealerTrack Holdings, Inc.10.16 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by
and between Raj Sundaram and DealerTrack Holdings, Inc.10.17 (11)
    
    Amended and Restated Senior Executive Employment Agreement, dated as of August 8, 2007, by
and between Robert Cox and DealerTrack Holdings, Inc.10.18 (1)
    
    2001 Stock Option Plan of DealerTrack Holdings, Inc., effective as of August 10, 2001.10.19 (1)
    
    First Amendment to 2001 Stock Option Plan of DealerTrack Holdings, Inc., effective as of
December 28, 2001.10.20 (1)
    
    Second Amendment to 2001 Stock Option Plan of DealerTrack Holdings, Inc., effective as of
March 19, 2003.10.21 (1)
    
    Third Amendment to 2001 Stock Option Plan of DealerTrack Holdings, Inc., effective as of
January 30, 2004.10.22 (6)
    
    Fourth Amendment to 2001 Stock Option Plan of DealerTrack Holdings, Inc. effective as of
February 10, 2006.10.23 (10)
    
    Amended and Restated 2005 Incentive Award Plan, effective as of July 11, 2007.
 92




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##### Table of Contents



Number
    
    Description10.24 (8)
    
    Amendment to Asset Purchase Agreement, dated October 18, 2006, by and among Santa Acquisition
Corporation, Automotive Lease Guide (alg), LLC, Automotive Lease Guide (alg) Canada, Inc., Douglas W.
Aiken, John A. Blair and Raj Sundaram.10.25 (5)
    
    Form of Stock Option Agreement.10.26 (5)
    
    Form of Restricted Stock Agreement.10.27 (1)
    
    Senior Executive Incentive Bonus Plan, effective as of May 26, 2005.10.28 (9)
    
    Stock Ownership and Retention Program, adopted May 26, 2005.10.29 (1)
    
    Employee Stock Purchase Plan, adopted May 26, 2005.10.30 (1)
    
    Directors Deferred Compensation Plan, effective as of June 30, 2005.10.31 (1)
    
    Employees Deferred Compensation Plan, effective as of June 30, 2005.10.32 (1)
    
    401(k) Plan, effective as of January 1, 2001, as amended.10.34 (9)
    
    Letter Agreement, dated October 23, 2006, from DealerTrack, Inc. to Raj Sundaram regarding relocation.10.35 (9)
    
    Unfair Competition and Nonsolicitation Agreement, dated as of May 25, 2005, by and between Raj
Sundaram and Automotive Lease Guide (alg), Inc.10.36 (9)
    
    Amendment No. 1 to Unfair Competition and Nonsoliciation Agreement, made as of August 21, 2006, by
and between Automotive Lease Guide (alg), Inc. and Raj Sundaram.10.37 (2)
    
    Lease Agreement, dated as of August 5, 2004, between iPark Lake Success, LLC and DealerTrack, Inc.10.38 (4)
    
    Lender Integration Support Agreement, dated as of September 1, 2005, between First American CMSI Inc.
and DealerTrack, Inc.10.39 (7)
    
    Shares Purchase Agreement, made as of January 16, 2007, among certain shareholders of Curomax
Corporation and all of the shareholders of 2044904 Ontario Inc., 2044903 Ontario Inc. and 2044905
Ontario Inc. and 6680968 Canada Inc.10.40 (11)
    
    First Amendment to DealerTrack Holdings, Inc. Directors Deferred Compensation Plan effective as of
January 1, 2007.10.41 (11)
    
    First Amendment to DealerTrack Holdings, Inc. Employees Deferred Compensation Plan effective as of
January 1, 2007.14.1 (6)
    
    Code of Business Conduct and Ethics.21.1*
    
    List of Subsidiaries.23.1*
    
    Consent of PricewaterhouseCoopers LLP.31.1*
    
    Certification of Mark F. ONeil pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Robert J. Cox III pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Mark F. ONeil and Robert J. Cox III pursuant 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.(1)
    
    Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-126944) filed July 28, 2005.(2)
    
    Incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-126944)
filed September 22, 2005.(3)
    
    Incorporated by reference to Amendment No. 2 to our Registration Statement on Form S-1 (File No. 333-126944)
filed October 12, 2005.(4)
    
    Incorporated by reference to Amendment No. 3 to our Registration Statement on Form S-1 (File No. 333-126944)
filed October 24, 2005.(5)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed May 12, 2006.(6)
    
    Incorporated by reference to our Annual Report on Form 10-K filed March 30, 2006.(7)
    
    Incorporated by reference to our Current Report on Form 8-K dated January 16, 2007 filed January 18, 2007.(8)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed November 14,
2006.(9)
    
    Incorporated by reference to our Annual Report on Form 10-K filed March 16, 2007.(10)
    
    Incorporated by reference to our Registration Statement on Form S-8 (File No. 333-144491) filed July 11, 2007 .(11)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed August 9, 2007 . 93